Document:

Exhibit 10.2

FARMOUT AGREEMENT 

          This
agreement (hereinafter referred to as the “Agreement”) is between Coastal
Petroleum Company (hereinafter referred to as “Coastal”) and Lusora Healthcare
Systems, Inc. (hereinafter referred to as “Lusora”). Coastal and Lusora are
sometimes collectively referred to as the “Parties”. 

          This
Exploration Agreement is the Farmout Agreement referred to in the Memorandum of
Intent signed by the Power Energy Enterpirses SA and Coastal Petroleum Company
on July 19, 2007 and assigned to Lusora Healthcare Systems, Inc. on August 20,
2007, and replaces that Memorandum of Intent and governs the rights and
obligations of the Parties hence forth. 

          In
consideration of the premises, mutual covenants and obligations herein
contained, the Parties agree as follows: 

          A. LEASES

          Coastal
has identified a Shallow Gas Prospect which may yield 220 BCF or more of natural
gas if it is productive. Coastal owns leases on 42,259.77 gross mineral acres
(42,080.84 net acres) in its Valley County Shallow Gas Assembly (the “Leases”).
The Leases are 100% working and at least between 75.5 and 80.5% net revenue
leases. A copy of the Schedule of Leases is enclosed herewith as Attachment A.

          B.
AREA OF MUTUAL INTEREST 

          An
Area of Mutual Interest (AMI) shall exist within four miles of the Leases.
Coastal’s other current leases are outside this AMI.

          C.
THE SHALLOW GAS PROSPECT 

          Coastal
has staked the Test Well of this Shallow Gas Prospect on a 160 acre spacing unit
in the center of the Shallow Gas Prospect in Section 19, Township 36 North,
Range 38 East, and plans to spud the well after September 15, 2007. The cost of
the Test Well with some lease rentals is $384,000. The parties agree that the
plan is to: drill four step out wells as soon as possible following a successful
Test Well; complete a reserve study; and obtain financing based upon the reserve
study to complete the development of the field; and install pipelines needed to
carry the gas to transmissions lines.

          D.
INTENTION OF THE PARTIES 

          Coastal’s
intention is to farmout the Shallow Gas Prospect Test Well location to Lusora on
the basis of Lusora paying 100% of the cost of the Test Well and associated
lease rentals, in return for 100% of the working interest before payout of the
Test Well and 80% of the working interest of the Test Well after payout. In
addition, after the results of the Test Well Lusora would be entitled to
purchase a 50% working interest in the remaining area of the Leases for
$1,000,000. From that point on the parties and Coastal would each pay 50% of the
cost of wells in which they both participate and each be entitled to 50% of the
revenues of wells in which they both participate. Lusora’s intention is to
acquire the total interest Coastal intends to farmout.

          E.
LUSORA TO ACQUIRE A 50% INTEREST IN THE LEASES 

          In
order for Lusora to acquire the interest Coastal is offering, Lusora and Coastal
agree that: 

	 	1. 	
      Lusora was required to and did pay to Coastal a good
      faith *nonrefundable payment of $40,000 and did deposit and escrow the sum
      of $384,000 with a bank acceptable to Coastal. The release of the escrowed
      funds is subject only to the final execution of this Agreement and that
      the funds will be released on the date the permit to drill is granted, but
      no earlier than September 15, 2007.

	 	 	 	 
	 	2. 	
      At the time the United States Bureau of Land Management
      grants the permit to drill the Test Well, but in no case before September
      15, 2007, Lusora shall release the escrowed sum of $384,000 to Coastal to
      be used by Coastal to pay the costs of the Test Well and associated lease
      rentals.

	 	 	 	 
	 	3. 	
      Within 30 days after the Test Well is completed, Lusora
      will elect in writing to purchase or not to purchase a 50% interest in the
      Leases for $1,000,000. If Lusora elects to purchase this interest, it
      shall pay the total purchase price of $1,000,000 to Coastal in five
      installments of $200,000, to be paid at the following times:

	 	 	 	 
	 		a. 	
      first installment at the time Coastal obtains the permit
      to drill the first step out well;

	 	 	 	 
	 		b. 	
      second installment at the time the second step out well
      is spud;

	 	 	 	 
	 		c. 	
      third installment at the time the third step out well is
      spud;

	 	 	 	 
	 		d. 	
      fourth installment at the time the fourth step out well
      is spud; and

	 	 	 	 
	 		e. 	
      fifth installment at the time the fourth step out well is
      completed.

          At
the time of payment of each installment, Coastal shall assign a 10% undivided
working interest in the Leases to Lusora. At the time of full payment, Coastal
shall assign or have assigned the full 50% undivided working interest in the
Leases to Lusora. 

          F.
RENTALS: 

          Coastal
and Lusora shall each pay their proportionate share of the delay or other
rentals on the Leases. Coastal shall be the party which actually submits the
rentals to the lessors. Coastal shall give sixty days notice to Lusora of the
date when rentals are due and Lusora shall pay its share, whatever that may be
at the time, within fifteen days of the date of the notice to Coastal. Coastal
shall pay the rentals advanced. In the event that either party elects not to pay
its portion of the rentals to any part of the Lease it shall give the other
party at least sixty days notice of its intention not to pay rentals and the
other party may do so and retain that portion of the Lease as its sole property,
less and excluding any producing units where the party’s rights continue and no
rentals were due.

          G.
FAILURE TO FULFILL REQUIREMENTS: 

          In
the event that Lusora completes the requirements of Paragraph E above, Lusora
shall have earned a 50% undivided working interest in the Leases. In the event
that Lusora fails to timely meet any of the requirements of Paragraph E. 3.,
Lusora will only earn a part of the 50% undivided working interest in the
Leases. Also in the event that Lusora fails to timely release and pay the cash
payment held in escrow, then Lusora shall earn no interest at all in the Leases.

          H.
FEDERAL EXPLORATORY UNIT: 

          The
Parties may work together to submit for approval a plan for a Federal
Exploratory Unit (“Unit”) that includes all of the Leases and so much of the
Area of Mutual Interest as possible.

          I.
SUBSEQUENT EXPLORATION OF THE LEASES: 

          After
Lusora earns its 50% undivided interest in the Leases, either party may propose
a well within the Leases or additional acreage acquired within the area of
mutual interest. The other party may opt-in or opt-out of the proposed well, on
a well by well basis. If the other party opts–in, the drilling shall proceed
with both Parties paying their share of the costs. If the other party opts-out
of the proposed well the party opting out shall have no interest in the spacing
unit of that well, but the party opting out shall retain its right to
participate in any other well drilled as a development well or exploratory well
following the well the party has opted out of. 

          J.
WELL INFORMATION: 

          Each
party shall furnish the other party with daily drilling reports, logs, DST
results, results of other tests performed, and production reports on any well it
drills under this Farmout Agreement. 

          K.
OPERATING AGREEMENT: 

          All
operations for the joint account of Coastal and Lusora on the Leases shall be in
accordance with the terms and provisions of the model Joint Operating Agreement
attached hereto and made a part of this Agreement as Exhibit “B”. Coastal shall
be designated Operator except where it declines to participate in the drilling
of a well or wells by Lusora, in which case, Lusora may elect to act as operator
and owner of such well or wells.

          L.
TIME OF THE ESSENCE: 

          It
is understood that time is of the essence of this Agreement, and no provision
hereof shall be modified nor waived except in writing. 

          M.
AREA OF MUTUAL INTEREST ACQUISITIONS: 

          The
Area of Mutual Interest exists within four miles of the Leases. Each party shall
offer to the other party the right to participate for its current share of the
interest in the Leases in the acquisition of any lease or other interest that
party may have the option to acquire, at the same percentage of the cost of
acquisition. In the event that the other party declines to participate, then
that lease or other interest shall become outside this AMI and the other party
shall have no interest under the AMI rights. Coastal’s other current leases are
outside this AMI. A party may propose geological investigations of whatever
character within the AMI, and that party shall offer to the other party the
right to participate in the costs and results of the proposed geological
investigation. In the event that the other party declines to participate, then
that party shall have no right to the information and data from the geological
investigation. However, declining to participate in the geological investigation
shall not affect that party’s right to participate in any well proposed by the
party. 

          N.
FORCE MAJEURE: 

          In
the event any party hereof is prevented from complying with any of the
obligations imposed upon it hereunder, or from exercising any of the rights
granted to it hereunder, as a result of an act of God, or any other cause,
whether similar or dissimilar, reasonably proved beyond the control of such
party, the time within which said party may perform such obligations or exercise
such rights shall be extended for a period equal to the time during which said
party was prevented from the performance of such obligations, or the exercise of
such rights. The party having the difficulty shall take all reasonable steps to
remedy such condition as rapidly as possible. 

          P.
NOTICES: 

          All
notices and other communications given or made pursuant to this Agreement shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient, and if not so
confirmed, then on the next business day, (c) five (5) days after having been
sent by registered or certified mail, return receipt requested, postage prepaid,
or (d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the respective Parties at their address as set
forth below or to such e-mail address, facsimile number or address as
subsequently modified by written notice given in accordance with this
Section.

Coastal Petroleum Company 
Post
Office Box 609 
Apalachicola, Florida 32329 

Telephone Number: 850-653-2732 
Fax
Number: 850-653-8804 

Lusora Healthcare Systems Inc. 
2
Sheraton Street 
London W1K 3AJ United Kingdom 
Telephone Number
442074794800 
Fax Number 442074794801 

          Q.
LEGAL ACTIONS:

          If
any action at law or in equity (including arbitration) is necessary to enforce
or interpret the terms of any of this Agreement, the prevailing party shall be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled. 

          R.
AMENDMENTS: 

          Any
term of this Agreement may be amended, terminated or waived only with the
written consent of each of the Parties hereto.

          S.
SEVERABILITY: 

          The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision. 

          T.
DELAY NO WAIVER OF REMEDIES: 

          No
delay or omission to exercise any right, power or remedy accruing to any party
under this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power or remedy of such non-breaching or
non-defaulting party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative. 

          U.
ENTIRE AGREEMENT: 

          This
Agreement (including the Exhibits hereto), constitute the full and entire
understanding and agreement between the Parties with respect to the subject
matter hereof, and any other written or oral agreement relating to the subject
matter hereof existing between the Parties are expressly canceled. 

          V.
ARBITRATION: 

          The
Parties agree that any unresolved controversy or claim arising out of or
relating to this Agreement, except as: (i) otherwise provided in this Agreement,
or (ii) any such controversies or claims arising out of either party’s
intellectual property rights for which a provisional remedy or equitable relief
is sought, shall be submitted to arbitration by one arbitrator mutually agreed
upon by the Parties, and if no agreement can be reached within thirty (30) days
after names of potential arbitrators have been proposed by the American
Arbitration Association (the “AAA”), then by one arbitrator having
reasonable experience in oil and gas transactions of the type provided for in
this Agreement and who is chosen by the AAA. The arbitration shall take place in
Tallahassee, Florida, in accordance with the AAA rules then in effect, and
judgment upon any award rendered in such arbitration will be binding and may be
entered in any court having jurisdiction thereof. There shall be limited
discovery prior to the arbitration hearing as follows: (a) 

exchange of witness lists and copies of documentary evidence
and documents relating to or arising out of the issues to be arbitrated; (b)
depositions of all party witnesses; and (c) such other depositions as may be
allowed by the arbitrators upon a showing of good cause. Depositions shall be
conducted in accordance with the Florida Code of Civil Procedure, the arbitrator
shall be required to provide in writing to the Parties the basis for the award
or order of such arbitrator, and a court reporter shall record all hearings,
with such record constituting the official transcript of such proceedings. The
prevailing party shall be entitled to reasonable attorney’s fees, costs, and
necessary disbursements in addition to any other relief to which such party may
be entitled. Each of the Parties to this Agreement consents to personal
jurisdiction for any equitable action sought in the U.S. District Court for the
Northern District of Florida or any court of the State of Florida having subject
matter jurisdiction. 

          W.
DATE: 

          The
date of this Agreement is August 30, 2007. 

	 	Coastal Petroleum Company 	Lusora Healthcare Systems, Inc. 
	 	  	  
	 	By: /s/ Phillip W. Ware 	By: /s/ Dan Bauer 
	 	       Phillip W. Ware,
      President 	       Dan Bauer,
      President and CEO 

 

 

 

 

 

 

 

 

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

MODEL FORM OPERATING AGREEMENT 

 

 

 

 

 

OPERATING AGREEMENT 

DATED

______________________,
________________________,
                                           
year

OPERATOR 
______________________________________________________________________________________________________

CONTRACT AREA
_________________________________________________________________________________________________

________________________________________________________________________________________________________________

________________________________________________________________________________________________________________

________________________________________________________________________________________________________________

________________________________________________________________________________________________________________

COUNTY OR PARISH OF __________________________________________,
STATE OF ________________________________________

 

 

COPYRIGHT 1989 – ALL RIGHTS RESERVED

AMERICAN ASSOCIATION OF PETROLEUM 
LANDMEN, 4100 FOSSIL CREEK BLVD.

FORT WORTH, TEXAS, 76137, APPROVED FORM. 

A.A.P.L. NO. 610 – 1989 

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

TABLE OF CONTENTS

	Article 	Title 	Page 
	I. 	DEFINITIONS 	1 
	II. 	EXHIBITS 	1 
	III. 	INTERESTS OF PARTIES 	2 
	  	A.	OIL AND GAS INTERESTS: 	2 
	  	B.	INTERESTS OF PARTIES IN COSTS AND PRODUCTION: 	2 
	  	C.	SUBSEQUENTLY CREATED INTERESTS: 	2 
	IV. 	TITLES 	2 
	  	A.	TITLE EXAMINATION: 	2 
	  	B.	LOSS OR FAILURE OF TITLE: 	3 
	  	 	1.	Failure of Title 	3 
	  		2. 	Loss by Non-Payment or Erroneous Payment of Amount Due 	3 
	  		3.	Other Losses 	3 
	  		4.	Curing Title 	3 
	V. 	OPERATOR 	4 
	  	A.	DESIGNATION AND RESPONSIBILITIES OF OPERATOR: 	4 
	  	B.	RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR:
      	4 
	  		1.	Resignation or Removal of Operator 	4 
	  		2.	Selection of Successor Operator 	4 
	  		3.	Effect of Bankruptcy 	4 
	  	C.	EMPLOYEES AND CONTRACTORS: 	4 
	  	D.	RIGHTS AND DUTIES OF OPERATOR: 	4 
	  		1.	Competitive Rates and Use of Affiliates 	4 
	  		2.	Discharge of Joint Account Obligations 	4 
	  		3.	Protection from Liens 	4 
	  		4.	Custody of Funds 	5 
	  		5.	Access to Contract Area and Records 	5 
	  		6.	Filing and Furnishing Governmental Reports 	5 
	  		7.	Drilling and Testing Operations 	5 
	  		8.	Cost Estimates 	5 
	  		9.	Insurance 	5 
	VI. 	DRILLING AND DEVELOPMENT 	5 
	  	A.	INITIAL WELL: 	5 
	  	B.	SUBSEQUENT OPERATIONS: 	5 
	  		1.	Proposed Operations 	5 
	  		2.	Operations by Less Than All Parties 	6 
	  		3.	Stand-By Costs 	7 
	  		4.	Deepening 	8 
	  		5.	Sidetracking 	8 
	  		6.	Order of Preference of Operations 	8 
	  		7.	Conformity to Spacing Pattern 	9 
	  		8.	Paying Wells 	9 
	  	C.	COMPLETION OF WELLS; REWORKING AND PLUGGING BACK: 	9 
	  		1.	Completion 	9 
	  		2.	Rework, Recomplete or Plug Back 	9 
	  	D.	OTHER OPERATIONS: 	9 
	  	E.	ABANDONMENT OF WELLS: 	9 
	  		1.	Abandonment of Dry Holes 	9 
	  		2.	Abandonment of Wells That Have Produced 	10 
	  		3.	Abandonment of Non-Consent Operations 	10 
	  	F.	F. TERMINATION OF OPERATIONS: 	10 
	  	G.	TAKING PRODUCTION IN KIND: 	10 
	  			(Option 1) Gas Balancing Agreement 	10 
	  			(Option 2) No Gas Balancing Agreement 	11 
	VII. 	EXPENDITURES AND LIABILITY OF PARTIES 	11 
	  	A.	LIABILITY OF PARTIES: 	11 
	  	B.	LIENS AND SECURITY INTERESTS: 	12 
	  	C.	ADVANCES: 	12 
	  	D.	DEFAULTS AND REMEDIES: 	12 
	  		1.	Suspension of Rights 	13 
	  		2.	Suit for Damages 	13 
	  		3.	Deemed Non-Consent 	13 
	  		4.	Advance Payment 	13 
	  		5.	Costs and Attorneys’ Fees 	13 
	  	E.	RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES: 	13 
	  	F.	TAXES: 	13 
	VIII. 	ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST
      	14 
	  	A.	SURRENDER OF LEASES: 	14 
	  	B.	RENEWAL OR EXTENSION OF LEASES: 	14 
	  	C.	ACREAGE OR CASH CONTRIBUTIONS: 	14 

i

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

TABLE OF CONTENTS

	  	D.	ASSIGNMENT; MAINTENANCE OF UNIFORM INTEREST: 	15 
	  	E.	WAIVER OF RIGHTS TO PARTITION: 	15 
	  	F.	PREFERENTIAL RIGHT TO PURCHASE: 	15 
	IX. 	INTERNAL REVENUE CODE ELECTION 	15 
	X. 	CLAIMS AND LAWSUITS 	15 
	XI. 	FORCE MAJEURE 	16 
	XII. 	NOTICES 	16 
	XIII. 	TERM OF AGREEMENT 	16 
	XIV. 	COMPLIANCE WITH LAWS AND REGULATIONS 	16 
	  	A.	LAWS, REGULATIONS AND ORDERS: 	16 
	  	B.	GOVERNING LAW: 	16 
	  	C.	REGULATORY AGENCIES: 	16 
	XV. 	MISCELLANEOUS 	17 
	  	A.	EXECUTION: 	17 
	  	B.	SUCCESSORS AND ASSIGNS: 	17 
	  	C	COUNTERPARTS: 	17 
	  	D.	SEVERABILITY 	17 
	XVI. 	OTHER PROVISIONS 	17 

ii

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

	1 	OPERATING AGREEMENT
	2 	
                       
      THIS AGREEMENT, entered into by and between
      ___________________________________________,

	3 	
      hereinafter designated and referred to as "Operator," and
      the signatory party or parties other than Operator, sometimes

	4 	
      hereinafter referred to individually as "Non-Operator,"
      and collectively as "Non-Operators."

	5 	WITNESSETH:
	6 	
                       
      WHEREAS, the parties to this agreement are owners of Oil and Gas Leases
      and/or Oil and Gas Interests in the land

	7 	
      identified in Exhibit "A," and the parties hereto have
      reached an agreement to explore and develop these Leases and/or
  Oil

	8 	
      and Gas Interests for the production of Oil and Gas to
      the extent and as hereinafter provided,

	9 	
                       
      NOW, THEREFORE, it is agreed as follows:

	10 	ARTICLE I.
	11 	DEFINITIONS
	12 	
                       
      As used in this agreement, the following words and terms shall have the
      meanings here ascribed to them:

	13 	
                       
      A. The term "AFE" shall mean an Authority for Expenditure prepared by a
      party to this agreement for the purpose of

	14 	
      estimating the costs to be incurred in conducting an
      operation hereunder.

	15 	
                       
      B. The term "Completion" or "Complete" shall mean a single operation
      intended to complete a well as a producer of Oil

	16 	
      and Gas in one or more Zones, including, but not limited
      to, the setting of production casing, perforating, well
  stimulation

	17 	
      and production testing conducted in such
  operation.

	18 	
                       
      C. The term "Contract Area" shall mean all of the lands, Oil and Gas
      Leases and/or Oil and Gas Interests intended to be

	19 	
      developed and operated for Oil and Gas purposes under
      this agreement. Such lands, Oil and Gas Leases and Oil and Gas

	20 	
      Interests are described in Exhibit "A."

	21 	
                       
      D. The term "Deepen" shall mean a single operation whereby a well is
      drilled to an objective Zone below the deepest

	22 	
      Zone in which the well was previously drilled, or below
      the Deepest Zone proposed in the associated AFE, whichever is
the

	23 	
      lesser.

	24 	
                       
      E. The terms "Drilling Party" and "Consenting Party" shall mean a party
      who agrees to join in and pay its share of the

	25 	
      cost of any operation conducted under the provisions of
      this agreement.

	26 	
                       
      F. The term "Drilling Unit" shall mean the area fixed for the drilling of
      one well by order or rule of any state or federal

	27 	
      body having authority. If a Drilling Unit is not fixed by
      any such rule or order, a Drilling Unit shall be the drilling unit
    as

	28 	
      established by the pattern of drilling in the Contract
      Area unless fixed by express agreement of the Drilling Parties.

	29 	
                       
      G. The term "Drillsite" shall mean the Oil and Gas Lease or Oil and Gas
      Interest on which a proposed well is to be

	30 	
      located.

	31 	
                       
      H. The term "Initial Well" shall mean the well required to be drilled by
      the parties hereto as provided in Article VI.A.

	32 	
                       
      I. The term "Non-Consent Well" shall mean a well in which less than all
      parties have conducted an operation as

	33 	
      provided in Article VI.B.2.

	34 	
                       
      J. The terms "Non-Drilling Party" and "Non-Consenting Party" shall mean a
      party who elects not to participate in a

	35 	
      proposed operation.

	36 	
                       
      K. The term "Oil and Gas" shall mean oil, gas, casinghead gas, gas
      condensate, and/or all other liquid or gaseous

	37 	
      hydrocarbons and other marketable substances produced
      therewith, unless an intent to limit the inclusiveness of this term
    is

	38 	
      specifically stated.

	39 	
                       
      L. The term "Oil and Gas Interests" or "Interests" shall mean unleased fee
      and mineral interests in Oil and Gas in tracts

	40 	
      of land lying within the Contract Area which are owned by
      parties to this agreement.

	41 	
                       
      M. The terms "Oil and Gas Lease," "Lease" and "Leasehold" shall mean the
      oil and gas leases or interests therein

	42 	
      covering tracts of land lying within the Contract Area
      which are owned by the parties to this agreement.

	43 	
                       
      N. The term "Plug Back" shall mean a single operation whereby a deeper
      Zone is abandoned in order to attempt a

	44 	
      Completion in a shallower Zone.

	45 	
                       
      O. The term "Recompletion" or "Recomplete" shall mean an operation whereby
      a Completion in one Zone is abandoned

	46 	
      in order to attempt a Completion in a different Zone
      within the existing wellbore.

	47 	
                       
      P. The term "Rework" shall mean an operation conducted in the wellbore of
      a well after it is Completed to secure,

	48 	
      restore, or improve production in a Zone which is
      currently open to production in the wellbore. Such operations include,
      but

	49 	
      are not limited to, well stimulation operations but
      exclude any routine repair or maintenance work or drilling,
      Sidetracking,

	50 	
      Deepening, Completing, Recompleting, or Plugging Back of
      a well.

	51 	
                       
      Q. The term "Sidetrack" shall mean the directional control and intentional
      deviation of a well from vertical so as to

	52 	
      change the bottom hole location unless done to straighten
      the hole or drill around junk in the hole to overcome other

	53 	
      mechanical difficulties.

	54 	
                       
      R. The term "Zone" shall mean a stratum of earth containing or thought to
      contain a common accumulation of Oil and

	55 	
      Gas separately producible from any other common
      accumulation of Oil and Gas.

	56 	
      Unless the context otherwise clearly indicates, words
      used in the singular include the plural, the word "person"
  includes

	57 	
      natural and artificial persons, the plural includes the
      singular, and any gender includes the masculine, feminine, and
    neuter.

	58 	ARTICLE II.
	59 	EXHIBITS
	60 	
                       
      The following exhibits, as indicated below and attached hereto, are
      incorporated in and made a part hereof:

	61 	
      _______  A. Exhibit "A," shall include the following
      information:

	62 	
                       
      (1) Description of lands subject to this agreement,

	63 	
                       
      (2) Restrictions, if any, as to depths, formations, or
  substances,

	64 	
                       
      (3) Parties to agreement with addresses and telephone numbers for notice
      purposes,

	65 	
                       
      (4) Percentages or fractional interests of parties to this
    agreement,

	66 	
                       
      (5) Oil and Gas Leases and/or Oil and Gas Interests subject to this
      agreement,

	67 	
                       
      (6) Burdens on production.

	68 	
      _______  B. Exhibit "B," Form of Lease.

	69 	
      _______  C. Exhibit "C," Accounting
  Procedure.

	70 	
      _______  D. Exhibit "D," Insurance.

	71 	
      _______  E. Exhibit "E," Gas Balancing
    Agreement.

	72 	
      _______  F. Exhibit "F," Non-Discrimination and
      Certification of Non-Segregated Facilities.

	73 	
      _______  G. Exhibit "G," Tax Partnership.

	74 	
      _______  H.
      Other:_________________________________________________________

- 1 - 

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

	1 	
                       
      If any provision of any exhibit, except Exhibits "E," "F" and "G," is
      inconsistent with any provision contained in

	2 	
      the body of this agreement, the provisions in the body of
      this agreement shall prevail.

	3 	ARTICLE III.
	4 	INTERESTS OF PARTIES
	5 	
      A. Oil and Gas Interests:

	6 	
                       
      If any party owns an Oil and Gas Interest in the Contract Area, that
      Interest shall be treated for all purposes of this

	7 	
      agreement and during the term hereof as if it were
      covered by the form of Oil and Gas Lease attached hereto as Exhibit
      "B,"

	8 	
      and the owner thereof shall be deemed to own both royalty
      interest in such lease and the interest of the lessee
thereunder.

	9 	
      B. Interests of Parties in Costs and
      Production:

	10 	
                       
      Unless changed by other provisions, all costs and liabilities incurred in
      operations under this agreement shall be borne

	11 	
      and paid, and all equipment and materials acquired in
      operations on the Contract Area shall be owned, by the parties as
    their

	12 	
      interests are set forth in Exhibit "A." In the same
      manner, the parties shall also own all production of Oil and Gas from
      the

	13 	
      Contract Area subject, however, to the payment of
      royalties and other burdens on production as described
hereafter.

	14 	
                       
      Regardless of which party has contributed any Oil and Gas Lease or Oil and
      Gas Interest on which royalty or other

	15 	
      burdens may be payable and except as otherwise expressly
      provided in this agreement, each party shall pay or deliver, or

	16 	
      cause to be paid or delivered, all burdens on its share
      of the production from the Contract Area up to, but not in excess
    of,

	17 	
      _____________________________and shall indemnify, defend
      and hold the other parties free from any liability therefor.

	18 	
      Except as otherwise expressly provided in this agreement,
      if any party has contributed hereto any Lease or Interest which
  is

	19 	
      burdened with any royalty, overriding royalty, production
      payment or other burden on production in excess of the amounts

	20 	
      stipulated above, such party so burdened shall assume and
      alone bear all such excess obligations and shall indemnify,
  defend

	21 	
      and hold the other parties hereto harmless from any and
      all claims attributable to such excess burden. However, so long
  as

	22 	
      the Drilling Unit for the productive Zone(s) is identical
      with the Contract Area, each party shall pay or deliver, or cause
  to

	23 	
      be paid or delivered, all burdens on production from the
      Contract Area due under the terms of the Oil and Gas Lease(s)

	24 	
      which such party has contributed to this agreement, and
      shall indemnify, defend and hold the other parties free from any

	25 	
      liability therefor.

	26 	
                       
      No party shall ever be responsible, on a price basis higher than the price
      received by such party, to any other party's

	27 	
      lessor or royalty owner, and if such other party's lessor
      or royalty owner should demand and receive settlement on a
higher

	28 	
      price basis, the party contributing the affected Lease
      shall bear the additional royalty burden attributable to such higher
      price.

	29 	
                       
      Nothing contained in this Article III.B. shall be deemed an assignment or
      cross-assignment of interests covered hereby,

	30 	
      and in the event two or more parties contribute to this
      agreement jointly owned Leases, the parties' undivided interests
  in

	31 	
      said Leaseholds shall be deemed separate leasehold
      interests for the purposes of this agreement.

	32 	
      C. Subsequently Created Interests:

	33 	
                       
      If any party has contributed hereto a Lease or Interest that is burdened
      with an assignment of production given as security

	34 	
      for the payment of money, or if, after the date of this
      agreement, any party creates an overriding royalty, production

	35 	
      payment, net profits interest, assignment of production
      or other burden payable out of production attributable to its
    working

	36 	
      interest hereunder, such burden shall be deemed a
      "Subsequently Created Interest." Further, if any party has
    contributed

	37 	
      hereto a Lease or Interest burdened with an overriding
      royalty, production payment, net profits interests, or other
  burden

	38 	
      payable out of production created prior to the date of
      this agreement, and such burden is not shown on Exhibit "A,"
such

	39 	
      burden also shall be deemed a Subsequently Created
      Interest to the extent such burden causes the burdens on such
    party's

	40 	
      Lease or Interest to exceed the amount stipulated in
      Article III.B. above.

	41 	
                       
      The party whose interest is burdened with the Subsequently Created
      Interest (the "Burdened Party") shall assume and

	42 	
      alone bear, pay and discharge the Subsequently Created
      Interest and shall indemnify, defend and hold harmless the other

	43 	
      parties from and against any liability therefor. Further,
      if the Burdened Party fails to pay, when due, its share of
  expenses

	44 	
      chargeable hereunder, all provisions of Article VII.B.
      shall be enforceable against the Subsequently Created Interest in
    the

	45 	
      same manner as they are enforceable against the working
      interest of the Burdened Party. If the Burdened Party is
required

	46 	
      under this agreement to assign or relinquish to any other
      party, or parties, all or a portion of its working interest and/or
    the

	47 	
      production attributable thereto, said other party, or
      parties, shall receive said assignment and/or production free and clear
      of

	48 	
      said Subsequently Created Interest, and the Burdened
      Party shall indemnify, defend and hold harmless said other party,
  or

	49 	
      parties, from any and all claims and demands for payment
      asserted by owners of the Subsequently Created Interest.

	50 	ARTICLE IV.
	51 	TITLES
	52 	
      A. Title Examination:

	53 	
                       
      Title examination shall be made on the Drillsite of any proposed well
      prior to commencement of drilling operations and,

	54 	
      if a majority in interest of the Drilling Parties so
      request or Operator so elects, title examination shall be made on the
      entire

	55 	
      Drilling Unit, or maximum anticipated Drilling Unit, of
      the well. The opinion will include the ownership of the working

	56 	
      interest, minerals, royalty, overriding royalty and
      production payments under the applicable Leases. Each party
      contributing

	57 	
      Leases and/or Oil and Gas Interests to be included in the
      Drillsite or Drilling Unit, if appropriate, shall furnish to
    Operator

	58 	
      all abstracts (including federal lease status reports),
      title opinions, title papers and curative material in its possession free
      of

	59 	
      charge. All such information not in the possession of or
      made available to Operator by the parties, but necessary for the

	60 	
      examination of the title, shall be obtained by Operator.
      Operator shall cause title to be examined by attorneys on its staff
    or

	61 	
      by outside attorneys. Copies of all title opinions shall
      be furnished to each Drilling Party. Costs incurred by Operator
  in

	62 	
      procuring abstracts, fees paid outside attorneys for
      title examination (including preliminary, supplemental, shut-in
    royalty

	63 	
      opinions and division order title opinions) and other
      direct charges as provided in Exhibit "C" shall be borne by the
      Drilling

	64 	
      Parties in the proportion that the interest of each
      Drilling Party bears to the total interest of all Drilling Parties as
      such

	65 	
      interests appear in Exhibit "A." Operator shall make no
      charge for services rendered by its staff attorneys or other
    personnel

	66 	
      in the performance of the above functions.

	67 	
                       
      Each party shall be responsible for securing curative matter and pooling
      amendments or agreements required in

	68 	
      connection with Leases or Oil and Gas Interests
      contributed by such party. Operator shall be responsible for the
      preparation

	69 	
      and recording of pooling designations or declarations and
      communitization agreements as well as the conduct of hearings

	70 	
      before governmental agencies for the securing of spacing
      or pooling orders or any other orders necessary or appropriate
to

	71 	
      the conduct of operations hereunder. This shall not
      prevent any party from appearing on its own behalf at such
  hearings.

	72 	
      Costs incurred by Operator, including fees paid to
      outside attorneys, which are associated with hearings before
      governmental

	73 	
      agencies, and which costs are necessary and proper for
      the activities contemplated under this agreement, shall be
direct

	74 	
      charges to the joint account and shall not be covered by
      the administrative overhead charges as provided in Exhibit
  "C."

- 2 - 

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

	1 	
      Operator shall make no charge for services rendered by
      its staff attorneys or other personnel in the performance of the
    above

	2 	
      functions.

	3 	
                       
      No well shall be drilled on the Contract Area until after (1) the title to
      the Drillsite or Drilling Unit, if appropriate, has

	4 	
      been examined as above provided, and (2) the title has
      been approved by the examining attorney or title has been accepted
    by

	5 	
      all of the Drilling Parties in such well.

	6 	
      B. Loss or Failure of Title:

	7 	
                       
      1. Failure of Title: Should any Oil and Gas Interest or Oil and Gas
      Lease be lost through failure of title, which results in a

	8 	
      reduction of interest from that shown on Exhibit "A," the
      party credited with contributing the affected Lease or Interest

	9 	
      (including, if applicable, a successor in interest to
      such party) shall have ninety (90) days from final determination of
      title

	10 	
      failure to acquire a new lease or other instrument curing
      the entirety of the title failure, which acquisition will not be
      subject

	11 	
      to Article VIII.B., and failing to do so, this agreement,
      nevertheless, shall continue in force as to all remaining Oil and
    Gas

	12 	
      Leases and Interests; and,

	13 	
                
                 (a) The party
      credited with contributing the Oil and Gas Lease or Interest affected by
      the title failure (including, if

	14 	
      applicable, a successor in interest to such party) shall
      bear alone the entire loss and it shall not be entitled to recover
    from

	15 	
      Operator or the other parties any development or
      operating costs which it may have previously paid or incurred, but
      there

	16 	
      shall be no additional liability on its part to the other
      parties hereto by reason of such title failure;

	17 	
                    
             (b) There shall be no retroactive
      adjustment of expenses incurred or revenues received from the operation of
      the

	18 	
      Lease or Interest which has failed, but the interests of
      the parties contained on Exhibit "A" shall be revised on an
  acreage

	19 	
      basis, as of the time it is determined finally that title
      failure has occurred, so that the interest of the party whose Lease
    or

	20 	
      Interest is affected by the title failure will thereafter
      be reduced in the Contract Area by the amount of the Lease or Interest
      failed;

	21 	
                 
                (c) If the
      proportionate interest of the other parties hereto in any producing well
      previously drilled on the Contract

	22 	
      Area is increased by reason of the title failure, the
      party who bore the costs incurred in connection with such well
      attributable

	23 	
      to the Lease or Interest which has failed shall receive
      the proceeds attributable to the increase in such interest (less costs
      and

	24 	
      burdens attributable thereto) until it has been
      reimbursed for unrecovered costs paid by it in connection with such
      well

	25 	
      attributable to such failed Lease or Interest;

	26 	
                
                 (d) Should
      any person not a party to this agreement, who is determined to be the
      owner of any Lease or Interest

	27 	
      which has failed, pay in any manner any part of the cost
      of operation, development, or equipment, such amount shall be
  paid

	28 	
      to the party or parties who bore the costs which are so
      refunded;

	29 	
              
                  
      (e) Any liability to account to a person not a party to this agreement for
      prior production of Oil and Gas which arises

	30 	
      by reason of title failure shall be borne severally by
      each party (including a predecessor to a current party) who
  received

	31 	
      production for which such accounting is required based on
      the amount of such production received, and each such party
shall

	32 	
      severally indemnify, defend and hold harmless all other
      parties hereto for any such liability to account;

	33 	
                 
                (f) No charge shall
      be made to the joint account for legal expenses, fees or salaries in
      connection with the defense of

	34 	
      the Lease or Interest claimed to have failed, but if the
      party contributing such Lease or Interest hereto elects to defend its
      title

	35 	
      it shall bear all expenses in connection therewith;
      and

	36 	
             
                   
      (g) If any party is given credit on Exhibit "A" to a Lease or Interest
      which is limited solely to ownership of an

	37 	
      interest in the wellbore of any well or wells and the
      production therefrom, such party's absence of interest in the
    remainder

	38 	
      of the Contract Area shall be considered a Failure of
      Title as to such remaining Contract Area unless that absence of
      interest

	39 	
      is reflected on Exhibit "A."

	40 	
                       
      2. Loss by Non-Payment or Erroneous Payment of Amount Due: If,
      through mistake or oversight, any rental, shut-in well

	41 	
      payment, minimum royalty or royalty payment, or other
      payment necessary to maintain all or a portion of an Oil and Gas

	42 	
      Lease or interest is not paid or is erroneously paid, and
      as a result a Lease or Interest terminates, there shall be no
    monetary

	43 	
      liability against the party who failed to make such
      payment. Unless the party who failed to make the required
payment

	44 	
      secures a new Lease or Interest covering the same
      interest within ninety (90) days from the discovery of the failure to
      make

	45 	
      proper payment, which acquisition will not be subject to
      Article VIII.B., the interests of the parties reflected on Exhibit
    "A"

	46 	
      shall be revised on an acreage basis, effective as of the
      date of termination of the Lease or Interest involved, and the
  party

	47 	
      who failed to make proper payment will no longer be
      credited with an interest in the Contract Area on account of
    ownership

	48 	
      of the Lease or Interest which has terminated. If the
      party who failed to make the required payment shall not have been
    fully

	49 	
      reimbursed, at the time of the loss, from the proceeds of
      the sale of Oil and Gas attributable to the lost Lease or
  Interest,

	50 	
      calculated on an acreage basis, for the development and
      operating costs previously paid on account of such Lease or
    Interest,

	51 	
      it shall be reimbursed for unrecovered actual costs
      previously paid by it (but not for its share of the cost of any dry
      hole

	52 	
      previously drilled or wells previously abandoned) from so
      much of the following as is necessary to effect reimbursement:

	53 	
                           
      (a) Proceeds of Oil and Gas produced prior to termination of the Lease or
      Interest, less operating expenses and lease

	54 	
      burdens chargeable hereunder to the person who failed to
      make payment, previously accrued to the credit of the lost Lease
  or

	55 	
      Interest, on an acreage basis, up to the amount of
      unrecovered costs;

	56 	
                           
      (b) Proceeds of Oil and Gas, less operating expenses and lease burdens
      chargeable hereunder to the person who failed

	57 	
      to make payment, up to the amount of unrecovered costs
      attributable to that portion of Oil and Gas thereafter produced
  and

	58 	
      marketed (excluding production from any wells thereafter
      drilled) which, in the absence of such Lease or Interest
    termination,

	59 	
      would be attributable to the lost Lease or Interest on an
      acreage basis and which as a result of such Lease or Interest

	60 	
      termination is credited to other parties, the proceeds of
      said portion of the Oil and Gas to be contributed by the other
    parties

	61 	
      in proportion to their respective interests reflected on
      Exhibit "A"; and,

	62 	
                           
      (c) Any monies, up to the amount of unrecovered costs, that may be paid by
      any party who is, or becomes, the owner

	63 	
      of the Lease or Interest lost, for the privilege of
      participating in the Contract Area or becoming a party to this
      agreement.

	64 	
                       
      3. Other Losses: All losses of Leases or Interests committed to
      this agreement, other than those set forth in Articles

	65 	
      IV.B.1. and IV.B.2. above, shall be joint losses and
      shall be borne by all parties in proportion to their interests shown
    on

	66 	
      Exhibit "A." This shall include but not be limited to the
      loss of any Lease or Interest through failure to develop or
  because

	67 	
      express or implied covenants have not been performed
      (other than performance which requires only the payment of
  money),

	68 	
      and the loss of any Lease by expiration at the end of its
      primary term if it is not renewed or extended. There shall be no

	69 	
      readjustment of interests in the remaining portion of the
      Contract Area on account of any joint loss.

	70 	
                       
      4. Curing Title: In the event of a Failure of Title under Article
      IV.B.1. or a loss of title under Article IV.B.2. above, any

	71 	
      Lease or Interest acquired by any party hereto (other
      than the party whose interest has failed or was lost) during the
    ninety

	72 	
      (90) day period provided by Article IV.B.1. and Article
      IV.B.2. above covering all or a portion of the interest that has
    failed

	73 	
      or was lost shall be offered at cost to the party whose
      interest has failed or was lost, and the provisions of Article
    VIII.B.

	74 	
      shall not apply to such
acquisition.

- 3 - 

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

	1 	ARTICLE V.
	2 	OPERATOR
	3 	
      A. Designation and Responsibilities of
      Operator:

	4 	
                       
      ________________________________________shall be the Operator of the
      Contract Area, and shall conduct

	5 	
      and direct and have full control of all operations on the
      Contract Area as permitted and required by, and within the limits
  of

	6 	
      this agreement. In its performance of services hereunder
      for the Non-Operators, Operator shall be an independent
  contractor

	7 	
      not subject to the control or direction of the
      Non-Operators except as to the type of operation to be undertaken in
      accordance

	8 	
      with the election procedures contained in this agreement.
      Operator shall not be deemed, or hold itself out as, the agent of
    the

	9 	
      Non-Operators with authority to bind them to any
      obligation or liability assumed or incurred by Operator as to any
    third

	10 	
      party. Operator shall conduct its activities under this
      agreement as a reasonable prudent operator, in a good and
    workmanlike

	11 	
      manner, with due diligence and dispatch, in accordance
      with good oilfield practice, and in compliance with applicable law
    and

	12 	
      regulation, but in no event shall it have any liability
      as Operator to the other parties for losses sustained or liabilities
      incurred

	13 	
      except such as may result from gross negligence or
      willful misconduct.

	14 	
      B. Resignation or Removal of Operator and Selection of
      Successor:

	15 	
                       
      1. Resignation or Removal of Operator: Operator may resign at any
      time by giving written notice thereof to Non-Operators.

	16 	
      If Operator terminates its legal existence, no longer
      owns an interest hereunder in the Contract Area, or is no longer capable
      of

	17 	
      serving as Operator, Operator shall be deemed to have
      resigned without any action by Non-Operators, except the selection of
    a

	18 	
      successor. Operator may be removed only for good cause by
      the affirmative vote of Non-Operators owning a majority interest

	19 	
      based on ownership as shown on Exhibit "A" remaining
      after excluding the voting interest of Operator; such vote shall not
    be

	20 	
      deemed effective until a written notice has been
      delivered to the Operator by a Non-Operator detailing the alleged default
      and

	21 	
      Operator has failed to cure the default within thirty
      (30) days from its receipt of the notice or, if the default concerns
    an

	22 	
      operation then being conducted, within forty-eight (48)
      hours of its receipt of the notice. For purposes hereof, "good cause"
      shall

	23 	
      mean not only gross negligence or willful misconduct but
      also the material breach of or inability to meet the standards
of

	24 	
      operation contained in Article V.A. or material failure
      or inability to perform its obligations under this agreement.

	25 	
                       
      Subject to Article VII.D.1., such resignation or removal shall not become
      effective until 7:00 o'clock A.M. on the first

	26 	
      day of the calendar month following the expiration of
      ninety (90) days after the giving of notice of resignation by
    Operator

	27 	
      or action by the Non-Operators to remove Operator, unless
      a successor Operator has been selected and assumes the duties of

	28 	
      Operator at an earlier date. Operator, after effective
      date of resignation or removal, shall be bound by the terms hereof as
    a

	29 	
      Non-Operator. A change of a corporate name or structure
      of Operator or transfer of Operator's interest to any single

	30 	
      subsidiary, parent or successor corporation shall not be
      the basis for removal of Operator.

	31 	
                       
      2. Selection of Successor Operator: Upon the resignation or removal
      of Operator under any provision of this agreement, a

	32 	
      successor Operator shall be selected by the parties. The
      successor Operator shall be selected from the parties owning an

	33 	
      interest in the Contract Area at the time such successor
      Operator is selected. The successor Operator shall be selected by
    the

	34 	
      affirmative vote of two (2) or more parties owning a
      majority interest based on ownership as shown on Exhibit "A";

	35 	
      provided, however, if an Operator which has been removed
      or is deemed to have resigned fails to vote or votes only to

	36 	
      succeed itself, the successor Operator shall be selected
      by the affirmative vote of the party or parties owning a
majority

	37 	
      interest based on ownership as shown on Exhibit "A"
      remaining after excluding the voting interest of the Operator that
    was

	38 	
      removed or resigned. The former Operator shall promptly
      deliver to the successor Operator all records and data relating
  to

	39 	
      the operations conducted by the former Operator to the
      extent such records and data are not already in the possession of
    the

	40 	
      successor operator. Any cost of obtaining or copying the
      former Operator's records and data shall be charged to the joint

	41 	
      account.

	42 	
                       
      3. Effect of Bankruptcy: If Operator becomes insolvent, bankrupt or
      is placed in receivership, it shall be deemed to have

	43 	
      resigned without any action by Non-Operators, except the
      selection of a successor. If a petition for relief under the
  federal

	44 	
      bankruptcy laws is filed by or against Operator, and the
      removal of Operator is prevented by the federal bankruptcy court,
    all

	45 	
      Non-Operators and Operator shall comprise an interim
      operating committee to serve until Operator has elected to reject
  or

	46 	
      assume this agreement pursuant to the Bankruptcy Code,
      and an election to reject this agreement by Operator as a debtor
  in

	47 	
      possession, or by a trustee in bankruptcy, shall be
      deemed a resignation as Operator without any action by
    Non-Operators,

	48 	
      except the selection of a successor. During the period of
      time the operating committee controls operations, all actions
  shall

	49 	
      require the approval of two (2) or more parties owning a
      majority interest based on ownership as shown on Exhibit "A." In

	50 	
      the event there are only two (2) parties to this
      agreement, during the period of time the operating committee
    controls

	51 	
      operations, a third party acceptable to Operator,
      Non-Operator and the federal bankruptcy court shall be selected as
  a

	52 	
      member of the operating committee, and all actions shall
      require the approval of two (2) members of the operating

	53 	
      committee without regard for their interest in the
      Contract Area based on Exhibit "A."

	54 	
      C. Employees and Contractors:

	55 	
                       
      The number of employees or contractors used by Operator in conducting
      operations hereunder, their selection, and the

	56 	
      hours of labor and the compensation for services
      performed shall be determined by Operator, and all such employees
  or

	57 	
      contractors shall be the employees or contractors of
      Operator.

	58 	
      D. Rights and Duties of Operator:

	59 	
                       
      1. Competitive Rates and Use of Affiliates: All wells drilled on
      the Contract Area shall be drilled on a competitive

	60 	
      contract basis at the usual rates prevailing in the area.
      If it so desires, Operator may employ its own tools and equipment
  in

	61 	
      the drilling of wells, but its charges therefor shall not
      exceed the prevailing rates in the area and the rate of such
  charges

	62 	
      shall be agreed upon by the parties in writing before
      drilling operations are commenced, and such work shall be performed
    by

	63 	
      Operator under the same terms and conditions as are
      customary and usual in the area in contracts of independent
    contractors

	64 	
      who are doing work of a similar nature. All work
      performed or materials supplied by affiliates or related parties of
      Operator

	65 	
      shall be performed or supplied at competitive rates,
      pursuant to written agreement, and in accordance with customs
and

	66 	
      standards prevailing in the industry.

	67 	
                       
      2. Discharge of Joint Account Obligations: Except as herein
      otherwise specifically provided, Operator shall promptly pay

	68 	
      and discharge expenses incurred in the development and
      operation of the Contract Area pursuant to this agreement and
  shall

	69 	
      charge each of the parties hereto with their respective
      proportionate shares upon the expense basis provided in Exhibit
  "C."

	70 	
      Operator shall keep an accurate record of the joint
      account hereunder, showing expenses incurred and charges and
  credits

	71 	
      made and received.

	72 	
                       
      3. Protection from Liens: Operator shall pay, or cause to be paid,
      as and when they become due and payable, all accounts

	73 	
      of contractors and suppliers and wages and salaries for
      services rendered or performed, and for materials supplied on, to or
    in

	74 	
      respect of the Contract Area or any operations for the
      joint account thereof, and shall keep the Contract Area free
  from

- 4 - 

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

	1 	
      liens and encumbrances resulting therefrom except for
      those resulting from a bona fide dispute as to services rendered
  or

	2 	
      materials supplied.

	3 	
                       
      4. Custody of Funds: Operator shall hold for the account of the
      Non-Operators any funds of the Non-Operators advanced

	4 	
      or paid to the Operator, either for the conduct of
      operations hereunder or as a result of the sale of production from
    the

	5 	
      Contract Area, and such funds shall remain the funds of
      the Non-Operators on whose account they are advanced or paid
  until

	6 	
      used for their intended purpose or otherwise delivered to
      the Non-Operators or applied toward the payment of debts as

	7 	
      provided in Article VII.B. Nothing in this paragraph
      shall be construed to establish a fiduciary relationship between
      Operator

	8 	
      and Non-Operators for any purpose other than to account
      for Non-Operator funds as herein specifically provided. Nothing
  in

	9 	
      this paragraph shall require the maintenance by Operator
      of separate accounts for the funds of Non-Operators unless the

	10 	
      parties otherwise specifically agree.

	11 	
                       
      5. Access to Contract Area and Records: Operator shall, except as
      otherwise provided herein, permit each Non-Operator

	12 	
      or its duly authorized representative, at the
      Non-Operator's sole risk and cost, full and free access at all reasonable
      times to

	13 	
      all operations of every kind and character being
      conducted for the joint account on the Contract Area and to the records
      of

	14 	
      operations conducted thereon or production therefrom,
      including Operator's books and records relating thereto. Such
  access

	15 	
      rights shall not be exercised in a manner interfering
      with Operator's conduct of an operation hereunder and shall not
      obligate

	16 	
      Operator to furnish any geologic or geophysical data of
      an interpretive nature unless the cost of preparation of such

	17 	
      interpretive data was charged to the joint account.
      Operator will furnish to each Non-Operator upon request copies of
    any

	18 	
      and all reports and information obtained by Operator in
      connection with production and related items, including, without

	19 	
      limitation, meter and chart reports, production purchaser
      statements, run tickets and monthly gauge reports, but excluding

	20 	
      purchase contracts and pricing information to the extent
      not applicable to the production of the Non-Operator seeking the

	21 	
      information. Any audit of Operator's records relating to
      amounts expended and the appropriateness of such expenditures

	22 	
      shall be conducted in accordance with the audit protocol
      specified in Exhibit "C."

	23 	
                       
      6. Filing and Furnishing Governmental Reports: Operator will file,
      and upon written request promptly furnish copies to

	24 	
      each requesting Non-Operator not in default of its
      payment obligations, all operational notices, reports or
    applications

	25 	
      required to be filed by local, State, Federal or Indian
      agencies or authorities having jurisdiction over operations
    hereunder.

	26 	
      Each Non-Operator shall provide to Operator on a timely
      basis all information necessary to Operator to make such
filings.

	27 	
                       
      7. Drilling and Testing Operations: The following provisions shall
      apply to each well drilled hereunder, including but not

	28 	
      limited to the Initial Well:

	29 	
                           
      (a) Operator will promptly advise Non-Operators of the date on which the
      well is spudded, or the date on which

	30 	
      drilling operations are commenced.

	31 	
                           
      (b) Operator will send to Non-Operators such reports, test results and
      notices regarding the progress of operations on the well

	32 	
      as the Non-Operators shall reasonably request, including,
      but not limited to, daily drilling reports, completion reports, and well
      logs.

	33 	
                           
      (c) Operator shall adequately test all Zones encountered which may
      reasonably be expected to be capable of producing

	34 	
      Oil and Gas in paying quantities as a result of
      examination of the electric log or any other logs or cores or tests
      conducted

	35 	
      hereunder.

	36 	
                       
      8. Cost Estimates: Upon request of any Consenting Party, Operator
      shall furnish estimates of current and cumulative costs

	37 	
      incurred for the joint account at reasonable intervals
      during the conduct of any operation pursuant to this agreement.

	38 	
      Operator shall not be held liable for errors in such
      estimates so long as the estimates are made in good faith.

	39 	
                       
      9. Insurance: At all times while operations are conducted
      hereunder, Operator shall comply with the workers

	40 	
      compensation law of the state where the operations are
      being conducted; provided, however, that Operator may be a self-

	41 	
      insurer for liability under said compensation laws in
      which event the only charge that shall be made to the joint account
      shall

	42 	
      be as provided in Exhibit "C." Operator shall also carry
      or provide insurance for the benefit of the joint account of the
      parties

	43 	
      as outlined in Exhibit "D" attached hereto and made a
      part hereof. Operator shall require all contractors engaged in work
    on

	44 	
      or for the Contract Area to comply with the workers
      compensation law of the state where the operations are being
    conducted

	45 	
      and to maintain such other insurance as Operator may
      require.

	46 	
                       
      In the event automobile liability insurance is specified in said Exhibit
      "D," or subsequently receives the approval of the

	47 	
      parties, no direct charge shall be made by Operator for
      premiums paid for such insurance for Operator's automotive

	48 	
      equipment.

	49 	ARTICLE VI.
	50 	DRILLING AND DEVELOPMENT
	51 	
      A. Initial Well:

	52 	
                       
      On or before the day of _______, ______________________,
      ______ Operator shall commence the drilling of the Initial

	53 	
      Well at the following location:

	54 	
      

	55 	
      

	56 	
      

	57 	
      

	58 	
      

	59 	
      

	60 	
      and shall thereafter continue the drilling of the well
      with due diligence to

	61 	
      

	62 	
      

	63 	
      

	64 	
      

	65 	
      

	66 	
      

	67 	
      The drilling of the Initial Well and the participation
      therein by all parties is obligatory, subject to Article VI.C.1. as to
      participation

	68 	
      in Completion operations and Article VI.F. as to
      termination of operations and Article XI as to occurrence of force
      majeure.

	69 	
      B. Subsequent Operations:

	70 	
                       
      1. Proposed Operations: If any party hereto should desire to drill
      any well on the Contract Area other than the Initial Well, or

	71 	
      if any party should desire to Rework, Sidetrack, Deepen,
      Recomplete or Plug Back a dry hole or a well no longer capable
of

	72 	
      producing in paying quantities in which such party has
      not otherwise relinquished its interest in the proposed objective Zone
      under

	73 	
      this agreement, the party desiring to drill, Rework,
      Sidetrack, Deepen, Recomplete or Plug Back such a well shall give
      written

	74 	
      notice of the proposed operation to the parties who have
      not otherwise relinquished their interest in such objective
  Zone

- 5 - 

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

	1 	
      under this agreement and to all other parties in the case
      of a proposal for Sidetracking or Deepening, specifying the work to
    be

	2 	
      performed, the location, proposed depth, objective Zone
      and the estimated cost of the operation. The parties to whom such
  a

	3 	
      notice is delivered shall have thirty (30) days after
      receipt of the notice within which to notify the party proposing to do the
      work

	4 	
      whether they elect to participate in the cost of the
      proposed operation. If a drilling rig is on location, notice of a proposal
      to

	5 	
      Rework, Sidetrack, Recomplete, Plug Back or Deepen may be
      given by telephone and the response period shall be limited to
    forty-

	6 	
      eight (48) hours, exclusive of Saturday, Sunday and legal
      holidays. Failure of a party to whom such notice is delivered to
    reply

	7 	
      within the period above fixed shall constitute an
      election by that party not to participate in the cost of the proposed
      operation.

	8 	
      Any proposal by a party to conduct an operation
      conflicting with the operation initially proposed shall be delivered to
      all parties

	9 	
      within the time and in the manner provided in Article
      VI.B.6.

	10 	
                       
      If all parties to whom such notice is delivered elect to participate in
      such a proposed operation, the parties shall be

	11 	
      contractually committed to participate therein provided
      such operations are commenced within the time period hereafter
  set

	12 	
      forth, and Operator shall, no later than ninety (90) days
      after expiration of the notice period of thirty (30) days (or as

	13 	
      promptly as practicable after the expiration of the
      forty-eight (48) hour period when a drilling rig is on location, as the
      case

	14 	
      may be), actually commence the proposed operation and
      thereafter complete it with due diligence at the risk and expense
  of

	15 	
      the parties participating therein; provided, however,
      said commencement date may be extended upon written notice of
  same

	16 	
      by Operator to the other parties, for a period of up to
      thirty (30) additional days if, in the sole opinion of Operator,
    such

	17 	
      additional time is reasonably necessary to obtain permits
      from governmental authorities, surface rights (including
  rights-of-

	18 	
      way) or appropriate drilling equipment, or to complete
      title examination or curative matter required for title approval
  or

	19 	
      acceptance. If the actual operation has not been
      commenced within the time provided (including any extension thereof
    as

	20 	
      specifically permitted herein or in the force majeure
      provisions of Article XI) and if any party hereto still desires to
      conduct

	21 	
      said operation, written notice proposing same must be
      resubmitted to the other parties in accordance herewith as if no
    prior

	22 	
      proposal had been made. Those parties that did not
      participate in the drilling of a well for which a proposal to Deepen
    or

	23 	
      Sidetrack is made hereunder shall, if such parties desire
      to participate in the proposed Deepening or Sidetracking
  operation,

	24 	
      reimburse the Drilling Parties in accordance with Article
      VI.B.4. in the event of a Deepening operation and in accordance

	25 	
      with Article VI.B.5. in the event of a Sidetracking
      operation.

	26 	
                       
      2. Operations by Less Than All Parties:

	27 	
                           
      (a) Determination of Participation. If any party to whom such
      notice is delivered as provided in Article VI.B.1. or

	28 	
      VI.C.1. (Option No. 2) elects not to participate in the
      proposed operation, then, in order to be entitled to the benefits of
      this

	29 	
      Article, the party or parties giving the notice and such
      other parties as shall elect to participate in the operation shall,
    no

	30 	
      later than ninety (90) days after the expiration of the
      notice period of thirty (30) days (or as promptly as practicable after
      the

	31 	
      expiration of the forty-eight (48) hour period when a
      drilling rig is on location, as the case may be) actually commence
    the

	32 	
      proposed operation and complete it with due diligence.
      Operator shall perform all work for the account of the
Consenting

	33 	
      Parties; provided, however, if no drilling rig or other
      equipment is on location, and if Operator is a Non-Consenting
  Party,

	34 	
      the Consenting Parties shall either: (i) request Operator
      to perform the work required by such proposed operation for the

	35 	
      account of the Consenting Parties, or (ii) designate one
      of the Consenting Parties as Operator to perform such work. The

	36 	
      rights and duties granted to and imposed upon the
      Operator under this agreement are granted to and imposed upon the
    party

	37 	
      designated as Operator for an operation in which the
      original Operator is a Non-Consenting Party. Consenting Parties,
    when

	38 	
      conducting operations on the Contract Area pursuant to
      this Article VI.B.2., shall comply with all terms and conditions of
      this

	39 	
      agreement.

	40 	
                       
      If less than all parties approve any proposed operation, the proposing
      party, immediately after the expiration of the

	41 	
      applicable notice period, shall advise all Parties of the
      total interest of the parties approving such operation and its

	42 	
      recommendation as to whether the Consenting Parties
      should proceed with the operation as proposed. Each Consenting
    Party,

	43 	
      within forty-eight (48) hours (exclusive of Saturday,
      Sunday, and legal holidays) after delivery of such notice, shall advise
      the

	44 	
      proposing party of its desire to (i) limit participation
      to such party's interest as shown on Exhibit "A" or (ii) carry only
    its

	45 	
      proportionate part (determined by dividing such party's
      interest in the Contract Area by the interests of all Consenting Parties
      in

	46 	
      the Contract Area) of Non-Consenting Parties' interests,
      or (iii) carry its proportionate part (determined as provided in (ii))
      of

	47 	
      Non-Consenting Parties' interests together with all or a
      portion of its proportionate part of any Non-Consenting Parties'

	48 	
      interests that any Consenting Party did not elect to
      take. Any interest of Non-Consenting Parties that is not carried by
    a

	49 	
      Consenting Party shall be deemed to be carried by the
      party proposing the operation if such party does not withdraw
its

	50 	
      proposal. Failure to advise the proposing party within
      the time required shall be deemed an election under (i). In the event
    a

	51 	
      drilling rig is on location, notice may be given by
      telephone, and the time permitted for such a response shall not exceed
      a

	52 	
      total of forty-eight (48) hours (exclusive of Saturday,
      Sunday and legal holidays). The proposing party, at its election,
    may

	53 	
      withdraw such proposal if there is less than 100%
      participation and shall notify all parties of such decision within ten
      (10)

	54 	
      days, or within twenty-four (24) hours if a drilling rig
      is on location, following expiration of the applicable response
    period.

	55 	
      If 100% subscription to the proposed operation is
      obtained, the proposing party shall promptly notify the Consenting
      Parties

	56 	
      of their proportionate interests in the operation and the
      party serving as Operator shall commence such operation within
  the

	57 	
      period provided in Article VI.B.1., subject to the same
      extension right as provided therein.

	58 	
                           
      (b) Relinquishment of Interest for Non-Participation. The entire
      cost and risk of conducting such operations shall be

	59 	
      borne by the Consenting Parties in the proportions they
      have elected to bear same under the terms of the preceding

	60 	
      paragraph. Consenting Parties shall keep the leasehold
      estates involved in such operations free and clear of all liens
  and

	61 	
      encumbrances of every kind created by or arising from the
      operations of the Consenting Parties. If such an operation
  results

	62 	
      in a dry hole, then subject to Articles VI.B.6. and
      VI.E.3., the Consenting Parties shall plug and abandon the well and
      restore

	63 	
      the surface location at their sole cost, risk and
      expense; provided, however, that those Non-Consenting Parties
  that

	64 	
      participated in the drilling, Deepening or Sidetracking
      of the well shall remain liable for, and shall pay, their
    proportionate

	65 	
      shares of the cost of plugging and abandoning the well
      and restoring the surface location insofar only as those costs were
    not

	66 	
      increased by the subsequent operations of the Consenting
      Parties. If any well drilled, Reworked, Sidetracked, Deepened,

	67 	
      Recompleted or Plugged Back under the provisions of this
      Article results in a well capable of producing Oil and/or Gas in

	68 	
      paying quantities, the Consenting Parties shall Complete
      and equip the well to produce at their sole cost and risk, and
  the

	69 	
      well shall then be turned over to Operator (if the
      Operator did not conduct the operation) and shall be operated by it at
      the

	70 	
      expense and for the account of the Consenting Parties.
      Upon commencement of operations for the drilling, Reworking,

	71 	
      Sidetracking, Recompleting, Deepening or Plugging Back of
      any such well by Consenting Parties in accordance with the

	72 	
      provisions of this Article, each Non-Consenting Party
      shall be deemed to have relinquished to Consenting Parties, and
  the

	73 	
      Consenting Parties shall own and be entitled to receive,
      in proportion to their respective interests, all of such Non-

	74 	
      Consenting Party's interest in the well and share of
      production therefrom or, in the case of a Reworking,
  Sidetracking,

- 6 -

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

	1 	
      Deepening, Recompleting or Plugging Back, or a Completion
      pursuant to Article VI.C.1. Option No. 2, all of such Non-

	2 	
      Consenting Party's interest in the production obtained
      from the operation in which the Non-Consenting Party did not
  elect

	3 	
      to participate. Such relinquishment shall be effective
      until the proceeds of the sale of such share, calculated at the well,
      or

	4 	
      market value thereof if such share is not sold (after
      deducting applicable ad valorem, production, severance, and excise
      taxes,

	5 	
      royalty, overriding royalty and other interests not
      excepted by Article III.C. payable out of or measured by the
    production

	6 	
      from such well accruing with respect to such interest
      until it reverts), shall equal the total of the following:

	7 	
                       
      (i) __________ % of each such Non-Consenting Party's share of the cost of
      any newly acquired surface equipment

	8 	
      beyond the wellhead connections (including but not
      limited to stock tanks, separators, treaters, pumping equipment
  and

	9 	
      piping), plus 100% of each such Non-Consenting Party's
      share of the cost of operation of the well commencing with first

	10 	
      production and continuing until each such Non-Consenting
      Party's relinquished interest shall revert to it under other

	11 	
      provisions of this Article, it being agreed that each
      Non-Consenting Party's share of such costs and equipment will be
    that

	12 	
      interest which would have been chargeable to such
      Non-Consenting Party had it participated in the well from the
    beginning

	13 	
      of the operations; and

	14 	
                       
      (ii) __________% of (a) that portion of the costs and expenses of
      drilling, Reworking, Sidetracking, Deepening,

	15 	
      Plugging Back, testing, Completing, and Recompleting,
      after deducting any cash contributions received under Article
    VIII.C.,

	16 	
      and of (b) that portion of the cost of newly acquired
      equipment in the well (to and including the wellhead
  connections),

	17 	
      which would have been chargeable to such Non-Consenting
      Party if it had participated therein.

	18 	
                       
      Notwithstanding anything to the contrary in this Article VI.B., if the
      well does not reach the deepest objective Zone

	19 	
      described in the notice proposing the well for reasons
      other than the encountering of granite or practically
  impenetrable

	20 	
      substance or other condition in the hole rendering
      further operations impracticable, Operator shall give notice thereof to
      each

	21 	
      Non-Consenting Party who submitted or voted for an
      alternative proposal under Article VI.B.6. to drill the well to
a

	22 	
      shallower Zone than the deepest objective Zone proposed
      in the notice under which the well was drilled, and each such
  Non-

	23 	
      Consenting Party shall have the option to participate in
      the initial proposed Completion of the well by paying its share of
    the

	24 	
      cost of drilling the well to its actual depth, calculated
      in the manner provided in Article VI.B.4. (a). If any such Non-

	25 	
      Consenting Party does not elect to participate in the
      first Completion proposed for such well, the relinquishment
    provisions

	26 	
      of this Article VI.B.2. (b) shall apply to such party's
      interest.

	27 	
                           
      (c) Reworking, Recompleting or Plugging Back. An election not to
      participate in the drilling, Sidetracking or

	28 	
      Deepening of a well shall be deemed an election not to
      participate in any Reworking or Plugging Back operation proposed
  in

	29 	
      such a well, or portion thereof, to which the initial
      non-consent election applied that is conducted at any time prior to
      full

	30 	
      recovery by the Consenting Parties of the Non-Consenting
      Party's recoupment amount. Similarly, an election not to

	31 	
      participate in the Completing or Recompleting of a well
      shall be deemed an election not to participate in any Reworking

	32 	
      operation proposed in such a well, or portion thereof, to
      which the initial non-consent election applied that is conducted
  at

	33 	
      any time prior to full recovery by the Consenting Parties
      of the Non-Consenting Party's recoupment amount. Any such

	34 	
      Reworking, Recompleting or Plugging Back operation
      conducted during the recoupment period shall be deemed part of
  the

	35 	
      cost of operation of said well and there shall be added
      to the sums to be recouped by the Consenting Parties _______%
    of

	36 	
      that portion of the costs of the Reworking, Recompleting
      or Plugging Back operation which would have been chargeable to

	37 	
      such Non-Consenting Party had it participated therein. If
      such a Reworking, Recompleting or Plugging Back operation is

	38 	
      proposed during such recoupment period, the provisions of
      this Article VI.B. shall be applicable as between said
Consenting

	39 	
      Parties in said well.

	40 	
                           
      (d) Recoupment Matters. During the period of time Consenting
      Parties are entitled to receive Non-Consenting Party's

	41 	
      share of production, or the proceeds therefrom,
      Consenting Parties shall be responsible for the payment of all ad
      valorem,

	42 	
      production, severance, excise, gathering and other taxes,
      and all royalty, overriding royalty and other burdens applicable
  to

	43 	
      Non-Consenting Party's share of production not excepted
      by Article III.C.

	44 	
                       
      In the case of any Reworking, Sidetracking, Plugging Back, Recompleting or
      Deepening operation, the Consenting

	45 	
      Parties shall be permitted to use, free of cost, all
      casing, tubing and other equipment in the well, but the ownership of
      all

	46 	
      such equipment shall remain unchanged; and upon
      abandonment of a well after such Reworking, Sidetracking, Plugging
      Back,

	47 	
      Recompleting or Deepening, the Consenting Parties shall
      account for all such equipment to the owners thereof, with each

	48 	
      party receiving its proportionate part in kind or in
      value, less cost of salvage.

	49 	
                       
      Within ninety (90) days after the completion of any operation under this
      Article, the party conducting the operations

	50 	
      for the Consenting Parties shall furnish each
      Non-Consenting Party with an inventory of the equipment in and connected
      to

	51 	
      the well, and an itemized statement of the cost of
      drilling, Sidetracking, Deepening, Plugging Back, testing,
    Completing,

	52 	
      Recompleting, and equipping the well for production; or,
      at its option, the operating party, in lieu of an itemized
  statement

	53 	
      of such costs of operation, may submit a detailed
      statement of monthly billings. Each month thereafter, during the time
      the

	54 	
      Consenting Parties are being reimbursed as provided
      above, the party conducting the operations for the Consenting
    Parties

	55 	
      shall furnish the Non-Consenting Parties with an itemized
      statement of all costs and liabilities incurred in the operation
  of

	56 	
      the well, together with a statement of the quantity of
      Oil and Gas produced from it and the amount of proceeds realized
    from

	57 	
      the sale of the well's working interest production during
      the preceding month. In determining the quantity of Oil and Gas

	58 	
      produced during any month, Consenting Parties shall use
      industry accepted methods such as but not limited to metering or

	59 	
      periodic well tests. Any amount realized from the sale or
      other disposition of equipment newly acquired in connection with

	60 	
      any such operation which would have been owned by a
      Non-Consenting Party had it participated therein shall be
  credited

	61 	
      against the total unreturned costs of the work done and
      of the equipment purchased in determining when the interest of
  such

	62 	
      Non-Consenting Party shall revert to it as above
      provided; and if there is a credit balance, it shall be paid to such
      Non-

	63 	
      Consenting Party.

	64 	
                       
      If and when the Consenting Parties recover from a Non-Consenting Party's
      relinquished interest the amounts provided

	65 	
      for above, the relinquished interests of such
      Non-Consenting Party shall automatically revert to it as of 7:00 a.m. on
      the day

	66 	
      following the day on which such recoupment occurs, and,
      from and after such reversion, such Non-Consenting Party shall

	67 	
      own the same interest in such well, the material and
      equipment in or pertaining thereto, and the production therefrom
  as

	68 	
      such Non-Consenting Party would have been entitled to had
      it participated in the drilling, Sidetracking, Reworking,

	69 	
      Deepening, Recompleting or Plugging Back of said well.
      Thereafter, such Non-Consenting Party shall be charged with and

	70 	
      shall pay its proportionate part of the further costs of
      the operation of said well in accordance with the terms of this

	71 	
      agreement and Exhibit "C" attached hereto.

	72 	
                       
      3. Stand-By Costs: When a well which has been drilled or Deepened
      has reached its authorized depth and all tests have

	73 	
      been completed and the results thereof furnished to the
      parties, or when operations on the well have been otherwise

	74 	
      terminated pursuant to Article VI.F., stand-by costs
      incurred pending response to a party's notice proposing a
  Reworking,

- 7 - 

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

	1 	
      Sidetracking, Deepening, Recompleting, Plugging Back or
      Completing operation in such a well (including the period
  required

	2 	
      under Article VI.B.6. to resolve competing proposals)
      shall be charged and borne as part of the drilling or Deepening

	3 	
      operation just completed. Stand-by costs subsequent to
      all parties responding, or expiration of the response time
    permitted,

	4 	
      whichever first occurs, and prior to agreement as to the
      participating interests of all Consenting Parties pursuant to the
    terms

	5 	
      of the second grammatical paragraph of Article VI.B.2.
      (a), shall be charged to and borne as part of the proposed
    operation,

	6 	
      but if the proposal is subsequently withdrawn because of
      insufficient participation, such stand-by costs shall be
  allocated

	7 	
      between the Consenting Parties in the proportion each
      Consenting Party's interest as shown on Exhibit "A" bears to the
    total

	8 	
      interest as shown on Exhibit "A" of all Consenting
      Parties.

	9 	
                       
      In the event that notice for a Sidetracking operation is given while the
      drilling rig to be utilized is on location, any party

	10 	
      may request and receive up to five (5) additional days
      after expiration of the forty-eight hour response period specified
    in

	11 	
      Article VI.B.1. within which to respond by paying for all
      stand-by costs and other costs incurred during such extended

	12 	
      response period; Operator may require such party to pay
      the estimated stand-by time in advance as a condition to
  extending

	13 	
      the response period. If more than one party elects to
      take such additional time to respond to the notice, standby costs shall
      be

	14 	
      allocated between the parties taking additional time to
      respond on a day-to-day basis in the proportion each electing
    party's

	15 	
      interest as shown on Exhibit "A" bears to the total
      interest as shown on Exhibit "A" of all the electing parties.

	16 	
                       
      4. Deepening: If less than all parties elect to participate in a
      drilling, Sidetracking, or Deepening operation proposed

	17 	
      pursuant to Article VI.B.1., the interest relinquished by
      the Non-Consenting Parties to the Consenting Parties under
  Article

	18 	
      VI.B.2. shall relate only and be limited to the lesser of
      (i) the total depth actually drilled or (ii) the objective depth or
      Zone

	19 	
      of which the parties were given notice under Article
      VI.B.1. ("Initial Objective"). Such well shall not be Deepened beyond
      the

	20 	
      Initial Objective without first complying with this
      Article to afford the Non-Consenting Parties the opportunity to
      participate

	21 	
      in the Deepening operation.

	22 	
                       
      In the event any Consenting Party desires to drill or Deepen a Non-Consent
      Well to a depth below the Initial Objective,

	23 	
      such party shall give notice thereof, complying with the
      requirements of Article VI.B.1., to all parties (including Non-

	24 	
      Consenting Parties). Thereupon, Articles VI.B.1. and 2.
      shall apply and all parties receiving such notice shall have the right
      to

	25 	
      participate or not participate in the Deepening of such
      well pursuant to said Articles VI.B.1. and 2. If a Deepening
    operation

	26 	
      is approved pursuant to such provisions, and if any
      Non-Consenting Party elects to participate in the Deepening
    operation,

	27 	
      such Non-Consenting party shall pay or make reimbursement
      (as the case may be) of the following costs and expenses.

	28 	
                           
      (a) If the proposal to Deepen is made prior to the Completion of such well
      as a well capable of producing in paying

	29 	
      quantities, such Non-Consenting Party shall pay (or
      reimburse Consenting Parties for, as the case may be) that share of
      costs

	30 	
      and expenses incurred in connection with the drilling of
      said well from the surface to the Initial Objective which Non-

	31 	
      Consenting Party would have paid had such Non-Consenting
      Party agreed to participate therein, plus the Non-Consenting

	32 	
      Party's share of the cost of Deepening and of
      participating in any further operations on the well in accordance with the
      other

	33 	
      provisions of this Agreement; provided, however, all
      costs for testing and Completion or attempted Completion of the
  well

	34 	
      incurred by Consenting Parties prior to the point of
      actual operations to Deepen beyond the Initial Objective shall be for
      the

	35 	
      sole account of Consenting Parties.

	36 	
                           
      (b) If the proposal is made for a Non-Consent Well that has been
      previously Completed as a well capable of producing

	37 	
      in paying quantities, but is no longer capable of
      producing in paying quantities, such Non-Consenting Party shall pay
    (or

	38 	
      reimburse Consenting Parties for, as the case may be) its
      proportionate share of all costs of drilling, Completing, and

	39 	
      equipping said well from the surface to the Initial
      Objective, calculated in the manner provided in paragraph (a) above,
      less

	40 	
      those costs recouped by the Consenting Parties from the
      sale of production from the well. The Non-Consenting Party shall

	41 	
      also pay its proportionate share of all costs of
      re-entering said well. The Non-Consenting Parties' proportionate part
      (based

	42 	
      on the percentage of such well Non-Consenting Party would
      have owned had it previously participated in such Non-Consent

	43 	
      Well) of the costs of salvable materials and equipment
      remaining in the hole and salvable surface equipment used in

	44 	
      connection with such well shall be determined in
      accordance with Exhibit "C." If the Consenting Parties have recouped
      the

	45 	
      cost of drilling, Completing, and equipping the well at
      the time such Deepening operation is conducted, then a Non-

	46 	
      Consenting Party may participate in the Deepening of the
      well with no payment for costs incurred prior to re-entering the

	47 	
      well for Deepening

	48 	
                       
      The foregoing shall not imply a right of any Consenting Party to propose
      any Deepening for a Non-Consent Well prior

	49 	
      to the drilling of such well to its Initial Objective
      without the consent of the other Consenting Parties as provided in
      Article

	50 	
      VI.F.

	51 	
                       
      5. Sidetracking: Any party having the right to participate in a
      proposed Sidetracking operation that does not own an

	52 	
      interest in the affected wellbore at the time of the
      notice shall, upon electing to participate, tender to the wellbore owners
      its

	53 	
      proportionate share (equal to its interest in the
      Sidetracking operation) of the value of that portion of the existing
      wellbore

	54 	
      to be utilized as follows:

	55 	
                           
      (a) If the proposal is for Sidetracking an existing dry hole,
      reimbursement shall be on the basis of the actual costs

	56 	
      incurred in the initial drilling of the well down to the
      depth at which the Sidetracking operation is initiated.

	57 	
                           
      (b) If the proposal is for Sidetracking a well which has previously
      produced, reimbursement shall be on the basis of

	58 	
      such party's proportionate share of drilling and
      equipping costs incurred in the initial drilling of the well down to the
      depth

	59 	
      at which the Sidetracking operation is conducted,
      calculated in the manner described in Article VI.B.4(b) above. Such
      party's

	60 	
      proportionate share of the cost of the well's salvable
      materials and equipment down to the depth at which the
  Sidetracking

	61 	
      operation is initiated shall be determined in accordance
      with the provisions of Exhibit "C."

	62 	
                       
      6. Order of Preference of Operations. Except as otherwise
      specifically provided in this agreement, if any party desires to

	63 	
      propose the conduct of an operation that conflicts with a
      proposal that has been made by a party under this Article VI,
  such

	64 	
      party shall have fifteen (15) days from delivery of the
      initial proposal, in the case of a proposal to drill a well or to
      perform

	65 	
      an operation on a well where no drilling rig is on
      location, or twenty-four (24) hours, exclusive of Saturday, Sunday and
      legal

	66 	
      holidays, from delivery of the initial proposal, if a
      drilling rig is on location for the well on which such operation is to
      be

	67 	
      conducted, to deliver to all parties entitled to
      participate in the proposed operation such party's alternative proposal,
      such

	68 	
      alternate proposal to contain the same information
      required to be included in the initial proposal. Each party receiving
      such

	69 	
      proposals shall elect by delivery of notice to Operator
      within five (5) days after expiration of the proposal period, or
    within

	70 	
      twenty-four (24) hours (exclusive of Saturday, Sunday and
      legal holidays) if a drilling rig is on location for the well that is
      the

	71 	
      subject of the proposals, to participate in one of the
      competing proposals. Any party not electing within the time
  required

	72 	
      shall be deemed not to have voted. The proposal receiving
      the vote of parties owning the largest aggregate percentage

	73 	
      interest of the parties voting shall have priority over
      all other competing proposals; in the case of a tie vote, the

	74 	
      

- 8 - 

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

	1 	initial proposal shall prevail.
      Operator shall deliver notice of such result to all parties entitled to
      participate in the operation 
	2 	within five (5) days after
      expiration of the election period (or within twenty-four (24) hours,
      exclusive of Saturday, Sunday 
	3 	and legal holidays, if a drilling
      rig is on location). Each party shall then have two (2) days (or
      twenty-four (24) hours if a rig 
	4 	is on location) from receipt of
      such notice to elect by delivery of notice to Operator to participate in
      such operation or to 
	5 	relinquish interest in the
      affected well pursuant to the provisions of Article VI.B.2.; failure by a
      party to deliver notice within 
	6 	such period shall be deemed an
      election not to participate in the prevailing proposal. 
	7 	                 
      7. Conformity to Spacing Pattern. Notwithstanding the provisions of
      this Article VI.B.2., it is agreed that no wells shall be 
	8 	proposed to be drilled to or
      Completed in or produced from a Zone from which a well located elsewhere
      on the Contract 
	9 	Area is producing, unless such
      well conforms to the then-existing well spacing pattern for such Zone.
  
	10 	                 
      8. Paying Wells. No party shall conduct any Reworking, Deepening,
      Plugging Back, Completion, Recompletion, or 
	11 	Sidetracking operation under this
      agreement with respect to any well then capable of producing in paying
      quantities except 
	12 	with the consent of all parties
      that have not relinquished interests in the well at the time of such
      operation. 
	13 	C. Completion of Wells;
      Reworking and Plugging Back: 
	14 	                 
      1. Completion: Without the consent of all parties, no well shall be
      drilled, Deepened or Sidetracked, except any well 
	15 	drilled, Deepened or Sidetracked
      pursuant to the provisions of Article VI.B.2. of this agreement. Consent
      to the drilling, 
	16 	Deepening or Sidetracking shall
      include: 
	17 	          [ ]
      Option No. 1: All necessary expenditures for the drilling,
      Deepening or Sidetracking, testing, Completing and 
	18 	              
      equipping of the well, including necessary tankage and/or surface
      facilities. 
	19 	          [ ]
      Option No. 2: All necessary expenditures for the drilling,
      Deepening or Sidetracking and testing of the well. When 
	20 	              
      such well has reached its authorized depth, and all logs, cores and other
      tests have been completed, and the results 
	21 	              
      thereof furnished to the parties, Operator shall give immediate notice to
      the Non-Operators having the right to 
	22 	              
      participate in a Completion attempt whether or not Operator recommends
      attempting to Complete the well, 
	23 	              
      together with Operator's AFE for Completion costs if not previously
      provided. The parties receiving such notice 
	24 	              
      shall have forty-eight (48) hours (exclusive of Saturday, Sunday and legal
      holidays) in which to elect by delivery of 
	25 	              
      notice to Operator to participate in a recommended Completion attempt or
      to make a Completion proposal with an 
	26 	              
      accompanying AFE. Operator shall deliver any such Completion proposal, or
      any Completion proposal conflicting 
	27 	              
      with Operator's proposal, to the other parties entitled to participate in
      such Completion in accordance with the 
	28 	              
      procedures specified in Article VI.B.6. Election to participate in a
      Completion attempt shall include consent to all 
	29 	              
      necessary expenditures for the Completing and equipping of such well,
      including necessary tankage and/or surface 
	30 	              
      facilities but excluding any stimulation operation not contained on the
      Completion AFE. Failure of any party 
	31 	              
      receiving such notice to reply within the period above fixed shall
      constitute an election by that party not to 
	32 	              
      participate in the cost of the Completion attempt; provided, that Article
      VI.B.6. shall control in the case of 
	33 	              
      conflicting Completion proposals. If one or more, but less than all of the
      parties, elect to attempt a Completion, the 
	34 	              
      provision of Article VI.B.2. hereof (the phrase "Reworking, Sidetracking,
      Deepening, Recompleting or Plugging 
	35 	              
      Back" as contained in Article VI.B.2. shall be deemed to include
      "Completing") shall apply to the operations 
	36 	              
      thereafter conducted by less than all parties; provided, however, that
      Article VI.B.2. shall apply separately to each 
	37 	              
      separate Completion or Recompletion attempt undertaken hereunder, and an
      election to become a Non-Consenting 
	38 	              
      Party as to one Completion or Recompletion attempt shall not prevent a
      party from becoming a Consenting Party 
	39 	              
      in subsequent Completion or Recompletion attempts regardless whether the
      Consenting Parties as to earlier 
	40 	              
      Completions or Recompletion have recouped their costs pursuant to Article
      VI.B.2.; provided further, that any 
	41 	              
      recoupment of costs by a Consenting Party shall be made solely from the
      production attributable to the Zone in 
	42 	              
      which the Completion attempt is made. Election by a previous
      Non-Consenting party to participate in a subsequent 
	43 	              
      Completion or Recompletion attempt shall require such party to pay its
      proportionate share of the cost of salvable 
	44 	              
      materials and equipment installed in the well pursuant to the previous
      Completion or Recompletion attempt, 
	45 	              
      insofar and only insofar as such materials and equipment benefit the Zone
      in which such party participates in a 
	46 	              
      Completion attempt. 
	47 	                 
      2. Rework, Recomplete or Plug Back: No well shall be Reworked,
      Recompleted or Plugged Back except a well Reworked, 
	48 	Recompleted, or Plugged Back
      pursuant to the provisions of Article VI.B.2. of this agreement. Consent
      to the Reworking, 
	49 	Recompleting or Plugging Back of
      a well shall include all necessary expenditures in conducting such
      operations and 
	50 	Completing and equipping of said
      well, including necessary tankage and/or surface facilities. 
	51 	D. Other Operations:

	52 	                 
      Operator shall not undertake any single project reasonably estimated to
      require an expenditure in excess of ________
	53 	____________________________________________Dollars
      ($________________________ ) except in connection with the 
	54 	drilling, Sidetracking,
      Reworking, Deepening, Completing, Recompleting or Plugging Back of a well
      that has been previously 
	55 	authorized by or pursuant to this
      agreement; provided, however, that, in case of explosion, fire, flood or
      other sudden 
	56 	emergency, whether of the same or
      different nature, Operator may take such steps and incur such expenses as
      in its opinion 
	57 	are required to deal with the
      emergency to safeguard life and property but Operator, as promptly as
      possible, shall report the 
	58 	emergency to the other parties.
      If Operator prepares an AFE for its own use, Operator shall furnish any
      Non-Operator so 
	59 	requesting an information copy
      thereof for any single project costing in excess of
      ______________________________Dollars 
	60 	($________________________ ). Any
      party who has not relinquished its interest in a well shall have the right
      to propose that 
	61 	Operator perform repair work or
      undertake the installation of artificial lift equipment or ancillary
      production facilities such as 
	62 	salt water disposal wells or to
      conduct additional work with respect to a well drilled hereunder or other
      similar project (but 
	63 	not including the installation of
      gathering lines or other transportation or marketing facilities, the
      installation of which shall 
	64 	be governed by separate agreement
      between the parties) reasonably estimated to require an expenditure in
      excess of the 
	65 	amount first set forth above in
      this Article VI.D. (except in connection with an operation required to be
      proposed under 
	66 	Articles VI.B.1. or VI.C.1.
      Option No. 2, which shall be governed exclusively be those Articles).
      Operator shall deliver such 
	67 	proposal to all parties entitled
      to participate therein. If within thirty (30) days thereof Operator
      secures the written consent 
	68 	of any party or parties owning at
      least ____________% of the interests of the parties entitled to
      participate in such operation, 
	69 	each party having the right to
      participate in such project shall be bound by the terms of such proposal
      and shall be obligated 
	70 	to pay its proportionate share of
      the costs of the proposed project as if it had consented to such project
      pursuant to the terms 
	71 	of the proposal. 
	72 	E. Abandonment of Wells:
    
	73 	                 
      1. Abandonment of Dry Holes: Except for any well drilled or
      Deepened pursuant to Article VI.B.2., any well which has 
	74 	been drilled or Deepened under
      the terms of this agreement and is proposed to be completed as a dry hole
      shall not be 

- 9 - 

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

	1 	
      plugged and abandoned without the consent of all parties.
      Should Operator, after diligent effort, be unable to contact any

	2 	
      party, or should any party fail to reply within
      forty-eight (48) hours (exclusive of Saturday, Sunday and legal holidays)
      after

	3 	
      delivery of notice of the proposal to plug and abandon
      such well, such party shall be deemed to have consented to the

	4 	
      proposed abandonment. All such wells shall be plugged and
      abandoned in accordance with applicable regulations and at the

	5 	
      cost, risk and expense of the parties who participated in
      the cost of drilling or Deepening such well. Any party who objects
    to

	6 	
      plugging and abandoning such well by notice delivered to
      Operator within forty-eight (48) hours (exclusive of Saturday,

	7 	
      Sunday and legal holidays) after delivery of notice of
      the proposed plugging shall take over the well as of the end of
  such

	8 	
      forty-eight (48) hour notice period and conduct further
      operations in search of Oil and/or Gas subject to the provisions
  of

	9 	
      Article VI.B.; failure of such party to provide proof
      reasonably satisfactory to Operator of its financial capability to
      conduct

	10 	
      such operations or to take over the well within such
      period or thereafter to conduct operations on such well or plug
  and

	11 	
      abandon such well shall entitle Operator to retain or
      take possession of the well and plug and abandon the well. The
  party

	12 	
      taking over the well shall indemnify Operator (if
      Operator is an abandoning party) and the other abandoning parties
      against

	13 	
      liability for any further operations conducted on such
      well except for the costs of plugging and abandoning the well
and

	14 	
      restoring the surface, for which the abandoning parties
      shall remain proportionately liable.

	15 	
                       
      2. Abandonment of Wells That Have Produced: Except for any well in
      which a Non-Consent operation has been

	16 	
      conducted hereunder for which the Consenting Parties have
      not been fully reimbursed as herein provided, any well which has

	17 	
      been completed as a producer shall not be plugged and
      abandoned without the consent of all parties. If all parties consent
    to

	18 	
      such abandonment, the well shall be plugged and abandoned
      in accordance with applicable regulations and at the cost, risk

	19 	
      and expense of all the parties hereto. Failure of a party
      to reply within sixty (60) days of delivery of notice of
proposed

	20 	
      abandonment shall be deemed an election to consent to the
      proposal. If, within sixty (60) days after delivery of notice of
  the

	21 	
      proposed abandonment of any well, all parties do not
      agree to the abandonment of such well, those wishing to continue
  its

	22 	
      operation from the Zone then open to production shall be
      obligated to take over the well as of the expiration of the

	23 	
      applicable notice period and shall indemnify Operator (if
      Operator is an abandoning party) and the other abandoning
parties

	24 	
      against liability for any further operations on the well
      conducted by such parties. Failure of such party or parties to
    provide

	25 	
      proof reasonably satisfactory to Operator of their
      financial capability to conduct such operations or to take over the
      well

	26 	
      within the required period or thereafter to conduct
      operations on such well shall entitle operator to retain or take
      possession

	27 	
      of such well and plug and abandon the well.

	28 	
                       
      Parties taking over a well as provided herein shall tender to each of the
      other parties its proportionate share of the value of

	29 	
      the well's salvable material and equipment, determined in
      accordance with the provisions of Exhibit "C," less the estimated
    cost

	30 	
      of salvaging and the estimated cost of plugging and
      abandoning and restoring the surface; provided, however, that in the
      event

	31 	
      the estimated plugging and abandoning and surface
      restoration costs and the estimated cost of salvaging are higher than
      the

	32 	
      value of the well's salvable material and equipment, each
      of the abandoning parties shall tender to the parties continuing

	33 	
      operations their proportionate shares of the estimated
      excess cost. Each abandoning party shall assign to the
    non-abandoning

	34 	
      parties, without warranty, express or implied, as to
      title or as to quantity, or fitness for use of the equipment and material,
      all

	35 	
      of its interest in the wellbore of the well and related
      equipment, together with its interest in the Leasehold insofar and
    only

	36 	
      insofar as such Leasehold covers the right to obtain
      production from that wellbore in the Zone then open to production. If
      the

	37 	
      interest of the abandoning party is or includes and Oil
      and Gas Interest, such party shall execute and deliver to the
  non-

	38 	
      abandoning party or parties an oil and gas lease, limited
      to the wellbore and the Zone then open to production, for a term
  of

	39 	
      one (1) year and so long thereafter as Oil and/or Gas is
      produced from the Zone covered thereby, such lease to be on the
  form

	40 	
      attached as Exhibit "B." The assignments or leases so
      limited shall encompass the Drilling Unit upon which the well is
      located.

	41 	
      The payments by, and the assignments or leases to, the
      assignees shall be in a ratio based upon the relationship of
  their

	42 	
      respective percentage of participation in the Contract
      Area to the aggregate of the percentages of participation in the
      Contract

	43 	
      Area of all assignees. There shall be no readjustment of
      interests in the remaining portions of the Contract Area.

	44 	
                       
      Thereafter, abandoning parties shall have no further responsibility,
      liability, or interest in the operation of or production

	45 	
      from the well in the Zone then open other than the
      royalties retained in any lease made under the terms of this Article.
      Upon

	46 	
      request, Operator shall continue to operate the assigned
      well for the account of the non-abandoning parties at the rates
  and

	47 	
      charges contemplated by this agreement, plus any
      additional cost and charges which may arise as the result of the
      separate

	48 	
      ownership of the assigned well. Upon proposed abandonment
      of the producing Zone assigned or leased, the assignor or lessor

	49 	
      shall then have the option to repurchase its prior
      interest in the well (using the same valuation formula) and participate
      in

	50 	
      further operations therein subject to the provisions
      hereof.

	51 	
                       
      3. Abandonment of Non-Consent Operations: The provisions of Article
      VI.E.1. or VI.E.2. above shall be applicable as

	52 	
      between Consenting Parties in the event of the proposed
      abandonment of any well excepted from said Articles; provided,

	53 	
      however, no well shall be permanently plugged and
      abandoned unless and until all parties having the right to conduct
      further

	54 	
      operations therein have been notified of the proposed
      abandonment and afforded the opportunity to elect to take over the
    well

	55 	
      in accordance with the provisions of this Article VI.E.;
      and provided further, that Non-Consenting Parties who own an
    interest

	56 	
      in a portion of the well shall pay their proportionate
      shares of abandonment and surface restoration cost for such well
  as

	57 	
      provided in Article VI.B.2.(b).

	58 	
      F. Termination of Operations:

	59 	
                       
      Upon the commencement of an operation for the drilling, Reworking,
      Sidetracking, Plugging Back, Deepening, testing,

	60 	
      Completion or plugging of a well, including but not
      limited to the Initial Well, such operation shall not be terminated
      without

	61 	
      consent of parties bearing _____% of the costs of
      such operation; provided, however, that in the event granite or
    other

	62 	
      practically impenetrable substance or condition in the
      hole is encountered which renders further operations
impractical,

	63 	
      Operator may discontinue operations and give notice of
      such condition in the manner provided in Article VI.B.1, and the

	64 	
      provisions of Article VI.B. or VI.E. shall thereafter
      apply to such operation, as appropriate.

	65 	
      G. Taking Production in Kind:

	66 	
              [ ] 
       Option No. 1: Gas Balancing Agreement
      Attached

	67 	
                       
      Each party shall take in kind or separately dispose of its proportionate
      share of all Oil and Gas produced from the

	68 	
                    
      Contract Area, exclusive of production which may be used in development
      and producing operations and in preparing and

	69 	
                     treating
      Oil and Gas for marketing purposes and production unavoidably lost. Any
      extra expenditure incurred in the taking

	70 	
                     in
      kind or separate disposition by any party of its proportionate share of
      the production shall be borne by such party. Any

	71 	
                    
      party taking its share of production in kind shall be required to pay for
      only its proportionate share of such part of

	72 	
                    
      Operator's surface facilities which it uses.

	73 	
                       
      Each party shall execute such division orders and contracts as may be
      necessary for the sale of its interest in

	74 	
                     
      production from the Contract Area, and, except as provided in Article
      VII.B., shall be entitled to receive payment

- 10 - 

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

	1 	
                    
      directly from the purchaser thereof for its share of all
  production.

	2 	
                      
      If any party fails to make the arrangements necessary to take in kind or
      separately dispose of its proportionate

	3 	
                    
      share of the Oil produced from the Contract Area, Operator shall have the
      right, subject to the revocation at will by

	4 	
                    
      the party owning it, but not the obligation, to purchase such Oil or sell
      it to others at any time and from time to

	5 	
                    
      time, for the account of the non-taking party. Any such purchase or sale
      by Operator may be terminated by

	6 	
                    
      Operator upon at least ten (10) days written notice to the owner of said
      production and shall be subject always to

	7 	
                    
      the right of the owner of the production upon at least ten (10) days
      written notice to Operator to exercise at any

	8 	
                    
      time its right to take in kind, or separately dispose of, its share of all
      Oil not previously delivered to a purchaser.

	9 	
                     Any
      purchase or sale by Operator of any other party's share of Oil shall be
      only for such reasonable periods of time

	10 	
                    
      as are consistent with the minimum needs of the industry under the
      particular circumstances, but in no event for a

	11 	
                    
      period in excess of one (1) year.

	12 	
                      
      Any such sale by Operator shall be in a manner commercially reasonable
      under the circumstances but Operator

	13 	
                    
      shall have no duty to share any existing market or to obtain a price equal
      to that received under any existing

	14 	
                    
      market. The sale or delivery by Operator of a non-taking party's share of
      Oil under the terms of any existing

	15 	
                    
      contract of Operator shall not give the non-taking party any interest in
      or make the non-taking party a party to said

	16 	
                    
      contract. No purchase shall be made by Operator without first giving the
      non-taking party at least ten (10) days

	17 	
                    
      written notice of such intended purchase and the price to be paid or the
      pricing basis to be used.

	18 	
                     
       All parties shall give timely written notice to Operator of their
      Gas marketing arrangements for the following

	19 	
                    
      month, excluding price, and shall notify Operator immediately in the event
      of a change in such arrangements.

	20 	
                    
      Operator shall maintain records of all marketing arrangements, and of
      volumes actually sold or transported, which

	21 	
                    
      records shall be made available to Non-Operators upon reasonable
      request.

	22 	
               
             In the event one or more
      parties' separate disposition of its share of the Gas causes split-stream
      deliveries to separate

	23 	
                    
      pipelines and/or deliveries which on a day-to-day basis for any reason are
      not exactly equal to a party's respective proportion-

	24 	
                    
      ate share of total Gas sales to be allocated to it, the balancing or
      accounting between the parties shall be in accordance with

	25 	
                    
      any Gas balancing agreement between the parties hereto, whether such an
      agreement is attached as Exhibit "E" or is a

	26 	
                    
      separate agreement. Operator shall give notice to all parties of the first
      sales of Gas from any well under this agreement.

	27 	
              [ ] 
       Option No. 2: No Gas Balancing
  Agreement:

	28 	
                       
      Each party shall take in kind or separately dispose of its proportionate
      share of all Oil and Gas produced from

	29 	
                    
      the Contract Area, exclusive of production which may be used in
      development and producing operations and in

	30 	
                    
      preparing and treating Oil and Gas for marketing purposes and production
      unavoidably lost. Any extra expenditures

	31 	
                    
      incurred in the taking in kind or separate disposition by any party of its
      proportionate share of the production shall

	32 	
                    
      be borne by such party. Any party taking its share of production in kind
      shall be required to pay for only its

	33 	
                    
      proportionate share of such part of Operator's surface facilities which it
      uses.

	34 	
                      
      Each party shall execute such division orders and contracts as may be
      necessary for the sale of its interest in

	35 	
                    
      production from the Contract Area, and, except as provided in Article
      VII.B., shall be entitled to receive payment

	36 	
                    
      directly from the purchaser thereof for its share of all
  production.

	37 	
                      
      If any party fails to make the arrangements necessary to take in kind or
      separately dispose of its proportionate

	38 	
                    
      share of the Oil and/or Gas produced from the Contract Area, Operator
      shall have the right, subject to the

	39 	
                    
      revocation at will by the party owning it, but not the obligation, to
      purchase such Oil and/or Gas or sell it to others

	40 	
                    
      at any time and from time to time, for the account of the non-taking
      party. Any such purchase or sale by Operator

	41 	
                    
      may be terminated by Operator upon at least ten (10) days written notice
      to the owner of said production and shall

	42 	
                    
      be subject always to the right of the owner of the production upon at
      least ten (10) days written notice to Operator

	43 	
                    
      to exercise its right to take in kind, or separately dispose of, its share
      of all Oil and/or Gas not previously delivered

	44 	
                    
      to a purchaser; provided, however, that the effective date of any such
      revocation may be deferred at Operator's

	45 	
                    
      election for a period not to exceed ninety (90) days if Operator has
      committed such production to a purchase

	46 	
                    
      contract having a term extending beyond such ten (10) -day period. Any
      purchase or sale by Operator of any other

	47 	
                    
      party's share of Oil and/or Gas shall be only for such reasonable periods
      of time as are consistent with the

	48	
                    
      minimum needs of the industry under the particular circumstances, but in
      no event for a period in excess of one (1)

	49 	
                    
      year.

	50 	
                      
      Any such sale by Operator shall be in a manner commercially reasonable
      under the circumstances, but Operator

	51 	
                    
      shall have no duty to share any existing market or transportation
      arrangement or to obtain a price or transportation

	52 	
                    
      fee equal to that received under any existing market or transportation
      arrangement. The sale or delivery by

	53 	
                    
      Operator of a non-taking party's share of production under the terms of
      any existing contract of Operator shall not

	54 	
                    
      give the non-taking party any interest in or make the non-taking party a
      party to said contract. No purchase of Oil

	55 	
                    
      and Gas and no sale of Gas shall be made by Operator without first giving
      the non-taking party ten days written

	56 	
                    
      notice of such intended purchase or sale and the price to be paid or the
      pricing basis to be used. Operator shall give

	57 	
                    
      notice to all parties of the first sale of Gas from any well under this
      Agreement.

	58 	
                      
      All parties shall give timely written notice to Operator of their Gas
      marketing arrangements for the following

	59 	
                    
      month, excluding price, and shall notify Operator immediately in the event
      of a change in such arrangements.

	60 	
                    
      Operator shall maintain records of all marketing arrangements, and of
      volumes actually sold or transported, which

	61 	
                    
      records shall be made available to Non-Operators upon reasonable
      request.

	62 	ARTICLE VII.
	63 	EXPENDITURES AND LIABILITY OF PARTIES
	64 	
      A. Liability of Parties:

	65 	
                       
      The liability of the parties shall be several, not joint or collective.
      Each party shall be responsible only for its obligations,

	66 	
      and shall be liable only for its proportionate share of
      the costs of developing and operating the Contract Area. Accordingly,
      the

	67 	
      liens granted among the parties in Article VII.B. are
      given to secure only the debts of each severally, and no party shall
      have

	68 	
      any liability to third parties hereunder to satisfy the
      default of any other party in the payment of any expense or
    obligation

	69 	
      hereunder. It is not the intention of the parties to
      create, nor shall this agreement be construed as creating, a mining or
      other

	70 	
      partnership, joint venture, agency relationship or
      association, or to render the parties liable as partners, co-venturers,
      or

	71 	
      principals. In their relations with each other under this
      agreement, the parties shall not be considered fiduciaries or to
    have

	72 	
      established a confidential relationship but rather shall
      be free to act on an arm's-length basis in accordance with their
  own

	73 	
      respective self-interest, subject, however, to the
      obligation of the parties to act in good faith in their dealings with each
      other

	74 	
      with respect to activities
hereunder.

- 11 - 

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

	1 	
      B. Liens and Security Interests:

	2 	
                       
      Each party grants to the other parties hereto a lien upon any interest it
      now owns or hereafter acquires in Oil and Gas

	3 	
      Leases and Oil and Gas Interests in the Contract Area,
      and a security interest and/or purchase money security interest in
    any

	4 	
      interest it now owns or hereafter acquires in the
      personal property and fixtures on or used or obtained for use in
      connection

	5 	
      therewith, to secure performance of all of its
      obligations under this agreement including but not limited to payment of
      expense,

	6 	
      interest and fees, the proper disbursement of all monies
      paid hereunder, the assignment or relinquishment of interest in
  Oil

	7 	
      and Gas Leases as required hereunder, and the proper
      performance of operations hereunder. Such lien and security
  interest

	8 	
      granted by each party hereto shall include such party's
      leasehold interests, working interests, operating rights, and royalty
      and

	9 	
      overriding royalty interests in the Contract Area now
      owned or hereafter acquired and in lands pooled or unitized therewith
      or

	10 	
      otherwise becoming subject to this agreement, the Oil and
      Gas when extracted therefrom and equipment situated thereon or

	11 	
      used or obtained for use in connection therewith
      (including, without limitation, all wells, tools, and tubular goods), and
      accounts

	12 	
      (including, without limitation, accounts arising from gas
      imbalances or from the sale of Oil and/or Gas at the wellhead),

	13 	
      contract rights, inventory and general intangibles
      relating thereto or arising therefrom, and all proceeds and products of
      the

	14 	
      foregoing.

	15 	
                       
      To perfect the lien and security agreement provided herein, each party
      hereto shall execute and acknowledge the recording

	16 	
      supplement and/or any financing statement prepared and
      submitted by any party hereto in conjunction herewith or at any
  time

	17 	
      following execution hereof, and Operator is authorized to
      file this agreement or the recording supplement executed herewith
  as

	18 	
      a lien or mortgage in the applicable real estate records
      and as a financing statement with the proper officer under the
    Uniform

	19 	
      Commercial Code in the state in which the Contract Area
      is situated and such other states as Operator shall deem
  appropriate

	20 	
      to perfect the security interest granted hereunder. Any
      party may file this agreement, the recording supplement executed

	21 	
      herewith, or such other documents as it deems necessary
      as a lien or mortgage in the applicable real estate records and/or
  a

	22 	
      financing statement with the proper officer under the
      Uniform Commercial Code.

	23 	
                       
      Each party represents and warrants to the other parties hereto that the
      lien and security interest granted by such party to

	24 	
      the other parties shall be a first and prior lien, and
      each party hereby agrees to maintain the priority of said lien and
      security

	25 	
      interest against all persons acquiring an interest in Oil
      and Gas Leases and Interests covered by this agreement by, through
    or

	26 	
      under such party. All parties acquiring an interest in
      Oil and Gas Leases and Oil and Gas Interests covered by this
    agreement,

	27 	
      whether by assignment, merger, mortgage, operation of
      law, or otherwise, shall be deemed to have taken subject

	28 	
      to the lien and security interest granted by this Article
      VII.B. as to all obligations attributable to such interest
  hereunder

	29 	
      whether or not such obligations arise before or after
      such interest is acquired.

	30 	
                       
      To the extent that parties have a security interest under the Uniform
      Commercial Code of the state in which the

	31 	
      Contract Area is situated, they shall be entitled to
      exercise the rights and remedies of a secured party under the
  Code.

	32 	
      The bringing of a suit and the obtaining of judgment by a
      party for the secured indebtedness shall not be deemed an

	33 	
      election of remedies or otherwise affect the lien rights
      or security interest as security for the payment thereof. In

	34 	
      addition, upon default by any party in the payment of its
      share of expenses, interests or fees, or upon the improper use

	35 	
      of funds by the Operator, the other parties shall have
      the right, without prejudice to other rights or remedies, to
  collect

	36 	
      from the purchaser the proceeds from the sale of such
      defaulting party's share of Oil and Gas until the amount owed by

	37 	
      such party, plus interest as provided in "Exhibit C," has
      been received, and shall have the right to offset the amount

	38 	
      owed against the proceeds from the sale of such
      defaulting party's share of Oil and Gas. All purchasers of
    production

	39 	
      may rely on a notification of default from the
      non-defaulting party or parties stating the amount due as a result of
      the

	40 	
      default, and all parties waive any recourse available
      against purchasers for releasing production proceeds as provided
  in

	41 	
      this paragraph.

	42 	
                       
      If any party fails to pay its share of cost within one hundred twenty
      (120) days after rendition of a statement therefor by

	43 	
      Operator, the non-defaulting parties, including Operator,
      shall upon request by Operator, pay the unpaid amount in the

	44 	
      proportion that the interest of each such party bears to
      the interest of all such parties. The amount paid by each party
  so

	45 	
      paying its share of the unpaid amount shall be secured by
      the liens and security rights described in Article VII.B., and
  each

	46 	
      paying party may independently pursue any remedy
      available hereunder or otherwise.

	47 	
                       
      If any party does not perform all of its obligations hereunder, and the
      failure to perform subjects such party to foreclosure

	48 	
      or execution proceedings pursuant to the provisions of
      this agreement, to the extent allowed by governing law, the
    defaulting

	49 	
      party waives any available right of redemption from and
      after the date of judgment, any required valuation or
  appraisement

	50 	
      of the mortgaged or secured property prior to sale, any
      available right to stay execution or to require a marshaling of
    assets

	51 	
      and any required bond in the event a receiver is
      appointed. In addition, to the extent permitted by applicable law, each
      party

	52 	
      hereby grants to the other parties a power of sale as to
      any property that is subject to the lien and security rights
  granted

	53 	
      hereunder, such power to be exercised in the manner
      provided by applicable law or otherwise in a commercially
  reasonable

	54 	
      manner and upon reasonable notice.

	55 	
                       
      Each party agrees that the other parties shall be entitled to utilize the
      provisions of Oil and Gas lien law or other lien

	56 	
      law of any state in which the Contract Area is situated
      to enforce the obligations of each party hereunder. Without
  limiting

	57 	
      the generality of the foregoing, to the extent permitted
      by applicable law, Non-Operators agree that Operator may invoke
  or

	58 	
      utilize the mechanics' or materialmen's lien law of the
      state in which the Contract Area is situated in order to secure
  the

	59 	
      payment to Operator of any sum due hereunder for services
      performed or materials supplied by Operator.

	60 	
      C. Advances:

	61 	
                       
      Operator, at its election, shall have the right from time to time to
      demand and receive from one or more of the other

	62 	
      parties payment in advance of their respective shares of
      the estimated amount of the expense to be incurred in operations

	63 	
      hereunder during the next succeeding month, which right
      may be exercised only by submission to each such party of an

	64 	
      itemized statement of such estimated expense, together
      with an invoice for its share thereof. Each such statement and
    invoice

	65 	
      for the payment in advance of estimated expense shall be
      submitted on or before the 20th day of the next preceding month.

	66 	
      Each party shall pay to Operator its proportionate share
      of such estimate within fifteen (15) days after such estimate
and

	67 	
      invoice is received. If any party fails to pay its share
      of said estimate within said time, the amount due shall bear interest
      as

	68 	
      provided in Exhibit "C" until paid. Proper adjustment
      shall be made monthly between advances and actual expense to the
  end

	69 	
      that each party shall bear and pay its proportionate
      share of actual expenses incurred, and no more.

	70 	
      D. Defaults and Remedies:

	71 	
                       
      If any party fails to discharge any financial obligation under this
      agreement, including without limitation the failure to

	72 	
      make any advance under the preceding Article VII.C. or
      any other provision of this agreement, within the period required
    for

	73 	
      such payment hereunder, then in addition to the remedies
      provided in Article VII.B. or elsewhere in this agreement, the

	74 	
      remedies specified below shall be applicable. For
      purposes of this Article VII.D., all notices and elections shall be
      delivered

- 12 - 

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

	1 	
      only by Operator, except that Operator shall deliver any
      such notice and election requested by a non-defaulting
  Non-Operator,

	2 	
      and when Operator is the party in default, the applicable
      notices and elections can be delivered by any Non-Operator.

	3 	
      Election of any one or more of the following remedies
      shall not preclude the subsequent use of any other remedy
  specified

	4 	
      below or otherwise available to a non-defaulting
      party.

	5 	
                       
      1. Suspension of Rights: Any party may deliver to the party in
      default a Notice of Default, which shall specify the default,

	6 	
      specify the action to be taken to cure the default, and
      specify that failure to take such action will result in the exercise of
      one

	7 	
      or more of the remedies provided in this Article. If the
      default is not cured within thirty (30) days of the delivery of
  such

	8 	
      Notice of Default, all of the rights of the defaulting
      party granted by this agreement may upon notice be suspended until
    the

	9 	
      default is cured, without prejudice to the right of the
      non-defaulting party or parties to continue to enforce the obligations
      of

	10 	
      the defaulting party previously accrued or thereafter
      accruing under this agreement. If Operator is the party in default,
    the

	11 	
      Non-Operators shall have in addition the right, by vote
      of Non-Operators owning a majority in interest in the Contract
  Area

	12 	
      after excluding the voting interest of Operator, to
      appoint a new Operator effective immediately. The rights of a
      defaulting

	13 	
      party that may be suspended hereunder at the election of
      the non-defaulting parties shall include, without limitation, the
    right

	14 	
      to receive information as to any operation conducted
      hereunder during the period of such default, the right to elect
  to

	15 	
      participate in an operation proposed under Article VI.B.
      of this agreement, the right to participate in an operation
being

	16 	
      conducted under this agreement even if the party has
      previously elected to participate in such operation, and the right
    to

	17 	
      receive proceeds of production from any well subject to
      this agreement.

	18 	
                       
      2. Suit for Damages: Non-defaulting parties or Operator for the
      benefit of non-defaulting parties may sue (at joint

	19 	
      account expense) to collect the amounts in default, plus
      interest accruing on the amounts recovered from the date of
  default

	20 	
      until the date of collection at the rate specified in
      Exhibit "C" attached hereto. Nothing herein shall prevent any party
      from

	21 	
      suing any defaulting party to collect consequential
      damages accruing to such party as a result of the default.

	22 	
                       
      3. Deemed Non-Consent: The non-defaulting party may deliver a
      written Notice of Non-Consent Election to the

	23 	
      defaulting party at any time after the expiration of the
      thirty-day cure period following delivery of the Notice of Default,
    in

	24 	
      which event if the billing is for the drilling a new well
      or the Plugging Back, Sidetracking, Reworking or Deepening of a

	25 	
      well which is to be or has been plugged as a dry hole, or
      for the Completion or Recompletion of any well, the defaulting

	26 	
      party will be conclusively deemed to have elected not to
      participate in the operation and to be a Non-Consenting Party
  with

	27 	
      respect thereto under Article VI.B. or VI.C., as the case
      may be, to the extent of the costs unpaid by such party,

	28 	
      notwithstanding any election to participate theretofore
      made. If election is made to proceed under this provision, then
  the

	29 	
      non-defaulting parties may not elect to sue for the
      unpaid amount pursuant to Article VII.D.2.

	30 	
                       
      Until the delivery of such Notice of Non-Consent Election to the
      defaulting party, such party shall have the right to cure

	31 	
      its default by paying its unpaid share of costs plus
      interest at the rate set forth in Exhibit "C," provided, however,
    such

	32 	
      payment shall not prejudice the rights of the
      non-defaulting parties to pursue remedies for damages incurred by the
      non-

	33 	
      defaulting parties as a result of the default. Any
      interest relinquished pursuant to this Article VII.D.3. shall be offered
      to the

	34 	
      non-defaulting parties in proportion to their interests,
      and the non-defaulting parties electing to participate in the
    ownership

	35 	
      of such interest shall be required to contribute their
      shares of the defaulted amount upon their election to participate
      therein.

	36 	
                       
      4. Advance Payment: If a default is not cured within thirty (30)
      days of the delivery of a Notice of Default, Operator, or

	37 	
      Non-Operators if Operator is the defaulting party, may
      thereafter require advance payment from the defaulting

	38 	
      party of such defaulting party's anticipated share of any
      item of expense for which Operator, or Non-Operators, as the case
    may

	39 	
      be, would be entitled to reimbursement under any
      provision of this agreement, whether or not such expense was the subject
      of

	40 	
      the previous default. Such right includes, but is not
      limited to, the right to require advance payment for the estimated costs
      of

	41 	
      drilling a well or Completion of a well as to which an
      election to participate in drilling or Completion has been made. If
    the

	42 	
      defaulting party fails to pay the required advance
      payment, the non-defaulting parties may pursue any of the remedies
      provided

	43 	
      in the Article VII.D. or any other default remedy
      provided elsewhere in this agreement. Any excess of funds advanced
      remaining

	44 	
      when the operation is completed and all costs have been
      paid shall be promptly returned to the advancing party.

	45 	
                       
      5. Costs and Attorneys' Fees: In the event any party is required to
      bring legal proceedings to enforce any financial

	46 	
      obligation of a party hereunder, the prevailing party in
      such action shall be entitled to recover all court costs, costs
  of

	47 	
      collection, and a reasonable attorney's fee, which the
      lien provided for herein shall also secure.

	48 	
      E. Rentals, Shut-in Well Payments and Minimum
      Royalties:

	49 	
                       
      Rentals, shut-in well payments and minimum royalties which may be required
      under the terms of any lease shall be paid

	50 	
      by the party or parties who subjected such lease to this
      agreement at its or their expense. In the event two or more
  parties

	51 	
      own and have contributed interests in the same lease to
      this agreement, such parties may designate one of such parties
to

	52 	
      make said payments for and on behalf of all such parties.
      Any party may request, and shall be entitled to receive, proper

	53 	
      evidence of all such payments. In the event of failure to
      make proper payment of any rental, shut-in well payment or

	54 	
      minimum royalty through mistake or oversight where such
      payment is required to continue the lease in force, any loss
  which

	55 	
      results from such non-payment shall be borne in
      accordance with the provisions of Article IV.B.2.

	56 	
                       
      Operator shall notify Non-Operators of the anticipated completion of a
      shut-in well, or the shutting in or return to

	57 	
      production of a producing well, at least five (5) days
      (excluding Saturday, Sunday, and legal holidays) prior to taking
    such

	58 	
      action, or at the earliest opportunity permitted by
      circumstances, but assumes no liability for failure to do so. In the event
      of

	59 	
      failure by Operator to so notify Non-Operators, the loss
      of any lease contributed hereto by Non-Operators for failure to
  make

	60 	
      timely payments of any shut-in well payment shall be
      borne jointly by the parties hereto under the provisions of
  Article

	61 	
      IV.B.3.

	62 	
      F. Taxes:

	63 	
                       
      Beginning with the first calendar year after the effective date hereof,
      Operator shall render for ad valorem taxation all

	64 	
      property subject to this agreement which by law should be
      rendered for such taxes, and it shall pay all such taxes
assessed

	65 	
      thereon before they become delinquent. Prior to the
      rendition date, each Non-Operator shall furnish Operator information
    as

	66 	
      to burdens (to include, but not be limited to, royalties,
      overriding royalties and production payments) on Leases and Oil
  and

	67 	
      Gas Interests contributed by such Non-Operator. If the
      assessed valuation of any Lease is reduced by reason of its
being

	68 	
      subject to outstanding excess royalties, overriding
      royalties or production payments, the reduction in ad valorem
  taxes

	69 	
      resulting therefrom shall inure to the benefit of the
      owner or owners of such Lease, and Operator shall adjust the charge
    to

	70 	
      such owner or owners so as to reflect the benefit of such
      reduction. If the ad valorem taxes are based in whole or in part

	71 	
      upon separate valuations of each party's working
      interest, then notwithstanding anything to the contrary herein, charges
      to

	72 	
      the joint account shall be made and paid by the parties
      hereto in accordance with the tax value generated by each
party's

	73 	
      working interest. Operator shall bill the other parties
      for their proportionate shares of all tax payments in the manner

	74 	
      provided in Exhibit "C."

- 13 - 

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

	1 	
                       
      If Operator considers any tax assessment improper, Operator may, at its
      discretion, protest within the time and manner

	2 	
      prescribed by law, and prosecute the protest to a final
      determination, unless all parties agree to abandon the protest prior to
      final

	3 	
      determination. During the pendency of administrative or
      judicial proceedings, Operator may elect to pay, under protest, all such
      taxes

	4 	
      and any interest and penalty. When any such protested
      assessment shall have been finally determined, Operator shall pay the tax
      for

	5 	
      the joint account, together with any interest and penalty
      accrued, and the total cost shall then be assessed against the parties,
      and be

	6 	
      paid by them, as provided in Exhibit "C."

	7 	
                       
      Each party shall pay or cause to be paid all production, severance,
      excise, gathering and other taxes imposed upon or with respect

	8 	
      to the production or handling of such party's share of
      Oil and Gas produced under the terms of this agreement.

	9 	ARTICLE VIII.
	10 	ACQUISITION, MAINTENANCE OR TRANSFER OF
  INTEREST
	11 	
      A. Surrender of Leases:

	12 	
                       
      The Leases covered by this agreement, insofar as they embrace acreage in
      the Contract Area, shall not be surrendered in whole

	13 	
      or in part unless all parties consent thereto.

	14 	
                       
      However, should any party desire to surrender its interest in any Lease or
      in any portion thereof, such party shall give written

	15 	
      notice of the proposed surrender to all parties, and the
      parties to whom such notice is delivered shall have thirty (30) days
      after

	16 	
      delivery of the notice within which to notify the party
      proposing the surrender whether they elect to consent thereto. Failure of
      a

	17 	
      party to whom such notice is delivered to reply within
      said 30-day period shall constitute a consent to the surrender of the
      Leases

	18 	
      described in the notice. If all parties do not agree or
      consent thereto, the party desiring to surrender shall assign, without
      express or

	19 	
      implied warranty of title, all of its interest in such
      Lease, or portion thereof, and any well, material and equipment which may
      be

	20 	
      located thereon and any rights in production thereafter
      secured, to the parties not consenting to such surrender. If the interest
      of the

	21 	
      assigning party is or includes an Oil and Gas Interest,
      the assigning party shall execute and deliver to the party or parties
      not

	22 	
      consenting to such surrender an oil and gas lease
      covering such Oil and Gas Interest for a term of one (1) year and so
      long

	23 	
      thereafter as Oil and/or Gas is produced from the land
      covered thereby, such lease to be on the form attached hereto as Exhibit
      "B."

	24 	
      Upon such assignment or lease, the assigning party shall
      be relieved from all obligations thereafter accruing, but not
      theretofore

	25 	
      accrued, with respect to the interest assigned or leased
      and the operation of any well attributable thereto, and the assigning
      party

	26 	
      shall have no further interest in the assigned or leased
      premises and its equipment and production other than the royalties
      retained

	27 	
      in any lease made under the terms of this Article. The
      party assignee or lessee shall pay to the party assignor or lessor
    the

	28 	
      reasonable salvage value of the latter's interest in any
      well's salvable materials and equipment attributable to the assigned or
      leased

	29 	
      acreage. The value of all salvable materials and
      equipment shall be determined in accordance with the provisions of Exhibit
      "C," less

	30 	
      the estimated cost of salvaging and the estimated cost of
      plugging and abandoning and restoring the surface. If such value is
      less

	31 	
      than such costs, then the party assignor or lessor shall
      pay to the party assignee or lessee the amount of such deficit. If
    the

	32 	
      assignment or lease is in favor of more than one party,
      the interest shall be shared by such parties in the proportions that
      the

	33 	
      interest of each bears to the total interest of all such
      parties. If the interest of the parties to whom the assignment is to be
      made

	34 	
      varies according to depth, then the interest assigned
      shall similarly reflect such variances.

	35 	
                       
      Any assignment, lease or surrender made under this provision shall not
      reduce or change the assignor's, lessor's or surrendering

	36 	
      party's interest as it was immediately before the
      assignment, lease or surrender in the balance of the Contract Area; and
      the acreage

	37 	
      assigned, leased or surrendered, and subsequent
      operations thereon, shall not thereafter be subject to the terms and
      provisions of this

	38 	
      agreement but shall be deemed subject to an Operating
      Agreement in the form of this agreement.

	39 	
      B. Renewal or Extension of Leases:

	40 	
                       
      If any party secures a renewal or replacement of an Oil and Gas Lease or
      Interest subject to this agreement, then all other parties

	41 	
      shall be notified promptly upon such acquisition or, in
      the case of a replacement Lease taken before expiration of an existing
      Lease,

	42 	
      promptly upon expiration of the existing Lease. The
      parties notified shall have the right for a period of thirty (30) days
      following

	43 	
      delivery of such notice in which to elect to participate
      in the ownership of the renewal or replacement Lease, insofar as such
      Lease

	44 	
      affects lands within the Contract Area, by paying to the
      party who acquired it their proportionate shares of the acquisition
      cost

	45 	
      allocated to that part of such Lease within the Contract
      Area, which shall be in proportion to the interest held at that time by
      the

	46 	
      parties in the Contract Area. Each party who participates
      in the purchase of a renewal or replacement Lease shall be given
  an

	47 	
      assignment of its proportionate interest therein by the
      acquiring party.

	48 	
                       
      If some, but less than all, of the parties elect to participate in the
      purchase of a renewal or replacement Lease, it shall be owned

	49 	
      by the parties who elect to participate therein, in a
      ratio based upon the relationship of their respective percentage of
      participation in

	50 	
      the Contract Area to the aggregate of the percentages of
      participation in the Contract Area of all parties participating in
    the

	51 	
      purchase of such renewal or replacement Lease. The
      acquisition of a renewal or replacement Lease by any or all of the parties
      hereto

	52 	
      shall not cause a readjustment of the interests of the
      parties stated in Exhibit "A," but any renewal or replacement Lease in
      which

	53 	
      less than all parties elect to participate shall not be
      subject to this agreement but shall be deemed subject to a separate
      Operating

	54 	
      Agreement in the form of this agreement.

	55 	
                       
      If the interests of the parties in the Contract Area vary according to
      depth, then their right to participate proportionately in

	56 	
      renewal or replacement Leases and their right to receive
      an assignment of interest shall also reflect such depth
  variances.

	57 	
                       
      The provisions of this Article shall apply to renewal or replacement
      Leases whether they are for the entire interest covered by

	58 	
      the expiring Lease or cover only a portion of its area or
      an interest therein. Any renewal or replacement Lease taken before
    the

	59 	
      expiration of its predecessor Lease, or taken or
      contracted for or becoming effective within six (6) months after the
      expiration of the

	60 	
      existing Lease, shall be subject to this provision so
      long as this agreement is in effect at the time of such acquisition or at
      the time

	61 	
      the renewal or replacement Lease becomes effective; but
      any Lease taken or contracted for more than six (6) months after
  the

	62 	
      expiration of an existing Lease shall not be deemed a
      renewal or replacement Lease and shall not be subject to the provisions of
      this

	63 	
      agreement.

	64 	
                       
      The provisions in this Article shall also be applicable to extensions of
      Oil and Gas Leases.

	65 	
      C. Acreage or Cash Contributions:

	66 	
                       
      While this agreement is in force, if any party contracts for a
      contribution of cash towards the drilling of a well or any other

	67 	
      operation on the Contract Area, such contribution shall
      be paid to the party who conducted the drilling or other operation and
      shall

	68 	
      be applied by it against the cost of such drilling or
      other operation. If the contribution be in the form of acreage, the party
      to whom

	69 	
      the contribution is made shall promptly tender an
      assignment of the acreage, without warranty of title, to the Drilling
      Parties in the

	70 	
      proportions said Drilling Parties shared the cost of
      drilling the well. Such acreage shall become a separate Contract Area and,
      to the

	71 	
      extent possible, be governed by provisions identical to
      this agreement. Each party shall promptly notify all other parties of
      any

	72 	
      acreage or cash contributions it may obtain in support of
      any well or any other operation on the Contract Area. The above

	73 	
      provisions shall also be applicable to optional rights to
      earn acreage outside the Contract Area which are in support of well
      drilled

	74 	
      inside Contract Area.

- 14 - 

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

	1 	
                       
      If any party contracts for any consideration relating to disposition of
      such party's share of substances produced hereunder,

	2 	
      such consideration shall not be deemed a contribution as
      contemplated in this Article VIII.C.

	3 	
      D. Assignment; Maintenance of Uniform
    Interest:

	4 	
                       
      For the purpose of maintaining uniformity of ownership in the Contract
      Area in the Oil and Gas Leases, Oil and Gas

	5 	
      Interests, wells, equipment and production covered by
      this agreement no party shall sell, encumber, transfer or make
  other

	6 	
      disposition of its interest in the Oil and Gas Leases and
      Oil and Gas Interests embraced within the Contract Area or in
  wells,

	7 	
      equipment and production unless such disposition covers
      either:

	8 	
                       
      1. the entire interest of the party in all Oil and Gas Leases, Oil and Gas
      Interests, wells, equipment and production; or

	9 	
                       
      2. an equal undivided percent of the party's present interest in all Oil
      and Gas Leases, Oil and Gas Interests, wells,

	10 	
      equipment and production in the Contract Area.

	11 	
                       
      Every sale, encumbrance, transfer or other disposition made by any party
      shall be made expressly subject to this agreement

	12 	
      and shall be made without prejudice to the right of the
      other parties, and any transferee of an ownership interest in any Oil
      and

	13 	
      Gas Lease or Interest shall be deemed a party to this
      agreement as to the interest conveyed from and after the effective date
      of

	14 	
      the transfer of ownership; provided, however, that the
      other parties shall not be required to recognize any such sale,

	15 	
      encumbrance, transfer or other disposition for any
      purpose hereunder until thirty (30) days after they have received a copy
      of the

	16 	
      instrument of transfer or other satisfactory evidence
      thereof in writing from the transferor or transferee. No assignment or
      other

	17 	
      disposition of interest by a party shall relieve such
      party of obligations previously incurred by such party hereunder with
      respect

	18 	
      to the interest transferred, including without limitation
      the obligation of a party to pay all costs attributable to an
    operation

	19 	
      conducted hereunder in which such party has agreed to
      participate prior to making such assignment, and the lien and
    security

	20 	
      interest granted by Article VII.B. shall continue to
      burden the interest transferred to secure payment of any such
      obligations.

	21 	
                       
      If, at any time the interest of any party is divided among and owned by
      four or more co-owners, Operator, at its discretion,

	22 	
      may require such co-owners to appoint a single trustee or
      agent with full authority to receive notices, approve
  expenditures,

	23 	
      receive billings for and approve and pay such party's
      share of the joint expenses, and to deal generally with, and with power
      to

	24 	
      bind, the co-owners of such party's interest within the
      scope of the operations embraced in this agreement; however, all such
      co-

	25 	
      owners shall have the right to enter into and execute all
      contracts or agreements for the disposition of their respective shares
      of

	26 	
      the Oil and Gas produced from the Contract Area and they
      shall have the right to receive, separately, payment of the sale

	27 	
      proceeds thereof.

	28 	
      E. Waiver of Rights to Partition:

	29 	
                       
      If permitted by the laws of the state or states in which the property
      covered hereby is located, each party hereto owning an

	30 	
      undivided interest in the Contract Area waives any and
      all rights it may have to partition and have set aside to it in severalty
      its

	31 	
      undivided interest therein.

	32 	
      F. Preferential Right to Purchase:

	33 	
      [
      ]            
       (Optional; Check if applicable.)

	34 	
                       
      Should any party desire to sell all or any part of its interests under
      this agreement, or its rights and interests in the Contract

	35 	
      Area, it shall promptly give written notice to the other
      parties, with full information concerning its proposed disposition,
      which

	36 	
      shall include the name and address of the prospective
      transferee (who must be ready, willing and able to purchase), the
      purchase

	37 	
      price, a legal description sufficient to identify the
      property, and all other terms of the offer. The other parties shall then
      have an

	38 	
      optional prior right, for a period of ten (10) days after
      the notice is delivered, to purchase for the stated consideration on
      the

	39 	
      same terms and conditions the interest which the other
      party proposes to sell; and, if this optional right is exercised,
    the

	40 	
      purchasing parties shall share the purchased interest in
      the proportions that the interest of each bears to the total interest of
      all

	41 	
      purchasing parties. However, there shall be no
      preferential right to purchase in those cases where any party wishes to
      mortgage

	42 	
      its interests, or to transfer title to its interests to
      its mortgagee in lieu of or pursuant to foreclosure of a mortgage of its
      interests,

	43 	
      or to dispose of its interests by merger, reorganization,
      consolidation, or by sale of all or substantially all of its Oil and Gas
      assets

	44 	
      to any party, or by transfer of its interests to a
      subsidiary or parent company or to a subsidiary of a parent company, or to
      any

	45 	
      company in which such party owns a majority of the
      stock.

	46 	ARTICLE IX.
	47 	INTERNAL REVENUE CODE ELECTION
	48 	
                       
      If, for federal income tax purposes, this agreement and the operations
      hereunder are regarded as a partnership, and if the

	49 	
      parties have not otherwise agreed to form a tax
      partnership pursuant to Exhibit "G" or other agreement between them,
      each

	50 	
      party thereby affected elects to be excluded from the
      application of all of the provisions of Subchapter "K," Chapter 1,
      Subtitle

	51 	
      "A," of the Internal Revenue Code of 1986, as amended
      ("Code"), as permitted and authorized by Section 761 of the Code
  and

	52 	
      the regulations promulgated thereunder. Operator is
      authorized and directed to execute on behalf of each party hereby
      affected

	53 	
      such evidence of this election as may be required by the
      Secretary of the Treasury of the United States or the Federal
    Internal

	54 	
      Revenue Service, including specifically, but not by way
      of limitation, all of the returns, statements, and the data required
    by

	55 	
      Treasury Regulation §1.761. Should there be any
      requirement that each party hereby affected give further evidence of
      this

	56 	
      election, each such party shall execute such documents
      and furnish such other evidence as may be required by the Federal
      Internal

	57 	
      Revenue Service or as may be necessary to evidence this
      election. No such party shall give any notices or take any other
    action

	58 	
      inconsistent with the election made hereby. If any
      present or future income tax laws of the state or states in which the
      Contract

	59 	
      Area is located or any future income tax laws of the
      United States contain provisions similar to those in Subchapter "K,"
      Chapter

	60 	
      1, Subtitle "A," of the Code, under which an election
      similar to that provided by Section 761 of the Code is permitted, each
      party

	61 	
      hereby affected shall make such election as may be
      permitted or required by such laws. In making the foregoing election,
      each

	62 	
      such party states that the income derived by such party
      from operations hereunder can be adequately determined without
  the

	63 	
      computation of partnership taxable income.

	64 	ARTICLE X.
	65 	CLAIMS AND LAWSUITS
	66 	
                       
      Operator may settle any single uninsured third party damage claim or suit
      arising from operations hereunder if the expenditure

	67 	
      does not exceed _________________________Dollars ($
      ___________________________) and if the payment is in complete
      settlement

	68 	
      of such claim or suit. If the amount required for
      settlement exceeds the above amount, the parties hereto shall assume and
      take over

	69 	
      the further handling of the claim or suit, unless such
      authority is delegated to Operator. All costs and expenses of handling
      settling,

	70 	
      or otherwise discharging such claim or suit shall be a
      the joint expense of the parties participating in the operation from which
      the

	71 	
      claim or suit arises. If a claim is made against any
      party or if any party is sued on account of any matter arising from
      operations

	72 	
      hereunder over which such individual has no control
      because of the rights given Operator by this agreement, such party
      shall

	73 	
      immediately notify all other parties, and the claim or
      suit shall be treated as any other claim or suit involving operations
      hereunder.

	74 	
      

- 15 - 

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

	1 	ARTICLE XI.
	2 	FORCE MAJEURE
	3 	
                       
      If any party is rendered unable, wholly or in part, by force majeure to
      carry out its obligations under this agreement, other

	4 	
      than the obligation to indemnify or make money payments
      or furnish security, that party shall give to all other parties

	5 	
      prompt written notice of the force majeure with
      reasonably full particulars concerning it; thereupon, the obligations of
      the

	6 	
      party giving the notice, so far as they are affected by
      the force majeure, shall be suspended during, but no longer than,
    the

	7 	
      continuance of the force majeure. The term "force
      majeure," as here employed, shall mean an act of God, strike, lockout,
      or

	8 	
      other industrial disturbance, act of the public enemy,
      war, blockade, public riot, lightening, fire, storm, flood or other act
      of

	9 	
      nature, explosion, governmental action, governmental
      delay, restraint or inaction, unavailability of equipment, and any
      other

	10 	
      cause, whether of the kind specifically enumerated above
      or otherwise, which is not reasonably within the control of the
    party

	11 	
      claiming suspension.

	12 	
                       
      The affected party shall use all reasonable diligence to remove the force
      majeure situation as quickly as practicable. The

	13 	
      requirement that any force majeure shall be remedied with
      all reasonable dispatch shall not require the settlement of
  strikes,

	14 	
      lockouts, or other labor difficulty by the party
      involved, contrary to its wishes; how all such difficulties shall be
      handled shall

	15 	
      be entirely within the discretion of the party
      concerned.

	16 	ARTICLE XII.
	17 	NOTICES
	18 	
                       
      All notices authorized or required between the parties by any of the
      provisions of this agreement, unless otherwise

	19 	
      specifically provided, shall be in writing and delivered
      in person or by United States mail, courier service, telegram,
    telex,

	20 	
      telecopier or any other form of facsimile, postage or
      charges prepaid, and addressed to such parties at the addresses listed
      on

	21 	
      Exhibit "A." All telephone or oral notices permitted by
      this agreement shall be confirmed immediately thereafter by
  written

	22 	
      notice. The originating notice given under any provision
      hereof shall be deemed delivered only when received by the party
  to

	23 	
      whom such notice is directed, and the time for such party
      to deliver any notice in response thereto shall run from the
date

	24 	
      the originating notice is received. "Receipt" for
      purposes of this agreement with respect to written notice delivered
      hereunder

	25 	
      shall be actual delivery of the notice to the address of
      the party to be notified specified in accordance with this agreement,
      or

	26 	
      to the telecopy, facsimile or telex machine of such
      party. The second or any responsive notice shall be deemed delivered
      when

	27 	
      deposited in the United States mail or at the office of
      the courier or telegraph service, or upon transmittal by telex,
      telecopy

	28 	
      or facsimile, or when personally delivered to the party
      to be notified, provided, that when response is required within 24
    or

	29 	
      48 hours, such response shall be given orally or by
      telephone, telex, telecopy or other facsimile within such period. Each
      party

	30 	
      shall have the right to change its address at any time,
      and from time to time, by giving written notice thereof to all
  other

	31 	
      parties. If a party is not available to receive notice
      orally or by telephone when a party attempts to deliver a notice
      required

	32 	
      to be delivered within 24 or 48 hours, the notice may be
      delivered in writing by any other method specified herein and
  shall

	33 	
      be deemed delivered in the same manner provided above for
      any responsive notice.

	34 	ARTICLE XIII.
	35 	TERM OF AGREEMENT
	36 	
                       
      This agreement shall remain in full force and effect as to the Oil and Gas
      Leases and/or Oil and Gas Interests subject

	37 	
      hereto for the period of time selected below; provided,
      however, no party hereto shall ever be construed as having any right,
      title

	38 	
      or interest in or to any Lease or Oil and Gas Interest
      contributed by any other party beyond the term of this
agreement.

	39 	
               [
      ]   Option No. 1: So long as any of the Oil and Gas
      Leases subject to this agreement remain or are continued in

	40 	
                     
      force as to any part of the Contract Area, whether by production,
      extension, renewal or otherwise.

	41 	
               [
      ]   Option No. 2: In the event the well described in
      Article VI.A., or any subsequent well drilled under any
provision

	42 	
                      of
      this agreement, results in the Completion of a well as a well capable of
      production of Oil and/or Gas in paying

	43 	
                      quantities,
      this agreement shall continue in force so long as any such well is capable
      of production, and for an

	44 	
                      additional
      period of ________days thereafter; provided, however, if, prior to the
      expiration of such

	45 	
                      additional
      period, one or more of the parties hereto are engaged in drilling,
      Reworking, Deepening, Sidetracking,

	46 	
                      Plugging
      Back, testing or attempting to Complete or Re-complete a well or wells
      hereunder, this agreement shall

	47 	
                      continue
      in force until such operations have been completed and if production
      results therefrom, this agreement

	48 	
                      shall
      continue in force as provided herein. In the event the well described in
      Article VI.A., or any subsequent well

	49 	
                      drilled
      hereunder, results in a dry hole, and no other well is capable of
      producing Oil and/or Gas from the

	50 	
                      Contract
      Area, this agreement shall terminate unless drilling, Deepening,
      Sidetracking, Completing, Re-

	51 	
                      completing,
      Plugging Back or Reworking operations are commenced within
      ________________ days from the

	52 	
                      date
      of abandonment of said well. "Abandonment" for such purposes shall mean
      either (i) a decision by all parties

	53 	
                      not
      to conduct any further operations on the well or (ii) the elapse of 180
      days from the conduct of any

	54 	
                      operations
      on the well, whichever first occurs.

	55 	
                       
      The termination of this agreement shall not relieve any party hereto from
      any expense, liability or other obligation or any

	56 	
      remedy therefor which has accrued or attached prior to
      the date of such termination.

	57 	
                       
      Upon termination of this agreement and the satisfaction of all obligations
      hereunder, in the event a memorandum of this

	58 	
      Operating Agreement has been filed of record, Operator is
      authorized to file of record in all necessary recording offices
a

	59 	
      notice of termination, and each party hereto agrees to
      execute such a notice of termination as to Operator's interest,
  upon

	60 	
      request of Operator, if Operator has satisfied all its
      financial obligations.

	61 	ARTICLE XIV.
	62 	COMPLIANCE WITH LAWS AND REGULATIONS
	63 	
      A. Laws, Regulations and Orders:

	64 	
                       
      This agreement shall be subject to the applicable laws of the state in
      which the Contract Area is located, to the valid rules,

	65 	
      regulations, and orders of any duly constituted
      regulatory body of said state; and to all other applicable federal,
      state,

	66 	
      and local laws, ordinances, rules, regulations and
      orders.

	67 	
      B. Governing Law:

	68 	
                       
      This agreement and all matters pertaining hereto, including but
      not limited to matters of performance, non-

	69 	
      performance, breach, remedies, procedures, rights,
      duties, and interpretation or construction, shall be governed
    and

	70 	
      determined by the law of the state in which the
      Contract Area is located. If the Contract Area is in two or more
      states,

	71 	
      the law of the state of
      __________________________shall govern.

	72 	
      C. Regulatory Agencies:

	73 	
                       
      Nothing herein contained shall grant, or be construed to grant, Operator
      the right or authority to waive or release any

	74 	
      rights, privileges, or obligations which Non-Operators
      may have under federal or state laws or under rules, regulations
  or

- 16 - 

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

	1 	
      orders promulgated under such laws in reference to oil,
      gas and mineral operations, including the location, operation,
or

	2 	
      production of wells, on tracts offsetting or adjacent to
      the Contract Area.

	3 	
                       
      With respect to the operations hereunder, Non-Operators agree to release
      Operator from any and all losses, damages,

	4 	
      injuries, claims and causes of action arising out of,
      incident to or resulting directly or indirectly from Operator's
      interpretation

	5 	
      or application of rules, rulings, regulations or orders
      of the Department of Energy or Federal Energy Regulatory
  Commission

	6 	
      or predecessor or successor agencies to the extent such
      interpretation or application was made in good faith and does
not

	7 	
      constitute gross negligence. Each Non-Operator further
      agrees to reimburse Operator for such Non-Operator's share of

	8 	
      production or any refund, fine, levy or other
      governmental sanction that Operator may be required to pay as a result of
      such

	9 	
      an incorrect interpretation or application, together with
      interest and penalties thereon owing by Operator as a result of
  such

	10 	
      incorrect interpretation or application.

	11 	ARTICLE XV.
	12 	MISCELLANEOUS
	13 	
      A. Execution:

	14 	
                       
      This agreement shall be binding upon each Non-Operator when this agreement
      or a counterpart thereof has been

	15 	
      executed by such Non-Operator and Operator
      notwithstanding that this agreement is not then or thereafter executed by
      all of

	16 	
      the parties to which it is tendered or which are listed
      on Exhibit "A" as owning an interest in the Contract Area or
  which

	17 	
      own, in fact, an interest in the Contract Area. Operator
      may, however, by written notice to all Non-Operators who have

	18 	
      become bound by this agreement as aforesaid, given at any
      time prior to the actual spud date of the Initial Well but in no

	19 	
      event later than five days prior to the date specified in
      Article VI.A. for commencement of the Initial Well, terminate
  this

	20 	
      agreement if Operator in its sole discretion determines
      that there is insufficient participation to justify commencement
  of

	21 	
      drilling operations. In the event of such a termination
      by Operator, all further obligations of the parties hereunder shall
      cease

	22 	
      as of such termination. In the event any Non-Operator has
      advanced or prepaid any share of drilling or other costs

	23 	
      hereunder, all sums so advanced shall be returned to such
      Non-Operator without interest. In the event Operator proceeds

	24 	
      with drilling operations for the Initial Well without the
      execution hereof by all persons listed on Exhibit "A" as having
a

	25 	
      current working interest in such well, Operator shall
      indemnify Non-Operators with respect to all costs incurred for
  the

	26 	
      Initial Well which would have been charged to such person
      under this agreement if such person had executed the same and

	27 	
      Operator shall receive all revenues which would have been
      received by such person under this agreement if such person had

	28 	
      executed the same.

	29 	
      B. Successors and Assigns:

	30 	
                       
      This agreement shall be binding upon and shall inure to the benefit of the
      parties hereto and their respective heirs,

	31 	
      devisees, legal representatives, successors and assigns,
      and the terms hereof shall be deemed to run with the Leases or

	32 	
      Interests included within the Contract Area.

	33 	
      C. Counterparts:

	34 	
                       
      This instrument may be executed in any number of counterparts, each of
      which shall be considered an original for all

	35 	
      purposes.

	36 	
      D. Severability:

	37 	
                       
      For the purposes of assuming or rejecting this agreement as an executory
      contract pursuant to federal bankruptcy laws,

	38 	
      this agreement shall not be severable, but rather must be
      assumed or rejected in its entirety, and the failure of any party
  to

	39 	
      this agreement to comply with all of its financial
      obligations provided herein shall be a material default.

	40 	ARTICLE XVI.
	41 	OTHER PROVISIONS
	42 	
      

	43 	
      

	44 	
      

	45 	
      

	46 	
      

	47 	
      

	48 	
      

	49 	
      

	50 	
      

	51 	
      

	52 	
      

	53 	
      

	54 	
      

	55 	
      

	56 	
      

	57 	
      

	58 	
      

	59 	
      

	60 	
      

	61 	
      

	62 	
      

	63 	
      

	64 	
      

	65 	
      

	66 	
      

	67 	
      

	68 	
      

	69 	
      

	70 	
      

	71 	
      

	72 	
      

	73 	
      

	74 	
      

- 17 - 

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

	1 	                 
      IN WITNESS WHEREOF, this agreement shall be effective as of the
      ___________day of _______________________, 
	2 	__________________. 
	3 	______________________________________, who has prepared and
      circulated this form for execution, represents and warrants 
	  	that the form was printed from
      and, with the exception(s) listed below, is identical to the AAPL Form
      610-1989 Model Form 
	4 	Operating Agreement, as published
      in computerized form by Forms On-A-Disk, Inc. No changes, alterations, or
    
	  	modifications, other than those
      made by strikethrough and/or insertion and that are clearly recognizable
      as changes in 
	5 	Articles
      _________________________________________________________________, have
      been made to the form. 
	6 	ATTEST OR WITNESS:
      OPERATOR 
	7 	                                                                                                                       ____________________________________________
	8 	____________________________________________                         
      By ____________________________________________
	9 	____________________________________________                               ____________________________________________                               
       
	  	                                                                                                                      
      Type or print name 
	10 	 
	11 	                                                                                                                       Title
      _______________________________________
	12 	                                                                                                                       Date
      _______________________________________
	13 	                                                                                                                      
      Tax ID or S.S. No. _____________________________
	14 	 
	15 	NON-OPERATORS 
	16 	 
	17 	                                                                                                                       ____________________________________________ 
	  	____________________________________________                         
      By ____________________________________________
	18 	____________________________________________                               ____________________________________________       
	  	                                                                                                                      
      Type or print name 
	19 	 
	20 	                                                                                                                       Title
      _______________________________________
	21 	                                                                                                                       Date
      _______________________________________
	22 	                                                                                                                      
      Tax ID or S.S. No. _____________________________
	23 	 
	24 	                                                                                                                        ____________________________________________
	25 	____________________________________________                         
      By ____________________________________________
	26 	____________________________________________                               ____________________________________________       
	 	Type or print name 
	27 	      
                                                                                                                     Title
      _______________________________________
	28 	                                                                                                                       Date
      _______________________________________
	29 	                                                                                                                      
      Tax ID or S.S. No. _____________________________
	30 	 
	31 	                                                                                                                        ____________________________________________
	32 	____________________________________________                         
      By ____________________________________________
	33 	____________________________________________                               ____________________________________________       
	34 	Type or print name 
	35 	                                                                                                                       Title
      _______________________________________
	36 	                                                                                                                       Date
      _______________________________________
	37 	                                                                                                                      
      Tax ID or S.S. No. _____________________________

- 18 - 

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

	1 	ACKNOWLEDGMENTS 
	2 	       Note:
      The following forms of acknowledgment are the short forms approved by the
      Uniform Law on Notarial Acts. 
	3 	The validity and effect of these
      forms in any state will depend upon the statutes of that state. 
	4 	 
	5 	Individual acknowledgment: 
	6 	State of _______________________)
    
	7 	                                                                    
      ) ss. 
	8 	County of _____________________)
    
	9 	        This instrument
      was acknowledged before me on 
	10 	____________________________________________by
      _______________________________________________
	11 	 
	12 	(Seal, if
      any)                                                                                     
      _______________________________________________
	13 	                                                                                                           
      Title (and Rank) ___________________________________
	14 	                                                                                                           
      My commission expires: _____________________________
	15 	 
	16 	Acknowledgment in representative
      capacity: 
	17 	State of _______________________)
    
	18 	                                                                    
      ) ss. 
	19 	County of _____________________)
    
	20 	This instrument was acknowledged
      before me on 
	21 	____________________________________________by
      _______________________________________________as 
	22 	________________________of
      ____________________________________________________________________.
  
	23 	(Seal, if
      any)                                                                                     
      ________________________________________________
	24 	                                                                                                           
      Title (and Rank) ___________________________________
	25 	                                                                                                           
      My commission expires: _____________________________
	26 	 
	27 	 
	28 	 
	29 	 
	30 	 
	31 	 
	32 	 
	33 	 
	34 	 
	35 	 
	36 	 
	37 	 

- 19 -Filed by Automated Filing Services Inc. (604) 609-0244 - Buckingham Exploration Inc. - Exhibit 10.3

 

Management Agreement 

THIS MANAGEMENT AGREEMENT
(the "Agreement") effective as of the 7th day of May 2007. 

	BETWEEN 	 	 
	 	BUCKINGHAM EXPLORATION INC. 	 
	 	502 - 1978 Vine Street 	 
	 	Vancouver, BC 	 
	 	V6K 4S1 Canada 	 
	 	  	 
	 		(the
"Company")  
	AND 	 	 
	 	CHRISTOPHER ROBIN RELPH 	 
	 	15 Nebuck House 	 
	 	Olde Towne at Sandyport 	 
	 	West Bay Street 	 
	 	Nassau, Bahamas 	 
	 	  	 
	 	 	(the
  “Executive”) 

WHEREAS: 

	A 	
      The Company is engaged in the acquisition of mining
      rights and the exploration of mining properties; and

	 	 
	B 	
      The Company and the Executive have agreed to enter into a
      management agreement for their mutual benefit.

THIS AGREEMENT WITNESSES that the parties have agreed
that the terms and conditions of the relationship shall be as follows: 

	1 	
      Duties

	 	 
	1.1 	
      The Company appointed the Executive to undertake the
      duties and exercise the powers as President, Chief Executive Officer
      and Chief Financial Officer of the Company as may be requested of
      the Executive by the Company, and in the other offices to which the
      Executive may be appointed by the subsidiary companies of the Company, and
      the Executive accepts the office, on the terms and conditions set forth in
      this Agreement.

	 	 
	2 	
      Term

	 	 
	2.1 	
      This Agreement shall commence with effect from May 7,
      2007 and shall continue until terminated in accordance with the provisions
      of clause 6 of this Agreement.

— 2 — 

	3 	
      Compensation

	 	 	 
	3.1 	
      The fixed remuneration of the Executive for his or her
      services shall be at the rate of US$10,000 per month commencing March 1,
      2007, payable at the beginning of each month, or accruing as a debt owing
      by the Company to the Executive beginning on March 1, 2007.

	 	 	 
	3.2 	
      In addition, the Company shall grant to the Executive
      2,000,000 options (the “Options”) to purchase common shares in the Company
      at a purchase price of US$0.10/share. The Options shall vest immediately
      upon execution of this Agreement and have an expiration date of 3 years
      from the date of this Agreement. Further terms of the Options are set out
      in an Option Agreement between the Company and the Executive dated May 7,
      2007. In addition, the Executive may be compensated with further options
      from time to time, at the discretion of the board of directors of the
      Company.

	 	 	 
	3.3 	
      In addition to the above compensation, the Company, at
      its discretion, may award an annual bonus to the Executive, based on
      performance and as per industry standards, which bonus may not be given at
      all in any year. The payment of a bonus in any year shall not be
      considered a precedent for any later year and the payment shall not fetter
      the Company’s absolute discretion in future years to pay or not to pay a
      bonus.

	 	 	 
	4 	
      Authority

	 	 	 
	4.1 	
      The Executive shall have, subject always to the general
      or specific instructions and directions of the Board of Directors of the
      Company, full power and authority to manage and direct the business and
      affairs of the Company (except only the matters and duties as by law must
      be transacted or performed by the Board of Directors or by the
      shareholders of the Company in general meeting), including power and
      authority to enter into contracts, engagements or commitments of every
      nature or kind in the name of and on behalf of the Company and to engage
      and employ and to dismiss all managers and other employees and agents of
      the Company other than officers of the Company.

	 	 	 
	4.2 	
      The Executive shall conform to all lawful instructions
      and directions given to the Executive by the Board of Directors of the
      Company, and obey and carry out the Bylaws of the Company.

	 	 	 
	5 	
      Confidential Information

	 	 	 
	5.1 	
      The Executive acknowledges that as the President and
      Chief Executive Officer and in any other position as the Executive may
      hold, he or she will acquire information about certain matters and things
      which are confidential to the Company, and which information is the
      exclusive property of the Company, including:

	 	 	 
		(a) 	
      names and locations of certain mining
  properties;

	 	 	 
		(b) 	
      trade secrets; and

	 	 	 
		(c) 	
      confidential information concerning the business
      operations or financing of the Company.

	 	 	 
	5.2 	
      The Executive acknowledges that the information referred
      to in clause 5.1 could be used to the detriment of the Company.
      Accordingly, the Executive undertakes not to disclose same to any third
      party either during the term of this Agreement (except as may be necessary
      in the proper provision of the Executive’s services under this Agreement),
      or after the termination of this Agreement, except with the written
      permission of an officer of the Company.

— 3 — 

	6 	
      Termination

	 	 
	6.1 	
      Either the Company or the Executive may terminate this
      Agreement at any time, provided that 14 days’ notice has been delivered by
      the party terminating the Agreement.

	 	 
	7 	
      Company’s Property

	 	 
	7.1 	
      The Executive acknowledges that all items of any and
      every nature or kind created or used by the Executive pursuant to this
      Agreement, or furnished by the Company to the Executive, and all
      equipment, automobiles, credit cards, books, records, reports, files,
      diskettes, manuals, literature, confidential information or other
      materials, shall remain and be considered the exclusive property of the
      Company at all times and shall be surrendered to the Company, in good
      condition, promptly at the request of the Company, or in the absence of a
      request, on the termination of this Agreement. The Executive hereby
      assigns any and all copyright to the Company on all literary and other
      artistic works created for the benefit of the Company towards which the
      Executive contributes, and the Executive waives any and all moral rights
      that may be associated with such works.

	 	 
	8 	
      Assignment of Rights

	 	 
	8.1 	
      The rights which accrue to the Company under this
      Agreement shall pass to its successors or assigns. The rights of the
      Executive under this Agreement are not assignable or transferable in any
      manner.

	 	 
	9 	
      Notices

	 	 
	9.1 	
      Any notice required or permitted to be given to the
      Executive shall be sufficiently given if delivered to the Executive
      personally or if mailed by registered mail to the Executive’s address last
      known to the Company, or if delivered to the Executive via
    facsimile.

	 	 
	9.2 	
      Any notice required or permitted to be given to the
      Company shall be sufficiently given if mailed by registered mail to the
      Company’s head office at its address last known to the Executive, or if
      delivered to the Company via facsimile.

	 	 
	10 	
      Severability

	 	 
	10.1 	
      In the event that any provision or part of this Agreement
      shall be deemed void or invalid by a court of competent jurisdiction, the
      remaining provisions or parts shall be and remain in full force and
      effect.

	11 	
      Currency

	 	 
	11.1 	
      All references to currency in this Agreement, unless
      otherwise indicated, are to US dollars.

IN WITNESS WHEREOF this Agreement has been executed by
the parties to it, the day, month and year first written. 

BUCKINGHAM EXPLORATION INC. by its authorized signatory

	Per: 	 
	/s/ Christopher Robin Relph	 
	Christopher Robin Relph, President 	 
	 	 
	Executive: 	 
	/s/ Christopher Robin Relph	 
	Christopher Robin Relph

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