OIL AND GAS OPERATING
AGREEMENT


 


THIS AGREEMENT,
made and entered into this 6th day of June, 2012, between TEHI ILLINOIS, LLC, P.O. Box 670, Olney, Illinois 62450, herein referred
to as “Operator,” and EOS PETRO, INC., herein referred to as “Non-Operator”;


 


WITNESSETH:


 


WHEREAS, Non-Operator
is the owner of the entire working interest in certain oil and gas leases covering and affecting the following described lands:


 


Those oil and gas leases shown
on Exhibit A attached hereto and incorporated herein by reference.


 


Article I – Operation
of the Well


 


A. Authority to Operate.
Non-Operator, who is the owner of the working interest in the above described acreage, hereby designates Operator, subject to the
provisions hereof, as Operator for oil and/or gas production (whether primary or secondary) with full control and management of
all operations on the leasehold property described herein, hereby granting to Operator full power and authority to do and perform
such acts and act in reference to said leasehold property as hereinafter set forth.


 


		1.	Supervision Expense. Operator shall manage the affairs of the lease and to properly keep the wells
in operation In the good and workmanlike manner as would a prudent operator under the same or similar circumstances, but it shall
have no liability as Operator to the other parties for losses sustained or liabilities incurred, expect as may result from gross
negligence or willful misconduct or from breach of the provisions of this Agreement. Operator may subcontract all or any portion
of said operations. Operator for its expenses in operating and supervising shall be entitled to an initial fee of Three Hundred
Dollars ($300.00) per month to pay for such overhead expenses.



 


		2.	Costs of Operation. Non-Operator shall pay to Operator Non-Operator’s proportionate share
of all costs and expenses arising out of the operation and maintenance of any wells drilled, completed and equipped pursuant to
this Agreement, such costs commonly being known as operating expenses, including but not limited to, the following:



 


(a)          The
pumper’s charge for daily inspection of the well, which charges not total Three Hundred Dollars ($300.00) per month per well;


 


(b)          The
Operator shall be entitled to and the Non-Operator shall pay a fee of ten percent (10%) of all costs for new drilling and new working
of existing wells. Such charge shall be an overseeing fee;


 


(c)          The
cost of all abstracts of title, title examination and curative work, including any costs in connection with proof of title to the
purchaser of oil produced on the promises;


 


(d)          All
costs and expenses of handling, investigating and settling litigation or claims arising by reason of operations which are necessary
to protect or recover leases or the equipment thereon, including, but not limited to, attorneys’ fees, court costs and amounts
paid in settlement or satisfaction of any such litigation or claims:


 



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(e)          Delay
or other rentals, when such rentals are paid by Operator, provided Operator shall not be liable for failure to pay, or improper
payment of, any such rentals through clerical error, oversight or otherwise, provided Operator shall have exercised in good faith;


 


(f)          The
cost of all labor, services, materials, equipment and supplies furnished by Operator or paid for by Operator, which is, in the
opinion of Operator, necessary for the efficient operation of the wells. Operator may furnish any of the foregoing items for the
wells developed pursuant to this Agreement, provided that the charges therefor are in accordance with industry standards prevailing
in the Southeastern Illinois area;


 


(g)          All
taxes paid for the benefit of the parties hereto, including ad valorem, property, gross production, or any other taxes of every
kind and nature assessed or levied upon or in connection with the wells, the operation thereof, or the production therefrom;


 


(h)          Premiums
paid for bonds carried with the State of Illinois and for insurance carried on the leases and wells, including Workers’ Compensation,
general public liability and property damage, coverage on equipment and personal property. Operator is authorized to use his discretion
in selecting insurance companies and the nature of and amount of any insurance. Operator may attempt to secure insurance protecting
insurable equipment against loss by fire and other extended hazards, but does not and cannot guarantee the insurability of the
same. In the event of loss, either partial or total, of any equipment by reason of fire, theft, vandalism or other hazards, Operator
shall not be responsible for the value of such property, except to the extent of the insurance proceeds, If any, which may be received
as a result of the loss;


 


(i)          The
costs of disposing of any salt water including hauling, transporting or disposing of salt water through salt water inspection wells;


 


(j)          In
the event Operator is required to pay for rights-of-way and easements for access to the leasehold premises or for rental of tank
battery sites, or if required, surface rental or other payments to the owners of the surface, these charges shall constitute costs
and expenses arising out of operation and maintenance;


 


(k)          Subject
to the limitations set forth in the following Subparagraph 3, the costs of any additional labor, equipment, materials to rework,
deepen, plug back, convert for injection, or clean out which may be required from time to time for the continued successful operation
of the wells and leasehold, including lease costs, additional rig time, and repairs and replacements of equipment;


 


(l)          Any
maintenance, repair or other single project, for which the Non-operators are responsible pursuance to this Article IV, which single
project requires an expenditure by the Operator in excess of $25,000.00 will be charged to Non-operators at cost plus ten percent
supervision fees.


 



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3.          Major
Expenditures. Notwithstanding any contrary provision in this paragraph, Operator shall not, without the prior written consent of
the Non-Operator, perform any single project reasonable estimated by Operator to require an expenditure in excess of $25,000, including
the term percent supervision fee described herein. The limitations contained herein shall not apply, however, in the event of an
explosion, fire, flood, or other sudden emergency, whether of the same or of a different nature, in which case Operator may take
such action and incur such expenses as are necessary in Operator’s judgment to safeguard life and property. Expenses in connection
with an emergency, Operator shall, as promptly as practicable, report to Non-Operator the nature of the emergency, the action taken
and the expenses incurred.


 


4.          Attorneys’
Fees.          In the event Operator shall ever be required to bring legal proceedings
in order to collect any sums due from any Non-Operators under this Agreement, then Operator shall also be entitled to recover all
court costs, costs of collection, and a reasonable attorneys’ fees, which the lien provided for herein shall also secure.


 


5.          Overhead
Rate Adjustment Provisions.          In the event the overhead supervision fees
or pumping fees provided for in this Article IV shall ever be less than the prevailing rates being charged by financially responsible
prudent operators in the area for comparable operations, then Operator may give written notice of such higher prevailing rates
to Non-Operators. The higher prevailing rates specified in said notice shall become the effective rates hereunder as of the first
day of the month following thirty (30) days from the giving of said notice.


 


6.          Plugging
Fund.          Operator is authorized to include as part of the monthly operation
statement an amount to be set aside for plugging and abandonment of any well drilled under the terms and conditions hereof. The
amount set aside shall not exceed a total amount of Eight Thousand Dollars ($8,000.00) per well, to be accrued over a time period
of not less than thirty-six (36) months. Monies set aside for the plugging fund shall be maintained by Operator in a separate account.
In the event a well drilled under the terms and conditions hereof is sold prior to the plugging and abandonment, any amounts set
aside for such costs shall be distributed to the Non-Operator of record on the effective date of said sale.


 


Article II – Payment of Operating
Costs


 


Non-Operator consents
and agrees to execute the documentation required by the pipeline purchaser permitting the Operator to submit monthly operating
statements directly to the pipeline purchaser, to be deducted from crude oil sales attributable to the working interest, remitting
to Non-Operator its proportionate share of said crude oil sales attributable to the working interest, after the deduction of operating
expenses.


 


Article III –
Failure to Pay Costs


 


In the event Non-Operator
fails to pay any cost due Operator under the terms of this Agreement within fifteen (15) days after receipt of the Operator’s
statement therefor, the unpaid sum shall bear interest at the rate of 18% per annum. Non-Operator grants to Operator a security
interest in and a lien upon Non-Operator’s ownership and interests in the proceeds of such oil and gas leases, the wells
situated thereon, and the oil and gas produced therefrom, the proceeds of such oil and gas, and all equipment, fixtures and personal
property situated thereon, to secure the payment of Non-Operator’s share of costs and operating expenses of Non-Operator’s
share of costs and operating expenses as herein defined, together with interest thereon. To the extent Operator has a security
interest under the Uniform Commercial Code of the State of Illinois, Operator 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 a Judgment by Operator for the secured indebtedness
will not be deemed an election of remedies or otherwise affect the lien rights or security interest granted herein as security
for the payment thereof. Any party, to the extent it deems necessary to perfect the lien and security interest provided herein,
may file this Operating Agreement 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. Further, and not in limitation of the foregoing, each party herein grants
to operator full right, power and authority to execute in each party’s name and on its behalf, any financing statement which
operator deems necessary in order to perfect the security interest hereby granted under the applicable Uniform Commercial Code.


 



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In addition, upon default
by Non-Operator in the payment of his share of the expense, Non-Operator appoints and constitutes Operator as his attorney-in-fact,
and Operator shall have the right, without prejudice to any other rights and remedies, to collect from the oil company purchasing
the proceeds of production from the leasehold estate, the Non-Operator’s share of the oil and gas produced until the amount
owned by such Operator, plus interest, has been paid. Each oil purchaser shall be entitled to rely upon Operator’s written
statement concerning the amount of any default. This power of attorney shall be considered a Power coupled with an interest and
irrevocable so long as any amounts are due Operator.


 


Article IV – Operator Not a Consultant


 


The Operator shall
have no obligation to advise or consult with Non-Operator in connection with the drilling or reworking of any well. Rather, the
Operator’s obligations under this agreement shall be as delineated herein.


 


Article V – Insurance To Be Provided
by Operator


 


Operator shall at all
times during the term of this Agreement carry insurance with responsible insurance carriers for the following items:


 


		(1)	Workers’ compensation and occupational disease insurance as required by the laws of the State
of Illinois;



 


		(2)	Comprehensive general public liability and property damage insurance with limits of not less than
$500,000 covering injury or death of any persons and $1,000,000 for more than one person in any one accident, and $500,000 coverage
damages for loss to property of third persons.



 


		(3)	Automobile public liability insurance covering all automobiles equipment used in the performance
of work under this Agreement with limits of not less than $500,000 applicable to bodily injury, sickness or death of any one person,
and $1,000,000 for more than one person in any one accident and $250,000 for loss of or damage to property in any one accident.



 


		(4)	Operator shall further require all contractors performing work under this Agreement to carry at
least the foregoing minimum amounts of insurance coverage.



 


Article VI
– Unitization and Communitization


 


Operator is hereby
granted a limited power of attorney to enter into on behalf of Non-Operator any unitization or communitization agreement involving
the leasehold premises or any part thereof, if, in the opinion of the Operator, the unitization or communitization of part or all
of the Leasehold premises is necessary or desirable for the primary or secondary development of the leasehold premises for oil
and gas purposes.


 


Article VII – Inspection of Well
and Access Records


 


Non-Operator shall
have access to the lease at all reasonable times, at his sole risk, to inspect or observe operations and shall have access during
normal business hours to information pertaining to the development or operation thereof, including Operator’s books and records
relating thereto, reports filed with governmental agencies, daily drilling reports, well logs, daily gauge and run tickets, and
shall make available samples of any cores or cuttings taken from any well drilled upon the lease. Operator shall be entitled to
charge a reasonable fee for the reproduction of any material requested by the Non-Operator.


 



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Article VIII – Liability of the
Parties


 


The liability of the
parties shall be several and not joint or collective. None of the rights, duties or obligations of the parties hereto or terms
hereof shall be construed as creating a joint venture, a partnership, or any legal entity whereby one party is responsible individually
for the debts, liabilities or charges incurred in connection with the operation or abandonment of such leasehold property, but
rather each party hereunder is a tenant in common, and as such is liable only for his, her or their proportionate charges in connection
with the operation or abandonment of such leasehold property.


 


Article IX – Resignation and Removal
of Operator


 


Operator may resign
at any time by giving notice thereof to Non-Operators. If Operator terminates its legal existence, 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 if it fails or refuses to carry out its duties hereunder, or becomes insolvent, bankrupt, or is placed
in receivership, by the affirmative vote of those Non-Operators owning a majority interest based on ownership and not on the number
of parties remaining after excluding the voting interest of Operator. Such resignation, termination, or removal will not become
effective until 7:00 a.m. on the first day of the calendar month following the automatic termination, giving of such 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 the effective date of resignation, termination or removal shall be bound
by the terms hereof as a Non-Operator. Notwithstanding anything herein to the contrary, Operator may transfer and assign its rights
of operation to include all rights granted Operator in this Agreement. Upon the resignation, termination, or removal of Operator,
the successor Operator will be selected by the affirmative vote of those parties owning a majority interest based on ownership,
and not on the number of parties. In the event Operator is removed pursuant to the provisions of this Article and fails to vote
or votes only to succeed itself, the successor Operator shall be selected by the affirmative votes of those parties owning a majority
interest based on Ownership and not on the number of parties remaining after excluding the voting interest of the Operator that
was removed.


 


A change of corporate
name or structure of Operator or transfer of operator’s interest to a subsidiary, parent or successor corporation shall not
be basis for termination of removal of Operator.


 


Article X – Abandonment of Well


 


At such time as any
well(s) on this leasehold, in the opinion of Operator, become(s) uneconomical to operate, Operator is authorized to plug and abandon
such well(s) in accordance with applicable regulations and terms of the Oil and Gas Leases, and salvage the equipment therefrom
at the cost, risk and expense of all parties, said salvage to be sold at prevailing market prices in that locality, and after deduction
of all final operation expenses, salvaging, plugging and abandoning costs, the remaining proceeds are to be distributed by Operator
to the interest holder as their interests appear of record, with each Non-Operator to receive his proportionate share of the proceeds
received on resale. In the event the proceeds are insufficient to pay the aforesaid costs, each owner shall be responsible for
this proportionate share of the remaining costs.


 


Article XI – Service of Notice


 


Any notice required
under the terms of this Agreement to be in writing shall be served upon the party to whom it is directed, addressed to such party
at the address for service of Notice as set forth below the party’s signature to this agreement, or if by telephone to the
number set forth below.


 



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Article XII – Use of Equipment


 


It is agreed that Operator
or his sub-contractors shall have the right to use its own equipment in the drilling, completion, equipping, and operating of any
well drilled pursuant to the terms and conditions of this Agreement and shall be entitled to charge for said equipment, labor,
and/or materials at competitive field rates.


 


Article XIII – Preferential Right
To Purchase


 


Should non-operator
desire to sell or dispose of all or any part of his interest in the leasehold premises acquired under this agreement, he shall
promptly give written notice to Operator, sent by Registered or Certified Mail to Operator, with full information concerning his
proposed sale, which shall include the name and address of the prospective purchaser, the purchase price, and all other terms of
the offer. The Operator shall then have an absolute right, for a period of ten days after receipt of notice, to purchase the Non-Operator’s
interests upon the same terms and conditions contained in the third party’s offer to purchaser.


 


If this preferential
right is not exercised by Operator, and Non-Operator does not consummate the proposed sale to the third party, the preferential
right shall remain in effect, equally applicable to any future sale.


 


Article XIV – Modification of Agreement
and Governing Law


 


No change, modification
or alteration of this Agreement shall be valid unless it is in writing, signed by the parties hereto, and no course of dealing
between the parties shall be construed to alter the terms hereof. If this Operating Agreement (or any agreement, assignment or
contract connected to this Agreement by reference) is executed in counterparts, any executed copy thereof shall be deemed an original
for any and all purposes. This agreement shall be subject to all valid and applicable State and Federal laws, rules, regulations
and orders and the operations conducted hereunder shall be performed in accordance with such rules and regulations and orders.
In the event this Agreement or any provision hereof is (or operations contemplated hereby are) found to be inconsistent with or
contrary to any such laws, rules, regulations or orders, the latter shall be deemed to control and this Agreement shall be regarded
as modified to conform; as so modified, it shall continue in full force and effect. This agreement shall be governed by and construed
In accordance with the laws of the State of Illinois.


 


Article XV – Operator to Keep Properly
Free if Liens


 


Operator shall at all
times keep the interest of Non-Operator in and to the land covered hereby and equipment thereon, free and clear of all laborer’s,
mechanic’s, and Material men’s liens.


 


Article XVI – Miscellaneous


 


This Agreement is made
solely for the benefit of those persons who are parties hereto (including those persons succeeding to all or part of this interest
of an original party if such succession is recognized under the other provisions thereof), and no other person shall have or claim
to be entitled to enforce any rights benefits or obligations under this Agreement.


 


IN WITNESS WHEREOF,
the parties hereto have duly executed this Agreement by having the authorized corporate officer sign the same and the Secretary
duly affix the Corporate Seal and the individuals have hereunto set their hand and deals the day and year first above written.


 



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	 	 	OPERATOR:
	 	 	 
	 	 	TEHI Illinois, LLC
	 	 	 
	 	 	BY: /s/ Harold  Murbarger
	 	 	 
	 	 	Address: 	Box 670
	 	 	Olney, Il.  62450
	 	 	 
	ATTEST:	 	 
	 	 	 
	/s/ Antum Sharma	 	 
	Antum Sharma	 	 
	 	 	NON-OPERATOR:
	 	 	 
	 	 	EOS PETRO, INC.
	 	 	 
	 	 	BY: /s/ Nikolas Konstant
	 	 	 
	 	 	Address: 	2029 Century Park East,
	 	 	Suite 3670
	 	 	Los Angeles, CA  90067
	 	 	 
	 	 	Social Security Number:
	 	 	EIN# 45-2041425
	 	 	 
	 	 	 
	 	 	 
	 	 	Address:	 
	 	 	 
	 	 	 
	 	 	Social Security Number:
	 	 	 


 



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EXHIBIT "A"


An Oil & Gas Lease dated 1/26/1966 from Lyman D.
Works and Frances M. Works, as Lessor, in favor of the Superior Oil Company, as Lessee, recorded as Book 73, page 254 in the Office
of the Recorder of Edwards County, Illinois.


An Oil & Gas lease dated 9/31/1938 from George J. Works,
Etux, as Lessor, in favor of Fred A. Noah, etal, at Lessee, recorded as Book 5, page 71 in the Office of the Recorder of Edwards
County, Illinois.


An Oil & Gas Lease dated 6/1/1938 from Frank Wood, Etal,
as Lessor, in favor of Fred A. Noah, etal, as Lessee, recorded as Book 6, page 287 in the Office of the Recorder of Edwards County,
Illinois..


An Oil & Gas Lease dated 5/24/1938 from Melvin Works, Etal,
as Lessor, in favor of Fred A. Noah, etal, as Lessee, recorded as Book 5, page 71 in the Office of the Recorder of Edwards County,
Illinois..


An Oil & Gas Lease dated 12/4/1996 from Alma Energy Corporation
as Lessor; in favor of The Speir Operating Company, as Lessee, recorded as Book 194, page 329 in the Office of the Recorder of
Edwards County, Illinois.


Covering the following described lands located in Edwards County,
IL


F. Wood Etal, Tract 4

Township 2 South, Range 14 East

Section 19: N/2

Section 18: Commencing near the SE corner where the South line of said Section intersects the west line of the right of way of
St Hwy 1, thence West 64 rods, thence North 5 rods, thence East 64 rods to the West line of said ROW, thence South 5 rods to
the POB


 


Book 223 Page 243



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G. J. Works, Tract 3

Township 2 South, Ranch 11 East

Section 18: Commencing at the SW corner, thence East 56 chains 58 links, thence North 26 chains 54 links, thence West 56 chains
681/2 links, thence South 26 chains 54 links to POB, containing 158 acres, 1 rod, 14 perches, more or less, excepting commenting
near the SE corner where the South Line of said Sections intersects the west line of the right of way of St HWY 1, thence West
54 rods, thence North 5 rods, thence East 54 rods to the West line of said ROW, thence South 5 rods to the POB.


G. J. Works

Township 2 South, Range 11 East

Section 18: 140 acres, more or less, located in the South part of Section 18, more fully described in that Oil Gas and Mineral
Lease dated May 31, 1938, by and between George Works, Etux, as Lesser, and The Superior Oil Company, as Lessee.


F. Wood

Township 2 South, Range 11 East

Section 18: 2 acres tract commencing near the SE corner where the South line of said Section intersects the west line of the right
of way of St HWY 1, thence West 64 rods, thence North 5 rods, thence East 54 rods to the West line of said ROW, thence South 5
rods to the POB


M. Works, Tract 2

Township 2 South, Ranch 11 East

Section 18: 120 acres off of the West side of the following described Lands; Commencing at the NE corner of 5/2 Section 19, North
60 deg 30 min West 69 chains 36 links, thence South 5 deg 15:min Basf 53 chains 22 links, thence North 64 deg East 56 chains 80
links, thence North 5 deg West 13 chains 22 links to the POB.


 



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