OPERATING AGREEMENT

 
THIS OPERATING AGREEMENT, made and entered into this   dl day of September,
2008, by and between PHOENIX ENERGY RESOURCE COPORATION, a Nevada Corporation,
whose address is 1001 Bayhill Drive, 2nd Floor, Suite 200, San Bruno, CA 94066,
hereinafter referred to as "Leaseholder," and JMACK ENERGY, LLC, a Kentucky
limited liability company whose address is 706 Mount Olivet Road, Bowling Green,
KY 42101 hereinafter referred to as "Operator."

 
RECITALS

 
A.               Leaseholder has a certain interest in leases in Allen County,
Kentucky. These leases have been selected because of their potential for
production.
 
B.               Leaseholder through application of certain geological data,
plans an extensive exploration program for oil and/or gas production on the
above- mentioned leases with these wells being the subject of this Operating
Agreement.
 
C.               The Operator, by execution of this Agreement, represents and
warrants that he has substantial knowledge and experience in the business
matters and operations concerning the management and production oil and gas and
is capable of independently and competently managing and evaluating the risks
and merits of the production of oil and gas.
 
D.               Through continuing research and development of geological data,
Leaseholder and representatives will select the most appropriate drilling site
taking into consideration the input and knowledge of the Operator.
 
E.               The lease referred to herein are the leases recorded in the
Allen County Clerk's office which are fully described in Exhibit "A" attached
hereto and incorporated by reference.
 
NOW THEREFORE, for and in consideration of the mutual promises and benefits to
each of the parties, the sufficiency of which is hereby acknowledged and other
good and valuable consideration, the parties agree as follows:
 
ARTICLE I

 
The Leaseholder does hereby retain the Operator as an independent contractor for
the drilling, management and operation of the well(s) located on the leases
setout in Exhibit A and currently located in Allen County, Kentucky. In exchange
for the services to be rendered by the Operator, the Leaseholder shall pay to
Operator as compensation an amount equal to a five (5%) percent overriding
royalty interest of all oil and/or gas produced from the above mentioned leases
held by Leaseholder. Leaseholder shall pay to the Operator all sums due the
Operator from the sale of oil and/or gas within ten (10) days of Leaseholder's
receipt of the sale proceeds received from the oil and/or gas purchaser.
 
ARTICLE n WELL INTERESTS, DEPTH AND COSTS
 
1. Leaseholder shall determine, with input from the Operator, the depth said
well(s) shall be drilled which depth may range from approximately feet to
approximately feet, depending on the location of the well(s) and the geological
data pertaining thereto. Leaseholder shall exercise its sole judgment and
discretion in making such decisions.
 
2. The Leaseholder and Operator shall estimate and agree on the cost for the
drilling and completion of said well(s) before Operator commences any drilling
operation. The Leaseholder shall be responsible for paying all costs owed to
third party subcontractors, the hiring of which must be pre-approved by the
Leaseholder.
 
ARTICLE in COMPLETION
 
In the event Leaseholder determines that any given well(s) is capable of
commercial production of oil and/or gas, then the Operator shall commence
completion and put such well(s) on production within thirty (30) days of
drilling as weather permits.
 
ARTICLE IV OPERATION AND MANAGEMENT
 
1. Leaseholder hereby appoints and Operator hereby accepts the duties and
obligations of Operator. Operator shall have the power and authority to act and
function in this management capacity in all respects affecting the production of
said well.
 
2. The Operator shall oversee the drilling of any well(s) and their completion
as well as the maintenance and operation of the well(s) covered by this
agreement on a daily basis. The Operator shall provide the necessary services
and professional oversight for the successful commercial operation of the
well(s), including, but not limited to, the pumping and marketing all oil and/or
gas produced from the well(s), the performance of all maintenance and upkeep
necessary in order to produce the well(s), providing weekly and monthly
production reports, providing copies of the oil run tickets by the last day of
each month that oil is sold, and overseeing and insuring compliance with all
local, stale and federal regulations and the timely filing of documents
necessary for permits and bonds with the appropriate governmental entity.
Failure of Leaseholder to strictly enforce any of the provisions of this
Paragraph shall not constitute a waiver thereof.
 
3.               If the Leaseholder reasonably determines that an enhancement or
secondary recovery would be beneficial to any well(s), then Operator agrees to
perform and oversee the installation operation and maintenance of this system.
 
ARTICLE V TERMINATION
 
1. This Operating Agreement shall remain in full force so long as the weB(s) is
being drilled, completed, and as long as the well(s) remains a commercially
productive well(s) and the leases or any lease as set out in Exhibit A is in
full force and effect.
 
2. In the event the Leaseholder determines, in its sole discretion, that the
well(s) is not commercially productive, then it shall advise the Operator of
this decision and this Operating Agreement shall terminate as to that well(s).
 
3. In the event the well(s) does not prove to be commercially productive, then
the Leaseholder may, in its sole discretion, abandon the well(s) and the
Operator shall then take all steps necessary to plug this well(s) pursuant to
all federal, state and local regulations and to secure the release of all bonds
posted in association with the well(s).
 
4. The Leaseholder shall also have the right to terminate this Operating
Agreement if the Operator fails to perform or observe any term, covenant,
condition, or agreement required to be performed or observed by Operator under
this agreement. Leaseholder shall provide Operator written notice of any breach
and default and Operator shall then have ten (10) days to correct the default to
the satisfaction of the Leaseholder
 
5. If Operator : (a) becomes insolvent or becomes unable to pay its debts as
they mature, (b) makes an assignment for the benefit of creditors, (c) is the
subject of any proceeding instituted by or against it under any bankruptcy or
insolvency law alleging that it is insolvent or unable to pay its debts as they
mature, (d) commences an action or has commenced against it any
action   or   proceeding   seeking   any   reorganization,   merger,   arrangement,   composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future law, statute, or regulation, or (e) if any trustee, custodian, receiver,
or liquidator is appointed voluntarily or
involuntarily for it or any material part of its assets. This agreement shall
immediately terminate after Leaseholder provides Operator written
notice.  Leaseholder shall be entitled to recover its costs, including attorney
fees, for any damages it may incur as a result of Operator's breach of this
agreement.
 
ARTICLE VI MISCELLANEOUS.

 
1. Leaseholder covenants with Operator that it is, or will be, the true and
lawful owner of the leases to be drilled under this agreement, and that it has
good right and full power to assign and transfer the rights in the well site(s)
on such leases and that there has been no default of any covenants, agreements,
terms or conditions contained in the leases.
 
2. The laws of the Commonwealth of Kentucky shall govern the construction of
this agreement and the rights, remedies, and duties of the parties hereto. The
parties hereto agree that the state courts located in the Commonwealth of
Kentucky shall have exclusive jurisdiction with regard to any litigation
relating to this Agreement and the parties agree that venue shall be proper in
county in which the lease interest lies.
 
3.    Time shall be of the essence in the performance by the Operator of all of
Operator's covenants, obligations, and agreements under this agreement.
 
4.    The invalidity or unenforceability of any provision of this agreement
shall not affect or impair the validity or enforceability of any other
provisions of this agreement.
 
LEASEHOLDER:
 
PHOENIX ENERGY RESOURCE COPORATION
 
Rene Ronald Soullier, CEO
 
OPERATOR:
 
JMACK ENERGY, LLC
 
Mark A. Cornell, Member
 
STATE COUNTY OF
 
SUBSCRIBE, SWORN TO AND ACKNOWLEDGED Soullier, CEO of Phoenix Energy Resource
Corporation, a Nc behalf of said corporation, on this the     ■Z- Y day of Sepi
ie by, Rene Ronald •ration, acting by and on

 
NOTXRJ>UBLIC - STATE AT LARGE My Commission Expires:   r&ee. 37, Zoux

 
COMMONWEALTH OF KENTUCKY      )
)
COUNTY OF WARREN)

 
SUBSCRIBE, SWORN TO AND ACKNOWLEDGED before me by, Mark A. Cornell, member of
JMACK Energy, LLC, a Kentucky limited liability company, acting by and on behalf
of said limited liability company on this the 13\-S day of September; 2008.
 
: - STATE AT LARGE My Commission Expires:

 
4
PREPARED BY:
D. Bditey Walton
LANPHEAR 4 WALTON, P.L.L.C.
P.O. Box 128
Bowling Green, KY 42102-0128
(270) 843-5500