Exhibit 10(iii)


                            A.A.P.L. FORM 610 - 1989

                         MODEL FORM OPERATING AGREEMENT











                               OPERATING AGREEMENT

                                      DATED



                                February 18, 2003
                               -------------------
                                           year


            OPERATOR             North Finn, LLC
                    ------------------------------------------------


            CONTRACT AREA        American Oil & Gas Area
                          ------------------------------------------

            --------------------------------------------------------
            --------------------------------------------------------
            --------------------------------------------------------
            --------------------------------------------------------
            COUNTY OR PARISH OF               , STATE OF
                               ---------------          ------------






                                   COPYRIGHT 1989 - ALL RIGHTS RESERVED
                                   AMERICAN ASSOCIATION OF PETROLEUM
                                   LANDMEN, 4100 FOSSIL CREEK BLVD.
                                   FORT WORTH, TEXAS, 76137, APPROVED FORM.

                                           A.A.P.L. NO. 610 - 1989




<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989


                                TABLE OF CONTENTS

Article                              Title                                Page
-------                              -----                                ----
  I.  DEFINITIONS............................................................1
      -----------
 II.  EXHIBITS...............................................................1
      --------
III.  INTERESTS OF PARTIES...................................................2
      --------------------
      A.  OIL AND GAS INTERESTS: ............................................2
      B.  INTERESTS OF PARTIES IN COSTS AND PRODUCTION:......................2
      C.  SUBSEQUENTLY CREATED INTERESTS: ...................................2
 IV.  TITLES.................................................................2
      ------
      A.  TITLE EXAMINATION:.................................................2
      B.  LOSS OR FAILURE OF TITLE:..........................................3

         1.  Failure of Title................................................3

  V.  OPERATOR...............................................................4
      --------
      A.  DESIGNATION AND RESPONSIBILITIES OF OPERATOR:......................4
      B.  RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR: ....4
         1.  Resignation or Removal of Operator..............................4
         2.  Selection of Successor Operator.................................4
         3.  Effect of Bankruptcy............................................4
      C.  EMPLOYEES AND CONTRACTORS: ........................................4
      D.  RIGHTS AND DUTIES OF OPERATOR: ....................................4
         1.  Competitive Rates and Use of Affiliates.........................4
         2.  Discharge of Joint Account Obligations..........................4
         3.  Protection from Liens...........................................4
         4.  Custody of Funds................................................5
         5.  Access to Contract Area and Records.............................5
         6.  Filing and Furnishing Governmental Reports......................5
         7.  Drilling and Testing Operations.................................5
         8.  Cost Estimates..................................................5
         9.  Insurance.......................................................5

 VI.  DRILLING AND DEVELOPMENT...............................................5
      ------------------------
      B.  SUBSEQUENT OPERATIONS: ............................................5

         1.  Proposed Operations.............................................5
         2.  Operations by Less Than All Parties.............................6
         3.  Stand-By Costs..................................................7
         4.  Deepening.......................................................8
         5.  Sidetracking....................................................8
         6.  Order of Preference of Operations...............................8
         7.  Conformity to Spacing Pattern...................................9
         8.  Paying Wells....................................................9
      C.  COMPLETION OF WELLS; REWORKING AND PLUGGING BACK:..................9
         1.  Completion......................................................9
         2.  Rework, Recomplete or Plug Back.................................9
      D.  OTHER OPERATIONS:..................................................9
      E.  ABANDONMENT OF WELLS:..............................................9
         1.  Abandonment of Dry Holes........................................9
         2.  Abandonment of Wells That Have Produced........................10
         3.  Abandonment of Non-Consent Operations..........................10
      F.  TERMINATION OF OPERATIONS:........................................10
      G.  TAKING PRODUCTION IN KIND:........................................10
         (Option 1) Gas Balancing Agreement.................................10
         (Option 2) No Gas Balancing Agreement..............................11
VII.  EXPENDITURES AND LIABILITY OF PARTIES.................................11
      -------------------------------------
      A.  LIABILITY OF PARTIES: ............................................11
      B.  LIENS AND SECURITY INTERESTS:.....................................12
      C.  ADVANCES:.........................................................12
      D.  DEFAULTS AND REMEDIES:............................................12
         1.  Suspension of Rights...........................................13
         2.  Suit for Damages...............................................13
         3.  Deemed Non-Consent.............................................13
         4.  Advance Payment................................................13
         5.  Costs and Attorneys' Fees......................................13
      E.  RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES:.............13
      F.  TAXES:............................................................13
VIII. ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST......................14
      ------------------------------------------------
      A.  SURRENDER OF LEASES:..............................................14
      B.  RENEWAL OR EXTENSION OF LEASES:...................................14
      C.  ACREAGE OR CASH CONTRIBUTIONS:....................................14

                                        i

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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989


                                TABLE OF CONTENTS


      D.ASSIGNMENT;.......................................................15
      E.WAIVER OF RIGHTS TO PARTITION:....................................15

 IX.  INTERNAL REVENUE CODE ELECTION......................................15
      ------------------------------
  X.  CLAIMS AND LAWSUITS.................................................15
      -------------------
 XI.  FORCE MAJEURE.......................................................16
      -------------
XII.  NOTICES.............................................................16
      -------
XIII. TERM OF AGREEMENT...................................................16
      -----------------
XIV.  COMPLIANCE WITH LAWS AND REGULATIONS................................16
      ------------------------------------
      A.LAWS, REGULATIONS AND ORDERS:.....................................16
      B.GOVERNING LAW:....................................................16
      C.REGULATORY AGENCIES: .............................................16
 XV.  MISCELLANEOUS.......................................................17
      -------------
      A.EXECUTION:........................................................17
      B.SUCCESSORS AND ASSIGNS:...........................................17
      C.COUNTERPARTS:.....................................................17
      D.SEVERABILITY......................................................17
XVI.  OTHER PROVISIONS....................................................17
      ----------------


                                       ii

<PAGE>


A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

                               OPERATING AGREEMENT


      THIS AGREEMENT, entered into between                  North Finn, LLC,
                                          --------------------------------------

hereinafter designated and referred to as "Operator," and the signatory party or
parties other than Operator, sometimes hereinafter referred to individually as
"Non-Operator," and collectively as "Non-Operators."

                                   WITNESSETH:

      WHEREAS, the parties to this agreement are owners of Oil and Gas Leases
and/or Oil and Gas Interests in the land

identified in Exhibit "A," and the parties hereto have reached an agreement to
explore and develop these Leases and/or Oil and Gas Interests for the production
of Oil and Gas to the extent and as hereinafter provided,

      NOW, THEREFORE, it is agreed as follows:

                                   ARTICLE I.

                                   DEFINITIONS

      As used in this agreement, the following words and terms shall have the
meanings here ascribed to them:

      A.  The term "AFE" shall mean an Authority for Expenditure prepared by a
party to this agreement for the purpose of estimating the costs to be incurred
in conducting an operation hereunder.

      B.  The term "Completion" or "Complete" shall mean a single operation
intended to complete a well as a producer of Oil and Gas in one or more Zones,
including, but not limited to, the setting of production casing, perforating,
well stimulation and production testing conducted in such operation.

      C.  The term "Contract Area" shall mean all of the lands, Oil and Gas
Leases and/or Oil and Gas Interests intended to be developed and operated for
Oil and Gas purposes under this agreement.  Such lands, Oil and Gas Leases and
Oil and Gas Interests are described in Exhibit "A."

      D.  The term "Deepen" shall mean a single operation whereby a well is
drilled to an objective Zone below the deepest Zone in which the well was
previously drilled, or below the Deepest Zone proposed in the associated AFE,
whichever is the lesser.

      E.  The terms "Drilling Party" and "Consenting Party" shall mean a party
who agrees to join in and pay its share of the cost of any operation conducted
under the provisions of this agreement.

      F.  The term "Drilling Unit" shall mean the area fixed for the drilling of
one well by order or rule of any state or federal body having authority.  If a
Drilling Unit is not fixed by any such rule or order, a Drilling Unit shall be
the drilling unit as established by the pattern of drilling in the Contract Area
unless fixed by express agreement of the Drilling Parties.

      G.  The term "Drillsite" shall mean the Oil and Gas Lease or Oil and Gas
Interest on which a proposed well is to be located.

      H.  The term "Initial Well" shall mean the well required to be drilled by
the parties hereto as provided in Article VI.A.

      I.  The term "Non-Consent Well" shall mean a well in which less than all
parties have conducted an operation as provided in Article VI.B.2.

      J.  The terms "Non-Drilling Party" and "Non-Consenting Party" shall mean a
party who elects not to participate in a proposed operation.

      K.  The term "Oil and Gas" shall mean oil, gas, casinghead gas, gas
condensate, and/or all other liquid or gaseous hydrocarbons and other marketable
substances produced therewith, unless an intent to limit the inclusiveness of
this term is specifically stated.

      L.  The term "Oil and Gas Interests" or "Interests" shall mean unleased
fee and mineral interests in Oil and Gas in tracts of land lying within the
Contract Area which are owned by parties to this agreement.

      M.  The terms "Oil and Gas Lease," "Lease" and "Leasehold" shall mean the
oil and gas leases or interests therein covering tracts of land lying within the
Contract Area which are owned by the parties to this agreement.

      N.  The term "Plug Back" shall mean a single operation whereby a deeper
Zone is abandoned in order to attempt a Completion in a shallower Zone.

      O.  The term "Recompletion" or "Recomplete" shall mean an operation
whereby a Completion in one Zone is abandoned in order to attempt a Completion
in a different Zone within the existing wellbore.

      P.  The term "Rework" shall mean an operation conducted in the wellbore of
a well after it is Completed to secure, restore, or improve production in a Zone
which is currently open to production in the wellbore.  Such operations include,
but are not limited to, well stimulation operations but exclude any routine
repair or maintenance work or drilling, Sidetracking, Deepening, Completing,
Recompleting, or Plugging Back of a well.

      Q.  The term "Sidetrack" shall mean the directional control and
intentional deviation of a well from vertical so as to change the bottom hole
location unless done to straighten the hole or drill around junk in the hole to
overcome other mechanical difficulties.

      R.  The term "Zone" shall mean a stratum of earth containing or thought to
contain a common accumulation of Oil and Gas separately producible from any
other common accumulation of Oil and Gas.

      Unless the context otherwise clearly indicates, words used in the singular
include the plural, the word "person" includes natural and artificial persons,
the plural includes the singular, and any gender includes the masculine,
feminine, and neuter.

                                   ARTICLE II.

                                    EXHIBITS

      The following exhibits, as indicated below and attached hereto, are
incorporated in and made a part hereof:


 x A.   Exhibit "A," shall include the following information:


        (1) Description of lands subject to this agreement,

        (2) Restrictions, if any, as to depths, formations, or substances,

        (3) Parties to agreement with addresses and telephone numbers for notice
            purposes,

        (4) Percentages or fractional interests of parties to this agreement,

        (5) Oil and Gas Leases and/or Oil and Gas Interests subject to this
            agreement,

        (6) Burdens on production.



x  C.   Exhibit "C," Accounting Procedure.

x  D.   Exhibit "D," Insurance.




x  F.  Exhibit "F," Non-Discrimination and Certification of Non-Segregated
       Facilities.



                                      - 1 -

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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

      If any provision of any exhibit, except Exhibits "E," "F" and "G," is
inconsistent with any provision contained in the body of this agreement, the
provisions in the body of this agreement shall prevail.

                                  ARTICLE III.

                              INTERESTS OF PARTIES

A.  Oil and Gas Interests:

      If any party owns an Oil and Gas Interest in the Contract Area, that
Interest shall be treated for all purposes of this

agreement and during the term hereof as if it were covered by the form of Oil
and Gas Lease attached hereto as Exhibit "B,"

and the owner thereof shall be deemed to own both royalty interest in such lease
and the interest of the lessee thereunder.

B.  Interests of Parties in Costs and Production:

      Unless changed by other provisions, all costs and liabilities incurred in
operations under this agreement shall be borne and paid, and all equipment and
materials acquired in operations on the Contract Area shall be owned, by the
parties as their interests are set forth in Exhibit "A."  In the same manner,
the parties shall also own all production of Oil and Gas from the Contract Area
subject, however, to the payment of royalties and other burdens on production as
described hereafter.

      Regardless of which party has contributed any Oil and Gas Lease or Oil and
Gas Interest on which royalty or other burdens may be payable and except as
otherwise expressly provided in this agreement, each party shall pay or deliver,
or cause to be paid or delivered, all burdens on its share of the production
from the Contract Area up to, but not in excess of,

20% and shall indemnify, defend and hold the other parties free from any
liability therefor.

Except as otherwise expressly provided in this agreement, if any party has
contributed hereto any Lease or Interest which is burdened with any royalty,
overriding royalty, production payment or other burden on production in excess
of the amounts stipulated above, such party so burdened shall assume and alone
bear all such excess obligations and shall indemnify, defend and hold the other
parties hereto harmless from any and all claims attributable to such excess
burden.  However, so long as the Drilling Unit for the productive Zone(s) is
identical with the Contract Area, each party shall pay or deliver, or cause to
be paid or delivered, all burdens on production from the Contract Area due under
the terms of the Oil and Gas Lease(s) which such party has contributed to this
agreement, and shall indemnify, defend and hold the other parties free from any
liability therefor.

      No party shall ever be responsible, on a price basis higher than the price
received by such party, to any other party's lessor or royalty owner, and if
such other party's lessor or royalty owner should demand and receive settlement
on a higher price basis, the party contributing the affected Lease shall bear
the additional royalty burden attributable to such higher price.

      Nothing contained in this Article III.B. shall be deemed an assignment or
cross-assignment of interests covered hereby, and in the event two or more
parties contribute to this agreement jointly owned Leases, the parties'
undivided interests in said Leaseholds shall be deemed separate leasehold
interests for the purposes of this agreement.

C.  Subsequently Created Interests:

      If any party has contributed hereto a Lease or Interest that is burdened
with an assignment of production given as security for the payment of money, or
if, after the date of this agreement, any party creates an overriding royalty,
production payment, net profits interest, assignment of production or other
burden payable out of production attributable to its working interest hereunder,
such burden shall be deemed a "Subsequently Created Interest."  Further, if any
party has contributed hereto a Lease or Interest burdened with an overriding
royalty, production payment, net profits interests, or other burden payable out
of production created prior to the date of this agreement, and such burden is
not shown on Exhibit "A," such burden also shall be deemed a Subsequently
Created Interest to the extent such burden causes the burdens on such party's
Lease or Interest to exceed the amount stipulated in Article III.B. above.

      The party whose interest is burdened with the Subsequently Created
Interest (the "Burdened Party") shall assume and alone bear, pay and discharge
the Subsequently Created Interest and shall indemnify, defend and hold harmless
the other parties from and against any liability therefor.  Further, if the
Burdened Party fails to pay, when due, its share of expenses chargeable
hereunder, all provisions of Article VII.B. shall be enforceable against the
Subsequently Created Interest in the same manner as they are enforceable against
the working interest of the Burdened Party.  If the Burdened Party is required
under this agreement to assign or relinquish to any other party, or parties, all
or a portion of its working interest and/or the production attributable thereto,
said other party, or parties, shall receive said assignment and/or production
free and clear of said Subsequently Created Interest, and the Burdened Party
shall indemnify, defend and hold harmless said other party, or parties, from any
and all claims and demands for payment asserted by owners of the Subsequently
Created Interest.

                                   ARTICLE IV.

                                     TITLES

A.  Title Examination:

      Title examination shall be made on the Drillsite of any proposed well
prior to commencement of drilling operations and, if a majority in interest of
the Drilling Parties so request or Operator so elects, title examination shall
be made on the entire Drilling Unit, or maximum anticipated Drilling Unit, of
the well.   The opinion will include the ownership of the working interest,
minerals, royalty, overriding royalty and production payments under the
applicable Leases.   Each party contributing Leases and/or Oil and Gas Interests
to be included in the Drillsite or Drilling Unit, if appropriate, shall furnish
to Operator all abstracts (including federal lease status reports), title
opinions, title papers and curative material in its possession free of charge.
All such information not in the possession of or made available to Operator by
the parties, but necessary for the examination of the title, shall be obtained
by Operator.  Operator shall cause title to be examined by attorneys on its
staff or by outside attorneys.

Copies of all title opinions shall be furnished to each Drilling Party.  Costs
incurred by Operator in procuring abstracts, fees paid outside
attorneys and landmen for title examination (including preliminary,
supplemental, shut-in royalty opinions, division order title opinions and
curative work) and other direct charges as provided in Exhibit "C" shall be
borne by the Drilling Parties in the proportion that the interest of each
Drilling Party bears to the total interest of all Drilling Parties as such
interests appear in Exhibit "A." Operator shall make no charge for services
rendered by its staff attorneys or other personnel in the performance of the
above functions.

      Each party shall be responsible for securing curative matter and pooling
amendments or agreements required in connection with Leases or Oil and Gas
Interests contributed by such party.  Operator shall be responsible for the
preparation and recording of pooling designations or declarations and
communitization agreements as well as the conduct of hearings before
governmental agencies for the securing of spacing or pooling orders or any other
orders necessary or appropriate to the conduct of operations hereunder.  This
shall not prevent any party from appearing on its own behalf at such hearings.
Costs incurred by Operator, including fees paid to outside attorneys, which are
associated with hearings before governmental agencies, and which costs are
necessary and proper for the activities contemplated under this agreement, shall
be direct charges to the joint account and shall not be covered by the
administrative overhead charges as provided in Exhibit "C."


                                      - 2 -

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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

Operator shall make no charge for services rendered by its staff attorneys or
other personnel in the performance of the above functions.

      No well shall be drilled on the Contract Area until after (1) the title to
the Drillsite or Drilling Unit, if appropriate, has been examined as above
provided, and (2) the title has been approved by the examining attorney or title
has been accepted by all of the Drilling Parties in such well.



      3. Other Losses: All losses of Leases or Interests committed to this
agreement shall be joint losses and shall be borne by all parties in proportion
to their interests shown on Exhibit "A."  This shall include but not be limited
to the loss of any Lease or Interest through failure to develop or because
express or implied covenants have not been performed (other than performance
which requires only the payment of money), and the loss of any Lease by
expiration at the end of its primary term if it is not renewed or extended.
There shall be no readjustment of interests in the remaining portion of the
Contract Area on account of any joint loss.


                                      - 3 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

                                   ARTICLE V.

                                    OPERATOR

A.  Designation and Responsibilities of Operator:


   North Finn shall be the Operator of the Contract Area, and shall conduct
   -----------

and direct and have full control of all operations on the Contract Area as
permitted and required by, and within the limits of this agreement.  In its
performance of services hereunder for the Non-Operators, Operator shall be an
independent contractor not subject to the control or direction of the
Non-Operators except as to the type of operation to be undertaken in accordance
with the election procedures contained in this agreement.  Operator shall not be
deemed, or hold itself out as, the agent of the Non-Operators with authority to
bind them to any obligation or liability assumed or incurred by Operator as to
any third party.  Operator shall conduct its activities under this agreement as
a reasonable prudent operator, in a good and workmanlike manner, with due
diligence and dispatch, in accordance with good oilfield practice, and in
compliance with applicable law and regulation, but in no event shall it have any
liability as Operator to the other parties for losses sustained or liabilities
incurred except such as may result from gross negligence or willful misconduct.

B. Resignation or Removal of Operator and Selection of Successor:

      1. Resignation or Removal of Operator: Operator may resign at any time by
giving written notice thereof to Non-Operators. If Operator terminates its legal
existence, no longer owns an interest hereunder in the Contract Area, or is no
longer capable of serving as Operator, Operator shall be deemed to have resigned
without any action by Non-Operators, except the selection of a successor.
Operator may be removed only for good cause by the affirmative vote of
Non-Operators owning a majority interest based on ownership as shown on Exhibit
"A" remaining after excluding the voting interest of Operator; such vote shall
not be deemed effective until a written notice has been delivered to the
Operator by a Non-Operator detailing the alleged default and Operator has failed
to cure the default within thirty (30) days from its receipt of the notice or,
if the default concerns an operation then being conducted, within forty-eight
(48) hours of its receipt of the notice.  For purposes hereof, "good cause"
shall mean not only gross negligence or willful misconduct but also the material
breach of or inability to meet the standards of operation contained in Article
V.A. or material failure or inability to perform its obligations under this
agreement.

      Subject to Article VII.D.1., such resignation or removal shall not become
effective until 7:00 o'clock A.M. on the first day of the calendar month
following the expiration of ninety (90) days after the giving of notice of
resignation by Operator or action by the Non-Operators to remove Operator,
unless a successor Operator has been selected and assumes the duties of Operator
at an earlier date. Operator, after effective date of resignation or removal,
shall be bound by the terms hereof as a Non-Operator.  A change of a corporate
name or structure of Operator or transfer of Operator's interest to any single
subsidiary, parent or successor corporation shall not be the basis for removal
of Operator.

      2.  Selection of Successor Operator: Upon the resignation or removal of
Operator under any provision of this agreement, a successor Operator shall be
selected by the parties.  The successor Operator shall be selected from the
parties owning an interest in the Contract Area at the time such successor
Operator is selected.  The successor Operator shall be selected by the
affirmative vote of two (2) or more parties owning a majority interest based on
ownership as shown on Exhibit "A"; provided, however, if an Operator which has
been removed or is deemed to have resigned fails to vote or votes only to
succeed itself, the successor Operator shall be selected by the affirmative vote
of the party or parties owning a majority interest based on ownership as shown
on Exhibit "A" remaining after excluding the voting interest of the Operator
that was removed or resigned.  The former Operator shall promptly deliver to the
successor Operator all records and data relating to the operations conducted by
the former Operator to the extent such records and data are not already in the
possession of the successor operator.  Any cost of obtaining or copying the
former Operator's records and data shall be charged to the joint account.

      3.  Effect of Bankruptcy: If Operator becomes insolvent, bankrupt or is
placed in receivership, it shall be deemed to have resigned without any action
by Non-Operators, except the selection of a successor.  If a petition for relief
under the federal bankruptcy laws is filed by or against Operator, and the
removal of Operator is prevented by the federal bankruptcy court, all
Non-Operators and Operator shall comprise an interim operating committee to
serve until Operator has elected to reject or assume this agreement pursuant to
the Bankruptcy Code, and an election to reject this agreement by Operator as a
debtor in possession, or by a trustee in bankruptcy, shall be deemed a
resignation as Operator without any action by Non-Operators, except the
selection of a successor.  During the period of time the operating committee
controls operations, all actions shall require the approval of two (2) or more
parties owning a majority interest based on ownership as shown on Exhibit "A."
In the event there are only two (2) parties to this agreement, during the period
of time the operating committee controls operations, a third party acceptable to
Operator, Non-Operator and the federal bankruptcy court shall be selected as a
member of the operating committee, and all actions shall require the approval of
two (2) members of the operating committee without regard for their interest in
the Contract Area based on Exhibit "A."

C.  Employees and Contractors:

      The number of employees or contractors used by Operator in conducting
operations hereunder, their selection, and the hours of labor and the
compensation for services performed shall be determined by Operator, and all
such employees or contractors shall be the employees or contractors of Operator.

D.  Rights and Duties of Operator:

     1. Competitive Rates and Use of Affiliates: All wells drilled on the
Contract Area shall be drilled on a competitive contract basis at the usual
rates prevailing in the area. If it so desires, Operator may employ its own
tools and equipment in the drilling and completion of wells, but its charges
therefor shall not exceed the prevailing rates in the area and such work shall
be performed by


Operator under the same terms and conditions as are customary and usual in the
area in contracts of independent contractors who are doing work of a similar
nature.  All work performed or materials supplied by affiliates or related
parties of Operator shall be performed or supplied at competitive rates,
pursuant to written agreement, and in accordance with customs and standards
prevailing in  the industry.

      2. Discharge of Joint Account Obligations: Except as herein otherwise
specifically provided, Operator shall promptly pay and discharge expenses
incurred in the development and operation of the Contract Area pursuant to this
agreement and shall charge each of the parties hereto with their respective
proportionate shares upon the expense basis provided in Exhibit "C." Operator
shall keep an accurate record of the joint account hereunder, showing expenses
incurred and charges and credits made and received.

      3. Protection from Liens: Operator shall pay, or cause to be paid, as and
when they become due and payable, all accounts contractors and suppliers and
wages and salaries for services rendered or performed, and for materials
supplied on, to or in respect of the Contract Area or any operations for the
joint account thereof, and shall keep the Contract Area free from liens and


                                   - 4 -

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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

encumbrances resulting therefrom except for those resulting from a bona fide
dispute as to services rendered or materials supplied.

      4. Custody of Funds: Operator shall hold for the account of the
Non-Operators any funds of the Non-Operators advanced paid to the Operator,
either for the conduct of operations hereunder or as a result of the sale of
production from the Contract Area, and such funds shall remain the funds of the
Non-Operators on account they are advanced or paid until used for their intended
purpose or otherwise delivered to the Non-Operators or applied toward the
payment of debts as provided in Article VII.B.  Nothing in this paragraph shall
be construed to establish a fiduciary relationship between Operator and
Non-Operators for any purpose other than to account for Non-Operator funds as
herein specifically provided.  Nothing in this paragraph shall require the
maintenance by Operator of separate accounts for the funds of Non-Operators
unless the parties otherwise specifically agree.

     5. Access to Contract Area and Records: Operator shall, except as otherwise
provided herein, permit each Non-Operator or its duly authorized representative,
at the Non-Operator's sole risk and cost, full and free access at all reasonable
times to operations of every kind and character in which it is a Consenting
Party that are being conducted for the joint account on the Contract Area and to
the records of operations conducted thereon or production therefrom, including
Operator's books and records relating thereto. Such access rights shall not be
exercised in a manner interfering with Operator's conduct of an operation
hereunder and shall not obligate Operator to furnish any geologic or geophysical
data of an interpretive nature unless the cost of preparation of such data was
charged to the joint account. Operator will furnish to each Consenting Party
upon request copies of any and all reports and information obtained by Operator
in connection with production and related items, including, without limitation,
meter and chart reports, production purchaser statements, run tickets and
monthly gauge reports, but excluding purchase contracts and pricing information
to the extent not applicable to the production of the Non-Operator seeking the
information. Any audit of Operator's records relating to amounts expended and
the appropriateness of such expenditures shall be conducted in accordance with
the audit protocol specified in Exhibit "C." A Non-Consenting Party shall have
access to Operator's records only for the purpose of verifying the costs
incurred in such operation.

      6. Filing and Furnishing Governmental Reports: Operator will file, and
upon written request promptly furnish copies to each requesting Non-Operator not
in default of its payment obligations, all operational notices, reports or
applications required to be filed by local, State, Federal or Indian agencies or
authorities jurisdiction over operations hereunder. Each Non-Operator shall
provide to Operator on a timely basis all information necessary to Operator to
make such filings.

      7. Drilling and Testing Operations: The following provisions shall apply
to each well drilled hereunder, including but not limited to the Initial Well:

        (a) Operator will promptly advise Non-Operators of the date on which the
well is spudded, or the date on which drilling operations are commenced.

        (b) Operator will send to Non-Operators such reports, test results and
notices regarding the progress of operations on  the well as the Non-Operators
shall reasonably request, including, but not limited to, daily drilling reports,
completion reports, and well logs.

        (c) Operator shall adequately test all Zones encountered which may
reasonably be expected to be capable of producing Oil and Gas in paying
quantities as a result of examination of the electric log or any other logs or
cores or tests conducted hereunder.

      8. Cost Estimates: Upon request of any Consenting Party, Operator shall
furnish estimates of current and cumulative costs incurred for the joint account
at reasonable intervals during the conduct of any operation pursuant to this
agreement. Operator shall not be held liable for errors in such estimates so
long as the estimates are made in good faith.

      9. Insurance: At all times while operations are conducted hereunder,
Operator shall comply with the workers compensation law of the state where the
operations are being conducted; provided, however, that Operator may be a self-
insurer for liability under said compensation laws in which event the only
charge that shall be made to the joint account shall be as provided in Exhibit
"C."  Operator shall also carry or provide insurance for the benefit of the
joint account of the parties as outlined in Exhibit "D" attached hereto and made
a part hereof.  Operator shall require all contractors engaged in work on or for
the Contract Area to comply with the workers compensation law of the state where
the operations are being conducted and to maintain such other insurance as
Operator may require.

      In the event automobile liability insurance is specified in said Exhibit
"D," or subsequently receives the approval of the parties, no direct charge
shall be made by Operator for premiums paid for such insurance for Operator's
automotive equipment.

                                   ARTICLE VI.

                            DRILLING AND DEVELOPMENT


B.  Subsequent Operations:

      1.  Proposed Operations: If any party hereto should desire to drill any
well on the Contract Area other than the Initial Well, or if any party should
desire to Rework, Sidetrack, Deepen, Recomplete or Plug Back a dry hole or a
well no longer capable of producing in paying quantities in which such party has
not otherwise relinquished its interest in the proposed objective Zone under
this agreement, the party desiring to drill, Rework, Sidetrack, Deepen,
Recomplete or Plug Back such a well shall give written notice of the proposed


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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

operation to the parties who have not otherwise relinquished their interest in
such objective Zone under this agreement and to all other parties in the case of
a proposal for Sidetracking or Deepening, specifying the work to be performed,
the location, proposed depth, objective Zone and the estimated cost of the
operation. The parties to whom such a notice is delivered shall have thirty (30)
days after receipt of the notice within which to notify the party proposing to
do the work whether they elect to participate in the cost of the proposed
operation. If a drilling rig is on location, notice of a proposal to Rework,
Sidetrack, Recomplete, Plug Back or Deepen may be given by telephone and the
response period shall be limited to forty- eight (48) hours. Failure of a party
to whom such notice is delivered to reply within the period above fixed shall
constitute an election by that party not to participate in the cost of the
proposed operation. Any proposal by a party to conduct an operation conflicting
with the operation initially proposed shall be delivered to all parties within
the time and in the manner provided in Article VI.B.6.

     If all parties to whom such notice is delivered elect to participate in
such a proposed operation, the parties shall be contractually committed to
participate therein provided such operations are commenced within the time
period hereafter set forth and Operator shall, no later than one hundred eighty
(180)days after expiration of notice period of thirty (30) days (or as promptly
as practicable after the expiration of the forty-eight (48) hour period when a
drilling rig is on location, as the case may be), actually commence the proposed
operation and thereafter complete it with due diligence at the risk and expense
of the parties participating therein; provided, however, said commencement date
may be extended upon written notice of same by Operator to the other parties,
for a period of up to thirty (30) additional days if, in the sole opinion of
Operator, such additional time is reasonably necessary to obtain permits from
governmental authorities, surface rights (including rights-of-way) or
appropriate drilling equipment, or to complete title examination or curative
matter required for title approval or acceptance. If the actual operation has
not been commenced within the time provided (including any extension thereof as
specifically permitted herein or in the force majeure provisions of Article XI)
and if any party hereto still desires to conduct said operation, written notice
proposing same must be resubmitted to the other parties in accordance herewith
as if no prior proposal had been made. Those parties that did not participate in
the drilling of a well for which a proposal to Deepen or Sidetrack is made
hereunder shall, if such parties desire to participate in the proposed Deepening
or Sidetracking operation, reimburse the Drilling Parties in accordance with
Article VI.B.4. in the event of a Deepening operation and in accordance with
Article VI.B.5. in the event of a Sidetracking operation.

      2.  Operations by Less Than All Parties:

         (a) Determination of Participation. If any party to whom such notice is
delivered as provided in Article VI.B.1. or (Option No. 2) elects not to
participate in the proposed operation, then, in order to be entitled to the
benefits of this Article, the party or parties giving the notice and such other
parties as shall elect to participate in the operation shall, no later than one
hundred eighty (180) days after the expiration of the notice period of thirty
days (or as promptly as practicable after the expiration of the forty-eight (48)
hour period when a drilling rig is on location, as the case may be) actually
commence the proposed operation and complete it with due diligence. Operator
shall perform all work for the account of the Consenting provided, however, if
no drilling rig or other equipment is on location, and if Operator is a
Non-Consenting Party, the Consenting Parties shall either: (i) request Operator
to perform the work required by such proposed operation for the account of the
Consenting Parties, or (ii) designate one of the Consenting Parties as Operator
to perform such work. The rights and duties granted to and imposed upon the
Operator under this agreement are granted to and imposed upon the party
designated as Operator for an operation in which the original Operator is a
Non-Consenting Party. Consenting Parties, when conducting operations on the
Contract Area pursuant to this Article VI.B.2., shall comply with all terms and
conditions of this agreement.

     If less than all parties approve any proposed operation, the proposing
party, immediately after the expiration of the applicable notice period, shall
advise all Parties of the total interest of the parties approving such operation
and its recommendation as to whether the Consenting Parties should proceed with
the operation as proposed. Each Consenting Party, within forty-eight (48) hours
after delivery of such notice, shall advise the proposing party of its desire to
(i) limit participation to such party's as shown on Exhibit "A" or (ii) carry
only its proportionate part (determined by dividing such party's interest in the
Contract Area by the interests of all Consenting Parties in the Contract Area)
of Non-Consenting Parties' interests, or (iii) carry its proportionate part
(determined as provided in (ii)) of Non-Consenting Parties' interests together
with all or a portion of its proportionate part of any Non-Consenting Parties'
interests that any Consenting Party did not elect to take. Any interest of
Non-Consenting Parties that is not carried by a Consenting Party shall be deemed
to be carried by the party proposing the if such party does not withdraw its
proposal. Failure to advise the proposing party within the time required shall
be deemed an election under (i). In the event a drilling rig is on location,
notice may be given by telephone, and the time permitted for such a response
shall not exceed a total of forty-eight (48) hours. The proposing party, at its
election, may withdraw such proposal if there is less than 100% participation
and shall notify all parties of such decision within ten (10) days, or within
twenty-four (24) hours if a drilling rig is on location, expiration of the
applicable response period. If 100% subscription to the proposed operation is
obtained, the proposing party promptly notify the Consenting Parties of their
proportionate interests in the operation and the party serving as Operator shall
commence such operation within the period provided in Article VI.B.1., subject
to the same extension right as provided therein.

        (b) Relinquishment of Interest for Non-Participation. The entire cost
and risk of conducting such operations shall be borne by the Consenting Parties
in the proportions they have elected to bear same under the terms of the
preceding paragraph.  Consenting Parties shall keep the leasehold estates
involved in such operations free and clear of all liens and encumbrances of
every kind created by or arising from the operations of the Consenting Parties.
If such an operation results in a dry hole, then subject to Articles VI.B.6. and
VI.E.3., the Consenting Parties shall plug and abandon the well and restore the
surface location at their sole cost, risk and expense; provided, however, that
those Non-Consenting Parties that participated in the drilling, Deepening or
Sidetracking of the well shall remain liable for, and shall pay, their
proportionate shares of the cost of plugging and abandoning the well and
restoring the surface location insofar only as those costs were not increased by
the subsequent operations of the Consenting Parties.  If any well drilled,
Reworked, Sidetracked, Deepened, Recompleted or Plugged Back under the
provisions of this Article results in a well capable of producing Oil and/or Gas
in paying quantities, the Consenting Parties shall Complete and equip the well
to produce at their sole cost and risk, and the well shall then be turned over
to Operator (if the Operator did not conduct the operation) and shall be
operated by it at the expense and for the account of the Consenting Parties.
Upon commencement of operations for the drilling, Reworking, Sidetracking,
Recompleting, Deepening or Plugging Back of any such well by Consenting Parties
in accordance with the provisions of this Article, each Non-Consenting Party
shall be deemed to have relinquished to Consenting Parties, and the Consenting
Parties shall own and be entitled to receive, in proportion to their respective
interests, all of such Non-Consenting Party's interest in the well and share of
production therefrom or, in the case of a Reworking, Sidetracking, Deepening,


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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

Recompleting or Plugging Back, or a Completion pursuant to Article VI.C.1.
Option No. 2, all of such Non-Consenting Party's interest in the production
obtained from the operation in which the Non-Consenting Party did not elect to
participate.  Such relinquishment shall be effective until the proceeds of the
sale of such share, calculated at the well, or market value thereof if such
share is not sold (after deducting applicable ad valorem, production, severance,
and excise taxes, royalty, overriding royalty and other interests not excepted
by Article III.C. payable out of or measured by the production from such well
accruing with respect to such interest until it reverts), shall equal the total
of the following:

     (i) 100 % of each such Non-Consenting Party's share of the cost of any
newly acquired surface equipment beyond the wellhead connections (including but
not limited to stock tanks, separators, treaters, pumping equipment and piping),
plus 100% of each such Non-Consenting Party's share of the cost of operation of
the well commencing with first production and continuing until each such
Non-Consenting Party's relinquished interest shall revert to it under other
provisions of this Article, it being agreed that each Non-Consenting Party's
share of such costs and equipment will be that interest which would have been
chargeable to such Non-Consenting Party had it participated in the well from the
beginning of the operations; and

     (ii) 200 % of (a) that portion of the costs and expenses of drilling,
Reworking, Sidetracking, Deepening, Plugging Back, testing, Completing, and
Recompleting, after deducting any cash contributions received under Article
VIII.C., and of (b) that portion of the cost of newly acquired equipment in the
well (to and including the wellhead connections), which would have been
chargeable to such Non-Consenting Party if it had participated therein. The
foregoing does not apply to Coalbed Methane Wells (as defined in Paragraph 1 of
Section I of the Accounting Procedure attached as Exhibit C to this agreement)
that are located in the Powder River Basin. For the consequences to a
Non-Consenting Party in respect of operations in a Coalbed Methane Well in the
Powder River Basin, see Article XVI.C of this agreement.


      Notwithstanding anything to the contrary in this Article VI.B., if the
well does not reach the deepest objective Zone described in the notice proposing
the well for reasons other than the encountering of granite or practically
impenetrable substance or other condition in the hole rendering further
operations impracticable, Operator shall give notice thereof to each
Non-Consenting Party who submitted or voted for an alternative proposal under
Article VI.B.6. to drill the well to a shallower Zone than the deepest objective
Zone proposed in the notice under which the well was drilled, and each such Non-
Consenting Party shall have the option to participate in the initial proposed
Completion of the well by paying its share of the cost of drilling the well to
its actual depth, calculated in the manner provided in Article VI.B.4. (a).  If
any such Non-Consenting Party does not elect to participate in the first
Completion proposed for such well, the relinquishment provisions of this Article
VI.B.2. (b) shall apply to such party's interest.

     (c) Reworking, Recompleting or Plugging Back. An election not to
participate in the drilling, Sidetracking or Deepening of a well shall be deemed
an election not to participate in any Reworking or Plugging Back operation
proposed in such a well, or portion thereof, to which the initial non-consent
election that is conducted at any time prior to full recovery by the Consenting
Parties of the Non-Consenting Party's recoupment amount. Similarly, an election
not to participate in the Completing or Recompleting of a well shall be deemed
an election not to participate in any Reworking operation proposed in such a
well, or portion thereof, to which the initial non-consent election applied that
is conducted at any time prior to full recovery by the Consenting Parties of the
Non-Consenting Party's recoupment amount. Any such Reworking, Recompleting or
Plugging Back operation conducted during the recoupment period shall be deemed
part of the cost of operation of said well and there shall be added to the sums
to be recouped by the Consenting Parties __100_____% of that portion of the
costs of the Reworking, Recompleting or Plugging Back operation which would have
been chargeable to such Non-Consenting Party had it participated therein. If
such a Reworking, Recompleting or Plugging Back operation is proposed during
such recoupment period, the provisions of this Article VI.B. shall be applicable
as between said Consenting Parties in said well.

      (d) Recoupment Matters. During the period of time Consenting Parties are
entitled to receive Non-Consenting Party's share of production, or the proceeds
therefrom, Consenting Parties shall be responsible for the payment of all ad
valorem, production, severance, excise, gathering and other taxes, and all
royalty, overriding royalty and other burdens applicable to Non-Consenting
Party's share of production not excepted by Article III.C.

      In the case of any Reworking, Sidetracking, Plugging Back, Recompleting or
Deepening operation, the Consenting Parties shall be permitted to use, free of
cost, all casing, tubing and other equipment in the well, but the ownership of
all such equipment shall remain unchanged; and upon abandonment of a well after
such Reworking, Sidetracking, Plugging Back, Recompleting or Deepening, the
Consenting Parties shall account for all such equipment to the owners thereof,
with each party receiving its proportionate part in kind or in value, less cost
of salvage.

      Within ninety (90) days after the completion of any operation under this
Article, the party conducting the operations for the Consenting Parties shall
furnish each Non-Consenting Party with an inventory of the equipment in and
connected to the well, and an itemized statement of the cost of drilling,
Sidetracking, Deepening, Plugging Back, testing, Completing, Recompleting, and
equipping the well for production; or, at its option, the operating party, in
lieu of an itemized statement of such costs of operation, may submit a detailed
statement of monthly billings.  Each month thereafter, during the time the
Consenting Parties are being reimbursed as provided above, the party conducting
the operations for the Consenting Parties shall furnish the Non-Consenting
Parties with an itemized statement of all costs and liabilities incurred in the
operation of the well, together with a statement of the quantity of Oil and Gas
produced from it and the amount of proceeds realized from the sale of the well's
working interest production during the preceding month.  In determining the
quantity of Oil and Gas produced during any month, Consenting Parties shall use
industry accepted methods such as but not limited to metering or periodic well
tests.  Any amount realized from the sale or other disposition of equipment
newly acquired in connection with any such operation which would have been owned
by a Non-Consenting Party had it participated therein shall be credited against
the total unreturned costs of the work done and of the equipment purchased in
determining when the interest of such Non-Consenting Party shall revert to it as
above provided; and if there is a credit balance, it shall be paid to such Non-
Consenting Party.

      If and when the Consenting Parties recover from a Non-Consenting Party's
relinquished interest the amounts provided for above, the relinquished interests
of such Non-Consenting Party shall automatically revert to it as of 7:00 a.m.
on the day following the day on which such recoupment occurs, and, from and
after such reversion, such Non-Consenting Party shall own the same interest in
such well, the material and equipment in or pertaining thereto, and the
production therefrom as such Non-Consenting Party would have been entitled to
had it participated in the drilling, Sidetracking, Reworking, Deepening,
Recompleting or Plugging Back of said well.  Thereafter, such Non-Consenting
Party shall be charged with and shall pay its proportionate part of the further
costs of the operation of said well in accordance with the terms of this
agreement and Exhibit "C" attached hereto.

      3. Stand-By Costs: When a well which has been drilled or Deepened has
reached its authorized depth and all tests have been completed and the results
thereof furnished to the parties, or when operations on the well have been
otherwise terminated pursuant to Article VI.F., stand-by costs incurred


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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

 pending response to a party's notice proposing a Reworking, Sidetracking,


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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

Deepening, Recompleting, Plugging Back or Completing operation in such a well
(including the period required under Article VI.B.6. to resolve  competing
proposals) shall be charged and borne as part of the drilling or Deepening
operation just completed.  Stand-by costs subsequent to all parties responding,
or expiration of the response time permitted, whichever first occurs, and prior
to agreement as to the participating interests of all Consenting Parties
pursuant to the terms of the second grammatical paragraph of Article VI.B.2.
(a), shall be charged to and borne as part of the proposed operation, but if the
proposal is subsequently withdrawn because of insufficient participation, such
stand-by costs shall be allocated between the Consenting Parties in the
proportion each Consenting Party's interest as shown on Exhibit "A" bears to the
total interest as shown on Exhibit "A" of all Consenting Parties.

      In the event that notice for a Sidetracking operation is given while the
drilling rig to be utilized is on location, any party may request and receive up
to five (5) additional days after expiration of the forty-eight hour response
period specified in Article VI.B.1. within which to respond by paying for all
stand-by costs and other costs incurred during such extended response period;
Operator may require such party to pay the estimated stand-by time in advance as
a condition to extending the response period.  If more than one party elects to
take such additional time to respond to the notice, standby costs shall be
allocated between the parties taking additional time to respond on a day-to-day
basis in the proportion each electing party's interest as shown on Exhibit "A"
bears to the total interest as shown on Exhibit "A" of all the electing parties.

      4. Deepening: If less than all parties elect to participate in a drilling,
Sidetracking, or Deepening operation proposed pursuant to Article VI.B.1., the
interest relinquished by the Non-Consenting Parties to the Consenting Parties
under Article VI.B.2. shall relate only and be limited to the lesser of (i) the
total depth actually drilled or (ii) the objective depth or Zone of which the
parties were given notice under Article VI.B.1. ("Initial Objective").  Such
well shall not be Deepened beyond the Initial Objective without first complying
with this Article to afford the Non-Consenting Parties the opportunity to
participate in the Deepening operation.

      In the event any Consenting Party desires to drill or Deepen a Non-Consent
Well to a depth below the Initial Objective, such party shall give notice
thereof, complying with the requirements of Article VI.B.1., to all parties
(including Non-Consenting Parties).  Thereupon, Articles VI.B.1. and 2. shall
apply and all parties receiving such notice shall have the right to participate
or not participate in the Deepening of such well pursuant to said Articles VI.B.
1. and 2.  If a Deepening operation is approved pursuant to such provisions, and
if any Non-Consenting Party elects to participate in the Deepening operation,
such Non-Consenting party shall pay or make reimbursement (as the case may be)
of the following costs and expenses.

      (a) If the proposal to Deepen is made prior to the Completion of such well
as a well capable of producing in paying quantities, such Non-Consenting Party
shall pay (or reimburse Consenting Parties for, as the case may be) that share
of costs and expenses incurred in connection with the drilling of said well from
the surface to the Initial Objective which Non-Consenting Party would have paid
had such Non-Consenting Party agreed to participate therein, plus the
Non-Consenting Party's share of the cost of Deepening and of participating in
any further operations on the well in accordance with the other provisions of
this Agreement; provided, however, all costs for testing and Completion or
attempted Completion of the well incurred by Consenting Parties prior to the
point of actual operations to Deepen beyond the Initial Objective shall be for
the sole account of Consenting Parties.

      (b) If the proposal is made for a Non-Consent Well that has been
previously Completed as a well capable of producing in paying quantities, but is
no longer capable of producing in paying quantities, such Non-Consenting Party
shall pay (or reimburse Consenting Parties for, as the case may be) its
proportionate share of all costs of drilling, Completing, and equipping said
well from the surface to the Initial Objective, calculated in the manner
provided in paragraph (a) above, less those costs recouped by the Consenting
Parties from the sale of production from the well.  The Non-Consenting Party
shall also pay its proportionate share of all costs of re-entering said well.
The Non-Consenting Parties' proportionate part (based on the percentage of such
well Non-Consenting Party would have owned had it previously participated in
such Non-Consent Well) of the costs of salvable materials and equipment
remaining in the hole and salvable surface equipment used in connection with
such well shall be determined in accordance with Exhibit "C."  If the Consenting
Parties have recouped the cost of drilling, Completing, and equipping the well
at the time such Deepening operation is conducted, then a Non-Consenting Party
may participate in the Deepening of the well with no payment for costs incurred
prior to re-entering the well for Deepening

      The foregoing shall not imply a right of any Consenting Party to propose
any Deepening for a Non-Consent Well prior to the drilling of such well to its


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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

Initial Objective without the consent of the other Consenting Parties as
provided in Article VI.F.

      5. Sidetracking: Any party having the right to participate in a proposed
Sidetracking operation that does not own an interest in the affected wellbore at
the time of the notice shall, upon electing to participate, tender to the
wellbore owners its proportionate share (equal to its interest in the
Sidetracking operation) of the value of that portion of the existing wellbore
to be utilized as follows:

         (a) If the proposal is for Sidetracking an existing dry hole,
reimbursement shall be on the basis of the actual costs incurred in the initial
drilling of the well down to the depth at which the Sidetracking operation is
initiated.

         (b) If the proposal is for Sidetracking a well which has previously
produced, reimbursement shall be on the basis of such party's proportionate
share of drilling and equipping costs incurred in the initial drilling of the
well down to the depth at which the Sidetracking operation is conducted,
calculated in the manner described in Article VI.B.4(b) above.  Such party's
proportionate share of the cost of the well's salvable materials and equipment
down to the depth at which the Sidetracking operation is initiated shall be
determined in accordance with the provisions of Exhibit "C."

     6. Order of Preference of Operations. Except as otherwise specifically
provided in this agreement, if any party desires to propose the conduct of an
operation that conflicts with a proposal that has been made by a party under
this Article VI, such party shall have fifteen (15) days from delivery of the
initial proposal, in the case of a proposal to drill a well or to perform an
operation on a well where no drilling rig is on location, or twenty-four (24)
hours from delivery of the initial proposal, if a drilling rig is on location
for the well on which such operation is to be conducted, to deliver to all
parties entitled to participate in the proposed operation such party's
alternative proposal, such alternate proposal to contain the same information
required to be included in the initial proposal. Each party receiving such
proposals shall elect by delivery of notice to Operator within five (5) days
after expiration of the proposal period, or within twenty-four (24) hours if a
drilling rig is on location for the well that is the subject of the proposals,
to participate in one of the competing proposals. Any party not electing within
the time required shall be deemed not to have voted. The proposal receiving the
vote of parties owning the largest aggregate percentage interest of the parties
voting shall have priority over all other competing proposals; in the case of a
tie vote, the initial proposal shall


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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

prevail. Operator shall deliver notice of such result to parties entitled to
participate in the operation within five (5) days after expiration of the
election period (or within twenty-four (24) hours if a drilling rig is on
location). Each party shall then have two (2) days (or twenty-four (24) hours if
a rig is on location) from receipt of such notice to elect by delivery of notice
to Operator to participate in such operation or to relinquish interest in the
affected well pursuant to the provisions of Article VI.B.2.; failure by a party
to deliver notice within such period shall be deemed an election not to
participate in the prevailing proposal.

      7. Conformity to Spacing Pattern. Notwithstanding the provisions of this
Article VI.B.2., it is agreed that no wells shall be proposed to be drilled to
or Completed in or produced from a Zone from which a well located elsewhere on
the Contract is producing, unless such well conforms to the then-existing well
spacing for such Zone.

      8. Paying Wells. No party shall conduct any Reworking, Deepening, Plugging
Back, Completion, Recompletion, or Sidetracking operation under this agreement
with respect to any well then capable of producing in paying quantities except
the consent of all parties that have not relinquished interests in the well at
the time of such operation.

C.  Completion of Wells; Reworking and Plugging Back:

     1. Completion: Without the consent of all parties, no well shall be
drilled, Deepened or Sidetracked, except any well Deepened or Sidetracked
pursuant to the provisions of Article VI.B.2. of this agreement. Consent to the
drilling, Deepening or Sidetracking shall include:

  X    Option No. 1: All necessary expenditures for the drilling, Deepening or
       Sidetracking, testing, Completing and equipping of the well, including
       necessary tankage and/or surface facilities.

     2. Rework, Recomplete or Plug Back: No well shall be Reworked, Recompleted
or Plugged Back except a well Reworked, or Plugged Back pursuant to the
provisions of Article VI.B.2. of this agreement. Consent to the Reworking,
Recompleting or Plugging Back of a well shall include all necessary expenditures
in conducting such operations and Completing and equipping of said well,
including necessary tankage and/or surface facilities.

D.  Other Operations:

     Operator shall not undertake any single project reasonably estimated to
require an expenditure in excess of Fifty Thousand Dollar ($ 50,000.00 ) except
in connection with the drilling, Sidetracking, Reworking, Deepening, Completing,
Recompleting or Plugging Back of a well that has been previously authorized by
or pursuant to this agreement; provided, however, that, in case of explosion,
fire, flood or other sudden emergency, whether of the same or different nature,
Operator may take such steps and incur such expenses as in its opinion are
required to deal with the emergency to safeguard life and property but Operator,
as promptly as possible, shall report the emergency to the other parties. If
Operator prepares an AFE for its own use, Operator shall furnish any
Non-Operator so requesting an information copy thereof for ay single project
costing in excess of Fifty Thousand Dollars ($50,000.00). Any party who has not
relinquished its interest in a well shall have the right to propose that
Operator perform repair work or undertake the installation of artificial lift
equipment or ancillary production facilities such as salt water disposal wells
or to conduct additional work with respect to a well drilled hereunder or other
similar project (but not including the installation of gathering lines or other
transportation or marketing facilities, the installation of which shall be
governed by separate agreement between the parties) reasonably estimated to
require an expenditure in excess of the amount first set forth above in this
Article VI.D. (except in connection with an operation required to be proposed
under Articles VI.B.1. or VI.C.1. Option No. 2, which shall be governed
exclusively be those Articles). Operator shall deliver such proposal to all
parties entitled to participate therein. If within thirty (30) days thereof
Operator secures the written consent of any party or parties owning at least 75%
of the interests of the parties entitled to participate in such operation,
each party having the right to participate in such project shall be bound by the
terms of such proposal and shall be obligated to pay its proportionate share of
the costs of the proposed project as if it had consented to such project
pursuant to the terms of the proposal.

E.  Abandonment of Wells:

   1.  Abandonment of Dry Holes: Except for any well drilled or Deepened
pursuant to Article VI.B.2., any well which has been drilled or Deepened under
the terms of this agreement and is proposed to be completed as a dry hole shall

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           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

not be plugged and abandoned without the consent of all parties. Should
Operator, after diligent effort, be unable to contact any party, or should any
party fail to reply within forty-eight (48) hours after delivery of notice of
the proposal to plug and abandon such well, such party shall be deemed to have
consented to the proposed abandonment. All such wells shall be plugged and
abandoned in accordance with applicable regulations and at the cost, risk and
expense of the parties who participated in the cost of drilling or Deepening
such well. Any party who objects to plugging and abandoning such well by notice
delivered to Operator within forty-eight (48) hours after delivery of notice of
the proposed plugging shall take over the well as of the end of such forty-eight
(48) hour notice period and conduct further operations in search of Oil and/or
Gas subject to the provisions of Article VI.B.; failure of such party to provide
proof reasonably satisfactory to Operator of its financial capability to conduct
such operations or to take over the well within such period or thereafter to
conduct operations on such well or plug and abandon such well shall entitle
Operator to retain or take possession of the well and plug and abandon the well.
The party taking over the well shall indemnify Operator (if Operator is an
abandoning party) and the other abandoning parties against liability for any
further operations conducted on such well except for the costs of plugging and
abandoning the well and restoring the surface, for which the abandoning parties
shall remain proportionately liable.

   2. Abandonment of Wells That Have Produced: Except for any well in which a
Non-Consent operation has been conducted hereunder for which the Consenting
Parties have not been fully reimbursed as herein provided, any well which has
been completed as a producer shall not be plugged and abandoned without the
consent of all parties.  If all parties consent to such abandonment, the well
shall be plugged and abandoned in accordance with applicable regulations and at
the cost, risk and expense of all the parties hereto.  Failure of a party to
reply within sixty (60) days of delivery of notice of proposed abandonment shall
be deemed an election to consent to the proposal.  If, within sixty (60) days
after delivery of notice of the proposed abandonment of any well, all parties do
not agree to the abandonment of such well, those wishing to continue its
operation from the Zone then open to production shall be obligated to take over
the well as of the expiration of the applicable notice period and shall
indemnify Operator (if Operator is an abandoning party) and the other abandoning
parties against liability for any further operations on the well conducted by
such parties.  Failure of such party or parties to provide proof reasonably
satisfactory to Operator of their financial capability to conduct such
operations or to take over the well within the required period or thereafter to
conduct operations on such well shall entitle operator to retain or take
possession of such well and plug and abandon the well.

      Parties taking over a well as provided herein shall tender to each of the
other parties its proportionate share of the value of the well's salvable
material and equipment, determined in accordance with the provisions of Exhibit
"C," less the estimated cost of salvaging and the estimated cost of plugging and
abandoning and restoring the surface; provided, however, that in the event the
estimated plugging and abandoning and surface restoration costs and the
estimated cost of salvaging are higher than the value of the well's salvable
material and equipment, each of the abandoning parties shall tender to the
parties continuing operations their proportionate shares of the estimated excess
cost.  Each abandoning party shall assign to the non-abandoning parties, without
warranty, express or implied, as to title or as to quantity, or fitness for use
of the equipment and material, all of its interest in the wellbore of the well
and related equipment, together with its interest in the Leasehold insofar and
only insofar as such Leasehold covers the right to obtain production from that
wellbore in the Zone then open to production.  If the interest of the abandoning
party is or includes and Oil and Gas Interest, such party shall execute and
deliver to the non-abandoning party or parties an oil and gas lease, limited to
the wellbore and the Zone then open to production, for a term of one (1) year
and so long thereafter as Oil and/or Gas is produced from the Zone covered
thereby, such lease to be on the form attached as Exhibit "B." The assignments
or leases so limited shall encompass the Drilling Unit upon which the well is
located. The payments by, and the assignments or leases to, the assignees shall
be in a ratio based upon the relationship of their respective percentage of
participation in the Contract Area to the aggregate of the percentages of
participation in the Contract Area of all assignees. There shall be no
readjustment of interests in the remaining portions of the Contract Area.

      Thereafter, abandoning parties shall have no further responsibility,
liability, or interest in the operation of or production from the well in the
Zone then open other than the royalties retained in any lease made under the
terms of this Article.  Upon request, Operator shall continue to operate the
assigned well for the account of the non-abandoning parties at the rates and
charges contemplated by this agreement, plus any additional cost and charges
which may arise as the result of the separate ownership of the assigned well.
Upon proposed abandonment of the producing Zone assigned or leased, the assignor

                                     - 10 -

<PAGE>

           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

or lessor shall then have the option to repurchase its prior interest in the
well (using the same valuation formula) and participate in further operations
therein subject to the provisions hereof.

      3. Abandonment of Non-Consent Operations: The provisions of Article VI.E.
1. or VI.E.2. above shall be applicable as between Consenting Parties in the
event of the proposed abandonment of any well excepted from said Articles;
provided, however, no well shall be permanently plugged and abandoned unless and
until all parties having the right to conduct further operations therein have
been notified of the proposed abandonment and afforded the opportunity to elect
to take over the well in accordance with the provisions of this Article VI.E.;
and provided further, that Non-Consenting Parties who own an interest in a
portion of the well shall pay their proportionate shares of abandonment and
surface restoration cost for such well as provided in Article VI.B.2.(b).

F.  Termination of Operations:

      Upon the commencement of an operation for the drilling, Reworking,
Sidetracking, Plugging Back, Deepening, testing, Completion or plugging of a
well, including but not limited to the Initial Well, such operation shall not be
terminated without consent of parties bearing _____% of the costs of such
operation; provided, however, that in the event granite or other practically
impenetrable substance or condition in the hole is encountered which renders
further operations impractical, Operator may discontinue operations and give
notice of such condition in the manner provided in Article VI.B.1, and the
provisions of Article VI.B. or VI.E. shall thereafter apply to such operation,
as appropriate.

G.  Taking Production in Kind:


     directly from the purchaser thereof for its share of all production.


  X       Option No. 2: No Gas Balancing Agreement:

        Each party shall take in kind or separately dispose of its proportionate
        share of all Oil and Gas produced from the Contract Area, exclusive of
        production which may be used in development and producing operations and
        in preparing and treating Oil and Gas for marketing purposes and
        production unavoidably lost.  Any extra expenditures incurred in the
        taking in kind or separate disposition by any party of its proportionate
        share of the production shall be borne by such party.  Any party taking
        its share of production in kind shall be required to pay for only its
        proportionate share of such part of Operator's surface facilities which
        it uses.

        Each party shall execute such division orders and contracts as may be
        necessary for the sale of its interest in production from the Contract
        Area, and, except as provided in Article VII.B., shall be entitled to
        receive payment directly from the purchaser thereof for its share of all
        production.

        If any party fails to make the arrangements necessary to take in kind or
        separately dispose of its proportionate share of the Oil and/or Gas
        produced from the Contract Area, Operator shall have the right, subject
        to the revocation at will by the party owning it, but not the
        obligation, to purchase such Oil and/or Gas or sell it to others at any
        time and from time to time, for the account of the non-taking party.
        Any such purchase or sale by Operator may be terminated by Operator upon
        at least ten (10) days written notice to the owner of said production
        and shall be subject always to the right of the owner of the production
        upon at least ten (10) days written notice to Operator to exercise its
        right to take in kind, or separately dispose of, its share of all Oil
        and/or Gas not previously delivered to a purchaser; provided, however,
        that the effective date of any such revocation may be deferred at
        Operator's election for a period not to exceed ninety (90) days if
        Operator has committed such production to a purchase contract having a
        term extending beyond such ten (10) -day period.  Any purchase or sale
        by Operator of any other party's share of Oil and/or Gas shall be only
        for such reasonable periods of time as are consistent with the minimum
        needs of the industry under the particular circumstances, but in no
        event for a period in excess of one (1) year.

        Any such sale by Operator shall be in a manner commercially reasonable
        under the circumstances, but Operator shall have no duty to share any
        existing market or transportation arrangement or to obtain a price or
        transportation fee equal to that received under any existing market or
        transportation arrangement.  The sale or delivery by Operator of a
        non-taking party's share of production under the terms of any existing
        contract of Operator shall not give the non-taking party any interest in
        or make the non-taking party a party to said contract.  No purchase of
        Oil and Gas and no sale of Gas shall be made by Operator without first
        giving the non-taking party ten days written notice of such intended
        purchase or sale and the price to be paid or the pricing basis to be
        used. Operator shall give notice to all parties of the first sale of Gas
        from any well under this Agreement.

        All parties shall give timely written notice to Operator of their Gas
        marketing arrangements for the following month, excluding price, and
        shall notify Operator immediately in the event of a change in such
        arrangements. Operator shall maintain records of all marketing
        arrangements, and of volumes actually sold or transported, which records
        shall be made available to Non-Operators upon reasonable request.

                                  ARTICLE VII.

                      EXPENDITURES AND LIABILITY OF PARTIES

A.  Liability of Parties:

   The liability of the parties shall be several, not joint or collective. Each
party shall be responsible only for its obligations, and shall be liable only
for its proportionate share of the costs of developing and operating the
Contract Area.  Accordingly, the liens granted among the parties in Article
VII.B. are given to secure only the debts of each severally, and no party shall
have any liability to third parties hereunder to satisfy the default of any
other party in the payment of any expense or obligation hereunder.  It is not
the intention of the parties to create, nor shall this agreement be construed as
creating, a mining or other partnership, joint venture, agency relationship or
association, or to render the parties liable as partners, co-venturers, or
principals.  In their relations with each other under this agreement, the
parties shall not be considered fiduciaries or to have established a
confidential relationship but rather shall be free to act on an arm's-length
basis in accordance with their own respective self-interest, subject, however,
to the obligation of the parties to act in good faith in their dealings with
each other with respect to activities hereunder.


                                     - 11 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

B.  Liens and Security Interests:

   Each party grants to the other parties hereto a lien upon any interest it now
owns or hereafter acquires in Oil and Gas Leases and Oil and Gas Interests in
the Contract Area, and a security interest and/or purchase money security
interest in any interest it now owns or hereafter acquires in the personal
property and fixtures on or used or obtained for use in connection therewith, to
secure performance of all of its obligations under this agreement including but
not limited to payment of expense, interest and fees, the proper disbursement of
all monies paid hereunder, the assignment or relinquishment of interest in Oil
and Gas Leases as required hereunder, and the proper performance of operations
hereunder.  Such lien and security interest granted by each party hereto shall
include such party's leasehold interests, working interests, operating rights,
and royalty and overriding royalty interests in the Contract Area now owned or
hereafter acquired and in lands pooled or unitized therewith or otherwise
becoming subject to this agreement, the Oil and Gas when extracted therefrom and
equipment situated thereon or used or obtained for use in connection therewith
(including, without limitation, all wells, tools, and tubular goods), and
accounts (including, without limitation, accounts arising from gas imbalances or
from the sale of Oil and/or Gas at the wellhead), contract rights, inventory and
general intangibles relating thereto or arising therefrom, and all proceeds and
products of the foregoing.

   To perfect the lien and security agreement provided herein, each party hereto
shall execute and acknowledge the recording supplement and/or any financing
statement prepared and submitted by any party hereto in conjunction herewith or
at any time following execution hereof, and Operator is authorized to file this
agreement or the recording supplement executed herewith as a lien or mortgage in
the applicable real estate records and as a financing statement with the proper
officer under the Uniform Commercial Code in the state in which the Contract
Area is situated and such other states as Operator shall deem appropriate to
perfect the security interest granted hereunder.  Any party may file this
agreement, the recording supplement executed herewith, or such other documents
as it deems necessary as a lien or mortgage in the applicable real estate
records and/or a financing statement with the proper officer under the Uniform
Commercial Code.

   Each party represents and warrants to the other parties hereto that the lien
and security interest granted by such party to the other parties shall be a
first and prior lien, and each party hereby agrees to maintain the priority of
said lien and security interest against all persons acquiring an interest in Oil
and Gas Leases and Interests covered by this agreement by, through or under such
party.  All parties acquiring an interest in Oil and Gas Leases and Oil and Gas
Interests covered by this agreement, whether by assignment, merger, mortgage,
operation of law, or otherwise, shall be deemed to have taken subject to the
lien and security interest granted by this Article VII.B. as to all obligations
attributable to such interest hereunder whether or not such obligations arise
before or after such interest is acquired.

   To the extent that parties have a security interest under the Uniform
Commercial Code of the state in which the Contract Area is situated, they shall
be entitled to exercise the rights and remedies of a secured party under the
Code. The bringing of a suit and the obtaining of judgment by a party for the
secured indebtedness shall not be deemed an election of remedies or otherwise
affect the lien rights or security interest as security for the payment thereof.
In addition, upon default by any party in the payment of its share of expenses,
interests or fees, or upon the improper use of funds by the Operator, the other
parties shall have the right, without prejudice to other rights or remedies, to
collect from the purchaser the proceeds from the sale of such defaulting party's
share of Oil and Gas until the amount owed by such party, plus interest as
provided in "Exhibit C," has been received, and shall have the right to offset
the amount owed against the proceeds from the sale of such defaulting party's
share of Oil and Gas.  All purchasers of production may rely on a notification
of default from the non-defaulting party or parties stating the amount due as a
result of the default, and all parties waive any recourse available against
purchasers for releasing production proceeds as provided in this paragraph.

   If any party fails to pay its share of cost within one hundred twenty (120)
days after rendition of a statement therefor by Operator, the non-defaulting
parties, including Operator, shall upon request by Operator, pay the unpaid
amount in the proportion that the interest of each such party bears to the
interest of all such parties.  The amount paid by each party so paying its share
of the unpaid amount shall be secured by the liens and security rights described
in Article VII.B., and each paying party may independently pursue any remedy
available hereunder or otherwise.

   If any party does not perform all of its obligations hereunder, and the
failure to perform subjects such party to foreclosure or execution proceedings
pursuant to the provisions of this agreement, to the extent allowed by governing
law, the defaulting party waives any available right of redemption from and
after the date of judgment, any required valuation or appraisement of the
mortgaged or secured property prior to sale, any available right to stay
execution or to require a marshaling of assets and any required bond in the
event a receiver is appointed.  In addition, to the extent permitted by
applicable law, each party hereby grants to the other parties a power of sale as
to any property that is subject to the lien and security rights granted
hereunder, such power to be exercised in the manner provided by applicable law
or otherwise in a commercially reasonable manner and upon reasonable notice.

   Each party agrees that the other parties shall be entitled to utilize the
provisions of Oil and Gas lien law or other lien law of any state in which the
Contract Area is situated to enforce the obligations of each party hereunder.
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, Non-Operators agree that Operator may invoke or utilize the
mechanics' or materialmen's lien law of the state in which the Contract Area is
situated in order to secure the payment to Operator of any sum due hereunder for
services performed or materials supplied by Operator.

C.  Advances:

   Operator, at its election, shall have the right from time to time to demand
and receive from one or more of the other parties payment in advance of their
respective shares of the estimated amount of the expense to be incurred in
operations hereunder during the next succeeding month, which right may be
exercised only by submission to each such party of an itemized statement of such
estimated expense, together with an invoice for its share thereof.  Each such
statement and invoice for the payment in advance of estimated expense shall be
submitted on or before the 20th day of the next preceding month. Each party
shall pay to Operator its proportionate share of such estimate within fifteen
(15) days after such estimate and invoice is received.  If any party fails to
pay its share of said estimate within said time, the amount due shall bear
interest as provided in Exhibit "C" until paid.  Proper adjustment shall be made
monthly between advances and actual expense to the end that each party shall
bear and pay its proportionate share of actual expenses incurred, and no more.

D.  Defaults and Remedies:

   If any party fails to discharge any financial obligation under this
agreement, including without limitation the failure to make any advance under
the preceding Article VII.C. or any other provision of this agreement, within
the period required for such payment hereunder, then in addition to the remedies
provided in Article VII.B. or elsewhere in this agreement, the remedies
specified below shall be applicable.  For purposes of this Article VII.D., all
notices and elections shall be delivered only by Operator, except that Operator


                                     - 12 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

shall deliver any such notice and election requested by a non-defaulting
Non-Operator, and when Operator is the party in default, the applicable notices
and elections can be delivered by any Non-Operator. Election of any one or more
of the following remedies shall not preclude the subsequent use of any other
remedy specified below or otherwise available to a non-defaulting party.

   1. Suspension of Rights: Any party may deliver to the party in default a
Notice of Default, which shall specify the default, specify the action to be
taken to cure the default, and specify that failure to take such action will
result in the exercise of one or more of the remedies provided in this Article.
If the default is not cured within thirty (30) days of the delivery of such
Notice of Default, all of the rights of the defaulting party granted by this
agreement may upon notice be suspended until the default is cured, without
prejudice to the right of the non-defaulting party or parties to continue to
enforce the obligations of the defaulting party previously accrued or thereafter
accruing under this agreement.  If Operator is the party in default, the
Non-Operators shall have in addition the right, by vote of Non-Operators owning
a majority in interest in the Contract Area after excluding the voting interest
of Operator, to appoint a new Operator effective immediately.  The rights of a
defaulting party that may be suspended hereunder at the election of the
non-defaulting parties shall include, without limitation, the right to receive
information as to any operation conducted hereunder during the period of such
default, the right to elect to participate in an operation proposed under
Article VI.B. of this agreement, the right to participate in an operation being
conducted under this agreement even if the party has previously elected to
participate in such operation, and the right to receive proceeds of production
from any well subject to this agreement.

   2. Suit for Damages: Non-defaulting parties or Operator for the benefit of
non-defaulting parties may sue (at joint account expense) to collect the amounts
in default, plus interest accruing on the amounts recovered from the date of
default until the date of collection at the rate specified in Exhibit "C"
attached hereto.  Nothing herein shall prevent any party from suing any
defaulting party to collect consequential damages accruing to such party as a
result of the default.

   3. Deemed Non-Consent: The non-defaulting party may deliver a written Notice
of Non-Consent Election to the defaulting party at any time after the expiration
of the thirty-day cure period following delivery of the Notice of Default, in
which event if the billing is for the drilling a new well or the Plugging Back,
Sidetracking, Reworking or Deepening of a well which is to be or has been
plugged as a dry hole, or for the Completion or Recompletion of any well, the
defaulting party will be conclusively deemed to have elected not to participate
in the operation and to be a Non-Consenting Party with respect thereto under
Article VI.B. or VI.C., as the case may be, to the extent of the costs unpaid by
such party, notwithstanding any election to participate theretofore made.  If
election is made to proceed under this provision, then the non-defaulting
parties may not elect to sue for the unpaid amount pursuant to Article VII.D.2.

   Until the delivery of such Notice of Non-Consent Election to the defaulting
party, such party shall have the right to cure its default by paying its unpaid
share of costs plus interest at the rate set forth in Exhibit "C," provided,
however, such payment shall not prejudice the rights of the non-defaulting
parties to pursue remedies for damages incurred by the non-defaulting parties
as a result of the default.  Any interest relinquished pursuant to this Article
VII.D.3. shall be offered to the non-defaulting parties in proportion to their
interests, and the non-defaulting parties electing to participate in the
ownership of such interest shall be required to contribute their shares of the
defaulted amount upon their election to participate therein.

   4. Advance Payment: If a default is not cured within thirty (30) days of the
delivery of a Notice of Default, Operator, or Non-Operators if Operator is the
defaulting party, may thereafter require advance payment from the defaulting
party of such defaulting party's anticipated share of any item of expense for
which Operator, or Non-Operators, as the case may be, would be entitled to
reimbursement under any provision of this agreement, whether or not such expense
was the subject of the previous default.  Such right includes, but is not
limited to, the right to require advance payment for the estimated costs of
drilling a well or Completion of a well as to which an election to participate
in drilling or Completion has been made.  If the defaulting party fails to pay
the required advance payment, the non-defaulting parties may pursue any of the
remedies provided in the Article VII.D. or any other default remedy provided
elsewhere in this agreement.  Any excess of funds advanced remaining when the
operation is completed and all costs have been paid shall be promptly returned
to the advancing party.

   5. Costs and Attorneys' Fees: In the event any party is required to bring
legal proceedings to enforce any financial obligation of a party hereunder, the
prevailing party in such action shall be entitled to recover all court costs,
costs of collection, and a reasonable attorney's fee, which the lien provided
for herein shall also secure.

E.  Rentals, Shut-in Well Payments and Minimum Royalties:

   Rentals, shut-in well payments and minimum royalties which may be required
under the terms of any lease shall be paid

by the Operator. party or parties who subjected such lease to this agreement at
its or their expense.  In the event two or more parties

own and have contributed interests in the same lease to this agreement, such
parties may designate one of such parties to make said payments for and on
behalf of all such parties.  Any party may request, and shall be entitled to
receive, proper evidence of all such payments.  In the event of failure to make
proper payment of any rental, shut-in well payment or minimum royalty through
mistake or oversight where such payment is required to continue the lease in
force, any loss which results from such non-payment shall be borne in accordance
with the provisions of Article IV.B.2.

   Operator shall notify Non-Operators of the anticipated completion of a
shut-in well, or the shutting in or return to production of a producing well, at
least five (5) days (excluding Saturday, Sunday, and legal holidays) prior to
taking such action, or at the earliest opportunity permitted by circumstances,
but assumes no liability for failure to do so.  In the event of failure by
Operator to so notify Non-Operators, the loss of any lease contributed hereto by
Non-Operators for failure to make timely payments of any shut-in well payment
shall be borne jointly by the parties hereto under the provisions of Article
IV.B.3. In no event will Operator be liable to a Non-Operator if Operator fails
to make a timely payment of a necessary rental, shut-in payment, or minimum
royalty.

F.  Taxes:

   Beginning with the first calendar year after the effective date hereof,
Operator shall render for ad valorem taxation all property subject to this
agreement which by law should be rendered for such taxes, and it shall pay all
such taxes assessed thereon before they become delinquent.  Prior to the
rendition date, each Non-Operator shall furnish Operator information as to
burdens (to include, but not be limited to, royalties, overriding royalties and
production payments) on Leases and Oil and Gas Interests contributed by such
Non-Operator.  If the assessed valuation of any Lease is reduced by reason of
its being subject to outstanding excess royalties, overriding royalties or
production payments, the reduction in ad valorem taxes resulting therefrom shall
inure to the benefit of the owner or owners of such Lease, and Operator shall
adjust the charge to such owner or owners so as to reflect the benefit of such
reduction.  If the ad valorem taxes are based in whole or in part upon separate
valuations of each party's working interest, then notwithstanding anything to
the contrary herein, charges to the joint account shall be made and paid by the
parties hereto in accordance with the tax value generated by each party's
working interest.  Operator shall bill the other parties for their proportionate
shares of all tax payments in the manner provided in Exhibit "C."

                                     - 13 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

   If Operator considers any tax assessment improper, Operator may, at its
discretion, protest within the time and manner prescribed by law, and prosecute
the protest to a final determination, unless all parties agree to abandon the
protest prior to final determination.  During the pendency of administrative or
judicial proceedings, Operator may elect to pay, under protest, all such taxes
and any interest and penalty.  When any such protested assessment shall have
been finally determined, Operator shall pay the tax for the joint account,
together with any interest and penalty accrued, and the total cost shall then be
assessed against the parties, and be paid by them, as provided in Exhibit "C."

   Each party shall pay or cause to be paid all production, severance, excise,
gathering and other taxes imposed upon or with respect to the production or
handling of such party's share of Oil and Gas produced under the terms of this
agreement.

                                  ARTICLE VIII.

                ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

A.  Surrender of Leases:

   The Leases covered by this agreement, insofar as they embrace acreage in the
Contract Area, shall not be surrendered in whole or in part unless all parties
consent thereto.

   However, should any party desire to surrender its interest in any Lease or in
any portion thereof, such party shall give written notice of the proposed
surrender to all parties, and the parties to whom such notice is delivered shall
have thirty (30) days after delivery of the notice within which to notify the
party proposing the surrender whether they elect to consent thereto.  Failure of
a party to whom such notice is delivered to reply within said 30-day period
shall constitute a consent to the surrender of the Leases described in the
notice.  If all parties do not agree or consent thereto, the party desiring to
surrender shall assign, without express or implied warranty of title, all of its
interest in such Lease, or portion thereof, and any well, material and equipment
which may be located thereon and any rights in production thereafter secured, to
the parties not consenting to such surrender.  If the interest of the assigning
party is or includes an Oil and Gas Interest, the assigning party shall execute
and deliver to the party or parties not consenting to such surrender an oil and
gas lease covering such Oil and Gas Interest for a term of one (1) year and so
long thereafter as Oil and/or Gas is produced from the land covered thereby,
such lease to be on the form attached hereto as Exhibit "B." Upon such
assignment or lease, the assigning party shall be relieved from all obligations
thereafter accruing, but not theretofore accrued, with respect to the interest
assigned or leased and the operation of any well attributable thereto, and the
assigning party shall have no further interest in the assigned or leased
premises and its equipment and production other than the royalties retained in
any lease made under the terms of this Article.  The party assignee or lessee
shall pay to the party assignor or lessor the reasonable salvage value of the
latter's interest in any well's salvable materials and equipment attributable to
the assigned or leased acreage.  The value of all salvable materials and
equipment shall be determined in accordance with the provisions of Exhibit "C,"
less the estimated cost of salvaging and the estimated cost of plugging and
abandoning and restoring the surface.  If such value is less than such costs,
then the party assignor or lessor shall pay to the party assignee or lessee the
amount of such deficit.  If the assignment or lease is in favor of more than one
party, the interest shall be shared by such parties in the proportions that the
interest of each bears to the total interest of all such parties.  If the
interest of the parties to whom the assignment is to be made varies according to
depth, then the interest assigned shall similarly reflect such variances.

   Any assignment, lease or surrender made under this provision shall not reduce
or change the assignor's, lessor's or surrendering party's interest as it was
immediately before the assignment, lease or surrender in the balance of the
Contract Area; and the acreage assigned, leased or surrendered, and subsequent
operations thereon, shall not thereafter be subject to the terms and provisions
of this agreement but shall be deemed subject to an Operating Agreement in the
form of this agreement.

B. Renewal or Extension of Leases:

   If any party secures a renewal or replacement of an Oil and Gas Lease or
Interest subject to this agreement, then all other parties shall be notified
promptly upon such acquisition or, in the case of a replacement Lease taken
before expiration of an existing Lease, promptly upon expiration of the existing
Lease.  The parties notified shall have the right for a period of thirty (30)
days following delivery of such notice in which to elect to participate in the
ownership of the renewal or replacement Lease, insofar as such Lease affects
lands within the Contract Area, by paying to the party who acquired it their
proportionate shares of the acquisition cost allocated to that part of such
Lease within the Contract Area, which shall be in proportion to the interest
held at that time by the parties in the Contract Area.  Each party who
participates in the purchase of a renewal or replacement Lease shall be given an
assignment of its proportionate interest therein by the acquiring party.

   If some, but less than all, of the parties elect to participate in the
purchase of a renewal or replacement Lease, it shall be owned by the parties


                                     - 14 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

who elect to participate therein, in a ratio based upon the relationship of
their respective percentage of participation in the Contract Area to the
aggregate of the percentages of participation in the Contract Area of all
parties participating in the purchase of such renewal or replacement Lease.
The acquisition of a renewal or replacement Lease by any or all of the parties
hereto shall not cause a readjustment of the interests of the parties stated in
Exhibit "A," but any renewal or replacement Lease in which less than all parties
elect to participate shall not be subject to this agreement but shall be deemed
subject to a separate Operating Agreement in the form of this agreement.

   If the interests of the parties in the Contract Area vary according to depth,
then their right to participate proportionately in renewal or replacement Leases
and their right to receive an assignment of interest shall also reflect such
depth variances.

   The provisions of this Article shall apply to renewal or replacement Leases
whether they are for the entire interest covered by the expiring Lease or cover
only a portion of its area or an interest therein.  Any renewal or replacement
Lease taken before the expiration of its predecessor Lease, or taken or
contracted for or becoming effective within six (6) months after the expiration
of the existing Lease, shall be subject to this provision so long as this
agreement is in effect at the time of such acquisition or at the time the
renewal or replacement Lease becomes effective; but any Lease taken or
contracted for more than six (6) months after the expiration of an existing
Lease shall not be deemed a renewal or replacement Lease and shall not be
subject to the provisions of this agreement.

   The provisions in this Article shall also be applicable to extensions of Oil
and Gas Leases.

C.  Acreage or Cash Contributions:

   While this agreement is in force, if any party contracts for a contribution
of cash towards the drilling of a well or any other operation on the Contract
Area, such contribution shall be paid to the party who conducted the drilling or
other operation and shall be applied by it against the cost of such drilling or
other operation.  If the contribution be in the form of acreage, the party to
whom the contribution is made shall promptly tender an assignment of the
acreage, without warranty of title, to the Drilling Parties in the proportions
said Drilling Parties shared the cost of drilling the well. Such acreage shall
become a separate Contract Area and, to the extent possible, be governed by
provisions identical to this agreement.  Each party shall promptly notify all
other parties of any acreage or cash contributions it may obtain in support of
any well or any other operation on the Contract Area. The above provisions shall
also be applicable to optional rights to earn acreage outside the Contract Area
which are in support of well drilled inside Contract Area.


                                     - 15 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

   If any party contracts for any consideration relating to disposition of such
party's share of substances produced hereunder, such consideration shall not be
deemed a contribution as contemplated in this Article VIII.C.

D.  Assignment;

   Every sale, encumbrance, transfer or other disposition made by any party
shall be made expressly subject to this agreement and shall be made without
prejudice to the right of the other parties, and any transferee of an ownership
interest in any Oil and Gas Lease or Interest shall be deemed a party to this
agreement as to the interest conveyed from and after the effective date of the
transfer of ownership; provided, however, that the other parties shall not be
required to recognize any such sale, encumbrance, transfer or other disposition
for any purpose hereunder until thirty (30) days after they have received a
copy of the instrument of transfer or other satisfactory evidence thereof in
writing from the transferor or transferee.  No assignment or other disposition
of interest by a party shall relieve such party of obligations previously
incurred by such party hereunder with respect to the interest transferred,
including without limitation the obligation of a party to pay all costs
attributable to an operation conducted hereunder in which such party has agreed
to participate prior to making such assignment, and the lien and security
interest granted by Article VII.B. shall continue to burden the interest
transferred to secure payment of any such obligations.

   If, at any time the interest of any party is divided among and owned by four
or more co-owners, Operator, at its discretion, may require such co-owners to
appoint a single trustee or agent with full authority to receive notices,
approve expenditures, receive billings for and approve and pay such party's
share of the joint expenses, and to deal generally with, and with power to bind,
the co-owners of such party's interest within the scope of the operations
embraced in this agreement; however, all such co-owners shall have the right to
enter into and execute all contracts or agreements for the disposition of their
respective shares of the Oil and Gas produced from the Contract Area and they
shall have the right to receive, separately, payment of the sale proceeds
thereof.

E. Waiver of Rights to Partition:

   If permitted by the laws of the state or states in which the property covered
hereby is located, each party hereto owning an undivided interest in the
Contract Area waives any and all rights it may have to partition and have set
aside to it in severalty its undivided interest therein.


                                     - 16 -

<PAGE>
           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989
                                   ARTICLE IX.

                         INTERNAL REVENUE CODE ELECTION




Each party elects to be excluded from the application of all of the provisions
of Subchapter "K," Chapter 1, Subtitle "A," of the Internal Revenue Code of
1986, as amended ("Code"), as permitted and authorized by Section 761 of the
Code and the regulations promulgated thereunder. Operator is authorized and
directed to execute on behalf of each party hereby affected such evidence of
this election as may be required by the Secretary of the Treasury of the United
States or the Federal Internal Revenue Service, including specifically, but not
by way of limitation, all of the returns, statements, and the data required by
Treasury Regulationss.1.761. Should there be any requirement that each party
hereby affected give further evidence of this election, each such party shall
execute such documents and furnish such other evidence as may be required by the
Federal Internal Revenue Service or as may be necessary to evidence this
election. No such party shall give any notices or take any other action
inconsistent with the election made hereby. If any present or future income tax
laws of the state or states in which the Contract Area is located or any future
income tax laws of the United States contain provisions similar to those in
Subchapter "K," Chapter 1, Subtitle "A," of the Code, under which an election
similar to that provided by Section 761 of the Code is permitted, each party
hereby affected shall make such election as may be permitted or required by such
laws. In making the foregoing election, each such party states that the income
derived by such party from operations hereunder can be adequately determined
without the computation of partnership taxable income.

                                   ARTICLE X.

                               CLAIMS AND LAWSUITS

     Operator may settle any single uninsured third party damage claim or suit
arising from operations hereunder if the expenditure does not exceed Fifty
Thousand Dollars ($50,000.00) and if the payment is in complete settlement of
such claim or suit. If the amount required for settlement exceeds the above
amount, the parties hereto shall assume and take over the further handling of
the claim or suit, unless such authority is delegated to Operator. All costs and
expenses of handling settling, or otherwise discharging such claim or suit shall
be a the joint expense of the parties participating in the operation from which
the claim or suit arises. If a claim is made against any party or if any party
is sued on account of any matter arising from operations hereunder over which
such individual has no control because of the rights given Operator by this
agreement, such party shall immediately notify all other parties, and the claim
or suit shall be treated as any other claim or suit involving operations
hereunder.



                                     - 17 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

                                   ARTICLE XI.

                                  FORCE MAJEURE

   If any party is rendered unable, wholly or in part, by force majeure to carry
out its obligations under this agreement, other than the obligation to indemnify
or make money payments or furnish security, that party shall give to all other
parties prompt written notice of the force majeure with reasonably full
particulars concerning it; thereupon, the obligations of the party giving the
notice, so far as they are affected by the force majeure, shall be suspended
during, but no longer than, the continuance of the force majeure.  The term
"force majeure," as here employed, shall mean an act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockade, public
riot, lightening, fire, storm, flood or other act of nature, explosion,
governmental action, governmental delay, restraint or inaction, unavailability
of equipment, and any other cause, whether of the kind specifically enumerated
above or otherwise, which is not reasonably within the control of the party
claiming suspension.

   The affected party shall use all reasonable diligence to remove the force
majeure situation as quickly as practicable. The requirement that any force
majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty by the party
involved, contrary to its wishes; how all such difficulties shall be handled
shall be entirely within the discretion of the party concerned.

                                  ARTICLE XII.

                                     NOTICES

   All notices authorized or required between the parties by any of the
provisions of this agreement, unless otherwise specifically provided, shall be
in writing and delivered in person or by United States mail, courier service,
telegram, telex, telecopier or any other form of facsimile, postage or charges
prepaid, and addressed to such parties at the addresses listed on Exhibit "A."
All telephone or oral notices permitted by this agreement shall be confirmed
immediately thereafter by written notice.  The originating notice given under
any provision hereof shall be deemed delivered only when received by the party
to whom such notice is directed, and the time for such party to deliver any
notice in response thereto shall run from the date the originating notice is
received.  "Receipt" for purposes of this agreement with respect to written
notice delivered hereunder shall be actual delivery of the notice to the address
of the party to be notified specified in accordance with this agreement, or to
the telecopy, facsimile or telex machine of such party.  The second or any
responsive notice shall be deemed delivered when deposited in the United States
mail or at the office of the courier or telegraph service, or upon transmittal
by telex, telecopy or facsimile, or when personally delivered to the party to be
notified, provided, that when response is required within 24 or 48 hours, such
response shall be given orally or by telephone, telex, telecopy or other
facsimile within such period. Each party shall have the right to change its
address at any time, and from time to time, by giving written notice thereof to
all other parties.  If a party is not available to receive notice orally or by
telephone when a party attempts to deliver a notice required to be delivered
within 24 or 48 hours, the notice may be delivered in writing by any other
method specified herein and shall be deemed delivered in the same manner
provided above for any responsive notice.

                                  ARTICLE XIII.

                                TERM OF AGREEMENT

   This agreement shall remain in full force and effect as to the Oil and Gas
Leases and/or Oil and Gas Interests subject hereto for the period of time
selected below; provided, however, no party heretoshall ever be construed as
having any right, title or interest in or to any Lease or Oil and Gas Interest
contributed by any other party beyond the term of this agreement.

   X     Option No. 1: So long as any of the Oil and Gas Leases subject to this
         agreement remain or are continued in force as to any part of the
         Contract Area, whether by production, extension, renewal or otherwise.


   The termination of this agreement shall not relieve any party hereto from any
expense, liability or other obligation or any remedy therefor which has accrued
or attached prior to the date of such termination.

   Upon termination of this agreement and the satisfaction of all obligations
hereunder, in the event a memorandum of this Operating Agreement has been filed
of record, Operator is authorized to file of record in all necessary recording
offices a notice of termination, and each party hereto agrees to execute such a
notice of termination as to Operator's interest, upon request of Operator, if
Operator has satisfied all its financial obligations.

                                  ARTICLE XIV.

                      COMPLIANCE WITH LAWS AND REGULATIONS

A.  Laws, Regulations and Orders:

   This agreement shall be subject to the applicable laws of the state in which
the Contract Area is located, to the valid rules, regulations, and orders of any
duly constituted regulatory body of said state; and to all other applicable
federal, state, and local laws, ordinances, rules, regulations and orders.

B.  Governing Law:

     This agreement and all matters pertaining hereto, including but not limited
to matters of performance, non-performance, breach, remedies, procedures,
rights, duties, and interpretation or construction, shall be governed and
determined by the law of the state in which the Contract Area is located. If the
Contract Area is in two or more states, the law of the state of Wyoming shall
govern.

C.  Regulatory Agencies:

   Nothing herein contained shall grant, or be construed to grant, Operator the
right or authority to waive or release any rights, privileges, or obligations
which Non-Operators may have under federal or state laws or under rules,
regulations or orders promulgated under such laws in reference to oil, gas and


                                     - 18 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989

mineral operations, including the location, operation, or production of wells,
on tracts offsetting or adjacent to the Contract Area.

      With respect to the operations hereunder, Non-Operators agree to release
Operator from any and all losses, damages, injuries, claims and causes of action
arising out of, incident to or resulting directly or indirectly from Operator's
interpretation or application of rules, rulings, regulations or orders of the
Department of Energy or Federal Energy Regulatory Commission or predecessor or
successor agencies to the extent such interpretation or application was made in
good faith and does not constitute gross negligence.  Each Non-Operator further
agrees to reimburse Operator for such Non-Operator's share of production or any
refund, fine, levy or other governmental sanction that Operator may be required
to pay as a result of such an incorrect interpretation or application, together
with interest and penalties thereon owing by Operator as a result of such
incorrect interpretation or application.

                                   ARTICLE XV.

                                  MISCELLANEOUS

A.  Execution:

   This agreement shall be binding upon each Non-Operator when this agreement or
a counterpart thereof has been executed by such Non-Operator and Operator
notwithstanding that this agreement is not then or thereafter executed by all of
the parties to which it is tendered or which are listed on Exhibit "A" as owning
an interest in the Contract Area or which own, in fact, an interest in the
Contract Area. Operator may, however, by written notice to all Non-Operators who
have become bound by this agreement as aforesaid, given at any time prior to the
actual spud date of the Initial Well but in no event later than five days prior
to the date specified in Article VI.A. for commencement of the Initial Well,
terminate this agreement if Operator in its sole discretion determines that
there is insufficient participation to justify commencement of drilling
operations.  In the event of such a termination by Operator, all further
obligations of the parties hereunder shall cease as of such termination.  In the
event any Non-Operator has advanced or prepaid any share of drilling or other
costs hereunder, all sums so advanced shall be returned to such Non-Operator
without interest. In the event Operator proceeds with drilling operations for
the Initial Well without the execution hereof by all persons listed on Exhibit
"A" as having a current working interest in such well, Operator shall indemnify
Non-Operators with respect to all costs incurred for the Initial Well which
would have been charged to such person under this agreement if such person had
executed the same and Operator shall receive all revenues which would have been
received by such person under this agreement if such person had executed the
same.

B. Successors and Assigns:

   This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, devisees, legal representatives,
successors and assigns, and the terms hereof shall be deemed to run with the
Leases or Interests included within the Contract Area.

C. Counterparts:

   This instrument may be executed in any number of counterparts, each of which
shall be considered an original for all purposes.

D.  Severability:

   For the purposes of assuming or rejecting this agreement as an executory
contract pursuant to federal bankruptcy laws, this agreement shall not be
severable, but rather must be assumed or rejected in its entirety, and the
failure of any party to this agreement to comply with all of its financial
obligations provided herein shall be a material default.

                               ARTICLE XVI.

                             OTHER PROVISIONS


A.   Conflicts:

       If there is a conflict between the provisions of this Article XVI and any
other provision of this agreement, the provisions of this Article XVI shall
control in all respects.

B.   Multiple Well Notices:

       A single notice given under Article VI.B.1 to drill a well on the
Contract Area may propose the drilling of more than one well using the same
drilling rig over a period of time not to exceed two months from spudding of the
first proposed well to release of the drilling rig from the location of the last
proposed well. In such event, the proposed operation shall conclusively be
deemed to include all wells identified in the proposal, and each party shall
elect to participate either in all of the proposed wells or in none of the
proposed wells. If less than all the Parties proceed with such a multiple well
proposed operation, the relinquishment described in Article VI.B.2(a), if
applicable, shall be effective until the total amounts identified in Article
VI.B.2(a), numbered clauses (i) and (ii) on page 7, for all wells drilled
pursuant to the proposal have been recouped from proceeds of the sale of such
share or market value thereof (as more fully explained in Article VI.B.2) from
all wells (considered as a basket or group) drilled pursuant to the proposal.

C.    Non-Consent Operations on Coalbed Methane Wells Located in the Powder
River Basin:

         If a party elects not to participate in a proposed operation in respect
of a Coalbed Methane Well, as defined in Paragraph 1 of Section I of the
Accounting Procedure attached as Exhibit C to this agreement, that is located in
the Powder River Basin, then upon commencement of operations for the drilling,
Reworking, Sidetracking, Recompleting, Deepening or Plugging Back of such
Coalbed Methane Well in the Powder River Basin by Consenting Parties, each
Non-Consenting Party shall assign its entire interest in the concerned well and
the concerned Leases, insofar and only insofar as the Leases cover the 640-acre
section of the governmental survey in which the well is located to the
Consenting Parties, each in proportion to their respective interests as elected
under Article VI.B.2(a). Such assignment shall be made without warranty of title
and will not require the Consenting Parties to bear aggregate landowner,
overriding royalty or other burdens greater than 20% of 8/8ths, although the
assignment may reserve to the Non-Consenting Party its interest in any
previously drilled well in that section in which it participated in drilling and
in the Leases, insofar as they cover the spacing unit for that previously
drilled well.

D.    Limitation on AFEs:

        While there is no limitation on the number of AFEs that may be submitted
and active in respect of the Contract Area during any time period, the total
estimated expenditures under all active AFEs shall not exceed $1,000,000 at any
one time. This dollar limitation may be lifted by the affirmative vote of
Parties owning an aggregate 65% interest based on ownership as shown on Exhibit
"A." If a Party reasonably believes that its interests under a Lease, farmin, or
other contractual interest might be placed in jeopardy unless necessary
operations are conducted, then the cost of conducting such operations shall not
be included in the foregoing dollar limitation on active AFEs.



                                     - 19 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989


      IN WITNESS WHEREOF, this agreement shall be effective as of the 18th day
of February, 2003  .

     Tower Colombia Corporation, who has prepared and circulated this form for
execution, represents and warrants that the form was printed from and, with the
exception(s) listed below, is identical to the AAPL Form 610-1989 Model Form
Operating Agreement, as published in computerized form by Forms On-A-Disk, Inc.
No changes, alterations, or modifications, other than those made by
strikethrough and/or insertion and that are clearly recognizable as changes in
ArticleII, III, IV, V, VI, VII, VIII, IX, X, XIII, XIV, and XVI, have been made
to the form.



ATTEST OR WITNESS:                       OPERATOR

                                         North Finn LLC

                                      By /s/ Wayne P. Neumiller
-----------------------------------      ----------------------------------
                                         Wayne P. Neumiller
                                         ----------------------------------
                                         Type or print name


                                         Title Manager
                                               ----------------------------

                                         Date  Februay 18, 2003
                                              -----------------------------

                                         Tax ID or S.S. No.
                                                            ---------------



                                  NON-OPERATORS


                                         American Oil & Gas, Inc.

                                      By /s/ Alan Gelfand
-----------------------------------      ----------------------------------
                                         Alan Gelfand
                                         ----------------------------------
                                         Type or print name


                                         Title President
                                               ----------------------------

                                         Date  February 18, 2003
                                              -----------------------------

                                         Tax ID or S.S. No.
                                                            ---------------




                                         Tower Columbia Corporation

                                      By /s/ Patrick D. O'Brien
-----------------------------------      ----------------------------------
                                         Patrick D. O'Brien
                                         ----------------------------------
                                         Type or print name


                                         Title
                                               ----------------------------

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

                                         Tax ID or S.S. No.
                                                            ---------------




                                      By
-----------------------------------      ----------------------------------


                                         Type or print name


                                         Title
                                               ----------------------------

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

                                         Tax ID or S.S. No.
                                                            ---------------



                                     - 20 -

<PAGE>


           A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989
                              ACKNOWLEDGMENTS

   Note: The following forms of acknowledgment are the short forms approved by
the Uniform Law on Notarial Acts.

The validity and effect of these forms in any state will depend upon the
statutes of that state.



Individual acknowledgment:

State of Colorado )
         --------

City and          ) ss.

County of Denver  )
          -------

   This instrument was acknowledged before me on

 February 18, 2003                      by Patrick D. O;Brien
------------------------------------    ----------------------------------- as
President of Tower Columbia Corporation, a Colorado corporation.
(Seal, if any)
                                       Title (and Rank) /s/ Sharon R. Ramirez
                                                        -------------------

                                       My commission expires: July 31, 2003
                                                              -------------



Acknowledgment in representative capacity:

State of Colorado )
         --------

City and          ) ss.

County of Denver  )
          -------

   This instrument was acknowledged before me on

  February 18, 2003                  by  Wayne Neumiller                 as
------------------------------------    --------------------------------

Manager      of North Finn LLC, a Wyoming limited liability company.
------------    ---------------------------------------------------------
(Seal, if any)
                                       Title (and Rank) Sharon R. Ramirez
                                                        -------------------

                                       My commission expires: July 31, 2003
                                                              -------------

Acknowledgment in representative capacity:

State of Colorado )
         --------

City and          ) ss.

County of Denver  )
          -------

   This instrument was acknowledged before me on

  February 18, 2003                  by  Alan Gelfand                   as
------------------------------------    --------------------------------

President     of American Oil & Gas, Inc, a Nevada corporation.
------------    ---------------------------------------------------------
(Seal, if any)
                                       Title (and Rank) Sharon R. Ramirez
                                                        -------------------

                                       My commission expires: July 31, 2003
                                                              -------------

                                     - 21 -

<PAGE>
                                   EXHIBIT "A"

                                    INSURANCE

ATTACHED TO AND MADE A PART OF THAT CERTAIN JOINT OPERATING AGREEMENT DATED
FEBRUARY 18, 2003, BY AND AMONT NORTH FINN, LLC; TOWER COLOMBIA CORPORATION; AND
AMERICAN OIL & GAS, INC.

   (1)   Description of lands

      The lands subject to this Agreement are described on the following
Schedule 1.2.

   (2)   Depth restrictions

      There are no depth restrictions, except as shown for particular leases on
Schedule 1.2.

   (3)  Parties

                  North Finn, LLC
                  950 Stafford Street
                  Casper, Wyoming 82609
                  Attention: Wayne Neumiller
                  Telephone:  (307)237-7854
                  Fax:  (307)237-7628

                  American Oil & Gas, Inc.
                  950 Stafford Street
                  Casper, Wyoming 82609
                  Attention: Alan Gelfand
                  Telephone:  (307)237-7854
                  Fax:  (307)237-7628

                  Tower Colombia Corporation
                  1050 17th Street, Suite 710
                  Denver, CO 80265
                  Attention: P. O'Brien
                  Telephone: (303)595-0125
                  Fax: (303)595-0709

   (4)    Fractional interests of the parties

      The fractional interest of the parties are as they appear in county and
BLM records.

   (5)    Description of leases

      The leases subject to this Agreement are described on the following
Schedule 1.2.

   (6)    Burdens on production

   Burdens on production are as they appear in county and BLM records.





<PAGE>



                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies



                                  EXHIBIT " C "

Attached to and made that certain Joint Operating Agreement dated February 17,
2003, by and among North Finn, LLC; Tower Colombia Corporation; and American Oil
& Gas, Inc.




                              ACCOUNTING PROCEDURE

                                JOINT OPERATIONS
                              I. GENERAL PROVISIONS



1.    Definitions

      "Joint Property" shall mean the real and personal property subject to the
      agreement to which this Accounting Procedure is attached.

      "Joint Operations" shall mean all operations necessary or proper for the
      development, operation, protection and maintenance of the Joint Property.

      "Joint Account" shall mean the account showing the charges paid and
      credits received in the conduct of the Joint

      Operations and which are to be shared by the Parties.

      "Operator" shall mean the party designated to conduct the Joint
      Operations.

      "Non-Operators" shall mean the Parties to this agreement other than the
      Operator.

      "Parties" shall mean Operator and Non-Operators.

      "First Level Supervisors" shall mean those employees whose primary
      function in Joint Operations is the direct supervision of other employees
      and/or contract labor directly employed on the Joint Property in a field
      operating capacity.

      "Technical Employees" shall mean those employees having special and
      specific engineering, geological or other professional skills, and whose
      primary function in Joint Operations is the handling of specific operating
      conditions and problems for the benefit of the Joint Property.

      "Personal Expenses" shall mean travel and other reasonable reimbursable
      expenses of Operator's employees.

      "Material" shall mean personal property, equipment or supplies acquired or
      held for use on the Joint Property.

      "Controllable Material" shall mean Material which at the time is so
      classified in the Material Classification Manual as most recently
      recommended by the Council or Petroleum Accountants Societies.

      "Coalbed Methane Well" means a well drilled with the objective of
      producing gas and associated hydrocarbons from coal formations or seams
      and all zones in communication therewith.

      "Non-Coalbed Methane Well" means any oil and gas well except a Coalbed
      Methane Well.

2.    Statement and Billings

      Operator shall bill Non-Operators on or before the last day of each month
      for their proportionate share of the Joint Account for the preceding
      month. Such bills will be accompanied by statements which identify the
      authority for expenditure, lease or facility, and all charges and credits
      summarized by appropriate classifications of investment and expense except
      that items of Controllable Material and unusual charges and credits shall
      be separately identified and fully described in detail.

3.    Advances and Payments by Non-Operators

      A.  Unless otherwise provided for in the agreement, the Operator may
          require the Non-Operators to advance their share of estimated cash
          outlay for the succeeding month's operation within fifteen (15) days
          after receipt of the billing or by the first day of the month for
          which the advance is required, whichever is later. Operator shall
          adjust each monthly billing to reflect advances received from the
          Non-Operators.

     B.   Each Non-Operator shall pay its proportion of all bills within fifteen
          (15) days after receipt. If payment is not made within such time, the
          unpaid balance shall bear interest monthly at the rate quoted as the
          prime rate in the table "Money Rates" in the Wall Street Journal on
          the first day of the month in which delinquency occurs plus 1% or the
          maximum contract rate permitted by the applicable usury laws in the
          state in which the Joint Property is located, whichever is the lesser,
          plus attorney's fees, court costs, and other costs in connection with
          the collection of unpaid amounts.


4.    Adjustments

      Payment of any such bills shall not prejudice the right of any
      Non-Operator to protest or question the correctness thereof; provided,
      however, all bills and statements rendered to Non-Operators by Operator
      during any calendar year shall conclusively be presumed to be true and
      correct after twenty-four (24) months following the end of any such
      calendar year, unless within the said twenty-four (24) month period a
      Non-Operator takes written exception thereto and makes claim on Operator
      for adjustment.  No adjustment favorable to Operator shall be made unless
      it is made within the same prescribed period. The provisions of this
      paragraph shall not prevent adjustments resulting from a physical
      inventory of Controllable Material as provided for in Section V.

     COPYRIGHT (C) 1985 by the Council of Petroleum Accountants Societies.

                                      - 1 -

<PAGE>



                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies



5.    Audits

     A.   A Non-Operator, upon notice in writing to Operator and all other
          Non-Operators, shall have the right to audit Operator's accounts and
          records relating to the Joint Account for any calendar year within the
          twenty-four (24) month period following the end of such calendar year;
          provided, however, the making of an audit shall not extend the time
          for the taking of written exception to and the adjustments of accounts
          as provided for in Paragraph 4 of this Section I. Where there are two
          or more Non-Operators, the Non-Operators shall make every reasonable
          effort to conduct a joint audit in a manner which will result in a
          minimum of inconvenience to the Operator. Operator shall bear no
          portion of the Non-Operators' audit cost incurred under this paragraph
          unless agreed to by the Operator. The audits shall not be conducted
          more than once each year without prior approval of Operator, except
          upon the resignation or removal of the Operator, and shall be made at
          the expense of those Non-Operators approving such audit.

     B.   The Operator shall reply in writing to an audit report within 180 days
          after receipt of such report.

6.    Approval By Non-Operators

      Where an approval or other agreement of the Parties or Non-Operators is
      expressly required under other sections of this Accounting Procedure and
      if the agreement to which this Accounting Procedure is attached contains
      no contrary provisions in regard thereto, Operator shall notify all
      Non-Operators of the Operator's proposal, and the agreement or approval of
      a majority in interest of the Non-Operators shall be controlling on all
      Non-Operators.



                               II. DIRECT CHARGES

Operator shall charge the Joint Account with the following items:



1.    Ecological and Environmental



      Costs incurred for the benefit of the Joint Property as a result of
      governmental or regulatory requirements to satisfy environmental
      considerations applicable to the Joint Operations. Such costs may include
      surveys of an ecological or archaeological nature and pollution control
      procedures as required by applicable laws and regulations.



2.    Rentals and Royalties



      Lease rentals and royalties paid by Operator for the Joint Operations.



3.    Labor

      A.  (1)   Salaries and wages of Operator's field employees directly
                employed on the Joint Property in the conduct of Joint
                Operations.
          (2)   Salaries of First level Supervisors in the field.
          (3)   Salaries and wages of Technical Employees directly employed on
                the Joint Property if such charges are excluded from the
                overhead rates.
          (4)   Salaries and wages of Technical Employees either temporarily or
                permanently assigned to and directly employed in the operation
                or the Joint Property if such charges are excluded from the
                overhead rates.

      B.  Operator's cost of holiday, vacation, sickness and disability benefits
          and other customary allowances paid to employees whose salaries and
          wages are chargeable to the Joint Account under Paragraph 3A of this
          Section II. Such costs under this Paragraph 3B may be charged on a
          "when and as paid basis" or by "percentage assessment" on the amount
          of salaries and wages chargeable to the Joint Account under Paragraph
          3A of this Section II. If percentage assessment is used, the rate
          shall be based on the Operator's cost experience.

      C.  Expenditures or contributions made pursuant to assessments imposed by
          governmental authority which are applicable to Operator's costs
          chargeable to the Joint Account under Paragraphs 3A and 3B of this
          Section II.

      D.  Personal Expenses of those employees whose salaries and wages are
          chargeable to the Joint Account under Paragraphs 3A and 3B of this
          Section II.



4.    Employee Benefits



      Operator's current costs or established plans for employees' group life
      insurance, hospitalization, pension, retirement, stock purchase, thrift,
      bonus, and other benefit plans of a like nature, applicable to Operator's
      labor cost chargeable to the Joint Account under Paragraphs 3A and 3B of
      this Section II shall be Operator's actual cost not to exceed the percent
      most recently recommended by the Council of Petroleum Accountants
      Societies.


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                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies






5.    Material



      Material purchased or furnished by Operator for use on the Joint Property
      as provided under Section IV.  Only such Material shall be purchased for
      or transferred to the Joint Property as may be required for immediate use
      and is reasonably practical and consistent with efficient and economical
      operations. The accumulation of surplus stocks shall be avoided.


6.    Transportation



      Transportation of employees and Material necessary for the Joint
      Operations but subject to the following limitations:

      A.  If Material is moved to the Joint Property from the Operator's
          warehouse or other properties, no charge shall be made to the Joint
          Account for a distance greater than the distance from the nearest
          reliable supply store where like material is normally available or
          railway receiving point nearest the Joint Property unless agreed to by
          the Parties.

      B.  If surplus Material is moved to Operator's warehouse or other storage
          point, no charge shall be made to the Joint Account for a distance
          greater than the distance to the nearest reliable supply store where
          like material is normally available, or railway receiving point
          nearest the Joint Property unless agreed to by the Parties. No charge
          shall be made to the Joint Account for moving Material to other
          properties belonging to Operator, unless agreed to by the Parties.

      C.  In the application of subparagraphs A and B above, the option to
          equalize or charge actual trucking cost is available when the actual
          charge is $400 or less excluding accessorial charges. The $400 will be
          adjusted to the amount most recently recommended by the Council of
          Petroleum Accountants Societies.



7.    Services



      The cost of contract services, equipment and utilities provided by outside
      sources, except services excluded by Paragraph 10 of Section II and
      Paragraph i, ii, and iii, of Section III.  The cost of professional
      consultant services and contract services of technical personnel directly
      engaged on the Joint Property if such charges are excluded from the
      overhead rates. The cost of professional consultant services or contract
      services of technical personnel not directly engaged on the Joint Property
      shall not be charged to the Joint Account unless previously agreed to by
      the Parties.



8.    Equipment and Facilities Furnished By Operator

     A.   Operator shall charge the Joint Account for use of Operator owned
          equipment and facilities at rates commensurate with commercial rates
          currently prevailing in the immediate area of the Joint Property.

9.    Damages and Losses to Joint Property



      All costs or expenses necessary for the repair or replacement of Joint
      Property made necessary because of damages or losses incurred by fire,
      flood, storm, theft, accident, or other cause, except those resulting from
      Operator's gross negligence or willful misconduct. Operator shall furnish
      Non-Operator written notice of damages or losses incurred as soon as
      practicable after a report thereof has been received by Operator.



10.   Legal Expense



      Expense of handling, investigating and settling litigation or claims,
      discharging of liens, payment of judgments and amounts paid for settlement
      of claims incurred in or resulting from operations under the agreement or
      necessary to protect or recover the Joint Property, except that no charge
      for services of Operator's legal staff or fees or expense of outside
      attorneys shall be made unless previously agreed to by the Parties. All
      other legal expense is considered to be covered by the overhead provisions
      of Section III unless otherwise agreed to by the Parties, except as
      provided in Section I, Paragraph 3.



11.   Taxes



      All taxes of every kind and nature assessed or levied upon or in
      connection with the Joint Property, the operation thereof, or the
      production therefrom, and which taxes have been paid by the Operator for
      the benefit of the Parties. If the ad valorem taxes are based in whole or
      in part upon separate valuations of each party's working interest, then
      notwithstanding anything to the contrary herein, charges to the Joint
      Account shall be made and paid by the Parties hereto in accordance with
      the tax value generated by each party's working interest.

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                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies




12.   Insurance



      Net premiums paid for insurance required to be carried for the Joint
      Operations for the protection of the Parties. In the event Joint
      Operations are conducted in a state in which Operator may act as
      self-insurer for Worker's Compensation and/or Employers Liability under
      the respective state's laws, Operator may, at its election, include the
      risk under its self-insurance program and in that event, Operator shall
      include a charge at Operator's cost not to exceed manual rates.



13.   Abandonment and Reclamation



      Costs incurred for abandonment of the Joint Property, including costs
      required by governmental or other regulatory authority.



14.   Communications



      Cost of acquiring, leasing, installing, operating, repairing and
      maintaining communication systems, including radio and microwave
      facilities directly serving the Joint Property. In the event communication
      facilities/systems serving the Joint Property are Operator owned, charges
      to the Joint Account shall be made as provided in Paragraph 8 of this
      Section II.



15.   Other Expenditures



      Any other expenditure not covered or dealt with in the foregoing
      provisions of this Section II, or in Section III and which is of direct
      benefit to the Joint Property and is incurred by the Operator in the
      necessary and proper conduct of the Joint Operations.





                                  III. OVERHEAD



1.    Overhead - Drilling and Producing Operations

      i.  As compensation for administrative, supervision, office services and
          warehousing costs, Operator shall charge drilling and producing
          operations on either:

         (     x     ) Fixed Rate Basis, Paragraph lA, or


         Unless otherwise agreed to by the Parties, such charge shall be in lieu
         of costs and expenses of all offices and salaries or wages plus
         applicable burdens and expenses of all personnel, except those directly
         chargeable under Paragraph 3A, Section II.  The cost and expense of
         services from outside sources in connection with matters of taxation,
         traffic, accounting or matters before or involving governmental
         agencies shall be considered as included in the overhead rates provided
         for in the above selected Paragraph of this Section III unless such
         cost and expense are agreed to by the Parties as a direct charge to the
         Joint Account.

     ii. The salaries, wages and Personal Expenses of  Technical Employees and/
         or the cost of professional consultant

         services and contract services of technical personnel directly employed
         on the Joint Property:


         (     x     ) shall not be covered by the overhead rates.

    iii. The salaries, wages and Personal Expenses of Technical Employees and/or
         costs of professional consultant services and contract services of
         technical personnel either temporarily or permanently assigned to and
         directly employed in the operation of the Joint Property:

         (     x     ) shall not be covered by the overhead rates.


      A.        Overhead - Fixed Rate Basis

            (1) Operator shall charge the Joint Account at the following rates
                per well :

                Drilling Well Rate $1,500 (if a Coalbed Methane Well) or $3,000
                (if a Non-Coalbed Methane Well)



                Producing Well Rate $200 per Coalbed Methane Well per month and
                $300 per Non-Coalbed Methane Well per month

            (2) Application of Overhead - Fixed Rate Basis shall be as follows:
                (a) Drilling Well Rate
                   (1)    Charges for drilling wells shall begin on the date the
                          well is spudded and terminate on the date the drilling
                          rig, completion rig, or other units used in completion
                          of the well is released, whichever is later, except


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                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies

                          that no charge shall be made during suspension of
                          drilling or completion operations for fifteen (15) or
                          more consecutive calendar days.
                   (2)    Charges for wells undergoing any type of workover or
                          recompletion for a period of five (5) consecutive work
                          days or more shall be made at the drilling well rate.
                          Such charges shall be applied for the period from date
                          workover operations, with rig or other units used in
                          workover, commence through date of rig or other unit
                          release, except that no charge shall be made during
                          suspension of operations for fifteen (15) or more
                          consecutive calendar days.
                (b) Producing Well Rates
                   (1)    An active well either produced or injected into for
                          any portion of the month shall be considered as a
                          one-well charge for the entire month.

                   (2)    Each active completion in a multi-completed well in
                          which production is not commingled down hole shall be
                          considered as a one-well charge providing each
                          completion is considered a separate well by the
                          governing regulatory authority.


                   (3)    An inactive oil and gas well shut in



                          for any reason shall qualify for an overhead charge
                          equal to 50% of the applicable Producing Well Rate.

                   (4)    A one-well charge shall be made for the month in which
                          plugging and abandonment operations are completed on
                          any well. This one-well charge shall be made whether
                          or not the well has produced except when drilling well
                          rate applies.

                   (5)    All other inactive wells (including but not limited to
                          inactive wells covered by unit allowable, lease
                          allowable, transferred allowable, etc.) shall not
                          qualify for an overhead charge.

            (3)    The well rates shall be adjusted as of the first day of April
                   each year following the effective date of the agreement to
                   which this Accounting Procedure is attached.  The adjustment
                   shall be computed by multiplying the rate currently in use by
                   the percentage increase or decrease in the average weekly
                   earnings of Crude Petroleum and Gas Production Workers for
                   the last calendar year compared to the calendar year
                   preceding as shown by the index of average weekly earnings of
                   Crude Petroleum and Gas Production Workers as published by
                   the United States Department of Labor, Bureau of Labor
                   Statistics, or the equivalent Canadian index as published by
                   Statistics Canada, as applicable. The adjusted rates shall be
                   the rates currently in use, plus or minus the computed
                   adjustment.

2.    Overhead - Major Construction

      To compensate Operator for overhead costs incurred in the construction and
      installation of fixed assets, the expansion of fixed assets, and any other
      project clearly discernible as a fixed asset required for the development
      and operation of the Joint Property, Operator shall either negotiate a
      rate prior to the beginning of construction, or shall charge the Joint


                                      - 5 -

<PAGE>



                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies



      Account for overhead based on the following rates for any Major
      Construction project in excess of $500,000.00

      A.    5      % of first $100,000 or total cost if less, plus
         ---------

      B.    3      % of costs in excess of $100,000 but less than $1,000,000,
         --------- plus

      C.    2      % of costs in excess of $1,000,000.
         ---------

      Total cost shall mean the gross cost of any one project. For the purpose
      of this paragraph, the component parts of a single project shall not be
      treated separately and the cost of drilling and workover wells and
      artificial lift equipment shall be excluded.

3.    Catastrophe Overhead

      To compensate Operator for overhead costs incurred in the event of
      expenditures resulting from a single occurrence due to oil spill, blowout,
      explosion, fire, storm, hurricane, or other catastrophes as agreed to by
      the Parties, which are necessary to restore the Joint Property to the
      equivalent condition that existed prior to the event causing the
      expenditures, Operator shall either negotiate a rate prior to charging the
      Joint Account or shall charge the Joint Account for overhead based on the
      following rates:

      A.    5      % of total costs through $100,000; plus
         ---------

      B.    3      % of total costs in excess of $100,000 but less than
         --------- $1,000,000; plus

      C.    2      % of total costs in excess of $1,000,000.
         ---------


      Expenditures subject to the overheads above will not be reduced by
      insurance recoveries, and no other overhead provisions of this Section III
      shall apply.


4.    Amendment of Rates

      The overhead rates provided for in this Section III may be amended from
      time to time only by mutual agreement between the Parties hereto if, in
      practice, the rates are found to be insufficient or excessive.


   IV.PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS



Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for all Material movements affecting the Joint
Property. Operator shall provide all Material for use on the Joint Property;
however, at Operator's option, such Material may be supplied by the
Non-Operator. Operator shall make timely disposition of idle and/or surplus
Material, such disposal being made either through sale to Operator or
Non-Operator, division in kind, or sale to outsiders. Operator may purchase, but
shall be under no obligation to purchase, interest of Non-Operators in surplus
condition A or B Material. The disposal of surplus Controllable Material not
purchased by the Operator shall be agreed to by the Parties.


1.    Purchases



      Material purchased shall be charged at the price paid by Operator after
      deduction of all discounts received. In case of Material found to be
      defective or returned to vendor for any other reasons, credit shall be
      passed to the Joint Account when adjustment has been received by the
      Operator.


2.    Transfers and Dispositions


      Material furnished to the Joint Property and Material transferred from the
      Joint Property or disposed of by the Operator, unless otherwise agreed to
      by the Parties, shall be priced on the following basis exclusive of cash
      discounts:

      A.  New Material (Condition A)

          (1)    Tubular Goods Other than Line Pipe
                 (a) Tubular goods, sized 2 3/8 inches OD and larger, except
                     line pipe, shall be priced at Eastern mill published
                     carload base prices effective as of date of movement plus
                     transportation cost using the 80,000 pound carload weight
                     basis to the railway receiving point nearest the Joint
                     Property for which published rail rates for tubular goods
                     exist. If the 80,000 pound rail rate is not offered, the
                     70,000 pound or 90,000 pound rail rate may be used. Freight
                     charges for tubing will be calculated from Lorain, Ohio
                     and casing from Youngstown, Ohio.

                 (b) For grades which are special to one mill only, prices shall
                     be computed at the mill base of that mill plus
                     transportation cost from that mill to the railway receiving
                     point nearest the Joint Property as provided above in
                     Paragraph 2.A.(1)(a). For transportation cost from points
                     other than Eastern mills, the 30,000 pound Oil Field


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<PAGE>



                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies




                     Haulers Association interstate truck rate shall be used.
                 (c) Special end finish tubular goods shall be priced at the
                     lowest published out-of-stock price, f.o.b. Houston, Texas,
                     plus transportation cost, using Oil Field Haulers
                     Association interstate 30,000 pound truck rate, to the
                     railway receiving point nearest the Joint Property.

                 (d) Macaroni tubing (size less than 2 3/8 inch OD) shall be
                     priced at the lowest published out-of-stock prices f.o.b.
                     the supplier plus transportation costs, using the Oil Field
                     Haulers Association interstate truck rate per weight of
                     tubing transferred, to the railway receiving point nearest
                     the Joint Property.

          (2)    Line Pipe

                 (a) Line pipe movements (except size 24 inch OD and larger with
                     walls 3/4 inch and over) 30,000 pounds or more shall be
                     priced under provisions of tubular goods pricing in
                     Paragraph A.(l)(a) as provided above. Freight charges shall
                     be calculated from Lorain, Ohio.

                 (b) Line Pipe movements (except size 24 inch OD) and larger
                     with walls 3/4 inch and over) less than 30,000 pounds shall
                     be priced at Eastern mill published carload base prices
                     effective as of date of shipment, plus 20 percent, plus
                     transportation costs based on freight rates as set forth
                     under provisions of tubular goods pricing in Paragraph A.
                     (1)(a) as provided above. Freight charges shall be
                     calculated from Lorain, Ohio.

                 (c) Line pipe 24 inch OD and over and3/4inch wall and larger
                     shall be priced f.o.b. the point of manufacture at current
                     new published prices plus transportation cost to the
                     railway receiving point nearest the Joint Property.

                 (d) Line pipe, including fabricated line pipe, drive pipe and
                     conduit not listed on published price lists shall be priced
                     at quoted prices plus freight to the railway receiving
                     point nearest the Joint Property or at prices agreed to by
                     the Parties.

          (3)    Other Material shall be priced at the current new price, in
                 effect at date of movement, as listed by a reliable supply
                 store nearest the Joint Property, or point of manufacture, plus
                 transportation costs, if applicable, to the railway receiving
                 point nearest the Joint Property.

          (4)    Unused new Material, except tubular goods, moved from the Joint
                 Property shall be priced at the current new price, in effect on
                 date of movement, as listed by a reliable supply store nearest
                 the Joint Property, or point of manufacture, plus
                 transportation costs, if applicable, to the railway receiving
                 point nearest the Joint Property. Unused new tubulars will be
                 priced as provided above in Paragraph 2.A.(l) and (2).

          B.     Good Used Material (Condition B)

                 Material in sound and serviceable condition and suitable for
                 reuse without reconditioning:

                 (1) Material moved to the Joint Property

                     At seventy-five percent (75%) of current new price, as
                     determined by Paragraph A.

                 (2) Material used on and moved from the Joint Property

                     (a)    At seventy-five percent (75%) of current new price,
                            as determined by Paragraph A, if Material was
                            originally charged to the Joint Account as new
                            Material or

                     (b)    At sixty-five percent (65%) of current new price, as
                            determined by Paragraph A, if Material was
                            originally charged to the Joint Account as used
                            Material

                 (3) Material not used on and moved from the Joint Property

                     At seventy-five percent (75%) of current new price as
                     determined by Paragraph A.

                 The cost of reconditioning, if any, shall be absorbed by the
                 transferring property.

          C.     Other Used Material

                 (1) Condition C

                     Material which is not in sound and serviceable condition
                     and not suitable for its original function until after
                     reconditioning shall be priced at fifty percent (50%) of
                     current new price as determined by Paragraph A. The cost of
                     reconditioning shall be charged to the receiving property,
                     provided Condition C value plus cost of reconditioning does
                     not exceed Condition B value.


                                      - 7 -

<PAGE>



                                                       COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies



                 (2) Condition D

                     Material, excluding junk, no longer suitable for its
                     original purpose, but usable for some other purpose shall
                     be priced on a basis commensurate with its use. Operator
                     may dispose of Condition D Material under procedures
                     normally used by Operator without prior approval of
                     Non-Operators.

                    (a) Casing, tubing, or drill pipe used as line pipe shall be
                        priced as Grade A and B seamless line pipe of comparable
                        size and weight.  Used casing, tubing or drill pipe
                        utilized as line pipe shall be priced at used line pipe
                        prices.

                    (b) Casing, tubing or drill pipe used as higher pressure
                        service lines than standard line pipe, e.g. power oil
                        lines, shall be priced under normal pricing procedures
                        for casing, tubing, or drill pipe. Upset tubular goods
                        shall be priced on a non upset basis.

                 (3) Condition E

                     Junk shall be priced at prevailing prices. Operator may
                     dispose of Condition E Material under procedures normally
                     utilized by Operator without prior approval of
                     Non-Operators.

          D.     Obsolete Material

                 Material which is serviceable and usable for its original
                 function but condition and/or value of such Material is not
                 equivalent to that which would justify a price as provided
                 above may be specially priced as agreed to by the Parties. Such
                 price should result in the Joint Account being charged with the
                 value of the service rendered by such Material.

          E.     Pricing Conditions

                 (1)   Loading or unloading costs may be charged to the Joint
                       Account at the rate of twenty-five cents (25(cent)) per
                       hundred weight on all tubular goods movements, in lieu of
                       actual loading or unloading costs sustained at the
                       stocking point. The above rate shall be adjusted as of
                       the first day of April each year following January 1,
                       1985 by the same percentage increase or decrease used to
                       adjust overhead rates in Section III, Paragraph 1.A.(3).
                       Each year, the rate calculated shall be rounded to the
                       nearest cent and shall be the rate in effect until the
                       first day of April next year. Such rate shall be
                       published each year by the Council of Petroleum
                       Accountants Societies.

                 (2)   Material involving erection costs shall be charged at
                       applicable percentage of the current knocked-down price
                       of new Material.

3.    Premium Prices

      Whenever Material is not readily obtainable at published or listed prices
      because of national emergencies. strikes or other unusual causes over
      which the Operator has no control, the Operator may charge the Joint
      Account for the required Material at the Operator's actual cost incurred
      in providing such Material, in making it suitable for use, and in moving
      it to the Joint Property; provided notice in writing is furnished to
      Non-Operators of the proposed charge prior to billing Non-Operators for
      such Material.  Each Non-Operator shall have the right, by so electing and
      notifying Operator within ten days after receiving notice from Operator,
      to furnish in kind all or part of his share of such Material suitable for
      use and acceptable to Operator.


4.    Warranty of Material Furnished By Operator


      Operator does not warrant the Material furnished.  In case of defective
      Material, credit shall not be passed to the Joint Account until adjustment
      has been received by Operator from the manufacturers or their agents.





                                 V. INVENTORIES



The Operator shall maintain detailed records of Controllable Material.



1.    Periodic Inventories, Notice and Representation


      At reasonable intervals, inventories shall be taken by Operator of the
      Joint Account Controllable Material. Written notice of intention to take
      inventory shall be given by Operator at least thirty (30) days before any
      inventory is to begin so that Non-Operators may be represented when any
      inventory is taken. Failure of Non-Operators to be represented at an
      inventory shall bind Non-Operators to accept the inventory taken by
      Operator.


2.    Reconciliation and Adjustment of Inventories



      Adjustments to the Joint Account resulting from the reconciliation of  a
      physical inventory shall be made within six months following the taking of
      the inventory. Inventory adjustments shall be made by Operator to the
      Joint Account for overages and shortages, but, Operator shall be held


                                      - 8 -

<PAGE>



                                                      COPAS   1984   ONSHORE
                                                      Recommended by the Council
                                                      of Petroleum Accountants
                                                      Societies



       accountable only for shortages due to lack of reasonable diligence.


3.    Special Inventories



      Special inventories may be taken whenever there is any sale, change of
      interest, or change of Operator in the Joint Property. It shall be the
      duty of the party selling to notify all other Parties as quickly as
      possible after the transfer of interest takes place. In such cases, both
      the seller and the purchaser shall be governed by such inventory. In cases
      involving a change of Operator, all Parties shall be governed by such
      inventory.



4.    Expense of Conducting Inventories

      A.  The expense of conducting periodic inventories shall not be charged to
          the Joint Account unless agreed to by the Parties.

      B.  The expense of conducting special inventories shall be charged to the
          Parties requesting such inventories, except inventories required due
          to change of Operator shall be charged to the Joint Account.



                                      - 9 -

<PAGE>
                                  EXHIBIT "D"

                                    INSURANCE

  ATTACHED TO AND MADE A PART OF THAT CERTAIN JOINT OPERATING AGREEMENT DATED
 FEBRUARY 17, 2003, BY AND AMONG NORTH FINN, LLC; TOWER COLOMBIA CORPORATION;
 AND AMERICAN OIL & GAS, INC.D AMONG NORTH FINN, LLC; TOWER COLOMBIA
 CORPORATION; AND AMERICAN OIL & GAS, INC.D AMONG NORTH FINN, LLC; TOWER
 COLOMBIA CORPORATION; AND AMERICAN OIL & GAS, INC.D AMONG NORTH FINN, LLC;
TOWER COLOMBIA CORPORATION; AND

      At all times while operations are conducted under this Agreement, Operator
shall maintain the following insurance:

      Commercial General Liability insurance with limits per occurrence of
      $1,000,000 for personal injury, $2,000,000 aggregate; and

      Automobile Public Liability Insurance with limits per occurrence of
      $1,000,000.

      The foregoing insurance shall be carried in an acceptable company or
companies; shall be maintained in full force and effect during the terms of this
agreement; and shall not be cancelled, altered or amended without 30 days prior
written notice. If so required. Operator agrees to have its insurance carrier
furnish a certificate of insurance evidencing such insurance coverage. Premiums
for such insurance shall be charged to the Joint Account.



<PAGE>



                                   EXHIBIT "F"
        NON-DISCRIMINATION AND CERTIFICATION OF NON-SEGREGATED FACILITIES

     ATTACHED TO AND MADE A PART OF THAT CERTAIN JOINT OPERATING AGREEMENT DATED
     FEBRUARY 17, 2003, BY AND AMONG NORTH FINN, LLC; TOWER COLOMBIA
     CORPORATION; AND AMERICAN OIL & GAS, INC.TH FINN, LLC; TOWER COLOMBIA
     CORPORATION; AND AMERICAN OIL & GAS, INC.TH FINN, LLC; TOWER COLOMBIA

Operator and Non-Operators (individually, a "Contractor") agree that the
following, if CORPORATION; AND AMERICAN OIL & GAS, INC.TH FINN, LLC; TOWER
COLOMBIA applicable, will be fulfilled in the performance of activities under
this Agreement:

1.  NONSEGREGATED FACILITIES REQUIREMENTS:  The provisions of this Section apply
    only if the total contract amount exceeds $10,000. A Certification of
    Nonsegregated Facilities, as required by 41 CFR ss.1-12.803-10(d)(1) and
    60-1.8, shall be submitted prior to the award of a subcontract exceeding
    $10,000 which is not exempt from the provisions of the Equal Opportunity
    clause. The certification may be submitted either for each subcontract or
    for all subcontracts during a period.

2.  EQUAL EMPLOYMENT OPPORTUNITY:  The provisions of this Section apply only if
    the total contract amount exceeds $10,000. During the performance of this
    contract, Contractor agrees that it will comply with all provisions of
    Executive Order No. 11246, which is incorporated into this agreement by
    this reference.

3.  EQUAL EMPLOYMENT OPPORTUNITY REPORTING REQUIREMENTS:  The following applies
    only if Contractor has 50 or more employees and holds contracts,
    subcontracts or purchase orders amounting to more than $50,000: Contractor
    will complete and file Government Standard Form 100, Equal Employment
    Opportunity Employer Information Report EEO-1 (or such other form as may
    have superseded it), in accordance with the instructions contained therein.

4.  AFFIRMATIVE ACTION COMPLIANCE PROGRAMS:  The provisions of this Section
    apply only if Contractor has 50 or more employees and holds contracts,
    subcontracts or purchase orders amounting to more than $50,000.

    (a) In compliance with Paragraph 60-1.40, and in accordance with Sections
    60-2.1 through 60-2.32 of the rules of the Office of Federal Contract
    Compliance Programs, Contractor shall develop a written affirmative action
    compliance program for each of its establishments. Within 120 days from the
    issue date of this contract, Contractor shall maintain a copy of separate
    affirmative action compliance programs for each of its establishments.

    (b) Contractor shall require each of its subcontractors who have 50 or more
    employees and a subcontract placed hereunder of $50,000 or more to develop a
    written affirmative action compliance program for each of its establishments
    in conformance with the requirements of this Section.

5.  EMPLOYMENT OF QUALIFIED HANDICAPPED INDIVIDUALS:  The provisions of this
    Section apply only if the total contract amount exceeds $2,500. Contractor
    agrees to comply with Section 503 of the Rehabilitation Act of 1973, Section
    III of the Rehabilitation Act amendments of 1974 and 41 CFR ss.60-741.4
    which are incorporated into this agreement by this reference.

6.  UTILIZATION OF MINORITY BUSINESS ENTERPRISES:  The provisions of this
    Section apply only if the total contract amount exceeds $10,000.

    (a) It is the policy of the Government that minority business enterprises
    shall have the maximum practicable opportunity to participate in the
    performance of Government contracts.

    (b) Contractor agrees to use its best efforts to carry out this policy in
    the award of its subcontracts to the fullest extent consistent with the
    efficient performance of this contract. As used in this contract, the term
    "minority business enterprise" means a business, at least 50 percent of
    which is owned by minority group members or, in case of publicly owned
    business, at least 51 percent of the stock of which is owned by minority
    group members. For the purpose of this definition, minority group members
    are Negroes, Spanish-speaking American persons, American-Orientals,


<PAGE>



     American-Indians, American-Eskimos, and American Aleuts. Contractors may
     rely on written representations by subcontractors regarding their status as
     minority business enterprises in lieu of an independent investigation. 41
     CFR ss.1-1.1310-2(a).

7.  UTILIZATION OF LABOR SURPLUS AREA CONCERNS:  The provisions of this Section
    apply only if the total contract amount exceeds $l0,000.

    (a) It is the policy of the Government to award contracts to labor surplus
    area concerns that agree to perform substantially in labor surplus areas,
    where this can be done consistent with the efficient performance of the
    contract and at prices no higher than are obtainable elsewhere. Contractor
    agrees to use its best efforts to place its subcontracts in accordance with
    this policy.

    (b) In complying with subsection (a) of this Section and with subsection (b)
    of Section 9 of this contract entitled "Utilization of Small Business
    Concerns," the Contractor in placing his subcontracts shall observe the
    following order of preference: (1) small business concerns that are labor
    surplus area concerns, (2) other small business concerns, and (3) other
    labor surplus area concerns.

    (c)   (1) The term "labor surplus area" means a geographical area identified
    by the Department of Labor as an area of concentrated unemployment or
    underemployment or an area of labor surplus.

    (2) The term "labor surplus area concern" means a concern that together with
    its first-tier subcontractors will perform substantially in labor surplus
    areas.

    (3) The term "perform substantially in a labor surplus area" means that the
    costs incurred on account of manufacturing, production, or appropriate
    services in labor surplus areas exceed 50 percent of the contract price. 41
    CFRss.1-1.805-3(a).

8.  UTILIZATION OF SMALL BUSINESS CONCERNS:  The provisions of this Section
    apply only if the total contract amount exceeds $10,000.

    (a) It is the policy of the Government as declared by Congress that a fair
    proportion of the purchases and contracts for supplies and services for the
    Government be placed with small business concerns.

    (b) Contractor agrees to accomplish the maximum amount of subcontracting to
    small business concerns that Contractor finds to be consistent with the
    efficient performance of this contract.  41 CFRss.1.1.710-3(a).

9.  AFFIRMATIVE ACTION FOR DISABLED VETERANS AND VETERANS OF THE VIETNAM ERA:
    The provisions of this Section apply only if the total contract amount
    exceeds $10,000. Contractor agrees to comply with Section 402 of the Vietnam
    Era Veterans Readjustment Assistance Act of 1974 and 41 CFR ss.60-250.1
    which are incorporated into this agreement by this reference.

10. UTILIZATION OF WOMEN-OWNED BUSINESS CONCERNS: The provisions of this Section
    apply only if the total contract amount exceeds $10,000.

    (a) It is the policy of the United States Government that women-owned
    businesses shall have the maximum practicable opportunity to participate in
    the performance of contracts awarded by any Federal agency.

    (b) Contractor agrees to use its best efforts to carry out this policy in
    the award of subcontracts to the fullest extent consistent with the
    efficient performance of this contract. As used in this contract, a
    "woman-owned business" concern means a business that is at least 51% owned
    by a woman or women who also control and operate it. "Control" in this
    context means exercising the power to make policy decisions. "Operate" in
    this context means being actively involved in the day-to-day management.
    "Women" mean all women business owners. Temporary Regulation 54, Appendix to
    4l CFR Chapter l. (See Executive Order 12138).