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Exhibit 10.4

EXECUTIVE AGREEMENT

This  Executive  Agreement  ("Agreement")  is  made  and  entered  into  on  this  1st  day  of  July,  2013  by  and

between  Allied  Resources,  Inc.,  of  1403  East  900  South,  Salt  Lake  City,  Utah  84105  (the  "Company"),

and Ruairidh Campbell (hereinafter, the "Executive").

W I T N E S S E T H:

WHEREAS,  the  Executive  serves  as  Chief  Executive  Officer,  Chief  Financial  Officer  and  Principal

Accounting Officer of the Company.

WHEREAS,  the  Executive  possesses  intimate  knowledge  of  the  business  and  affairs  of  the  Company,  its

policies, methods and personnel;

WHEREAS,  the  Board  of  Directors  of  the  Company  recognizes  that  the  Executive  will  contribute  to  the

growth  and  success  of  the  Company,  and  desires  to  assure  the  Company  of  the  Executive's  continued

engagement and to compensate him therefore;

WHEREAS,  the  Board  has  determined  that  this  Agreement  will  reinforce  and  encourage  the  Executive's

continued attention and dedication to the Company;

WHEREAS,  the  Executive  is  willing  to  make  his  services  available  to  the  Company  on  the  terms  and

conditions hereinafter set forth.

NOW,  THEREFORE,  in  consideration  of  the  premises  and  mutual  covenants  set  forth  herein,  and  for

other  good  and  valuable  consideration,  the  receipt  and  sufficiency  of  which  are  mutually  acknowledged,

the Company and the Executive hereby agree as follows:

AGREEMENT

For  good  and  valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby  acknowledged,  the

parties hereto covenant and agree as follows:

1.

AGREEMENT  TERM.  The  term  of  this  Agreement  shall  be  five  (5)  years  beginning  on  July  1,

2013,  and  ending  on  June  30,  2018  (the  “Term”),  unless  terminated  sooner  pursuant  to  the  termination

provisions herein contained.

2.

POSITION AND DUTIES OF ENGAGEMENT.

a.

Executive Duties and Title. The Company hereby engages Executive to continue to act as

the  Chief  Executive  Officer,  Chief  Financial  Officer  and  Principal  Accounting  Officer  of  the  Company,

pursuant  to  the  terms  hereof,  and  Executive  hereby  accepts  such  engagement.  Executive’s  duties  and

responsibilities  generally  shall  be  those  customarily  undertaken  by  executives  of  companies  engaged  in

enterprises   in   which   the   Company   is   engaged,   including   but   not   necessarily   limited   to,   general

management  and  operations,  responsibility  for  finance,  administration,  and  human  resources.  The  Board

may add,  delete  or  otherwise  alter  Executive’s  duties  and  responsibilities,  provided  the  Board  shall  make

all  assignments  of  duties  and  responsibilities  in  good  faith  and  shall  not  materially  alter  the  general

character  of  the  work  to  be  performed  by  Executive,  who  shall  perform  such  duties  and  discharge  such

responsibilities  as  directed  by  the  Board  in  a  good  and  businesslike  manner.  Executive’s  duties  shall  be

governed by such policies and  procedures adopted by the Company from time to time that provide for the

orderly administration of the workplace.

1

Exhibit 10.4

b.

Performance.  During  the  Term,  Executive  shall  (i)  devote  sufficient  time  to  the  business

of  the  Company;  (ii)  faithfully  serve  the  Company;  (iii)  in  all  respects  conform  to  and  comply  with  the

lawful  and  reasonable  directions  and instructions  given by the  Board  in  accordance  with  the terms  of  this

Agreement;  and  (iv)  use  reasonable  business  efforts  to  promote  and  serve  the  interests  of  the  Company.

Notwithstanding  the  foregoing,  provided  the  following  does  not  interfere  with  Executive’s  ability  to

perform  his  duties  under  this  Agreement,  Executive  may  (i)  participate  in  outside  business  activities  for

remuneration;  (ii)  participate in the activities of professional  trade organizations related to the business of

Company or its affiliates; (iii)  engage in personal  investing activities;  and (iv)  devote reasonable amounts

of time to civic, social, community, charitable or religious pursuits.

3.

COMPENSATION AND BENEFITS.

a.

Base  Executive  Fee.  The  Company  shall  pay  Executive  an  annual  base  fee  of  One

Hundred  and  Twenty Thousand  and  No/100  Dollars  ($120,000.00),  which  shall  be  payable  monthly as  it

accrues,  or  at  such  other  intervals  as  Company  and  Executive  may  hereafter  from  time  to  time  agree  in

writing.  Further,  the  Company  agrees  to  review  Executive’s  base  fee  and  increase  the  amount  payable

commensurate with an increase in net pre-tax profits over the Term of the Agreement.

b.

Annual  Bonus.  On  each  anniversary  of  the  beginning  of  the  Term,  the  Company,  at  its

sole discretion, shall pay Executive an annual bonus in an amount to be determined by the Board.

c.

Stock  Options.  Executive  shall  be  granted  options  to  purchase  Five  Hundred  Thousand

(500,000)  shares of the Common Stock of the Company,  which shall  vest  as indicated on the schedule  set

forth in Exhibit A attached hereto.

All stock options described herein shall be granted in accordance with the terms and conditions of the

Company’s 2013 Stock Option Plan. Notwithstanding anything to the contrary herein, or in any other

document or agreement between the Company and Executive, each such stock option granted to

Executive shall have an exercise price that is not less than the fair market value of the Company’s

Common Stock on the date of grant.

All  stock  options  described  herein  shall  be  granted  in  accordance  with  the  terms  and  conditions  of  the

Company’s  2013  Stock  Option  Plan.   Notwithstanding  anything  to  the  contrary  herein  or  in  any  other

document  or  agreement  between  the  Company  and  Executive,  each  stock  option  granted  to  Executive

shall  have  an  exercise  price  that  is  not  less  than  the  fair  market  value  of  the  Company’s  Common  Stock

on the date of the grant.

d.

Expenses.    The    Company    shall    reimburse    Executive    for    all    reasonable    travel,

entertainment  and  out-of-pocket  expenses  incurred  by  Executive  in  the  course  and  scope  of  authorized

Company business regardless of when incurred.

2

Exhibit 10.4

4.

TERMINATION OF AGREEMENT.

a.

By Company Without Cause. During the Term:

(i)

The Company may terminate Executive’s engagement at any time without cause

upon ninety (90) days written notice.

(ii)

(iii)

(iv)

(i)

The Company may terminate the Executive’s engagement at any time

without cause upon ninety (90) days written notice.

(ii)

In  the  event  the  Company  terminates  Executive’s   engagement  during  the  Term

without  cause  pursuant  to  this  article  4.a.(i),  any  stock  options  not  vested  in  accordance  with

Exhibit  A  will  automatically  vest  and  Executive  shall  have  twenty  four  (24)  months  in  which  to

exercise  vested  stock  options.  Any  remaining  stock  options  that  have  not  been  exercised  at  the

end of said twenty four (24) months shall expire.

(iii)

In  the  event  the  Company  terminates  Executive’s  engagement  during  the  Term

without  cause  pursuant  to  article  4.a.(i),  the  Company  shall  pay  Executive  an  amount  equal  to

twenty four (24) months of Executive’s then base fee plus any unpaid reimbursable expenses, and

any earned but unpaid annual bonus.

(ii)

In  the  event  the  Company  terminates  Executive’s  engagement

during  the  Term  without  cause  pursuant  to  article  4.a.(i),  any  stock  options  not

vested  in  accordance  with  Exhibit  A  will  automatically  vest  and  Executive  shall

have  twenty  four  (24)  months  in  which  to  exercise  vested  stock  options.   Any

remaining  stock  options  that  have  not  been  exercised  at  the  end  of  said  twenty

four (24) months shall expire.

(iii)

In  the  event  the  Company  terminates  Executive’s  engagement  during  the  Term

without  cause  pursuant  to  article  4.a.(i),  the  Company  shall  pay  Executive  an  amount  equal  to

twenty four (24) months of Executive’s then base fee plus any unpaid reimbursable expenses, and

any earned but unpaid annual bonus.

b.

By the Company With Cause.

(i)

The Company may terminate Executive’s engagement at any time for cause.

(ii)

(iii)

(i)

The  Company  may  terminate  Executive’s  engagement  at  any  time  for

cause. (i)

The  Company  may  terminate  Executive’s  engagement  at  any

time for cause. (i)

The  Company may terminate  Executive’s engagement  at

any time for cause. (i)     The  Company may terminate  Executive’s engagement  at

any time for cause.

3

Exhibit 10.4

(ii)

The  term  “cause”  shall  mean  (1)  Executive’s  material  failure,  neglect  or  refusal

to  perform  any duties,  responsibilities  or  obligations  specifically described  in  or  assigned  to  him

under article 2 of this Agreement; (2) any willful or intentional act of Executive that has the effect

of substantially injuring the reputation or business of the  Company or  any of its affiliates  and  any

of  their  respective  affiliates;  (3)  use  of  illegal  drugs  by  Executive  or  repeated  drunkenness;  (4)  a

plea  of  nolo  contendre,  admission  of  guilt  or  conviction  of  Executive  by  a  court  of  competent

jurisdiction  for  the  commission  of  (A)  a  felony  or  (B)  a  misdemeanor  involving  moral  turpitude;

(5)  an  act  of fraud  or  embezzlement  or  material  dishonesty by Executive  against  the Company or

any  other  person  or  entity;  (6)  other  violations  of  policies  adopted  by  the  Company  that  provide

for  the  orderly administration  of  the  workplace;  or  (7)  during  the Term,  any material  violation  of

a covenant described in article 5 of this Agreement.

(iii)

Company  shall  give  Executive  written  notice  of  the  Company’s  intention  to

terminate Executive’s engagement for cause under article 4.b.(i) (the “Cause Notice”). The Cause

Notice  shall  state  the  particular  action(s)  or  inaction(s) giving rise  to  cause  for  termination.  If  the

cause  for  termination  is  capable  of  cure,  Executive  shall  have  a  reasonable  time  not  to  exceed

thirty  (30)  days  after  a  Cause  Notice  is  communicated  pursuant  to  article  7.a.  to  perform  or

correct  performance  of the particular duties,  responsibilities  or  obligations described in the Cause

Notice.  If  Executive  performs  and  continues  to  perform  as  required,  the  Company  shall  not

terminate Executive’s engagement for cause based upon the reasons stated in the Cause Notice.

(iv)

Upon  termination  by  the  Company  for  cause,  Executive  shall  be  entitled  only  to

accrued  and  unpaid  compensation  and  benefits  unreimbursed  expenses  and  earned  but  unpaid

bonuses  as  defined  in  article  3  of  this  Agreement  through  the  date  of  termination,  and  any  rights

and  benefits  to  which  Executive  is  entitled  at  law.   Any  stock  options  that  have  not  vested  at  the

time  of  termination  of  Executive  for  cause  shall  expire,  and  Executive  shall  have  twelve  (12)

months  from  the  date  of  termination  to  exercise  any  vested  stock  options,  after  which  time,  such

vested options shall expire.

(ii)

The  term  “cause”  shall  mean  (1)  Executive’s  material  failure,  neglect  or  refusal

to  perform  any duties,  responsibilities  or  obligations  specifically described  in  or  assigned  to  him

under article 2 of this Agreement; (2) any willful or intentional act of Executive that has the effect

of substantially injuring the reputation or business of the  Company or  any of its affiliates  and  any

of  their  respective  affiliates;  (3)  use  of  illegal  drugs  by  Executive  or  repeated  drunkenness;  (4)  a

plea  of  nolo  contendre,  admission  of  guilt  or  conviction  of  Executive  by  a  court  of  competent

jurisdiction  for  the  commission  of  (A)  a  felony  or  (B)  a  misdemeanor  involving  moral  turpitude;

(5)  an  act  of fraud  or  embezzlement  or  material  dishonesty by Executive  against  the Company or

any  other  person  or  entity;  (6)  other  violations  of  policies  adopted  by  the  Company  that  provide

for  the  orderly administration  of  the  workplace;  or  (7)  during  the Term,  any material  violation  of

a covenant described in article 5 of this Agreement.

(iii)

Company  shall  give  Executive  written  notice  of  the  Company’s  intention  to

terminate Executive’s engagement for cause under article 4.b.(i) (the “Cause Notice”). The Cause

Notice  shall  state  the  particular  action(s)  or  inaction(s) giving rise  to  cause  for  termination.  If  the

cause  for  termination  is  capable  of  cure,  Executive  shall  have  a  reasonable  time  not  to  exceed

thirty  (30)  days  after  a  Cause  Notice  is  communicated  pursuant  to  article  7.a.  to  perform  or

correct  performance  of the particular duties,  responsibilities  or  obligations described in the Cause

4

Exhibit 10.4

Notice.  If  Executive  performs  and  continues  to  perform  as  required,  the  Company  shall  not

terminate Executive’s engagement for cause based upon the reasons stated in the Cause Notice.

(iv)

Upon  termination  by  the  Company  for  cause,  Executive  shall  be  entitled  only  to

accrued  and  unpaid  compensation  and  benefits  unreimbursed  expenses  and  earned  but  unpaid

bonuses  as  defined  in  article  3  of  this  Agreement  through  the  date  of  termination,  and  any  rights

and  benefits  to  which  Executive  is  entitled  at  law.   Any  stock  options  that  have  not  vested  at  the

time  of  termination  of  Executive  for  cause  shall  expire,  and  Executive  shall  have  twelve  (12)

months  from  the  date  of  termination  to  exercise  any  vested  stock  options,  after  which  time,  such

vested options shall expire.

c.

Termination of Engagement by Executive.

(i)

At any time during the Term, Executive may terminate his engagement, with or

without good reason, by giving sixty (60) days prior written notice of termination to the Company

pursuant to article 7.a.

(ii)

The term “good reason” shall mean the occurrence of any of the following

events: (1) Company shall fail to pay Executive any compensation or benefits due under this

Agreement and such failure shall not be remedied within ten (10) days after receipt of written

notice from Executive specifying such failure; or (2) Company shall materially breach any other

provision of this Agreement and such breach shall not be remedied within a reasonable time after

receipt by Company of written notice from Executive specifying such breach.

(iii)

In the event Executive terminates his engagement with good reason during the

Term, any stock options not vested in accordance with Exhibit A will automatically vest and

Executive shall have twenty four (24) months in which to exercise those and any remaining

unexercised stock options.  Any remaining stock options that have not been exercised at the end

of twenty (24) months shall expire.

(iv)

Executive shall give written notice to the Company of his intention to terminate

his engagement for good reason under article 4.c. (i) (the “Good Reason Notice”). The Good

Reason Notice shall state the particular action(s) or inaction(s) giving rise to good reason for

termination. Company shall have a reasonable time, not to exceed thirty (30) days after a Good

Reason Notice is given, to perform or correct performance of the particular duties action(s) or

inaction(s) described in the Good Reason Notice. If Company reasonably corrects performance of

the action(s) or inaction(s) described in the Good Reason Notice, then Company shall not

terminate Executive’s engagement for good reason based upon the reasons stated in the Good

Reason Notice.

(v)

In the event Executive voluntarily terminates his engagement without good

reason at any time during the Term, he shall be entitled to the compensation, benefits,

unreimbursed expenses and earned but unpaid bonus as defined in article 3 of this Agreement

through the date of termination, and any rights and benefits to which Executive is entitled at law.

Any stock options that have not vested at the time Executive voluntarily terminates without good

reason shall expire, and Executive shall have twenty four (24) months from the date of

termination to exercise any vested options, after which time, such vested options shall expire.

5

Exhibit 10.4

(i)

At  any  time  during  the  Term,  Executive  may  terminate  his  engagement,  with  or

without good reason, by giving sixty (60) days prior written notice of termination to the Company

pursuant to article 7.a.

(ii)

The  term  “good  reason”  shall  mean  the  occurrence  of  any  of  the  following

events:  (1)  Company  shall  fail  to  pay  Executive  any  compensation  or  benefits  due  under  this

Agreement  and  such  failure  shall  not  be  remedied  within  ten  (10)  days  after  receipt  of  written

notice  from  Executive  specifying  such  failure;  or  (2)  Company  shall  materially  breach  any other

provision of this Agreement  and such breach shall  not be remedied within a  reasonable time after

receipt by Company of written notice from Executive specifying such breach.

(iii)

In  the  event  Executive  terminates  his  engagement  with  good  reason  during  the

Term,  any  stock  options  not  vested  in  accordance  with  Exhibit  A  will  automatically  vest  and

Executive  shall  have  twenty  four  (24)  months  in  which  to  exercise  those  and  any  remaining

unexercised  stock  options.   Any  remaining  stock  options  that  have  not  been  exercised  at  the  end

of twenty (24) months shall expire.

(iv)

Executive  shall  give  written  notice  to  the  Company  of  his  intention  to  terminate

his  engagement  for  good  reason  under  article  4.c.  (i)  (the  “Good  Reason  Notice”).  The  Good

Reason  Notice  shall  state  the  particular  action(s)  or  inaction(s)  giving  rise  to  good  reason  for

termination.  Company  shall  have  a  reasonable  time,  not  to  exceed  thirty  (30)  days  after  a  Good

Reason  Notice  is  given,  to  perform  or  correct  performance  of  the  particular  duties  action(s)  or

inaction(s) described in the Good Reason Notice. If Company reasonably corrects performance of

the  action(s)   or  inaction(s)   described  in  the  Good  Reason  Notice,  then  Company  shall  not

terminate  Executive’s  engagement  for  good  reason  based  upon  the  reasons  stated  in  the  Good

Reason Notice.

(v)

In   the   event   Executive   voluntarily  terminates   his   engagement   without   good

reason   at   any   time   during   the   Term,   he   shall   be   entitled   to   the   compensation,   benefits,

unreimbursed  expenses  and  earned  but  unpaid  bonus  as  defined  in  article  3  of  this  Agreement

through the  date  of  termination,  and any rights  and benefits  to  which Executive  is  entitled  at  law.

Any stock options that  have  not  vested at  the time Executive  voluntarily terminates  without  good

reason   shall   expire,   and   Executive   shall   have   twenty   four   (24)   months   from   the   date   of

termination to exercise any vested options, after which time, such vested options shall expire.

d.

Termination  of Engagement  by Reason  of  Death.  If  Executive  shall  die  during  the  Term,

this   Agreement   shall   terminate   automatically   as   of   the   date   of   death,   and   Company   shall   pay   to

Executive’s estate (i) the compensation and  benefits under article 3,  which would otherwise be payable to

Executive  up  to  the  end  of  the  month  in  which  death  occurs,  and,  to  the  extent  applicable,  (ii)  any

insurance  or  insurance  proceeds,  vested  death  benefits,  compensation  for  accrued  vacation  or  leave  time,

(iii)  any unpaid  bonus  for  the  prior  fiscal  period,  and  (iv)  an  amount  equal  to  one  (1)  year  of  Executive’s

then  base  fee.  In  addition,  any stock options  held  by Executive  at  the  time  of his  death  shall  be  treated in

accordance with the Company’s Stock Option Plan.

6

Exhibit 10.4

5.

CONFIDENTIALITY.

a.

Nondisclosure  of  Confidential  Information.  Executive  will  have  access  to  Confidential

Information  (defined  below)  during  his  engagement  with  Company.  Except  pursuant  to  his  engagement

hereunder,  or  as  required  to  be  disclosed  by  any  law,  regulation  or  order  of  any  court  or  regulatory

commission,  department  or  agency,  Executive  shall  not  use  or  disclose  to  any person  or  entity during  the

Term or at any time thereafter, any Confidential Information of Company.

(i)

“Confidential  Information”  shall  include  all  information  regarding  Company’s

(or  any of  its  affiliate’s)  customers,  vendors,  suppliers,  trade  secrets,  training  programs,  manuals

or  materials,  technical  information,  seismic  data,  contracts,  systems,  procedures,  mailing  lists,

know-how,   trade   names,   improvements,   price   lists,   financial   or   other   data   (including   the

revenues,  costs  or  profits  associated  with  Company’s  products  or  services),  business  plans,  code

books,  invoices  and  other  financial  statements,  computer  programs,  software  systems,  databases,

discs   and   printouts,   plans   (business,   technical   or   otherwise),   customer   and   industry   lists,

correspondence,   internal   reports,   personnel   files,   sales   and   advertising   material,   telephone

numbers,  names  and  addresses  or  any  other  compilation  of  information,  written  or  unwritten,

which is or was used in the business of Company not  in the  public  domain or  generally known in

the  industry,  in  any  form,  and  including  without  limitation  all  such  information  acquired  by

Executive before or during the Term.

(ii)  Executive  agrees  and  acknowledges  that  all  Confidential  Information,  in  any  form,

and copies and extracts thereof,  are  and shall  remain  the sole and exclusive property of Company

and   upon   termination   of   his   engagement   under   this   Agreement,   Executive   shall   within   a

reasonable  period  of time return  to Company the  originals and all  copies  of  any such  information

provided  to  or  acquired  by  Executive  in  connection  with  the  performance  of  his  duties  for

Company,    and    shall    return    to    Company    all    such    files,    correspondence    and/or    other

communications  received,  maintained  and/or  originated  by  Executive  during  the  course  of  his

engagement.

(i)

“Confidential  Information”  shall  include  all  information  regarding  Company’s

(or  any of  its  affiliate’s)  customers,  vendors,  suppliers,  trade  secrets,  training  programs,  manuals

or  materials,  technical  information,  seismic  data,  contracts,  systems,  procedures,  mailing  lists,

know-how,   trade   names,   improvements,   price   lists,   financial   or   other   data   (including   the

revenues,  costs  or  profits  associated  with  Company’s  products  or  services),  business  plans,  code

books,  invoices  and  other  financial  statements,  computer  programs,  software  systems,  databases,

discs   and   printouts,   plans   (business,   technical   or   otherwise),   customer   and   industry   lists,

correspondence,   internal   reports,   personnel   files,   sales   and   advertising   material,   telephone

numbers,  names  and  addresses  or  any  other  compilation  of  information,  written  or  unwritten,

which is or was used in the business of Company not  in the  public  domain or generally known in

the  industry,  in  any  form,  and  including  without  limitation  all  such  information  acquired  by

Executive before or during the Term.

(ii)

Executive  agrees  and  acknowledges  that  all  Confidential  Information,  in  any

form,  and  copies  and  extracts  thereof,  are  and  shall  remain  the  sole  and  exclusive  property  of

Company and  upon  termination  of  his  engagement  under  this  Agreement,  Executive  shall  within

a   reasonable   period   of   time   return   to   Company   the   originals   and   all   copies   of   any   such

information  provided  to  or  acquired  by  Executive  in  connection  with  the  performance  of  his

7

Exhibit 10.4

duties  for  Company,  and  shall  return  to  Company  all  such  files,  correspondence  and/or  other

communications  received,  maintained  and/or  originated  by  Executive  during  the  course  of  his

engagement.

6.

DISPUTE RESOLUTION.

a.

Resolution  Procedure.  The  parties  agree  to  resolve  any  dispute  or  controversy  between

Company and  Executive  arising  out  of  or  in  connection  with  the  terms  and  provisions  of  this  Agreement

in accordance with the following:

(i)

If  any  dispute  or  controversy  arises  out  of  or  relates  to  this  Agreement  or  any

alleged  breach  hereof,  the  party  desiring  to  resolve  such  dispute  or  controversy  shall  deliver  a

written  notice  of  the  dispute,  including the  specific  claim in  the  dispute (“Dispute  Notice”)  to the

other  party  pursuant  to  article  7.a.  If  any  party  delivers  a  Dispute  Notice  pursuant  to  this  article

6.a.(i), the parties involved in the  dispute or controversy shall  meet at  least twice within the thirty

(30)  day  period  commencing  with  the  date  of  the  Dispute  Notice  and  in  good  faith  shall  attempt

to resolve such dispute or controversy through negotiation.

(ii)

If any dispute or controversy is not resolved or settled by the parties as a result of

negotiation  pursuant  to  article  6.a.(i)  above,  the  parties  shall  in  good  faith  submit  the  dispute  or

controversy to  non-binding  mediation  in  Salt  Lake  County before  a  mediator  agreed  upon  by the

parties. In the event the parties are unable to agree upon a mediator, the parties shall request that a

mediator  be  appointed  by  the  Salt  Lake  County  Court  or  the  Federal  District  Court.  The  parties

shall bear the costs of such mediation equally.

(iii)

Any  dispute  or  controversy  between  Company  and  Executive  arising  out  of  or

relating  to  this  Agreement  or  any  breach  of  this  Agreement  that  is  not  resolved  by  mediation

pursuant  to  article  6.a.(ii)  above,  the  dispute  or  controversy  shall  be  resolved  through  arbitration

held in  Salt  Lake  County,  Utah,  which arbitration shall be conducted in accordance with the rules

and  procedures  of  the  American  Arbitration  Association  in  accordance  with  its  Rules  for  the

Resolution  of  Employment  Disputes,  then  in  effect.  The  arbitration  of  such  issues,  including  the

determination of any amount of actual damages suffered by any party hereto by reason of the acts

or  omissions  of  any  party,  shall  be  final  and  binding  upon  all  parties.  Except  as  otherwise  set

forth   in   this   Agreement,   the   cost   of   arbitration   hereunder,   including   the   cost   of   record   or

transcripts  thereof,  if  any,  administrative  fees,  and  all  other  fees  involved,  including  reasonable

attorneys’  fees  incurred  by the  party determined  by the  arbitrator  to  be  the  prevailing  party,  shall

be  paid  by  the  party  determined  by  the  arbitrator  not  to  be  the  prevailing  party,  or  otherwise

allocated  in  an  equitable  manner  as  determined  by  the  arbitrator.  The  parties  shall  instruct  the

arbitrator  to  render  his  or  her  decision  no  later  than  ninety  (90)  days  after  submission  of  the

dispute to the arbitrator.

(i)

If  any  dispute  or  controversy  arises  out  of  or  relates  to  this  Agreement  or  any

alleged  breach  hereof,  the  party  desiring  to  resolve  such  dispute  or  controversy  shall  deliver  a

written  notice  of  the  dispute,  including the  specific  claim in  the  dispute (“Dispute  Notice”)  to the

other  party  pursuant  to  article  7.a.  If  any  party  delivers  a  Dispute  Notice  pursuant  to  this  article

6.a.(i), the parties involved in the  dispute or controversy shall  meet at  least twice within the thirty

(30)  day  period  commencing  with  the  date  of  the  Dispute  Notice  and  in  good  faith  shall  attempt

to resolve such dispute or controversy through negotiation.

(iii)

Any  dispute  or  controversy  between  Company  and  Executive  arising  out  of  or

relating  to  this  Agreement  or  any  breach  of  this  Agreement  that  is  not  resolved  by  mediation

pursuant  to  article  6.a.(ii)  above,  the  dispute  or  controversy  shall  be  resolved  through  arbitration

8

Exhibit 10.4

held in  Salt  Lake  County,  Utah,  which arbitration shall be conducted in accordance with the rules

and  procedures  of  the  American  Arbitration  Association  in  accordance  with  its  Rules  for  the

Resolution  of  Employment  Disputes,  then  in  effect.  The  arbitration  of  such  issues,  including  the

determination of any amount of actual damages suffered by any party hereto by reason of the acts

or  omissions  of  any  party,  shall  be  final  and  binding  upon  all  parties.  Except  as  otherwise  set

forth   in   this   Agreement,   the   cost   of   arbitration   hereunder,   including   the   cost   of   record   or

transcripts  thereof,  if  any,  administrative  fees,  and  all  other  fees  involved,  including  reasonable

attorneys’  fees  incurred  by the  party determined  by the  arbitrator  to  be  the  prevailing  party,  shall

be  paid  by  the  party  determined  by  the  arbitrator  not  to  be  the  prevailing  party,  or  otherwise

allocated  in  an  equitable  manner  as  determined  by  the  arbitrator.  The  parties  shall  instruct  the

arbitrator  to  render  his  or  her  decision  no  later  than  ninety  (90)  days  after  submission  of  the

dispute to the arbitrator.

b.

Confidentiality.   Each   party   agrees   to   keep   all   disputes,   mediation   and   arbitration

proceedings  strictly confidential,  except  for  disclosures  of  information  in  the  ordinary course  of  business

of the parties or by applicable law or regulation.

7.

GENERAL PROVISIONS.

a.

Notices.  Any  notices  to  be  given  hereunder  by  either  party  to  the  other  may  be  effected

by  personal  delivery in  writing  or  by registered  or  certified  mail,  with  postage  prepaid  and  return  receipt

requested, addressed as follows:

If to Executive, to:

Ruairidh Campbell

3002 Kinney Avenue

Austin, TX 78704

Email: ruairidhcampbell@msn.com

If to Company, to:

Paul Crow

1403 East 900 South

Salt Lake City

Utah 84105

Email: paulcrow@comcast.com

Any party may change  its  address  by written  notice  in  accordance  with  this  article  7.a.  Notices  delivered

personally   shall   be   deemed   communicated   as   of   actual   receipt;   mailed   notices   shall   be   deemed

communicated  as  of  five  (5)  days  after  mailing  by  delivering  the  same  into  the  care  and  custody  of  the

United States Postal Service  or  other national  postal  service,  by registered or  certified mail,  return receipt

requested, with postage prepaid.

b.

Entire  Agreement.  This  Agreement  and  Exhibit  A  hereto  supersedes  any  and  all  other

agreements,  either  oral  or  in  writing,  between  the  parties  hereto  with  respect  to  the  engagement  of

Executive by Company and contains all of the covenants and agreements between the parties with respect

to   the   subject   matter   hereof.   Each   party   to   this   Agreement   acknowledges   that   no   representations,

inducement,  promises,  or  agreements,  orally  or  otherwise,  have  been  made  which  are  not  embodied

herein,  and  that  no  other  agreement,  statement  or  promise  not  contained  in  this  Agreement  shall  be  valid

or  binding.  Any  modification  of  this  Agreement  will  be  effective  only  if  it  is  in  writing  signed  by  the

party to be charged.

9

Exhibit 10.4

c.

Waiver and Amendments. 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,  whether  or  not

similar,  unless  such  waiver  specifically  states  that  it  is  to  be  construed  as  a  continuing  waiver.  This

Agreement  may  be  amended,  modified  or  supplemented  only  by  a  written  instrument  executed  by  the

parties hereto.

d.

Law  Governing  Venue,  Successors  and  Assigns.  This  Agreement  shall  be  governed  by

and  construed  in  accordance  with  the  laws  of  the  State of  Utah,  excluding its  conflicts  of laws  principles.

Each  party  consents  to  jurisdiction  and  venue  for  any  suit  relating  to  this  Agreement  in  any  court  of

competent jurisdiction in Salt Lake County, Utah, or the United States District Court for the District of Utah.

This Agreement shall be binding upon and inure to the benefit of the legal representatives, successors and

assigns  of  the  parties  hereto  (provided,  however,  that  Executive  shall  not  have  the  right  to  assign  this

Agreement  in  view  of  its  personal  nature)  and  Company  shall  not  assign  or  transfer  this  Agreement

without the consent of Executive.

e.

Attorney’s Fees and Costs. Except as otherwise provided in this Agreement, if any action

is  necessary to  enforce  or  interpret  the  terms  of  this  Agreement  (including  without  limitation  any actions

for  injunctive  relief),  the  prevailing  party  shall  be  entitled  to  reasonable  attorney’s  fees,  costs  and

necessary disbursements in addition to any other relief to which the prevailing party may be entitled.

f.

Severability.  Should  any  term,  covenant,  condition  or  provision  of  this  Agreement  be

held to be invalid or unenforceable, the balance of this Agreement shall remain in full force and effect and

shall stand as if the unenforceable term, covenant, condition or provision did not exist.

g.

Article  Headings.  The  article  and  section  headings  of  this  Agreement  are  for  reference

only and shall not be considered in the interpretation of this Agreement.

h.

Counterparts. It is also expressly understood that this Agreement may be executed and

effective with multiple original signature pages.

EXECUTED to be effective this 1st day of July, 2013.

COMPANY:

ALLIED RESOURCES, INC.

By: /s/ Ed Haidenthaller

Ed Haidenthaller, Director

On Behalf of the Board of Directors

EXECUTIVE:

/s/ Ruairidh Campbell

Ruairidh Campbell

10Unassociated Document

Exhibit 10.12

 

PARTICIPATION AGREEMENT

 

BOYD, CARTER, GREENUP AND LAWRENCE COUNTIES, KENTUCKY

 

This Participation Agreement (“Agreement”) is entered into as of February 25, 2014 (the “Effective Date”), by and among NYTIS EXPLORATION COMPANY LLC, a Delaware limited liability company (“Nytis”), CARBON NATURAL GAS COMPANY, a Delaware corporation (“Carbon”) (for purposes of Article X only), and LIBERTY ENERGY, LLC, a Massachusetts limited liability company (“Liberty”).

 

RECITALS

 

WHEREAS, Nytis, Carbon and Liberty are parties to that certain Participation Agreement dated September 17, 2012 (the “Prior Participation Agreement”), covering approximately 26,000 net mineral acres located in Boyd, Carter, Greenup and Lawrence Counties, Kentucky as generally depicted on Exhibit B-1 attached hereto (the “Original Contract Area”);

 

WHEREAS, the area outlined on Exhibit B-2 attached hereto is referred to herein as the “Program Area” (such area includes the Original Contract Area);

 

WHEREAS, pursuant to the Prior Participation Agreement, Liberty earned forty percent (40%) of Nytis’ undivided working interest in certain leases underlying the oil and gas interests in the Original Contract Area;

 

WHEREAS, as of the Effective Date, Nytis has leased or obtained leases of, oil and gas interests covering 12,497.38 net mineral acres in the Program Area outside of the Original Contract Area (the area within the Program Area that lies outside the Original Contract Area is hereinafter referred to as the “New Area”);

 

WHEREAS, Liberty desires to participate in the development of additional oil and gas interests located in the Program Area (whether within or outside of the Original Contract Area) by paying a portion of the costs incurred by Nytis (subject to the provisions of Section 3.2 below) associated with the drilling, completion and equipping of oil and gas wells in the Berea Sandstone Geologic Interval in exchange for forty percent (40%) of Nytis’ undivided working interest in the Leases (as such term is defined below) underlying such new oil and gas interests in the New Area; and

 

WHEREAS, Liberty, as consideration for the right to participate in the development in the New Area and other rights set forth herein, has agreed to carry a portion of Nytis’ costs in the Carry Wells (as such term is defined below) as set forth herein.

 

NOW, THEREFORE, for a good and valuable consideration, it is agreed between the parties as follows:

 

  

 

  

 

ARTICLE I

DEFINITIONS

 

1.1           The following definitions shall apply in this Agreement:

 

“Acreage Cap” means 20,000 net mineral acres, including Nytis’ net mineral acres from which Liberty is purchasing the Liberty Working Interest on the Effective Date.

 

“AFE” means an authorization for expenditure representing an estimate of work to be performed for a specific drilling, completion or other operation.

 

“Approved Spacing Unit” means the unit described in the as-built plat that is used for division order purposes and submitted to the Kentucky Division of Oil and Gas.

 

“Berea Sandstone Geologic Interval” means the geologic interval below the Sunbury Shale and above the Devonian Shale as located in Brice Shepherd #1 from 1007 feet to 1162 feet.

 

“Carry Costs” has the meaning provided in Section 3.1(c)(i).

 

“Carry Wells” has the meaning provided in Section 2.1(a).

 

“Drilling and Completion Activities” means all activities and operations carried out by or on behalf of the parties related to the Wells and under the terms and conditions of this Agreement, including, but not limited to, drilling, sidetracking, well control, acquisition, transportation and installation of tubular goods, materials and equipment; surveying, constructing roads and surface location.

 

“Drilling and Completion Costs” means all costs incurred in connection with Drilling and Completion Activities, all of which will be determined, and billed to the parties participating in such activities, pursuant to the Operating Agreement.

 

“Existing Wells” has the meaning provided in Section 3.7.

 

“Horizontal Well” means a well permitted and spudded with the intent to drill with at least 1500 feet of horizontal displacement from the surface location.  If the parties mutually agree to drill a Carry Well not intended to have significant horizontal displacement under this Agreement, that Carry Well shall be counted as 1/3 of a Horizontal Well for the purpose of this Agreement.  Notwithstanding the foregoing, the vertical Wells referenced in Section 2.5(a) shall not be counted toward the total number of Carry Wells hereunder.

 

“Leases” means those mineral leases more particularly described on Exhibit A attached hereto and incorporated herein (as such may be supplemented from time to time to reflect (i) additional leases underlying oil and gas interests within the Subsequent Acreage Acquisition Basket and (ii) additional leases underlying oil and gas interests acquired within the Program Area in which a Party elects to participate pursuant to Section 7.2 hereof).

 

  

2

  

 

“Liberty Working Interest” means forty percent (40%) of Nytis’ undivided working interest in the Leases.

 

“New Area” has the meaning provided in the Recitals.

 

“Operating Agreement” means the joint operating agreement in substantially the form of that attached hereto as Exhibit C, together with the COPAS Accounting Procedure annexed thereto, and together with all Exhibits thereto.

 

“Operator” means Nytis, its successors and assigns.

 

“Original Contract Area” has the meaning provided in the Recitals.

 

“Prior AMI Provisions” has the meaning provided in Article VII.

 

“Prior Participation Agreement” means that certain Participation Agreement dated September 17, 2012, by and among Nytis, Carbon and Liberty.

 

“Program Area” has the meaning provided in the Recitals.

 

“Proportionately Reduced” means the pro rata reduction of the amount to be paid by Liberty and/or Nytis, as the case may be, with respect to any Well and/or Lease in which Liberty and Nytis do not collectively own a 100% working interest, based on the actual working interest owned by Liberty and Nytis, collectively, in such Well and/or Lease.

 

“Subsequent Acreage Acquisition Basket” means the balance of the Acreage Cap regarding Leases acquired by Nytis in the New Area after the Effective Date hereof.

 

“Well” means each Carry Well, each vertical well proposed by Nytis in accordance with Section 2.5(a), and any subsequent well in which Liberty participates under the Operating Agreement.

 

1.2           The following Exhibits are attached to and made a part of this Agreement:

 

	
Exhibit “A”

	
Description of Leases

	
Exhibit “B-1”

	
Outline of Original Contract Area

	
Exhibit “B-2”

	
Outline of Program Area

	
Exhibit “C”

	
Operating Agreement

	
Exhibit “D”

	
Form of Well AFEs

	
Exhibit “E”

	
Form of Assignment

	
Exhibit “F”

	
Existing Wells

 

  

3

  

 

ARTICLE II

DRILLING COMMITMENT; SUBSEQUENT ACTIVITIES

 

2.1           Carry Wells.

 

(a)           Liberty hereby commits to drill, complete and equip one (1) Horizontal Well targeting the Berea Sandstone Geologic Interval for each 1,000 net mineral acres acquired by Nytis in the New Area (collectively, the “Carry Wells”) as proposed and operated by Nytis; provided, however, that in no event shall the number of Carry Wells drilled pursuant to this Agreement exceed twenty (20).

 

(b)           Liberty shall bear the costs for the Carry Wells in accordance with Section 3.1(c)(i).

 

2.2           Other Wells Within the Original Contract Area.  If, prior to completion of all Carry Wells, Nytis proposes to drill Wells in the Original Contract Area, such Wells shall be drilled in accordance with the terms of the Operating Agreement on a heads up basis: Nytis 60% and Liberty 40%, each Proportionately Reduced

 

2.3           Subsequent Activities.  Upon completion of the Carry Wells, the parties may proceed to drill additional Wells in the Program Area in accordance with the terms of the Operating Agreement on a heads up basis: Nytis 60% and Liberty 40%, each Proportionately Reduced.

 

2.4           Drilling and Completion.  All Wells shall be Drilled and Completed in accordance with the terms of the Operating Agreement.  Prior to spudding each Well subject to this Agreement, Nytis shall deliver an AFE, in the form as set forth on Exhibit D attached hereto (each a “Well AFE”), setting forth the estimate of Drilling and Completion Costs for such Well.  It is understood and agreed that the Well AFEs represent an estimate of the costs of drilling and completing the Wells, but final billing will be based on actual costs incurred.  Billings will be charged pursuant to the Operating Agreement unless otherwise set forth herein.  In connection with any Well AFE, Nytis agrees promptly to provide any additional information regarding the Well which is reasonably requested by Liberty.  The location of each Well shall be determined by the Operator in its sole discretion.  Unless (a) otherwise consented to in writing by Liberty, or (b) pursuant to Section 2.5(a), Nytis shall drill each Well as a Horizontal Well running through the Berea Sandstone Geologic Interval.  Nytis shall drill, complete, equip and produce, or plug and abandon each of the Wells, with due diligence and reasonable dispatch in accordance with applicable laws and the Operating Agreement.

 

2.5           Vertical Wells.

 

(a)           In addition to the Carry Wells, Nytis may at any time propose to drill up to six (6) vertical Wells in the Program Area in accordance with the terms of the Operating Agreement, and each of Liberty and Nytis shall, in accordance with the Operating Agreement, participate therein on a heads up basis: Nytis 60% and Liberty 40%, each Proportionately Reduced.  Such vertical Wells shall not count toward the number of Carry Wells that Liberty is obligated to participate in hereunder.

 

(b)           Notwithstanding Section 2.5(a), if (i) any such vertical Well is drilled in the New Area and (ii) in the exercise of Nytis’ sole discretion Nytis determines that such Well provides adequate evidence that warrants completion of such Well as a Horizontal Well, and (iii) all Carry Wells have not yet then been drilled, such Well will be a Carry Well with Liberty obligated to pay the Carry Costs of such Horizontal Well with the amount previously paid by Liberty credited toward such Carry Costs

 

  

4

  

 

ARTICLE III

PURCHASE OF WORKING INTEREST; ASSIGNMENT

 

3.1           Purchase of Working Interest.

 

(a)           Upfront Payment.

 

(i)           Upon execution of this Agreement, Liberty will pay to Nytis an amount equal to $350.00 per net mineral acre for forty percent (40%) of Nytis’ undivided working interest in the Leases, which amount is $1,749,633.20 (the “Initial Payment”).  The Initial Payment shall be made by wire transfer of immediately available funds to an account designated by Nytis no later than two Business Days prior to Closing.

 

(ii)          In exchange for the Initial Payment at the Closing, Nytis shall make at Closing the assignments to Liberty set forth in Section 3.4 and grant Liberty the right to participate for a forty percent (40%) working interest in the drilling, development and production of oil and gas from the Leases in accordance with the terms and conditions of this Agreement.

 

(b)           Additional Acreage; Subsequent Payment.

 

(i)           If, during the period commencing on the date of this Agreement and ending on the later of (A) December 31, 2014, or (B) the date which is nine (9) months after the date that the most recent Well has been spud in the Program Area, Nytis acquires additional oil and gas leasehold interests in the New Area (the “Additional Acreage”), then, subject to the Acreage Cap, Liberty will pay to Nytis $350.00 per net mineral acre to acquire the Liberty Working Interest in the Leases underlying the Additional Acreage (the “Subsequent Payment”).  Any Additional Acreage acquired over the Acreage Cap shall be acquired and offered to Liberty subject to the provisions of Article VII; provided, however, that if, prior to the drilling of all Carry Wells, Nytis proposes drilling a Well on Additional Acreage that is acquired over the Acreage Cap, such Well shall be drilled as a Carry Well and if Liberty does not elect to acquire its pro rata interest in the oil and gas interest underlying such Additional Acreage in accordance with the provisions of Article VII, upon completion of such Well and Liberty’s payment of the Carry Costs, Nytis shall be obligated to assign to Liberty only forty percent (40%) of Nytis undivided working interest in such Well’s wellbore.

 

(ii)          Nytis will provide written notice to Liberty of any Additional Acreage acquired by Nytis promptly following such acquisition.  The notice shall contain (A) an executed copy of the oil and gas lease and any agreement pursuant to which such Additional Acreage has been acquired, (B) a complete description of the Additional Acreage including information specifying the number of gross and net acres and existing overriding royalty or other burdens affecting the Additional Acreage, and (C) a copy of any related title work.

 

  

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(iii)         Within 20 days after receipt of the notice described in Section 3.1(b)(ii), Liberty shall pay to Nytis by wire transfer of immediately available funds an amount equal to the Subsequent Payment.

 

(c)           Subject to the limitation set forth in Section 3.2 below and in accordance with the payment terms of the applicable Operating Agreement, unless otherwise set forth herein, Liberty agrees to be responsible for and pay the Drilling and Completion Costs of the Wells as follows:

 

(i)           Eighty percent (80%), Proportionately Reduced, of the Drilling and Completion Costs for the Carry Wells (the “Carry Costs”).

 

(ii)          In the event that Liberty participates in any Wells on the Leases proposed by Nytis, in accordance with the Operating Agreement, under Section 2.5(a)  or subsequent to the completion of the agreed number of Carry Wells, Liberty shall bear forty percent (40%), Proportionately Reduced, of the Drilling and Completion Costs for such Wells in accordance with the Operating Agreement.  For the sake of clarity, Liberty’s election to not participate in any such Wells shall provide to Nytis and other working interest owners under the Operating Agreement any and all remedies provided by the Operating Agreement.

 

3.2           Well Cost Cap.

 

(a)           Notwithstanding anything to the contrary in this Agreement, if the Drilling and Completion Costs (or plugging and abandoning, if not completed):

 

(i)           associated with any particular Carry Well to be drilled pursuant to Section 2.1 or Section 2.5(b) above exceed Seven Hundred Fifty Thousand Dollars ($750,000.00) (the “Single Well Cost Cap”), Liberty only shall be required to pay forty percent (40%), Proportionately Reduced, of Drilling and Completion Costs in excess of the Single Well Cost Cap for such Carry Well, and Nytis shall be required to pay sixty percent (60%), Proportionately Reduced, of Drilling and Completion Costs in excess of the Single Well Cost Cap for such Carry Well; or

 

(ii)          associated with all Carry Wells to be drilled pursuant to Section 2.1 or Section 2.5(b) above exceed Twelve Million Dollars ($12,000,000.00) in the aggregate (the “Aggregate Well Cost Cap”), Liberty only shall be required to pay forty percent (40%), Proportionately Reduced, of Drilling and Completion Costs in excess of the Aggregate Well Cost Cap for the Carry Wells, and Nytis shall be required to pay sixty percent (60%), Proportionately Reduced, of Drilling and Completion Costs in excess of the Aggregate Well Cost Cap for the Carry Wells.

 

  

6

  

 

(b)           Nytis shall use its reasonable best efforts to obtain competitive, market standard rates and costs with respect to the Drilling and Completion Costs.

 

3.3           Spud Fee.  In addition to the amounts Liberty is required to pay pursuant to Section 3.1, Liberty shall pay to Nytis a spud fee for each Well drilled within the Program Area equal to $10,000.00, Proportionately Reduced to Nytis’ initial working interest in such Well (the “Spud Fee”).  The Spud Fee shall be paid by wire transfer of immediately available funds in accordance with the invoicing provisions set forth in Section 4.2.

 

3.4           Assignment.  Simultaneously with Liberty’s payment of the Initial Payment, Nytis shall deliver to Liberty a recordable assignment, in substantially the form attached hereto as Exhibit E (the “Assignment”), assigning Liberty forty percent (40%) of all of Nytis’ undivided right, title and interest in and to the Leases.  Each and every Assignment contemplated herein shall be made with a warranty of title, by, through and under Nytis, but not otherwise, and such assignment(s) shall be subject to the terms contained in this Agreement and the applicable operating agreements and/or pooling orders, if any.  Furthermore, in exchange for and within five (5) days after remittance of the Subsequent Payment, Nytis will deliver to Liberty an Assignment, assigning Liberty forty percent (40%) of all of Nytis’ undivided right, title and interest in and to the Leases underlying the Additional Acreage purchased by Liberty pursuant to Section 3.1(b).  At the time of such assignment of Additional Acreage, Nytis shall be deemed to make the representations and warranties set forth in Section 5.2 applicable to Leases with respect to all Leases conveyed underlying such Additional Acreage.

 

3.5           Non-Consent Penalty.  In the event that Liberty defaults in its obligations to pay the Carry Costs, Liberty’s rights to further participation in the Program Area shall terminate and Liberty shall promptly re-assign to Nytis, without further consideration, the identical leasehold and net revenue interest assigned to Liberty pursuant to Section 3.4 using the form of Assignment; provided, however, that Liberty shall retain its rights and interest in any Approved Spacing Unit surrounding each Carry Well in which Liberty has previously participated.  If Liberty participates in all of the Carry Wells, Liberty shall have earned the Liberty Working Interest and shall not be subject to any further re-assignment obligations.

 

3.6           Overriding Royalty; Minimum Net Revenue Interest.  The parties acknowledge that all Assignments shall include a reservation by Nytis of an overriding royalty interest on all Leases equal to the lesser of (a) three percent (3%) and (b) the difference between the net revenue interest delivered with respect to a Lease and eighty-three percent (83%), proportionately reduced, with respect to such Lease.  For clarity, no overriding royalty interest will be reserved by Nytis on Leases assigned to Liberty which do not have a net revenue interest of greater than eighty-three percent (83%), proportionately reduced.

 

3.7           Existing Wells.  Nytis shall reserve and retain the wellbores and Approved Spacing Units of all existing Wells spudded prior to the Effective Date in the New Area, all of which are identified on Exhibit F attached hereto (the “Existing Wells”), the production therefrom, and all equipment and facilities exclusively associated therewith.  Nytis will assume all liabilities associated therewith and indemnify Liberty therefrom.

 

  

7

  

 

3.8           Accelerated Payment of Carry Costs.  Liberty shall have the option, and Nytis hereby grants Liberty the option, to accelerate its payment of the Carry Costs and secure its full Liberty Working Interest (the “Acceleration Option”) if Nytis elects to sell the majority of its working interests in the Program Area to a third party at any point before Liberty has paid Carry Costs equal to the Aggregate Well Cost Cap.  If Liberty elects to exercise the Acceleration Option, then Liberty shall immediately pay to Nytis an amount equal to the Aggregate Well Cost Cap minus any Carry Costs actually paid by Liberty as of the date of Liberty’s exercise of the Acceleration Option (the “Accelerated Amount”).  Upon Liberty’s payment of the Accelerated Amount, Liberty shall have satisfied its obligation to pay the Carry Costs in its entirety, and shall have no further obligation to pay Carry Costs to Nytis or any third party that acquires an interest in the Program Area for any Carry Costs.

 

ARTICLE IV

OPERATOR

 

4.1           Operating Agreement.  Nytis shall be the Operator under the Operating Agreement and in such capacity shall carry out or cause to be carried out all Drilling and Completion Activities as well as all other operations covered by the Operating Agreement; provided, however, that Nytis shall be permitted to assign its obligations as Operator in accordance with the Operating Agreement.  Additionally, it is understood that Nytis may engage a legitimate third party contract operator, which is mutually acceptable to the parties hereto, to consummate the actual Drilling and Completion Activities to be conducted on each designated prospect.

 

4.2           Invoicing.  Notwithstanding the payment terms of any Operating Agreement to the contrary, as to any Well proposed by Nytis under this Agreement or any Operating Agreement, Nytis shall invoice Liberty twenty (20) days prior to the estimated spud date for such Well for Liberty’s estimated share of Drilling and Completion Costs on each such Well.  Such invoices will be due and payable by Liberty within twenty (20) days of receipt of such invoice.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

5.1           Mutual Representations and Warranties.  Each party, with respect to itself only, hereby represents and warrants to the other party the following:

 

(a)           Each party is duly organized, validly existing and in good standing under the applicable laws of the State of its formation, and is qualified to do business and is in good standing in every other jurisdiction where the failure to so qualify would have a material adverse effect on its ability to execute, deliver and perform this Agreement and the other agreements contemplated herein.

 

(b)           Each party has all requisite power and authority to (i) own, lease or operate its assets and properties and to carry on the business as now conducted, and (ii) enter into and perform its obligations under this Agreement and to carry out the transactions contemplated hereby.

 

  

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(c)           Each party has taken (or caused to be taken) all acts and other proceedings required to be taken by such party to authorize the execution, delivery and performance by such party of this Agreement and the other agreements contemplated herein.  This Agreement has been duly executed and delivered by each party and constitutes the valid and binding obligation of each party, enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, reorganization or similar laws affecting the rights of creditors generally and by principles of equity, whether considered in a proceeding at law or in equity.  The execution, delivery and performance of this Agreement by each party does not and will not (i) conflict with, or result in any violation of or constitute a breach or default (with notice or lapse of time, or both) under (A) any provision of the organizational documents of such party, or (B) any applicable statute, law, rule, regulation, order,  agreement, instrument or license applicable to such party, except as would not have a material adverse effect, or (ii) except as provided on Schedule 5.1(c) attached hereto, require the submission of any notice, report, consent or other filing with or from any governmental authority or third persons.

 

(d)           There are no actions, suits or proceedings pending or, to such party’s knowledge, threatened against a party which if decided unfavorably to such party could have a material adverse effect on the ability of such party to execute, deliver or perform this Agreement.

 

(e)           No party has incurred any obligation or liability, contingent or otherwise, for any fee payable to a broker or finder with respect to the matters provided for in this Agreement or the other agreements contemplated herein which could be attributable to or charged to the other party.  Each party shall indemnify, defend and hold harmless the other party from any claims, damages, liabilities, costs and expenses, including reasonable attorneys’ fees in the event the prior sentence should be or become untrue as to such party.

 

5.2           Nytis Representations and Warranties.  Nytis hereby represents and warrants as follows:

 

(a)           There are no bankruptcy, reorganization or rearrangement proceedings pending, being contemplated by or to its knowledge threatened against it.

 

(b)           None of the Leases which will be assigned to Liberty under this Agreement will be subject to liens burdening Liberty’s interest therein, including but not limited to any liens in favor of The Bank of Oklahoma (“BOK”), as lender, pursuant to that certain Amended and Restated Credit Agreement, dated May 31, 2010, by and between Nytis and BOK (as amended).  There are no calls on production or contracts for sale of production encumbering the Leases which provide for the delivery of hydrocarbons at a price below the prevailing market price.

 

(c)           All Leases are in full force and effect and are legal, valid and binding obligations of the parties thereto, and their respective successors and assigns.  Operations with respect to the Wells are in material compliance with applicable rules, regulations, statutes, and laws of any applicable governmental authority.  To the best of Nytis’ knowledge and belief, after appropriate inquiry, Nytis is not in breach or default under the terms of any of the Leases which may result in material impairment or loss of title to any material part of the Leases taken as a whole or the value thereof taken as a whole or which might materially hinder or impede the operation of the Leases as a whole.

 

  

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(d)           Nytis has delivered to Liberty all Phase I or Phase II environmental site assessment reports in Nytis’ possession or control on the Leases or the lands covered thereby. To the best of Nytis’ knowledge and belief, after appropriate inquiry, Nytis has complied in all material respects with all environmental laws with respect to the Leases.  To the best of Nytis’ knowledge and belief, after appropriate inquiry, Nytis possesses all environmental permits that are required for the operation of the Leases (except for such permits as are expected to be obtained in the ordinary course of business), and is in compliance with the provisions of all such environmental permits.  Nytis has not received any written notice, report or other information regarding any liabilities relating to its business or any of the Leases arising under environmental laws, including any written notice of violation from any governmental authority.  To the best of Nytis’ knowledge and belief, after appropriate inquiry, Nytis has not treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including any hazardous materials, or owned or operated any facility or property, so as to give rise to liabilities for response costs, natural resource damages or attorneys’ fees pursuant to federal or state environmental laws.  Without limiting the foregoing, no facts, events or conditions relating to the past or present facilities, properties or operations of Nytis with respect to the Leases will prevent, hinder or limit continued compliance with environmental laws, give rise to any investigatory, remedial or corrective obligations on the part of Liberty pursuant to environmental laws, or give rise to any other liabilities on the part of Liberty (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, and regardless of whether asserted) pursuant to environmental laws, including any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resource damage.

 

(e)           The information set forth on Schedule 5.2(e) with respect to the working interest and net revenue interest of Nytis in the Leases is true and correct.

 

(f)           Schedule 5.2(f) sets forth a list of all policies of insurance owned or held by or maintained by Nytis with respect to the Leases and the operations thereon.  Such policies are in full force and effect and, coupled with the insurance to be obtained under any applicable Operating Agreement, will satisfy in all material respects all requirements of applicable, laws and any agreements to which Nytis is a party.

 

(g)           Nytis has or will have obtained, or cause to be obtained, any consents, approvals, certificates, licenses, permits, and other authorizations of the necessary governmental authorities, which to the best of Nytis’ knowledge and belief, after appropriate inquiry, are required for Nytis to own, develop, operate, and maintain its proposed or reasonably anticipated operations in the Program Area.

 

  

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(h)           Nytis has paid its pro-rata share of all ad valorem, property, production, severance, excise, and similar taxes and assessments with respect to the Leases that have become due and payable, and all tax returns required to be filed by Nytis with respect to the same have been timely filed.  To the best of Nytis’ knowledge and belief, after appropriate inquiry, with respect to the Leases there are no tax deficiencies assessed against or audits in progress by any governmental authority.  There are no tax liens on or with respect to the Leases.

 

(i)           All rentals, royalties, shut-in royalties, overriding royalties and other payments due pursuant to or with respect to the Leases have been properly paid, excluding amounts properly held in suspense.

 

(j)           To the best of Nytis’ knowledge and belief, after appropriate inquiry, there are no wells located on the Leases (other than the Existing Wells) that (a) Nytis is obligated by law or contract to plug and abandon; (b) Nytis would be obligated by law or contract to plug and abandon with the lapse of time or notice or both because the well is not capable of producing oil, gas or other hydrocarbons in commercial quantities or otherwise being used in normal operations; (c) are subject to exceptions to a requirement to plug and abandon issued by a regulatory authority having jurisdiction over the Leases; or (d) have been plugged and abandoned but have not been plugged in accordance, in all material respects, with all applicable requirements of each regulatory authority having jurisdiction over the Leases.

 

(k)           The Leases are not subject to any preferential purchase rights applicable to the transactions contemplated hereby.

 

(l)           There are no outstanding Well AFEs or other capital commitments which are binding on the Leases.

 

5.3           Liberty Representations and Warranties.  Liberty hereby represents and warrants as follows:

 

(a)           There is no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to its knowledge threatened against it.

 

(b)           The working interests being acquired by Liberty are being acquired for investment purposes only, for Liberty’s own account, and not with a current view to, for offer for sale or for sale in connection with, the distribution or transfer thereof.  The working interests being acquired by Liberty are not being purchased for subdivision or fractionalization thereof; and Liberty has no contract, agreement or arrangement with any person or entity to sell or otherwise transfer (with or without consideration) to any such person or entity any of the working interests being acquired by Liberty, nor present plans or intention to enter into any such contract, agreement or arrangement.

 

(c)           Liberty has expressly authorized the persons executing this Agreement to sign, on behalf of Liberty, this Agreement and all other related documents to which Liberty is a party.

 

  

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ARTICLE VI

CLOSING CONDITIONS; TERM AND TERMINATION

 

6.1           Closing Conditions.  It is the intent of the parties that a closing of the transactions contemplated by this Agreement (the “Closing”) shall take place contemporaneously with the execution of this Agreement at such location as is mutually acceptable to the parties.  The parties’ obligations to close the transactions contemplated hereby shall be subject to delivery of the following:

 

(a)           Liberty shall pay to Nytis the Initial Payment;

 

(b)           The parties shall execute the Operating Agreement;

 

(c)           Nytis shall deliver to Liberty:

 

(i)           the Assignment; and

 

(ii)          the acknowledgement of BOK of Nytis’ entry into this Agreement, and that there are no liens held by BOK with respect to the Liberty Working Interest in the Leases, in form and substance reasonably acceptable to Liberty.

 

6.2           Term.  The term of this Agreement (the “Term”) shall begin on the Effective Date and shall continue so long as any Leases in which one of the parties holds an interest continue in force, whether by production, extension, renewal or otherwise; provided, however, that this Agreement may be earlier terminated by the mutual consent of the parties hereto and shall be earlier terminated upon Liberty’s failure to participate in any of the Carry Wells in accordance with this Agreement; provided further, however, that any outstanding assignment obligations of either party pursuant to this Agreement shall survive any such termination.

 

6.3           Termination.  Upon termination of this Agreement, all rights and obligations of the parties with respect to the Program Area will be governed solely by the terms of the applicable Operating Agreements and any other agreements entered into by the parties with respect to such properties, and neither party shall have any further rights or obligations hereunder, except as otherwise provided herein.

 

ARTICLE VII

AREA OF MUTUAL INTEREST

 

7.1           Subsequent Acquisitions.  If during the Term of this Agreement, either Liberty or Nytis, or any of their respective affiliates, acquires any oil and gas leasehold interest, whether by purchase, farm-in, contribution, forced pooling or otherwise, covering lands lying within the Program Area, the acquiring party shall promptly notify the non-acquiring party of such acquisition, describing the oil and gas leasehold interest acquired and detailing the actual, third-party out-of-pocket costs incurred and the value of any rights, leases, oil and gas interests or other property exchanged in connection with the acquisition of the acquired interest.  Such acquired interest shall be offered to the non-acquiring party on a heads up basis: sixty percent (60%) to Nytis and forty percent (40%) to Liberty.

 

  

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7.2           Election to Participate.  The non-acquiring party shall have a period of twenty (20) days after receipt of such notice to notify the acquiring party of the non-acquiring party’s election to participate or not in the ownership of the acquired oil and gas leasehold interest, with the failure of the non-acquiring party to notify the acquiring party within such twenty (20) day period to constitute an election not to participate.

 

7.3           Payment and Assignment of Interest.  In the event the non-acquiring party timely elects to participate in the acquired oil and gas leasehold interest, and unless any such working interests have previously been conveyed to such non-acquiring party, the acquired oil and gas leasehold interest shall become subject to this Agreement and the acquiring party shall promptly assign to the non-acquiring party its undivided percentage of the working interest acquired by the acquiring party in such oil and gas leasehold interest, subject only to the burdens in effect at the time the subject oil and gas leasehold interest was acquired.  Such assignment shall be substantially in the same form as Exhibit E attached hereto.  Upon receipt of such assignment, the non-acquiring party will pay to the acquiring party, in immediately available funds, the non-acquiring party’s share of the costs incurred in acquiring the acquired oil and gas leasehold interest (limited to actual, third-party out-of-pocket costs and the value of any rights, leases, oil and gas interests or other property exchanged therefor), in accordance with such party’s undivided percentage working interest.   For purposes of this Article VII, Liberty’s undivided percentage working interest shall be forty percent (40%) and Nytis’ undivided percentage working interest shall be sixty percent (60%).

 

7.4           Non-Participation.  In the event a non-acquiring party fails to timely elect to participate in acquired leasehold interest pursuant to Section 7.2, then such oil and gas leasehold interest shall not in any manner be subject to the terms of this Agreement and shall be held solely by the acquiring party.

 

7.5           Replacement of Prior Contract Area.  Each of Nytis and Liberty acknowledges and agrees that the provisions contained in this Article VII shall replace in their entirety the provisions contained in Article VII of the Prior Participation Agreement (the “Prior AMI Provisions”).  Each of Liberty and Nytis further acknowledges and agrees that the Prior AMI Provisions shall terminate and be of no further force or effect, and that the provisions of this Article VII solely shall govern all subsequent acquisitions of acreage within the Program Area.

 

ARTICLE VIII

CONFIDENTIAL DATA AND INFORMATION

 

8.1           Confidential Information.  Nytis has provided Liberty with certain information, reports and data used in the evaluation of the subject matter of this Agreement. Subject to the terms of Section 8.2, any party hereto may at any time utilize, and show and provide to third parties, copies of such information.

 

8.2           Limitations.  Except to the extent that such data may legally become a part of the public domain, all data and information acquired by the parties pursuant to this Agreement or supplied by one party to the other pursuant to this Agreement will be kept confidential and will be for the sole and exclusive use and benefit of the parties hereto; provided, however, the parties may disclose such data and information to their respective consultants and parties providing, or proposing to provide, financial accommodations to the disclosing party where each such recipient has (a) been advised of the confidential nature of such data and information and the obligations of the disclosing party with respect thereto hereunder, and (b) agreed to be bound by the terms of this Article VIII, it being understood and agreed that the disclosing party shall remain liable for any breach by any such recipient of the obligations of the disclosing party under this Article VIII.  Notwithstanding anything to the contrary herein, any party may disclose Confidential Information (i) to other working interest owners under the Leases, if any, (ii) to third parties to the extent such information is required to be disclosed under applicable law, rule, order or regulation of any governmental entity having jurisdiction over such matters, (iii) to the extent requested by regulatory or self-regulatory authority, (iv) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, or (v) to an equity owner, director, officer, employee or agent of such party, including legal counsel, accountants and other advisors where each such recipient has (y) been advised of the confidential nature of such data and information and the obligations of the disclosing party with respect thereto hereunder and (z) such recipient is subject to enforceable obligations to keep such data and information confidential.

 

  

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ARTICLE IX

INSURANCE

 

The Operator will at all times and in connection with all work performed hereunder carry, for the account of the parties, the insurance specified on Exhibit “D” to the Operating Agreement and shall otherwise comply with the provisions of such Exhibit “D”.

 

ARTICLE X

INDEMNIFICATION

 

10.1           Application of Indemnities.  Indemnities shall apply as follows:

 

(a)           All indemnities set forth in this Agreement extend to the affiliates, partners, directors, managers, employees, members, shareholders, subsidiaries, permitted successors and permitted assigns of the indemnified party.  The indemnities set forth in this Agreement do not extend to any part of an indemnified claim that is the result of the gross negligence, willful misconduct or fraud of the indemnified party.

 

(b)           Neither Nytis nor Liberty shall be entitled to recover from the other party (or Carbon, as applicable), respectively, and each party releases the other party from and waives, any liabilities arising under this Agreement by reason of the breach thereof, or in connection with or with respect to the transactions contemplated in this agreement, any amount in excess of the actual compensatory damages suffered by such party. Each of Nytis and Liberty waive, and release each other (and Carbon, as applicable) from any right to recover punitive or exemplary damages arising in connection with or with respect to any breach hereof or as to the transactions contemplated in this Agreement; provided, however, any such damages recovered by a third party (other than a party’s affiliates) for which a party owes the other party an indemnity under this Agreement shall not be waived.

 

  

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(c)           The indemnities of the indemnifying party in this Agreement do not cover or include any amounts that the indemnified party may legally recoup from other third party owners under applicable joint operating agreements or other agreements, and for which the indemnified party is reimbursed by any third party.  If it is judicially determined that any provision of this indemnity is found to be in violation of state or federal law, such that the violation would render the entire Agreement void and unenforceable, said provision shall be amended automatically to comply with said law. In the event that such provision cannot be amended to comply with said law, the provision shall be disregarded, and the validity and enforceability of the remaining provisions shall not be affected.

 

10.2           Liberty Indemnity.  Liberty shall indemnify, defend and hold Nytis and Carbon harmless from and against any and all claims and liabilities caused by, resulting from or incidental to (a) any inaccuracy of any representation or warranty of Liberty set forth in this Agreement or (b) any breach of, or failure to perform or satisfy, any of the covenants and obligations of Liberty hereunder.

 

10.3           Nytis Indemnity.  Nytis and Carbon shall indemnify, defend and hold Liberty harmless from and against any and all claims and liabilities caused by, resulting from or incidental to (a) any inaccuracy of any representation or warranty of Nytis set forth in this Agreement, (b) any breach of, or failure to perform or satisfy, any of the covenants and obligations of Nytis hereunder which are to be performed after the execution of this Agreement, (c) the Existing Wells, and (d) any matter arising or resulting from the ownership and operation of the Leases prior to the Effective Date.  The liability of Nytis and Carbon pursuant to this Article X shall be joint and several.

 

10.4           Demand.  Each indemnified party hereunder agrees that promptly upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being collectively referred to herein as the “Indemnity Claim”), with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party or parties, together with a statement of such information respecting any of the foregoing as it shall have.  Such notice shall include a formal demand for indemnification under this Agreement.  The indemnifying party or parties shall not be obligated to indemnify the indemnified party with respect to any Indemnity Claim if the indemnified party knowingly failed to notify the indemnifying party or parties thereof in accordance with the provisions of this Agreement in sufficient time to permit the indemnifying party or parties or its/their counsel to defend against such matter and to make a timely response thereto including, without limitation, any responsive motion or answer to a complaint, petition, notice or other legal, equitable or administrative process relating to the Indemnity Claim, only insofar as such knowing failure to notify the indemnifying party has actually resulted in prejudice or damage to the indemnifying party or parties.

 

10.5           Reimbursement.  The indemnifying party or parties shall pay to the indemnified party in immediately available funds any amounts to which the indemnified party may become entitled by reason of the provisions of this Article X, such payment to be made within five (5) days after any such amounts are finally determined either by mutual agreement of the parties hereto or pursuant to the final unappealable judgment of a court of competent jurisdiction.  In calculating any amount to be paid by an indemnifying party or parties by reason of the provisions of this Agreement, the amount shall be reduced by all tax benefits and other reimbursements credited to or received by the other party related to the damages.

 

  

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10.6           Survival.  The representations and warranties of the parties set forth in Section 5.1 shall survive the execution of this Agreement indefinitely.  All other representations and warranties of Nytis and Liberty made on the date of execution of this Agreement shall survive the execution of this Agreement for a period of two (2) years.  All other covenants and agreements contained in this Agreement shall survive the execution of this Agreement until this Agreement is terminated in accordance with Section 6.2; provided, however, that the indemnification provisions of this Article X shall survive the termination of this Agreement indefinitely.

 

10.7           Exclusive Remedy.  The terms and provisions of this Article X shall be the sole and exclusive remedy of each of the parties indemnified hereunder with respect to the representations, warranties, covenants and agreements of the parties set forth in this Agreement and the other documents executed and delivered hereunder.

 

10.8           Assumption of Liability.  Each party that is required to assume any obligation or liability of the other party pursuant to this Agreement or that is required to defend, indemnify or hold the other party harmless hereunder shall, notwithstanding any other provision hereof to the contrary, be entitled to the use and benefit of all defenses (legal and equitable) and counterclaims of such other party in defense of third party claims arising out of any such assumption or indemnification.

 

ARTICLE XI

RELATIONSHIP OF PARTIES

 

It is not the purpose or intention hereof to create any mining partnership, joint venture, general partnership or other partnership relation and none shall be inferred.  The parties understand and agree that their relationship hereunder is not one of partnership, association, trust, joint venture, mining partnership or entity of any kind.

 

ARTICLE XII

FORCE MAJEURE

 

If any party is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement, other than an obligation to make payments of money, such party shall give to the other party prompt written notice of the force majeure with reasonably full particulars concerning it; thereupon, the obligations of the party giving the notice, so far as they are affected by the force majeure, shall be suspended during, but no longer than, the continuance of the force majeure. The affected party shall use all reasonable diligence to remove the force majeure situation as quickly as practicable.  The requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts or other labor difficulties by the party involved, contrary to its wishes; how any such difficulties shall be handled shall be entirely within the discretion of the party concerned.  The term “force majeure”, as here employed, shall mean an act of God, strike, lockout or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion, governmental action, governmental delay, restraint or inaction, and any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of the party claiming suspension.

 

  

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ARTICLE XIII

MARKETING

 

Production of oil and gas for Liberty from the Wells drilled and completed by the parties in the Program Area shall be gathered, processed, treated, transported and marketed by Nytis, after reasonable consultation with Liberty, with no “mark-up” costs and/or internal fees from Nytis or its affiliates to Liberty; provided, however, that Nytis may charge Liberty the typical overhead fees relating to such activities included within the standard COPAS Accounting Procedure annexed to the Operating Agreement.

 

ARTICLE XIV

NOTICES

 

All notices and communication required or permitted under this Agreement shall be in writing, delivered to or sent by U.S. Mail or any other recognized overnight delivery service, postage or similar charges prepaid, or by facsimile, addressed as follows:

 

Nytis Exploration Company LLC

c/o Carbon Natural Gas Company

1700 Broadway, Suite 1170

Denver, CO 80290

Attn: Patrick R. McDonald

Telephone No. (720) 407-7032

Facsimile No. (720) 407-7031

 

with a copy to:

Nytis Exploration Company LLC

2480 Fortune Drive, Suite 300

Lexington, KY 40509

2480 Fortune Drive, Suite 300

Lexington, KY 40509

Attn: Mark Pierce

Telephone No. (859) 299-0771, ext. 301

Facsimile No. (859) 299-0772

 

Liberty Energy, LLC

c/o Old Ironsides Energy, LLC

10 St. James Avenue, 19th Floor

Boston, MA 02116

Attn: Scott Carson

Telephone No. (617) 654-4595

Facsimile No. (617) 574-6920

 

  

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ARTICLE XV

CONFLICTS

 

In the event of any conflict between the provisions of this Agreement and the Operating Agreement, including the Exhibits attached thereto, the terms of this Agreement shall control.

 

ARTICLE XVI

SUCCESSORS AND ASSIGNS

 

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.  Neither party shall assign any of its rights and obligations under this Agreement, without the express written consent of the other party, such consent to not be unreasonably withheld, delayed or conditioned; provided, however, that no consent shall be required for an assignment in connection with (i) the sale of all or substantially all of such party’s assets or (ii) the merger or consolidation of such party in which such party is not the survivor, so long as (A) such assignee agrees to be bound by the provisions of this Agreement, and (B) such party shall promptly notify the other party prior to the making of such a permitted assignment.  No consent shall be required by a party for any mortgage of the other party’s interest herein.

 

ARTICLE XVII

GOVERNING LAW

 

This Agreement shall be construed under and in accordance with the laws of the State of Colorado, excluding any conflicts-of-law rule or principle that might apply the law of another jurisdiction.  The parties agree that venue for any dispute hereunder shall be in a Federal or state court in Denver County, Colorado.

 

ARTICLE XVIII

NO THIRD PARTY BENEFICIARY

 

Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto any rights, remedies, obligations or liabilities in and to the Wells, or the interest in lands included therein or pertaining thereto acquired hereunder, or otherwise, under or by reason of this Agreement.

 

ARTICLE XIX

PUBLIC ANNOUNCEMENTS

 

Subject to applicable legal requirements, at all times during the term hereof, each party shall promptly advise and cooperate with the others before issuing, or permitting any of its affiliates, directors, officers, employees, managers, members or agents to issue any press release or other public announcement with respect to this Agreement or the transactions contemplated hereby.

 

  

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ARTICLE XX

FURTHER ASSURANCES

 

Each party agrees to deliver or cause to be delivered to the other parties at such times as shall be requested any additional instrument that the other may reasonably request for the purpose of carrying out this Agreement.

 

ARTICLE XXI

COUNTERPART EXECUTION

 

This Agreement may be executed in one or more counterparts, no one of which need be executed by all parties but all of which shall constitute but one and the same instrument.

 

ARTICLE XXII

ENTIRE AGREEMENT

 

This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof, and supersedes all other agreements, written or oral, between the parties with respect to such subject matter.

 

ARTICLE XXIII

CAPTIONS/HEADINGS

 

Any captions to or headings of the articles, sections, subsections, paragraphs or subparagraphs of this Agreement are solely for the convenience of the parties, are not a part of this Agreement and shall not be used for the interpretation or determination of validity of this Agreement or any provision hereof.

 

[Signatures Begin on the Following Page]

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first set forth above.

 

	 	
NYTIS EXPLORATION COMPANY LLC

	 
	 	 	 	 	 
	 	
By: 

	Nytis Exploration (USA) Inc., its Manager
	 	 	 	 	 
	 	 	
By:

	/s/ Patrick R. McDonald	 
	 	 	 	Patrick R. McDonald, President	 

 

	 	

LIBERTY ENERGY, LLC

	 
	 	 	 	 	 
	 	
By: 

	

Old Ironsides Energy, LLC, on behalf of Liberty Energy, LLC, as its agent

	 	 	 	 	 
	 	 	
By:

	
/s/ Scott E. Carson  

	 
	 	 	 	Scott E. Carson, Managing Partner	 

 

Acknowledged and agreed for purposes of Article X only:

 

	

CARBON NATURAL GAS COMPANY

	 
	 	 	 
	
By:

	
/s/ Patrick R. McDonald

	 
	 	
Patrick R. McDonald, President

Chief Executive Officer

	 

 

  

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List of Exhibits and Schedules

 

	
Exhibit A *

	
Description of Leases

	
Exhibit B-1 *

	
Outline of Original Contract Area

	
Exhibit B-2 *

	
Outline of Program Area

	
Exhibit C *

	
Form of Operating Agreement

	
Exhibit D *

	
Form of Well AFEs

	
Exhibit E *

	
Form of Assignment

	
Exhibit F *

	
Existing Wells

	
Schedule 5.1 (c) *

	
Required Filings

	
Schedule 5.2 (e) *

	
Working Interest; Net Revenue Interests

	
Schedule 5.2 (f) *

	
Insurance

 

           * A copy of any omitted scheduled will be furnished supplementally to the Commission upon request.

 

 

List of Exhibits and Schedules

 

 

21

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