Document:

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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is made and entered into as
of the 1st day of January, 2003 (the "Effective Date"), by and between Magnum
Hunter Resources, Inc., a Nevada corporation ("Magnum Hunter") and its
affiliates, Gruy Petroleum Management Co., a Texas Corporation and a
wholly-owned subsidiary of Magnum Hunter, (collectively, the "Employer") and
Charles R. Erwin ("Employee").

         WHEREAS, the Board of Directors of the Employer (the "Board")
recognizes that it is important to attract, hire and retain key officers and
management personnel;

         WHEREAS, the Board also recognizes that, in the event of a Change in
Control (as hereinafter defined), significant distractions of its key management
and operations personnel can result because of the uncertainties inherent in
such a situation;

         WHEREAS, the Board has determined that it is essential and in the best
interest of the Employer and its stockholders to retain officers and key
employees in the event of a threat or occurrence of Change in Control and to
ensure their continued dedication and efforts in such event without undue
concern for their personal, financial and employment security; and

         WHEREAS, in order to induce qualified candidates to accept employment
with the Employer and to remain in the employ of the Employer in the event of a
threat or the occurrence of a Change in Control, the Employer desires to enter
into this Agreement with the Employee.

         NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

         1.    Employment. Employer hereby employs Employee and Employee hereby
         accepts employment with Employer upon the terms and conditions
         hereinafter set forth.

         2.    Duties. Employee shall serve Employer as Sr. Vice President
         Exploration of the Employer with such responsibilities as shall be
         determined from time to time by the President of the Employer and the
         Board; provided, however, that all duties assigned to Employee
         hereunder shall be commensurate with the skill and experience of
         Employee. Employee agrees to devote all of his professional time,
         attention, skills, benefits and best efforts to the performance of his
         duties hereunder and to the promotion of the business and interests of
         Employer.

         3.    Term. This Agreement shall become effective on the Effective
         Date, and shall continue, unless earlier terminated in accordance with
         the terms of this Agreement, for a period of three (3) years commencing
         on the Effective Date. This Agreement shall thereafter be automatically
         renewed for a period of six (6) months, unless earlier terminated as
         provided herein, and unless one party has given written notice to the
         other party of its or his intention not to renew this Agreement at
         least thirty (30) days prior to the expiration of its then current term
         (the "Term").

         4.    Compensation. As compensation for his services rendered under
         this Agreement, Employee shall be entitled to receive the following:

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               (a)    Base Salary. During the Term, Employee shall initially be
               paid an annual salary of One Hundred Eighty Five Thousand and
               No/100 Dollars ($185,000.00) per annum (the "Base Salary")
               payable in equal payments twice a month for a total of
               twenty-four (24) payments per year. The Base Salary may be
               increased or decreased as the Board may determine from time to
               time. The Base Salary may be increased or decreased as the Board
               may determine from time to time. The Base Salary may be increased
               or decreased as the Board may determine from time to time,
               however in no event will the Base Salary be less than One Hundred
               Eighty Five Thousand and No/100 Dollars ($185,000.00);

               (b)    Expenses. Employer shall reimburse Employee for all
               reasonable and necessary out-of-pocket travel and other expenses
               incurred by Employee in rendering services required under the
               terms of this Agreement, promptly after submission, on a monthly
               basis, of a detailed statement of such expenses and reasonable
               documentation.

               (c)    Bonus. Expressly conditioned on the Employee being
               employed on the last day of the fiscal year of the Employer, the
               Employee may receive a bonus in an amount determined solely by
               the unanimous approval of the compensation committee of the
               Employer and the Board, in their sole discretion.

               (d)    Benefits. During the Term, Employee shall be entitled to
               receive such group benefits as Employer may provide to its other
               employees at comparable salaries and responsibilities to those of
               Employee.

               (e)    Automobile. During the Term, Employee may be entitled to
               an automobile allowance to be determined by the Chief Executive
               Officer of Employer, in his sole discretion.

         Except as provided in Section 7, the compensation set forth in this
         Section 4 will be the sole compensation payable to Employee and no
         additional compensation or fee will be payable by Employer to Employee
         by reason of any benefit gained by the Employer directly or indirectly
         through Employee's efforts on Employer's behalf, nor shall Employer be
         liable in any way for any additional compensation or fee unless
         Employer shall have expressly agreed thereto in writing.

         5.    Confidentiality; Covenants Not-To-Compete.

               (a)    Acknowledgment of Proprietary Interest. Employee
               acknowledges and agrees that he has had access to proprietary
               information and also recognizes the sole proprietary interest of
               Employer in any Trade Secrets (as hereinafter defined) of
               Employer. Employee further acknowledges and agrees that any and
               all Trade Secrets of Employer, learned by Employee during the
               course of his employment by Employer or otherwise, whether
               developed by Employee alone or in conjunction with others or
               otherwise, is and shall be the property of Employer. Employee
               further acknowledges and understands that his disclosure of any
               Trade Secrets of Employer will result in

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               irreparable injury and damage to Employer. As used herein, "Trade
               Secrets" means all non-public confidential and proprietary
               information of Employer whether embodied in writing, a computer
               disk, video or magnetic tape, CD-Rom or in other form, relating
               to the business, operations or affairs of Employer and, any other
               confidential information that Employee may then possess or have
               under Employee's control, including, without limitation,
               information derived from reports, investigations, experiments,
               research, work in progress, drawings, designs, plans, proposals,
               codes, marketing and sales programs, client lists, mailing lists,
               financial projections, any information regarding Employer's oil
               and gas properties, maps, plats, surveys, geophysical and
               geological data, cost summaries, pricing formula, reports,
               studies, well logs, production data, land and title records,
               leases and all other materials, or information prepared,
               compiled, evaluated, interpreted or performed, for or by
               Employer. "Trade Secrets" also includes confidential information
               related to the business, products or sales of Employer or
               Employer's customers or other business relationships.

               (b)    Covenants Not-To-Divulge Trade Secrets. Employee
               acknowledges and agrees that Employer is entitled to prevent the
               disclosure of Trade Secrets of Employer. As a portion of the
               consideration for the employment of Employee and for the
               compensation being paid to Employee by Employer, Employee agrees
               at all times during the term of this Agreement and for three (3)
               years thereafter to hold in strictest confidence and not to
               disclose or allow to be disclosed to any person, firm, or
               corporation, other than to persons engaged by Employer to further
               the business of Employer, Trade Secrets of Employer, without the
               prior written consent of Employer, including Trade Secrets
               developed by Employee. Notwithstanding the foregoing, Employee
               shall not be obligated to keep secret and not to disclose or
               allow to be disclosed knowledge or information (a) which has
               become generally known to the public through no wrongful act of
               Employee; (b) which has been rightfully received by Employee from
               a third party which to Employee's knowledge was received without
               restriction on disclosure and not in violation of any
               confidentiality obligation of said third party; (c) which has
               been approved for release without restriction as to use or
               disclosure by written authorization of Employer; or (d) which has
               been disclosed pursuant to a requirement of a governmental agency
               or of law without similar restrictions or other protections
               against public disclosure, or which disclosure is required by
               operation of law. Without limiting the generality of the
               foregoing, Employee agrees to affirmatively take such precautions
               as Employer may reasonably request or Employee reasonably
               believes are appropriate to prevent the disclosure, copying or
               use of any of the computer software programs, data bases or other
               such information now existing or hereafter developed to any
               person or for any purpose not specifically authorized by
               Employer.

               (c)    Abide by Third Party Confidentiality Agreements. Employee
               acknowledges that Employer enters into confidentiality agreements
               with third parties. Without limiting the generality of the
               foregoing, Employee agrees to abide by the terms and conditions
               of such confidentiality agreements during the term of this
               Agreement for a period

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               beginning on the Effective Date and ending three (3) years
               following the Employee's termination of employment with the
               Employer for any reason.

               (d)    Return of Materials at Termination. In the event of any
               termination of this Agreement for any reason whatsoever, Employee
               will promptly deliver to Employer all documents, data and other
               information pertaining to Trade Secrets. Employee shall not take
               any documents or other information, or any reproduction or
               excerpt thereof, containing or pertaining to any Trade Secrets.

               (e)    Competition During the Term of this Agreement. From the
               period beginning on the Effective Date and ending one (1) year
               following the Employee's voluntary termination of employment with
               the Employer:

                      (i)     Employee shall not, directly or indirectly, either
               for himself or any other person, engage or invest in, own,
               manage, operate, finance, control or participate in the
               ownership, management, operation, financing or control of, or be
               employed by, associated with, or in any manner connected with,
               lend Employee's credit to, or render services or advice to, any
               business whose products or activities compete in whole or in part
               with the oil and gas exploration and production activities of the
               Employer in prospects known to be active in the southwestern and
               southeastern portions of the United States and the Gulf of Mexico
               (including any offshore activities as reflected on Exhibit I
               hereto) and any other business which Employer is involved in or
               pursuing in the regions in which Employer is conducting such
               activities at the time of Employee's termination; provided,
               however, that (aa) this Section 5(e) shall not prohibit Employee
               from purchasing or holding an equity interest of any class of
               securities of any enterprise (but without otherwise participating
               in the activities of such enterprise) whether or not such
               securities are listed on any national or regional securities
               exchanges or have been registered under Section 12(g) of the
               Securities Exchange Act of 1934, as amended (the "Exchange Act"),
               and (bb) this Section 5(e) shall not prohibit Employee from
               engaging in any such activities unless such Employee is using
               Employer's Trade Secrets in connection therewith.

                      (ii)    Employee shall not, directly or indirectly, either
               for himself or any other person (A) solicit, induce, recruit, or
               attempt to solicit, induce or recruit any employee of the
               Employer or to leave the employ of the Employer, (B) in any way
               interfere with the relationship between the Employer and any
               employee thereof, (C) employ, or otherwise engage as an employee,
               independent contractor or otherwise, any employee of the Employer
               or (D) induce or attempt to induce any customer, representative,
               supplier, licensee or business relation of the Employer to cease
               doing business with the Employer, or in any way interfere with
               the relationship between any customer, representative, supplier,
               licensee or business relation of the Employer.

               (f)    Tolling of Statute of Limitations. In the event of a
               breach by Employee of any covenant set forth in Section 5 above,
               the term of such covenants shall be extended by the period of the
               duration of such breach.

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               (g)    Reasonableness of Terms. The time, scope, geographic area
               and other provisions hereof are reasonable and are necessary
               under the circumstances to protect the Employer and to enable the
               Employer to receive the benefit of this bargain under this
               Agreement.

               (h)    Reformation. If a court of competent jurisdiction
               determines that the limitations as to time, geographical area or
               scope of activity to be restrained contained herein are not
               reasonable and impose a greater restraint than is necessary to
               protect the goodwill or other business interest of the Employer,
               then the parties agree that such court should (and Employee will
               request such court to) reform this Agreement to the extent
               necessary to cause the limitations contained herein as to time,
               geographical area and scope of activity to be restrained to be
               reasonable and to impose a restraint that is not greater than
               necessary to protect the goodwill or other business interests of
               the Employer and such court then shall enforce this Agreement as
               reformed.

         6.    Prohibition of Disparaging Remarks. Employee shall, during the
         term of this Agreement, refrain from making disparaging, negative or
         other similar remarks concerning Employer, any of its subsidiaries or
         other affiliated companies, to any third party that causes substantial
         harm to Employer, except to the extent that Employee is required to
         make such remarks (a) by applicable law or regulation or judicial or
         regulatory process or (b) in or in connection with any pending or
         threatened litigation relating to this Agreement or any transaction
         contemplated hereby or thereby. Similarly, Employer shall, during the
         term of this Agreement, refrain from making disparaging, negative or
         other similar remarks concerning Employee to any third party except to
         the extent that Employer is required to make such remarks (a) by
         applicable law or regulation or judicial or regulatory process or (b)
         in or in connection with any pending or threatened litigation relating
         to this Agreement or any transaction contemplated hereby or thereby. In
         view of the difficulty of determining the amount of damages that may
         result to the parties hereto from the breach of the provision of this
         Section 6, it is the intent of the parties hereto that, in addition to
         monetary damages, any non- breaching party shall have the right to
         prevent any such breach in equity or otherwise, including without
         limitation prevention by means of injunctive relief.

         7.    Termination Events.

               (a)    This Agreement and the employment relationship created
               hereby shall terminate upon the occurrence of any of the
               following events:

                      (i)     The expiration of the Term or any renewal period
                      as set forth in Section 3 above, provided that either
                      Employee or Employer has given at least thirty (30) days
                      prior written notice to the other party of such party's
                      intention not to renew;

                      (ii)    The death of Employee;

                      (iii)   The "Disability" (as hereinafter defined) of
                      Employee;

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                      (iv)    Written notice from Employer to Employee of
                      termination for "Just Cause" (as hereinafter defined); or

                      (v)     Thirty (30) days written notice by Employee to
                      Employer for "Good Reason" (as hereinafter defined)
                      provided that the event constituting Good Reason occurs
                      within two (2) years of a "Change in Control" (as
                      hereinafter defined).

               (b)    Definitions.

               (i) For purposes of Section 7(a)(iii) above, the "Disability" of
               Employee shall mean a physical or mental infirmity which impairs
               the Employee's ability to substantially perform his duties under
               this Agreement for a period of 120 consecutive days or for 120
               days out of any 150 consecutive day period.

               (ii)   For purposes of Section 7(a)(iv) above, "Just Cause" shall
               mean:

                           (1) the failure of Employee to diligently or
                           effectively perform his duties under this Agreement;

                           (2) If Employee has been accused of
                           sexually-harassing another individual and such
                           accusation is either confirmed by Employer upon its
                           own investigation or confirmed by a finding of a
                           court of competent jurisdiction or the EEOC;

                           (3) the commission by Employee of any act involving
                           moral turpitude or the commission by Employee of any
                           act or the suffering by Employee of any occurrence or
                           state of facts which renders Employee incapable of
                           performing his duties under this Agreement, or
                           adversely affects or could reasonably be expected to
                           adversely affect Employer's business reputation;

                           (4) any breach by Employee of any of the material
                           terms of, or the failure to perform any material
                           covenant contained in, this Agreement; or

                           (5) the violation by Employee of material
                           instructions or material policies established by
                           Employer with respect to the operation of its
                           business and affairs or Employee's failure, in a
                           material respect, to carry out the reasonable
                           instructions of the President or the Board of
                           Employer;

               provided, however, that no termination of Employee's employment
               shall be for Just Cause under Section 7(a)(iv) until there shall
               have been delivered to the Employee a copy of a written notice
               setting forth that the Employee was guilty of the particular
               conduct and specifying the particulars thereof in detail, and the
               Employee shall have been provided an opportunity to be heard by
               the entire Board.

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               (iii) For purposes of Section 7(a)(v) above, the term "Good
               Reason" shall mean the occurrence of any of the events or
               conditions described in items (1) through (7) below within two
               (2) years after a Change in Control has occurred:

                           (1) A substantial adverse change in the Employee's
                           status, position or responsibilities (including
                           reporting responsibilities) which represents an
                           adverse change from his status, position or
                           responsibilities as in effect immediately prior
                           thereto;

                           (2) Any reduction in the Employee's Base Salary;

                           (3) The Employer's requiring the Employee to be based
                           at any place outside fifty (50) miles from Irving,
                           Texas, except for reasonably required travel in
                           connection with the Employer's business which is not
                           greater than such travel requirements prior to the
                           Change in Control;

                           (4) The insolvency of Employer or the filing (by any
                           party, including the Employer) of a petition for the
                           bankruptcy of the Employer;

                           (5) Any material breach by the Employer of any
                           provision of this Agreement;

                           (6) Any purported termination of the Employee's
                           employment for Just Cause by the Employer which does
                           not comply with the terms of Section 7(a)(iv) or
                           Section 7(b)(ii); or

                           (7) The failure of the Employer to obtain an
                           agreement, satisfactory to the Employee, from any
                           successor or assignee of the Employer to assume and
                           agree to perform this Agreement, as contemplated in
                           Sections 2, 3, 7 and 8 hereof.

               (iv) For purposes of Section 7(a)(v) above, the term "Change in
               Control" of the Employer shall mean if any of the following
               events have occurred:

                           (1) An acquisition of any voting securities of the
                           Employer (the "Voting Securities") by a "Person" (as
                           that term is used for the purposes of Section 13(d)
                           of the Exchange Act) immediately after which such
                           person has "Beneficial Ownership" (within the meaning
                           of Rule 13d-3 promulgated under the Exchange Act) of
                           one hundred percent (100%) or more of the combined
                           voting power of the Employer's then outstanding
                           Voting Securities; or

                           (2) The following events have occurred during a one
                           (1) year period:

                                (a) The Chief Executive Officer changes for any
                                reason; and

                                (b) An acquisition of any voting securities of
                                the Employer (the "Voting Securities") by a
                                "Person" (as that term is used for the purposes
                                of Section 13(d) of the Exchange Act)
                                immediately after which such

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                                person has "Beneficial Ownership" (within the
                                meaning of Rule 13d-3 promulgated under the
                                Exchange Act) of forty percent (40%) or more of
                                the combined voting power of the Employer's then
                                outstanding Voting Securities; and

                                (c) The individuals who, as of January 1, 2003,
                                and each January 1 thereafter are members of the
                                Board (the "Incumbent Board") cease to
                                constitute at least fifty-one percent (51%) of
                                the members of the Board.

         8.    Termination Payments.

               (a) In the event of the termination of Employee's employment for
               any reason specified in Section 7 (other than the reasons set
               forth in Sections 7(a)(iii) or Section (a)(v)), Employee shall be
               entitled only to the compensation earned by him as of the
               effective date of termination, including any declared but unpaid,
               bonus or pro-rata portion thereof.

               (b) In the event of the termination of Employee's employment as
               the result of Section 7(a)(iii), Employee shall be entitled to
               compensation for the remaining term of the Agreement until the
               disability insurance company begins making payments to the
               Employee.

               (c) In the event of the termination of the Employee's employment
               for the reason specified in Section 7(a)(v), Employee shall be
               entitled to receive, immediately in one lump sum, two (2) times
               the sum of the following: (i) the current Base Salary, plus (ii)
               annualized bonus from the previous year, plus (iii) the value of
               the car allowance for the current year.

               (d) In addition, any medical, dental and group life insurance
               covering the Employee and his dependents shall continue until the
               earlier of (i) twelve (12) months after the Change in Control or
               (ii) the date the Employee becomes a participant in the group
               insurance benefit program of a new employer, with the
               understanding that the Employer shall pay for such benefits for
               the Employee, and the Employee shall pay for that portion of the
               premiums related to the coverage for Employee's dependents.

               (e) If the Employee pays or becomes obligated to pay any excise
               tax under Section 4999 of the Internal Revenue Code of 1986, as
               amended (the "Code") on any payment or benefit he receives
               (whether pursuant to this Agreement or otherwise) in connection
               with the event giving rise to his right to receive payments and
               benefits under Section 8(c) of this Agreement, the Employer shall
               pay to the Employee an amount equal to the total excise tax paid
               or payable.

         9.    Remedies. Each party recognizes and acknowledges that in the
         event of any default in, or breach of any of, the terms, conditions and
         provisions of this Agreement (either actual or threatened) by the other
         party, then the non-defaulting party's remedies at law shall be
         inadequate. Accordingly, each party agrees that in such event, the
         non-defaulting party shall

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         have the right of specific performance and/or injunctive relief in
         addition to any and all other remedies and rights at law or in equity,
         and such rights and remedies shall be cumulative.

         10.   Acknowledgments. Employee acknowledges and recognizes that the
         enforcement of any of the non-competition provisions set forth in
         Section 5 above by Employer will not interfere with Employee's ability
         to pursue a proper livelihood. Employee recognizes and agrees that the
         enforcement of this Agreement is necessary to ensure the preservation
         and continuity of the business and good will of Employer. Employee
         agrees that due to the nature of Employer's business, the
         non-competition restrictions set forth in this Agreement are reasonable
         as to time and geographic area. Employer and Employee hereby agree that
         notwithstanding any other provision of this Agreement, Employee shall
         have all rights to products or information, or applications of such
         information, which do not relate to Employer's business and were
         developed during the non-employment hours and without utilizing any
         resources of Employer.

         11.   Notices. Any notices, consents, demands, requests, approvals and
         other communications to be given under this Agreement by either party
         to the other shall be deemed to have been duly given in writing
         personally delivered, by facsimile or sent by mail, registered or
         certified, postage prepaid with return receipt requested, as follows:

         If to Employer:           600 East Las Colinas Blvd.
                                   Suite 1100
                                   Irving, Texas 75039
                                   Attention: Morgan F. Johnston
                                   Telephone: (972) 401-0752
                                   Facsimile:  (972) 401-3110

         If to Employee:           5720 Ranchero Lane
                                   Dallas, Texas 75236
                                   Telephone: (972) 296-9412

         Notices delivered personally shall be deemed communicated as of actual
         receipt or receipt of facsimile; mailed notices shall be deemed
         communicated as of three (3) days after mailing.

         12.   Survival. The following sections of this Agreement shall survive
         termination of this Agreement for any reason: Sections 5, 6, 7, 8, 9,
         11, 13, 14, 15, 16 and 17.

         13.   Arbitration. The parties agree to binding arbitration in any
         action, proceeding or counterclaim arising out of or relating to this
         Agreement. Such arbitration will be conducted in Dallas, Texas through
         the offices of and in accordance with the Commercial Arbitration Rules
         of the American Arbitration Association. Judgment upon the award
         rendered in any arbitration may be entered in any court of competent
         jurisdiction or application may be made to such court for a judicial
         acceptance of the award and an enforcement, as the law of such
         jurisdiction may require or allow.

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         14.   Entire Agreement. This Agreement contains the entire agreement of
         the parties hereto and supersedes all prior agreements and
         understandings, oral or written between the parties hereto. No
         modification or amendment of any of the terms, conditions or provisions
         herein may be made otherwise than by written agreement signed by the
         parties hereto.

         15.   GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
         THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN
         ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

         16.   Parties Bound. This Agreement and the rights and obligations
         hereunder shall be binding upon and inure to the benefit of Employer
         and Employee, and their respective heirs, personal representatives,
         successors and assigns. Employer shall have the right to assign this
         Agreement to any affiliate or to its successors or assigns provided
         that such affiliate, successor or assign agrees to be bound by the
         terms hereof. The terms "successors" and "assigns" shall include any
         person, corporation, partnership or other entity that buys all or
         substantially all of Employer's assets or all of its stock, or with
         which Employer merges or consolidates. The rights, duties or benefits
         to Employee hereunder are personal to him, and no such right or benefit
         may be assigned by him.

         17.   Estate. If Employee dies prior to the payment of all sums owed,
         or to be owed, to Employee pursuant to Section 4 above, then such sums,
         as they become due, shall be paid to Employee's estate.

         18.   Enforceability. If, for any reason, any provision contained in
         this Agreement should be held invalid in part by a court of competent
         jurisdiction, then it is the intent of each of the parties hereto that
         the balance of this Agreement be enforced to the fullest extent
         permitted by applicable law. It is the intent of each of the parties
         that the covenants not-to-compete contained in Section 5 above be
         enforced to the fullest extent permitted by applicable law.
         Accordingly, should a court of competent jurisdiction determine that
         the scope of any covenant is too broad to be enforced as written, it is
         the intent of each of the parties that the court should reform such
         covenant to such narrower scope as it determines enforceable.

         19.   Waiver of Breach. The waiver by any party hereto of a breach of
         any provision of this Agreement shall not operate or be construed as a
         waiver of any subsequent breach by any party.

         20.   Captions. The captions in this Agreement are for convenience of
         reference only and shall not limit or otherwise affect any of the terms
         or provisions hereof.

         21.   Costs. If any action at law or in equity is necessary to enforce
         or interpret the terms of this Agreement, the prevailing party shall be
         entitled to reasonable attorneys' fees, costs and necessary
         disbursements in addition to any other relief to which he or it may be
         entitled.

         22.   Counterparts. This Agreement may be executed in one or more
         counterparts, each of which shall be deemed an original and all of
         which shall constitute one and the same instrument, but only one of
         which need be produced.

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EMPLOYER:

GRUY PETROLEUM MANAGEMENT CO.

By: /s/ Gary C. Evans
    -------------------------------
    Gary C. Evans
    Chief Executive Officer

EMPLOYER'S PARENT COMPANY:

MAGNUM HUNTER RESOURCES, INC.

By: /s/ Gary C. Evans
    -------------------------------
    Gary C. Evans, Chairman
    President and CEO

EMPLOYEE:

 /s/ Charles R. Erwin
 ----------------------------------
 Charles R. Erwin

                                       11<PAGE>

                                                                   Exhibit 10.30

                             SYNTROLEUM CORPORATION
                             SECURED PROMISSORY NOTE

$2,300,000                                                      February 1, 2003

     Syntroleum Corporation, a Delaware corporation (the "Borrower"), the
principal office of which is located at Suite 1100, 1350 South Boulder, Tulsa,
Oklahoma, for value received hereby promises to pay to Marathon Oil Company, an
Ohio corporation ("Lender"), at P. O. Box 3128, Houston, Texas 77253-3128
("Registered Address"), or its registered assigns, the lesser of (i) the sum of
Two Million Three Hundred Thousand and no/100ths Dollars ($2,300,000), or (ii)
the then outstanding principal amount of advances made to Borrower under this
Note, in each case together with interest thereon, on the terms and conditions
set forth hereinafter. The principal amount of all advances made by Lender to
Borrower under this Note together with accrued interest thereon, as set forth
below, shall be due and payable in accordance with the payment terms set forth
in Section 4 below, or when declared due and payable by the Lender upon the
occurrence of an Event of Default (as defined below). Payment for all amounts
due hereunder shall be made by mail to the Registered Address of the Lender.
This Note is issued pursuant to the provisions of that certain Participation
Agreement between the Borrower and the Lender dated May 8, 2002, as amended (the
"Participation Agreement").

     The following is a statement of the rights of the Lender of this Note and
the obligations and conditions to which this Note are subject, and to which the
Lender and Borrower hereby agree.

     1.   Definitions. As used in this Note, the following terms, unless the
          context otherwise requires, have the following meanings:

          (a)  Borrower means Syntroleum Corporation, a Delaware corporation,
               and includes any corporation or other entity which shall succeed
               to or assume the obligations of the Borrower under this Note.

          (b)  Change of Control means if (i) any "person" or "group of related
               persons" shall have acquired "beneficial ownership" (within the
               meaning of Section 13(d) or 14(d) of the Securities Exchange Act
               of 1934, as amended, and the applicable rules and regulations
               thereunder), of shares of Voting Stock representing 35% or more
               of the Voting Power of Borrower, (ii) during any period of
               twenty-five consecutive months, commencing on the Original Issue
               Date, individuals who on the Original Issue Date were members of
               the board of directors of the Borrower (together with any
               replacement or additional directors whose election was
               recommended by incumbent management of the Borrower or who were
               elected by a majority of directors then in office) cease to
               constitute a majority of the board of directors of the Borrower,
               (iii) any person or group of related

<PAGE>

               persons shall merge or consolidate with the Borrower and, as a
               result of such merger or consolidation, the holders of a majority
               of the Voting Stock immediately before such merger or
               consolidation cease to hold a majority of the Voting Stock
               immediately after such merger or consolidation, or (iv) any
               person or group of related persons shall acquire all or
               substantially all of the assets of the Borrower. A Change of
               Control shall not include an increase in the percentage of shares
               of Voting Stock representing 35% or more of the Voting Power of
               the Borrower beneficially owned by any person solely as a result
               of a reduction in the number of shares of Voting Stock then
               outstanding solely due to the repurchase of Voting Stock by
               Borrower.

          (c)  Common Stock means the Borrower's common stock, $.01 par value
               per share.

          (d)  Event of Default means any of the events set forth in Article 8
               of this Note which constitute Borrower's default under this Note.

          (e)  GAAP means generally accepted accounting principles as in effect
               from time to time in the United States of America.

          (f)  Governmental Authority means (i) the government of (a) the United
               States of America or any State or other political subdivision
               thereof, or (b) any jurisdiction in which Borrower or any
               Subsidiary conducts all or any part of its business, or which
               asserts jurisdiction over any properties of Borrower or any
               Subsidiary, or (ii) any entity exercising executive, legislative,
               judicial, regulatory or administrative functions of, or
               pertaining to, any such government.

          (g)  Lender means Marathon Oil Company, an Ohio corporation, and
               includes any corporation or other entity which shall succeed to
               or assume the rights and obligations of the Lender under this
               Note.

          (h)  Market Value means the average closing price of the Common Stock
               on the five (5) trading days preceding the date in question as
               quoted on the NASDAQ Market System or, if the Common Stock is no
               longer traded on the NASDAQ Market System, on the largest U.S.
               stock exchange or market on which the Common Stock is traded or,
               if the Common Stock is not listed and traded on a stock exchange
               or market system, then as determined by an independent third
               party with expertise in the valuation of businesses. Such
               independent third party shall be selected by mutual agreement of
               Lender and Borrower.

          (i)  Material means material in relation to the business, operations,
               affairs, financial condition, assets, properties, or prospects of
               Borrower and its Subsidiaries taken as a whole.

                                       2

<PAGE>

          (j)  Material Adverse Effect means any change to or effect on the
               business, operations, affairs, financial condition, assets or
               properties of Borrower and its Subsidiaries taken as a whole,
               other than as a result of the sole acts or omissions of Lender,
               including a default by Lender of any of its obligations under the
               Participation Agreement or this Note, that is Materially adverse
               to the ability of the Borrower to substantially perform its
               obligations under the Participation Agreement or this Note and
               will likely result in an Event of Default in the near term;
               provided, however, in no event shall cost overruns from the
               Project constitute a Material Adverse Effect.

          (k)  Maturity Date means the June 30, 2004.

          (l)  Original Issue Date means May 8, 2002.

          (m)  Participation Agreement means the Participation Agreement dated
               May 8, 2002 between the Borrower and Lender, as amended.

          (n)  Subsidiary means, as to any person, any corporation, association
               or other entity in which such person or one or more of its
               Subsidiaries or such person and one or more of its Subsidiaries
               owns sufficient equity or voting interests to enable it or them
               (as a group) to elect a majority of the directors (or persons
               performing similar functions) of such entity.

          (o)  Voting Power means the total voting power represented by all
               outstanding Voting Stock.

          (p)  Voting Stock means stock of any class or classes (however
               designated) of Borrower having ordinary voting power for the
               election of the directors of Borrower, other than stock having
               such power only by reason of the happening of a contingency.

          (q)  Other Defined Terms. Unless otherwise defined herein, any
               capitalized term used herein shall have its respective meaning as
               defined in the Participation Agreement. Terms defined herein
               shall include the plural, as well as the singular use of such
               words.

     2.   Advances. The Lender shall make advances under this Note as and when
          requested by Borrower from time to time up to and not to exceed
          $2,300,000 in principal amount, the proceeds of which will be used by
          Borrower to carry out the Project. Borrower requests for advances
          shall be in minimum amounts of $1,000,000 or more. Such requests for
          advances shall be supported by actual and forecasted Project
          expenditures in accordance with the unanimously approved Project
          budget and approved and submitted by the Executive Committee to Lender
          on or before the first (1st) day of the month and funded by Lender on
          or

                                       3

<PAGE>

          before the fifteenth (15th) day of such month. Lender and Borrower
          shall reconcile such expenditures and advances on a monthly basis.
          Lender reserves the right to temporarily or permanently suspend any
          such advances upon (i) the occurrence of an Event of Default, or (ii)
          a termination under Article VI of the Participation Agreement or
          suspension of performance under Article XV of the Participation
          Agreement. The Lender is hereby authorized by the Borrower to endorse
          on the schedule forming a part of this Note appropriate notations
          evidencing the date and the amount of each advance made by the Lender
          to Borrower.

     3.   Interest.

          (a)  Subject to Section 17 hereof, simple interest on the unpaid
               balance of the Note shall accrue from the Original Issue Date
               until this Note is paid at the rate of interest equal to eight
               percent (8%) per annum (the "Interest Rate").

          (b)  Subject to Section 17 hereof, upon the occurrence of an Event of
               Default (as defined below) the interest rate on this Note will
               increase immediately to a rate equal to the Interest Rate plus 2%
               until such time as no Event of Default exists (whether through
               cure, repayment or otherwise).

     4.   Repayment. This Note shall be repaid by Borrower and Lender shall have
          no recourse against Borrower or its affiliates for the repayment of
          this Note (or interest accrued thereon), except in the manner and only
          in the manner set forth below.

          (a)  Subject to Lender's conversion right and notice provisions as set
               forth in Section 4(d), Borrower may prepay, from the date hereof
               until and including May 31, 2003, in cash, in whole or in part
               and without penalty, the outstanding principal balance, together
               with accrued interest to date of payment, of this Note upon five
               (5) days written notice to Lender. Other than as provided above,
               Borrower shall not prepay the Note.

          (b)  In the event a third party participant (excluding the DOE)
               provides capital contributions to the Project on or before May
               31, 2003, Borrower shall apply such capital contributions to the
               outstanding principal advanced to Borrower under this Note, plus
               accrued interest thereon with payment due within five (5) days of
               receipt of such capital contributions.

          (c)  Notwithstanding Sections 4(a) and 4(b) hereof and within five (5)
               business days of the date of Lender's written notice to Borrower,
               Lender shall have the option until this Note has been fully
               satisfied by Borrower and from time-to-time to convert all or any
               part of the then outstanding principal balance and interest
               accrued thereon owed to Lender under this Note in any combination
               of the following methods:

                                       4

<PAGE>

                    (i)   in the form of validly issued, fully paid and
                          nonassessable shares of Common Stock at a per share
                          conversion price of (y) $7.50 on or prior to June 30,
                          2003 or (z) $8.50 between July 1, 2003 and June 30,
                          2004 (adjusted in each such case for any stock splits,
                          reverse stock splits, stock dividends or any other
                          recapitalizations or reorganizations subsequent to the
                          date hereof);

                    (ii)  in the form of current or future credits on a
                          $1-for-$1 basis against Net License Fees payable by
                          Lender to Borrower in accordance with Section 4.05(a)
                          of the Participation Agreement; or

                    (iii) in the form of credit on a $1-for-$1 basis against any
                          amounts due Borrower resulting from Lender's equity
                          participation in a gas-to-liquids specialty chemicals
                          plant located in Equatorial Guinea using Lender's
                          natural gas as plant feedstock and in which Lender and
                          Borrower each own an equity interest.

               Upon satisfaction by Borrower of its obligations under this
               Section 4(c), this Note shall be deemed repaid in the amount of
               principal and interest to the extent applied by Lender to the
               conversion to Common Stock or credits pursuant to this Section
               4(c).

          (d)  Without limiting Lender's other rights and remedies contained
               herein, if any unpaid balance of this Note (including accrued
               interest) remains outstanding on the Maturity Date or has not
               been converted pursuant to any of the provisions contained in
               this Section 4 prior to the Maturity Date, the unpaid balance
               outstanding under this Note (including accrued interest) shall be
               payable to Lender as follows:

                    (i)   if the Market Value is at or above $8.50 per share on
                          the Maturity Date, Lender shall convert in the form of
                          validly issued, fully paid and nonassessable shares of
                          Common Stock at a per share conversion price of $8.50
                          (adjusted in each such case for any stock splits,
                          reverse stock splits, stock dividends or any other
                          recapitalizations or reorganizations subsequent to the
                          date hereof); or

                    (ii)  if the then Market Value is below $8.50 per share on
                          the Maturity Date, Borrower shall have the option to
                          pay Lender in cash; provided however, that if Borrower
                          does noT pay Lender all amounts due and owing under
                          this Note within ten (10) business days after the
                          Maturity Date, Lender shall have the option to
                          receive, at Lender's option, any combination of the
                          following upon notification to Borrower:

                                        5

<PAGE>

                    (x)  payment in the form of validly issued, fully paid and
                         nonassessable shares of Common Stock at a per share
                         conversion price of the higher of (1) the Market Value
                         on the Maturity Date, or (2) $6.00 (adjusted in each
                         such case for any stock splits, reverse stock splits,
                         stock dividends or any other recapitalizations or
                         reorganizations subsequent to the date hereof);

                    (y)  payment in the form of current or future credits, on a
                         $1-for-$1 basis, against Net License Fees payable by
                         Lender to Borrower in accordance with Section 4.05(a)
                         of the Participation Agreement; or

                    (z)  payment in the form of credits on a $1-for-$1 basis
                         against any amounts due Borrower resulting from
                         Lender's equity participation in a gas-to-liquids
                         specialty chemicals plant located in Equatorial Guinea
                         using Lender's natural gas as plant feedstock and in
                         which Lender and Borrower each own an equity interest.

               Borrower agrees to provide written notice to Lender on or about
               the Maturity Date reminding Lender of its election rights under
               this Section 4. In the event that Lender has not notified
               Borrower of its election under this Section 4(d)(ii) within
               twenty (20) business days after the Maturity Date, Lender shall
               be deemed to have elected payment in the form specified in
               Section 4(d)(ii)(y) (license fee credits). Upon satisfaction by
               Borrower of all of its obligations under this Section 4(d), this
               Note shall be deemed repaid in full.

     5.   Common Stock Payment Procedure.

          (a)  Upon Lender's election to receive payment of this Note in the
               form of Common Stock, the payment of this Note will be deemed to
               have been made as of the close of business on the date on which
               Lender receives the number of validly issued, fully paid and
               nonassessable shares of Common Stock equal to the principal and
               interest due and owing on the Note divided by the applicable
               conversion price per share as provided herein (adjusted for any
               stock splits, reverse stock splits, stock dividends or any other
               recapitalizations or reorganizations subsequent to the date
               hereof). Upon such event, Lender shall surrender this Note at the
               principal office of the Borrower. At such time as such payment
               has been effected, the rights of the Lender of this Note as such
               a Lender will cease and the person or persons in whose name or
               names any certificate or certificates

                                       6

<PAGE>

               for shares of Common Stock are to be issued upon such conversion
               will be deemed to have been the holder or holders of record of
               the shares of Common Stock represented thereby.

          (b)  Upon any conversion to Common Stock by Lender as provided herein,
               Borrower will deliver to the Lender within ten (10) business days
               of Lender's election to convert to such Common Stock:

               (i)  a certificate or certificates representing the number of
                    shares of Common Stock issuable by reason of such payment in
                    such name or names and such denomination or denominations as
                    the Lender has specified; and

               (ii) payment in an amount equal to the principle and interest
                    payable to the Lender in lieu of a fractional share of
                    Common Stock, if any.

          (c)  The issuance of certificates for shares of Common Stock upon
               payment of this Note upon Lender's election to receive payment in
               the form of Common Stock will be made without charge to the
               Lender for any issuance tax in respect thereof or other cost
               incurred by the Borrower in connection with such payment and the
               related issuance of shares of Common Stock. Upon payment of this
               Note in the form of Common Stock, the Borrower will take all such
               actions as are necessary in order to insure that the Common Stock
               issuable with respect to such payment will be validly issued,
               fully paid and nonassessable.

          (d)  The Borrower will not close its books against the transfer of
               this Note or of Common Stock issued or issuable upon payment of
               this Note, in any manner which interferes with the timely payment
               of this Note in such manner.

          (e)  The Borrower shall at all times reserve and keep available out of
               its authorized but unissued shares of Common Stock, solely for
               the purpose of effecting the payment of this Note, such number of
               its shares of Common Stock as shall from time to time be
               sufficient to effect a payment of this Note and if at any time
               the number of authorized but unissued shares of Common Stock
               shall not be sufficient to effect the payment of the Note, the
               Borrower shall promptly seek such corporate action as may, in the
               opinion of its counsel, be necessary to increase its authorized
               but unissued shares of Common Stock to such number of shares as
               shall be sufficient for such purpose.

          (f)  The Borrower shall pay all issue taxes and other governmental
               charges (other than income or other taxes imposed upon profits
               realized by the recipient) that may be imposed in respect of the
               issue or delivery of shares

                                       7

<PAGE>

               of Common Stock or other securities or property upon payment of
               this Note.

          (g)  No fractional share shall be issued upon payment of this Note in
               the form of Common Stock. All shares of Common Stock (including
               fractions thereof) issuable upon payment of this Note in the form
               of Common Stock by the Borrower shall be aggregated for purposes
               of determining whether the payment would result in the issuance
               of any fractional share. If, after such aggregation, the payment
               would result in the issuance of a fraction of a share of Common
               Stock, the Borrower shall, in lieu of issuing any fractional
               share, pay the Lender a sum in cash equal to the remainder of
               principal and interest otherwise not payable pursuant to such
               payment.

          (h)  Except as specified in this Section 5(h), Borrower is under no
               obligation to file a registration under the Securities Act of
               1933 for shares of Common Stock issued to Lender under this Note.

               (i)  For all Common Stock collectively issued to Lender under
                    this Note, Lender may on one occasion demand the Borrower to
                    file a registration under the Securities Act of 1933 in
                    respect of all or a portion of such Common Stock shares by
                    delivering to Borrower written notice stating that such
                    right is being exercised, specifying the number of shares to
                    be included in such registration and describing the intended
                    method of distribution thereof. In response to such request,
                    Borrower shall as promptly as practicable, file with the SEC
                    a registration statement providing for the registration of
                    such number of shares as the Lender shall have requested be
                    registered for distribution and perform all other acts
                    reasonably necessary to insure that such registration
                    statement becomes effective in a timely manner.

               (ii) If, at any time during the term of this Note, Borrower on
                    its own initiative or on behalf of any other holder of
                    registration rights proposes to register any Common Stock on
                    a registration statement on Form S-1, Form S-2 or Form S-3
                    for purposes of a primary or secondary offering, Borrower
                    shall give prompt written notice to Lender of its intention
                    to do so and Lender shall, upon prompt written request
                    specifying the number of shares to be disposed, be entitled
                    to "piggy-back" upon such registration subject to the
                    limitations contained herein. In the event that Borrower and
                    its investment advisors reasonably and in good faith
                    determine that the inclusion of such "piggy-back" shares
                    creates a substantial risk that the price per share of
                    Common Stock will be materially and adversely affected or
                    that the number of shares of Common Stock sought to be
                    registered is a greater number than can reasonably be sold
                    or the success of the offering would otherwise be materially

                                       8

<PAGE>

                    and adversely affected, Borrower shall include in such
                    registration statement such number of shares of Common Stock
                    as Borrower, any other holder of registration rights, and
                    Lender are advised can be sold in such offering without such
                    an effect (the "Maximum Number") as follows and in the
                    following order of priority: (A) first, such number of
                    shares of Common Stock as Borrower intended to be registered
                    and sold by Borrower; and (B) second, such additional
                    shares, up to the Maximum Number, requested by Lender on a
                    pro rata basis with all other holders of registration rights
                    desiring to participate in the registration.

          (i)  Lender agrees that, with respect to any Common Stock issued
               pursuant to this Note, if Lender sells such Common Stock, the
               amount of Common Stock sold, together with all sales of Common
               Stock sold by or for the account of Lender within the preceding
               three months, excluding any Common Stock held by Lender prior to
               the Original Issue Date, shall not exceed the greater of (i) one
               percent of the shares of Common Stock outstanding as shown by the
               most recent Form 10-K, 10-Q, or other report or statement
               published by Borrower, or (ii) the average weekly reported volume
               of trading in such securities on all national securities
               exchanges and/or reported through the automated quotation system
               of a registered securities association during the four calendar
               weeks preceding the date of sale. Notwithstanding the sales
               limitations contained in this Section 5(i), Lender shall be
               entitled to dispose of its shares of Common Stock through
               privately negotiated block sales in excess of 50,000 shares.

     6.   Representations, Warranties and Covenants.

          (a)  Borrower's Representations, Warranties and Covenants. In addition
               to other representations, warranties and covenants of Borrower
               set forth herein, Borrower further represents, warrants and
               covenants to Lender that as of the Original Issue Date:

               (i)  The Borrower is a corporation duly organized, validly
                    existing and in good standing under the laws of its
                    jurisdiction or incorporation and is duly qualified as a
                    foreign corporation and is in good standing in each
                    jurisdiction in which such qualification is required by law,
                    other than those jurisdictions as to which the failure to be
                    so qualified or in good standing could not, individually or
                    in the aggregrate, reasonably be expected to have a Material
                    Adverse Effect.

               (ii) This Note and the transactions contemplated herein have been
                    duly authorized by all necessary corporate action on the
                    part of the Borrower, and upon execution and delivery, this
                    Note will constitute, a legal, valid and binding obligation
                    of the Borrower

                                       9

<PAGE>

                     enforceable against the Borrower in accordance with its
                     terms, except as such enforceability may be limited by (i)
                     applicable bankruptcy, insolvency, reorganization,
                     moratorium or other similar laws affecting the enforcement
                     of creditors' rights generally and (ii) general principles
                     of equity (regardless of whether such enforceability is
                     considered in a proceeding in equity or at law).

               (iii) The execution, delivery and performance of the Borrower of
                     this Note will not (i) contravene, result in any breach of,
                     or constitute a default under, or result in the creation of
                     any Lien (except as provided herein) in respect of any
                     property of the Borrower or any Subsidiary under, any
                     indenture, mortgage, deed of trust, loan, purchase or
                     credit agreement, lease, corporate charter or by-laws, or
                     any other agreement or instrument to which the Borrower or
                     any Subsidiary is bound or by which the Borrower or any
                     Subsidiary or any of their respective properties may be
                     bound or affected, (ii) conflict with or result in a breach
                     of any of the terms, conditions or provisions of any order,
                     judgment, decree, or ruling of any court, arbitrator or
                     Governmental Authority applicable to the Borrower or any
                     Subsidiary or (iii) violate any provision of any statute or
                     other rule or regulation of any Governmental Authority
                     applicable to the Borrower or any Subsidiary.

               (iv)  No consent, approval or authorization of, or registration,
                     filing or declaration with, any Governmental Authority is
                     required in connection with the execution, delivery or
                     performance by the Borrower of this Note.

               (v)   There are no actions, suits or proceedings pending against
                     the Borrower or any Subsidiary or any property of the
                     Borrower or any Subsidiary in any court or before any
                     arbitrator of any kind or before or by any Governmental
                     Authority that, individually or in the aggregrate, could
                     reasonably be expected to have a Material Adverse Effect.

               (vi)  To the knowledge of Borrower, neither the Borrower nor any
                     Subsidiary is in default under any term of any agreement or
                     instrument to which it is a party or by which it is bound,
                     or any order, judgment, decree or ruling of any court,
                     arbitrator or Governmental Authority or is in violation of
                     any applicable law, ordinance, rule or regulation
                     (including without limitation environmental laws) of any
                     Governmental Authority, which default or violation,
                     individually or in the aggregrate, could reasonably be
                     expected to have a Material Adverse Effect.

                                       10

<PAGE>

               (vii)  The Borrower and its Subsidiaries have filed all tax
                      returns that are required to have been filed in any
                      jurisdiction, and have paid all taxes shown to be due and
                      payable on such returns and all other taxes and
                      assessments levied upon them or their properties, assets,
                      income or franchises, to the extent such taxes and
                      assessments have become due and payable and before they
                      have become delinquent, except for any taxes and
                      assessments (i) the amount of which is not individually or
                      in the aggregrate Material or (ii) the amount,
                      applicability or validity of which is currently being
                      contested in good faith by appropriate proceedings and
                      with respect to which the Borrower or a Subsidiary, as the
                      case may be, has established adequate reserves in
                      accordance with GAAP. The Borrower knows of no basis for
                      any other tax or assessment that could reasonably be
                      expected to have a Material Adverse Effect.

               (viii) Except for the rights of the DOE in the Project and the
                      existing real property lease upon which the Project will
                      be constructed, Borrower is not aware of any mortgage,
                      lien, pledge, charge, security interest or other
                      encumbrance, or any interest or title of any vendor,
                      lessor, lender or other secured party to or of such person
                      under any agreement including, without limitation, any
                      conditional sale or other title retention agreement or
                      capital lease, upon or with respect to such lease or the
                      Project assets.

          (b)  Lender's Representations, Warranties, and Covenants. With respect
               to Lender's right to convert outstanding balances due under this
               Note into Common Stock pursuant to Section 4 of this Note, Lender
               represents, warrants and covenants to Borrower the following:

               (i)    Lender is a sophisticated investor and has experience in
                      evaluating and investing in private placement transactions
                      of securities in companies similar to Borrower so that
                      Lender is capable of evaluating the merits and risks of
                      its investment in Borrower and has the capacity to protect
                      Lender's own interests. Further, Lender recognizes that an
                      investment in Borrower is highly speculative and involves
                      significant risks (including those identified in
                      Borrower's Annual Report on Form 10-K for its fiscal year
                      ended December 31, 2001 and the Proxy Statement dated
                      March 25, 2002 (the "SEC Reports")) including a complete
                      loss of such investment. In addition, Lender is an
                      "accredited investor" as such term is defined in Rule
                      501(a) of Regulation D under the Securities Act. Lender is
                      able to bear the substantial economic risk of an
                      investment in the Common Stock for an indefinite period
                      and could afford the complete loss of Lender's investment
                      in the Common Stock.

                                       11

<PAGE>

               (ii) Lender has read carefully and understands this Note and has
                    consulted with Lender's own attorney, accountant or
                    investment advisor with respect to the investment
                    contemplated hereby and its suitability for Lender. Lender
                    has received a copy of the SEC Reports. Lender has had an
                    opportunity to discuss Borrower's business, management and
                    financial affairs with its management and has had the
                    opportunity to review Borrower's facilities. Lender also has
                    had opportunity to ask questions of officers of Borrower.
                    Lender's taking advantage of any such opportunity however,
                    does not limit or modify the representations and warranties
                    of Borrower in Section 6(a) hereof or the right of Lender to
                    rely thereon. Lender has relied solely upon the information
                    provided by Borrower in the SEC Reports and this Note in
                    making the decision to invest in the Common Stock.

     7.   Grant of Security Interest and Leasehold Mortgage; Other Agreements.

          (a)  Within ninety (90) days of the Original Issue Date and subject to
               the interest of the DOE in the Project, Borrower shall exercise
               its commercially reasonable efforts to execute those agreements
               (including, without limitation, a security agreement and
               leasehold mortgage) and other documents and to do all things
               necessary to grant to Lender a first security interest, leasehold
               mortgage and mortgage in the Project's assets for the purpose and
               only for the purpose of allowing Lender to complete the Project
               (as described in Article II of the Participation Agreement) in
               the event of an Event of Default by Borrower. The security
               granted by Borrower to Lender shall include without limitation:

               (i)   a first perfected security interest in all tangible and
                     intangible personal property associated with the SFP or
                     located from time to time on the property on which the SFP
                     is located;

               (ii)  a first position with respect to the leasehold mortgage in
                     the lease between Borrower and the Port of Catoosa
                     Authority relating to the real property (including without
                     limitation any buildings and fixtures) on which the SFP is
                     located;

               (iii) a first mortgage position with respect to any buildings and
                     fixtures located on the real property on which the SFP is
                     located; and

               (iv)  a first perfected security interest in the rights-of-way
                     and easements necessary to operate the SFP.

               In the case of an Event of Default, Borrower further covenants
               and agrees to (i) grant Lender such further rights-of-way and
               easements necessary to complete and operate the SFP, and (ii)
               enter into a services agreement

                                       12

<PAGE>

               with Lender for providing utilities and services to Lender
               necessary to operate the SFP. Such agreement shall provide that
               such utilities and services shall be provided by Borrower to
               Lender at Borrower's cost and shall include, without limitation,
               any water, electricity, gas and other utilities and services
               necessary to operate the SFP and complete the Project. Borrower
               shall further assist Lender with obtaining all necessary
               licensing rights, catalysts and other facilities and services
               necessary to operate the SFP and complete the Project in the
               event that Lender exercises its rights hereunder.

          (b)  Each of the agreements referenced in Section 7(a) shall provide
               that upon completion of the Project (as described in Article II
               of the Participation Agreement), Lender shall reasonably promptly
               release its security interest in and mortgages on any Project
               assets and shall reasonably promptly return possession and
               control of the SFP to Borrower, with the SFP to be in
               substantially the same condition as when Lender took control,
               normal wear and tear excepted along with any Project additions
               completed by Lender as contemplated by the Participation
               Agreement.

     8.   Events of Default. If any of the events specified in this Section 8
          shall occur (herein individually referred to as an "Event of
          Default"), Lender may, so long as such condition exists, declare the
          entire outstanding principal and unpaid accrued interest under this
          Note immediately due and payable and exercise its remedies pursuant to
          Section 9 of this Note by notice in writing to the Borrower.

          (a)  The Borrower shall default in the payment of principal, interest
               or any other amounts due under this Note when the same shall
               become due and payable, whether at any stated due date, at
               maturity or by acceleration or otherwise and such default shall
               not have been remedied within five (5) business days after
               written notice thereof shall have been given to the Borrower; or

          (b)  The Borrower shall default in the performance of or compliance
               with any representation and warranty, covenant, agreement,
               condition or term contained in this Note or the Participation
               Agreement and such default shall not have been remedied within
               the applicable cure period herein or therein, if any; or

          (c)  The Borrower shall make an assignment for the benefit of
               creditors, or shall admit in writing its inability to pay its
               debts as they become due, or an order for relief is entered
               against the Borrower under any bankruptcy, insolvency or similar
               laws or the Borrower shall file any petition or answer seeking
               for itself any reorganization, arrangement, composition,
               readjustment, dissolution or similar relief under any present or
               future statute, law or regulation, or shall file an answer
               admitting the material allegations of a petition filed against
               the Borrower in any such proceeding,

                                       13

<PAGE>

               or shall seek or consent to the acquiesce in the appointment of
               any trustee, receiver or liquidator of the Borrower of all or any
               substantial part of the properties of the Borrower, or the
               Borrower or its board of directors or a majority of its
               stockholders shall take any action looking to the dissolution or
               liquidation of the Borrower and such default shall not have been
               remedied within 60 days after written notice thereof shall have
               been given by Lender to the Borrower; or

          (d)  Within 60 days after the commencement of any proceeding against
               the Borrower seeking any reorganization, arrangement,
               composition, readjustment, liquidation, dissolution or similar
               relief under any present or future statute, law or regulation,
               such proceeding shall not have been dismissed or, within 60 days
               after the appointment without the consent or acquiescence of the
               Borrower of any trustee, receiver or liquidator of the Borrower
               or of all or any substantial part of the properties of the
               Borrower such appointment shall not have been vacated; or

          (e)  Borrower shall have a Material Adverse Effect; or

          (f)  Borrower shall experience a Change of Control; or

          (g)  Borrower's current assets minus current liabilities as set forth
               on its most recent audited or unaudited balance sheet filed with
               the Securities and Exchange Commission with Form 10-K or Form
               10-Q fall below $10 million; provided, however, that for purposes
               of calculating such amount, amounts due under this Note and
               liabilities associated with prepaid license fees shall be
               excluded from current liabilities.

     9.   Remedies for an Event of Default. Without limiting any other rights or
          remedies of Lender contained herein or under the Participation
          Agreement, Lender shall have the right to exercise any and all of the
          following remedies upon an Event of Default:

          (a)  Lender may exercise any of its rights and remedies with respect
               to the security interests, leasehold mortgage, mortgage,
               rights-of-way and easements granted to Lender hereunder pursuant
               to Section 7; and

          (b)  Lender shall have the right to appoint a majority of the
               Executive Committee under the Participation Agreement, and in
               such event, shall be entitled to such other rights as provided by
               Section 3.02(b) of the Participation Agreement.

          The limitation of Lender's rights and remedies contained herein shall
          in no event limit Lender's remedies available at law or equity to
          enforce such rights and remedies.

                                       14

<PAGE>

     10.  Assignment. Subject to the restrictions on transfer and assignment
          described in Section 18 below, the rights and obligations of the
          Borrower and the Lender of this Note shall be binding upon and benefit
          the permitted successors, assigns, heirs, administrators and
          transferees of the parties.

     11.  Waiver and Amendment. Any provision of this Note may be amended,
          waived or modified only upon the written agreement of the Borrower and
          Lender.

     12.  Notices. Any notice relating to this Note shall be deemed sufficiently
          given and served for all purposes when receipt has been evidenced (i)
          if by facsimile notification, by the sending facsimile confirming
          receipt, or (ii) if by courier, certified or registered mail, by
          signature of recipient confirming receipt. Notice shall be given to
          the address of the party set forth in the Participation Agreement.

     13.  No Stockholder Rights. Nothing contained in this Note shall be
          construed as conferring upon the Lender or any other person the right
          to vote or to consent or to receive notice as a stockholder in respect
          of meetings of stockholders for the election of directors of the
          Borrower or any other matters or any rights whatsoever as a
          stockholder of the Borrower and no dividends shall be payable or
          accrued in respect of the Common Stock obtainable hereunder until, and
          only to the extent that, this Note shall have been paid in the form of
          Common Stock.

     14.  Course of Dealing. No course of dealing between the Borrower and the
          Lender or any delay on the part of the Lender in exercising any rights
          hereunder shall operate as a waiver of any rights of the Lender.

     15.  Waiver of Notice. Except as otherwise expressly specified in this
          Note, the Borrower and each surety, guarantor, endorser, or other
          party liable for payment on this Note hereby waive diligence,
          presentment, demand, protest, and notice of any kind whatsoever, and
          agree that their liability on this Note shall not be affected by any
          renewal or extension in the time of payment hereof, or any
          indulgences, or by any taking, release, or change in any security for
          payment of this Note.

     16.  Costs and Fees. If this Note is placed in the hands of an attorney for
          collection after occurrence of an Event of Default, or if it is
          collected through legal or bankruptcy proceedings, the Borrower agrees
          to pay all costs of collection, including but not limited to, court
          costs and reasonable attorneys fees.

     17.  Interest Limitation. All agreements between or among the Borrower and
          the Lender, whether now existing or hereafter arising and whether
          written or oral, are hereby limited so that in no contingency, whether
          by reason of demand or acceleration of the maturity hereof or
          otherwise, shall the interest contracted for, charged, received, paid
          or agreed to be paid to the Lender under this Note exceed the maximum
          amount permissible under applicable law. If, from any circumstance
          whatsoever, interest would otherwise be payable to the Lender in

                                       15

<PAGE>

          excess of the maximum lawful amount, the interest payable to the
          Lender shall be reduced to the maximum amount permitted under
          applicable law; and if from any circumstance the Lender shall ever
          receive anything of value deemed to be interest by applicable law in
          excess of the maximum lawful amount, an amount equal to any excessive
          interest shall be applied to the reduction of the principal hereof and
          not to the payment of interest, or if such excessive interest exceeds
          the unpaid balance of principal hereof, such excess shall be refunded
          to the Borrower. All interest paid or agreed to be paid to the Lender
          shall, to the extent permitted by applicable law, be amortized,
          prorated, allocated, and/or spread throughout the full period until
          payment in full of the principal (including the period of any renewal
          or extension hereof) so that the interest hereon for such full period
          shall not exceed the maximum amount permitted by applicable law. This
          paragraph shall control all agreements between or among the Lender and
          the Borrower.

     18.  Transfer. This Note is transferable only on the books of the Borrower
          by the Lender or the Lender's duly authorized attorney-in-fact. Unless
          notified by Lender, the Borrower shall be entitled to treat the
          registered Lender of this Note as the true and lawful owner hereof for
          all purposes, including payment. Lender may transfer or assign its
          rights and obligations to any party and shall provide reasonably
          prompt notice to Borrower. Borrower shall not transfer or assign its
          rights or obligations hereunder.

     19.  Governing Law. This Note shall be governed by and construed in
          accordance with the laws of the State of Oklahoma, excluding that body
          of law relating to conflict of laws.

     20.  Heading; References. All headings used herein are used for convenience
          only and shall not be used to construe or interpret this Note. Except
          where otherwise indicated, all references herein to Sections refer to
          Sections hereof.

     IN WITNESS WHEREOF, the Borrower has caused this Note to be issued this 1st
day of February, 2003.

SYNTROLEUM CORPORATION                 MARATHON OIL COMPANY

By:_____________________________       By: _____________________________________
   John B. Holmes, Jr., President          John T. Mills, Senior Vice President

                                       16

<PAGE>

                             SYNTROLEUM CORPORATION
                            UNSECURED PROMISSORY NOTE
                       ADVANCES AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
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       Date            Amount of      Type of Advances     Amount of                    Notation Made By
                        Advances                        Principal Repaid
<S>                    <C>            <C>               <C>                             <C>
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</TABLE>

                                       17

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