Document:

Exhibit 10.6

    Exhibit
      10.6

    

    AMENDMENT
      TO PURCHASE AND OPTION AGREEMENT

     

    THIS
      AMENDMENT TO PURCHASE AND OPTION AGREEMENT (“Amendment”) is made as of September
      14, 2004

    

    BETWEEN:

    

    QUANECO,
      L.L.C.,
      a
      limited liability company organized under the laws of the State of Oklahoma
      (hereinafter referred to as “Quaneco”)

    

    -
      and
      -

    

    FELLOWS
      ENERGY, LTD., a
      body
      corporate incorporated under the laws of the State of Nevada (hereinafter
      referred to as “Fellows Energy”)

    

    WHEREAS
      Quaneco and Fellows Energy entered into that certain PURCHASE AND OPTION
      AGREEMENT dated as of March 16, 2004 and desire to amend said PURCHASE AND
      OPTION AGREEMENT as provided herein;

    

    NOW
      THEREFORE in consideration of the premises and the mutual covenants and
      agreements hereinafter set forth, the Parties agree to amend the PURCHASE AND
      OPTION AGREEMENT as follows:

    

    1.
      The
      following definitions in the PURCHASE AND OPTION AGREEMENT are amended in their
      entirety to read as follows:

    

    
      	 	
              “o)
                “Option
                Period”
                means:

            

    

    

    
      	 	
              (i)

            	
              for
                Phase One of the Option Lands, as described in Schedule “A”, the period
                ending on July 31, 2005, provided that if the Phase One Drilling
                Program
                is not completed within such time, due to delays caused by Force
                Majeure
                situations, the Option Period will be extended for a concurrent period
                of
                time equal to the period of time the Force Majeure situation existed;
                and

            

    

    
      	 	
              (ii)

            	
              for
                Phase Two of the Option Lands, as described in Schedule “A”, the period in
                time from August 1, 2005 through April 30, 2006 provided that if
                the Phase
                Two Drilling Program is not completed within such time due to delays
                caused by Force Majeure situations, the Option Period will be extended
                for
                a concurrent period of time equal to the period of time the Force
                Majeure
                situation existed;”

            

    

    

    “t)
      “Phase
      One Drilling Program”
      means
      the expenditures and work previously undertaken by Fellows Energy under the
      PURCHASE AND OPTION AGREEMENT, of approximately One Million Dollars
      ($1,000,000.00), and in addition, the following. Fellows Energy will complete
      a
      study of the geology of the Utah/Wyoming Overthrust area. This study will enable
      Fellows to better evaluate the potential in various areas of the Quaneco
      acreage. Fellows Energy Ltd. will also run an RST log suite in the Crane 13-8
      well to correlate with the cores recovered from the Crane 6-7 and to correlate
      it with the Murphy Ridge 1-32 well. Following the geological study and RST
      log
      evaluation, Fellows and Quaneco will mutually determine whether a pilot program
      in the Murphy Ridge area is the most prudent course of action to take next
      or
      whether Fellows should explore to the south, north, and/or west of the Murphy
      Ridge area. Fellows agrees to drill and complete a five (5) well pod, with
      four
      (4) wells on 40 acre spacing and the center well on 20 acre spacing, in the
      mutually agreeable area around the Murphy Ridge. Quaneco and Fellows will also
      mutually determine a location to drill a core hole in the Coalville area where
      if the results justify it, Fellows will drill and complete the core hole. Both
      Quaneco and Fellows Energy Ltd. will negotiate an earn-in with Anadarko on
      the
      checkerboard in the Coalville area. During the period from September 16, 2004
      to
      July 31, 2005, the Phase I Drilling Program will complete the required
      obligations as set forth in this paragraph (t) which will require an expenditure
      of an additional $1.5 million (minimum) on the geology and logging described
      above and drilling and completing a pilot program and a coring program.” In the
      event that Fellows does not spend a minimum of an additional 1.5 million dollars
      on the Phase One Drilling Program by July 31, 2005, Fellows will pay the
      difference between $1.5 million and the amount spent by Fellows in the Phase
      One
      Drilling Program in cash to Quaneco on or before August 10, 2005.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “u)
      "Phase
      Two Drilling Program"
      means
      the expenditures by Fellows Energy after the Phase One Drilling Program of
      at
      least One Million Five Hundred Thousand Dollars ($1,500,000.00) to expand a
      pilot well program or expand the coring work performed in the Phase I Drilling
      Program.”

    

    “w)
      “Purchase
      Price 1”
      means
      the consideration payable by Fellows Energy to Quaneco, if Fellows Energy
      exercises the Option on Phase I of the Option Lands, of $20 per net mineral
      acre
      acquired of part or all of the Option Lands (maximum investment of 183,945
      net
      mineral acres x 65% x $20);”

    

    2.
      The
      following definition is added to the PURCHASE AND OPTION AGREEMENT for use
      in
      connection with this Amendment:

    

    “Shares”
      means shares of common stock of Fellows Energy Ltd., with the greatest rights
      of
      any capital stock which at the time of issuance shall either be fully registered
      shares or be the subject of a registration statement filed prior to issuance
      or
      filed within 90 days of issuance and diligently pursued by Fellows
      Energy. 

    

     

    3.
      The
      following provisions of the PURCHASE AND OPTION AGREEMENT are amended in their
      entirety to read as follows:

    

    “3.3 Phase
      One Drilling Program

    

    Fellows
      Energy agrees to complete the Phase One Drilling Program on or prior to July
      31,
      2005. The expenditure amount required by Fellows Energy in the Phase One
      Drilling Program will include all direct costs incurred by Fellows Energy’s
      staff or consultants (limited to ten (10%) percent of the total spent) to manage
      the Phase One Drilling Program, but will not include any of Fellows Energy’s
      overhead and managerial costs. All information, data, records and related
      materials from the Phase One Drilling Program activity will be the joint
      property of the Parties and Fellows Energy will provide such information to
      Quaneco as it is obtained. In the event Fellows Energy does not elect to
      exercise the Purchase Price 1, then any costs incurred and paid by Fellows
      Energy in the Phase One Drilling Program in excess of the additional $1,500,000
      will vest and inure to the sole benefit of Quaneco.”

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    

    “3.4 Phase
      Two Drilling Program

    

    In
      the
      event that Fellows Energy elects to exercise Purchase Price 1, Fellows Energy
      agrees to complete the Phase Two Drilling Program on or prior to April 30,
      2006.
      The expenditure amount required by Fellows Energy in the Phase Two Drilling
      Program will include all direct costs incurred by Fellows Energy’s staff or
      consultants (limited to ten (10%) percent of the total spent) to manage the
      Phase Two Drilling Program, but will not include any of Fellows Energy’s
      overhead and managerial costs. All information, data, records and related
      materials from the Phase Two Drilling Program activity will be the joint
      property of the Parties and Fellows Energy will provide such information to
      Quaneco as it is obtained In the event Fellows Energy does not elect to exercise
      the Purchase Price 2, then any costs incurred and paid by Fellows Energy in
      the
      Phase Two Drilling Program, including any costs incurred in excess of the One
      Million Five Hundred Thousand Dollars ($1,500,000.00), will vest and inure
      to
      the sole benefit of Quaneco.”

    

    

    “4.1 Exercise
      of the Option (s)

    

    
      	 	
              a)

            	
              On
                or before July 31, 2005, Fellows Energy may elect to exercise the
                Option
                to perform the Phase Two Drilling Program of the Option Lands. If
                Fellows
                Energy elects to exercise the Option to perform the Phase Two Drilling
                Program on the Option Lands, it must provide its election in writing
                to
                Quaneco and pay to Quaneco the Purchase Price 1, plus an additional
                200,000 Shares. On or before April 30, 2006, Fellows Energy may elect
                to
                exercise the Purchase Price 2 to acquire the Assets in the Option
                Lands,
                and it must provide its election in writing to Quaneco and pay to
                Quaneco
                the Purchase Price 2. Upon Fellows Energy electing to exercise the
                Option
                and concurrently with Fellows Energy paying the Purchase Price 2,
                Quaneco
                will deliver the assignments and other conveyances of the Assets
                in the
                Option Lands to Fellows Energy within ten business days, and Fellows
                Energy and Quaneco will thereafter participate in all future work
                on the
                Option Lands and Leases at their respective working interests, subject
                to
                the Operating Agreement, with Fellows Energy named as operator therein.
                In
                the event Fellows Energy does not elect to exercise the Option to
                pay
                Purchase Price 2 and to acquire the Assets in the Option Lands, then
                Fellows Energy’s right to acquire the Assets will terminate, Fellows
                Energy will no longer be the operator of any of the Option Lands
                and the
                Option Payment and any other payments and all information from the
                Drilling Program will be retained by
                Quaneco.”

            

    

    

    

    

    

    

    

    

    

    

    

    THIS
      SPACE INTENTIONALLY LEFT BLANK

     

    
      
         

      

      
        3

        
          

        

      

       

    

    4.
      As
      additional consideration for the execution of this Amendment, Fellows Energy
      shall pay to Quaneco the amount of $100,000 and issue to Quaneco 200,000 Shares
      on or before October 11, 2004. In addition, the operative date in Section 9.3
      of
      the PURCHASE AND OPTION AGREEMENT is hereby changed to be two years from
      September 16, 2004.

    

    

    IN
      WITNESS WHEREOF the Parties have executed this Agreement as of the day and
      year
      first above written.

     

    
      
        	
                QUANECO,
                  L.L.C.

              
	
                Per:
                  /s/
                  Paul J. Mysyk 

              
	
                

                Name:
                  Paul J. Mysyk

              
	
                Title:
                  Managing Member 

              

      

       

       

      
        	
                FELLOWS
                  ENERGY 

              
	
                Per:
                  /s/
                  George S. Young

              
	
                

                Name:
                  George S. Young 

              
	
                Title:
                  PresidentExhibit 10.7

    Exhibit
      10.7

    

    Fellows
      Energy Ltd.

    370
      Interlocken Blvd. Suite 400

    Broomfield,
      Colorado 80021

    (303)
      327-1525

    

    March
      1,
      2005

    

    Mr.
      Paul
      Mysyk 

    Quaneco,
      LLC

    35010
      Chadron Road

    Suite
      200

    Willoughby
      Hills, OH 44094

    

    SENT
      BY
      FAX TO: (440) 954-5026

    

    RE:
       Letter
      Agreement for Purchase of Interests in the Castle Rock and Kirby CBNG
      Projects

            
      Castle Rock Project: T3S-T8S, R45W and R47W-R49W Powder River County,
      Montana

            
      Kirby Project; T6S-T8S and R38E-R42E Big Horn and Custer Counties,
      Montana

    

    Dear
      Paul,

     

    Fellows
      Energy Ltd. ("Fellows") hereby offers to purchase a 12.5% working interest
      in
      the Castle Rock and Kirby Coal Bed Natural Gas Projects, inclusive of said
      working interest in 18 wells previously drilled in the Kirby Project (the
      "Properties"), on the terms and conditions listed in the attached Exhibit 1
      and
      within this Letter Agreement.

     

    This
      Letter Agreement and the offer made herein are based upon the terms and subject
      to the conditions set forth below. This offer has been made without the benefit
      of reviewing certain title and other information in your possession. We have
      prepared this offer using publicly available information and information
      provided by you. We hope to expeditiously review any additional information
      you
      may make available to us in order to remove certain of the conditions to which
      this Letter Agreement is subject. Other than such conditions, upon execution,
      this Letter Agreement is binding and sets forth the basic business terms and
      conditions under which the parties will proceed to formalize a definitive
      agreement for the purchase described above and close said purchase.

     

    Upon
      the
      execution of this Letter Agreement and for a period of 30 days thereafter (or
      such longer period as may be provided for in a definitive agreement) Quaneco
      will not entertain, solicit or encourage any inquiry or proposal, from any
      third
      party concerning the acquisition of the Properties. 

    This
      offer shall expire at 5:00 p.m. Mountain Time on Friday, March 4, 2005. Once
      executed by all parties, this Letter Agreement shall expire on April 10, 2005
      unless extended by the parties or superceded by a definitive
      agreement.

     

    This
      Letter Agreement may be superseded and replaced by a definitive purchase
      agreement incorporating all of the material terms hereof and such other terms
      as
      are customary in transactions of the type contemplated herein.

     

    PURCHASE
      PRICE: 

     

    Subject
      to the completion of due diligence and analyses of valuation, it is anticipated
      that the purchase price will be $4,850,000. The timing of, and form of,
      consideration paid will be in cash and stock of Fellows as described in Exhibit
      1 and as set forth below:

     

     

    
      
        
        

      

      
        1

        
          

        

      

       

    

     

    
      	 	
              1.

            	
              Fellows
                shall pay $4,850,000 in cash and stock for 12.5% working interest
                in the
                235,000 acres comprising the Properties, inclusive of a 12.5% working
                interest in 18 wells already drilled and completed in the Kirby Project.
                This purchase price includes $4,406,250 in consideration for lease
                rights
                and $443,750 in consideration for the 18 wells in the Kirby Project.
                It is
                agreed that Quaneco shall be responsible for paying all costs of
                drilling,
                completion and gathering infrastructure relating to the 12.5% working
                interest in the existing 18 wells in the Kirby Project.
                

            

    

    
      	 	
              2.

            	
              Of
                the total purchase price $3,850,000 shall be in the form of cash.
                Of this
                amount, $2,880,000 shall be due on April 10, 2005, and the balance
                of
                $970,000 shall be due on July 1, 2005.

            

    

    
      	 	
              3.

            	
              The
                balance of consideration due on April 10, 2005 of $1,000,000 shall
                be in
                the form of Fellows stock valued at $1.00 per share, or 1,000,000
                shares
                of Fellows stock. 

            

    

    
      	 	
              4.

            	
              If
                Fellows makes the payment of $2,880,000 in cash plus 1,000,000 shares
                of
                Fellows stock on April 10, but fails to make the payment of $1,000,000
                on
                or before July 1, 2005, it shall be deemed to have earned a 10% working
                interest in the Properties and the Kirby
                wells.

            

    

    
      	 	
              5.

            	
              Assignment
                of the 12.5% working interest in the properties from Quaneco to Fellows
                will be made within five business days of receipt of the final cash
                payment due July 1, 2005.

            

    

    

    CONDITIONS
      TO THE PURCHASE:

    The
      following are the conditions to which our offer is subject:

     

    
      
        	 	
                1. 

              	
                The
                  transaction is subject to the completion of an offering in connection
                  with
                  the transaction of at least an amount sufficient to pay the cash
                  portion
                  of the purchase price prior to April 10,
                  2005. 

              

      

      
        	 	
                2.

              	
                Any
                  purchase rights or rights of refusal to which the Properties are
                  subject
                  are waived; standard confidentiality and announcement procedures
                  shall
                  apply, as agreed by the parties and in accordance with normal industry
                  practice.

              

      

    

    
      	 	
              3.

            	
              Satisfactory
                legal due diligence verifying title interest in and to the
                Properties.

            

    

    
      	 	
              4.

            	
              Satisfactory
                completion of an analysis of the value of the Properties by Fellows
                or an
                independent and qualified third party appointed by Fellows showing
                that
                the value thereof is substantially equivalent to the market value
                of
                Fellows.

            

    

    
      	 	
              5.

            	
              Completion
                of the contemplated offering by Fellows in connection with the transaction
                in an. amount at least enabling the payment of the cash portion oft.be
                purchase price,

            

    

    
      	 	
              6.

            	
              Formal
                corporate and regulatory approvals as required by the
                parties.

            

    

    
      	 	
              7.

            	
              Closing
                to occur within five business days of completion of Fellows' offering,
                with the parties cooperating in good faith to engage investment bankers
                and brokers to complete the financing as soon as
                possible.

            

    

     

    If
      the
      foregoing meets with your approval, and you desire to proceed with the sale
      of
      your interest as described above, and as provided herein, please so indicate
      and
      affirm by executing a copy of this Letter Agreement and returning a copy to
      George S Young at Fellows Energy. 

    

    Sincerely,

     

    
      	
              Fellows
                Energy Ltd. 

            
	/s/ George S. Young 
	
              
                

              

              George
                S. Young 

            
	
              President
                & CEO 

            

    

     

    
      AGREED
        AND ACCEPTED THIS _____ DAY OF MARCH, 2005

       

       

      
        	By:
                /s/ Paul Mysyk
	
                
Paul
                Mysyk 
	
                Quaneco,
                  LLC

              
	 

      

      

    

     

    
 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

     

    Exhibit
      1 to Letter Agreement Dated March 1, 2005 

    between

    Fellows
      Energy Ltd. and Quaneco, LLC

     

     

    
 

    
      	Castle
              Rock 	 
	 	 
	Counter Party: 	Quaneco, L.L.C., an Oklahoma limited
              liability company 
	Acreage:   	140,000 acres, more or less (to be confirmed
              through due diligence)
	Purchase
              Price:    	$150 per net mineral acre or a total
              of
              $2,625,000 
	 	 
	Payment:   	Stock Portion:   541,237
              shares for $541,237 in consideration
	 	
              Cash
                Portion:    $2,083,763 

            
	 	 
	Location:  	T3S-T8S, R45W and R47W-R49W Powder River
              County, Montana 
	Principal Coals: 	Pawnee, Sawyer. and Flowers-Goodale
              coals 
	Other Coals:   	Cook, Lower Cook, Brewster-Arnold, Knobloch,
              Terret, and Stag coals. 
	Planned Drilling:   	Four or five pilot projects of 16 wells
              each
              are planned for the Castle
              Rock block in 2005 
	Drilling Budget: 	$562,000 for 12.5% working interest
              in 48
              wells 
	 	 
	
              Kirby 

            	 
	 	 
	Counter Party:   	Quaneco, L.L.C., an Oklahoma limited
              liability company 
	Acreage: 	95,000 acres, more or less (to be confirmed
              through due diligence) 
	Purchase Price:  	
              $150 per net mineral acre (or a total of
                $1,781,250),

              plus
                $443,750 for 12.5% working interest in 18 existing wells,

              or
                a total of $2,225,000

            
	Payment:   	
              Stock Portion:  458,763
                shares for $458,763 in consideration

            
	 	
              Cash
                Portion:    $1,766,237

            
	 	 
	Location:         	T6S-T8S and R38E-R42E Big Horn and Custer
              Counties, Montana 
	Principal Coals: 	Wall, Brewster-Arnold, Sawyer and
              Flowers-Goodale coals 
	Planned Drilling:   	48 are planned for the Kirby block in
              2005 
	Drilling
              Budget:    	$562,000 for 12.5% working interest
              in 48
              wells
	 	 

    

    

    
      
        	
                 

                Total
                  Cash Budget 

              	 
	 	 
	
                $2,083,763
                  for Castle Rock Purchase

              	 
	
                $1,766,237
                  for Kirby Purchase 

              	 
	
                $3,850,000
                  Total acquisition cost 

              	 
	 	 
	
                $562,000
                  for Castle Rock Drilling

              	 
	
                $562,000
                  for Kirby Drilling

                $1,124,000
                  Total drilling cost

              	 

      

      

    

    

    $4,974,000
      cash required for acquisition of 12.5 working interest in properties, inclusive
      of interest in 18 existing wells, and development of 12.5% working interest
      in
      96 wells

    

    Total
      Stock Portion of Transaction

    

    1,000,000
      shares issued as consideration for $1,000,000 of purchase
      price.

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