Participation Agreement dated October 31, 2008 with respect to the Pearce #1Well located Lee County, Texas

RE:

Pearce #1 Well

1.

INTEREST: PARTICIPANT (NON-OPERATOR) WILL DESIGNATE THE PERCENTAGE WORKING INTEREST BELOW THAT THEY ARE ACQUIRING IN AND TO THE WELLS.

2.

PAYMENT: Upon acceptance of this agreement by PARTICIPANT, PARTICIPANT (NON-OPERATOR) will remit payment representing consideration for the interest being acquired by PARTICIPANT (NON-OPERATOR) to LEEXUS OIL in the AFE pro-rata amount of $56,000.00 plus a prospect fee of $11,200.00 for a total amount of $67,200.00.

3.

ASSIGNMENT: Upon receipt of payment from PARTICIPANT (NON-OPERATOR) for the interest being acquired herein, LEEXUS OIL will execute an ASSIGNMENT AND BILL OF SALE conveying said interest to PARTICIPANT.  It is understood and agreed by all parties hereto that the interests to be assigned in and to the WELLS shall be made on an “as-is, where-is” basis and LEEXUS OIL expressly disclaims any warranty of any kind.  LEEXUS OIL will provide PARTICIPANT (NON-OPERATOR) a copy of the ASSIGNMENT AND BILL OF SALE for their review and consideration upon LEEXUS OIL prior to execution of this Letter Agreement.  Acceptance and execution of this Letter Agreement by PARTICIPANT (NON-OPERATOR) shall be deemed acceptance of the previously referenced ASSIGNMENT AND BILL OF SALE form.

4.

JOINT OPERATING AGREEMENT: LEEXUS OIL and PARTICIPANT (NON-OPERATOR) agree to add, amend, ratify the current Master Joint Operating Agreement (“Master JOA”) with COPAS Joint Accounting Procedure, originally signed and dated October 15, 2008, and contemporaneously herewith, designating LEEXUS OIL L.L.C. as Operator of the WELLS.  PARTICIPANT (NON-OPERATOR) will be responsible and liable for paying their proportionate share of any and all monthly operating costs, rework costs or any and all other costs as may be incurred as a result of conducting operations in accordance with the Master JOA as of the effective date and thereafter.  In the event of any conflict between the provisions of the Joint Operating and this Letter Agreement, both parties agree the terms of this Letter Agreement shall control.

 

SECURITIES DISCLAIMER: THE PARTIES UNDERSTAND AND AGREE THAT THE PROPOSED VENTURE IS A HIGHLY SPECULATIVE ONE AND THAT NO REPRESENTATIONS ARE MADE TO PARTICIPANT(S) AS TO THE SUCCESS OF THE VENTURE OR FINANCIAL GAIN. PARTICIPANT (NON-OPERATOR) REPRESENTS AND WARRANTS THAT THEY ARE A SOPHISTICATED OIL AND GAS INVESTOR.  THE PARTIES AGREE AND UNDERSTAND THIS IS NOT A REGISTERED SECURITIES AGREEMENT.

6.

TAX STATUS: It is understood that LEEXUS OIL and PARTICIPANT (NON-OPERATOR) are not partners and each of them elects, under the authority of Section 761(a) of the Internal Revenue Code of 1954, to be excluded from the application of all the provisions of Subchapter K of Chapter 1 of Subtitle A thereof.

7.

ENTIRE AGREEMENT: This Participation Agreement, the Master JOA, and the COPAS Joint Accounting Procedure hereby incorporated by reference, constitute the entire agreement by and between LEEXUS OIL and PARTICIPANT (NON-OPERATOR) and may not be altered or amended except in writing signed by both parties.

8.

GOVERNING LAW: This Agreement shall be governed by the laws of the State of Texas.

9.

WARRANTY DISCLAIMER: LEEXUS OIL makes no warranty of title, express or implied, with respect to the WELLS or any leasehold or other right(s) acquired hereunder.  PARTICIPANT’S interest in and to the WELLS will be acquired on an “as-is, where-is” basis.