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Exhibit 10.2    
    

 
 

EMPLOYMENT AGREEMENT    
    

        This Employment Agreement is made as of July 11, 2006 by and between Ellora Energy, Inc., a Delaware corporation (the
"Company"), and T. Scott Martin (the "Executive"). All capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Company's 2006 Stock Incentive Plan (the "Plan"). 

Agreement  

        In consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows: 

        1.    Employment.    Subject to the terms and conditions set forth in this Agreement, the Company offers and the
Executive hereby accepts employment, subject to and effective as of the date hereof (the "Effective Date"). 

        2.    Term.    The Executive shall be employed hereunder for a 24 month period commencing on the Effective Date
and ending on the second anniversary thereof, or until such earlier date that his employment terminates pursuant to Section 5 hereof. The term of the Executive's employment under this Agreement
is hereinafter referred to as the "Term". 

        3.    Capacity and Performance.    

        3.1    Office.    The Executive shall serve the Company in the position of President and Chief Executive Officer.
While serving as President and Chief Executive Officer and except as otherwise provided in
this Agreement, the Executive shall be subject to the direction of, and shall have such other powers, duties and responsibilities as may from time to time be prescribed by, the Company's Board of
Directors (the "Board"). 

        3.2    Duties and Responsibilities.    The Executive shall be responsible for managing the overall operations of the
Company. 

        3.3    Performance.    

        3.3.1  During
the Term, the Executive shall be employed by the Company on a full-time basis and shall perform and discharge (faithfully, diligently and to the
best of his ability) the duties and responsibilities on behalf of the Company as set forth in Section 3.2 above, and, subject to the provisions of Section 3.2, such additional duties and
responsibilities as may be reasonably designated from time to time by the Board. During the Term, the Executive shall devote his full business time and his best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests of the Company and to the discharge of his duties and responsibilities hereunder. 

        3.3.2  The
Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the Term, except
such activities to which the Board may provide advance consent, which consent shall not be unreasonably withheld. 

        4.    Compensation and Benefits.    As compensation for all services performed by the Executive under this Agreement
(subject to Section 5 hereof and performance by the Executive of his duties and obligations to the Company, pursuant to this Agreement or otherwise), the Executive shall be entitled to the
following: 

        4.1    Base Salary; Bonuses.    During the Term, the Company shall pay, or cause to be paid, to the Executive a salary
of $341,000 per year, payable in accordance with the payroll practices of the Company for its executives. Such salary is hereinafter referred to as the "Base
Salary". The 

 

Company
shall review Executive's compensation package no less frequently than annually, and may in its reasonable discretion increase the salary and other compensation paid or provided to Executive.
Annually the Executive shall also receive a bonus in an amount determined by Board or the Compensation Committee of the Board. 

        4.2    Options and Option Shares.    The Company shall grant to the Executive, pursuant to the Plan, options to
purchase shares of Company Common Stock as set forth on Exhibit A. The options granted to the Executive as contemplated hereby will vest and
become exercisable according to the schedule and on the terms set forth in Exhibit A of this Agreement, and will be subject to the other terms
and conditions in the Stock Option Agreement between the Executive and the Company (the "Stock Option Agreement") and in the Plan. If a conflict exists
between the terms of this Agreement and the Stock Option Agreement and/or the Plan, this Agreement shall control. 

        4.3    Vacations.    During the Term, the Executive shall be entitled to four weeks of paid vacation per calendar
year, to be taken at such times and intervals as shall be determined by the Executive in his reasonable discretion. The Executive may accumulate or carry over from one calendar year to another any
unused, accrued vacation time. Upon the termination of this Agreement or Executive's employment for any reason and at any time, the Company shall pay Executive the value of his accrued, unused
vacation time. 

        4.4    Other Benefits and Perquisites.    During the Term and subject to any contribution therefor generally required
of executives of the Company, the Executive shall be entitled to participate in all employee benefit plans from time to time adopted by the Board and in effect for executives of the Company generally.
Such participation shall be subject to (i) the terms of the applicable plan documents, (ii) generally applicable Company policies, and (iii) the reasonable discretion of the Board
or any administrative or other committee provided for in or contemplated by such plan. The Company may alter, modify, add to or delete its employee benefit plans at any time as the Board, in its sole
judgment, determines to be appropriate. In addition, if at any time the Company discontinues life, health and disability insurance for its executives generally, then the Company will make available
to, and will pay for, such coverage (on terms substantially equivalent to those in effect immediately prior to such termination) for the remainder of the Term for the Executive. The Executive shall
also be entitled to all perquisites made available by the Company to any similarly situated executive employee and shall receive a one-time payment of up to $5,000 as reimbursement of tax
and estate planning expenses. 

        4.5    Business Expenses.    The Company shall pay or reimburse the Executive for all reasonable business expenses
(including, without limitation, reimbursement of reasonable travel expenses) incurred or paid by the Executive in the performance of his duties and responsibilities hereunder, subject to
(i) any expense policy established by the Company from time to time, and (ii) such reasonable substantiation and documentation requirements as may be specified by the Company from time
to time or as otherwise required by law. 

        4.6    Sick leave and Holidays.    Executive shall receive paid sick leave and holidays under the guidelines for such
leave applicable from time to time to the Company's executive and management employees. 

        4.7    Severance.    In the event the Executive's employment with the Company is terminated as set forth in
Section 5.4 (by the Company other than for Cause) or in Section 5.5 (by the Executive for breach or Good Reason) prior to the end of the Term, then upon the Executive's execution of a
legal release in a form equivalent to the reasonable standards for such a release that includes a final, complete and enforceable release of all claims that the Executive has or may have against the
Company relating to or arising out of his employment and/or the termination thereof, the Company shall pay Executive the compensation and other benefits set forth in this Section 4.7 

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(collectively,
the "Separation Benefits"). The cash portion of such compensation shall be paid in a lump sum, less legally required withholdings, within
ten business days following the Separation Date. Executive shall have no obligation to mitigate in relation to the Separation Benefits, nor shall the Company be entitled to any offset in relation to
the Separation Benefits arising from other Employment or business activities in which Executive may engage. The Separation Benefits shall consist of: 

        4.7.1  all
Base Salary and accrued, unused vacation pay earned but unpaid through the Separation Date; 

        4.7.2  one
year of Base Salary (at the rate applicable at the Separation Date); and 

        4.7.3  reimbursement
of any outstanding travel or other out-of-pocket expenses incurred by Executive in doing business on behalf of the Company but
unpaid through the Separation Date. 

The
provisions of this Section 4.7 shall not apply in the event the Executive's employment with the Company is terminated as set forth in Section 5.1 (retirement or death),
Section 5.2 (disability), Section 5.3 (by the Company for Cause), or Section 5.6 (by the Executive for other than breach or Good Reason). If Executive dies after the Company
terminates this Agreement other than for Cause or Executive terminates this Agreement for Good Reason but before all payments hereunder have been made, all remaining payments shall be made to a single
beneficiary designated on or about the Separation Date (and in the absence of such designation, in the manner provided by law at the time of his death). 

        5.    Termination of Employment and Severance Benefits.    Notwithstanding Section 2 hereof, the Executive's
employment hereunder shall terminate prior to the end of the Term under the following circumstances: 

        5.1    Death.    In the event of the Executive's death during the Term, the Executive's employment hereunder shall
immediately and automatically terminate. The Company shall then pay to the Executive's designated beneficiary or, if no beneficiary has been designated by the Executive, to his trust or estate: 

        5.1.1  any
Base Salary and accrued, unused vacation pay earned but unpaid through the date of such death; and 

        5.1.2  reimbursement
of any outstanding travel or other out-of-pocket expenses incurred in doing business on the Company's behalf. 

        5.2    Disability.    

        5.2.1  The
Company may terminate the Executive's employment hereunder, upon notice to the Executive, in the event that the Executive becomes Disabled during his employment
hereunder. "Disabled" shall mean any illness, injury, accident or condition of either a physical or psychological nature which, as a result, causes Executive to be unable to perform substantially all
of his duties and responsibilities hereunder with or without reasonable accommodation for 180 consecutive days. 

        5.2.2  The
Board may designate another employee to act in the Executive's place during any period during which Executive is Disabled. Notwithstanding any such designation,
the Executive shall continue to receive the Base Salary in accordance with Section 4.1, and shall continue to receive benefits in accordance with Section 4.4, to the extent permitted by
the then-current terms of the applicable benefit plans, until the Executive becomes eligible for disability income benefits under any disability income plan maintained by the Company or
until the termination of his employment, whichever shall first occur. During any period prior 

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to
the termination of Executive's employment with respect to which the Executive receives disability income benefits under any disability income plan maintained by the Company, the Company shall pay
Executive the difference between such disability income benefits and Executive's then-current Base Salary. 

        5.2.3  Except
as otherwise provided in Section 5.2.2, above, while receiving disability income payments under any disability income plan maintained by the Company, the
Executive shall not be entitled to receive any Base Salary under Section 4.1 or Bonus payments under Section 4.2 (except with respect to periods prior to the commencement of such
disability), but shall continue to participate in the Company's benefit plans in accordance with Section 4.4 and the terms of such plans. 

        5.2.4  If
any question shall arise as to whether during any period throughout the Term the Executive is Disabled, the Executive may, and at the request of the Company shall,
submit to a medical examination by a physician selected by the Company to whom the Executive or his duly appointed guardian, if any, has no reasonable objection, in order to determine whether the
Executive is so Disabled. If such question shall arise and the Executive shall fail to submit to such medical examination, the Board's reasonable determination of the issue shall be binding on the
Executive. 

        5.3    By the Company for Cause.    The Company may terminate the Executive's employment hereunder for Cause (defined
in Section 12.1 below) at any time, provided that before terminating Executive's employment for Cause the Company shall provide written notice to the Executive setting forth in reasonable
detail the nature of such Cause and enclosing all documents or other evidence that in the Company's judgment reflects or evidences such Cause, and thereafter shall permit Executive (and at Executive's
option, Executive's counsel) a reasonable opportunity to appear before the Board for a hearing to determine whether Cause exists. If after that hearing the Company still desires to terminate
Executive's employment for Cause, it shall provide to Executive a written a termination notice reaffirming the existence of Cause and explaining its reasoning in reasonable detail. In the event of any
termination for Cause as provided in this Section, the Company shall have no further obligation or liability to the Executive relating to the Executive's employment hereunder, or the termination
thereof, other than for (i) Base Salary and vacation pay earned but unpaid through the Separation Date and (ii) reimbursement of any outstanding travel and other
out-of-pocket expenses incurred by Executive in doing business on behalf of the Company but unpaid through the Separation Date. 

        5.4    By the Company other than for Cause.    The Company may terminate the Executive's employment hereunder other
than for Cause at any time upon 60 days' notice to the Executive. In the event of such termination, then the Company shall provide Executive with the Separation Benefits specified in
Section 4.7. 

        5.5    By the Executive for Breach or Good Reason.    The Executive may terminate his employment hereunder in the
event that the Company fails to perform, in any material respect, its obligations under this Agreement, including failure to pay the Executive any compensation when due, after written notice by the
Executive to the Company setting forth in reasonable detail the nature of such breach if such breach remains uncured for a period of 30 days following such written notice to the Company. The
Executive may also terminate his employment hereunder for Good Reason. "Good Reason" shall mean (i) a change in the Executive's reporting
responsibilities such that the Executive reports to an individual or entity other than the Board; (ii) a material reduction in the responsibilities and/or job description of the Executive
without the Executive's consent; (iii) a material reduction in the overall value of the Executive's compensation and benefits as specified in Sections 4.1 and 4.4 unless such reduction
is generally and proportionately applicable to all senior officers of the Company; or (iv) a requirement by the Company that the 

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Executive
relocate to a location other than the Denver/Boulder metropolitan area. In the event of termination in accordance with this Section 5.5, then the Company shall pay the Executive the
Separation Benefits specified in Section 4.7 hereof. 

        5.6    By the Executive Other than Upon Breach or Good Reason.    The Executive may terminate his employment hereunder
at any time upon 60 days' notice to the Company. In the event of termination by the Executive pursuant to this Section 5.6, the Company may elect to waive the period of notice upon
paying Executive the Base Salary that would have been payable to Executive in connection with Executive's performance of services during the notice period, and all other amounts payable under this
Agreement. Upon the effective date of Executive's resignation pursuant to this Section 5.6, the Company shall have no further obligation or liability to the Executive relating to the
Executive's employment hereunder, or the termination thereof, other than (i) payment to the Executive of his Base Salary and accrued, unused vacation pay for the remaining period of his
employment with the Company and (ii) reimbursement to the Executive of any outstanding travel or other out-of-pocket expenses incurred by Executive in doing business on
behalf of the Company but unpaid through the Separation Date. 

        6.    Effect of Termination.    The provisions of this Section 6 shall apply in the event of termination of
employment, pursuant to Section 2 or Section 5. 

        6.1    Payment in Full.    Payment by the Company of any Base Salary and other amounts due under the applicable
provisions of Sections 4 and 5, and contributions to the cost of the Executive's continued participation in the Company's plans that are expressly due the Executive under the applicable
termination provisions of Sections 4 and 5, shall constitute the entire obligation of the Company to the Executive. Acceptance by the Executive of performance by the Company shall constitute
full settlement of any claim that the Executive might otherwise assert against the Company, its subsidiaries or any of their respective shareholders, partners, directors, officers, employees or agents
relating to such termination. 

        6.2    Termination of Benefits.    Except for benefit plan participation continued pursuant to Section 5.2
hereof and any right of continuation of health coverage to the extent required by Sections 601 through 608 of ERISA, benefits shall terminate pursuant to the terms of the applicable benefit
plans based on the date of termination of the Executive's employment, without regard to any continuation of Base Salary or other payments to the Executive following such date of termination pursuant
to Section 5. 

        6.3    Survival of Certain Provisions.    Provisions of this Agreement shall survive any termination of employment if
so provided herein, or if necessary or desirable fully to accomplish the purposes of such provision, including, without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of the Executive under Sections 4.7, 5.4 or 5.5 hereof is expressly conditioned upon the Executive's continued full
performance of obligations under Sections 7 and 8 hereof. The Executive recognizes that, except as expressly provided in Section 4.7, 5.4 or 5.5, no compensation shall be earned after
termination of employment. 

        7.    Confidential Information; Intellectual Property.    

        7.1    Confidentiality.    The Executive acknowledges that the Company and its subsidiaries continually develop
Confidential Information, that the Executive may develop Confidential Information for the Company or its subsidiaries, and that the Executive may learn of Confidential Information during the course of
employment. The Executive will comply with the policies and procedures of the Company for protecting Confidential Information and shall never disclose to any Person (except as required by applicable
law or for the proper performance of his duties and responsibilities to the Company and its subsidiaries), or use for his own benefit or gain, or 

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otherwise
use in a manner adverse to the interests of the Company and its subsidiaries, any Confidential Information obtained by the Executive incident to his employment or other association with the
Company or any of its subsidiaries. The Executive understands that this restriction shall continue to apply after his employment terminates, regardless of the reason for such termination. 

        7.2    Return of Documents.    All documents, records, tapes and other media of every kind and description relating to
the business, present or otherwise, of the Company or its subsidiaries, and any copies, in whole or in part, thereof ("Documents"), whether or not
prepared by the Executive, and any and all equipment or other tangible personal property provided by the Company or its subsidiaries for the Executive's use ("Company
Property") shall be the sole and exclusive property of the Company and its subsidiaries. The Executive shall safeguard all Documents and Company Property, and shall surrender
to the Company at the time his employment terminates, or at such earlier time or times as the Board or its designee may specify, all Documents and all Company Property then in the Executive's
possession or control. 

        7.3    Assignment of Rights to Intellectual Property.    The Executive shall from time to time upon request promptly
and fully disclose all Intellectual Property to the Company or any of its subsidiaries. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the
Executive's full right, title and interest in and to all Intellectual Property. The Executive agrees to execute any and all applications for domestic and foreign patents, copyrights or other
proprietary rights, and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) reasonably requested by the Company in order
to assign the Intellectual Property to the Company, and to permit the Company to enforce any patents, copyrights or other proprietary rights to the Intellectual Property. The Executive will not charge
the Company for time spent in complying with these obligations. All copyrightable, patentable or similarly protectable works that the Executive creates shall be considered "work made for hire." 

        8.    Agreement Not to Compete or Solicit.    Subject to the Company's compliance with its payment obligations to the
Executive under this Agreement, the Executive agrees that during the Term and for a period of 12 months following the date of termination of this Agreement (the
"Non-Solicitation Period"), he will not, directly or indirectly solicit, recruit, or otherwise seek to induce any employees of the Company
or any of its subsidiaries to terminate their employment or violate any agreement with, or duty to, the Company or any of its subsidiaries. 

        9.    Enforcement of Covenants.    The Executive acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including without limitation the restraints imposed upon him pursuant to Sections 7 and 8 hereof. The Executive agrees that said restraints are necessary for
the reasonable and proper protection of the Company and its subsidiaries and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area.
The Executive further acknowledges that, were he to breach any of the covenants or agreements contained in Sections 7 or 8 hereof, the damage to the Company could be irreparable. The Executive
therefore agrees that the Company, in addition to any other remedies available to it, shall be entitled to seek preliminary and permanent injunctive relief against any breach or threatened breach by
the Executive of any of said covenants or agreements, subject to the provisions of Fed. R. Civ. P. 65 and/or any state analogue thereof. The parties further agree that in the event that any provision
of Section 7 or 8 hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too
great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. 

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        10.    Conflicting Agreements; Indemnity by the Executive.    The Executive hereby represents and warrants that the
execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which or by which the Executive is a party or is bound, and
that the Executive is not now subject to any covenants against competition or similar covenants that would affect the performance of him obligations hereunder. The Executive will not disclose to or
use on behalf of the Company or any of its subsidiaries any proprietary information of a third party without such party's consent. 

        11.    Indemnity by the Company.    During and after the Term, the Company shall indemnify the Executive to the
maximum extent provided in its then current charter or by-laws. The Company's charter or by-laws will contain indemnification provisions for officers and directors to the
maximum extent permitted by law. In addition, to the extent that the Executive serves as an officer or director of any of the Company's subsidiaries, such subsidiary's charter or by-laws
will contain indemnification provisions for officers and directors to the maximum extent permitted by law. The Executive agrees to promptly notify the Company of any actual or threatened claim arising
out of or as a result of his employment with the Company, or his offices and positions with the Company or its subsidiaries. 

        12.    Definitions.    Terms defined elsewhere in this Agreement are used herein as so defined. In addition, the
following terms shall have the following meanings: 

        12.1    Cause.    The following events or conditions shall constitute
"Cause" for termination: (i) a material breach by the Executive of any of the provisions of this Agreement, which breach is not cured within a
reasonable time (not exceeding 30 days) of notice thereof to the Executive, (ii) fraud or embezzlement by the Executive, (iii) conviction of, or plea of nolo contendere to, any
felony that would create a material liability or material public embarrassment to the Company, or (iv) willful or intentional conduct by the Executive that subjects the Company to material
liability. 

        12.2    Change of Control.    "Change of Control" shall mean
(i) any change in the ownership of the capital stock of the Company if, immediately after giving effect thereto, the holders of the outstanding capital stock of the Company on the date hereof
no longer own at least 51% of the outstanding capital stock of the Company, or (ii) any sale or other disposition (including without limitation by way of a merger or consolidation of the
Company with another Person) of all or substantially all of the assets of the Company to another Person (the "Transferee") if, immediately after giving
effect thereto, the holders of the outstanding capital stock of the Company on the date hereof do not own at least 51% of the outstanding capital stock of the Transferee. Notwithstanding the
foregoing, a Change of Control shall not include a financing transaction approved by the board of directors of the Company. 

        12.3    Confidential Information.    "Confidential Information" means
any and all information of the Company and its subsidiaries that is not generally known by the public, including but not limited to any and all information the disclosure of which would otherwise be
adverse to the interests of the Company or any of its subsidiaries. 

        12.4    ERISA.    "ERISA" means the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations thereunder, and, in the case of any referenced section thereof, any successor section thereto, collectively and as from
time to time amended and in effect. 

        12.5    Intellectual Property.    "Intellectual Property" means all
proprietary rights of any kind, including inventions, discoveries, developments, methods, processes, compositions, works, concepts, trademarks, copyrights, knowhow, trade secrets and ideas (whether or
not patentable or copyrightable or constituting trade secrets) conceived, made, created, developed or reduced to practice by the Executive (whether alone or with others, whether or not during normal
business hours or on or off Company premises) during the Executive's employment that relate to either any 

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business,
venture or activity being conducted or known by the Executive to have been proposed to be conducted by the Company or its subsidiaries at any time during the Term, or any known prospective
activity of the Company or any of its subsidiaries. 

        12.6    Person.    "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and any other entity or organization. 

        12.7    Separation Date.    The "Separation Date" shall be the
effective date of the termination of Executive's employment, for any reason and at any time, irrespective of the circumstances of such termination. 

        13.    Withholding.    All payments made by the Company under this Agreement shall be reduced by any tax or other
amounts required to be withheld by the Company under applicable law. 

        14.    Miscellaneous.    

        14.1    Assignment.    Neither the Company nor the Executive may make any assignment of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of the other; provided,  however, that the Company may assign its rights and
obligations under this Agreement without the consent of the Executive in the event that the Company
shall hereafter effect a reorganization, consolidate with, or merge into, any other Person or transfer all or substantially all of its properties or assets to any other Person so long as such other
Person assumes all of Company's obligations under this Agreement, in which event such other Person shall be deemed the "Company" hereunder for all purposes. This Agreement shall inure to the benefit
of, and be binding upon, the Company and the Executive, and their respective successors, executors, administrators, heirs and permitted assigns. 

        14.2    Severability.    If any portion or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the application of such provision in such circumstances shall be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable and the remainder of this Agreement shall not be
affected thereby, and each portion and provision of this Agreement shall be valid and enforceable, to the fullest extent permitted by law. 

        14.3    Waiver; Amendment.    No waiver of any provision hereof shall be effective unless made in writing and signed
by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach. This Agreement may be amended or modified only by a written instrument signed by the
Executive and the Company. 

        14.4    Notices.    Any and all notices, requests, demands and other communications provided for by this Agreement
shall be in writing and shall be effective when delivered in person or two (2) business days after being deposited in the United States mail, postage prepaid, registered or certified, and
addressed 

(a) in
the case of the Executive, to: 

T.
Scott Martin

7310 Island Circle

Boulder, CO 80301 

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or,
(b) in the case of the Company, to: 

Ellora
Energy, Inc.

5480 Valmont, Suite 350

Boulder, CO 80301 

or
to such other address as either party may specify by notice to the other. 

        14.5    Entire Agreement.    This Agreement constitutes the entire agreement between the parties with respect to the
terms and conditions of the Executive's employment and, except as otherwise provided herein, supersedes all prior communications, agreements and understandings, written or oral, with the Company or
any of its predecessors with respect to the terms and conditions of the Executive's employment. 

        14.6    Headings.    The headings and captions in this Agreement are for convenience only and in no way define or
describe the scope or content of any provision of this Agreement. 

        14.7    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument. 

        14.8    Disputes.    Any action relating to, arising from or involving the application or construction of this
Agreement may be brought at the plaintiff's option in the federal or state courts situated in the Denver/Boulder, Colorado metropolitan area. Each of the Company and the Executive, by its or his
execution hereof, (i) hereby irrevocably submits to the jurisdiction of the such courts for the purpose of any claim or action arising out of or based upon this Agreement or relating to the
subject matter hereof, (ii) hereby waives, to the extent not prohibited by applicable law, and agrees not to assert by way of motion, as a defense or otherwise, in any such claim or action, any
claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such proceeding brought in the
above-named courts is improper, or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (iii) hereby agrees not to commence any claim or action arising
out of or based upon this Agreement or relating to the subject matter hereof other than before the above-named courts, nor to make any motion or take any other action seeking or intending to cause the
transfer or removal of any such claim or action to any court other than the above-named courts, whether on the grounds of inconvenient forum or otherwise. Each of the Company and the Executive hereby
consents to service of process in any such proceeding in any manner permitted by the law of the forum state, and agrees that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 14.4 hereof is reasonably calculated to give actual notice. In any such action the Court shall award the party that substantially
prevails all costs and expenses incurred by that party in connection with the action, including reasonable attorneys' fees. 

        14.9    Governing Law.    This Agreement shall be governed by and construed in accordance with the domestic
substantive laws of the State of Colorado, without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other
jurisdiction. 

(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK) 

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        IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its duly authorized representative, and by
the Executive, as of the date first above written. 

	THE COMPANY:	 	 
	

ELLORA ENERGY, INC.	
 	

 
	

By	
 	

/s/  JAMES R CASPERSON      
Name: James R. Casperson
Title: CFO
	
 	

 
	

THE EXECUTIVE:	
 	

 
	

/s/  T. SCOTT MARTIN          
 Name: T. Scott Martin	
 	

 

10

 
EXHIBIT A  

Stock Option Award  

        In accordance with the terms set forth below and subject to the Company's 2006 Stock Incentive Plan (the "Plan")
and the Stock Option Agreement between the Executive and the Company (the "Stock Option Agreement"), the Executive will be granted options to purchase a
total of            shares of Common Stock (the "Options"), all of which will have an exercise price of $    per share.

        Subject
to the exceptions set forth below, these Options shall vest in accordance with the following schedule: 

        In
accordance with the Plan, the foregoing options will be incentive stock options. Subject to any prior termination of options in accordance with their terms, the vesting schedule for
options will be subject
to acceleration in certain events as specified below and in the Stock Option Agreement. As set forth in Section 4.2, if a conflict exists between the terms of this Agreement and the Stock
Option Agreement and/or the Plan, this Agreement shall control. 

 Major Transactions  

        (1)    Change of Control.    In the event of a Change of Control, all Options awarded under this Agreement and any
options subsequently awarded to the Executive by the Company shall vest immediately prior to the transaction resulting in the Change of Control. 

        (2)    Merger or Sale.    In the event that the Company or any parent company of the Company merges with another
company or is acquired by another company and such transaction does not constitute a Change of Control, then the treatment of the Options shall be governed by Section 15.2 of the Plan. 

 Termination of Employment  

        Vesting.    The treatment of the Executive's unvested and vested options upon a termination of the Executive's employment shall
be governed by Section 7.4 of the Plan, unless otherwise specified in this Agreement. 

        Other
relevant terms and conditions are as set forth in the Stock Option Agreement and the Plan attached hereto. 

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Exhibit 10.2

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Exhibit 10.3    
    

 
 

FARMOUT CONTRACT    

        THIS
FARMOUT CONTRACT ("Contract"), made this 14th day of November, 1997, by and between AMOCO PRODUCTION COMPANY, a Delaware corporation, authorized to do business in the State of
Kansas, whose mailing address is P.O. Box 800, Denver, Colorado 80201, hereinafter referred to as "Amoco" or "Farmor" and PRESCO, INC., a Delaware corporation, authorized to do business
in the State of Kansas, whose mailing address is P. O. Box 7520, The Woodlands, Texas 77387, hereinafter referred to as "PRESCO" or "Farmee". Farmer and Farmee are sometimes collectively referred to
herein as the "Parties"; 

        WITNESSETH,
THAT: 

        WHEREAS,
Amoco is the owner of certain oil and gas leasehold and mineral interests, as to those depths below the top of the Heebner Shale (or if the Heebner Shale is not present,
then,400' below the base of the Council Grove formation), with said oil and gas leasehold and mineral interests being located in Morton, Grant, Stevens, Stanton, Kearny, Finney, Haskell, Hamilton, and
Seward Counties, Kansas, as shown in yellow on the attached Exhibit "A" and hereinafter referred to as "Lease Acreage" and with the whole of said Lease Acreage sometimes referred to as "Exploration
Area"; and 

        WHEREAS,
Amoco, has agreed to farmout to PRESCO and PRESCO has agreed to accept from Amoco, its successors and assigns, the hereinafter specified interests in the Lease Acreage, Insofar
and only insofar as to the depths described herein above, with the right: to ingress and egress upon the Lease Acreage expressly provided to the Parties, and subject to the reservations, terms,
covenants and conditions hereinafter set forth. 

        NOW,
THEREFORE, in consideration of the premises and mutual covenants contained herein, it is hereby agreed by and between the Parties hereto as follows: 

        1.    EXCEPTIONS:    

        Notwithstanding
anything contained herein to the contrary, Amoco excludes from this Contract and reserves unto itself all right, title and interest in and to the Lease Acreage as to all
depths as to each eighty (80) acre tract attributable to each oil well capable of commercial production below the base of the council Grove formation and all depths as to each three hundred
twenty (320) acre tract attributable to each gas well capable of commercial production below the base of the Council Grove formation in existence as of the date of this Contract. The
determination as to which acreage would be excluded from this Contract shall coincide with the Lease Acreage attributable to each unit by Amoco's lease records as of the date of this Contract. 

        Notwithstanding
anything contained herein to the contrary, Amoco excludes from this Contract and reserves unto itself, all right, title and interest in and to the Lease Acreage as to the
depths lying in the interval from the surface of the earth down to the top of the Heebner formation (or in the event the Heebner shale is not present, then four hundred (400) feet below the
base of the Council Grove formation). 

        2.    TITLE:    

        Amoco
does not warrant title to the Lease Acreage that comprises the Exploration Area covered by this Contract. Farmee shall assume all title risks. A review of the county records in
which the lands are located would reveal that Amoco has some interest in some of the lands shown on the attached Exhibit "A" as to depths described herein above. A further examination would reveal
that Amoco's rights are limited by, among other things, depth restrictions, product restrictions and burdens in excess of the landowner's 1/8th royalty. Amoco shall not be required to cure title
defects discovered by Farmee. There shall be no obligation of any nature, on the part of Amoco to purchase new or supplemental abstracts, nor to do any curative work in connection with the title to
the leases and minerals that comprise the Lease Acreage. Any additional title examination and curative work shall be 

 

conducted
by PRESCO at PRESCO'S sole cost, risk and expense. Farmee shall have access to, for review and reproduction at Farmee's expense, during normal business hours in Amoco's office, all Amoco
lease and contract files associated with the Lease Acreage. Farmee shall have access during normal business hours in Amoco's office, to Amoco's Lease Data computer system for review and copying of
information regarding the Lease Acreage. 

        3.    EXPLORATION TEST WELLS:    

        Farmee
shall at no cost, risk or expense to Amoco, drill or cause to be drilled a minimum of ten (10) Exploration Test Wells located on the Lease Acreage, or within a pooled or
unitized area or unit containing Lease Acreage within the Exploration Area, for each calendar year this Contract is in effect, beginning with the 1998 calendar year. For purposes of this Contract, a
well drilled or caused to be drilled by Farmee, shall be considered an Exploration Test Well if such well is located on Lease Acreage or lands pooled or unitized therewith  and if either of the following
conditions apply: i) the well is a newly-drilled well located a distance of one (1) mile or greater from an
existing well, then producing from any horizon below the top of the Heebner Shale, (or if the Heebner Shale is not present, then 400' below the base of the Council Grove formation); or ii) the
well is a newly-drilled well located a distance of less than one (1) mile from an existing well capable of commercial production, with said newly drilled well being completed as a well capable
of production from a stratigraphic horizon, which is not correlative, nor in pressure communication, with the stratigraphic horizon currently producing; or a stratigraphic horizon capable of
commercial production, in the existing wellbore. For purposes of the Exploration Test Well definition, a stratigraphic horizon shall be defined as each separate potentially productive interval within
a formation.. For example: the upper, middle or lower Morrow zones shall each be considered separate stratigraphic horizons within the Morrow formation, likewise, the "B" or "C" zones which produce
from the St. Louis formation shall be considered separate stratigraphic horizons in an Exploration Test Well. Determination as to whether or not a well. shall be considered an "Exploration Test Wall"
for purposes of this Contract shall be made as of date of the commencement of the actual drilling of the well, or if the well is completed so as to comply with the requirements set forth in
ii) above, upon the date of completion. Farmee shall be required to commence, or cause to be commenced, the actual drilling of not less than three (3)of the required ten (10) Exploration
Test Wells on the Lease Acreage within the first one hundred and eighty (180) days of the first day of each new calendar year, with the actual drilling of the remaining seven (7) wells
to be commenced, or caused to be commenced within the remaining one hundred and eighty five (185) days of the year. Each Exploration Test Well shall be drilled, or caused to be drilled, to a
minimum total depth of at least 5600, below the surface of the earth or to a depth sufficient to test the St. Louis formation whichever is the lesser depth, hereinafter referred to as "Contract
Depth". Farmee shall be required to drill, or cause to be drilled, a minimum of two (2) of the ten (10) Exploration Test Wells on Lease Acreage located in Stanton., Grant, Stevens,
Morton, Hamilton or Kearny Counties, Kansas, which for purposes of this Contract are outlined in magenta on the attached Exhibit "A". All wells drilled, or caused to be drilled on Lease Acreage by
Farmee, considered Exploration Test Wells or otherwise shall be required to be completed as a test well capable of the commercial production of oil and/or gas, taken over by Amoco, as provided for in
Article Eleven (11) below, or plugged and abandoned as a dryhole within sixty (60) days of drilling rig release. Amoco shall not limit the number of other wells, not considered
Exploration Test Wells, drilled, or caused to be drilled under this Contract. 

        Should
the number of Exploration Test Wells drilled or caused to be drilled, or replaced by the acquisition of 3-D seismic as provided below, by Farmee in any calendar year,
be in excess of the ten (l0) required Exploration Test Wells, Farmee's obligation in the subsequent calendar year to "drill or cause to be drilled ten (10) Exploration Test Wells, shall be
reduced by said number of wells up to a maximum number of four (4). In no instance shall Farmee's obligation to drill, or cause to be drilled a minimum number of two (2) Exploration Test Wells
per year on the West Side, or acreage pooled 

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therewith,
be reduced. Should Farmee elect to acquire 3-D seismic on Lease Acreage within the Exploration Area, on its own, by, through or under a party other than Amoco, Farmee shall have
the right to substitute the acquisition and processing of 3-D seismic for the drilling of up to a maximum number of three (3) Exploration Test Wells per calendar year at a rate
equal to four (4) 640 acre governmental sections of 3-D seismic acquired and processed on the Lease Acreage to one (1) Exploration Test Well. The seismic data acquired by
Farmee for purposes of reducing Farmee's obligation to drill Exploration Test Wells shall be located on governmental quarter sections where Amoco owns a minimum of seventy five percent (75%) of the
gross working interest in oil and/or gas rights. For purposes of reducing Farmees obligation to drill Exploration Test Wells hereunder, Farmee shall be allowed to combine four (4) separate
governmental quarter sections in which Amoco owns a minimum seventy five percent (75%) gross working interest to create a 640 acre governmental section. It is recognized by the Parties, that in order
for Farmee to obtain full fold data on the Lease Acreage or a portion thereof, Farmee may be required to acquire data beyond the boundary of an Amoco lease or mineral interest. In said instance,
Farmee shall be allowed to utilize the additional area covered by the data in calculating Farmee's credit toward the drilling of Exploration Test wells hereunder. It is herein recognized that seismic
data is typically acquired during the months of November, December, January, February, and March, hereinafter referred to as "Acquisition Window". For purposes of determining whether data acquired
shall serve to diminish Farmee's obligation to drill Exploration Test Wells hereunder, it is hereinafter agreed that 3-D seismic data acquired during said Acquisition Window shall he
utilized by Farmee to reduce Farmee's obligation to drill Exploration Test Wells in the next calendar year only. For example, should Farmee begin the actual acquisition of seismic data in December of
1998 and. not complete the actual acquisition of data until January of 1999, the data acquired may serve to reduce Farmee's Exploration Test Well drilling obligation for 1999 only. Processing of said
data shall be completed within twelve (12) months from the. date in which the acquisition of data was completed, or if processing is required in the case of purchased data, from the date the
data was purchased. The right to conduct and/or acquire 3-D or 2-D seismic data and geophysical surveys on Amoco Lease Acreage is expressly granted to Farmee by Amoco. Farmee
shall not be required to obtain a permit from Amoco prior to acquisition of the geologic or geophysical data, and is herein granted the right, but not the obligation to approve third party requests to
acquire geologic or seismic data on the Lease Acreage, however, Farmee shall conduct its operations and require any third parties to conduct their operations, in a good and workmanlike manner and
shall settle all reasonable damages with the surface owners as soon as would be practical after the work has been completed. Amoco shall have access to said data upon its written request. Should
Farmee fail" to drill or cause to be drilled the ten (10) Exploration Test Wells, or reduce said drilling requirement through the acquisition and processing of seismic data within each and
every calendar year, as set forth herein above, this Contract shall immediately terminate. 

        4.    DATA:    

        Amoco
agrees to sell to Farmee, for the sum of ten dollars, and other good and valuable consideration, all geological and 3-D geophysical data, owned, obtained, controlled or
in the possession of Amoco, as it pertains to the Exploration Area, including but not limited to, all geophysical data resulting from field seismic operations, observer's reports, surveyor's notes,
shot point maps, and magnetic tapes used to record the raw seismic data. Not longer than sixty (60) days following receipt of payment by Farmee to Amoco, Farmee shall receive copies of all
processed data as it pertains to the Exploration Area. Amoco shall make available to Farmee for Farmee's use, inspection and copying, all of the geological, production and reservoir information, data
and interpretations in Amoco's possession with respect to the Exploration Area, including but not limited to, well logs, microfiche sets, and any geological or geophysical leads and/or
interpretations. All costs associated with the copying or collection of all data and or information described herein shall be completed at Farmee's sole cost and expense. Amoco shall make no warranty
whether express or implied with respect to the reliability, accuracy or to the completeness of the data for any particular purpose. Farmee agrees to use the data 

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made
available by or through Amoco at its sole cost risk and expense, and shall not seek to hold Amoco liable or responsible, in any respect for Farmee's use of the data. Additionally, not later than
thirty (30) days from the effective date of this Contract, Amoco shall be required to furnish to Farmee all data, materials and equipment as set forth on the attached Exhibit "B". 

        5.    DRILLING AND COMPLETION OF WELLS:    (Applicable separately to each well) 

        All
operations conducted by Farmee, it successors and assigns shall be at Farmee's sole cost, risk and expense. Farmee agrees to indemnify, defend and hold Amoco harmless from and
against all claims, demands, causes of action and judgments of any nature (and all costs and fees associated with same) arising in favor of any party (including Farmee, Farmee's employees, agents,
servants, contractors or invitees or Amoco's employees and any other party whomsoever) for personal injury, death, property damage, damage to natural resources, or for any other reason whatsoever,
growing out of, incident to, or arising, either directly or indirectly, from Farmee's, its successors and assigns, operations on or with respect to the Exploration Area. Farmee further agrees to pay
Amoco for any damages to Amoco's property which is caused by Farmee, Farmee's employees, agents, servants, contractors or invitees or Farmee's successors and assigns. 

        Prior
to building the location for any well drilled hereunder, Farmee shall furnish Amoco with a detailed plat showing the location of the well. Farmee shall notify Amoco immediately
when the location for each well to be drilled hereunder is staked, when the material for the drilling thereof is moved to the location and when actual drilling is commenced. Farmee shall provide to
Amoco one (1) copy of the staking plat, along with the Kansas Corporation Commission "Permit To Drill" at no cost to Amoco. 

        After
actual drilling has been commenced and continuing until Farmee has completed as a well capable of producing oil and/or gas in commercial quantities, is taken over by Amoco as
provided for in Article Eleven (11) below, or is plugged and abandoned as a dry hole, Farmee shall furnish to Amoco daily reports as to the progress as well as any and all other information
requested by Amoco as set forth in the Geological Requirements included herein as Exhibit "C". 

        Once
a well has reached contract Depth and Farmee determines that the well drilled is incapable of producing oil or gas in commercial quantities and that said well should be plugged and
abandoned, and Amoco has declined to takeover the well as provided for in article Eleven (11) below, Farmee shall proceed at Farmee's sole cost, risk and expense to plug and abandon said well
in accordance with all applicable state and local laws and regulations. Farmee shall additionally level the ground around the location and clean the premises so as to comply with the Environmental
Stipulations set forth in Exhibit "D". 

        6.    SUBSTITUTE WELLS:    

        If,
because of encountering impenetrable substances or because of other conditions making further drilling impracticable, Farmee may discontinue drilling any well under this Contract
before reaching Contract Depth. Farmee shall have the right, but not the obligation, to drill a "substitute" well at a legal location on the same tract of acreage as the well it is to replace,
provided the actual drilling of said substitute well is commenced not later than thirty (30) days after the abandonment of the Exploration Test Well or other well which it is to replace. If
Farmee elects to commence a substitute well, it thereafter shall prosecute the drilling thereof to Contract Depth and complete said substitute well with due diligence. If a substitute well is drilled
as herein provided, than Farmee shall be deemed to have complied with this Contract as if the substitute well had been an original well. 

        7.    GEOLOGICAL REQUIREMENTS:    

        Farmee
shall test or have tested all wells drilled under this Contract and promptly furnish Amoco all data and information specified in Exhibit "C" attached hereto. Within fourteen
(14) days of 

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discovery
by Farmee that data as set forth in said Geological. Requirements has not been provided to Amoco, Farmee shall provide to Amoco any and all information which had not been previously
forwarded. 

        8.    COST OF THE WELL:    (Applicable separately to each well) 

        The
entire cost and expense associated with the drilling, testing and equipping each well drilled hereunder shall be paid by Farmee or shall be paid by a third party in the instance of a
farmout by Farmee to a third party, as provided fort hereinabove, unless Amoco elects to take over a well as provided for in Article Eleven (11) hereto. Farmee or said third party shall
maintain the Lease Acreage free and clear of any and all liens and encumbrances. As a condition precedent to Amoco's obligation to perform in accordance with the provisions of this Contract, Farmee
shall furnish, at the request of Amoco, evidence satisfactory to Amoco establishing the prudent payment of bills required to be paid by Farmee in connection with any well drilled hereunder. 

        9.    CONTRIBUTIONS:    

        All
contributions, including but not limited to, dry hole money, bottom hole money, acreage, farmout agreements, or farmout option agreements received in connection with the drilling of
any well drilled under this Contract will be owned solely by Farmee. 

        10.    WELL CLASSIFICATION:    

        An
"oil well" shall be defined as any well drilled hereunder with a GOR of less than 15,000:1. A "gas well" shall be defined as any well drilled hereunder with a GOR of greater than
15,000:1. All determinations as to a well's type, either gas or oil, shall be made on the date of completion. It is hereby agreed that should the classification for any well drilled hereunder change
from oil to gas thereby causing the assignment delivered by Amoco to Farmee of a 160 acre governmental quarter section to cover an inadequate proration area either for KCC compliance or for the
distribution of royalties under a pre-existing unitization agreement, then Amoco shall, upon request by Farmee, agree to an assignment of the remaining leasehold it owns below the top of
the Heebner to total depth drilled in the 640 acre governmental section in which said well is located. 

        11.    TAKEOVER PROVISION:    

        Amoco
shall retain the right, but not the `obligation to takeover any Well drilled by virtue of this Contract as hereinafter provided: 

        a)    Prior
to the commencement of the actual drilling of a well under this Contract, Farmee shall furnish to Amoco a plat showing the location of the well to be drilled.
Within five (5) days of receipt of said plat, Amoco shall declare in writing to Farmee, its intention to takeover the well bore, in the event of a dryhole, at a time mutually agreed to by the
Parties prior to the drilling well reaching Contract Depth. Failure by Amoco to timely notify Farmee of its intention to takeover a well, shall constitute Amoco's concurrence with Farmee's intention
to plug and abandon the well. Amoco shall release Farmee from all liability and costs incurred in the well at the point of takeover by Amoco. 

        b)    Not
later than thirty (30) days prior to the plugging and abandonment of any producing well drilled under this Contract, Farmee shall notify Amoco of its intention
to plug and abandon said well. Amoco shall have the option to takeover said well, for its own purposes, free of any cost to Amoco, by notifying Farmee, in writing within fifteen (15) days from
receipt of the aforementioned notice, and prior to said well being plugged and abandoned as a dryhole. Failure by Amoco to timely notify Farmee of its intention to takeover a well, shall constitute
Amoco's concurrence with Farmee's intention to plug and abandon the well. Amoco shall release Farmee from all liability and costs incurred in the well at the point of takeover by Amoco. 

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        12.    PERFORMANCE:    (Applicable separately to each well completed as a well capable of the commercial production of
oil and/or gas) 

        12.1    Assignments:    Not later than sixty (60) days after Farmee has completed or caused to be completed. a
well drilled hereunder, Farmee shall notify Amoco that said well has been completed as a well producing oil or gas in commercial quantities or as a well capable of commercial production of oil or gee,
and Farmee has otherwise complied with and performed all of the other terms, covenants and conditions herein, providing to Amoco the total depth drilled in the well and said weal's exact location.
Farmee shall within a reasonable time thereafter, prepare and deliver to Amoco for execution, an assignment a follows: 

        (a)   An
assignment of one hundred percent (100.0%) of Amoco's right, title and interest in and to the oil and gas leases, as to the oil, gas and mineral rights, comprising
that part of the Lease Acreage covering land within the one hundred sixty (160) acre tract comprising the governmental quarter section where such well is located from the top of the Heebner
Shale (or from 400' below the base of the Council Grove formation if the Heebner Shale is not present) down to total depth drilled as found in the test well, insofar as said leases cover land within
said one hundred sixty (160) acres of the Lease Acreage, if the well has a gas-oil ratio of less than 15,000 to 1. Such assignment shall reserve unto Amoco a
non-convertible overriding royalty interest equal to the difference between twenty percent (20%) and any burdens in existence on the Lease Acreage as of the date of this Contract. 

        (b)   An
assignment of one hundred percent (100.0%) of Amoco's right, title and interest in and to the oil and gas leases, as to the oil, gas and mineral rights, comprising
that part of the Lease Acreage covering land within the six hundred forty (640). Acre. tract comprising the governmental section where°`U6h well is located, from the top of the Heebner
Shale (or from 400' below the base of the Council Grove formation if the Heebner Shale is not present) down to total depth drilled as found in the well, insofar as said leases cover land within said
six hundred forty (640) acre governmental section of Lease Acreage, if the well has a gas-oil ratio of equal to or greater than 15,000 to 1. Such assignment shall reserve unto Amoco
a non-convertible
overriding royalty interest equal to the difference between twenty percent (20%) and burdens in existence on the Lease Acreage as of the date of this Contract. 

        All
assignments prepared by Farmee under this Contract, for the successful completion of a well, shall be prepared using the form of assignment attached hereto as Exhibit "E". All oil
and Gas Leases prepared by Farmee under this Contract, prior to the drilling of a well hereunder, shall be prepared using the form of oil and Gas Lease attached hereto as Exhibit "F". 

        It
is hereby understood and agreed, that should Amoco be unable to deliver a proportionately reduced 80% net revenue leasehold,. then Amoco shall assign the maximum deliverable net
revenue interest available, up to 80%. It is understood that in some instances, the proportionately reduced net revenue interest, deliverable from Amoco to Farmee may fall below 80%. In those
instances where delivering less than a proportionately reduced 80% net revenue interest occurs, Amoco shall not retain an override. Additionally, Amoco's inability to deliver proportionately reduced
80% net revenue interest shall not constitute a breach of this Contract. Any assignment granted to Farmee under this Contract shall be subject to a re-assignment to Amoco upon the plugging
and abandonment of the well or wells drilled on the assigned Lease Acreage, free of all burdens, liens and encumbrances created by Farmee or otherwise, as of the date of this contract. 

        12.2    Recording of,Assignments or Leases:    Upon delivery to Farmee thereof, of a fully executed and acknowledged
assignment, Farmee agrees to forthwith file of record the assignment(s) delivered to Farmee by Amoco hereunder and to furnish Amoco with the pertinent recording data thereof as soon as the same is
available. 

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        12.3    Affidavits of Production:    At the time that production is obtained from any part of the Lease Acreage,
Farmee shall execute and file of record in the appropriate county, an Affidavit of Production pursuant to the laws of the State of Kansas with respect to such producing lease(s). Farmee shall
immediately furnish a copy of the recorded Affidavit of Production to Amoco, free of cost to Amoco. 

        13.    SHUT-IN GAS ROYALTY AND ABANDONMENT OF WELLS:    

        Farmee
agrees to notify Amoco in writing of the anticipated completion of a shut-in gas well, the shutting in of a producing gas well or the abandonment (both temporary or
permanent) of a completed well, at least five (5) days (excluding Saturdays, Sundays and legal holidays) prior to taking such action. Farmee shall pay any shut-in payment that may
become due pursuant to the terms of the affected lease (a) and furnish Amoco copies of such checks making any required payment.
Farmee agrees to promptly notify Amoco upon the return to production of any well which has been shut-in or abandoned. 

        14.    EXISTING AGREEMENTS:    

        The
Parties hereto recognize that certain tracts of the Lease Acreage may be subject to pre-existing agreements. Copies of all such agreements which are deemed by Amoco to
have a material effect on Farmee's rights under this contract shall be furnished to Farmee when they come to the attention of Amoco, provided Amoco has the legal right to furnish the agreement(s).
Amoco shall not be required to search to discover the existence of any such agreements. In no event shall Amoco have or incur any liability to Farmee, its successors or assigns, for failure to
identify any such agreements. 

        15.    LANDOWNER DEMANDS:    

        In
the event that Amoco or Farmee shall receive any demand from or on behalf of a landowner for the drilling of a well on the Lease Acreage subject to this Contract, the party receiving
the demand shall promptly notify the other party of said demand. Farmee shall have fifteen (15) days in which to respond to the landowner acknowledging receipt of such demand. Farmee and Amoco
shall have an additional fifteen (15) days to formulate a more definitive response to the landowner either expressing Farmee's intent to cause a well to be drilled, or if drilling would appear
to be imprudent then formulating an appropriate response td said landowner and forwarding said response to Amoco for finalization and transmission to the landowner. Farmee shall be allowed a
reasonable time to resolve issues set forth in each demand and shall be required to keep Amoco apprised of said actions. Should Farmee be unable to satisfy said landowner's demand, Amoco and Farmee
shall work together to formulate a reasonable approach to resolution of the issue. Should Amoco and Farmee disagree on the action required to resolve the landowner's demands, Amoco and Farmee shall as
soon as would be practical, seek resolution through the arbitration procedure set forth on Exhibit "I". However, release of an oil and gas lease to satisfy a landowner's demand shall be at Amoco's
sole option. 

        16.    SURFACE DAMAGE:    

        Prior
to building or staking a location on the Lease Acreage, or lands pooled therewith, Farmee shall make personal contact with each and every surface owner holding title to land on
which Farmee intends to conduct operations. Farmee shall settle damages with said surface owner prior to commencing operations and said damage settlement shall be made in accordance with the Southwest
Kansas Royalty owners Association guidelines, a copy of which is attached as Exhibit "a" to this Contract. If Farmee is able to settle damages with the surface owner for a lesser sum of money than is
set forth in the Southwest Kansas Royalty Owners Association guidelines and can provide written evidence to Amoco that the surface owner is satisfied with said settlement, then said settlement shall
be acceptable to Amoco. Farmee shall either 1) furnish proof to Amoco in written form, signed by the actual surface owner, that damages have been settled, or 2) shall furnish proof that
damages have been paid in accordance with Southwest Kansas Royalty Owners Association's guidelines if the damages caused have been reasonable and customary. No burn pits are allowed in conjunction
with the 

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operations
under this Contract. All trash must be removed by Farmee. from the drillsite immediately following the drilling of each well. 

        17.    ENVIRONMENTAL STT'ULATIONS:    

        Farmee
shall be held in strict compliance with the Environmental Stipulations set forth on Exhibit "D". Within forty-eight (48) hours of discovery by Farmee that an Environmental
Stipulation has been breached, Farmee shall notify Amoco, both by telephone and in writing, of said breach, including details regarding location and factual information about what had occurred.
Additionally, Farmee shall promptly indicate the steps it intends to take to remediate the occurrence. As soon as would be practical, Farmee shall commence the actual on-site work to
remediate the occurrence and within sixty (60) days of the onset of the incident, bring the lands associated with the incident back into compliance with the Environmental Stipulations. 

        18.    FARMOUT REQUESTS:    

        All
requests for farmout of Lease Acreage within the Exploration Area received by Amoco or Farmee shall be addressed by Farmee promptly. Amoco shall promptly forward any requests for
farmout it receives to Farmee. It is the expectation of Amoco that each farmout request received by the Farmee or Amoco shall be reviewed by Farmee and Farmee shall consider each request's
applicability to Farmee's drilling plans. If Farmee considers that a farmout of the Lease Acreage would be prudent, within Farmee's sole discretion, Farmee shall as soon. as would be practical farmout
said Lease Acreage, or a portion thereof to said company. 

        19.    INSURANCE:    

        As
to all operations hereunder with respect to each well, Farmee shall secure and maintain the following insurance: 

        (a)   Workmen's
Compensation Insurance: In compliance with Workmen's compensation laws of the governmental bodies having jurisdiction and with Employer's Liability insurance
with a limit of $100,000 each accident with respect to bodily injury and the aggregate with respect to occupational diseases. 

        (b)   General
Liability Insurance: A combined single limit of $500,000 each occurrence for bodily injuries or death and property damage. 

        (c)   Automobile
Liability Insurance: A combined single limit of $500,000 each accident for bodily injuries or death and property damage. 

        Farmee
shall require its contractors and subcontractors working or performing services on the premises covered hereby to comply with the Workmen's Compensation laws of the governmental
bodies having jurisdiction and to carry such other insurance and in such amounts as Farmee shall deem necessary. 

        Farmee
shall obtain and maintain a drilling bond with the State of Kansas. 

        20.    FORCE MAJEURE:    

        Non-performance,
other than failure to make. payments due under this Contract, shall be excused in the event performance is prevented by strikes, fires, floods, tornadoes,
lightning, explosions, acts of God or public enemy, or other happenings beyond the reasonable control of the Parties hereto whether similar or dissimilar to the causes herein specifically enumerated;
provided, however, that performance)shall be resumed within a reasonable time after such cause has been removed. The affected party shall use reasonable diligence to remove the force majeure as
quickly as possible. In the case of force majeure, the party hereto asserting said force majeure shall, within five (5) days of discovery of the force majeure, notify the other party hereto of
the existence of the force majeure and 

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the
reasons therefore. Once the force majeure event has terminated, the party hereto asserting force majeure shall, within five (5) days of termination of the force majeure, notify the other
party hereto of the termination of said conditions. 

        21.    SALT WATER DISPOSAL WELLS:    

        Farmee
shall not drill any Salt Water Disposal Wells on the Lease Acreage without the prior written consent of Amoco, said consent shall not be unreasonably withheld. 

        22.    TECHNICAL REVIEWS:    

        Farmee
shall, beginning in June of 1998, and in June and December of each calendar year thereafter during the term of this Contract, provide to the appropriate Amoco personnel, a review
of Farmee's activities on the Lease Acreage in the Exploration Area. Information included in the review shall include, but shall not be limited to, details regarding proposed seismic acquisition
programs, well status reports including location and results of wells drilled and location and approximate drilling schedule of proposed wells. Additionally, the review shall include. information
regarding the handling of farmout requests received by Farmee including information detailing the response or proposed response Farmee made to each request. All information included in the review
shall be held strictly confidential by Amoco. 

        23.    INTERNAL REVENUE CODE ELECTION:    

        This
Contract is not intended to create, land shall not be construed to create, a relationship of partnership or an association for profit between or among the partied hereto. If, for
Federal income tax purposes, this Contract and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded from the application of all of the provisions of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 198.6, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. If any present or
future income tax laws of the State of Kansas or any future income tax laws of the United States contain provisions similar to those in Subchapter K, Chapter 1, subtitle A, of the Internal Revenue
Code of 1986, under which an election similar to that provided by Section 761 of the Code is permitted, each party hereby affected shall make such election as may be permitted or required by
such laws. 

        24.    INDEMNITY:    

        Amoco
shall agree to indemnify, defend and hold Farmee, its affiliates, officers, agents and employees harmless from and against any and all claims, damages, losses, costs (including
without limitation reasonable attorney fees, court costs or other expenses incurred in the defense of any claim or lawsuit.) which arise out of, or are attributable to. Amoco's actions prior to or
under this Contract, including but not limited to, all claims for injury or death, claims for damages to property and claims relating to violations of applicable laws, rules, orders, regulations or
codes. 

        Farmee
shall agree to indemnify, defend and hold Amoco, its affiliates, officers,' agents and employees harmless from and against any and. all claims, damages, losses, costs (including
without limitation reasonable attorney fees, court costs or other expenses incurred in the defense of any claim,pr lawsuit) which arise out of, or are attributable to Farmee's actions prior to or
under this Contract, including but not limited to all claims for injury or death, claims for damages to property and claims relating to violations of applicable laws, rules, orders, regulations or
codes. 

        25.    LAWS AND REGULATIONS:    

        Farmee
shall comply with and conduct its operations hereunder as a reasonable and prudent operator and in accordance with the terms and provisions of the oil and gas leases comprising
the Lease Acreage, all existing contracts which Farmee has been made aware of by Amoco, and all applicable laws, ordinances, rules, regulations, and orders, of all governmental authorities having 

9

 

jurisdiction
thereof. This Contract and the rights and duties of the Parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Kansas; without regard to any
choice of law provisions thereof. Venue for all matters for this Contract shall be the Federal Court located in Wichita, Kansas. If the Federal Court in Wichita, Kansas is divested of jurisdiction,
forum and venue shall be in the State District Court in Wichita, Kansas. 

        26.    NOTICES:    

        Except
as herein otherwise expressly provided, any notice or other communication required or permitted hereunder shall be deemed to have been properly given when delivered personally, by
facsimile or by registered mail, with all postage or charges fully prepaid, to the other party at its address as set forth as below: 

Amoco
Production Company

P.O. Box 800

1670 Broadway

Denver, Colorado 80201

Attn.: Ms. Colleen M. Kennedy

Office: (303) 830-5817

Fax: (303) 830-5388 

PRESCO, Inc.

P. O. Box 7520

The Woodlands, Texas 77387

Attn.: Mr. David R. Wheeler

Office: (281) 367-8697

Fax: (281) 364-4919 

        All
notices are deemed given when received. Any notice given may be preceded by a telephonic conversation, but shall not be deemed properly given until notice is received as outlined
above. Each party hereto shall have the right to change its address,. telephone or facsimile number by notifying the other party hereto in writing. 

        27.    BANKRUPTCY:    

        In
the event Farmee becomes insolvent or files for voluntary protection under the Federal Bankruptcy Act or in the event Farmee's creditors file any such involuntary action against it
and the involuntary action is not dismissed. within ninety (90) days, this Contract shall terminate in its entirety and Farmee shall have no further right to drill any additional wells or
receive an assignment of additional acreage. 

        28.    CALL ON PRODUCTION AND PROCESSING:    

        Farmee
shall provide to Amoco three (3) copies of the completion report for each well drilled on the Lease Acreage or land pooled therewith within fifteen (15) days after
it is filed with the applicable state agency. One (1) copy shall be sent to Amoco at P.O, Box 3092, Houston, Texas 77253 to the attention of the Natural as Manager (West); and two
(2) copies shall be sent to-Amoco at P.O. Box 800, Denver, Colorado 8020l, of which one (1) copy shall be to the attention of Crude Oil Supply Manager, and of which
one (1) copy shall be to the attention of Western U. S. Business Unit Land Manager. 

        Not
longer than thirty (30) days from the completion of a well drilled hereunder, Farmee shall notify Amoco in writing that said well has been completed. 

10

 

        A.    Call on Oil:    

        Amoco
reserves and excepts unto itself, its successors and assigns, the option and exclusive right at any time, at all times and from time to time, to purchase all oil, distillate,
condensate, and other liquid hydrocarbons, including natural gas liquids produced at any processing facility to the extent that the source gas stream for this liquid production originates from said
Lease Acreage, hereinafter referred to as "Oil"", produced and saved from said Lease Acreage or allocated to said Lease Acreage. Within seven (7) days of written notice, by Farmee to Amoco, to
the attention of the crude oil Supply Manager, at the address set forth above, that Farmee has received a bona fide offer for the purchase of Oil, Amoco shall notify Farmee whether or not it elects to
exercise its option to purchase said oil. If Amoco elects to exercise its option, payment for any Oil purchased hereunder shall match the terms and pricing included in said bona fide offer. If Amoco
does not notify Farmee within the seven (7) day period that it has elected to exercise said option, it shall be deemed an election to waive this option. If Amoco does not elect to exercise its
option to purchase such Oil as provided above, Farmee may enter into a contract to sell to another party for a term not to exceed one (1) year. Upon the termination of any such sales contract,
Farmee shall give written notice to Amoco and Amoco's right to the above seven (7) day option period shall be revived. 

        If,
after exercising its option, Amoco should thereafter wish to cease purchasing Oil, it may do so upon; thirty (30) days advance notice to Farmee. Should Amoco elect not to
exercise its option to purchase oil, or having made an election should Amoco determine to cease purchasing Oil, such action shall not be a waiver of the right to exercise the option at any later time.
Amoco shall not be required to purchase or furnish a market for the Oil. 

        B.    Call on Gas:    

        Amoco
reserves and excepts unto itself, its successors and assigns, the right, but not the obligation to make a bona fide offer to Farmee for the purchase of gas. Farmee shall be under
no obligation to accept said offer from Amoco. 

        C.    Processing Dedication Option:    

        Amoco
reserves and excepts unto itself, its successors and assigns, the following option and right, but not the obligation, to process all gas and casinghead gas ("gas") produced and
saved from said Lease Acreage or allocated to said Lease Acreage. Farmee agrees, at Amoco's sole option on a well by well basis, to dedicate all gas produced from or allocated to the Lease Acreage to
Amoco's Kansas Hugoton Jayhawk Plant ("Plant"), located in Grant County, Kansas. The Parties agree to negotiate in good faith and execute a gas processing agreement covering such dedicated gas. Said
gas processing agreement shall keep Farmee whole on wellhead BTUs less shrinkage from fuel, volume losses, and unaccounted for gas associated with gathering. The Plant shall retain 100% of the
products recovered from Farmee's gas. Additionally, the gas processing agreement shall include other terms and conditions customarily included in an agreement of this nature and which are consistent
with the operation of the Plant.
Amoco shall have a period of thirty (30) days from receipt of written notice from Farmee that a gas well has bean completed, received at Amoco's address in Houston, within which to exercise its
right and option but not the obligation to avoid gas or to release its right to process. Amoco's election shall be given by written notice to Farmee within said thirty (30) day period. Failure
to so notify Farmee within the thirty (30) day period shall be deemed an election by Amoco not to exercise its right. 

        29.    CONFLICTS:    

        Except
as may be specifically provided, if any provision of any Exhibit attached hereto is inconsistent with any provision contained in the body of this Contract, the provisions in the
body of this Contract shall control. 

11

   
        30.    ASSIGNABILITY:    

        This
Contract shall be considered personal in nature and is not assignable, in whole or in part, without the prior written consent of Amoco. It is agreed that approval for Farmee to
assign shall not be unreasonably withheld, Provided, however, Farmee is allowed, to enter into farmout arrangements with third parties, consistent with the provisions of this contract, as to Lease
Acreage included in the Exploration Area, covering an area" of up to thirty-six (36) 640 acre governmental sections each, without the prior written consent of Amoco. Additionally,
Farmee is granted the right to assign this Contract, to a majority owned company, provided however that Farmee shall be held strictly liable for said company's performance under this Contract and
Farmee shall be obligated to execute a Guarantee by Farmee of assignee's performance under this Contract. 

        The
letter provided herein as Exhibit "H", is hereby prepared by Amoco and is intended to be provided to potential third party farmees, indicating that FRESCO, Inc, is the farmee of
Amoco's deep acreage in the Exploration Area. 

        31.    DISPUTE RESOLUTION:    

        Should
a dispute arise as to the interpretation of any provision of this Contract, Amoco and Farmee agree to proceed in good faith to attempt resolution of said dispute by following the
procedure set forth in Exhibit "I" to this Contract. 

        32.    TERM:    

        This
Contract shall be in effect, and shall inure to the benefit of the Parties hereto; their successors and assigns, for a term ending December 31, 2005, unless terminated
earlier due to Farmee's failure to perform as specified by this Contract. Upon the termination of this Contract, Farmee, its successors and assigns shall retain all interest in lands previously
assigned, but shall have no right to an assignment of additional acreage by the drilling of a well or wells capable of production. So long as Farmee has met all of its obligations under the terms of
this Contract, Farmee may elect to extend the definitive agreement on an annual basis, until December 31, 2013, by giving written notice to Amoco of its intent annually, not later than
September 1 of each calendar year. 

        33.    SAVING CLAUSE:    

        In
case any one or more of the provisions contained in this Contract shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provisions of this Contract. In such event this Contract shall be construed, if at 

        34.    FINAL AGREEMENT:    

        This
Contract including Exhibits "A" through "I" is the full and final agreement between the parties hereto and supersedes all prior negotiations and agreements, whether written or oral,
including but not limited to the Letter of Intent between the Parties dated October 28, 1997. The Parties disclaim all oral, written or electronic communications, statements or representations
made prior or subsequent to this Contract except those included in this Contract. This Contract may be amended only by written agreement signed by both Parties. 

        35.    EXECUTION:    

        If
this Contract is not duly executed by Farmee on or before November 21, 1997, then and thereupon, at Amoco's option, this Contract shall be null and void and of no effect. 

12

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Contract as of the day and year first above written. 

	 	 	AMOCO PRODUCTION COMPANY
	

 	
 	

By:	

 
	 	 	 	/s/  JOHN A. HUSTON      
 John A. Huston

Attorney-in-Fact
	

 	
 	

PRESCO, INC.
	

 	
 	

By:	

/s/  DAVID R. WHEELER      

	 	 	Title:	Executive Vice President

	 	 	Name:	David R. Wheeler

ATTEST:

13

 

	STATE OF COLORADO	 	)	 	 	 	 
	CITY AND	 	)	 	ss.	 	 
	COUNTY OF DENVER	 	)	 	 	 	 

        The
foregoing instrument was acknowledged before me this            day of November, 1997
by                        , Attorney-In-Fact for AMOCO PRODUCTION COMPANY,
a Delaware Corporation. 

        WITNESS
my hand and official seal. 

	 	
 Notary Public
	

My Commission expires:	

 
	  	 
	
	 

	STATE OF COLORADO	 	)	 	 	 	 
	CITY AND	 	)	 	ss.	 	 
	COUNTY OF DENVER	 	)	 	 	 	 

        The
foregoing instrument was acknowledged before me this    day of                        , 1997
by                        , of PRESCO, INC. 

        WITNESS
my hand and official seal. 

	 	
 Notary Public
	

My Commission expires:	

 
	  	 
	
	 

14

  

 
 

EXHIBIT "A"—MAP    
    

15

 
 
 

EXHIBIT "B"    
    

        Attached to and made a part of that certain Farmout Contract dated November 14, 1997 by and between Amoco Production Company and PRESCO, Inc. 

	1.
	Interpretive
Imaging Software License including existing database and future license.

	2.
	Binocular
Scope 3, Microfiche

	4.
	Tamran
Readers (ail 3 machines)

	5.
	Hard
copy logs

	6.
	Greenback
Well Files

	7.
	Access
to Amoco's cores and cuttings

	8.
	Digital
well data.

	9.
	All
interpretive maps and cross sections generated by Amoco staff in southwest Kansas.

	10.
	Two
Head SUN Workstation

	11.
	3-D
data; processed, interpreted and raw data. 

16

 
 
 

EXHIBIT "C"    
    

        Attached to and made a part of that certain Ferment Contract dated November 14, 1997 by and between Amoco Production Company, "Amoco" and
PRESCO, Inc. "PRESCO". 

        AMOCO
PRODUCTION COMPANY GEOLOGICAL

REQUIREMENTS CONCERNING ALL WELL(S)

LOCATED ON THE EXPLORATION AREA 

        PRESCO,
shall give Amoco Production Company ("Amoco") or its authorized representatives access to well(s) and the derrick floor at all times. 

        PRESCO
shall furnish Amoco without cost to Amoco the following reports, data and information: 

        DURING
THE DRILLING OF ANY WELL(S) LOCATED

ON THE EXPLORATION AREA 

        1.     Copies
of the survey plat, governmental forms, and daily drilling or completion reports showing nature of all work done shall be provided. Depth and formations penetrated
shall be telecopied (303) 830-5388 (Attn: Dean Tinsley) or telephoned (303) 830-5141 (Attn: Dean Tinsley) daily beginning the date actual drilling is commenced
and continuing until final completion of the well(s) or plugging and abandonment of same. Also Amoco shall be given sufficient notification prior to any and all drill stem tests, coring, or logging,
so that a company representative can be present during such work if Amoco so desires. Amoco shall also be notified if the well is a dry hole and shall receive copies of the plugging reports. If PRESCO
does not elect to run a drill stem test or core certain intervals that Amoco believes are necessary, Amoco shall have the right, to request PRESCO perform and/or obtain said wireline formation tests,
drill stem tests or sidewall cores before the well is plugged or production casing is set, at its sole cost, risk and expense, 

        2.     PRESCO
agrees to maintain adequate mud to assure good sample returns, good hole conditions for drill stem testing and. logging operations. If applicable, PRESCO shall
have the Mud Engineer run a HT-HP fluid loss test. Amoco shall receive daily copies of the Mud Check reports and any recaps. 

        3.     PRESCO
agrees to have a one (1) man unit mud logger on location for the drilling of Exploration Test Wells unless previously agreed to by Amoco and PRESCO from the
Heebner Shale (Upper Pennsylvanian) to total depth, 

        4.     One
(1) set of dry drilling samples shall be furnished by PRESCO to the Kansas Geological Survey, Sample Library in Wichita Kansas. Samples should be collected
every ten (10) feet Prom the Heebner Shale to rotary total depth. 

        5.     PRESCO
shall furnish to Amoco, at Amoco's expense, slabs of all cores taken to Amoco Production Company, 2980 Huron Street, Denver, Colorado 80202. 

        UPON
COMPLETION OF TILE TEST WELL(S) 

        6.     Copies
of all logs are to be sent to Amoco by Telecopier (303) 830-5300 before any orders are given to plug the well; unless other arrangements have
been made. 

        7.     Three
(3) copies of final prints of the following logs shall be furnished to Amoco for Exploration Test Wells: Compensated Neutron-Formation Density with PE curve
from total depth to Heebner Shale and Dual Induction SFL w/Gamma Ray from total depth to base of surface casing. For wells other than Exploration Test Wells, PRESCO agrees to furnish to Amoco the same
respective number of final prints of all logs which have been run. 

        8.     One (1) copy of survey to determine the deviation of the. hole from the vertical, (if surveys taken). 

17

 

        9.     Two (2), copies of any core analysis and complete reports. 

        10.   Two (2) copies of drill stem test charts and complete reports. 

        11.   One (1) print and one (1) reproducible copy of all velocity
survey data, (if survey conducted). 

        12.   Two (2) copies of any stimulation proposals or job reports. 

        13.   Two (2) copies of any cased hole logs. 

        14.   Two (2) copies of gas oil ratio tests, if any. 

        15.   Two (2) copies of reservoir fluid, gas analysis, or water analysis, if any. 

        16.   Two (2) copies of any open flow potential and shut-in tests; One
(1) copy of any four-point test. 

        17.   Two (2) copies of final geological report as compiled by well site geologist showing detailed lithological and
fluoroscopic examination by depth with porosity, gas chromatograph and drilling rate plots, utilized from Heebner Shale to total depth. 

        18.   Two (2) copies of photoprints of the plugging records required by the governmental office or body having
jurisdiction on the premises, if the well is a dry hole, or, if a well is capable of production, two (2) copies of the report advising the State regulatory body of such fact. 

        Unless
otherwise specifically provided herein, all of the above information shall be furnished to the following address: 

	Mailing Address
 
	 	Street Address
 

	Amoco Production Company	 	Amoco Production Company
	P.O. Cox 800	 	1670 Broadway
	Denver, Colorado 80201	 	Denver, Colorado 80201
	Telephone No. (303) 830.6141	 	Attn: Dean Tinsley
	Facsimile: (303) 830-5388	 	 
	Attn: Dean Tinsley	 	 

        IF
PRODUCTION IS OBTAINED 

        19.   Two (2) copies of any subsurface pressure and fluid level tests and productivity index determination, whether by
pressure bomb or sonic sounder. 

        20.   Two (2) copies of each report covering all subsequent workover operations, such as: deepening, acidizing, fracing,
etc., if any. 

        21.   Two (2) copies of each open flow potential or capability test (flawing pressure with rate) and any
shut-in test results, if any. 

        22.   All
Production data and reports shall be mailed to: 

        Production/Engineering
Department

Amoco Production Company

Attn: Dean Tinsley

P.O. Box 800

Denver, Colorado 80201 

18

 
 
 

EXHIBIT "D"    
    

        Attached to and made a part of that certain Farmout Contract dated November 14, 1997, by and between AMOCO PRODUCTION COMPANY. "Amoco" and
PRESCO, Inc. "PRESCO". 

        ENVIRONMENTAL STIPULATIONS

        PRESCO
shall use, and shall require its contractors, employees and agents to use, environmentally sound materials and practices in its operations on the Exploration Area so as to
minimize or eliminate wastes, hazards and impacts on the environment. These practices include the following: 

	1.
	PRESCO
shall assess the material available for a given purpose and shall select the least toxic option available. This would include, but not be limited to, materials such as solvents,
paints, paint thinners, boiler chemicals, thread compounds, cleaners and mud products. Material Safety Data Sheets for each product provide information to determine its relative toxicity.

	2.
	Pipe
dope containing lead or zinc shall be applied in such a manner to minimize the total volume required. Low toxicity compounds shall be used on drill pipe. No muds or pipe dope
containing chrome shall be brought onto the Exploration Area.

	3.
	PRESCO
shall participate in a recycling program for all wastes generated where recycling is an economically viable option. This shall include all used oils., solvents, drums, etc.

	4.
	PRESCO
shall remove any unused product from the Exploration Area. Unused commercial products shall not be mixed with domestic or oilfield wastes. No waste materials shall be put in any
reserve pits or flare pits except drilling and workover fluids where allowed by law.

	5.
	All
trash shall be removed from the premises and all pits on the drilling location shall be properly closed as soon as practical following the drilling of any well.

	6.
	PRESCO
shall practice water conservation measures.

	7.
	PRESCO
shall provide dikes, ditches, or other methods of containment for all fuel and oil containers. Any leakage or spillage shall be promptly reported to the appropriate authorities
as required by statute, rule, or regulation, and to the appropriate Amoco representative. PRESCO shall have a Spill Prevention, Control and Countermeasure Plan in effect as required by the code of
Federal Regulations Title 40, Part 112.

	8.
	PRESCO
shall adopt practices for minimization of volume and toxicity of wastes for all waste streams.

	9.
	PRESCO
shall handle and dispose of any and all solid waste., including hazardous waste, as defined in Code of Federal Regulations Title 40, Parts 261.2 and 261.3, resulting from the
performance of its operations on the Exploration Area in accordance with all applicable federal, state and local statutes, regulations, ordinances and requirements. The joint working interest owners
if any, shall own all waste generated in connection with PRESCO's operations on the Exploration Area in proportion to each party's interest therein. 

19

 
 
 

EXHIBIT "E"    
    

        Attached to and made a part of that certain Farmout Contract dated Member 14, 1997, by and between Amoco Production Company, Fanner and Presco, Inc.,
Farmee. 

 
 

ASSIGNMENT OF OIL AND GAS LEASE    
    

	STATE OF KANSAS	 	)	 	 
	 	 	 	 	:ss	 	 
	COUNTY OF	 	    
	 	)	 	 

        KNOW
ALL MEN BY THESE PRESENTS: 

        THAT,
in consideration of the sum of Ten Dollars ($10.00) rind other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AMOCO PRODUCTION
COMPANY, a Delaware corporation, with an office in the Amoco Building, 1670 Broadway, Denver, Colorado 80202, hereinafter referred to as "Assignor" or "Amoco", hereby does bargain, sell, assign,
transfer and convey unto PRESCO, INC., whose address is P.O. Box 7520, The Woodlands, Texas 77387, its successors and assigns, hereinafter referred to as "Assignee", all of Amoco's
right, title and interest in and In the oil and gas lenses) described on Exhibit "A", attached hereto and by this reference made a part hereof, insofar as said Lease(s) cover the oil and gas mineral
rights in tire land described on Exhibit "A", subject to any depth limitations described on said Exhibit "A", said land being situated in            County, State of Kansas, all other depths,

zones and formations being expressly reserved herein to Amoco, (said lease(s) and land insofar as said leases) coder the nil and gas mineral rights lying in and under said land as to the subsurface
depths assigned hereby are sometimes referred to herein as "Lease Acreage") subject to the following terms, covenants and conditions: 

        1.     The
Lease Acreage covered hereby is assigned by the Assignor and accepted by tine Assignee subject to the overriding royalties, production payments, net profits
obligations, carried working interests and other payments oat of or with respect to production which are of record and with which said Lease Acreage is encumbered; and the Assignee hereby assumes and
agrees to pay, perform or carry, as the case may be, each of said overriding royalties, production payments, net profits obligations, carried working interests and other payments net of or with
respect to production, to the extent that it is or remains a burden on the Lease Acreage herein assigned. 

        2.     The
Assignor hereby excepts and reserves unto itself, its successors or assigns, a proportionate, non-convertable overruling royalty interest equal to the
difference between twenty percent (20.0%) and any existing landowners royalties, overriding royalties and other burdens on production of record as of November 14, 1997, of all oil, distillate,
condensate, liquid hydrocarbons, gas and casinghead gas produced and saved from said Lease Acreage under said lease(s), which shall be delivered free of ail cost and expense, except taxes on
production, at the well or wells on said Lease Acreage or, at the Assignor's option, to the credit of the Assignor into the pipe line to which said well or wells maybe connected; 

        3      With
respect to the overriding royally herein excepted and reserved by the Assignor, the Assignor and the Assignee agree, as follows: 

        (a)   That
said overriding royalty shall extend to any extensions or renewals of said lease(s) which are renewed or extended within one hundred twenty (120) days of
said lease(s)' expiration. 

        (b)   That
oil and gas used in drilling and operations on said Lease Acreage and in the handling of production therefrom shall be deducted before said overriding royalty is
computed. 

20

 

        (c)   That
in the event said lease(s) or interest herein assigned cover less than all the oil and gas mineral rights in and to the land covered by this Assignment, said
overriding royalty as to such lease(s) shall be proportionately reduced. 

        (d)   That
in the event any drilling and spacing unit established by governmental authority for production from the Lease Acreage embraces land in addition to the land covered
by this Assignment, said overriding royalty shall be proportionately reduced so as in be equal to that proportionally of said production which the number of surface acres covered by this Assignment
and placed in said unit bears to the total number of surface acres included in such drilling or spacing unit. 

        4.     Assignee
shall furnish to Assignor authentic itemized monthly reports of all production from or attributable to the Lease Acreage as well as the documented operating
costs incurred in connection with such production. Such reports shall he mailed to Assignor not later than forty five (45) days following the last day of the month following that for which the
reports are made. 

        5.     As
to any wells drilled on said Lease Acreage by the Assignee after the delivery of this assignment, the Assignee shall, prior to the commencement of drilling operations,
give Assignor notice thereof and shall give to Assignor access to said wells and the derrick floor at all reasonable limes, and, upon request of the Assignor, shall furnish to the Assignor welt
samples of all cores and cuttings consecutively taken, unless the Assignor elects to take such samples; and, at the request of the Assignor, the Assignee shall furnish to the Assignor copies of any
electrical well formation surveys made. 

        6.     This
Assignment is matte subject to all the terms and the express and implied covenants and conditions of said leases) to the extent of the rights hereby assigned, which
terms, covenants and conditions the Assignee hereby assumes and agrees to perform with respect to the lands covered hereby. This Assignment is made subject to the terms and provisions of that certain
Farmout Contract dated November 14, 1997 by and between Amoco and Assignee. Said terms, covenants and conditions,' insofar as the said Lease Acreage is concerned, shall be binding on the
Assignee, net only in favor of the lesser or lessors and their heirs, successors and assigns, but also favor of the Assignor and. its successors and assigns. 

        7.     In
the event that the Assignee should elect to surrender, abandon or release all or any of its rights in said Lease Acreage, or any part thereof, the Assignee shall
notify the Assignor not less than thirty (30) days in advance of such surrender, abandonment or release and, if requested by the Assignor, the Assignee immediately Omit reassign such tights in
said Lease Acreage, or such part thereof, to the Assignor. 

        8.     This
assignment is made without warranty of an kind, either express or implied, 

        9.     All
entices, reports and other communications required or permitted hereunder, or desired to be given with respect to the tights or Interests herein assigned nr reserved,
shall be deemed to have properly given or delivered when delivered personally or when sent by certified mail or facsimile, with all postage or charges fully prepaid, and addressed to the Assigner and
Assignee, respectively, as follows: 

	Assignor:	 	Amoco Production Company

P.O. Box 800

Denver, Colorado 80201

Attn: Western U. S, Business Unit -Land Manager
	

Assignee:	
 	

Presco, Inc.

P.O. Box 7520

The Woodlands, Texas 77387

21

 

        10.   The
terms, covenants anti conditions hereof shall he binding upon and shall inure to the benefit of, the Assignor and the Assignee and their respective heirs, successors
or assigns; mitt such terms, covenants and conditions shall be covenants running with the lands herein described and the Lease Acreage herein assigned and with each transfer or assignment of said land
or Lease Acreage. 

        11.   Assignee
shall provide to Amoco three (3) copies of the completion report for each well drilled on the Lease Acreage or land pooled therewith within fifteen
(15) days after it is filed with the applicable state agency. One (1) copy shall be sent to Amoco at P.O. Box 3092, Houston, Texas 77253 to the attention of the Natural Gas
Manager (West); and two (2) copies shall be sent to Amoco at P.O. Box 1100, Denver, Colorado 80201, of which one (I) copy shall be to the attention of Crude Oil Supply Manager,
and of which one (i) copy shall he to the anent inn of Western U. S. Business Unit—Land Manager, 

        Assignee
shall provide to Amoco three (3) copies of the completion report for each well drilled on the Lease Acreage or land pooled therewith within fifteen (15) days niter
it is filed with the applicable stale agency. One (I) copy shall be sent to Amoco at P.O. Box 3092, Houston, Texas 77253 to the attention of the Natural Gas Manager (West); and two
(2) copies shall he sent to Amoco at P.O. Box 800, Denver, Colorado 130201, of which one (1) copy shall be to the attention of Crude Oil Supply Manager, and of which one
(1) copy shall be to the attention of Western U. S. Business Unit Land Manager. 

        Not
longer than thirty (30) days from the completion of a gas well drilled hereunder, Assignee shall notify Amoco in writing that a well has been completed. 

        A.    Call on Oil: 

        Amoco
reserves and excepts unto itself, its successors and assigns, the option and exclusive right at any time, at all times and from time to throe, to purchase nil oil, distillate,
condensate, and other liquid hydrocarbons, including natural gas liquids produced at any processing facility to the extent that the source gas stream for this liquid production originates from said
Lease Acreage, hereinafter referred to as "Oil", produced and saved from said Lease Acreage or allocated to said Lease Acreage. Within seven (7) days of written notice, by Assignee to Anima, to
the attention of the Crude Oil Supply Manager, at the address set forth above, that Assignee has received it bona fide offer for time purchase of Oil, Amoco shall notify Assignee whether or not it
elects to exercise its option to purchase said Oil. If Amoco elects to exercise its option, payment for any Oil purchased hereunder shall match the terms and pricing included in said bona fide offer.
If Amoco does not notify Assignee within the seven (7) tiny period that it has elected to exercise mid option, it shall be deemed an election to waive this option. If Amoco does not elect to
exercise its option to purchase such Oil as provided above, Assignee may enter into a contract to sell to another party far a term not to exceed one (1) year. Upon the termination of any such
sales contract, Assignee shall give written notice to Amoco and Amoco's right to the above seven (7) day option period. shall be revived. 

        If,
alter exercising Its option, Amoco should thereafter wish to cease purchasing Oil, it may do so upon thirty (30) days advance notice to Assignee. Should Amoco elect not to
exercise its option to purchase Oil, or having made an election should Amoco determine to cease purchasing Oil, such action shall not be a waiver of the right to exercise the option at any later time,
Amoco shall not he required to purchase or furnish a market for the Oil. 

        B.    Call on Gas: 

        Amoco
reserves and excepts unto itself, its successors and assigns; the right, but not the obligation to make a bona fide offer to Assignee for the purchase of gas, Assignee shall be
under no obligation to accept said offer from Amoco. 

22

 

        C.    Call Dedication and Processing: 

        Amoco
reserves and excepts unto itself, its successors and assigns, the following option and right, but not the obligation, to process all gas and casinghead gas ("gas") produced and
saved froth said Lease Acreage or allocated to said Lease Acreage. Assignee agrees, at Amoco's sole option on a well by well basis, to dedicate all gas produced from or allocated to the Lease Acreage
to Amoco's Kansas Hugoton Jayhawk Plant ("Plant"), located in Grant County, Kansas. The Assignor and Assignee agree to negotiate in good faith and execute a gas processing agreement covering such
dedicated gas. Said gas processing agreement shall keep Assignee whole on wellhead BTUs less shrinkage from fuel, volume losses, and unaccounted for gas associated with gathering. The Plant shall
retain 100% of the products recovered tram Assignee's gas. Additionally, the gas processing agreement shall include other terms and conditions customarily included in an agreement of this nature and
which are consistent with the operation of the Plant. Amoco shell have a period of thirty (30) days from receipt of written notice from Assignee that a gas well has been completed, received at
Amoco's address in Houston, within which to exercise its right and option but not the obligation In said gas or to release its right to process. Amoco's election shall be given by written notice to
Assignee within said thirty (30) tiny period. Failure to so notify Assignee within the thirty (30) clay period shall he deemed an election by Amoco not to exercise its right. 

        12.   Amoco
reserves unto itself, its successors and assigns, the right to use the surface of the Lease Acreage assigned herein to conduct operations in those depths, nines
and formations not assigned herein. 

        13.   In
the event there is no longer a well which is producing gas in commercial quantities on the Lease Acreage, Assignor shall have the right, following one hundred twenty
(120) days after the date of last production on the Lease Acreage, in which to request the immediate reassignment of the Lease Acreage, Assignee agrees to reassign. the Lease Acreage to
Assignor within ten (10) days following receipt o) the reassignment request from Assignor. 

        TO
HAVE AND TO BOLD said Lease Acreage unto the Assignee, his heirs and assigns, subject to the terms, covenants and conditions hereinabove set forth. 

        EXECUTED
this            day of                        , 1997, effective as of
the            day of                        ,
199    . 

	 	AMOCO PRODUCTION COMPANY
	

 	

By	
 	

	 	 	 	Its Attorney-in-Fact

	STATE OF COLORADO	 	)	 
	CITY AND	 	:ss	 
	COUNTY OF DENVER	 	)	 

        The
foregoing instrument was acknowledged before me this            day
of                        , 19            ,
by                        , Attorney-In-Fact for AMOCO
PRODUCTION COMPANY, a Delaware corporation. 

        WITNESS
my hand and official seal. 

My
Commission expires: 

	
	 	

	 	 	Notary Public

1670 Broadway

Denver, Colorado 80202

23

   EXHIBIT "F"  

Attached
to and made a part of that certain Femora Contract dated November 14, 1997, by and between Amoco Production Company and FRESCO, Inc. 

	STATE OF	 	 	 	)	 	 	 	 
	 	 	
	 	 	 	 	 	 
	 	 	 	 	: ss.	 	 
	COUNTY OF	 	 	 	)	 	 	 	 
	 	 	
	 	 	 	 	 	 

OIL AND GAS LEASE  

        THIS AGREEMENT, made and entered INTO and
effective                        , 19    , by and between AMOCO PRODUCTION COMPANY, a Delaware corporation,
whose
mailing address is P.O. Box 800, Denver, Colorado 80201, hereinafter referred to as "Lessor," and 

	whose mailing address is	 	 
	 	 	

	

	hereinafter referred to as "Lessee";

        WITNESSETH,
that the said Lessor for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and of the covenants and agreements hereinafter contained on the pert of Lessee to be paid, kept and performed, has granted, demised, leased and let and, by these presents hereby does
grant, demise; !ease and let, unto Lessee, for the purpose of investigating. exploring, prospecting, drilling, and mining for arid producing oil and/or gas, laying pipelines and building tanks, roads,
power stations and other structures thereon necessary to produce, save, store and collect such products, the oil and gas mineral rights lying in and under the following described tract of land
situated in                        County, State of Kansas, to wit: 

from
the surface thereof to, but not below, the base of the St. Louis formation, said lands to the depth above specified being hereinafter referred to as the "lease acreage," subject to the following
provisions 

        1.     PRIMARY TERM: This lease shall remain In force for a primary term of one (1) year from the effective dale hereof,
and as long thereafter as nit or gas shall be produced and saved front the lease acreage, or drilling or reworking operations me conducted thereon without cessation of more than thirty
(30) days. 

        2.     REQUIRED WELL: Before the expiration of the primary term, Lessee shall commence actual drilling operations at a location
approved by Lesser on the tense acreage or on acreage pooled therewith. Thereafter Lessee shall prosecute the drilling of said well diligently, in a workmanlike manner without unnecessary delay to a
depth of 5600' feet from the surface or to a depth sufficient to test the St. Louis formation whichever is the lesser depth, Lessee shall complete said well with due diligence. 

        3.     RELEASE OF LEASE: At the end of the primary term, Lessee shall execute end record a release of this lease insofar as it
corers any part of the lease acreage not included in the spacing unit for the well mentioned in the preceding paragraph, if not spaced by the governmental authority having jurisdiction, said spacing
unit shall be deemed in be 640 acres for gas and 160 acres for oil. 

24

 

        4.     ROYALTIES: Lessee shall pay Lessor royalties as fellows, to wit: 

        (a)   Seven
and one-half percent of eight-eighths (71/2% of 8/8ths) of the proceeds of the sale or if no sale, of the market value, at the well, of
all gas and casinghead gas produced and saved front the lease acreage, which shall be paid to the Lessor free of all cost and expense, except taxes on production; 

        (b)   Seven
and one-half percent of eight-eighths (71/2% of 8/8ths) of all oil, condensate, distillate and other liquid hydrocarbons produced and
saved from the lease acreage which shall be delivered free of all cost and expense, except taxes on production. at the well or wells out said lease acreage or, at the Lessor's option, to the credit of
the Lessor into the pipeline to which said well or wells may be connected; 

        5.     POOLING: Lessee is hereby authorized to pool and combine the lease acreage with other leases and lands, or interests
therein, so as to form a consolidated unit, as prescribed by appropriate governmental authority, butt, in the event said lease acreage shall be pooled and unitized by Lessee with other leases
and lands, or interests therein, so as to form a consolidated unit, a proportionate past of all production from sold consolidated unit, without regard to the location of the well or wells
within said consolidated unit from which produced, equal to that proportionate part thereof which the aggregate number of surface news in said lease acreage bears to the aggregate number of surface
ages in all of said consolidated unit, shall he treated as though produced in its entirety from said lease nonage; and the royalties hereinabove specified shall be applicable to, end shall constitute
a burden against, such proportionate part of said production flan said consolidated trait. 

        6.     SHUT-IN PAYMENTS: While there is a well on this lease or on acreage pooled therewith, which well is capable of
producing only gas, gas condensate, or some combination of gas and gas condensate, bet from which production is not be sold or used, this lease shall be extended for a period of one year
(1 year) from the date such well is shut-in, and the Lessee may tender or pay annually as royalty the sum of One Dollar ($l.00) for tack net mineral acre covered hereby, payment or
tender of such royalty may be made by check or draft of Lessee mailed or delivered to Lessor, with the first payment to be made on or before one year (1 year) from and after the date on which
such well is shut-in, and a similar payment to be made annually thereafter on or before the anniversary date on which such well is shut-in, and if such payments are so made, it
shall be considered that gas, gas condensate, or it combination of gas and gas condensate is being produced in paying quantities from the above described land under all the terms, conditions and
limitation of this lease. 

        7.     LESSER INTEREST: If Lessor owns a lesser interest in the lease acreage than the entire and undivided fee simple estate
therein, then, all royalties herein provided shall be paid Lessor only In the proportion which its interest beers to the whole and undivided fee. 

        8.     WELL INFORMATION: Lessee shall furnish Lessor the information and data described on and shall otherwise comply with the
provisions of, the Geological Requirements attached as Exhibit "A" and made a part hereof. 

        9.     SURFACE RIGHTS: When requested by the surface owner, or by a lessee of the surface owner, Lessee shall bury its pipelines
below plow depth. No well shall be drilled nearer than two hundred (200) feet to the house or barn now on the lease acreage, without the written consent of the surface owner. Lessee shall pay
for damages to the surface of said land caused by its operations, insofar as Lessor has the right to grant such privilege, Lessee shall have the right at any lime during the term of this lease and for
six (6) months thereafter In remove all machinery and fixtures placed on said lease acreage, including the right to draw and remove casing. 

        10.   INDEMNITY: Lessee shall assume full responsibility for the lease acreage and shall protect, defend, indemnify and hold
Lessor, its employees and agents harmless from and against any and all losses, claims, demands, suits, causes of action, including attorney's fees and expense of litigation, 

25

 

including
claims for pollution and environmental damage, any fines or penalties assessed on account of' such damage, and causes of action alleging statutory liability, caused by, arising ant of, or in
any way incidental to operations conducted on the lease acreage by Lessee or its agents, assignees or contractors, which obligations shell survive the termination dads lease. 

        11.   ASSIGNABILITY: Lessee shall not assign this lease or any interest therein without the written consent of Lessor. The
covenants hereof shall extend to the respective successors or assigns of Lessor and Lessee, but no change in the ownership of the land or assignment of royalties shall be binding on Lessee antic after
Lessee has been furnished with n true copy thereof. 

        12.   NO WARRANTY: This lease is executed and delivered by Lessor, and said lease is accepted by Lessee, without warranty of
title, express or implied. 

        13.   EFFECT OF LEASE: The terms and provisions of this lease shell be binding upon, and shall inure to the benefit of, Lessor,
and lessee end their respective heirs, successors and assigns. 

        14.   Other
Provisions: 

        IN
WITNESSETH WHEREOF, this instrument is executed as of the day and year first above written. 

	 	 	AMOCO PRODUCTION COMPANY
	

 	
 	

By	

 
	 	 	 	
 Its Attorney-in-Fact

	STATE OF COLORADO	 	)	 	 	 	 
	CITY AND	 	:ss	 	 
	COUNTY OF DENVER	 	)	 	 	 	 

        The
foregoing instrument was acknowledged before me this            day
of                        , 19    ,
by                        , Attorney-In-Fact for AMOCO
PRODUCTION COMPANY, a Delaware corporation. 

        WITNESS
my hand and official seal. 

My
Commission expires: 

	 	 	 
	
	 	
 Notary Public

26

 
EXHIBIT "G"  

Attached
to and made a part of that certain Farmout Contract dated November 14, 1997 by and between Amoco Production. Company, Farmer and PRESCO, Inc., Farmee. 

Wellsite Damages  

Your
Southwest Kansas Royalty Owners Association Board of Directors has adopted the following resolution to use as a guideline for its members in negotiating for settlement of wellsite and surface
damages: 

RESOLUTION  

BE
IT RESOLVED, that the Southwest Kansas Royalty Owners Association, acting by and through its Board of Directors, recommends to its members the following guidelines in settling for wellsite damages: 

	(1)
	From
$1,500 to $3,000 for pasture land, including surface damages

	(2)
	From
$2,000 to $4,000 for dry land, including surface damages

	(3)
	From
$3,000 to $5,000 for irrigated land, including surface damages 

BE
IT FURTHER RESOLVED, that the following factors be considered in arriving at surface damages: 

	(1)
	Location
of well

	(2)
	Weather
conditions

	(3)
	Depth
of well

	(4)
	Type
of soil, it.e., subject to wind and/or water erosion

	(5)
	Amount
of acreage used in drilling well, including roadway and pipeline

	(6)
	Cattle
guards on pasture land

	(7)
	Fencing
wellsite from livestock

	(8)
	Reseeding
of grass 

BE
IT FURTHER RESOLVED, that consideration be given by the lessee in selecting a well location in such a manner as to preserve archeological sites. 

PASSED
AND ADOPTED this 17th day of December, 1966, by the Board of Directors of the Southwest Kansas Royalty Owners Association. 

	 	 	/s/	Robert Larrabee

	 	 	 	President

Attest:

	/s/	S. E. Nordling
	 	 
	 	Secretary

	 	 

27

 
Exhibit H  

Attached
to and made a part of that certain Farmout Contract dated November 14, 1997 by and between Amoco Production Company as Farmor and PRESCO, Inc. as Farmee. 

November 14,
1997 

To
whom it may concern: 

Amoco
Production Company "Amoco" has entered into a Farmout Agreement with PRESCO, Inc. "PRESCO" covering all of Amoco's right title and interest, below the base of the Heebner formation in And
to lands in Stanton, Morton, Grant, Stevens, Kearny, Finney, Haskell, Hamilton and Seward Counties, Kansas. FRESCO is hereby granted the right to farmout and/or lease the oil, gas and mineral rights
owned by Amoco of record in said counties, to third parties subject to the terms and conditions of that certain Farmout Contract dated November 14, 1997, 

Very
truly yours, 

John
A. Huston

Attorney-in-Fact 

28

 
EXHIBIT "I"  

Attached
to and made a part of that certain Farmout Contract dated November 14, 1997, by and between Amoco Production Company and PRESCO, Inc. 

DISPUTE RESOLUTION PROCEDURE  

In
the event the Parties have a dispute pertaining to any matter set forth in this Contract, or with respect to the interpretation of this Contract, the Parties agree that as a precondition to either
Party being able to institute any judicial or administrative proceeding with respect to any such dispute, the Parties will attempt to resolve the dispute by the following dispute resolution procedure
or a modified procedure agreed to by both parties in a particular instance: 

        1.     If
the Parties are unable to agree through tine personnel directly involved, either Party may invoke this dispute resolution procedure by giving written notice to the
other, designating an executive officer with appropriate authority to be its representative in negotiations regarding the dispute. Upon receipt of this notice, the receiving Party shall, within five
(5) business days, designate an executive officer with similar authority to be its representative. The designated executive officers shall, following whatever investigation each deems
appropriate, promptly enter into discussions concerning the dispute. If the dispute is not resolved as a result of such discussions, either Party may request the commencement of good faith
negotiations with respect to a procedure for dealing with the dispute through means other than litigation, Upon such request, counsel for the Parties shall promptly communicate concerning the
following and other related subjects: 

	(a)
	The
mode of further proceeding (for example, but not limited to, a formal, non-binding mini-trial before a panel composed of executive officers. of each of the
Parties, with or without an independent neutral chairman, advisor, or arbitrator.)

	(b)
	A.
procedure and schedule for exchange of documents and other information related to the dispute.

	(c)
	Ground
rules and a schedule for the conduct of the selected mode of proceeding.

	(d)
	Selection
and compensation of the neutral chairman, advisor, or arbitrator (if any). 

        2.     Following
the conclusion of any agreed upon formal procedure and a receipt of the input of the neutral chairman, advisor, or arbitrator (if any), the Parties shall
continue direct contacts at the executive management level and continue to attempt to resolve the dispute. 

Either
Party may terminate the dispute resolution procedure at any time by written notice to the other after the initial good faith discussions between their designated executive officers. 

29

QuickLinks

Exhibit 10.3

FARMOUT CONTRACT

EXHIBIT "A"—MAP

EXHIBIT "B"

EXHIBIT "C"

EXHIBIT "D"

EXHIBIT "E"

ASSIGNMENT OF OIL AND GAS LEASE

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00112-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00112-of-00352.parquet"}]]