Document:

Lease Agreement by and between University Housing Corp. and Nanometrics Inc.

 Exhibit 10.12 
  
 LEASE AGREEMENT 
  
 TERMS AND DEFINITIONS 
  
 Date: February 2, 2001  
  
 Landlord: University Housing Corp 
  

			
	 Landlord’s Address:
	  	801 W 24th St
	 	  	Austin, Tx 78705
	 Landlord’s Phone:
	  	512-472-5846
		
	 Tenant:
	  	Nanometrics Incorporated
		
	 Tenant’s Address:
	  	1550 Buckeye Drive
	 	  	Milpitas, CA 95035
	 Tenant’s Phone (H):
	  	 
	 Tenant’s Phone (O):
	  	 
		
	 Premises
	  	 
		
	 Approximate Square Feet:
	  	1,130 sq ft @ $1.15/sq ft
	 Name of Building:
	  	University Towers Court
	 Street Address/Suite:
	  	715 W 23rd St., Suite E
	 City, State, Zip:
	  	Austin, Tx 78705

  
 Base Rent (monthly):
$1,299.50 
  
 Annual Rent Adjustment: $
                                     or 4% 

 
 Term (months): 36 
  
 Commencement Date: February 15, 2001 
  
 Termination Date: March 31, 2004 
  
 Security Deposit: $1,299.50 
  
 Parking Spaces Assigned: 3 
  
 Use of Premises: Engineering Design, sales and service. 
  

  
 LEASE AGREEMENT 

 
 THIS LEASE AGREEMENT (this “lease”) is made and entered into
this 15th day of February, 2001, by and between UNIVERSITY HOUSING CORPORATION, a Texas corporation, d/b/a University Towers, hereinafter called “Lessor”, and Nanometrics Incorporated, a California corporation, hereafter called
“Lessee.” 
  
 WITNESSETH: 
  
 THAT for and in consideration of the covenants, agreements and stipulations
herein contained, Lessor does hereby demise and lease unto Lessee, and Lessee does hereby take, rent and hire from Lessor for the term and upon the terms and conditions hereinafter set forth, commercial space located at suite E of that
certain building (the “Building”) having the address of 715 West 23rd Street, City of Austin, Travis County, State of Texas, (the “demised premises”). The tract upon which the Building is located is more particularly described on
Exhibit “A” attached hereto and made a part hereof for all purposes. The demised premises are outlined on the plan of the Building attached hereto as Exhibit “B” and made part hereof for all purposes. For purposes of this lease,
the demised premises shall be deemed to comprise 1,130 square feet of leasable area. Lessor reserves the right to place in, under, over or through the demised premises all pipes, wires, lines, and facilities serving the Building and the
parking facilities owned by Lessor that are located above the demised premises known as University Towers Parking Garage. 
  
 1. Use of Demised Premises: Engineering Design, Sales and Service. 
  
 Lessee’s business will be advertised as and operated under the name of Nanometrics Incorporated. Lessee will not conduct any auction,
bankruptcy, fire, lost-our-lease, going-out-of-business, or 

  

 (1) 

 
similar sale or promotion and will not use any loudspeaker, phonograph, radio or sound amplifier which is audible outside the demised premises. Lessee will
not commit any act which is a nuisance or annoyance to Lessor or residents of University Towers; or which might, in the reasonable judgment of Lessor, appreciably damage Lessor’s goodwill and reputation, or which would tend to injure or
depreciate the Building or University Towers. Lessee binds and obligates itself to occupy and use the entire demised premises continuously during the term of this lease for the purpose provided above and according to the generally accepted standards
for the operation same or similar businesses, including without limitation maintaining a sufficient staff of employees; remaining open for business hours, without a restriction on maximum hours, for a comparable in the City of Austin, Travis County,
State of Texas. 
  
 2. Lease Term. The term of this lease
shall begin on the date on which the demised premises have been improved as provided in Paragraph 10 below, the date on which such term begins being hereinafter referred to as the “Commencement Date.” The term of this lease shall terminate
on the last day of the 36th full calendar month after the Commencement Date, unless sooner terminated in accordance with the terms and conditions herein set forth. Lessee shall have the option to renew and extend the term of this lease as
provided in Exhibit “C” attached hereto and made a part hereof for all purposes. 
  
 During the last ninety (90) days of the lease term, Lessor shall have the right to enter and show the demised premises and any part thereof for the purpose of reletting such premises. Lessor shall have the right
throughout the lease term to enter and show the demised premises to prospective purchasers and/or lenders. 
  
 3. Rent. Lessee shall pay to Lessor as rent for the demised premises $1.15 per month per square foot of leasable area, or $1,299.50
per month in advance, commencing on the first day of the initial term hereof. If such initial term does not begin on the first day of a calendar month, 

  

 (2) 

 
Lessee shall pay in advance a pro rata part of such rental for the initial, partial month of such term. Rent shall thereafter be paid on the first day of
each month during the entire term hereof, in advance. All payments of rent, and all other payments required of Lessee hereunder, shall be paid to Lessor at its address stated herein. Lessee shall pay an administrative late charge of five percent
(5%) of the past due rent in the event that Lessor has not received the rent within five (5) days after it was due. All past due rent shall also bear interest at the rate of twelve percent (12%) per annum (i.e., one percent per month) from the date
due until paid. Lessee shall also pay twenty-five and no/100 ($25.00) for each check which is returned for insufficient funds. 
  
 4. Adjustment to Rent. 
  
 (a) As used in this paragraph, the fiscal year of this lease shall be considered as commencing on the first day of the first full calendar month of the lease term,
disregarding any partial month at the commencement of this lease. The parties hereto accordingly agree that the minimum monthly rental shall be effective during the first fiscal year of this lease. At the commencement of the second fiscal year of
this lease, and at the commencement of each fiscal year of this lease thereafter during the lease term or any renewal, Lessee shall add and pay to Lessor, in addition to the rental set out in Paragraph 3 above, and as rent, an amount equal to the
product of such rent multiplied by 4 percent (4%). 
  
 Any adjustment hereunder shall be paid monthly in advance for each month during the fiscal year for which such adjustment is applicable. Refer to Exhibit “D” for yearly rate adjustments attached hereto and made a part hereof for
all purposes. 
  
 5. Ad Valorem Taxes. Lessor will pay all
ad valorem taxes on the demised premises. Lessee will pay all taxes on its personal property, equipment and fixtures located on or in the demised premises. 
  

 (3) 

 6. Security Deposit. In addition to the rental for the first month of this lease, Lessee will,
promptly upon execution of this lease, pay to Lessor the sum of 1,299.50, which sum shall remain on deposit with Lessor and shall be maintained by Lessee throughout the term of the lease, without liability for interest, as security for the
faithful performance of all the terms and conditions of this lease by Lessee. If lessee should default in performing any term or provision of this lease then the security deposit, or any part thereof, may be applied to the damages or expenses
sustained by Lessor by reason of such default. Lessee shall, upon the written request of Lessor, deposit with Lessor an amount sufficient to restore the security deposit after any such application. Any such application shall not be construed as an
agreement to limit the amount of Lessor’s claim or as a waiver of any damages, and Lessor’s claim for all damages not covered by such security deposit shall remain in full force and effect. Provided Tenant has fully and faithfully carried
out all of said terms, covenants and conditions on Tenant’s part to be performed, this Security Deposit shall be returned to Tenant after the expiration of this Lease. In the event of a bona fide sale, subject to this Lease, Landlord shall have
the right to transfer the Security Deposit to the buyer for the benefit of Tenant. Landlord, upon notice to Tenant of such sale and assignment of the security deposit to the buyer, shall be released from all liability for the return of such Security
Deposit. Tenant agrees to look solely to the new Landlord for the return of the Security Deposit, and it is agreed that this shall also apply to any subsequent transfer or assignment of the Security Deposit to any new Landlord. 
  
 7. Utilities Charges. Lessor shall make available and pay all charges
for customary office use of water, sewage and garbage disposal and Lessee shall pay for electricity, heating and air conditioning of all areas occupied by Lessee, plus None Other. 
  

 (4) 

 8. Surrender of premises: Holding over. On expiration or termination of the lease term, Lessee
shall surrender to Lessor the demised premises in good condition (except for ordinary wear and tear), Lessee shall remove all of its trade fixtures, signs, and personal property, including furniture, equipment, inventory and other improvements by
Lessee as requested by Lessor. Where Lessee unlawfully holds over, Lessee shall pay double rents for such holdover, plus reasonable attorneys fees and damages such as loss of rentals from prospective Lessees. 
  
 9. Maintenance, Cleaning and Repair Obligations. 
  
 (a) Lessee’s Obligations: 
  
 Lessee agrees to maintain at its own cost and expense the interior of the
demised premises in substantially the same condition as at the beginning of the term, excepting only reasonable wear and tear arising from proper use thereof, and will make all necessary repairs to keep the interior of the demised premises in good
order and condition. All window breakage, including plate glass and special store front equipment will be repaired by Lessee at Lessee’s expense. 
  
 Lessor will provide and maintain vermin-proof receptacles for Lessee’s use in an outside area designated by the Lessor. Lessee will be responsible
for the removal of large refuse from the demised premises and will promptly deposit them to an outside dumpster. Lessee will also promptly and strictly comply with all health, sanitary or other laws, regulations and ordinances pertaining to the
depositing and removal of such refuse from or about the demised premises. Special services by Lessor are outlined in Exhibit “E” attached hereto and made part of hereof for all purposes. 
  

 (5) 

 (b) Lessor’s Obligations: 
  
 Repair, replace, and maintain the (a) roof, (b) foundation, (c) parking facility and common areas, (d) structural soundness
of the exterior walls, doors, corridors, and window casings, and (e) other structures or equipment serving the premises. 
  
 10. Finish-Out of Demised Premises. The demised premises will be constructed in accordance with the “Terms and Conditions” outlined in
Exhibit “F” attached hereto and made a part hereof for all purposes. 
  
 11. Exterior Signs, Etc. Lessee will not place or suffer to be placed or maintain on the exterior of the demised premises any sign, advertising matter, or any other thing of any kind, and will not place or
maintain any decoration, lettering, or advertising matter on the glass of any window or door of the demised premises without first obtaining Lessor’s written approval, which shall not be unreasonably denied, and Lessee will maintain such signs,
lettering, advertising matter or such other things as may be approved by Lessor in good condition and repair at all times. 
  
 12. Loading/Unloading. Lessee will not load or unload any trucks or permit any trucks serving the demised premises, whether owned by Lessee or not,
to be loaded or unloaded in the Building except in the areas designated for such use by Lessor. 
  
 13. Alterations. Lessee shall not make any additions, alterations, or changes in the demised premises without first obtaining Lessor’s written
approval. Lessee may install machinery, equipment and trade fixtures necessary for the conduct of its business as provided herein, and upon termination of the lease, if Lessee is not in default hereunder, Lessee shall be entitled to remove any such
machinery, equipment and trade fixtures installed by Lessee on the demised premises, with the understanding, however, that Lessee shall be obligated to place the demised premises in their original condition, normal wear and tear excepted, in the
event alterations have to 

  

 (6) 

 
be made or damage is caused by the removal of such property by Lessee, and further that Lessee shall remove all such property which Lessor requests.

  
 14. Lessor’s Right of Entry. Lessor shall have the
right to enter the demised premises at all reasonable hours for the purpose of inspecting same. 
  
 15. Compliance with all laws. Lessee, at Lessee’s sole cost and expense, will comply with all statutes, ordinances, rules, orders, regulations
and requirements of the federal, state, county and city governments and all departments thereof applicable to the demised premises or the business conducted therein by Lessee, including, without limitation, all zoning, building, noise and parking
regulations of the City of Austin. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, AS TO WHETHER LESSEE’S PLANNED USE OF THE LEASED PREMISES IS PERMITTED UNDER SUCH REGULATIONS, RULES AND ORDINANCES. 

 
 16. Insurance 
  
 (a) Lessee shall maintain in full force and effect during the term of this
lease, at Lessee’s own expense, personal injury and property damage liability (which shall be not less than the amount of $300,000.00 with respect to any one person, $1,000,000.00 with respect to any one accident and $100,000.00 with respect to
property damage) in form approved by Lessor, insuring Lessor and Lessee jointly. 
  
 Certificates for such insurance shall be issued showing Lessor to be an additional insured, and the policy shall be written so that it may not be changed or canceled without ten (10) days prior written notice being
first given to Lessor. Lessee will deliver a duplicate original of such policy to Lessor within ten (10) days after the Commencement Date. Lessee will also maintain fire and 

  

 (7) 

 
extended casualty insurance on all fixtures, equipment or other property owned by or placed in the demised premises by Lessee. 
  
 (b) Lessor will maintain in full force and effect during the term of this
lease fire and extended coverage casualty insurance on the improvements located in the Building. Tenant will not do anything in or to the Premises, or bring anything into the Premises, or permit anything to be done or brought into or kept in the
Premises, which will in any way increase the rate of fire insurance on said Premises, nor use the Premises or any part thereof, nor allow or permit its use for any business or purpose which would cause an increase in the rate of fire insurance on
said building, and the Tenant agrees to pay as additional rent the cost of any increase in the fire insurance on demand by Landlord. 
  
 (c) Each party hereto hereby waives any cause of action it might have against the other party on account of any loss or damage that is insured against
under any insurance policy (to the extent that such loss or damage is recoverable under such insurance policy) that covers the Building, the demised premises, Lessor’s or Lessee’s fixtures, personal property, leasehold improvements or
business and which names Lessor or Lessee, as the case may be, as a party insured. Each party hereto agrees that it will request its insurance carrier to endorse all applicable policies waiving the carrier’s rights of recovery under subrogation
or otherwise against the other party. It is agreed that this provision shall not supersede or in any way limit the provisions of Paragraph 18 hereof. 
  
 17. Indemnity. Lessor shall not be liable or responsible to Lessee for any loss or damage to any property or person occasioned by theft, Act of
God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority. Lessor shall not be liable to Lessee, Lessee’s agents, servants, employees, members, customers or invitees and
Lessee shall indemnify, defend and hold Lessor harmless from and against any and all fines, suits, 

  

 (8) 

 
claims, demands, losses, liabilities, actions and costs (including court costs and attorney’s fees) arising from (a) any injury to person or damage
property caused by any act, omission or neglect of Lessee, Lessee’s agents, servants, employees, customers or invitees, (b) Lessee’s use of the demised premises or the conduct of Lessee’s business or profession, (c) any activity,
work, or thing done, permitted or suffered by Lessee in or about the demised premises or (d) any breach or default in the performance of any obligation on Lessee’s part to be performed under the terms of this lease. 
  
 18. Condemnation. 
  
 (a) If any part of the demised premises is taken through exercise of the
power of condemnation or eminent domain or is conveyed under the threat thereof and the option not so taken is less than is reasonably required for carrying on the operations being conducted thereon by Lessee (in good faith and in conformity with
this lease) just prior to commencement of such condemnation proceedings, then either Lessee or Lessor may, by written notice to such effect given to the other within thirty (30) days after such taking, terminate this lease in its entirety as of the
date of such taking. If this lease is not so terminated in its entirety, it shall nevertheless terminate as to the portion of the demised premises so taken as of the date of such taking, and the rent provided herein to be paid by Lessee to Lessor
shall be proportionately reduced based upon the reduction, if any, of the fair rental value of the remainder. 
  
 (b) If any part of the demised premises is so taken and this lease is not terminated in its entirety under the immediately preceding paragraph, Lessor
shall within a reasonable time after such taking, restore the demised premises as nearly as practicable to its condition prior to such taking; provided, however that Lessor shall not be required to apply to such restoration any made available to
Lessor for such purpose. If, in so restoring, Lessor shall temporarily deprive Lessee of occupancy or use of part or all of the demised premises as to which this lease shall not have 

  

 (9) 

 
terminated, the rent provided herein shall be abated for the period of such deprivation, in direct proportion to the reduction in the usefulness of the
demised premises to Lessee. 
  
 (c) All compensation awarded for
any taking or condemnation (or sale proceeds in lieu thereof) shall be the property of Lessor, and Lessee shall have no claim thereto, the same being hereby expressly waived by Lessee. Lessor shall have no interest in and Lessee shall not be
required to assign to Lessor any award made to Lessee and/or for the interruption of or unamortized cost of leasehold improvements. Lessor may, without any obligation or liability to Lessee, agree with any condemning authority to a judgment of
condemnation without the necessity of a formal suit or judgment of condemnation, and the date of taking under this clause shall then be deemed the date agreed to under the terms of said agreement. 
  
 19. Fire or Other Casualty. 
  
 (a) Within ten (10) days after any fire or other casualty which damages or
destroys the demised premises, Lessee shall give Lessor written notice of the fire or other casualty. If the improvements on the demised premises are destroyed or damaged by fire or other casualty to the extent that the operations being conducted
thereon by Lessee (in good faith and in conformity with this lease) just prior to the fire or casualty cannot reasonably be made within one hundred eighty (180) days under the applicable laws and regulations of governmental authorities, then
Lessor/Lessee shall have the option of terminating this lease. Within ninety (90) days following receipt of written notice Lessee in writing of whether Lessor will exercise its option to terminate. If lessor elects to terminate this lease then this
lease shall terminate as of the date of the destruction or damage giving rise to said option and Lessor shall return any unearned rent paid in advance. If Lessor does not elect to terminate, then Lessor shall begin repair of the demised premises
within ninety (90) days following the date of said notice to lessee, and shall pursue and complete the repair with all reasonable dispatch so that the demised premises are restored to substantially the same condition that exists just prior to the
fire or other casualty; provided, however, that Lessor 

  

 (10) 

 
shall not be required to expend therefor any sum in excess of the insurance proceeds paid to lessor by reason of such casualty. If Lessor does not elect to
terminate, this lease shall continue in effect; however, from the date of said destruction or damage to the date of completion of repair, all rents due by Lessee to Lessor under this lease shall be abated proportionately to the diminished usefulness
of the demised premises to Lessee. 
  
 (b) If the improvements on
the demised premises are destroyed or damaged by fire or other casualty and the damage or destruction does not give rise to the option set forth above, then Lessor shall begin repair of the demised premises within ninety (90) days following receipt
of written notice of the fire or other casualty from Lessee, and shall pursue and complete the repair with all reasonable dispatch so that the demised premises are restored to substantially the same condition that existed just prior to the fire or
other casualty; provided however, that Lessor shall not be required to expend therefor any sum in excess of the insurance proceeds paid to Lessor’s by reason of such casualty. If such damage or destruction, or Lessor’s subsequent repair,
shall temporarily deprive Lessee of Occupancy or use of part or all of the demised premises, then the rent provided for herein shall be abated, for the period of such deprivation, in direct proportion to the reduction in the usefulness of the
demised premises to Lessee. 
  
 (c) In no event may this lease be
terminated or the rent provided for herein abated if the demised premises are destroyed or damaged by fire or other casualty and the fire or casualty is caused by or arises in connection with any act or omission of Lessee, its agents, employees,
customers or invitees. 
  
 20. Assignment and Subletting.
Lessee may not assign, sublet or underlet the demised premises or any portion thereof without the prior written approval of Lessor, which shall not be unreasonably denied. Any attempt to do so shall be null and void. Lessee and Subgents or
Subtenants/Assigns shall be prohibited from conducting tutoring services for students in 

  

 (11) 

 
connection with standardized testing or preparation for high school exams (SSAT), college entrance exams (PSAT, SAT, and ACT), graduate school admissions
tests (GRE, LSAT, GMAT, MCAT and DAT) or professional licensure exams, National Medical Boards for American and foreign physician and nurses or preparation of students for CLEP or TOFEL and English as a second language, plus speed reading. In the
event Lessor’s written approval is given to such assignment, subletting or underletting, Lessee shall not be relieved from any liability hereunder. 
  
 21. Default and Remedies Upon Default. The following events shall be deemed to be events of default by Lessee under this lease: 
  
 (a) Lessee shall fail to pay any installment of the rent or any other sums to
be paid by Lessee hereunder when due, and such failure shall continue for a period of five (5) days after the date such payment was due. 
  
 (b) Lessee shall become insolvent; Lessee shall file a petition under any section or chapter of the Federal Bankruptcy Code, as amended, or under any
similar law or statute of the United States or any State thereof; a receiver or trustee shall be appointed for all or substantially all of the assets of Lessee; or Lessee shall be adjudged bankrupt or insolvent in proceedings filed against Lessee
thereunder. 
  
 (c) Lessee shall desert or vacate any substantial
portion of the demised premises. 
  
 (d) Lessee shall fail to
comply with any term, provision or covenant of this lease (other than the foregoing in this Paragraph 21), and shall not cure such failure within twenty (20) days after written notice thereof to Lessee. 
  

 (12) 

 Upon the occurrence of any event of default by Lessee, Lessor shall have the option to pursue any one or
more of the following remedies, in addition to any option remedies available to lessor at law or in equity, without any notice or demand whatsoever: 
  
 a. Terminate this lease, in which event Lessee shall immediately surrender the demised premises to Lessor, and if Lessee fails to do so, Lessor may,
without prejudice to any other remedy which it may have for possession or arrearage in rent, enter upon and take possession of the demised premises, by any lawful means, including by picking or changing locks if necessary, and lock out, expel or
remove Lessee and any other person who may be occupying said demised premises or any part thereof, without being liable for prosecution or any claim for damages therefor; and Lessee agrees to pay to Lessor on demand the amount of all loss and damage
through inability to relet the demised premises on satisfactory terms or otherwise. 
  
 b. Enter upon and take possession of the demised premises by any lawful means, including by picking or changing locks if necessary, and lock out, expel or remove Lessee and any other person who may be occupying the
demised premises or any part thereof without being liable for prosecution or any claim for damages therefor, and if Lessor so elects, relet the demised premises on such terms as Lessor shall deem advisable and receive the rent therefor, and Lessee
agrees to pay to Lessor on demand any deficiency that may arise by reason of such reletting for the remainder of the lease term or any extension thereof (if the event of default occurs during such extension term). Lessee shall be liable immediately
to Lessor for all costs Lessor incurs in reletting the demised premises, including, without limitation, brokers’ commissions, expenses of remodeling the demised premises required by the reletting, and like costs. 
  
 c. Enter upon the demised premises by any lawful means, including by picking
or changing locks if necessary, without being liable for prosecution or any claim for damages therefore, and do whatever Lessee is obligated to do under the terms of this lease; and Lessee agrees to reimburse 

  

 (13) 

 
Lessor on demand for any expenses which Lessor may incur in thus effecting compliance with Lessee’s obligations under this lease, and Lessee further
agrees that Lessor shall not be liable for any damages resulting to Lessee from such action. 
  
 If Lessee shall be in default as provided above, Lessor shall be entitled to change or modify door locks on all entry doors to the demised premises, provided Lessor shall immediately post a notice on the primary entry
door to the demised premises stating the name and address or the telephone number of the individual or company from which a new key may be obtained during such individual’s or company’s normal business hours upon Lessee having cured all
its defaults under this lease. 
  
 No re-entry or taking
possession of the demised premises by Lessor shall be construed as an election on its part to terminate this lease, unless a written notice of such intention be given to Lessee. Notwithstanding any such reletting or re-entry or taking possession,
Lessor may at any time thereafter elect to terminate this lease for a previous default. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall
pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Lessor hereunder or of any damages accruing to Lessor by reason of the violation of any of the terms, provisions and covenants herein contained. Lessor’s
acceptance of rent following an event of default hereunder shall not be construed as Lessor’s waiver of such event of default. No waiver by Lessor of any violation or breach of any of the terms, provisions and covenants herein contained shall
be deemed or construed to constitute a waiver of any other violation or default. The loss or damage that Lessor may suffer by reason of termination of this lease or the deficiency from any reletting as provided for above shall include the expense of
repossession and any repairs or remodeling undertaken by Lessor following possession. Should Lessor at any time terminate this lease for any default, in addition to any other remedy Lessor may have, Lessor may recover from Lessee all damages Lessor
may incur by reason of such default, 

  

 (14) 

 
including the cost of recovering the demised premises and the loss of rental for the remainder of the lease term or extension thereof (if the event of
default occurs during such extension term). 
  
 22. No
Waiver. No acceptance of rent by Lessor or delay in enforcing any obligation shall be construed as a waiver of any default in the performance of any obligation to be undertaken by Lessee. Lessor’s failure to enforce the default provisions
hereof in the event of Lessee’s default hereunder shall not act as a waiver of Lessor’s right to enforce the default provisions hereof in the event of a subsequent breach thereof by Lessee. 
  
 23. Mechanic’s Liens. Lessee will not permit any mechanic’s
or materialman’s lien or liens to be placed upon the land or the Building of which the demised premises is a part during the lease term or any extension thereof caused by or resulting from any work performed, materials furnished or obligation
incurred by or at the request of Lessee, and in the case of the filing of any such lien Lessee will promptly pay, bond off or obtain the release of same to the satisfaction of Lessor. If default in compliance with the provisions of this Paragraph 23
shall continue for twenty (20) days after written notice thereof from Lessor to Lessee, Lessor shall have the right and privilege at lessor’s option of paying the same or any portion thereof without inquiry as to the validity thereof, and any
amounts so paid, including expenses and interest, shall be so much additional rental hereunder due from Lessee to Lessor and shall be repaid to Lessor immediately. 
  
 24. Lessor’s Lien. In consideration of the mutual benefits arising under this lease, Lessee hereby gives Lessor
(in addition to and cumulative of Lessor’s statutory lessor’s lien) a lien upon all Lessee’s property at any time placed in or upon the demised premises, to secure the prompt payment of all monthly rent and other sums stipulated to be
paid herein by Lessee. 
  

 (15) 

 This lease shall constitute a security agreement under the Uniform Commercial Code so that lessor shall
have and may enforce a security interest on all property of Lessee now or hereafter place in or on the demised premises, including, but not limited to, all fixtures, machinery, equipment, furnishings and other articles of personal property now or
hereafter placed in or upon the demised premises by Lessee. Lessee agrees to execute as debtor such financing statement or statements as Lessor may now or hereafter request in order that such security interest or interest may be protected pursuant
to said Code. Lessor may at its election at any time file a copy of this lease as a financing statement. Lessor, as secured party, shall be entitled to all rights and remedies afforded a secured party under said Uniform Commercial Code, which rights
and remedies shall be in addition to and cumulative of the landlord’s liens and rights provided by law or by the other terms and provisions of this lease. 
  

25. Notices. Any notices, requests or other communications hereunder shall be deemed duly given if made in writing and delivered or mailed by
registered or certified mail as follows: To Lessor; with copy to; to Lessee; Attention CFO, and to Nanometrics-SW, 9020 Capital of Texas Highway, N., Bldg. 1, Ste. 345, Austin, Texas 78759, attention: Bill McGahan. 
  
 Either party may change such address by notice to the other as provided
herein. 
  
 University Towers 
 801 West 24th Street 
 Austin, TX 78705

 ATTN: General Manager 
 (512)
472-5846 
  
 27. Miscellaneous. 
  
 (a) This lease shall be binding upon and inure to the benefit of the heirs,
legatees, devisees, executors, administrators, successors and assigns of the respective parties hereto, and any other party who may come into possession of the demised premises in any manner whatsoever. 
  

 (16) 

 (b) This lease may not be altered, changed or amended except by instrument in writing signed by both
parties. Each and every covenant and agreement contained in this lease is, and shall be construed to be, a separate and independent covenant and agreement. This lease contains all of the agreements of the parties hereto with respect to any matter
covered or mentioned in this lease and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. Neither Lessor nor Lessor’s agents or brokers have made any representations or promises with respect to
the demised premises or the Center except as herein expressly set forth and no rights, easements or licenses are acquired by Lessee by implication or otherwise except as expressly set forth in the provisions of this lease. 
  
 (c) If any clause or provision of this lease is illegal, invalid or
unenforceable under applicable laws, then it is the intention of the parties hereto that the remainder of this lease shall not be affected thereby, and that there be added as a part of this lease a clause or provision as similar in terms to any such
illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. 
  
 (d) Any liability of Lessor to Lessee arising out of Lessor’s obligations under or otherwise related to the terms of this lease shall be limited to
the interest of Lessor in the Building; and Lessor shall not be personally liable for any deficiency. This clause shall not be deemed to limit or deny any remedies which Lessee may have against Lessor except as expressly stated above. 
  
 (e) If the leased premises or the Building or any part thereof are at any
time subject to a first mortgage or a first deed of trust or other similar instrument and this lease or the rentals hereunder are assigned to the holder of such mortgage, deed of trust or other similar instrument and Lessee is given written notice
thereof, including the post office address of such assignee, then Lessee shall not exercise any remedies for any default on the part of Lessor without first giving written notice by certified or registered mail, return receipt requested, to such
assignee, specifying the default in 

  

 (17) 

 
reasonable detail, and affording such assignee a reasonable opportunity to make performance, at its election, for and on behalf of Lessor. 
  
 (f) Parking: See Exhibit “H” 
  
 (g) Rules of Building: Lessee and Lessee’s agents, employees and
invitees will comply fully with the Building Rules and Regulations which are attached as Exhibit “I” to this Lease and made a part hereof by this reference. Landlord may amend or change the rules and regulations as it may deem advisable to
provide for the safety, protection, care and cleanliness of the Building by giving Tenant a written copy of all such changes and amendments. 
  
 (h) Special Conditions with Written Addendums: Special conditions, if any are contained in the attached addendums. All attachment and written addendums to
this lease agreement are identified and briefly described as follows: 
  
 SCHEDULE OF EXHIBITS 
  

			
		
	Exhibit A.	  	Legal Description
		
	Exhibit B.	  	Drawing of Demised Premise
		
	Exhibit C.	  	Renewal Options
		
	Exhibit D.	  	Rent Adjustment Schedule
		
	Exhibit E.	  	Special Services by Lessor
		
	Exhibit F.	  	Finish out Schedule
		
	Exhibit G.	  	[omitted by parties]
		
	Exhibit H.	  	Parking Agreement
		
	Exhibit I.	  	Building Rules

  

 (18) 

 IN WITNESS WHEREOF, Lessor and Lessee have caused this lease to be executed in duplicate originals, effective on and as
of the date first written above. 
  

			
	 LESSOR:
  

UNIVERSITY HOUSING CORPORATION,
  
 a Texas corporation, d/b/a
  
 University Towers

		
	 Date:
	 	                     ,
            

		
	 By:
	 	 
		
	 Print Name: 
	 	 
		
	 Title:
	 	 
	
	 LESSEE:
  

NANOMETRICS INCORPORATED,
  
 a California corporation

		
	 Date:
	 	 February 15, 2001

		
	 By:
	 	 /s/ John D. Heaton

		
	 Print Name: 
	 	 John D. Heaton

		
	 Title:
	 	 President & CEO

  

 (19) 

  
 Amendment No. 1 to Lease
Agreement 
 between 
 University Housing Corporation 
 and 
 Nanometrics Incorporated 
  
 University
Housing Corporation (“Lessor”) and Nanometrics Incorporated (“Lessee”) hereby agree to amend the Lease Agreement (the “Lease”) between the parties made and entered into February 15, 2001 as follows: 
  

	 	A.	Paragraph 3, Page 3, Line 5: “Five (5) days” is replaced with “Fourteen (14) days.” 

  

	 	B.	Paragraph 11, Page 6: The following sentence is added at the end of the Paragraph: “Lessor hereby approves the signs of Lessee.” 

  

	 	C.	Paragraph 19(d), Page 11: The following is added as a new Paragraph 19(d): “Notwithstanding the foregoing, Lessee may terminate this lease with no notice and without obligation
or liability in the event of substantial fire or casualty damage.” 

  

	 	D.	Paragraph 21(a), Page 12, Line 2: “Five (5) days” is replaced with “Fourteen (14) days.” 

  

	 	E.	Paragraph 21(d), Page 12, Lines 1 and 2: “(other than the foregoing in this Paragraph 21)” is deleted. 

  

	 	F.	Paragraph 24, Pages 15 and 16: Paragraph 24 is deleted. 

  

	 	G.	Exhibit C, Page 1-1: The following is added as a new sentence at the end of the paragraph: “Notwithstanding the foregoing, any rent increase during any option period shall not
exceed Five Percent (5%) per annum. 

  
 In Witness Whereof,
Lessor and Lessee have caused this Amendment Number 1 to be executed in duplicate originals, effective on and as of the date first written above. 
  

									
	LESSOR:	 	 	 	LESSEE:
			
	 University Housing Corporation,
 a Texas Corporation, DBA University Towers
	 	 	 	 Nanometrics Incorporated

					
	By:	 	 	 	 	 	By:	 	/s/ John D. Heaton
	 	 	(Signature)	 	 	 	 	 	(Signature)
					
	 Title:
	 	 	 	 	 	 Title:
	 	 President and Chief Executive Officer

					
	 Address:
	 	 801 West 24th Street
 Austin, Texas 78705
	 	 	 	 Address:
	 	 1550 Buckeye Drive
 Milpitas, California 95035

					
	 Date:
	 	 	 	 	 	 Date:
	 	 2-14-01

  

 [University Towers Letterhead] 
  
 January 20, 2004 
  
 Nano Metrics, Inc. 
 Bill McGahan 
 715 W. 23rd St. Suite E 

Austin, TX 78705 
  
 As per your request to exercise your option to renew the lease for your offices located at 715 W. 23rd St., Suite E, Austin, TX, for a 3-year period, we hereby extend the lease from April 1, 2004, to March 31, 2007. 
  
 Rental adjustments for the period above stated shall remain 4% per annum on the 1st of April each year during that period. 
  

	
	 Sincerely,

	
	 /s/ Ugene Olson

	 Ugene Olson

	 General Manager

	 University TowersExploration and Development Agreement

 Exhibit 10.1 
  
 EXPLORATION AND DEVELOPMENT AGREEMENT 
  
 This Exploration and Development Agreement (“Agreement”), dated and effective the 1st day of March, 2005 (the “Effective Date”), is entered into by and between Indiana Posey, L.P., a Texas
limited partnership (“Indiana Posey”) and GEM-CBM Company f/k/a Harken Gulf Exploration Company, a Delaware corporation (“GEM”). Indiana Posey and GEM are sometimes referred to individually as a
“Party”, and collectively as “Parties.” Ute Oil Company, d/b/a. A.C.T. Operating Company, a Texas corporation (“Ute Oil”) is a party to this Agreement because it is to be designated as Operator
under the applicable operating agreement and, therefore, will be bound by this Agreement. 
  
 RECITALS 
  
 WHEREAS, Indiana Posey and GEM have identified a particular area of land located in the State of Indiana, described as the “Posey Prospect Area”, which is believed to be prospective for hydrocarbon exploration and
more particularly coalbed methane; and 
  
 WHEREAS, the
Parties desire to jointly explore and develop the Posey Prospect Area in accordance with the terms and provisions of this Agreement; 
  
 NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by all parties, Indiana Posey and GEM hereby agree as follows: 
  
 ARTICLE I. 
 AGREEMENT TO PARTICIPATE 
  
 1.1 Indiana Posey and GEM each agrees to participate in the Posey Prospect
Area as set forth in this Agreement, according to the terms and provisions set forth in this Agreement, and all Exhibits hereto. 
  
 ARTICLE II. 
 POSEY PROSPECT AREA

  
 2.1 The Posey Prospect Area. The Posey
Prospect Area consists of the lands, located in Posey, Gibson and Vanderburgh Counties, Indiana, and included within the dotted lines on the map at Exhibit A hereto, and consisting of approximately 400,000 acres, more or less. The only depth
restriction applied to the Posey Prospect Area shall be those, if any, contained in the applicable Leases and Agreements (as hereinafter defined) and in leases acquired pursuant to Section 5.4. 
  
 2.2 Leases and Agreements. Indiana Posey is the current owner
of a certain Option to Lease and Drilling Agreement between Indiana Posey and Indiana Franklin Realty, Inc., dated September 15, 2004, which provides, in part, a five year option to acquire a coalbed methane lease covering approximately 85,000 gross
acres of land within the Posey Prospect Area, which are depicted in yellow on Exhibit A and which are more particularly described on Exhibit B hereto. The Option to Lease and Drilling Agreement (“Option Agreement”) and
the proposed form Coal Bed Methane Lease document (“Lease Form”) are identified on Exhibit B. The Option Agreement and the Lease Form are, sometimes, collectively referred to as the “Leases and Agreements.”

  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 1 

 ARTICLE III. 
 DEVELOPMENT OF THE POSEY PROSPECT AREA 
  
 3.1 Exploration Phases. Indiana Posey and GEM shall initially explore and develop the Posey Prospect Area in three (3) phases, in accordance with the terms of this Agreement. “Phase I”
shall mean and refer to all the obligations and rights of all Parties in Section 3.2, along with the activities described therein. “Phase II” shall mean and refer to all the obligations and rights of all Parties in Section
3.3, along with the activities described therein. “Phase III” shall mean and refer to all the obligations and rights of all Parties in Section 3.4, along with the activities described therein. Phase I, Phase II, Phase III
and the Subsequent Operations (as defined hereinafter) shall constitute the “Project.” 
  
 3.2 Phase I. Contemporaneous with the execution of this Agreement, GEM shall pay to Indiana Posey the sum of Five Hundred Thousand And No/100
Dollars ($500,000.00) as the first payment of the initial prospect costs (“First Prospect Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Indiana
Posey. Subject to Section 9.16 of this Agreement, failure by GEM to timely make said payment shall cause this Agreement to terminate and become null and void as between the Parties. 
  
 (a) Within sixty (60) days following execution of this Agreement, GEM shall
direct the Operator to commence the drilling of three (3) core holes to be located in the Posey Prospect Area. The three (3) core holes (each a “Phase I Core Hole,” and together with any other core holes drilled during Phase I, the
“Phase I Core Holes”) shall be continuous wireline retrievable whole core holes which shall be drilled from the shallowest to the deepest structural position on the Posey Prospect Area. Each Phase I Core Hole will be drilled to a
depth sufficient to penetrate the #3 coal (as determined by GEM), as seen at seven hundred three feet (703’) in the logs of the KS Oil Kissel #10 well located in Section 36, T4S, R12W, Vanderburgh County, Indiana, and at the written request of
GEM, may be drilled through the #1 coal member which is believed to be the deepest known coal zone in the Posey Prospect Area and is believed to be not more than 3,000 feet below the surface at any location within the Posey Prospect Area. GEM may
choose to direct the Operator to drill more than three (3) Phase I Core Holes at a location and at a depth to be determined by GEM, the drilling of additional Phase I Core Holes shall also be considered to be a part of Phase I for all purposes under
this Agreement. All Phase I Core Holes shall be plugged and abandoned in compliance with all state and federal rules, regulations and/or procedures and in accordance with standard industry customs and practices. The plugging and abandonment of all
Phase I Core Holes shall also be considered to be part of Phase I for all purposes under this Agreement. 
  
 (b) In conjunction with the Phase I Core Hole operations, the Operator will use its best efforts to collect a sufficient quantity of coal samples in gas
desorption canisters. Thereafter, the Operator shall have all Phase I Core Hole samples analyzed by a laboratory approved by the Parties. The analysis will include, without limitation, gas content, gas and coal qualitative analyses, and desorption
isotherm determination. The Operator shall obtain reports of such laboratory analysis and shall deliver such reports to the Parties no later than ten (10) days after receipt of the reports. Within thirty (30) days of the completion of the Phase I
Core Holes and the delivery of the laboratory analysis of all samples taken in the Posey Prospect Area, the Operator and Indiana Posey shall prepare and deliver to GEM a report detailing the Operator’s recommendations (which shall account for
environmental issues) for Phase II of the Posey Prospect (hereinafter referred to as the “Phase I Report”). The Phase I Report shall account for all aspects of the Phase II Pilot Projects (as defined hereinafter), which shall
include, with out limiting the generality 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 2 

 of the foregoing, location of each pilot project, schedule for drilling of all wells and construction of facilities,
location of each well to be drilled (including surface and bottomhole locations, if applicable), all zones to be tested, drill depth of each well, prognosis of drilling operations for each well, method of drilling each well, completion procedures to
be utilized for each well, any stimulation procedures to be utilized, equipping of each well, electrical services, production facilities, flowlines, gathering systems and facilities, compression, dehydration and other treating facilities, pipeline
taps, transmission lines and facilities. GEM shall have thirty (30) days after receiving the Phase I Report from the Operator and Indiana Posey to elect to proceed with Phase II (the “Phase II Election Window”) and must make such
election pursuant to the terms of Section 3.2(d). Within the Phase II Election Window, GEM shall review the Phase I Report and make any modifications to the recommendations (the “Phase I Report Modifications”) set forth in
the Phase I Report. Notwithstanding the foregoing, GEM’s modifications, if any, shall be solely limited to the technical aspects of the Phase I Report, and shall in no manner modify or change the schedule for the drilling or construction of
facilities set forth in the Phase I Report. If GEM does not deliver any Phase I Report Modifications within the Phase II Election Window, it shall be deemed to have no Phase I Report Modifications, and the Phase I Report shall stand as it was
submitted to GEM. However, if, within the Phase II Election Window, GEM delivers to Indiana Posey, written Phase I Modifications, then the version submitted by the Operator and Indiana Posey along with the Phase I Report Modifications shall
constitute the Phase I Report. Unless mutually agreed to by the Indiana Posey and GEM, no Phase I Report Modifications shall have the effect of extending the time of the Phase II Election Window. 
  
 (c) Following the execution of this Agreement and within ten (10) days of the
receipt by GEM of the written request by Indiana Posey, GEM shall deliver to the Operator, a fully executed Authority For Expenditure (“AFE I”) attached hereto as Exhibit C. GEM shall pay to the Operator the total AFE I
amount within thirty (30) days from its delivery of the fully executed AFE I. Subject to Section 9.16 of this Agreement, failure by GEM to timely make said payment shall cause this Agreement to terminate and become null and void as between
the Parties. Subject to the provisions of Section 3.7 below, GEM is responsible for all of the actual costs incurred even if they exceed the amounts shown in the AFE I, and all such costs actually paid or credited shall be considered in the
calculation of the Carried Interest Amount (as defined below). All costs in excess of the AFE I shall be billed to GEM in accordance with the provisions of the Posey Prospect Joint Operating Agreement and shall be paid by GEM within fifteen (15)
days of receipt of an invoice for any such costs. At the end of operations for Phase I, any overpayment will be returned, unless GEM elects otherwise, and any underpayment will be paid promptly. 
  
 (d) GEM shall have the option, but not the obligation, to elect to proceed
with Phase II of the Posey Prospect. GEM must provide Indiana Posey with written notice of its election to proceed with Phase II within the Phase II Election Window. If GEM fails to respond within the Phase II Election Window, Indiana Posey shall
send GEM a termination notice. If GEM fails to elect to proceed with Phase II following three (3) business days after receipt of such termination notice, then GEM shall be deemed to have elected not to proceed with Phase II, and this Agreement shall
terminate and be null and void as of the date that the Phase II Election Window expired. 
  
 3.3 Phase II. If GEM elects to participate in Phase II, it shall pay to Indiana Posey, within ten (10) days of receipt by Posey of GEM’s written election to participate, the sum of Five Hundred
Thousand And No/100 Dollars ($500,000.00) as the second payment of the initial prospect costs (“Second Prospect Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified
in writing by Indiana Posey. Subject to Section 9.16, GEM’s failure to pay timely shall cause this Agreement to terminate and become null and void as between the Parties. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 3 

 (a) Within sixty (60) days of Indiana Posey’s receipt of the Second Prospect Payment, the Operator
shall commence operations for Phase II which will consist of two (2) pilot projects. The first pilot project (the “First Pilot Project”) shall be at a location in the general vicinity of a Phase I Core Hole and will consist of five
(5) wells in a “five-spot” pattern spaced on 40 acres, more or less, per well. The second pilot project (the “Second Pilot Project”; together with the First Pilot Project, referred to as the “Phase II Pilot
Projects”) shall be located in the general vicinity of where a Phase I Core Hole (but a different Phase I Core Hole than chosen for the First Pilot Project) and will consist of five (5) wells in a “five-spot” pattern spaced on 40
acres, more or less, per well. The purpose of Phase II will be to determine the commercial viability of actual producing wells in the Posey Prospect Area. The Parties agree to market and sell, to the extent commercially viable, all liquid and
gaseous hydrocarbons produced and save from Phase II wells. The Operator, within ninety (90) days after completion of the Phase II Pilot Projects, or other such time as may be mutually agreed between GEM and Indiana Posey not to exceed one hundred
eighty (180) days after completion of the Phase II Pilot Projects, shall prepare and deliver to Indiana Posey and GEM a report detailing the Operator’s recommendations (which shall account for, among other things, environmental issues, if any)
for Phase III of the Posey Prospect (hereinafter referred to as the “Phase II Report”). The Phase II Report shall account for all aspects of the development drilling of the Posey Prospect Area, which shall include a development plan
scheduling the drilling and development of the Posey Prospect Area, which shall include without limiting the generality of the foregoing, a schedule for drilling of all wells, a schedule for the construction of gathering, production, and treatment
facilities, location of all wells to be drilled (including surface and bottomhole locations, if applicable), all zones to be tested, drill depth of each well, prognosis of drilling operations for each well, method of drilling each well, completion
procedures to be utilized for each well, any stimulation procedures to be utilized, equipping of each well, electrical services, production facilities, flowlines, gathering systems and facilities, compression, dehydration and other treating
facilities, pipeline taps, transmission lines and facilities and any other operations necessary to the development of the Posey Prospect Area. GEM shall have thirty (30) days after receiving the Phase II Report from the Operator and Indiana Posey to
elect to proceed with Phase III (the “Phase III Election Window”) and must make the election pursuant to the terms of Section 3.3(b). Within the Phase III Election Window, GEM shall review the Phase II Report and make any
modifications to the recommendations (the “Phase II Report Modifications”) set forth in the Phase II Report. Notwithstanding the foregoing, GEM’s modifications, if any, shall be solely limited to technical aspects of the Phase
II Report, and shall in no way modify or change the schedule for the drilling of wells or construction of production, gathering, or treating facilities as set forth in the Phase II Report. If GEM does not deliver the Phase II Report Modifications
within the Phase III Election Window, then GEM shall be deemed to have no modifications to the Phase II Report, and the Phase II Report shall stand as it was submitted to GEM. However, if, within the Phase III Election Window, GEM delivers to
Indiana Posey written Phase II Report Modifications, then the version submitted by the Operator along with GEM’s Phase II Report Modifications shall constitute the Phase II Report. . Unless mutually agreed to by the Indiana Posey and GEM, no
Phase II Report Modifications shall have the effect of extending the time of the Phase III Election Window. 
  
 (i) Within ten (10) days after the written request of Indiana Posey, following GEM’s written election to participate in Phase II, GEM
shall execute and deliver to the 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 4 

 Operator the Authority For Expenditure II (“AFE II”) for 100% of the estimated costs for
the Firs Pilot Project which is attached hereto as Exhibit D. AFE II maybe modified by the Operator to account for any increase or reduction in third party services prices that may have incurred prior to the execution of the AFE II. In the
event AFE II is modified Indiana Posey shall submit the modified AFE II along with the request. GEM shall pay to the Operator the 100% of AFE amounts for tangible and intangible costs within thirty (30) days from its delivery of the fully executed
AFE. That portion of the AFE attributable to field facilities cost shall be paid within five (5) business days of the GEM’s receipt of a written request from the Operator. Subject to Section 9.16 of this Agreement, failure by GEM to
timely make said payment shall cause this Agreement to terminate and become null and void as between the Parties. 
  
 (ii) After the fifth well in the First Pilot Project has been spudded, the Operator shall submit an additional AFE (“AFE
III”) for 100% of the estimated costs for the Second Pilot Project. GEM shall deliver a fully executed AFE III to the Operator within ten (10) days after the receipt of AFE III from the Operator. Should GEM elect not to proceed with the
Second Pilot Project or, if GEM fails to return the executed AFE III to the Operator within the specified time, then Indiana Posey shall send GEM a written termination notice. If GEM fails to deliver the executed AFE III within three (3) business
days after receipt of a termination notice, then GEM shall be deemed to have elected not to proceed with the Second Pilot Project and with Phase III and this Agreement shall terminate and be null and void except, with respect to the wells drilled in
the First Pilot Project. GEM shall earn an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled and completed in the First Pilot Project. Said forty (40) acre production unit shall be the closest quarter
(1/4) quarter (1/4) section of land surrounding each such well. 
  
 (iii) Subject to the provisions of Section 3.7 below, GEM is responsible for all of the costs incurred even if they exceed the amounts shown in AFE II or AFE III, and all such costs actually paid or credited
shall be considered in the calculation of the Carried Interest Amount. At the end of operations for Phase II, any overpayment will be returned, unless GEM elects otherwise, and any underpayment will be paid promptly. 
  
 (b) GEM shall have the option, but not the obligation, to elect to proceed
with Phase III of the Posey Prospect. GEM must provide Indiana Posey with written notice of its election to proceed with Phase III within the Phase III Election Window. If GEM fails to respond within the Phase III Election Window, then Indiana Posey
shall send GEM a written termination notice. If GEM fails to elect to proceed within three (3) days after receipt of a termination notice, then GEM shall be deemed to have elected not to proceed with Phase III and this Agreement shall terminate and
be null and void as of the date that the Phase III Election Window expired except, with respect to the wells drilled in Phase II, as to a forty (40) acre production unit, as to all depths, for each well drilled and completed in the Posey Prospect
Area in Phase II. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 5 

 3.4 Phase III. If GEM elects to participate in Phase III, it shall pay to Indiana Posey,
within ten (10) days of receipt by Indiana Posey of GEM’s written election to participate, the sum of Five Hundred Thousand And No/100 Dollars ($500,000.00) as the third and final payment of the initial prospect costs (“Third Prospect
Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Indiana Posey. Subject to Section 9.16, GEM’s failure to pay timely shall cause this
Agreement to terminate and become null and void as between the Parties. 
  
 (a) Notwithstanding the operator replacement provisions in the Posey Prospect Operating Agreement, GEM shall have the option at any time, after GEM makes the Third Prospect Payment and after consultation with Indiana
Posey, to become the contract operator or to appoint a designee as contract operator. For the purposes of this Agreement the term “Contract Operator” shall mean GEM, if it elects to become the contract operator or its designee contract
operator and shall not be interchanged with the term “Operator” as hereinafter defined. If GEM elects to become the Contract Operator, then Indiana Posey and the Operator shall be obligated to take all reasonably necessary actions to make
GEM or a designee the contract operator for the Posey Prospect Area for the purposes of this Agreement; such contract operating agreement shall be consistent with industry standards, have a term of one year (and may be renewable, unless terminated
earlier by Indiana Posey pursuant to Section 3.4(c) hereinbelow), provide that all Overhead charges under the Posey Prospect Operating Agreement shall be paid to the Contract Operator, but shall provide for distribution of production revenues
by the Contract Operator only if the first purchaser of production who is not a Party, refuses to distribute directly to the Parties. If GEM elects to become the Contract Operator or elects a designee to be the Contract Operator, neither GEM nor its
designee shall in any manner change or modify the scheduling or implementation of the Phase II Report or change or modify any AFE previously submitted to GEM pursuant to the terms of this Agreement. 
  
 (b) Within ninety (90) days of Indiana Posey’s receipt of the Third
Prospect Payment, the Operator shall commence operations for Phase III, in accordance with the Phase II Report. The Phase III operations will begin the development drilling of the Posey Prospect Area. Phase III will end at the point in time when GEM
has met the Carried Interest Amount as defined in Section 3.5 below. 
  
 (c) In addition to the payment of the Third Prospect Payment, GEM shall pay all of the costs for all operations to be conducted in Phase III until GEM has paid the Carried Interest Amount. Subject to the provisions of
Section 3.7, GEM shall pay 100% of the actual costs incurred for Phase III until GEM has paid the Carried Interest Amount. Within ten (10) days after Indiana Posey’s receipt of the Third Prospect Payment, the Operator shall submit to GEM
an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the first calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and
shall contemporaneously deliver a fully executed AFE. Thereafter the Operator shall submit to GEM at least thirty (30) days prior to the next calendar quarter an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the
Phase II Report for the next calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall deliver an executed AFE with its payment. The Operator shall continue to submit
AFE’s on a quarterly basis until such time as the Carried Interest Amount has been reached. Once the Carried Interest Amount is met, then Phase III shall end. Subject to Section 9.16 of this Agreement, failure by GEM to timely pay the
full 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 6 

 amount of each AFE submitted by the Operator for the Phase III costs shall cause the Agreement to terminate and become
null and void as between the Parties. GEM shall only be entitled to an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter
(1/4) section of land surrounding each such well. 
  
 3.5
Indiana Posey’s Carried Interest. 
  
 (a)
Notwithstanding anything to the contrary contained herein, GEM hereby agrees to pay for or carry Indiana Posey’s interest in all operations conducted in Phases I, II, and III in the Posey Prospect Area until such time as GEM has expended a
total amount of Seven Million Five Hundred Thousand And No/100 Dollars ($7,500,000.00) in the Posey Prospect Area (the “Carried Interest Amount”), without regard to any production proceeds or other income received by GEM with
respect to the Posey Prospect. For the purposes of calculating the total amount expended by GEM, the sum shall include the First, Second, and Third Prospect Payments, all costs expended in Phase I, II and III, that portion, if any, of the actual
costs reimbursed to 25-25 Corp. for management fees and expenses paid to Oso Energy Resources Corp. (“Oso Fees”) as determined by GEM pursuant to the terms of that certain Coalbed Methane Master Exploration Agreement dated March 1, 2005 by
and between 25-25 Corp. and GEM, any costs under the indemnity provisions of Section 8.2 and Section 8.3, all actual costs (including salaries and benefits per COPAS guidelines) incurred and paid by GEM for its technical employees but
only to the extent they are used directly on the Project, any reimbursement paid to surface owners for damages caused by the Project’s activities, any expenses for expenditures related to any bond or letter of credit required by any
governmental authority or any rule, law, statute, or administrative regulations, and all other costs paid by GEM to Indiana Posey or to the Operator or to any other person or entity providing services to the Posey Prospect Area, other than persons
or entities related to GEM, except as specified above. GEM shall provide to Indiana Posey on a quarterly basis a statement identifying the total amounts expended in the Posey Prospect Area; such amounts shall be subject to audit by Indiana Posey
pursuant to the Posey Prospect Operating Agreement. At such time as GEM has expended $7,500,000.00 in the Posey Prospect Area, the Parties shall thereafter share all costs in proportion to their interests as set forth in Section 4.1 below;
with respect to costs or services incurred or contracted for prior to the final payment of the Carried Interest Amount, Indiana Posey shall pay its share of such costs or services that become due after such final payment, regardless of whether it
signed an AFE or consented to the operation. In addition, as interests are assigned to GEM under Section 4.2, Indiana Posey shall be responsible for direct operating expenses on the well(s) related to the assignment in accordance with its
ownership interest under Section 4.1, regardless of whether the full amount of the Carried Interest Amount has been paid. For this purpose, operating expenses do not include costs of deepening, side tracking, re-completing a well, overhead
costs, or any capital expenditures; such costs of deepening, side tracking, re-completing a well, overhead costs, or any capital expenditures are to be paid by GEM as part of the Carried Interest Amount. 
  
 (b) Notwithstanding anything to the contrary contained herein, Indiana Posey
shall have the liability and responsibility for the payment of all sums required to be paid under paragraphs (1) and (5) (second sentence) of the Option to Lease and Drilling Agreement as well as providing and maintaining the bond required at the
top of page 5 of the Option to Lease and Drilling Agreement. Notwithstanding the foregoing, GEM has the right to contact the parties to whom payment or performance is due in the reference provisions of the first sentence of this Section
3.5(b) and, if performance and/or payment is not or may not be tendered timely, GEM has the right to make such payments or tender such performance. GEM shall reimburse Indiana Posey for all payments set forth herein which shall count toward the
Carried 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 7 

 Interest Amount, or if GEM has made such payments, the amount shall be counted towards the Carried Interest Amount. If
the Carried Interest Amount has been expended all such payments shall be joint expenses of the Parties and billed to the joint account, regardless of which Party makes the payment. 
  
 (c) The Minimum Royalty amount (as defined in the Lease Form) required to be paid under paragraph 4 of the Lease Form and
the letter of credit required to be provided under paragraph 5 of the Lease Form shall be paid by Indiana Posey, prior to reaching the Carried Interest Amount. GEM shall reimburse Indiana Posey for all payments set forth herein which shall count
toward the Carried Interest Amount. After the Carried Interest Amount has been reached, then such Minimum Royalty and letter of credit costs shall be borne according to the interest owned by each Party to this agreement (currently 65% GEM and 35%
Indiana Posey). 
  
 3.6 Subsequent Operations. After
the completion of Phase III, all subsequent wells and facilities within the Posey Prospect Area, and the reworking, deepening, side tracking, re-equipping or re-completion of prior wells drilled within the Posey Prospect Area (the
“Subsequent Operations”) shall be subject to the Posey Prospect Operating Agreement. 
  
 3.7 Limit on Expenditures under AFEs. Notwithstanding the foregoing, in the event any single operation covered by a multiple operation AFE
provided hereunder, or under the Posey Prospect Operating Agreement, experiences an excess of actual costs over the AFE’d amounts for a single operation which is in excess of 20% of the AFE’d amounts (exclusive of any costs for plugging
and abandonment and/or reclamation for any such single well or operation) or if the single operation is projected to be in excess of 20% of the AFE’d amount (exclusive of any costs for plugging and abandonment and/or reclamation for any such
single well or operation), either Party may elect to require the Operator to cease that operation (and plug and abandon any well). 
  
 ARTICLE IV. 
 PARTIES AND INTEREST IN
PROSPECT AREA 
  
 4.1 Parties and Interests. The
interest of each Party hereto in and to the Posey Prospect Area (“Posey Prospect Area Interest”) shall be as follows: 
  

			
	 Party

	 	 Posey Prospect Area Interest

	 Indiana Posey
	 	35%
	 GEM
	 	65%

  
 Notwithstanding the
interests of the Parties set forth above, Indiana Posey owns 100% of the Leases and Agreements subject to GEM’s right to earn interest in the Leases and Agreements as a result of GEM’s full participation in Phase II and Phase III and full
compliance with the terms of this Agreement. 
  
 4.2
Interests Earned by GEM. Subject to Section 9.16, if GEM timely pays all sums as required in Section 3.2 and Section 3.3, and all Oso Fees, GEM shall earn an assignment of its proportionate interest as set forth in
Section 4.1 as to forty (40) acre production unit, as to all depths, surrounding each well drilled an completed in the Posey Prospect Area in Phase II. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4)
section of land surrounding each such well. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 8 

 At the completion of Phase III pursuant to Section 3.5 and if GEM has paid all sums required in Section 3.4
, and all Oso Fees, GEM shall earn an assignment of its proportionate interest as set forth in Section 4.1 as to all leases, and Leases and Agreements within the Posey Prospect Area. 
  
 4.3 Assignment of Earned Interests. The assignment and
conveyance of the interests earned by GEM hereunder shall include the following representations and warranties: 
  

	 	(i)	the assignment shall be without warranty of title, express or implied, except for claims made by through or under Indiana Posey, but not otherwise; 

  

	 	(ii)	Indiana Posey has the full authority to execute and deliver the assignment provided for herein in order to convey to GEM the full interest as contemplated hereunder, and shall
deliver to GEM an approval of the assignment of the rights under the Leases and Agreement from Indiana Franklin Realty, Inc. in substantially the same form of the letter that is set forth as Exhibit “E” attached hereto. In the event
that Indiana Posey fails to obtain the approval of Indiana Franklin Realty, Inc., as set forth herein, within sixty (60) days after the Effective Date, then GEM shall have the option, at its sole discretion, to either terminate this Agreement or
waive the compliance of this provision and perform all remaining terms of this Agreement; 

  

	 	(iii)	Indiana Posey owns 100% of the Leases and Agreements being assigned or conveyed subject to GEM’s right to earn interests in the Leases and Agreements as a result of GEM’s
full participation in Phase II and Phase III and full compliance with the terms of this Agreement; 

  

	 	(iv)	GEM shall receive a net revenue interest on a sliding scale based on the mmbtu price of gas produced from Leases and Agreement as set forth on Exhibit “F” which is
attached hereto, subject to the Overriding Royalty Interest reserved by Indiana Posey as set forth on Exhibit “F” 

  

	 	(v)	The interests assigned hereunder to GEM shall be free and clear of any mortgages, liens, burdens, or encumbrances, of any character or kind, originating by through or under Indiana
Posey, except for leases and burdens contemplated under this Agreement. The assignment and conveyance shall be in a form that is mutually agreeable to the Parties. In the event a lease within the Posey Prospect Area covers less than the full
undivided mineral interest in the lands covered thereby, then the interest to be conveyed herein, shall be proportionately reduced in direct proportion to that which the mineral interests actually covered under said lease. 

 
 NOTWITHSTANDING THE FOREGOING, the Parties hereby stipulate and agree that
the net revenue interests that may be assigned hereunder, as a result of a farm-in from an unrelated third party whereby an interest in the Posey Prospect Area may be earned or acquired, shall be the same net revenue interest acquired pursuant to
the terms of said farm-in. Notwithstanding anything to the contrary contained herein, said assignment shall only be delivered to GEM upon the timely payment of all monies set forth herein, subject to Section 9.16. Each Party agrees to assume
and hold each of the other Parties harmless from said Party’s respective share of the conditions, terms and obligations of the Leases and Agreements. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 9 

 4.4 Overriding Royalty. Subject to the following limitations, Indiana Posey shall be
entitled to receive an overriding royalty interest (“Overriding Royalty Interest”) in all leases acquired in the Posey Prospect Area of Mutual Interest (this provision is not applicable to the Leases and Agreements) equal to the
difference between the royalty burden imposed on the original lease and eighty two and one-half percent (82.5%). 
  

	 	(i)	In no event may the overriding royalty exceed 5%, proportionately reduced; 

  

	 	(ii)	In no event may the overriding royalty be less than 1%, proportionately reduced, even if it results in GEM receiving a smaller net revenue interest than is provided for in this
Section 4.4 above; 

  

	 	(iii)	The Overriding Royalty Interest shall be free and clear of all costs of exploration, drilling, completion and production, but shall bear its proportionate share of all severance and
ad valorem taxes and its proportionate share of all costs incurred after the wellhead in making such production marketable and transporting it to market, which shall never exceed a maximum of twenty five cents ($00.25) per mmbtu;

  

	 	(iv)	The Overriding Royalty Interest shall apply to all of the Posey Prospect Area Interest; that is, Indiana Posey’s interest shall be burdened along with GEM’s interest; and

  

	 	(v)	No Overriding Royalty Interest shall apply to any leases in which less than all of the expense bearing, or working interest is acquired by the Parties(but without regard to unleased
interests); and 

  

	 	(vi)	No Overriding Royalty Interest shall apply to any leases which are acquired by the Parties in a joint venture or partnership with parties are unrelated to GEM and/or Indiana Posey.

  

	 	(vii)	In the event of the acquisition of a lease in the Posey Prospect Area of Mutual Interest under Section 5.4, the Overriding Royalty Interest shall apply except as follows:

  
 (a) No Overriding Royalty
Interest shall apply to any leases acquired by a farm in or similar means under which an interest in leases is acquired by drilling; 
  
 4.5 Additional Leases Acquired. Notwithstanding any other provision of this Agreement under which GEM forfeits or surrenders its interest,
if the Carried Interest Amount has not been reached at the time of such forfeit, and additional leases or other interests have been acquired under this Agreement after the date of this Agreement and have been paid for by GEM, GEM shall not be
required to surrender such additional leases until it has been reimbursed for the actual, out of pocket, acquisition costs incurred and paid by GEM for such additional leases. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 10 

 ARTICLE V. 
 OPERATIONS 
  
 5.1
The Posey Prospect Operating Agreement. All operations in the Posey Prospect Area shall be governed by the terms of the Posey Prospect Operating Agreement. Notwithstanding the foregoing, the Parties stipulate and agree that none of the
Posey Prospect Operating Agreement’s non-consent provisions shall in any manner be applicable until after the completion of Phase III; however, the default provisions of the Posey Prospect Operating Agreement shall be applicable to the extent
that any such provision is not in conflict with the terms of this Agreement. The Posey Prospect Operating Agreement is subject to the terms of this Agreement and shall be in the form attached as Exhibit G (the “Posey Prospect
Operating Agreement”). In the event of a conflict between the terms of the Posey Prospect Operating Agreement and this Agreement, the terms of this Agreement shall control. The Posey Prospect Operating Agreement shall be deemed to have been
executed by Indiana Posey and GEM upon the execution of this Agreement. 
  
 5.2 Operator. Ute Oil shall be designated as the operator of record in the Posey Prospect Area, pursuant to the terms of the Posey Prospect Operating Agreement and subject to the terms of this Agreement. Ute Oil shall remain
the operator of record of the Posey Prospect Area through the completion of Phase III, subject only to (i) its removal or resignation under the terms of the Posey Prospect Operating Agreement or (ii) a vote of 75% of the working interest owners by
interest without regard to the provisions of the Posey Prospect Operating Agreement. For the purposes of this Agreement the term “Operator” shall mean the operator of record. 
  
 5.3. Posey Prospect Area of Mutual Interest. 
  
 (a) By the execution of this Agreement, the Parties establish an Area of
Mutual Interest covering the Posey Prospect Area. If, during the term of this Agreement, any Party acquires a legal or beneficial interest, or the right to acquire same, in a coal bed methane lease oil and gas lease, mineral interest, royalty or
overriding royalty (excluding the Overriding Royalty Interest), production payments, net profits interest or any other interest in oil or gas (an “AMI Interest”) within the Posey Prospect Area of Mutual Interest, then such Party
(the “Acquiring Party”) shall promptly notify the other Party hereto (the “Non-Acquiring Party”) advising that such interest has been acquired. The notification shall set forth the direct costs incurred by the
Acquiring Party in connection therewith (the “Acquisition Costs”), along with any documents relating to the acquisition of the AMI Interest, all title information, and an invoice of the Acquisition Costs to the Non-Acquiring Party.
The Non-Acquiring Party shall have a fourteen (14) day period after proper notice has been received in which to elect to acquire its proportionate Posey Prospect Area Interest in such interest by paying the Acquiring Party its proportionate share of
the Acquisition Costs as determined by Section 5.3(b) and Section 5.4(c). An election to acquire an interest in such an AMI Interest by a Non-Acquiring Party must be made by giving written notice to the Acquiring Party of the intent to so
acquire, accompanied with the appropriate payment of its share of the Acquisition Costs (the “Non-Acquiring Party’s AMI Payment”); this notice and payment must be made on or before the expiration of the fourteenth
(14th) day after receipt of the notice that the interest had been acquired. Failure to timely make such notice of
election and payment within said time period will be deemed an election to not acquire an interest. If any Party elects to not acquire an interest, the Acquiring Party shall notify the Non-Acquiring Party who did elect to acquire an interest and
said Party shall have fourteen (14) days from the date of its notice in which to elect to acquire and pay a proportionate share of the interest which was not taken, in the proportion that the interest of each of said Party’s Posey Prospect Area
Interest bears to the total Posey Prospect Area Interest of all of the Parties remaining with an interest in said AMI Interest. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 11 

 Within five (5) business days after the receipt of payment, the Acquiring Party shall execute and deliver to the Parties
who have acquired an interest therein a recordable assignment of said interest. All AMI Leases in which any of the Parties acquire an interest therein pursuant to this provision shall be subject to the terms of this Agreement and the Posey Prospect
Operating Agreement. An AMI Lease must be free and clear of liens and burdens other than such liens and/or burdens which were reserved or created by unrelated parties prior to the acquisition by the Acquiring Party and must be fully disclosed to the
Non-Acquiring Party when notice is given of the acquisition of an AMI Lease. If an Acquiring Party fails to give timely notice of liens or burdens associated with an AMI Lease to the Non-Acquiring Party, then the Non-Acquiring Party may elect to
re-assign its interests in the AMI Lease to the Acquiring Party, and the Acquiring Party must return all monies paid by Non-Acquiring Party, along with reasonable expenses, including, without limitation, attorney fees, of the Non-Acquiring Party.

  
 (b) Indiana Posey shall receive its Overriding Royalty
Interest in any leases constituting an AMI Interest pursuant to Section 4.4. 
  
 (c) Either Party may propose the creation of a lease acquisition budget designed to acquire interests within the Posey Prospect Area of Mutual Interest. Upon the mutual written agreement of GEM and Indiana Posey, the
proposing party shall submit an AFE to the non-proposing party outlining the area wherein the interests will be acquired and the estimated costs for the acquisition, which will include, without limitation, all bonus, brokerage, legal, recording fees
and miscellaneous expenses. Upon the payment of the non-proposing party’s share of the estimated AFE costs, the proposing party shall begin its activities in the acquisition of interests within the Posey Prospect Area of Mutual Interest. All
interests acquired pursuant to this section shall be owned by the parties pursuant to Section 4.1. 
  
 5.4 Interests Not Subject to This Agreement. Any AMI Lease in which only one Party participates shall be free and clear of this Agreement,
including its exhibits. In other words, if an interest is offered under Section 5.3, and no other Party elects to participate, the offered interest is no longer subject to this Agreement. 
  
 5.5 Parties Subject to Posey Area of Mutual Interest.
Parties who have signed this Agreement, other than GEM, Ute Oil Company (doing business as A.C.T. Operating Company) and Indiana Posey have done so solely for the purpose of agreeing that he, she, or it is bound by the terms of Section
5.3, Section 5.4 and Section 5.65 of this Agreement and is thereby required to tender any AMI Lease it acquires to GEM and Indiana Posey and is not entitled to retain or receive any interest therein. 
  
 5.6 Modifications to Operating Agreement. Notwithstanding the
adoption of the Posey Prospect Operating Agreement in Section 5.1 above, and as otherwise modified by this Agreement, Indiana Posey and Ute Oil Company agree that if Ute Oil Company ever sells, transfers, or conveys 50% interest or more of
the shares of stock currently held in Ute Oil Company, Ute Oil Company shall be deemed, at the option of GEM, to have resigned immediately as Operator under the Posey Prospect Operating Agreement, without any further action necessary to be taken by
any Non-Operator. Ute Oil Company undertakes and agrees to inform GEM, in writing, of the change in ownership of Ute Oil Company of 50% or greater. 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 12 

 ARTICLE VI. 
 RECORDS AND DATA 
  
 6.1
Data. The Operator under the Posey Prospect Operating Agreement shall, during the term of this Agreement maintain accurate land, land accounting, and geological and mapping records relating to the Posey Prospect Area. Subject to the
terms of this Agreement, each Party, proportionate to its Posey Prospect Area Interest will jointly own and be entitled to receive, copy and possess all such land, legal and geological information, maps and data developed by the Operator or any of
the Parties in connection with the Posey Prospect Area (“Data”). The Operator shall provide access, during normal business hours to the Data to any Party. 
  
 6.2 Utilization of Data. Each Party shall have the right to use the Data in connection with the joint
exploration and development of the Posey Prospect Area. Except as provided in Section 6.3 below, no Party shall have the right to sell, trade, share or exchange the Data during the term of this Agreement without the prior written consent of
all the other Parties. The Data may be sold or exchanged upon the unanimous consent of the Parties. 
  
 6.3 Disclosure of Data. The Parties shall not exchange, trade, share or disclose the Data or any interpretational maps, except that each
Party may disclose the Data to: (i) third parties in connection with bona fide negotiations with such third parties for farmout or farm-in agreements with the disclosing Party covering all or parts of the Posey Prospect Area; (ii) third parties with
a bona fide interest in entering into agreements to purchase all or a portion of a Party’s Posey Prospect Area Interest, or otherwise participating in the exploration and/or development of all or parts of the Posey Prospect Area with the
disclosing Party; or (iii) any consultant retained by a Party to evaluate the Data; or (iv) any third party as a result of any court order or order of governmental agency; provided, however, that all third parties to which the
Data is to be disclosed during the term of this Agreement must execute prior to review of the Data, a Confidentiality/Non-Circumvention Agreement in a form acceptable to all Parties. 
  
 ARTICLE VII 
 TERM 
  
 7.1 Term. The obligations
of the Parties pursuant to this Agreement shall be for a term of five (5) years from the Effective Date, and as long thereafter as any Lease and Agreement acquired by the Parties pursuant to this Agreement remains in force and effect, unless sooner
terminated under the provisions hereof or by the agreement of the Parties. 
  
 ARTICLE VIII. 
 RELATIONSHIP OF PARTIES 
  
 8.1 No Partnership. The liabilities of the Parties hereunder
shall be several, but not joint or collective. The Parties hereto expressly do not intend to create, and no provision hereof shall be construed as creating a partnership, joint venture, mining partnership, corporation, association, agency
relationship or other relationship whereby any Party shall ever be held liable for the acts either by omission or commission, of the other, the liability of all the respective Parties being several and not joint or collective. Except as expressly
provided in this Agreement or in connection with the sale of production and the disposition of proceeds thereof, the Parties hereto expressly do not intend to create, and no provision hereof shall be construed as creating an agency relationship.
Each Party shall be individually responsible for its own obligations as set out in this Agreement and in the Posey Prospect Operating Agreement, and all exhibits attached thereto. However, if for federal income tax purposes, this Agreement and the
operations hereunder are regarded as a partnership, each party thereby affected elects not to be excluded in the application of all of the provisions of Subchapter “K” Chapter 1, Subtitle “A” of the Internal Revenue Code

  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 13 

 of 1986, as amended (hereinafter referred to as the “Code”), as permitted and authorized by Section 761 of the
Code and the regulations promulgated thereunder. Should there be any requirement that each Party hereby affected give further evidence of this election, each such Party shall execute such documents and furnish such other evidence as may be required
by the Federal Internal Revenue Service or as may be necessary to evidence this election. No Party shall give any notice or take any other action inconsistent with the election made hereby. In making the foregoing election, each Party states that
the income derived by such Party from operations hereunder can be adequately determined without computation of partnership taxable income. 
  
 8.2 Third Party Claim and Liability. ANY THIRD PARTY DAMAGE CLAIM OR SUIT OF ANY KIND ARISING DIRECTLY FROM ANY OPERATIONS CONDUCTED
PURSUANT TO THE TERMS OF THIS AGREEMENT AND ALL COSTS AND EXPENSES OF HANDLING, SETTLING, OR OTHERWISE DISCHARGING SUCH CLAIM OR SUIT SHALL BE AT THE JOINT EXPENSE OF THE PARTIES PARTICIPATING IN THE AGREEMENT OR BY THE OPERATION GIVING RISE TO THE
CLAIM, EACH PARTY’S RESPONSIBILITY BEING IN THE PROPORTION OF THEIR POSEY PROSPECT AREA INTEREST IN THE AGREEMENT OR OPERATION GIVING RISE TO THE CLAIM OR SUIT, REGARDLESS OF WHETHER OR NOT SUCH THIRD PARTY DAMAGE CLAIM OR SUIT IS FOUND TO
ARISE IN WHOLE OR IN PART FROM THE SOLE OR CONCURRENT NEGLIGENCE OF ANY PARTY HERETO; PROVIDED, HOWEVER, THAT THIS SECTION 8.2 SHALL NOT APPLY TO ANY DAMAGE CLAIM OR SUIT ARISING AS A RESULT OF A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
THE PARTIES REPRESENT THAT, TO THE BEST OF THEIR KNOWLEDGE, NO SUCH THIRD PARTY ADVERSE CLAIM OR SUIT PRESENTLY EXISTS. IN THE EVENT AN SUCH CLAIM OR SUIT IS MADE AGAINST ANY PARTY HERETO, SUCH PARTY SHALL IMMEDIATELY NOTIFY THE OTHER PARTIES, AND
THE CLAIM OR SUIT SHALL BE JOINTLY HANDLED BY ALL OF THE PARTIES HERETO PARTICIPATING IN THE OPERATION GIVING RISE TO THE CLAIM OR SUIT. 
  
 8.3 Waiver of Consumer Protective Act-Deceptive Trade Practices. DECEPTIVE TRADE PRACTICES. AS PARTIAL CONSIDERATION FOR THE PARTIES
AGREEING TO ENTER INTO THIS AGREEMENT, THE PARTIES EACH CAN AND DO EXPRESSLY WAIVE THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES—CONSUMER PROTECTION ACT, ARTICLE 17.41, ET SEQ., TEXAS BUSINESS AND COMMERCE CODE, AND ANY APPLICABLE
SIMILAR LAW OF ANY OTHER STATE, A LAW THAT GIVE CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND ALL THE CONSUMER PROTECTION LAWS OF THE STATE OF TEXAS, OR ANY OTHER STATE, APPLICABLE TO THIS TRANSACTION THAT MAY BE WAIVED BY THE PARTIES. IT IS NOT THE
INTENT OF THE PARTIES HERETO TO WAIVE AND THE PARTIES SHALL NOT WAIVE ANY APPLICABLE LAW OR SUB-PART THEREOF WHICH IS PROHIBITED BY LAW FROM BEING WAIVED. THE PARTIES HERETO REPRESENT THAT THEY HAVE HAD AN ADEQUATE OPPORTUNITY TO REVIEW THE
PRECEDING WAIVER PROVISION, INCLUDING THE OPPORTUNITY TO SUBMIT THE SAME TO LEGAL COUNSEL FOR REVIEW AND COMMENT AND AFTER CONSULTATION WITH AN ATTORNEY OF THEIR OWN SELECTION, VOLUNTARILY CONSENT TO THIS WAIVER, AND UNDERSTAND THE RIGHTS BEING
WAIVED HEREIN. 
  
 8.4 Bankruptcy. If, following the
granting of relief under the Bankruptcy Code to any Party hereto as debtor thereunder, this Agreement and the Posey Prospect Operating Agreement shall be held to be an executory contract under the Bankruptcy Code, then any remaining Party(ies) shall
be entitled to 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 14 

 determination by debtor or any trustee for debtor within thirty (30) days from the date an order for relief is ordered
under the Bankruptcy Code as to the rejection or assumption of this Agreement. In the event of an assumption, such Party(ies) seeking determination shall be entitled to have all of debtor’s existing defaults under this Agreement cured within
five days of such assumption, and to be provided adequate assurances as to the future performance of the debtor’s obligation hereunder and the protection of the interest of all Parties. The debtor shall satisfy its obligations to provide
adequate assurances by either advancing payments or depositing the debtor’s proportionate share of expenses in escrow. 
  
 ARTICLE IX. 
 MISCELLANEOUS

  
 9.1 Assignments. The terms of this Agreement
will be binding on the Parties hereto, their successors and assigns. Any assignment or encumbrance of a Party’s interest in and to any Leases and Agreements covering the Posey Prospect Area or the Posey Prospect Area of Mutual Interest shall be
made expressly subject to this Agreement and the Posey Prospect Operating Agreement, and any assignee shall be deemed to have expressly assumed its proportionate share of the liabilities under this Agreement form and after the effective date of such
assignment; the assigning Party shall remain fully liable for its obligations prior to such effective date. This provision also applies to successor-in-interest who acquires a Party’s interest under this Agreement through foreclosure.

  
 9.2 Notices. All notices made by one Party to
one or more other Parties shall be in writing and delivered in person, by email, or by United States mail, courier service, telecopy, postage or charges prepaid and addressed to such Parties at the addresses listed below. Notice given under any
provision hereof shall be deemed delivered only when received by the Party to whom such notice is directed, and the time for such Party to deliver any notice in response thereto shall run from the date the originating notice is received. All
originating email or telecopy notices shall be confirmed by mailing such notice by United States mail, but the date of receipt shall be the date such email or telecopy was delivered to the computer or telecopy machine of the recipient. The
responsive notice shall be deemed delivered when deposited in the United States mail or at the office of the courier or upon transmittal by telecopy or email, to the Party as follows: 
  

			
	 Indiana Posey:
	  	GEM:
	 111 Soledad, Suite 250
	  	580 Westlake Park Blvd., Suite 750
	 San Antonio, Texas 78205
	  	Houston, Texas 77079
		
	 Attention: Mr. Harvey V. Risien, Jr.
	  	Attention: Mr. Jim Denny
		
	 Telephone: (210) 225-0800
	  	Telephone: (281) 504-4021
	 Facsimile: (210) 225-8282
	  	Facsimile: (281) 504-4123
	 E-Mail: hvrisien@sbcglobal.net
	  	E-Mail: jdenny@gemtx.com
		
	 With a copy to:
	  	 
		
	 Oil Transaction
	  	Elmer A. Johnson
	 3480 Buskirk Ave, Suite 330
	  	General Counsel to GEM
	 Pleasant Hill, CA 94523
	  	180 State Street, Suite 200
	 	  	 Southlake, Texas 76092

		
	 Telephone: (925) 933-5464
	  	Telephone: (817) 424-2424
	 Facsimile: (925) 947-3920
	  	Facsimile: (817) 488-0971
	 E-Mail: oiltrans@sbcglobal.net
	  	E-Mail: eaj@harkenenergy.com

  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 15 

 A Party may change its address by giving notice to the other Parties, in the manner provided in this
section, at least ten (10) days prior to the effective date of such change of address. 
  
 9.3 Governing Law. THIS AGREEMENT (INCLUDING ALL ITS EXHIBITS) SHALL, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW WHICH WOULD RESULT IN THE APPLICATION OF THE LAW OF A DIFFERENT JURISDICTION, BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN TEXAS, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH A PORTION OF THE POSEY
PROSPECT IS LOCATED OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE POSEY PROSPECT NECESSARILY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE CREATION, TRANSFER AND ENFORCEMENT OF THE LEASES AND OTHER INTEREST IN
MINERALS, IN WHICH CASE THE LAW OF SUCH STATE SHALL APPLY TO THE PORTION OF THE POSEY PROSPECT LOCATED WITHIN SUCH STATE. 
  
 9.4 Entirety of Agreement. This Agreement, including its Exhibits, all of which are incorporated herein by reference, supersedes any and all
other agreements, either verbal or in writing, between the Parties hereto with respect to the subject matter hereof and contains all of the covenants and agreements between the Parties with respect to said subject matter. Each Party to this
Agreement acknowledges that no inducements, promises or agreements, verbally or otherwise, have been relied upon or made by any Party, or anyone acting on behalf of any Party, which are not embodied herein and that any other agreement, statement, or
promise not contained in this Agreement shall not be valid or binding. 
  
 9.5 Counterparts. This Agreement may be executed in a number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. It shall not be necessary that the Parties
hereto execute a single counterpart hereof, and this Agreement shall be effective when each Party has executed a counterpart hereof (whether or not any other Party has executed the same counterpart). 
  
 9.6 Amendment. Unless otherwise expressly provided for herein,
this Agreement may only be amended by an instrument in writing signed by all Parties. 
  
 9.7 Construction. The Parties acknowledge that they and their respective counsel have negotiated and drafted this Agreement jointly and agree that the rule of construction that ambiguities are to be
resolved against the drafting Party shall not be employed in the interpretation or construction of this Agreement. 
  
 9.8 Cost of Litigation. If any Party hereto should hereafter institute litigation against any other 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 16 

 Party hereto alleging that such other Party has breached this Agreement or any contracts or other instrument delivered
pursuant hereto, the non-prevailing Party or Parties (whether plaintiff or defendant) in such action shall reimburse the prevailing Party for the prevailing Party’s reasonable attorney’s fees, witness fees court costs, and all other
reasonable costs in connection with such litigation. 
  
 9.9
No Third Party Beneficiaries. Nothing in this Agreement (express or implied) is intended or shall be construed to confer upon any person or entity not a Party any right, remedy or claim under or by reason of this Agreement. 

 
 9.10 Subject Headings. The subject headings of the articles,
sections and subsections of this Agreement are included solely for purposes of convenience and reference only, and shall not be deemed to explain, modify, limit, amplify or aid in the meaning, construction or interpretation of any of the provisions
of this Agreement. 
  
 9.11 Securities Law. The
Parties have entered into this Agreement for their own accounts and shall acquire any Leases hereunder for their own accounts and not with the intent to make a distribution thereof within the meaning of Securities Act of 1933 and the rules and
regulations pertaining to it or distribution thereof in violation of any applicable securities laws. The Parties acknowledge that each Party and their respective officers, managers, members, and/or directors are sophisticated and experienced
investors who have engaged actively in the oil and gas business, or other business with limited liquidity and/or high risk and is are Accredited Investors as that term is defined in the Securities Act of 1933, as amended. The Parties, at their sole
risk and expense, have either conducted their own independent evaluation of the interests identified herein, or having been provided the opportunity have elected to not exercise that opportunity. 
  
 9.12 Further Assurances. Each Party hereto shall from time to
time do and perform such further acts and execute and deliver such further instruments, assignments and documents as may be required or reasonably requested by the Parties to carry out and effect the intentions and purposes of this Agreement.

  
 9.13 Rights Cumulative. The rights, remedies,
and powers granted to the Parties under this Agreement shall be cumulative and shall not be exclusive rights, remedies and powers, but shall be in addition to all other rights, remedies and powers available at law or in equity, by virtue of any
statute or otherwise, and may be exercised from time to time concurrently or independently and as often and in such order as deemed expedient. 
  
 9.14 No Waiver. The failure of any Party hereto to insist upon strict performance of any provision hereof shall not constitute a waiver of
or estoppel against asserting, the right to require such performance in the future, nor shall a waiver or estoppel in any once instance constitute a waiver or estoppel with respect to a later breach of a similar nature or otherwise. 
  
 9.15 Unenforceable Provisions. If any part of this Agreement is
invalid or unenforceable, the other provisions of this Agreement shall remain in full force and effect and shall be liberally construed to effectuate the intent of this Agreement. 
  
 9.16 Cure Period. In the event of a payment default by a Party under the terms of this Agreement, such
defaulting party shall have ten (10) days after receiving written notice of such default, in 
  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 17 

 accordance with Section 9.2 of this Agreement, to cure the default. After the Carried Interest Amount is reached,
this Section 9.16 shall no longer apply, nor shall any forfeiture provisions of this Agreement (other than those related to the AMI) and all payment provisions and times shall be governed by the Posey Prospect Operating Agreement. 

 
 9.17 Time. The Parties stipulate and agree that TIME IS
OF THE ESSENCE IN THIS AGREEMENT. 
  
 IN WITNESS WHEREOF, this
Agreement is executed, accepted and agreed to by the Parties effective as of the Effective Date first set forth above. 
  

			
	INDIANA POSEY, L.P.
		
	 By:
	 	 /s/ Harvey V. Risien, Jr.

	 	 	Harvey V. Risien, Jr., President of
	 	 	25-25 Corp., its General Partner
	
	 GEM-CBM COMPANY

		
	 By:
	 	 /s/ James W. Denny, III

	 	 	James W. Denny, III,
	 	 	President and CEO

  
 Ute Oil Company d/b/a A.C.T. Operating
Company executes this Agreement solely for the purpose of stating that, for good and valuable consideration, the sufficiency of which is hereby confessed, Ute Oil Company d/b/a A.C.T. Operating Company is bound by the terms of Sections 5.3. 5.4
and 5.5 of this Agreement. 
  
 UTE OIL COMPANY, doing business as A.C.T.
Operating Company 
  

			
	 By:
	 	 /s/ Donald W. Raymond

	 	 	Donald W. Raymond, President

  

 EXPLORATION AND DEVELOPMENT AGREEMENT 
 PAGE 18

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