PRODUCTION AGREEMENT


 


THIS PRODUCTION
AGREEMENT ("Agreement") is made and entered into by Adino Exploration, LLC, whose address is 2500 CityWest, Suite 300,
Houston, Texas 77042 ("Grantor"), and BlueRock Energy Capital II, LLC, whose address is 20445 State Highway 249, Suite


160, Houston, Texas 77070 ("Grantee").


 


WHEREAS,
by Conveyance of Production Payment effective as of September 1, 2011, from Grantor to Grantee (the "Conveyance"), Grantor
has sold and conveyed to Grantee, and Grantee has purchased and acquired from Grantor, as a Production Payment a term overriding
royalty interest in the Subject Lands and the Subject Interests described in the Conveyance, together with a Permanent ORRI therein;
and


 


NOW, THEREFORE,
as a material inducement to cause Grantee to purchase the Production Payment and the Permanent ORRI, and in consideration of the
mutual benefits and obligations of the parties hereunder, Grantee and Grantor have agreed, and hereby agree, as follows:


 


1.Definitions.


 


Each capitalized
term used herein but not defined herein shall have the meaning given to it in the Conveyance.


 


2.Marketing.


 


(a) Subject
to the provisions of Section 3., the Production Payment Hydrocarbons shall be delivered to the credit of Grantee, free of cost,
at the Delivery Points.


 


(b) Grantor
shall market and sell all Production Payment Oil on behalf of Grantee on the same basis as Grantor markets its own share of Oil
produced from or attributable to land covered by Subject Interests, but never for less than the net price received by Grantor at
the Delivery Points.


 


(c) During
the remaining term of each Existing Gas Sales Contract, Grantor shall deliver or cause to be delivered thereunder on behalf of
and for the credit of Grantee all of the Production Payment Gas which is subject to such Existing Gas Sales Contract at the contract
price and terms applicable thereto without deduction for nonperformance or noncompliance. Grantor shall not amend any of the Existing
Gas Sales Contracts or any gas gathering or transportation contract without Grantee's prior written consent, which consent shall
not be unreasonably withheld.


 




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(d) All
Production Payment Hydrocarbons marketed by Grantor on behalf of Grantee shall be sold pursuant to arm's length contracts with
parties not affiliated with Grantor, containing terms negotiated by Grantor as a prudent operator.


 


(e) All
proceeds received by Grantor from the sale of Production Payment Hydrocarbons sold on behalf of Grantee pursuant to the terms hereof
are received by Grantor in trust for Grantee and shall be held in trust by Grantor for Grantee; provided, however, Grantor shall
pay such proceeds by electronic funds transfer or corporate check to such account as Grantee shall have designated from time to
time to Grantee within seven (7) days after receipt thereof by Grantor. The foregoing sentence is subject to Grantee's right at
any time to direct the purchasers of any Production Payment Hydrocarbons to pay the proceeds thereof directly to Grantee by delivering
to such purchasers the letters in lieu of transfer orders previously executed by Grantor and held by Grantee. In the event Grantee
requests direct payment, Grantor shall cooperate in instructing the purchasers to pay such proceeds directly to Grantee and shall
execute such additional instruments as may be necessary or appropriate in connection therewith. In the event any Production Payment
Hydrocarbons are sold by Grantor, on behalf of Grantee, under the terms of any agreement between Grantor and Grantee or any of
its affiliates, Grantee shall at all times be entitled to retain the proceeds of such sale or receive direct payment from its affiliate.


 


Notwithstanding
any provision of this Agreement to the contrary, during the term of the Production Payment, Grantee shall have the right, at Grantee's
election, to receive directly from the purchasers all proceeds attributable to Grantor's and Grantee's interest in all Hydrocarbons
produced from the Subject Lands and the Leases. Subject to all of the provisions of the Conveyance and the Production Agreement
(including Grantor's obligation not to be in default), after Grantee deducts the applicable Production Payment, Grantee shall pay
the remainder, if any, of such proceeds by electronic funds transfer or corporate check to such account as Grantor shall have designated
from time to time to Grantee, within seven (7) days after the receipt of such proceeds from the purchasers. Grantor shall execute
any and all documents requested by purchasers or by Grantee to facilitate the direct payment of all Hydrocarbon proceeds to Grantee
pursuant to this Subsection 2.(e), and Grantor shall cooperate fully in instructing the purchasers to pay all such Hydrocarbon
proceeds directly to Grantee.


 


(f) Production
Payment Gas shall be marketed by Grantor on the same basis as Grantor markets its share of Gas produced from the Subject Interests.




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(g) All
Production Payment Gas shall be delivered to Grantee's credit, into the facilities installed and maintained by the Operator or
the First Purchaser located at each applicable Delivery Point, currently as produced and saved, in its natural state after removal
of liquids by conventional mechanical field separation facilities (low temperature absorption, lean oil absorption, or similar
"separation", facility shall not be considered conventional mechanical field separation facilities), and if Production
Payment Gas is flowed through any processing plant or cryogenic facilities after delivery to Grantee or to the credit of Grantee
at the Delivery Points the provisions of Section 4. shall be applicable.


 


3.Gathering and Transportation.


 


Grantor
shall gather or cause to be gathered all Production Payment Hydrocarbons at the wellheads where produced and transport the same
to the Delivery Points. Grantor shall be in exclusive control and possession of the Production Payment Hydrocarbons gathered at
the wellheads and responsible for any loss, damage or injury caused thereby. Grantee's Production Payment shall not bear any gas
processing, gathering or transportation charges attributable to Production Payment Hydrocarbons, except to the extent provided
in Section 1.02 of the Conveyance.


 


4.Processing; Plant Products; Exchange.


 


It is recognized
that as the owner of the Production Payment Grantee owns the Production Payment Gas in its natural state, including, without limitation,
all liquefiable Hydrocarbons contained therein. It is recognized that certain of the Subject Interests currently may be subject
to existing processing agreements. Grantee agrees that Grantor may commit Production Payment Gas to other processing agreements
to unaffiliated third parties on the same terms as it commits Gas from its interests in the Subject Interests as long as such agreements
would not have an adverse affect on Grantee's or Grantor's interest in the Production Payment. If as a result of any existing or
future processing agreement Grantor elects to process Production Payment Gas, Grantee will have an interest in all plant products
and liquids extracted (the "Liquids") and all residue gas remaining ("Plant Residue Gas") attributable or allocable
to the Production Payment and the Production Payment Gas under the terms of the Processing Agreements. Grantor agrees that it will
not exercise any processing rights if the Plant Residue Gas would not meet the quality requirements set forth in Section 7.


 




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5.Rate of Production.


 


Grantor
shall use its best efforts to prudently operate and produce the Subject Wells (or, if any Subject Wells are operated by a third
party, cause the Subject Wells to be prudently operated and produced) in accordance with the terms of the joint operating agreements
and in accordance with good engineering practices and the following requirements: (i) the amount of Hydrocarbons produced from
any Subject Well shall not exceed in any Month the lower of (x) the maximum amount that in the good faith judgment of the operator
is capable of producing at its maximum efficient rate of flow or (y) the respective allowable rate of flow under applicable orders,
rules, regulations or laws, if any; (ii) the amount of Hydrocarbons produced from the Subject Wells shall be in the good faith
judgment of the operator sufficient to prevent a net migration of Hydrocarbons from the reservoirs to which proved reserves are
attributed underlying the Subject Interest; and (iii) subject to field rules established by governmental authorities having or
asserting jurisdiction, the amount of Hydrocarbons produced from the Subject Wells shall be equitable and ratable, based on factors
used in determining such field rules.


 


6.Scheduling.


 


At all times
from the Effective Time until the Termination Time, Grantor, at Grantor's cost and expense, shall, to the best of Grantor's ability,
perform, or cause to be performed, the following:


 


(a) Grantor
shall ensure that nominations of Gas quantities are timely made to transporting pipelines and that such nominations reflect the
actual expected deliveries and receipts.


 


(b) If any
charges, penalties, costs or expenses are incurred or payable to any transporting pipeline, or any other party as a result of Grantor's
failure to nominate quantities of Gas, or Grantor's failure to deliver quantities of Gas so nominated at any Delivery Point, then
as between the parties hereto, Grantor shall be liable for and shall hold Grantee harmless from and against all such charges, penalties,
costs and/or expenses. Grantor shall promptly notify Grantee of any notice received from any transporting pipeline, or other party,
that indicates an imbalance in deliveries exist or is occurring that may give rise to any such charges, penalties, costs and/or
expenses.


 


7.Quality Requirements.


 


All Production
Payment Gas delivered to Grantee's credit shall satisfy the quality requirements and specifications as set forth in the First Purchaser's
or the First Transporter's




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agreements, as applicable.
All costs and expenses of dehydrating, treating, and compressing Production Payment Hydrocarbons, except those as set forth in
Section 1.02 of the Conveyance, to satisfy such quality requirements shall be borne and paid by Grantor.


 


8.Pressure.


 


Grantor
shall deliver, or cause to be delivered, the Production Payment Gas at a pressure sufficient to deliver the same into the First
Purchaser's or First Transporter's pipeline, as applicable, at each Delivery Point against the operating pressure in existence
from time to time; provided that Grantor shall not be required to install compression equipment or other equipment in circumstances
in which such installation is not economically feasible without regard to the burden of the Production Payment. Grantor shall inform
Grantee, as often as may be necessary, of the delivery rate and pressure of the Production Payment Gas delivered to Grantee's credit.


 


9.Operation of Subject Interests.


 


(a) At all
times from the date hereof until the termination of the Production Payment, Grantor, at Grantor's cost and expense shall:


 


(i) Cause
the Subject Interests to be maintained in full force and effect, and to be developed, protected against drainage, and continuously
operated for the production of Hydrocarbons in a good and workmanlike manner as would a prudent operator (and without regard to
the burden of the Production Payment), all in accordance with generally accepted industry practices, applicable operating agreements,
and all applicable federal, state and local laws, rules and regulations, and shall otherwise comply with all applicable laws, rules
and regulations;


 


(ii) Pay,
or cause to be paid, promptly as and when due and payable, all rentals and royalties payable in respect of the Subject Interests
or the production therefrom. Further, Grantor will, according to industry standard and practice (but in no event beyond 90 days
from the date of any invoice), promptly pay all costs, expenses and liabilities incurred in or arising from the operation or development
of the Subject Interests, or the producing, treating, gathering, storing, marketing or transporting of Hydrocarbons therefrom;


 


(iii)
Cause all wells, machinery, equipment and Facilities of any kind now or hereafter located on the Subject Interests, and necessary
or useful in the operation thereof for the production of Hydrocarbons therefrom, to be provided and to be kept in good and effective
operating condition as would a prudent




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operator (and without regard
to the burden of the Production Payment), and all repairs, renewals, replacements, additions and improvements thereof or thereto,
useful or needful to such end, shall be promptly made;




 


(iv) Give or cause to be given to Grantee written
notice of every adverse claim or demand made by any person
affecting the Subject Interests, the Hydrocarbons produced therefrom, the Production Payment and/or the
Production Payment Hydrocarbons in any manner whatsoever, and of any suit or other legal proceeding instituted with respect
thereto, and at Grantor's expense cause all necessary and proper steps to be taken with reasonable diligence to protect and
defend the Subject Interests, the Hydrocarbons produced therefrom, the Production Payment and/or the Production Payment
Hydrocarbons against any such adverse claim or demand, including (but not limited to) the employment of counsel for the
prosecution or defense of litigation and the contest, release or discharge of such adverse claim or demand;


 


(v) Cause
the Subject Interests to be kept free and clear of liens, charges and encumbrances of every character;


 


(vi)
Pay, or cause to be paid, all Taxes when due and before they become delinquent, and shall provide Grantee with County Clerk's receipts
(or receipts from the applicable office having jurisdiction) evidencing proof of payment within ten (10) days after payment. Grantor
shall reimburse Grantee for any Taxes paid by Grantee as a result of the Production Payment or the Production Payment Hydrocarbons
or the production of same, other than Grantee's respective share of any Hydrocarbon Severance Taxes, which shall be paid by Grantee;


 


(vii)
Pay, or cause to be paid, promptly when due and before they become delinquent all operating expenses and all billings under the
joint operating agreement (except to the extent contested in good faith);


 


(viii)
Not, without prior written approval from Grantee, resign as operator or transfer operations to any other party, whether affiliated
with Grantor or not, or, if any of the Subject Interests are operated by third parties, not vote for the removal of the operator
as operator of any of the Subject Interests until and unless the successor operator has been approved in writing by Grantee.


 


In addition,
Grantor shall provide Grantee upon execution of this Agreement a full and complete Texas Railroad Commission Form P-4 (or, if applicable,
the Form required by the applicable regulatory authority of the State where the subject Wells are located) executed by Grantor,
for change of operator on each




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Subject Well. The original
Forms shall be held by Grantee during the term of the Production Payment. If Grantor is in default under the terms of the Conveyance
and/or the Production Agreement, Grantor may, in Grantee's discretion in the exercise of Grantee's remedies under Section 15. hereof,
file such original Forms with the applicable authority to change the operator to Grantee or Grantee's designee on any or all of
the Subject Wells;


 


(ix) Not
change the purchaser(s) of any Hydrocarbons covered hereby without (1) giving Grantee at least five (5) days written notice of
Grantor's intent to change purchasers; (2) first obtaining Grantee's written approval of such change, which approval shall not
be unreasonably withheld; and (3) first delivering to Grantee executed originals of any additional letters in lieu that may be
requested by Grantee after receiving Grantor's notice;


 


(x) In
conjunction with Grantor's obligation to protect the Subject Interests from drainage as set forth in subsection (i) above, provide
Grantee with at least thirty (30) days prior written notice of Grantor's intention to drill and/or complete a well located on the
Subject Lands, together with detailed information identifying the proposed well location and intended completion location, together
with any further documentation and/or information as may be requested by Grantee relating to such drilling and/or completion proposal;


 


(xi) Subject
only to Force Majeure, temporary cessation of production for normal maintenance, operational difficulties that would cause a reasonably
prudent operator to temporarily cease production, and/or the abandonment provisions of Section 11. hereof, cause all Subject Wells
operated by Grantor to be maintained in continuous production;


 


(xii)
Maintain or cause to be maintained in full force and effect in accordance with prudent operator standards, free of any right of
cancellation, forfeiture or termination, all permits, licenses, easements, servitudes, contracts and other rights reasonably necessary
or useful in connection with the development, operation or management of the Subject Interests and the production, treating, gathering,
storing, marketing or transportation of the Hydrocarbons or of water produced or used in connection therewith;


 


(xiii) Not
conduct any work or operation in any wellbore of a Subject Well, which work or operation is related to any horizon, zone, formation
or interval not included in the Subject Interests, without the prior written consent of Grantee; and


 


(xiv) Whenever, Grantor is not the operator of a
Subject Interest, use Grantor's reasonable best efforts and diligently




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enforce its rights under any
operating agreement for such Subject Interests in order to cause such Subject Interests to be operated and dealt with as contemplated
herein.


 


(b) If at
any time during the Production Payment, there is a change of control (as hereinafter defined) in Grantor, Grantee shall immediately
be provided written notification thereof. As used herein, the term "change of control" shall include (i) death of the
principal officer or controlling shareholder or owner of Grantor; (ii) disability of the controlling shareholder or owner of Grantor
to the point where such person cannot substantially perform on behalf of Grantor under the Conveyance or this Agreement;(iii) Grantor
becoming insolvent or files a voluntary petition in bankruptcy or a receiver is appointed against any of the Subject Interests;
(iv) an involuntary bankruptcy proceeding is filed or threatened against Grantor; (v) the issuance by Grantor to any shareholder,
or to any other person or entity, any common or preferred stock or membership interests other than the authorized and issued stock
and/or membership interests of Grantor that exists as of the date of this Agreement; and (vi) if Grantor dissolves, winds up, liquidates
or otherwise terminates, or Grantor becomes a party to any merger or consolidation without the written consent of Grantee. Whether
or not Grantor gives written notification to Grantee as required herein, upon any change of control, as defined herein, Grantee
shall have the right, but not the obligation, to notify Grantor, in writing, that such change of control constitutes an event of
default under the Conveyance and the Production Agreement, and Grantee thereafter shall have the right to exercise any and all
of Grantee's remedies under Section 15. hereof.


 


10. Insurance; Damage or Loss.


 


(a) Grantor
shall maintain or cause to be maintained, at its sole cost and expense and with financially sound and reputable insurers, insurance
covering the Subject Lands, Leases, Subject Wells and Facilities located thereon against such liabilities, casualties, risks and
contingencies, and in such types as is customary in the case of independent oil companies engaged in similar operations and having
similar property. Such insurance shall name Grantee as an additional insured as Grantee's interests appear. Grantor shall furnish
certificates of such insurance to Grantee and shall obtain endorsements to such policies providing that the insurer will notify
Grantee in writing not less than thirty (30) days prior to the expiration or termination of such policy of insurance. Grantor shall
furnish Grantee with annual renewal certificates of insurance within ten (10) days of renewal term.


 


(b) In the event of any damage to or loss of any
Subject Well or to any of the Facilities on the Subject Lands and/or the




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Leases, Grantor (at no cost
to Grantee) shall promptly redrill, rebuild, reconstruct, repair, restore or replace such damaged or lost property, unless to do
so would not be economically feasible (without regard to the burden of the Production Payment, but taking into account insurance
proceeds and recoveries).


 


11. Abandonment of Wells.


 


(a) Until
the termination of the Production Payment, Grantor shall not, without first obtaining the written consent of Grantee, abandon any
Subject Well heretofore or hereafter drilled and/or completed for production of Hydrocarbons on any of the Subject Lands and/or
Leases attributable to the Subject Interests or surrender, abandon or release any Subject Lands and/or Leases or Subject Interest
or any part thereof; provided, however, that, without the consent of Grantee:


 


(i) If
and when, in Grantor's reasonable judgment, exercised in good faith and as would a prudent operator not burdened by the Production
Payment, a well becomes no longer capable of producing Hydrocarbons in paying quantities (without regard to the burden of the Production
Payment) and it would not be economically feasible (without regard to the burden of the Production Payment) to restore the productivity
of such well by reworking, reconditioning, deepening, plugging back, or otherwise, Grantor shall have the right to abandon such
well, subject to the provisions of Section 11.(c) of this Agreement.


 


(ii) Subject
to the provisions of Section 11.(c), Grantor shall have the right to surrender and release any Subject Interest or part thereof
when, in the reasonable judgment of Grantor exercised in good faith and as would a prudent operator not burdened by the Production
Payment, there is no well located thereon which is capable of producing Hydrocarbons in paying quantities and the drilling of an
additional well thereon would not, in Grantor's reasonable opinion, be economically feasible (without regard to the burden of the
Production Payment).


 


(b) For all
purposes of this Agreement, (i) a well shall be deemed to be capable of producing Hydrocarbons "in paying quantities"
unless and until there arises a condition which reasonably appears to be permanent, such that the aggregate value of the Hydrocarbons
which are being produced from such well, net of royalties and Taxes and appropriately risked and discounted but without regard
to the burden of the Production Payment, no longer exceeds or will not exceed the costs and expenses directly related to the operation
and maintenance of such well (including the costs and expenses incurred by the Operator under the joint operating agreement but
excluding office and management overhead and similar charges), and (ii) the restoration of the productivity of a well or




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the drilling of a well shall
be deemed to be "economically feasible" whenever the aggregate value of the Hydrocarbons which it reasonably appears
will be produced from such well, net of royalties and Taxes and appropriately risked and discounted but without regard to the burden
of the Production Payment, will exceed the costs and expenses directly related to such restoration or drilling and the operation
and maintenance of such well (excluding office and management overhead and similar charges).


 


(c) Before
abandoning any well or surrendering or releasing any Subject Interest or part thereof, Grantor shall offer, subject to the Permitted
Encumbrances, to assign the same to Grantee upon Grantee's payment of the net salvage value (if any) attributable to Grantor's
interest therein and assumption of the obligations attributable to Grantor's interest therein.


 


12. Voting Under the Joint Operating Agreement.


 


Grantor
shall not vote for, consent to, or otherwise endorse under the terms of any applicable joint operating agreement or otherwise,
any operation or action that is inconsistent with Grantor's obligations under this Agreement.


 


13. Information.


 


At all times
from the date hereof until the termination of the Production Payment, Grantor, at its own expense (and in addition to any information
and/or documents requested by Grantee under Section 13.(h) hereof), shall furnish to Grantee the following reports and information
at the times indicated below:


 


(a) Grantor
shall furnish a monthly report showing the gross production of Hydrocarbons from each Subject Land and/or Lease, the quantity of
Hydrocarbons sold for Grantor's account, and the quantity of Production Payment Hydrocarbons sold for Grantee's account.


 


(b) Grantor
shall furnish Grantee monthly with full and complete copies of the Joint Interest Billings (JIB's) covering each well located on
the Subject Lands (whether or not Grantor operates such well or wells). Upon Grantee's written request, Grantor shall furnish appropriate
"back up" information for the JIB's, including, but not limited to all third party invoices, field tickets and daily
work and cost summaries identifying any work performed, or cost incurred, on the Subject Wells.


 


(c) Upon
written request from Grantee, Grantor shall make available to Grantee for review and copying in Grantor's offices at the address
stated herein surface maps showing property lines and well locations, well logs, core analysis data, flow and




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pressure tests, natural gas
analysis and casing programs, title opinions, regulatory filings; field notes and any and other information or documents related
to the Subject Interests and/or the Subject Wells and the production therefrom.


 


(d) Grantor
shall furnish Grantee a monthly report of all Hydrocarbon sales and expenses covering each well located on the Subject Lands in
a Lease Operating Summary Statement format as set forth in Exhibit "C" attached hereto and made a part hereof.


 


(e) Quarterly
within sixty (60) days after the end of each calendar quarter, and annually within one hundred twenty (120) days of the calendar
year, Grantor shall furnish financial statements, including balance sheet, income statement, stockholder's equity and cash flow,
prepared in accordance with generally accepted accounting principles and, with respect to annual financial statements, if requested
in writing by Grantee, accompanied by a report of the Grantor's independent certified public accountants stating that their examination
was made in accordance with generally accepted auditing standards and that, in their opinion, such financial statements fairly
present Grantor's financial condition, results of operations and changes in financial position and in accordance with general accepted
accounting principles consistently applied.


 


(f) Quarterly,
a Compliance Certificate (in a form to be submitted to Grantor by Grantee) executed by an officer of Grantor certifying that, to
the best of his knowledge after reasonable investigation and due diligence, Grantor is in compliance in all material respects with
the terms of the Conveyance and this Agreement, or if not, specifying in reasonable detail any exceptions thereto.


 


(g) Grantor
shall provide an accounting to Grantee, on a monthly basis, for funds advanced by Grantee to Grantor, if any, and used by Grantor
for the purposes of payment of Taxes, royalties or third party vendor invoices. The accounting shall include copies of such third
party invoices, evidences of payment of the same, and evidence of payment of such Taxes and royalties.


 


(h) Upon written
request, Grantor shall furnish any other information and/or documents as Grantee may reasonably request relating to the Subject
Lands, Leases and/or Subject Interests.


 


(i) Upon written
request from Grantee, Grantor shall submit all or any portion of the information required by this Section on a concise reporting
exhibit in a form determined by Grantee and supplied to Grantor.




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Notwithstanding
the preceding provisions to the contrary, and notwithstanding the fact that Grantee may be a non-operating working interest owner
in some, or all of the Subject Interests, during any and all times that Grantor is in default of any of Grantor's obligations under
this Agreement or the Conveyance, Grantor shall be required to furnish to Grantee, at Grantor's expense, any and all information
(including access to such information) described in this Section as may be requested by Grantee, in writing.


 


14. Access to Subject Interests.


 


Grantor
shall permit the duly authorized representatives of Grantee, at any reasonable time, but at Grantee's sole risk (except to the
extent of any injury or damage caused by the gross negligence or willful misconduct of Grantor or the operator) and expense, to
make such inspection of the Subject Lands, Leases and/or Subject Interests and the property, machinery, equipment and facilities
used in the operation thereof as such representatives shall deem proper.


 


15. Remedies of Grantee.


 


(a) At any
time and from time to time until the termination of the Production Payment, if Grantor shall fail to perform or observe any of
the covenants or agreements provided herein or in the Conveyance to be performed or observed by Grantor, Grantee (or Grantee's
designee), in addition to Grantee's right to recover damages and all other remedies available to Grantee at law or in equity, may,
if such failure shall continue unremedied after five (5) business days after written notice thereof is delivered to Grantor:


 


(i) perform
(or cause to be performed) on behalf of and at the expense of Grantor, any obligation which has not been performed or observed
by Grantor, in which event Grantee may advance funds and incur and pay bills for expenses for such purpose and shall be reimbursed
out of the proceeds attributable to Grantor's interest in the Subject Interests, together with interest on the unpaid amounts thereof
at the rate of interest publicly announced by Citibank, N.A. as its prime or base rate plus five percent (5%), but not to exceed
the maximum nonusurious rate permitted by applicable law (the "Agreed Rate"), from the date of such advance or payment
by Grantee until the date reimbursed by Grantor. Grantor and Grantee agree that none of the terms and/or provisions contained herein
or in the Conveyance shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest
in excess of the maximum amount of interest permitted to be charged by applicable law from time to time in effect. The parties
to this agreement or the Conveyance




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shall never be required to
pay interest in excess of the maximum amount that may be lawfully charged under applicable law from time to time in effect.


 


Notwithstanding
any provision of the Conveyance or this Agreement to the contrary, if Grantee advances any funds on behalf of Grantor under the
terms of this Section 15., in addition to Grantee having a right to be reimbursed for such costs out of the proceeds attributable
to Grantor's interest in the Subject Interests, Grantee shall have the right to be reimbursed for all such funds, together with
the Agreed Rate, out of any proceeds attributable to the interests of Grantor arising from or out of any written contracts between
Grantor and any third party, including, but not limited to (i) any fees or revenues payable to Grantor as gathering, transportation
and/or pipeline operator fees for any gas or liquids or liquefiable Hydrocarbons produced from the Subject Lands or any lands contiguous
to the Subject Lands; (ii) any fees or revenues payable to Grantor arising from or out of the treating, compressing, dehydrating
and/or processing of Hydrocarbons produced from the Subject Lands or any lands contiguous to the Subject Lands; (iii) any fees
or revenues payable to Grantor from the sale of any Subject Wells and/or Facilities; and (iv) any proceeds resulting from court
judgments, arbitration awards and/or settlement of claims in favor of Grantor arising from or out of any contracts relating to
or affecting the Subject Lands, Leases and/or the Subject Interests, and Grantee shall have the right to receive all of such proceeds
from Grantor, or directly from any applicable third parties, and to apply any or all of such funds against such advanced funds;


 


(ii) upon
written notice to Grantor, succeed to and exercise (or appoint Grantee's designee to succeed to and exercise) any and all rights
of the Grantor with respect to the possession, operation and development of the Subject Interests and Subject Wells, and use in
connection therewith all property of Grantor as may be useful or appropriate for the production, treating, storing, gathering,
transporting, compressing and/or dehydrating of Hydrocarbons or other minerals (including but not limited to the Facilities as
defined in the Conveyance), and all other properties and rights of a similar character then held by Grantor and situated upon or
useful or held for future use in connection with the exploration, development or operation of the Subject Interests and Subject
Wells for the production, treating, storing, gathering, transporting, compressing and/or dehydrating of Hydrocarbons or other minerals,
and the Grantee shall have the right on behalf and for the account of Grantor, to sell and utilize (a) all of the Hydrocarbons
attributable to Grantor's interest in the Subject Interests and (b) any or all of the Facilities not essential to production, and
to receive from the purchasers of the Hydrocarbons and/or the Facilities all proceeds attributable thereto, and to




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apply the proceeds thereof to
the costs and expenses of the operation and development of the same as reimbursement to Grantee for any amounts so expended by
Grantee;


 


(iii)
pay (or cause to be paid) any of the costs, expenses, Taxes (which Taxes are not being contested in good faith by the Grantor)
or other amounts which the Grantor has agreed to pay under the Conveyance and/or this Agreement which have become delinquent, and
to be reimbursed out of the proceeds of the Hydrocarbons attributable to the Grantor's interest in the Subject Interests, together
with interest on the unliquidated amounts thereof, at the Agreed Rate from the date of such payment; and/or


 


(iv)
apply to a court of equity for the specific performance or observance of any such covenant or condition and in aid of the execution
of any power herein granted and for the appointment of a receiver of the Subject Lands, Leases and/or Subject Interests and the
Hydrocarbons produced therefrom.


 


(b) Any purchaser of Hydrocarbons from or attributable to the Subject Interests is authorized
and directed to make payment to the Grantee of all proceeds from the sale of Hydrocarbons attributable to Grantor's interest in
the Subject Interests upon written notification from Grantee of Grantor's unremedied breach in any material respect of any provision
of this Agreement and/or the Conveyance, and of Grantee's exercise of Grantee's rights under this Section 15. Any insurer is authorized
and directed to make payment to the Grantee of proceeds of insurance described in Section 10.(a) hereof for any amount which Grantee
shall certify to such insurer that it has expended in redrilling, rebuilding, reconstructing, repairing, restoring or replacing
damaged or lost property which Grantor has failed or refused to do promptly pursuant to Section 10.(b) hereof.


 






(c) Grantor
hereby designates Grantee as its agent and attorney in fact to execute any instruments which may be necessary or appropriate, including
without limitation designations of operator, to enable Grantee to exercise its rights under this Section 15. This designation and
appointment shall be irrevocable as long as the Production Payment remains in effect.


 


(d)
Notwithstanding any provision of this Agreement to the contrary, for the purposes of this Section 15. and Section 9.(b), any
written notice of default sent by Grantee to Grantor to the telecopy number, email address and/or the mailing address for
Grantor set forth in this Agreement shall be effective on the date such notice is (i) sent by telecopy (as confirmed
transmitted by written report generated at the point of origin of such facsimile or telecopy transmission); or (ii) sent by
email (as confirmed transmitted by written printout of such email transmittal by




    	14



    	 



    

Grantee), with hard copy of
such notice of default to be transmitted by certified mail (as evidenced by the postmark stamp on the "Receipt for Certified
Mail" held by the sender of such notice), and Grantee shall not be required to take any further action to notify Grantor of
such default prior to Grantee exercising any of Grantee's remedies set forth in this Section.


 


16. Force
Majeure. In the event of either party being rendered unable, wholly or in part, by Force Majeure to carry out its obligations
under this Agreement other than to make payments due hereunder, it is agreed that on such party's giving notice and full particulars
of such force majeure in writing or by telecopy to the other party as soon as practicable after the occurrence of the cause relied
on, then the obligations of the party giving such notice, so far as they are affected by such force majeure, shall be suspended
during the continuance of any inability so caused but for no longer period, and such cause shall as far as practicable be remedied
with all reasonable dispatch. It is expressly agreed that Force Majeure shall not include the level of market prices being offered
and/or received by Grantor (or by the operator of a Subject Well if not Grantor) for the sale of Hydrocarbons produced from the
Subject Wells.


 


17. Notices.


 


Unless otherwise
specifically provided herein to the contrary, all notices, requests, demands, instructions, payments and other communications required
or permitted to be given hereunder shall be in writing and shall be delivered personally or by telex/telecopier, email, regular
mail and/or by certified mail, postage prepaid and return receipt requested, as follows:


 


If to Grantor, addressed to:


 


Adino Exploration,
LLC


2500 CityWest, Suite 300


Houston, Texas 77042


Attention: Shannon W. McAdams


Telephone No.: (___) ___ -____ 


Telecopy No.:    (___)  ___-____ 


Email Address: smcadams@adinoenergycorp.com


 




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If to Grantee, addressed to:


 


BlueRock Energy Capital II, LLC


20445 State Highway 249, Suite 160


Houston, Texas 77070


Attention: Catherine L. Sliva, President


Telephone No.: (281) 376-0111


Telecopy No.:    (281) 376-2121


Email Address: sabel@bluerockenergycapital.com


 


or to such other place within
the United States of America as either party may designate as to itself by written notice to the other. Unless otherwise specifically
provided herein to the contrary, all notices given by personal delivery or mail shall be effective on the date of actual receipt
at the appropriate address. Notice given by telex/telecopier or by email shall be effective upon actual receipt if received during
recipient's normal business hours or at the beginning of the next business day after receipt if received after the recipient's
normal business hours. All material notices by email shall be confirmed promptly after transmission by regular mail, certified
mail, telex/telecopier or personal delivery.


 


18. INDEMNITY.


 


(a) IT
IS UNDERSTOOD AND AGREED THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE CONVEYANCE, GRANTEE DOES NOT ASSUME NOR SHALL
GRANTEE EVER BE LIABLE OR RESPONSIBLE IN ANY WAY FOR THE PAYMENT OF ANY COSTS, EXPENSES OR LIABILITIES INCURRED IN CONNECTION WITH
DEVELOPING, EXPLORING, DRILLING, EQUIPPING, TESTING, OPERATING, PRODUCING, MAINTAINING, PLUGGING OR ABANDONING THE SUBJECT INTERESTS
OR ANY WELL OR FACILITY THEREON OR STORING, HANDLING, TREATING OR TRANSPORTING TO THE DELIVERY POINTS PRODUCTION THEREFROM.


 


(b) GRANTOR
SHALL FULLY DEFEND, PROTECT, INDEMNIFY AND HOLD GRANTEE, ITS OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS, DEMANDS, SUITS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING REASONABLE ATTORNEYS' FEES
AND COSTS OF DEFENSE, WHICH MAY BE MADE OR ASSERTED BY ANY THIRD PARTY OR GOVERNMENTAL AGENCY OR ENTITY, OR BY GRANTOR, GRANTOR'S
EMPLOYEES, AGENTS, CONTRACTORS AND SUBCONTRACTORS AND THEIR EMPLOYEES, AGENTS, AND REPRESENTATIVES ON ACCOUNT OF PERSONAL INJURY,
DEATH OR PROPERTY DAMAGE (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR POLLUTION AND ENVIRONMENTAL DAMAGE), ANY CIVIL OR CRIMINAL
FINES OR PENALTIES AND ANY CAUSES OF ACTION ALLEGING STATUTORY LIABILITY, RELATING TO, ARISING OUT OF, OR IN ANY WAY INCIDENTAL
TO THE SUBJECT INTERESTS, THE WELLS AND FACILITIES




    	16



    	 



    

THEREON OR USED IN CONNECTION
THEREWITH, THE OPERATION THEREOF AND THE PRODUCTION THEREFROM, WHETHER THROUGH AN ACT OR OMISSION OF GRANTEE, OR OTHERWISE, AND
WHETHER OR NOT ARISING OUT OF THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF GRANTOR OR ANY OTHER PERSON
OR ENTITY INDEMNIFIED HEREUNDER, EXCEPT FOR ACTS OR OMISSIONS OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF GRANTEE OR GRANTEE'S
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS. THIS INDEMNITY SHALL APPLY, WITHOUT LIMITATION, TO ANY LIABILITY IMPOSED UPON
ANY PARTY INDEMNIFIED HEREUNDER AS A RESULT OF ANY STATUTE, RULE, REGULATION OR THEORY OF STRICT LIABILITY.


 


19. Successors and Assigns.


 


All the
covenants and agreements herein contained shall be deemed to be covenants running with the land and shall be binding upon the successors
and assigns of Grantor's interest in the Subject Interests and Grantee's interest in the Production Payment and shall inure to
the benefit of Grantor, Grantee, and their respective successors and permitted assigns. The foregoing notwithstanding, nothing
herein is intended to modify or shall have the effect of modifying the restrictions on assignment set forth in the Conveyance regarding
mortgage, assignments, transfer or pooling of Grantor's interest in the Subject Interests; and the preceding sentence shall not
be deemed to permit any assignment or other transfer of the interest of Grantor in any of the Subject Interests that is not specifically
permitted by the provisions of the Conveyance. Grantee's interest in the Production Payment is assignable.


 


20. Damages.


 


It is recognized
that Grantee will look solely to the Production Payment Hydrocarbons for satisfaction and discharge of the Production Payment,
and that neither Grantor nor its principal officers is personally or corporately liable for the payment and discharge thereof.
However, satisfaction of the Production Payment by Grantor shall not relieve Grantor of any obligations under this Agreement or
any obligation to respond in damages for any breach of any of the provisions hereof, or provisions of the Conveyance other than
the payment of the Production Payment.


 


21. Cost of Litigation.


 


In the event
of a breach of this Agreement or of the Conveyance, or if a dispute arising hereunder or under the Conveyance is not resolved by
mutual agreement, and either party should sue the other party to enforce its rights under the same, or for breach thereof, the
party prevailing in such litigation shall be entitled to recover its costs and reasonable attorneys' fees in




    	17



    	 



    

addition to any other remedy or recovery to which it may be
entitled.


 


22. Confidentiality.


 


Grantor
and Grantee shall keep all of the terms and provisions of this Agreement confidential, and shall not disclose the contents thereof
to any third party, other than their respective attorneys, accountants and/or lending institutions on a strictly "need to
know" basis, and except as may be required by the ruling of a court of competent jurisdiction. Grantor and Grantee shall take
appropriate steps to comply with the terms of this confidentiality provision including, but not limited to, specifically advising
all of its employees, officers, directors and/or owners about this confidentiality requirement. Grantor and Grantee are entering
into this Agreement in reliance upon each others compliance with this confidentiality provision.


 


23. Headings.


 


The headings
of the sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any
of the terms or provisions of this Agreement.


 


24. Certain References.


 


Certain
agreements, contracts and other documents are included in the definition of Permitted Encumbrances. References herein to Permitted
Encumbrances are made solely for the purpose of protecting Grantor on Grantor's warranties and representations as to the Subject
Interests, and without regard to whether or not any Permitted Encumbrance is valid, subsisting, legal or enforceable or affects
the Production Payment; and such references are not intended to constitute and shall not constitute any sort of recognition or
acknowledgment by any party as to the validity, legality, or enforceability of the same or of any term, provision or condition
thereof or the applicability thereof to the Production Payment, and shall not revive or ratify the same or create any rights in
any third person.


 


25. Counterpart Execution.


 


This Agreement
may be executed by Grantor and Grantee in any number of counterparts, each of which shall be deemed an original instrument, but
all of which shall constitute but one and the same Agreement.




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26. Partial Invalidity.


 


Except as
otherwise expressly stated herein, in the event any provision contained in this Agreement shall for any reason be held invalid,
illegal or unenforceable by a court or regulatory agency of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect the remaining provisions of this Agreement.


 


27. Applicable Law and Venue.


 


THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. VENUE FOR ANY LAWSUIT OR LAWSUITS
ARISING OUT OF THIS AGREEMENT SHALL BE IN STATE OR FEDERAL COURT IN HOUSTON, HARRIS COUNTY, TEXAS. THE PARTIES HERETO HEREBY WAIVE
AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING BROUGHT HEREUNDER OR UNDER THE CONVEYANCE
IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND EACH PARTY HERETO FURTHER AGREES TO A TRANSFER OF
ANY SUCH PROCEEDING TO THE VENUE STATED ABOVE. THE PARTIES HERETO HEREBY ACKNOWLEDGE AND AGREE THAT IT WILL BE NEITHER INCONVENIENT
NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN THE ABOVE NAMED COUNTY.


 


EACH
PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREUNDER OR UNDER THE CONVEYANCE, OR DIRECTLY OR INDIRECTLY
AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE CONVEYANCE OR ANY TRANSACTION CONTEMPLATED THEREBY
OR ASSOCIATED THEREWITH; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN
ANY SUCH LITIGATION ANY EXEMPLARY OR PUNITIVE DAMAGES OR (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE CONVEYANCE
AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.


 


28. Termination Time.


 


As used
in this Agreement, "Termination Time" means the later of (A) the date upon which the proceeds actually received by Grantee
from the Production Payment after the Effective Time (net of any charges described in Section 1.02 of the Conveyance and paid




    	19



    	 



    

by Grantee) equal (i) the
Production Payment Amount, plus (ii) an amount sufficient to provide Grantee with an eighteen percent (18%) internal rate of return
on the Production Payment Amount, as determined in accordance with the formula set forth in Exhibit "A" of this Agreement,
or (B) the date that Grantor executes and delivers to Grantee the Permanent ORRI Assignment. In addition to the foregoing, this
Agreement shall terminate as of the Termination Time.


 


29. Gas Imbalances.


 


Notwithstanding
anything in this Agreement or in the Conveyance to the contrary, to the extent any of the Subject Interests are subject to any
gas imbalances that would reduce the amount of Hydrocarbons that would otherwise be attributable to such Subject Interests, the
existence of any such gas imbalance shall not decrease, in any manner, the Production Payment Percentage applicable to such Subject
Interest or the quantity of Production Payment Hydrocarbons to which Grantee is entitled, it being agreed that Grantor shall bear
the entire burden of any such gas imbalance.


 


30. Use by Grantor
of Portion of Production Payment Amount.


 


(a)
In consideration of the payment by Grantee to Grantor of the Production Payment Amount, Grantor agrees (i) to complete in a
good and workmanlike manner, in accordance with industry standards and as a reasonably prudent operator, the Work Plan
described in Exhibit "B" hereto, inclusive of any and all written materials related thereto previously given by
Grantor to Grantee ("Work Plan"); and (ii) that Grantor shall use at least Three Hundred Seventy-Five Thousand and
No/100 Dollars ($375,000.00) of the Production Payment Amount to pay the costs associated with the Work Plan. If the actual
cost of completing the Work Plan is less than $375,000.00, Grantor shall, subject to the terms of the Work Plan, use the
remaining funds to further increase production on any of the Subject Wells. If the actual cost of completing the Work Plan
exceeds $375,000.00, Grantor shall use a greater portion of the Production Payment Amount or other funds available to Grantor
to pay such excess. If Grantor fails to comply with any of the provisions of this subsection (a), Grantee shall be entitled
to exercise any and all of the remedies set forth in Section 15. hereof relating to Grantor's breach of this Agreement.


 


(b) Grantor
shall provide promptly to Grantee, on a monthly basis, reports detailing the progress of the Work Plan including work performed,
costs incurred (including copies of all third party invoices if specifically requested by Grantee in writing) and operating results,
and any other information required




    	20



    	 



    

to be included as set forth
in the Work Plan in Exhibit "B" hereto. Grantor shall also provide to Grantee a detailed written accounting of the expenditure
of the $375,000.00 portion of the Production Payment Amount described in Section 30(a) above, including equipment purchases and
labor expense.


 


(c) Nothing
in this Section 30., or in any other provision of this Agreement or the Conveyance, shall obligate Grantee to make available, or
to pay, any amounts in addition to the Production Payment Amount to Grantor, it being agreed that the Production Payment Amount
is the sole and exclusive consideration from Grantee for the acquisition by Grantee of the Production Payment and the Permanent
ORRI.


 


31. Option to Purchase Production Payment.


 


Grantee
hereby grants to Grantor the right and option to purchase the Production Payment, which right shall be exercisable as follows:
(i) Grantor may purchase the Production Payment at any time after September 1, 2011 and prior to September 1, 2012 by paying to
Grantee an amount equal to one hundred twenty percent (120%) of the Option Price (as defined below); (ii) Grantor may purchase
the Production Payment on or after September 1, 2012 and prior to September 1, 2013 by paying to Grantee an amount equal to one
hundred fifteen percent (115%) of the Option Price; and (iii) Grantor may purchase the Production Payment on or after September
1, 2013 and prior to Termination Time by paying to Grantee an amount equal to one hundred ten percent (110%) of the Option Price.
The purchase price shall be paid by cashier's check or by wire transfer, with confirmed receipt of funds. The closing shall take
place in the offices of Grantee, or at such other place and time as Grantor and Grantee may agree. Grantor shall exercise such
option by giving Grantee notice not less than forty-five (45) days prior to the date of the purchase. As used in this Agreement,
the term "Option Price" means an amount equal to (A) the Production Payment Amount less any proceeds actually received
by Grantee from the Production Payment prior to the date Grantor repurchases the Production Payment (net of any charges paid by
Grantee pursuant to Section 1.02 of the Conveyance), plus (B) an amount sufficient to provide Grantee with a eighteen percent
(18%) internal rate of return on the Production Payment Amount, as determined in accordance with the formula set forth in Exhibit
"A".


 


32. Area of Mutual Interest for the Production
Payment/Rights to Fund.


 


(a) Notwithstanding
any provision of the Conveyance or this Agreement to the contrary, the Production Payment shall also extend to any fee interest,
mineral interest, leasehold interest, royalty interest, overriding royalty interest, operating rights




    	21



    	 



    

interest, and any and all
other right, title, interest or claim of every kind and character purchased or otherwise acquired by Grantor (or any Affiliate
of Grantor), or by any owner, member, shareholder or partner of Grantor (or any Affiliate of such person) during the term of the
Production Payment in and to the Subject Lands and in and to any lands extending outward one (1) mile from the boundaries of each
Subject Lands and/or Leases described or referenced in Exhibit "A" of the Conveyance ("Additional Interest").
Within five (5) days from the date that any Additional Interest is so targeted by Grantor to be acquired, Grantor shall give written
notice thereof to Grantee, together with a specific description of the interest targeted, and a legally sufficient description
of the lands affected. Grantor shall also furnish Grantee with any additional information and/or documents requested by Grantee
relating to the Additional Interest including, but not limited to, the contracts and/or agreements pursuant to which the Additional
Interest is intended to be acquired. If Grantor acquires an Additional Interest, Grantee shall prepare and submit to Grantor for
execution an original Amendment of Conveyance of Production Payment adding the Additional Interest to the Conveyance, together
with a conforming original of an Amendment of Production Agreement. Within five (5) days from receipt thereof, Grantor shall execute
and deliver the original Amendment of Conveyance to Grantee, in recordable form, together with the conforming Amendment of Production
Agreement. The Amendment shall be recorded in the appropriate property records evidencing, as contractually agreed to by the parties
as of the Effective Time of the Conveyance, that the Production Payment covers the Additional Interest.


 


(b) In addition
to the foregoing provisions of this Section, Grantee shall have the right of first refusal to provide the funding to Grantor for
the purchase of any and/or all such Additional Interest, under the terms and conditions of the Conveyance and this Agreement. Upon
receipt by Grantee from Grantor of the information required above to be furnished regarding a targeted Additional Interest, Grantee
shall have fifteen (15) days from receipt of such information to notify Grantor in writing whether or not Grantee elects to provide
funding under the terms and conditions of the Conveyance and this Agreement for the purchase of such Additional Interest. Grantee's
failure to notify Grantor of Grantee's election within such time period shall constitute Grantee's waiver of its right to fund,
but only with respect to the specific Additional Interest identified in Grantor's written notice in subsection (a) above.


 


(c) In addition
to the foregoing provisions of this Section, and notwithstanding any provision of the Conveyance or this Agreement to the contrary,
if Grantor elects to drill an additional well or wells on the Subject Lands and Leases (including lands and leases in which Grantor
acquired an Additional Interest




    	22



    	 



    

under subsection (a) above),
or on lands with which all or a portion of such Subject Lands and Leases are pooled, Grantor hereby grants to Grantee, during the
term extending from the Effective Time until Termination Time, a first right of refusal to fund such drilling under the terms and
conditions of the Conveyance and this Agreement. Grantor shall provide at least thirty (30) days prior written notice to Grantee
of Grantor's intention to drill an additional well or wells, together with documentation specifically describing the proposed drilling
operation. Grantee shall also have the right to request that Grantor submit for Grantee's review any documentation that Grantee
reasonably requests relating to such proposed drilling operation. Grantee shall have fifteen (15) days from receipt of Grantor's
notice and the additional information requested by Grantee, to notify Grantor whether Grantee elects to fund such additional drilling
operation. Grantee's failure to notify Grantor of Grantee's election within such time period shall constitute Grantee's waiver
of its right to fund, but only with respect to the specific drilling operation identified in Grantor's notice.


 


(d) If Grantee
declines to fund the acquisition by Grantor of an Additional Interest in the area of mutual interest in subsection (a) above, or
the drilling of a new well under subsection (c) above on the area of mutual interest, (i) Grantor may obtain alternate third party
funding of the same and (ii) if the Additional Interest to be obtained by Grantor by such acquisition or drilling is in a wellbore
located (or to be located) within the boundaries of the area of mutual interest described in subsection (a) above, which wellbore
is not, in Grantee's sole discretion, completed (or to be completed) in a zone or formation that could drain reserves from any
of the Subject Lands and Leases hereof, then if subsections (d)(i) and (d)(ii) hereof are applicable, such Additional Interest
in such wellbore shall not be subject to the Production Payment.


 


33. Grantor's Representations and Warranties; Liquidated
Damages.


 


(a) Notwithstanding
any provision of the Conveyance or this Agreement to the contrary, Grantor represents and warrants to Grantee the following:


 


(i) All
of the written information (including, but not limited to, financial, production, engineering, geological, geophysical, title or
ownership) provided by Grantor to Grantee prior to the date this Agreement and the Conveyance are executed by Grantor is, to the
best of Grantor's knowledge and after reasonable due diligence, true and correct. Grantor shall execute the verification page ("Verification")
attached as Exhibit "D" hereto and made a part hereof relating to the information provided by




    	23



    	 



    

Grantor to Grantee prior to
the date Grantor executes this Agreement and the Conveyance, and Grantor shall also execute such Verification effective as of the
time any written amendments to the Conveyance and/or the Production Agreement are entered into by Grantor and Grantee;


 


(ii) No material
information relating to the valuation of the Subject Interests has been knowingly withheld by Grantor from Grantee including, but
not limited to, information relating to existing or potential liens or encumbrances affecting the Subject Interests and/or knowing
violations of environmental laws affecting the Subject Interests;


 


(iii)
Grantor has, as of the date this Agreement is executed by Grantor, furnished Grantee full and complete (including all referenced
Exhibits), copies of all written agreements between Grantor and (1) the entity from which Grantor is purchasing all or any part
of the Subject Interests and/or (2) any other entity, whether affiliated with Grantor or not, relating to or in any way affecting
the Subject Interests;


 


(iv) All
of the information relating to the Subject Interests provided by Grantor to Grantee after the date hereof and during the term
of the Production Payment shall be, to the best of Grantor's knowledge and after reasonable due diligence, true and correct;


 


(v)
Grantor shall promptly notify Grantee, in writing, if Grantor becomes aware, during the term of the Production Payment, of any
material change in any information provided by Grantor to Grantee hereunder; and


 


(vi) Grantor
shall timely pay all Taxes and royalties and Grantor shall pay all operating charges, joint interest billings before they become
delinquent and third party vendor charges due and owing (but no later than 90 days from the date of any invoice) arising from the
Subject Interests and/or production therefrom (except to the extent being contested in good faith), and Grantor shall comply with
the requirements of Section


36. hereof.


 


(b) Grantor
acknowledges that a material inducement for Grantee to purchase the Production Payment is Grantee's reliance upon Grantor's representations
and warranties herein, and that Grantee has relied upon the same. If Grantor breaches any of the representations and warranties
in subsections (a)(i), (a)(ii), (a)(iii) and/or (a)(iv) hereof, Grantor shall be liable to Grantee for liquidated damages in the
amount of Ten Percent (10%) of all amounts actually funded by Grantee to Grantor during the term of the Conveyance. If Grantor
breaches the representation and




    	24



    	 



    

warranty in subsection (a)(vi)
hereof, and such breach is not cured within five (5) days from the date that Grantee gives Grantor written notice thereof, Grantor
shall be liable to Grantee for liquidated damages in addition to the actual amount of such Taxes, royalties, operating charges,
joint interest billings and/or third party vendor charges that Grantee may, in its discretion, pay on behalf of Grantor in accordance
with other provisions of this Agreement, such liquidated damage amount being equal to $1,000.00 for each day that such breach or
breaches are not cured, until they are cured; provided however, that the maximum amount of liquidated damages under this sentence
shall be Ten Percent (10%) of all amounts actually funded by Grantee to Grantor during the term of the Conveyance.


 


(c) Grantor
and Grantee agree that the amount of damages above actual out of pocket capital expenditures that might be sustained by Grantee
in the event of a breach of any of the representations or warranties of Grantor in this Section 33. are uncertain and difficult
to ascertain, and that the above stated liquidated damages constitute reasonable compensation for such additional damages. Each
signatory party hereby agrees that the liquidated damages provided for hereunder do not constitute a penalty.


 


(d) The undersigned
officer or representative of Grantor shall also, by the execution of the Verification, be jointly and severally liable with Grantor
to Grantee for all liquidated damages applicable herein, and such individual personally guarantees that Grantor shall pay to Grantee
all such liquidated damages, if any, applicable under this Section 33., but not to exceed Ten Percent (10%) of all amounts actually
funded by Grantee to Grantor during the term of the Conveyance.


 


(e) Grantor
also warrants and represents to Grantee that, at the time of execution of the Conveyance and this Agreement;


 


(i) Grantor has fully read, and
comprehends, all of the provisions of the Conveyance and this Agreement;


 


(ii) Grantor
has relied upon Grantor's own knowledge and judgment and upon the advice of independent counsel and/or consultants of Grantor's
own free choice; and


 


(iii)
in entering into the Conveyance and this Agreement, Grantor has acted in reliance upon Grantor's own independent judgment, and
not upon any representation, advice or action by Grantee or by any agent or representative of Grantee.




    	25



    	 



    

34. Capacity.


 


Grantor
represents and warrants that (i) Grantor is a corporation, limited liability company, partnership or trust in good standing/existence
under all laws of such party Grantor's state of incorporation or formation; and (ii) the undersigned officer or representative
of Grantor is fully authorized by Grantor to execute this Agreement on behalf of such Grantor, in the capacity stated herein, and
to bind such Grantor to perform all of such Grantor's obligations hereunder.


 


35. Further Assurances.


 


Grantor,
at Grantee's request, shall execute and deliver such further instruments and do such further acts as may be necessary to carry
out the purposes of this Agreement, as the same may relate to the Subject Interests.


 


36. Use of Production Proceeds.


 


Notwithstanding
any provision of the Conveyance or this Agreement to the contrary, commencing as of the Effective Time and continuing until Termination
Time, if during any month production revenues attributable to the Subject Interests covered by the Production Payment are insufficient
(after deducting applicable taxes, royalties and Grantee's Production Payment revenues) to pay all of the leasehold operating expenses
for such properties for such month ("Monthly Deficit"), Grantor shall not make any distribution to any of Grantor's officers,
directors, shareholders, beneficiaries, owners, managers, members, employees, Affiliates or any person or entity having any ownership
interest in Grantor, of any proceeds attributable to Grantor's interest in the Subject Interests covered by this Conveyance until
such time as the Monthly Deficit for such month, and for all succeeding months, if any, in which a Monthly Deficit occurs, are
fully paid off out of Grantor's production revenues attributable to the Subject Interests and/or from other funds owned by, or
obtained by, Grantor. Grantor's failure to comply with the terms of the above provisions shall constitute a breach of this Agreement
and shall, in addition to all other remedies available at equity or in law, entitle Grantee to exercise any and all of the remedies
set forth in Section 15. hereof.


 


37. Use of Funding.


 


Notwithstanding
any provision of this Agreement or the Conveyance to the contrary, the Production Payment Amount funding made by Grantee to Grantor
shall be utilized by Grantor as follows:




    	26



    	 



    

(a) Three Hundred Seventy-Five Thousand and
No/100 Dollars ($375,000.00) to complete the Work Plan (which Work Plan includes, but is not limited to, drilling and
completing 5 new PUD wells on the James Leonard Lease in Coleman County, Texas described in Part I. of Exhibit "A"
of the Conveyance);


 


(b) Thirty Thousand and No/100 Dollars ($30,000.00)
for Working Capital relating to the Work Plan; and


 


(c) Five
Thousand and No/100 Dollars ($5,000.00) for the Production Payment origination fee associated with the Conveyance and this Agreement.


 


At Grantee's
request, Grantor shall furnish Grantee with any and all documentation requested by Grantee to confirm Grantor's use of such funding
amounts as set forth above, and in accordance with the other terms of this Agreement. Grantor's failure to comply with the terms
of the above provisions, without a written waiver of such provisions executed by Grantee, shall constitute a breach of this Agreement,
and shall, in addition to all other remedies available at equity or in law, entitle Grantee to exercise any and all of the remedies
set forth in Section 15. hereof.


 


38. Entire Agreement; Amendments; Waiver.


 


This Agreement
and the Conveyance constitute the entire agreement between the parties hereto. This Agreement and/or the Conveyance may not be
amended and no rights thereunder may be waived except by a written document signed by the duly authorized representatives of the
parties. No waiver of any of the provisions of this Agreement and/or the Conveyance shall be deemed to be or shall constitute a
waiver of any other provisions thereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.


 


39. No Adverse Claim Against the Production Payment.


 


During the term of the Production Payment,


 


(i) Each
party Grantor, and each shareholder, member and/or owner of each party Grantor, agrees that the real property interest conveyed
to Grantee in the Conveyance is not subject to, nor shall be adversely affected by, any monetary obligations owed and/or incurred,
or to be owed and/or to be incurred, between the shareholders, members and/or owners of each party Grantor, or between each party
Grantor and any such shareholder, member and/or owner, in any way related to the Subject Interests, Subject Lands and/or the Leases;
and




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(ii) neither
of each party Grantor, nor any shareholder, member and/or owner of each party Grantor, either individually or through any entity
owned or controlled by, or owned or under common control with, such shareholder, member and/or owner and/or such party Grantor,
shall assert any adverse action or claim against the Production Payment conveyed to Grantee under the Conveyance and this Agreement,
and each party Grantor and each shareholder, member and/or owner of each party Grantor hereby waives the right, either contractual,
statutory or in equity, to asset any such action or claim of record and/or in any court or legal forum having jurisdiction.


 


40. Due Diligence/Documentation Costs.


 


Notwithstanding
any provision of the Conveyance and/or this Agreement to the contrary, Grantor shall reimburse Grantee for all costs incurred by
Grantee for due diligence and documentation costs relating to the Subject Lands, Leases and/or Subject Interests including, but
not limited to, land/title, legal, recording and travel expenses (collectively "Closing Costs"). Grantee acknowledges
receipt from Grantor of a prepayment of


$10,000.00 toward the Closing
Costs. If the total of the Closing Costs exceeds the initial $10,000.00 payment, Grantor shall pay Grantee at Closing the remainder
of such total Closing Costs. If the total Closing Costs are less than the initial $10,000.00 payment, Grantee will refund the overpayment
to Grantor.


 


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EXECUTED in multiple originals
as of the date first set forth above, effective as of the Effective Time.


 





	 	ADINO EXPLORATION, LLC
	 	 	 	 
	 	By:	 /s/	 
	 	 	Shannon W. McAdams	 
	 	 	Chief Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	Shannon W. McAdams, Individually
	 	 	 	 
	 	/s/	 
	 	Shannon W. McAdams,
	 	Individually, BUT SOLELY FOR THE

PURPOSES OF SECTION 33. AND
    SECTION 

39. OF THIS AGREEMENT
	 	 	GRANTOR
	 	 	 	 
	 	BLUEROCK ENERGY CAPITAL II, LLC
	 	 	 	 
	 	By: 	/s/	 
	 	 	Catherine L. Sliva	 
	 	 	President	GRANTEE


 




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