**Exhibit10.1**

 

**FARMOUT AGREEMENT INDEX**

 

1.                                       **Exhibits**

 

2.                                       **Definitions**

 

3.                                       **FarmoutWell(s)**

 

3.1                                 TestWell

 

3.2                                 SubstituteWell(s)

 

3.3                                 EarnedAssignments-Produce to Earn

 

3.4                                 AcreageAssignment

 

3.5                                 DepthsEarned

 

3.6                                 Termof Assignment

 

3.7                                 Extensionby Drilling or Reworking

 

3.8                                 ContinuousDevelopment

 

4.                                       **ReservedWorking Interest**

 

4.1                                 Reservation

 

4.2                                 ProportionateReduction

 

5.                                       **Abandonmentof Wells**

 

6.                                       **Failure toCommence Operations or Cessation of Operations**

 

6.1                                 LiquidatedDamages-Test Well only

 

7.**                                       Shut-InPayments**

 

8.                                       **Liability**

 

9.                                       **TitleInformation and Warranty of Title**

 

9.1                                 Farmorand Farmee

 

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10.                                 **Notices andWell Information**

 

10.1                           InGeneral

 

10.2                           Notices

 

11.                                 **Insurance**

 

12.                                 **Extensions,Renewals and New Leases**

 

13.                                 **General**

 

13.1                           Audits

 

13.2                           LeaseObligations

 

13.3                           Lawsand Regulations

 

13.4                           Permissionto Enter

 

13.5                           Accessto Well Location

 

13.6                           SectionTitles

 

14.                                 **AgreementsAffecting Farmout Lands**

 

14.1                           FarmeeBound

 

15.                                 **Permissionto Assign**

 

16.                                 **Reassignment**

 

17.                                 **Execution**

 

17.1                           Ratification

17.2                           EffectiveDate

 

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**FARMOUT AGREEMENT**

 
| **Farmor:**          |   | **REEF PARTNERS 2001-A INCOME FUND LP**  |
|----------------------|--------|------------------------------------------|
|                 |   | **AND**                                  |
|                 |   | **REEF PARTNERS 2001-B INCOME FUND LP.** |
|                 |   | **AND**                                  |
|                 |   | **REEF EXPLORATION, INC.**               |
|                 |   |                                     |
|                 |   | **1901 North Central Expressway**        |
|                 |   | **Suite 300**                            |
|                 |   | **Richardson, Texas 75080**              |
|                 |   |                                     |
| **Farmee:**          |   | **Reef  Global Energy I LP**             |
|                 |   | **1901 North Central Expressway**        |
|                 |   | **Suite 300**                            |
|                 |   | **Richardson, Texas 75080**              |
|                 |
| **Area/Prospect:**   |   | **Scherer  B #3**                        |
|                 |   | **Section  34-T4N-R15E**                 |
|                 |   |                                     |
| **State:**           |   | **Oklahoma**                             |
|                 |   |                                     |
| **County:**          |   | **Pittsburg**                            |
|                 |   |                                     |
| **Effective  Date:** |   | **February  1, 2003**                    |
|                      |        |                                          |  |  |

 

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Farmor represents, but does not warrant, that it isthe owner of certain interest(s) in the oil and gas lease(s) (the “Leases”)covering the lands (“Lands”) described in Exhibit “A” to this Agreement.

 

Farmor agrees that Farmee may acquire an interest in the Leases insofaras they cover Lands in Section34-T4N-R15E, Pittsburg County, Oklahoma under the terms and conditionsof this Agreement.

 

**In consideration of the mutualcovenants and agreements provided in this Agreement, Farmor and Farmee agree asfollows:**

 

**1.****                                      EXHIBITS.**

 

The following Exhibits, if checked, are attached andshall be considered part of this Agreement:

 

ý                                    ExhibitA - Lease Schedule.

 

**2.****                                      DEFINITIONS.**

 

For the purpose of this Agreement, the following termsshall have the meaning set opposite each term.

 

(a)                                  “CompletedWell” means a well which has been fully equipped for the taking of productionthrough and including the tanks for an oil well and through and including thechristmas tree for a gas well, or plugged and abandoned, if a dry hole.

 

(b)                                 “ContractDepth” shall mean:  10,500 feet or to adepth to sufficiently test the Middle Atoka sands whichever is lesser.

 

(c)                                  “DrillingUnit” means the area within the surface boundaries established or prescribed byfield rules or special order of the applicable regulatory authority; e.g., thespacing unit, unit for production, proration unit, or participating area.  In the absence of any unit established orprescribed by field rules or special order of the applicable regulatoryauthority, and solely for the purposes of this Agreement, “Drilling Unit” shallalso mean a 160 acre hypothetical unit if an earning well is completed as anoil well, or a 640 acre hypothetical unit if an earning well is completed as agas well.  Any hypothetical unit is tobe designated by Farmor.

 

(d)                                 “OutsideAcreage” means farmout lands, which are outside the surface boundaries of aDrilling Unit as defined in Section 2. (b) Above.

 

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(e)                                  “EarningWell” means any well drilled under the terms and conditions of this Agreementby which Farmee is entitled to receive an assignment.

 

(f)                                    “LeaseBurdens” means any royalty, overriding royalty, production payment, and othersimilar burdens on production.

 

(g)                                 “GasWell” means any well that is so classified by rules or special order of theapplicable regulatory agency, or, in the absence of same, a well with a gas/oilratio greater than or equal to 2,000 to 1.

 

(h)                                 “OilWell” means any well that is so classified by rules or special order of theapplicable regulatory agency, or, in the absence of same, a well with a gas/oilratio of less than 2,000 to 1.

 

(g)                                 “Payout”means actual reasonable expenditures incurred in drilling, testing, completing,equipping, and operating the unit well, including a charge for supervision.

 

**3.****                                      FARMOUTWELL(S).**

 

3.1                                 TESTWELL.  Farmee shall drill a well,the “Test Well”, strictly in accordance with the following well specifications:

 

(a)                                  SurfaceLocation: Approximately 825’ FNL and 1900’ FWL, of Section 34, T4N R15E,Pittsburg County, Oklahoma

 

                                                BottomHole Location: 825’ FNL & 2850’ FWL of Section 34, T4N R15E, PittsburgCounty, Oklahoma

 

(b)                                 SpudDeadline:  On or before March 31, 2003,Farmee must commence the actual drilling of a Test Well at the locationspecified in 3.1. (a).  Should anextension of commencement be necessary, Farmor agrees that it will not beunreasonably withheld and Farmor will extend the spud deadline to a date uponwhich Farmor and Farmee mutually agree. Once operations are commenced, such operations shall continue with duediligence and in a workmanlike manner until actual inhole drilling of the TestWell is commenced.  Further, Farmorshall, on a best efforts basis, keep Farmee informed of any anticipated leasemaintenance or possible other problems in connection with the Farmout Lands andLeases.  In turn, Farmee shall utilizeits best efforts to conduct operations or take other action as may be requiredto maintain such Farmout Lands and Leases in full force and effect.

 

(c)                                  Completionattempt/Plugging Deadline:  Within 60days after reaching total depth.

 

  2.                                 SUBSTITUTE WELL(S).(Check applicable provision.)

 

ý                                                                                   LOSTHOLE OR DRY HOLE.  In the event anywell is lost for any 

 

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reason prior to beingdrilled to Contract Depth or Farmee has encountered during the drilling of anywell mechanical difficulty or formation or condition which would render furtherdrilling impracticable or impossible, or any well reaches Contract Depth and iscompleted as a dry hole, Farmee may plug and abandon such well and thereaftermay continue its rights by commencing a Substitute Well (or Wells) for any suchwell (which has been lost or abandoned or completed as a dry hole) within onehundred eighty (180) days from the date the prior well was lost or completed asa dry hole.  Any Substitute Well drilledshall be drilled subject to the same terms and conditions and to the same depthas provided for the well so lost or abandoned or completed.  Any refer­ence in this Agreement to the TestWell shall be deemed to be a reference to any well or wells which may bedrilled as a Substitute Well.

 

3.3                                 EARNEDASSIGNMENTS-PRODUCE TO EARN.

 

On receipt of Farmee’s written request and as soon aspracticable after Farmor is satisfied that Farmee has complied with all of itsobligations (including, but not limited to, all geological requirements as setout in Exhibit “C”) under this Agreement with regard to the completion of theTest Well or Substitute Well(s) hereunder as a producer of oil and/or gas inpaying quantities, Farmor shall deliver to Farmee an acreage assignment of Oiland Gas Lease(s) for the Earning Well as de­scribed in Section 3.4 below.  **However, Farmor and Farmee agree that record title andthe management of this Farmout Agreement may be held and administered by ReefExploration, Inc.**

 

3.4                                 ACREAGEASSIGNMENT.

 

**If an acreage assignment of Oil and Gas Lease(s) is earned,such assignment/lease shall cover the rights and lands described in Exhibit “A”and covering an undivided 100% of Farmor’s right, title and interest in and tothe leases described on Exhibit “A”, subject to the reserved 15%Back-In-After-Payout Working Interest on Farmor’s leasehold described inSection 4 below, and subject to the depth limitations set out in Section 3.5.**

 

# PRODUCER

 

3.5                               DEPTHSEARNED.

 

If an assignment/lease is earned, the rights earned will be limited asfollows:

 

ý                                                                                    Limitedto the rights from the surface of the ground down to one hundred feet (100’)below the stratigraphic equiva­lent of the producing interval in the EarningWell or 10,500’ whichever is lesser.

 

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3.6                                 TERMOF ASSIGNMENT.

 

The Assignment shall be for a term of one (1) year from the date offirst production of the Earning Well and for so long thereafter as oil and/orgas are produced in paying quantities from the Leases or from lands validlypooled therewith or for so long as the Assignment is otherwise maintained ineffect pursuant to the provisions hereof.

 

3.7                                 EXTENSIONBY DRILLING OR REWORKING

 

If at the expiration of the 1-year term of the Assignment, oil and/orgas are not being produced from the Leases or lands validly pooled therewith,but Assignee is then engaged in drilling or reworking operations thereon, theAssignment shall remain in force so long as drilling or reworking operationsare prosecuted (whether on the same day or different wells) with no cessationof more than sixty (60) consecutive days, and, if they result in production inpaying quantities, for so long thereafter as oil and/or gas are produced inpaying quantities from the Leases or lands validly pooled therewith.  If oil and/or gas on the Leases or landsvalidly pooled therewith should cease producing in paying quantities from anycause, the Assignment nevertheless shall continue in force and effect as longas additional drilling operations or reworking operations are conducted on theLeases or on lands validly pooled therewith, which additional operations shallbe deemed to be had when not more than sixty (60) consecutive days elapsebetween the abandonment of operations on one well and the actual commencementof drilling on another well, and, if production in paying quantities isobtained, the Assignment shall continue as long thereafter as oil and/or gas isproduced in paying quantities from the Leases or lands validly pooledtherewith, and as long thereafter as additional operations, either drilling orreworking, are had thereon.

 

3.8                                 CONTINUOUSDEVELOPMENT

 

(a)                                  IfAssignee, at the expiration of the 1-year term is engaged in actual drillingoperations, the Assignment shall remain in full force and effect as to alllands covered hereby for so long as such operations continue to completion orabandonment and for so long thereafter as continuous development is conducted,being defined as no more than 180 days elapsing between the completion orabandonment of one well and the commencement of actual drilling operations onanother well; or

(b)                                 Ifat the expiration of the 1-year term, Assignee is not conducting actualdrilling operations, but Assignee has completed a well on the properties priorto the expiration of the 1-year term which is capable of producing oil and/orgas in paying quantities, the Assignment shall remain in full force and effectfor so long as actual drilling operations on an additional well are commencedwithin 180 days following the expiration of the 1-year term, and the Assignmentshall continue in force for so long thereafter as continuous development isconducted, being defined as no more than 180 days elapsing between thecompletion or abandonment of one well and the commencement of actual drillingoperations on the next succeeding well.

(c)                                  Atsuch time as Assignee (1) fails to commence said continuous development, or (2)once commenced, fails to continue same, the Assignment shall automaticallyterminate as to all land not included within a Drilling Unit assigned to a wellthen producing oil or gas in paying quantities.

 

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**4.****                                      RESERVEDWORKING INTEREST**.

 

4.1                                 RESERVATION.

 

In any assignment hereunder, Farmor shall reserve aFifteen Percent (15%) Back-in-after-Payout Working Interest of Farmor’sproportionate leasehold interest in the unit. Farmor shall deliver to Farmee a net revenue interest lease includingonly existing lease burdens of record as of February 1, 2003.

 

4.2                                                                                PROPORTIONATEREDUCTION.

 

If Leases described in this Agreement cover less thanthe full leasehold estate in any Lands described under such Leases, or ifFarmor’s interest in such Leases covering any Lands described under the Leasesis less than the full leasehold estate, then the overrid­ing royalty reservedout of production shall be payable in the proportion that Farmor’s interestbears to the full leasehold estate in the Lands.

 

**5.****                                      ABANDONMENTOF WELLS.**

 

5.1                                                                                  Inthe event any well is completed hereunder as non-productive of oil and/or gasin paying quantities or ceases production, Farmee shall immediately give Farmorwritten notice via U.S. Post Office mail certified return receipt required orvia facsimile transmission, of the proposed plugging and abandonment of thatwell. Farmor shall have ten days after receipt of that written notice withinwhich to elect to take over the well for the purpose of conducting additionaloperations as it desires; except that if a drilling rig is on location, noticeto plug and abandon may be given by telephone or by facsimile transmission onworking days and Farmor’s response period shall be limited to forty-eight (48)hours, inclusive of Saturday, Sunday and legal holidays.  In the event Farmor fails to advise Farmeeof its election within the prescribed period of time, the well shall be pluggedand abandoned by Farmee.  If electing todo so, Farmor shall have the right to take over such well, using so far asnecessary, at Farmor’s expense, the tools and workmen of Farmee.  If Farmor elects to take over a well, Farmorshall pay to Farmee the reasonable salvage value for material and equipment inand on the well, less the cost of salvaging, and acquire the well for Farmor’sown use and purposes.

 

5.2                                                                                Inthe event Farmor exercises the option provided in Section 5.1, all of Farmee’sright, title and interest in and to said non-earning well and the leasesdescribed and depicted on Exhibit “A” and “A-1” hereof shall terminate andrevert to Farmor.  Any well and all subsequentproduction from the well shall be owned solely by Farmor and it shall have thesole right to operate and maintain the well and use, sell or otherwise disposeof all production as it may desire, without any limitation.  Farmor shall have the option to purchasefrom Farmee any items of equipment, fixtures and machinery in, on or around thewell as Farmor may desire, 

 

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paying the reasonablesalvage value, such value being the reasonable value of the right to remove theitems from the Lands less the cost of removal. If Farmor and Farmee cannot agree on a reasonable salvage value, thenthe highest of three (3) bona fide written offers, the originals of which areto be submitted to Farmor, will be controlling as to items Farmor may desire topurchase.

 

5.3                                                                                Notwithstandingthe automatic reverting and revesting of all right, title and interest intoFarmor, Farmee shall promptly make, execute and deliver to Farmor anyinstrument or instruments reassigning and reconveying record title into Farmor,as and when requested.  Farmee agreesand all persons are given notice that, should the Lands at any time bereassigned or reconveyed in accor­dance with the terms of this Agreement, itshall be free and clear of any overriding royalty, payments out of production,net profit obligations or carried interests, or any obligation to which it mayhave been subjected by Farmee or Farmee’s assigns.  Any such obligations shall cease and terminate and be of nofurther force and effect as to any part of the Lands reassigned or reconveyedto Farmor, notwithstanding Farmor may have expressly or impliedly consented tothe assignment or the instrument in which the obligation was reserved orcreated.  In the event Farmor exercises itsoption to take over a well, as provided above, and that well is the last oronly producing well on the Lands, the reassignment shall cover all of the Landsthen held by Farmee under the terms of this Agreement.

 

5.4                                                                                Inthe event Farmee abandons any well after Farmor fails to exercise its options,or fails to give Farmor a reasonable opportunity to consider its options, asprovided in Section 5.1, this Agreement, as to the unearned portions of theLease, shall automatically terminate, and Farmee shall have no rights as to anyunearned portions of the Lease, but Farmee shall remain responsible for thecost of abandonment and restoration of the surface around any such well.  In the event Farmee fails to plug any wellor fails to restore the surface around the well, to the satisfaction of theSurface Owner and Farmor, then Farmor, at its option, may plug the well andrestore the surface around any well to its satisfaction, and Farmee shallreimburse Farmor for all costs incurred in connection with thoseoperations.  Farmee shall comply withall statutory requirements and governmental rules and regulations in effect atthe time of plugging any well not taken over, and Farmee agrees to fullydefend, protect, indemnify, and hold Farmor harmless from and against each andevery claim, demand or cause of action, expense or liability arising fromFarmee’s failure to plug or properly plug any such well.

 

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**6.****                                      FAILURETO COMMENCE OPERATIONS OR CESSATION OF OPERA­TIONS**.

 

6.1                                 LIQUIDATEDDAMAGES-TEST WELL ONLY.

 

In the event the Test Well covenanted to be drilled,is not drilled in accordance with the requirements of this Agreement, theparties agree that the resulting damages to the Farmor will be indefinite,uncertain and speculative, and Farmor and Farmee agree that Farmee will pay toFarmor, as liquidated damages, the sum of ZERO Dollars, ($0.00), proportionateto the Farmors.  All Substitute Wellswill be covered by the provisions of Section 6.1.

 

**7.****                                      SHUT-INPAYMENTS.**

 

7.1                                 SHUT-INPAYMENTS.

 

Shut-in payments on Farmee’s well shall be made byFarmee or Farmee’s Operator.

 

If shut-in payments are made by Farmor, Farmee shallreimburse Farmor for 100% of the shut-in payment.

 

Until a Lease on the Lands is assigned in whole or inpart to Farmee, Farmor shall be responsible for exercising due diligence andutilizing reasonable commercial efforts to pay all shut-in payments required tomaintain the Lease(s) in effect and; within 30 days after receipt of invoicefrom Farmor, Farmee shall reimburse Farmor for 100% of the shut-in paymentspaid.  If Farmee fails to reimburseFarmor within the time specified, the balance of any unpaid shut-in paymentinvoice shall bear interest, monthly, at the rate of 10% per annum or themaximum contract rate permitted by the applicable usury laws in the state inwhich the Lands are located, whichever is the lesser, plus attorney’s fees,court costs and any other costs in connection with the collection of any unpaidbalance.

 

After the Lease(s) has been assigned in whole or inpart to Farmee, the responsibility for making such payments covering theassigned depths under said Lease(s)shall belong to Farmee.

 

The party responsible for paying shut-in paymentsshall not be liable to the other party for any loss resulting from any failureto properly do so.

 

**8.****                                      LIABILITY.**

 

8.1                                                                                 Alloperations shall be conducted at the sole cost, risk and expense of Farmee in aproper and workmanlike manner and in accordance with all applicable laws andregulations of all constituted authorities, and Farmee shall defend, indem­nifyand hold Farmor and its officers, directors, agents, employees and invitesharmless from all liability for damage (including attorney’s fees) to theperson (including death) and/or property of all persons arising from theperformance or non-performance of Farmee’s operations conducted under the termsof this Agreement.

 

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8.2                                                                                 Duringthe life of this Agreement the Farmee shall keep the Leases free and clear fromall liens.

 

**9.****                                      TITLEINFORMATION AND WARRANTY OF TITLE.**

 

9.1                                                                                  FARMOR.

Farmor agrees, on written request, to make availableFarmee copies of the Leases and all title information in its possession withinthirty (30) days of request.  Farmorshall neither be liable for the accuracy of any title information obtained byFarmee affect­ing the Leases covering the land.  This Agreement and title to the Lease(s) listed in Exhibit “A”are made without warranty of title, either express or implied.

 

**10.****                               NOTICESAND WELL INFORMATION.**

 

10.1                           INGENERAL.

 

All well data, information and notices to be given toFarmor, as provided in this Agreement, shall be given as provided in Exhibit“C”, with such Well data and information to be held confidential as betweenFarmor and Farmee, unless written consent is obtained by the party desiring todisclose such information to a third party.

 

10.2                                                                           NOTICES.

 

All notices, payments or other correspondence providedfor in this Agreement, other than notices provided under Exhibit “C”, shall begiven as follows:

 
| **Farmors:** |   | **REEF  PARTNERS 2001-A INCOME FUND LP** |
|--------------|--------|------------------------------------------|
|         |   | **REEF  PARTNERS 2001-B INCOME FUND LP** |
|         |   | **REEF EXPLORATION, INC.**               |
|         |   | **1901 North Central Expressway**        |
|         |   | **Suite 300**                            |
|         |   | **Richardson, Texas 75080**              |
|         |   |                                     |
| **Farmee:**  |   | **Reef Global Energy I LP**              |
|         |   | **1901 North Central Expressway**        |
|         |   | **Suite 300**                            |
|         |   | **Richardson, Texas 75080**              |

 

 

**11.****                               INSURANCE.**

 

11.1                                                                         Whileoperations are being conducted on the Lands Farmee agrees to acquire or causeto be acquired and/or maintain the following insurance:

 

(a)                                  Workmen’sCompensation in accordance with applicable state laws and 

 

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when ap­plicable extended to include coverage formaritime obligations, United States Longshoremen’s and Harbor Worker’s Com­pensationAct, Outer Continental Shelf Lands Act, Jones Act and Death on the High SeasAct.

 

(b)                                 Employer’sLiability, with limits of at least $1,000,000.00.

 

(c)                                  (i)Comprehensive General Liability, with limits of at least $6,000,000.00; (ii)Excess Liability with limits of at least $5,000,000.00 each occurrence.

 

(d)                                 AutomobileLiability covering all owned, non-owned, and hired vehicles, with limits of atleast $1,000,000.00

 

(e)                                  Other(Specify): O.E.E., with limits of at least $10,000,000.00

 

11.2                                                                           Farmeefurther agrees to name Farmor as an additional insured under items (c) and (d)above and further agrees to secure a waiver of subrogation in favor of Farmorunder each of the insurance policies noted above.

 

**12.****                               EXTENSIONS,RENEWALS AND NEW LEASES**.

 

Any and all extension of any of the Leases, in wholeor in part, shall maintain and continue in effect the rights and interestsreserved by Farmor in each of the Leases so extended and in the Lands coveredby the Leases.  In the event anextension, renewal or new lease or leases covering the Lands, or a part of orinterest in the Lands, or a part of or interest in a Lease, be acquired byFarmee, or by a third party wholly or partly for Farmee or Farmee’s benefit,within one hundred eighty days from either the date of the expiration of theprimary terms of the Leases having the latest date, for the Leases remaining intheir primary term; or from the date of the assignment, for the Leases whichare beyond their primary term, the rights, interests and depths reserved andretained by Farmor shall attach and apply to each renewal or new lease, theland described and the estate created, with the same result and effect as suchreserved and retained rights and interests attach and apply to the Leases, theLands or the estates created by the Leases.

 

**13.****                               GENERAL.**

 

13.1                           AUDITS.

 

Upon written notice to Farmee, Farmor may auditFarmee’s books and records relating to overriding royalty payments and/orcalcula­tion of Payout.  Such auditrights may be exercised any time while overriding 

 

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royalties are payable and for a period of twenty-four(24) months after Farmor has received written notice that Payout status hasbeen achieved, notwithstanding an earlier termination of this Agreement.

 

13.2                           LEASEOBLIGATIONS.

 

Farmee shall comply with all Lease obliga­tions andrequirements.

 

13.3                           LAWSAND REGULATIONS.

 

Farmee shall comply with all governmental laws, rulesand regulations.

 

13.4                           PERMISSIONTO ENTER.

 

Farmee shall obtain permission to enter the Lands fromboth the surface owner and tenants. Further, Farmee agrees to settle surface damages and to clean up andrestore the premises as nearly as possible to its original condition, and asprovided for in 5.4 above.

 

13.5                           ACCESSTO WELL LOCATION.

 

Farmor’s employees and authorized representatives, atthe sole risk of Farmor, shall have access to the derrick floor of any farmoutwell at all times.

 

13.6                           SECTIONTITLES.

 

The section titles used in this agreement are for theconvenience of the parties only and are not intended to be used for the purposeof construing or interpreting the meaning of any section.

 

**14.****                               AGREEMENTSAFFECTING FARMOUT LANDS.**

 

14.1                           FARMEEBOUND.

Except as otherwise provided, Farmee shall be bound byany agreement which affects the Lands at the time of assignment to Farmee.

 

 

**15.****                               PERMISSIONTO ASSIGN.**

 

This Farmout Agreement may not be assigned by Farmeewithout the prior written consent of Farmor. Such consent shall not be unreasonably withheld.  **Farmor and Farmee agree that record title and theadministration of this Farmout Agreement may be held and maintained by ReefExploration, Inc., 1901 North Central Expressway, Suite 300**

 

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**16.****                               REASSIGNMENT.**

 

Subject to the provisions of Section 5, it isunderstood that at the time any well drilled on any Drilling Unit under theterms of this Agreement becomes incapable of producing oil or gas in payingquantities, thus becoming noncommercial, or rework operations are not commencedwithin one hundred twenty (120) days (or sixty (60) days in the event the Leaseare not otherwise being maintained), or if rework operations fail andproduction in paying quantities is not restored, Farmee will, at such time,reassign the assigned acreage and leases to Farmor by recordable instrumentfree and clear of any liens, and encumbrances and any lease burdens not inexistence as of the date of the original Assignment from Farmor to Farmee.

 

**17.****                               EXECUTION.**

 

Time is of the essence of this Agreement in all of itsparts.  This Agreement may be executedin any number of counterparts, each of which shall be considered as an originalfor all purposes.  The terms, covenantsand conditions of this Agreement shall run in favor of and be binding upon theparties and their successors, heirs, and assigns, and shall run with the Leasesand the Lands.

 

17.1                           RATIFICATION.

 

The execu­tion and delivery of a good and sufficientinstrument of ratification may execute this Agreement, adopting and enteringinto this Agreement.  Such ratificationshall have the same effect as if the party executing it had executed thisAgreement or a counterpart of this Agreement.

 

17.2                           EFFECTIVEDATE.

 

This Agreement shall be effective as of the EffectiveDate stated even though actually signed at a later date.

 

**AGREEDTO AND EXECUTED THIS 6th DAY OF FEBRUARY, 2003**

 
| **FARMOR:** |   | **REEF  PARTNERS 2001-A INCOME FUND LP** |
|-------------|--------|------------------------------------------|
|        |   | **1901 North Central Expressway**        |
|        |   | **Suite 300**                            |
|        |   | **Richardson, Texas 75080**              |

 

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| By:                | /s/ Michael J. Mauceli |                                     |   |
|--------------------|------------------------|------------------------------------------|--------|
| Michael J. Mauceli |                   |                                     |
| Managing Partner   |                   |                                     |
|               |
|               |
| **FARMOR:**        |                   | **REEF  PARTNERS 2001-B INCOME FUND LP** |
|               |                   | **1901 North Central Expressway**        |
|               |                   | **Suite 300**                            |
|               |                   | **Richardson, Texas 75080**              |
|               |
|               |
| By:                | /s/ Michael J. Mauceli |                                     |   |
| Michael J. Mauceli |                   |                                     |
| Managing Partner   |                   |                                     |
|               |
|               |
| **FARMOR:**        |                   | **REEF  EXPLORATION, INC.**              |
|               |                   | **1901 North Central Expressway**        |
|               |                   | **Suite 300**                            |
|               |                   | **Richardson, Texas 75080**              |
|               |
| By:                | /s/ Michael J. Mauceli |                                     |   |
| Michael J. Mauceli |                   |                                     |
| President          |                   |                                     |
|               |
|               |
| **FARMEE:**        |                   | **Reef Global Energy I LP**              |
|               |                   | **1901 North Central Expressway**        |
|               |                   | **Suite 300**                            |
|               |                   | **Richardson, Texas 75080**              |
|               |
|               |
| By:                | /s/ Michael J. Mauceli |                                     |   |
| Michael J. Mauceli |                   |                                     |
| Managing Partner   |                   |                                     |
|                    |                        |                                          |        |  |  |

 

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