EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT, is entered to this 25th day of March, 2009, to be effective as of January 1, 2009 by and between ASPEN EXPLORATION CORPORATION , a public Delaware corporation, Suite 208, 2050 S. Oneida Street, Denver, CO 80224, (303) 639-9860 (“ASPEN”), and R. V. BAILEY , P.O. Box 1420 (current office is located at 515 Jerry St. but no mail is delivered to this address), Castle Rock, CO 80104, (303) 660-0966 (“BAILEY”), sometimes collectively referred to as the “Parties.”

WITNESSETH

     WHEREAS, ASPEN has employed BAILEY since ASPEN’S incorporation in 1980, a portion of which employment has been pursuant to an employment agreement which will expire on May 1, 2009; and

     WHEREAS, BAILEY has, as he has done in the past, once again served as ASPEN’S CEO beginning in February, 2008 following the stroke which removed Robert Cohan from service as Aspen’s president and CEO; and

     WHEREAS, ASPEN wishes to amend and extend the existing Employment Agreement for BAILEY to reflect the change in ASPEN’S management; and

     WHEREAS, ASPEN wishes to retain BAILEY in the capacity of Chief Executive Officer and Board Chairman, and BAILEY wishes to serve ASPEN in such capacities; and

     WHEREAS, the Parties wish to establish an Employment Plan for BAILEY.

     NOW, THEREFORE, in consideration of the conditions and covenants set forth, it is agreed that the prior employment agreement between ASPEN and BAILEY as amended and effective September 24, 2004 be and hereby is terminated, effective as of January 1, 2009, and it is further agreed as follows:

1.      EMPLOYMENT : Effective as of January 1, 2009 ASPEN hereby employs BAILEY, and BAILEY hereby agrees to be employed by ASPEN in the capacity of Chief Executive Officer in accordance with the terms of this Agreement. BAILEY and ASPEN hereby agree that BAILEY shall be employed by ASPEN for a period from January 1, 2009 through July 31, 2009 (the “EMPLOYMENT PERIOD”) unless such employment is terminated at an earlier date as described herein in Section 6.

          (a) This Agreement does not, however, terminate any rights that BAILEY may have (or which may be granted to him in the future) to participate in ASPEN’S “Amended Royalty and Working Interest Plan” or any stock options that BAILEY may own.

     (b)      Furthermore, this Agreement does not terminate any rights that BAILEY may have (or which may be granted to him in the future) to participate in other benefit programs or undertakings established by ASPEN for the benefit of employees, including any stock option plans adopted by ASPEN.

2.   DUTIES :

     (a)      During the EMPLOYMENT PERIOD, BAILEY shall be employed with the title of Chief Executive Officer and shall be subject to the general direction of the Board of Directors of ASPEN. Nothing in this Agreement prevents BAILEY and the Board of Directors of Aspen from discussing alternative positions as an employee or officer of, or consultant to, ASPEN in the future.

     (b)      BAILEY shall have such authority and responsibilities as are customarily performed by a person holding such positions. BAILEY shall devote time, attention and energies as needed to the business of ASPEN. No specific portion of BAILEY’S time shall be required. BAILEY shall not engage in any business or render services to others who directly or indirectly compete in direct or indirect competition with the oil and gas business of ASPEN. This provision shall not preclude BAILEY from making investments in any entity or continuing to maintain BAILEY’S existing investments in certain oil and gas properties as in the past. In addition, BAILEY may make other passive outside investments in oil and gas opportunities only after having first offered such investment opportunity to ASPEN. Such offer, and the response, may take the form of a phone call or electronic mail between BAILEY and ASPEN.

3.   COMPENSATION :

     (a)      ASPEN shall pay BAILEY a salary of $120,000.00 per year subject to such further salary increases and bonuses as the Board of Directors may determine to be appropriate. ASPEN shall deduct and withhold such sums as are required by statute and applicable laws for Social Security, taxes and otherwise, to be deducted or withheld from compensation. ASPEN shall pay such compensation to BAILEY in equal monthly installments in arrears after the deduction of appropriate taxes. During the term of this Agreement BAILEY shall also participate in corporate stock option plans in amounts deemed appropriate by the Board of Directors.

     (b)      ASPEN shall provide BAILEY the other benefits and expense reimbursement as described in Sections 4, 5 and 6, below.

4.    LOCATION :

     (a)      As long as ASPEN maintains a Denver office, ASPEN will not reimburse BAILEY for the use of any other office space. If ASPEN no longer maintains a staffed Denver office, ASPEN will pay to BAILEY a flat fee of $500 per month to reimburse him for expenses he may incur for rent and utilities for any office selected by BAILEY, regardless of BAILEY’S actual cost for providing office space he deems appropriate.

     (b)      During the term of this Agreement, BAILEY may continue to utilize office equipment (including computer equipment and accessories) that ASPEN owns and which are located at BAILEY’S office in Castle Rock, Colorado. Such equipment may be upgraded from time to time during the term of this Agreement. BAILEY may, at his option, purchase such office equipment from ASPEN at any time on or before July 31, 2009, for a total purchase price of $100.00.

     (c)      During the term of this Agreement, ASPEN will continue to provide BAILEY an office at ASPEN’S Denver office for so long as ASPEN maintains offices in Denver. The parties hereto recognize that this Denver office is also utilized for filing cabinets and by the auditors and other parties as needed and this use in the future is expected and approved.

     (d)      During the term of this Agreement ASPE