Exhibit 10.1


        


        
        EMPLOYMENT AGREEMENT


        


        
             THIS EMPLOYMENT AGREEMENT (the
        "Agreement"), effective as of the 1st day of June, 2005, by and between BLUE STAR ENERGY,
        INC., a Colorado corporation with its principal place of business located at 5525 Erindale
        Dr., Suite 201, Colorado Springs, CO 80918 (hereinafter referred to as "Company" or
        "Employer") and Raymond E. McElhaney (hereinafter referred to as the
        "Employee").


        


        
        RECITALS


        


        
             NOW THEREFORE,
        in consideration of the Recitals and the mutual covenants,
        promises, agreements, representations and warranties contained in this Agreement, the
        parties hereby accept employment on the terms and conditions hereinafter set forth.

         


        
            
        1.     
        Term.          Subject
        to the provisions for termination hereinafter provided, the initial three (3) year term of
        this Agreement shall commence on June 1, 2005 and terminate on June 01, 2008, and shall
        continue thereafter on a year to year basis unless terminated by the Company by delivery of
        written notice to the Employee not later than sixty (60) days prior to the date for
        termination as indicated in said notice.


        


        
             2.     
        Compensation and Performance
        Review.

         

              a)      For all services rendered
        by the Employee under this Agreement, commencing June 01, 2005, the Company shall be
        obligated to pay the Employee a salary of $5,000.00 per month, payable in accordance with
        the Employer's regular payroll procedure.

         

              b)     At the end of every yearly
        period after the commencement of the term of this agreement, the Company shall grant the
        Employee a performance and salary review for the purposes of gauging the performance of the
        Employee for the preceding year and adjusting the salary of the Employee hereunder looking
        to the results of such review and the Company's financial progress, among other things, as
        guides in such adjustments; provided, however, compensation payable to the Employee
        pursuant to this provision shall in no event be reduced from that fixed by Subparagraph (a)
        in this Section 2.

         

              3.     
        Duties.          Employee
        is engaged as the President of the Company. In such capacity, Employee shall exercise
        detailed supervision over the operations of the Company subject, however, to control by the
        Board of Directors. The Employee shall perform all duties incident to the title of
        President and such other duties as from time to time may be assigned to him by the Board of
        Directors.

         

              4.     
        Best Efforts of
        Employee.     The
        Employee shall devote his full time efforts to the business of the Company and to all of
        the duties that may be required by the terms of this Agreement to the reasonable
        satisfaction of the Company. The Employee shall at all times faithfully, with diligence and
        to the best of his ability, experience and talents, perform all the duties that may be
        required of and from his pursuant to the express and implicit terms hereof to the
        reasonable satisfaction of the Company. Such services shall be rendered at such other place
        or places as the Company shall in good faith require or as the interest, needs, business or
        opportunity of the Company shall require. The Employee agrees not to engage in any
        employment or consulting work or any trade or business for his account or for or on behalf
        of any other person, firm or corporation, unless the Employee obtains prior written consent
        from the Board of Directors of the Company.

        

        
        

        

        
        

             5.     
        Working
        Facilities.     The
        Employee shall be furnished with all such facilities and services suitable to his position
        and adequate for the performance of his duties.

         

              6.     
        Expenses.     The
        Employee is authorized to incur reasonable expenses for promoting the business of the
        Company, including his out-of-pocket expenses for entertainment, travel and similar items.
        The Company shall reimburse the Employee for all such expenses on the presentation by the
        Employee, from time to time, of an itemized account of such expenditures in accordance with
        the guidelines set forth by the Internal Revenue Service for travel and entertainment.

         

              7.     
        Benefits.     The
        Employee shall be entitled to receive any and all health, insurance, disability or any
        other benefit plan adopted by the Board of Directors from time to time for the benefit of
        its employees.

         

              8.     
        Vacation.     The
        Employee shall be entitled each year to a vacation of a reasonable amount during which time
        his compensation shall be paid in full.

         

              9.     
        Disability.

         

              a) Should the Employee, by reason of illness or incapacity,
        be unable to perform his job for a period of up to and including a maximum of three (3)
        months, the compensation payable for and during such period under this Agreement shall be
        unabated. The Board of Directors shall have the right to determine the incapacity of the
        Employee for the purposes of this provision, and any such determination shall be evidenced
        by its written opinion delivered to the Employee. Such written opinion shall specify with
        particularity the reasons supporting such opinion and be manually signed by at least a
        majority of the Board. Should the Board of Directors determine the Employee incapable of
        the performance of his duties, the Employee's compensation thereafter shall be reduced to
        zero.

         

              b) The Employee shall receive full compensation upon his
        return to employment and regular discharge of his full duties hereunder. Should the
        Employee be absent from his employment for whatever cause for a continuous period of more
        than 365 calendar days, the Company may terminate this Agreement and all obligations of the
        Company hereunder shall cease upon such termination.

        

        
        


        

        

        
             10.     
        Termination.

         

        


        


        
        a) The Company may terminate this Agreement with cause at any
        time with immediate notice to the Employee thereof, and such notice having been given, this
        Agreement shall terminate in accordance therewith. For the purpose of this section, "cause"
        shall be defined as meaning such conduct by the Employee which constitutes in fact and/or
        law a breach of fiduciary duty or felonious conduct having the effect, in the opinion of
        the Board of Directors, of materially adversely affecting the Company and/or its
        reputation.

         

              b) The Company may terminate this Agreement without cause by
        giving sixty (60) days written notice to the Employee, and such notice having been given,
        this Agreement shall terminate in accordance therewith.

        


        
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             c) The Employee may terminate this Agreement without cause by
        giving sixty (60) days written notice to the Company, and such notice having been given,
        this Agreement shall terminate in accordance therewith.

         

              d) In the event of termination without cause or being asked
        to resign as part of a merger, acquisition, buyout or any corporate restructure, the
        Employee shall be entitled to receive compensation through the original term specified in
        paragraph one (1). Such compensation shall be paid in full at the date of termination only
        if the Employment Agreement is terminated without cause. After the date of termination, all
        benefit and incentive programs of any kind or nature then in place shall terminate.

         

              11.     
        Notices. All
        notices, demands, elections, opinions or requests (however characterized or described)
        required or authorized hereunder shall be deemed given sufficiently if in writing and sent
        by registered or certified mail, return receipt requested and postage prepaid, or by tested
        telex, telegram or cable to, in the case of the Company:

         

                   
        Blue Star Energy, Inc.


        
                      5525
            Erindale Dr.

                      Suite 201

                      Colorado Springs, CO
            80918

             

              

             and in the case of the Employee:

             

              

                       Raymond E. McElhaney

                      1245 Scarsbrook Court

                      Monument, CO 
            80132
        


        
            

             

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        12.     
        Confidential
        Information.     During
        the term of this Agreement, the Employee will have access to certain confidential
        information and materials, including but not limited to oil and gas property and lease
        information, originated by the Company or disclosed to the Company by others under
        agreements to hold the same confidential (“Confidential Information”).
        Confidential Information further includes, but is not limited to, all technical,
        engineering, property and lease information, financial, business practices, customer lists,
        customer identities and commercial information heretofore or hereafter disclosed or
        transmitted by the Company in any form and manner to the Employee or otherwise received by
        the Employee, whether orally or in writing. Employee acknowledges that Employee shall not
        either directly or indirectly use, disclose or communicate to any person or entity any
        Confidential Information for any purpose at all whether during or after the term of this
        Agreement, except to the extent any such information becomes generally known to the public
        through no fault of Employee. Furthermore, the terms of this provision survive the Term of
        this Agreement, or any termination thereof.


        
         


        
        13.     
        Remedies.     
        Employee acknowledges that any failure to carry out an obligation under this Agreement, or
        a breach by the Employee of any provision herein, will constitute immediate and irreparable
        damage to the Company, which cannot be fully and adequately compensated in money damages
        and which will warrant preliminary and other injunctive relief, an order for specific
        performance, and other equitable relief. Employee also understands that other actions may
        be taken and remedies enforced against the Employee, including termination of any other
        agreements the Employee may have with the Company.


        


        
               
        14.      Entire
        Agreement.     This
        Agreement contains the entire agreement between the Company and the Employee, regarding
        employment of the Employee. This Agreement shall not be modified except by written
        agreement signed by both parties.

        

              15.     
        Headings.     The
        subject headings of the articles and sections contained in this Agreement are included for
        convenience purposes only and shall not control or affect the meaning, construction or
        interpretation of any provision hereof.

        

             16.     
        Assigns.     This
        Agreement shall be binding upon the Company and Employee, their respective heirs,
        executors, legal representatives, successors and assigns.

        

             17.     
        Waiver and
        Severability.     No
        waiver by either party of any breach or default hereof by the other shall be deemed to be a
        waiver of any preceding or succeeding breach or default hereof, and no waiver shall be
        operative unless the same shall be in writing. Should any provision of this Agreement be
        declared invalid by a court of competent jurisdiction, the remaining provisions hereof
        shall remain in full force and effect regardless of such declaration.


        


        


        
             18.     
        Arbitration.     Any
        dispute regarding the subject matter of this Agreement shall be resolved by binding
        arbitration to be conducted by an arbitration association upon mutual written agreement of
        the parties. The prevailing party shall be entitled to an award of attorney's fees, costs
        and expenses. The award may be converted to an order of a court of competent jurisdiction,
        and each party voluntarily submits to personal jurisdiction in the federal and state courts
        located in Colorado. Notwithstanding the aforementioned, the Company shall be entitled to
        seek injunctive relief for violation of the provisions of Section 12 herein, as provided in
        Section 13 herein.


        
         


        
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             19.     
        Counterparts.          This
        Agreement may be executed in several counterparts, and as to executed shall constitute one
        Agreement, binding on all parties hereto, notwithstanding that all parties are not
        signatory as to other original or the same counterpart. Facsimile signatures are
        acceptable.


        


        
             20.     
        Time.          Time
        is of the essence.

         

              21.     
        Governing
        Law.      This Agreement
        shall be construed under the laws of the State of Colorado.


        


        
        IN WITNESS WHEREOF,
        the parties have executed this Agreement on the day and year
        first above written.


        	
                	
                
	THE
                COMPANY:

                

                BLUE STAR ENERGY, INC.

                

                

                By: /s/ Bill M. Conrad

                Bill M. Conrad, Secretary 	THE
                EMPLOYEE:

                

                

                

                

                /s/ Raymond E. McElhaney

                Raymond E. McElhaney 



         


         


         


         


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