Exhibit 10.3
COMPROMISE SETTLEMENT AGREEMENT AND
MUTUAL GENERAL RELEASE

I.
PARTIES
The parties to this Compromise Settlement Agreement and Mutual General Release
are:

1.01    Earthstone Operating, LLC; Earthstone Energy, Inc.; Oak Valley
Resources, LLC; Oak Valley Operating, LLC; and Sabine River Energy, LLC
(collectively, “Earthstone”).
1.02    Lucas Energy, Inc. (“LEI”).
1.03    Victory Energy Corporation; AEP Assets LLC, and Aurora Energy Partners
(together, “Victory”).
II.    
DEFINITIONS
2.01    “JOA” means that certain Joint Operating Agreement which appears as
Exhibit “C” to the Participation Agreement, as defined below.
2.02    “Earthstone Parties” means Earthstone and its past and present
principals, officers, directors, shareholders, employees, agents,
representatives, members, parents, subsidiaries, affiliates, assigns,
predecessors and successors.
2.03    “LEI Parties” means LEI and its past and present principals, officers,
directors, shareholders, employees, agents, representatives, members, parents,
subsidiaries, affiliates, assigns, and successors.
2.04    “Participation Agreement” means that certain Participation Agreement,
dated August 1, 2014, between Earthstone and LEI.
2.05    “Victory Assignment” means the assignment to Victory of the Subject
Interests, as defined below, pursuant to that certain Partial Assignment and
Bill of Sale of Wellbore Rights dated effective as of February 27, 2015 and
recorded in Volume 1223, Page 133 in the Official Records of Karnes County,
Texas.
2.06    “Victory Parties” means Victory and its past and present principals,
officers, directors, shareholders, employees, agents, representatives, members,
parents, subsidiaries, affiliates, assigns, and successors.

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2.07     “Settlement Agreement” means this Compromise Settlement Agreement and
Mutual General Release.
2.08    “Subject Interests” means a purported fifty percent (50%)
Working/Leasehold Interest in and to the Boggs #1H and #2H wellbore rights,
along with one hundred feet (100’) laterally perpendicular to said wellbores
that were assigned by Lucas to Victory pursuant to the Victory Assignment.
2.09    “Parties” means Earthstone, LEI, and Victory, each of whom shall be
individually referred to as a “Party.”
2.10    The “Dispute” means all claims and causes of action of any kind
whatsoever which the Parties have or may have in the future against each other,
based on any acts or events that have occurred on or before the Effective Date,
as defined below, related to or arising out of those facts set forth in Section
III below, except as otherwise provided in this Settlement Agreement.
2.11    “Effective Date” means the date on which this Settlement Agreement is
executed by LEI, Earthstone and Victory. If executed on different dates, the
Effective Date shall be the date that this Agreement is executed by the last
party to any such agreement to execute.
2.12    “VL Settlement Agreement” means that certain Settlement Agreement and
Mutual Release between Victory and Lucas, including all exhibits thereto.
2.13    “Rogers Release” means the full mutual release, including a release in
favor of Victory and its affiliates from Louis H. Rogers, Lucas’ senior secured
lender that is contemplated by the VL Settlement Agreement.
III.    
Background
3.01    Each of the Parties has informed the other Parties that it intends to
assert claims against the other Parties for various reasons, including, without
limitation, claims arising out of the following agreements, conveyances or
interests:
(a)
the Participation Agreement;

(b)
the JOA;

(c)
the letter of intent dated August 4, 2014 between LEI and the Earthstone
Parties;

(d)
the Partial Assignment dated effective August 1, 2014, and recorded in Volume
1196, Page 702 of the Official Records of Karnes County;

(e)
the Victory Assignment;

(f)
the letter agreement dated February 9, 2015, between LEI and the Earthstone
Parties;

(g)
a letter dated May 1, 2015, from the Earthstone Parties to LEI; and

(h)
an oil and gas lease, the memorandum of which is recorded as Instrument No.
201500142279 of the Official Records of Karnes County (the “Boggs Lease”).

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All of the Parties dispute the claims that each other Party has made against it.
The parties wish to resolve the respective claims by entering into this
Agreement without admitting liability therefor, and in order to avoid the
uncertainty, expense and burden of litigation. Concurrently, one or more of the
Parties is entering into the Lucas Settlement, the VL Settlement Agreement and
the Rogers Release.
Scope of Settlement
3.02    Bona fide disputes and controversies may exist between the Parties, both
as to the fact and extent of liability, if any, and as to the fact and extent of
damages, if any, and by reason of such disputes and controversies, the Parties
to this Settlement Agreement desire to settle all claims and causes of action of
any kind whatsoever which the Parties have or may have in the future against
each other, based on any acts or events that have occurred on or before the
Effective Date, except as otherwise provided in this Settlement Agreement.
3.03    The Parties intend that the full terms and conditions of the compromise
and settlement be set forth in this Settlement Agreement.
In consideration of the agreements contained in this Settlement Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
IV.    
REPRESENTATIONS AND WARRANTIES
The following representations and warranties shall survive the execution of this
Settlement Agreement and the completion of the settlement provided below.
Authority/Capacity
4.01    Each Party to this Settlement Agreement warrants and represents that it
has the power and authority to enter into this Settlement Agreement and that
this Settlement Agreement and all documents delivered pursuant to this
Settlement Agreement are valid, binding, and enforceable upon him or it.
4.02    Each Party to this Settlement Agreement warrants and represents that no
consent, approval, authorization or order of, and no notice to, or filing with
any court, governmental authority, person or entity is required for the
execution, delivery, and performance of this Settlement Agreement.
4.03    Earthstone warrants and represents that it is not the fiduciary of LEI
or Victory; no fiduciary relationship exists between Earthstone and LEI or
between Earthstone and Victory; and this is an arm’s length transaction. LEI
warrants and represents that it is not the fiduciary of Earthstone or Victory;
no fiduciary relationship exists between LEI and Earthstone or between LEI and
Victory; and this is an arm’s length transaction. Victory warrants and
represents that it is not the fiduciary of LEI or Earthstone; no fiduciary
relationship exists between Victory and LEI or between Victory and Earthstone;
and this is an arm’s length transaction.

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4.04    Earthstone warrants and represents that it is duly formed under the laws
of the state of its organization and is duly organized and validly existing in
good standing under such laws. Earthstone warrants and represents that it has
the power and authority to execute and deliver this Settlement Agreement and all
other agreements and instruments to be executed by it as contemplated by this
Settlement Agreement and to carry out the transactions and perform its
obligations provided for in this Settlement Agreement and in those other
agreements and instruments. The execution and delivery of this Settlement
Agreement and such other agreements and instruments and the consummation of the
transactions contemplated by this Settlement Agreement and such other agreements
and instruments have been duly and validly authorized by all necessary action on
the part of Earthstone.
4.05    LEI warrants and represents that it is duly formed under the laws of the
state of its organization and is duly organized and validly existing in good
standing under such laws. LEI warrants and represents that it has the power and
authority to execute and deliver this Settlement Agreement and all other
agreements and instruments to be executed by it as contemplated by this
Settlement Agreement and to carry out the transactions and perform its
obligations provided for in this Settlement Agreement and in those other
agreements and instruments. The execution and delivery of this Settlement
Agreement and such other agreements and instruments and the consummation of the
transactions contemplated by this Settlement Agreement and such other agreements
and instruments have been duly and validly authorized by all necessary action on
the part of LEI.
4.06    Victory warrants and represents that it is duly formed under the laws of
the state of its organization and is duly organized and validly existing in good
standing under such laws. Victory warrants and represents that it has the power
and authority to execute and deliver this Settlement Agreement and all other
agreements and instruments to be executed by it as contemplated by this
Settlement Agreement and to carry out the transactions and perform its
obligations provided for in this Settlement Agreement and in those other
agreements and instruments. The execution and delivery of this Settlement
Agreement and such other agreements and instruments and the consummation of the
transactions contemplated by this Settlement Agreement and such other agreements
and instruments have been duly and validly authorized by all necessary action on
the part of Victory.
V.    
SETTLEMENT TERMS
This Settlement Agreement has been negotiated concurrently with (a) the VL
Settlement Agreement, (b) the Rogers Release and (c) that certain Compromise
Settlement Agreement and General Release by and between Earthstone and LEI of
even date herewith (the “Lucas Settlement”). Notwithstanding any provision
herein contained to the contrary, this Settlement Agreement shall automatically
terminate and be of no force or effect if (a) the VL Settlement Agreement, (b)
the Rogers Release or (c) the Lucas Settlement is not executed by all of the
parties thereto on or before the expiration of two (2) business days after the
Effective Date.

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In reliance upon the representations, warranties, and covenants in this
Settlement Agreement, and concurrently with the execution and delivery of this
Settlement Agreement, the Parties have settled and compromised their claims and
causes of action against each other as follows:
Payment, Reassignment & Non-Consent
5.01    LEI shall be entitled to receive from Earthstone $195,928.33, being the
sum previously advanced to Earthstone on behalf of LEI (the “JIB Return”); and
Earthstone shall be entitled to receive from LEI $141,907.50 (the “Title Failure
Return”).
THEREFORE, Earthstone shall pay to LEI the difference between the JIB Return and
the Title Failure Return, being FIFTY-FOUR THOUSAND TWENTY AND 83/100 DOLLARS
($54,020.83) (the “Payment”).
5.02    Earthstone shall deliver the Payment by wire transfer of immediately
available funds in U.S. dollars to the account of LEI to the bank or account
specified as follows:
_________________
_________________
_________________
_________________

5.03    The parties hereby agree that, notwithstanding the election period set
forth in the Letter dated May 1, 2015 (described in Section 3.01(g) above), LEI
is hereby deemed a Non-Consenting Party as defined under the terms of the JOA,
for all purposes.
5.04    LEI shall execute and deliver an irrevocable election not to participate
in the Boggs #1H and #2H Wells (or any AFEs related thereto) as proposed under
the above described May 1, 2015 Letter. LEI will further acknowledge in such
election that it and its interests in the Boggs #1H and #2H wells are subject to
the non-consent penalties set forth in the JOA for failure to participate in
such wells.
5.05    Victory shall execute and record a “quit claim” assignment of leasehold
working interest in favor of Sabine River Energy, LLC, effective as of February
27, 2015, substantially in the form attached hereto as Exhibit A (the
“Reassignment”), of all of the right, title and interest conveyed pursuant to
the Victory Assignment. LEI shall warrant title to the Subject Interests unto
Sabine River Energy, LLC, against all persons claiming by, through and under LEI
and/or Victory, but not otherwise.
5.06    As described in Section 5.02 above, the Payment shall be transmitted to
the account specified by LEI within two (2) business days after receipt by
Earthstone’s counsel, Thompson & Knight, LLP (“T&K”) of the fully executed
signature pages of this Settlement Agreement, the Lucas Settlement, the VL
Settlement Agreement, and the Rogers Release for all respective parties thereto;
the Reassignment; and any other documentation required to be exchanged under
this Settlement Agreement. This Settlement Agreement shall automatically
terminate and be null and void, and of

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no further force or effect, if the Payment is not timely transmitted in
accordance with this Settlement Agreement.
5.07    LEI acknowledges that Earthstone has in good faith commenced operations,
and Earthstone shall take commercially reasonable steps to continue such
operations on or before August 31, 2015, for the drilling of either the Boggs
#1H well or the Boggs #2H well. LEI’s sole and exclusive remedy for any failure
of Earthstone to take such further steps shall be Earthstone’s waiver of the
non-consent penalty as to the AFEs included in the May 1, 2015 letter to the
extent such waiver is required under the JOA, and LEI shall waive all other
rights and remedies for the same (including, without limitation, LEI shall not
sue Earthstone for money damages or injunctive relief for failure to continue
its operations for such wells).
5.08    In the event that “Recoupment”, as defined under Article VI(d) of the
JOA, occurs as to either the Boggs #1H well or the Boggs #2H well, respectively,
then within thirty (30) days thereafter Earthstone shall assign to LEI its
proportionate share of the applicable wellbore, and the Subject Interests to the
extent located within one hundred feet (100’) laterally perpendicular to such
wellbore with special warranty of title by, through and under Earthstone, but
not otherwise, effective as of the first day of the month following the month in
which such Recoupment occurs. For purposes of this section, LEI’s “proportionate
share” means an undivided 34.3971%, provided that if as of the Effective Date
Earthstone, Victory and LEI, collectively, own less than one hundred percent
(100%) of the wells, leases, and other oil and gas properties lying within the
“Contract Area” of the JOA (as defined therein), as reflected in the real
property records of Karnes County, Texas, then such percentage shall be
proportionately reduced.
Non-Disparagement
5.09    From and after the Effective Date, LEI agrees not to discuss or comment
upon, or publish any information concerning, any Earthstone Parties or Victory
Parties, their business affairs, or their management in a negative or
disparaging manner. From and after the Effective Date, Victory agrees not to
discuss or comment upon, or publish any information concerning, any Earthstone
Parties or LEI Parties, their business affairs, or their management in a
negative or disparaging manner. From and after the Effective Date, Earthstone
agrees not to discuss or comment upon, or publish any information concerning,
any Victory Parties or LEI Parties, their business affairs, or their management
in a negative or disparaging manner. LEI, Victory, and Earthstone each agree not
to act to disrupt, derogate, or detrimentally affect, directly or indirectly,
the business or any business relationship, services, operations, reputation,
officers, employees, financial status, or liabilities of any other Party.
Release by LEI of the Earthstone Parties
5.10    Except as otherwise expressly set forth in the Lucas Settlement, as of
the Effective Date, LEI generally releases and forever discharges the Earthstone
Parties from any and all claims, demands, and causes of action of whatever kind
or character which LEI or any other LEI Parties have, or may have in the future,
based on any acts or omissions that have occurred on or before the Effective
Date, whether known or unknown, including claims for fraud, fraudulent
inducement, and breach of fiduciary duty (collectively, the “LEI Claims”), save
and except solely those claims,

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demands, and causes of action arising out of or relating to the breach,
enforcement, or interpretation of this Settlement Agreement.
5.11    This release is to be construed as the broadest type of general release
and includes, but is not limited to: (a) any claim growing out of, or connected
in any way with, the Dispute; (b) any claims growing out of, or connected in any
way with, LEI’s business dealings with the Earthstone Parties; (c) any claim
based in whole or in part on the activities of the Earthstone Parties that may
have been alleged to violate any laws or administrative rules of the United
States, or any state or subdivision of the United States, or any foreign country
or subdivision of any foreign country, pertaining to inter alia, breach of
contract, fraud, negligent misrepresentation, tortious interference of
prospective contractual relations, intentional interference with an existing
contract, attorneys’ fees, breach of fiduciary duty, or punitive damages; (d)
any claim based in whole or in part on the activities of the Earthstone Parties
that may have been alleged to create any right or action for recovery for
damages or injunction, under any federal or state statutes or administrative
rule or other judicial decisions or the common law of the United States, or any
state or subdivision of the United States, or any foreign country or subdivision
of any foreign country; (e) any claim based in whole or in part on the
activities of the Earthstone Parties that may have been alleged to create or
contribute to any other right, claim or cause of action of LEI against the
Earthstone Parties; and (f) claims for punitive or exemplary damages, attorneys’
fees, or penalties.
5.12    This release is intended to constitute a general release by LEI of the
Earthstone Parties of the LEI Claims, whether known or unknown. To the extent
any of the LEI Claims have not been released by this Settlement Agreement, LEI
hereby assigns those claims to Earthstone.
Release by Victory of the Earthstone Parties
5.13    As of the Effective Date, Victory generally releases and forever
discharges the Earthstone Parties from any and all claims, demands, and causes
of action of whatever kind or character which Victory or any other Victory
Parties have, or may have in the future, based on any acts or omissions that
have occurred on or before the Effective Date, whether known or unknown,
including claims for fraud, fraudulent inducement, and breach of fiduciary duty
(collectively, the “Victory Claims”), save and except solely those claims,
demands, and causes of action arising out of or relating to the breach,
enforcement, or interpretation of this Settlement Agreement.
5.14    This release is to be construed as the broadest type of general release
and includes, but is not limited to: (a) any claim growing out of, or connected
in any way with, the Dispute; (b) any claims growing out of, or connected in any
way with, Victory’s business dealings with the Earthstone Parties; (c) any claim
based in whole or in part on the activities of the Earthstone Parties that may
have been alleged to violate any laws or administrative rules of the United
States, or any state or subdivision of the United States, or any foreign country
or subdivision of any foreign country, pertaining to inter alia, breach of
contract, fraud, negligent misrepresentation, tortious interference of
prospective contractual relations, intentional interference with an existing
contract, attorneys’ fees, breach of fiduciary duty, or punitive damages; (d)
any claim based in whole or in part on the activities of the Earthstone Parties
that may have been alleged to create any right or action for recovery for
damages or injunction, under any federal or state statutes or administrative
rule or other judicial decisions or the common law of the United States, or any
state or subdivision of the

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United States, or any foreign country or subdivision of any foreign country; (e)
any claim based in whole or in part on the activities of the Earthstone Parties
that may have been alleged to create or contribute to any other right, claim or
cause of action of Victory against the Earthstone Parties; and (f) claims for
punitive or exemplary damages, attorneys’ fees, or penalties.
5.15    This release is intended to constitute a general release by Victory of
the Earthstone Parties of the Victory Claims, whether known or unknown. To the
extent any of the Victory Claims have not been released by this Settlement
Agreement, Victory hereby assigns those claims to Earthstone.
Release of the Earthstone Claims
5.16    Except as otherwise expressly set forth in the Lucas Settlement as to
Earthstone Claims against LEI, as of the Effective Date, Earthstone generally
releases and forever discharges the LEI Parties and the Victory Parties from any
and all claims, demands, and causes of action of whatever kind or character
which Earthstone or any other Earthstone Parties have, or may have in the
future, based on any acts or omissions that have occurred on or before the
Effective Date, whether known or unknown, including claims for fraud, fraudulent
inducement, and breach of fiduciary duty (collectively, the “Earthstone
Claims”), save and except solely those claims, demands, and causes of action
arising out of or relating to the breach, enforcement, or interpretation of this
Settlement Agreement.
5.17    This release is to be construed as the broadest type of general release
and includes, but is not limited to: (a) any claim growing out of, or connected
in any way with, the Dispute; (b) any claims growing out of, or connected in any
way with, Earthstone’s business dealings with the LEI Parties and/or the Victory
Parties; (c) any claim based in whole or in part on the activities of the LEI
Parties and/or the Victory Parties that may have been alleged to violate any
laws or administrative rules of the United States, or any state or subdivision
of the United States, or any foreign country or subdivision of any foreign
country, pertaining to inter alia, breach of contract, fraud, negligent
misrepresentation, tortious interference of prospective contractual relations,
intentional interference with an existing contract, attorneys’ fees, breach of
fiduciary duty, or punitive damages; (d) any claim based in whole or in part on
the activities of the LEI Parties and/or the Victory Parties that may have been
alleged to create any right or action for recovery for damages or injunction,
under any federal or state statutes or administrative rule or other judicial
decisions or the common law of the United States, or any state or subdivision of
the United States, or any foreign country or subdivision of any foreign country;
(e) any claim based in whole or in part on the activities of the LEI Parties
and/or the Victory Parties that may have been alleged to create or contribute to
any other right, claim or cause of action of Earthstone against the LEI Parties
and/or the Victory Parties; and (f) claims for punitive or exemplary damages,
attorneys’ fees, or penalties.
5.18    This release is intended to constitute a general release by Earthstone
of the LEI Parties and/or the Victory Parties of the Earthstone Claims, whether
known or unknown. To the extent any of the Earthstone Claims have not been
released by this Settlement Agreement, Earthstone hereby assigns those claims to
LEI and/or Victory, as may be applicable.

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5.19    Notwithstanding anything in this Settlement Agreement to the contrary,
the Earthstone Claims do not include, and Earthstone hereby reserves and does
not release or waive, and does not assign to LEI and/or Victory, any claims,
demands, and/or causes of action of whatever kind or character which Earthstone
or any other Earthstone Parties have against LEI arising from or relating to the
Lucas Settlement or the performance or enforcement thereof.
Indemnification
5.20    LEI warrants and represents that it owns the LEI Claims and that no part
of the LEI Claims has been assigned or transferred to any other person or
entity. LEI AGREES TO FULLY INDEMNIFY AND HOLD HARMLESS EARTHSTONE FROM ANY AND
ALL CLAIMS ARISING OUT OF, OR DERIVATIVE OF, THE CLAIMS RELEASED BY LEI IN THIS
SETTLEMENT AGREEMENT, INCLUDING ALL CLAIMS FOR CONTRIBUTION AND INDEMNITY, AND
EXPRESSLY INCLUDING ANY CLAIMS ARISING OUT OF LEI’S OWN NEGLIGENCE OR FAULT. LEI
AGREES THAT THE INDEMNIFICATION AND HOLD HARMLESS INCLUDES THE AMOUNTS OF THE
CLAIMS, THE EXPENSES OF DEFENDING AGAINST THE CLAIMS, COURT COSTS, AND
ATTORNEYS’ FEES.
5.21    Victory warrants and represents that it owns the Victory Claims and that
no part of the Victory Claims has been assigned or transferred to any other
person or entity. Victory AGREES TO FULLY INDEMNIFY AND HOLD HARMLESS EARTHSTONE
FROM ANY AND ALL CLAIMS ARISING OUT OF, OR DERIVATIVE OF, THE CLAIMS RELEASED BY
VICTORY IN THIS SETTLEMENT AGREEMENT, INCLUDING ALL CLAIMS FOR CONTRIBUTION AND
INDEMNITY, AND EXPRESSLY INCLUDING ANY CLAIMS ARISING OUT OF VICTORY’S OWN
NEGLIGENCE OR FAULT. VICTORY AGREES THAT THE INDEMNIFICATION AND HOLD HARMLESS
INCLUDES THE AMOUNTS OF THE CLAIMS, THE EXPENSES OF DEFENDING AGAINST THE
CLAIMS, COURT COSTS, AND ATTORNEYS’ FEES.
5.22    Earthstone warrants and represents that it owns the Earthstone Claims
and that no part of the Earthstone Claims has been assigned or transferred to
any other person or entity. EARTHSTONE AGREES TO FULLY INDEMNIFY AND HOLD
HARMLESS LEI AND/OR VICTORY FROM ANY AND ALL CLAIMS ARISING OUT OF, OR
DERIVATIVE OF, THE CLAIMS RELEASED BY EARTHSTONE IN THIS SETTLEMENT AGREEMENT,
INCLUDING ALL CLAIMS FOR CONTRIBUTION AND INDEMNITY, AND EXPRESSLY INCLUDING ANY
CLAIMS ARISING OUT OF EARTHSTONE’S OWN NEGLIGENCE OR FAULT. EARTHSTONE AGREES
THAT THE INDEMNIFICATION AND HOLD HARMLESS INCLUDES THE AMOUNTS OF THE CLAIMS,
THE EXPENSES OF DEFENDING AGAINST THE CLAIMS, COURT COSTS, AND ATTORNEYS’ FEES.
Covenant Not to Sue
5.23    LEI covenants and agrees not to sue Earthstone for any matters released
in Sections 5.10 and 5.11 above.

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5.24    Victory covenants and agrees not to sue Earthstone for any matters
released in Sections 5.13 and 5.14 above.
5.25    Earthstone covenants and agrees not to sue LEI and/or Victory for any
matters released in Sections 5.16 and 5.17 above.
5.26    The parties agree that for any breach of a covenant not to sue the
breaching party shall be liable for the non-breaching party’s attorneys’ fees
and costs as actual damages in a breach of contract action.
Cooperation and Additional Actions
5.27    The Parties agree to cooperate fully in executing any and all
supplementary documents, and to take all additional actions that may be
necessary or appropriate to give full force and effect to the basic terms and
intent of this Settlement Agreement.
Costs and Fees
5.28    The Parties agree that each Party shall bear its or his own costs and
attorneys’ fees incurred in connection with the Dispute and the negotiation,
drafting, and execution of this Settlement Agreement.
Choice of Law
5.29    This Settlement Agreement shall be governed by, construed, interpreted,
and enforced in accordance with the laws of the State of Texas, except that any
conflict of law rule of that jurisdiction that may require reference to the laws
of some other jurisdiction shall be disregarded.
Confidentiality
5.30    From the Effective Date forward, the Parties agree not to reveal the
terms of this Settlement Agreement to anyone who is not a Party to this
Settlement Agreement. However, the Parties agree that this section shall not
prevent any Party from revealing or discussing the terms of this Settlement
Agreement (a) with its or his legal advisors, accountants, tax advisors, or
financial advisors; (b) in any action regarding the breach, enforcement, or
interpretation of this Settlement Agreement; and (c) as required by law
(including, where applicable, the Securities and Exchange Commission filing
obligations of the Parties), contract, governmental agency, or any court of
competent jurisdiction.
Miscellaneous
5.31    The Parties agree that this Settlement Agreement is entered into for
settlement purposes only in order to avoid further trouble, litigation, and
expense, and it is further agreed that no Party admits any liability or damages
as a result of the acts and omissions that form the basis of the Dispute.

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5.32    This Settlement Agreement has been prepared by the joint efforts of the
respective attorneys for each of the Parties.
5.33    Section numbers and section titles have been set forth herein for
convenience only; they shall not be construed to limit or extend the meaning or
interpretation of any part of this Settlement Agreement.
5.34    With the exception of Sections 5.10, 5.13 and 5.16, if any provision of
this Settlement Agreement is or may be held by a court of competent jurisdiction
to be invalid, void, or unenforceable, the remaining provisions shall
nevertheless survive and continue in full force and effect without being
impaired or invalidated in any way.
5.35    None of the Parties to this Settlement Agreement has expressed any
facts, representations, or express or implied warranties to the other Party,
except as expressly contained in this Settlement Agreement.
5.36    This Settlement Agreement shall continue perpetually and shall be
binding upon the Parties and their heirs, successors, and assigns and shall
inure to the benefit of the Parties and their heirs, successors, and assigns.
5.37    Except, as between Earthstone and LEI, as expressly set forth in the
Lucas Settlement, and as between Victory and LEI as expressly set forth in the
VL Settlement Agreement or the Rogers Release, this Settlement Agreement
represents the entire agreement of the Parties and supersedes all prior written
or oral agreements, and the terms are contractual and not mere recitals.
5.38    This Settlement agreement may not be amended, altered, modified or
changed in any way except in writing signed by all the Parties to this
Settlement Agreement.
5.39    EACH PARTY WARRANTS THAT IT HAS CAREFULLY READ THIS AGREEMENT (INCLUDING
THIS DISCLAIMER OF RELIANCE SET FORTH HEREIN IN WHAT EACH PARTY AGREES TO BE
APPROPRIATELY CONSPICUOUS LANGUAGE) AND ANY EXHIBITS ATTACHED TO THIS AGREEMENT,
EACH PARTY REPRESENTS AND WARRANTS THAT IT UNDERSTANDS THIS AGREEMENT AND
DISCLAIMER’S CONTENTS, AND SIGNS THIS AGREEMENT AS ITS OR HIS OWN FREE ACT. EACH
PARTY EXPRESSLY WARRANTS THAT NO PROMISE OR AGREEMENT WHICH IS NOT HEREIN
EXPRESSED HAS BEEN MADE TO IT OR HIM IN EXECUTING THIS AGREEMENT, AND THAT EACH
PARTY IS NOT RELYING UPON (INDEED, EXPRESSLY DISCLAIMS RELIANCE UPON) ANY
STATEMENT OR REPRESENTATION OF ANY PARTY OR ANY AGENT OF ANY OF THE PARTIES
HERETO. EACH PARTY AGREES THIS IS AN ARM’S-LENGTH TRANSACTION (NO FIDUCIARY
RELATIONSHIP EXISTS) AND EACH PARTY REPRESENTS, WARRANTS, AND PROMISES THAT IT
OR HE IS RELYING SOLELY ON ITS OR HIS OWN JUDGMENT AND DUE DILIGENCE, WHICH IT
OR HE HEREBY CONTRACTUALLY AGREES TO UNDERTAKE. EACH PARTY WARRANTS IT OR HE HAS
BEEN REPRESENTED BY LEGAL COUNSEL IN THIS MATTER. EACH PARTY REPRESENTS THAT ITS
OR HIS LEGAL COUNSEL HAS READ AND EXPLAINED TO THAT PARTY THE ENTIRE CONTENTS OF
THIS AGREEMENT IN FULL, AS WELL AS THE

COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE – PAGE 11

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LEGAL CONSEQUENCES OF THIS AGREEMENT AND DISCLAIMER. EACH PARTY AGREES AND
WARRANTS THAT IT OR HE HAS READ THE ENTIRE CONTENTS OF THIS AGREEMENT IN FULL,
IS SOPHISTICATED AND KNOWLEDGEABLE ABOUT BUSINESS, AND FULLY UNDERSTANDS THE
LEGAL CONSEQUENCES OF THIS AGREEMENT AND DISCLAIMER. EACH PARTY REPRESENTS,
WARRANTS, AND PROMISES THAT THIS SECTION IS A CLEAR, UNEQUIVOCAL, AND EFFECTIVE
DISCLAIMER OF RELIANCE UNDER TEXAS LAW AND THAT THIS AGREEMENT AND DISCLAIMER IS
INTENDED TO AND DOES NEGATE ANY CLAIM FOR FRAUD OR FRAUDULENT INDUCEMENT INTO
THIS AGREEMENT.
[The remainder of this page has been intentionally left blank]

COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE – PAGE 12

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5.40    This Settlement Agreement may be executed in multiple counterparts or
copies and/or on separated signature pages and/or by e-mail transmission, any or
all of which when taken together shall be deemed an original for all purposes.

EARTHSTONE OPERATING, LLC (formerly Oak Valley Operating, LLC)

By: /s/ Christopher E. Cottrell
Name, Title: Christopher E. Cottrell, Executive Vice President Land & Marketing

Date: June 25, 2015

EARTHSTONE ENERGY, INC.

By: /s/ Christopher E. Cottrell
Name, Title: Christopher E. Cottrell, Executive Vice President Land & Marketing

Date: June 25, 2015

OAK VALLEY RESOURCES, LLC

By: /s/ Christopher E. Cottrell
Name, Title: Christopher E. Cottrell, Executive Vice President Land & Marketing

Date: June 25, 2015

SABINE RIVER ENERGY, LLC

By: /s/ Christopher E. Cottrell
Name, Title: Christopher E. Cottrell, Executive Vice President Land & Marketing

Date: June 25, 2015

COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE – PAGE 13

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LUCAS ENERGY INC.

By: /s/ Anthony Schnur
Name, Title: Anthony Schnur, Chief Executive Officer
Date: June 24, 2015

VICTORY ENERGY CORPORATION

By: /s/ Kenneth Hill
Name, Title: Kenneth Hill, CEO
Date: June 24, 2015

AEP ASSETS, LLC

By: /s/ Kenneth Hill
Name, Title: Kenneth Hill, CEO
Date: June 24, 2015

AURORA ENERGY PARTNERS

By Victory Energy Corporation
Its General Partner

By: /s/ Kenneth Hill
Name, Title: Kenneth Hill, CEO
Date: June 24, 2015

COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE – PAGE 14

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EXHIBIT A
Form of Reassignment

[ attached ]

EXHIBIT A – PAGE 1

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NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR
STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT
TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE
PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

ASSIGNMENT AND BILL OF SALE

STATE OF TEXAS
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF KARNES

THAT, VICTORY ENERGY CORPORATION, a Texas corporation, whose mailing address is
3355 Bee Caves Road, Suite 608, Austin, Texas 78746 (hereinafter referred to as
“Assignor”), for sufficient consideration received from SABINE RIVER ENERGY,
LLC, a Texas limited liability company, whose mailing address is 1400 Woodloch
Forest Drive, Suite 300, The Woodlands, Texas 77380-1197 (hereinafter referred
to as “Assignee”), does hereby transfer, assign, sell, bargain and convey unto
Assignee, subject as herein provided, all of Assignor’s right, title and
interest in and to the Oil and Gas Leases described on Exhibit “A” attached
hereto and made a part hereof (said leases being hereinafter referred to as
“Leases”).

It is the intent of this Assignment and Bill of Sale that Assignor shall retain
no interest of any kind or character in the Leases described on Exhibit “A”
attached hereto and made a part hereof.

To have and to hold the Leases and interest forever, subject to the following:

1. This Assignment and Bill of Sale is subject to the terms and provisions of
the Leases and Assignee hereby assumes its proportionate share of all express
and implied covenants thereunder.

2. This Assignment and Bill of Sale shall be binding upon and inure to the
benefit of Assignee and Assignor and their respective successors, heirs and
assigns.

3.    This Assignment and Bill of Sale is subject to all of the terms and
provisions contained in the unrecorded Participation Agreement dated effective
August 1, 2014. It is agreed between the Parties that should there arise any
conflict between the terms of this Assignment and Bill of Sale and said
Participation Agreement, the terms and provisions of the Participation Agreement
shall control.

4.    This Assignment and Bill of Sale is further made subject to all of the
terms and provisions contained in that certain unrecorded Compromise Settlement
Agreement and General Release executed by and among the Assignor, the Assignee,
Lucas Energy, Inc., and certain affiliated parties, dated June ___ , 2015 (the
“Settlement Agreement”). Notwithstanding anything

EXHIBIT A – PAGE 2

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contained herein to the contrary, in the event of conflict between the terms of
this Assignment and Bill of Sale, the Participation Agreement referenced in
Section 3 above, and the Settlement Agreement, the terms of the Settlement
Agreement shall control.

5.    This Assignment and Bill of Sale may be executed in any number of
counterparts, and each counterpart may be recorded separately or may be combined
to form one (1) instrument for recording purposes.

[Signature Page to Follow]

EXHIBIT A – PAGE 3

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Executed by Assignor and Assignee on the dates reflected in their respective
acknowledgments, but effective as of February 27, 2015.

ASSIGNOR

VICTORY ENERGY CORPORATION

By: /s/ Kenneth Hill
                        
Printed Name: Kenneth Hill
Title: CEO
ASSIGNEE

SABINE RIVER ENERGY, LLC

By: /s/ Christopher E. Cottrell
Christopher E. Cottrell
Executive Vice President Land & Marketing
        

EXHIBIT A – PAGE 4

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ACKNOWLEDGMENTS

STATE OF TEXAS

COUNTY OF TRAVIS

This instrument was acknowledged before me on this 24th day of June, 2015 by
Kenneth Hill, who is CEO of VICTORY ENERGY CORPORATION, a Texas corporation, on
behalf of said corporation.

My Commission Expires: July 31, 2017    /s/ Sara Hofstetter
Notary Public for the State of Texas
County of Travis
Printed Name: Sara Hofstetter

STATE OF TEXAS
    
COUNTY OF MONTGOMERY

This instrument was acknowledged before me on this 25th day of June, 2015 by
Christopher E. Cottrell, who is Executive Vice President Land & Marketing of
SABINE RIVER ENERGY, LLC, a Texas limited liability company, on behalf of said
limited liability company.

My Commission Expires:___________    ____________________________________
Notary Public for the State of Texas
County of Montgomery
Printed Name:________________________

EXHIBIT “A”

EXHIBIT A – PAGE 5

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Attached hereto and made to that certain Assignment and Bill of Sale dated
effective February 27, 2015 by and between Victory Energy Corporation, as
Assignor, and Sabine River Energy, LLC, as Assignee.

OIL AND GAS LEASES:

Lessor:                Leland Copeland
Lessee:                Lucas Energy, Inc.
Effective Date:        July 16, 2013
Memorandum Recorded:    Volume 1134, Page 651
Description:            143.00 acres more or less, out of the Thomas P. Crosby
Survey,                    Abstract 66, Karnes County, Texas

Lessor:                Glenn D. Boggs, Jr. and Wife, Betty J. Boggs
Lessee:                Lucas Energy, Inc.
Effective Date:        July 16, 2013
Memorandum Recorded:    Volume 1134, Page 653
Description:            143.00 acres more or less, out of the Thomas P. Crosby
Survey,                    Abstract 66, Karnes County, Texas

Lessor:                Red Crest Trust, JPMorgan Chase Bank, N. A. as Trustee
Lessee:                Billy R. Wilson
Effective Date:        March 25, 2008
Recorded:            Volume 873, Page 394
Description:            250.00 acres more or less, out of the Thomas P. Crosby
Survey,                    Abstract 66, Karnes County, Texas

IN ADDITION TO ANY AND ALL INTEREST ASSIGNOR HAS IN THE ABOVE DESCRIBED LEASES,
ASSIGNOR IS CONVEYING TO ASSIGNEE ALL OF ITS RIGHT, TITLE AND INTEREST THAT
ASSIGNOR WAS ASSIGNED IN THAT CERTAIN PARTIAL ASSIGNMENT AND BILL OF SALE OF
WELLBORE RIGHTS BY AND BETWEEN LUCAS ENERGY, INC., AS ASSIGNOR, AND VICTORY
ENERGY CORPORATION, AS ASSIGNEE, DATED EFFECTIVE FEBRUARY 27, 2015, RECORDED IN
VOLUME 1223, PAGE 133, DOCUMENT NO. 00141110 IN THE OFFICIAL RECORDS OF KARNES
COUNTY, TEXAS.

All recording references are as to Karnes County, Texas.

END OF EXHIBIT “A”

EXHIBIT A – PAGE 6