Document:

EXHIBIT 10.1

                            INDEMNIFICATION AGREEMENT

          THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made as of the
__________, 200__, between Gateway Energy Corporation, a Delaware corporation
(the "Company"), and __________________________ (the "Indemnitee").

          WHEREAS, it is important to the Company to attract and retain as
directors and officers the most capable persons available; and

          WHEREAS, the Bylaws of the Company (the "Bylaws") provide for the
indemnification of the directors, officers, employees and agents of the Company
as authorized by Delaware General Corporation Law Section 145 (the "State
Statute"); and

          WHEREAS, such Bylaws and the State Statute specifically provide that
they are not exclusive, and thereby contemplate that contracts may be entered
into between the Company and its directors and officers with respect to
indemnification of such directors and officers; and

          WHEREAS, in accordance with the authorization provided by the State
Statute and the Bylaws, the Company has purchased and presently maintains a
policy or policies of Directors and Officers Liability Insurance ("D&O
Insurance"), covering certain liabilities which may be incurred by its directors
and officers in the performance of their services for the Company; and

          WHEREAS, recent developments with respect to the terms and
availability of D&O Insurance and with respect to the application, amendment and
enforcement of statutory and bylaw indemnification provisions generally have
raised questions concerning the adequacy and reliability of the protection
afforded to directors and officers thereby; and

          WHEREAS, in order to resolve such questions and thereby induce the
Indemnitee to agree to serve or continue to serve as a director and/or officer
of the Company, the Company has determined and agreed to enter into this
contract with the Indemnitee;

          NOW, THEREFORE, in consideration of the premises and of Indemnitee's
agreeing to serve or continuing to serve as a director and/or officer of the
Company, the parties hereto agree as follows:

          1. Indemnity. The Company hereby agrees to hold harmless and indemnify
the Indemnitee to the full extent permitted by law:

               (a) Against any and all expenses (including attorneys' fees),
          judgments, fines, penalties and amounts paid in settlement (including,
          without limitation, all interest, assessments and other charges paid
          or payable in connection therewith) actually and reasonably incurred
          by the Indemnitee in connection with any threatened, pending or
          completed action, suit or proceeding, whether brought by or in the
          right of the Company or otherwise and whether civil, criminal,
          administrative or investigative, to which the Indemnitee is, was or at
          any time becomes a party, or is threatened to be made a party, by

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          reason of the fact that the Indemnitee is, was or at any time becomes
          a director, officer, employee, agent or fiduciary of the Company, or
          is or was serving at the request of the Company as a director,
          officer, employee, agent or fiduciary of another corporation,
          partnership, joint venture, employee benefit plan, trust or other
          entity or enterprise, or by reason of anything done or not done by
          Indemnitee in any such capacity, whether prior to or subsequent to the
          date of this Agreement; and

                    (b) Against any and all expenses (including attorneys' fees)
          actually and reasonably incurred by the Indemnitee in serving or
          preparing to serve as a witness or other participant in any
          threatened, pending or completed action, suit or proceeding, whether
          brought by or in the right of the Company or otherwise and whether
          civil, criminal, administrative or investigative, if Indemnitee is
          such a witness or participant by reason of the fact that the
          Indemnitee is, was or at any time becomes a director, officer,
          employee, agent or fiduciary of the Company or is or was serving at
          the request of the Company as a director, officer, employee, agent or
          fiduciary of another corporation, partnership, joint venture, employee
          benefit plan, trust or other entity or enterprise.

          2. Specific Limitations on Indemnity. Indemnitee shall not be entitled
to indemnification under this Agreement:

                    (a) In respect to remuneration paid to or advantage gained
          by the Indemnitee if it shall be determined by a final judgment or
          other final adjudication that the Indemnitee was not legally entitled
          to such remuneration or advantage;

                    (b) On account of the Indemnitee's conduct which is
          determined by a final judgment or other final adjudication to have
          been knowingly fraudulent, deliberately dishonest or willful
          misconduct;

                    (c) Prior to a Change in Control (as defined in Section
          4(e)), in respect of any action, suit or proceeding initiated by the
          Indemnitee against the Company or any director or officer of the
          Company unless the Company has joined in or consented to the
          initiation of such action, suit or proceeding, except (i) as set forth
          in Section 12(b) hereof, (ii) in respect of any counterclaims made
          against Indemnitee in any such action, suit or proceeding, and (iii)
          to the extent Indemnitee seeks contribution or apportionment of an
          award or settlement against Indemnitee and against the Company and/or
          any other director or officer of the Company;

                    (d) On account of any matter determined by a final judgment
          or other final adjudication to be a violation by the Indemnitee of the
          provisions of Section 16 of the Securities Exchange Act of 1934, as
          amended (the "Act"), or the rules and regulations promulgated
          thereunder, as amended from time to time; or

                    (e) With respect to any matter if it shall be determined by
          a final judgment or other final adjudication that such indemnification
          is not lawful.

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          3. Advance of Expenses and Payment of Indemnification. Upon the
written request of Indemnitee, expenses that are subject to indemnification
under this Agreement shall be advanced by the Company within five (5) business
days of receipt of such request. Subject to Section 4(a), indemnification shall
be made under this Agreement no later than sixty (60) days after receipt by the
Company of the written request of Indemnitee, which written request shall
identify the judgments, fines, penalties and amounts paid in settlement that are
subject to indemnification under this Agreement and for which indemnification is
requested. Written request shall be deemed received three days after the date
postmarked if sent by prepaid mail properly addressed to the Company at the
address set forth in Section 11(a) hereof.

          4. Determination of Indemnification.

                    (a) Notwithstanding any other provision of this Agreement
          (i) the obligations of the Company under Section 1 shall be subject to
          the condition that the Reviewing Party shall have determined (in a
          written opinion, in any case in which the Independent Legal Counsel
          referred to in Section 4(c) is involved) that Indemnitee would be
          permitted to be indemnified under this Agreement, (ii) the obligation
          of the Company to make an expense advance pursuant to Section 3 shall
          be subject to the condition that, if, when and to the extent that it
          is finally determined that Indemnitee would not be permitted to be
          indemnified for such expenses under this Agreement, the Company shall
          be entitled to be reimbursed by Indemnitee (who hereby agrees and
          undertakes to reimburse the Company) for all such amounts theretofore
          paid, and (iii) the obligation of the Company to make an expense
          advance pursuant to Section 3 shall be made without regard to the
          Indemnitee's ability to repay the amount advanced and without regard
          to the Indemnitee's ultimate entitlement to indemnification under this
          Agreement or otherwise. Indemnitee's obligation to reimburse the
          Company for expense advances shall be unsecured and no interest shall
          be charged thereon.

                    (b) The Reviewing Party shall be selected by the Board of
          Directors, provided, however, that if there has been a Change in
          Control (other than a Change in Control which has been approved by a
          majority of the Company's Board of Directors who were directors
          immediately prior to such Change in Control) the Reviewing Party shall
          be the Independent Legal Counsel referred to in Section 4(c). If there
          has been no determination by the Reviewing Party within the sixty (60)
          day period referred to in Section 3, the Reviewing Party shall be
          deemed to have made a determination that it is permissible to
          indemnify Indemnitee under this Agreement.

                    (c) The Company agrees that if there is a Change in Control
          of the Company (other than a Change in Control which has been approved
          by a majority of the Company's Board of Directors who were directors
          immediately prior to such Change in Control) then Independent Legal
          Counsel shall be selected by Indemnitee and approved by the Company
          (which approval shall not be unreasonably withheld) and such
          Independent Legal Counsel shall determine whether the director or
          officer is entitled to indemnification for expenses, judgments, fines,
          penalties and amounts paid in settlement (including, without
          limitation, all interest, assessments and other charges paid or
          payable in connection therewith) under this Agreement or any other
          agreement or the Certificate of Incorporation or Bylaws of the Company

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          now or hereafter in effect relating to indemnification. Such
          Independent Legal Counsel shall render its written opinion to the
          Company and Indemnitee as to whether and to what extent the Indemnitee
          will be permitted to be indemnified for expenses, judgments, fines,
          penalties and amounts paid in settlement (including, without
          limitation, all interest, assessments and other charges paid or
          payable in connection therewith). The Company agrees to pay the
          reasonable fees of the Independent Legal Counsel and to indemnify
          fully such Independent Legal Counsel against any and all expenses
          (including attorneys' fees), claims, liabilities and damages arising
          out of or relating to this Agreement or the engagement of Independent
          Legal Counsel pursuant hereto.

                    (d) If a determination denying Indemnitee's claim is made by
          a Reviewing Party (other than Independent Legal Counsel), notice of
          such determination shall disclose with particularity the reasons for
          such determination. If a determination denying Indemnitee's claim is
          made by Independent Legal Counsel, the notice shall include a copy of
          the related legal opinion of such counsel.

                    (e) "Change in Control" shall be deemed to have occurred if
          (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
          the Act, other than a trustee or other fiduciary holding securities
          under an employee benefit plan of the Company or a corporation owned
          directly or indirectly by the stockholders of the Company in
          substantially the same proportions as their ownership of stock of the
          Company, is or becomes the "beneficial owner" (as defined in Rule
          13d-3 under the Act), directly or indirectly, of securities of the
          Company representing 15% or more of the total voting power represented
          by the Company's then outstanding Voting Securities, or (ii) during
          any period of two consecutive years, individuals who at the beginning
          of such period constitute the Board of Directors of the Company and
          any new director whose election by the Board of Directors or
          nomination for election by the Company's stockholders was approved by
          a vote of at least two-thirds (2/3) of the directors then still in
          office who either were directors at the beginning of the period or
          whose election or nomination for election was previously so approved,
          cease for any reason to constitute a majority thereof, or (iii) the
          stockholders of the Company approve a merger or consolidation of the
          Company with any other corporation, other than a merger or
          consolidation which would result in the Voting Securities of the
          Company outstanding immediately prior thereto continuing to represent
          (either by remaining outstanding or by being converted into Voting
          Securities of the surviving entity) at least 85% of the total voting
          power represented by the Voting Securities of the Company or such
          surviving entity outstanding immediately after such merger or
          consolidation, or the stockholders of the Company approve a plan of
          complete liquidation of the Company or an agreement for the sale or
          disposition by the Company (in one transaction or a series of
          transactions) of all or substantially all of the assets of the
          Company.

                    (f) "Reviewing Party" shall mean any appropriate person or
          body consisting of a member or members of the Board of Directors of
          the Company or any other person or body appointed by the Board who is
          not a party to the particular action, suit or proceeding with respect
          to which Indemnitee is seeking indemnification, or Independent Legal
          Counsel.

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                    (g) "Independent Legal Counsel" shall mean an attorney,
          selected in accordance with the provisions of Section 4(c), who shall
          not have otherwise performed services for the Company or Indemnitee
          within the last five years (other than in connection with seeking
          indemnification under this Agreement). Independent Legal Counsel shall
          not be any person who, under the applicable standards of professional
          conduct then prevailing, would have a conflict of interest in
          representing either the Company or Indemnitee in an action to
          determine Indemnitee's rights under this Agreement, nor shall
          Independent Legal Counsel be any person who has been sanctioned or
          censured for ethical violations of applicable standards of
          professional conduct.

                    (h) "Voting Securities" shall mean any securities of the
          Company which vote generally in the election of directors.

          5. Partial Indemnity. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines, penalties and amounts paid in
settlement (including, without limitation, all interest, assessments and other
charges paid or payable in connection therewith) incurred by the Indemnitee, but
not for the total amount thereof, the Company shall indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise in defense of any or all actions, suits or
proceedings relating in whole or in part to an event subject to indemnification
hereunder or in defense of any issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against expenses incurred in
connection with such action, suit, proceeding, issue or matter, as the case may
be.

          6. Non-exclusivity. The rights of the Indemnitee under this Agreement
shall be in addition to any other rights Indemnitee may have under the
Certificate of Incorporation, the Bylaws, any other agreement of the Company,
the Delaware General Corporation Law ("DGCL"), D&O Insurance or otherwise. To
the extent that any change in the DGCL (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Certificate of Incorporation and the Bylaws of the Company and this
Agreement, it is the intent of the parties hereto that Indemnitee shall by this
Agreement be entitled to the greater benefits so afforded by such change.

          7. Liability Insurance. To the extent the Company maintains D&O
Insurance, the Company shall maintain coverage for Indemnitee under such policy
or policies, in accordance with its or their terms, to the maximum extent of the
coverage provided under such policy or policies in effect for any other director
or officer of the Company.

          8. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any claim against the
Indemnitee to the extent the Indemnitee has otherwise actually received payment
(under any insurance policy, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder or to the extent that Indemnitee is entitled to be

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indemnified directly by any insurance company under the individual directors'
and officers' liability provisions of any D&O Insurance maintained by the
Company.

          9. No Presumption. For purposes of this Agreement, the termination of
any claim, actions, suit or proceeding by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not of itself create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.

          10. Continuation of Indemnity. All agreements and obligations of the
Company contained herein shall continue during the period the Indemnitee is a
director, officer, employee, agent or fiduciary of the Company, or is serving at
the request of the Company as a director, officer, employee, agent or fiduciary
of another corporation, partnership, joint venture, trust or other entity or
enterprise, and shall continue thereafter so long as the Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that the Indemnitee was a director or officer of the Company or serving in any
other capacity referred to herein.

          11. Notification of Proceedings; Consent to Settlements; Defense.

                    (a) Promptly after receipt by the Indemnitee of notice of
          the commencement of any action, suit or proceeding, the Indemnitee
          shall, if a claim in respect thereof is to be made against the Company
          under this Agreement, notify the Company of the commencement thereof.
          Notice shall be in writing and shall be addressed as follows:

                           Gateway Energy Corporation
                           500 Dallas Street, Suite 2615
                           Houston, Texas 77002
                           Attention:  Secretary

                           Such notice shall be deemed received if sent by
         prepaid mail properly addressed. Indemnitee and the Company shall
         cooperate fully with each other in the defense of any such action, suit
         or proceeding and each shall provide the other with such information as
         the other may reasonably require. The Company shall not be liable to
         indemnify the Indemnitee under this Agreement for any amounts paid in
         settlement of any action, suit or proceeding effected without its prior
         written consent (which consent shall not be unreasonably withheld).

                    (b) The Company shall be entitled to participate in the
          Proceeding at its own expense.

                    (c) Except as otherwise provided below, the Company may, at
          its option, assume the defense of such action, suit or proceeding with
          legal counsel reasonably satisfactory to the Indemnitee. After notice
          from the Company to the Indemnitee of its election to assume the
          defense of an action, suit or proceeding, the Company will not be

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          liable to the Indemnitee for expenses incurred by the Indemnitee in
          connection with such action, suit or proceeding under this Agreement,
          including Section 3 hereof, other than Indemnitee's reasonable costs
          of investigation or participation in such action, suit or proceeding
          (including, without limitation, travel expenses) and except as
          provided below. The Indemnitee shall have the right to employ
          Indemnitee's own counsel in any such action, suit or proceeding, but
          the fees and expenses of such counsel incurred after notice from the
          Company of its assumption of the defense of such action, suit or
          proceeding shall be at the expense of the Indemnitee, unless (i) the
          employment of counsel by the Indemnitee has been authorized by the
          Company, (ii) the Indemnitee shall have reasonably concluded that
          there may be a conflict of interest between the Company and the
          Indemnitee in the conduct of the defense of such action, suit or
          proceeding, or (iii) the Company shall not in fact have employed
          counsel to assume the defense of such action, suit or proceeding, in
          each of which cases the fees and expenses of the Indemnitee's counsel
          shall be advanced by the Company as provided in Section 3 hereof. The
          Company shall not be entitled to assume the defense of any such
          action, suit or proceeding brought by or on behalf of the Company.

                    (d) If two or more persons, including the Indemnitee, may be
          entitled to indemnification from the Company as parties to any action,
          suit or proceeding, the Company may require the Indemnitee to use the
          same legal counsel as the other parties. The Indemnitee shall have the
          right to use separate legal counsel in such action, suit or
          proceeding, but the Company shall not be liable to the Indemnitee
          under this Agreement, including Section 3 hereof, for the fees and
          expenses of separate legal counsel incurred after notice from the
          Company of the requirement to use the same legal counsel as the other
          parties, unless the Indemnitee reasonably concludes that there may be
          a conflict of interest between the Indemnitee and any of the other
          parties required by the Company to be represented by the same legal
          counsel.

                    (e) The Indemnitee shall permit the Company to settle any
          action, suit or proceeding that the Company assumes the defense of,
          except that the Company shall not, without the Indemnitee's written
          consent, settle any action, suit or proceeding unless such settlement
          includes a provision whereby the parties to the settlement
          unconditionally release Indemnitee from all liabilities, damages,
          fines, penalties, costs and expenses in respect of claims by reason of
          the settlement or release of the parties in such action, suit or
          proceeding.

          12. Enforcement.

                    (a) The Company expressly confirms and agrees that it has
          entered into this Agreement and assumed the obligations imposed on it
          hereby in order to induce the Indemnitee to agree to serve or to
          continue to serve as a director and/or officer of the Company and
          acknowledges that the Indemnitee is relying upon this Agreement in
          agreeing to serve or continuing to serve in such capacity.

                    (b) The right to indemnification provided by this Agreement
          shall be enforceable by Indemnitee in any court in the State of
          Delaware having subject matter jurisdiction thereof and in which venue

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          is proper. The Indemnitee shall have the right to commence litigation
          in any such court challenging any determination by the Reviewing Party
          or any aspect thereof, or the legal or factual bases therefor. The
          Company shall reimburse Indemnitee for any and all reasonable expenses
          (including attorneys' fees) incurred by Indemnitee in connection with
          any claim asserted or action brought by Indemnitee to enforce rights
          or to collect moneys due under this Agreement, the Certificate of
          Incorporation or the Bylaws of the Company or any other agreement with
          the Company nor or hereafter in effect relating to indemnification, or
          any D&O Insurance purchased and maintained by the Company, regardless
          of whether Indemnitee ultimately is determined to be entitled to such
          indemnification, advance expense payment or insurance coverage, as the
          case may be, unless the court determines that the claim or action is
          frivolous or that assertions made therein were made with no reasonable
          basis.

                    (c) In connection with any determination by the Reviewing
          Party or otherwise as to whether Indemnitee is entitled to be
          indemnified hereunder the burden of proof shall be on the Company to
          establish that Indemnitee is not so entitled.

          13. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.

          14. Governing Law; Binding Effect; Amendment and Termination.

                    (a) This Agreement shall be interpreted and enforced in
          accordance with the laws of the State of Delaware without giving
          effect to the principles of conflicts of laws thereof.

                    (b) This Agreement shall be binding upon the Indemnitee and
          upon the Company, its successors and assigns (including any transferee
          of all or substantially all of the assets of the Company and any
          successor by merger or operation of law), and shall inure to the
          benefit of the Indemnitee, his or her heirs, personal representatives
          and assigns and to the benefit of the Company, its successors and
          assigns. The Company shall require and cause any successor to all or
          substantially all of its assets, by written agreement in form and
          substance satisfactory to Indemnitee, expressly to assume and agree to
          perform this Agreement in the same manner and to the same extent that
          the Company would be required to perform if no succession had taken
          place.

                    (c) No amendment, modification, termination or cancellation
          of this Agreement shall be effective unless in writing signed by both
          parties hereto. No waiver of any provision of this Agreement shall be
          deemed or shall constitute a waiver of any other provision hereof, and
          no such waiver shall constitute a continuing waiver.

          15. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of such Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.

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          16. Change in Other Rights. The Company will not adopt any amendment
to the Certificate of Incorporation or Bylaws of the Company the effect of which
would be to deny, diminish or encumber the Indemnitee's rights to
indemnification, advancement of expenses, exculpation or maintenance of the D &
O Insurance hereunder, under such other documents or under applicable law, as
applied to any act or failure to act occurring in whole or in part prior to the
date upon which any such amendment was approved by the Board of Directors or the
stockholders, as the case may be. Notwithstanding the foregoing, if the Company
adopts any amendment to the Certificate of Incorporation or Bylaws the effect of
which is to so deny, diminish or encumber such rights, such amendment will apply
only to acts or failures to act occurring entirely after the effective date
thereof.

          17. Savings Clause. If this Agreement or any provision hereof is
invalidated on any ground by any court of competent jurisdiction, the Company
shall nevertheless indemnify the Indemnitee as to any expenses, judgments,
fines, penalties and amounts paid in settlement actually and reasonably incurred
by the Indemnitee in connection with any action, suit or proceeding to the
fullest extent permitted by any applicable provision of this Agreement that has
not been invalidated and to the fullest extent permitted by Delaware law.

          18. Deposit of Funds in Trust. In the event that the Company decides
to voluntarily dissolve or to file a voluntary petition for relief under
applicable bankruptcy, moratorium or similar laws, then not later than ten (10)
days prior to such dissolution or filing, the Company shall deposit in trust for
the exclusive benefit of Indemnitee a cash amount equal to all amounts
previously authorized to be paid to Indemnitee hereunder, such amounts to be
used to discharge the Company's obligations to Indemnitee hereunder. Any amount
in such trust not required for such purpose shall be returned to the Company.

          19. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other.

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

                                            GATEWAY ENERGY CORPORATION

                                            By:  /s/
                                               --------------------------------
                                                      Robert Panico,
                                                      President and
                                                      Chief Executive Officer

                                            Indemnitee:

                                            -----------------------------------
                                            Name:

                                       9Exhibit 10.2

                              EMPLOYMENT AGREEMENT

          This Employment Agreement (the "Agreement"), dated as of August 22,
2006 (the "Effective Date"), by and between the Gateway Energy Corporation, a
Delaware corporation (the "Employer"), and Robert Panico (the "Executive").

                              W I T N E S S E T H:

          In consideration of the promises, the agreements and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Executive
hereby agree as follows:

          1. Agreement of Employment. The Executive's future employment with the
Employer shall be subject to the terms and conditions of this Agreement. Various
capitalized terms are defined either where they first appear in this Agreement
or in Sections 7(b) and 8.

          2. Term, Position and Responsibilities.

                    (a) Term of Employment. Pursuant to this Agreement, Employer
          shall employ the Executive for a term commencing on the Effective Date
          and ending upon termination pursuant to Section 6 (such period to be
          known as the "Term"). The respective rights and obligations of the
          parties hereunder shall survive the end of the Term to the extent that
          any obligation of the Employer under this Agreement remains unpaid (or
          otherwise not fully discharged) as of such time, and to the extent
          provided in Sections 7 and 18.

                    (b) Position and Responsibilities. During the Term, the
          Executive shall serve as Chief Executive Officer and President of the
          Employer reporting directly to its Board. The Executive shall devote
          substantially all of his skill, knowledge and working time to the
          conscientious performance of such duties, except for reasonable
          vacation time (as described in Section 5(b)), absence for sickness or
          similar Disability and authorized leaves of absence.

                    (c) Place of Employment. During the Term, the Executive's
          primary place of employment shall be at the Employer's headquarters
          located in Houston, Texas, except as travel to other locations is
          warranted by the business of the Employer.

          3. Base Salary. As partial compensation for the services to be
performed by the Executive hereunder, the Employer shall pay the Executive an
annualized base salary of at least $139,920.00 during each year of the Term. The
Compensation and Stock Option Committee of the Employer's Board of Directors
(the "Committee") shall review Executive's base salary at least annually during
the Term and, in its discretion, may increase (but not decrease) such base
salary from time to time based upon the performance of the Executive, the
financial condition of the Employer, prevailing industry salary scales and such
other factors as it may consider relevant. The annualized base salary payable to

<PAGE>

the Executive under this Section 3, as the same may be increased from time to
time and without regard to any reduction therefrom in accordance with the next
sentence, shall hereinafter be referred to as the "Base Salary." The Base Salary
actually payable under this Section 3 shall be reduced to the extent that the
Executive elects to defer any portion of such Base Salary under the terms of any
section 401(k) savings plan or nonqualified deferred compensation plan
maintained or established by the Employer and shall be reduced for applicable
statutory reductions and withholding. The Employer shall pay the Executive the
Base Salary in semi-monthly installments, or in such other installments as may
be mutually agreed upon by the Employer and the Executive.

          4. Benefits.

                    (a) Welfare Benefits. During the Term, the Employer shall
          arrange for the provision to the Executive and his family of medical,
          dental, prescription drug, vision, life insurance and long-term
          disability benefits. The benefits so required shall be comparable to
          those benefits presently available to the Executive by the Employer,
          as the same may be amended and in effect from time to time.

                    (b) Retirement Benefits. During the Term, the Executive
          shall be entitled to participate in a tax-qualified "section 401(k)"
          retirement plan as made generally available to employees of the
          Employer and such other retirement plans as are generally available
          from time to time to senior executive officers of the Employer.

          5. Perquisites and Expenses.

                    (a) General. During the Term, the Executive shall be
          entitled to participate in such perquisites as are generally available
          from time to time to senior executive officers of the Employer, on the
          terms and conditions then prevailing under such perquisites.

                    (b) Vacation. During the Term, the Executive shall be
          entitled to four (4) weeks of paid vacation per year, without
          carry-over accumulation, consistent with the Employer's vacation
          policy generally applicable to other employees of the Employer.

                    (c) Expense Reimbursement. During the Term, the Executive
          shall be entitled to receive prompt reimbursement upon a timely basis
          (according to the then-current practices of the Employer) for all
          reasonable expenses incurred by the Executive in performing his duties
          and responsibilities hereunder upon the presentation by the Executive
          of an itemized monthly accounting of such expenditures, including
          receipts where required by the Employer's policy or federal income tax
          regulations.

          6. Termination of Employment.

                    (a) Due to Death or Disability. Upon the Executive's death
          or Disability, all obligations of the Employer and the Executive under
          Sections 1 through 5 of this Agreement shall immediately cease;
          provided, however, the Employer shall pay, and the Executive (or his
          estate) shall be entitled to receive, the following:

                                       2

<PAGE>

                    (i)       any accrued, unpaid portion of Base Salary and
                              accrued vacation through the Date of Termination;

                    (ii)      in lieu of any annual incentive compensation for
                              the period in which Executive's applicable Date of
                              Termination occurs, but subject to the terms of
                              any annual incentive compensation plan or program
                              which would provide for greater compensation upon
                              the Date of Termination, the Executive shall be
                              paid the amount produced by multiplying:

                              (A)       the Executive's annual incentive bonus
                                        for the year in which the Executive's
                                        Date of Termination occurs determined as
                                        of the end of such year in accordance
                                        with the applicable plan, by

                              (B)       a fraction, the numerator of which is
                                        the number of days the Executive was
                                        employed in the year through the Date of
                                        Termination, and the denominator of
                                        which is the total number of days in the
                                        year relevant to the annual incentive
                                        compensation plan; and

                    (iii)     all amounts owing and accrued at the Date of
                              Termination, after taking into account such death
                              or Disability, under any long-term incentive
                              compensation and deferred compensation plans in
                              which the Executive theretofore participated,
                              under the terms and conditions of such plans.

          Amounts which are immediately payable will be paid as promptly as
          reasonably practicable, but no later than thirty (30) days, after the
          Executive's Date of Termination, except that the amounts payable under
          clause (ii) above shall be paid as promptly as reasonably practicable
          after the end of the year in which the Date of Termination occurs. In
          addition, the Employer shall continue to provide at its expense the
          benefits described in Section 4(a) of this Agreement, as in effect at
          the time of Executive's death or Disability, to the Executive (if
          disabled) and Executive's immediate family for a period of eighteen
          (18) months.

                    (b) Termination by the Employer for Cause and Voluntary
          Termination by the Executive. Upon the Executive's termination of
          employment during the Term (i) by the Employer for Cause or (ii) by
          the Executive without Good Reason (other than due to the Executive's
          death or Disability), in which case Executive agrees to deliver to the
          Board the Notice of Termination at least thirty (30) days prior to
          termination of employment, all obligations of the Employer under
          Sections 1 through 5 of this Agreement shall immediately cease;
          provided, however, the Employer shall pay the Executive, and the
          Executive shall be entitled to receive, any accrued, unpaid portion of
          Base Salary through the Date of Termination. In addition, the
          Executive shall be entitled to any vested, non-forfeitable amounts
          owing and accrued at the Date of Termination under any long-term
          incentive compensation and deferred compensation plans in which the

                                       3

<PAGE>

          Executive theretofore participated, under the terms and conditions of
          such plans. Amounts which are immediately payable will be paid as
          promptly as reasonably practicable, but no later than thirty (30)
          days, after the Executive's Date of Termination.

                    (c) Termination by the Employer without Cause and
          Termination by the Executive for Good Reason. Upon the Executive's
          termination of employment during the Term either (1) by the Employer
          for any reason other than death, Disability, Retirement or for Cause,
          or (2) by the Executive for Good Reason, all obligations of the
          Employer and the Executive under Sections 1 through 5 of this
          Agreement shall immediately cease; provided, however, the Employer
          shall provide to the Executive and the Executive shall be entitled to
          receive:

                    (i)       payment of the aggregate of the following amounts:

                              (A)       the Executive's accrued and unpaid Base
                                        Salary and accrued vacation through the
                                        Date of Termination to the extent not
                                        theretofore paid; and

                              (B)       one and one-half (1 1/2) times an amount
                                        equal to the highest sum of the
                                        Executive's Base Salary plus annual
                                        incentive bonus earned, in each of the
                                        three most recently completed fiscal
                                        years of the Employer, provided that in
                                        the event a Change of Control has
                                        occurred prior to the Date of
                                        Termination, such highest sum shall be
                                        multiplied times two (2); and

                    (ii)      the Employer shall continue to provide at its
                              expense the benefits described in Section 4(a) of
                              this Agreement, as in effect at the Date of
                              Termination to the Executive and Executive's
                              immediate family for a period of up to eighteen
                              (18) months. The Executive's coverage for the
                              remainder of such eighteen-month period shall not
                              be included in the calculation of the period of
                              coverage to be provided pursuant to any statutory
                              continuation of benefits obligation (such as
                              COBRA). The Executive's right to statutory
                              continuation coverage shall commence on the first
                              day following the end of such eighteen-month
                              period. If such welfare benefit plans and programs
                              do not allow the Executive's continued
                              participation, a cash payment shall be made to the
                              Executive equal to the value of the additional
                              benefits the Executive would have received under
                              such benefit programs in which the Executive was
                              participating immediately prior to the Date of
                              Termination. With respect to any payment under the
                              immediately preceding sentence, the value of any
                              insurance-provided benefits shall be based on the
                              premium cost to the Executive, which shall not
                              exceed the highest risk premium charged by a
                              carrier having an investment grade or better
                              credit rating. These benefits shall be reduced by
                              the amount of similar benefits Executive is
                              eligible to receive during such period from or
                              through a subsequent employer, as determined
                              solely by the Board. For the purposes of enforcing
                              this offset provision, Executive shall notify the
                              Board as to the terms and conditions of any
                              subsequent employment and the corresponding
                              benefits received pursuant thereto, and shall
                              provide, or cause to provide the Board, correct,
                              complete, and timely information concerning the
                              same.

          Amounts which are payable above will be paid as promptly as reasonably
          practicable, but no later than thirty (30) days, after the Executive's
          Date of Termination, provided however, if a Change of Control has not
          occurred prior to the Date of Termination, then the Company may elect
          to pay such amounts in eighteen (18) equal monthly installments with
          the first such installment being due and payable on the first day of
          the first calendar month following the Date of Termination. If the
          Company elects to make such payments in installments, the Company
          shall secure the entire amount due pursuant to a letter of credit
          issued by a bank.

                    (d) Notice of Termination. Any purported termination of the
          Executive's employment (other than by reason of death) or notice on
          non-renewal of the Term pursuant to Section 2(d) shall be communicated
          by written "Notice of Termination" from one party hereto to the other
          party hereto. For purposes of this Agreement, a "Notice of
          Termination" shall mean a notice that indicates the specific
          termination provision in this Agreement relied upon. Any Notice of
          Termination shall set forth in reasonable detail the facts and
          circumstances claimed to provide a basis for termination of the
          Executive's employment under the provision so indicated and the
          effective date of termination of this Agreement and Executive's
          employment.

                    (e) Notices of Cause and Good Reason. A termination for
          Cause shall be permitted hereunder only if an Employer provides the
          Notice of Termination not later than six (6) months after the date the
          Employer first knew or should have known of the act or omission to act
          giving rise to the termination for Cause. A termination for Good
          Reason shall be permitted hereunder only if the Executive provides the
          Notice of Termination not later than six (6) months after the date the
          Executive first knew or should have known of the act or omission to
          act giving rise to the termination for Good Reason. In either case,
          the six (6)-month period shall be tolled during any permitted period
          of correction or administrative procedure.

                    (f) Discharge of Obligations. The payments and benefits
          under Section 6 shall fully and totally satisfy the Executive's
          entitlement, and shall fully discharge the Employer, in respect of all
          statutory compensation and benefits and any notice obligation under
          applicable law. Any payments and benefits provided for in this Section
          6 shall be contingent upon Executive executing a full release of any
          and all claims against the Employer, the Board and officers of the
          Employer and any affiliates and representatives of the Employer
          arising out of Executive's employment with the Employer or this
          Agreement.

                                       5

<PAGE>

                    (g) Termination by Either Party After the Term Hereof.
          Notwithstanding any of the provisions of Section 7 hereof, if
          Executive's employment is terminated for any reason after the
          expiration of the Term hereof and no other written employment
          agreement between the Executive and the Employer is in effect,
          Executive will be free of all his obligations under second sentences
          of Section 7(d), (e) and (e) hereof.

                    (h) Resignation. In the event of termination of Executive's
          employment hereunder (for any reason other than death), the Executive
          agrees that if at such time he is a member of the Board or officer of
          this Employer or a director or officer of any of its subsidiaries, he
          will promptly deliver to the Employer his written and executed
          resignation from all such positions, such resignation to be effective
          as of the Executive's Date of Termination.

          7. Non-Disclosure, Non-Competition and Non-Solicitation Covenants. Set
out in this Section are certain covenants regarding non-disclosure,
non-competition and non-solicitation which the Executive acknowledges, accepts
and agrees to by entering into this Agreement.

                    (a) Acknowledgements. The Executive acknowledges that, as
          Chief Executive Officer and President of the Employer, the Executive
          frequently is or will be exposed to certain "Trade Secrets" and
          "Confidential Information" (as those terms are defined in Section
          7(b)). Accordingly, the Executive acknowledges and agrees that it is
          reasonable for the Employer to require the Executive to abide by the
          covenants set forth in this Section 7 during and after Executive's
          term of employment.

                    (b) Definitions. For purposes of this Section 7, the
          following terms shall have the following meanings:

                    (i)       "Competitive Position" means a position as an
                              employee, employer, consultant, agent, principal,
                              partner, shareholder, officer, director or other
                              individual or representative capacity with a
                              competitor whereby Executive is required to
                              perform executive level services substantially
                              similar to those that the Executive performs for
                              the Employer.

                    (ii)      "Competitor" refers to any person or entity
                              engaged, wholly or partly, in the business of
                              owning or operating natural gas gathering,
                              transportation and distribution systems and
                              related facilities or nitrogen rejection processes
                              which would result in direct competition with the
                              Employer.

                    (iii)     "Confidential Information" means the proprietary
                              and confidential data or information of the
                              Employer, other than "Trade Secrets" (as defined
                              below), which is of tangible or intangible value
                              to the Employer and is not public information or
                              is not generally known or available to the
                              Employer's Competitors.

                    (iv)      "Trade Secrets" means information of the Employer,
                              including, but not limited to, technical or
                              non-technical data, compilations, programs,

                                       6

<PAGE>

                              devices, methods, techniques, financial data,
                              financial plans, product plans or lists of actual
                              or potential customers or suppliers, which (a)
                              derives economic value, actual or potential, from
                              not being generally known to, and not being
                              readily ascertainable by proper means by, other
                              persons who can obtain economic value from its
                              disclosure or use; and (b) is the subject of
                              efforts that are reasonable under the
                              circumstances to maintain its secrecy.

                    (c) Non-disclosure, Ownership of Proprietary Property.

                    (i)       The Executive hereby covenants and agrees that (A)
                              with regard to information constituting a Trade
                              Secret, at all times during the Executive's
                              employment with the Employer and all times
                              thereafter during which such information continues
                              to constitute a Trade Secret; and (B) with regard
                              to any Confidential Information, at all times
                              during the Term and for a period of five (5) years
                              after his Date of Termination, the Executive shall
                              regard and treat all information constituting a
                              Trade Secret or Confidential Information as
                              strictly confidential and wholly owned by the
                              Employer and will not, for any reason in any
                              fashion, either directly or indirectly, use, sell,
                              lend, lease, distribute, license, give, transfer,
                              assign, show, disclose, disseminate, reproduce,
                              copy, appropriate or otherwise communicate any
                              such information to any party for any purpose
                              other than strictly in accordance with the express
                              terms of this Agreement and other than as may be
                              required by law.

                    (ii)      In addition to complying with the provisions of
                              Section 7(c)(i) and except as provided in Section
                              6(g), the Executive shall exercise the Executive's
                              best efforts to assist the Employer, to the extent
                              the Employer deems reasonably necessary, in the
                              procurement of any protection of its rights to or
                              in any of the Trade Secrets or Confidential
                              Information.

                    (iii)     Immediately upon the Executive's Date of
                              Termination with the Employer, or at any point
                              prior to or after that time upon the specific
                              request of the Employer, the Executive shall
                              return to the Employer all written or descriptive
                              materials of any kind in the Executive's
                              possession or to which the Executive has access
                              that constitute or contain any Confidential
                              Information or Trade Secrets.

                    (d) Non-Competition. The Executive agrees that during the
          Term of this Agreement, the Executive will not, either directly or
          indirectly, alone or in conjunction with any other party, take any
          action in furtherance of or in conjunction with a Competitive Position
          with a Competitor of the Employer. Except as provided in Section 6(g),

                                       7

<PAGE>

          the Executive agrees that for a period of eighteen (18) months after
          his Date of Termination, the Executive will not, either directly or
          indirectly, alone or in conjunction with any other party, take any
          action in furtherance of or in conjunction with a Competitive Position
          with a Competitor within the continental United States.

                    (e) Non-Solicitation of Customers. The Executive agrees
          that, while employed with the Employer, the Executive will not, either
          directly or indirectly, alone or in conjunction with any other party,
          solicit, divert or appropriate, or attempt to solicit, divert or
          appropriate, any customer or actively sought prospective customer of
          the Employer for on behalf of himself or any Competitor. Except as
          provided in Section 6(g), the Executive agrees that for a period of
          eighteen (18) months after his Date of Termination, the Executive will
          not, either directly or indirectly, alone or in conjunction with any
          other party, for or on behalf of himself or a Competitor, solicit,
          divert or appropriate, or attempt to solicit, divert or appropriate
          any customer or actively sought prospective customer of the Employer
          with whom the Executive had substantial contact during a period of
          time up to, but no longer than two (2) years prior to the Executive's
          Date of Termination.

                    (f) Non-Solicitation of Personnel. The Executive agrees
          that, while employed with the Employer, the Executive will not, either
          directly or indirectly, alone or in conjunction with any other party,
          solicit or attempt to solicit any employee or other personnel of the
          Employer to terminate, alter or lessen that party's affiliation with
          the Employer or to violate the terms of any agreement or understanding
          between such employee or other person and the Employer. The Executive
          agrees that, for a period of eighteen (18) months after the
          Executive's Date of Termination, the Executive will not, either
          directly or indirectly, alone or in conjunction with any other party,
          solicit or attempt to solicit any "material" or "key" (as those terms
          are defined in the next sentence) employee or other personnel of the
          Employer to terminate, alter or lessen that party's affiliation with
          the Employer or to violate the terms of any agreement or understanding
          between such employee or other person and the Employer. For purposes
          of the preceding sentence, "material" or "key" employees or other
          personnel of the Employer are those who have access to the Employer's
          Trade Secrets and Confidential Information.

                    (g) Remedies. The Executive agrees that damages at law for
          the Executive's violation of any of the covenants in this Section 7
          would not be an adequate or proper remedy and that should the
          Executive violate or threaten to violate any of the provisions of such
          covenants, an Employer or its successors or assigns shall be entitled
          to obtain a temporary or permanent injunction against the Executive in
          any court having jurisdiction prohibiting any further violation of any
          such covenants.

                    (h) Ability to Earn Livelihood. Executive expressly agrees
          and acknowledges that the covenants and restrictions contained in
          Section 7 do not preclude Executive from earning a livelihood, nor do
          they unreasonably impose limitations on Executive's ability to earn a
          living. In addition, Executive agrees and acknowledges that the
          potential harm to the Employer of its non-enforcement outweighs any
          harm to the Executive of its enforcement by injunction or otherwise.

                                       8

<PAGE>

                    (i) Enforcement. If any court of competent jurisdiction or
          arbitrator deems any term, or the scope of any provision, of Section 7
          unenforceable, the aspects of this Section 7 so deemed shall be
          reduced, reformed or modified by appropriate order and shall
          thereafter continue, as so modified, in full force and effect, and the
          remainder of Section 7 of the Agreement shall nevertheless stand and
          shall remain in full force and effect.

          8. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings (unless expressly indicated to the contrary)
and the term shall be capitalized when the meaning is intended:

          (a)       "Board" means the Board of Directors of the Employer.

          (b)       "Cause" means, as to the Executive, any of the following:

                    (i)       the Executive's conviction of any felony, or any
                              other crime involving misuse or misappropriation
                              of money, or entering a plea of no contest in a
                              court of law to a felonious crime or other crime
                              involving a misuse or misappropriation of money or
                              property; or

                    (ii)      the Executive's engaging in one or more acts of
                              dishonesty which (A) result in material and
                              demonstrable damage to the Employer or (B)
                              materially and demonstrably impair the value of
                              the Executive's services to the Employer; or

                    (iii)     a fraudulent certification under Section 302 or
                              Section 906 of the Sarbanes-Oxley Act of 2002, as
                              amended from time to time; or

                    (iv)      the Executive's violation of any of the covenants
                              set out in Section 7 of this Agreement.

                    Notwithstanding the foregoing, the Executive may not be
          terminated for Cause unless and until there shall have been delivered
          to the Executive a copy of a notice specifying the nature of the
          grounds for such termination. The notice also shall afford the
          Executive with the opportunity, together with the Executive's counsel,
          to be heard regarding the existence of Cause. The Executive shall have
          thirty (30) days to correct the acts or omissions complained of, if
          correctable. Nothing contained in the foregoing provisions of this
          Section or elsewhere in this Agreement shall be deemed to interfere in
          any way with the right to terminate the Executive's employment at any
          time without Cause.

                    (c) "Change in Control" means the occurrence of any of the
          following events during the Term of this Agreement and shall be deemed
          to have occurred on the date the first such event occurs:

                    (i)       Change in Voting Power. Any person or persons
                              acting together which would constitute a "group"
                              for purposes of Section 13(d) of the Exchange Act
                              (other than the Employer, or any Subsidiary, or

                                       9

<PAGE>

                              any entity beneficially owned by any of the
                              foregoing) beneficially own (as defined in Rule
                              13(d)-3 under the Exchange Act) without Board
                              approval or consent, directly or indirectly, at
                              least thirty percent (30%) of the total voting
                              power of the Employer entitled to vote generally
                              in the election of the Board;

                    (ii)      Change in Board of Directors. Either:

                              (A)       the Current Directors (as hereinafter
                                        defined) cease for any reason to
                                        constitute at least a majority of the
                                        members of the Board (for these
                                        purposes, a "Current Director" means any
                                        member of the Board as of the date of
                                        this Agreement, and any successor of a
                                        Current Director whose election or
                                        nomination for election by the
                                        Employer's stockholders was approved by
                                        at least a majority of the current
                                        Directors then on the Board); or

                              (B)       at any meeting of the stockholders of
                                        the Employer called for the purpose of
                                        electing directors, a majority of the
                                        persons nominated by the Board for
                                        election as directors fail to be
                                        elected; or

                    (iii) Liquidation, Merger or Consolidation. The stockholders
          of the Employer approve an agreement providing for the merger or
          consolidation of the Employer (i) in which the Employer is not the
          continuing or surviving corporation (other than consolidation or
          merger with a wholly owned subsidiary of the Employer in which all
          shares outstanding immediately prior to the effectiveness thereof are
          changed into or exchanged for the same consideration) or (ii) pursuant
          to which the shares are converted into cash, securities or other
          property, except a consolidation or merger of the Employer in which
          the holders of the shares immediately prior to the consolidation or
          merger have, directly or indirectly, at least a majority of the common
          stock of the continuing or surviving corporation immediately after
          such consolidation or merger, or in which the Board immediately prior
          to the merger or consolidation would, immediately after the merger or
          consolidation, constitute a majority of the board of directors of the
          continuing or surviving corporation; or

                    (iv) Sale of Assets. The stockholders of the Employer
          approve an agreement (or agreements) providing for the sale or other
          disposition (in one transaction or a series of transactions) of all or
          substantially all of the assets of the Employer or a plan of complete
          liquidation of the Employer.

                    (d) "Code" means the Internal Revenue Code of 1986, as
          amended.

                                       10

<PAGE>

                    (e) "Date of Termination" means, (i) if the Executive's
          employment with the Employer (or a successor) is terminated by the
          Executive's death, the date of the Executive's death; (ii) if such
          employment is terminated by the Employer for Cause, the date on which
          Notice of Termination is given; and (iii) if such employment is
          terminated for any other reason, the date on which Notice of
          Termination is given or, if no such Notice of Termination is given,
          the day after the date the Executive ceases to render services.

                    (f) "Disability" means a determination by the Board, in its
          reasonable discretion, that the Executive is unable to engage in the
          customary duties and responsibilities of his position by reason of any
          medically determinable physical or mental impairment which can be
          expected to result in death or which has lasted or can be expected to
          last for a continuous period of at least six (6) months. If the
          Executive disputes the determination of the Board, the dispute shall
          be resolved by a mutually agreed upon physician. Upon the failure of
          the Employer and the Executive to agree upon a physician, the
          Executive and the Employer shall each select, at their own expense, a
          physician, duly licensed to practice in that field of medicine
          encompassing the area of alleged disability, to examine the Executive.
          The physicians selected by Executive and the Employer, respectively,
          shall mutually select a third physician, duly licensed to practice in
          that field of medicine encompassing the area of alleged disability, to
          examine Executive. Each such physician selected shall be a
          disinterested person of recognized competence who, at the time of his
          or her selection, has no professional or business relationship with
          the other physicians selected, Executive or the Employer. Thereafter,
          within a reasonable time period after the selection of the three (3)
          physicians, not to exceed thirty (30) days after the selection of the
          final physician, Executive shall submit to an examination by each such
          physician. Each physician shall then determine whether Executive is
          disabled within the meaning of this Agreement, and shall provide
          written notice of his or her determination to both Executive and the
          Employer. The decision reached by a majority of the physicians shall
          be conclusive on the parties hereto. The cost of each physician shall
          be borne equally by the Executive and the Employer. In no event shall
          the good faith determination of any physician selected pursuant to
          this Agreement give rise to liability of any kind whatsoever by such
          physician to either Executive or the Employer.

                    (g) "Good Reason" means the occurrence of any of the
          following events:

                    (i)       the assignment to the Executive of duties
                              materially inconsistent with the Executive's
                              position (including status, titles and reporting
                              requirements), authority, duties or
                              responsibilities as contemplated by Section 2(b)
                              of this Agreement, or any other action by the
                              Employer which results in a significant diminution
                              in such position, authority, duties;

                    (ii)      the Employer's requiring the Executive to be based
                              at any office or location more than fifty (50)
                              miles from the location described in Section 2(c);

                                       11

<PAGE>

                    (iii)     a reduction by the Employer in the Executive's
                              rate of annual Base Salary; or

                    (iv)      the failure of the Employer to obtain from a
                              successor (including a successor to a material
                              portion of the business or assets of the Employer)
                              a satisfactory assumption in writing of the
                              Employer's obligations under this Agreement.

                    Notwithstanding the foregoing, Good Reason shall not exist
          if (i) such event occurs with the Executive's express prior written
          consent; (ii) the event is an isolated, insubstantial and inadvertent
          action or failure to act which was not taken in bad faith and which is
          remedied by the Employer promptly after receipt of notice thereof
          given by the Executive; or (iii) the event occurs in connection with
          the termination of the Executive's employment for Cause or due to
          Disability or death.

                    (h) "Retirement" means termination of Executive's employment
          by the Employer after Executive has reached the Employer's retirement
          age, as established from time to time by the Employer for its senior
          executive officers, which in no event shall be earlier than 65 years
          of age.

          9. Assumption of Agreement. The Employer will require any successor
(by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Employer, by agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that Employer
would be required to perform it if no such succession had taken place. Failure
of the Employer to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from the Employer in the same amount and on the same terms as
the Executive would be entitled hereunder if the Executive incurred a
termination of employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the term "Employer" shall mean the Employer as herein previously defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, written agreement or otherwise.

          10. Entire Agreement. Except as otherwise expressly provided herein,
this Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof, and all promises, representations,
understandings, arrangements and prior agreements relating to such subject
matter (including those made to or with the Executive by any other person or
entity) are merged herein and superseded hereby.

          11. Successors and Assigns. This Agreement shall inure to the benefit
of and be enforceable by the Executive and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees, and shall be binding upon and inure to the benefit of the
Employer and its permitted successors and assigns as provided. This Agreement is
a personal contract and the rights and interests of the Executive hereunder may
not be sold, transferred, assigned, pledged, encumbered, margined, conveyed,

                                       12

<PAGE>

gifted, alienated, or hypothecated by the Executive, except as otherwise
expressly permitted by the provisions of this Agreement. The Employer shall have
the right to assign this Agreement to any corporation with which it may merge or
consolidate.

          12. Arbitration. Except for the rights and duties of the parties set
forth in Section 7(g) of this Agreement, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Houston, Texas, according to the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
for all periods up to the Date of Termination during the pendency of any dispute
or controversy arising under or in connection with this Agreement. If the
Executive is the prevailing party with respect to enforcement of this Agreement,
Employer shall pay all costs and expenses, including but not limited to,
reasonable attorneys' fees actually incurred by the Executive in the successful
enforcement in respect to any of his rights under this Agreement.

          13. Governing Law. This Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Texas, without regard to Texas conflicts of law principles, except in so far
as federal laws and regulations may be applicable.

          14. Withholding. The foregoing and other provisions of this Agreement
notwithstanding, all payments to be made to the Executive under this Agreement
will be subject to required withholding taxes and other required deductions, and
the Executive shall provide the Employer such information as the Employer
reasonably requests so that such Employer may implement and verify the operation
of this Section.

          15. Amendments and Waivers. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by the Committee or a person authorized thereby and is agreed to in
writing by the Executive and such officer as may be specifically designated by
the Committee. No waiver by any party hereto at any time of any breach by any
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

          16. Severability. In the event that all or any part of any provision
of this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement or such provision shall be
unaffected thereby and shall remain in full force and effect. If any provision
of this Agreement or portion thereof is so broad as to be unenforceable, it
shall be interpreted to be only so broad as is enforceable. Nothing in this
Agreement is intended to or shall be construed to violate any federal or state
law or regulation.

          17. Notices. Any notice or other communication required or permitted
to be delivered under this Agreement shall be in writing, delivered personally,
by courier service or by certified or registered mail, first-class postage
prepaid and return receipt requested, deemed to have been received on the date
of delivery or on the third business day after the mailing thereof, and
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):

                                       13

<PAGE>

                    (a) if to the Employer, to it at its headquarters, to the
          attention of the chairman of its Board of Directors; and

                    (b) if to the Executive, to the Executive at the last
          address the Executive has filed in writing with the Employer.

          18. Assistance in Litigation. During the Term and for a period of
three (3) years thereafter, the Executive shall, upon reasonable notice, furnish
such information and proper assistance to the Employer as may reasonably be
required by the Employer in connection with any litigation in which the Employer
or any of its subsidiaries or affiliates is, or may become, a party. The
Employer shall reimburse the Executive for all reasonable out-of-pocket expenses
incurred by the Executive in rendering such assistance and, in the event
Executive is no longer employed by the Employer, the Employer shall pay
Executive reasonable compensation for his time spent rendering such assistance.
The provisions of this Section 18 shall continue in effect notwithstanding
termination of the Executive's employment hereunder for any reason. If
assistance is required after the Term, Executive shall not be required to
provide assistance to the extent it unreasonably interferes with Executive's new
employment.

          19. No General Waivers. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.

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

          21. Headings. The section and other headings contained in this
Agreement are for the convenience of the parties only and are not intended to be
a part hereof or to affect the meaning or interpretation hereof.

                                       14

<PAGE>

         IN WITNESS WHEREOF, the Employer has duly executed this Agreement by
its authorized representative and the Executive has hereunto set his hand, in
each case effective as of the date first above written.

                                            GATEWAY ENERGY CORPORATION

                                            By:  /s/  Robert Panico
                                               --------------------------------
                                            Name:     Robert Panico
                                            Title:    President and
                                                      Chief Executive Officer

                                            THE EXECUTIVE:

                                            /s/   Robert Panico
                                            -----------------------------------
                                                  Robert Panico

                                       15

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