Document:

Doral Energy Corp.: Exhibit 10.1 - Filed by newsfilecorp.com

PURCHASE AND SALE AGREEMENT

BETWEEN

Mr. John R. Stearns & Mr. John R. Stearns, Jr. 

(the “Sellers”) 

and 

Doral Energy Corp 

(the “Buyer”)

June 14, 2010

TABLE OF CONTENTS

	Article I.
      PURCHASE AND SALE 	1 
	 	 
	    Section 1.1 	Purchase
      and Sale 	1 
	    Section 1.2 	The Properties 	1 
	 	 	 
	Article II. CONSIDERATION
    	2 
	 	 
	    Section 2.1 	Purchase Price 	2 
	    Section 2.2 	Payment
      Method 	2 
	    Section 2.3 	Adjustments to Base
      Purchase Price 	3 
	    Section 2.4 	Sellers’
      Preliminary and Final Settlement Statements 	4 
	    Section 2.5 	Allocation of Purchase
      Price 	4 
	 	 	 
	Article III. REPRESENTATIONS
      AND WARRANTIES 	4 
	 	 
	    Section 3.1 	Sellers’ Representations
      and Warranties 	4 
	    Section 3.2 	Buyer’s
      Representations and Warranties 	8

	    Section 3.3 	Representations and
      Warranties Exclusive 	9 
	 	 	 
	Article IV. WARRANTIES AND
      DISCLAIMERS 	9 
	 	 
	    Section 4.1 	Title; Condition and
      Fitness of the Properties 	9 
	    Section 4.2 	Information About the Properties 	10
  
	    Section 4.3 	NORM 	10 
	    Section 4.4 	Subrogation of Warranties 	10
  
	 	 	 
	Article V. DUE
      DILIGENCE REVIEW OF THE PROPERTIES 	10
  
	 	 
	    Section 5.1 	Title Due
      Diligence Examination 	10
  
	    Section 5.2 	Environmental Due
      Diligence Examination	13 
	    Section 5.3 	Buyer
      Indemnification 	13
  
	    Section 5.4 	Casualty Loss 	14 
	    Section 5.5 	Consents;
      Preferential Rights 	14
  
	 	 	 
	Article VI.
      CONDITIONS PRECEDENT TO CLOSING 	14
  
	 	 
	    Section 6.1 	Conditions Precedent to Sellers’ Obligation to
      Close 	14
  
	    Section 6.2 	Conditions Precedent to
      Buyer’s Obligation to Close 	15 
	    Section 6.3 	Termination of Agreement 	16
  
	 	 	 
	Article VII.
      CLOSING AND POST-CLOSING OBLIGATIONS 	17
  
	 	 
	    Section 7.1 	Closing
      Date 	17
  
	    Section 7.2 	Closing 	17 
	 	 	 
	Article VIII. OPERATIONS
      DURING THE INTERIM PERIOD 	18 
	 	 
	    Section 8.1 	Operations 	18 
	 	 	 
	Article IX. CERTAIN
      POST-CLOSING OBLIGATIONS 	18 
	 	 
	    Section 9.1 	Delivery of Records
      	18 
	    Section 9.2 	Revenues
      and Expenses 	18
  
	    Section 9.3 	Suspense Funds
	19

	Article
      X. BUYER’S ASSUMPTION OF OBLIGATIONS 	20
      
	 	 
	    Section
      10.1 	Buyer’s
      Assumption of Obligations 	20
      
	 	 	 
	Article
      XI. INDEMNITIES 	20
      
	 	 
	    Section
      11.1 	Definition
      of Claims 	20
      
	    Section
      11.2 	Buyer’s
      Indemnity 	20
      
	    Section
      11.3 	Sellers’
      Indemnity 	20
      
	    Section
      11.4 	Covered
      Claims and Parties 	21
      
	    Section
      11.5 	Express
      Negligence Disclosure 	21
      
	    Section
      11.6 	Notices
      and Defense of Indemnified Claims 	22
      
	    Section
      11.7 	Waiver
      of Consequential and Punitive Damages 	22
      
	    Section
      11.8 	Exclusive
      Remedy 	22
      
	 	 	 
	Article
      XII. TAXES 	22
      
	 	 
	    Section
      12.1 	Ad
      Valorem, Real Property and Personal Property Taxes 	22
      
	    Section
      12.2 	Tax
      Reporting 	23
      
	    Section
      12.3 	Transfer
      Taxes 	23
      
	    Section
      12.4 	Income
      and Franchise Taxes 	23
      
	 	 	 
	Article
      XIII. dispute resolution 	23
      
	 	 
	    Section
      13.1 	Dispute
      Resolution Procedures 	23
      
	    Section
      13.2 	Good
      Faith Efforts 	23
      
	    Section
      13.3 	Independent
      Expert 	24
      
	    Section
      13.4 	Arbitration
      	24
      
	 	 	 
	Article
      XIV. MISCELLANEOUS 	25
      
	 	 
	    Section
      14.1 	Survival
      	25
      
	    Section
      14.2 	Assignment
      	25
      
	    Section
      14.3 	Parties
      Bear Own Expenses 	25
      
	    Section
      14.4 	Recording
      Expenses 	25
      
	    Section
      14.5 	Public
      Announcements 	25
      
	    Section
      14.6 	Notices
      	26
      
	    Section
      14.7 	Interpretation
      	26
      
	    Section
      14.8 	Third-Party
      Beneficiaries 	27
      
	    Section
      14.9 	Entire
      Agreement and Amendment 	27
      
	    Section
      14.10 	     Further
      Assurances 	27
      
	    Section
      14.11 	     Successors
      and Assigns 	27
      
	    Section
      14.12 	     Severability
      	27
      
	    Section
      14.13 	     Counterparts
      	28
      
	    Section
      14.14 	     Governing
      Law 	28
      
	    Section
      14.15 	     Exhibits
      	28
      

ii

	Exhibits 	  
	 	  
	Exhibit “A” 	The Leases 
	Exhibit “B” 	The Wells 
	Exhibit “C” 	The Equipment 
	Exhibit “D” 	Contracts 
	Exhibit “E” 	Form of Assignment 
	Exhibit “F” 	1445 Certificate 
	Exhibit “G” 	Buyer’s Closing Certificate 
	Exhibit “H” 	Sellers’ Closing Certificate 
	Exhibit “I” 	Transition Services Agreement    
	 	  
	Schedule 2.5 	Allocated Values 
	Schedule 3.1(j) 	Contractual Defaults 
	Schedule 3.1(l) 	Commitments 
	Schedule 3.1(m) 	Imbalances 
	Schedule 3.1(n) 	Preferential Rights and
      Consents 

PURCHASE AND SALE AGREEMENT

     This Purchase and Sale Agreement
(this “Agreement”), dated June 14, 2010, is entered into by and between Mr. John
R. Stearns, an individual, and Mr. John R Stearns, Jr. (collectively, the
“Sellers” and “Seller” being any one of the Sellers) and Doral Energy Corp, a
Nevada Corporation (the “Buyer”). Each of Buyer and Sellers are sometimes
referred to herein individually as a “Party,” and they are sometimes
collectively referred to herein as the “Parties.”

AGREEMENT

     In consideration of the premises,
the mutual promises contained herein, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Sellers
agree as follows:

ARTICLE I. PURCHASE AND SALE

     Section 1.1 Purchase and
Sale. Sellers agrees to sell to Buyer, and Buyer agrees to purchase from
Sellers, the Properties (as hereinafter defined) as of 7:00 a.m. local time at
the location of the Properties on June 1, 2010 (the “Effective Time”), subject
to the terms hereof.

     Section 1.2 The
Properties. As used herein, “Properties” means Sellers’ right, title, and
interest in and to the properties described in (a) through (g) below:

     (a) Sellers’ right, title and
interest in and to oil and gas leases, fee minerals, royalty, overriding royalty
and other oil and gas interests covering lands located in both Chaves and
Roosevelt Counties, New Mexico, including, without limitation, the oil and gas
leases described on Exhibit “A” (the “Leases”), including all rights and
interests in any unit or pooled area in which the Leases are included,
including, to the extent arising from or associated with the Leases, all rights
derived from any unitization, pooling, operating, communitization or other
agreement;

     (b) The oil and gas wells located
on the Leases or lands pooled therewith, including, without limitation, the
wells identified on Exhibit “B” attached hereto (collectively, the “Wells”);

     (c) All crude oil, natural gas,
casinghead gas, condensate, sulfur, natural gas liquids, products, and other
liquid or gaseous hydrocarbons, and other minerals of every kind and character
which may be produced from or allocable to the Properties (collectively,
“Hydrocarbons”) with respect to all periods on or after the Effective Time,
together with all proceeds from or of such Hydrocarbons, and the Inventory
Hydrocarbons, as defined below;

     (d) All equipment, fixtures,
facilities, improvements and other property used, or held for use, in exploring,
developing, operating, producing maintaining or repairing the Leases or lands
pooled therewith, including, without limitation, all equipment, tank batteries,
pump jacks, gathering systems, pipelines, processing systems, plants,
compressors, meters, injection wells, disposal wells, vehicles, pipe, inventory,
machinery, spare parts, and tools (collectively, the “Equipment”), including,
without limitation, the equipment described in Exhibit “C” attached hereto;

     (e) All easements, rights-of-way,
surface leases, licenses, permits, servitudes, approvals, consents, certificates
and other similar interests applicable to or used in operating the Wells, the
Leases, or the Equipment (the “Permits”);

     (f) All valid and existing
agreements, contracts and contractual rights and interests of every kind and
nature relating to the Wells, the Leases or lands pooled therewith, or any other
right or property described in Sections (a) through (e) above, including all
unit agreements, farmout agreements, farmin agreements, salt water handling
agreements, operating agreements, and Hydrocarbon sales, purchase, gathering,
transportation, treating, marketing, exchange, and processing agreements,
including, without limitation, the leases and other contracts and agreements
described in Exhibit “D” (the “Contracts”); 

     (g) Sellers’ files and records
relating to the Properties described in Sections (a) through (f) above,
including, without limitation (i) lease, division order, contract, and land
files, abstracts and title opinions; (ii) operations, maintenance, production,
environmental and engineering records; (iii) logs, facility and well records;
and (iv) accounting files, well payout files, and lease operating statements
(collectively, the “Records”); provided, however, that the Records shall not
include the general corporate files and records of Sellers, any files and
records which are subject to confidentiality obligations owed to third parties
(provided that Sellers will, at Buyer’s request, at no cost or expense to
Sellers, request waivers of such confidentiality restrictions), or files and
records, other than title opinions, that are subject to attorney-client
privilege.

ARTICLE II. CONSIDERATION

     Section 2.1 Purchase
Price. The purchase price for the Properties to be paid by Buyer to Sellers
at Closing shall be One Million Seven Hundred Thousand and No/100 Dollars
($1,700,000.00) (the “Base Purchase Price”), subject to adjustment as provided
herein. The Base Purchase Price, as adjusted pursuant to Section 2.3, is herein
called the “Adjusted Purchase Price.”

     Section 2.2 Payment Method.

     (a) Contemporaneously with the
execution of this Agreement, Buyer and Sellers shall execute an escrow agreement
(the “Escrow Agreement”), in form and substance reasonably acceptable to the
Parties, with the law firm of Vincent & Rees of 175 East 400 South, Suite
1000, Salt Lake City, Utah (the “Escrow Agent”). On or before June 17, 2010,
Buyer shall pay into the escrow account established with the Escrow Agent
pursuant to the Escrow Agreement a performance deposit in the amount of Twenty
Five Thousand Dollars ($25,000) (the “Deposit”). The fees and expenses
associated with the escrow account shall be borne 50% by Buyer and 50% by
Sellers. At Closing, the Deposit, together with earnings thereon, shall be
applied to the Adjusted Purchase Price. The Sellers shall not hold any legal or
equitable interest in the Deposit until the Deposit is delivered by the Escrow
Agent as provided in this Agreement and in the Escrow Agreement.

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     (b) At Closing, Buyer shall pay
the Adjusted Purchase Price, less the Deposit (together with earnings thereon),
by wire transfer of immediately available funds to the account or accounts
designated by Sellers in writing (which account designation shall be delivered
to Buyer at least two (2) business days prior to Closing).

     Section 2.3 Adjustments to
Base Purchase Price. The Base Purchase Price shall be adjusted at Closing
and upon Final Settlement (as hereinafter defined) as follows:

     (a) The Base Purchase Price shall
be adjusted upward by the sum of the following (without duplication)
(collectively, the “Sellers’ Credits”):

               (i)
The value of all merchantable oil and condensate produced from and attributable
to the Properties prior to the Effective Time which has not been sold or taken
by Sellers for its own account and is in storage at the Leases on the Closing
Date (the “Inventory Hydrocarbons”), net of royalties and other burdens thereon,
and less severance and production taxes, transportation expenses, and other fees
deducted by the purchaser of such Hydrocarbons;

               (ii)
All operating and capital expenditures paid by Sellers which are attributable,
in accordance with generally accepted accounting principles, consistently
applied (“GAAP”), to the operation of the Properties after the Effective Time;
and

               (iii)
An amount equal to any upward adjustment provided elsewhere in this Agreement or
agreed between Sellers and Buyer in writing prior to or at Closing.

     (b) The Base Purchase Price shall
be adjusted downward by the sum of the following (without duplication)
(collectively, the “Buyer’s Credits”):

               (i)
Amounts received by Sellers prior to Closing from the sale of Hydrocarbons
produced and sold after the Effective Time which are attributable to the
Properties;

               (ii)
All operating and capital expenditures paid by Buyer which are attributable, in
accordance with GAAP, to the operation of the Properties prior to the Effective
Time;

               (iii)
Sellers’ share of the amount of all ad valorem, property, and similar taxes and
assessments (but not including income or franchise taxes) with respect to the
Properties for the 2010 tax year which are unpaid as of the Closing Date, to the
extent attributable to periods prior to the Effective Time, which amount shall,
where possible, be computed based upon the tax rate and values applicable to the
tax assessment period in question; otherwise, the amount of the adjustment under
this paragraph shall be estimated based upon such taxes assessed against the
applicable portion of the Properties for the immediately preceding tax
assessment period just ended; 

               (iv)
An amount equal to the sum of any downward adjustments to the Base Purchase
Price for Title Defects and Casualty Loss; and

3

               (v)
An amount equal to any other downward adjustment as provided elsewhere in this
Agreement or agreed between Sellers and Buyer in writing prior to or at
Closing.

     Section 2.4 Sellers’
Preliminary and Final Settlement Statements. At least three (3) business
days prior to Closing, Sellers shall furnish Buyer a statement (“Preliminary
Settlement Statement”) reflecting Sellers good faith estimate of the amount of
Sellers’ Credits and Buyer’s Credits (in each case, accompanied by the
calculation of same in reasonable detail). The Adjusted Purchase Price payable
at Closing shall be the estimated Adjusted Purchase Price set forth in the
Preliminary Settlement Statement, subject to being finally adjusted after the
Closing as hereinafter provided. Within ninety (90) days after Closing, Sellers
shall provide to Buyer an accounting (the “Final Settlement Statement”) of
Sellers final calculation of the actual amounts of Sellers’ Credits and Buyer’s
Credits for the adjustments to the Base Purchase Price as set out in Section
2.3. Buyer shall have the right for a period of thirty (30) days after receipt
of the Final Settlement Statement (the “Exception Period”) to review and object
to Sellers determinations set forth in the Final Settlement Statement. If Buyer
does not object to such Final Settlement Statement in writing to Sellers before
the end of the Exception Period, the Final Settlement Statement shall become
final and binding upon Sellers and Buyer. Not later than the close of business
on the third business day after the resolution of any timely objection by Buyer
to the Final Settlement Statement, Buyer shall pay to Sellers the amount, if
any, by which the final Adjusted Purchase Price exceeds the estimated Adjusted
Purchase Price paid at Closing, or Sellers shall pay to Buyer the amount, if
any, by which the estimated Adjusted Purchase Price paid at Closing exceeds the
final Adjusted Purchase Price (the payment due in accordance with this sentence
is the “Final Settlement”). Payment of the Final Settlement shall be made by
wire transfer of immediately available funds to an account specified by Sellers
or Buyer, as the case may be.

     Section 2.5 Allocation of
Purchase Price. Buyer and Sellers have agreed upon an allocation of the Base
Purchase Price among individual Properties (each an “Allocated Value”) as set
forth in Schedule 2.5. The Allocated Values shall be used (a) to notify holders
of preferential rights, if any, of Buyer’s offer, (b) as a basis for adjustments
to the Base Purchase Price for defect and casualty loss adjustments and (c) as
otherwise provided in this Agreement.

ARTICLE III. REPRESENTATIONS AND WARRANTIES

     Section 3.1 Sellers’
Representations and Warranties. By their execution of this Agreement,
Sellers jointly and severally represent and warrant to Buyer that the following
statements are true and accurate at and as of the date of Sellers execution of
this Agreement and as of the Closing Date, except as otherwise expressly
provided herein:

     (a) Authority. Sellers
have all the requisite power and authority to enter into and perform this
Agreement.

     (b) Authorization. This
Agreement and all other transaction documents it is to execute and deliver at
Closing (a) have been duly executed by Seller’s (b) constitute the valid and
legally binding obligation of Sellers, and (c) are enforceable against it in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, and other similar laws of general application with respect to creditors and the power of
a court to deny enforcement of remedies generally based upon public policy;
and

4

     (c) No Violation of
Contractual Restrictions. The execution, delivery, and performance of this
Agreement does not conflict with or violate any agreement or instrument to which
Sellers’ are a party or by which it is bound.

     (d) No Violation of Other
Legal Restrictions. The execution, delivery, and performance of this
Agreement does not violate any law, rule, regulation, ordinance, judgment,
decree, or order to which Sellers are subject or by which the Properties are
bound.

     (e) No Restraining
Litigation. There is no action, suit, arbitration, or proceeding by any
person, entity, administrative agency, or governmental body pending or, to
Sellers knowledge, threatened, against it before any court, arbitrator or
governmental agency that seeks damages in connection with, or seeks to restrain,
enjoin, impair, or prohibit the consummation of all or part of the transactions
contemplated hereunder.

     (f) Bankruptcy. There are
no bankruptcy or receivership proceedings pending, or to Sellers’ knowledge,
threatened against it.

     (g) Broker’s Fees. Sellers
are solely responsible for any Brokers’ Fee associated with this Agreement. 

     (h) Compliance with Laws.
To the knowledge of Sellers, the Properties are in compliance with all
applicable laws, except for such non-compliance as would not, individually or in
the aggregate, have a material adverse effect on the ownership, operation or
value of the Properties.

     (i) Litigation. There is
no litigation, action or proceeding pending to which Sellers’ are a party which
relates to the Properties; and to Sellers knowledge, there is no litigation,
action or proceeding threatened against Sellers, which, if determined adversely
to Sellers, would have a material adverse effect on the ownership, operation or
value of the Properties.

     (j) Contract Obligations.
To Sellers knowledge, Exhibit C identifies all material contracts relating to
the Properties. Except as set forth in Schedule 3.1(j), Sellers are not, nor to
Sellers knowledge is any third party, in default in any material respect under
any Contract relating to the Properties.

     (k) Rights to Production.
To Sellers knowledge, no person has any call upon, option to purchase, or
similar rights with respect to any portion of the production of Hydrocarbons
from the Properties from and after the Effective Time.

     (l) Commitments. Except as
set forth on Schedule 3.1(l), there are no commitments to make capital
expenditures with respect to any of the Properties which will individually
require expenditures after the Effective Time in excess of $25,000.00, net to
Sellers’ interest. There are no contractual obligations of Sellers that require
the drilling of additional Wells or other material development operations in order to earn
or, excluding the operation of Pugh clauses in the Leases, to continue to hold,
all or any portion of the Properties.

5

     (m) Gas or Pipeline
Imbalances. To Sellers knowledge, except as set forth on Schedule 3.1(m), as
of the Effective Time, there are no wellhead, pipeline or plant imbalances
attributable to any of the Properties.

     (n) Preferential Rights and
Third Party Consents to Assignment. Except as disclosed on Schedule 3.1(n),
there are no preferential rights applicable to the transactions contemplated
herein. Except as disclosed on Schedule 3.1(o), and except for governmental
consents customarily obtained post-Closing, there are no third party consents
required in connection with the transactions contemplated herein.

     (o) Sales of Hydrocarbons.
Sellers do not have any outstanding obligations to deliver natural gas, natural
gas liquids or other Hydrocarbons produced from or attributable to the
Properties in the future, without then or thereafter being entitled to receive
full value therefor, on account of prepayments, advance payments, take or pay or
similar obligations.

     (p) Payment of Royalties.
All rentals, royalties, shut-in royalties, overriding royalties, and other
payments due pursuant to or with respect to the Leases have been properly and
timely paid.

     (q) Condemnation. To
Sellers knowledge, there is no pending actual or threatened taking (whether
permanent, temporary, whole or partial) of any part of the Properties by reason
of condemnation or the threat of condemnation.

     (r) Receipt of Payments for
Production. Sellers are receiving its Net Revenue Interest share, as shown
on Exhibit A, of proceeds from the sale of Hydrocarbons produced from the
Properties, without suspense, counterclaim or set-off. 

     (s) Taxes and Assessments.
With respect to all taxes relating to the Properties (a) all reports, returns,
statements (including estimated reports, returns or statements), and other
similar filings (the “Tax Returns”) required to be filed by Sellers have been
timely filed with the appropriate governmental authority in all jurisdictions in
which such Tax Returns are required to be filed; and (b) such Tax Returns are
true and correct in all material respects, and (c) all Taxes owed by Sellers
with respect to the Properties have been paid. There are not currently in effect
any extensions or waivers of any statute of limitations of any jurisdiction
regarding the assessment or collection of any taxes related to the Properties;
there are no administrative proceedings or lawsuits that are pending or, to
Sellers knowledge, threatened, against the Properties or against Sellers with
respect to the Properties by any taxing authority; and there are no tax liens on
any of the Properties, except for liens for taxes not yet due. None of the
Properties are subject to tax partnership reporting requirements under
applicable provisions of the Internal Revenue Code. 

     (t) Governmental
Authorizations. Except as would not, individually or in the aggregate, have
a material adverse effect on the ownership, operation or value of the
Properties, (i) Sellers have obtained and is maintaining all federal, state and
local governmental licenses, permits, franchises, orders, exemptions, variances,
waivers, authorizations, certificates, consents, rights, and privileges (the “Governmental Authorizations”) that
are presently necessary or required for the ownership and operation of the
Properties as currently owned and operated, (ii) each of the Properties has been
operated in accordance with the conditions and provisions of such Governmental
Authorizations in all material respects, and (iii) no written notices of
violation have been received by Sellers, and no proceedings are pending or
threatened in writing that might result in any modification, revocation,
termination or suspension of any such Governmental Authorizations or which would
require any corrective or remedial action by Sellers.

6

     (u) Environmental. Sellers
have notified Buyer of all violations of Environmental Laws, Environmental
Liabilities and other adverse environmental conditions to which Sellers are
aware of with respect to the Properties (an “Environmental Issue”) and has
provided Buyer with all material communications received by Sellers from, and
sent by Sellers to, any federal, state or other governmental or administrative
authorities in respect of such Environmental Issues, and Buyer acknowledges
receipt of such communications.

     (i) As used herein,
“Environmental Laws” shall mean all applicable federal, state and local laws,
statutes, rules, codes, ordinances, regulations, certificates, judgments,
decrees, injunctions, writs, orders, directives, interpretations, licenses,
permits and other authorizations of any governmental authority dealing with the
protection of the environment, including the Clean Air Act, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Toxic Substances Control Act, the
Hazardous & Solid Waste Amendments Act of 1984, the Superfund Amendments and
Reauthorization Act of 1986, the Hazardous Materials Transportation Act, the Oil
Pollution Act of 1990, the Federal Water Pollution Control Act, as amended by
the Clean Water Act, and any state laws implementing or substantially equivalent
to the foregoing laws, in each case as the same may be amended from time to
time.

     (ii) As used herein,
“Environmental Liabilities” shall mean any and all liabilities,
responsibilities, claims, suits, damages, costs (including remedial, removal,
response, abatement, clean-up, investigative or monitoring costs and any other
related costs and expenses), other causes of action, damages, settlements,
expenses, charges, assessments, liens, penalties, fines, pre-judgment and
post-judgment interest, attorneys’ fees and other legal fees (a) pursuant to any
agreement, order, consent decree, injunction, judgment or similar documents
(including settlements) arising out of any Environmental Laws, or (b) pursuant
to any claim by a governmental authority or other person for personal injury,
property damage, damage to natural resources, remediation or payment or
reimbursement of remediation costs incurred or expended by a governmental
authority or person arising under any Environmental Laws.

     (v) Hedges. Sellers have
not entered into any hedge contracts, futures contracts, swap contracts, option
contracts, or similar derivatives contracts with respect to the Properties which
will be binding thereon after Closing.

     (w) Wells and Equipment.
To Sellers knowledge, all currently producing Wells and all related Equipment
are in an operable state of repair adequate to maintain normal operations in
accordance with past practices, ordinary wear and tear excepted.

7

     Section 3.2 Buyer’s
Representations and Warranties. By its execution of this Agreement, Buyer
represents and warrants to Sellers that the following statements are true and
accurate, at and as of the date of Buyer’s execution of this Agreement and as of
the Closing Date.

     (a) Authority. Buyer is
duly organized and in good standing under the laws of its state of formation,
Buyer is, or prior to Closing Buyer will be, duly qualified to carry on its
business in the State of New Mexico, and Buyer has all the requisite power and
authority to enter into and perform this Agreement.

     (b) Authorization.

               (i)
This Agreement and all other transaction documents Buyer is to execute and
deliver at Closing (a) have been duly executed by Buyer or its authorized
representatives, (b) constitute the valid and legally binding obligation of such
Party, and (c) are enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization and other
similar laws of general application with respect to creditors, general
principles of equity, and the power of a court to deny enforcement of remedies
generally based upon public policy; and

               (ii)
Buyer has taken all necessary actions pursuant to its governing documents to
fully authorize (a) the execution and delivery of this Agreement and any
transaction documents related to this Agreement, and (b) the consummation of the
transactions contemplated by this Agreement.

     (c) No Violation of
Contractual Restrictions. The execution, delivery, and performance of this
Agreement by Buyer does not conflict with or violate any agreement or instrument
to which it is a party or by which it is bound.

     (d) No Violation of Other
Legal Restrictions. The execution, delivery, and performance of this
Agreement by Buyer does not violate any law, rule, regulation, ordinance,
judgment, decree, or order to which Buyer is subject.

     (e) No Restraining
Litigation. There is no action, suit, arbitration, or proceeding by any
person, entity, administrative agency, or governmental body pending or, to
Buyer’s knowledge, threatened, against it before any court, arbitrator or
governmental agency that seeks damages in connection with, or seeks to restrain,
enjoin, impair, or prohibit the consummation of all or part of the transactions
contemplated hereunder.

     (f) Bankruptcy. There are
no bankruptcy, reorganization, or receivership proceedings pending, being
contemplated by, or to Buyer’s knowledge, threatened against it.

     (g) Broker’s Fees. Buyer
has not incurred any obligation for brokers’, finders’, or similar fees for
which Sellers will be liable or responsible in any way.

     (h) Independent
Evaluation. Buyer is an experienced and knowledgeable investor in the oil
and gas business and the business of owning and operating oil and gas
properties. In making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has relied on (i) its
own independent due diligence investigation of the Properties, and (ii) its own
expertise and legal, land, tax, reservoir engineering, and other professional
counsel concerning this transaction, the Properties, and the value thereof.

8

     (i) No Investment Company.
Buyer is not an investment company or a company controlled by an investment
company within the meaning of the Investment Company Act of 1940, as amended, or
subject in any respect to the provisions of that Act.

     Section 3.3 Representations
and Warranties Exclusive. All representations and warranties contained in
this Agreement and the documents delivered in connection herewith, are
exclusive, and are given in lieu of all other representations and warranties,
express, implied, or statutory.

ARTICLE IV. WARRANTIES AND DISCLAIMERS

     Section 4.1 Title; Condition
and Fitness of the Properties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT AND IN THE ASSIGNMENT, SELLERS WILL CONVEY TO BUYER THE PROPERTIES
WITHOUT ANY EXPRESS, STATUTORY, OR IMPLIED WARRANTY OR REPRESENTATION OF ANY
KIND, INCLUDING, WITHOUT LIMITATION, WARRANTIES RELATING TO (i) TITLE, (ii) THE
CONDITION OF THE PROPERTIES, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY OF THE PROPERTIES, (iv) ANY IMPLIED OR EXPRESS WARRANTY OF THE
FITNESS OF THE PROPERTIES FOR A PARTICULAR PURPOSE, (v) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (vi) ANY RIGHTS OF
BUYER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN
OF THE ADJUSTED PURCHASE PRICE, (vii) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM
FROM DEFECTS, WHETHER KNOWN OR UNKNOWN; (viii) ANY IMPLIED WARRANTY OF FREEDOM
FROM PATENT OR TRADEMARK INFRINGEMENT, (ix) ANY AND ALL IMPLIED WARRANTIES
EXISTING UNDER APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, (x) ANY IMPLIED OR
EXPRESS WARRANTY REGARDING ANY ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO
THE ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH, AND (xi) ANY RIGHTS
OF BUYER UNDER STATUTES TO CLAIM DIMINUTION OF VALUE. EXCEPT AS SET FORTH IN
THIS AGREEMENT AND IN THE ASSIGNMENT, BUYER WILL ACCEPT THE PROPERTIES “AS IS,”
“WHERE IS,” AND “WITH ALL FAULTS” AND IN THEIR PRESENT CONDITION AND STATE OF
REPAIR. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT, SELLERS MAKE NO REPRESENTATION OR WARRANTY AS TO
(a) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR DELIVERABILITY OF ANY OIL,
GAS, OR OTHER MINERALS OR RESERVES (IF ANY) IN, UNDER, OR ATTRIBUTABLE TO THE
PROPERTIES, (b) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY, OR
ENVIRONMENTAL CONDITION OF THE PROPERTIES, OR (c) THE GEOLOGICAL OR ENGINEERING
CONDITION OF THE PROPERTIES OR ANY VALUE THEREOF.

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     Section 4.2 Information About
the Properties. EXCEPT AS SET FORTH IN THIS AGREEMENT AND IN THE ASSIGNMENT,
SELLERS MAKE NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY, OR IMPLIED, AS
TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR
RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE PROPERTIES OR OTHERWISE
CONSTITUTING A PORTION OF THE PROPERTIES. EXCEPT AS SET FORTH IN THIS AGREEMENT
AND IN THE ASSIGNMENT, ANY DATA, INFORMATION, OR OTHER RECORDS FURNISHED BY
SELLERS ARE PROVIDED TO BUYER AS A CONVENIENCE TO BUYER AND BUYER’S RELIANCE ON
OR USE OF THE SAME IS AT BUYER’S SOLE RISK. 

     Section 4.3 NORM. BUYER
ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS PRODUCING FORMATIONS CAN
CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL (“NORM”). SCALE FORMATION OR
SLUDGE DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM ON EQUIPMENT AND OTHER
PROPERTY. SOME OR ALL OF THE EQUIPMENT, MATERIALS, AND PROPERTY SUBJECT TO THIS
AGREEMENT MAY HAVE LEVELS OF NORM ABOVE BACKGROUND LEVELS. A HEALTH HAZARD MAY
EXIST IN CONNECTION WITH THIS EQUIPMENT, MATERIALS, AND OTHER PROPERTY BY REASON
THEREOF. THEREFORE, BUYER MAY NEED TO FOLLOW SAFETY PROCEDURES AND OTHER
APPLICABLE REGULATIONS WHEN HANDLING THIS EQUIPMENT AND OTHER PROPERTY.

     Section 4.4 Subrogation of
Warranties. To the extent transferable, Sellers shall grant to Buyer, its
successors and assigns, full power and right of substitution and subrogation in
and to all covenants, indemnities and warranties (including warranties of title)
given or made by preceding owners, vendors, or others with respect to the
Properties.

ARTICLE V. DUE DILIGENCE REVIEW OF THE PROPERTIES

     Section 5.1 Title Due
Diligence Examination.

     (a) From the date of this
Agreement until 5:00 p.m. (local time in Midland, Texas) on the date that is 90
days after the Closing Date (the “Examination Period”), Sellers shall afford to
Buyer and its authorized representatives reasonable access during normal
business hours to the office, personnel and books and records of Sellers,
including the right to make copies of such books and records, in order for Buyer
to conduct a title examination as it may in its sole discretion choose to
conduct with respect to the Properties in order to determine whether Title
Defects (as below defined) exist (“Buyer’s Title Review”). Such books and
records shall include all abstracts of title, title opinions, title files,
ownership maps, lease files, assignments, division orders, operating records and
agreements, well files, financial and accounting records, geological,
geophysical and engineering records, in each case insofar as same may now be in
existence and in the possession of Sellers, excluding, however, any information
that Sellers are prohibited from disclosing by third-party confidentiality
restrictions; provided, however, that, at Buyer’s request, Sellers shall request
waivers of such confidentiality restrictions. The cost and expense of Buyer’s
Title Review, if any, shall be borne solely by Buyer. 

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     (b) If Buyer discovers any Title
Defect affecting any of the Properties, Buyer shall notify Sellers prior to the
expiration of the Examination Period of such alleged Title Defect. To be
effective, such notice (“Title Defect Notice”) must (i) be in writing, (ii) be
received by Sellers prior to the expiration of the Examination Period, (iii)
describe the Title Defect in reasonable detail (including any alleged variance
in the Net Revenue Interest or Working Interest), (iv) identify the specific
Property or Properties affected by such Title Defect, and (v) include the value
of such Title Defect as determined by Buyer in good faith. Any matters that may
otherwise constitute Title Defects, but of which Sellers have not been
specifically notified by Buyer in accordance with the foregoing (excluding,
however, breaches of Sellers special warranty of title), shall be deemed to have
been waived by Buyer for all purposes. Upon the receipt of such effective Title
Defect Notice from Buyer, Sellers shall have the option, but not the obligation,
to attempt to cure such Title Defect at any time prior to the Closing. The cost
of such cure or attempted cure of such Title Defect shall be borne by
Sellers.

     (c) Subject to Section 5.1(d),
with respect to each Title Defect described in a Title Defect Notice received
prior to Closing that is not cured on or before the Closing Date, the Base
Purchase Price shall be reduced by the amount by which the value of the affected
Property is impaired as a result of the existence of such Title Defect (the
“Title Defect Amount”). Subject to Section 5.1(d), with respect to each Title
Defect described in a Title Defect Notice received after Closing, Sellers shall
pay to Buyer the Title Defect Amount in respect of such Title Defect. The Title
Defect Amount shall be determined as follows:

               (i)
If such Title Defect is in the nature of Sellers’ Net Revenue Interest in the
Properties being less than the Net Revenue Interest set forth on Exhibit “B” and
the Working Interest remains the same, then Buyer and Sellers agree that the
Base Purchase Price shall be reduced by an amount equal to the Allocated Value
of the affected Property multiplied by the percentage reduction in such Net
Revenue Interest as a result of such Title Defect;

               (ii)
If such Title Defect is in the nature of a lien, then Sellers and Buyer agree
that the Title Defect Amount shall be equal to the amount required to fully
discharge such lien.

               (iii) If the Title Defect results
from any matter not described in Section 5.1(c)(i) or Section 5.1(c)(ii) above,
the Title Defect Amount shall be an amount equal to the difference between the
value of the affected Property as impaired by such Title Defect and the value of
such Property without such Title Defect (taking into account the Allocated Value
of the Property).

     (d) Notwithstanding any provision
hereof to the contrary, no adjustment for Title Defects shall be made unless the
aggregate Title Defect Values attributable to all uncured Title Defects timely
asserted by Buyer exceeds $100,000, it being understood that such amount is a
threshold, rather than a deductible.

     (e) As used in this Section 5.1,
“Defensible Title” means such title to the Properties by Sellers that (i)
entitles Sellers to receive not less than the percentage set forth in Exhibit
“A” as Sellers’ “Net Revenue Interest” of all Hydrocarbons produced, saved and
marketed from the Properties; (ii) obligates Sellers to bear not greater than
the percentage set forth in Exhibit “A” as Sellers’ “Working Interest” of the
costs and expenses relating to the maintenance, development and operation of the
Properties; and (iii) is free and clear of all liens, claims and encumbrances,
except Permitted Encumbrances.

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    (f) As used in this Section 5.1, “Permitted Encumbrances”
means:

               (i)
liens for taxes which are not yet delinquent or which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established; 

               (ii)
normal and customary liens of co-owners under operating agreements, unitization
agreements, and pooling orders relating to the Properties, which obligations are
not yet due and pursuant to which Sellers are not in default; 

               (iii)
mechanic’s and materialman’s liens relating to the Properties, which obligations
are not yet due and pursuant to which Sellers are not in default; 

               (iv)
preferential rights to purchase the Properties that have expired or been waived
prior to Closing, and required consents to the transfer of the Properties,
provided that such required consents are obtained prior to Closing (other than
the consent of any governmental authority customarily obtained post-Closing);

               (v)
liens created or arising by operation of law to secure obligations as a
purchaser of oil and gas in respect of obligations that are not past-due; 

               (vi)
valid and subsisting laws applicable to the Properties; and 

               (vii)
minor defects and irregularities in title or other restrictions that are of the
nature customarily accepted by prudent purchasers of oil and gas properties and
do not materially affect the value of any Property encumbered thereby or
materially impair the ability of the obligor to use any such property in its
operations; provided the effect thereof does not operate to reduce the net
revenue interest of Sellers below the net revenue interest set forth in Exhibit
“A” or increase the working interest of Sellers above the working interest set
forth in Exhibit “A” (unless there is a corresponding increase in the net
revenue interest for such well or unit).

     (g) “Title Defect” shall mean any
particular defect in or failure of Sellers’ ownership of any Property or
Properties: (i) that causes Sellers to not have Defensible Title to such
Property or Properties, (ii) regarding which a Title Defect Notice has been
timely and otherwise validly delivered and (iii) that has attributable thereto a
Title Defect Amount in excess of $10,000. Notwithstanding any other provision in
this Agreement to the contrary, defects or irregularities that have been cured
or remedied by the passage of time, including, without limitation, applicable
statutes of limitation or statutes for prescription, shall not constitute, and
shall not be asserted as, Title Defects.

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     (h) The term “Title Benefit”
shall mean (i) Sellers’ Net Revenue Interest in any Property is greater than the
Net Revenue Interest with respect to such Property set forth in Exhibit “B”, or
(ii) Sellers’ Working Interest in any Property is less than the Working Interest
set forth in Exhibit “B” for such Property without a proportionate decrease in
Sellers’ Net Revenue Interest in such Property. If prior to expiration of the
Examination Period Buyer identifies a Title Benefit affecting the Properties,
Buyer shall promptly notify Sellers of such Title Benefit. Subject to the
limitations set out below, Sellers shall be entitled to an upward adjustment to
the Base Purchase Price with respect to all Title Benefits of which Sellers
provides Buyer notice (a “Title Benefit Notice”) in writing prior to the
expiration of the Examination Period. If the Title Benefit is in the nature of
Sellers’ Net Revenue Interest in a Property being greater than the Net Revenue
Interest set forth on Exhibit “B” and the Working Interest remains the same,
then Buyer and Sellers agree that, subject to the limitation set out below, the
Base Purchase Price shall be increased by an amount (the “Title Benefit Amount”)
equal to the Allocated Value for the relevant Property multiplied by a fraction,
the numerator of which is the amount of the increase in such Net Revenue
Interest as a result of such Title Benefit and the denominator of which is the
Net Revenue Interest specified for such Property on Exhibit “B”. As to other
Title Benefits, the Title Benefit Amount shall be determined in accordance with
the criteria set forth in the definition of “Title Defect Amount.” No adjustment
shall be made with respect to any Title Benefit unless the Title Benefit Amount
attributable thereto exceeds $10,000. Title Benefit Amounts shall be offset
first against Title Defect Amounts, and no adjustment to the Purchase Price with
respect to Title Benefits shall be made unless, and then only to the extent
that, after offsets against Title Defect Amounts, the aggregate value of Title
Benefit Amounts exceeds $100,000. 

      (i)
In the event the Parties do not agree on whether a Title Defect exists, whether
a Title Defect has been cured, or the Title Defect Amount attributable thereto,
then, at Buyer’s election, either (i) if Closing has not yet occurred, the
affected Property shall be excluded from this Agreement and from the Properties
delivered at Closing, and the Base Purchase Price shall be reduced by the
Allocated Value thereof; (ii) if Closing has occurred, Buyer shall, at cost of
Sellers, convey the affected Party back to Sellers and Sellers shall pay to
Buyer the Allocated Value thereof or (iii) the Dispute shall be referred to the
Independent Expert for determination pursuant to Section 13.3. In the event the
Dispute is referred to the Independent Expert for determination and Closing has
not yet occurred, (i) the affected Properties shall be excluded from the
Properties delivered at Closing, (ii) Sellers shall execute and deliver to the
Escrow Agent an assignment of the affected Properties to Buyer, (iii) the
Adjusted Purchase Price delivered at Closing shall be reduced by the Allocated
Values of the affected Properties, and Buyer shall deposit an amount equal to
the Allocated Values of the affected Properties with the Escrow Agent at
Closing, and (iv) the amounts and assignments so held in escrow shall be
disbursed in accordance with the determination of the Independent Expert. In the
event the Dispute is referred to the Independent Expert for determination and
Closing has occurred, (i) Buyer shall execute and deliver to the Escrow Agent an
assignment of the affected Properties to Sellers, (ii) Sellers shall deposit an
amount equal to the Allocated Values of the affected Properties with the Escrow
Agent, and (iii) the amounts and assignments so held in escrow shall be
disbursed in accordance with the determination of the Independent Expert.

     Section 5.2 Buyer
Indemnification. Buyer hereby RELEASES and INDEMNIFIES and SHALL DEFEND AND
HOLD HARMLESS Sellers and its employees, agents, representatives, contractors,
successors, and assigns from and against any and all Claims (hereinafter
defined) arising from Buyer’s inspection of the Properties under this Article V,
including Claims for personal injuries to or death of any person or damage to
the property of any person, except for injuries, death or damage to Property
caused by the gross negligence or willful misconduct of Sellers or its
employees, agents, representatives, contractors, or consultants.

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     Section 5.3 Casualty Loss.
If, subsequent to the date of this Agreement and prior to the Closing, all or
any portion of the Properties are destroyed by fire or other casualty or are
taken in condemnation or under the right of eminent domain (collectively,
“Casualty Loss”) or proceedings for such purposes are pending or threatened, the
Base Purchase Price shall be adjusted by the amount by which the value of the
Properties has been diminished as a result of such Casualty Loss, provided that,
in no case shall the Base Purchase Price be reduced by more than a total $50,000
in respect of all Casualty Losses. Sellers shall retain all sums paid to Sellers
by third parties by reason of the destruction or taking of such Properties, and
shall retain all of the right, title and interest of Sellers in and to any
unpaid awards or other payments from third parties arising out of the
destruction, taking or pending or threatened taking as to such Properties. If
the Parties are unable to agree upon the amount by which the value of the
affected Property has been diminished as a result of the Casualty Loss, then the
affected Property shall be excluded from the Properties delivered at Closing,
and the Base Purchase Price shall be adjusted downward by the Allocated Value
thereof. Notwithstanding any provision hereof to the contrary, no adjustment for
Casualty Losses shall be made unless the aggregate of all Casualty Losses
exceeds $50,000, it being understood that such amount is a threshold, rather
than a deductible.

     Section 5.4 Consents;
Preferential Rights; Consents. As soon as practicable after execution of
this Agreement, Sellers shall send requests to the holders of required consents
to assignment for their consent to assignment of the affected Properties to
Buyer. The form and content of all solicitations for such consents shall be
agreed upon by Buyer and Sellers and shall not be inconsistent with any of the
terms of this Agreement. Buyer agrees to furnish such information as may be
reasonably requested, and to otherwise reasonably cooperate with Sellers, in
connection with efforts to contain such consents. In the event a required
consent is not obtained prior to Closing, the affected Property will be excluded
from the Properties delivered at Closing and will not be sold to Buyer, and the
Base Purchase Price will be adjusted downward by the Allocated Value of the
affected Property.

     (b) Preferential Rights.
Promptly after execution of this Agreement, Sellers shall use the Allocated
Values set forth on Schedule 2.5 to provide notice to each holder of a
preferential right to purchase all or any portion of the Properties (a
“Preferential Right”). If a third party gives valid notice of its exercise of a
Preferential Right to purchase any of the Properties, the affected Property will
be excluded from the Properties delivered at Closing and will not be sold to
Buyer, and the Base Purchase Price will be adjusted downward by the Allocated
Value of the affected Property.

ARTICLE VI. CONDITIONS PRECEDENT TO CLOSING

     Section 6.1 Conditions
Precedent to Sellers’ Obligation to Close. Sellers shall be obligated to
consummate the sale of the Properties as contemplated by this Agreement on the
Closing Date, provided the following conditions precedent have been satisfied or
have been waived in writing by Sellers:

14

     (a) All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and at and as of Closing as
though such representations and warranties were made at and as of such time and
Sellers shall have received a certificate signed by Buyer to such effect; 

     (b) Buyer shall have complied in
all material respects with all obligations and conditions contained in this
Agreement to be performed or complied with by Buyer on or prior to the Closing
and Sellers shall have received a certificate signed by Buyer to such
effect;

     (c) No suit, action or other
proceedings shall be pending before any court or governmental entity in which it
is sought by a person or entity other than the Parties hereto or any of their
affiliates, officers, directors, or employees to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement, or
to obtain damages in connection with the transactions contemplated herein, nor
shall there be any investigation by a governmental entity pending which might
result in any such suit, action or other proceedings seeking to restrain, enjoin
or otherwise prohibit the consummation of the transactions contemplated by this
Agreement;

     (d) All Preferential Rights shall
have been exercised, been waived, or expired; and

     (e) The aggregate sum of downward
adjustments to the Purchase Price for Title Defects and Casualty Losses, and for
exclusion of Properties due to the exercise of Preferential Rights or failure to
obtain required consents shall not exceed fifteen percent (15%) of the Base
Purchase Price.

     Section 6.2 Conditions
Precedent to Buyer’s Obligation to Close. Buyer shall be obligated to
consummate the purchase of the Properties as contemplated by this Agreement on
the Closing Date, provided the following conditions precedent have been
satisfied or have been waived in writing by Buyer:

     (a) All representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and at and as of Closing
as though such representations and warranties were made at and as of such time
and Buyer will have received a certificate signed by Sellers to such effect;
provided, however, that any representations or warranties that, by their express
terms, are required to be true and correct only as of Closing shall be true and
correct only as of Closing; 

     (b) Sellers shall have complied
in all material respects with all obligations and conditions contained in this
Agreement to be performed or complied with by Sellers on or prior to the Closing
and Buyer will have received a certificate signed by Sellers to such effect;

     (c) No suit, action or other
proceedings shall be pending before any court or governmental entity in which it
is sought by a person or entity other than the Parties hereto or any of their
affiliates, officers, directors, or employees to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement, or
to obtain damages in connection with the transactions contemplated herein, nor
shall there be any investigation by a governmental entity pending which might
result in any such suit, action or other proceedings seeking to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement;

15

     (d) All Preferential Rights shall
have been exercised, been waived, or expired; 

     (e) The aggregate sum of downward
adjustments to the Purchase Price for Title Defects and Casualty Losses, and for
exclusion of Properties due to the exercise of Preferential Rights or failure to
obtain required consents shall not exceed fifteen percent (15%) of the Base
Purchase Price; and 

     (f) No adverse material change in
the Properties, or Sellers’ interest therein, shall have occurred between May
18, 2010 and the Closing Date.

     (g) At or before Closing, Sellers
shall have delivered a full and complete release of the liens and security
interests encumbering the Properties, if any, including, without limitation,
liens and security interests as well as all mechanics’ and materialmen’s liens
and other liens encumbering the Properties, such releases, in each case, to be
reasonably acceptable to Buyer.

   Section 6.3 Termination of
Agreement.

     (a) This Agreement and the
transactions contemplated hereby may be terminated in the following
instances:

               (i)
By Sellers if any of the conditions set forth in Section 6.1 are not satisfied
in all material respects or waived as of the Closing Date;

               (ii)
By Buyer if any of the conditions set forth in Section 6.2 are not satisfied in
all material respects or waived as of the Closing Date; or

               (iii)
At any time by the mutual written agreement of Buyer and Sellers.

     (b) If Sellers terminate this
Agreement in accordance with Section 6.3(a)(i) due to Buyer’s material breach of
its representations, warranties or covenants herein, Sellers shall receive the
Deposit, together with all earnings thereon, as liquidated damages, not as
penalty, as its sole and exclusive remedy. If this Agreement is terminated for
any other reason, then the Deposit, together with all earnings thereon, shall be
returned to Buyer. If Sellers terminate this Agreement for any reason other than
as specified in the first sentence of this paragraph, Buyer may seek such
damages and other relief, including specific performance, as may be available at
law or in equity. If Buyer terminates this Agreement for any reason, Buyer shall
not be entitled to seek damages other than return of the Deposit and any
earnings thereon.

     (c) Buyer terminates this
Agreement in accordance with Section 6.3(a)(ii) due to Sellers’ breach of its
representations and warranties or covenants hereunder, then, in addition to the
return of the Deposit, Buyer may seek such damages and other relief, including
specific performance, as may be available at law or equity.

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ARTICLE VII. CLOSING AND POST-CLOSING OBLIGATIONS

     Section 7.1 Closing Date.
The closing of the transactions contemplated by this Agreement (the “Closing”)
shall occur at 10:00 a.m. on June 30, 2010 at the offices of Simplex Energy
Solutions, Midland, Texas. The date on which Closing actually occurs is referred
to herein as the “Closing Date.” If Closing does not occur on or before June 30,
2010, this Agreement shall automatically terminate; provided, however, that
Buyer shall have the right, but not the obligation, at its sole discretion, upon
written notice delivered to Sellers on or before June 30, 2010, to extend the
Closing by thirty (30) days. If Buyer exercises its right to extend the Closing,
then the Deposit shall be increased to $50,000.00 (Fifty Thousand Dollars), and
contemporaneously with such election, Buyer shall deposit an additional
$25,000.00 (Twenty Five Thousand Dollars) into the Escrow Account, which amount
shall be deemed included in the Deposit for all purposes.

     Section 7.2 Closing. At
Closing, the following events shall occur and the Parties shall execute,
acknowledge (if necessary) and exchange, as applicable, the items set forth
below. All events of Closing shall be deemed to have occurred simultaneously
with the others, regardless of when actually occurring, and each is a condition
precedent to the other.

     (a) Buyer shall deliver the
Adjusted Purchase Price, less the Deposit (together with earnings thereon), to
Sellers by wire transfer in immediately available funds to the account(s)
designated by Sellers;

     (b) Buyer and Sellers shall
direct Escrow Agent to deliver the Deposit (together with earnings thereon) to
Sellers;

(c) Buyer and Sellers shall execute the Preliminary Settlement
Statement;

     (d) Sellers shall execute,
acknowledge, and deliver to Buyer, and Buyer shall accept, an Assignment and
Bill of Sale (or Assignments and Bills of Sale if more than one such Assignment
and Bill of Sale is required to effect the Closing) in the form of Exhibit “E”
(the “Assignment”) in sufficient counterparts to facilitate recording.

     (e) With respect to state,
federal and tribal Leases, Buyer and Sellers shall execute counterpart
assignments of operating rights and of record title to such Leases on officially
approved forms to satisfy applicable governmental requirements, if
applicable.

     (f) Each Seller shall deliver to
Buyer a certificate pursuant to Internal Revenue Code Section 1445, in the form
of Exhibit “F”, certifying that such Seller is not a foreign person. 

     (g) Sellers and Buyer shall
execute, acknowledge and deliver transfer orders or letters in lieu thereof
directing all purchasers of production to make payment to Buyer of proceeds
attributable to production from the Properties.

     (h) Sellers and Buyer shall
execute and deliver change of operator forms, in form and in counterparts
sufficient for filing with applicable regulatory authorities to effectuate
transfer of operatorship of the Properties to Buyer; provided, however, that if
Buyer and Sellers enter into a Transition Services Agreement as provided in
Section 7.2(k) below, such change of operator forms shall not be executed and
delivered at Closing, but instead shall be executed and delivered prior to
expiration or termination of the Transition Services Agreement.

17

     (i) Buyer shall deliver to
Sellers the certificate required pursuant to Section 6.1(a) and Section 6.1(b)
in the form attached as Exhibit “G” hereto.

     (j) Sellers shall deliver to
Buyer the certificate required pursuant to Section 6.2(a) and Section 6.2(b), in
the form of Exhibit “H” attached hereto.

     (k) If requested by Buyer, Buyer
and Sellers shall execute and deliver a Transition Services Agreement, in the
form of Exhibit “I” attached hereto, pursuant to which, for the consideration
and subject to the terms expressed therein, Sellers will continue to operate the
Properties on Buyer’s behalf.

     (l) The Parties shall execute and
deliver such other documents, agreements and instruments that the Parties agree
in writing shall be delivered at Closing.

ARTICLE VIII. OPERATIONS DURING THE INTERIM PERIOD

     Section 8.1 Operations.
With respect to operations of the Properties during the period between the
execution of this Agreement and the Closing Date (the “Interim Period”), Sellers
covenant that Sellers shall, except for emergency action taken in the face of
serious risk of life, property, or the environment, (i) obtain Buyer’s prior
written approval of all future expenditures and proposed contracts and
agreements relating to the Properties that involve individual commitments of
more than $25,000, net to Sellers’ interest; and (ii) obtain Buyer’s written
approval before making an election under any material agreement. Furthermore,
during the Interim Period, Sellers will not, without the prior written consent
of Buyer, (a) enter into any agreement or arrangement transferring, selling, or
encumbering any of the Properties; (b) grant any preferential or other similar
right to purchase any Properties; or (c) enter into any material contract
relating to the Properties, including any new production sales contract
extending beyond the Closing Date and not terminable on thirty (30) days’ notice
or less. Sellers shall notify Buyer of any emergency action taken, and to the
extent reasonably practicable, obtain Buyer’s prior approval of such
actions.

ARTICLE IX. CERTAIN POST-CLOSING OBLIGATIONS

     Section 9.1 Delivery of
Records. Within fourteen (14) days after the later to occur of (i) the
Closing Date or (ii) expiration or termination of the Transition Services
Agreement, if applicable, Sellers shall deliver the Records to Buyer, at a
location designated by Buyer. Buyer shall promptly reimburse Sellers for all
reasonable costs of shipping the Records. Sellers shall have the right, upon
reasonable advance notice to Buyer, to have reasonable access during Buyer’s
normal office hours and the right to copy (at Sellers’ expense) all original
Records delivered to Buyer for a period of five (5) years after the Closing
Date.

     Section 9.2 Revenues and
Expenses.

18

     (a) Revenues. After
Closing, to the extent not accounted for in Buyer’s Credits and Sellers’ Credits
and adjustments under Section 2.3 hereof: 

               (i)
All proceeds, trade credits, accounts receivables, note receivables, income, and
other revenues and receivables attributable to the ownership or operation of the
Properties prior to the Effective Time shall belong to and be retained or paid
to Sellers, including, without limitation, all adjustments, credits or refunds
(a) to ad valorem, property, production, excise, severance, and any other taxes
(except income or franchise taxes) based upon or measured by the ownership of
the Properties or the production of Hydrocarbons or the receipt of proceeds
therefrom, or (b) under any contracts or agreements affecting the Properties, to
the extent relating to periods prior to the Effective Time; and

               (ii)
All proceeds, trade credits, accounts receivables, note receivables, income, and
other revenues and receivables attributable to the ownership or operation of the
Properties from and after the Effective Time shall belong to and be retained or
paid to Buyer, including, without limitation, all adjustments, credits or
refunds (a) to ad valorem, property, production, excise, severance, and any
other taxes (except income or franchise taxes) based upon or measured by the
ownership of the Properties or the production of Hydrocarbons or the receipt of
proceeds therefrom, or (b) under any contracts or agreements affecting the
Properties, to the extent relating to periods after the Effective Time.

     (b) Expenses. After
Closing, to the extent not accounted for in Buyer’s Credits and Sellers’ Credits
and adjustments under Section 2.3 hereof:

               (i)
All accounts payable, trade payables, taxes payable, notes payable, and other
costs, expenses and payables with respect to the Properties which are
attributable under GAAP to the period prior to the Effective Time shall be the
obligations of and be paid by Sellers; and 

               (ii)
All accounts payable, trade payables, taxes payable, notes payable, and other
costs, expenses and payables with respect to the Properties which are
attributable under GAAP to the period from and after the Effective Time shall be
the obligation of and be paid by Buyer.

     (c) Post-Closing
Obligations. If any funds are received by a Party hereto that belong to
another Party, the Party receiving such funds shall immediately pay the funds
over to the other Party entitled thereto. If an invoice or other obligation to
be discharged is, under the terms of this Agreement, partially the obligation of
Sellers and partially the obligation of Buyer, the Party receiving such invoice
or request to discharge the obligation shall promptly notify the other Party
which shall promptly pay over its share thereof after receipt of such notice. If
an invoice or other obligation to be discharged is, under the terms of this
Agreement, solely the obligation of Sellers or Buyer, then that Party shall
promptly pay or discharge such obligation upon receipt of notice of same.

     Section 9.3 Suspense
Funds. At Closing, Sellers shall transfer all proceeds of production, and
penalties and interest with respect thereto, payable to third parties but held
in suspense by Sellers (“Suspense Funds”) as operator of any of the Properties.
Buyer, from and after Closing, shall accept sole responsibility for
disbursement of the Suspense Funds so delivered to Buyer, and shall release
Sellers from, and shall defend, indemnify and hold Sellers harmless from and
against, any and all Claims relating to, arising out of, or connected with,
directly or indirectly, such Suspense Funds; provided, however, that Buyer shall
have no liability for penalties or interest with respect thereto to the extent
attributable to periods prior to the Effective Time.

19

ARTICLE X. BUYER’S ASSUMPTION OF OBLIGATIONS

     Section 10.1 Buyer’s
Assumption of Obligations. Upon and after Closing, Buyer will assume, and
will pay and perform all of the obligations, liabilities, and duties arising
under the Leases and the Contracts, or otherwise relating to the ownership and
operation of the Properties, in each case to the extent attributable to periods
from and after the Effective Time (collectively, the “Buyer’s Assumed
Obligations”).

ARTICLE XI. INDEMNITIES

     Section 11.1 Definition of
Claims. As used in this Agreement, the term “Claims” means any and all
direct or indirect, demands, claims, notices of violation, notices of probable
violation, filings, investigations, administrative proceedings, actions, causes
of action, suits, and other legal proceedings, judgments, assessments, damages,
deficiencies, taxes, penalties, fines, obligations, responsibilities,
liabilities, payments, charges, costs, and expenses (including without
limitation costs and expenses of operating the Properties) of any kind or
character (whether or not asserted prior to Closing, and whether known or
unknown, fixed or unfixed, conditional or unconditional, based on negligence,
strict liability, breach of representation, warranty or agreement, or otherwise,
choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent, or otherwise), including, without limitation, penalties
and interest on any amount payable as a result of any of the foregoing, any
legal or other costs and expenses incurred in connection with investigating or
defending any Claim, and all amounts paid in settlement of Claims. Without
limiting the generality of the foregoing, the term “Claims” specifically
includes, without limitation, any and all Claims arising from, attributable to
or incurred in connection with any (i) breach of contract, (ii) loss or damage
to property, injury to or death of persons, and other tortious injury, and (iii)
violations of applicable laws, rules, regulations, orders or any other legal
right or duty actionable at law or equity.

     Section 11.2 Buyer’s
Indemnity. From and after Closing, Buyer shall indemnify, defend and hold
harmless Sellers from and against any and all Claims caused by, resulting from
or incidental to:

          (a)
Buyer’s Assumed Obligations;

          (b)
any inaccuracy of any representation or warranty of Buyer set forth in this
Agreement; and

          (c)
any breach of, or failure to perform or satisfy, any of the covenants and
obligations of Buyer hereunder.

     Section 11.3 Sellers’
Indemnity.

20

          (a)
Sellers’ Indemnity. From and after Closing, Sellers shall jointly and
severally indemnify, defend and hold harmless Buyer from and against any and all
Claims caused by, resulting from or incidental to:

               (i)
Sellers’ ownership or operation of the Properties prior to the Effective
Time;

               (ii)
Any inaccuracy of any representation or warranty of Sellers set forth in this
Agreement; 

               (iii)
any breach of, or failure to perform or satisfy, any of the covenants and
obligations of Sellers hereunder prior to Closing; and

               (iv)
Any obligations for brokerage or finder’s fee or commission incurred in
connection with the transactions contemplated hereby.

          (b)
Limitations on Sellers’ Indemnity Obligation.

               (i)
In no event shall Sellers’ liability for indemnity obligations (including
Sellers’ obligation to defend and hold harmless) under this Article XI exceed
twenty-five percent (25%) of the Base Purchase Price (the “Indemnity Cap”);
provided, however, that any claim for indemnification from Sellers with respect
to the breach of any of Sellers’ representations and warranties in Sections
3.1(a) or 3.1(b) (“Sellers’ Fundamental Corporate Representations”) shall not be
subject to the Indemnity Cap.

               (ii)
Any claim for indemnification (including any claim for defense and hold
harmless) from Sellers under this Article XI shall be brought within two (2)
years after the Closing Date or shall be deemed waived, except as follows: (i)
claims for indemnification with respect to the breach of any of Sellers’
Fundamental Corporate Representations may be brought at any time after the
Closing Date; and (ii) claims for indemnification with respect to Sellers’
breach of its representations and warranties in Section 3.1(t) (Taxes) and
Section 3.1(q) (Royalties) may be brought at any time prior to the expiration of
the applicable statute of limitations with respect to such claims, plus ninety
(90) days.

     Section 11.4 Covered Claims
and Parties. All indemnities of an indemnified party set forth in this
Agreement extend to the shareholders, members, officers, directors, employees,
partners, and affiliates of such indemnified party. The indemnities set forth in
this Agreement do not extend to an indemnified Claim to the extent that such
Claim (or portion thereof) is the result of the gross negligence, willful
misconduct, or fraud of the indemnified party.

     Section 11.5 Express
Negligence Disclosure. UNLESS THIS AGREEMENT EXPRESSLY PROVIDES TO THE
CONTRARY, THE INDEMNITY, RELEASE, WAIVER AND ASSUMPTION PROVISIONS SET FORTH IN
THIS AGREEMENT APPLY REGARDLESS OF WHETHER THE INDEMNIFIED PARTY (OR ITS
EMPLOYEES, PARTNERS, AGENTS, CONTRACTORS, SUCCESSORS OR ASSIGNS) CAUSES, IN
WHOLE OR PART, AN INDEMNIFIED CLAIM, INCLUDING WITHOUT LIMITATION INDEMNIFIED
CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR IN PART, FROM, OUT OF OR IN
CONNECTION WITH THE CONDITION OF THE PROPERTY OR THE INDEMNIFIED PARTY’S (OR ITS EMPLOYEES’, PARTNERS’, AGENTS’,
REPRESENTATIVES’, CONTRACTORS’, SUCCESSORS’ OR ASSIGNS’) SOLE, JOINT,
COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY, EXCLUDING, HOWEVER,
THE INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. 

21

     Section 11.6 Notices and
Defense of Indemnified Claims. Each indemnified Party shall immediately
notify in writing each indemnifying Party of any Claim of which it becomes aware
and for which it is entitled to indemnification from such indemnifying Party
under this Agreement. The indemnifying Party shall be obligated to defend at the
indemnifying Party’s sole expense any litigation, arbitration or other
administrative or adversarial proceeding against the indemnified Party relating
to any Claim for which the indemnifying Party has agreed to indemnify and hold
the indemnified Party harmless under this Agreement. The indemnifying party
shall have control over the defense and/or settlement of such Claim. However,
the indemnified Party shall have the right to participate with the indemnifying
Party in the defense of any such Claim at its own expense. The indemnified party
shall assist and cooperate in the prosecution or defense of such Claims.

     Section 11.7 Waiver of
Consequential and Punitive Damages. NEITHER BUYER NOR SELLERS SHALL BE
ENTITLED TO RECOVER FROM THE OTHER, AND EACH PARTY RELEASES THE OTHER PARTY
FROM, ANY LOSSES, COSTS, EXPENSES, OR DAMAGES ARISING UNDER THIS AGREEMENT OR IN
CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS
AGREEMENT IN EXCESS OF THE ACTUAL COMPENSATORY DAMAGES SUFFERED BY SUCH PARTY.
EACH PARTY WAIVES, AND RELEASES THE OTHER PARTY FROM, ANY RIGHT TO RECOVER
PUNITIVE, SPECIAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES ARISING IN CONNECTION
WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT;
PROVIDED, HOWEVER, THAT ANY SUCH DAMAGES RECOVERED BY A THIRD PARTY (OTHER THAN
SUBSIDIARIES, PARTNERS, AFFILIATES, OR PARENTS OF A PARTY) FOR WHICH A PARTY
OWES THE OTHER PARTY AN INDEMNITY UNDER THIS ARTICLE XI SHALL NOT BE WAIVED.
NOTHING IN THIS SECTION 11.7 SHALL WAIVE OR BE DEEMED TO WAIVE ANY PARTY’S RIGHT
TO SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF, OR OTHER EQUITABLE REMEDIES.

     Section 11.8 Exclusive
Remedy. After Closing, the terms and provisions of this Article XI shall be
the sole and exclusive remedy of each of the Parties indemnified hereunder with
respect to the Claims described in Section 11.2 and Section 11.3, including,
without limitation, Claims arising from breaches of the representations and
warranties of the Parties set forth in this Agreement, regardless of whether
such Claims are based on contract, tort, securities laws, strict liability, or
other principles.

ARTICLE XII. TAXES

     Section 12.1 Ad Valorem, Real
Property and Personal Property Taxes. All ad valorem taxes, real property
taxes, personal property taxes, and other similar taxes and assessments
(“Property Taxes”) with respect to the Properties are the obligation of, and
shall be borne by, Sellers for periods, including partial periods, before the
Effective Time. Property Taxes with respect to the Properties, to the extent
attributable to periods, including partial periods, from and after the Effective
Time shall be borne by Buyer. The Base Purchase Price will be adjusted at
Closing based on a proration of all such Property Taxes for the 2010 tax year as
of the Effective Time as contemplated by Section 2.3. If actual Property Taxes
with respect to the Properties for the 2010 tax year are greater than the
amounts estimated for purposes of adjustment of the Base Purchase Price pursuant
to Section 2.3, then Sellers shall pay Buyer the difference between actual taxes
for the 2010 tax year and the estimated amount, prorated to the period prior to
the Effective Time. If actual Property Taxes with respect to the Properties for
the 2010 tax year are less than the amounts estimated for purposes of adjustment
of the Base Purchase Price pursuant to Section 2.3, then Buyer shall pay Sellers
the difference between actual taxes for the 2010 tax year and the estimated
amount, prorated to the period prior to the Effective Time.

22

     Section 12.2 Tax
Reporting. Prior to Closing, Buyer and Sellers shall confer and cooperate in
the allocation of the Base Purchase Price among the Properties in accordance
with Section 1060 of the Internal Revenue Code and the Treasury Regulations
thereunder (and any similar provision of state, local or foreign law, as
appropriate) (the “Tax Allocation”). Buyer and Sellers shall confer and
cooperate on any revisions to the Tax Allocation (the “Revised Allocation”) so
as to report any matters related to the Tax Allocation that require updating
(including adjustments to the Base Purchase Price) to be consistent with the
agreed allocation. Sellers and Buyer shall report the transactions contemplated
hereby on all tax returns, including, but not limited to Form 8594, in a manner
consistent with the Tax Allocation or, if applicable, the Revised
Allocation.

     Section 12.3 Transfer
Taxes. In the event any federal, state or local sales, transfer, gross
proceeds, use and similar taxes are incident or applicable to the transfer of
the Properties to Buyer under this Agreement, or caused by the transfer of the
Properties to Buyer, such taxes shall be paid by Buyer.

     Section 12.4 Income and
Franchise Taxes. Each Party shall be responsible for its own federal, state,
local and foreign income and franchise taxes, if any, which may result from this
transaction.

ARTICLE XIII. DISPUTE RESOLUTION

     Section 13.1 Dispute
Resolution Procedures. Any dispute concerning this Agreement (other than
Claims by a third party in litigation for which a Party to this Agreement is
claiming indemnity, but not disputes among the Parties to this Agreement over
the interpretation and scope of the indemnity provisions of this Agreement,
which are hereby made expressly subject to the dispute resolution procedures set
forth herein) (a “Dispute”) shall be resolved under the mediation and binding
arbitration procedures set forth herein. 

     Section 13.2 Good Faith
Efforts. If a Dispute occurs and the senior representatives of the Parties
have been unable, in good faith, to settle or agree within a period of fifteen
(15) days after such Dispute arose, each Party shall nominate and commit one of
its senior officers to meet at a mutually agreed time and place not later than
thirty (30) days after the Dispute arose to attempt to resolve same. If such
senior management have been unable to resolve such Dispute within a period of fifteen (15) days after such meeting, or if
such meeting has not occurred within forty-five (45) days following such Dispute
arising, then either Party shall have the right, by written notice to the other,
to resolve the Dispute (i) through the relevant Independent Expert pursuant to
Section 13.3, or (ii) by arbitration in accordance with the provisions of
Section 13.4.

23     

     Section 13.3 Independent
Expert. Each Party shall have the right to submit Disputes regarding the
matters covered by Section 5.1 or Error! Reference source not found.
including the nature or calculation of Title Defects) to an independent
expert appointed in accordance with this Section 13.3 (each, an “Independent
Expert”), who shall serve as sole arbitrator. The Independent Expert shall be
appointed by mutual agreement of Sellers and Buyer from among candidates with
experience and expertise in the area that is the subject of such Dispute, and
failing such agreement, such Independent Expert for such Dispute shall be
selected in accordance with the Rules (as hereinafter defined). Disputes to be
resolved by an Independent Expert shall be resolved in accordance with mutually
agreed procedures and rules and failing such agreement, in accordance with the
rules and procedures for arbitration provided in Section 13.4. The Independent
Expert shall be instructed by the Parties to resolve such Dispute as soon as
reasonably practicable in light of the circumstances. The decision and award of
the Independent Expert shall be binding upon the Parties as an award under the
Federal Arbitration Act and final and nonappealable to the maximum extent
permitted by law, and judgment thereon may be entered in a court of competent
jurisdiction and enforced by any party as a final judgment of such court.

     Section 13.4
Arbitration.

          (a)
If the provisions set forth in Section 13.3 do not pertain to the Dispute, such
Dispute will be resolved by binding arbitration in accordance with the terms
below. Either Party may, by summary proceedings, bring an action in court to
compel arbitration of any Dispute. Any arbitration will be administered by the
American Arbitration Association (the “AAA”) and in accordance with the terms of
this Section 13.4 and the Commercial Arbitration Rules of the AAA, including the
Optional Rules for Emergency Measures of Protection, as supplemented to the
extent necessary by the Federal Arbitration Act (Title 9 of the United States
Code) (the “Rules”). If there is any inconsistency between this Section 13.4 and
the Commercial Arbitration Rules, or the Federal Arbitration Act, the terms of
this Section 13.4 will control the rights and obligations of the Parties. Any
arbitration will be conducted by one (1) arbitrator. Arbitration must be
initiated within the applicable time limits set forth in this Agreement and not
thereafter or if no time limit is given, within the time period allowed by the
applicable statute of limitations.

          (b)
Arbitration may be initiated by any Party (“Claimant”) serving written notice on
the other Party with whom such Dispute exists (the “Respondent”) that Claimant
elects to refer the Dispute to binding arbitration. Claimant and Respondent
shall attempt to agree upon an arbitrator within twenty (20) days after
Claimant’s serving of written notice on Respondent, and if the Parties are
unable to agree within such time period, then either Party may petition the
Chief United States District Judge for the Southern District of Texas to select
an arbitrator. Each Party shall pay one-half of the compensation and expenses of
the arbitrator. The arbitrator must be a neutral party who has never been an
officer, director, attorney, consultant or employee of any of the Parties or any
of their affiliates. The arbitrator named by the Parties must have not less than ten (10) years experience as an oil and gas lawyer. The
Parties and the arbitrator shall proceed diligently and in good faith in order
that the award may be made as promptly as possible. Any arbitration proceeding
hereunder will be conducted in Midland, Texas and will be concluded within one
hundred eighty (180) days of the filing of the Dispute with the AAA. All
statutes of limitations and defenses based upon passage of time applicable to
any Dispute (including any counterclaim or setoff) shall be interrupted by the
filing of the arbitration and suspended while the arbitration is pending. The
arbitrator will be empowered to award sanctions and to take such other actions
as they deem necessary, to the same extent a judge could impose sanctions or
take such other actions pursuant to the Federal Rules of Civil Procedure and
applicable law; provided, however, that no award by the arbitrator will assess
consequential, punitive, exemplary, or special damages or losses (including,
without limitation, loss of profit or business interruption), but may assess
costs and expenses in a manner deemed equitable. The arbitrator will make
specific written findings of fact and conclusions of law. The decision of the
arbitrator will be final and binding on each Party. Judgment on any award
rendered by the arbitrator may be entered in any court having jurisdiction.

24

ARTICLE XIV. MISCELLANEOUS

     Section 14.1 Survival. All
of the representations, warranties, covenants, indemnities, and agreements of or
by the Parties to this Agreement will survive the Closing, the execution and
delivery of the Assignment and other instruments under this Agreement, and the
transfer of the right, title, and interest in and to the Properties to Buyer
hereunder; and they shall not be merged into or superseded by the Assignment or
other documents delivered at Closing; provided, however, that, except as
otherwise expressly provided herein, Sellers’ representations and warranties
hereunder shall terminate two (2) years after Closing. 

     Section 14.2 Assignment.
Buyer may, at any time, assign or convey any of its rights, title and interests
obtained by or conferred upon it under this Agreement to any other person or
persons and may enter into all agreements, contracts and other documents and do
all necessary acts and things to give effect to such assignment or conveyance.
Sellers may not assign or transfer any of its rights, title and interests under
this Agreement to any other person or poersons without the prior written consent
of Buyer, which consent shall not be unreasonably withheld or delayed.

     Section 14.3 Parties Bear Own
Expenses. Each Party shall bear and pay all expenses (including, without
limitation, legal fees) incurred by it in connection with the transaction
contemplated by this Agreement.

     Section 14.4 Recording
Expenses. Buyer shall pay all filing fees and other costs of filing the
Assignment and any and all other instruments required to be filed relating to
the sale of the Properties.

     Section 14.5 Public
Announcements. No Party may make press releases or other public
announcements concerning this transaction without the other’s prior written
approval and agreement to the form of the announcement, except as may be
required by applicable laws or rules and regulation of any governmental agency
or stock exchange.

25

     Section 14.6 Notices. All
notices under this Agreement must be in writing. Any notice under this Agreement
may be given by personal delivery, facsimile transmission, U.S. mail (postage
prepaid), or commercial delivery service, and will be deemed duly given when
received by the party charged with such notice and addressed as follows:

	If to Sellers: 	1710 N NM HWY 206 
	  	Crossroads, NM 88114 
	  	Attn: Mr. John R Stearns Jr. 
	  	Telephone No. 575.675.2356 
	  	  
	  	  
	If to Buyer: 	Doral Energy Corp 
	  	415 W. Wall Street, Suite 500 
	  	Midland, TX 79701 
	  	Attn: E. Will Gray II 
	  	Fax No.: (432) 505-9746 
	  	Telephone: (432) 789-1180 
	  	  
	           
             With a Copy to: 	Haynes & Boone, LLP 
	  	1 Houston Center 
	  	1221 McKinney, Suite 2100 
	  	Houston, Texas 77010 
	  	Attn: Bernard F. Clark, Jr. 
	  	Fax No.: 713.236.5577 
	  	Telephone No.: 713.547.2077

Any Party, by written notice to the others, may change the
address or the individual to which or to whom notices are to be sent under this
Agreement.

     Section 14.7
Interpretation. The Parties stipulate and agree that this Agreement shall
be deemed and considered for all purposes to have been jointly prepared by the
Parties, and shall not be construed against any one Party (nor shall any
inference or presumption be made) on the basis of who drafted this Agreement or
any particular provision hereof, who supplied the form of Agreement, or any
other event of the negotiation, drafting or execution of this Agreement. Each
Party agrees that this Agreement has been purposefully drawn and correctly
reflects its understanding of the transaction that it contemplates. In
construing this Agreement, the following principles will apply.

          (a)
Defined terms in this Agreement are denoted by quotation marks. A defined term
has its defined meaning throughout this Agreement and each Exhibit and Schedule
to this Agreement, regardless of whether it appears before or after the place
where it is defined.

          (b)
If there is any conflict or inconsistency between the provisions of the main
body of this Agreement and the provisions of any Exhibit or Schedule hereto, the
provisions of this Agreement shall take precedence. If there is any conflict
between the provisions of any pro forma Assignment Document or other transaction
documents attached to this Agreement as an Exhibit or Schedule and the provisions of any Assignment
Documents and other transaction documents actually executed by the Parties, the
provisions of the executed Assignment Documents and other executed transaction
documents shall take precedence.

26

          (c)
To the fullest extent permitted by law, all provisions of this Agreement are
hereby deemed incorporated into the Assignment by reference.

          (d)
The Article, Section, Exhibit and Schedules references in this Agreement refer
to the Articles, Sections, Exhibits and Schedules of this Agreement. The
headings and titles in this Agreement are for convenience only and shall have no
significance in interpreting or otherwise affect the meaning of this
Agreement.

          (e)
The plural shall be deemed to include the singular, and vice versa. 

          (f)
The term “including” means “including, without limitation.”

          (g)
The term “Person” (whether or not capitalized) means any individual,
corporation, partnership, limited liability company, joint venture, association,
joint-stock company, trust, enterprise, unincorporated organization, or
governmental entity.

     Section 14.8 Third-Party
Beneficiaries. It is understood and agreed that there shall be no
third-party beneficiary of this Agreement, and that the provisions hereof do not
impart enforceable rights, benefits, or remedies in anyone who is not a Party or
a successor of a Party hereto.

     Section 14.9 Entire Agreement
and Amendment. This Agreement constitutes the entire understanding by and
among the Parties, replacing and superseding all prior negotiations, letters of
intent, discussions, arrangements, agreements, and understandings by and among
the Parties regarding the subject transaction and subject matter hereof (whether
written or oral), excepting any written agreements that may be executed by the
Parties concurrently or after the execution of this Agreement. This Agreement
may be supplemented, altered, amended, modified or revoked by writing only,
signed by the Parties hereto.

     Section 14.10 Further
Assurances. After Closing, the Parties shall execute, acknowledge, and
deliver or cause to be executed, acknowledged, and delivered such instruments
and take such other action as may be reasonably necessary or advisable to carry
out their obligations under this Agreement and under any Exhibit, document,
certificate, or other instrument delivered pursuant thereto.

     Section 14.11 Successors and
Assigns. This Agreement binds and inures to the benefit of the Parties
hereto and their respective permitted successors and assigns. 

     Section 14.12 Severability.
If any provision of this Agreement is found by a court of competent jurisdiction
or arbitrator to be invalid or unenforceable, that provision will be deemed
modified to the extent necessary to make it valid and enforceable and if it
cannot be so modified, it shall be deemed deleted and the remainder of the
Agreement shall continue and remain in full force and effect.

27

     Section 14.13 Counterparts.
This Agreement may be executed in counterparts, each of which shall constitute
an original and all of which shall constitute one document.

     Section 14.14 Governing
Law. This Agreement is governed by and must be construed according to the
laws of the State of Texas, excluding any conflicts of law rule or principle
that might apply the law of another jurisdiction.

     Section 14.15 Exhibits. The
Preamble, Exhibits and Schedules attached to this Agreement are incorporated
into and made a part of this Agreement for all purposes.

[Signature Page Follows]

28

     IN WITNESS WHEREOF, the Parties
have executed this Agreement as of the date first set forth above.

	 	SELLER: 
	 	 
	 	MR. JOHN R STEARNS 
	 	 
	 	 
	 	By: /s/ John R. Stearns 
	 	 
	 	Name: John R. Stearns 
	 	 
	 	Title: an Individual 
	 	 
	 	 
	 	SELLER: 
	 	 
	 	MR. JOHN R STEARNS, JR. 
	 	 
	 	 
	 	By: /s/ John R. Stearns, Jr. 
	 	 
	 	Name: John R. Stearns, Jr. 
	 	 
	 	Title: an Individual 
	 	 
	 	 
	 	BUYER: 
	 	 
	 	DORAL ENERGY CORPORATION 
	 	 
	 	 
	 	By: /s/ Everett W. Gray II 
	 	 
	 	Name: Everett W. Gray II 
	 	 
	 	Title: Chairman and CEO

Exhibit “A”

The Leases

	EXHIBIT “A” 
	 
	Description of Properties Contained in Purchase and
      Sale Agreement betwee 
	Doral Energy Corp. and J.R. Stearns and J.R. Stearns
      Jr 
	Dated June 14, 2010 

April __

  	

          
	

          DESCRIPTION 
	Gross 

          Lease 

        Acreage 	Doral Interests 
	Working 

          WI 	Net Revenue 

          NRI 
	1

          

        

        

        

        

        2

        

        

        

        

        

        
	Amoco Federal Lease: United
        States Oil and Gas Lease Serial No. NM-13418, insofar as said lease covers
        the following described land in Chaves County: 

              Township 7 South,
                Range 31 East, N.M.P.M. 

               
        Section 23 : E2 SW4 

                Section
        26: N2 SW4, SW4, SW4, SW4,SE4 

        LIMITED IN DEPTH from the surface to
        4,250' 	

          

        

        

        

        360.00 	

        0.56103700 

        

        

        
	

        0.48726600 

        

        

        
	

          

        

        

        

	Hahn Federal Lease: United
        States Oil and Gas Lease NM-15677, insofar as said lease cover the
        following described land in Chaves County: 

              Township 7 South, Range
                31 East, N.M.P.M. 

               
        Section 20: NE4 

               
        Section 21: NE4 

               
        Section 22: E2 

                Section
        23: SE4 

                Section 27:
        S2 

                Section 31: Lots
        1&2, E2 NW4, NE4 

        ALL RIGHTS, ALL DEPTHS 	

          

        

        

        

        

        

        

        1,440.00 	

        0.78125000 

        

        

        

        

        
	

        0.71953100 

        

        

        

        

        
	

          

        

        

        

        

        

	3

          

        

        

        

        
	Hahn Federal "A" Lease: United
        States Oil and Gas Lease Serial No. NM-16637 insofar as sai lease covers
        the following described land in Chaves County: 

              Township 7 South,
                Range 31 East
                N.M.P.M. 

                Section
        18: Lots 1&2, E2
        NW4 

                Section 27:
        N2 

                Section 28: NE4, N2
        SE4, SE4 SE4 

        ALL RIGHTS, ALL DEPTHS 	

          

        

        

        

        

        760.00 	

        0.78125000 

        

        

        

        
	

        0.71953100 

        

        

        

        
	

          

        

        

        

        

	4

          

        

        
	Miller Federal 1,3,5,6 Lease: United States Oil and Gas Lease Serial No. NM-046153-A insofar as
        said lease covers the following described land in Chaves County: 

              Township 7 South, Range 31 East,
                N.M.P.M. 

                Section
        34: SE4 SE4, NW4 SE4, SE4 NE4, SE4 NW4, SW4 SW4 

        LIMITED IN DEPTH from
        the surface to 4,485' 	

          

        

        

        200.00 	1.00000000 

          

        

        
	0.81458000 

          

        

        
	

          

        

        

	5

          

        

        
	Miller Federal 7,8,9 Lease: United States Oil and Gas Lease Serial No. NM-046153-A, insofar as
        said lease covers the following described land in ChavesCounty: 

              Township 7 South, Range 31 East,
                N.M.P.M. 

                Section
        35: NW4 SW4, NE4 SE4, SE4 SE4, NW4 SE4 

        LIMITED IN DEPTH from the
        surface to 4,485' 	

          

        

        

        160.00 	1.00000000 

          

        

        
	0.81458000 

          

        

        
	

          

        

        

	EXHIBIT "A" - Properties 	Page 1 of 3 	 

		

          DESCRIPTION 	Gross 

          Lease 

        Acreage 	Doral Interests 
	Working 

          WI 	Net Revenue 

          NRI 
	6 

          

        

        
	Mountain Federal Lease: United States Oil and Gas Lease Serial No. NM-80166, insofar as 

        said lease covers the following described land in Roosevelt County: 

        Township 7 South, Range 32 East, N.
          M.P.M. 

                Section 30:
        NE4, E2 NW4 

        LIMITED IN DEPTH from the surface to the top of the San
        Andres formation 	

          

        

        

        240.00 	

        1.00000000 

        

        
	

        0.75000000 

        

        
	

          

        

        

	7 

          

        

        
	New Mexico "BA" State
        Lease: New Mexico Oil and Gas Lease, 

        insofar as said
        lease covers the following described land in Chaves County: 

        Township 8 South, Range 31 East,
          N.M.P.M. 

                Section
        16: N2 NW4, S2 NE4, NE4 SW4 

        LIMITED IN DEPTH from the surface to
        4,080' 	

          

        

        

        200.00 	1.00000000 

          

        

        
	0.87500000 

          

        

        
	

          

        

        

	8 

          

        

        

        

        

        
	Nuckols "24" Lease: State of New Mexico Oil and Gas Lease, insofar as said lease
        covers th 

        following described land in Chaves County: 

        Township 7
          South, Range 31 East,
          N.M.P.M. 

                Section
        24: All 

                Section 23: N2
        NE4 

                Section 14: S2
        SE4 

                Section 13: SE4 

        LIMITED IN DEPTH from the surface to the base of the Sn Andres
        formation 	

          

        

        

        

        

        

        960.00 	

        0.78728800 

        

        

        

        

        
	

        0.66371200 

        

        

        

        

        
	

          

        

        

        

        

        

	9 

          

        

        
	Southard "26"Lease: State of New Mexico Oil and Gas Lease, insofar as said lease
        covers th 

        following described land in Chaves County: 

        Township 7
          South, Range 31 East,
          N.M.P.M. 

                Section
        26: NW4 

        ALL RIGHTS, ALL DEPTHS 	

          

        

        

        160.00 	

        0.59606000 

        

        
	

        0.49843000 

        

        
	

          

        

        

	10 

          

        

        
	Southard "A" Lease: State of New Mexico Oil and Gas Lease, insofar as said lease
        covers th 

        following described land in Chaves County: 

        Township 7
          South, Range 31 East, N. M. P.
          M. 

                 Section
        26: NE4 

        ALL RIGHTS, ALL DEPTHS 	

          

        

        

        160.00 	

        0.37952000 

        

        
	

        0.32293000 

        

        
	

          

        

        

	11 

          

        

        
	State "32" Lease: State of New Mexico Oil and Gas Lease No. K-3754, insofar as said
        leas 

        covers the following described land in Chaves County: 

        Township 7 South, Range 31 East,
          N.M.P.M. 

                Section
        32: E2 NE4, NE4 NW4, S2 SW4, NW4 SE4 

        LIMITED IN DEPTH from the surface
        to 4,100' 	

          

        

        

        240.00 	

        1.00000000 

        

        
	

        0.75000000 

        

        
	

          

        

        

	12 

          

        

        
	Strange Federal Lease: United States Oil and Gas Lease Serial No. NM-15677-A, insofar as 

        said lease covers the following described land in Chaves County: 

        Township 7 South, Range 31 East,
          N.M.P.M. 

                Section
        25: S2 

        LIMITED IN DEPTH from the surface to base of San Andres
        formation 	

          

        

        

        320.00 	

        1.00000000 

        

        
	

        0.84600000 

        

        
	

          

        

        

	13 

          

        

        
	Sunray State Lease: New Mexico Oil and Gas Lease, insofar as said lease covers the
        followin 

        described land in Chaves County: 

        Township 8 South,
          Range 31 East,
          N.M.P.M. 

                Section
        16: S2 NW4 

        LIMITED IN DEPTH from the surface to 3,973' 	

          

        

        

        80.00 	

        1.00000000 

        

        
	

        0.75000000 

        

        
	

          

        

        

	14 

          

        

        
	Tom "36" State Lease: State of New Mexico Oil and Gas Lease No. L-5120, insofar as 

        said leases covers the following described land in Chaves County: 

        Township 7 South, Range 31 East,
          N.M.P.M. 

                Section
        36: NE4 NE4, S2 NE4, NE4 NW4, SE4 

        LIMITED IN DEPTH from 	

          

        

        

        320.00 	1.00000000 

          

        

        
	0.80000000 

          

        

        
	

          

        

        

	EXHIBIT "A" - Properties 	Page 2 of 3 	 

	

          
	

          DESCRIPTION 
	Gross 

          Lease 

        Acreage 	Doral Interests 
	Working 

          WI 	Net Revenue 

          NRI 
	15 

          

        

        

        

        
	Wattam Federal Lease: United States Oil and Gas Serial No. NM-15016, insofar as said
        lease 

        covers the following described land in Chaves County: 

        Township 8 South, Range 31 East,
          N.M.P.M. 

                Section
        6: Lots 2&4, SE4 NW4, SE4
        NE4 

                Section 7: Lots
        2,3&4, E2, SE4 NW4, E2
        SW4 

                Section 8: S2 NW4,
        SW4 

        ALL RIGHTS, ALL DEPTHS 	

          

        

        

        

        

        960.00 	

        1.00000000 

        

        

        

        
	

        0.79000000 

        

        

        

        
	

          

        

        

        

        

	16 	TOTALS 	6,560.00 			

	EXHIBIT "A" - Properties 	Page 3 of 3 	 

Exhibit “B”

The Wells

EXHIBIT B

List of Wells to be acquired per the Purchase and Sale
  Agreement between Doral Energy and Mr. J.R. Stearns and Mr. J.R. Stearns Jr.
dated June 14, 2010

  	Lease/ Well 	API No. 	Status 
	Amoco Federal 	 	 
	3 	30-005-20634 	Shut In. 
	4 	30-005-20643 	Producing 
	6 	30-005-20680 	Producing 
	7 	30-005-20712 	Producing 
	8 	30-005-20732 	Producing 
	Hahn Federal 	 	 
	1 	30-005-20466 	Shut In. 
	5 SWD 	30-005-20532 	Scheduling to Plug 
	6 	30-005-20665 	Producing 
	7 	30-005-20774 	Producing 
	Hahn Federal 	 	 
	1 	30-005-20664 	Producing 
	Miller Federal 	 	 
	1	30-005-20044 	Producing 
	3 	30-005-20120 	Producing 
	5 	30-005-20122 	Scheduling to Plug 
	6 SWD 	30-005-20530 	 
	Miller Federal 	 	 
	8 	30-005-21030 	Shut In. 
	Mountain 	 	 
	2 	30-041-20462 	Shut In. 
	3 	30-041-20463 	Producing 
	4 	30-041-20489 	Shut In. 
	6 	30-041-20507 	Scheduling to Plug 
	New Mexico 	 	 
	1 	30-005-20944 	Shut In. 
	3 	30-005-21021 	Producing 
	4 	30-005-21023 	Producing 
	Nuckols "24" 	 	 
	1 	30-005-20736 	Producing 
	2 	30-005-20773 	Producing 
	Southard "26" 	 	 
	1 	30-005-20569 	Producing 
	2 	30-005-20641 	Producing 
	3 	30-005-20660 	Producing 
	Southard "A" 	 	 
	1 	30-005-20676 	Producing 
	2 	30-005-20685 	Producing 
	3 	30-005-20797 	Producing 
	State "32" 	 	 
	2 	30-005-20674 	Producing 
	3 	30-005-20695 	Producing 
	4 	30-005-20735 	Producing 
	5 	30-005-20789 	Producing 
	Strange Federal 	 	 
	1 	30-005-20717 	Producing 
	3 	30-005-20719 	Shut In. 
	4 	30-005-20720 	Shut In. 
	5 	30-005-20752 	Shut In. 
	Sunray State 	 	 
	2 	30-005-21036 	Producing 
	Tom "36" State 	 	 
	1 SWD 	30-005-20686 	 
	4 	30-005-21015 	Producing 
	5 	30-005-21105 	Shut In. 
	Wattam Federal 	 	 
	1 	30-005-20810 	Producing 
	2 	30-005-20811 	Producing 
	3 	30-005-20812 	Producing 
	4 	30-005-20813 	           
                 TA'd 
	6 SWD 	30-005-20814 	 
	7 	30-005-20815 	Producing 

  

Exhibit “C

The Equipment

Exhibit “D”

Contracts

Exhibit “E”

Form of Assignment

ASSIGNMENT AND BILL OF SALE

	STATE OF NEW MEXICO 	§ 	  
	  	§ 	KNOW ALL MEN BY THESE PRESENTS: 
	COUNTY OF [insert county] 	§ 	  

     THAT this Assignment and Bill of
Sale, dated this ___ day of ______________, 2010, but effective for all purposes
as of ____________1, 2010, at 7:00 A.M. local time where the Properties, as
defined herein, are located (the “Effective Time”) is by and between Mr. John
R Stearns, an Individual, whose address is
______________________(“Stearns”), and Mr. John R. Stearns, Jr., an Individual,
whose address is______________________(“Stearns Jr.”) (Stearns and Stearns Jr.
collectively being the “Assignors” and any one of the Assignors being an
“Assignor”), and Doral Energy Corp., a Nevada Corporation, whose address is
_______________________, Midland, Texas 79701 (“Assignee”).

     FOR AND IN CONSIDERATION of the
sum of One Hundred Dollars ($100.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each Assignor does
hereby sell, assign, transfer, convey and deliver unto Assignee all of
Assignor’s right, title and interest in and to the following property
(collectively, the “Properties”):

     (a) Assignor’s right, title and
interest in and to oil and gas leases, fee minerals, royalty, overriding royalty
and other oil and properties covering lands located in [insert county]
County, New Mexico, including, without limitation, the oil and gas leases
described on Exhibit “A” (the “Leases”), including all rights and interests in
any unit or pooled area in which the Leases are included, including, to the
extent that these rights and interests arise from and are associated with the
Leases, including all rights derived from any unitization, pooling, operating,
communitization or other agreement;

     (b) The oil and gas wells located
on the Leases or lands pooled therewith, including, without limitation, the
wells identified on Exhibit “B” attached hereto (collectively, the “Wells”);

     (c) All crude oil, natural gas,
casinghead gas, condensate, sulfur, natural gas liquids, products, and other
liquid or gaseous hydrocarbons, and other minerals of every kind and character
which may be produced from or allocable to the Properties (collectively, “Hydrocarbons”) with respect to all periods on or after the
Effective Time, together with all proceeds from or of such Hydrocarbons, and the
Inventory Hydrocarbons, as defined below;

     (d) All equipment, fixtures,
facilities, improvements and other property used, or held for use, in exploring,
developing, operating, producing maintaining or repairing the Leases or lands
pooled therewith, , including, without limitation, all equipment, tank
batteries, pump jacks, gathering systems, pipelines, processing systems, plants,
compressors, meters, injection wells, disposal wells, pipe, inventory,
machinery, spare parts, and tools, including, without limitation, the equipment
described in Exhibit “C” attached hereto (collectively, the “Equipment”);

     (e) All easements, rights-of-way,
surface leases, licenses, permits, servitudes, approvals, consents, certificates
and other similar interests applicable to or used in operating the Wells, the
Leases, or the Equipment (the “Permits”);

     (f) All valid and existing
agreements, contracts and contractual rights and interests of any kind and
nature relating to the Wells, the Leases or lands pooled therewith, or any other
right or property described in Sections Section 1.2(a) through Section 1.2(d)
above, including all unit agreements, farmout agreements, farmin agreements,
operating agreements, and Hydrocarbon sales, purchase, gathering,
transportation, treating, marketing, exchange, and processing agreements,
including, without limitation, the leases and other contracts and agreements
described in Exhibit “D” (the “Contracts”); and

     (g) Assignor’s files and records
relating to the Properties described in Sections Section 1.2(a) through Section
1.2(f) above, including, without limitation (i) lease, division order, contract,
and land files, abstracts and title opinions; (ii) operations, maintenance,
production, environmental and engineering records; (iii) logs, facility and well
records; and (iv) accounting files, well payout files, and lease operating
statements (collectively, the “Records”); provided, however, that the Records
shall not include the general corporate files and records of Assignor, any files
and records which are subject to confidentiality obligations owed to third
parties (provided that Assignor will, at Buyer’s request, at no cost or expense
to Assignor, request waivers of such confidentiality restrictions), or files and
records, other than title opinions, that are subject to attorney-client
privilege.

     TO HAVE AND TO HOLD the
Properties unto Assignee and its successors and assigns forever, subject to the
matters in this Assignment.

     Assignors jointly and severally
bind themselves and their respective successors and assigns to warrant and
forever defend, all and singular, title to the Properties unto Assignee, its
successors and assigns, from and against all persons claiming or to claim the
Properties or any part thereof by, through or under Assignors, but not
otherwise.

     This Assignment is made by
Assignors and accepted by Assignee subject to the terms and conditions of that
certain Purchase and Sale Agreement, dated ____________, 2010, by and between
Assignors and Assignee (the “Agreement”).

     EXCEPT FOR THE SPECIAL WARRANTY
OF TITLE EXPRESSLY PROVIDED ABOVE, THIS ASSIGNMENT IS MADE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY.

2

     Notwithstanding the above
limitation of warranties, this Assignment is made with full rights of
substitution and subrogation of Assignee in and to all rights and actions of
warranty against previous owners, assignors and grantors.

     Assignors and Assignee agree to
execute and deliver all such other and additional assignments or other documents
and to do all such other and further acts and things as may be necessary to more
fully and effectively grant, convey and assign to Assignee the Properties
assigned or intended to be assigned herein or to give effect to the reservations
herein.

     This Assignment may be executed
in multiple counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.

     EXECUTED as of the ____ day of
_______________, 2010, but effective for all purposes as of the Effective Time.

	 	ASSIGNOR: 
	 	 
	 	MR. JOHN R. STEARNS 
	 	  
	 	 
	 	By: ____________________________
	 	 
	 	Name: __________________________
	 	 
	 	Title: an Individual 
	 	  
	 	 
	 	ASSIGNOR: 
	 	 
	 	MR. JOHN R. STEARNS, JR. 
	 	  
	 	 
	 	By: _____________________________
	 	 
	 	Name: ___________________________
	 	 
	 	Title: an Individual 
	 	  
	 	 
	 	ASSIGNEE: 
	 	 
	 	DORAL ENERGY CORP. 

3

	 	By: __________________________
	 	 
	 	Name: ________________________
	 	 
	 	Title:
_________________________

4

STATE OF TEXAS

COUNTY OF ____________

     This instrument was acknowledged
before me this ___ day of _____________, 2010, by _____________________.

________________________________
Notary Public in and for the
State of ____

(Stamp)

STATE OF TEXAS

COUNTY OF ____________________

     This instrument was acknowledged
before me this ___ day of ______________, 2010, by _______________________, as
___________________of Doral Energy Corp., a Nevada Corporation, on behalf of the
company.

________________________________
Notary Public in and for the
State of_____

 (Stamp)

5

Exhibit “F”

1445 Certificate

     Section 1445 of the Internal
Revenue Code (the “Code”) provides that a transferee (buyer) of a U.S. real
property interest must withhold tax if the transferor (seller) is a foreign
person. To inform Doral Energ Corp. (the “Transferee) that withholding of tax is
not required upon the disposition of a U.S. real property interest by [insert
name of Seller] (the “Transferor”), the undersigned hereby certifies
that:

1. Transferor is not a foreign person within the meaning of
Section 1445 of the Code;

2. Transferor’s social security number is: __________________;
and

4. Transferor’s home address is
_____________________________________________________________________________________.

     Transferor understands that this
Certification may be disclosed to the Internal Revenue Service by the Transferee
and that any false statement contained herein could be punished by fine,
imprisonment, or both.

     Under penalties of perjury, I
declare that I have examined this Certification and, to the best of my knowledge
and belief, it is true, correct, and complete.

Date: _______________, 2010

	 	By (sig): ________________________
	 	  
	 	Name: __________________________
	 	           
                   (please print)
  

Exhibit “G”

Buyer’s Closing Certificate

     Pursuant to Sections 6.1(a) and
6.1(b) of the Purchase and Sale Agreement (“Agreement”), dated ____________,
2010, by and between Mr. John R. Stearns and Mr. John R. Stearns, Jr. (the
“Sellers”) and Doral Energy Corp (the “Buyer”), Buyer hereby certifies to
Sellers as follows:

     1. All representations and
warranties of Buyer contained in the Agreement are true and correct in all
material respects as of the date hereof; 

     2. Buyer has complied in all
material respects with all obligations and conditions contained in the Agreement
to be performed or complied with by Buyer on or prior to the Closing.

     This Certificate is executed this
_____day of ______________, 2010.

	 	Doral Energy Corp. 
	 	  
	 	By: _________________________
	 	 
	 	Name: _______________________
	 	 
	 	Title:
________________________

Exhibit “H”

Sellers’ Closing Certificate

     Pursuant to Sections 6.2(a) and
6.2(b) of the Purchase and Sale Agreement (“Agreement”), dated ____________,
2010, by and between Mr. John R. Stearns and Mr. John R. Stearns, Jr. (the
“Sellers”) and Doral Energy Corp (the “Buyer”), Sellers hereby certifies to
Buyer as follows:

     1. All representations and
warranties of Sellers contained in the Agreement are true and correct in all
material respects as of the date hereof; 

     2. Sellers have complied in all
material respects with all obligations and conditions contained in the Agreement
to be performed or complied with by Sellesr on or prior to the Closing.

This Certificate is executed this _____day of ______________, 2010.

	 	Mr. John R. Stearns 
	 	  
	 	By: ___________________________
	 	 
	 	Name: _________________________
	 	 
	 	Title: an Individual 
	 	  
	 	  
	 	  
	 	Mr. John R. Stearns, Jr. 
	 	  
	 	By: ___________________________
	 	 
	 	Name: _________________________
	 	 
	 	Title: an Individual

Exhibit “I”

Transition Services Agreement

Schedule 2.5

Allocated Values

Schedule 3.1(j)

Contractual Defaults

Schedule 3.1(l)

Commitments

Schedule 3.1(m)

Imbalances

Schedule 3.1(n)

Preferential Rights and Consentsacar8k201005ex10-1.htm

Exhibit 10.1

Co-Development and Exclusive Distribution Agreement between ActiveCare, Inc. and Vista Therapeutics, Inc.

Final Agreement

May 11, 2010

Recitation.

Whereas Vista Therapeutics, Inc. (Vista) is commercializing its patented nanowire-based biosensors that will permit almost immediate, multiplexed and label-free biomarker assessment; and whereas ActiveCare, Inc. (ActiveCare) is commercializing simple, continuous patient monitoring systems for in-home use. Vista and ActiveCare are in a perfect position to jointly develop and co-market an at-home patient monitoring system wherein an elderly patient’s biomarkers for certain disease conditions would be routinely assessed and the information automatically sent to an ActiveCare monitoring station for evaluation. This Memorandum of Understanding (MOU) outlines the main terms under which NanoBiosensorTM-based biomarker assessment products would be developed, fabricated, owned, distributed and supported.

Definitions and Abbreviations.

The following terms and abbreviations shall have the following meanings.

‘Biomarker’ shall mean a single protein found in the blood and/or urine of affected patients.

‘Medical Condition’ shall mean a well-defined medical condition, such as cardiac arrhythmia, prostate enlargement, prostate cancer, hepatitis, etc. which has already been diagnosed in each potential customer for Vista’s assays.

‘NW’ shall mean nanowire.

‘NanoBiosensorTM’ shall mean instrument made by Vista for measurement of biomarkers using nanowires.

‘NanoBioCardTM’ or ‘Card’ shall mean Vista’s PCB card containing functionalized nanowires. Electric termini for connecting to Vista’s NanoBiosensorTM instrument and a fluidics channel that allows prepared samples to flow across functionalized nanowires.

’Field’ or ‘Field of Use’ shall mean the particular market segment into which ActiveCare can sell the resultant products from this agreement.  The ‘Field’ shall include up to ten different chronic Medical Conditions of the elderly which can be monitored in private homes or in group homes that cater to the elderly within the US. It shall also include mobile monitoring of the elderly. The ‘Field’ specifically excludes hospitals, emergency rooms, community health-care centers, doctors' offices, CRO centers, academic research centers, rural health-care centers (save those specifically catering to the elderly), border crossings,  military installations or sites of action, pharmaceutical and biotechnology companies, chemical companies, food companies, agricultural companies, governmental labs, institutes and research centers and all countries other than the US and its territories.

‘Notice of Acquisition’ shall mean that Vista will notify ActiveCare of acquisition of a 51% interest in Vista by a third party within 10 business days of such acquisition.

Effective Date shall mean the date the Final Agreement is entered into.

Specific Market.

The intended market(s) for these products include: i) customers of ActiveCare, ii) patients/customers of ActiveCare who would benefit from access to in-home or mobile monitoring for biomarkers which are indicative of the status of that patient relevant to a particular disease state, iii) patients who have previously been diagnosed as having a disease condition appropriate for monitoring,  iv) at least 55 years of age, and v) residents of the US.

  

  

  

 

Designated Liaisons.

Both parties will designate one business and one technical liaison to interact with the other company on all technical and business matters. The Business and Technical Liaisons may be a single person.

Deliverables.

Near-Term deliverables will include:

	
  

	
i)

	
At no additional cost, two working NanoBiosensorTM instruments and software (‘Sensors’), both of which will be identical to the versions Vista has most recently offered directly to Vista’s own end-users and customers.  Up to three additional NanoBiosensorTM instruments can be purchased under this Agreement within 1 year from the Effective Date at a price described in Appendix 1.  These instruments must be ordered and 30% deposit paid for same within 1 year of the Effective Date.

	
  

	
ii)

	
At no additional cost, 60 NanoBioCardsTM (‘Cards’), 20 of which will be for Medical Condition 1, 20 of which will be for Medical Condition 2 and 20 of which will be for Medical Condition 3.  Up to 20 additional Cards of each type can be purchased from Vista for the first year after the Effective Date at a price described in Appendix 1.  Other than the capture molecules used, or combinations thereof, the Cards will be of the same design as Vista provides to other direct Vista customers.

	
  

	
iii)

	
At no additional cost, 60 Sample Prep Kits (‘Kits’) will be provided to ActiveCare.  These Kits will be of the same design as Vista provides to other direct Vista customers.

	
  

	
iv)

	
Vista will teach ActiveCare's designated technical liaison how to use the above deliverables.

The deliverables to be provided by Vista to ActiveCare described above are intended for ActiveCare's internal use and for demonstrations to potential ActiveCare investors and customers. They are not guaranteed to be suitable for any particular use.  ActiveCare will not provide Vista’s Sensors, software, Cards or Kits described above and provided by Vista as part of this Agreement to any third party without Vista’s prior express written authorization.   ActiveCare will not conduct research intended for publication, nor will it publish any results obtained with the Deliverables without Vista’s prior  authorization.

Conditions and Biomarkers.

Prior to commencement of work, Vista will propose Medical Conditions that frequently occur in elderly individuals, the health and longevity of whom might be enhanced if biomarkers for such conditions could be frequently evaluated.   The first condition shall be prostate enlargement and possible prostate cancer.  The biomarker for which is serum levels of prostate serum antigen (PSA). The capture molecule shall be anti-PSA monoclonal antibodies (mAB’s).  Within 30 days of signing, Vista will have proposed several alternative Medical Conditions and biomarkers, and the Parties will have chosen two specific target Medical Conditions (with up to three biomarkers for each Condition) for subsequent NW-based assay development.   Vista’s assays developed for this agreement shall only be used to monitor the status of Medical Conditions that have already been diagnosed in ActiveCare's customers by other means.  Vista’s assays shall not be used for diagnostic purposes.

  

  

  

  

 

Process Outline.

Once two primary and two alternative Medical Conditions and suitable biomarkers have been identified (besides PSA), Vista will purchase commercially available mAB’s and purified target biomarkers.  To the extent that isoelectric points (IEPs) are known or can be calculated from protein sequences, if known, Vista will attempt to identify biomarkers and conditions for binding that are compatible for groups of biomarkers (e.g., two markers with similar IEP’s are more likely to be compatible in a single assay than two with IEP’s that differ significantly).  Next, Vista will covalently attach Condition-specific mAB’s to NW’s and determine if they retain their antigen binding ability when attached.  We will use purified target Biomarker proteins to determine optimum pH for binding.  We will next quantify concentration Vs. signal using purified target Biomarker proteins.   If results indicate suitable sensitivity, we will next test specificity by repeating the above experiments with donkey serum proteins added in at physiological concentrations.  If  the signal remains suitable, we will next use human serum proteins isolated by Vista’s blood sample preparation kits and spike in purified target proteins and test for signal as a function of spiked in protein concentrations.  Blood samples will be derived from subjects likely to have low or zero levels of target proteins (e.g. use blood derived from young female subjects for spike-in studies with purified PSA).    As final verification of the assay’s utility, ActiveCare will procure blood samples from a statistically significant number of male volunteers whose PSA levels have been previously determined by existing approved assays.  Vista will assess PSA levels from these volunteers on a blinded basis.  After sending results of the blinded samples to ActiveCare, the sample identity and PSA levels, as determined by existing assays will be revealed and compared with Vista’s results.  Vista and ActiveCare will have agreed in advance to the nature and number of samples to be used as well as the statistical methods to be employed.  The Parties will also agree in advance of the study to the results that comprise success or failure (e.g. 85 % correct grouping using four categories such as 0-5, 6-10, 11-20 and 21-above ng/ml, or 90% correct ranking from lowest to highest PSA concentration).   To the extent possible, the same samples will be used to repeat this validation within ActiveCare’s own facilities under the guidance of Vista’s technical liaison.  Once repeated, this step plus delivery of Deliverables will constitute final and satisfactory performance for this Medical Condition and will count as an achieved Milestone.  Vista will have discretion as to when a NW-based assay for a targeted Medical Condition cannot be successfully developed and a suitable alternative Medical Condition targeted.

Payment, Milestones and Timing.

Upon the execution of a formal agreement between the parties, ActiveCare or its principals will invest $50,000 into Vista by the purchase of Series B Preferred Convertible stock.  Should ActiveCare determine that it would like to acquire a sub-license to Vista’s NW technology, it will notify Vista in writing of such desire.  Up to a time 30 days after ActiveCare has received the first Deliverable from Vista, Vista will use best efforts to afford ActiveCare a Sub-Licence under the payment schedule described in Appendix II of this Agreement.   In addition, commencing on July 1, 2010 ActiveCare will pay Vista $15,000 per month for 15 months.  For each assay, successfully completed in a double blind study with Deliverables for each Medical Condition, ActiveCare will pay Vista $50,000, for up to three assays.  Vista will deliver an assay system, support data and Deliverables for PSA to Active Care within 9 months of execution.  It will deliver assay systems, support data and Deliverables for two other Medical Conditions on or before months 12 and 15 respectively.

Exclusive Sub-License.

.    If and when a  Sublicense is  granted to ActiveCare,   under such Sub-license agreement, as long as the minimum fees as described in Appendix II are paid,  ActiveCare will have an Exclusive Sub-License to sell, market and distribute Products made by Vista or its successors in business within ActiveCare’s Field as described above.  If Vista or its successors in business cannot produce the Products required by this Agreement, ActiveCare will have the option to have others provide such Products to ActiveCare.   At its sole discretion, and so long as a determination is made at the time of execution of this Agreement, ActiveCare may elect to work under  an exclusive sales, marketing and distribution agreement which would allow ActiveCare  to sell Vista’s Products and NanoBioCards to its customers within its Field..  This agreement does not allow ActiveCare or it successors-in-business to sub-license any part of this license to a third party.

  

  

  

 

Supply Agreement.

ActiveCare agrees to have Vista as its sole supplier of NanoBioSensors, NanoCards and Sample Prep kits as long as Vista's price for such items are competitively priced. Vista will fabricate Products and supply them to ActiveCare on a preferential cost basis. Products will be transferred to ActiveCare at the volume-related price listed in Appendix 1 (plus S&H).     For orders exceeding $10,000, 50% of the total order shall be paid when the order is submitted and the balance shall be due upon receipt of the order.  As Vista anticipates using just-in-time manufacturing techniques, ActiveCare will allow 40 days for receipt of orders from the time orders are placed and deposits received.

Late Payments.

Any payments due from ActiveCare that are not paid on the date such payments are due under this Agreement shall bear interest at the lesser of (a) the 6 month LIBOR rate on the date such payment is due, plus an additional four percent (4%) calculated on the number of days such payment is delinquent.

Transfer and Survivability.

Either Party may transfer it rights and obligations under this agreement to its successors and heirs in business.

Records.

ActiveCare shall keep complete, true and accurate books of account and records for the purpose of determining the amounts payable to Vista under this Agreement.  Such books and records shall be kept at the principal place of business of ActiveCare and will be open for inspection by a designee of Vista reasonably acceptable to ActiveCare, for the purpose of verifying payments hereunder.  Inspections may be made no more than once each calendar year at reasonable times and on reasonable notice.

   

Use of Names.

Products sold to ActiveCare by Vista shall include Vista’s name and logo on any product sold by ActiveCare that contains any Vista Product.  The size of Vista’s name and logo will be no smaller than 30% the size of ActiveCare’s name and logo. In addition, product inserts will also incorporate Vista’s name, logo and contact information.  Any product insert containing ActiveCare’s logo shall also feature Vista’s logo on the same page(s) containing ActiveCare’s logo.  Vista shall ship Products to ActiveCare with in Vista’s standard packaging.  Vista will use reasonable efforts to utilize alternative packaging provided by ActiveCare so long as: a) packaging is of the same materials and size as Vista’s standard packaging, and b) ActiveCare provides such packaging to Vista at no additional cost to Vista.  The exterior of Vista’s NanoBiosensor (instrument) incorporates Vista’s logo as part of the manufacturing process.  Vista will use reasonable efforts to alter the exterior of its NanoBiosensor instruments so long as ActiveCare agrees to pay all costs associated with alteration of the exterior of the instrument. Vista must approve in advance any alternative packaging or instrument exterior proposed by ActiveCare; such approval will not be unreasonably withheld. Except as set forth above, ActiveCare shall not use the name or trademarks of Vista without Vista’s prior written approval.  Any press release or other public announcement with respect to this Agreement shall be subject to the mutual agreement of the Parties, which agreement shall not be unreasonably withheld.

  

  

  

No Warranty about Freedom-to-Operate for mAB’s.

Vista will use reasonable efforts to identify commercially available mAB’s that can be used without patent infringement if directed to do so in advance by ActiveCare.  This may have the effect of decreasing the probability of project success.  If a NW-based assay can be developed with a commercially available, but protected mAB, Vista and/or ActiveCare may want to attempt to obtain rights to resell such mAB’s.  Alternatively, it is likely that new mAB’s can be successfully developed that will also work. (the going rate for commercial production of new mAB’s is about $10,000).  In any event, this project does not include or imply freedom to operate using otherwise successful mAB’s.  The cost of licensing existing mAB’s (if necessary) or developing and validating novel mAB’s would be an additional charge and is not part of this agreement.

Advisory Roles:

Spencer Farr will serve as an advisor to ActiveCare in order to help identify new products and services that ActiveCare may wish to provide to its client base.  Reasonable per diem and travel fees will be provided.

Term.

Unless terminated earlier pursuant to this Section 9, the term of this Agreement shall commence on the Effective Date and continue in full force and effect until the later of (a) the expiration, revocation or invalidation of the last patent within Patent Rights, and (b) the abandonment of the last patent application within the Patent Rights.

Termination.

Either Party may terminate this Agreement upon written notice in the event of the other Party’s material breach of this Agreement, which remains uncured forty-five (45) days after written notice to such other Party specifying such breach.

Governing Law and Venue.

This Agreement shall be governed by and construed in accordance with the law of the State of New Mexico, the United States of America, without regard to conflict of laws provisions.  The Parties agree to bring any action, suits or proceedings relating to this Agreement or the performance or breach hereof in state and federal courts located in Santa Fe, New Mexico.

Notice.

Any notice required or permitted to be given under this Agreement shall be delivered (a) by hand, (b) by registered or certified mail, postage prepaid, return receipt requested, to the address of the other Party as first set forth above to the attention of the President of such other Party, or to such other address and addressee as a Party may designate by written notice in accordance with this Section 10.3, (c) by overnight courier, or (d) by fax with confirming letter mailed under the conditions described in (b) above.  Notice so given shall be deemed effective when received, or if not received by reason of fault of addressee, when delivered.

  

  

  

 

Amendments and Waivers.

Any term or provision of this Agreement may be amended, and the observance of any term of this Agreement may be waived, only in writing and signed by the Party to be bound thereby.  The waiver by either Party of a breach of or a default under any provision of this Agreement by the other Party shall not be construed as a waiver of any subsequent breach of the same or any other provision of this Agreement nor shall any delay or omission on the Party of either Party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any right or remedy by such Party.

Should any part or provision of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding.

	
Vista Therapeutics, Inc.

	  	
ActiveCare, Inc.

	  	  	  
	
By Spencer Farr

	  	
By James Dalton

	  	  	  
	
Its CEO

	  	
Its CEO

  

  

  

 

APPENDIX I

TRANSFER PRICE OF PRODUCTS TO ACTIVECARE

 

 

	
Notes: 

	
i)  Above transfer prices are for un-regulated, non-GMP Products under a Sub-License option.

	
  

	
ii)  If ActiveCare chooses to work under a Sales and Distribution option, an 8% royalty will be added.

	
 

	

iii) Does not include any taxes Vista may be required to pay in selling Products to ActiveCare.

 

  

  

  

APPENDIX II

ANNUAL MINIMUM SUB-LICENSE FEES

 

1.0           Sub-License Fee.  If and when ActiveCare exercises its rights to an exclusive Sub-license from Vista, then ActiveCare shall pay Vista a license fee of One Hundred Twenty-five Thousand Dollars (US$125,000), payable as follows:

 

(a)           Twenty Five Thousand Dollars (US $25,000) upon execution of this exclusive Sub-license;

(b)           Fifty Thousand dollars (US $50,000) within 30 days of execution of its option to an exclusive Sub-license; and

(c)           Fifty Thousand dollars (US $50,000) within 120 days of execution of its option to an exclusive Sub-license.

2.0                 Maintenance Fees / Minimum Royalties.  If ActiveCare exercises its right to a Sub-license as described herein as further consideration of the right and Sub-licenses granted, ActiveCare shall pay Vista the following annual amounts.

(a)           Seventy-five Thousand dollars (US $75,000) end of year 1;

(b)           One Hundred Thousand dollars (US $100,000) end of year 2;

(c)           One Hundred Fifty Thousand Dollars (US $150,000) end of each year thereafter so long as the patents and agreement are in effect.

Fifty percent of payments made to Vista for the transfer of Products to ActivCare for a year shall be creditable against the amounts owed for Sub-License fees for that year.

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