Purchase and Sale Agreement CRAWFORD & BOURBON COUNTIES, KANSAS

Purchase and Sale Agreement

XXXXXXXX & BOURBON COUNTIES, KANSAS

This Agreement made February 18th, 2008

BETWEEN:

GALAXY ENERGY INC.,

a body corporate, registered to carry on business in the State of Kansas

and having an office in the town of Stigler, Okalahoma

(hereinafter called the “Transferor”)

- and -

JAYHAWK ENERGY INC.,

a body corporate, registered to carry

on business in the State of Colorado and having an office in the town of Broomfield

(hereinafter called the “Transferee”)

Whereas Transferor wishes to sell and the Transferee wishes to purchase the Assets, the Parties agree as follows:

1.	Definitions

(a)	“Closing Date” means 3:00 p.m. on March 31st, 2008, or such other time and date as may be agreed upon in writing by the Parties.

(b)	“Effective Date” means March 1, 2008.

(c)	“During the date of closing March 31, 2008 & time forward the revenue & expenses are all eligible to thee Transferee.

Schedules

The following Schedules are attached hereto and made part of this Agreement:

(a)	Schedule “A”, which is the Land Schedule, and identifies:

(i)

the Lands;

(ii)

the Leases;

(iii)

any other agreements, documents or data that are relative to the xxxxx, properties, lands & surface equipment;

(iv)	any encumbrances;

(v)	any Rights of First Refusal;

(vi)	production sale agreements;

(vii)

other agreements, penalties or restrictions by contract on the use of the Assets required to be included in the Land Schedule under the definition of Permitted Encumbrances or the definition of Title and Operating Documents;

(viii)

any Facilities required to be included in the Land Schedule under the definition of Facilities, any other Tangibles described in Paragraph (c) of the definition of Tangibles and any assets otherwise falling within the definition of Tangibles that are specifically excluded therefrom; and

(ix)	the Xxxxx;

(x)	any lawsuits and claims;

(xi)	any default notices;

(xii)

any outstanding AFE’s;

(xiii)

any knowledge of environmental matters of the Property Transfer Procedure;

(xiv)

any areas of mutual interest; and

3.	Purchase and Sale

(a)

The Transferor agrees to dispose of the Assets to the Transferee and the Transferee agrees to purchase the Assets from the Transferor on the terms and conditions set forth in this Agreement.

(b)	The purchase price for the assets listed below.


(i) To Petroleum and Natural Gas Rights. (ii) 6500 Acres Of Leases. (iii) 6” Gas Pipeline (iv) Easements of pipeline. (v) All existing 34 xxxxx. (vi) 22,000’ x 4” of SDR 11 stock pipe. (vii) De-hy, Compressor & all equipment on all xxxxx remain as per February, 08, 2008 lease visit.
(ii) Cash	$ 1,000,000.00
(iii) JAYHAWK ENERGY Stock	$ 1,000,000.00
Total	$2,000,000.00

(c)	The Transferee will pay the Purchase Price to the Transferor as

follows:

(i)	the delivery of ten percent (10%) of the Cash Purchase Price, representing a Deposit towards the Purchase Price, payable upon request anytime prior to Closing Date March 31st.

(ii)	at Closing, the delivery of the remainder of the Purchase Price (ie. the Purchase Price less the Deposit).

In witness whereof the Parties have duly executed this Agreement.

GALAXY ENERGY INC.

Per:____________________

JAYHAWK ENERGY INC.

Per:____________________

This is the execution page of that certain Purchase and Sale Agreement dated February 18, 2008 between GALAXY ENERGY INC., as Transferor and JAYHAWK ENERGY INC., as Transferee.

“Exhibit A”

Galaxy Leases Held By Production

County: Bourbon

Twp 26S

Range 23E

Section 26

Description: W/2SW & W/2NW less tract

Acres: 155

Lessor: Xxxx Xxxxxxx Xxx

Twp 27S

Range 23E

Section 2

Description: N/W less right away

Acres: 157

Lessor: Xxxxx Xxxxxxx

Twp 27S

Range 23E

Section 14

Description: S/2 NW

Acres: 79

Lessor: Xxxxxx Xxx

Twp 27S

Range 23E

Section 14

Description: S/W less right away

Acres: 160

Lessor: Xxxxxxx Xxxxxx Trust

Twp 27S

Range 23E

Section 15

Description: S/E less right away

Acres: 160

Lessor: Hervey/Ricci

County: Xxxxxxxx

Twp 27S

Range 23E

Section 26

Description: S/E

Acres: 160

Lessor: Xxxxx Xxxxxxxxxxx

Xxx 00

Xxxxx 00

Xxxxxxx 00

Description: S/W

Acres: 160

Lessor: Xxxx Xxxxxxx

Twp 27S

Range 23E

Section 27

Description: NE & E/2 NW less tract & SW

Acres: 396

Lessor: Xxxxx X’Xxxxx

Twp 27S

Range 23E

Section 34

Description: NE less right away

Acres: 162

Lessor: Xxxxx Xxxxxxxxxxxx

Twp 27S

Range 23E

Section 35

Description: SW less right away

Acres: 158

Lessor: Xxxx Xxxxxxxx

Twp 28S

Range 23E

Section 3

Description: NE

Acres: 160

Lessor: Bus Xxxxxxx

Twp 28S

Range 23E

Section 7

Description: W/2 less NE-NW

Acres: 280

Lessor: Xxxxxxx Xxxxxxxxx

Twp 28S

Range 23E

Section 11

Description: SW

Acres: 160

Lessor: Xxxxxx Xxxxxxx

Twp 28S

Range 23E

Section 13

Description: W/2 NE & E/2 N/2 NW

Acres: 120

Lessor: Xxxxxx Xxxxxxx

Twp 28S

Range 23E

Section 13

Description: S/2 NW & NW SE & SW SE

Acres: 200

Lessor: Xxxxx Xxxxxxxx

Twp 28S

Range 23E

Section 14

Description: SW NE & NW SE & SW SE

Acres: 121

Lessor: Xxxxxx Xxxxxxxx

Twp 28S

Range 23E

Section 17

Description: E/2 less right away

Acres: 317

Lessor: Don Ralph

Twp 28S

Range 23E

Section 23

Description: NW

Acres: 161

Lessor: Don Ralph

Twp 28S

Range 23E

Section 24

Description: W/2 NE

Acres: 80

Lessor: Xxxxxx & Xxxx Xxxxxxxx

Twp 28S

Range 23E

Section 24

Description: W/2 less tract

Acres: 314

Lessor: Xxxxxx Xxxxxxxx

Twp 28S

Range 23E

Section 26

Description: NW less tract

Acres: 158

Lessor: Xxxxxxxx Xxxxxxx

Twp 28S

Range 23E

Section 34

Description: NW less tract

Acres: 78

Lessor: Xxxx Trust

Twp 29S

Range 23E

Section 3

Description: NE & E/2 SE

Acres: 240

Lessor: Twylet Enterprises

Twp 29S

Range 23E

Section 12

Description: E/2 NE

Acres: 80

Lessor: Xxxxxxx Xxxxxx

Galaxy Leases Not Held By Production

County: Bourbon

Twp 27S

Range 21E

Section 23

Description: SE/4 less right away

Acres: 157

Lessor: Xxxxxxx Xxxxxxxx

Twp 27S

Range 21E

Section 24

Description: W/2 SW & SE SW less right away

Acres: 120

Lessor: Xxxxxxx Xxxxxxxx

County: Xxxxxxxx

Twp 27S

Range 21E

Section 25

Description: NW less right away

Acres: 158

Lessor: Xxxxxxx Xxxxxxxx Xx

Twp 27S

Range 21E

Section 25

Description: S/2 less right away

Acres: 320

Lessor: Xxxxx Xxxxxxxx

Twp 27S

Range 21E

Section 26

Description: NE less right away

Acres: 156

Lessor: Xxxxxxx Xxxxxxxx Xx

Twp 27S

Range 21E

Section 36

Description: S/2 NW less right away

Acres 80

Lessor: Xxxxx Xxxxxxxx

Twp 27S

Range 21E

Section 36

Description: N/2 NW less right away

Acres: 80

Lessor: Xxxx Xxxxxxxx

County: Bourbon

Twp 27S

Range 22E

Section 11

Description: S/2 SE less right away

Acres: 80

Lessor: Xxxx Xxxxxx

Twp 27S

Range 22E

Section 14

Description: NW SE less right away

Acres: 40

Lessor: Xxxx Xxxxxx

Twp 27S

Range 22E

Section 21

Description: N/2 SE less tract

Acres: 75

Lessor: Xxxx Xxxx

Twp 27S

Range 22E

Section 22

Description: W/2 SW less right away

Acres: 78

Lessor: Xxxx Xxxx

County: Neosho

Twp 28S

Range 21E

Section 3

Description: S/2 NE

Acres: 80

Lessor: Xxxxx Xxxxxxxx

County: Xxxxxxxx

Twp 27S

Range 22E

Section 25

Description: NW & W/2 NE & S/2 less right away

Acres: 560

Lessor: Xxxxxxx Xxxxxxxxx

Twp 27S

Range 22E

Section 25

Description: E/2 NE less right away

Acres: 79

Lessor: X.X Grain (Xxxxxx)

Twp 27S

Range 22E

Section 26

Description: S/2 NE & NE NW SE

Acres: 91

Lessor: Xxxxxxx X’Xxxxx

Twp 27S

Range 22E

Section 26

Description: NE SE & E/2 SE SE & tract

Acres: 64

Lessor: Xxxxx Xxxxxx

Twp 27S

Range 22E

Section 26

Description: NW NW & SW NW & W/2 SW

Acres: Combined from above

Lessor: Xxxxx Xxxxxx

Twp 27S

Range 22E

Section 26

Description: less tracts & right away

Acres: 165

Lessor: Xxxxxxx Xxxxxx

Twp 27S

Range: 22E

Section 27

Description: E/2 SE less right away

Acres: 81

Lessor: Xxxxxxx Xxxxxx

Twp 27S

Range 22E

Section 29

Description: N/2 SW less right away

Acres: 81

Lessor: Xxxxx Xxxx

Twp 27S

Range 22E

Section 33

Description: S/2 NE

Acres: 80

Lessor: Xxxx Xxxx

Twp 27S

Range 22E

Section 34

Description: X/0 XX & XX & X/0 XX less right away

Acres: 314

Lessor: Xxxxxxx Xxxxxxxxx

Twp 27S

Range 22E

Section 35

Description: S/2 NW & SW & N/2 NW less tract

Acres: 218

Lessor: Xxxxxxx Xxxxxxxxx

Twp 27S

Range 22E

Section 35

Description: SE SE less right away

Acres: 39

Lessor: Xxxxx Xxxx

Galaxy Easements

County: Bourbon

Twp 26S

Range 23E

Section 26

Description: W/2 W/2

Grantor: Xxxx Xxxxxxx Xxx

Twp 26S

Range 23E

Section 35

Description: SW SW

Grantor: Xxx Xxxxxxx

Twp 26S

Range 23E

Section 35

Description: W/2 W/2

Grantor: Xxxxx Xxxxxx

Twp 27S

Range 23E

Section 2

Description: NW

Grantor: Xxxxx Xxxxxxx

Twp 27S

Range 23E

Section 2

Description: SW

Grantor: Jetta Xxxxxx

Twp 27S

Range 23E

Section 2

Description: Highway Crossing Permit

Grantor: Kansas Dept Of Transportation

Twp 27S

Range 23E

Section 11

Description: NW

Grantor: Xxxx Xxxxxxxx

Twp 27S

Range 23E

Section 11

Description: SW SW

Grantor: Xxxx Xxxxxxx Xxx

Twp 27S

Range 23E

Section 11

Description: Highway Crossing Permit

Grantor: Dept Of Transportation

Twp 27S

Range 23E

Section 14

Description: S/2 NW

Grantor: Xxxxxx Xxx

Twp 27S

Range 23E

Section 14

Description: SW

Grantor: Xxxxxxx Xxxxxx Trust

Twp 27S

Range 23E

Section 23

Description: SW

Grantor: Xxxxxxxxx Xxxx III

Twp 27S

Range 23E

Section 23

Description: NW

Grantor: Xxxxx Xxxx

County: Xxxxxxxx

Twp 27S

Range 23E

Section 26

Description: NW

Grantor: Xxxx Xxxxxxx

Twp 27S

Range 23E

Section 26

Description: W/2 NW

Grantor: Xxxxx X’Xxxxx

Twp 27S

Range 23E

Section 35

Description: NW

Grantor: Xxxx Xxxx

Twp 27S

Range 23E

Section 35

Description: SW

Grantor: Xxxx Xxxxxxxx

Twp 28S

Range 23E

Section 2

Description: NW

Grantor: Xxxxxx Xxxxxxxx

Twp 28S

Range 23E

Section 2

Description: W ¾ of SW

Grantor: Xxxxxx Xxxxxxx

Twp 28S

Range 23E

Section 10

Description: S/2 SE

Grantor: Xxxxx Xxxxxxx

Twp 28S

Range 23E

Section 10

Description: N/2 SE

Grantor: Xxxxxx Xxxxxxx

Twp 28S

Range 23E

Section 15

Description: E/2

Grantor: Xxxxx Xxxxxx

Twp 28S

Range 23E

Section 23

Description: NW

Grantor: Don Ralph

Twp 28S

Range 23E

Section 26

Description: NW

Grantor: Xxxxxxxx Xxxxxxx

Xxx 00X

Range 23E

Section 26

Description: SW

Grantor: Xxxxx XxXxxxx

Assets

16mile x 6.0” x 150psi MOP group pipeline (Poly)

400Mcf x 3phase gas compressor

2- H2s scrubbers

Dehydration

34-xxxxx (7-producing)

22,000’ (Feet) Stock 4.0” x 150psi MOP pipeline (Poly)

Various production packages (Seperator, meter run, tanks & chart recorders)

Well Descriptions

XXXXX LEASE NAME

#26 –1 X.Xxx

#00-0 X.Xxx

#0-0 Xxxxxxx

#00-0 X.Xxx

#14-1 Xxxxxxxxxxx

#27-1 X. X’Xxxxx

#00-0 Xxxxxxxxxxxx

#00-0 Xxxxxxxx

#00-0 Xxxxxxx

#00-0 Xxxxxxxxx

#27-1 Senecaut

#00-0 Xxxxxxx

#27-1 Xxxxx Xxxxxxx

#OLD Xxxxx Xxxxxxx

#27-2 Xxxxxxxx

XXXXX LEASE NAME

#27-1 D. Ralph (West)

#00-0 X.Xxxxx (Xxxxx)

#00-0 X. Xxxxxxxx

#27-2 X. Xxxxxxxx

#27-3 X. Xxxxxxxx

#27-4 X. Xxxxxxxx

#00-0 Xxx Xxxxxxxx (Xx Xxxx)

#00-0 Xxxxxxx

#00-0 Xxxx

#00-0 Xxxxxx

#00-0 Xxxx-Xxxxx

#00-0 Xxxxxxx

#00-0 XxXxxxx

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Purchase and Sale Agreement CRAWFORD & BOURBON COUNTIES, KANSAS

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