Document:

Bayshore Exploration L.L.C.
 	
            20501 Kay Freeway, Suite 216
 

	
             
 	
            Katy, Texas  77450
 

	
             
 	
            Phone (281) 646-1919
 

	
             
 	
            Fax (281) 647-9448
 

	
             
 	
            bayshoreexpl@sbcglobal.net
 

 

 

PARTICIPATION AGREEMENT

 

 

Bayshore Exploration L.L.C.

20501 Kay Freeway, Suite 216

Katy, Texas  77450

 

	
            RE:
 	
            South Nome Field Prospect
 

	
             
 	
            Jefferson County, Texas
 

	
             
 	
            Turnkey Agreement
 

 

Gentlemen:

 

I desire to apply for the purchase of a working interest in the S. Nome Field Prospect in Jefferson County, Texas. I (“Participant”) hereby acknowledge that Bayshore Exploration L.L.C. (“Bayshore”) will cause to drill and put into production, if warranted, one-well project (McDermand No. 1 Well) in the S. Nome Field for Frio oil/gas production.

 

I hereby apply for the purchase of 10 percentage point(s) at $16,000.00 per each percentage point (1.00% working interest) payable upon application, and tender herewith a check in the amount of $160,000.00.

 

	
             
 	
            I hereby make the following representations, warranties and commitments:
 

 

Initial only what is applicable:

 

a.           By executing this Participation Agreement, I have committed myself to become a (10%) working interest owner in this prospect. RF initials

 

b.          The undersigned has such knowledge and experience in financial and business matters that the undersigned is capable of evaluating the merits and risks of an investment in this oil prospect and of making an informed investment decision. RF initials

 

DRILLING OPERATIONS:  Upon acceptance of the above recited consideration, Howard Exploration, as operator, agrees to drill and test, and if warranted, complete and equip one oil/gas well at a location of Howard’s choice on the subject leases, with the following terms and conditions:

 

	
             
 	
            Page 2
 	
            10/20/2006
 

 

1.          Howard Exploration shall permit said test well with the Railroad Commission of Texas, survey and stake the drilling location, build a necessary lease road, prepare the location, cure title to the drillsite, contract with third party contractors and drill with due diligence one test well to a total depth of 8,750 feet, or a depth sufficient to test the Frio formation, log and test said well for the purpose of establishing commercial oil/gas production or plugging and abandoning same. Bayshore shall deliver a 70% net revenue interest to participant in the McDermand No. 1 Well.

 

2.           Bayshore agrees that, during drilling and completion operations, Participant shall receive the following:

	
             
 	
            a.
 	
            Daily drilling and completion reports on the subject well.
 

	
             
 	
            b.
 	
            Copies of all logs, tests and samples gained from the drilling and completion of the subject well.
 

	
             
 	
            c.
 	
            Copies of all Railroad Commission of Texas filings on the subject well.
 

 

3.          In the event that an oil and/or gas well completion is attempted on the subject test well, Participant agrees to pay its proportionate share of the completion costs for the well which equals $5,000.00 per each percentage point upon written and/or verbal notification from Bayshore.

 

4.          In the event that commercial oil and/or gas production is established on the subject leases with said test well, then both Participant and Bayshore shall enter into a mutually acceptable Joint Operating Agreement Model Form 610-1989 for the operation of the subject well. All subsequent operations and subsequent wells drilled and completed on the unit acreage shall be governed by the Joint Operating Agreement. 

 

I recognize that an investment in oil exploration involves a high degree of risk of loss of its entire investment. I have been advised to consult with my own financial advisors regarding this investment. My commitments to all investments bear a reasonable relationship to my net worth and I am able to bear the risk of loss of its entire investment in this prospect. 

 

In the event that a dispute arises between Participant and Bayshore or its affiliates, or any of their respective successors, representatives, agents, officers or employees, in connection with this offering, the offer and sale of working interest, or this Participant Agreement, the parties hereto hereby expressly agree that any such dispute shall be resolved through Arbitration rather than litigation, and to submit the dispute to the American Arbitration Association within 15 days after receiving a written request to do so. If any party hereto fails to submit the dispute to Arbitration with in the specified time above, the requesting party may then file any papers necessary to commence arbitration. The parties hereto agree that any hearing scheduled after an Arbitration proceeding is initiated, by either party, shall take place in Houston, Harris County, Texas. 

 

This Participation Agreement, and all of its terms and conditions, represent the entire agreement between Participant and Bayshore pertaining to the S. Nome Field Prospect, and supersedes any and all prior agreements, written or oral. Any changes to this agreement must be agreed to in writing by both parties hereto. 

 

	
             
 	
            Page 3
 	
            10/20/2006
 

 

Amount of Working Interest:  Participant represents that he is delivering herewith a check or certified funds in the amount of $16,000.00 per each percentage point. The total point(s) for which Participant is offering to purchase and the total amount of the aforementioned check or certified funds are as follows:

 

	
             
 	
            Total Point(s) Desired:
 	
            Ten (10)
 

 

	
             
 	
            Amount of Subscription:
 	
            $160,000.00
 

 

**Make check payable to Bayshore Exploration L.L.C.

 

IN WITNESS WHEREOF, the undersigned has executed this Agreement on the date set forth below:

 

	
            20-1399613
 	
            /s/ Robert Freiheit CEO
 

	
            S.S. No./Federal I.D. No.
 	
            Participant’s Signature
 

 

	
            2533 North Carson Street
 	
            Paxton Energy, Inc.
 

	
            Business Address-Street
 	
            Participant’s Name & Date
 

 

	
            Carson City, NV  89706
 	
            4120 Douglas Blvd., Suite 306
 

	
            City, State & Zip
 	
            Home Address
 

 

	
            775 841-5049
 	
            Granite Bay, CA  95746
 

	
            Business Telephone
 	
            City, State & Zip
 

 

	
            775-883-2384
 	
            916 768-2160
 

	
            Fax Number
 	
            Home Telephone
 

 

rf@paxtonenergyinc.com

E-Mail Address

 

**Please note where and how you would like to receive your reports.

 

	
             
 	
            rf@paxtonenergyinc.com
 

 

ACCEPTANCE

 

Bayshore Exploration L.L.C. hereby accepts the offer represented by the foregoing Participation Agreement, subject to the terms and conditions thereof. 

 

	
             
 	
            AGREED AND ACCEPTED ON THIS 7TH DAY OF NOVEMBER, 2006.
 

 

	
             
 	
            By: /s/ Jamin Swantner
 

	
             
 	
            Jamin Swantner, President
 

 

JJS:jrsFiled by Automated Filing Services Inc. (604) 609-0244 - Lexington Energy Services Inc. - Exhibit 10.23

These securities have not been registered under the
Securities Act of 1933 (the "Securities Act") and may not be offered or sold in
the United States or to U.S. persons (other than distributors) unless the
securities are registered under the Securities Act, or an exemption from the
registration requirements of the Securities Act is available. Hedging
transactions involving these securities may not be conducted unless in
compliance with the Securities Act.

SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT

This Secured Convertible Debenture Purchase Agreement (this
"Agreement") is entered into as of this 6th day of November, 2006, among
Lexington Energy Services Inc., a Nevada corporation (the "Company"), and
LexCore Services Inc., a wholly owned subsidiary of the Company, (the
“Subsidiary”) and Alliance World Limited ("Creditor").

     1. Purchase and Sale of
Debentures.

          1.1
Authorization. Pursuant to this Agreement, the Company has authorized the
issuance of (i) one Secured Convertible Debenture in the form attached hereto as
Exhibit A ("Debenture"), and (ii) the warrant more specifically described in
Section 6.3 hereof (the "Warrant").

          1.2
Issuance and Sale of Securities. Subject to the terms and conditions
hereof, the Company hereby agrees to issue and sell to the Creditor, and the
Creditor hereby agrees to accept delivery from the Company, of a Debenture and
the Warrant to be issued to the Creditor pursuant to Section 6.3 hereof.

          1.3
Advance of Funds. The delivery of the Debenture and the Warrant (as
defined in Section 6.3 hereof) shall take place on November 6, 2006 (the
"Closing"). At the Closing, the Company shall deliver to the Creditor the
Warrant and a Debenture against delivery to the Company by the Creditor, by wire
transfer of immediately available funds, or by check, an aggregate amount under
the Debenture of Five Hundred Thousand Dollars (US$500,000), subject to the
conditions set forth herein and in the Debenture;

          1.4
Repayment Terms/Conversion. Outstanding principal and accrued interest on
the Debenture shall be fully due and payable in compliance with the terms set
forth in the Debenture. At the Creditor's option, at any time during the term of
this Agreement, the Creditor may choose to have all or any part of the
outstanding principal and accrued interest owing to the Creditor repaid in
shares of Common Stock of the Company at a conversion rate equal to the lower of
the following: 

	 	a) 	
      ten percent (10%) below the fair market value of the
      Common Stock at the time of conversion, as calculated according to the
      average closing market price of the five business days preceding the
      conversion date, or if there has been no sales of the Company’s stock for
      five days, the price shall be determined according to the price of the
      last trade of the Company’s stock, or

	 	 	 
	 	b) 	
      US$0.85 per share, as adjusted pursuant to Section 2 (the
      "Conversion Price").

In the event the Creditor chooses to convert any outstanding
principal and/or accrued interest into Common Stock of the Company, the Creditor
shall give written notice to the Company of such conversion no less than fifteen
(15) business days prior to such conversion.

     2. Adjustment of Exercise
Price and Number of Shares. The Conversion Price and the number of shares of
Common Stock subject to the Debenture (the "Debenture Stock") shall be subject
to adjustment from time to time as follows:

          2.1
Subdivision or Combination of Stock. If at any time or from time to time
after the date of the Debenture (the "Issue Date") the Company shall subdivide
its outstanding shares of Debenture Stock, the Conversion Price in effect
immediately prior to such issuance or subdivision shall be proportionately
reduced. If the outstanding shares of Debenture Stock of the Company shall be
combined into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.

     3. Security. The Debenture
shall be secured by a security interest in certain assets of the Subsidiary in
accordance with the terms of the Security Agreement in the form attached hereto
as Exhibit B (the "Security Agreement").

     4. Representations and
Warranties of the Company and the Subsidiary. The Company and its Subsidiary
hereby represent and warrant the following as of the date hereof, and as of the
date of Closing:

          4.1
Organization and Standing. The Company and the Subsidiary are
corporations duly organized, validly existing and in good standing under the
laws of the State of Nevada and have all requisite corporate power and authority
to carry on their business as now conducted and as proposed to be conducted. The
Company and the Subsidiary are duly qualified to transact business and are in
good standing in each jurisdiction in which the failure to so qualify is
reasonably likely to have a material adverse effect on its business or its
properties.

          4.2
Authorization. All corporate action on the part of the Company and the
Subsidiary, its officers and directors necessary for the authorization,
execution and delivery of this Agreement, the Debenture, the Warrant, the
Security Agreement and performance of all obligations of the Company and the
Subsidiary hereunder and thereunder, has been or shall be taken prior to the
Closing, and this Agreement, the Debenture, the Warrant, and the Security
Agreement, when executed and delivered, shall constitute the valid and legally
binding obligations of the Company and the Subsidiary, enforceable in accordance
with their terms.

          4.3
Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with any third
party or any federal, state or provincial governmental authority on the part of
the Company or the Subsidiary are required in connection with the consummation
of the transactions contemplated herein.

          4.4
No Conflicts. Neither the execution and delivery of this Agreement, the
Debenture, the Warrant, or the Security Agreement by the Company or the
Subsidiary nor the consummation by the Company or the Subsidiary of the
transactions contemplated herein will (i) conflict with or result in any breach
of any provision of the

Certificate of Incorporation or Bylaws of the Company or the
Subsidiary, (ii) violate in any material respect any statute, rule, regulation,
order, writ, injunction, decree or arbitration award applicable to the Company
or the Subsidiary or its assets, or (iii) breach in any material respect any
other material agreement, undertaking, contract, or security agreement to which
the Company or the Subsidiary is subject.

          4.5
No Defaults. No Event of Default, as defined in Section 8.1 of this
Agreement, shall have occurred and be continuing prior to the Closing.

          4.6
Voting. Other than the Common Stock, there are no shares of stock in the
Company possessing voting rights.

          4.7
Authorized Shares. Until the later of the date on which (a) the Warrant
has been exercised or has expired, or (b) the Maturity Date (as defined in the
Debenture), the Company shall maintain sufficient numbers of shares of
authorized Common Stock to permit the full exercise of the Warrant and
conversion of the Debenture.

     5. Representations and
Warranties of the Creditor. The Creditor represents and warrants to the
Company as follows:

          5.1
Authorization. This Agreement, when executed and delivered by it, will
constitute a valid and legally binding obligation of it, enforceable in
accordance with its terms.

          5.2
Investment. It is acquiring the Debenture to be sold by the Company to
it, the Warrant to be issued by the Company to it, and any equity in the Company
which it may receive therefrom for investment for its own account, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof in violation of the Securities Act. It understands that
the Debenture to be sold by the Company to it, the Warrant to be issued by the
Company to it, and equity of the Company to be purchased or received have not
been registered under the Securities Act, however the Company agrees to register
the Debenture and the Warrant within ninety days of the execution of this
Agreement.

It acknowledges, represents and warrants as of the date of this
Agreement that it is purchasing the Shares for its own account for investment
purposes only and that it does not intend to resell the Shares within the next
year.

It certifies that: (a) it is not a U.S. person and is not
acquiring the securities for the account or benefit of any U.S. person; or (b)
it is a U.S. person who purchased securities in a transaction that did not
require registration under the Securities Act.

It agrees not to engage in hedging transactions with regard to
the Shares unless in compliance with the Securities Act.

The representations, warranties and acknowledgements of the
Creditor contained in this Section will survive the Closing.

          6.
Conditions of Creditor's Obligations at Closing. The obligations of the
Creditor under Sections 1.2 and 1.3 of this Agreement are subject to the
fulfillment on or before the Closing, and on or before of each borrowing, of
each of the following conditions:

          6.1
Representations and Warranties. The representations and warranties of the
Company and the Subsidiary contained in Section 4 hereof shall be true on and as
of the Closing.

          6.2
Performance/No Event of Default. The Company shall have performed and
complied with all agreements and conditions contained herein to be performed or
complied with by it on or before the Closing and there shall exist no Event of
Default.

          6.3
Execution and Delivery of Debenture and Warrant. The Company shall have
authorized, executed and delivered (a) the Debenture to the Creditor, and (b)
the Warrant to the Creditor to purchase a total of 250,000 shares of the
Company's Common Stock at an exercise price of US$0.85 per share (the "Warrant")
in a form substantially similar to that set forth at Exhibit C.

          6.4
Security Agreement. The Company and the Subsidiary shall have duly
authorized, executed and delivered to the Creditor the Security Agreement

     7. Conditions of the Company's
Obligations at Closing. The obligations of the Company under Sections 1.2
and 1.3 of this Agreement are subject to the fulfillment on or before the
Closing of the following condition:

          7.1
Representations and Warranties. The representations and warranties of the
Creditor contained in Section 5 hereof shall be true on and as of the
Closing.

     8. Default.

          8.1
Events of Default. With respect to the Debenture, the Warrant, the
Security Agreement, and this Agreement, the following events are "Events of
Default" thereunder and hereunder:

                    (a)
Default shall be made by the Company in the payment of principal of or any
interest on the Debenture after five (5) days' written notice from the Creditor
following the date when the same is due and payable; or

                    (b)
Default shall be made in the due performance or observance of any other material
covenant, agreement or provision herein, or in the Debenture, the Warrant, or
the Security Agreement, to be performed or observed by the Company or the
Subsidiary, or a material breach shall exist in any representation or warranty
herein contained, or in any Debenture, any Warrant, or the Security Agreement,
as of the date when made, and such default or breach shall have continued for a
period of thirty (30) days after written notice thereof to the Company and the
Subsidiary from the Creditor; or

                    (c)
The Company shall be involved in financial difficulties as evidenced:

                              (i)
by the Company filing a petition in bankruptcy or for reorganization or for the
adoption of an arrangement under the United States Bankruptcy Code or the
Bankruptcy and Insolvency Act of Canada (as now or in the future amended, the
"Bankruptcy Codes") or an admission seeking the relief therein provided;

                              (ii)
by the Company making a general assignment for the benefit of its creditors;

                              (iii)
by the Company consenting to the appointment of a receiver or trustee for all or
a substantial part of the property of the Company or approving as filed in good
faith a petition filed against the Company under said Bankruptcy Codes (in both
cases without the consent of the Company);

                              (iv)
by the commencement of a proceeding or case, without the application or consent
of the Company, in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company or of all or any substantial
part of its assets, or (iii) similar relief in respect of the Company under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case set forth in
(i), (ii), or (iii) above continues undismissed or uncontroverted, or an order,
judgement or decree approving or ordering any of the foregoing being entered and
continuing unstayed and in effect, for a period of sixty (60) days; or

                              (v)
by the Company admitting in writing its inability to pay its debts as such debts
become due; or

                         (d)
Company shall be terminated, dissolved or liquidated (as a matter of law or
otherwise) or proceedings shall be commenced by the Company or by any person
seeking the termination, dissolution or liquidation of the Company.

          8.2
Acceleration. If any one or more Events of Default described in Section
8.1 shall occur and be continuing, then the Creditor may, at the Creditor's
option and by written notice to the Company, declare the unpaid balance of the
Debenture owing to the Creditor to be forthwith due and payable and thereupon
such balance shall become so due and payable without presentation, protest or
further demand or notice of intent to accelerate or other notice of any kind,
all of which are hereby expressly waived by the Company.

     9. Miscellaneous.

          9.1
Notices. All notices, requests, demands and other communications under
this Agreement, the Debenture, the Warrant and the Security Agreement shall be
in writing and shall be deemed to have been duly "given" on the date of
delivery, if delivery is made personally or by fax or email to the party to whom
notice is to be given, or upon receipt if mailed by first class mail, either
registered or certified, postage prepaid and properly addressed as follows:

	If to the Company or the Subsidiary: 	Suite 1209, 207 West Hastings Street 
	  	Vancouver British Columbia 
	  	Canada V6B 1H7 
	  	Attn: President 
	  	  
	If to the Creditor: 	12F, Golden Star Building 
	  	20 Lockhart Road 
	  	Wanchai, Hong Kong 
	  	Attn: President 

Each party may change its address for purposes of this Section
by giving the other party written notice of the new address in the manner set
forth above.

          9.2
Remedies. No failure on the part of the Creditor to exercise, and no
delay on the part of the Creditor in exercising, any right hereunder or under
the Debenture, the Warrant or the Security Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right owned by it
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

          9.3
Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.

          9.4
Term. This Agreement shall terminate upon repayment or conversion of the
Debenture.

          9.5
Legal Advice. The parties each acknowledge that they have had the
opportunity to obtain independent legal advice with respect to the terms of this
Agreement prior to its execution, and the parties have either done so or have
declined to so. In any event, the parties understand their respective terms,
rights and obligations under this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.

	Company 	Lexington Energy Services
      Inc. 
	  	By: 
	  	  
	  	  
	  	  
	  	/s/ Larry Kristof
	  	Larry Kristof, 
	  	President and Chief Executive
      Officer 
	  	  
	  	  
	Subsidiary 	LexCore Services Inc.
  
	  	By: 
	  	  
	  	/s/ Brent Nimeck
	  	Brent Nimeck, 
	  	President and Chief Executive
      Officer 
	  	  
	  	  
	  	  
	  	  
	Creditor 	Alliance World Limited
  
	  	By:
	  	/s/ Cathy Chu
	  	Cathy Chu 
	  	 

EXHIBIT A

THIS DEBENTURE IS SUBJECT TO A SECURED CONVERTIBLE DEBENTURE

PURCHASE AGREEMENT DATED NOVEMBER 6, 2006.

These securities have not been registered under the
Securities Act of 1933 (the "Securities Act") and may not be offered or sold in
the United States or to U.S. persons (other than distributors) unless the
securities are registered under the Securities Act, or an exemption from the
registration requirements of the Securities Act is available. Hedging
transactions involving these securities may not be conducted unless in
compliance with the Securities Act.

SECURED CONVERTIBLE DEBENTURE

US$500,000

November 6, 2006

          For
Value Received, the undersigned, Lexington Energy Services Inc., a Nevada
corporation ("Borrower"), under the terms of this Secured Convertible Debenture
("Debenture") hereby unconditionally promises to pay to the order of Alliance
World Limited ("Creditor"), by wire transfer to such account as Creditor shall
provide notice of to Borrower or by check, in lawful money of the United States
of America and in immediately available funds, the principal amount borrowed and
outstanding hereunder at any time not to exceed US$500,000 (the "Commitment")
and such interest as will have accrued and been outstanding, both payable in the
manner set forth below, such funds to be advanced by the Creditor to Borrower
upon the execution of the Secured Convertible Debenture Purchase Agreement.
Borrower may repay any amounts borrowed hereunder and reborrow any amounts
repaid, up to the Commitment, without penalty or premium from the date hereof
through October 1, 2008 (the "Drawdown Period").

          Capitalized
terms used herein but not otherwise defined herein shall have the meanings given
to them in that certain Secured Convertible Debenture Purchase Agreement
("Purchase Agreement") dated of even date herewith among the Borrower and
Creditor named therein.

          This
Debenture is the Debenture referred to in the Purchase Agreement, the Warrant,
and the Security Agreement.

     1.      Repayment.
Interest shall accrue monthly during the Drawdown Period but shall not be
payable until the Maturity Date as defined below. The outstanding principal and
accrued interest shall be payable in monthly installments of US$10,000
commencing on October 1, 2008, (the "Maturity Date") subject to the right of the
Creditor to accelerate after the occurrence and continuance of an Event of
Default as defined in Section 8.1 of the Purchase Agreement. At any time, at
Creditor's option, Creditor may choose to have all or any part of the
outstanding principal and accrued interest repaid in shares of Common Stock of
the Borrower at a conversion rate equal to:

(1) ten percent (10%) below the fair market value of the Common
Stock at the time of conversion, as calculated according to the average closing
market price of the five business days preceding the conversion date, or if
there has been no sales of the Company’s stock for five days, the price shall be
determined according to the price of the last trade of the Company’s stock or,

(2) at US$0.85 per share (subject to adjustment as set forth in
Section 2 of the Purchase Agreement). 

Such repayment shall not affect Creditor's rights under any
Warrant issued to the Creditor by the Borrower. In the event that Creditor
chooses to convert outstanding principal and accrued interest into Common Stock
of the Borrower, Creditor shall give written notice to the Borrower of such
anticipated conversion no less than fifteen (15) business days prior to the date
of conversion.

     2.      Interest.
Simple interest shall accrue on the outstanding principal amount hereof from the
date funds are advanced until payment in full is received by Creditor, which
interest shall be equal to 10% per annum.

     3.      Secured
Debenture. The full amount of this Debenture is secured by the collateral
identified and described as security therefor in the Security Agreement.

     4.      Default.
Borrower's failure to pay timely any of the principal amount due under this
Debenture or any accrued interest or other amounts due under this Debenture
pursuant to the terms hereof shall constitute an Event of Default as defined in
Section 8.1 of the Purchase Agreement.

     5.      Waiver.
Except as provided for herein, Borrower waives presentment, notice of dishonor,
protest or notice of protest and nonpayment, notice of costs, expenses or losses
and interest thereon and diligence in taking any action to collect any sums
owing under this Debenture or in any proceeding against any of the rights or
interests in or to the properties or assets securing payment of this
Debenture.

     6.      Successors.
The provisions of this Debenture shall inure to the benefit of and be binding on
any successor or Creditor. This Debenture cannot be assigned by any party
hereto.

     7.      Legal
Interest Rate. Notwithstanding anything herein to the contrary, in no event
shall Borrower be obligated to pay interest in excess of the legal limit. In the
event such interest is determined to have been paid, such excess shall be deemed
to have been paid on the principal balance outstanding on this Debenture.

Lexington Energy Services Inc., a Nevada corporation 

By:__________________________________

Name:_______________________________

Title:________________________________

EXHIBIT B

THIS SECURITY AGREEMENT IS SUBJECT TO A SECURED CONVERTIBLE

DEBENTURE PURCHASE AGREEMENT DATED NOVEMBER 6, 2006.

SECURITY AGREEMENT

This Security Agreement (this "Security Agreement") dated as of
November 6, 2006, is made by Lexington Energy Services Inc., (“Grantor”), and
LexCore Services Inc., (“Security Holder”) both Nevada corporations in favor of
Alliance World Limited (the "Creditor"). Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement (as defined below).

Recitals

     A. Pursuant to that certain
Secured Convertible Debenture Purchase Agreement dated as of November 6, 2006
(the "Purchase Agreement"), by and among Grantor, Security Holder and Creditor
and the related Debenture, Creditor has agreed, to make an advance of money and
to extend certain financial accommodations to Grantor in the amounts and in the
manner set forth in the Purchase Agreement and the Debenture (collectively, the
"Loan").

     B. Creditor is willing to make
the Loan to Grantor only upon the condition, among others, that Grantor and
Security Holder shall have executed and delivered to the Creditor this Security
Agreement.

NOW THEREFORE, in order to induce the Creditor to make the Loan
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, and intending to be legally bound, Grantor and Security
Holder hereby represent, warrant, covenant and agree as follows:

     1. Defined Terms. The
following terms shall have the following meanings (such meanings being equally
applicable to both the singular and plural forms of the terms defined):

          "Collateral"
shall have the meaning assigned to such term in Section 3 of this Security
Agreement.

          "Event
of Default" shall have the meaning set forth in the Purchase Agreement.

          "Secured
Obligations" means all indebtedness, liabilities and obligations of Grantor to
Creditor, whether now existing or hereafter incurred, pursuant to the Debenture
and the Purchase Agreement.

     2. Secured Obligations.
Grantor agrees to pay to the Creditor all of the unpaid principal amount of, and
accrued interest on, the Debenture, in accordance with the terms thereof, and
all other indebtedness, liabilities and obligations of Grantor to Creditor,
whether now existing or hereafter incurred, arising out of or in connection with
the Purchase Agreement, the Debenture or this Security Agreement.

     3. Grant of Security
Interest. As collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or 

otherwise) of all the Secured Obligations and in order to
induce the Creditor to cause the Loan to be made, Grantor and Security Holder
hereby, assign, convey, mortgage, pledge, hypothecate and transfer to the
Creditor, for the benefit of the Creditor, and hereby grant to the Creditor, a
security interest in all of Grantor’s and Security Holder’s right, title and
interest in, to and under the following (collectively called the
"Collateral"):

                    (a)
Coring Oil Rig 2006 Peterbuilt Truck VIN# 1NPAL40X06D886718, owned by Security
Holder, located in Calgary, Alberta

     4. Representations and
Warranties. Grantor and Security Holder hereby represent and warrant to the
Creditor that except for the security interest granted under this Security
Agreement, the Security Holder is the sole legal and equitable owner of the
Collateral in which it purports to grant a security interest hereunder, having
good, marketable title thereto and that the Creditor shall have a valid, binding
and enforceable lien and/or security interest in and to the Collateral.

     5. Covenants. Grantor
covenants and agrees with the Creditor that from and after the date of this
Security Agreement and until the Secured Obligations have been performed and
paid in full:

          5.1
Further Assurances. At any time and from time to time, upon the written
request of the Creditor, and at the sole expense of Grantor, Security Holder
shall promptly and duly execute and deliver any and all such further instruments
and documents and take such further actions as the Creditor may reasonably deem
desirable to obtain the full benefit of this Security Agreement. At the request
of the Creditor, the parties shall execute all necessary documentation to
perfect the registration in Alberta, Canada and, or, in any other province or
state as the Creditor shall deem necessary, of the Secured Obligations and the
Collateral by giving 20 days written notice.

          5.2
Maintenance of Records. Security Holder shall keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral.
Security Holder shall allow reasonable access to such records upon reasonable
notice from Creditor.

          5.3
Collateral. Security Holder agrees that it will not, without the prior
written consent of the Creditor, consent to, permit or suffer to occur any sale,
transfer, hypothecation, lien, or use of any of the Collateral adversely
affecting the interest of the Creditor therein.

     6. Rights and Remedies Upon
Default.

                    (a)
If any Event of Default shall occur and be continuing, the Creditor shall have
the right to take title to, seize, assign, sell, and otherwise dispose of the
Collateral, either at public or private sale, for cash, credit or otherwise,
with or without representations or warranties, and upon such terms as shall be
reasonable, and the Creditor may bid or become the purchaser at any such sale,
and such Creditor shall have the right at its option to apply or credit the
amount of all or any part of the Secured Obligations owing to it against the
purchase price bid by it at any such sale. If notification to Grantor or
Security Holder of any intended disposition by the Creditor of any of the
Collateral is required by applicable law, such notification will be deemed to
have been reasonable and proper if given at least 20 days prior to such
disposition.

                    (b)
Except as specifically provided for herein, Grantor hereby waives presentment,
demand, protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Security Agreement or any
Collateral.

     7. Reinstatement. This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against Grantor for liquidation or
reorganization, should Grantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Grantor's property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

     8. Miscellaneous.

          8.1
No Waiver; Cumulative Remedies.

                    (a)
Creditor shall not by any act, delay, omission or otherwise be deemed to have
waived any of their respective rights or remedies hereunder, nor shall any
single or partial exercise of any right or remedy hereunder on any one occasion
preclude the further exercise thereof or the exercise of any other right or
remedy.

                    (b)
The rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.

                    (c)
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Grantor, Security Holder and Creditor; 

          8.2
Termination of this Security Agreement. This Security Agreement shall
terminate upon the payment and performance in full of the Secured
Obligations.

          8.3
Successor and Assigns. This Security Agreement shall be binding upon the
successors of Grantor, Security Holder and Creditor and may be assigned by any
party.

          8.4
Counterparts. This Security Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          8.5
Titles and Subtitles. The titles of the sections and subsections of this
Security Agreement are not to be considered in construing this Security
Agreement.

          8.6
Severability. In case any provision of this Security Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired
thereby.

          8.7
Agreement is Entire Contract. This Security Agreement, together with the
Debenture, the Warrant, and the Purchase Agreement, constitutes the final,
complete and exclusive contract between the parties hereto with respect to the
subject matter hereof and no party shall be liable or bound to the other in any
manner by any warranties, representations, guarantees or covenants except as
specifically set forth herein and in such other documents referred to above.
Nothing in this Security Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any right, remedies, obligations or liabilities under or by reason
of this Security Agreement, except as expressly provided herein.

          8.8
Relationship of Certain Rights and Obligations. The repayment of the Loan
does not diminish, curtail, amend, alter, or otherwise change the rights of the
Creditor to exercise the Warrant, nor does the exercise of the Warrant by
Creditor alleviate, amend, alter, or otherwise change Grantor's obligation to
repay the Loan.

IN WITNESS WHEREOF, the undersigned has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.

	Grantor 	Lexington Energy Services Inc.
  
	  	By: 
		 -------------------------------- 
	  	Larry Kristof, President and
      Chief Executive Officer 
	Security Holder 	LexCore Services Inc. 
	  	By: 
		 -------------------------------- 
	  	Brent Nimeck, President and Chief
      Executive Officer 
	  	  
	Creditor 	Alliance World Limited 
	  	By: 
	  	----------------------------------- 

EXHIBIT C

WARRANT CERTIFICATE

WARRANTS TO PURCHASE SHARES
OF COMMON STOCK OF LEXINGTON
ENERGY SERVICES INC.

	Certificate No. 	250,000 Warrants

     This Warrant Certificate
certifies that Alliance World Limited (the “Holder”), is the owner of
250,000 Warrants (subject to adjustment as provided herein), each of
which represents the right to subscribe for and purchase from Lexington
Energy Services Inc., a Nevada corporation (the “Company”), one share of the
Common Stock, par value $0.001 per share, of the Company (the common stock,
including any stock into which it may be changed, reclassified or converted, is
herein referred to as the “Common Stock”) at the purchase price (the “Exercise
Price”) of $0.85 per share (subject to adjustment as provided herein).
This Warrant Certificate represents only Warrants issued pursuant to a Secured
Convertible Debenture Purchase Agreement, between the Company and the Holder
(the “Debenture”), approved by the Company on November 6, 2006.

THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND ARE SUBJECT TO CERTAIN RESTRICTIONS, CONTAINED IN
PARAGRAPHS 5 AND 6 HEREOF, WITH RESPECT TO THEIR TRANSFER.

     The Warrants represented by this
Warrant Certificate are subject to the following provisions, terms and
conditions:

1. EXERCISE OF WARRANTS

     Exercise of Warrants. The
Warrants may be exercised by the Holder, in whole or in part (but not as to a
fractional share of Common Stock), by surrender of this Warrant Certificate at
the principal office of the Company at Suite 1209, 207 West Hastings Street,
Vancouver British Columbia, Canada V6B 1H7 (or such other office or agency of
the Company as may be designated by notice in writing to the Holder at the
address of such Holder appearing on the books of the Company), with the
appropriate form attached hereto duly exercised, at any time within the period
beginning on the date hereof and expiring on November 1, 2008 (the
“Exercise Period”) and by payment to the Company by certified check or bank
draft of the purchase price for such shares. The Company agrees that the shares
of Common Stock so purchased shall be and are deemed to be issued to the Holder
as the record owner of such shares of Common Stock as of the close of business
on the date on which the Warrant Certificate shall have been surrendered and
payment made for such shares of Common Stock. Certificates representing the
shares of Common Stock so purchased shall be delivered to the Holder promptly
and in no event later than ten (10) days after the Warrants shall have been so
exercised, and, unless the Warrants have expired, a new Warrant Certificate
representing the number of Warrants represented by the surrendered Warrant
Certificate, if any, that shall not have been exercised shall also be delivered
to the Holder within such time.

2. ADJUSTMENTS

     A. Adjustments. The
Exercise Price and the number of shares of Common Stock issuable upon exercise
of each Warrant shall be subject to adjustment from time to time as follows:

 Stock Dividends; Stock Splits;
Reverse Stock Splits; Reclassifications. In case the Company shall (i)
subdivide its outstanding shares of Common Stock, (ii) combine its outstanding
shares of Common Stock into a smaller number of shares of any class of Common
Stock or (iii) issue any shares of its capital stock in a reclassification of
the Common Stock (including any such reclassification in connection with a
merger, consolidation or other business combination in which the Company is the
continuing corporation) (any one of which actions is herein referred to as an
“Adjustment Event”), the number of shares of Common Stock purchasable upon
exercise of each Warrant immediately prior to the record date for such
Adjustment Event shall be adjusted so that the Holder shall thereafter be
entitled to receive the number of shares of Common Stock or other securities of
the Company (such other securities thereafter enjoying the rights of shares of
Common Stock under this Warrant Certificate) that such Holder would have owned
or have been entitled to receive after the happening of such Adjustment Event,
had such Warrant been exercised immediately prior to the happening of such
Adjustment Event or any record date with respect thereto. An adjustment made
pursuant to this Section 2A shall become effective immediately after the
effective date of such Adjustment Event retroactive to the record date, if any,
for such Adjustment Event.

(1) Adjustment of Exercise
Price. Whenever the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 2A, the Exercise Price
for each share of Common Stock payable upon exercise of each Warrant shall be
adjusted by multiplying such Exercise Price immediately prior to such adjustment
by a fraction, the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of shares of Common
Stock so purchasable immediately thereafter.

     B. Statement on Warrant
Certificates. The form of this Warrant Certificate need not be changed
because of any change in the Exercise Price or in the number of kind of shares
purchasable upon the exercise of a Warrant and any Warrant Exercise Price and
the same number and kind of shares as are stated in this Warrant Certificate.
However, the Company may at the time in its sole discretion make any change in
the form of the Warrant Certificate that it may deem appropriate and that does
not affect the substance thereof and any Warrant Certificate thereafter issued,
whether in exchange or substitution for any outstanding Warrant Certificate or
otherwise, may be in the form so changed.

3. RESERVATION AND AUTHORIZATION OF COMMON STOCK

     The Company covenants and agrees
(A) that all shares of Common Stock which may be issued upon the exercise of the
Warrants represented by this Warrant Certificate will, upon issuance, be validly
issued, fully paid and nonassessable and free of all insurance or transfer
taxes, liens and charges with respect to the issue thereof, (b) that during the
Exercise Period, the Company will at all times have authorized, and reserved for
the purpose of issue or transfer upon exercise of the Warrants evidenced by this
Warrant Certificate, sufficient shares of Common Stock to provide for the
exercise of the Warrants represented by this Warrant Certificate, and (c) that
the Company will take all such action as may be necessary to ensure that the
shares of Common Stock issuable 

upon the exercise of the Warrants may be so issued without
violation of any applicable law or regulation, or any requirements of any
domestic securities exchange upon which any capital stock of the Company may be
listed, provided, however, that nothing contained herein shall impose upon the
Company any obligation to register the warrants evidenced by this Warrant
Certificate or such Common Stock under applicable securities laws except as
provided in the Subscription Agreement. In the event that any securities of the
Company other than the Common Stock are issuable upon exercise of the Warrants,
the Company will take or refrain from taking any action referred to in clauses
(A) through (c) of this Section 3 as though such clauses applied, mutatis
mutandis to such other securities then issuable upon the exercise the
Warrants.

4. NO VOTING RIGHTS

     This Warrant Certificate shall
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company.

5. EXERCISE OF WARRANTS OR COMMON STOCK

     The Holder of this Warrant
Certificate agrees to be bound by the provisions contained in the Subscription
Agreement with respect to the limitations, including limitations imposed for
Securities Act compliance, on the transfer of the Warrants and the shares of
Common Stock or other securities issuable upon exercise of the Warrants.

6. WARRANTS NON-TRANSFERABLE

     This Warrant Certificate and the
Warrants it evidences are non-transferable, in whole or in part.

7. CLOSING OF BOOKS

     The Company will at no time close
its transfer books against the transfer of any Warrant or of any shares of
Common Stock or other securities issuable upon the exercise of any Warrant in
any manner which interferes with the timely exercise of the Warrants.

8. WARRANTS EXCHANGEABLE, LOSS, THEFT

     This Warrant Certificate is
exchangeable, upon the surrender hereof of any Holder at the office or agency of
he Company referred to in Section 1, for new Warrant Certificates of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each such new Warrant to represent the right to subscribe and purchase such
number of shares of Common Stock as shall be designated by said holder hereof at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation, upon surrender or cancellation of
this Warrant Certificate, the Company will issue to the holder hereof a new
Warrant Certificate of like tenor, in lieu of this Warrant Certificate,
representing the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder.

9. MERGERS, CONSOLIDATIONS, ETC.

     A. If the Company shall merge or
consolidate with another corporation, the holder of this Warrant shall
thereafter have the right, upon exercise hereof and payment of the Exercise
Price, to receive solely the kind and amount of shares of stock (including, if
applicable, Common Stock), other securities, property or cash or any combination

thereof receivable by a holder of the number of shares of
Common Stock for which this Warrant might have been exercised immediately prior
to such merger or consolidation (assuming, if applicable, that the holder of
such Common Stock failed to exercise its rights of election, if any, as to the
kind or amount of shares of stock, other securities, property or cash or
combination thereof receivable upon such merger or consolidation).

     B. In case of any
reclassification or change of the shares of Common Stock issuable upon exercise
of this Warrant (other than elimination or par value, a change in par value, or
from par value to no par value, or as the result of a subdivision or combination
of shares (which is provided for elsewhere herein), but including any
reclassification of the shares of Common stock into two or more classes or
series of shares) or in case of any merger or consolidation of another
corporation into the Company in which the Company is the surviving corporation
and in which there is a reclassification or change of the shares of Common Stock
(other than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination (which is provided for elsewhere herein),
but including any reclassification of the shares of Common Stock this Warrant
shall thereafter have the right, upon exercise hereof and payment of the
Exercise Price, to receive solely the kind and amount of shares of stock
(including, if applicable, Common Stock), other securities, property or cash or
any combination thereof receivable upon such reclassification, change, merger or
consolidation by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such reclassification,
change, merger or consolidation (assuming, if applicable, that the holder of
such Common Stock failed to exercise its rights of election, if any, as to the
kind or amount of shares of stock, other securities, property or cash or
combination thereof receivable upon such reclassification, change, merger or
consolidation).

10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANTS

     The rights and obligations of the
Company, of the Holder, and of the holders of shares of Common Stock or other
securities issued upon exercise of the Warrants, contained in Sections 5 and 7
of this Warrant Certificate shall survive the exercise of the Warrants.

	November 6, 2006 	LEXINGTON ENERGY SERVICES INC. 
	  	  
	  	  
	  	  
	  	  
	  	Larry Kristof 
	  	President 

Exhibit A to Warrant Certificate

SUBSCRIPTION AGREEMENT

(To be executed upon exercise of the Warrant)

Date:______________________

To: LEXINGTON ENERGY SERVICES INC.

     The undersigned, pursuant to the
provisions set forth in the attached Warrant Certificate, hereby agrees to
subscribe for and purchase _________________ shares of the Common Stock covered
by such Warrant Certificate, and tenders payment herewith in full thereof at the
price per shares provided by such Warrant Certificate.

 

 

___________________________________
Signature

 

___________________________________
(Print Name and
Title, if applicable) 

 

___________________________________
(Street Address)

 

___________________________________
 (City) (Province)
(Postal Code)

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