Document:

Exhibit 10.1

 

 

PARTICIPATION
AGREEMENT

 

This
Participation Agreement (hereinafter “Agreement”) is made and entered into effective September 30, 2013, by and between
PetroShare Corp., hereinafter referred to as “PetroShare”, and Rancher Energy Corp. (“Participant”).

 

RECITALS:

 

A.          PetroShare
has acquired certain oil and gas leases described on Exhibit “A”, attached hereto (“Existing Leases”).

 

B.          Participant
wishes to participate with PetroShare in the drilling, and development of the Leases pursuant to the provisions of this Agreement.

 

Now
therefore, the parties hereto, for the mutual promises contained herein and other good and valuable consideration, the sufficiency
of which is hereby acknowledged, do hereby contract and agree as follows:

 

I.
  DEFINITIONS

 

		1.	Effective
                                                                                                                          Date:
                                                                                                                          The
                                                                                                                          Effective
                                                                                                                          Date
                                                                                                                          is September
                                                                                                                          30,
                                                                                                                          2013.

 

		2.	Existing
                                                                                                                          Leases:
                                                                                                                          The
                                                                                                                          oil
                                                                                                                          and
                                                                                                                          gas
                                                                                                                          leases
                                                                                                                          on Exhibit
                                                                                                                          “A”,
                                                                                                                          attached
                                                                                                                          hereto
                                                                                                                          which
                                                                                                                          includes
                                                                                                                          the
                                                                                                                          acreage
                                                                                                                          required
                                                                                                                          for
                                                                                                                          the
                                                                                                                          drilling
                                                                                                                          of the
                                                                                                                          obligation
                                                                                                                          well(s).

 

	3.	Obligation
                                                                                                                          Wells:
                                                                                                                          The
                                                                                                                          wells
                                                                                                                          will
                                                                                                                          be drilled
                                                                                                                          from
                                                                                                                          a common
                                                                                                                          well
                                                                                                                          pad
                                                                                                                          and
                                                                                                                          will
                                                                                                                          be the
                                                                                                                          Kowach
                                                                                                                          #3-25
                                                                                                                          well,
                                                                                                                          located
                                                                                                                          in NESW
                                                                                                                          Section
                                                                                                                          25,
                                                                                                                          T6N
                                                                                                                          R90W,
                                                                                                                          a vertical
                                                                                                                          well
                                                                                                                          bore
                                                                                                                          and
                                                                                                                          the
                                                                                                                          Voloshin
                                                                                                                          #3-25
                                                                                                                          well,
                                                                                                                          located
                                                                                                                          in NESW
                                                                                                                          Section
                                                                                                                          25,
                                                                                                                          T6N
                                                                                                                          R90W;
                                                                                                                          directional
                                                                                                                          well
                                                                                                                          bore
                                                                                                                          to test
                                                                                                                          the
                                                                                                                          Niobrara
                                                                                                                          formation
                                                                                                                          at approximately,
                                                                                                                          7850
                                                                                                                          feet
                                                                                                                          TVD.
                                                                                                                          Upon
                                                                                                                          reaching
                                                                                                                          total
                                                                                                                          depth
                                                                                                                          in the
                                                                                                                          first
                                                                                                                          Obligation
                                                                                                                          Well
                                                                                                                          and
                                                                                                                          upon
                                                                                                                          the
                                                                                                                          completion
                                                                                                                          of mud
                                                                                                                          logging
                                                                                                                          and
                                                                                                                          open
                                                                                                                          hole
                                                                                                                          logging
                                                                                                                          operations,
                                                                                                                          PetroShare
                                                                                                                          will
                                                                                                                          provide
                                                                                                                          such
                                                                                                                          data
                                                                                                                          to all
                                                                                                                          JOA
                                                                                                                          working
                                                                                                                          interest
                                                                                                                          participants
                                                                                                                          along
                                                                                                                          with
                                                                                                                          its
                                                                                                                          well
                                                                                                                          evaluation
                                                                                                                          report.
                                                                                                                          JOA
                                                                                                                          participants
                                                                                                                          shall
                                                                                                                          have
                                                                                                                          forty
                                                                                                                          eight
                                                                                                                          (48)
                                                                                                                          hours
                                                                                                                          from
                                                                                                                          the
                                                                                                                          receipt
                                                                                                                          of the
                                                                                                                          data
                                                                                                                          to make
                                                                                                                          its
                                                                                                                          election
                                                                                                                          whether
                                                                                                                          to proceed
                                                                                                                          with
                                                                                                                          the
                                                                                                                          drilling
                                                                                                                          of the
                                                                                                                          second
                                                                                                                          Obligation
                                                                                                                          Well.
                                                                                                                          In the
                                                                                                                          event,
                                                                                                                          a simple
                                                                                                                          majority
                                                                                                                          of JOA
                                                                                                                          participants
                                                                                                                          elect
                                                                                                                          not
                                                                                                                          to proceed
                                                                                                                          or not
                                                                                                                          with
                                                                                                                          the
                                                                                                                          drilling
                                                                                                                          of the
                                                                                                                          second
                                                                                                                          Obligation
                                                                                                                          Well,
                                                                                                                          PetroShare
                                                                                                                          shall
                                                                                                                          release
                                                                                                                          the
                                                                                                                          rig
                                                                                                                          and
                                                                                                                          waive
                                                                                                                          the
                                                                                                                          requirement
                                                                                                                          to drill
                                                                                                                          the
                                                                                                                          second
                                                                                                                          Obligation
                                                                                                                          Well.
	 	 
	4.	Operator:
                                                                           PetroShare Corp.

 

		5.	Operating
                                                                                                                          Agreement:
                                                                                                                          A joint
                                                                                                                          operating
                                                                                                                          agreement
                                                                                                                          substantially
                                                                                                                          in the
                                                                                                                          form
                                                                                                                          attached
                                                                                                                          hereto
                                                                                                                          as Exhibit
                                                                                                                          “B”.

 

		6.	Participant
                                                                                                                          Interest:
                                                                                                                          An Expense
                                                                                                                          and
                                                                                                                          Working
                                                                                                                          Interest
                                                                                                                          in the
                                                                                                                          Leases
                                                                                                                          and
                                                                                                                          Obligation
                                                                                                                          Well(s)
                                                                                                                          of 30.0%
                                                                                                                          thereafter
                                                                                                                          having
                                                                                                                          a net
                                                                                                                          revenue
                                                                                                                          interest
                                                                                                                          of not
                                                                                                                          less
                                                                                                                          than
                                                                                                                          23.509%.

 

 

 

    	 

    	 

    

 

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		7.	Reversionary
                                                                                                                          Working
                                                                                                                          Interest:
                                                                                                                          In the
                                                                                                                          event
                                                                                                                          that
                                                                                                                          the
                                                                                                                          acquisition
                                                                                                                          contemplated
                                                                                                                          in that
                                                                                                                          certain
                                                                                                                          Letter
                                                                                                                          of Intent
                                                                                                                          dated
                                                                                                                          September
                                                                                                                          12,
                                                                                                                          2013
                                                                                                                          by and
                                                                                                                          between
                                                                                                                          the
                                                                                                                          parties
                                                                                                                          hereto
                                                                                                                          is not
                                                                                                                          completed,
                                                                                                                          Participants
                                                                                                                          Interest
                                                                                                                          in the
                                                                                                                          Leases
                                                                                                                          and
                                                                                                                          Obligation
                                                                                                                          Wells
                                                                                                                          shall
                                                                                                                          be reduced
                                                                                                                          to 25.0%
                                                                                                                          and
                                                                                                                          the
                                                                                                                          net
                                                                                                                          revenue
                                                                                                                          interest
                                                                                                                          shall
                                                                                                                          be proportionately
                                                                                                                          reduced.
                                                                                                                          It is
                                                                                                                          the
                                                                                                                          intent
                                                                                                                          that
                                                                                                                          the
                                                                                                                          Participant
                                                                                                                          carry
                                                                                                                          PetroShare
                                                                                                                          and
                                                                                                                          bear
                                                                                                                          all
                                                                                                                          costs
                                                                                                                          and
                                                                                                                          expenses
                                                                                                                          associated
                                                                                                                          with
                                                                                                                          the
                                                                                                                          Leases
                                                                                                                          and
                                                                                                                          Obligation
                                                                                                                          Wells
                                                                                                                          for
                                                                                                                          5.0%
                                                                                                                          of the
                                                                                                                          expenses
                                                                                                                          associated
                                                                                                                          therewith
                                                                                                                          in the
                                                                                                                          event
                                                                                                                          the
                                                                                                                          acquisition
                                                                                                                          is not
                                                                                                                          completed
                                                                                                                          as set
                                                                                                                          forth
                                                                                                                          herein.

 

		8.	Working
                                                                                                                          Interest:
                                                                                                                          The
                                                                                                                          cost
                                                                                                                          bearing
                                                                                                                          interest
                                                                                                                          created
                                                                                                                          by oil
                                                                                                                          and
                                                                                                                          gas
                                                                                                                          leases.
                                                                                                                          Working
                                                                                                                          Interest
                                                                                                                          may
                                                                                                                          also
                                                                                                                          refer
                                                                                                                          to the
                                                                                                                          share
                                                                                                                          of ownership
                                                                                                                          attributable
                                                                                                                          to an
                                                                                                                          unleased
                                                                                                                          mineral
                                                                                                                          interest.

 

		9.	Net
                                                                                                                          Revenue
                                                                                                                          Interest:
                                                                                                                          The
                                                                                                                          share
                                                                                                                          of the
                                                                                                                          gross
                                                                                                                          production
                                                                                                                          proceeds
                                                                                                                          after
                                                                                                                          payment
                                                                                                                          of royalty
                                                                                                                          and
                                                                                                                          overriding
                                                                                                                          royalty
                                                                                                                          interests.

 

		10.	Project
                                                                                                                           Area:
                                                                                                                           As
                                                                                                                           set
                                                                                                                           forth
                                                                                                                           in
                                                                                                                           Exhibit
                                                                                                                           A

 

 

II.  
PROSPECT FEE

 

A.          Payment
of Prospect Fee. Participant agrees to pay 30% of the total cost and expense of the Obligation Wells for a 30% Working Interest
(to be reduced to a 25% Reversionary Working Interest in the event of the circumstances described in Article I, (7), in lieu of
a prospect fee.

 

III.  
DRILLING AND DEVELOPMENT.

 

A.          Obligation
Wells. Participant agrees to pay for its Participant Interest share of the drilling, completion and equipping, or the plugging
and abandonment, of the Obligation Wells. PetroShare shall use its commercially reasonable efforts to commence the drilling of
the first Obligation Well by October 15, 2013.

 

B.          Interests
Earned.Upon Participant paying the Prospect Fee, together with its share of the costs for the drilling, completion and
equipping, or the plugging and abandonment of an Obligation Well(s), Participant shall be assigned an undivided interest in and
to the Leases equal to Participant’s Interest or the Reversionary Working Interest as the case may be, of PetroShare’s
interest in the Existing Leases as to the unit for such Obligation Well, and as to all depths from the surface to the deepest
depth drilled in the Obligation Well. All assignments will be subject to all royalties, overriding royalties, production payments,
net profits interests and similar burdens existing as of the date hereof. PetroShare shall proceed with recording such assignments
on a timely basis.

 

 

    	 

    	 

    

 

 

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C.          Subsequent
Drilling and Development Operations. After drilling and completion of the Obligation Well(s), all subsequent wells (“Subsequent
Wells”) and subsequent operations with respect to the Obligation Wells shall be proposed in accordance with the Operating
Agreement and the provisions of this Agreement with Participant being responsible for its Participant Interest or Reversionary
Working Interest as the case may be, subject to any elections to not participate in the Operating Agreement.

 

IV.
  OPERATIONS WITHIN PROJECT AREA

 

A.          Operating
Agreement. All operations within the Project Area shall be conducted pursuant to the joint operating agreement attached hereto
as Exhibit “B” (“Operating Agreement”), reference to which is hereby made for all purposes, except as
expressly modified by the terms hereof. PetroShare Corp., shall be designated as Operator subject to the resignation and removal
provisions of the Operating Agreement. In the event of a conflict between this Agreement and the Operating Agreement, this Agreement
shall control.

 

B.          Cash
Advances.Notwithstanding anything in the Operating Agreement to the contrary, PetroShare shall have the right to require
cash advances from Participant with respect to the proposed drilling and completion of one or more Obligation Well(s). Such request
shall be in the form of one or more Authorities for Expenditure (“AFEs”) and payment shall be due within 10 days following
receipt of the AFEs. Provided however, that such AFE’s shall not be issued by PetroShare more than 30 days in advance of
the confirmed spud date (i.e. drilling commencement date) of the applicable Obligation Well(s).

 

 

V.
  PROPORTIONATE REDUCTION

 

A.          Proportionate
Reduction Clause: If an oil and gas lease or other Mineral Interest covers less than the entire mineral fee estate, or if
a party’s interest in the applicable lease or Mineral Interest is less than a 100% ownership interest, any interest conveyed
or reserved pursuant to this Agreement is intended to be proportionately reduced to accord to (i) the proportion of mineral interest
covered by the relevant oil and gas lease or other Mineral Interest, and (ii) the proportion of ownership held by the conveying
party, in the case of a conveyance, or the burdened party, in the case of a reservation of interest.

 

 

VI.
  CONFIDENTIALITY

 

A.          Confidentiality.
The parties acknowledge that the information that is the subject matter of this Agreement (including but not limited to all well
information acquired by operations conducted under the Operating Agreement) is sensitive and confidential proprietary information
belonging to the parties. Each party, for itself and its Affiliates, agrees not to release or disclose or otherwise make the information
available to or to furnish any of said information to any third party without (i) obtaining the agreement of the third party to
maintain such information confidential and to not use such information other than in connection with investing in or participating
with or purchasing interests from the disclosing party, or (ii) first obtaining the express written consent of the other party.
Any such release or disclosure if approved shall be conditioned upon the third party expressly agreeing to all terms herein and
becoming a party to and subject to this Confidentiality Agreement. Nothing contained above shall restrict or impair any party’s
right to use or disclose any of the information which is: (1) at the time of disclosure available to the public through no act
or omission of that party; (2) can be shown was lawfully in that party’s possession prior to the time of this Agreement;
or (3) is independently made available to that party by a third party who is independently entitled to disclose such information
and that party shows that the right of such third party to disclosure existed prior to the date of this Agreement.

 

 

 

    	 

    	 

    

 

 

 

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B.          Public
Disclosure. Subject to the exceptions set forth below, and unless otherwise agreed upon by the parties, prior to substantial
leasing completion in the AMI as contemplated by this Agreement, the parties intend to keep material information concerning the
entering into of this Agreement and the location of the Project Area confidential to the extent any disclosure thereof could impair
the leasing activities of the parties. Notwithstanding such intent, either party may make any public disclosure to the extent
that, upon advice of such party’s counsel, such disclosure is advisable to comply with United States or state securities
laws, rules or regulations. Any proposed press release or other disclosure, shall be provided to the other party in advance on
a confidential basis for its information and comment.

 

VII.
  TAX ELECTION

 

This
Agreement is not intended to create, and shall not be construed to create, a relationship of partnership or an association for
profit between or among the parties hereto except as provided herein. Each party hereby affected elects to be excluded from the
application of all the provisions of Subchapter “K”, Chapter 1, Subtitle “A”, of the Internal Revenue
Code of 1986 and all amendments thereto.

 

VIII.
  PAYMENT OF DELAY RENTALS AND LEASE EXTENSIONS

 

Operator
shall be responsible for making any payment of delay rentals, shut in royalties and minimum royalty payments on the Leases. Participant
shall bear and pay its share of such payments. Participant shall be billed and shall pay for said costs in the manner set forth
for the billing and paying of direct costs in the COPAS accounting procedures attached to the form of Operating Agreement. Operator
shall not be liable to Participant for any loss resulting from a good faith effort to properly do so.

 

 

IX.
  NO JOINT LIABILITY

 

The
rights, duties, obligations and liabilities of the parties hereto shall be several and not joint or collective. Each party hereto
shall be responsible only for its obligations as herein set out and shall be liable only for its share of the cost and expense
as herein provided; it being the express purpose and intention of the parties that their interest in this Agreement and the rights
and property acquired in connection herewith shall be held by them as tenants in common. Except for the tax election which the
parties may have made, it is not the purpose or intention of this Agreement to create any mining partnership, commercial partnership
or other partnership.

 

 

 

    	 

    	 

    

 

 

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X.
  ASSIGNMENTS OF LEASES

 

Any
assignment of any interest pursuant to this Agreement by and between the parties hereto shall be made with a special warranty
of title by through and under the assignor, but not otherwise and on the form attached hereto as Exhibit “C” which
shall be for recording in the official records of the county in which the Lease lies. Where applicable, separate assignments of
operating rights shall likewise be made on such State and Federal forms as required by rule or regulation. Any assignment hereafter
executed shall specifically refer to, and be made subject to, the terms and conditions hereof.

 

XI.
  FORCE MAJEURE

 

Should
any party be prevented or hindered from complying with any obligation created hereunder, other than the obligation to pay money,
by reason of fire, flood, storm, act of God, governmental authority, governmental action or inaction, failure or delay in obtaining
any necessary permits, labor disputes, war, the inability to secure qualified labor, geoscience data, title abstracts, curative
title work, lease brokers, entry onto the land, drilling equipment and drilling rig(s) at prevailing market rates, drilling tools,
materials or transportation, or any other cause not enumerated herein but which is beyond the normal control of the party whose
performance is affected, then the performance of any such obligation shall be suspended during the period of such prevention or
hindrance, provided the affected party promptly notifies the other party of such force majeure circumstances and exercises all
reasonable diligence to remove the cause of force majeure.

 

XII.
  EXHIBITS

 

The
following exhibits are attached to this Agreement:

 

Exhibit
“A” – Leases

Exhibit
“B” – Form of Joint Operating Agreement

Exhibit
“C” – Form of Assignment

 

If
the terms of any of these Exhibits conflict with the terms of this Agreement, this Agreement shall control.

 

 

 

    	 

    	 

    

 

 

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XIII.
  MISCELLANEOUS

 

A.          Assignment:
Participant may assign its interest under this Agreement provided that Participant remains liable for or guarantees the performance
of its assignee and provided Participant gives PetroShare appropriate documentation evidencing such assignment.

 

B.          Governing
Law: This Agreement and other instruments executed in accordance with it, except for assignments of lands, or the execution
hereof shall be governed by and interpreted according to the laws of the State of Colorado. Forum and venue shall be exclusively
in Denver, Colorado. As to assignments of lands, they shall be governed by the laws of the State wherein they lie.

 

C.          Entire
Agreement: This Agreement, the documents to be executed hereunder, and the Exhibits attached hereto constitute the entire
agreement between the parties, supersedes all prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other agreements between the parties except as specifically
set forth herein. No supplement, amendment, alteration, modification, waiver or termination of the Agreement shall be binding
unless executed in writing by the parties hereto.

 

D.          Waiver:
No waiver of any of the provisions of the Agreement shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

E.          Captions;
Definition of “Including”: The captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this Agreement. The term “including” or
“includes”, as used herein, shall mean “including, without limitation,” and “includes, without limitation”.

 

F.          Binding:
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors,
assigns and legal representatives.

 

G.          Notices:
Any notice hereunder shall be given in writing by mail, courier, personally, E-mail or by facsimile and shall be effective
when delivered to the party intended to be notified. The contact information for each party is as follows:

 

If
to PetroShare:

 

PetroShare
Corp.

7200
So. Alton Way, Ste B220

Centennial,
CO 80112

Attn:
Frederick J. Witsell

(303)
500-1168 Office

(303)
770-6885 fax

(303)
881-2157 cell

fwitsell@petrosharecorp.com

 

 

 

    	 

    	 

    

 

 

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If
to Participant:

 

Rancher
Energy Corp.

c/o
A.L. (Sid) Overton, Esq.

6950
East Belleview Ave., Suite. 202

Greenwood
Village, CO 80111

Attn:
Jon Nicolaysen

(303)
779-5900 Office

(303)
779-6006 Fax

sidoverton@oalaw.net

 

Any
party may change their foregoing contact information by notice to the other party.

 

H.          Expenses:
Except as otherwise provided herein, each party shall be solely responsible for all expenses incurred by it in connection
with this transaction (including fees and expenses of its own counsel and accountants).

 

I.          Execution:
This Agreement may be executed in multiple original counterparts, all of which shall together constitute a single agreement
and each of which, when executed, shall be binding for all purposes thereof on the executed party, its successors and assigns.

 

J.          Severability:
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, all
other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any materially adverse manner to either party.

 

K.          Arbitration:
Any dispute arising under this Agreement (“Arbitrable Dispute”) shall be referred to and resolved by binding arbitration
in Denver, Colorado, to be administered by and in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Arbitration shall be initiated within the applicable time limits set forth in this Agreement and not thereafter or
if no time limit is given, within the time period allowed by the applicable statute of limitations, by one party (“Claimant”)
giving written notice to the other party (“Respondent”) and to the Denver Regional Office of the American Arbitration
Association (“AAA”), that the Claimant elects to refer the Arbitrable Dispute to arbitration. All arbitrators must
be neutral parties who have never been officers, directors or employees of the parties or any of their Affiliates, must have not
less than ten (10) years experience in the oil and gas industry, and must have a formal financial/accounting, engineering or legal
education. The hearing shall be commenced within thirty (30) days after the selection of the arbitrator. The parties and the arbitrators
shall proceed diligently and in good faith in order that the arbitral award shall be made as promptly as possible. The interpretation,
construction and effect of this Agreement shall be governed by the Laws of Colorado, and to the maximum extent allowed by law,
in all arbitration proceedings the Laws of Colorado shall be applied, without regard to any conflicts of laws principles. All
statutes of limitation and of repose that would otherwise be applicable shall apply to any arbitration proceeding. The tribunal
shall not have the authority to grant or award indirect or consequential damages, punitive damages or exemplary damages.

 

 

 

    	 

    	 

    

 

 

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L.          Further
Assurances: During the time in which this Agreement is in effect, the parties shall, at any time and from time to time, and
without further consideration, execute and deliver or use reasonable efforts to cause to be executed and delivered such other
instruments of conveyance and contract, and to take such other actions as either party may reasonably may request effect the intent
of this Agreement.

 

M.          Not
to be Construed Against Drafter:  The parties acknowledge that they have had an adequate opportunity to review each and every
provision contained in this Agreement, that they have participated equally in the drafting hereof and that they have had adequate
time to submit same to legal counsel for review and comment. Based on said review and consultation, the parties agree with each
and every term contained in this Agreement. Based on the foregoing, the parties agree that the rule of construction that a contract
be construed against the drafter, if any, shall not be applied in the interpretation and construction of this Agreement.

 

N.          Laws
and Regulations: Any reference to any federal, state, local, or foreign statute or law will be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context otherwise requires.

 

O.          Third-Party
Beneficiaries: This Agreement is not intended to confer any rights or remedies upon any Person other than the parties and
their respective successors and permitted assigns.

 

P.          Investment
Representations: Participant understands (1) that the interests evidenced by this Agreement have not been registered under
the Securities Act of 1933, the Colorado Securities Act or any other state securities laws (the “Securities Acts”).

 

Prior
to acquiring the interests, Participant has made an investigation of the PetroShare and its business and has had made available
to it all information with respect thereto which it needed to make an informed decision to acquire the interest. Participant considers
itself to be an entity possessing experience and sophistication as an investor which are adequate for the evaluation of the merits
and risks of its investment in the interest.

 

 

 

    	 

    	 

    

 

 

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IN
WITNESS WHEREOF, this Agreement is executed effective as of the date hereinabove provided.

 

Parties:

 

	PETROSHARE
                                                                          CORP

         

         

        By:
        ________________________

        Name:
        Stephen J. Foley

        Title:
        CEO
	RANCHER
                                                                          ENERGY CORP.

         

         

        By:
        ____________________________

        Name:
        Jon Nicolaysen

        Title:
        President & CEO

 

    	 

    	 

    

 

 

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EXHIBIT
A

 

Leases
Project Area

 

Attached
to and made a part of that certain Participation Agreement by and between PetroShare Corp and Rancher Energy Corp., dated September
30, 2013.

 

See Attached
Lease Schedule

 

 

 

 

    	 

    	 

    

 

 

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EXHIBIT
B

 

Joint
Operation Agreement

 

Attached
to and made a part of that certain Participation Agreement by and between PetroShare Corp and Rancher Energy Corp., dated September
30, 2013.

 

See Attached
JOA

 

 

 

 

    	 

    	 

    

 

 

 

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EXHIBIT
“C”

 

ASSIGNMENT

 

STATE
OF COLORADO)

COUNTY
OF _________________)

 

KNOW
ALL MEN BY THESE PRESENTS, that PetroShare Corp., with an office at ______________________, hereinafter referred to as
“Assignor”, for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00), the receipt and adequacy of which
is hereby acknowledged and full acquittance granted therefor, has granted, sold, conveyed and delivered and does hereby grant,
sell, convey and deliver unto _________________ with an office at _____________________,  hereinafter collectively referred
to as “Assignee”, ___% of Assignor’s right, title and interest in the following properties (real, personal
or mixed) and rights (contractual or otherwise) unless expressly reserved or excluded herein, the following being referred to
herein collectively as the Assets:

 

	(a)		the oil and gas leases described
on Exhibit “A”, attached hereto, in the amounts of the working interests specified thereon (the “Leases”);

 

	(b)		The rights and interests in,
to and under, or derived from, all of the presently existing and valid unitization and pooling agreements and units (including
all units formed by voluntary agreement and those formed under the rules, regulations, orders or other official acts of any governmental
entity having appropriate jurisdiction) to the extent they relate to any of the Leases;

 

	(c)		The rights and interests in,
to and under, or derived from, all of the presently existing and valid joint operating agreements, oil sales contracts, casinghead
gas sales contracts, gas sales contracts, processing contracts, gathering contracts, transportation contracts, easements, rights-of-way,
servitudes, surface leases and other contracts to the extent they are described on Exhibit “C”, attached hereto (the
“Contracts”);

 

	(d)		The rights and interests in
and to all personal property and improvements, including without limitation, tanks, buildings, fixtures, machinery, equipment,
pipelines, utility lines, power lines, telephone lines, roads and other appurtenances, to the extent the same are situated upon
and/or used or held for use by Seller in connection with the ownership, operation, maintenance and repair of the Leases; and

 

	(f)		The
rights and interests in all permits and licenses of any nature owned, held or operated in connection with operations for the exploration
and production of oil, gas or other minerals to the extent the same are used or obtained in connection with any of the Leases
or other property described in Exhibit “A” (“Permits”);

			

 

 

    	 

    	 

    

 

 

 

	13	Page - PetroShare
    PA - Buck Peak

 

TO
HAVE AND TO HOLD the Assets, together with all and singular the rights and appurtenances thereunto in anywise belonging, unto
Assignee, its successors and assigns, forever, subject to the following terms and conditions:

 

1.          Special
Warranty of Title. Assignor represents and warrants that the Assets are free and clear of all liens, encumbrances, security
interests or other adverse claims arising by, through or under Assignor, but not otherwise. Assignor shall warrant and defend
the title to the Assets conveyed to Assignee against every person whomsoever lawfully claims the Assets or any part thereof by,
through, or under Assignor, but not otherwise.

 

2.          Successors
and Assigns. The terms, covenants and conditions contained in this Assignment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, and such terms, covenants and conditions shall be covenants
running with the land and with each subsequent transfer or assignment of the Assets, or any part thereof.

 

3.          Participation
Agreement. This Assignment is made in accordance with and is subject to the terms, covenants and conditions contained in that
certain Participation Agreement dated as of ____________, 2013, by and between Assignor and Assignee (“Participation Agreement”),
all of which shall remain in full force and effect in accordance with their terms as set forth therein and shall not be deemed
to have been merged with this Assignment. If there is a conflict between the provisions of the Participation Agreement and this
Assignment, the provisions of the Participation Agreement shall control the rights and obligations of the parties.

 

4.          Further
Assurances. Assignor and Assignee agree to take all such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purpose of this Assignment.

 

5.          Counterparts.
This Assignment is being executed in multiple counterparts each of which shall for all purposes be deemed to be an original and
all of which shall constitute one instrument.

 

ASSIGNOR:

PetroShare
Corp.

 

By:

Name:

Title:

 

ASSIGNEE:

 

By:
________________________________________

Name:

Title:

 

 

 

    	 

    	 

    

 

 

 

	14	Page - PetroShare
    PA - Buck Peak

 

 

STATE
OF__________________________ )

                                                                                )ss.

COUNTY
OF ________________________)

 

 

The
foregoing instrument was acknowledged before me this ____ day of ________, 2013, by _______________, as ___________of PetroShare
Corp.

 

Witness
my hand and seal.

 

	My Commission Expires: ________________________	 	 
		 	Notary Public

 

 

STATE
OF__________________________ )

                                                                                )ss.

COUNTY
OF ________________________)

 

 

The
foregoing instrument was acknowledged before me this ____ day of ________, 2013, by _______________, as ________________ of ____________________.

 

Witness
my hand and seal.

 

	 My
Commission Expires:___________________________	 	
	 	 	 Notary PublicExhibit 10.1 2013.10.09

Exhibit 10.1
October 3, 2013
Steven J. Issa 
At the address on file with the Company

Dear Steve:
This letter agreement amends that certain letter agreement by and between you and Flagstar Bank, FSB (the "Bank"), dated as of February 28, 2013 (the "Transition Agreement"), pursuant to which you and the Bank modified your employment relationship.  
By letter dated September 6, 2013, the Office of the Comptroller of the Currency (the "OCC") informed the Bank that the OCC, after consultation with the Federal Deposit Insurance Corporation (the "FDIC"), had determined that (a) the Transition Agreement is an agreement to make a "golden parachute payment" within the meaning of 12 C.F.R. Part 359 and (b) the 2013 increases in your cash and share salary and the retention payments described in the Transition Agreement were golden parachute payments that would be in violation of Part 359 unless approved under 12 C.F.R. § 359.4(a)(1).   
You have requested that the Bank not contest the OCC’s conclusion that the 2013 Compensation Adjustment (as defined below) is a golden parachute payment subject to Part 359, and, instead, submit a letter application requesting the approval of the OCC, and the written concurrence of the FDIC, to the agreement that you and the Bank have made below.        
The Bank and you have mutually agreed as follows:   
		
	1.
	This letter confirms your receipt from the Bank of the following payments: 

		
	A.
	$317,500.01, representing cash salary for January 1, 2013 through April 30, 2013;

		
	B.
	$192,062.26, representing share salary for January 1, 2013 through April 30, 2013; and

		
	C.
	$15,483.87, representing the first retention payment pursuant to Paragraph 4(A) of the Retention Agreement, with respect to the period from March 1, 2013 through March 31, 2013.  

		
	2.
	You acknowledge and agree that the aggregate amount of payments described in Section 1 (A), (B) and (C) above represents a $266,712.81 increase in your compensation over 2012 (the "2013 Compensation Adjustment").  

		
	3.
	You hereby irrevocably waive all right and interest to receive a retention payment with respect to the period from April 1, 2013 through April 30, 2013, pursuant to Paragraph 4(B) of the Transition Agreement, and any other increase in compensation called for under the Transition Agreement other than the 2013 Compensation Adjustment.   

		
	4.
	You acknowledge and agree that your entitlement to retain the 2013 Compensation Adjustment is subject to regulatory approval under 12 C.F.R. § 359.4(a)(1).   

		
	5.
	As soon as practicable after the mutual execution and delivery of this letter agreement, the Bank shall request the approval of the OCC, and the written concurrence of the FDIC, under 12 C.F.R. § 359.4(a)(1), for you to retain the 2013 Compensation Adjustment (the "Part 359 Application").  The Bank shall afford you an opportunity to review and comment on the Part 359 Application before it is submitted.   

		
	6.
	Consistent with Paragraph 10 of the Transition Agreement, the Bank shall use commercially reasonable efforts to obtain OCC and FDIC approval of the Part 359 Application, including, without limitation, by responding to whatever questions, if any, that one or both regulators may raise and by providing any additional information the OCC or FDIC may request in connection with its review of the Part 359 Application; provided, however, that neither the Bank nor any of its affiliates shall have any obligation to participate in any adversarial proceeding (including any civil or administrative matter) or to take any action that the Bank’s Board of Directors determines in the exercise of its fiduciary duty is not in the Bank’s best interest.  

		
	7.
	You unconditionally and irrevocably agree to repay to the Bank the 2013 Compensation Adjustment without interest to the extent that the OCC or the FDIC declines to approve your retention of the 2013 Compensation Adjustment, in whole or in part, under 12 C.F.R. § 359.4(a)(1), such repayment to be made by bank check or wire transfer within a reasonable period of time not to exceed 30 days after the Bank makes demand therefor.  You shall pay to the Bank immediately upon demand the full amount of costs and expenses, including attorneys’ fees (to include outside counsel fees and all allocated costs of the Bank’s in-house counsel), reasonably expended or incurred by the Bank in connection with the enforcement of the immediately preceding sentence or the prosecution or defense of any action in any way related to this paragraph, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise. 

		
	8.
	You and the Bank agree that each party will hold the existence, terms, and provisions of this letter agreement in confidence, and will not disclose, directly or indirectly, the existence, terms or provisions of this letter agreement except (i) in your case, to your spouse or your accountants and legal and financial advisors, and then only on the condition that they be advised that they cannot further disclose the same to others, (ii) in the Bank’s case, to its directors, officers, employees, legal and financial advisors, accountants and regulators, and (iii) as required by law.

		
	9.
	Except as expressly amended or waived hereby, the Transition Agreement and each provision thereof is hereby ratified and confirmed in every respect.  

[Remainder of Page Intentionally Left Blank]

Please return the original signed copy of this letter agreement to me and retain a copy for your records.

This letter agreement shall become effective as of the date first set forth above.

Sincerely,
FLAGSTAR BANK, FSB
	
			
	Date:
	October 3, 2013
	/s/ Alessandro DiNello

	 
	 
	Alessandro DiNello

	 
	 
	President and Chief Executive Officer

Terms and conditions of this letter agreement are confidential and are hereby accepted by:
	
			
	Date:
	October 3, 2013
	/s/ Steven J. Issa

	 
	 
	Steven J. Issa

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