ReoStar Energy Corp (REOS)

[redwards]

As compensation for ZAZA Energy, the Company will issue to ZAZA Energy an aggregate of 12,000,000 shares of the Company's common stock and an overhead payment of $1,500,000 per year for three years. The shares of the Company's common stock will be issuable pursuant to Section 4(2) of the Securities Act of 1933. The Development Agreement has a term of three years and can be extended beyond the initial term by mutual written consent of the parties.

Both transactions are to close concurrently, and the closing is subject to certain conditions precedent, including the consummation by the Company of a minimum of $15 million in financing. If the transactions do not close by August 1, 2009, the agreements will terminate and be of no further force and effect.