Exhibit 10.12


                              EMPLOYMENT AGREEMENT

     This  EMPLOYMENT  AGREEMENT (the  "Agreement"),  entered into on August 17,
2005 and made  effective as of December 21, 2005 (the  "Effective  Date") by and
among Calibre Energy, Inc. (referred to as "CALIBRE" or the "Company") and Peter
F. Frey ("Executive");

                              W I T N E S S E T H:

     WHEREAS,  the Company desires to retain the services of the Executive,  and
the Executive is willing to provide such  services to the Company,  all upon the
terms and conditions set forth herein;

     NOW THEREFORE,  in consideration of the premises,  the terms and provisions
set forth herein,  the mutual benefits to be gained by the  performance  thereof
and other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     SECTION 1.  Employment.  The Company hereby employs the Executive,  and the
Executive hereby accepts such employment,  all upon the terms and conditions set
forth herein.

     SECTION 2. Term.  Unless  sooner  terminated  pursuant to Section 5 of this
Agreement,  the  Executive  shall  be  employed  for a  term  commencing  on the
Effective  Date and ending on the first  anniversary  of the Effective Date (the
"Term");  provided,  however, that the Term shall automatically be extended on a
daily basis for an additional  day such that, at all times,  the remaining  Term
shall be one (1) year.  Notwithstanding any other provision of this Agreement to
the contrary,  this Agreement may be terminated by Company upon written  notice,
in which case the Agreement will terminate upon the expiration of the three-year
Term.

     SECTION 3. Duties and Responsibilities.

     A. Capacity.  The Executive shall serve in the capacity of Senior Financial
Controller of CALIBRE,  and in such other or  additional  capacity or capacities
for the Company or an  affiliate of CALIBRE as the Board of Directors of CALIBRE
(the "Board") may direct from time to time.  During the term of this  Agreement,
as Senior Financial Controller of the Company,  Executive agrees to perform such
duties as are normally  incident to that  position and shall  perform such other
duties and  responsibilities as may be prescribed from time to time by the board
of directors of the Company.

     B. Duties. The Executive shall devote his full business time, attention and
energies  to the  business  of the Company and shall not be engaged in any other
business  activity,  whether or not pursued for gain,  profit or other pecuniary
advantage,  which would  impair his ability to fulfill his duties to the Company
under this Agreement,  without the prior written  consent of the Board.  Nothing
contained  in this  Section  3(B) shall  prevent the  Executive  from  passively
investing  his  assets in such a form or manner  as will not  conflict  with the
terms  of this  Agreement  and  will  not  require  services  on the part of the
Executive in the operation of the business of the companies or other enterprises
in which such investments are made.

     C. Standard of  Performance.  The  Executive  will perform his duties under
this Agreement with fidelity and loyalty, to the best of his ability, experience
and talent and in a manner consistent with his fiduciary responsibilities.

<PAGE>


     SECTION 4. Compensation.

A. Base Salary. The Company shall pay the Executive a salary (the "Base Salary")
of U.S.  $100,000 per annum. The Base Salary shall be payable in accordance with
the general  payroll  practices of the Company in effect from time to time.  The
Company  shall  review the Base Salary then being paid to the  Executive at such
times as the Company regularly reviews the compensation paid to employees.  Upon
completion of such review,  the Company in its sole  discretion  may increase or
maintain the  Executive's  then current Base Salary,  and any  increased  salary
shall be the "Base Salary" for all purposes under this Agreement.

B. Stock Options.  The Company shall grant the Executive  100,000  non-qualified
options and 100,000 qualified option under the 2005 Calibre Stock Option Plan at
$.12 per share. Such options shall be immediately vested and such vested options
shall survive Executives termination date.

C. Bonus. The Executive shall be eligible,  in the sole discretion of the Board,
to be considered  for a bonus  following each fiscal year ending during the Term
based upon the Executive's  performance and the operating results of the Company
and  their  affiliates  during  such year in  relation  to  performance  targets
established  by the Board.  Determination  of the bonus  amount  shall take into
account such unusual or  nonrecurring  items as the Chief  Executive  Officer of
CALIBRE and/or the Board deem appropriate.

D. Benefits.  If and to the extent that the Company  maintains  employee benefit
plans  (including,  but not limited to,  pension,  profit  sharing,  disability,
accident,  medical,  life insurance and  hospitalization  plans),  the Executive
shall be entitled to  participate  therein in accordance  with the terms of such
plans and the Company's  regular  practices  with respect to its  employees.  In
addition, the Company promises to provide reasonable health and dental insurance
for the  Executive and his family,  including  $500,000 in life  insurance.  The
Executive  shall be entitled to  reimbursement  from the Company for  reasonable
out-of-pocket  expenses  incurred by him in the course of the performance of his
duties,  hereunder,  including all reasonable commuting and communication costs,
upon the submission of appropriate documentation.

E. Vacation.  The Executive shall be entitled to four weeks of paid vacation per
calendar year,  which,  if not taken,  may be carried  forward to any subsequent
year,  except in  accordance  with Company  policy  applicable  to the Company's
employees generally.  The Executive shall also be entitled to such holidays and,
subject to the  provisions  of Section 5, other paid or unpaid leaves of absence
as are consistent with the Company's normal policies.

     SECTION 5. Termination of Employment.

     Notwithstanding  the  provisions of Section 2, the  Executive's  employment
hereunder shall terminate under any of the following conditions:

     A. Death.  The Executive's  employment under this Agreement shall terminate
automatically upon his death.

     B.  Disability.  The  Executive's  employment  under this  Agreement  shall
terminate  automatically  upon his  Disability.  For purposes of this Agreement,
"Disability" means permanent and total disability (within the meaning of section
22(e) (3) of the Internal  Revenue Code of 1986,  as amended,  or any  successor
provision) which has existed for at least 180 consecutive days.

<PAGE>


     C.  Termination by the Company Without Cause. The Company may terminate the
Executive's  employment  hereunder  without "Cause" (as hereinafter  defined) on
three months written notice by the Company.

     D.  Termination  by the  Company  for  Cause.  The  Executive's  employment
hereunder may be terminated  for Cause upon written  notice by the Company.  For
purposes of this  Agreement,  "Cause"  shall mean (i) the willful and  continued
failure by the Executive to  substantially  perform his  obligations  under this
Agreement (other than such failure resulting from his Disability) after a demand
for  substantial  performance  has  been  delivered  to him by the  Board  which
specifically identifies the manner in which the Board believes the Executive has
not  substantially  performed  such  provisions  and the Executive has failed to
remedy the  situation  three  months  after such  demand;  (ii) the  Executive's
willfully  engaging in conduct  materially  and  demonstrably  injurious  to the
property  or business  of the  Company,  including  without  limitation,  fraud,
misappropriation  of funds or  other  property  of the  Company,  other  willful
misconduct,  gross  negligence  or  conviction of a felony or any crime of moral
turpitude;  or (iii) the  Executive's  material  breach of this Agreement  which
breach has not been  remedied by the  Executive  within  three  months after the
receipt by the  Executive of written  notice from the Company that the Executive
is in material  breach of this  Agreement,  specifying  the  particulars of such
breach.

     For purposes of this  Agreement,  no act, or failure to act, on the part of
the Executive shall be deemed  "willful" or engaged in "willfully" if it was due
primarily to an error in judgment or negligence,  but shall be deemed  "willful"
or engaged in "willfully"  only if done, or omitted to be done, by the Executive
not in good faith and without  reasonable belief that his action or omission was
in the  best  interest  of  the  Company.  Notwithstanding  the  foregoing,  the
Executive  shall not be deemed to have been  terminated  as a result of  "Cause"
hereunder  unless and until there shall have been  delivered to the  Executive a
copy of a  resolution  duly  adopted  by the  affirmative  vote of not less than
three-quarters  of the Board then in office at a meeting of the Board called and
held  for  such  purpose  (after  reasonable  notice  to  the  Executive  and an
opportunity for the Executive, together with his counsel, to be heard before the
Board),  finding that, in the good faith opinion of the Board, the Executive has
committed  an act set  forth  above  in this  Section  5(D) and  specifying  the
particulars  thereof  in detail.  Nothing  herein  shall  limit the right of the
Executive  or his legal  representative  to contest the validity or propriety of
any such determination.

     E.  Termination  by the  Executive  for  Good  Reason.  The  Executive  may
terminate  his  employment  hereunder  for "Good  Reason."  For purposes of this
Agreement,  "Good Reason" for termination shall mean any of the following (which
occur without the Executive's prior written consent):

          (1) a decrease in the  Executive's  Base Salary not in accordance with
     section 4 (A) above;

          (2)  a  materially   adverse   diminution  of  the  overall  level  of
     responsibilities of the Executive;

          (3) a material  breach by the Company of any term or provision of this
     Agreement;

          (4) after a Change of Control (as defined in Section  7(B)) and during
     the Effective  Period (as defined in Section 7(C)),  (a) the failure of the
     Company to continue in effect any benefit or compensation  plan (including,
     but  not  limited  to,  any  bonus,  incentive,  retirement,   supplemental
     executive retirement,  savings, profit sharing, pension, performance, stock
     option, stock purchase,  deferred  compensation,  life insurance,  medical,
     dental,  health,  hospital,  accident  or  disability  plans)  in which the
     Executive is  participating at the time of such Change of Control (or plans
     providing  to  the  Executive,  in  the  aggregate,  substantially  similar
     benefits as the  benefits  enjoyed by the  Executive  under the benefit and
     compensation  plans in which the Executive is  participating at the time of
     such  Change of  Control),  or (b) the taking of any action by the  Company
     that would adversely affect the Executive's  participation in or materially
     reduce the  Executive's  benefits  under any of such  plans or deprive  the
     Executive of any material  fringe  benefit  enjoyed by the Executive at the
     time of such Change in Control;

<PAGE>


          (5) any personal reason that the  Compensation  Committee of the Board
     in its discretion determines shall constitute Good Reason.

     However,  that no event or condition described in clauses (1) - (4) of this
Section 5(E) shall  constitute  Good Reason unless (a) the  Executive  gives the
Company  written  notice of his  objection to such event or condition  within 90
days after the  Executive  learns of such event,  (b) such event or condition is
not  corrected  by the Company  within 10 days of its receipt of such notice and
(c) the Executive  voluntarily  resigns his employment  with the Company and its
affiliates  not more than 60 days  following the expiration of the 10-day period
described in the foregoing clause (b).

     F. Voluntary Termination by the Executive.  The Executive may terminate his
employment  hereunder  at any time for reason  other than Good Reason on 30 days
written notice to the Company.

     SECTION 6. Payments Upon Termination.

     A. Upon termination of the Executive's  employment  hereunder,  the Company
shall be obligated to pay and the Executive shall be entitled to receive, on the
pay date for the pay period in which the  termination  occurs,  all  accrued and
unpaid Base Salary to the date of termination.  In addition, the Executive shall
be  entitled  to any  benefits  to which he is  entitled  under the terms of any
applicable employee benefit plan or program or applicable law.

     B. Except as provided in Section 7(A), upon  termination of the Executive's
employment by the Company  without Cause or by the Executive due to Good Reason,
in  addition  to the amount  set forth in Section  6(A),  the  Company  shall be
obligated  to pay,  and the  Executive  shall be entitled  to receive,  (i) Base
Salary  for a period  of three  years  and (ii)  continued  medical  and  dental
benefits  for a period of three years at no cost to the  Executive.  The Company
may cease all  payments of Base Salary and bonus under this  Section 6(B) in the
event of a willful breach by the Executive of the provisions of Sections 8, 9 or
10 of this Agreement or any inadvertent breach that continues after notice given
to the Executive by the Company.  As a condition precedent to the receipt of any
of the severance  benefits  hereunder  the Executive  hereby agrees to execute a
release of claims  against the Company and its  affiliates in form and substance
reasonably satisfactory to the Company.

     C. In the event  Executive  elects to terminate  employment as set forth in
Section  5(F) then in such event any  options not vested as set forth in Section
3(B) shall terminate.

     D.  Upon  any  termination  or  expiration  of the  Executive's  employment
hereunder  pursuant to Section 5, the Executive shall have no further  liability
or obligation  under or in connection  with this Agreement;  provided,  however,
that the Executive shall continue to be subject to the provisions of Sections 8,
9, 10, 11 and 12 hereof (it being  understood  and agreed  that such  provisions
shall  survive any  termination  or  expiration  of the  Executive's  employment
hereunder  for any reason).  Upon any  Voluntary  Termination  by the  Executive
(other than a resignation  by the  Executive for Good Reason),  or expiration of
Executive's  employment  agreement,  the Company shall have no further liability
under or in  connection  with this  Agreement,  except to pay the portion of the
Executive's Base Salary earned or accrued at the date of termination.

<PAGE>


     SECTION 7. Change of Control.

     A. In the event that, during the Effective Period (as hereinafter defined),
the Executive's  employment is terminated by the Company without Cause or by the
Executive for Good Reason,  in lieu of the amount set forth in Section 6(B), the
Executive shall immediately become entitled to the following benefits:

          (1) the  outstanding  options to acquire shares of the Company held by
     the  Executive  under any share  option plan and granted on or prior to the
     Change of Control  shall become  immediately  fully  exercisable  and shall
     remain  exercisable for three years after  termination of employment or, if
     less, their remaining term;

          (2) a  lump-payment  equal  to one  times:  (a) the  Executive's  then
     current Base Salary;

          (3) a lump-sum  payment equal to three times the highest  annual bonus
     allowed  under  the  Executive  Bonus  Plan for the  Executive  during  the
     three-year period preceding the date of the Change of Control; and

          (4)  continued  medical and dental  coverage  for three years from the
     termination date at no cost to the Executive.

     B. For purposes of this Agreement, a "Change of Control" shall be deemed to
have taken place upon the earliest  occurrence  of any of the  following:  (i) a
tender offer is made and consummated for the beneficial ownership of 25% or more
of the  outstanding  voting  securities  of CALIBRE;  (ii)  CALIBRE is merged or
consolidated  with  another  corporation,  and as a  result  of such  merger  or
consolidation,  less  than  75%  of the  outstanding  voting  securities  of the
surviving or resulting  corporation are  beneficially  owned in the aggregate by
the persons or entities who were  shareholders of CALIBRE  immediately  prior to
such merger or  consolidation;  (iii) CALIBRE sells all or substantially  all of
its assets to another  entity or person that is not a wholly  owned  subsidiary;
(iv) during any 15-month period, individuals who at the beginning of such period
constituted the Board  (including for this purpose any new member whose election
or nomination for election by the shareholders of CALIBRE was approved by a vote
of at least 2/3 of the members  then still in office and who were members at the
beginning of such period) cease for any reason to constitute at least a majority
of the Board; (v) the  Compensation  Committee of the Board  determines,  in its
sole  discretion,  that a Change of Control has  occurred  for  purposes of this
Agreement;  (vi) the  Company  sells all or  substantially  all of its assets to
another entity or person that is not a subsidiary or affiliate of the Company or
(vii)  80% or more of the  outstanding  voting  securities  of the  Company  are
acquired  by any  person or entity  other  than  CALIBRE,  its  subsidiaries  or
affiliates.

     C. For purposes of this Agreement, "Effective Period" shall mean the period
beginning  on the date of a Change of Control  and ending on the  earlier of the
third anniversary of the Change of Control or the expiration of the Term.

<PAGE>


     D.  To the  extent  that  the  acceleration  of  vesting  or  any  payment,
distribution  or  issuance  made to the  Executive  in the  event of a Change of
Control is subject  to federal  income,  excise or other tax at a rate above the
rate  ordinarily  applicable  to  compensation  paid in the  ordinary  course of
business  (collectively,  a  "Parachute  Tax"),  whether  as  a  result  of  the
provisions  of Section  280G and 4999 of the Internal  Revenue Code of 1986,  as
amended,  or  any  similar  or  analogous  provisions  of  any  statute  adopted
subsequent to the date hereof,  or otherwise,  then the Company shall pay to the
Executive an additional sum (the  "Additional  Amount") such that the net amount
received by the  Executive,  after paying any  applicable  Parachute Tax and any
federal or state  income tax on such  Additional  Amount,  shall be equal to the
amount that the  Executive  would have  received if such  Parachute Tax were not
applicable.

     SECTION 8. Confidential Information and Inventions.

     A. Nondisclosure.  The Executive hereby acknowledges that the Executive has
knowledge  of certain  confidential  and  proprietary  information  relating  to
Company,  CALIBRE  or  their  affiliates  and  that  it will  be  necessary,  in
connection  with the  performance  of  services  hereunder,  to  provide or make
available to the Executive  certain  confidential  and proprietary  information,
including, but not limited to, business and financial information, technological
information,  strategies,  the status and content of contracts with suppliers or
clients,  customer lists and financial  information  on customers,  intellectual
property,  trade  secrets  and other  information  relating  to the  businesses,
products,  technology,  services,  customers, methods or tactics of the Company,
CALIBRE or its affiliates  (any such  confidential  or  proprietary  information
being  hereinafter  referred to as  "Confidential  Information").  The Executive
further  acknowledges  that the Confidential  Information  constitutes  valuable
trade secrets of Company,  CALIBRE and its  affiliates  and agrees that any such
Confidential  Information shall remain the property of the Company,  CALIBRE and
their  affiliates  at all times during the term of this  Agreement and following
the  expiration  or  termination   hereof.  The  Executive  shall  not  publish,
disseminate, distribute, disclose, sell, assign, transfer, copy, remove from the
premises of the Company, CALIBRE or their affiliates, commercially exploit, make
available to others, or otherwise make use of any Confidential Information to or
for the use or benefit of the Executive or any other person,  firm,  corporation
or entity,  except as specifically  and previously  authorized in writing by the
Board or as  required  for the due and  proper  performance  of his  duties  and
obligations  under this Agreement.  In addition,  the Executive shall employ all
necessary safeguards and precautions in order to ensure that unauthorized access
to the Confidential Information is not afforded to any person, firm, corporation
or entity. Upon any expiration or termination of this Agreement, or if the Board
or the Company so requests at any time, the Executive  shall promptly  return to
the Company,  CALIBRE and their affiliates all  Confidential  Information in the
Executive's  possession,  whether in writing,  on computer disks or other media,
without  retaining  any  copies,   extracts  or  other  reproductions   thereof.
Notwithstanding  the  foregoing,  nothing  contained  in this Section 8(A) shall
prevent  the  publishing,   dissemination,   distribution,   disclosure,   sale,
assignment,  transfer, copying, removal, commercial exploitation or other use by
the Executive of any information  that (i) is generally  available to the public
(other than through a breach of an  obligation  of  confidentiality,  or (ii) is
lawfully obtained by the Executive without obligation of confidentiality  from a
source other than the Company, CALIBRE or its affiliates,  directors,  officers,
employees, agents or other representatives (provided,  however, that such source
is not bound by a confidentiality  agreement with the Company, CALIBRE or any of
its  affiliates  and  is  not  otherwise  under  an  obligation  of  secrecy  or
confidentiality to either of them).

     B. Requests for Disclosure.  It shall not be a breach of the obligations of
Section  8(A) if Executive  discloses  Confidential  Information  as required by
judicial or  administrative  process or, in the written  opinion of  Executive's
counsel,  by the  requirements of applicable law, but only upon  satisfaction of
the following  conditions:  (i) the Executive gives prompt written notice to the
Chairman of the Board of the existence of, and the  circumstances  attendant to,
such  request,  sufficient  to permit the  Company,  CALIBRE or an  affiliate to
contest or seek to restrict the required  disclosure (ii) the Executive consults
with  the  Chairman  of the  Board  as to the  advisability  of  taking  legally
available  steps to resist or narrow any such  request or otherwise to eliminate
the need for such  disclosure,  (iii) if disclosure  is required,  the Executive
cooperates  with the Chairman of the Board in  obtaining a  protective  order or
other reliable  assurance in form and substance  satisfactory to the Chairman of
the Board that  confidential  treatment  will be accorded to such portion of the
Confidential Information as is required to be disclosed, and (iv) that Executive
disclosed only such  Confidential  Information as is legally required (or, where
applicable,  only such information as the written opinion of Executive's counsel
deems required).

<PAGE>


     C. Confidential  Information of Others. The Executive shall not disclose to
the Company, CALIBRE or their affiliates, or induce them to use, the proprietary
information, trade secrets, or confidential information of others.

     D.  Disclosure.  Upon  each  occurrence  of  conception,  creation,  and/or
reduction to practice, the Executive will promptly provide a written description
of each Invention (as hereinafter defined) to the Board or its designee.

     E.  Assignment  and  Ownership  of Rights.  The  Executive  agrees that all
Inventions  shall and,  to the  extent  necessary,  shall  become and remain the
property of CALIBRE or the Company,  and their  successors  and assigns,  unless
expressly released by CALIBRE and the Company in writing. The Executive assigns,
and to the extent such  assignment is not  effective,  the  Executive  agrees to
assign all such Inventions to CALIBRE or the Company.  The Executive agrees that
all  copyrightable   works  created  for  CALIBRE  or  the  Company  during  the
Executive's  employment are owned by CALIBRE or the Company and, if necessary or
appropriate, are works made for hire.

     F. Obtaining Patents.  CALIBRE or the Company shall have sole discretion to
decide  whether to obtain any patent or other  protection on any  Invention.  If
CALIBRE or the Company seeks any such  protection,  the Executive  shall have no
obligation to pay any expenses of the filing or  maintenance  of any such patent
or other protection.

     G.  Inventions.   "Inventions"   means  (i)  any  invention,   development,
improvement,  or  copyrightable  work,  (ii) created,  conceived,  or reduced to
practice  by the  Executive  individually  or  jointly  with  others  while  the
Executive is employed by the Company,  CALIBRE or their  affiliates  or within a
six-month  period  following  termination of the Executive's  employment,  (iii)
whether  patentable or not, (iv) whether or not conceived or reduced to practice
during  regular  working  hours,  (v) that  relates to any  methods,  apparatus,
products,  or components  thereof which,  before  termination of the Executive's
employment,  are manufactured,  sold, leased, or used by the Company, CALIBRE or
their affiliates or which are under  development by, or which otherwise  pertain
to  the  business  of,  the  Company,  CALIBRE  or  their  affiliates.  However,
"Inventions" shall not include any inventions,  developments,  improvements,  or
copyrightable  work (i) for which no  equipment,  supplies,  facility,  or trade
secret  information of the Company,  CALIBRE or their affiliates were used, (ii)
which the Executive  developed  entirely on the Executive's own time (iii) which
does not  relate  directly  to the  business  of the  Company,  CALIBRE or their
affiliates  or  to  their  actual  or  demonstrably   anticipated   research  or
development,  or (iv)  which  does not  result  from any work  performed  by the
Executive for the Company, CALIBRE or their affiliates. The Executive represents
that he has provided CALIBRE, on or prior to the date hereof, a complete written
description of all unpatented inventions and improvements in which the Executive
has any  rights  that  are not  included  in the  term  "Inventions",  in a form
acknowledged in writing by the Chief Executive Officer of CALIBRE.

<PAGE>


     SECTION 9. Covenant Not to Compete.

     A.   Noncompetition.   The   Executive   hereby   agrees  that  during  the
"Noncompetition  Period"  (as  hereinafter  defined),  he will  not,  except  as
otherwise permitted under this Agreement,  directly or indirectly (whether as an
employee,  consultant,  shareholder  or  director,  or whether  acting  alone or
through any of his  affiliates,  as a member of a partnership or a joint venture
or an  investor  in, or a holder of  securities  of,  any  corporation  or other
entity, or otherwise),  engage in any business conducted by the Company, CALIBRE
or its affiliates in the area of particle impact  drilling (the  "Noncompetition
Area").  Notwithstanding  anything  to the  contrary  in  this  Section  9,  the
Executive may  passively  invest his assets in such a form or manner as will not
conflict with the terms of this  Agreement and will not require  services on the
part of the Executive in the operation of the business of the companies or other
enterprises in which such investments are made. The Executive  acknowledges that
(i) the  provisions  set  forth in this  Section  9 are for the  benefit  of the
Company, CALIBRE and its affiliates, (ii) his agreement to such provisions is an
express condition to his employment by the Company and (iii) such provisions are
reasonably necessary to protect the goodwill and other business interests of the
Company,  CALIBRE and its affiliates.  The "Noncompetition  Period" shall be the
period commencing on the Effective Date and ending on the second  anniversary of
the date of termination of the Executive's employment.

     B.  Reformation  of Scope.  If any of the  provisions  of this Section 9 is
found to be unreasonably  broad,  oppressive or unenforceable in an action, suit
or proceeding before any federal or state court, such court (i) shall narrow the
Noncompetition  Period or the Noncompetition Area or shall otherwise endeavor to
reform  the scope of such  agreements  in order to ensure  that the  application
thereof is not unreasonably  broad,  oppressive or unenforceable and (ii) to the
fullest extent permitted by law, shall enforce such agreements as so reformed.

     SECTION  10.   Nonsolicitation.   The  Executive  shall  not,  directly  or
indirectly,  during the Noncompetition Period, (A) take any action to solicit or
divert  any  business  (or  potential   business)  or  customers  (or  potential
customers)  away  from  the  Company,  CALIBRE  or its  affiliates,  (B)  induce
customers,  potential  customers,  suppliers,  agents  or  other  persons  under
contract or otherwise associated or doing business with the Company,  CALIBRE or
its  affiliates to terminate,  reduce or alter any such  association or business
with or from the Company, CALIBRE or its affiliates and/or (C) induce any person
in the employment of the Company, CALIBRE or its affiliates or any consultant to
the Company,  CALIBRE or its  affiliates  to (i)  terminate  such  employment or
consulting  arrangement,  (ii) accept  employment,  or enter into any consulting
arrangement,  with  anyone  other than the  Company,  CALIBRE or its  affiliates
(except to the extent  the  consultant  makes its  services  available  to third
parties on a regular basis) and/or (iii) interfere with the customers, suppliers
or  clients  of the  Company,  CALIBRE  or its  affiliates  in any manner or the
business of the Company,  CALIBRE or its affiliates in any manner.  For purposes
of this  Section 10, a "potential  customer"  shall mean a person or entity that
the  Company,  CALIBRE  or  its  affiliates,  as of  the  date  the  Executive's
employment  terminates,  is  soliciting  or is  considering  soliciting  (or has
targeted for solicitation).

     SECTION 11.  Remedies.  The Executive hereby agrees that a violation of the
provisions  of  Section 8, 9 or 10 hereof  may cause  irreparable  injury to the
Company, CALIBRE and its affiliates for which they would have no adequate remedy
at law. Accordingly,  in the event of any such violation,  the Company,  CALIBRE
and/or its  affiliates  shall be entitled to  preliminary  and other  injunctive
relief. Any such injunctive relief shall be in addition to any other remedies to
which the Company,  CALIBRE  and/or its  affiliates may be entitled at law or in
equity or otherwise.

     SECTION 12.  Arbitration.  Any dispute or  controversy  arising under or in
connection  with this Agreement  (other than any dispute or controversy  arising
from a violation or alleged  violation by the  Executive  of the  provisions  of
Section 8, 9 or 10 hereof)  shall be settled  exclusively  by final and  binding
arbitration in Houston,  Texas,  in accordance with the Rules for the Resolution
of Employment  Disputes of the American  Arbitration  Association  ("AAA").  The
arbitrator shall be selected by mutual agreement of the parties, if possible. If
the parties fail to reach agreement upon appointment of an arbitrator  within 30
days  following  receipt by one party of the other  party's  notice of desire to
arbitrate,  the  arbitrator  shall be selected from a panel or panels of persons
submitted by the AAA. The selection  process shall be that which is set forth in
the AAA Rules for the Resolution of Employment Disputes then prevailing,  except
that, if the parties fail to select an arbitrator  from one or more panels,  AAA
shall not have the power to make an  appointment  but shall  continue  to submit
additional  panels until an  arbitrator  has been  selected.  This  agreement to
arbitrate shall not preclude the parties from engaging in voluntary,  nonbinding
settlement efforts,  including,  but not limited to, mediation. In the event the
arbitration  is  decided  in whole or in part in  favor  of the  Executive,  the
Company will  reimburse the Executive for his  reasonable  costs and expenses of
the arbitration (including reasonable attorneys' fees).

<PAGE>


     SECTION 13. Notices. All notices and other  communications  hereunder shall
be in  writing  and shall be given  (and shall be deemed to have been duly given
upon receipt) by delivery in person,  by  registered  or certified  mail (return
receipt requested and with postage prepaid thereon) or by facsimile transmission
to the respective  parties at the following  addresses (or at such other address
as either party shall have previously  furnished to the other in accordance with
the terms of this Section 13):


     If to the Company:

                              Calibre Energy, Inc.
                          1667 K Street NW, Suite 1230
                              Washington, DC 20006


     if to the Executive:

                                  Peter F. Frey
                             520 Market Street East
                             Gaithersburg, MD 20878

     SECTION 14. No Mitigation. In the event of any termination of employment by
the Company without Cause, by the Executive for Good Reason, the Executive shall
be  under no  obligation  to seek  other  employment,  or  otherwise  engage  in
mitigating  activity,  following the date of termination,  and there shall be no
offset against  amounts due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that he may obtain.

     SECTION 15.  Indemnification.  CALIBRE and the Company  agree that,  in the
event the  Executive's  employment is terminated  during the Term by the Company
without Cause or by the Executive for Good Reason, the Company shall continue to
indemnify the Executive following termination to the fullest extent permitted by
applicable law consistent with the Certificate of Incorporation  and By-Laws and
the Company in effect as of the date of  termination  with respect to Executives
sole,  joint or  concurrent  negligence  and any acts or  omissions  he may have
committed  during the period  during  which he was an officer,  director  and/or
employee  of the  Company or any of their  affiliates  for which he served as an
officer, director or employee at the request of the Company.

<PAGE>


     SECTION 16. Amendment;  Waiver.  The terms and provisions of this Agreement
may be modified or amended only by a written instrument  executed by each of the
parties  hereto,  and  compliance  with the terms and  provisions  hereof may be
waived  only by a written  instrument  executed  by each party  entitled  to the
benefits thereof. No failure or delay on the part of any party in exercising any
right,  power or privilege  granted hereunder shall constitute a waiver thereof,
nor shall any single or partial  exercise of any such right,  power or privilege
preclude  any other or further  exercise  thereof or the  exercise  of any other
right, power or privilege granted hereunder.

     SECTION  17.  Entire  Agreement.  This  Agreement  constitutes  the  entire
agreement  between the parties  with  respect to the subject  matter  hereof and
supersedes all prior written or oral  agreements or  understandings  between the
Executive and the Company or its affiliates relating thereto, including, without
limitation.

     SECTION 18.  Severability.  In the event that any term or provision of this
Agreement  is found to be  invalid,  illegal  or  unenforceable,  the  validity,
legality and  enforceability  of the remaining terms and provisions hereof shall
not be in any way  affected or impaired  thereby,  and this  Agreement  shall be
construed as if such invalid,  illegal or unenforceable provision had never been
contained therein.

     SECTION 19. Binding  Effect;  Assignment.  This Agreement  shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns (it being  understood  and agreed  that,  except as  expressly  provided
herein, nothing contained in this Agreement is intended to confer upon any other
person or entity any  rights,  benefits  or  remedies  of any kind or  character
whatsoever).  The  Executive  may not assign  this  Agreement  without the prior
written consent of the Company.  Except as otherwise provided in this Agreement,
the Company  may assign  this  Agreement  to any of their  affiliates  or to any
successor (whether by operation of law or otherwise) to all or substantially all
of their  business  and assets  without  the consent of the  Executive,  and any
transfer of employment  from the Company to such affiliate or successor shall be
deemed  to  constitute  an  assignment  and  not  a  termination  of  employment
hereunder.  In the event of an assignment of this Agreement by the Company,  all
references  herein to CALIBRE or the Company shall be deemed to be references to
the assignee.  Similarly,  in the event CALIBRE is no longer an affiliate of the
Company  (or any  assignee),  all  references  to CALIBRE  shall be deemed to be
references to the Company (or the assignee).

     SECTION 20.  Withholding  of Taxes.  The Executive  agrees that the Company
shall deduct, or shall cause to be deducted,  from the amount of any benefits to
be paid  hereunder any taxes required to be withheld by the federal or any state
or local government.

     SECTION  21.  Governing  Law.  This  Agreement  shall  be  governed  by and
construed  in  accordance  with the laws of the State of Texas  (except  that no
effect  shall be given to any  conflicts  of law  principles  thereof that would
require the application of the laws of another jurisdiction).

     SECTION 22.  Headings.  The  headings  of the  sections  contained  in this
Agreement are for convenience  only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.

     SECTION 23.  Counterparts.  This  Agreement  may be executed in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

     SECTION  24.  Subsidiaries  and  Affiliates.   As  used  herein,  the  term
"subsidiary"  shall mean any corporation or other business entity  controlled by
the corporation in question, and the term "affiliate" shall mean and include any
corporation or other business entity controlling,  controlled by or under common
control with the corporation in question. The terms "controlled," "controlling,"
"controlled  by" and "under  common  control  with," as used with respect to any
person, means the possession,  directly or indirectly, of the power to direct or
cause the  direction of the  management  and  policies of such  person,  whether
through the ownership of voting securities or by contract or otherwise.

<PAGE>


     IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of the
date first above written.

                                               CALIBRE ENERGY, INC.


                                               By: /s/ Prentis B. Tomlinson, Jr.
                                                   -----------------------------
                                                   Prentis B. Tomlinson, Jr.
                                                   President and CEO


                                                   Peter F. Frey


                                                   /s/ Peter F. Frey
                                                   -----------------------------
                                                   Executive