Document:

EMPLOYMENT
      AGREEMENT

    

    This
      Employment Agreement ("Agreement") is made as of February 21 2006 by and between
      Miller Petroleum Inc., a Tennessee Corporation (the "Company"), and Ernest
      Payne. (hereinafter, the "Executive").

    

    RECITALS

    

    A.
      The
      Board of Directors of the Company (the "Board") recognizes the Executive's
      potential contribution to the growth and success of the Company, and desires
      to
      assure the Company of the Executive's employment in an executive capacity and
      to
      compensate him therefore, and has approved the provisions of this Agreement
      and
      has authorized the officers of the Company to execute the Agreement on behalf
      of
      the Company.

    

    B.
      The
      Executive is willing to make his services available to the Company and on the
      terms and conditions hereinafter set forth.

    

    AGREEMENT

    

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants set forth
      herein, the parties agree as follows:

    

    1.
       Employment.

    

    1.1.  Employment
      and Term.
      The
      Company hereby agrees to employ the Executive and the Executive hereby agrees
      to
      serve the Company on the terms and conditions set forth herein.

    

    1.2.
       Duties
      of Executive.
      During
      the Term of Employment under this Agreement, the Executive shall serve as the
      President of the Company. As allowed by the Company's Articles and Bylaws,
      and
      with the approval of the Board, the Executive may also serve as a member of
      the
      Board, during the Term of Employment under this Agreement. The Executive shall
      be accountable only to the Chairman of the Board, and, subject to the authority
      of the Chairman of The Board, shall have supervision and control over, and
      responsibility for, the general management and operation of the Company. He
      also
      shall have such other powers and duties as may from time to time be prescribed
      by the Board, provided that such duties are consistent with the Executive's
      position as President of a company the size and type of the Company. The
      Executive shall devote his full time and attention to the business and affairs
      of the Company, render such services to the best of his ability, and use his
      reasonable best efforts to promote the interests of the Company. Notwithstanding
      the foregoing or any other provision of this Agreement, it shall not be a breach
      or violation of this Agreement for the Executive to (i) serve on corporate
      (subject to approval of the Board), civic or charitable boards or committees,
      (ii) deliver lectures, fulfill speaking engagements or teach at educational
      institutions, or (iii) manage personal investments, so long as such activities
      do not significantly interfere with or significantly detract from the
      performance of the Executive's responsibilities to the Company in accordance
      with this Agreement.. The Executive may continue to serve out the remaining
      term
      as a board member on any corporate board on which he serves as of the
      Commencement Date.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.
       Term.

    

    2.1.
      Term. The term of employment under this Agreement (the "Term of Employment")
      shall commence as of February 21 2006 (the "Commencement Date") and shall
      continue for a period ending three (3) years from any date as of which the
      Term
      of Employment is being determined, subject to earlier termination pursuant
      to
      Section 5 hereof. The date on which the Term of Employment shall expire is
      sometimes referred to in this Agreement as the "Expiration Date".

    

    3. Compensation.

    

    3.1 Base
      Salary.
      The
      Executive shall receive a base salary at the annual rate of $200,000 (the “Base
      Salary”) during the Term of Employment, with such Base Salary payable in
      installments consistent with the Company's normal payroll schedule, subject
      to
      applicable withholding and other taxes. The Base Salary shall be reviewed,
      at
      least annually, for merit increases and may, by action and in the discretion
      of
      the Board, be increased at any time or from time to time. 

    

    3.2. Bonuses.

    

    
      	 	
              a.

            	
              Guaranteed
                Loan

            

    

    

    
      	 	
              b.

            	
              Formula
                Bonus

            

    

    

    
      	 	
              c.

            	
              Termination
                Year Bonus 

            

    

    

    d.
       Additional
      Discretionary Bonuses.
      The
      Executive shall receive such additional bonuses, if any, as the Board may in
      its
      sole and absolute discretion determine.

    

    e.  Definitions.
      Any
      bonuses, other than the Signing Bonus, payable pursuant to this Section 3.2
      are
      sometimes hereinafter referred to as "Incentive Compensation." Each period
      for
      which Incentive Compensation is payable under this Section 3.2 is sometimes
      hereinafter referred to as a Bonus Period. Except as otherwise provided in
      Section 3 .2c, and unless otherwise agreed to by the Board and the Executive,
      the Bonus Period shall be the fiscal year of the Company; provided, however,
      that the initial Bonus Period shall commence on February 21, 2006 and end on
      February 20, 2009.

    

    f.
       Time
      of Payment.
      Except
      as otherwise provided herein, any Incentive Compensation payable pursuant to
      this Section 3.2 shall be paid by the Company to the Executive within 2112
      months after the end of the Bonus Period for which it is payable.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	 	
              4.

            	
              Expense
                Reimbursement and Other
                Benefits.

            

    

    

    4.1.
       Reimbursement
      of Expenses.
      Upon
      the submission of proper substantiation by the Executive, and subject to such
      rules and guidelines as the Company may from time to time adopt with respect
      to
      the reimbursement of expenses of executive personnel, the Company shall
      reimburse the Executive for all reasonable expenses actually paid or incurred
      by
      the Executive during the Term of Employment in the course of and pursuant to
      the
      business of the Company. The Executive shall account to the Company in writing
      for all expenses for which reimbursement is sought and shall supply to the
      Company copies of all relevant invoices, receipts or other evidence reasonably
      requested by the Company.

    

    4.2.
       Compensation/Benefit
      Programs.
      During
      the Term of Employment, the Executive shall be entitled to participate in all
      medical, dental, hospitalization, accidental death and dismemberment,
      disability, travel and life insurance plans and all other plans as are presently
      and hereinafter offered by the Company, to its executive personnel, including
      savings, pension, profit-sharing and deferred compensation plans, subject to
      the
      general eligibility and participation provisions set forth in such
      plans.

    

    4.3.
       Working
      Facilities.
      During
      the Term of Employment, the Company shall furnish the Executive with an office,
      secretarial help and such other facilities and services suitable to his position
      and adequate for the performance of his duties hereunder.

    

    4.4. Automobile.
      To be
      supplied with company truck.

    

    4.5. Stock

    

    a. Initial
      Grant.
      As of
      the Commencement Date, the Company shall grant to the Executive, Five Hundred
      Thousand (500,000) shares of common stock of the Company at the closing price
      on
      the Commencement Date, parvalue being 001.

    

    b.
       Future
      Grants.
      In
      addition, during the Term of Employment, the Executive shall be eligible to
      be
      granted options (the "Stock Options") to purchase common stock (the "Common
      Stock") of the Company under (and therefore subject to all terms and conditions
      of) the Company's Stock Option Plan, and any successor plan thereto (the "Stock
      Option Plan"); provided, however, that the Stock Options shall become
      immediately exercisable in full upon termination of the Executive's employment
      with the Company for any reason other than termination by the Company for Cause
      under Section 5.1 hereof or termination by the Executive without Good Reason
      under Section 5.5b hereof. The number of Stock Options and terms and conditions
      of the Stock Options shall be determined by the committee of the Board appointed
      pursuant to the Stock Option Plan, or by the Board of Directors of the Company,
      in its discretion and pursuant to the Stock Option Plan.

    

    4.6.
       Other
      Benefits.
      The
      Executive shall be entitled to Two-weeks of paid vacation each calendar year
      during the Term of Employment, to be taken at such times as the Executive and
      the Company shall mutually determine and provided that no vacation time shall
      significantly interfere with the duties required to be rendered by the Executive
      hereunder. Any vacation time not taken by Executive during any calendar year
      may
      be carried forward into any succeeding calendar year. The Executive shall
      receive such additional benefits, if any, as the Board of the Company shall
      from
      time to time determine. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.
       Termination. 

    

    5.1.
       Termination
      for Cause.
      The
      Company shall at all times have the right, upon written notice to the Executive,
      to terminate the Term of Employment, for Cause as defined below. For purposes
      of
      this Agreement, the term "Cause" shall mean (i) an action or omission of the
      Executive which constitutes a willful and material breach of, or a willful
      and
      material failure or refusal (other than by reason of his disability or
      incapacity) to perform his duties under, this Agreement which is not cured
      within fifteen (15) days (or if the Executive is acting diligently to effect
      a
      cure, such longer time as shall be reasonably necessary to effect the cure)
      after receipt by the Executive of written notice of same, (ii) fraud,
      embezzlement, misappropriation of funds or breach of trust in connection with
      his services hereunder, or (iii) a conviction of any crime which involves
      dishonesty or a breach of trust. Any termination for Cause shall be made in
      writing by notice to the Executive, which notice shall set forth in reasonable
      detail all acts or omissions upon which the Company is relying for such
      termination. The Executive (and his legal representative) shall have the right
      to address the Board regarding the acts set forth in the notice of termination.
      Upon any termination pursuant to this Section 5.1, the Company shall (i) pay
      to
      the Executive any unpaid Base Salary through the date of termination and (ii)
      pay to the Executive his accrued but unpaid Incentive Compensation, if any,
      for
      any Bonus Period ending on or before the date of the termination of Executive's
      employment with the Company. Upon any termination effected and compensated
      pursuant to this Section 5.1, the Company shall have no further liability
      hereunder (other than for (x) reimbursement for reasonable business expenses
      incurred prior to the date of termination, subject, however, to the provisions
      of Section 4.1, and (y) payment of compensation for unused vacation days that
      have accumulated during the calendar year in which such termination
      occurs).

    

    5.2.
       Disability.
      The
      Company shall at all times have the right, upon Written notice to the Executive,
      to terminate the Term of Employment, if the Executive shall as the result of
      mental or physical incapacity, illness or disability, become unable to perform
      his obligations hereunder for a period of 180 days in any l2-month period.
      The
      determination of whether the Executive is or continues to be disabled shall
      be
      made in writing by a physician selected by the Board and reasonably acceptable
      to the Executive. Upon any termination pursuant to this Section 5.2, the Company
      shall (i) pay to the Executive any unpaid Base Salary through the effective
      date
      of termination specified in such notice, (ii) pay to the Executive his accrued
      but unpaid Incentive Compensation, if any, for any Bonus Period ending on or
      before the date of termination of the Executive’s employment with the Company
      (iii) pay to the Executive his Termination Year Bonus, if any, at the time
      provided in Section 3.2f hereof Upon any termination effected and compensated
      pursuant to this Section 5.2, the Company shall have no further liability
      hereunder (other than for (x) reimbursement for reasonable business expenses
      incurred prior to the date of termination, subject, however to the provisions
      of
      Section 4.1, and (y) payment of compensation for unused vacation days that
      have
      accumulated during the calendar year in which such termination
      occurs).

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.3.
       Death.
      Upon the
      death of the Executive during the Tenn of Employment, the Company shall (i)
      pay
      to the estate of the deceased Executive any unpaid Base Salary through the
      Executive's date of death, (ii) pay to the estate of the deceased Executive
      his
      accrued but unpaid Incentive Compensation, if any, for any Bonus Period ending
      on or before the Executive's date of death, (iii) pay to the estate of the
      deceased Executive, the Executive's Termination Year Bonus, if any, at the
      time
      provided in Section 3.2f hereof Upon any termination effected and compensated
      pursuant to this Section 5.3, the Company shall have no further liability
      hereunder (other than for (x) reimbursement for reasonable business expenses
      incurred prior to the date of the Executive's death, subject, however to the
      provisions of Section 4.1, and (y) payment of compensation for unused vacation
      days that have accumulated during the calendar year in which such termination
      occurs). 

    

    5.4.
       Termination
      Without Cause.
      At any
      time the Company shall have the right to terminate the Term of Employment by
      written notice not less than thirty (30) days prior to the termination date,
      to
      the Executive. Upon any termination pursuant to this Section 5.4 (that is not
      a
      termination under any of Sections 5.1, 5.2, 5.3 or 5.5, the Company shall (i)
      pay to the. Executive on the termination date any unpaid' Base Salary through
      the date of termination specified in such notice, (ii) pay to the Executive
      the
      accrued but unpaid Incentive Compensation, if any, for any Bonus Period ending
      on or before the date of the termination of the Executive's employment with
      the
      Company, at the time provided in Section 3.2f, (iii) pay to the Executive on
      the
      termination date a lump sum payment equal to his Base Salary through the
      remaining term of this Agreement subject to board approval and the Formula
      Bonus
      for the year in which such termination occurs, assuming a Target Award
      Percentage of 100%, (iv) continue to provide the Executive with the benefits
      he
      was receiving under Sections 4.2 and 4.4 hereof (the "Benefits") for the
      remaining term of this Agreement in the manner and at such times as the Benefits
      otherwise would have been provided to the Executive, (v) pay to the Executive
      his Termination Year Bonus, if any, at the time provided in Section 3.2f; and
      (vi) pay to the Executive as a single lump sum payment, within 30 days of the
      date of termination, a lump sum benefit equal to the value of the portion of
      his
      benefits under any savings, pension, profit sharing or deferred compensation
      plans that are forfeited under such plans but that would not have been forfeited
      if the Executive's employment had contained for an additional three (3) years.
      In the event that the Company is unable to provide the Executive with any
      Benefits required hereunder by reason of the termination of the Executive's
      employment pursuant to this Section 5.4, then the Company shall promptly
      reimburse the Executive for amounts paid by the Executive to acquire comparable
      coverage. Upon any termination effected and compensated pursuant to this Section
      5.4, the Company shall have no further liability hereunder (other than for
      (x)
      reimbursement for reasonable business expenses incurred prior to the date of
      termination, subject, however, to the provisions of Section 4.1, and (y) payment
      of compensation for unused vacation days that have accumulated during the
      calendar year in which such termination occurs).

    

    5.5. Termination
      by Executive.

    

    a.
       The
      Executive shall at all times have the right, by written notice not less than
      (30) days prior to the termination date, to terminate the Term of
      Employment.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    b. Upon
      termination of the Term of Employment pursuant to this Section 5.5 by the
      Executive without Good Reason (as defined below), the Company shall (i) pay
      to
      the Executive upon the termination date any unpaid Base Salary through the
      effective date of termination specified in such notice or otherwise mutually
      agreed and (ii) pay to the Executive his accrued but unpaid Incentive
      Compensation, if any, for any Bonus Period ending on or before the termination
      of Executive's employment with the Company, at the time provided in Section
      3.2f
      Upon any termination effected and compensated pursuant to this Section 5.5(b),
      the Company shall have no further liability hereunder (other than for (x)
      reimbursement for reasonable business expenses incurred prior to the date of
      termination, subject, however, to the provisions of Section 4.1, and (y) payment
      of compensation for unused vacation days that have accumulated during the
      calendar year in which such termination occurs.)

    

    c.
       Upon
      termination of the Term of Employment pursuant to this. Section 5.5 by the
      Executive for Good Reason, the Company shall pay to the Executive the same
      amounts, and shall continue or compensate for Benefits in the same amounts,
      that
      would have been payable or provided by the Company to the Executive under
      Section 5.4 of this Agreement if the Term of Employment had been terminated
      by
      the Company without Cause. Upon any termination effected and compensated
      pursuant to this Section 5.5(c), the Company shall have no further liability
      hereunder (other than for (x) reimbursement for reasonable business expenses
      incurred prior to the date of termination, subject, however, to the provisions
      of Section 4.1, and (y) payment of compensation for unused vacation days that
      have accumulated during the calendar year in which such termination
      occurs.)

    

    d.
       For
      purposes of this Agreement, "Good Reason" shall mean (i) the assignment to
      the
      Executive of any duties inconsistent in any respect with the Executive's
      position (including status, offices, titles and reporting requirements),
      authority, duties or responsibilities as contemplated by Section 1.2 of this
      Agreement, or any other action by the Company which results in a diminution
      in
      such position, authority, duties or responsibilities, excluding for this purpose
      an isolated, insubstantial and inadvertent action not taken in bad faith and
      which is remedied by the Company promptly after receipt of notice thereof given
      by the Executive; (ii) any failure by the Company to comply with any of the
      provisions of Article 3 of this Agreement, other than an isolated, insubstantial
      and inadvertent failure not occurring in bad faith and which is remedied by
      the
      Company promptly after receipt of notice thereof given by the Executive; (iii)
      the Company's requiring the Executive to be based at any office or location,
      that is not within a 100 mile radius of Huntsville, TN , except for travel
      reasonably required in the performance of the Executive's responsibilities;
      (iv)
      any purported termination by the Company of the Executive's employment other
      than for Cause pursuant to Section 5.1 or because of the Executive's disability
      pursuant to . Section 5.2 of this Agreement; or (v) the occurrence of a Change
      in Control. For purposes of this "" ". Section 5.5 (d), the Executive
      acknowledges that the Company's holding company functions are headquartered
      and
      centralized in Huntsville TN. For purposes of this Section 5.5(d), any good
      faith determination of "Good Reason" made by the Executive shall be conclusive;
      provided that the Executive shall not exercise his right to terminate his
      employment for Good Reason without first giving sixty (60) days written notice
      to the Chief Executive Officer of the factual basis constituting good reason.
      The Company shall have the right to cure the problem(s) noted by the Executive,
      before the Executive may terminate his employment for Good Reason.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    e. For
      purposes of this Agreement, the term "Change in Control" shall
      mean:

    

    (i) Approval
      by the shareholders of the Company of (x) a reorganization, merger,
      consolidation or other form of corporate transaction or series of transactions,
      in each case, with respect to which persons who were the shareholders of the
      Company immediately prior to such reorganization, merger or consolidation or
      other transaction do not, immediately thereafter, own more than 50% of the
      combined voting power entitled to vote generally in the election of directors
      of
      the reorganized, merged or consolidated company's then outstanding voting
      securities, in substantially the same proportions as their ownership immediately
      prior to such reorganization, merger, consolidation or other transaction, or
      (y)
      a liquidation or dissolution of the Company or (z) the sale of all or
      substantially all of the assets of the Company (unless such reorganization,
      merger, consolidation or other corporate transaction, liquidation, dissolution
      or sale is subsequently abandoned);

    

    (ii)
       A
      new
      Board member is elected without the approval of at least two of the Individuals
      who, as of the Commencement Date of this Agreement, constitute the Board (the
      "Incumbent Board"); or

    

    (iii)
       the
      acquisition (other than from the Company) by any person, entity or "group",
      within the meaning of Section l3(d)(3) or 14(d)(2) of the Securities Exchange
      Act, of beneficial ownership within the meaning of Rule l3-d promulgated under
      the Securities Exchange Act of more than 51 % of either the then outstanding
      shares of the Company's Common Stock or the combined voting power of the
      Company's then outstanding voting securities entitled to vote generally in
      the
      election of directors (hereinafter referred to as the ownership of a
      "Controlling Interest") excluding, for this purpose, any acquisitions by (1)
      the
      Company or its Subsidiaries, (2) any person, entity or "group" that as of the
      Commencement Date of this Agreement owns beneficial ownership (within the
      meaning of Rule I3d-3 promulgated under the Securities Exchange Act) of a
      Controlling Interest or (3) any employee benefit plan of the Company or its
      Subsidiaries;

    

    (iv)
      provided that, with respect to this Section 5.5(e), a Change in Control shall
      not be deemed to have occurred should any of the contingencies referred to
      in
      this Section involve any of the companies, persons or other legal entities
      with
      whom the Company is negotiating on or before the Commencement Date.

    

    5.6.
      Certain
      Additional Payments by the Company.
      Anything
      in this Agreement to the contrary notwithstanding, in the event it shall be
      determined that any payment, distribution or other action by the Company to
      or
      for the benefit of the Executive (whether paid or payable or distributed or
      distributable pursuant to the terms of this Agreement or otherwise, including
      any additional payments required under this Section 5.6) (a "Payment") would
      be
      subject to an excise tax imposed by Section 4999 of the Internal Revenue Code
      of
      1986, as amended (the "Code"), or any interest or penalties are incurred by
      the
      Executive with respect to any such excise tax (such excise tax, together with
      any such interest and penalties, are hereinafter collectively referred to as
      the
      "Excise Tax"), the Company shall make a payment to the Executive (a "Gross-Up
      Payment") in an amount such that after payment by the Executive of aU taxes
      (including any Excise Tax) imposed upon the Gross-Up Payment, the Executive
      retains (or has had paid to the Internal Revenue Service on his behalf) an
      amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed
      upon the Payments and (y) the product of any deductions disallowed because
      of
      the inclusion of the Gross-Up Payment in. the Executive's adjusted gross income
      and the highest applicable marginal rate of federal income taxation for the
      calendar year in which the Gross-Up Payment is to be made. For purposes of
      determining the amount of the Gross-Up Payment, the Executive shall be deemed
      to
      (i) pay federal income taxes at the highest marginal rates of federal income
      taxation for the calendar year in which the Gross-Up Payment is to be made,
      and
      (ii) pay applicable state and local income taxes at the highest marginal rate
      of
      taxation for the calendar year in which the Gross-Up Payment is to be made,
      net
      of the maximum reduction in federal income taxes which could be obtained from
      deduction of such state and local taxes. .

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.7.
       Resignation.
      Upon
      any termination of employment pursuant to this Article 5, the Executive shall
      be
      deemed to have resigned as an officer, and if he or she was then serving as
      a
      director of the Company, as a director, and if required by the Board, the
      Executive hereby agrees to immediately execute a resignation letter to the
      Board.

    

    5.8.
       Survival.
      The
      provisions of this Article 5 shall survive the termination of this Agreement,
      as
      applicable.

    

    6. Restrictive
      Covenants.

    

    6.1.
       Non-competition.
      At all
      times during the Restricted Period, the Executive shall not, directly or
      indirectly, engage in or have any interest in any sole proprietorship,
      corporation, company, partnership, association, venture or business or any
      other
      person or entity (whether as an employee, officer, director, partner, agent,
      security holder, creditor, consultant or otherwise) that directly or indirectly
      (or through any affiliated entity) competes with the Company's business (for
      this purpose, any business that engages in a competing business of the Company
      shall be deemed to compete with the Company); provided that such provision
      shall
      not apply to the Executive's ownership of Common Stock of the Company or the
      acquisition by the Executive, solely as an investment, of securities of any
      issuer that is registered under Section 12(b) or 12(g) of the Securities
      Exchange Act of 1934, as amended, and that are listed or admitted for trading
      on
      any United States national securities exchange or that are quoted on the
      National Association of Securities Dealers Automated Quotations System, or
      any
      similar system or automated dissemination of quotations of securities prices
      in
      common use, so long as the Executive does not control, acquire a controlling
      interest in or become a member of a group which exercises direct or indirect
      control of, more than five percent of any class of capital stock of such
      corporation. For purposes of this Agreement the "Restricted Period" shall be
      the
      period during which the Executive is employed by the Company and, if the
      Executive's employment with the Company is either terminated by the Company
      without Cause pursuant to Section 5.4, or by the Executive for Good Reason
      pursuant to Section 5.5c, and the Company has paid to the Executive all of
      amounts then payable to the Executive pursuant to Sections 5.4 or 5. 5c, as
      applicable, the three (3) year period immediately following the termination
      of
      the Executive's employment with the Company.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    6.2.  Confidential
      Information.
      The
      Executive shall not at any time divulge, communicate, use to the detriment
      of
      the Company or for the benefit of any other person or persons, or misuse in
      any
      way, any Confidential Information (as hereinafter defined) pertaining to the
      business of the Company. Any Confidential Information or data now or hereafter
      acquired by the Executive with respect to the business of the Company (which
      shall include, but not be limited to, information concerning the Company's
      financial condition, prospects, technology, customers, suppliers, sources of
      leads and methods of doing business) shall be deemed a valuable, special and
      unique asset of the Company that is received by the Executive in confidence
      and
      as a fiduciary, and Executive shall remain a fiduciary to the Company with
      respect to all of such information. For purposes of this Agreement,
      "Confidential Information" means information disclosed to the Executive or
      known
      by the Executive as a consequence of or through the unique position of his
      employment with the Company (including information conceived, originated,
      discovered or developed by the Executive) prior to or after the date hereof,
      and
      not generally or publicly known, about the Company or its business.
      Notwithstanding the foregoing, nothing herein shall be deemed to restrict the
      Executive from disclosing Confidential Information to promote the best
      'interests of the Company or to the extent required by law. .

    

    6.3.
       Nonsolicitation
      of Employees and Customers.
      At all
      times during the Restricted Period, as defined in Section 6. I hereof, the
      Executive shall not, directly or indirectly, for himself or for any other
      person, firm, corporation, partnership, association or other entity (a) employ,
      solicit, recruit or attempt to employ, solicit, or recruit any employee of
      the
      Company to leave the Company's employment, or (b) solicit or attempt to solicit
      any of the actual or targeted prospective customers or clients of the Company
      with whom the Executive had material contact or about whom the Executive learned
      Confidential Information on behalf of any person or entity in connection with
      any business that competes with the Business or the Company nor shall the
      Executive make known the names and addresses of such clients or any information
      relating in any manner to the Company's trade or business relationships with
      such customers, other than in connection with the performance of Executive's
      duties under this Agreement.

    

    6.4.  Ownership
      of Developments.
      All
      copyrights, patents, trade secrets, or other intellectual property rights
      associated with any ideas, concepts, techniques, inventions, processes, or
      works
      of authorship developed or created by Executive during the course of performing
      work for the Company or its clients (collectively, the "Work Product") shall
      belong exclusively to the Company and shall, to the extent possible, be
      considered a work made by the Executive for hire for the Company within the
      meaning of Title 17 of the United States Code. To the extent the Work Product
      may not be considered work made by the Executive for hire for the Company,
      the
      Executive agrees to assign, and automatically assign at the time of creation
      of
      the Work Product, without any requirement of further consideration, any right,
      title, or interest the Executive may have in such Work Product. Upon the request
      of the Company, the Executive shall take such further actions, including
      execution and delivery of instruments of conveyance, as may be appropriate
      to
      give full and proper effect to such assignment.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.5.
       Books
      and Records. All
      books, records, and accounts relating in any manner to the customers or clients
      of the Company, whether prepared by the Executive or otherwise corning into
      the
      Executive's possession, shall be the exclusive property of the Company and
      shall
      be returned immediately to the Company on termination of the Executive's
      employment hereunder or on the Company's request at any time.

    

    6.6.
       Definition
      of Company.
      Solely
      for purposes of this Article 6, the term "Company" also shall include any
      existing or future subsidiaries of the Company that are operating during the
      time periods described herein and any other entities that directly or
      indirectly, through one or more intermediaries, control, are controlled by
      or
      are under common control with the Company during the periods described
      herein.

    

    6.7.
       Acknowledgment
      by Executive.
      The
      Executive acknowledges and confirms that (a) the restrictive covenants contained
      in this Article 6 are reasonably necessary to protect the legitimate business
      interests of the Company, and (b) the restrictions contained in this Article
      6
      (including without limitation the length of the term of the provisions of this
      Article 6) are not overbroad, overlong, or unfair and are not the result of
      overreaching, duress or coercion of any kind. The Executive further acknowledges
      and confirms that his full, uninhibited and faithful observance of each of
      the
      covenants contained in this Article 6 will not cause him any undue hardship,
      financial or otherwise, and that enforcement of each of the covenants contained
      herein will not impair his ability to obtain employment commensurate with his
      abilities and on terms fully acceptable to him or otherwise to obtain income
      required for the comfortable support of him and his family and the satisfaction
      of the needs of his creditors. The Executive acknowledges and confirms that
      his
      special knowledge of the business of the Company is such as would cause the
      Company serious injury or loss if he were to use such ability and knowledge
      to
      the benefit of a competitor or were to compete with the Company in violation
      of
      the terms of this Article 6. The Executive further acknowledges that the
      restrictions contained in this Article 6 are intended to be, and shall be,
      for
      the benefit of and shall be enforceable by, the Company's successors and
      assigns.

    

    6.8.
       Reformation
      by Court.
      In the
      event that a court of competent jurisdiction shal1 determine that any provision
      of this Article 6 is invalid or more restrictive than permitted under the
      governing law of such jurisdiction, then only as to enforcement of this Article
      6 within the jurisdiction of such court, such provision shall be interpreted
      and
      enforced as if it provided for the maximum restriction permitted under such
      governing law.

    

    6.9.
       Extension
      of Time.
      If the
      Executive shall be in violation of any provision of this Article 6, then each
      time limitation set forth in this Article 6 shall be extended for a period
      of
      time equal to the period of time during which such violation or violations
      occur. If the Company seeks injunctive relief from such violation in any court,
      then the covenants set forth in this Article 6 shall be extended for a period
      of
      time equal to the pendency of such proceeding including all appeals by the
      Executive.

    

    6.10.
       Survival.
      The
      provisions of this Article 6 shall survive the termination of this Agreement,
      as
      applicable.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    7.
       Injunction.
      It is
      recognized and hereby acknowledged by the parties hereto that a breach by the
      Executive of any of the covenants contained in Article 6 of this Agreement
      will
      cause irreparable harm and damage to the Company, the monetary amount of which
      may be virtually impossible to ascertain. As a result, the Executive recognizes
      and hereby acknowledges that the Company shall be entitled to an injunction
      from
      any court of competent jurisdiction enjoining and restraining any violation
      of
      any or all of the covenants contained in Article 6 of this Agreement by the
      Executive or any of his affiliates, associates, partners or agents, either
      directly or indirectly, and that such right to injunction shall be cumulative
      and in addition to whatever other remedies the Company may possess.

    

    8.
       Attorney's
      Fees.
      Nothing
      contained herein shall be construed to prevent the Company or the Executive
      from
      seeking and recovering from the other damages sustained by either or both of
      them as a result of its or his breach of any term or provision of this
      Agreement. In the event that either party hereto brings suit for the collection
      of any damages resulting from, or the injunction of any action constituting,
      a
      breach of any of the terms or provisions of this Agreement, then the party
      found
      to be at fault shall pay all reasonable court costs and attorneys' fees of
      the
      other.

    

    9.
       Assignment.
      Neither
      party shall have the right to assign or delegate his fights or obligations
      hereunder, or any portion thereof, to any other person.

    

    10.
       Governing
      Law and Venue.
      This
      Agreement shall be governed by and construed and enforced in accordance with
      the
      internal laws of the State of Georgia. The venue for any action to enforce
      this
      Agreement shall be the state or federal courts located within Knoxville, Knox
      County Tennessee

    

    11.  Entire
      Agreement.
      This
      Agreement constitutes the entire agreement between the parties hereto with
      respect to the subject matter hereof and, upon its effectiveness, shall
      supersede all prior agreements, understandings and arrangements, both oral
      and
      written, between the Executive and the Company (or any of its affiliates) with
      respect to such subject matter. This Agreement may not be modified in any way
      unless by a written instrument signed by both the Company and the
      Executive.

    

    12.
       Notices.
      All
      notices required or permitted to be given hereunder shall be in writing and
      shall be personally delivered by courier, sent by registered or certified mail,
      return receipt requested or sent by confirmed facsimile transmission addressed
      as set forth herein. Notices personally delivered, sent by facsimile or sent
      by
      overnight courier shall be deemed given on the date of delivery and notices
      mailed in accordance with the foregoing shall be deemed given upon the earlier
      of receipt by the addressee, as evidenced by the return receipt thereof, or
      three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if
      to
      the Company, addressed to 3651 Baker Highway Huntsville TN 37756 Attention:
      Chairman of the Board, and (ii) if to the Executive, to his address as reflected
      on the payroll records of the Company, or to such other in accordance with
      this
      provision.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    13.
       Benefits;
      Binding Effect.
      This
      Agreement shall be for the benefit of and binding upon the parties hereto and
      their respective heirs, personal representatives, legal representatives,
      successors and, where permitted and applicable, assigns, including, without
      limitation, any successor to the Company, whether by merger, consolidation,
      sale
      of stock, sale of assets or otherwise.

    

    14.
       Severability.
      The
      invalidity of anyone or more of the words, phrases, sentences, clauses,
      provisions, sections or articles contained in this Agreement shall not affect
      the enforceability of the remaining portions of this Agreement. or any part
      thereof, all of which are inserted conditionally on their being valid in law,
      and, in the event that anyone or more of the words, phrases, sentences, clauses,
      provisions, sections or articles contained in this Agreement shall be declared
      invalid, this Agreement shall be construed as if such invalid word or words,
      phrase or phrases, sentence or sentences, clause or clauses, provisions or
      provisions, section or sections ot article or articles had not been inserted.
      If
      such invalidity is caused by length of time or size of area, or both, the
      otherwise invalid provision will be considered to be reduced to a period or
      area
      which would cure such invalidity.

    

    15.
       Waivers.
      The
      waiver by either party hereto of a breach or violation of any term or provision
      of this Agreement shall not operate nor be construed as a waiver of any
      subsequent breach or violation. .

    

    16.
       Damages.
      Nothing
      contained herein shall be construed to prevent the Company or the Executive
      from
      seeking and recovering from the other damages sustained by either or both of
      them as a result of its or his breach of any term or provision of this
      Agreement. In the event that either party hereto brings suit for the collection
      of any damages resulting from, or the injunction of any action constituting,
      a
      breach of any of the terms or provisions of this Agreement, then the party
      found
      to be at fault shall pay all reasonable court costs and attorneys' fees of
      the
      other.

    

    17.
       Section
      Headings.
      The
      article, section and paragraph headings contained in this Agreement are for
      reference purposes only and shall not affect in any way the meaning or
      interpretation of this Agreement.

    

    18.
       No
      Third Party Beneficiary.
      Nothing
      expressed or implied in this Agreement is intended, or shall be construed,
      to
      confer upon or give any person other than the Company, the parties hereto and
      their respective heirs, personal representatives, legal representatives,
      successors and permitted assigns, any rights or remedies under or by reason
      of
      this Agreement.

    

    19.  Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed to be an original but all of which together shall constitute one and
      the
      same instrument and agreement.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    20. Indemnification.

    

    a. 
      Subject
      to limitations imposed by law, the Company shall indemnify and hold harmless
      the
      Executive to the fullest extent permitted by law from and against any and all
      claims, damages, expenses (including attorneys' fees), judgments, penalties,
      fines, settlements, and all other liabilities incurred or paid by him in
      connection with the investigation, defense, prosecution, settlement or appeal
      of
      any threatened, pending or completed action, suit or proceeding, whether civil,
      criminal, administrative or investigative and to which the Executive was or
      is a
      party or is threatened to be made a party by reason of the fact that the
      Executive is or was an officer, employee or agent of the Company, or by reason
      of anything done or not done by the Executive in any such capacity or
      capacities, provided that the Executive acted in good faith, in a manner that
      was not grossly negligent or constituted willful misconduct and in a manner
      he
      reasonably believed to be in or not opposed to the best interests of the
      Company, and, with respect to any criminal action or proceeding, had no
      reasonable cause to believe his conduct was unlawful. The Company also shall
      pay
      any and all expenses (including attorney's fees) incurred by the Executive
      as a
      result of the Executive being called as a witness in connection with any matter
      involving the Company and/or any of its officers or directors.

    

    b.
       The
      Company shall pay any expenses (including attorneys' fees), judgments,
      penalties, fines, settlements, and other liabilities. incurred by the Executive
      in investigating, defending, settling or appealing any action, suit or
      proceeding described in this Section 20 in advance of the final disposition
      of
      such action, suit or proceeding. The Company shall promptly pay the amount
      of
      such expenses to the Executive, but in no event later than 10 days following
      the
      Executive's delivery to the Company of a written request for an advance pursuant
      to this Section 20, together with a reasonable accounting of such
      expenses.

    

    c.
       The
      Executive hereby undertakes and agrees to repay to the Company any advances
      made
      pursuant to this Section 20 if and to the extent that it shall ultimately be
      found that the Executive is not entitled to be indemnified by the Company for
      such amounts.

    

    d.
       The
      Company shall make the advances contemplated by this Section 20 regardless
      of
      the Executive's financial ability to make repayment, and regardless whether
      indemnification of the Indemnitee by the Company will ultimately be required.
      Any advances and undertakings to repay pursuant to this Section 20 shall be
      unsecured and interest-free.

    

    e. The
      provisions of this Section 20 shall survive the termination of this
      Agreement.

    

    [The
      remainder of this page has been intentionally left blank]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
      first above written,

    

    
      
        	 	
                COMPANY:

                

                Miller
                  Petroleum Inc

                

                

                By:
                  /s/ Deloy
                  Miller                                                
                  

                Name:
                  Deloy Miller 

                Title:
                  Chief Executive Officer

                

                EXECUTIVE:

                

                

                /s/
                  Ernest F.
                  Payne                                                  
                  

                Ernest
                  F. PayneEXHIBIT 10.136

[EXPLANATORY NOTE: THIS IS AN AMENDMENT TO THE ORIGINAL AGREEMENT EXECUTED JULY
25, 2003. ON AUGUST 27, 2003, THE PARTIES AMENDED THE AGREEMENT BY SUBSTITUTING
A NEW VERSION OF THE FIRST PAGE OF THE AGREEMENT WITH THE REVISED PARAGRAPH 1
AND SIGNING THE RIGHT MARGIN OF PARAGRAPH 1.]

                           HiENERGY TECHNOLOGIES, INC.

                      INTERNATIONAL DISTRIBUTION AGREEMENT

HiENERGY TECHNOLOGIES, INC.         PH:   949.757.0855
1601 ALTON PARKWAY, UNIT B          FAX:  949.757.1477
IRVINE, CA 92606

This AGREEMENT, dated as of the 25th day of July, 2003 , between HiENERGY
TECHNOLOGIES, INC., a Delaware USA corporation. (hereinafter called "Company")
and Electronic Equipment Marketing Company (EEMCO), a corporation duly
registered in Riyadh, Saudi Arabia (hereinafter called "Dealer").

This consideration of the mutual promises herein contained, it is agreed as
follows:

1. SCOPE OF AGREEMENT

Dealer agrees to act as a Dealer of Company on a exclusive basis and in that
capacity Dealer shall purchase for resale or arrange for the sale of car bomb
detection products and services provided by Company of a type listed as follows:
HiEnergy CarBomb Finder Beta-models 301, 302, and 303 (such products and
services hereinafter called the "Products"), within the territory described as
follows: Kingdom of Saudi Arabia Land Forces, Signal Corps, RSAF, Ministry of
Interior and Navy AND the Middle-East countries of Saudi Arabia, , Kuwait,
Qatar, Bahrain, Oman, UAE, Iraq, Yemen, Jordan, and Lebanon AND North African
countries of Sudan, Egypt, Morocco, Tunis, Algeria, and Mauritania (hereinafter
called the "Territory"), in accordance with the terms and conditions set forth
in this Agreement. Company will sell to Dealer, or on Dealer's order as herein
set forth.
                                                           /s/ Bogdan C. Maglich
                                                            /s/ Meqbil Al Tamimi
                                                                         8/27/03

2. DEALERS OBLIGATIONS

a. The Dealer agrees to promote the sale of the Products in the Territory
aggressively; to contact all potential users and customers and to sell as large
a quantity as possible; to avoid transactions which might call upon Company to
accept obligations inconsistent with Company's terms and conditions of sale or
at unreasonable prices; to refrain from representing, promoting, selling, or
arranging to sell products, accessories, or lines competitive with the Products
in the Territory within the term hereof; and to avoid any and all activity
inconsistent with the foregoing.

<PAGE>

b. Dealer will maintain a sales organization, conduct promotional activities,
advertise and distribute promotional material as may be mutually agreed upon
from time to time.

c. Dealer will supply Company with the resale prices for the Territory and will
provide assistance in contract negotiations if and when orders are placed by
Dealer for direct contracting by Company with Dealer's customers.

d. Dealer agrees to actively work on and use all reasonable efforts in securing
the release of bid bonds, performance bonds, bank letters of guarantee and
customer holdbacks in connection with orders placed by Dealer, or directly by
customers with Company.

In the event that the Dealer requires Company's assistance in securing the
releases of the above, Company will provide Dealer with reasonable support and
assistance in securing any such releases. In such event Dealer and Company with
mutually agree upon cost sharing for such assistance.

e. In situations where Company is selling directly to a foreign government or
government agency, Dealer will not represent Company unless Dealer warrants to
Company that neither Dealer nor any employee or sub-agent of Dealer holds an
official position with said government or government agency.

f. In order to further promote and support the sale of the Products, Company
may, from time to time, wish to provide technical, marketing, or other support
in the Territory to assist the Dealer organization in such activities. It is
envisioned that such support by Company shall be provided on a cost sharing
basis, to be mutually determined on a case-by-case basis.

g. In certain situations, in addition to the normal responsibilities set forth
above, Company may direct Dealer to perform additional services such as
assisting in market surveys; providing maintenance or technical services,
support and assistance; assisting Company personnel traveling in the Territory;
reviewing and editing sales literature for suitability in the Territory; and/or,
providing reasonable assistance to customers not within Dealer's Territory as
defined herein. Dealer agrees to provide such additional services or assistance,
for which Dealer may request reasonable compensation for such services or
assistance.

3. PRICES AND DISCOUNTS

a. Prices to Dealer shall be Company's suggested international list prices, less
international discounts, as may be established by Company from time to time.
Prices and discounts currently in effect have heretofore been conveyed to Dealer
(Appendix A),

b. For installation, or special products, services or projects where no
suggested list prices or discounts are available, Company shall quote to Dealer
the prices to be received by Company net of any discounts or allowances, and
such prices quoted to Dealer shall apply as between HiEnergy and Dealer
regardless of whether Company sells to Dealer, or receives an order directly
from a customer of Dealer, and regardless of the price quoted to, or agreed on
by contract with, such customer.

c. Dealer shall establish prices to customers and, in case of direct contract
between Company and a customer or Dealer, Company shall quote to Dealer's
customer the prices so established by Dealer. Dealer's discount shall be reduced
if prices to such customer are below Company's suggested international list
prices, it being understood that Dealer shall receive from any payments from the
customer only the excess over the net prices due to Company.

                                       2
<PAGE>

4. ORDERS AND ACCEPTANCE

All orders and contracts shall be forwarded to Company at its office in the
United States at the address specified herein. Company reserves the right in its
sole discretion to accept or reject any such order or contract, and normally
will not accept unless specifications, terms of payment, deliveries, terms and
conditions, credit and shipping arrangements are satisfactory to Company. Except
as otherwise agreed in writing, terms and conditions of sale, warranties,
express or implied, and provisions for damages shall be limited as set forth in
Company's Standard Terms and Conditions of Sale in effect at date of order
applicable to the Products.

5. PAYMENT

a. Payment of the price due Company shall be made in U.S. dollars by a letter of
credit acceptable to Company, payable in sixty (60) days from the date of
shipment against normal shipping documents at a United States bank. Advance
payments or letters of credit from Dealer's customer may be accepted if the
amount due Company or the full resale price is payable to Company, or to an
independent bank or escrow holder satisfactory to Company which guarantees
payment to Company upon its order of the net amount due Company. Any balance due
Dealer from Company or any such bank or escrow holder shall be remitted to
Dealer in accordance with the escrow agreement or as mutually agreed upon.

b. Company may hold back or retain payments due Dealer, or any portions of
Dealer's discount, in an amount necessary to offset Company's exposure for
bonds, guarantees, and customer payment retention which are outstanding.

c. Dealer will reimburse Company for all fees and expenses incurred by the
Company in the said Territory, including cable and confirmation fees incurred by
Company in connection with posting, filing, and maintenance of bonds and letters
of credit and letters of guarantee.

6. WARRANTY

Until otherwise stated, Product shall be sold as a beta-model and not be
warranted by Company unless defect occurs prior to delivery or can be determined
to be a preexisting fault particular to the single unit in question. This
warranty shall not apply to any defect, failure or damage caused by improper use
or improper or inadequate care. Company shall not be obligated to provide
service under this warranty if:
      a)  Damage has been caused by a failure to make a full and proper
          inspection of the Product (as described by the documentation enclosed
          with the Product at the time of shipment) on initial receipt of the
          Product following shipment;
      b)  Damage has been caused by the attempts of individuals, other than
          Company-certified staff, to repair or service the Product;
      c)  Damage has been caused by the improper use or a connection with
          incompatible equipment or product including software applications.

This limited warranty on defects shall remain valid for a period of twelve (12)
months beginning on the day of installation/acceptance of Product. Company shall
replace such defective equipment or parts at no cost to buyer, inclusive of
freight/customs, etc. Service and maintenance will be provided by the Dealer for
beta-models at the expense of the buyer, unless otherwise specified or agreed
upon at time of purchase or thereafter, given the proper amendment is made to
Company's Standard Terms and Conditions of Sale and agreed on by all parties.
Any disputes concerning the warranty shall be settled according to the
APPLICABLE LAW/DISPUTES subsection of this Agreement.

                                       3
<PAGE>

7. COSTS AND EXPENSES

Dealer shall bear all its own costs and expenses, including without limitation
all costs, fees, discounts, wages and salaries of any employees, agents,
sub-agents or experts, except as otherwise specifically authorized in advance in
writing by a duly authorized official of Company. Company's prices do not
include, and Dealer shall pay or cause to be paid, any and all expenses within
the territory related to sales taxes, any other local taxes, license or other
fees, assessments or other charges incident to sale of the Products or levied
against Company's products in Dealer's possession, whether or not title thereto
is in Dealer or Company.

8. SUB-DEALERS AND REPRESENTATIVES

Subject to Company's advance written approval which shall not be unreasonably
withheld, Dealer may appoint, sub-dealers or representatives within the
Territory provided that: (1) no such arrangement; or any consent of Company
thereto shall in any way modify this Agreement; (2) Dealer shall be fully
responsible for such sub-dealer or representatives, and any agreement between
them shall contain terms consistent with the terms hereof; and (3) Dealer shall
compensate them from its discounts without any cost or liability to Company. If
Dealer should authorize or direct Company to pay to any such sub-dealer any sums
due by Company to Dealer, Company shall deduct any such payment from the amounts
then due to Dealer.

9. REPORTS

Company will require Dealer to submit monthly written reports for each country
or other information with respect to Products sold in the Territory or other
relevant business information. Specifically, describe (1) the sales effort
during the month, (2) the potential buyers, and (3) those that were approached,
but were determined not to be potential buyers and the reasons why.

10. RESTRICTIONS ON EXCLUSIVITY

Dealer agrees that exclusivity shall be cancelled for any country, kingdom, or
other sovereign state within said Territory in which:

      1. During year one (1) of Agreement, ending August 1, 2004, there is
         either:

            a. No evident sales contact or effort within the first two (2)
               months; or

            b. No identifiable potential buyers with expressed interest within
               the first six (6) months; or

            c. No sales within year one (1).

                                       or;

                                       4
<PAGE>

      2. During year two (2) of Agreement, ending August 1, 2005, there are less
         than 3 sales.

11. TERM AND TERMINATION

a. This Agreement shall commence on the date specified above and shall remain in
effect for a period of one (1) year, unless terminated earlier as provided
herein. After the first year this Agreement shall automatically renew for
successive one year periods, unless either party expresses in writing its
intention not to in advance of the renewal date.

b. This Agreement may be terminated at any time by either party, effective upon
sixty (60) days written notice by either party to the other. Furthermore, either
party may terminate this Agreement immediately in the event that the other party
has materially breached any of its obligations under the Agreement; or, has been
adjudged a bankrupt, has become insolvent by any test, has filed any petition in
any court of bankruptcy or equivalent court for receivership, reorganization,
bankruptcy, arrangement or relief from debts or creditors, or for any other
relief whatsoever, has had any such petition filed against it, or has made any
assignment for the benefit of creditors or has any substantial part of its
assets subjected to any involuntary lien which is not removed within thirty (30)
days after notice thereof.. In addition Company may terminate the Agreement
effective immediately in the event that Dealer's authorized representative
identified to Company as representing Dealer in the Territory ceases to
represent Dealer.

c. Company agrees to fill all Dealer's orders accepted by Company prior to
termination to the extent the payment provisions hereof can be fully complied
with and Dealer agrees to accept shipment and make payment for such orders, all
in accordance with the provisions of this Agreement; to the same extent as if
termination had not occurred. In the event of termination by reason of cessation
of employment of Dealer's authorized representative, Company shall have the
right to terminate any and all further obligations unless it receives assurances
satisfactory to Company that further obligations of Dealer will be performed.

d. The parties recognize, and acknowledge, that certain provisions contained
herein may conflict with or differ from the laws of the Territory. To the extent
that any provision contained herein is different from, or conflicts with, any
laws of the Territory, the parties hereby waive their rights with respect to
such laws, because it is the express intent of the parties to relay exclusively
on the contractual provisions bargained for and agreed to herein.

12. INDIRECT SALES INTO THE TERRITORY AND HEADQUARTERS ACCOUNTS

a. Notwithstanding any other provisions hereof, this agreement shall not apply
to: (1) sales of services, equipment or goods other than the Products; (2)
United States Government purchases from Company for reshipment into the
Territory; (3) governmentally sponsored or funded military or AID-type programs
conducted under the auspices and/or assistance of the United States Government
or other international agencies, except where Dealer is legally permitted to and
does at the request of Company participate in such programs but in such even
subject to all conditions and limitations thereof.

b. If sales of the Products are made into the Territory by dealers located
outside the Territory, or sales originate in the Territory for delivery outside
the Territory, or sales result front promotional activity of more than one
authorized Company dealer or representative, Company may in its sole discretion
allocate total discount, or other compensation, among one or more of the dealers
or representatives responsible in whole or in part for such sales or orders, but
in no event shall the total amount thereof reduce the company's net price after
discounts below that specified to be received by Company in connection with such
orders or sales.

                                       5
<PAGE>

13. LIABILITIES AND DAMAGES

Company shall not be liable to Dealer, or to any third party claiming through
Dealer for the failure of performance of any obligation under this Agreement
except as specifically set forth herein, or otherwise agreed to in writing.
Additionally, Company shall not, under any circumstances, be liable hereunder
for indirect, special, incidental or consequential damages resulting from its
failure of performance. Any failure to perform any obligation under this
Agreement except payment of monies due, shall be excused if such failure is
caused by acts of God, acts of public authorities, wars and war measures, fires,
casualties, labor difficulties and strikes, shortages of material or fuel,
failure or delays of suppliers or carriers, shortage of transportation, or other
causes beyond the failing party's control.

14. INSTALLATION AND SPECIAL PROJECTS

It is recognized that from time to time certain orders or projects may call for
installation, construction, facilities or services of a continuing nature within
the Territory, where more than a sale of Company's standard products may be
specified or standard terms of sale, F.O.B. U.S.A., may be applied. For such
special projects, upon Company's written request or pursuant to special written
contract, Dealer may furnish additional services or facilities, serve as a prime
contractor, engage in a protracted pre sales effort, or provide continuing
support during a prolonged performance period, all upon terms and conditions to
be mutually agreed upon.

15. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES

a. It is expressly understood that this Agreement, and all obligations arising
hereunder, are subject to U.S. Government export control laws and regulations,
including without limitation, the requirement to obtain necessary approvals and
licenses prior to the acceptance of any orders, or the export of Products,
hereunder. Such shall also apply, by way of example only, to spare parts,
warranty items delivered by Company in connection with the Products and the
transfer or re-export of any such Products by Dealer or Dealer's customer
thereafter. During the term of this Agreement, and thereafter, any Products
purchased by or provided Dealer hereunder, including any technical data or
documentation pertaining thereto, shall not be sold, leased, released, assigned,
transferred, conveyed or in any manner disposed of, either directly or
indirectly, without the prior written approval of the United States Government,
in accordance with U.S. law.

b. Company agrees to use its best efforts to obtain all necessary U.S.
Government approvals or licenses for export of the Products hereunder. Dealer
agrees to use its best efforts to provide timely and accurate Non-transfer and
Use Certificates (including Form DSP-83 if necessary) to Company, as
appropriate, prior to Company's application for export license and submission of
this Agreement to the appropriate U.S. Government Department to secure the
appropriate export approval.

c. Company shall be excused from performance, and not be liable for damages,
including the assessment of late delivery penalties, for failure to deliver
Products hereunder resulting from the U.S. Government's denial or withdrawal of
approval to export Products to Dealer or Dealer's customers.

                                       6
<PAGE>

d. If Company has reason to believe that Dealer has misrepresented, or failed to
properly disclose, any fact with regard to end users to country of ultimate
destination, Company shall terminate this Agreement for default immediately and
discontinue all performance hereunder.

e. Dealer agrees to comply in all respects with the U.S. Foreign Corrupt
Practices Act of 1977 (FCPA), as amended, which provides generally that: under
no circumstances will foreign officials, representatives, political parties or
holders of public offices be offered, promised or paid any money, remuneration,
things of value, or provided any other benefit, direct or indirect, in
connection with obtaining or maintaining contracts or orders hereunder. When
sub-dealers, representatives or other individuals or organizations associated
with Dealer are required to perform any obligations related to or in connection
with this Agreement the substance of this provision shall be flowed-down and
included in any agreement between Dealer and any such sub-dealers and
representatives. The failure of Dealer to comply in all respects with the
provisions of the FCPA shall constitute a material breach by Dealer of its
obligations hereunder; and, shall entitle Company to terminate the Agreement
immediately.

16. SUBSIDIARIES OF COMPANY INCLUDED

For purposes of this Agreement the term "Company" shall include subsidiaries, if
any, of HiEnergy Technologies, Inc. which manufacture, sell, distribute, install
or service the Product.

17. APPLICABLE LAW/DISPUTES

This Agreement has been entered into and shall be governed in accordance with
the laws of the State of California, U.S.A. Any differences or disagreements
between the parties arising out of or in connection with the performance by
either party of its obligations under this Agreement will be resolved by mutual
agreement of the parties. Any such differences which cannot be resolved through
management intervention shall be deemed a dispute and be adjudicated by a court
of competent jurisdiction in the State of California. Venue shall lie in County
of Orange, California, and the parties shall submit to personal jurisdiction in
the State of California.

18. GENERAL PROVISIONS

a. Neither party is authorized to act for or bind the other, except as expressly
provided herein. Dealer agrees not to represent itself as an employee, agent, or
commission representative of Company or that its relationship with the Company
is other than that of Dealer, or to enter into any agreement or contract in the
place of Company. Dealer may use Company sales literature and documents
applicable to the Products consistent with compliance with it identification as
a Dealer.

b. Notice and payment to either party shall be sent by cable or telex (confirmed
by registered airmail) addressed to the parties at their addresses above set
forth or at such other address as a party may from time to time designate by
written notice. Any notice shall be deemed to have been given when sent.

c. This Agreement is personal to the parties hereto and shall not be assignable
by either party without the prior written consent of the other.

d. This Agreement shall be governed in all respects by the laws of the State of
California, and any actions for the resolution of disputes arising hereunder
shall be brought in a court of competent jurisdiction located in the State of
California, U.S.A.

                                       7
<PAGE>

e. Dealer agrees to insure at its expense, for the benefit of the Company at the
full insurable value, all Products in Dealers possession, covering all insurable
hazards including without limitation, fire, flood, tornado, collision, riot and
other civil disturbances.

f. The name HiEnergy Technologies, Inc. or any derivative thereof, and any
trademarks or logos associated with the Products are the property of the Company
and may be used only as authorized by Company in writing.

g. The Dealer will not, during or following the terms of this Agreement,
disseminate, disclose or publish information relating to the design or
manufacturing techniques employed by the Company in the production of the
Products, or information relating to research, development, marketing or sales
of the Products of the Company.

h. Should any of the Products incorporate software or firmware belonging to
Company, Company hereby grants to Dealer a non-exclusive license to use any such
software/firmware with the Products, in accordance with Company's standard
license agreement then in effect. Pursuant to the terms of such standard license
terms, Dealer shall have the right to sub-license a customer of the Products in
the normal use of the software/firmware with the Products.

i. This Agreement cancels and supersedes all prior agreements, understandings,
representations, written or oral, and contains the entire understanding and
agreement of the parties with respect to its subject matter. It states Dealer's
total right to discounts, compensation and reimbursement applicable to any
purchase and resale by Dealer or direct sale by the Company to any customer. No
amendment, modification, waiver or release with respect to this Agreement shall
be effective unless it is in writing signed by a duly authorized representative
of each party and no failure to enforce to take advantage of any provision
hereof shall constitute a waiver.

IN WITNESS WHEREOF, the parties hereto have set their hands the day and year
written.

EEMCO                                     HiEnergy Technologies, Inc. by

By /s/_Meqbil Al Tamimi                   /s/ Bogdan C. Maglich
  ---------------------------             ------------------------------
                                          Bogdan C. Maglich
                                          CEO

Date                                      Date
    -------------------------                 --------------------------

                                       8

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