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                                                                     EXHIBIT (4)

                        OPERATING AGREEMENT FOR PROGRAM A



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                           COMPANY OPERATING AGREEMENT

                                       of

              WOLVERINE ENERGY 98-99(A) DEVELOPMENT COMPANY, L.L.C.


     This OPERATING AGREEMENT (the "Agreement") is made as of September 4, 1998,
by Wolverine Energy, L.L.C., a Michigan limited liability company, which, with
its successor(s) as trustee(s) and managing Interestholder(s) under this
Agreement, is referred as the "Manager," and Gary L. Foltz as the Initial
Investor Member under this Agreement.


                              W I T N E S S E T H:

     WHEREAS, the Manager wishes to organize the WOLVERINE ENERGY 98-99(A)
DEVELOPMENT COMPANY, L.L.C. (the "Company") as a limited liability company under
the Michigan Limited Liability Company Act pursuant to Sections 451.1101 to
451.2200 of the Michigan Compiled Laws, as the same may be amended from time to
time (the "Michigan Act"), to provide for the management of the Company by the
Manager, and to provide for the sale of interests in the Company, the operation
of the Company and the rights and obligations of the owners of interests; and

     WHEREAS, Articles of Organization (the "Articles") shall be filed by the
Manager on                     , 199 , with the State of Michigan Department of
Consumer and Industry Services in accordance with the Michigan Act, to form the
Company as a statutory limited liability company under the Michigan Act;


                                    ARTICLE 1

                             ORGANIZATION AND POWERS

     1.1 COMPANY ESTATE; NAME. It is the intention of the parties hereto that
the Company constitute a limited liability company under the Michigan Act and
that this Agreement constitute the governing instrument of such limited
liability company. The Company created hereby shall be designated as "Wolverine
Energy 98-99(A) Development Company, L.L.C.," which name shall refer to the
Company and which shall not refer to the Manager or the officers, agents,
managing shareholders or beneficial owners of the Manager or the Company, and in
which name the Manager may conduct the business of the Company, make and execute
contracts, instruments and other documents on behalf of the Company and sue and
be sued. The Manager shall, to the extent possible, conduct all business and
execute all documents relating to the Company in the name of the Company. The
Manager may conduct the business of the Company or hold its property in trust
under other names as necessary to comply with law or to further the affairs of
the Company as it deems advisable in its sole discretion. This Agreement, the
Articles and any other documents, and any amendments of any of the foregoing,
required by law or appropriate, shall be recorded in all offices or
jurisdictions where the Company shall determine such recording to be necessary
or advisable for the conduct of the business of the Company.


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     1.2 COMPANY PURPOSE. The primary purpose of the Company is to acquire
working interests and/or similar interests in natural gas Properties in the
Devonian shale formation, particularly those which are within the Antrim shale
play in Michigan, and to participate in the drilling, completion and operation
of development natural gas wells on such Properties and in the acquisition,
construction, reconstruction, operation and management of natural gas
transmission systems, all of the foregoing in such manner as the Manager shall
designate. The general purpose of the Company shall be to acquire interests of
whatever type the Manager shall determine in Properties located within the
Continental United States. The Company shall have the power to perform any and
all acts and activities with respect to its primary or general purpose that are
customary or incident thereto including, by way of illustration and not
limitation, the acquisition, exploration, development, management,
administration and disposition of such properties as the Company shall designate
and the production and the marketing of the products therefrom. The Company may
engage in natural gas operations with others when, in the judgment of the
Manager, it is prudent and desirable under the circumstances. In any such
operations, the Company may acquire, own, hold and develop leases, either as
principal, agent, partner, syndicate member, associate, joint venturer or
otherwise and may invest funds in any such business, and may do any and all
things necessary or incidental to the conduct of any such activities.

     1.3 RELATIONSHIP AMONG INTERESTHOLDERS; NO PARTNERSHIP. As among the
Company, the Manager, the Interestholders and the employees and agents of the
Company, a limited liability company and not a partnership is created by this
Agreement irrespective of whether any different status may be held to exist as
far as others are concerned or for tax purposes or in any other respect. The
Interestholders hold only the relationship of owners of equity interests in the
Company to the Company and the Manager with only such rights as are conferred on
them by the Michigan Act, the Articles and this Agreement.

     1.4 ORGANIZATION ARTICLES. The Manager shall cause to be executed and filed
(a) the Articles, (b) such certificates as may be required by so-called "assumed
name" laws in each jurisdiction, including, but not limited to, Michigan, in
which the Company has a place of business, (c) all such other certificates,
notices, statements or other instruments required by law or appropriate for the
formation and operation of a Michigan limited liability company in all
jurisdictions where the Company may elect to do business, and (d) any amendments
of any of the foregoing required by law or appropriate.

     1.5 PRINCIPAL PLACE OF BUSINESS. The resident office and principal place of
business of the Company shall be 4660 South Hagadorn Road, Suite 230, East
Lansing, Michigan 48823, or such other place as the Manager may from time to
time designate by notice to all Investor Interestholders. The Company may
maintain such other offices at such other places as the Company may determine to
be in the best interests of the Company.

     1.6 SUBSCRIPTION AND ADMISSION OF INVESTOR INTERESTHOLDERS.

          (a) The Company shall have the unrestricted right at all times prior
to the Termination Date (as defined in Article 2 hereof) to admit to the Company
such Investor Interestholders in conformity with the Prospectus as it may deem
advisable, provided the aggregate subscriptions received for Aggregate Capital
Contributions of the Investor Interestholders and accepted by the Company do not
exceed $15,000,000 less the aggregate amount of capital contributions received
from Investor Interestholder in the preceding


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Companies described in the Prospectus, but may not be increased beyond that
amount at any time.

          (b) Each person who or which subscribes for Interests of the Company,
intending to become an Investor Interestholder of the Company, shall execute a
Signature Page and Power of Attorney and thereby agree to the terms of the
Subscription Agreement and this Agreement and shall be bound by each, and shall
make such Capital Contribution to the Company as subscribed for by such person.
Subject to the acceptance thereof by the Manager, each such subscriber shall be
admitted to the Company as an Investor Interestholder. All funds received from
such subscriptions will be deposited in the Company's name in an
interest-bearing escrow account at a commercial bank until subscriptions in the
amount of at least $300,000 have been received and collections on instruments
have been successfully completed.

          (c) If, by the close of business on the Termination Date, Investor
Interestholder Interests representing Aggregate Capital Contributions in the
aggregate amount of at least $300,000 have not been sold or if the Manager
withdraws the offering of Investor Interestholder Interests in accordance with
the terms of the Prospectus, the Subscription Agreement and this Agreement, the
Company shall be immediately dissolved at the expense of the Manager and all
subscription funds shall be forthwith returned to the respective subscribers
together with the net interest earned thereon.

          (d) In all events, interest actually earned on subscription funds held
in escrow shall be paid to subscribers for Investor Interestholder Interests,
PRO RATA, regardless of whether their subscriptions for such Interests are
accepted. As soon after the Termination Date as practicable, the Company shall
advise each Investor Interestholder of the Termination Date and the aggregate
amount of Aggregate Capital Contributions made by all Investor Interestholders
and pay such net interest as has been earned on such subscriptions while held in
escrow to all subscribers for Investor Interestholder Interests.

          (e) The full cash price for Investor Interestholder Interests must be
paid to the Company at the time of subscription.

     1.7 TERM OF THE COMPANY. For all purposes, this Agreement shall be
effective on and after the date hereof and the Company shall continue in
existence until December 31, 2035, at which time the Company shall be dissolved
unless sooner dissolved under any other provision of this Agreement.

     1.8 POWERS OF THE COMPANY. Without limiting any powers granted to the
Company under this Agreement or applicable law, the Company shall have, in
addition to all powers necessary, implied or incident to the Company purpose as
described in Section 1.2 hereof, the following additional powers;

          (a) To borrow money or to loan money and to pledge, mortgage or
otherwise encumber any and all Company Property and to execute conveyances,
mortgages, security agreements, assignments and any other contract or agreement
deemed by the Manager to be proper and in furtherance of the Company's purposes
and affecting the Company or any Company Property;

          (b) To pay all indebtedness, taxes and assessments due or to become
due with regard to Company Property and to give or receive notices,


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reports or other communications arising out of or in connection with the
Company's business or Company Property;

          (c) To collect all monies due the Company;

          (d) To establish, maintain and supervise the deposit of funds or
Company Property into and the withdrawals of the same from Company bank accounts
or securities accounts;

          (e) To employ accountants to prepare required tax returns and provide
other professional services and to pay their fees as a Company expense;

          (f) To make any election relating to adjustments in basis on behalf of
the Company or the Interestholders which is or may be permitted under the Code,
particularly with respect to Sections 743 and 754 of the Code;

          (g) To employ legal counsel for Company purposes and to pay their fees
and expenses as a Company expense;

          (h) To conduct the affairs of the Company with the general objective
of achieving distributable income from the Company Property;

          (i) To prepare or commission reports of the value of Company Property
or the natural gas reserves thereon and to pay the costs of such reports as a
Company expense; and

          (j) To sell, relinquish, release, "farm-out," or otherwise dispose of
or deal with any producing or non-producing leases, leasehold interests,
undivided interests therein or contractual rights to acquire such interests
which in the Manager's judgment should be sold, released, "farmed-out,"
relinquished or otherwise disposed of or dealt with, for such consideration or
without consideration as the Manager deems proper.

     1.9 TITLE TO COMPANY PROPERTY. Title to all of the Company Property shall
be vested in the Company until the Company and this Agreement are terminated
pursuant to Article 14 hereof; PROVIDED, HOWEVER, that if the laws of any
jurisdiction require that title to all or any portion of any Company Property be
vested in a trustee of the Company, then title to that part of the Company
Property shall be deemed to be vested in the Manager or any co-trustee, as the
case may be, appointed pursuant to Section 15.7 hereof.


                                    ARTICLE 2

                                   DEFINITIONS

     The following terms, whenever used herein, shall have the meanings assigned
to them in this Article 2 unless the context indicates otherwise. References to
sections and articles without further qualification denote sections and articles
of this Agreement. The singular shall include the plural and the masculine
gender shall include the feminine, and vice versa, as the context requires, and
the terms "person" and "he" and their derivations whenever used herein shall
include natural persons and entities, including, without limitation,
corporations, partnerships and trusts, unless the context indicates otherwise.

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     "Act" - The Securities Act of 1933, as amended, and any rules and
regulations promulgated thereunder.

     "Additional Development Well" - With respect to any Property in which the
Company owns a Working Interest, any well (other than an Initial Well) drilled
on such property, which well is located within the proven area of a known oil or
gas reservoir to the depth of the stratigraphic horizon known to be productive.

     "Additional Well" - Any well (other than an Initial Well) in which the
Company participates as the owner of a Working Interest.

     "Adjusted Capital Account" - An Interestholder's Capital Account at any
time (determined before any allocations for the current fiscal period) (a)
increased by (i) the amount of the Interestholder's share of partnership minimum
gain (as defined in Regulation Section 1.704-2(d)) at such time, (ii) the amount
of the Interestholder's share of the minimum gain attributable to partner
non-recourse debt (as defined in Regulation Section 1.704-2(b)(4)) and (iii) the
amount of the deficit balance in the Interestholder's Capital Account which the
Interestholder is obligated to restore under Regulation Section
1.704-1(b)(2)(ii)(c), if any, and (b) decreased by reasonably expected
adjustments, allocations and distributions described in Regulation Sections
1.704-1 (b)(2)(ii)(d)(4), (5) and (6) (taking into account the adjustments
required by Regulation Sections 1.704-2(g)(ii) and 1.704-2(i)(5)).

     "Affiliate" - An "affiliate" of, or person "affiliated" with, a specified
person is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.

     "Aggregate Capital Contributions" - The aggregate capital contributions of
the Investor Interestholders in payment of the purchase price of one or more
whole or fractional Interests (inclusive of the amount of any fee or other
compensation waived by the Company or the Manager or the amount by which the
Soliciting Dealer Commission paid pursuant to Section 9.5 hereof to any
Soliciting Dealer is less than 8% of the Capital Contribution of the
corresponding Investor Interestholder) plus any amounts contributed by the
Manager pursuant to Section 14.7 hereof.

     "Aggregate Net Capital Contributions" - The Aggregate Capital Contributions
of the Investor Interestholders and the Manager pursuant to Article 5 hereof,
less each Investor Interestholder's PRO RATA portion of the expenses described
in Sections 9.5 and 9.6 hereof, less the sum of all distributions pursuant to
Sections 8.1(b) and 8.1(c) hereof.

     "Agreement" - This Operating Agreement of the Company, as amended or
otherwise modified from time to time.

     "Articles" - The Articles of Organization of the Company, as amended from
time to time.

     "Capital Account" - The dollar amount reflecting a Interestholder's capital
interest in the Company from time to time, computed in accordance with Sections
6.1 and 6.2 hereof.

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     "Capital Contribution" - Each Contributing Interestholder's "Initial
Capital Contribution" shall be equal to such Contributing Interestholder's
initial capital contribution (i.e., the subscription amount for each Investor
Interestholder and the Manager's Contribution for the Manager).

     "Cause", when used in connection with the removal of the Manager by a
Majority of the Investor Interestholders, shall mean, (i) breach of its
fiduciary obligations to the Company, subject to Section 3.5(c) hereof, (ii)
actual fraud upon the Investor Interestholders, (iii) a material
misrepresentation herein or in the Prospectus, or (iv) a material and continuing
failure to perform its obligations to the Company hereunder.

     "Code" - The Internal Revenue Code of 1986, as amended from time to time.

     "Company" - The Michigan statutory limited liability company created and
existing pursuant to this Agreement, designated as "Wolverine 98-99(A) Antrim
Development Company. L.L.C."

     "Company Property" - All property contributed to, owned or otherwise
acquired by the Company as part of the Company's assets under this Agreement.

     "Completion" or "Completion Attempt" - As to any wells, all of the
operations conducted after drilling, testing and establishing the well as a
producer of natural gas in commercial quantities, including casing, cementing,
full testing for production and installation of all equipment such as meters,
pumps, gauges, flowlines, tanks, separators and dehydration facilities necessary
to produce and market gas, including plugging and abandoning if the Completion
Attempt is not successful.

     "Contributing Interestholders" - Each of the Investor Interestholders, to
the extent of and in proportion to their individual capital contributions, and
the Manager to the extent of the Manager's Contribution only.

     "Direct Costs" - The direct costs and expenses incurred by the Company in
the ordinary course of its business which are not routine or recurring expenses
or the benefits of which accrue directly to the Company and are not shared with
other entities affiliated with the Manager. Such expenses include legal,
accounting, engineering and consulting expenses and regulatory reporting costs.
Such expenses do not include the customary, routine and necessary costs incurred
by the Manager which are associated with or attributable to administration of
the business of the Company.

     "Escrow Date" - The later of the date on which the Company accepts the
subscription for the three hundredth Investor Interestholder Interest sold in
the initial offering to Investor Interestholders and the date on which the
Company has deposited at least $300,000 in collected funds in escrow under
Section 1.6(b) hereof.

     "Initial Well" - Any well drilled on property in which the Company
participates as the owner of a Working Interest which is acquired with the funds
received by the Company as Aggregate Capital Contributions, which well is
located within the proven area of a known oil or gas reservoir to the depth of
the stratigraphic horizon known to be productive, including the completion
facilities relating to that well, such as production platforms, production
equipment, flowlines and pipelines to connect the well to an interstate sales
pipeline.

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     "Interest" - An Investor Interestholder Interest or a Manager Interest.

     "Interestholder" - An owner of record of one or more Interests, including
the Investor Interestholders with respect to Investor Interestholder Interests
and the Manager with respect to the Manager Interests and any Investor
Interestholder Interests acquired by it.

     "Investor" - Each Investor Interestholder and the Manager with respect to
and to the extent of the Manager's Investment Interest.

     "Investor Interestholder" - A subscriber for Investor Interestholder
Interests (including the Manager or its affiliates solely with respect to
Interests acquired by them which are not Manager Interests) whose subscription
is accepted by the Company and who or which is admitted as a member in
accordance with Section 1.6 hereof.

     "Investor Interestholder Interest" - A beneficial interest in the Company
representing an Initial Capital Contribution of $1,000, issued pursuant to
Section 1.6 hereof in a public offering conducted pursuant to and in accordance
with the terms of the Prospectus.

     "Liquidation" - Either (a) the earlier of (i) the date upon which the
Company is terminated under Code Section 708(b)(1), or (ii) the date upon which
the Company ceases to be a going concern, or (b) as otherwise defined Section
1.704-1(g) of the Regulations.

     "Losses" - Defined at "Profits or Losses."

     "Majority" - When used with respect to any consent or approval to be given
or decision to be made or action taken by the Investor Interestholders, a
majority in interest of all the then current Investor Interestholders. Such
majority, or any lesser or greater interest prescribed herein, shall be
calculated based upon the total amount of the Aggregate Capital Contributions.
Investor Interestholder Interests created under Section 12.9 shall not be
included in the computation.

     "Manager" - Wolverine Energy, L.L.C., a Michigan limited liability company
having its principal office at 4660 South Hagadorn Road, Suite 230, East
Lansing, Michigan 48823, which is the initial Manager and any substitute or
different Manager as may subsequently be created under the terms of this
Agreement.

     "Manager Contribution" - The capital contribution required to be made to
the Company by the Manager as provided in Section 5.4 hereof.

     "Manager's Investment Interest" - Interests in the Company that represent
the beneficial interests of the Manager with respect to the Manager
Contribution, representing a Capital Contribution in an amount equal to 5% of
the Aggregate Capital Contributions of the Investor Interestholders acquired
pursuant to Section 5.4 hereof, and having the same rights and interests of the
Investor Interestholder Interests.

      "Manager's Promoted Interest" - Interests in the Company that represent
the beneficial interests and management rights of the Manager, as described in
Section 12.9 hereof.

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     "Managing Person" - Any of the following: (a) an officer or agent of the
Company, the Manager and each Affiliate of the Manager, and (b) any of the
directors, officers and agents of organizations named in (a) when acting for the
Manager or its Affiliates on behalf of the Company.

     "Michigan Act" - The Michigan Limited Liability Company Act, Section
451.1101 of the Michigan Compiled Laws, ET SEQ., as the same may be amended from
time to time and any successor to such statute.

     "Net Capital Contributions" - The Aggregate Capital Contributions of the
Interestholders pursuant to Article 5 hereof, less the Investor Interestholder's
allocable portion of the expenses described in Sections 9.2, 9.4, 9.5 and 9.6
hereof, less the sum of all distributions pursuant to Sections 8.1(a) and 8.1(b)
hereof.

     "Net Cash Flow" - The total gross receipts of the Company, less
corresponding cash operating expenses, all other cash expenditures of the
Company and reasonable reserves as determined by the Manager to cover
anticipated Company expenses. For purposes of determining Net Cash Flow, gross
receipts shall mean revenues from any source whatsoever, including, but not
limited to, revenues from sales of gas produced from wells on Company Property
and any proceeds from the sale, exchange, financing or refinancing of Company
Property, but excluding any Aggregate Capital Contributions of the
Interestholders.

     "Participating Investor" - An Investor Interestholder who or which has made
the election provided in Section 11.6 to assume personal liability for the
Special Obligations of the Company and waive limited liability with respect to
such Special Obligations, but only for so long as such Investor Interestholder
does not terminate or reverse such election.

     "Profits or Losses" - For a given fiscal period, an amount equal to the
Company's taxable income or loss for such period, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, expense, loss,
deduction or credit required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with the following
adjustments:

          (a) Any income of the Company that is exempt from federal income tax
     and not otherwise taken into account in computing Profits or Losses
     pursuant to this definition and any income and gain described in Regulation
     Section 1.704-1(b)(2)(iv)(i)(1) shall be added to such taxable income or
     loss;

          (b) Any expenditures of the Company described in Code Section
     705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
     to Regulation Section 1.704-1 (b)(2)(iv)(i), and not otherwise taken into
     account in computing Profits or Losses pursuant to this definition shall be
     subtracted from such taxable income or loss;

          (c) in the event of a distribution in kind under Section 8.2, the
     amount of any unrealized gain or loss deemed to have been realized on the
     property distributed shall be added or subtracted from such taxable income
     or loss, as the case may be; and

          (d) Notwithstanding any other provision of this definition, any items
     which are specially allocated pursuant to Sections 4.1, 4.5, 4.6,


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     4.7 and 7.4 shall not be taken into account in computing Profits or Losses.

     "Properties" - Interests in mineral and other subsurface rights in parcels
of real property, which may be evidenced by mineral leaseholds in such parcels
or other similar property interests under applicable law which have been granted
by the fee owners thereof and which provide, INTER ALIA, that the grantee of
such leasehold or other similar property interest may explore for and develop
reserves of minerals underlying such parcel of real property, shall acquire
ownership of such reserves if any are discovered and may occupy such parcel of
real property to the extent necessary to explore for, develop and extract such
minerals, in exchange for the payment to the grantor of a portion of the
minerals so extracted, whether in kind or from the proceeds of the sale thereof
by the grantee.

     "Prospectus" - The Prospectus dated December 4, 1998, of the Company,
together with the Supplement thereto with respect to the Company, to which this
Agreement is Appendix I.

     "Regulation" - A final, temporary or proposed Treasury regulation
promulgated under the Code.

     "Residual Operating Cash Flow" - Revenues from sales of production reduced
by operating expenses charged by the Operator(s) to the Company's working
interest(s), the Administrative Cost Allowance and Direct Costs for such period
and the establishment or increase of such cash reserves as the Manager shall
deem prudent for the Company to maintain under the circumstances.

     "Selling Agreement" - An agreement, in form and content approved by the
Manager on behalf of the Company, pursuant to which a Soliciting Dealer acts as
non-exclusive agent of the Company to offer and sell Investor Interestholder
Interests to persons who or which satisfy the suitability standards established
by the Manager in a public offering which is registered under the Act and the
securities regulatory statutes of the states in which such offers and sales are
conducted.

     "Simulated Depletion Deductions" - The simulated or actual depletion
allowance computed by the Company with respect to its oil and gas properties
pursuant to Regulations Section 1.704-1(b)(2)(iv)(k). In computing such
amounts, the Company shall have complete and absolute discretion to make any and
all permissible elections.

     "Simulated Gains" and "Simulated Losses" - Respectively, the simulated
gains or simulated losses computed by the Company with respect to its oil and
gas properties pursuant to Regulations Section 1.704-1 (b)(2)(iv)(k).  In
computing such amounts, the Company shall have complete and absolute discretion
to make any and all permissible elections.

     "Soliciting Dealer" - Any NASD-member securities broker/dealer which is
registered as such under Section 15 of the Securities Exchange Act of 1934, as
amended, and by the securities regulatory authority of each state in which it
conducts any securities-related business, and which executes a Selling Agreement
with the Company and participates as a selling broker/dealer with respect to
Investor Interestholder Interests.

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     "Special Obligations" - With respect to each Initial Well or Additional
Development Well, the obligations of the Company of whatever type or description
arising solely out of or in connection with its ownership of working shares in
such Initial Well or Additional Development Well, including but not limited to
the obligation to pay the costs of acquisition of the Company's share in such
Initial Well or Additional Development Well, the drilling and completion of such
Initial Well or Additional Development Well, to pay the Company's share of the
costs of Facilities, including Facilities not currently contemplated by the
Operators or the Manager, and tort liabilities for personal injury or
environmental damage with respect to such Initial Well or Additional Development
Well.

     "Subscription Agreement" - The subscription agreement (in substantially the
form which is attached to the Prospectus as Appendix III or such other form as
the Manager may prescribe or approve) which each prospective Investor
Interestholder must enter into with the Company through the execution of a
Signature Page and Power of Attorney in order to subscribe for Investor
Interestholder Interests.

     "Termination Date" - 150 days following the date of the Prospectus (which
may be extended, in the sole discretion of the Manager, to not later than
December 31, 1999), or an earlier date determined by the Company in its
discretion as follows:

          (a) The Company may designate any date between the Escrow Date and
     December 31, 1999, inclusive, as the Termination Date.

          (b) If the Company elects as provided in Section 1.6 hereof to
     withdraw the offering of Investor Interestholder Interests, the Termination
     Date is the date of that election.

     "Working Interest" - A Working Interest is an interest under an oil and
natural gas lease which carries with it the obligation to pay the costs of such
operation. The holders of the entire Working Interest bear 100% of the costs of
exploring, drilling, developing and operating the lease and are entitled to
receive revenues derived from oil and natural gas production on such lease which
remain after deduction of the cost of processing, transporting and marketing
such oil and natural gas, royalty and overriding royalty interest payments and
other burdens on production.

                                    ARTICLE 3

                   LIABILITIES OF MANAGER AND INTERESTHOLDERS

     3.1 LIABILITY AND OBLIGATIONS OF MANAGER.

          (a) To the fullest extent permitted by the Michigan Act, the Manager
shall not be personally liable to any person other than the Company and its
Interestholders for any act or omission of the Manager or any obligation of the
Company incurred by the Manager in its capacity as manager. The Company shall be
directly liable for the payment or satisfaction of all obligations and
liabilities of the Company incurred by the Manager and the officers and agents
of the Company within their authority.

          (b)  The Manager, as manager, may be made party to any action,
suit or proceeding to enforce an obligation, liability or right of the Company,
but it shall not solely on account thereof be liable separate from


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the Company and it shall be a party in that case only insofar as may be
necessary to enable such obligation or liability to be enforced against the
Company.

     3.2 LIABILITY OF INVESTOR INTERESTHOLDERS IN GENERAL. Except as
specifically provided in Section 3.3 hereof, no Investor Interestholder in his
capacity as an Investor Interestholder shall have any liability for the debts
and obligations of the Company in any amount beyond the unpaid amount, if any,
of the Capital Contributions subscribed for by him. Except as specifically
provided in Section 3.3 hereof, each Investor Interestholder in his capacity as
an Investor Interestholder shall have the limitation on his liability for the
Company's acts, debts and obligations that are described in Section 501(2) of
the Michigan Act.

     3.3 LIABILITY OF PARTICIPATING INVESTOR INTERESTHOLDERS. With respect to
any Initial Well or Additional Development Well, each Participating Investor
Interestholder, in his capacity as a Participating Investor Interestholder and
after he elects and for so long as he does not terminate his election to assume
liability for Special Obligations pursuant to and in accordance with Section
11.6 with respect to such well, shall be jointly and severally liable with the
Manager and each other Participating Investor Interestholder for any Special
Obligation of the Company with respect to such well incurred during such period,
notwithstanding that such Special Obligation may be asserted against the Company
and/or such Investor Interestholder at any other time. The intent of this
Section 3.3 is to qualify Participating Investor Interestholders for the
exclusion contained in Section 469(c)(3) of the Code or any successor provision
from the passive activity rules of the Code with respect to any one or more
Initial Wells or Additional Development Wells, with respect to tax items
attributable to Company expenditures which constitute Special Obligations
derived from Initial Wells or Additional Development Wells, and this Section 3.3
shall be interpreted to achieve that result.

     3.4 LIABILITY OF INVESTOR INTERESTHOLDERS TO MANAGER, COMPANY AND
INTERESTHOLDERS. Except to the extent that Participating Investor
Interestholders are liable for Special Obligations under Section 3.3, no
Investor Interestholder in his capacity as an Investor Interestholder shall be
liable, responsible or accountable in damages or otherwise to any
Interestholder, the Manager or the Company for any claim, demand, liability,
cost, damage and cause of action of any nature whatsoever that arises out of or
that is incidental to the management of the Company's affairs.

     3.5 LIABILITY OF MANAGING PERSONS TO COMPANY AND INTERESTHOLDERS. (a) The
Managing Persons shall have no liability to the Company or to any other
Interestholder for any loss suffered by the Company that arises out of any
Action or inaction of those Managing Persons if those Managing Persons, in good
faith, determined that such course of conduct was in the Company's best interest
and such course of conduct was within the scope of this Agreement and did not
constitute negligence or misconduct of the Managing Persons involved.

          (b) No act of the Company shall be affected or invalidated by the fact
that a Managing Person may be a party to or has an interest in any contract or
transaction of the Company if the interest of the Managing Person has been
disclosed or is known to the Interestholders.


                                       59
<PAGE>   13

          (c) To the fullest extent permitted by law and notwithstanding any
provision of this Agreement, the Company shall not be liable to any
Interestholder nor shall any Managing Person be considered to have breached any
fiduciary duty of loyalty to the Company or any Interestholder as the result of
any of the following:

               (1) The retention of a Managing Person as a consultant, agent or
          adviser to an enterprise in which the Company has an interest;

               (2) The ownership by a Managing Person of debt, equity or other
          interests in a venture in which the Company owns or may in the future
          own an interest or the organization, operation or advising of or the
          ownership of interests in any entity that may participate in such
          venture, whether or not the interests of the Managing Person are on
          terms more or less favorable than those afforded the Company;

               (3) The participation by a Managing Person or any entity
          organized or advised by it in a venture in lieu of the Company's
          participation or increasing its participation in the venture, whether
          or not the terms afforded to the Managing Person are more or less
          favorable than those afforded the Company;

               (4) Any transactions with Managing Persons or entities in which
          they have an interest, whether or not the terms of those transactions
          are determined by costs to the Managing Persons or entities,
          independent appraisals or comparable third party transactions; or

               (5) Any other conflict of interest or conflicting duty described
          in the Prospectus or this Agreement.

This Section 3.5(c) does not relieve any Managing Person from any duty to
exercise appropriate business judgment or care (but which shall not be enhanced
by any duty of loyalty), which duty of judgment or care shall be governed by the
other provisions of this Agreement, but the taking of any action described in
any portion of this Section 3.5(c) shall not in and of itself be considered
failure to exercise appropriate judgment or to take the appropriate level of
care.

     3.6 INDEMNIFICATION OF MANAGING PERSONS.

          (a) Each Managing Person shall be indemnified from the Company
Property against any losses, liabilities, judgments, expenses and amounts paid
in settlement of any claims sustained by him in connection with the Company or
claims by the Company, in right of the Company or by or in right of any
Interestholders, if the Managing Person would not be liable under the standards
of Section 3.5. The termination of any action, suit or proceeding by judgment,
order or settlement shall not, of itself, create a presumption that the Managing
Person charged did not act in good faith and in a manner that he reasonably
believed was in the Company's best interests. To the extent that any Managing
Person is successful on the merits or otherwise in defense of any action, suit
or proceeding or in defense of any claim, issue or matter therein, the Company
shall indemnify that Managing Person against the expenses, including attorneys'
fees, actually and reasonably incurred by him in connection therewith.

          (b) Notwithstanding the foregoing, no Managing Person nor any
broker-dealer shall be indemnified, nor shall expenses be advanced on its


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<PAGE>   14

behalf, for any losses, liabilities or expenses arising from or out of an
alleged violation of federal or state securities laws, unless (i) there has been
a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee, or (ii) those claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee, or (iii) a court of competent
jurisdiction approves a settlement of the claims against the particular
indemnitee. In any claim for federal or state securities law violations, the
party seeking indemnification shall place before the court the positions of the
Securities and Exchange Commission, the Massachusetts Securities Division and
other state securities administrators to the extent required by them with
respect to the issue of indemnification for securities law violations.

          (c) The Company shall not incur the cost of that portion of any
insurance, other than public liability insurance, that insures any person
against any liability for which indemnification hereunder is prohibited.

     3.7 GENERAL PROVISIONS. The following provisions apply to all rights of
indemnification and advances of expenses under this Agreement and all
liabilities described in this Article 3:

          (a) Expenses, including attorneys' fees, incurred by a Managing Person
in defending any action, suit or proceeding may be paid by the Company in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by the recipient to repay such amount if it shall ultimately
be determined that it is not entitled to be indemnified by the Company under
this Agreement or otherwise.

          (b) Rights to indemnification and advances of expenses under this
Agreement are not exclusive of any other rights to indemnification or advances
to which a Managing Person may be entitled, both as to action in a
representative capacity or as to action in another capacity taken while
representing another.

          (c) Each Managing Person shall be entitled to rely upon the opinion or
advice of or any statement or computation by any counsel, engineer, accountant,
investment banker or other person which he believes to be within such person's
professional or expert competence. In so doing, he will be deemed to be acting
in good faith and with the requisite degree of care unless he has actual
knowledge concerning the matter in question that would cause such reliance to be
unwarranted.

     3.8 DEALINGS WITH COMPANY. With regard to all rights of the Company and all
actions to be taken on its behalf, the Company and not the Manager, nor the
Company's officers and agents, nor the Investor Interestholders, shall be the
principal and the Company shall be entitled as such to the extent permitted by
law to enforce the same, collect damages and take all other action. All
agreements, obligations and actions of the Company shall be executed or taken in
the name of the Company, by an appropriate nominee, or by the Manager as trustee
but not in its individual capacity and every note, bond, contract or other
undertaking shall include a recitation limiting the obligations represented
thereby to the assets of the Company. Money may be paid and property delivered
to any duly authorized employee or agent of the Company who may provide receipt
therefor in the name of the Company and no person dealing in good faith thereby
shall be bound to see to the application of any moneys so paid or property so
delivered. No entity whose


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<PAGE>   15

securities are held by the Company shall be affected by notice of such fact or
be bound to see to the execution of the Company or to ascertain whether any
transfer of its securities by or to the Company or the Manager is authorized.

     3.9 NO INDEMNIFICATION OF PARTICIPATING INVESTOR INTERESTHOLDERS. The
Company shall not indemnify Investor Interestholders who elect to become
Participating Investor Interestholders pursuant to Section 11.6 for any
liability with respect to or in connection with any Special Obligation,
notwithstanding that liability for such may be asserted against such Investor
Interestholder at a time when he is not a Participating Investor Interestholder.

                                    ARTICLE 4

                          ALLOCATION OF PROFIT AND LOSS

     4.1  INITIAL ALLOCATIONS WITH RESPECT TO CAPITAL CONTRIBUTIONS.  All tax
items attributable to expenditures of Aggregate Capital Contributions on
Properties shall be specially allocated as provided in Section 4.4 hereof. All
net income attributable to the temporary investment of the Aggregate Capital
Contributions until and through the dates on which the Aggregate Capital
Contributions are applied to the Company's business shall be specially allocated
100% to the Investor Interestholders and 0% to the Manager.

     4.2  ALLOCATION OF PROFITS AND LOSSES FROM OPERATIONS.

          (a) First, Profits shall be allocated, PRO RATA, to the extent of any
negative balance in the Manager's or Investor Interestholders' Adjusted Capital
Accounts.

          (b) After giving effect to the provisions of Sections 4.1, 4.4, 4.6,
4.7 and 7.4, Profits for any fiscal period shall be allocated to the Investors
(including the Manager with respect to the Manager's Investment Interest) and
the Manager, respectively, in the same proportions as Cash Flow for the
corresponding period is distributed pursuant to Section 8.1(a) hereof.

          (c)  Profits remaining after the allocations in Section 4.2 (a) and
(b) above shall be allocated, before Payout, 94.76% to the Investors (including
the Manager with respect to the Manager's Investment Interest) and 5.24% to the
Manager with respect to its Promoted Interest and, after Payout, 69.76% to the
Investors (including the Manager with respect to the Manager's Investment
Interest) and 30.24% to the Manager with respect to its Promoted Interest.

          (d) Losses shall be allocated, after giving effect to the provisions
of Sections 4.1, 4.4, 4.6, 4.7 and 7.4, for any fiscal periods, first, to the
extent of Profits allocated in Section 4.2(c), then, before Payout, 94.76% to
the Investors (including the Manager with respect to the Manager's Investment
Interest) and 5.24% to the Manager with respect to its Promoted Interest and,
after Payout, 69.76% to the Investors (including the Manager with respect to the
Manager's Investment Interest) and 30.24% to the Manager with respect to its
Promoted Interest. The Losses allocated under this Section 4.2(d) shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Investor or the Manager to have a negative


                                       62
<PAGE>   16

amount in his/her/its Adjusted Capital Account at the end of any fiscal period.
All Losses in excess of the limitation of this Section 4.2(d) shall be allocated
to those Investors and/or the Manager with positive Adjusted Capital Accounts.

     4.3  GENERAL ALLOCATION PROVISIONS.

          (a) Except as otherwise provided in this Agreement, all items of
Company income, gain, expense, loss, deduction and credit for a particular
fiscal period and any other allocations not otherwise provided for shall be
divided among the Investors in the same proportions as they share Profits or
Losses, as the case may be for the fiscal period.

          (b) The Investors shall be bound by the provisions of this Agreement
in reporting their Interests of Company income and loss for income tax purposes.

          (c) The Company may use any permissible method under Code Section
706(d) and the Regulations thereunder to determine Profits, Losses and other
items on a daily, monthly or other basis for any fiscal period in which there is
a change in a Interestholder's interest in the Company.

          (d) The definition of "Capital Account" and certain other provisions
of this Agreement are intended to comply with Regulations Sections 1.704-1(b)
and 1.704-2 and shall be interpreted and applied in a manner consistent with
such Regulations. These Regulations contain additional rules governing
maintenance of Capital Accounts that may not have been provided for in this
Agreement because, in part, these rules may relate to transactions that are not
expected to occur and in some instances are prohibited by this Agreement. If the
Company after consultation with its regular accountants or tax counsel
determines that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to comply with
such Regulation, or to avoid the effects of unanticipated events that might
otherwise cause this Agreement not to comply with Regulations Sections
1.704-1(b) and 1.704-2, the Company shall make such modification without the
need of prior notice to or consent of any Interestholder; provided, that such
modification is not likely to have a material effect on the amounts
distributable to any Interestholder.

          (e) Allocations under Sections 4.2 and 4.7 shall be made independently
for each well or Property in which the Company has an interest.

     4.4 SPECIAL ALLOCATIONS.

          (a) All expenses of the sale of Interests incurred by the Company and
paid pursuant to Sections 9.5 and 9.6 hereof shall be allocated 100% to the
Investor Interestholders and 0% to the Manager with respect to the Manager's
Investment Interest and the Manager's Promoted Interest in the year in which
such expenses are incurred.

          (b)  All organizational expenses of the Company paid pursuant to
Section 9.4 hereof shall be allocated 100% to the Investor Interestholders and
0% to the Manager with respect to the Manager's Investment Interest and the
Manager's Promoted Interest in the year in which such expenses are incurred.

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<PAGE>   17


          (c) The management fee expense of the Company paid pursuant to Section
9.2 hereof shall be allocated 100% to the Investor Interestholders and 0% to the
Manager with respect to the Manager's Investment Interest and the Manager's
Promoted Interest in the year in which such expenses are incurred.

          (d) All intangible drilling and development expenses allocated to the
Company with respect to Initial Wells shall be allocated 100% to the Investor
Interestholders and 0% to the Manager with respect to the Manager's Investment
Interest and the Manager's Promoted Interest in the year such expenses are
incurred.

          (e) All costs and expenses incurred by the Company in connection with
the acquisition of Working Interests in Initial Wells shall be allocated 100% to
the Investor Interestholders and 0% to the Manager with respect to the Manager's
Investment Interest and the Manager's Promoted Interest in the year in which
such expenses are incurred.

          (f) All tangible drilling and development expenses allocated to the
Company with respect to Initial Wells shall be allocated to the Investors
(including the Manager with respect to the Manager's Investment Interest) and to
the Manager with respect to the Manager's Promoted Interest, respectively, in
such proportion as will result in the total of all drilling and development
expenses through such date being allocated 94.76% to the Investors (including
the Manager with respect to the Manager's Investment Interest) and 5.24% to the
Manager with respect to the Manager's Promoted Interest in the year such
expenses are incurred.

          (g)  All costs of Company borrowings to pay amounts referred to in
Sections 4.4(a) through 4.4(f) hereof shall be allocated to the Manager and the
Investor Interestholders in the same proportion as the costs paid from amounts
disbursed from the proceeds of such borrowings are allocated.

     4.5 ALLOCATIONS AMONG INVESTOR INTERESTHOLDERS.  Each Investor
Interestholder shall be allocated that percentage part of the aggregate amounts
allocated to all Investor Interestholders or to a subgroup of investors as such
Investor Interestholder's Capital Contribution bears to the Aggregate Capital
Contributions of all Investor Interestholders or such subgroup.

     4.6 TAX ALLOCATION. Notwithstanding anything to the contrary in this
Agreement, to the extent that the Manager is treated for federal income tax
purposes as having received an interest in the Company as compensation for
services constituting income to the Manager under Code Section 61, any amount
allowed as a deduction for federal income tax purposes to the Company (whether
as an ordinary and necessary business expense or as a depreciation or
amortization deduction) as a result of such characterization shall be allocated
solely for federal income tax purposes to the Manager.

     4.7 ALLOCATION OF PROFITS AND LOSSES FROM DISPOSITIONS. The Profits and
Losses from any sale, transfer, injury, destruction or other disposition of
Company Property or an interest therein, other than in the ordinary course of
business (including, without limitation, proceeds from insurance, refinancing or
condemnation) shall be allocated as follows:

          (a) Profits or gain (including items of gross income, as necessary)
shall be allocated:

                                       64
<PAGE>   18

              (i)   first, PRO RATA to the extent of any negative balance in the
                    Manager's or Investor Interestholders' Adjusted Capital
                    Accounts;

             (ii)   second, 5.24% to the Manager with respect to its Promoted
                    Interest and 94.76% to the Investors (including the Manager
                    with respect to the Manager's Investment Interest) until
                    each such Interestholder's Capital Account equals his Net
                    Capital Contribution;

            (iii)   third, to the Manager to the extent of any deferred Net Cash
                    Flow not distributed to the Manager pursuant to the language
                    of Section 8.1(a) following Section 8.1(a)(3) hereof, to the
                    extent such deferred amounts have not been recovered;

             (iv)   fourth, to the Manager with respect to the Manager's
                    Promoted Interest, an amount equal to the difference between
                    (A) the quotient determined by dividing the excess of (x)
                    the Capital Accounts of the Investors (including the
                    Manager's Capitol Account computed only with respect to the
                    Manager's Investment Interest) over (y) the Net Capital
                    Contributions (such difference between (x) and (y) being the
                    "Computed Capital Account") by .6976 and (B) the Computed
                    Capital Account, and

              (v)   then, 30.24% to the Manager with respect to the Manager's
                    Promoted Interest and 69.76%, PRO RATA, to the Investors
                    (including the Manager with respect to the Manager's
                    Investment Interest); provided, however, that the amount of
                    profit or gain allocated to the Manager pursuant to this
                    Section 4.7(a)(v) shall be reduced by the amount of any
                    Contingent Compensation paid to any Soliciting Dealer
                    pursuant to Section 9.8 hereof.

          To the extent required by Code Section 1254, such amounts will be
treated as ordinary income.

          (b) Losses shall be allocated PRO RATA to the Investors and the
Manager in proportion to the Capital Account balances of the Investors and the
Manager until each Investor's and the Manager's Capital Account balance equals
zero and, thereafter, 69.76% to the Investors (including the Manager with
respect to the Manager's Investment Interest) and 30.24% to the Manager with
respect to the Manager's Promoted Interest.


                                    ARTICLE 5

                    CAPITAL CONTRIBUTIONS OF INTERESTHOLDERS

     5.1 CAPITAL CONTRIBUTIONS. The Aggregate Capital Contributions of the
Investor Interestholders shall aggregate not less than $300,000. Each Investor
Interestholder shall make a Capital Contribution in exchange for Investor
Interestholder Interests (including fractional Interests),


                                       65
<PAGE>   19

subscribed for by and issued to such Investor Interestholder in accordance with
Section 1.6 hereof, payable as set forth in Section 5.2 hereof.

     5.2  PAYMENT OF CAPITAL CONTRIBUTION.  The Capital Contribution of the
Investor Interestholders, made with respect to the initial offering of
Interests, shall be payable in cash upon subscription.

     5.3 ASSESSMENTS; ADDITIONAL CAPITAL CONTRIBUTIONS. The Company may not make
any assessments on Interests. Further, the Company may not require that the
Investor Interestholders make any Capital Contribution in excess of the
Aggregate Capital Contributions provided for under Section 5.1 hereof, for any
purpose whatsoever.

     5.4 MANAGER CONTRIBUTION. The Manager Contribution shall equal 5% of the
Aggregate Capital Contributions of the Investor Interestholders, which shall be
made in cash by the Manager directly to the Company in exchange for the
Manager's Investment Interests to be issued to the Manager in the same
proportion as Interests are issued to the Investor Interestholders hereunder.
The Manager Contribution shall be made not later than December 31 of the year in
which such Aggregate Capital Contributions of the Investor Interestholders are
made. The Manager in its capacity as Manager shall also make capital
contributions in accordance with Section 14.7.

                                    ARTICLE 6

                                CAPITAL ACCOUNTS

     6.1 CAPITAL ACCOUNTS. A Capital Account shall be established and maintained
for each Interestholder and shall be adjusted as follows:

          (a) The Capital Account of each Interestholder shall be increased by:

               (1) The amount of such Interestholder's Capital Contribution to
          the Company;

               (2) The amount of Profits allocated to such Interestholder
          pursuant to Articles 4, 7 and 9;

               (3) The fair market value of property contributed by the
          Interestholder to the Company (net of liabilities secured by the
          contributed property that the Company under Code Section 752 is
          considered to assume or take subject to);

               (4) Any items in the nature of income or gain that are specially
          allocated to such Interestholder pursuant to Sections 4.1, 4.4, 4.6,
          4.7 and 7.4; and

               (5) Such Interestholder's allocable share of Simulated Gains.

          (b) The Capital Account of each Interestholder shall be decreased by:

               (1) The amount of Losses allocated to such Interestholder
          pursuant to Articles 4, 7 and 9;

                                       66
<PAGE>   20

               (2) All amounts of money and the fair market value of property
          paid or distributed to such Interestholder pursuant to the terms
          hereof (other than payments made with respect to loans made by such
          Interestholder to the Company), net of liabilities secured by that
          property that the Interestholder under Code Section 752 is considered
          to have assumed or taken subject to;

               (3) Any items in the nature of expenses or losses that are
          specially allocated to such Interestholder pursuant to Sections 4.1,
          4.4, 4.6, 4.7 and 7.4; and

               (4) Such Interestholder's allocable share of Simulated Losses and
          Simulated Depletion Deductions.

     6.2 CALCULATION OF CAPITAL ACCOUNT.

          (a) Whenever it is necessary to determine the Capital Account of any
Interestholder, the Capital Account of such Interestholder shall be determined
in accordance with the rules of Regulation Sections 1.704-1(b)(2)(iv) and
1.704-2 (as amended from time to time).

          (b) For purposes of computing the Interestholders' Capital Accounts,
any Simulated Depletion Deductions, Simulated Gains and Simulated Losses shall
be allocated among the Interestholders in the same proportions as they (or their
predecessors in interest) were allocated the bases of Company Properties
pursuant to Code Section 613A(c)(7)(D), the Regulations thereunder and
Regulations Section 1.704-1 (b)(4)(v). Pursuant to Code Section 613A(c)(7)(D)
and the Regulations thereunder and Regulations Section 1.704-1(b)(4)(v), the
adjusted bases of all such properties shall be shared by the Interestholders in
the same proportions as provided in Article 4.

     6.3 EFFECT OF LOANS. Loans by any Interestholder to the Company shall not
be considered contributions to the capital of the Company.

     6.4 WITHDRAWAL OF CAPITAL. A Interestholder shall not be entitled to
withdraw any part of his Capital Account or to receive any distribution from the
Company, except as specifically provided herein.

     6.5 CAPITAL ACCOUNTS OF NEW INTERESTHOLDERS. Any person who shall acquire
Interests in accordance with the terms and conditions of Article 13 of this
Agreement shall have the Capital Account of his transferor after adjustments
reflecting the transfer, if any, except as specifically provided herein.

                                    ARTICLE 7

                INTEREST OF INTERESTHOLDERS IN INCOME AND LOSSES

     7.1 DETERMINATION OF INCOME AND LOSS. At the end of each Company fiscal
year, and at such other times as the Company shall deem necessary or
appropriate, each item of Company income, gain, expense, loss, deduction and
credit shall be determined for the period then ending and shall be allocated to
the Capital Account of each Interestholder in accordance with the provisions
hereof. With respect to the admission of Interestholders, the Company will use
the "interim closing date" method of accounting as permitted by Regulations.

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<PAGE>   21

     7.2  DETERMINATION OF INCOME AND LOSS IN THE EVENT OF TRANSFER.  In the
event that a Interestholder transfers his interest in the Company in accordance
with the terms of this Agreement, the determination and allocation described in
Section 7.1 shall be made as of the date of such transfer and thereafter all
such allocations shall be made to the account of the transferee of such
interest; provided, however, that the Company may agree that such determination
and allocation shall be PRO RATA to the Interestholders based upon the actual
number of days in such fiscal year that each such Interestholder held an
interest in the Company. In the event of a PRO RATA determination and
allocation, the foregoing provisions of this Section will not be applicable to
the distributive shares, with respect to the Interests transferred, of items of
Company income, gain, expense, loss, deduction and credit arising out of:

          (a) the sale or other disposition of all or substantially all Company
Property, or

          (b) other extraordinary nonrecurring items, all of which will be
allocated to the holder of such Company interest on the date such items of
Company income, gain, expense, loss, deduction and credit are earned or
incurred.

     7.3 ALLOCATION OF NET INCOME AND NET LOSSES. All items of income, gain,
expense, loss, deduction and credit of the Company from operations and in the
ordinary course of business shall be allocated among the Interestholders in
accordance with Article 4.

     7.4 QUALIFIED INCOME OFFSET AND OTHER ALLOCATION PROVISIONS.

          (a) If there is a net decrease in "partnership minimum gain" (within
the meaning of Regulation Section 1.704-2(d)) during a fiscal period, then there
shall be allocated to each Interestholder items of income and gain for such
fiscal period (and, if necessary, subsequent fiscal periods) in proportion to,
and to the extent of, an amount equal to the portion of such Interestholder's
share of the net decrease in partnership minimum gain during such fiscal period
that is allocable to the disposition of Company Property subject to one or more
nonrecourse liabilities of the Company. However, such allocation shall be
reduced to the extent the Interestholder contributes capital to the Company that
is used to repay the nonrecourse liability and the Interestholder's share of the
net decrease in partnership minimum gain resorts from the repayment. The
foregoing is intended to be a "minimum gain chargeback" provision as described
in Regulation Section 1.704-2(f), and shall be interpreted and applied in all
respects in accordance with such Regulation. If there is a net decrease in the
minimum gain attributable to a "partner nonrecourse debt" (as defined in
Regulation Section 1.704-2(b) (4)) for a fiscal period, then, in addition to the
amounts, if any, allocated pursuant to the first sentence of this Subsection
7.4(a), there shall be allocated to each Interestholder with a Interest of such
minimum gain attributable to a "partner nonrecourse debt" items of income and
gain for such fiscal period (and, if necessary, subsequent fiscal periods) in
proportion to, and to the extent of, an amount equal to the portion of such
Interestholder's share of the net decrease in the minimum gain attributable to a
partner nonrecourse debt during such fiscal period that is allocable to the
disposition of Company Property subject to one or more nonrecourse liabilities
of the Company. However, such amount shall be reduced to the extent the
Interestholder contributes capital to the Company that is used to repay the
nonrecourse liability and the Interestholder's share of the net


                                       68
<PAGE>   22
decrease in the minimum gain attributable to a partner nonrecourse debt results
from the repayment.

          (b) If during any fiscal period of the Company an Interestholder
unexpectedly receives an adjustment, allocation or distribution described in
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or
increases a deficit balance in the Interestholder's Adjusted Capital Account,
there shall be allocated to the Interestholder items of income and gain
(consisting of a PRO RATA portion of each item of Company income, including
gross income, and gain for such period) in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible. The foregoing is
intended to be a "qualified income offset" provision as described in Regulation
Section 1.704-1(b)(2)(ii)(d), and shall be interpreted and applied in all
respects in accordance with such Regulation. It is the intent of this provision
that Investors and the Manager will not be allocated any deductions or losses if
such allocation would cause such Investor or the Manager to have a negative
Capital Account balance when any Investor or the Manager has a positive Capital
Account balance.

          (c) Notwithstanding anything to the contrary in Article 4 or this
Article 7, any item of deduction, loss or Code Section 705(a)(2)(B) expenditure
that is attributable to "partner nonrecourse debt" shall be allocated in
accordance with the manner in which the Interestholders bear the economic risk
of loss for such debt (determined in accordance with Regulation Section
1.704-2(i).

          (d) To the extent that any item of income, gain, loss or deduction has
been specially allocated pursuant to paragraph (a), (b) or (c) of this Section
7.4 ("Required Allocations") and such allocation is inconsistent with how the
same amount otherwise would have been allocated under Section 4.2,
subsequent allocations under Section 4.2 shall be made, to the extent possible,
in a manner consistent with paragraphs (a), (b) and (c) of this Section 7.4
which negates as rapidly as possible the effect of all previous Required
Allocations.

          (e) Solely for Federal, state and local income and franchise tax
purposes and not for book or Capital Account purposes, income, gain, loss and
deduction with respect to property carried on the Company's books at a value
other than its tax basis shall be allocated (i) in the case of property
contributed in kind, in accordance with the requirements of Code Section 704(c)
and such Regulations as may be promulgated thereunder from time to time, and
(ii) in the case of other property, in accordance with the principles of Code
Section 704(c) and the Regulations thereunder, in each case, as incorporated
among the requirements of the relevant provisions of the Regulations under Code
Section 704(b).

                                    ARTICLE 8

                INTEREST OF INTERESTHOLDERS IN CASH DISTRIBUTIONS

     8.1 DISTRIBUTION OF NET CASH FLOW. Subject to the terms of this Agreement,
the Company shall make distributions of Net Cash Flow out of the Company funds,
to the extent and at such times as it deems advisable, in the following manner:

          (a) NET CASH FLOW. Net Cash Flow shall be computed and distributed
annually as follows:

                                       69
<PAGE>   23

               (1) first, PRO RATA (in accordance with the percentage of total
          loans that are owing to each Interestholder) to the payment to
          Interestholders of interest and principal, in that order, on loans, if
          any, made to the Company by such Interestholders, to the extent of
          such loans, if any; and

               (2) second, 5.24% to the Manager with respect to the Manager's
          Promoted Interest and 94.76% to the Investors (including the Manager
          with respect to the Manager's Investment Interest) until the Investors
          (including the Manager with respect to the Manager's Investment
          Interest) have received the return of their Capital Contributions; and

               (3) lastly, after the Investors (including the Manager with
          respect to the Manager's Investment Interest) have received the return
          of their Capital Contributions, 30.24% to the Manager with respect to
          the Manager's Promoted Interest and 69.76% to the Investors (including
          the Manager with respect to the Manager's Investment Interest);
          provided, however, that the amount of cash distributed to the Manager
          pursuant to this Section 8.1(a)(3) shall be reduced by the amount of
          any Contingent Compensation paid to any Soliciting Dealer pursuant to
          Section 9.8 hereof.

PROVIDED, however, that the Manager shall subordinate its right to receive
distributions of Net Cash Flow of (i) 100% of the Net Cash Flow from Operations
attributable to the Manager's Promoted Interest, plus (ii) UP TO 100% of the Net
Cash Flow from Operations attributable to the Manager's Investment Interest if,
after 60 months from the date of the first distribution of cash to Investors,
the Investors have not received distributions of Net Cash Flow which, in the
aggregate, are equal to 100% of the Investors' subscriptions. Any such deferral
of distributions of cash to the Manager will be recovered by the Manager from
first available Net Cash Flow after, and for so long as, the Investors have
received distributions of Net Cash Flow which, in the aggregate, are equal to
100% of the Investors' Capital Contributions, until such deferrals have been
recovered.

          (b) LIQUIDATION PROCEEDS. Upon Liquidation of the Company pursuant to
a dissolution under Section 14.1 or otherwise, the Net Cash Flow for
Dispositions in respect of such Liquidation shall be applied or distributed as
follows:

               (1) First, to the Company's creditors other than Interestholders,
          to the extent of the Company's liabilities and obligations to such
          creditors, including costs and expenses of liquidation (or provision
          for payment shall be made, which provision may include a distribution
          of assets subject to the obligations in question);

               (2) Second, PRO RATA (in accordance with the percentage of total
          loans that are owing to each Interestholder) to the payment to
          Interestholders of interest and principal, in that order, on loans, if
          any, made to the Company by such Interestholders; and

               (3) thereafter, PRO RATA to the Interestholders in proportion to
          the Capital Account balances of the Interestholders as determined
          after taking into account all adjustments to Capital


                                       70
<PAGE>   24

          Accounts for all fiscal periods through and including the fiscal
          period in the Liquidation occurs.

     8.2 DISTRIBUTION IN KIND. If the Company elects to make distribution in
kind of any of the assets of the Company, it shall give notice of its election
to each Interestholder, specifying the nature and value of all such assets to be
distributed in kind, the deadline for giving notice of refusal to accept a
distribution in kind and, to the extent advisable, the estimated time necessary
for the Company to liquidate assets if those assets are not distributed and
other information. An Interestholder may refuse to accept a distribution in kind
by giving written notice to the Company not later than 30 days after the
effective date of the Company's notice of distribution. If an Interestholder
refuses distribution in kind, the Company shall retain in the Company's name the
portion of the assets which were to be distributed in kind and which were to be
allocated to the refusing Interestholder (the "Retained Assets") and shall
liquidate the Retained Assets in accordance with this Agreement. Upon
liquidation of the Retained Assets, the sum realized shall be distributed to the
Interestholder refusing distribution in kind in full discharge of the Company's
obligation to distribute the Retained Assets. In determining the capital
accounts of the Interestholders, a distribution of assets in kind shall be
considered a sale of the property distributed so that any unrealized gain or
loss with respect to such property shall be deemed to have been realized and
allocated among the Interestholders in accordance with Article 4.

     8.3  AMOUNTS WITHHELD.  All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Company or the Interestholders shall be treated as amounts
distributed to the Interestholders pursuant to this Article 8 for all purposes
under this Agreement. The Company may allocate any such amounts among the
Interestholders in any manner that is in accordance with applicable law.

                                    ARTICLE 9

                              OPERATION OF COMPANY

     9.1  ADMINISTRATIVE COST ALLOWANCE.  The Manager shall administer the
day-to-day business of the Company, including maintaining financial and other
records, complying with all regulatory and contractual obligations of the
Company, including for tax and other reporting, collecting and disbursing funds,
managing Company assets on a routine basis, maintaining Investor Interestholder
communications and records and other customary, necessary, routine and/or
recurring administrative tasks. In consideration thereof, for each 12-month
period beginning on the Escrow Date and ending upon completion of the winding up
of the business affairs of the Company, the Company shall (i) accrue, and (ii)
pay out of Company revenues from the sale of production only, to the Manager, an
administrative cost allowance, payable in advance in equal monthly installments,
in an annual amount equal 2.5% of Aggregate Capital Contributions. The amount of
the administrative cost allowance shall be adjusted annually to reflect
increases or decreases in the costs of administration in accordance with the
procedures and index published annually by the Council of Petroleum Accountants
Societies (COPAS). Such fee shall be in lieu of any reimbursement to the Manager
for the customary, routine and necessary costs and expenses incurred by the
Manager which are associated with or attributable to the administration of the
business of the Company including, but not limited to, an allocable portion of
telephone, postage,


                                       71
<PAGE>   25

computer service and an allocable portion of salaries and expenses of employees
and officers (other than controlling persons) of the Manager, but shall not be
in lieu of or include the direct expenses of the Company, such as legal,
accounting, engineering and consulting expenses, regulatory reporting costs and
amounts paid to the for its services, or for any other fees or expenses
expressly provided for herein. The administrative costs allowance shall begin to
accrue on the Escrow Date as to Aggregate Capital Contributions in respect of
Interests purchased through that date and on each date thereafter on which the
Company receives and collects full payment for additional accepted subscriptions
for Interests as to Aggregate Capital Contributions in respect of such
Interests. The Company shall not otherwise pay or reimburse the Manager for any
expenses paid or incurred in connection with the operation of the Company,
including the Company's allocable Interest of the Manager's overhead.

     9.2 MANAGEMENT FEE. The Company shall pay the Manager out of Company
Property a management fee in an amount equal to 2.5% of Aggregate Capital
Contributions. The management fee payable by Investor Interestholders whose
subscriptions for Interests are accepted by the Manager is for its services in
managing the operations of the Company in the first full elapsed year of Company
operations. The management fee shall be payable on the Escrow Date as to
Aggregate Capital Contributions in respect of Interests purchased through that
date and on each date thereafter on which the Company receives and collects full
payment for additional accepted subscriptions for Interests.

     9.3 ASSET DISPOSITION FEE.

          (a) Upon each sale of the Company's interest in an Initial Well or
Additional Well, there shall be payable to the Manager out of the net proceeds
of such sale otherwise payable to the Company an asset disposition fee equal to
3.5% of such net proceeds.

          (b) In the event that the Manager is removed pursuant to Section 12.10
hereof other than for Cause, it shall be paid an asset disposition fee, computed
in accordance with Section 9.3(a) hereto, equivalent to the amount that it would
have been paid if all of the Company's property were sold on the effective date
of such removal for an amount equal to sixty (60) times the average monthly
revenues of the Company from sales of production of gas during the last twelve
months of Company operations prior to such date.

     9.4 DIRECT COSTS. The Company shall pay out of Company Property all Direct
Costs at the time such costs are incurred. The Manager may pay such Direct Costs
from its funds and cause the Company to reimburse it as a matter of
administrative convenience. The Manager shall be under no obligation to make its
funds available to enable the Company to pay any Direct Costs. The provisions of
Section 3.5 shall apply to all Direct Costs paid to affiliates of the Manager.

     9.5 SOLICITING DEALER COMMISSIONS. The Company may pay, out of Company
Property, cash selling commissions to the Soliciting Dealer who effects the sale
of each whole or fractional Interests in an amount up to 8% of the Capital
Contribution of each such Investor Interestholder. Sales commissions payable to
a Soliciting Dealer shall be due and payable not earlier than promptly after the
latest to occur of (i) acceptance by the Company of the Investor
Interestholder's subscription, (ii) the Escrow Date or (iii) the


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<PAGE>   26

receipt by the Company of the gross purchase price for the Interests, with
respect to such sale.

     9.6 SELLING, MARKETING AND OTHER EXPENSES. The Company shall sequester, out
of Company Property, an amount not to exceed 1.0% of the Aggregate Capital
Contributions with respect to each sale of any whole or fractional Interest to
an Investor Interestholder. Such amount shall be available for application by
the Company in accordance with the provisions of this Section 9.6 on the Escrow
Date as to Aggregate Capital Contributions in respect of Interests purchased
through that date and on each date thereafter on which the Company receives and
collects full payment for additional accepted subscriptions for Interests as to
Aggregate Capital Contributions in respect of such Interests. Such amounts shall
be applied by the Company to the payment of the expenses actually incurred by
the Company in the offer and sale of Interests, other selling and marketing
expenses, including fees and expenses of independent contractors (including
Soliciting Dealers) and employees who are engaged in the marketing and sales of
Interests, legal, accounting, and consulting fees and distribution and selling
costs. Any such expenses incurred by the Company in excess of 1.0% of the
Aggregate Capital Contributions with respect to each sale of any whole or
fractional Interest to an Investor Interestholder shall be paid by the Manager.

     9.7 PAYMENT AND RECOUPMENT OF FEES. As soon as funds have been released to
the Company from the escrow account referred to in Section 1.6, they may be used
to pay the fees referred to in Sections 9.2, 9.5 and 9.6 then due. If the
Manager withdraws the offering of Interests without admitting Investor
Interestholders, any entity that has received payments from the proceeds of the
offering shall return such payments to the Company upon demand by the Manager.

     9.8  CONTINGENT COMPENSATION.  Additional sales commissions ("Contingent
Compensation"), may be paid to the Soliciting Dealers, solely out of the
Manager's share of distributions of Net Cash Flow in subsequent years if the
Company generates sufficient cash flow from operations to make such payments, as
described below. Contingent Compensation may be paid only from Residual
Operating Cash Flow for the period concerned.

     Contingent Compensation shall consist of payments of a portion of Company
profits, computed as a pro rata percentage (determined according to the table
set forth below) of Residual Operating Cash Flow based upon the proportion of
the Aggregate Capital Contributions which are represented by the purchase price
of Interests sold by that Soliciting Dealer. Contingent Compensation with
respect to any year will be payable to Soliciting Dealers not later than April
15 of the succeeding year. Contingent Compensation may be paid only if, (i) the
Interestholders have received cash distributions from the Company equal, in the
aggregate, to 100% of their initial subscription amount plus a 6% cumulative
annual preferred return on such initial subscription amount, and (ii) the amount
of Contingent Compensation does not in any event exceed 12% in the aggregate of
each distribution. Soliciting Dealers can earn the right to receive Contingent
Compensation through the sales of specified minimum numbers of Interests in the
Company pursuant to the schedule provided below:



                                       73
<PAGE>   27
<TABLE>
<CAPTION>
                       Amount of Interests Sold                Contingent Compensation %
                       ------------------------                -------------------------
<S>                                                            <C>
             In excess of $75,000, but less than $150,000                  1.5%

             In excess of $150,000, but less than $225,000                 3.0%

             In excess of $225,000                                         4.5%
</TABLE>


                                   ARTICLE 10

                                   ACCOUNTING

     10.1 ELECTIONS. The Company shall elect the calendar year as its fiscal
year. The Company shall adopt the accrual method of accounting or such other
method of accounting as the Company shall determine. The Company shall not elect
to be taxed other than as a partnership. The Company shall not be required to
make an election under Section 754 of the Code or corresponding state taxation
laws.

     10.2 BOOKS AND RECORDS. The Company books and records shall be kept at the
principal place of business of the Company. The Company's books and records
shall be maintained on the basis utilized in preparing the Company's federal
income tax return with such adjustments in accounting as are required by this
Agreement or as the Company determines would be in the best interests of the
Company.

     10.3 REPORTS. The Company will keep each Investor Interestholder and
assignees complying with Article 13.3 currently advised as to activities of the
Company by reports furnished not less than quarterly. An independent certified
public accounting firm selected by the Company will prepare the Company's
federal income tax return as soon as practicable after the conclusion of each
year and each Interestholder will be furnished, at that time, with the necessary
accounting information for each Interestholder to take into account and report
separately such Interestholder's distributive Interest of the income and
deductions of the Company. The Company will use its reasonable best efforts to
obtain the information necessary for the accounting firm as soon as practicable
and to transmit the resulting accounting and tax information to the
Interestholders as soon as possible after receipt from the accounting firm. The
Company shall furnish each Interestholder as soon as practicable after the
conclusion of each year annual financial statements of the Company which have
been audited by the Company's independent certified public accounting firm.

     10.4 BANK ACCOUNTS. The Company shall maintain separate segregated accounts
in its name at one or more commercial banks, and the cash funds of the Company
shall be kept in such of those accounts as determined by the Manager.

     10.5 INTERIM ASSETS. The Company may purchase, to the extent the Company's
funds are not otherwise committed to transactions or required for other
purposes, any or all of the following:

          (a) Obligations of banks or savings and loan associations that either
     (i) have assets in excess of $5 billion or (ii) are insured in


                                       74
<PAGE>   28

     their entirety by agencies of the United States government;

          (b) Obligations of or guaranteed by the United States government or
     its agencies;

          (c) Repurchase obligations for securities described in clauses (a) or
     (b) above, If possession of the subject securities is maintained by the
     Company or its agent;

          (d) Any debt obligation rated at the time of purchase in the highest
     three grades by a nationally recognized securities rating organization;

          (e) Funds or financial instruments that are comprised of or backed by
     substantially only those obligations described in clauses (a) through (d)
     above; or

          (f) advances to a single-purpose finance affiliate of the Manager (a
     "Finance Subsidiary") which will utilize such funds solely to fund
     acquisitions of rights to acquire working interests in natural gas
     development projects, some or all of which may be subsequently acquired by
     the Company, which (i) bear interest at a rate equivalent to that which
     would obtain between arm's length parties under similar circumstances, and
     (ii) are fully secured by first liens on rights to acquire working
     interests in natural gas development projects.


                                   ARTICLE 11

               RIGHTS AND OBLIGATIONS OF INVESTOR INTERESTHOLDERS

     11.1 PARTICIPATION IN MANAGEMENT. No Interestholder (other than the
Manager) shall have the right, power, authority or responsibility to participate
in the ordinary and routine management of the Company's affairs or to bind the
Company in any manner.

     11.2 RIGHTS TO ENGAGE IN OTHER VENTURES. No Investor Interestholder or any
officer, director, Interestholder or other person holding a legal or beneficial
interest in any Investor Interestholder shall, by virtue of his ownership of a
direct or indirect interest in the Company, be in any way prohibited from or
restricted in engaging in, or possessing an interest in, any other business
venture of a like or similar nature including any venture involving the oil and
gas industry.

     11.3 LIMITATIONS ON TRANSFERABILITY. The interest of an Investor
Interestholder shall not be transferable under any circumstances except in
accordance with the conditions and procedures set forth in Article 13 hereof.

     11.4 INFORMATION.

          (a) Each Investor Interestholder's rights to obtain information from
the Company from time to time are set forth in this Section. In addition to
information provided under Section 10.3, each Investor Interestholder shall be
provided on request with the following:

               (1) True and full information regarding the status of the
          Company's business and financial condition;

                                       75
<PAGE>   29

               (2) Promptly after becoming available, a copy of the Company's
          federal, state and local income tax returns or information returns for
          the preceding year and prior years to the extent reasonably available;

               (3) A current list of the name and last known business, residence
          or mailing address of each Interestholder (unless such Interestholder
          has specified that the Company is not to disclose such information, in
          which case the Company, at the requesting Investor Interestholder's
          cost, shall forward communications, sealed or unsealed, from the
          requesting Investor Interestholder to such Interestholder upon
          assertion by the requesting Investor Interestholder in writing to the
          Company of a proper purpose for the communication);

               (4) A copy of the Articles and this Agreement and all amendments
          thereto;

               (5) True and full information regarding the amount of cash and a
          description and statement of the agreed value of any other property or
          services contributed by each Interestholder and which any
          Interestholder has agreed to contribute in the future, and the date on
          which each current Interestholder acquired his Interests; and

               (6) Such other information regarding the Company's affairs as is
          just and reasonable.

          (b) The Company shall establish reasonable standards governing the
information and documents to be furnished and the time and the location, if
appropriate, of furnishing such information and documents. Costs of providing
information and documents shall be borne by the requesting Investor
Interestholder except for DE MINIMIS amounts consistent with the Company's
ordinary practices. The Company shall be entitled to reimbursement for its
direct, out-of-pocket expenses incurred in declining unreasonable requests (in
whole or in part) for information.

          (c) The Company may keep confidential from Investor Interestholders
for such period of time as it deems reasonable any information that it
reasonably believes to be in the nature of trade secrets or other information
that the Manager in good faith believes would not be in the best interests of
the Company to disclose or that could damage the Company or its business or that
the Company is required by law or by agreement with a third party to keep
confidential.

          (d) The Company may keep its records in other than written form if
capable of conversion into written form within a reasonable time.

          (e) All demands or requests for information under this Section shall
be solely for a purpose reasonably related to the Investor Interestholder's
interest in the Company. All requests or demands for information under this
Section shall be in writing and shall state the purpose of the demand; the
Company's acceptance of oral requests shall not waive or limit the scope of this
provision. Any action to enforce rights under this Section may be brought in the
Michigan Court of Chancery, subject to Section 15.4.

                                       76
<PAGE>   30

     11.5 RESTRICTIONS UPON DISQUALIFYING FOREIGN INVESTOR INTERESTHOLDERS. If
the Company, upon advice of counsel, determines at any time that an Investor
Interestholder, because of the Investor Interestholder's nationality or the
nationality of any of an Investor Interestholder's equity owners, may cause the
Company to be disqualified as a holder of federal offshore oil and natural gas
leases or leases located on federal or state lands, the Company shall promptly
give the Investor Interestholder notice of such determination and of the
provisions of this Section 11.5 as applicable to the Investor Interestholder.
Effective upon the giving of such notice, the Investor Interestholder shall not
be entitled to vote on any Company matter and his Interests shall be disregarded
in any calculation of votes. If, upon advice of counsel, the Company determines
that, because of an Investor Interestholder's nationality or the nationality of
any of an Investor Interestholder's equity owners, a risk exists that any
federal offshore oil and natural gas lease or lease located on federal or state
lands, in which the Company has an interest, or the Company's interest therein,
may be canceled or forfeited or that the Company may be barred from acquiring
interests in federal or state oil and natural gas leases, or if any federal or
state agency having jurisdiction asserts that any such consequence may result,
the Company in its discretion may additionally give notice to the Investor
Interestholder to tender his Interests to the Company at the principal offices
of the Company at a time to be designated in the notice (but not earlier than 72
hours after delivery of the notice). At the time designated in the notice, the
Company shall pay the Investor Interestholder in cash or by check an amount
equal to the price paid by the Investor Interestholder for the Interests to be
tendered less any distributions received by such Investor Interestholder in
respect of such Interests. If the Investor Interestholder does not tender the
Interests, the Company shall mail, in the same manner as prescribed herein for
notices, a check in the same amount to the Investor Interestholder, together
with a notice that the Investor Interestholder's Interests have been canceled,
and the Company shall forthwith cancel the Investor Interestholder's Interests
on the books and records of the Company.

     11.6 ELECTIONS BY INVESTOR INTERESTHOLDERS REGARDING SPECIAL OBLIGATIONS.
Each Investor Interestholder shall, at the time that he subscribes for Interests
pursuant to and in accordance with Section 1.6, elect to:

          (a) assume liability for Special Obligations with respect to all of
the Initial Wells and thereby become a Participating Investor Interestholder
with respect to each Initial Well; or

          (b) decline to assume liability for Special Obligations for any
Initial Wells and thereby become an Investor Interestholder who is not a
Participating Investor Interestholder with respect to each Initial Well.

Such election shall be indicated on the Subscription Page of such Investor
Interestholder executed and delivered to the Company in respect of his
subscription for Interests and shall be binding upon such Investor
Interestholder until the earlier of (i) one year following the completion of the
offering, or (ii) the Facilities Completion Date, at which time such Interests
shall be automatically converted from Participating Investor Interestholder
Interests to Non-Participating Investor Interestholder Interests with respect to
the Initial Wells and Additional Development Wells; provided, however, that such
Non-Participating Investor Interestholders will


                                       77
<PAGE>   31

remain liable for Special Obligations incurred by the Company with respect to
the Initial Wells and Additional Development Wells while they were Participating
Investor Interestholders. Such notice shall be effective only upon actual
receipt thereof by the Manager. The Manager shall give each Investor
Interestholder notice of the date upon which the production commenced with
respect to the last Initial Well to be completed.

     The automatic termination by a Participating Investor Interestholder of his
assumption of Special Obligations with respect to all Initial Wells and
Additional Development Wells, and conversion to an Investor Interestholder who
is not a Participating Investor Interestholder with respect to such wells shall
not bar any action by the Company, including asserting claims against such
Investor Interestholder for contribution in respect of Special Obligations
incurred with respect to any such well during the time when such Investor
Interestholder was a Participating Investor Interestholder with respect to such
well, or entitle such Investor Interestholder to indemnification by the Company
in respect of claims asserted against such Investor Interestholder by persons
who or which are not affiliated with the Company or the Manager on account of
Special Obligations with respect to such well incurred during the time when such
Investor Interestholder was a Participating Investor Interestholder with respect
to such well.

                                   ARTICLE 12

             POWERS, DUTIES, LIMITATIONS AND OBLIGATIONS OF MANAGER

     12.1 MANAGEMENT OF THE COMPANY.  The Manager shall have full, exclusive and
complete discretion in the management and control of the Company.  The Manager
agrees to manage and control the affairs of the Company to the best of its
ability and to conduct the operations contemplated under this Agreement in a
careful and prudent manner and in accordance with good industry practice.

     12.2 ACCEPTANCE OF SUBSCRIPTIONS. The Manager shall not cause the Company
to accept any subscription for Interests except as provided in Article 1.

     12.3 SPECIFIC LIMITATIONS.

          (a) The Manager shall not take any of the following actions without
the approval of all Investor Interestholders:

               (1) Any act in contravention of this Agreement or the Articles;

               (2) Any act that would make it impossible to carry on the
          Company's ordinary business;

               (3) Effecting a confession of judgment against the Company in an
          amount exceeding 10% of the Aggregate Capital Contributions;

               (4) Causing the dissolution or termination of the Company before
          the expiration of its Term, except as provided under Article 14;

               (5) Possessing Company Property or assigning rights in specific
          Company Property for other than a Company purpose;

                                       78
<PAGE>   32

               (6) Accepting a subscription that constitutes any other person as
          a Manager, except as provided in Article 14;

               (7) The merger of the Company into another or with another
          entity; or

               (8) The amendment of the Company's Articles of Organization.

          (b) The Manager shall not sell, exchange, lease, mortgage, pledge or
transfer all or substantially all of the Company's assets if not in the ordinary
course of its business or amend this Agreement as specified in Section 15.8(b)
without the approval of a Majority of the Investor Interestholders.

          (c) The Manager, the Company or the Company's agents shall not take
any action that is prohibited to the Manager by this or any other provision of
this Agreement and shall take all actions necessary or advisable to carry out
actions authorized by this section.

     12.4 SPECIFIC POWERS. In addition to the powers and duties otherwise
provided for in this Agreement, the Manager have the following powers and/or
duties:

          (a) To direct or supervise the Company and the Company's agents in the
exercise of any action relating to the Company's affairs, including without
limitation the powers described in Section 1.8;

          (b) To take the actions specified in Section 12.3 if the approvals
specified therein are obtained;

          (c) To amend this Agreement as specified in Section 15.8(a);

          (d) To lend money to the Company (without being obligated to do so) if
such loan bears interest at a reasonable rate not exceeding the amount that
would be charged to the Company by an unrelated lender on a comparable loan for
the same purpose (without reference to the financial abilities or guarantees of
the Manager). The Manager may not receive points or other financing charges or
fees regardless of the amount loaned to the Company. Before making any loans to
the Company, the Manager will attempt to obtain a loan from an unrelated lender
secured, if at all, only by Company Property;

          (e) To approve or disapprove, in its sole discretion, any transfer of
Investor Interestholder Interests;

          (f) To terminate the offering of Interests at any time prior to the
Termination Date, regardless of the amount of subscriptions, if subscriptions
for at least an aggregate of 300 Investor Interestholder Interests have not been
accepted;

          (g) To withdraw the offering of Interests at any time prior to the
Escrow Date as provided in Section 1.6;

          (h) To defer payment by the Company of all or any fees or compensation
payable to it and to continue to be a creditor of the Company with respect to
any amounts so deferred and to cause the Company to pay to it


                                       79
<PAGE>   33

all or any portion of such amounts as and when the Manager, in its sole
discretion, deems it appropriate to do so; or

          (i) To waive any fees or compensation payable to it and to credit such
waived amount in its discretion against its obligation to contribute capital
under Section 14.7.

     12.5 LIMITATION ON DUTY. Notwithstanding anything to the contrary contained
in this Article or elsewhere in this Agreement, the Manager shall have no duty
to take any affirmative action with respect to management of the Company
business or the Company Property which might require the expenditure of monies
by the Company unless the Company is then possessed of such monies available for
the proposed expenditure. Under no circumstances shall the Interestholders be
required to expend their own funds in connection with the operation of the
Company business.

     12.6 OFFICERS OF COMPANY; SIGNATORIES.

          (a) The Manager may employ or retain such persons as may be necessary
or appropriate for the conduct of the Company's business, including permanent,
temporary or part-time employees and attorneys, accountants, agents, consultants
and contractors and to have employees and agents who shall be designated as
officers with titles including but not limited to "president", "vice-president",
"treasurer," "secretary," "assistant treasurer," "assistant secretary,",
"managing director" and "chairman" and who in such capacity may act for and on
behalf of the Company, as and to the extent authorized by the Manager, including
without limitation to:

          (i) represent the Company in its dealings with third parties, and
          execute any kind of document or contracts on behalf of the Company;

          (ii) approve the sale, purchase, exchange, lease, mortgage,
          assignment, pledge or other transfer or acquisition of, of granting or
          acquiring of a security interest in, any asset or assets of the
          Company; or

          (iii) propose, approve or disapprove of, and take, action for and on
          behalf of the Company, with respect to the operations of the Company.

None of such persons need be Interestholders and any of such persons may be
affiliates of the Manager. Except as otherwise prescribed by the Manager or in
this Agreement, each such person shall have the powers and duties assigned to
such person by the Manager and shall serve at the pleasure and under the
direction of the Manager. Any two or more of such offices may be held by the
same person. Any such officer may resign by delivering a written resignation to
the Manager and such resignation shall take effect upon delivery or as specified
therein.

          (b) All conveyances of real property or any interest therein by the
Company may be made by the Manager alone as Manager of the Company, which may
execute on behalf of the Company any instruments necessary to effect the
conveyance. A certificate by the Secretary of the Company stating compliance
with this Section 12.6(b) shall be conclusive in favor of any person relying
thereon.

                                       80
<PAGE>   34

          (c) All other documents, agreements, instruments and Articles that are
to be made, executed or endorsed on behalf of the Company shall be made,
executed or endorsed by such officers or persons as the Manager shall from time
to time authorize and such authority may be general or confined to specific
instances. In the absence of other provisions, the President is authorized to
execute any document, to take any action on behalf of the Company within this
Section 12.6(c), and to authorize other officers to execute confirmatory
documents or Articles.

     12.7 PRESUMPTION OF POWER. The execution by the Manager or the officers on
behalf of the Company of leases, assignments conveyances, contracts or
agreements of any kind whatsoever shall be sufficient to bind the Company. No
person dealing with the Manager or the officers shall be required to determine
their authority to make or execute any undertaking on behalf of the Company, nor
to determine any fact or circumstances bearing upon the existence of their
authority nor to see to the application or distribution of revenues or proceeds
derived therefrom, unless and until such person has received written notice to
the contrary.

     12.8 OBLIGATIONS NOT EXCLUSIVE. The Manager shall be required to devote
only such part of its time as is reasonably needed to manage the business of the
Company, it being understood that the Manager has and shall have other business
interests and therefore shall not be required to devote its time exclusively to
the Company. The Manager shall in no way be prohibited from or restricted in
engaging in, or possessing an interest in, any other business venture of a like
or similar nature including any venture engaged in oil and natural gas or
pipeline operations. Nothing in this Section 12.8 shall relieve the Manager of
its other fiduciary obligations to the Investor Interestholders, except as
limited in Article 3.

     12.9 MANAGER'S PROMOTED INTERESTS.

          (a) The Manager shall be credited with a number of Manager's Promoted
Interests equal in the aggregate to the product of the number of Investor
Interestholder Interests outstanding at any time (excluding Investor
Interestholder Interests created under Sections 12.9(b) or 12.10) multiplied by
 .0524; less the number of Investor Interestholder Interests created under
Sections 12.9(b) and 12.10. The Manager's Promoted Interests shall have no
voting rights (other than the rights held by the Manager as such) and shall be
deemed in the aggregate to have attached to them the rights held by the Manager
as such. Unless converted under Sections 12.9(b) or 12.10, no Manager's Promoted
Interest shall be held by or transferred to a person who is not a Manager except
as provided by Section 13.1.

          (b) The Manager from time to time may convert all or any portion of
its Manager's Promoted Interests into Investor Interestholder Interests and
convey those converted Interests to other persons as compensation or for other
purposes. Each Management Interest shall be convertible into one Investor
Interestholder Interest. The Investor Interestholder Interests so created shall
have the rights and obligations of all other Investor Interestholder Interests,
except that the holders of the Investor Interestholder Interests so created
shall not share with other Investor Interestholders in allocations of Profits,
Losses, tax credits and all other Items; instead, the holders of the Investor
Interestholder Interests created under this Section 12.9(b) shall share in
allocations and distributions accruing under this Agreement to the Manager in
proportion to the numbers of Interests owned by the Manager and those holders.
Further, those holders


                                       81
<PAGE>   35

shall be allocated initially, as the balances of their Capital Accounts,
proportionate amounts of the Capital Account of the Manager who converted the
underlying Manager's Promoted Interests. The holders of Investor Interestholder
Interests created under this Section 12.9 shall have no voting rights.

     12.10 REMOVAL OF MANAGER. If, at any time, the holders of not less than a
Majority of the Investor Interestholders Interests determine in their discretion
that the Manager is not fully performing its powers, duties and obligations in
the best interests of the Company, or it is otherwise in the best interests of
the Company to do so, such Investor Interestholders may remove the Manager from
such office and elect by at least a Majority such successor Manager as they
shall determine. In the event of any such removal or the resignation or other
incapacity of the Manager as enumerated in Section 14.1(c), the removed or
former Manager's Manager's Promoted Interests shall be automatically converted
into a number of Investor Interestholder Interests equal to the number of its
Manager Interests, less the number of Manager's Promoted Interests that the
Manager may have converted into Investor Interestholder Interests under Section
12.9(b). The removed or former Manager, as holder of such Investor
Interestholder Interests, shall be entitled to the same allocations of income,
gain, expense, loss, deduction and credit and the same distributions to which
the Manager would otherwise have been entitled; provided, however, that the
removed or former Manager shall not then be entitled to uncollected amounts
specified in Section 9.1 to the extent not accrued before the date of removal,
resignation or other incapacity. A removed or former Manager will be considered
to be an Investor Interestholder, except with regard to Articles 4 and 5 and
Section 14.7.

     12.11 INDEMNIFICATION OF SOLICITING DEALERS.

          (a) The Soliciting Dealers shall not have any duty, responsibility or
obligation to the Company, the Manager or any Interestholder as a consequence of
its right to receive any selling commissions, except to the extent provided
under the Act. The Soliciting Dealers have not assumed, and will not assume, any
responsibility with respect to the Company nor will they be permitted by the
Company to assume any duties, responsibilities or obligations regarding the
management, operations or any of the business affairs of the Company, subsequent
to any offering of Interests.

          (b) The Soliciting Dealers shall be indemnified and held harmless by
the Company against any losses, damages, liabilities or costs (including
attorneys' fees) arising from any threatened, pending or completed action, suit,
claim or proceeding by any Interestholder against the Soliciting Dealers (except
as may be limited by the Act or applicable state statutes, including, but not
limited to, the Massachusetts Securities Act and the Tennessee Securities Act),
based upon the assertion that the Soliciting Dealers have any continuing duty or
obligation, subsequent to any offering of Interests, to the Company or Manager
or any Interestholder or otherwise to monitor Company operations or report to
Investor Interestholders concerning Company operations.


                                       82
<PAGE>   36
                                   ARTICLE 13

                             TRANSFERS OF INTERESTS

     13.1 TRANSFER BY MANAGER. The Manager shall not sell, assign or otherwise
transfer its Manager Interests without first obtaining the consent of a Majority
of the Investor Interestholders, except that (i) the Manager may pledge its
Manager's Promoted Interests for a loan to the Manager or its affiliates
provided that such pledge does not reduce the cash flow of the Company
distributable to other Interestholders, and (ii) the Manager may convert
Manager's Promoted Interests under Section 12.9(b) and convey the resulting
Investor Interestholder Interests to any person without consent.

     13.2 TRANSFERS BY INVESTOR INTERESTHOLDERS. An Investor Interestholder may
not sell, exchange or transfer his Interests except as restricted by and upon
compliance with all applicable laws and all of the following provisions of this
Section 13.2:

          (a) Interests may not be transferred to any person or entity if, as
determined by the Company, such assignment would have adverse regulatory
consequences to the Company or the Properties, including but not limited to, an
involuntary termination of the Company for federal income tax purposes, causing
the Company to be treated as an association for federal income tax purposes, or
would be deemed to be a transfer on a recognized public securities exchange or
the functional equivalent thereof which would have the effect of causing the
Company to be treated as a "publicly traded partnership" for federal income tax
purposes.

          (b) Within 30 days after written notice of a proposed sale or
assignment is received by the Company, the Manager may request in its sole
discretion an opinion of counsel acceptable to the Manager that the proposed
transfer would not (i) cause an involuntary termination of the Company for
federal income tax purposes, (ii) cause the Company to be treated as an
association taxable as a corporation for federal income tax purposes, or (iii)
be deemed to be a transfer on a recognized public securities exchange or the
functional equivalent thereof which would have the effect of causing the Company
to be treated as a "publicly traded partnership" for federal income tax
purposes.

          (c) THE WRITTEN APPROVAL OF THE MANAGER MUST BE OBTAINED, THE GRANTING
OR DENIAL OF WHICH SHALL BE WITHIN ITS SOLE AND ABSOLUTE DISCRETION.

          (d) The transferor and transferee must deliver a dated notice in
writing signed by each, confirming that (i) the transferee accepts and agrees to
comply with and be bound by all the terms of this Agreement, and (ii) the
transfer was made in compliance with this Agreement and all applicable laws and
regulations.

          (e) The transferor, transferee and the Company must execute all other
Articles, instruments and documents and take all such additional action as the
Manager may deem appropriate.

          (f) The Manager may require as a condition to any transfer that may
create a future interest that an opinion of counsel acceptable to the Company be
delivered to the Company confirming that the proposed transfer does not have
adverse effects on the Company under the rule against perpetuities or similar
provisions of law.

                                       83
<PAGE>   37

Transfers shall be effective and recognized upon fulfillment of the requirements
of clauses (a) through (f) above and the transferee shall be admitted to the
Company as an Investor Interestholder owning Investor Interestholder Interests
with the same rights as appertained to the transferor. Any purported sale or
transfer consummated without first complying with this Section 13.2 shall be
void.

     13.3 ASSIGNMENTS BY OPERATION OF LAW. If any Investor Interestholder shall
die, with or without leaving a will, or become NON COMPOS MENTIS, bankrupt or
insolvent, or if a corporate, partnership or Company Investor Interestholder
dissolves during the Company term or if any other involuntary transfer of an
Investor Interestholder's Interests is made, the legal representatives, heirs
and legatees (and spouse, if the Interests have been community property of such
Investor Interestholder and his or her spouse), bankruptcy assignees,
successors, assigns and corporate, partnership or Company distributees or such
other involuntary transferees shall not be admitted to the Company as Investor
Interestholders but shall have (subject to the other terms and provisions
hereof) such rights as are provided with respect to such persons under the law;
provided, however, that such legal representatives, heirs and legatees, spouse,
bankruptcy assignees, successors, assigns and corporate, partnership or Company
distributees or involuntary transferees may be admitted to the Company as
Investor Interestholders in accordance with the provisions of Section 13.2.

     13.4 EXPENSES OF TRANSFER. In the sole discretion of the Company, the
person acquiring Interests pursuant to any of the provisions of this Article 13
may be required to bear all costs and expenses necessary to effect a transfer of
such Interests including, without limitation, reasonable attorney's fees
incurred in preparing any required amendments to this Agreement and the Articles
to reflect such transfer or acquisition and the cost of filing such amendments
with the appropriate governmental officials.

     13.5 SURVIVAL OF LIABILITIES. No sale or assignment of Interests shall
release the transferor from those liabilities to the Company which survive such
assignment or sale as a matter of law or that are imposed under Sections 3.2 and
3.3. A transferee Participating Investor Interestholder shall be liable for
Special Obligations incurred by the Company prior to transfer only to the extent
of the transferee's interest in the Company.

     13.6 NO ACCOUNTING. No transfer of Interests, whether voluntary,
involuntary or by operation of law, shall entitle the transferor or transferee
to demand or obtain immediate valuation, accounting or payment of the
transferred Interests.

                                   ARTICLE 14

                    DISSOLUTION, TERMINATION AND LIQUIDATION

     14.1 DISSOLUTION. Unless the provisions of Section 14.2 are elected, the
Company shall be dissolved and its business shall be wound up upon the decision
of the Manager to withdraw the offering of Interests described in the Prospectus
in accordance with Section 1.6(c) or on the earliest to occur of:

          (a) December 31, 2035;

                                       84
<PAGE>   38

          (b) The sale of all or substantially all of the Company Property:

          (c) The death, removal, dissolution, resignation, insolvency,
bankruptcy or other legal incapacity of any Manager or any other event which
would legally disqualify any Manager from acting hereunder;

          (d) The decision of all Investor Interestholders or the Manager and a
Majority of Investor Interestholders; or

          (e) The occurrence of any other event which, by law, would require the
Company to be dissolved.

     14.2 CONTINUATION OF THE COMPANY. Upon the occurrence of any event of
dissolution described in Sections 14.1 (a) through (e), inclusive, the Company
shall be dissolved and wound up unless the remaining Manager and a Majority of
the Investor Interestholders elect to continue the Company or, or if there is no
remaining Manager, within 90 days after the occurrence of any such event, if a
Majority of the Investor Interestholders shall elect, in writing, that the
Company shall be continued on the terms and conditions herein contained and
shall designate one or more persons willing to be substituted as Manager. In the
event all the Investor Interestholders elect to continue the Company, it shall
be continued with the new Manager who shall succeed to and assume all of the
powers, privileges and obligations of the previous Manager hereunder except as
specified in Section 12.10. In the event of a dissolution under Section 14.1(c),
the former Manager shall have the rights specified in Section 12.10.

     14.3 OBLIGATIONS ON DISSOLUTION. The dissolution of the Company shall not
release any of the parties hereto from their contractual obligations under this
Agreement.

     14.4 LIQUIDATION PROCEDURE.

          (a) A reasonable time shall be allowed for the orderly liquidation of
the assets of the Company and the discharge of liabilities to creditors so as to
enable the Company to minimize the losses normally attendant to a liquidation.

          (b) Upon dissolution of the Company for any reason, the
Interestholders shall continue to receive Net Cash Flow, subject to the other
provisions of this Agreement and to the provisions of subsection (c) hereof, and
shall share Profits and Losses for all tax and other purposes during the period
of liquidation. Distributions in liquidation of the Company shall conform to the
provisions of Section 8.1(b) hereof.

          (c) The Manager shall act as liquidating Manager (or, in its absence,
a successor Manager shall act) and shall proceed to liquidate the Company
Properties to the extent that they have not already been reduced to cash unless
the Manager elects to make distributions in kind to the extent and in the manner
herein provided and such cash, if any, and property in kind, shall be applied
and distributed in accordance with Article 8.

     14.5 LIQUIDATING MANAGER.

          (a) If the dissolution of the Company is caused by circumstances under
which no Manager shall be acting as a Manager or if the Manager as liquidating
Manager is unable to or refuses to act, a Majority of the


                                       85
<PAGE>   39

Investor Interestholders shall appoint a liquidating Manager who shall proceed
to wind up the business affairs of the Company. The liquidating Manager shall
have no liability to the Company or to any Interestholder for any loss suffered
by the Company which arises out of any action or inaction of the liquidating
Manager if the liquidating Manager, in good faith, determined that such course
of conduct was in the best interests of the Interestholder and such course of
conduct did not constitute negligence or misconduct of the liquidating Manager.
The liquidating Manager shall be indemnified by the Company against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by it in connection with the Company, provided that the same were not
the result of negligence or misconduct of the liquidating Manager.

          (b) Notwithstanding the above, the liquidating Manager shall not be
indemnified and no expenses shall be advanced on its behalf for any losses,
liabilities or expenses arising from or out of an alleged violation of federal
or state securities laws, unless (1) there has been a successful adjudication on
the merits of each count involving alleged securities law violations as to the
particular indemnitee, or (2) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (3) a court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee.

          (c) In any claim for indemnification for federal or state securities
law violations, the party seeking Indemnification shall place before the court
the position of the Securities and Exchange Commission and the Massachusetts
Securities Division (if applicable), the Tennessee Securities Division (if
applicable), or other applicable securities administrators if required, with
respect to the issue of indemnification for securities law violations.

          (d) The Company shall not incur the cost of that portion of any
insurance, other than public liability insurance, which insures any party
against any liability the indemnification of which is herein prohibited.

     14.6 DEATH, INSANITY, DISSOLUTION OR INSOLVENCY OF AN INVESTOR
INTERESTHOLDER. The death, insanity, dissolution, winding up, insolvency,
bankruptcy, receivership or other legal termination of an Investor
Interestholder who is not a Manager shall have no effect on the form of the
Company and the Company shall not be dissolved thereby.

     14.7 WITHDRAWAL OF OFFERING. Dissolution of the Company resulting from
withdrawal of the offering of Interests is governed by Section 1.6(c) and
Section 12.4(g).

     14.8 ARTICLES OF CANCELLATION. Upon the winding up of the Company and its
termination, the Manager or liquidating trustee, as the case may be, shall cause
the Articles to be canceled by filing a Articles of Cancellation with the
Secretary of State of Michigan in accordance with the provisions of Section 3810
of the Michigan Act.




                                       86
<PAGE>   40


                                   ARTICLE 15

                                  MISCELLANEOUS

     15.1 NOTICES. Notices or instruments of any kind which may be or are
required to be given hereunder by any person to another shall be in writing and
deposited in the United States Mail, certified or registered, postage prepaid,
addressed to the respective person at the address appearing in the records of
the Company. Any Investor Interestholder may change his address by giving notice
in writing, stating his new address, to the Company. Any notice shall be deemed
to have been given effective as of 72 hours, excluding Saturdays, Sundays and
holidays, after the depositing of such notice in an official United States Mail
receptacle. Notice to the Company may be addressed to its principal office.

     15.2 MEETINGS OF INTERESTHOLDERS.

          (a) MEETINGS. The Manager may call meetings of the Interestholders or
the Investor Interestholders concerning any matter on which they may vote as
provided by this Agreement or by law or to receive and act upon a report of the
Manager on matters pertaining to the Company's business and activities. A
Majority of the Investor Interestholders may also call meetings by giving notice
to the Company demanding a meeting and stating the purposes therefor. After
calling a meeting or within 20 days after receipt of a written request or
requests meeting the requirements of the preceding sentence, the Company shall
mail to all Interestholders written notice of the place and purposes of the
meeting, which shall be held on a date not less than 7 days nor more than 21
days after the Company mails the notice of meeting to the Interestholders. Any
Investor Interestholder may appear and vote or consent at a meeting by proxy,
provided that such authority is granted by a writing signed by the Investor
Interestholder and delivered to the Company at or prior to the meeting.

          (b) CONSENTS. Any consent or approval required by this Agreement or
any vote or action by the Interestholders or the Investor Interestholders may be
effected without a meeting by a consent or consents in writing signed by the
persons entitled to give such consent or approval, to vote or to take action.
The Manager may solicit consents or a Majority of the Investor Interestholders
may demand a solicitation of consents by giving notice to the Manager stating
the purpose of the consent and including a form of consent. The Manager shall
effect a solicitation of consents by giving the Interestholders or the Investor
Interestholders, as the case may be, a notice of solicitation stating the
purpose of the consent, a form of consent and the date on which the consents are
to be tabulated, which shall be not less than 7 days nor more than 21 days after
the Company transmits the notice of solicitation for consents. If a Majority of
the Investor Interestholders demand a solicitation, the Company shall transmit
the notice of solicitation not later than 20 days after receipt of the demand.

          (c) GENERAL. To the extent not inconsistent with this Agreement,
Michigan law governing Interestholders' meetings, proxies and consents for
corporations shall apply as to the procedure, validity and use of meetings,
proxies and consents. Any Interestholder may waive notice of or attendance at
any meeting or notice of the solicitation of any consent, whether before or
after any action is taken. The date on which the Company transmits the notice of
meeting or notice soliciting consents shall be the record date for determining
the right to vote or consent. A list of the


                                       87
<PAGE>   41

names, addresses and Interestholdings of all Interestholders shall be maintained
as part of the Company's books and records.

     15.3 LOAN TO COMPANY BY INTERESTHOLDER. If any Investor Interestholder
shall, in addition to his Capital Contribution to the Company, lend any monies
to the Company, the amount of any such loan shall not increase his Capital
Account nor shall it entitle him to any increase in his Interest of the
distributions of the Company, but the amount of any such loan shall be an
obligation on the part of the Company to such Interestholder and shall be repaid
to him on the terms and at the interest rate negotiated at the time of the loan,
and the loan shall be evidenced by a promissory note executed by the Company,
except that no Investor Interestholder shall be personally obligated to repay
the loan, such loan shall not be a Special Obligation, and such loan shall be
repayable and collectible only out of the assets of the Company.

     15.4 MICHIGAN LAWS GOVERN. This Agreement shall be governed and construed
in accordance with the laws of the State of Michigan, and venue for any
litigation between or against any of the parties hereto may be maintained in
Ingham County, Michigan; however, residents of Massachusetts may, at their
option, choose to maintain any such litigation in the Commonwealth of
Massachusetts.

     15.5 POWER OF ATTORNEY. Each Investor Interestholder irrevocably
constitutes and appoints the Manager as his true and lawful attorney-in-fact and
agent to effectuate and to act in his name, place and stead, in effectuating the
purposes of the Company including the execution, verification, acknowledgment,
delivery, filing and recording of this Agreement as well as all authorized
amendments thereto and hereto, all assumed name and doing business Articles,
documents, bills of sale, assignments and other instruments of conveyances,
leases, contracts, loan documents and counterparts thereof, and all other
documents which may be required to effect a continuation of the Company and
which the Manager deems necessary or reasonably appropriate, including documents
required to be executed in order to correct typographical errors in documents
previously executed by or on behalf of such Investor Interestholder and all
conveyances and other instruments or other Articles necessary or appropriate to
effect an authorized dissolution, liquidation and termination of the Company.
The power of attorney granted herein shall be deemed to be coupled with an
interest, shall be irrevocable and shall survive and not be affected by the
subsequent death, incompetency, incapacity or legal disability of an Investor
Interestholder.

     15.6 DISCLAIMER. In forming this Company, all Investor Interestholders
recognize that the oil and gas business is highly speculative and that the
Company makes no guaranty or representation to any Investor Interestholder as to
the probability of gain or loss from the conduct of Company business.

    15.7 MANAGER RESIGNATION AND REPLACEMENT. The Manager may increase or
decrease the number of managers so long as there is at least one manager. A
manager other than the Manager may resign by delivering a written resignation to
the Manager not less than 60 days prior to the effective date of the
resignation. The Manager may remove a Manager at any time, provided that if
there is no incumbent, at least one new Manager is concurrently appointed. In
the event of the absence, death, resignation, removal, dissolution, insolvency,
bankruptcy or legal incapacity of a Manager other than the Manager or if an
additional Manager is to be appointed, the Manager


                                       88
<PAGE>   42

shall appoint the Manager in writing and shall subsequently give notice to the
Investor Interestholders, although such notice is not necessary to the validity
of the appointment. A Manager so appointed shall qualify by filing his written
acceptance at the Company's principal place of business. If there are multiple
managers, each is vested with an undivided interest in the Company estate and
may possess and exercise all powers vested in such estate as directed by the
Manager.

     15.8 AMENDMENT AND CONSTRUCTION OF AGREEMENT.

          (a) Amendments to this Agreement may be proposed by either the Manager
or a Majority of the Investor Interestholders (as determined by their Capital
Contributions), in each case by calling a meeting of Investor Interestholders or
requesting consents under Section 15.2 and specifying the text of the amendment
and the reasons therefor. Such proposed amendments shall be implemented only if
approved by (i) the Manager and a Majority of the Investor Interestholders, or
(ii) the holders of a Majority of the Investor Interestholder Interests. No
amendment under this Section 15.8(b) that increases any Interestholder's
liability, changes the capital contributions required of him or his rights and
interest in the profits, losses, deductions, credits, revenues or distributions
of the Company in more than a DE MINIMIS manner, his rights on dissolution, or
his voting or management rights set forth in this Agreement shall become
effective as to that Interestholder without his written approval thereof.

          (b) The Manager shall have the power to construe this Agreement and to
act and cause the Company to act upon any such construction. Its construction of
the same and any action taken pursuant thereto by the Company, the Manager or a
Managing Person in good faith shall be final and conclusive.

     15.9 BONDS AND ACCOUNTING. The Manager and the Managing Persons shall not
be required to give bond or otherwise post security for the performance of their
duties and the Company waives all provisions of law requiring or permitting the
same. No person shall be entitled at any time to require the Manager, the
Company or any Interestholder to submit to a judicial or other accounting or
otherwise elect any judicial, administrative or executive supervisory proceeding
applicable to non-business Companies.

     15.10 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the Interestholders (and their spouses if the Interests of
such Interestholders shall be community property) as well as their respective
heirs, legal representatives, successors and assigns. This Agreement constitutes
the entire agreement among the Company, the Manager, the and the Interestholders
with respect to the formation and operation of the Company, other than the
Subscription Agreement entered into between the Company and each Investor
Interestholder.

     15.11 HEADINGS. Headings of Articles and Sections used herein are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.

     15.12 TAX MATTERS PARTNER. The Manager or its designee shall be designated
the tax matters partner of the Company pursuant to Code Section 6221.

                                       89
<PAGE>   43

     15.13 TITLE TO COMPANY PROPERTY. Title to all of the Company's property
shall be vested in the Company until this Agreement terminates pursuant to
Article 14 hereof, provided, that is the laws of any jurisdiction require that
title to any part of such property be vested in a trustee of the Company, then
title to that part of the Company's property shall be vested in the Manager.

     IN WITNESS WHEREOF, the undersigned have signed this Agreement as of the
date first above written.


                         WOLVERINE ENERGY, L.L.C.,
                         MANAGER


                         By:                //George H. Arbaugh, Jr.//
                             ---------------------------------------------------
                         George H. Arbaugh, Jr., President


                         WOLVERINE ENERGY, L.L.C.
                         AS ATTORNEY-IN-FACT FOR THE INVESTOR INTERESTHOLDERS


                         By:                //George H. Arbaugh, Jr.//
                            ----------------------------------------------------
                         George H. Arbaugh, Jr., President




                                       90
<PAGE>   44



                                                                       EXHIBIT A

     WOLVERINE ENERGY 1998-1999 (A) DEVELOPMENT CO, L.L.C. INVESTOR SUMMARY

<TABLE>
<CAPTION>
                  UNITS   INVESTORS
<S>                       <C>
                   5.25   Rosanna C. Bias
                  10.50   Alma M. Moore Trust
                   5.25   Margaret J. Grasston
                  10.50   John L. or Jeannette D. Gordon
                   5.25   Donald G. & June F. Holmes
                   5.25   Zimmerman Living Trust
                   5.25   Peter C. Einselen
                  16.01   Barry Quattromani
                  61.50   David J. Harris
                  10.50   Ila W. Nestor
                  10.50   Paul F. Keeler
                  10.50   Marsh & Helyn Howard
                  11.49   Doris Ludvigsen
                   5.25   Joanne Vogelsong
                   5.25   James J. Bodine
                   5.25   Edwand & Gloria Waskiweicz Trust
                  30.75   Lowell D. Molloy
                  31.50   Richard & Elizabeth Nadolny
                  15.75   Richard Wells
                  15.75   Red Wells, Inc.
                  10.50   Anthony & Margaret Kasavage
                  52.50   Marion L. White Trust
                   5.25   David & Ana Meyers
                  31.50   Terry & Donna Rock
                   5.00   Jeanmarie Kapp
                  10.00   Lawrence & Sandra Langer
                  10.00   Sylvester & Diana Mason
                  10.00   John & Robert  Cheppo
                   5.00   Trina L. Buettner
                   5.00   Paul Jones
                  10.00   James & Emily Wilkerson
                  10.00   Arden & Gloria Zentic Trust
                  12.00   Marjorie Thomas
                   9.00   James Kulwicki
                  15.00   Dorothy J. Walkowski
                  10.00   Robert A. Latham
                   6.00   Joseph A. Schaerfl
                   5.00   Dr. William M. Mewborn, Jr.
                  90.00   John N. Foster, Sr.
                   2.50   Paul A. Lay
                  15.00   Carlton L. Dietsch
                   5.00   Raymond J. Zelinsky
                   5.00   Paul Jurkovic
                  50.00   Larry A. Dennison
                  13.00   Ronald & Patricia Phelps
                  15.00   Roger & Arlene Memmer
                  10.00   Frank Ruzich
                  10.00   Regis F. Wolanin
                  20.00   John & Lynn Wilson
                  10.00   Charles R. Schumacher
                   5.00   John R. McPHERSON
</TABLE>


                                       91
<PAGE>   45

<TABLE>
<S>                       <C>
                  -5.00   Refund (John McPHERSON)
                   5.00   J. Kevin Fernen
                   5.00   Michael P. Ellis
                   5.00   Esther M. McPHERSON
                  -5.00   Refund (Esther McPHERSON)
                   5.00   Sesinando R. Torres
                   5.00   Robert S. Lingo
                   5.00   Lisa Luczek
                   5.00   Diane M. Price
                   5.00   Butala Family Trust
                  10.00   David W. Forbes
                  15.00   Edward F. Watson, Jr.
                  30.00   Dean C. Pitcairn
                  40.00   Carl I. Rogers
                   5.00   Dallas E. Layman
                  30.00   Gerald F. Schafer
                  10.00   John J. Cheppo              reinvest
                  24.00   Kathleen E. McGUIRE
                  52.50   Paul & Marion White      reinvest
                   2.00   Barry Quattromani         reinvest
                  14.00   Mark or Tina Stewart
                   6.00   Bruce A. Wilde
                   7.00   Eylene S. Thompson
                   5.00   Joan B. Coleson
                   5.00   Kenneth P. Nestlehutt
                   7.00   Harold C. Mims
                   5.00   Robert E. Smith
                  15.00   Alan E. Frost
                   5.00   Daniel Griffin
                   5.00   Richard Dickinson
                  15.00   Albert S. Szychowski, Living Trust
                   5.00   James Gifford
                   8.00   Kathryn P. Gustafson
                   5.00   Douglas & Carol Laumann, TTEE
                   5.00   Doris Meidt, TTEE
                   5.00   Garry Lovelace
                  10.00   Richard Ippolito
                  20.00   Donald & Betty Morris
                   5.00   Dana Fauth
                  10.00   Zimmerman Living Trust - reinvest
                  10.00   Thomas L. Cook Family Living Trust
                  11.00   Maurice E. Davis
                   5.00   Jack Armstrong, TTEE
                  15.00   Robert J. Nolan
                  10.00   John J. Cheppo           reinvest
                   5.00   Douglas B. Rigg
                   5.00   Donald W. Knutson
                   5.00   Edward F. Watson, Jr.   reinvest
                 5.0550   Lee Gholson
                   5.00   John P. Lopardo Living Trust
                  35.00   Clara Nadine Reece
                  34.00   Donna & James Ackley
                   5.00   Jane M. Chavez, TTEE
                  10.99   Doris Ludvigsen            reinvest
                   5.00   Martin & Susan Buck
                  31.50   Marylin L. Henegar
                  10.00   T. Allen & Jeanette James
</TABLE>


                                       92
<PAGE>   46

<TABLE>
<S>                       <C>
                  10.00   Carol Hardy
                  30.00   Cannon Family Trust (Winton)
                   8.00   William & Jean Gordon TTEE
                  10.00   Charles M. Ferguson, TTEE
                   5.49   Doris Ludvigsen            reinvest
                   5.00   Gregory Lingenfelter, TTEE
                   5.00   Brian Martin
                  10.99   Ashley Arbaugh
                  50.00   John N. Foster, Sr.   reinvest
                  20.00   Joyce B. Sachse
                  15.00   Vivekananda Wall
                  10.00   Herbert I. Ott, Trustee
                  30.00   Loree Dempsey
                   5.00   Bernard Slakoff
                   5.00   Charles Watt
                  20.00   Peter Grylls
                   2.00   William & Jean Gordon TTEE  rein.
                   5.00   Charles A. Russell, TTEE
                   5.00   Julian Family Trust
                  15.00   Evans Family Trust
                   5.00   Karen L. Dziegeleski
                   5.00   Clifford A. Simpson
                 126.59   Al Thomas
                 100.00   George R. Murray
                   5.00   Brent Yeates
                   5.00   Paulette Scherr
                  15.00   Dale K. Rider
                  15.00   Robert H. Ford
                  10.00   Arden & Gloria Zentic Trust  reinvest
                 16.484   Howard M. Kaplan
                  15.00   William Muscatello
                   5.00   John Kolc
                   5.00   Donald E. Bowles
                   5.00   Gayla J. Stubblefield
                 100.00   Robert E. Bryan
                  6.285   Todd Levault
                   8.00   George Doerr, Jr.
                  30.00   North Lake Capital, LLC
                   5.00   William Muscatello, II
                  15.00   Barbara Kosciuch
                  15.00   Irma L. Radcliff
                  10.00   Robert Iseli
                   5.00   Freeman Coney
                  10.00   Shirley Ribble
                  15.00   James & Emily Wilkerson - reinvest
                  25.00   Julie A. Hartigan
                   5.00   Gregory Lingenfelter,TTEE reinvest
                   5.00   Lori & Steven Allison
                 400.00   Shirley Balk, TTEE
                   5.00   A.M. Pezzano
                   7.50   Renate Lawrence
                   7.50   Dieter Kirchheim
                   5.00   Gary Gordon
                 17.647   Dr. J's Oil Production Corp.
                  10.00   John Campbell
                  30.00   Robert Half of Louisiana(McCall)
                  10.00   John Henthorn
</TABLE>


                                       93
<PAGE>   47

<TABLE>
<S>                       <C>
                   5.00   Donald Maxwell
                  30.00   Shawn R. Kirk
                  30.00   John Damen Kirk
                  30.00   John B. Rice
                  15.00   Thomas & Deanna O'Hare
                  10.00   Herbert I. Ott, Trustee     reinvest
</TABLE>



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