**EMPLOYMENTAGREEMENT**

 

                This EmploymentAgreement is entered into as of the 1st day of July, 2001, by and betweenGateway Energy Corporation, a Delaware corporation, with its principal place ofbusiness at 500 Dallas Street, Suite 2615, Houston, Texas  77002 (hereinafter the “Company”), subjectto the further definition set forth in Section 7.1, and Michael T. Fadden,whose address is 1701 Hermann Drive, Houston, Texas 77004 (hereinafter“Executive”).

 

                WHEREAS, theCompany considers the establishment and maintenance of a sound and vitalmanagement to be essential to protecting and enhancing the best interests ofthe Company and its shareholders; and

 

                WHEREAS, the Boardof Directors of the Company has determined that appropriate steps should betaken to reinforce and encourage the continued attention and dedication ofmembers of the Company's management, including Executive, to their assignedduties without distraction.

 

                NOW, THEREFORE, inconsideration of the mutual covenants and agreements of the parties set forthherein, and for other good and valuable consideration, the parties agree asfollows:

 

**Section1.  Employment.**

 

                The Company andExecutive agree that Executive shall serve as President and Chief ExecutiveOfficer of the Company.  Executive shallperform such duties and exercise such powers pertaining to the management andoperations of the Company as may be determined from time to time by theCompany.  Such duties and powers shallbe consistent with those normally expected of persons holding similarpositions.  Executive’s duties, however,are subject to reasonable modifications based on future developments in theCompany’s business.

 

**Section2. Term of Agreement.**

 

                This Agreementwill be effective as of July 1, 2001, and, except as otherwise provided in thisAgreement, will continue in effect until October 31, 2004 and shall berenewable for additional one (1) year terms at the option of the Company.  If either party chooses not to renew thisAgreement for a successive one year term, the party making that choice mustprovide the other party with notice of the intent not to renew at least 180days prior to the expiration of the then current term.  If a Change in Control occurs prior to theexpiration of the initial term of this Agreement, this Agreement will continuein effect for three (3) years from the Change in Control.  If a Change in Control occurs during a one(1) year renewal term, this Agreement will continue in effect for one (1) yearfrom the Change in Control.  Executive’sbase salary while employed will be determined from year to year in accordancewith the Company’s Executive Compensation Plan (the “Plan”), but shall be noless than $175,000 annually.

 

**Section3. Change in Control.**

 

                The Companyrecognizes that, as is the case with many publicly held corporations, thepossibility of a change in control exists, and that possibility, along with theuncertainty and questions which may arise among management, may result in thedeparture or distraction of management personnel to the detriment of theCompany and its shareholders.  In orderto induce Executive to remain in its employ, the Company agrees to provideExecutive the payments and benefits described in this Agreement if Executive'semployment with the Company is terminated subsequent to a “Change in Control”of the Company as defined in Section 4, under the circumstances described inSection 5.

 

**Section4. Definition of Change in Control.**

 

                For purposes ofthis Agreement, a Change in Control of the Company means the occurrence of anyof the following events during the period in which this Agreement remains ineffect.  A Change in Control will bedeemed to occur on the date the event occurs:

 

4.1           Change in Voting Power. Anyperson or persons acting together which would constitute a “group” for purposesof Section 13(d) of the Exchange Act (other than the Company, or anySubsidiary, or any entity beneficially owned by any of the foregoing)beneficially own (as defined in Rule 13(d)-3 under the Exchange Act) withoutBoard approval or consent, directly or indirectly, at least thirty percent(30%) of the total voting power of the Company entitled to vote generally inthe election of the Board;

 

4.2           Change in Board of Directors.Either:

 

(a)           the Current Directors (as hereinafterdefined) cease for any reason to constitute at least a majority of the membersof the Board (for these purposes, a “Current Director” means any member of theBoard as of the date of this Agreement, and any successor of a Current Directorwhose election or nomination for election by the Company's stockholders wasapproved by at least a majority of the current Directors then on the Board); or

 

(b)           at any meeting of the stockholders ofthe Company called for the purpose of electing directors, a majority of thepersons nominated by the Board for election as directors fail to be elected; or

 

4.3           Liquidation, Merger orConsolidation. The stockholders of the Company approve:

 

(a)           a plan of complete liquidation of theCompany; or

 

(b)           an agreement providing for the mergeror consolidation of the Company (i) in which the Company is not the continuingor surviving corporation (other than consolidation or merger with a whollyowned subsidiary of the Company in which all shares outstanding immediatelyprior to the effectiveness thereof are changed into or exchanged for the sameconsideration) or (ii) pursuant to which the shares are converted intocash, securities or other property, except a consolidation or merger of theCompany in which the holders of the shares immediately prior to theconsolidation or merger have, directly or indirectly, at least a majority ofthe common stock of the continuing or surviving corporation immediately aftersuch consolidation or merger, or in which the Board immediately prior to themerger or consolidation would, immediately after the merger or consolidation,constitute a majority of the board of directors of the continuing or survivingcorporation; or

 

4.4           Sale of Assets. Thestockholders of the Company approve an agreement (or agreements) providing forthe sale or other disposition (in one transaction or a series of transactions)of all or substantially all of the assets of the Company.

 

**Section5.  Termination Following Change inControl.**

 

If any of the eventsdescribed in Section 4 constituting a Change in Control occur, Executive willbe entitled to the payments and benefits provided for in Section 6 if asubsequent termination of Executive's employment occurs within three (3) yearsfrom the date of that Change in Control, unless that termination is:

 

(a)           becauseof Executive's death;

 

(b)           bythe Company for Cause or Disability; or

 

(c)           byExecutive other than for Good Reason.

 

Those payments and benefits will be in lieu of anyseverance payments Executive would otherwise receive in accordance with Section19 of this Agreement.

 

5.1           Cause. Termination by theCompany of Executive's employment for “Cause” means Executive has materiallybreached this Agreement or has engaged in action or misconduct in connectionwith the performance of his duties that is injurious to the business of theCompany, or is convicted of a felony or commits an act of gross, flagrant, andwillful misconduct relating to his employment or the Company’s business,including, but not limited to, theft or embezzlement of the Company’s propertyor money, or an act of fraud against the Company.  If Company believes Cause exists, as defined herein, a writtennotice will be delivered to Executive by the Chief Executive Officer of theCompany (or if Executive is the Chief Executive Officer, the Chairman ofthe  Compensation and Stock OptionCommittee) that specifically identifies the manner in which the Chief ExecutiveOfficer (or the Chairman of the Committee) believes that Executive has giventhe Company Cause for termination of Executive's employment, and givingExecutive an opportunity for Executive, together with Executive's counsel, tobe heard before the Board of Directors of the Company.  The Board of Directors of the Company maythen make a finding that, in the good faith opinion of two-thirds of the Boardof Directors (excluding the Executive), Executive acted (or failed to act whenhe should have acted) in a manner constituting Cause as defined herein, andspecifying the particulars of that finding in detail. For purposes of thissubsection 5.1, no act, or failure to act, on Executive's part will beconsidered “willful” unless done, or omitted to be done, by Executive not ingood faith and without reasonable belief that Executive's action or omissionwas in the best interest of the Company. Following the opportunity for the Executive, together with theExecutive’s counsel, to be heard, the Board of Directors may excuse theExecutive from any further Board of Directors’ proceeding where the finding isdiscussed or made.

 

5.2           Disability. Termination by theCompany of Executive's employment for “Disability” means termination ofExecutive’s employment following and because of Executive's failure to performsubstantially all of the material duties of his position for a period of atleast one hundred eighty (180) consecutive calendar days due to physical ormental illness or injury.  Executivewill continue to receive Executive's full base salary at the rate in effect andany bonus payments under the Plan payable during the one hundred eighty (180)day qualification period until termination of Executive's employment forDisability. After that termination, Executive's benefit will be determined inaccordance with the Company's other benefit plans and practices then in effectthat apply to Executive.  The Companywill have no further obligation to Executive under this Agreement and allsupplemental benefits will be terminated. If the Company and Executive disagree as to Executive's incapacity, eachmay appoint a medical doctor to certify his opinion as to Executive'sincapacity, and if the doctors do not agree as to Executive's incapacity, thenthe two doctors will appoint a third medical doctor to certify his opinion asto Executive's incapacity, and the decision of a majority of the three doctors willprevail.  The Company will bear thecosts of the doctors’ opinions.

 

5.3           Good Reason. Termination byExecutive of Executive's employment for “Good Reason” means termination byExecutive of Executive's employment based on:

 

(a)           Theassignment to Executive of duties inconsistent with his position and statuswith the Company as they existed immediately prior to a Change in Control, or asubstantial change in Executive's title, offices or authority, or in the natureof his responsibilities, as they existed immediately prior to a Change inControl, except in connection with the termination of his employment for Causeor Disability or as a result of his death or by Executive other than for GoodReason;

 

(b)           Areduction in Executive's base salary as in effect on the date of this Agreementor as his salary may be increased from time to time;

 

(c)           Afailure to continue the Company's Plan, as it may be modified from time totime, substantially in the form in effect immediately prior to a Change inControl, or a failure to continue Executive as a participant in the Plan on abasis substantially similar to his participation immediately prior to a Changein Control, or to pay Executive the amounts that Executive would be entitled toreceive in accordance with the Plan;

 

(d)           RequiringExecutive to be based more than fifty (50) miles from the location whereExecutive is based immediately prior to a Change in Control, except forrequired travel on business to an extent substantially consistent withExecutive’s business travel obligations prior to the Change in Control, or ifExecutive is agreeable to relocating, then the Company agrees to reimburseExecutive for all reasonable moving expenses incurred by Executive or toindemnify Executive against any loss realized in the sale of his principalresidence in connection with that relocation;

 

(e)           Thefailure to continue in effect any retirement plan, life insurance plan, medicalinsurance plan, disability plan or any other benefit plan in which Executive isparticipating immediately prior to a Change in Control (or provide plansproviding Executive with substantially similar benefits), the taking of anyaction by the Company that would adversely affect Executive's participation ormaterially reduce his benefits under any of those plans or deprive Executive ofany material fringe benefit enjoyed by Executive immediately prior to a Changein Control; or

 

(f)            Thefailure by the Company to obtain the assumption of this Agreement by anysuccessor, as contemplated in Section 7.

 

5.4           Noticeof Termination. Any purported termination by the Company pursuant tosubsections 5.1 or 5.2 or by Executive pursuant to subsection 5.3 will becommunicated by written Notice of Termination to the other party. For purposesof this Agreement, a “Notice of Termination” means a notice that indicates thespecific termination provision in this Agreement relied upon and setting forthin reasonable detail the facts and circumstances claimed to provide a basis fortermination of Executive's employment under the provision so indicated. Anypurported termination not effected pursuant to a Notice of Termination meetingthe requirements set forth in this Agreement will not be effective.

 

5.5           Dateof Termination.  For purposes ofthis Agreement, the date of the termination of Executive’s employment (“Date ofTermination”) will be:

 

(a)           ifExecutive’s employment is terminated by his death, the end of the month inwhich his death occurs;

 

(b)           ifExecutive’s employment is terminated for Disability, thirty (30) days afterNotice of Termination is given; or

 

(c)           ifExecutive’s employment is terminated by Executive or by the Company for anyother reason, the date specified in the Notice of Termination.

 

**Section6.  Payments and Benefits UponCertain Terminations Following a Change in Control.**

 

If within three (3) yearsfollowing the Change in Control, Executive's employment is terminated otherthan for Death, Disability or Cause, or if Executive terminates his employmentfor Good Reason, then the following provisions will apply:

 

6.1           CompensationThrough Date of Termination. The Company will pay Executive within thirty(30) days after termination:

 

(a)           Anyunpaid amount of Executive’s base salary through the Date of Termination;

 

(b)           Withrespect to any year then completed, any unpaid amount accrued to Executivepursuant to the Plan; and

 

(c)           Withrespect to any year then partially completed, a pro rata portion through theDate of Termination of Executive’s annual bonus under the Plan, based upon theamount of his bonus for the previous year.

 

6.2           AdditionalSeverance. In lieu of any further salary and bonus payments to Executivefor periods subsequent to the Date of Termination, or other severance payments,the Company will pay as severance pay to Executive two times the sum of:

 

(a)           Executive'sannual base salary as of the date of Change in Control, or as of the Date ofTermination, whichever is greater; and

 

(b)           Executive'sannual bonus under the Plan. Executive's annual bonus amount is to be based on the greater of:

 

(1)           theaverage of Executive's bonus for the two fiscal years of the Company precedingthe year in which the Change in Control occurs; or

 

(2)           theaverage of Executive's bonus for the two fiscal years of the Company precedingthe year in which the termination of employment occurs.

 

The severance payprovided for in this Section 6.2 shall be transferred to a “Rabbi Trust,”effective as of the Date of Termination, and paid to Executive in twenty-four(24) equal monthly installments commencing on the first day of the next monthfollowing the Date of Termination, and on the first day of each subsequentmonth, until fully paid.

 

6.3           BenefitPlans.  In the event of a Change inControl, unless Executive's employment is terminated for Cause, the Companywill, at the Company expense, maintain in full force and effect for Executive'scontinued benefit, for a period of four (4) years following the Date ofTermination, the health, dental, disability and other welfare benefits, plan,programs and arrangements substantially equivalent to the most valuablecoverage provided under any plan maintained by the Company from time to timeduring such period.  In addition,Executive will continue to be provided during the four (4) years following theDate of Termination, with the same life insurance coverage maintained on hislife immediately prior to the Date of Termination.  These benefits shall be reduced by the amount of similar benefitsprovided to Executive during such period by a subsequent employer, asdetermined solely by the Board.  For thepurposes of enforcing this offset provision, Executive shall notify the Boardas to the terms and conditions of any subsequent employment and thecorresponding benefits received pursuant thereto, and shall provide, or causeto provide the Board, correct, complete, and timely information concerning thesame.

 

6.4           NoMitigation Required.  Executive willnot be required to mitigate the amount of any payment provided for in thisSection 6 by seeking other employment or otherwise, nor will the amount of anypayment provided for in this Section 6 be reduced by any compensation earned byExecutive as the result of employment with another employer after the Date ofTermination or otherwise, except for a reduction in benefits as set forth insubsection 6.3.

 

6.5           TaxGross-up Payment.  If any paymentsor benefits provided pursuant to this Section 6 are subject to an excise tax onan “excess parachute payment” under Section 4999 of the Internal Revenue Codeof 1986 (the “Code”), or any successor provision of the Code, or are subject toan excise or penalty tax under any similar provision of any other revenuesystem to which Executive may be subject, the Company will provide a gross-uppayment to Executive in order to place Executive in the same after-tax positionExecutive would have been in had no excise or penalty tax become due andpayable under Code Section 4999 (or any successor provision) or any similarprovision of another revenue system.  Nogross-up payment will be made for any excise or penalty tax attributable to anystock options granted to Executive, or for any other payments or benefitsprovided to Executive under other sections of this Agreement.

 

**Section7. Successors; Binding Agreement.**

 

7.1           Assumptionby Company’s Successor.  The Companywill request any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company, by agreement in form and substance reasonablysatisfactory to Executive, to expressly assume and agree to perform thisAgreement.  Failure of the Company toobtain that agreement prior to the effectiveness of any succession will be abreach of this Agreement and will entitle Executive to payments and benefitsfrom the Company in the same amount and on the same terms to which Executivewould be entitled under this Agreement if Executive terminated Executive'semployment for Good Reason within three (3) years following a Change inControl, except that for purposes of implementing the foregoing, the date onwhich that succession becomes effective will be deemed the Date ofTermination.  As used in this Agreement,“Company” means Gateway Energy Corporation and any successor to its businessand/or assets, regardless of whether such successor specifically assumes andagrees to perform this Agreement.

 

7.2           Enforcementby Executive’s Successor. This Agreement will inure to the benefit of andbe enforceable by Executive's personal or legal representatives, executors,administrators, successors, heirs, distributees, devisees and legatees.  If Executive dies subsequent to thetermination of Executive's employment while any amount would still be payableto Executive pursuant to this Agreement if Executive had continued to live, allthose amounts, will be paid in accordance with the terms of this Agreement toExecutive's devisee, legatee or other designee or, if there be no designee, toExecutive's estate. The foregoing payment will be made in a lump sum withinsixty (60) days following the date of Executive's death.

 

**Section8.  Working Facility.**

 

Executive will performhis services hereunder at the principal office of the Company, located inHouston, Texas, except as travel to other locations is warranted by thebusiness of the Company.  The Companyshall provide Executive with such office space, secretarial help, and otherfacilities and services as may be suitable to his position and appropriate forthe performance of his duties.

 

**Section9.  Expenses and Benefits.**

 

The Company shall pay orreimburse Executive for any expenses reasonably incurred by him in furtheranceof his duties hereunder, including, but not limited to, reasonable expenses fortraveling, meals and hotel accommodations, upon submission by Executive ofvouchers or itemized statements therefor, prepared in compliance with suchrules and policies as the Company may from time to time adopt and as may berequired in order to permit such payments as proper deductions by the Companyunder the Internal Revenue Code and the rules and regulations adopted pursuantthereto, now or hereafter in effect.

 

Executive shall have madeavailable to him, on substantially the same terms as other management levelemployees of the Company, group insurance, retirement plans, and other benefitprograms in effect from time to time during the term of Executive’semployment.  Executive’s participationunder any group insurance programs, retirement plans or other benefit programsshall be subject to the applicable terms and conditions of the same.  This paragraph shall not be construed as acommitment on the part of the Company to establish, maintain, or continue anysuch plans or programs.

 

**Section10. Notice.**

 

For purposes of thisAgreement, notices and all other communications provided for in this Agreementwill be in writing and will be deemed to have been duly given when delivered ormailed by United States registered mail, return receipt requested, postageprepaid, addressed to the respective addresses set forth on the first page ofthis Agreement, provided that all notices to the Company will be directed tothe attention of the Chief Executive Officer of the Company (or if the noticeis from the Chief Executive Officer, to the Secretary of the Company), or tosuch other address as either party may have furnished to the other in writingin accordance with this Section 10, except that notice of change of addresswill be effective only upon receipt.

 

**Section11. Modification and Waiver.**

 

No provision of thisAgreement may be modified, waived or discharged unless that waiver,modification or discharge is agreed to in writing by Executive and such officeras may be specifically designated by the Board of Directors of the Company. Nowaiver by either party at any time of any breach by the other party of, or compliancewith, any condition or provision of this Agreement to be performed by thatother party will be deemed a waiver of similar or dissimilar provisions orconditions at the time or at any prior or subsequent time.

 

**Section12. Construction.**

 

This Agreement supersedesany oral agreement between Executive and the Company and any oralrepresentation by the Company to Executive with respect to the subject matterof this Agreement.  The validity,interpretation, construction and performance of this Agreement will be governedby the laws of the State of Texas.

 

**Section13. Severability.**

 

If any one or more of theprovisions of this Agreement, including but not limited to Section 18 hereof,or any word, phrase, clause, sentence or other portion of a provision is deemedillegal or unenforceable for any reason, that provision or portion will bemodified or deleted in such a manner as to make this Agreement as modifiedlegal and enforceable to the fullest extent permitted under applicable laws.The validity and enforceability of the remaining provisions or portions willremain in full force and effect.

 

**Section14. Counterparts.**

 

This Agreement may beexecuted in two or more identical counterparts, each of which will take effectas an original and all of which will evidence one and the same agreement.

 

**Section 15. Legal Fees.**

 

If the Company breachesthis Agreement or if, within three (3) years following a Change in Control, (a)Executive's employment is terminated by the Company other than for Cause orDisability; or (b) Executive terminates Executive's employment for Good Reason,the Company will reimburse Executive for all legal fees and expenses reasonablyincurred by Executive as a result of that termination (including all those feesand expenses, if any, incurred in contesting or disputing the termination or inseeking to obtain or enforce any right or benefit provided by this Agreement,unless the Company is the prevailing party in such contest or dispute).

 

**Section16. Employment by a Subsidiary.**

 

Either the Company or aSubsidiary may be Executive's legal employer. For purposes of this Agreement,any reference to Executive's termination of employment with the Company meanstermination of employment with the Company and all Subsidiaries, and does notinclude a transfer of employment between any of them. The actions referred tounder the definition of “Good Reason” in subsection 5.3 include the actions ofthe Company or Executive's employing Subsidiary, as applicable. The obligationscreated under this Agreement are obligations of the Company. A change incontrol of a Subsidiary will not constitute a Change in Control for purposes ofthis Agreement unless there is also a contemporaneous Change in Control of theCompany. For purposes of this Agreement, a “Subsidiary” means an entity morethan fifty percent (50%) of whose equity interests are owned directly orindirectly by the Company.

 

**Section17.  Arbitration.**

 

Except for the rights andduties of the parties set forth in Section 18 of this Agreement, any dispute orcontroversy arising under or in connection with this Agreement shall be settledexclusively by arbitration in Houston, Texas, according to the rules of theAmerican Arbitration Association then in effect. Judgment may be entered on thearbitrator's award in any court having jurisdiction; provided, however, thatExecutive shall be entitled to seek specific performance of his right to bepaid for all periods up to the Date of Termination during the pendency of anydispute or controversy arising under or in connection with this Agreement.

 

**Section18.  Restrictive Covenant.**

 

18.1         Needfor Protection.  Executiveacknowledges that, because of his senior executive position with the Company,his knowledge of the affairs of the Company and his relations with its suppliersand customers, he could do serious damage to the financial welfare of theCompany, should he compete or assist others in competing with the business ofthe Company.  Accordingly, the partiesagree as follows:

 

18.2         Confidential Information.

 

(a)           Non-Disclosure.  Except as the Company may permit or directin writing, during the term of this Agreement and thereafter, Executive agreesthat he will never disclose to any person or entity any confidential orproprietary information, knowledge, or data of the Company, which he may haveobtained while in the employ of the Company, relating to any customers,customer lists, methods of distribution, sales, prices, profits, costs,contracts, inventories, suppliers, dealers, distributors, business prospects, businessmethods, manufacturing ideas, formulas, plans or techniques, research, tradesecrets, or know how of the Company.

 

(b)           Returnof Records.  All records, documents,software, computer disks, and any other form of information relating to thebusiness of the Company, which are or were prepared or created by Executive, orwhich may or did come into his possession during the term of his employmentwith the Company, including any and all copies thereof, shall be returned tothe Company, or as the case may be, shall remain in the possession of theCompany, upon termination of employment for any reason.

 

(c)           FutureEmployment.  Nothing in this sectionshall limit the Executive’s right to carry Executive’s accumulated careerknowledge and professional skills to any future employment, subject to thespecific limitations of the foregoing provisions of this section and thecovenants set forth below.

 

18.3         Non-Competition.

 

(a)           Scopeof Operations.  The parties heretoacknowledge that the Company’s operations are within the continental UnitedStates, and that it conducts business throughout the continental United States,thus, the Company’s need for protection against unfair competition isthroughout the continental United States.

 

(b)           CovenantNot To Compete.  Executive agreesthat he will not, during the term of this Agreement and for a period of six (6)months after his employment with the Company has terminated:

 

(1)           engagedirectly or indirectly, for his own personal benefit or the benefit of anyperson or entity other than the Company, in bidding on any projects which wouldresult in direct competition with the Company, anywhere in the continentalUnited States; or

 

(2)           develop,promote, invest in, provide financing for, be employed by, or operate anybusiness on his own behalf, or for any other person or entity, which bids orsolicits on any projects which would result in direct competition with theCompany, or, assist any other person in doing so; and

 

(3)           inaddition to the foregoing, Executive further agrees that during the term ofthis Agreement and for a period of two (2) years after his employment with theCompany has terminated, he will not engage directly or indirectly, in anymanner with any business or company engaged in the on purpose removal of nitrogenfrom natural gas streams.

 

(c)           CovenantNot To Solicit.  Executive agreesthat he will not for a period of two (2) years after his employment with theCompany has terminated:

 

(1)           directlyor indirectly request or advise any of the Company’s customers or suppliers tocurtail their business with the Company or to patronize another business whichis in competition with the Company; or

 

(2)           directlyor indirectly, on behalf of himself or any other person or entity, request,advise, or solicit any employee of the Company to leave that employment inorder to engage in, or assist any other person or entity to engage in,competition with the Company.

 

18.4         TerminationWithout Cause.  It is understood andagreed that in the event the Company terminates Executive’s employment withoutCause, subsection 18.3 hereof shall be null and void.  Notwithstanding the foregoing provision, however, if Executive’semployment is terminated under circumstances which entitle him to receive thepayments and benefits provided in Section 6 of this Agreement, then in suchevent, the provisions of Section 18.3 hereof shall remain in full force andeffect.

 

18.5         JudicialModification.  In the event that anycourt of law or equity shall consider or hold any aspect of this Section 18 tobe unreasonable or otherwise unenforceable, the parties hereto agree that theaspects of this section so found may be reduced, reformed or modified byappropriate order of the court, and shall thereafter continue, as so modified,in full force and effect.

 

18.6         InjunctiveRelief.  The parties heretoacknowledge that the remedies at law for breach of this section will beinadequate, and the Company shall be entitled to injunctive relief forviolation thereof; provided, however, that nothing herein shall be construed asprohibiting the Company from pursing any other remedies available for suchbreach or threatened breach, including the recovery of damages from Executive.

 

**Section 19.  Termination and Severance; No Change in Control**.

 

Executive’s employment underthis Agreement may be terminated, separate and apart from the occurrence of aChange in Control, in one of the following ways:

 

19.1         MutualAgreement.  At any time by mutualwritten agreement of both parties to this Agreement, subject to any terms and conditionsspecified in such mutual written agreement; or

 

19.2         ForCause.  At any time by the Company,by written notice to Executive, terminating this Agreement and dischargingExecutive for Cause, as defined in Section 5.1 of this Agreement; or

 

19.3         Automatically.  Automatically and immediately should one ofthe following events occur:

 

(a)           Executivedies; or

 

(b)           Executive’sDisability, as defined in Section 5.2 of this Agreement.

 

19.4         Severance.  In addition to the foregoing, Company may atany time, upon thirty (30) days’ written notice, terminate this Agreementwithout Cause.  If termination occursduring the initial term of this Agreement, Executive shall be entitled toseverance pay in an amount equal to (including amounts paid during the 30-daynotice period) one (1) years’ base salary at the rate then in effect, or thebase salary attributable to the remaining months of the term of this Agreementat the rate then in effect, whichever is greater.  If termination occurs during a one (1) year renewal period underthis Agreement, Executive shall be entitled to severance pay in an amount equalto (including amounts paid during the 30-day notice period) the base salaryattributable to the remaining months of the one (1) year term at the rate thenin effect.  In either event, Executiveshall also receive a pro rata share of any cash bonus paid for the year,attributable to that portion of the year during which Executive was employed,and will also receive any unpaid bonus attributable to the previous year ofemployment.  The base salary portion ofthe severance shall be payable, at the Company’s option, in a lump sum or inequal monthly installments consistent with the Company’s ordinary payrollpractices.  The cash bonus portion ofthe severance shall be paid in accordance with the schedule set forth in thePlan.  Executive shall also be entitledto continuation of benefits, at the expense of the Company, then in effectunder this Agreement (i) thru October 31, 2004 if the Company elects toterminate this Agreement under this provision prior to that date; (ii) throughthe end of the applicable renewal term if termination occurs after October 31,2004; or (iii) if sooner, until such time as he secures alternative employmentwhich provides him with comparable benefits. If the Company terminates this Agreement without Cause, the Companyshall have the right at its option, to require Executive to immediately leavethe Company’s premises; provided, that the Company shall be obligated to pay(as part of the severance) Executive’s base salary during the 30-day noticeperiod.

 

**Section20.  Exclusivity of Services.**

 

Executive agrees that hisemployment with the Company will be full time, and that he will devote his bestefforts and attention to the business of the Company.  The Company agrees that Executive will serve as a member of theBoard of Directors of the Company.  Inthe event of his election to the Board, Executive will receive no additionalcompensation for his services as a Board member.  The Company, through the Board of Directors, agrees to nominatethe Executive to serve as a member of the Board of Directors of the Company.

 

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

 
|   |   |   |   |   |   | GATEWAY ENERGY CORPORATION, INC. |
|--------|--------|--------|--------|--------|--------|----------------------------------|

 
|   |   |   |   |   |   |   |                          |
|--------|--------|--------|--------|--------|--------|--------|-------------------------------|
|   |   |   |   |   |   | By:    |                          |
|   |   |   |   |   |   |   | John B. Ewing, Chairman       |
|   |   |   |   |   |   |   | Compensation and Stock Option |
|   |   |   |   |   |   |   | Committee                     |
|   |   |   |   |   |   |   |                          |
|   |   |   |   |   |   |   |                          |
|   |   |   |   |   |   |   |                          |
|   |   |   |   |   |   |   |                          |
|   |   |   |   |   |   |   |                          |
|   |   |   |   |   |   |   | Michael T. Fadden             |