Document:

Exhibit 10.3

    Exhibit
      10.3

    

    EXPLORATION
      SERVICES FUNDING AGREEMENT

    

    THIS
      AGREEMENT is
      made
      and
      entered into this
      26th
      day of
      January 2004, by and between Thomasson
      Partner Associates, Inc., whose
      mailing address is 1410
      High Street, Denver, CO 80218
      (hereinafter referred to as “Thomasson”),
      and
Fellows
      Energy Ltd, a Nevada Corporation, whose
      mailing address is 8716
      Arapahoe Road, Boulder, CO 80303, (hereinafter
      referred to as “Fellows”).
      Thomasson
      and Fellows shall herein be collectively referred to as the
“Parties.”

     

    WHEREAS,
      Thomasson is a oil and gas exploration company engaged, among other activities,
      in the business of developing oil and natural gas, projects and selling such,
      projects to other oil and gas exploration companies; and

     

    WHEREAS,
      Fellows is an exploration company which desires to gain additional exposure
      to
      oil and gas exploration and development, projects; and

     

    WHEREAS,
      the Parties hereto desire to enter into this Exploration Services Funding
      Agreement (hereinafter referred to as “Agreement”), whereby Fellows shall pay
      Thomasson an annual overhead fee in exchange for Thomasson providing Fellows
      with a preferential right to purchase and participate in, during the term of
      this Agreement, all
      oil and
      natural gas,
      projects
developed
      by Thomasson.

     

    NOW,
      THEREFORE, for and in consideration of the mutual covenants herein contained,
      and other good and valuable considerations, the receipt and sufficiency of
      which
      are hereby acknowledged, the Parties agree as follows:

     

    I. EXHIBITS
      TO THIS AGREEMENT. The
      Exhibits attached to this Agreement and by this reference incorporated herein
      are as follows:

     

    Exhibit
      “A”
      -
      Definition of Terms.

      
      Exhibit “B”
      -Letter
      Agreement dated January 1, 2004 by and between Thomasson, Fellows and
      Houston.

      
      Exhibit “C”
      - Data
      and Notification Requirements

    

    II. EFFECTIVE
      DATE. The
      effective date for this Agreement shall be January 1, 2004 (hereinafter referred
      to as “Effective Date”).

    

    III. INTENT
      OF THE PARTIES.

     

    A.  Oil
      and Natural Gas Opportunities.
      The
      Parties acknowledge that Fellows’ primary objective under this Agreement is to
      be exposed to and have opportunities to acquire significant oil and natural
      gas
      exploration projects (hereinafter collectively referred to as “Project” or
“Projects”). The Parties acknowledge that the term “natural gas” includes all
      gaseous hydrocarbon substances including coalbed methane and shale gas. For
      purposes of this Agreement,
      the separate use of the words “Play” and “Project” shall carry their respective
      definitions described in Exhibit “A”. 

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    B.
      Projects
      Rejected by Fellows.
      In the
      event Fellows rejects a Project (hereinafter referred to as “Rejected Project”)
      hereunder at any time prior to such Project
      becoming an Acquired Project (as hereinafter defined), then the Parties shall
      be
      under no further obligation or liability to each other with respect to such
      Rejected Project, and Thomasson shall immediately be free to market such Project
      to a third party. Fellows agrees not to reject a Project presented by Thomasson
      and subsequently acquire an interest in the same geographic area of a Rejected
      Project, either directly or through a third party, for
      a
      period of three (3) years from the date Fellows rejects such Project. Thomasson
      shall define said geographic area at such time as a Project is presented to
      Fellows under Article VI.A. 

     

    C.
      Good
      Faith, Timeliness and Communication.
      It is
      the clear and overriding intent of the Parties that the processes of
      presentation and evaluation described herein be flexible, fair and conducted
      in
      good faith. Toward that end, the Parties agree that each shall proceed in a
      timely and diligent manner to respond to the other within the most commercially
      expedient and commercially reasonable amount of time, having regard to all
      of
      the circumstances, and shall place a priority on ongoing communication
      throughout.

     

    IV. TERM
      OF THIS AGREEMENT. The
      initial term of this Agreement shall be from January 1, 2004 to December 31,
      2004
      and
      shall continue year to year thereafter until either Party gives
      written
      notice at
      least
      ninety (90) days prior to the
      end
      of the then current calendar year to
      the
      other Party
      of its
      intent to terminate the Agreement at the
      end
      of such year.
      Such
      termination will be effective as of midnight (CST) on December 31
      of the
      year of such
      notice,
      and will not extinguish any existing obligations made by either Party
      while
      this Agreement is in effect, inclusive of Fellows’ right to view certain
      Projects which have been developed by Thomasson prior to the effective
      termination date and Thomasson’s right to receive any fees and other
      consideration earned prior to the effective termination date. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    V. THOMASSON’S
      OVERHEAD FEE. In
      exchange for Thomasson providing Fellows with the right to review and purchase
      up to a fifty percent (50%) interest in all
      Projects
      as contemplated by this Agreement,
      Fellows
      agrees to pay Thomasson an overhead fee in the amount of Four Hundred Thousand
      and
      no/100 Dollars ($400,000.00)
      per
      year (hereinafter referred to as an “Overhead Fee”). An amount equal to one-half
      (1/2) of the Overhead Fee for the period from January 1, 2004 to December 31,
      2004, or Two hundred thousand and no/100 Dollars ($200,000.00), shall be paid
      to
      Thomasson by Fellows within ten (10) days following the execution of this
      Agreement by both Parties. The balance of the Overhead Fee for the period from
      January 1, 2004 to December 31, 2004, or Two hundred thousand and no/100 Dollars
      ($200,000.00), shall be paid to Thomasson by Fellows no later than May 1, 2004.
      Fellows’ failure to pay Thomasson said balance of the Overhead Fee by May 1,
      2004 shall result in the termination of this Agreement effective as of January
      1, 2004; provided, however, that Thomasson shall retain the Two hundred thousand
      and no/100 Dollars ($200,000.00) paid by Fellows to Thomasson upon the execution
      of this Agreement. Together, the two (2) payments of Two hundred thousand and
      no/100 Dollars ($200,000.00), which total Four Hundred Thousand and no/100
      Dollars ($400,000.00),
      shall
      constitute the Overhead Fee for the period of January 1, 2004 through December
      31, 2004. In the event this Agreement is extended beyond December 31, 2004,
      Fellows shall pay Thomasson the entire Overhead Fee of Four Hundred Thousand
      and
      no/100 Dollars ($400,000.00)
      for
      each subsequent year no later than January 5th
      of each
      such year.

        

    VI. 
      FELLOWS’ RIGHT TO REVIEW AND PURCHASE. In
      return
      for paying the Overhead Fee described above, Thomasson shall provide Fellows
      the
      first right to review and purchase up to a fifty percent (50%) interest
      in
      all
      Projects
      developed by Thomasson during the term of this Agreement. Thomasson acknowledges
      that Fellows’ right to review and purchase an interest in a Project shall not
      obligate Fellows to act upon, purchase or otherwise acquire an interest in
      any
      Project presented hereunder. Fellows’ right to review and purchase an interest
      in any such Project shall be exercised according to the following
      provisions:

     

    A. Development
      of a Project for Formal Presentation.
      Upon
      completion of Thomasson’s preliminary compilation of information concerning any
      Project during the term of this Agreement, Thomasson shall notify Fellows in
      writing of the Project and provide the following information and data relative
      to such Project: (1) geographical location, (2) estimated reserve potential
      and
      average Estimated Ultimate Recovery (EUR) per well, (3) basic geological theory,
      (4) basic maps, (5) analogues, if any, (6) anticipated drilling costs, (7)
      any
      leasehold availability information that Thomasson may have at the time of such
      notice and (8) significant regulatory or permitting issues of which Thomasson
      may be aware. As soon as is practicable, but not later than fourteen (14) days
      after Thomasson has provided Fellows with the information and data described
      above, Fellows shall notify Thomasson in writing if such Project is one that
      Fellows will consider for Formal Presentation (as hereinafter defined). If
      Fellows elects to consider a Project for Formal Presentation, then Thomasson
      will continue to evaluate such Project in order to present it at a Formal
      Presentation with as complete a depiction of the geologic and/or geophysical
      concepts as is reasonably possible. If Fellows does not consider a Project
      for
      Formal Presentation, it shall be deemed a Rejected Project for
      purpose of
      Article
      III B. However, Fellows agrees to select a minimum of eight (8) Projects to
      be
      viewed as Formal Presentations, as described hereinafter.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    B. Formal
      Presentation of a Project.
      At such
      time as Thomasson has sufficiently evaluated such a Project, a Formal
      Presentation of said Project shall be made to Fellows (hereinafter referred
      to
      as a “Formal Presentation”) at Thomasson’s offices located at 1410 High Street,
      Denver, CO 80218, and at a time to be agreed upon by the Parties. Any Formal
      Presentation to Fellows of a Project developed hereunder shall contain
a
      Project
plan
      developed by Thomasson that will demonstrate how the Project can be best brought
      to the point of drilling an initial test well thereon in the most expeditious
      and efficient manner. Such Project plan
      may
      include the following:
      (i) a
      write up of the geological idea, geological maps, cross sections and
      interpretations thereof; (ii)
      a
      reservoir analysis;
      (iii)
      an economic analysis for the Project;
      (iv)
      any proposed geological and/or geophysical data acquisitions;
      (v) a
      proposed lease acquisition and lease availability plan;
      (vi) a
      proposed acquisitions of producing properties, if any;
      (vii) a
      budget of the estimated costs necessary to bring the Project to the drilling
      of
      the initial test well thereon;
      (viii) a
proposed
      definition of the type and amount of specific activity or event, as appropriate,
      within that Project that both Parties
      will
      consider as significant (hereinafter referred to as “Significant Activity”).
      This activity or event, as appropriate, is envisioned to be the initiation
      of
      leasehold and/or seismic acquisition, but is not intended to be additional
      studies. The purpose of this definition shall be to determine the point at
      which
      Fellows shall pay Thomasson additional fees as set forth in Article
      VIII;
      and
      (ix) a proposed
      Area of
      Mutual Interest (hereinafter referred to as “AMI”) that sufficiently covers the
      Project, and shall apply to the appropriate horizontal and vertical areas and
      zones. The geographical area under a Project’s AMI shall include a minimum of
      10,000 contiguous surface acres and shall not exceed a maximum of 80,000
      contiguous surface acres. The definition of said AMI shall be subject to Article
      VI.F.2. The Parties
      may
      mutually agree to increase or decrease the aforementioned surface acreage
      amounts for the geographical area under a Project’s AMI. Unless
      the Parties agree to the contrary, the AMI shall be for a period of five (5)
      years beginning from the date of Fellows’ written notice to Thomasson of its
      election to acquire an interest in such Project; provided that, if no leases
      covering land within such AMI are acquired by Fellows during the first year
      of
      such five (5) year period, such five (5) year period shall be extended for
      one
      (1) additional year to six (6) years. The
      definition of any AMI shall include the terms and conditions under which Fellows
      shall offer and be offered subsequently acquired interests
      within
      said AMI. 

     

    C.
      Fellows’
      Option to Acquire a Project.
      Subject
      to the terms and conditions of this Agreement, Fellows shall have the option,
      but not the obligation, for a period of thirty (30) days from the date of
      viewing the Formal Presentation of a Project made hereunder, to acquire
up
      to
fifty
      percent (50%) of such Project. Fellows shall notify Thomasson in writing, within
      the thirty (30) day period specified herein, as to whether Fellows elects to
      acquire such
      Project,
      as well as the percentage of such Project that Fellows intends to
      acquire
      (“Fellows’ Percentage Interest”). Any such Project, or portion thereof, that
      Fellows elects to acquire shall hereinafter be referred to as an “Acquired
      Project”. If Fellows fails to provide Thomasson with such written notice within
      the thirty (30) day period, or if within such period Fellows informs Thomasson
      in writing that it elects not to acquire any portion of the Project, then such
      Project shall be deemed a Rejected Project for purposes of Article
      III.B.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    D.
      The
      Houston Exploration Company’s Second Preferential Right to
      Participate.

    1. Fellows
      hereby acknowledges that Thomasson has entered into a similar Exploration
      Services Funding Agreement dated January 17, 2003 with The
      Houston Exploration Company, whose mailing address is 1100 Louisiana, Suite
      2000, Houston, TX 77002-5215 (hereinafter referred to as “Houston”).
      Said
      Exploration Services Funding Agreement between Houston and Thomasson shall
      hereinafter be referred to as the “Houston Agreement.” Said Houston Agreement
was
      effective from January 1, 2003 through December 31, 2003. Houston and Thomasson
      have agreed to extend the Houston Agreement from January 1, 2004 through
      December 31, 2004. In addition to certain rights and obligations, the Houston
      Agreement provides Houston with a preferential right to participate in and
      purchase up to fifty percent (50%) in all oil and natural gas projects developed
      by Thomasson within the Rocky Mountain Basins during the term of the Houston
      Agreement, (hereinafter referred to as "Projects").

    2. Fellows,
      Thomasson
      and Houston have entered into that certain Letter Agreement dated January 23,
      2004, a copy of which is attached hereto and made a part hereof as Exhibit
“B“
      and is hereinafter referred to as the “Letter Agreement.” Said Letter Agreement
      provides Houston with the second preferential right to participate
      in and purchase any interest not acquired by Fellows in all Projects developed
      by Thomasson under this Agreement.

    3. In
      the
event
      that Fellows and
      Houston jointly acquire an Acquired Project, then the definitions of Significant
      Activity and Area of Mutual Interest, as required under a Formal Presentation,
      shall be mutually agreed to by Fellows, Houston and Thomasson. Further, in
      the
      event Fellows and Houston jointly participate in an Acquired Project, Fellows
      and Houston shall enter into a mutually acceptable AAPL 1989 Model Form 610
      Operating Agreement, and shall proceed to develop the Acquired Project as
      intended by the terms and conditions of this Agreement.

    4. In
      the
      event Houston does not elect to participate in an Acquired Project or together
      Fellows and Houston jointly acquire less than one hundred percent (100%) of
      an
      Acquired Project, then Thomasson
      shall sell the remaining interest that is either not acquired by Fellows or
      that
      is not together acquired by Fellows and Houston, in such Acquired Project
      (hereinafter referred to as “Third
      Party Interest”) to another party or parties (hereinafter
      referred to as “Third
      Party Purchaser or Purchasers”).

    5. In
      the
event
      that the entire Third Party Interest
      in an
      Acquired Project
      has not
      been acquired by a Third Party Purchaser or Purchasers, Fellows may elect to
      acquire up to the
      remaining portion of the Third Party Interest in
      such
      Acquired
      Project. Fellows’ election to acquire such an additional interest shall be made
      within ten (10) days after
      Thomasson notifies
      Fellows in writing that its election under this paragraph has accrued.
The
      remaining available interest, depending on Fellows’ elections under this
paragraph,
      shall
      then be defined as the
      Non-Fellows
      Interest under Article X
      and
      marketed by Thomasson subject to the provision of said Article. Further, if
      the
      Third
      Party Interest
      has not been entirely sold within the one hundred twenty (120) day period
      provided above
      and
      Fellows elects to acquire at least a total of fifty percent (50%) interest
      in
      such
      Acquired
      Project, then Fellows shall be named as Operator under any Operating
      Agreement applicable to such
      Acquired
      Project 

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	 	
              E._

            	
              Fellows’
                Participation in Projects Acquired by
                Houston.

            

    

    1. Houston
      has previously elected to acquire and participate in certain Acquired Projects
      presented to them under the Houston Agreement. Among such Acquired Projects,
      Houston
      has purchased from Thomasson one hundred percent (100%) of the Gordon Creek
      Project located in Carbon County, Utah and one hundred percent (100%) of the
      Deer Creek Project located in Sweet Grass County, Montana

    2. As
      provided in the Letter Agreement attached hereto as Exhibit “B,” Fellows has
      been granted the right to participate in undivided
      twenty-five (25%) of the Deer Creek Project
      and the
      right to acquire all of the Gordon Creek Project.

    3. Fellows
      hereby agrees that its acquisition and participation of interest in said Deer
      Creek and Gordon Creek Projects is subject to all of the terms and provisions
      of
      this Agreement. However, it is hereby agreed by the Parties that the Deer Creek
      and Gordon Creek Projects shall not be included in the minimum number of Project
      presented under Article VII. 

     

    
      	 	
              F._

            	
              Acquisition
                of Acquired Projects.

            

    

    1. As
      soon
      as practicable after Fellows has elected to participate in an Acquired Project,
      Fellows shall endeavor to acquire leases and, if necessary farmouts, covering
      the land in the AMI for such Acquired Project. On a minimum of a quarterly
      basis, the Parties and Houston, or a Third Party Purchaser(s),
      as the
      case may be, will meet to discuss the progress of such leasing activities.
      If an
      Acquired Project is jointly owned by Fellows and Houston or a Third Party
      Purchaser(s),
      as the
      case may be,
      then
      Fellows and Houston or the Third Party Purchaser(s),
      as the
      case may be,
      will
      mutually agree on the leases to be acquired and the costs to be expended. If
      Houston or a Third Party Purchaser is not participating in an Acquired Project
      and Fellows elects to acquire a minimum of fifty percent (50%) interest in
      an
      Acquired Project, then Fellows shall solely determine what leases are to be
      acquired within the AMI and the costs to be expended on said leases. If Houston
      or a Third Party Purchaser(s),
      as
      the case may be,
      is
      participating in an Acquired Project, then Fellows and Houston, or such Third
      Party Purchaser(s),
      as
      the case may be,
      shall
      jointly determine what leases are to be acquired within the AMI and the costs
      to
      be expended on said leases

    2. If
      Fellows has not expended its proportionate share of a minimum of $300,000.00
      (“Minimum Expenditure”) within an Acquired Project’s AMI prior to the end of the
      third (3rd)
      year of
      that AMI’s term, then the boundary of such AMI shall contract down to an area
      consisting of one (1) mile around the then current leasehold that has been
      acquired by Fellows inside such AMI. Such Minimum Expenditure shall include,
      without limitation, drilling and operating costs, leasehold bonus, leasehold
      acquisition costs, geological and/or geophysical data acquisition costs, plus
      any other data and/or work costs Fellows deems necessary for the prudent
      development of said Acquired Project
      (collectively, “Leasehold Costs”).
      Any
      such Minimum Expenditure shall not include the applicable Project Fees paid
      to
Thomasson
      or any
      general overhead expenses Fellows might allocate to said Project. In the event
      that Fellows has not acquired any leasehold within an Acquired Project’s AMI
      during the first three (3) years of the AMI’s term and has not spent the Minimum
      Expenditure, then the said AMI shall terminate.

    3. Any
      agreement between Thomasson and a Third Party Purchaser for participation in
      an
      Acquired Project shall provide that the Third Party Purchaser will immediately
      reimburse Fellows for such Third Party Purchaser’s proportionate share of the
      leasehold costs relative to an Acquired Project that has been incurred by
      Fellows through such time as said agreement has been made effective. On a
      monthly basis, Fellows shall advise Thomasson of the leasehold costs incurred
      for the Acquired Project during the proceeding month. Upon a Third Party
      Purchaser purchasing an interest in an Acquired Project, Fellows and said Third
      Party Purchaser shall immediately thereafter enter into a mutually acceptable
      Operating Agreement that shall provide for joint acquisition of future
      leasehold. 

     

    G.
      Drilling of Initial Test Well.

    1. At
      such
      time as Fellows, after consultations with Thomasson, is prepared to drill an
      initial test well on an Acquired Project, Fellows shall propose such well (the
      “Initial Test Well”).

    2. The
      Initial Test Well shall be drilled as presented in Fellows’ proposal and in
      accordance with an Operating Agreement that is mutually acceptable to Fellows
      and the
      other
      participants in such well.
      All
      subsequent operations on the Project shall be conducted in accordance with
      said
      Operating Agreement for such Project.

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    H.
      Disposition
      and Execution of Project Plan. The Parties acknowledge that in any Acquired
      Project, Thomasson shall
      remain
      available to assist Fellows through the Appraisal
      of the Initial Test Well thereon.

     

    VII. MINIMUM
      PROJECTS PRESENTED TO FELLOWS. Thomasson
      shall provide Fellows with a minimum number of Formal Presentations of oil
      and
      natural gas exploration Projects available
      for purchase based on the following:

     

    A.
      Formal
      Presentations During the Initial Twelve (12) Months.
      During
      the initial twelve (12) months of this Agreement, that being from January 1,
      2004 to December 31, 2004, Thomasson shall provide Fellows with Formal
      Presentations for a minimum of eight (8) Projects situated in at least four
      (4)
      different Plays.

    B.
      Subsequent
      Annual Formal Presentations.
      In the
      event that this Agreement remains effective subsequent to December 31, 2004,
      Thomasson shall provide Fellows with Formal Presentations for a minimum of
      six
      (6) and a maximum of ten (10) Projects per year, situated in at least four
      (4)
      different Plays. Provided, however that Thomasson shall provide Fellows with
      Formal Presentations for an average minimum of eight (8) such Projects per
      year
      over a period of two (2) consecutive years.

    C.
      Minimum
      Reserve Potential.
      Each
      individual Project presented to Fellows by Formal Presentation hereunder shall
      represent the reasonable potential of at least two hundred (200) billion cubic
      feet of natural gas reserves (200 BCF) or twenty (20) million barrels of oil
      reserves (20 MMBO).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    D.
      Time
      Distribution of Formal Presentations.
      Fellows
      and Thomasson shall use all reasonable efforts to evenly distribute the minimum
      number of Formal Presentations over the term of this Agreement. The intent
      being
      that Fellows shall have adequate time to evaluate each Project presented.
      However, the Parties acknowledge that more than one (1) Formal Presentation
      may
      be
      made at once and that the Parties
      will act
      in good faith to accommodate and abide by the deadlines contained
      herein.

    E.
      Exclusive Showing.
      During
      the term of this Agreement, Thomasson shall present to Fellows in accordance
      with this Agreement, each and every Project it develops, as defined herein,
      and
      shall not show, reveal or otherwise communicate information or data relating
      to
      such Projects to other parties, except The Houston Exploration Company, without
      the expressed written permission of Fellows.
      Provided, however, that if Thomasson is selling a Non-Fellows interest to a
      Third Party then the party, or parties, may view any information or data
      relating to such Project or Projects without Thomasson violating this
paragraph.

    F.
      Failure to Present.
      If
      Thomasson fails to meet the average minimum of eight (8) such Formal
      Presentations per year, then it shall return to Fellows, an amount equal to
      $50,000 times the difference between eight and the number of actual Formal
      Presentations made during such period.

     

    VIII. THOMASSON’S
      PROJECT FEES. In
      addition to the Overhead Fees, for each Acquired Project,
      Fellows
      shall pay Thomasson an amount equal to One Hundred Fifty Thousand Dollars
      ($150,000)
      (hereinafter referred to as the “Project Fee”), proportionally reduced to
Fellows’ Percentage
      Interest
      in the
      applicable Acquired Project.
      Fellows
      agrees to pay Thomason one-half (1/2) of Fellows’ proportionate share of any
      such Project Fee within ten (10) days after Fellows makes a written election
      to
      acquire an
      Acquired
      Project under Article VI.C.
      The
      balance of such Project Fee, or Fellows’ proportionate share of any such Project
      Fee, shall be payable to Thomasson within ten (10) days from the date that
      the
      Significant
      Activity (as determined by the Parties
      pursuant
      to under Article VI.B.)
      has
      occurred for such Acquired Project or the date twelve (12) months after Fellows
      has made its election to purchase such Acquired Project under Article
      VI.C.,
      whichever occurs earlier.

    

    IX. THOMASSON’S
      OVERRIDING ROYALTY. In
      addition to the Overhead Fees and any Project Fees paid by Fellows, Thomasson
      shall also receive from Fellows an assignment of an overriding royalty interest
      (“Thomasson’s ORRI”) on any oil and gas leasehold interest acquired, or caused
      to be acquired, by Fellows within the relevant AMI, as a result of any Acquired
      Project, based on the following sliding scale:

     

     

     

    
      	
              Fellows
                Net Revenue Interest (NRI**)

            	
              Thomasson’s
                ORRI

            
	
               

            	 
	
              NRI
                85.0% to 87.5% 

            	Thomasson’s ORRI = 5%
	
              NRI
                83.0% to 84.99% 

            	Thomasson’s ORRI = 4%
	
              NRI
                82.0% to 82.99%

            	Thomasson’s ORRI = 3%
	NRI 81.0% to 81.99%	Thomasson’s ORRI = 2%
	NRI less than 81.0%	Thomasson’s ORRI = 1%

    

     

    **
      Fellow’s NRI shall be based on a Working Interest of 100%

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    The
      Parties agree that Thomasson’s overriding royalty under interests acquired by
      Fellows within an AMI shall not apply to (a) interests in a particular AMI
      which
      are included in a larger package of oil and gas properties acquired by Fellows,
      provided that such acquired interests located within such AMI do not comprise
      more than 50% of the entire value of such acquisition; or (b) any lands in
      which
      Fellows already owns an interest or has existing contractual obligations to
      acquire interests, in which event such lands shall be considered as excluded
      from an AMI. Any
      assignment of any overriding royalty interest to Thomasson under this Agreement
      shall (i) be reduced proportionately to the working interests acquired by
      Fellows and the mineral estates leased thereby;
      (ii) be
      free of all drilling, development, production, operating and overhead costs
      and
      expenses; (iii) bear and pay its proportionate share of post-production costs
      up
      to the point of sale (including but not limited to transportation, dehydration
      and processing costs), gross production taxes, pipeline taxes, ad valorem taxes
      and other taxes assessed against the gross production attributable to said
      overriding royalty interests; (iv) be assigned to Thomasson within ninety (90)
      days of Fellows acquiring said working interest and/or leasehold interests;
      and
      (v) apply to any and all renewals and/or extensions of the working interest
      and/or leasehold interest in the relevant AMI which is subject to said
      overriding royalty.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    X. SUBSEQUENT
      MARKETING OF A PROJECT. Prior
      to
      the drilling of an initial test well within the AMI of any Acquired Project,
      Fellows may request that Thomasson market a portion of Fellows’ interest
      thereunder to a third party or parties. Upon successful sale to a third
Party,
      any
      such interest shall hereinafter be referred to as a “Non-Fellows Interest”. The
      Parties agree that Fellows may make such a marketing request only after Fellows
      has exercised its option to acquire an
      interest in an
      Acquired
      Project
      under Article VI.C.
      and an
      AMI has been established
      as part
      of the pertinent Project plan.
      Fellows shall notify Thomasson in writing at least ninety (90) days prior to
      the
      anticipated spud date of the initial test well for the relevant AMI and
      stipulate the percentage amount of such Non-Fellows Interest, along with
      Fellows’ preferred terms for such marketing effort. Thomasson shall make it an
      explicit condition of sale for Non-Fellows Interests that the purchaser will
      acknowledge that the interest sold is subject to the relevant
      Operating
      Agreement
      for the
      AMI. Upon the successful sale of the Non-Fellows interest, Fellows and Thomasson
      shall share equally any promotion obtained in the form of (1) fees over and
      above Fellows’ actual direct costs, (2) working interest, and (3) ORRI over and
      above the ORRI due Thomasson in this Agreement. In the event Fellows selects
      Thomasson to market a Non-Fellows Interest, Thomasson shall use it best efforts
      to market the Non-Fellows Interest to a third party or parties. The Parties
      acknowledge that the results of any sale of any Non-Fellows Interest by
      Thomasson shall not reduce Fellows’ obligation to pay the Project Fee owed to
      Thomasson on any such Acquired Project, subject to the terms and conditions
      of
      Article IX
      above.
      Fellows shall have the exclusive right to approve the party or parties
      purchasing any Non-Fellows Interest, as well as the terms and conditions of
      any
      such sale. Nothing contained in this Article X shall preclude Fellows from
      directly marketing any interest it owns in an AMI for an Acquired Project at
      any
      time, to any party, on any terms;
      provided
      that,
      the
      results of any sale of
      a
      Non-Fellows Interest by Fellows shall not reduce Fellows’ obligation to pay the
      Project Fee owed to Thomasson on any such Acquired Project, subject to the
      terms
      and conditions of Articles VIII and IX above. 

     

    XI. THOMASSON’S
      OPTION TO PARTICIPATE IN DRILLING. Thomasson
      shall have a one-time option to participate for up to an undivided two and
      one-half percent (2.5%) of 8/8ths working interest in the second and subsequent
      wells drilled, or caused to be drilled, by Fellows within an AMI of any Acquired
      Project. Any such participation by Thomasson in the second and subsequent wells
      of an Acquired Project shall be proportionately reduced to Fellows’ working
      interest in such AMI. Fellows shall notify Thomasson in writing at least sixty
      (60) days (or as soon as is reasonably practicable) prior to the anticipated
      spud date of the second well drilled, or caused to be drilled, by Fellows within
      the relevant AMI. Thomasson shall then have thirty (30) days, or forty-eight
      (48) hours in the case where a rig is on location, from the receipt of such
      written notice to respond in writing to Fellows of Thomasson’s election to
      participate in drilling said second well at the interest stipulated above.
      Failure of Thomasson to provide such a written election to Fellows shall be
      deemed as an election not to participate in said well(s). If Thomasson elects
      not to participate in the drilling of the second and subsequent wells, Thomasson
      shall forfeit any future rights to participate for a working interest in the
      AMI
      for such Acquired Project. If Thomasson does elect to participate for such
      an
      interest in the second and subsequent wells on any Acquired Project then
      Thomasson shall be responsible from that time forward for its proportionate
      share of any and all working interest costs associated with AMI activities
      in
      accordance with the relevant Operating Agreement that has been mutually agreed
      upon by the parties participating in the Acquired Project.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    XII. NOTICES.
      All
      notices and other communications required or permitted by the terms of the
      Agreement or any notices that one Party
      may
      desire to give to the other Party
      shall be
      in writing, unless otherwise specifically provided, and shall be deemed to
      have
      been properly delivered if personally handed to an authorized representative
      of
      the Party
      for whom
      intended, or sent by overnight delivery service, or facsimile (with written
      confirmation of a successful transmission), and addressed to the Party
      to whom
      the notice is given at the address listed below or such other address
      as
a Party
      may from
      time to time designate by notice in writing to the other Party.
      The
      originating notice to be given under any provision hereof shall be deemed to
      be
      given only when received by the Party
      to whom
      such notice is directed, and the time for such Party
      to give
      any notice in response thereto shall run from the date that said originating
      notice is received. A response shall be deemed returned when deposited in the
      mail or with overnight delivery service or facsimile (with written confirmation
      of a successful transmission), with postage or charges prepaid. Each
Party
      shall
      have the right to change its address at any time or from time to time by giving
      written notice thereof to the
      other
Party.
      Notices
      by a
      Party
      hereto
      shall be promptly given in writing and shall be delivered as
      follows:

    

    Fellows
      Energy Ltd.

    Attn:
      Mr.
George
      Young 

    8716
      Arapahoe Road

    Boulder,
      CO 80303

    Phone:
      303-799-9015

    Fax:
      303-799-9017

    E-mail:
      georgesyoung@msn.com

    

    Thomasson
      Partner Associates, Inc.

    Attn:
      Mr.
      M. Ray Thomasson

    1410
      High
      Street

    Denver,
      CO 80218

    Phone:
      303-436-1930

    Fax:
      303-322-2288

    E-mail:
      tpaexpl@aol.com

     

    XIII. ACCESS
      TO GEOLOGICAL AND SEISMIC INFORMATION. Thomasson,
      its agents, representatives and employees, at Thomasson’s sole risk and expense,
      shall have reasonable access at all times to the rig floor of any well drilled,
      or caused to be drilled by Fellows or its designee, within the AMI of any
      Acquired Project, and shall at all times be subject to the operator’s safety
      requirements. Further, during the term of the AMI or according to the terms
      of
      any applicable operating agreement, Thomasson shall be supplied, as soon as
      is
      practicable, with copies of all tests, logs and drilling reports that are taken
      in any well drilled, or caused to be drilled, by Fellows within the AMI of
      any
      Acquired Project. Such information shall be provided to Thomasson without regard
      as to whether Thomasson owns a working interest under such well or wells and
      shall be provided according to the data and notification requirements set out
      in
      Exhibit “C” attached hereto. Thomasson shall be allowed to use any and all
      seismic data, whether trade or proprietary, that Fellows may acquire within
      the
      AMI, subject to the terms of any agreements governing the use of such data.
      Thomasson agrees that it will hold any such well and seismic data in confidence,
      and agrees to use such well and seismic data only for its own internal purposes
      or for the benefit of assisting Fellows in the development of any Acquired
      Project, subject to the period of confidentiality
      described in Article XIX
      hereof.
      All seismic data, whether trade or proprietary, acquired by Fellows and
      furnished to Thomasson shall remain the property of Fellows and shall be
      returned to Fellows upon the termination of this Agreement. Fellows, its agents,
      representatives and employees, at Fellows’ sole risk and expense, shall have
      reasonable access at all times to the rig floor of any well drilled, or caused
      to be drilled, by Thomasson, or its designee, within the AMI of any Acquired
      Project, and shall at all times be subject to the operator’s safety
      requirements. Further, during the term of the AMI or according to any applicable
      operating agreement, Fellows shall be supplied, as soon as is practicable,
      with
      copies of all tests, logs and drilling reports that are taken in any well
      drilled, or caused to be drilled, by Thomasson within the AMI of any Acquired
      Project. Such information shall be provided to Fellows if
      Fellows owns any
      interest
in
      such
      well or wells and shall be provided according to the data and notification
      requirements set out in Exhibit “C” attached hereto. Fellows shall be allowed to
      inspect and review any and all seismic data, whether trade or proprietary,
      that
      Thomasson has access to or may acquire within the AMI, subject to the terms
      of
      any agreements governing the use of such data. Further, Fellows will be allowed
      to use any proprietary seismic data acquired by Thomasson within the AMI.
      Fellows agrees that it will hold any such well and seismic data in confidence
      and agrees to use such well and seismic data only for its own internal purposes
      or for the benefit of assisting Thomasson in the development of any Acquired
      Project subject to the period of confidentiality described in Article
XIX.
      All
      seismic data, whether trade or proprietary, acquired by Thomasson and furnished
      to Fellows shall remain the property of Thomason and shall be returned to
      Thomasson upon the termination of this Agreement.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    XIV. ASSIGNABILITY.
      Fellows
      may not assign the rights, obligations, terms and conditions of this Agreement
      without the expressed written permission of Thomasson.

    

    XV. RELATIONSHIP
      OF THE PARTIES. The
      duties, obligations, and liabilities of the Parties hereto are intended to
      be
      several and not joint or collective. This Agreement is not intended to create,
      and shall not be construed to create an association or trust, or to impose
      a
      partnership,
      duty,
      obligation, or liability with regard to any one or more of the Parties hereto.
      Each Party
      hereto
      shall be individually responsible for its own obligations as herein
      provided.

     

    XVI. LAWS
      AND REGULATIONS. The
      Parties, in conducting all operations under this Agreement, shall comply with
      all applicable state and federal laws, rules and regulations.

     

    XVII. MODIFICATIONS.
      No
      change, modification or alteration of this Agreement shall be valid unless
      the
      same is made in writing, signed by the Parties,
      and no
      course of dealing between the Parties shall be construed to alter the terms
      hereof.

     

    XVIII. MEDIATION
      AND ARBITRATION. Any
      controversy or claim (“claim”), whether based on contract, tort, statute or
      other legal or equitable theory (including but not limited to any claim of
      fraud, misrepresentation or fraudulent inducement or any question of validity
      or
      effect of this Agreement, including this clause) arising out of or related
      to
      this Agreement (including amendments or extensions), or the breach or
      termination thereof shall be first submitted to a mutually agreed neutral third
      party for mediation. If mediation is not successful, then such controversy
      or
      claim shall be settled by arbitration in accordance with the then current CPR
      Institute for Dispute Resolution Rules for Non-Administered Arbitration of
      Business Disputes, and this provision. The arbitration shall be governed by
      the
      United States Arbitration Act, 9 U.S.C. Sections 1 through 16 to the exclusion
      of any provision of state law inconsistent therewith or which would produce
      a
      different result, and the judgment upon the award rendered by the arbitrator
      may
      be entered by any court having jurisdiction.
      The
      arbitration shall be held in Denver,
      Colorado, or such other location as agreed to by the Parties,
      and
      there shall be one arbitrator who must be knowledgeable in oil and gas
      exploration matters. Such arbitrator shall be chosen subject to the rules and
      procedures as provided by the CPR Institute for Dispute Resolution. The
      arbitrator shall
      determine the claims of the Parties
      and
      render a final award in accordance with the substantive law of the State of
      Colorado,
      excluding the conflicts provisions of such law. The arbitrator shall set forth
      the reasons for the award in writing. Except as required by law (and then only
      after
      prior notice to the other Party),
      no
Party
      shall
      disclose the facts of the underlying dispute or the contents or results of
      the
      arbitration without the prior consent of the
      other
      party.
      Any
      claim
      by either Party
      shall be
      time-barred if the asserting Party
      does not
      give written notice to the other Party
      or
      commence arbitration with respect to such claim within two years after the
      cause
      of action accrues. All statutes of limitations and defenses based upon passage
      of time applicable to any claim of a defending Party
      (including any counterclaim or claim of setoff) shall be tolled while the
      mediation and/or arbitration is pending. The
      obligation to arbitrate any claim shall extend to the successors, assigns and
      third party beneficiaries of the Parties.
      The
      terms hereof shall not limit any obligations of a Party
      to
      defend, indemnify or hold harmless the
      other
      Party
      against
      court proceedings or other claims, losses, damages or expenses. The
      arbitrator shall order the Parties
      to
      promptly exchange copies of all exhibits and witness lists, and, if requested
      by
      a Party,
      to
      produce other relevant documents, to answer up to ten interrogatories (including
      subparts), to respond to up to ten requests for admissions (which shall be
      deemed admitted if not denied) and to produce for deposition and, if requested,
      at the hearing, all witnesses that such Party
      has
      listed and up to four other persons within such Party’s
      control. Any additional discovery shall only occur by agreement of the
Parties
      or as
      ordered by the arbitrator upon a finding of good cause. Each
      Party
      shall
      bear its own costs, expenses and attorney’s fees; provided that if court
      proceedings to stay litigation or compel
      arbitration are necessary, the Party
      who
      unsuccessfully opposes such proceedings shall pay all reasonable associated
      costs, expenses and attorney’s fees in connection with such court proceeding.
In
      order
      to prevent irreparable harm, the arbitrator shall have the power to grant
      temporary or permanent injunctive or other equitable relief. Prior to the
      appointment of an arbitrator a Party
      may,
      notwithstanding any other provision of this agreement, seek temporary injunctive
      relief from any court of competent jurisdiction; provided that the Party
      seeking
      such relief shall (if arbitration has not already been commenced) simultaneously
      commence arbitration. Such court ordered relief shall not continue more than
      ten
      (10) days after the appointment of the arbitrator (or in any event for longer
      than sixty (60))
      days.
If
      any
      part of this arbitration provision is held to be unenforceable, it shall be
      severed and shall not affect either the duty to arbitrate or any other part
      of
      this provision.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    XIX. CONFIDENTIALITY.
      The
      Parties agree that all data and information generated as a result of this
      Agreement (hereinafter referred to as “Confidential Information”) will be
      considered the Confidential Information of both Parties. Provided, however,
      Confidential Information shall not include data or information that is generally
      available to the public other than through acts by either Party in violation
      of
      this Agreement.

    A. During
      the term of this Agreement each Party may disclose Confidential Information
      only
      to its direct employees, and to its subsidiaries or affiliates, agents, advisors
      or representatives who have agreed, prior to being given access to the
      Confidential Information, to be bound by the terms herein. After a period of
      either three (3) years
      from the date of a Formal Presentation of a Project or upon the effective
      termination date of this Agreement, whichever is the longer period, any
      geological or geophysical data gathered by the Parties, which is relevant to
      a
      particular Project, may be used by either Party
      and
      divulged to third parties for the purpose of selling or promoting geological
      or
      geophysical ideas or concepts. Provided, however, the use of any licensed
      geophysical data will be strictly limited to the terms of any agreements
      governing the use of such data.

    B. Neither
      Party
      shall
      use said Confidential Information for any purpose other than the uses
      contemplated by this Agreement.

    C. The
      Parties shall maintain the confidentiality of the Confidential Information
      (including the terms and conditions of this Agreement) and shall not disclose
      the Confidential Information to any person, firm, corporation or association,
      except as mutually agreed, and specified in A.
      above.

     

    XX. JURISDICTION.
      The
      terms
      and conditions of this Agreement shall be interpreted and construed in
      accordance with the laws of the State of Colorado.
      This Agreement shall, in every regard, be treated as a contract made in the
      State of Colorado.
      To the extent any such matters are not subject to arbitration under Article
      XVIII,
      the Parties irrevocably submit to the jurisdiction of the courts of the State
      of
Colorado
      and the courts of appeal therefrom in respect to the interpretation and
      construction of the terms and conditions of this Agreement.

     

    XXI. ENTIRE
      AGREEMENT. No
      amendments shall be made to this Agreement unless in writing and executed by
      the
Parties.
      This
      Agreement supersedes all other prior agreements, documents, writings and verbal
      understandings among the Parties relating to the subject matter hereof and
      expresses the entire agreement of the Parties with respect to the subject matter
      hereof.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    XXII. MISCELLANEOUS.
      This
      Agreement may be executed
      in
      one document, signed by both
      Parties,
      or in a number of counterparts; and when executed in counterpart, all such
      counterparts shall constitute one document. This Agreement and Exhibits,
      attached hereto and made a part hereof, shall inure to the benefit of and be
      binding upon the Parties, their successors and assigns.

    

    IN
      WITNESS WHEREOF, the Parties hereto have executed this Agreement the date and
      year first above written, but effective as of January 1, 2004.

     

    
      	 	 	 
	 	THOMASSON PARTNER ASSOCIATES, INC.
	 
 	 
 	 
 
	 	By:  	/s/ James
              E. Sullivan
	 	
              

              James E. Sullivan, a duly authourized representative of Thomasson Partner
              Associates, Inc.
	 	
            

    

     

    

     

      	 	 	 
	 	
              FELLOWS
                ENERGY LTD. 

            
	 
 	 
 	 
 
	
            	By:  	/s/ George
              Young 
	 	
              
GeorgeYoung,
              President Acknowledgements
	 	
            

    

    
       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

    

    

    
      	STATE OF COLORADO	
              ) 

            	 
	 	
              ) 

            	ss. 
	COUNTY OF DENVER 	
              ) 

            	 

    

     

    Before
      me, the undersigned, a Notary Public in and for said County and State, on this
      ____ day of ____________, 2004,
      personally appeared James E. Sullivan, as a duly authorized representative
      of
      Thomasson Partner Associates, Inc., to me known to be the identical person
      who
      subscribed the name thereof to the foregoing instrument and acknowledged to
      me
      that he executed the same as his free and voluntary act and deed and as the
      free
      and voluntary act and deed of such corporation, for the uses and purposes
      therein set forth.

    

    IN
      WITNESS WHEREOF, I have hereunto set my hand and affixed my seal the date above
      written.

     

     

    
 

    
      	My Commission Expires:	 	
              

              Notary Public 
	 	 	Address: 1410
              High Street 
	 	 	Denver, CO 80218 
	 	 	 

    

     

    

    
      
        	STATE OF COLORADO	
                ) 

              	 
	 	
                ) 

              	ss. 
	COUNTY OF  	
                ) 

              	 

      

    Before
      me, the undersigned, a Notary Public in and for said County and State, on this
      ____ day of ____________, 2003,
      personally appeared George Young, as President of Fellows Energy Ltd, to me
      known to be the identical person who subscribed the name thereof to the
      foregoing instrument and acknowledged to me that he executed the same as his
      free and voluntary act and deed and as the free and voluntary act and deed
      of
      such corporation, for the uses and purposes therein set forth.

    

    IN
      WITNESS WHEREOF, I have hereunto set my hand and affixed my seal the date above
      written.

     

     

    
      	 My Commission Expires:	 	
              

              Notary Public 
	 	 	Address: 
	 	 	 

    

     

      

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    

    Exhibit
      “A”

    
       

    

    Attached
      to that certain Exploration Services Funding Agreement dated effective January
      1, 2004 between Thomasson
      Partner Associates, Inc.
      and
Fellows
      Energy Ltd.

     

    Definitions

    

    The
      following definitions shall apply to these terms:

    

    1. Play.
      A Play
      is an area that contains a broad geologically defined concept with one or more
      geological horizons that are thought to be commercially productive of oil and/or
      natural gas. A play consists of multiple Projects.

    2. Project.
      A
      Project shall
      be
      a geographical
      portion
      of a geologically defined Play that represents
      a geologically unique structural and/or stratigraphic concept, which is capable
      of being drilled and/or developed for a potential EUR of at least 200 BCFE;
      provided, however, that the geographical area under any one (1) Project shall
      include a minimum of 10,000 contiguous surface acres and shall not exceed a
      maximum of 80,000 contiguous surface acres. A
      Project
      may contain more than one Prospect and may be limited to one stratigraphic
      zone.

    3. Prospect.
      A
      Prospect is a well defined, singular anomaly that is thought to be commercially
      productive of oil and/or natural gas and which is recommended as site to drill
      a
      test well.

    

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    
       

    

    Exhibit
      “B”

     

    Attached
      to that certain Exploration Services Funding Agreement dated effective January
      1, 2004 between Thomasson
      Partner Associates, Inc.
      and
Fellows
      Energy Ltd.

    

    

    

    

    

    TO
      BE INSERTED WHEN AVAILABLE

    
       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

    Exhibit
      “C”

     

    Attached
      to that certain Exploration Services Funding Agreement dated effective January
      1, 2004 between Thomasson
      Partner Associates, Inc.
      and
Fellows
      Energy Ltd.

    

    1.
      Well Data to be supplied by Operator during drilling.

    During
      the drilling of any Test Well drilled under the captioned Agreement, Operator
      shall provide to Thomasson, at no cost or expense to Thomasson, copies of all
      well data relating to said Test Well that would normally be supplied to a
      working interest participant in such well. Such information shall include,
      without limitation:

    A. Daily
      drilling reports including geological reports showing the nature of all work
      done and depth and formations penetrated;

    B. A
      copy of
      any mechanical or electrical survey that is run in the course of the
      well;

    C. One
      copy
      of the Lithologic log on a daily basis, if run;

    D. One
      set
      of ditch samples, washed and dried, if taken;

    E. A
      digital
      copy, if made, of all wireline surveys conducted;

    F. The
      results of any drill stem test carried out. .

    

    2.
      Well data to be supplied by Operator.

    As
      soon
      as practicable after completion of the drilling of said Test Well, Operator
      shall provide to Thomasson listed below, at no cost or expense to Thomasson,
      a
      copy of the final well completion report. Each copy of the well report shall
      include the following: 

     

     

    
      	A. 	
              A
                copy of all wireline surveys conducted;

            
	B. 	
              A
                copy of the mud logging survey; 

            
	C.	
              A
                copy of the velocity survey, if run; 

            
	D. 	
              A
                copy of the well site geologist's description of the ditch samples,
                if
                taken;

            
	E.	
              A
                copy of the well site geologist's description of the sidewall cores
                or
                conventional cores, if taken;

            
	E.	
              A
                copy of the well site geologist's description of the sidewall cores
                or
                conventional cores, if taken;

            
	F. 	
              A
                copy of the commercial core analyses (sidewall or conventional) if
                cores
                are  taken; 

            
	G. 	
              A
                copy of the commercial analyses of the water, gas or oil, if test
                and
                recovery that are made; 

            
	H. 	
              A
                copy of the analyses, if made, made in dating a sample radioactively
                or
                palaentologically, plus copy of core photographs, if
                taken;

            
	I.	
              A
                copy of the geological reports;

            
	J. 	
              A
                copy of the well location map;

            
	K. 	
              A
                copy of the well history;

            
	L. 	
              A
                copy of the well records;

            
	M.	
              A
                copy of the drilling report;

            
	N.	
              A
                copy of the mud record;

            
	O. 	
              A
                copy of the bit record;

            
	P. 	
              A
                copy of the formation test data, if a test is made;

            
	Q.	
              A
                copy of all other data relative to the
                well.

            

    

     

     

    3.
      Parties to receive data.

    

    Thomasson
      Partner Associates, Inc. 

    1410
      High
      Street

    Denver,
      CO 80218

    Phone
      303-436-1930

    Fax
      303-322-2288Exhibit 10.5

    Exhibit
      10.5

    PURCHASE
      AND OPTION AGREEMENT

    THIS
      AGREEMENT made as of March 16, 2004.

    

    BETWEEN:

    

    QUANECO,
      L.L.C.,
      a
      limited liability company organized under the laws of the State of Oklahoma
      (hereinafter referred to as “Quaneco”)

    

    -
      and
      -

    

    FELLOWS
      ENERGY, LTD., a
      body
      corporate incorporated under the laws of the State of Colorado (hereinafter
      referred to as “Fellows Energy”)

    

    WHEREAS
      Quaneco has agreed to grant Fellows Energy the exclusive and irrevocable option
      to acquire a 65% interest in the Assets and Fellows Energy has agreed to pay
      Quaneco the Initial Payment and conduct certain work on the Option Lands to
      have
      the exclusive right to exercise the option to acquire an interest in the Assets
      for the consideration and in accordance with the terms and conditions set forth
      herein;

    

    NOW
      THEREFORE in consideration of the premises and the mutual covenants and
      agreements hereinafter set forth, the Parties agree as follows:

    

    ARTICLE
      I - INTERPRETATION

    

    1.1 Definitions

    

    In
      this
      Agreement including the recitals, and the Schedules, unless otherwise stated
      or
      unless the context otherwise requires, the following words and phrases will
      have
      the meanings hereby assigned to them:

    

    
      	
              a)

            	
              “Agreement”,
                “this
                Agreement”,
                “herein”,
                “hereby”,
                “hereto”
                and “hereof”
                and similar expressions mean and refer to this Agreement and includes
                any
                Schedules attached hereto and any agreement amending this Agreement
                or any
                agreement or instrument which is supplemental or ancillary hereto;
                and the
                expressions “Article”, “Paragraph” and “Subparagraph” followed by a number
                or letter or combination thereof, or “Schedule” followed by a letter, mean
                and refer to the specified Article, Paragraph, Subparagraph of, or
                Schedule to, this Agreement;

            

    

     

    
      	
              b)

            	
              “Assets”
                means an undivided sixty-five (65%) percent working interest and
                an
                undivided fifty-two (52%) percent net revenue interest in and to
                the
                Petroleum Rights, and an undivided sixty-five (65%) percent interest
                in
                the Tangibles and the Miscellaneous
                Interests;

            

    

    

    
      	
              c)

            	
              “Closing”
                means the delivery by Fellows Energy to Quaneco of the Initial Payment,
                the commitment by Fellows Energy to its share of the Phase One Drilling
                Program, and such other actions, all as further detailed in Paragraph
                3.1,
                occurring on the Closing Date, at the offices of Fellows Energy,
                Ltd. in
                Broomfield, Colorado;

            

    

    

    
      	
              d)

            	
              “Closing
                Conditions”
                means the conditions set out in Paragraph 3.2, which are for the
                sole
                benefit of Fellows Energy and which may be waived in whole or in
                part by
                Fellows Energy at any time on or before the Closing
                Date;

            

    

    

    
      	
              e)

            	
              “Closing
                Date”
                means the hour of 2:00 p.m. MST on March 16 , 2004, or such other
                time and
                date as may be agreed upon in writing by Quaneco and Fellows
                Energy;

            

    

     

    
 

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
              f)

            	
              “Dollars”
                or “$”
                means the official and legal currency of the United States of
                America;

            

    

    

    
      	
              g)

            	
              “Force
                Majeure”
                means any acts of God, including flood, fire, storms, lightning,
                landslides and earthquakes; any strikes, lockouts or other industrial
                disturbances; acts of war, blockades, insurrections, riots, arrests
                and
                restraints of rulers and peoples, civil disturbances and explosions;
                the
                binding order of any court or governmental authority; the issuance
                of a
                moratorium or significant restriction on drilling activity by any
                court or
                governmental authority; and any other cause, whether of the kind
                herein
                enumerated or otherwise, not within the control of the Party claiming
                suspension and which, by the exercise of due diligence, is unpreventable
                or incapable of being overcome. Lack of funds and economic hardship
                will
                not constitute Force Majeure;

            

    

     

    
      	
              h)

            	“Initial
              Payment”
              means the non-refundable payment, to be made by Fellows Energy to Quaneco
              at Closing, of Two Hundred Fifty Thousand and 00/100 Dollars
              ($250,000.00). 

    

     

    
      	
              i)

               

            	
              “Leases”
                means, collectively, any and all leases, and other documents of title
                including, without limitation, all agreements granting, reserving
                or
                otherwise conferring rights to explore for, drill for, produce, take,
                use,
                market, share in the production of or the proceeds from the sale
                of
                Petroleum Substances; and rights to acquire any of the foregoing
                rights;
                but only if the foregoing pertain in whole or in part to Petroleum
                Substances within, upon or under the Option Lands, including, without
                limitation, those leases set out in Schedule “A” under the heading
                “Leases”;

            

    

    

    
      	
              j)

            	
              “Miscellaneous
                Interests”
                means all right, title, estate and interest (whether absolute or
                contingent, legal or beneficial), of Quaneco in and to all property,
                assets and rights (other than the Petroleum Rights or Tangibles)
                pertaining to the Petroleum Rights or Tangibles including, without
                limitation:

            

    

    

    
      	 	
              (i)

            	
              all
                contracts, agreements, and documents relating to the Petroleum
                Rights;

            

    

    
      	 	
              (ii)

            	
              all
                surface leases, surface access right-of-way and damage agreements
                and any
                subsisting rights to enter upon, use or occupy the surface of any
                lands
                which are or may be used to gain access to or otherwise use the Petroleum
                Rights and/or the Tangibles;

            

    

    
      	 	
              (iii)

            	
              all
                Wells; and

            

    

    
      	 	
              (iv)

            	
              all
                well, pipeline and other permits, licenses and authorizations relating
                to
                the Petroleum Rights or the
                Tangibles;

            

    

    

    
      	
              k)

            	
              “Net
                Mineral Acre”
                means the full mineral interest in one (1) acre of Option Lands as
                set
                forth in Schedule “A”. Where consideration is expressed in this Agreement
                as being on the basis of dollars per Net Mineral Acre, such amount
                is
                based upon the number of Net Mineral Acres included in the Assets
                to be
                assigned to Fellows Energy pursuant to this
                Agreement;

            

    

    

    
      	
              l)

            	
              “Operating
                Agreement”
                means the American Association of Petroleum Landmen Model Form Operating
                Agreement (A.A.P.L. Form 610 - 1989 version), including the rates,
                elections and modifications contained therein, and incorporating
                the COPAS
                1995 Accounting Procedure, which will be attached as an exhibit to
                the
                Operating Agreement, including the rates, elections and modifications
                contained therein. The Operating Agreement rates, elections and
                modifications will be negotiated by Quaneco and Fellows Energy and
                added
                as an addendum to this Agreement prior to the Closing
                Date;

            

    

    

    
      	
              m)

            	
              “Option”
                means the exclusive and irrevocable option granted by Quaneco to
                Fellows
                Energy to acquire the Assets, exercisable in accordance with Paragraph
                4.1;

            

    

    

    
      	
              n)

            	
              “Option
                Lands”
                means the lands as described in Schedule “A”, together with the rights to
                explore for and recover the Petroleum Substances within, upon or
                under
                such lands, insofar only as such rights are granted by the
                Leases;

            

    

     

    
 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    
      	
              o)

            	
              “Option
                Period”
                means:

            

    

    

    
      	 	
              (i)

            	
              for
                Phase One of the Option Lands, as described in Schedule “A”, the period in
                time of six (6) months from the Closing Date, provided that if the
                Phase
                One Drilling Program is not completed within six (6) months from
                the
                Closing Date, due to delays caused by Force Majeure situations, the
                Option
                Period will be extended for a concurrent period of time equal to
                the
                period of time the Force Majeure situation existed;
                and

            

    

    
      	 	
              (ii)

            	
              for
                Phase Two of the Option Lands, as described in Schedule “A”, the period in
                time of twelve (12) months from the Closing Date provided that if
                the
                Phase Two Drilling Program is not completed within twelve (12) months
                from
                the Closing Date, due to delays caused by Force Majeure situations,
                the
                Option Period will be extended for a concurrent period of time equal
                to
                the period of time the Force Majeure situation
                existed;

            

    

    

    
      	
              p)

            	
              “Party”
                and “Parties”
                means the entity or entities, as the case may be, named in the first
                paragraph of this Agreement and any respective permitted successors
                or
                assigns;

            

    

     

    
      
        	
                q)

              	
                “Permitted
                  Encumbrances”
                  means:

              

      

      
 

    

    
      	 	
              (i)

            	
              liens
                for Taxes not at the time due or delinquent or the validity of which
                is
                being contested at the time in good faith by or on behalf of Quaneco,
                but
                only to the extent Quaneco, at its option, elects to indemnify Fellows
                Energy against such claims;

            

    

    
      	 	
              (ii)

            	
              builder’s,
                mechanic’s, laborer’s, carrier’s, warehouseman’s, materialman’s and
                similar liens being contested in good faith or not then delinquent,
                but
                only to the extent Quaneco, at its option, elects to indemnify Fellows
                Energy against such claims;

            

    

    
      	 	
              (iii)

            	
              easements,
                rights of way, servitudes or other similar rights in land which do
                not
                materially detract from the value of the land concerned or materially
                impair the use of the Assets affected
                thereby;

            

    

    
      	 	
              (iv)

            	
              rights
                of general application reserved to or vested in any governmental
                authority
                to levy Taxes on the Petroleum Substances or the income
                therefrom;

            

    

    
      	 	
              (v)

            	
              statutory
                exceptions to title, and the reservations, limitations, provisos
                and
                conditions in any original grants from the governments of the States
                of
                Utah or Wyoming or the United States of America of any of the mines
                and
                minerals within, upon or under the Option Lands;
                and

            

    

    
      	 	
              (vi)

            	
              lessor
                royalties, royalty burdens, liens, adverse claims, and other encumbrances
                (collectively the “Royalties” in this definition) set forth in Schedule
                “B” attached hereto or if such Royalties are not actually described,
                that
                total of such Royalties that result in Quaneco’s net revenue interest in
                the Leases equal eighty-percent (80%), as such net revenue interest
                is
                described under the heading “Lease NRI” in Schedule
                “A”;

            

    

    

    
      	
              r)

            	
              “Petroleum
                Rights”
                means all of Quaneco’s interest in and to the Leases, to the extent
                applicable to the Option Lands, as set forth in Schedule
                “A”;

            

    

    

    
      	
              s)

            	
              “Petroleum
                Substances”
                means any of crude oil, crude bitumen and products derived therefrom,
                synthetic crude oil, petroleum, natural gas, natural gas liquids,
                coalbed
                methane, and hydrocarbons related to any of the foregoing, to the
                extent
                granted by or under the Leases, insofar only as they pertain to the
                Option
                Lands;

            

    

    

    
      	
              t)

            	
              “Phase
                One Drilling Program”
                means the expenditure by Fellows Energy, after Closing, of approximately
                One Million Dollars ($1,000,000.00) to drill, test, complete, production
                test and shut-in or plug and abandon a minimum of five (5) core holes,
                the
                location and depth of the core holes to be mutually agreed to by
                the
                parties, on the Option Lands in the Prospect Area, as further detailed
                in
                Paragraph 3.3;

            

    

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      
        	
                u)

              	
                "Phase
                  Two Drilling Program"
                  means the expenditures by Fellows Energy after the Phase One Drilling
                  Program of at least One Million Dollars ($1,000,000.00) to complete
                  a
                  pilot well program of Fellows Energy's design. 

              

      

    
      	
              v)

            	
              “Prospect
                Area”
                means the area containing the Option Lands and the area in which
                the
                Parties agree to jointly acquire lands, pursuant to the terms and
                conditions as set out in Article VII. The Prospect Area is identified
                in
                the map attached as Schedule “C”;

            

    

    

    
      	
              w)

            	
              “Purchase
                Price 1”
                means the consideration payable by Fellows Energy to Quaneco, if
                Fellows
                Energy exercises the Option on Phase I of the Option Lands, of $15
                per net
                mineral acre acquired of part or all of the Option Lands (maximum
                investment of 183,945 net mineral acres x 65% x $15 =
                $1,793,463.70);

            

    

    

    
      	
              x)

            	
              “Purchase
                Price 2”
                means the consideration payable by Fellows Energy to Quaneco, if
                Fellows
                Energy exercises the Option on Phase II of the Option Lands, of $35
                per
                net mineral acres of part or all of the Option Lands (maximum investment
                of 183,945 net mineral acres x 65% x $35 =
                $4,184,748.70);

            

    

    

    
      	
              y)

            	
              “Tangibles”
                means all of Quaneco’s interest in and to any and all tangible and
                depreciable property including, without limitation, all well equipment
                located on the wellsites of the Wells located on the Option
                Lands;

            

    

    

    
      	
              z)

            	
              “Taxes”
                means all taxes imposed at a federal, state, county or local level
                affecting or related to the Assets, including but not limited to
                any
                windfall profit taxes, excise taxes, ad valorem taxes, production
                taxes
                and severance taxes, including interest and penalties, if any, thereon
                (but exclusive of federal and state income taxes and franchise or
                other
                taxes imposed upon Quaneco and Fellows Energy) incurred or accruing
                after
                the Closing Date; and

            

    

    

    
      	
              aa)

            	
              “Wells”
                means all producing, suspended, shut-in, disposal or injection wells
                located on the Option Lands including, without limitation, the wells
                set
                forth and described in Schedule
“A”.

            

    

    

    1.2 Schedules

    

    There
      is
      appended to this Agreement the following Schedules:

    

    
      	
              a)

            	
              Schedule
                “A”, containing a description of the Option Lands, Leases, Permitted
                Encumbrances and the Wells;

            

    

    

    
      	
              b)

            	
              Schedule
                "B" containing a description of the Royalties that burden the Option
                Lands; 

            

    

    

    
      	
              c)

            	
              Schedule
                “C”, containing a map which identifies the Prospect Area;
                and

            

    

    

    
      	
              d)

            	
              Schedule
                “D”, describing the drilling and geological requirements for Fellows
                Energy’s operations during the Phase One Drilling
                Program.

            

    

    

    The
      Schedules are incorporated herein as though contained in the body hereof.
      Wherever any term or condition, express or implied of the Schedules conflict
      or
      are at variance with any term or condition in this Agreement, such term or
      condition of this Agreement will prevail.

    

    1.3 Applicable
      Law

    

    This
      Agreement will, in all respects, be subject to, construed and enforced in
      accordance with the laws of the State of Utah, without regard to principles
      of
      conflict of laws. Except with those matters which are the subject of arbitration
      as provided in Paragraph 9.7, the Parties do hereby irrevocably submit and
      attorn to the jurisdiction of the courts of the State of Utah for all other
      matters arising out of or in connection with this Agreement.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    1.4 Successors
      and Assigns

    

    This
      Agreement will enure to the benefit of and be binding upon the respective
      successors and permitted assigns of the Parties, subject to compliance with
      the
      provisions of Paragraph 9.6.

    

    1.5 Interpretation

    

    
      	
              a)

            	
              Included
                Words:
                Words importing the singular number include the plural and vice versa
                and
                words importing gender include the masculine, feminine and neuter
                genders.

            

    

    

    
      	
              b)

            	
              Waiver
                and Amendment:
                No failure of any Party in exercising any right or remedy hereunder
                will
                operate as a waiver thereof, nor will any single or partial exercise
                of
                any such right or remedy preclude any other or further exercise thereof
                or
                the exercise of any right or remedy in law or in equity or by statute
                or
                otherwise conferred. No waiver or amendment of any provision of this
                Agreement will be effective unless waived or varied by an instrument
                in
                writing dated subsequent to the date hereof, executed by duly authorized
                representatives of all Parties.

            

    

     

    
      	
              c)

            	
              Time:
                Time will be of the essence of this
                Agreement.

            

    

     

    

    
      	
              d)

            	
              Entire
                Agreement:
                This Agreement constitutes the entire agreement of the Parties relative
                to
                the subject matter contained herein, and there are no oral or other
                representations or warranties connected with the subject matter hereof
                other than as are contained herein, except as and to the extent that
                any
                other agreement, document, or instrument, whether the whole or any
                terms
                thereof, may be incorporated herein by reference, or authorized,
                required
                or permitted by the terms hereof, or obligations contained therein
                may be
                assumed by any of the Parties or stated herein to be of continuing
                effect.
                Wherever any term or condition, express or implied of a document
                delivered
                in pursuance hereof conflicts or is at variance with any term or
                condition
                in this Agreement, such term or condition of this Agreement will
                prevail.
                Subject to the foregoing, this Agreement supercedes all prior agreements
                between the Parties relating to the subject matter contained
                herein.

            

    

    

    ARTICLE
      II - TITLE OBJECTIONS AND THIRD PARTY RIGHTS AND
      CONSENTS

    

    2.1 Title
      Review

    

    Prior
      to
      the Closing Date, Fellows Energy will review Quaneco's title to the Assets.
      In
      Fellows Energy’s review of Quaneco’s title to the Assets, if any encumbrance,
      encroachment, claim or defect is disclosed by Fellows Energy’s title opinions or
      by the title information provided by Quaneco to Fellows Energy, county records,
      Bureau of Land Management records, or any other source, other than Permitted
      Encumbrances, which in the opinion of Fellows Energy renders title to the Assets
      not good or marketable or which otherwise constitutes a breach of any warranty
      or representation of Quaneco herein pertaining to the Assets, and which Fellows
      Energy does not waive (all of which herein are called “Title Defects”), Fellows
      Energy will give written notice to Quaneco of such Title Defects not later
      than
      five (5) days prior to the Closing Date Such notice will include a description
      of each Title Defect and the Option Lands affected thereby. Quaneco will
      diligently make all reasonable efforts to cure or rectify all Title Defects,
      not
      later than three (3) days prior to the Closing Date.

    

    
      2.2 Cure

    

    

    If
      the
      Title Defects are not cured or removed to the satisfaction of Fellows Energy
      at
      least three (3) days prior to Closing, Fellows Energy may, as its sole remedy
      for such Title Defects, elect in writing to:

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    
      	
              a)

            	
              not
                close this Agreement, if the total of the Title Defects, which are
                not
                cured or removed to the satisfaction of Fellows Energy, affect more
                than
                fifteen (15%) percent of the
                Assets;

            

    

    

    
      	
              b)

            	
              grant
                a further period or periods of time, not to exceed fifteen (15) days,
                within which Quaneco will attempt to cure or remove the Title Defects,
                in
                which event the Closing Date will be deferred for a like
                period;

            

    

     

    
      
        	
                c)

              	
                waive
                  the uncured Title Defects;
                  or

              

      

    
      	
              d)

            	
              delete
                the affected Assets from this transaction and reduce the Purchase
                Price 1
                and/or Purchase Price 2, as the case may be, if Fellows Energy exercises
                the Option) accordingly, which remedy must be mutually agreed to
                by
                Quaneco and Fellows Energy.

            

    

     

    

    ARTICLE
      III - CLOSING AND PHASE ONE DRILLING PROGRAM

    

    3.1 Closing

    

    Subject
      to the Closing Conditions, at Closing, the following will occur, all of which
      will be deemed to have occurred simultaneously:

    

    
      	
              a)

            	
              Fellows
                Energy will deliver one hundred (100%) percent of the Initial Payment
                to
                Quaneco, on behalf of Fellows Energy, by wire transfer of funds to
                a bank
                and bank account of Quaneco’s
                choosing;

            

    

    

    
      	
              b)

            	
              Quaneco
                and Fellows Energy will execute, acknowledge and deliver a mutually
                agreeable memorandum of this Agreement, suitable for recording where
                appropriate, which will give notice of this Agreement and the rights
                of
                the Parties;

            

    

    

    
      	
              c)

            	
              Quaneco
                will execute and deliver to Fellows Energy a designation of operator
                or
                other documents that might be reasonably required to afford Fellows
                Energy
                access to the Option Lands and Leases in order to conduct the Phase
                One
                Drilling Program. 

            

    

    

    3.2 Closing
      Conditions

    

    The
      obligation of Fellows Energy to attend Closing, pay the Option Payment and
      commit to its share of the Phase One Drilling Program is subject to the
      following Closing Conditions:

    

    
      	
              a)

            	
              Fellows
                Energy will have done such due diligence regarding Quaneco's interest
                in
                and title to the Assets including, but not limited to, verification
                that
                the Parties comprising Quaneco collectively own a one hundred (100%)
                percent working interest in the Option Lands and the Leases, the
                Leases
                have a net revenue interest of not less than eighty (80%) percent
                and that
                Quaneco is capable of assigning the Assets to Fellows
                Energy;

            

    

    

    
      	
              b)

            	
              Fellows
                Energy will have the opportunity to review, and will be satisfied
                with,
                all agreements relating to Quaneco's interest in the
                Assets;

            

    

    

    
      	
              c)

            	
              At
                the Closing Date, Fellows Energy shall be designated as operator
                for the
                exploration, development and production of all coalbed methane on
                the
                Option Lands and within the Prospect
                Area;

            

    

    

    
      	
              d)

            	
              The
                Assets and the Prospect Area will not be subject to any contracts
                for the
                production, sale and transportation of petroleum
                substances.

            

    

    

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

    3.3 Phase
      One Drilling Program

    

    Fellows
      Energy agrees to complete the Phase One Drilling Program during the initial
      six
      (6) months of the Option Period. The expenditure amount required by Fellows
      Energy in the Phase One Drilling Program will include all direct costs incurred
      by Fellows Energy’s staff or consultants (limited to ten (10%) percent of the
      total spent) to manage the Phase One Drilling Program, but will not include
      any
      of Fellows Energy’s overhead and managerial costs. All information, data,
      records and related materials from the Phase One Drilling Program activity
      will
      be the joint property of the Parties and Fellows Energy will provide such
      information to Quaneco as it is obtained In the event Fellows Energy does not
      elect to exercise the Purchase Price 1, then any costs incurred and paid by
      Fellows Energy in the Phase One Drilling Program, including any costs incurred
      in excess of the One Million Dollars ($1,000,000.00), will vest and inure to
      the
      sole benefit of Quaneco.

    

    

    3.4 Phase
      Two Drilling Program

    

    In
      the
      event that Fellows Energy elects to exercise Purchase Price 1, Fellows Energy
      agrees to complete the Phase Two Drilling Program during the initial twelve
      (12)
      months of the Option Period. The expenditure amount required by Fellows Energy
      in the Phase Two Drilling Program will include all direct costs incurred by
      Fellows Energy’s staff or consultants (limited to ten (10%) percent of the total
      spent) to manage the Phase Two Drilling Program, but will not include any of
      Fellows Energy’s overhead and managerial costs. All information, data, records
      and related materials from the Phase Two Drilling Program activity will be
      the
      joint property of the Parties and Fellows Energy will provide such information
      to Quaneco as it is obtained In the event Fellows Energy does not elect to
      exercise the Purchase Price 2, then any costs incurred and paid by Fellows
      Energy in the Phase Two Drilling Program, including any costs incurred in excess
      of the One Million Dollars ($1,000,000.00), will vest and inure to the sole
      benefit of Quaneco.

    

    

    3.5 Activity
      During Option Period

    

    
      	
              a)

            	
              During
                the Option Period, Fellows Energy will assume the responsibilities
                of
                operator, and conduct all operations consistent with its ultimate
                ownership interest as if it had exercised the Option.
                

            

    

    

    
      	
              b)

            	
              The
                Parties further agree that, after Fellows Energy’s payment of the Initial
                Payment to Quaneco at Closing, and during the Phase One and Phase
                Two
                Option Period, the ongoing operation of the Option Lands and Leases
                and
                relationship between the Parties in respect of the Option Lands and
                Leases
                and the Phase One and Phase Two Drilling Programs will be governed
                by this
                Agreement.

            

    

    

    
      	
              c)

            	
              All
                of Fellows Energy’s operations in the Phase One and Phase Two Drilling
                Programs will be conducted in a careful and workmanlike manner consistent
                with good oil field practices and in compliance with all applicable
                laws,
                rules and regulations, and in accordance with the drilling and geological
                requirements set out in Schedule “D”. Fellows Energy agrees to comply with
                and observe all of the terms and conditions of the Leases and amendments,
                addendums and exhibits thereto, covering the Option Lands. Fellows
                Energy
                agrees to indemnify and save Quaneco harmless from all claims, demands,
                losses, damages and liabilities resulting from or arising out of
                the
                violation of any such laws, rules and regulations or the breach of
                any
                provisions of such Leases, and agrees to defend any suit that may
                be
                brought and pay any judgment that may be rendered against Quaneco
                for any
                such breach or violation as a result of Fellows Energy’s operations in the
                Phase One and Phase Two Drilling
                Program.

            

    

    

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    

    ARTICLE
      IV - EXERCISE OF OPTION

    

    4.1 Exercise
      of the Option (s)

    

    
      	
              a)

            	
              On
                or before the end of the initial six month Option Period for the
                Option
                Lands, Fellows Energy may elect to exercise the Option to perform
                the
                Phase Two Drilling Program of the Option Lands. If Fellows Energy
                elects
                to exercise the Option to perform the Phase Two Drilling Program
                on the
                Option Lands, it must provide its election in writing to Quaneco
                and pay
                to Quaneco the Purchase Price 1. On or before the twelve (12) month
                Option
                Period on the Option Lands, Fellow Energy may elect to exercise the
                Purchase Price 2 to acquire the Assets in the Option Lands, it must
                provide its election in writing to Quaneco and pay to Quaneco the
                Purchase
                Price 2. Upon Fellows Energy electing to exercise the Option and
                concurrently with Fellows Energy paying the Purchase Price 2, Quaneco
                will
                deliver the assignments and other conveyances of the Assets in the
                Option
                Lands to Fellows Energy within ten business days, and Fellows Energy
                and
                Quaneco will thereafter participate in all future work on the Option
                Lands
                and Leases at their respective working interests, subject to the
                Operating
                Agreement, with Fellows Energy named as operator therein. In the
                event
                Fellows Energy does not elect to exercise the Option to pay Purchase
                Price
                2 and to acquire the Assets in the Option Lands, then Fellows Energy’s
                right to acquire the Assets will terminate, Fellows Energy will no
                longer
                be the operator of any of the Option Lands and the Option Payment
                and any
                other payments and all information from the Drilling Program will
                be
                retained by Quaneco.

            

    

    

    ARTICLE
      V - REPRESENTATIONS AND WARRANTIES

    

    5.1 Covenants,
      Representations and Warranties of Quaneco

    

    Fellows
      Energy acknowledges that the acquisition of the Assets is on an “as is, where
      is” basis, without representation and warranty and without reliance on any
      information provided to Fellows Energy by Quaneco or any third party, and
      Quaneco, where applicable and as the case may be, make the following
      representations and warranties to Fellows Energy in respect of the
      Assets:

    

    
      	
              a)

            	
              Quaneco
                is a valid and subsisting limited liability company and is validly
                existing under the laws of its jurisdiction of organization and the
                jurisdiction within which the Assets are located; and has all requisite
                power and authority to assign a proportionate interest in the Petroleum
                Rights, Tangibles and Miscellaneous Interests which together will
                comprise
                the Assets;

            

    

    

    
      	
              b)

            	
              the
                transactions contemplated in this Agreement have been duly and validly
                authorized and all documents and instruments contemplated in this
                Agreement, including this Agreement, have been duly and validly
                authorized, executed and delivered;

            

    

    

    
      	
              c)

            	
              the
                transactions contemplated in this Agreement will not violate, nor
                be in
                conflict with any provisions of Quaneco's constituting documents,
                by-laws
                or governing documents, or any agreement or contract or instrument
                to
                which it is a party or by which it is bound or any judgment, decree,
                order, statute, rule or regulations applicable to
                it;

            

    

    

    
      	
              d)

            	
              this
                Agreement, and all documents and instruments contemplated thereby,
                are
                legal, valid and binding obligations of Quaneco, enforceable against
                it in
                accordance with their respective
                terms;

            

    

    

    
      	
              e)

            	
              Quaneco
                has incurred no obligation or liability for broker’s or finder’s fees in
                respect of this Agreement, or the transactions contemplated hereby,
                for
                which Fellows Energy will have any obligation or
                liability;

            

    

    

    
      	
              f)

            	
              the
                Assets are free and clear of all mortgages, pledges, liens, charges,
                burdens and encumbrances (other than the Permitted Encumbrances)
                created
                by, through or under Quaneco, but, subject to the foregoing, Quaneco
                will
                not be bound to convey and does not warrant any better title to the
                Assets
                than it now has;

            

    

     

    
 

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              g)

            	
              Quaneco
                has received no notice of default including, without limitation,
                a notice
                of work required to be done, under any agreement relating to the
                Assets to
                which it is a party or by which it is bound, or with respect to any
                statute, order, writ, injunction or decree of any governmental agency
                or
                of any court which might adversely affect the
                Assets;

            

    

    

    
      	
              h)

            	
              Quaneco
                has made or has caused to be made proper and timely payments of all
                royalties, bonus payments, option payments, rentals and deposits
                due under
                the Leases and has complied with, performed, observed and satisfied
                or has
                caused to be complied with, performed, observed and satisfied all
                material
                terms, conditions, obligations and liabilities which have arisen
                under any
                of the provisions of any of the Leases or any agreements or instruments
                or
                any statute, order, writ, injunction or decree of any governmental
                agency
                or of any court relating to the
                Assets;

            

    

    

    
      	
              i)

            	
              subject
                to the Permitted Encumbrances, Quaneco has done no act or suffered
                or
                permitted no action to be done whereby any individual or legal entity
                has
                acquired or may acquire any interest in or to the
                Assets;

            

    

    

    
      	
              j)

            	
              there
                are no existing or outstanding authorities for expenditures related
                to the
                Assets, nor any other financial commitments which are now outstanding
                or
                due, other than usual operating expenses incurred in the normal course
                of
                business;

            

    

    

    
      	
              k)

            	
              to
                the best of its knowledge, without having made any special
                inquiry, all
                Taxes that pertain to the Assets and that are due and payable by
                Quaneco
                have been properly paid;

            

    

    

    
      	
              l)

            	
              to
                the best of its knowledge, without having made any special inquiry,
                no
                suit, action or other proceeding is commenced, pending or threatened
                before any court or governmental agency or tribunal, which might
                have a
                material adverse affect on the
                Assets;

            

    

    

    
      	
              m)

            	
              subject
                to the rents, covenants, conditions and stipulations contained in
                the
                Leases, Fellows Energy may enter into and upon, hold and enjoy the
                Leases
                for the residue of their respective terms and all renewals or extensions
                of the Leases for its own use and benefit, without any lawful interruption
                by Quaneco or any individual or entity claiming, or to claim, by,
                through
                or under Quaneco, except pursuant to Permitted
                Encumbrances;

            

    

    

    

    These
      representations and warranties of Quaneco herein contained are true in all
      respects when made and additionally will be true on and as of the Closing Date.
      These covenants, representations and warranties will either be in or deemed
      to
      apply to the assignments and other conveyances described in Paragraph 3.1,
      and
      there will not be any merger of any covenant, representation or warranty in
      such
      assignments and other conveyances, any rule of law, equity or statute to the
      contrary notwithstanding, and all such covenants, representations and warranties
      will survive Closing for a period of twenty four (24) months.

    

    5.2 Covenants,
      Representations and Warranties of Fellows Energy

    

    Fellows
      Energy hereby covenants with, and represents and warrants to Quaneco in respect
      of the Assets, that:

    

    
      	
              a)

            	
              Fellows
                Energy is a valid and subsisting corporation and is validly existing
                under
                the laws of its jurisdiction of incorporation and the jurisdiction
                within
                which the Assets are located, and has all requisite power and authority
                to
                acquire the Assets;

            

    

     

    
 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              b)

            	
              the
                transactions contemplated in this Agreement have been duly and validly
                authorized and all documents and instruments contemplated in this
                Agreement, including this Agreement, have been duly and validly
                authorized, executed and delivered;

            

    

    

    
      	
              c)

            	
              the
                transactions contemplated in this Agreement will not violate, nor
                be in
                conflict with any provisions of Fellows Energy's constituting documents,
                by-laws or governing documents, or any agreement or contract or instrument
                to which it is a party or by which it is bound or any judgment, decree,
                order, statute, rule or regulations applicable to
                it;

            

    

    

    
      	
              d)

            	
              this
                Agreement, and all documents and instruments contemplated thereby,
                are
                legal, valid and binding obligations of Fellows Energy enforceable
                against
                it in accordance with their respective
                terms;

            

    

    

    
      	
              e)

            	
              Fellows
                Energy has incurred no obligation or liability for broker’s or finder’s
                fees in respect of this Agreement or the transactions contemplated
                hereby
                for which Quaneco will have any obligation or
                liability;

            

    

    

    
      	
              f)

            	
              Fellows
                Energy is acquiring the Assets as principal and not as an agent of
                a third
                party.

            

    

    

    These
      representations and warranties of Fellows Energy herein contained are true
      in
      all respects when made and additionally will be true on and as of the Closing
      Date. These covenants, representations and warranties will either be in or
      be
      deemed to apply to the assignments and other conveyances described in Paragraph
      3.1, and there will not be any merger of any covenant, representation or
      warranty in such assignments, any rule of law, equity or statute to the contrary
      notwithstanding and all such covenants, representations and warranties will
      survive Closing for a period of twenty four (24) months.

    

    

    ARTICLE
      VI - ADJUSTMENTS AND OPERATING MATTERS

    

    6.1 Adjustments

    

    Subject
      to all other provisions of this Agreement, there will be no adjustments of
      any
      kind and nature relating to the operation of the Assets as of the Closing Date,
      except that the Parties agree to the following:

    

    
      	
              a)

            	
              prior
                to the Closing Date, all benefits and obligations relating to the
                Assets,
                including bonus and option payments made to the lessors of the Leases,
                annual delay rentals and shut-in royalties required to continue the
                Leases, operating costs and expenses, and capital costs, will be
                paid by
                and be the sole responsibility of
                Quaneco;

            

    

    

    
      	
              b)

            	
              subsequent
                to the Closing Date and during the Option Period, all annual delay
                royalties and shut-in royalties required to continue the Leases will
                be
                shared as to Quaneco thirty-five percent (35%) and Fellows Energy
                sixty-five percent (65%) except to the extent that Fellows Energy
                elects
                not to exercise part or all of the Option in Phase I or Phase II
                of the
                Option Lands;

            

    

    

    
      	
              c)

            	
              subsequent
                to the Closing Date and during the Option Period, all option payments
                made
                to the lessors of the Leases and required to extend the term of the
                Leases, will be shared as to Quaneco thirty-five percent (35%) and
                Fellows
                Energy sixty-five percent (65%) except to the extent that Fellows
                Energy
                elects not to exercise part or all of the Option in Phase I or Phase
                II of
                the Option Lands; and

            

    

    

    6.2 Quaneco
      to Provide Notices to Fellows Energy

    

    Following
      the Closing, Quaneco will forthwith provide to Fellows Energy all notices,
      specific information and other documents in respect of the Assets which it
      receives and will respond to such notices, information and other documents
      pursuant to the written instructions of Fellows Energy, if received on a timely
      basis, provided that Quaneco may (but will not be obliged to) refuse to follow
      instructions which it reasonably believes to be unlawful or in conflict with
      an
      applicable contract or Lease.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    6.3 Specific
      Conveyances of Government Leases

    

    With
      respect to those Leases issued by the government of the United States of America
      or agencies thereof, or by the State of Utah or agencies thereof, which require
      filing with and approval by the Bureau of Land Management or other agency of
      the
      United States of America, or by the appropriate agency by any state or local
      governmental authority or agency having jurisdiction thereof, (“Government
      Leases”), Quaneco will use its best efforts to assist and cooperate with Fellows
      Energy in obtaining the approval to the specific conveyance of the Assets from
      the agency having jurisdiction thereover. Any specific conveyances of Government
      Leases delivered to the Escrow Agent at Closing will:

    

    a) be
      executed, acknowledged and delivered to the Escrow Agent;

    

    
      	
              b)

            	
              be
                on forms agreed upon between Quaneco and Fellows Energy, or where
                appropriate, on forms prescribed or suggested by the agency having
                jurisdiction thereover;

            

    

    

    
      	
              c)

            	
              evidence
                the assignment of the Assets; and

            

    

    

    
      	
              d)

            	
              not
                modify any of the terms, covenants and warranties herein set forth
                (except
                to the extent the specific conveyance better describes the particular
                Lease and Option Lands).

            

    

    

    Each
      specific conveyance and this Agreement will, when taken together, be deemed
      to
      constitute but one assignment by Quaneco of the Assets as described in such
      specific conveyance.

    

    ARTICLE
      VII - AREA OF MUTUAL INTEREST

    

    
      	
              7.1

            	
              Area
                of Mutual Interest

            

    

    

    
      	
              a)

            	
              In
                this Article “mutual interest lands” means any leases, and any other
                documents of title including without limitation any agreements granting,
                reserving or otherwise conferring rights to explore for, drill for,
                produce, take, use, market, share in the production of or the proceeds
                from the sale of Petroleum Substances; any portion of which lie fifty
                (50%) percent or more within the Prospect
                Area.

            

    

    

    
      	
              b)

            	
              The
                provisions of this Article will exist from the date of this Agreement
                and
                remain in effect until twenty four (24) months after Fellows Energy
                exercises the Option to acquire the Assets in the Option Lands, or,
                in the
                event Fellows Energy does not exercise the Option and its right to
                acquire
                the Assets in the Option Lands is terminated or expires, then the
                provisions of this Article will no longer be in effect as of the
                date of
                such termination or expiration. 

            

    

    

    
      	
              c)

            	
              Each
                of the Parties represents and warrants that it is not a party to
                any
                agreement which predates this Agreement whereby it is obligated to
                offer
                an interest in any mutual interest lands to any third party, who
                is not a
                Party.

            

    

    

    
      	
              d)

            	
              For
                the purpose of this Article, only money consideration actually paid
                for an
                interest in any mutual interest lands will be reimbursed. If one
                of the
                Parties (“Acquiring Party”) acquires an interest in mutual interest lands,
                the Acquiring Party will forthwith give written notice to the other
                Parties together with all pertinent information with respect thereto.
                Each
                of the other Parties will have the option to acquire an interest
                from the
                Acquiring Party equal to their respective participating interest,
                exercisable by payment of the proportionate share of the costs of
                acquisition within sixty (60) days of

            

    

     

    
 

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    

    

    
      	 	
              receipt
                of notice of the acquisition. If the non-acquiring parties comprise
                more
                than one party and if one of the other parties does not exercise
                the
                option hereinbefore provided, the party (or parties) exercising the
                option
                will have a further option, exercisable by payment within twenty (20)
                days of notice thereof, to acquire from the Acquiring Party its
                proportionate share of the interest which was offered to the party
                which
                did not exercise the option in the original
                instance.

            

    

    

    
      	
              e)

            	
              In
                the event the consideration is the fulfillment of an obligation to
                earn an
                interest instead of money consideration, then the non-acquiring party
                may
                elect to participate for its proportionate share in fulfilling such
                obligation, to earn its proportionate share of the earnable interest.
                In
                the event the consideration is neither cash nor the fulfillment of
                an
                obligation the Acquiring Party will set out its bona fide estimate
                of the
                value in cash of the consideration and the non-acquiring party may
                acquire
                an interest as though that estimate were a cash consideration pursuant
                to
                Subparagraph 7.1(c). In case of dispute as to the reasonableness
                of the
                estimate the matter will be referred to arbitration, pursuant to
                the
                provisions of Paragraph 9.7.

            

    

    

    
      	
              f)

            	
              If
                any of the mutual interest lands are posted for public sale, the
                Parties
                will consult with a view to reaching an agreeable bid price for such
                lands
                and if agreement is reached Fellows Energy will make a bid therefore
                in
                the names and on behalf of all of the Parties. If agreement is not
                reached
                on a bid price by all of the Parties prior to forty-eight (48) hours
                before the time for submission of bids, each of the Parties may submit
                its
                own bid and may acquire an interest in the mutual interest lands
                for its
                own account and the provisions of Subparagraph 7.1(d) will not apply
                unless the party acquiring such lands does so at a price which differs
                by
                more than five (5%) percent from the price which such party
                had
                represented to the other parties as the price which such party would
                submit as a bid price, in which event such Acquiring Party must give
                the
                notice required under the provisions of Subparagraph
                7.1(d).

            

    

    

    
      	
              g)

            	
              With
                respect to any mutual interest lands in which all of the Parties
                acquire a
                working interest pursuant to this Article, the interests of the parties
                therein will forthwith become subject to the Operating Agreement,
                with
                Fellows Energy being appointed as operator and the interests of the
                Parties will be in accordance with the respective participating interests
                of the Parties, pursuant to Paragraph 3.5, subject to adjustments
                in
                accordance herewith.

            

    

    

    

    ARTICLE
      VIII - INDEMNITY

    

    8.1 Indemnity
      of Quaneco

    

    Quaneco
      will be liable to Fellows Energy, its officers, directors, employees, agents,
      successors or permitted assigns (herein referred to collectively as “Fellows
      Energy”) for and, in addition, will indemnify and save Fellows Energy harmless
      from and against all claims, liabilities, actions, proceedings, demands, losses,
      costs, damages and expenses whatsoever which may be brought against or suffered
      by Fellows Energy or which it may sustain, pay or incur, as a direct consequence
      of Quaneco’s breach of any of Quaneco’s representations or warranties contained
      in Paragraph 5.1. No claim may be made against Quaneco for such liability or
      indemnity or pursuant to or based in any way upon the provisions of this
      Paragraph 8.1 unless written notice thereof with reasonable particulars will
      have been provided by Fellows Energy to Quaneco within twenty four (24) months
      of the Closing Date. The indemnified Party hereunder will give the indemnifying
      Party prompt notice in writing of any claim to which this Paragraph 8.1 applies
      and afford the indemnifying Party the reasonable opportunity to pay, settle
      or
      contest the claim at its expense.

    

    8.2 Indemnity
      of Fellows Energy

    

    Fellows
      Energy will be liable to Quaneco, its officers, directors, employees, agents,
      successors or permitted assigns (herein referred to collectively as “Quaneco”)
      for and, in addition, will indemnify and save Quaneco harmless from and against
      all claims, liabilities, actions, proceedings, demands, losses, costs, damages
      and expenses whatsoever which may be brought against or suffered by Quaneco
      or
      which it may sustain, pay or incur, as a direct consequence of Fellows Energy’s
      breach of any of Fellows Energy’s representations or warranties contained in
      Paragraph 5.2. No claim may be made against Fellows Energy for such liability
      or
      indemnity or pursuant to or based in any way upon the provisions of this
      Paragraph 8.2 unless written notice thereof with reasonable particulars will
      have been provided by Fellows Energy to Quaneco within twenty four (24) months
      of the Closing Date. The indemnified Party hereunder will give the indemnifying
      Party prompt notice in writing of any claim to which this Paragraph 8.2 applies
      and afford the indemnifying Party the reasonable opportunity to pay, settle
      or
      contest the claim at its expense.

     

    
 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    8.3 Non-Merger
      of Indemnities and Liabilities

    

    The
      liabilities and indemnities contained herein will be deemed to apply to, and
      will not merge in, all specific conveyances conveying the Assets to Fellows
      Energy or otherwise provided with respect to the transaction
      herein.

    

    ARTICLE
      IX - GENERAL

    

    9.1 Subrogation
      and Substitution

    

    Quaneco
      will convey, to the extent permitted, the Assets to Fellows Energy with full
      rights of substitution and subrogation of Fellows Energy in and to all
      covenants, representations and warranties by others heretofore given or made
      in
      respect of the Assets or any part thereof.

    

    9.2 Public
      Announcements

    

    There
      will be no public release of information of any kind by any of the Parties
      with
      respect to this Agreement, and the transactions herein provided for, unless
      mutually approved by the Parties, which approval will not be unreasonably
      withheld, or, if such release is required by the law, including necessary
      disclosure under the security laws, then each of the Parties will receive a
      copy
      of such release at least twenty four (24) hours prior to its
      dissemination.

    

    9.3 Confidential
      Information

    

    In
      the
      event Fellows Energy does not close the transaction consistent with this
      Agreement or chooses not to exercise the Option, Fellows Energy agrees to return
      all information of any kind obtained by it from Quaneco, and its agents and
      representatives, concerning the Assets or the Prospect Area, including
      proprietary data obtained from drilling and testing coalbed methane wells on
      the
      Option Lands (“Information”), and to keep any and all Information obtained by
      Fellows Energy or its agents and representatives confidential for a period
      of
      two (2) years from March 12, 2004. The Information obtained by Fellows Energy
      will not be considered confidential if:

    

    
      	
              a)

            	
              it
                obtained such Information from the public domain other than as a
                result of
                a disclosure by Fellows Energy, or one of its agents or
                representatives;

            

    

    

    
      	
              b)

            	
              such
                Information became available to Fellows Energy on a non-confidential
                basis
                from a source other than Quaneco, or one of its agents or representatives,
                where that source has represented to Fellows Energy it is entitled
                to
                disclose it; or

            

    

    

    
      	
              c)

            	
              such
                Information was known to Fellows Energy on a non-confidential basis
                prior
                to its disclosure to Fellows Energy by Quaneco, or one of its agents
                or
                representatives.

            

    

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    9.4 Severability

    

    If,
      and
      to the extent that, any court of competent jurisdiction determines that it
      is
      impossible to construe any provision of this Agreement and consequently holds
      that provision to be invalid, illegal or unenforceable, such holding will in
      no
      way affect the validity of the other provisions of this Agreement, which will
      remain in full force and effect.

    

    9.5 Further
      Assurances

    

    The
      Parties will, from time to time, on and after Closing, at the request of the
      other and without further consideration, execute and deliver all such other
      and
      additional instruments, notices, releases and other documents, and will do
      all
      such other acts and things as may be necessary to more fully assure the subject
      matter of this Agreement, including the acquisition by Fellows Energy of the
      Assets.

    

    9.6 Assignment

    

    Except
      in
      respect of an affiliate, none of the Parties will assign their rights and
      obligations under this Agreement without obtaining the prior written consent
      of
      the other Parties. Where the assigning party wishes to assign its rights and
      obligations to an affiliate, it will provide the other Parties with prior
      written notice of such assignment. For this Paragraph, affiliate means a
      company, partnership or other legal entity which owns, directly or indirectly,
      fifty (50%) percent or more of a Party.

    

    9.7 Arbitration

    

    The
      Parties hereby submit all controversies, claims and matters of difference in
      any
      way related to this Agreement or the performance or breach of the whole or
      any
      part hereof to arbitration to be conducted in English in Sheridan, Wyoming,
      U.S.A., according to the Wyoming Uniform Arbitration Act, ________ ss ___-__-___
      et
      seq
      (the
“Act”) and pursuant to the commercial rules and practices of the American
      Arbitration Association (“AAA”) from time to time in force, except that if such
      rules and practices will conflict with the Act or the Wyoming Rules of Civil
      Procedure relating thereto (“RCP”) or any other provision of the law of the
      State of Wyoming then in force, such rules and provisions will govern. In
      addition, the Act and the RCP will supplement the AAA rules where no conflict
      exists. Except as authorized hereunder, arbitration of any such controversy,
      claim or matter of difference will be a condition precedent to any legal action
      thereon. This submission and agreement to arbitration will be specifically
      enforceable in accordance with the Act. Awards will be final and binding on
      all
      parties to the extent and in the manner provided by the RCP. Any party may
      apply
      to the Wyoming District Court having jurisdiction, for an appropriate judgement
      entered thereon and execution issued therefor. At the election of any party,
      said award may also be filed, and judgement entered thereon and execution issued
      therefor, with the clerk of one or more other courts, in the United States
      of
      America, or elsewhere, having jurisdiction over the party against whom such
      an
      award is rendered or its property.

    

    9.8 No
      Partnership

    

    The
      Parties do not intend that this Agreement create (and it shall not be construed
      to create) a joint venture, mining partnership, partnership or any type of
      association. None of the Parties are authorized to act as agent or principal
      for
      another Party with respect to any matter except as specifically provided
      herein.

    

    9.9 Communications

    

    Any
      notice, direction or other instrument required or permitted to be given under
      this Agreement by the Quaneco to Fellows Energy or Fellows Energy to Quaneco
      must be in writing and must be given by delivering the same personally to the
      following addresses:

    

    a) if
      to
      Quaneco:

     

    
 

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

       

       

      
        	 	
                Quaneco,
                  L.L.C. 

              	
                Quaneco,
                  L.L.C.

              
	 	
                35010
                  Chardon Road, Suite 200  

              	211 North Robinson
	 	
                Willoughby
                  Hills, OH 44094

              	
                One
                  Leadership Square, 12th
                  Floor 

              
	 	
              	
                Oklahoma
                  City, Oklahoma 73102 

              
	 	
                Attn: Mr.
                  Paul Mysyk

              	
                Attn:
                  Mr. Robert O’Bannon

              
	 	Fax:
                (440)
                954-5026	
                Fax:
                  (405) 235-4133 

              
	 	 	 
	b) 	if to Fellows Energy: 	 
	 	 	 
	 	
                Fellows
                  Energy  

              	 
	 	
                370
                  Interlocken Boulevard, Suite 400

              	 
	 	
                Broomfield,
                  CO 80021

              	 
	 	
                Attn:
                  George
                  S. Young

              	 
	 	
                Fax:

              	 

      

       

    

     

    

    A
      party
      may from time to time change its address for service herein by giving written
      notice to the other party. Any notice may be served by personal service upon
      a
      party or by instantaneous electronic means to the number for notice hereunder.
      Any notice given by service upon a party and any notice given by instantaneous
      electronic means will be deemed to be given to and received by the addressee
      on
      the day (except Saturdays, Sundays, statutory holidays and days which the
      offices of the addressee are closed for business) of service, provided it is
      received within regular business hours. Any notice received outside of regular
      business hours will be deemed received on the next regular business
      day.

    

    9.10 Counterpart
      Execution

    

    This
      Agreement may be executed in counterpart and the counterparts together will
      be
      effective and binding on the Parties as if the same copy of this Agreement
      was
      executed by the Parties in each other's presence. Delivery of an executed
      counterpart may be by facsimile, which facsimile will be replaced by the
      delivery of three (3) executed originals as soon after signing as reasonably
      possible.

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

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

     

     

    
      	
              QUANECO,
                L.L.C. 

            
	Per:
              /s/ Paul Mysyk
	
              

              Name:
                Paul Mysyk

            
	
              Title:
                Managing Member 

            

    

    

      
        	
                Per:
                  /s/
                  Harry Schumaker 

              
	
                
Name:
                Harry Schumaker
	
                Title:
                  Managing Member

              

      

    

     

    
      	FELLOWS
              ENERGY 
	Per:
              /s/ George S. Young
	
              

              Name:
                George S. Young

            
	
              Title:
                President 

            

    

     

    
 

    This
      is
      the counterpart execution page to a Purchase and Option Agreement for the
      Overthrust Prospect Area, Utah between Quaneco, L.L.C. and Fellows Energy,
      Ltd.,
      dated March 12, 2004.

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    

    This
      is Schedule “A” attached to a Purchase and Option Agreement for the Overthrust
      Prospect, Utah and Wyoming between Quaneco, L.L.C. and Fellows Energy, Ltd.,
      dated March 12, 2004.

    

    Option
      Lands

    

    

    

    Wells

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    

    This
      is Schedule “C” attached to a Purchase and Option Agreement for the Overthrust
      Prospect, Utah and Wyoming between Quaneco, L.L.C. and Fellows Energy, Ltd.
      dated March 12, 2004.

    

    

    Map
      of
      Prospect Area

    

    

    

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
 

    

    

    This
      is Schedule “B” attached to a Purchase and Option Agreement for the Overthrust
      Prospect, Utah and Wyoming between Quaneco, L.L.C. and Fellows Energy, Ltd.
      dated March 12, 2004.

    

    

    

    

    

    Royalties

    

    

    

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    

    This
       is Schedule “D” attached to a Purchase and Option Agreement for the
      Overthrust Prospect, Utah and Wyoming between Quaneco, L.L.C. and Fellows
      Energy, Ltd. dated March 12, 2004.

    

    

    

    

    Drilling
      and Geological Requirements

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}]]