Document:

Exhibit 10.4

                             PARTICIPATION AGREEMENT

                             Eugene Island Block 346
                             Eugene Island Block 347

     This Participation Agreement ("Agreement") is made and entered into
effective as of the 15th day of March, 2007 (the "Effective Date"), by and
between Newfield Exploration Company ("Newfield") and Ridgewood Energy
Corporation ("Ridgewood"). Newfield and Ridgewood are also sometimes hereinafter
referred to collectively as the "Parties" or individually as a "Party".

                                   WITNESSETH:

     WHEREAS, Apache Corporation ("Apache") owns one hundred percent (100%)
record title interest in the following described portion of oil and gas lease
and area:

     Oil and Gas Lease dated June 1, 1994, bearing serial number OCS-G 14482, by
     and between the United States of America, as Lessor, and Anadarko Petroleum
     Corporation and Phillips Petroleum Company, as Lessees, covering all of
     Block 346, Eugene Island Area, South Addition, OCS Leasing Map, Louisiana
     Map No. LA4A, containing approximately 5,000 acres more or less ("Apache
     Lease") and

     WHEREAS, Apache is willing to Farmout a portion of the Apache Lease to the
Contract Area (hereinafter defined), INSOFAR AND ONLY INSOFAR AS said Apache
Lease covers the West Half of the Southwest Quarter of the Northwest Quarter
(W/2 SW/4 NW/4); the Southeast Quarter of the Southwest Quarter of the Northwest
Quarter (SE/4 SW/4 NW/4); the Northwest Quarter of the Southwest Quarter (NW/4
SW/4) and the West Half of the Southwest Quarter of the Southwest Quarter (W/2
SW/4 SW/4) of said Apache Lease ("EI 346 Acreage").

     WHEREAS, Newfield owns one hundred percent (100%) record title interest in
the following described portion of oil and gas lease and area:

     Oil and Gas Lease dated June 1, 2006, bearing serial number OCS-G 27919, by
     and between the United States of America, as Lessor, and Newfield
     Exploration Company, as Lessee, covering all of Block 347, Eugene Island
     Area, South Addition, OCS Leasing Map, Louisiana Map No. LA4A, containing
     approximately 5,000 acres more or less ("Newfield Lease") and

     WHEREAS, Newfield is willing to commit its interest in a portion of the
Newfield Lease to the Contract Area INSOFAR AND ONLY INSOFAR AS said Newfield
Lease covers the Southeast Quarter of the Northeast Quarter (SE/4, NE/4); the
North Half of the Northeast Quarter of the Southeast Quarter (N/2 NE/4 SE/4);
the Southeast Quarter of the Northeast Quarter of the Southeast Quarter (SE/4
NE/4 SE/4) and the East Half of the Southeast Quarter of the Southeast Quarter
(E/2 SE/4 SE/4) of said Newfield Lease ("EI 347 Acreage").

     The alloquotted portions of the EI 346 Acreage and the alloquotted portions
of the El 347 Acreage as described above are hereinafter referred to as the
"Contract Area".

<PAGE>

     WHEREAS, Newfield and Apache entered into that certain Option Agreement,
dated September 14, 2006 ("Option Agreement"), which provided Apache the option
to either (i) participate with Newfield in drilling a test well on the Contract
Area or (ii) farmout the EI 346 Acreage within the Contract Area to Newfield. A
copy of the Option Agreement is attached hereto as Exhibit "A";

     WHEREAS, pursuant to the Option Agreement, Apache has elected to farmout
the Contract Area to Newfield, and Newfield has entered into a formal farmout
agreement with Apache ("Farmout Agreement") covering the Contract Area, which
provides that Apache shall reserve an overriding royalty interest ("ORRI") of
5.0% of 6/6ths, but proportionately in the event Apache owns less than one
hundred percent (100%) of the record title and/or operating rights in the
Contract Area which Newfield may earn. The Farmout Agreement is attached hereto
as Exhibit "B";

     WHEREAS, Ridgewood agrees to bear a disproportionate share of drilling
costs associated with the Initial Test Well (defined in Article 3 hereinbelow)
in order to earn an interest in the Contract Area and the Newfield Lease,
pursuant to the terms and conditions of this Agreement, the Option Agreement and
the Farmout Agreement;

     WHEREAS, the Parties desire to enter into this Agreement to set forth the
manner in which the cost of drilling, producing and operating wells, and the
production from the Contract Area and the Newfield Lease and the interest in the
Contract Area and the Newfield Lease shall be shared and/or owned.

     NOW, THEREFORE, for the consideration, being the mutual benefits and
advantages accruing hereunder, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:

                       Article 1 - Interest of the Parties
                       -----------------------------------

     The costs, risk and liabilities associated with the exploration and
development of the Contract Area and the Newfield Lease (including all wells,
platforms, pipelines, facilities and equipment associated directly with the
specified operations herein) and all oil and gas produced from wells drilled
pursuant to the terms hereof, shall be borne and owned, subject to the terms and
conditions set out herein, and unless otherwise agreed, by the Parties in
accordance with the following percentage working interests ("Working
Interests"):

           Party                            Working Interests
           -----                            -----------------

          Newfield                               50.00000%
          Ridgewood                              50.00000%*

*Subject to an obligation to pay a disproportionate share of Initial Test Well
costs to Casing Point, as further described in Article 3.

    Participation Agreement-Eugene Island Block 346/347 dated March 15, 2007
           Newfield Exploration Company & Ridgewood Energy Corporation
                                     - 2 -
<PAGE>

                         Article 2 - Operating Agreement
                         -------------------------------

     2.1  Newfield is designated as the Operator of the Contract Area and the
Newfield Lease, and all operations conducted on the Contract Area and the
Newfield Lease shall be performed in accordance with and shall be subject to the
terms and provisions of this Agreement, the Option Agreement, the Farmout
Agreement and the Operating Agreement attached hereto as Exhibit "C" ("Operating
Agreement"). The Parties shall execute the Operating Agreement simultaneously
with this Agreement.

     2.2  Notwithstanding anything herein to the contrary, the non-consent
penalties set forth in Article XII of the Operating Agreement shall not be
applicable to drilling operations on the Initial Test Well, or substitute
therefor, prior to the Parties drilling an Earning Well (as hereinafter
defined).

                          Article 3 - Initial Test Well
                          -----------------------------

     3.1  On or before May 30, 2007, Newfield shall commence actual drilling
operations for the Eugene Island 346 (OCS-G-14482) No. 7 Well at an approximate
surface and bottomhole location of 6,150' FSL and 900' FWL of Eugene Island 346
("Initial Test Well"). The Initial Test Well will be drilled in accordance with
Newfield's AFE dated October 27, 2006, and shall be drilled to a proposed total
depth of 12,890' TVD/MD, or to a depth sufficient to fully evaluate the "GA-1"
Sand, whichever is lesser depth ("Contract Depth"). The "GA-1" Sand correlates
to the shale interval which occurs at 10,550' MD (10,459' SSTVD) in the El 346,
Anadarko Petroleum Corporation Well No. 1 ST-1 (OCS-G 14482).

     3.2  As additional consideration for the opportunity to earn its Working
Interest in the Contract Area, the Parties will pay the following percentages of
the costs to drill the Initial Test Well to Casing Point (as described in
Article 3.3 below):

          Newfield             0%
          Ridgewood            100%

The dry hole well cost for the Initial Test Well is estimated to be
$18,036,673.00 ("Dry Hole Cost") as outlined on the drilling authorization for
expenditure ("AFE") for the Initial Test Well attached hereto as Exhibit "D".
Ridgewood's disproportionate cost sharing will cease once cumulative costs and
expenses for the Initial Test Well, and if drilled, the substitute well
therefore, reach Casing Point or $18,000,000.00, whichever occurs first.
Thereafter Newfield will bear its 50% and Ridgewood will bear its 50% share of
subsequent costs, subject to the non-consent rights set out in the Operating
Agreement.

    Participation Agreement-Eugene Island Block 346/347 dated March 15, 2007
           Newfield Exploration Company & Ridgewood Energy Corporation
                                     - 3 -
<PAGE>

     3.3  Casing Point is defined as that point in time when the Initial Test
Well, or substitute well therefor, has been drilled to the Contract Depth, and
all open-hole logs and all appropriate tests have been performed and delivered
to the Parties, and a recommendation is made to (i) set casing and complete the
well, (ii) plug and abandon the well or (iii) conduct other operations as
provided within the priority of operations outlined within the Operating
Agreement.

     3.4  If the Initial Test Well is either, i) unable to reach the Contract
Depth due to encountering domal material, heaving shale, saltwater, salt or
other impenetrable substance, or suffers any adverse condition (mechanical,
structural, stratigraphic or otherwise) in drilling said well, which substance
or condition cannot be overcome at a reasonable cost by means considered
customary or ordinary in the industry; or, ii) plugged and abandoned as a dry
hole, then any Party shall have the right to propose a substitute well in the
same manner as provided for and defined in the Farmout Agreement. Ridgewood
shall have the option, but not the obligation, to participate in such substitute
well; however, if Ridgewood elects not to participate in a substitute well, it
shall forfeit its rights under this Agreement, and in the Farmout Agreement. If
actual drilling operations are commenced on the substitute well within ninety
(90) days from the date of rig release of the Initial Test Well, then said well
shall be considered the Initial Test Well for purposes of this Agreement.

                 Article 4 - Assignment and Assumption of Rights
                 -----------------------------------------------

     4.1  Newfield will obtain Apache's written consent to assignment, by
Newfield to Ridgewood, of a 50.00% interest in the rights, duties and
obligations conferred by the Option Agreement and Farmout Agreement.

     4.2  Upon Ridgewood's participation pursuant to the terms and conditions
set forth herein and in the Farmout Agreement, and upon the Parties drilling an
Earning Well (as defined in the Farmout Agreement) and satisfying the Earning
Requirements defined and set out in the Farmout Agreement, the Parties who
participated in the Earning Well, and the full satisfaction of the Earning
Requirements, shall receive from Apache, an assignment of their respective
Working Interest shares of the operating rights interest in the Apache Lease
within the Contract Area, from the surface down to the base of the deepest
productive interval in said well and its stratigraphic equivalent, plus one
hundred (100) feet. In addition, Ridgewood shall be entitled to an assignment of
fifty percent (50%) of the Record Title interest in the entirety of the Newfield
Lease provided it participates in the drilling of the Initial Test Well or
substitute(s) thereof to Contract Depth as defined in the Farmout Agreement.

     4.3  The interest assigned to Ridgewood pursuant hereto shall be subject
only to the federal 1/6th royalty (subject to any applicable royalty relief
granted by the Minerals Management Service), and the Apache ORRI, and shall be
free and clear of any other overriding royalty interest, production payments, or
other burdens on production.

    Participation Agreement-Eugene Island Block 346/347 dated March 15, 2007
           Newfield Exploration Company & Ridgewood Energy Corporation
                                     - 4 -
<PAGE>

                       Article 5 - Ownership of Production
                       -----------------------------------

     Production from each well drilled on the Contract Area will be owned
pursuant to the terms of this Agreement, the Farmout Agreement and the Operating
Agreement.

                              Article 6 - Insurance
                              ---------------------

     In connection with any drilling and/or production operations on the
Contract Area, the Operator shall carry the type and amount of insurance
required by the Farmout Agreement and the Operating Agreement. No other
insurance shall be required of the Operator hereunder.

                      Article 7 - Miscellaneous Provisions
                      ------------------------------------

     Additionally, Ridgewood commits to participate in the drilling of the West
Cameron Block 296 Prospect pursuant to the terms of Letter Agreement dated
November 28, 2006, between Newfield and Ridgewood.

                           Article 8 - Confidentiality
                           ---------------------------

     Except for required disclosures as provided in the Operating Agreement, or
the Farmout Agreement, no Party shall release any geological, geophysical, or
reservoir information or any logs or other information pertaining to the
progress, tests, or results of any well drilled pursuant to this Agreement.

                              Article 9 - Conflicts
                              ---------------------

     Unless provided for otherwise in this Agreement, in the event of any
conflict between the terms and conditions as set forth herein and the terms and
conditions set forth in the Farmout Agreement, the terms and conditions set
forth in the Farmout Agreement shall control. In the event of any conflict
between the terms and conditions as set forth herein and the terms and
conditions set forth in the Operating Agreement, the terms and condition set
forth herein shall control.

                              Article 10 - Notices
                              --------------------

     All notices, requests or demands to be given under this Agreement shall be
in writing and shall be deemed to have been given (i) three (3) business days
after being sent by registered mail or certified mail, postage prepaid, or (ii)
on the day sent, if hand delivered or sent by facsimile, with receipt confirmed
and verbal confirmation, in each case addressed as follows or to such other
address as may have been furnished in writing to the other Parties hereto in
accordance herewith:

    Participation Agreement-Eugene Island Block 346/347 dated March 15, 2007
           Newfield Exploration Company & Ridgewood Energy Corporation
                                     - 5 -
<PAGE>

     If to Newfield:
     ---------------
     Newfield Exploration Company
     363 N. Sam Houston Pkwy. E., Suite 2020
     Houston, Texas 77060
     Attention: Ms. Christina Linscomb
     Office Phone: (281) 847-6074
     Fax Number:   (281) 405-4207

     If to Ridgewood:
     -----------------
     Ridgewood Energy Corporation
     11700 Old Katy Road, Suite 280
     Houston, Texas 77079
     Attn: Mr. Greg Tabor
     Office Phone: (281) 293-8449
     Fax Number:   (281) 293-7705

                          Article 11 - Topical Headings
                          -----------------------------

     Topical headings appearing at the top of each numbered article have been
inserted for convenience only and are to be given no force or affect whatsoever
in the interpretation of this Agreement.

                       Article 12 - Successors and Assigns
                       -----------------------------------

     This Agreement shall be binding upon each Party and their successors and
assigns. An assignment by a Party of any lands affected by this Agreement shall
be made expressly subject to, and the assignee shall expressly agree to assume
and comply with, the terms and provisions of this Agreement, the Option
Agreement, the Farmout Agreement and the Operating Agreement.

                       Article 13 - Counterpart Execution
                       ----------------------------------

     This Agreement may be executed by signing the original or a counterpart
thereof. If this Agreement is executed in counterparts, all counterparts taken
together shall have the same effect as if all the Parties had signed the same
instrument. However, this Agreement shall not be effective as to any Party,
until it has been executed by all Parties.

    Participation Agreement-Eugene Island Block 346/347 dated March 15, 2007
           Newfield Exploration Company & Ridgewood Energy Corporation
                                     - 6 -
<PAGE>

     IN WITNESS WHEREOF, this instrument is executed by each of the Parties on
the dates noted below, but shall be effective as of the Effective Date
hereinabove first written.

 WITNESSES:                               NEWFIELD EXPLORATION COMPANY

/s/ Christina Linscomb                    By:   /s/ W.M. Blumenshine
----------------------                          ----------------------
/s/ Rhoda Vaughn                          Name:     W.M. Blumenshine
---------------------                     Title:    Vice President - Land

WITNESSES:                                RIDGEWOOD ENERGY CORPORATION

Christina Linscomb                        By:   /s/ Randy Bennett
---------------------                           ----------------------
                                          Name:     Randy Bennett
                                          Title:    Land Manager

    Participation Agreement-Eugene Island Block 346/347 dated March 15, 2007
           Newfield Exploration Company & Ridgewood Energy Corporation
                                     - 7 -
<PAGE>

                                 [NEWFIELD LOGO]

                               September 14, 2006

Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, TX 77056
Attn:   Mr. Darrell Donaldson

        Re:  Option Agreement
             Eugene Island Block 346
             Eugene Island Block 347
             Federal Offshore Louisiana

Dear Mr. Donaldson:

Newfield Exploration Company ("Newfield") hereby proposes that Apache
Corporation ("Apache") as owner of Lease No. OCS-G 14482, Eugene Island Block
346, commit its interest in the West Half of the Southwest Quarter of the
Northwest Quarter (W/2SW/4NW/4), the Southeast Quarter of the Southwest Quarter
of the Northwest Quarter (SE/4SW/4NW/4), the Northwest Quarter of the Southwest
Quarter (NW/4SW/4) and the West Half of the Southwest Quarter of the Southwest
Quarter (W/2SW/4SW/4) of said lease ("EI 346 Acreage") and Newfield, as owner of
Lease No. OCS-G 27919, Eugene Island Block 347, commit its interest in the
Southeast Quarter of the Northeast Quarter (SE/4NE/4), North Half of the
Northeast Quarter of the Southeast Quarter (N/2NE/4SE/4), Southeast Quarter of
the Northeast Quarter of the Southeast Quarter (SE/4NE/4SE/4) and the East Half
of the Southeast Quarter of the Southeast Quarter (E/2SE/4SE/4) of said lease
("Newfield Acreage") with the combined El 346 Acreage and Newfield Acreage being
referred to herein as the ("Contract Area") under this option agreement ("Option
Agreement") pursuant to the following terms and conditions:

1.   Well Proposal.

     a.   Within thirty (30) days of full execution of this Option Agreement,
Newfield shall hold a technical review meeting in its offices and provide Apache
a prospect presentation, detailing Newfield's geological/geophysical evaluation
of the Contract Area, including any prospect Newfield has identified and whether
or not Newfield plans to drill same on the Contract Area. Said presentation
shall include a review of Newfield's licensed seismic data which shall be
subject to any restrictions imposed on the data to be shown to Apache by any
applicable confidentiality, license or other agreement, under the terms of the
Confidentiality Agreement attached hereto as Exhibit "A".

     b.   Within thirty (30) days following the technical review, and after due
consultation with Apache, Newfield may propose to Apache the drilling and
evaluating of a well (the "Initial Test Well") at a location of its choice on
the Contract Area to a minimum depth of 12,000' TVD, or a depth sufficient to
test the equivalent shale interval as seen in the El 346 OCS-G 14482 No. 1 ST-1

                                   EXHIBIT "A"
                   Attached to and made a part of that certain
                     Participation Agreement dated effective
                         March 15, 2007, by and between
                        Newfield Exploration Company and
                          Ridgewood Energy Corporation
Newfield Exploration Company                   (281) 847-6000 Fax (281) 405-4242

<PAGE>

Apache Corporation
September 14, 2006
Page 2

Well, whichever is the lesser depth ("Contract Depth"), and shall provide Apache
with a proposed location, objective, cost estimate, AFE and well plan. The
proposed target "GA-1" Sand should occur in a correlative position equivalent to
a shale interval which occurs at 10,550' MD (-10,459' SSTVD) in the EI 346,
Anadarko Petroleum Corporation Well No. 1 ST-1 (OCS-G 14482). Should Newfield
not propose the Initial Test Well as provided in this paragraph, this Option
Agreement will terminate on the thirtieth (30th) day after the technical review
provided for in Paragraph l.a above.

     c.   If Apache elects to participate pursuant to Article 2.a below and
Newfield elects to process its production from the Initial Test Well or its
substitute at Apache facilities or if the Initial Test Well or its substitute is
drilled from an Apache owned platform, Newfield would drill and complete such
well and thereafter Apache would become the operator. If Apache elects to
farmout pursuant to Article 2.b below and the Initial Test Well is drilled from
an Apache operated platform, Newfield would drill and complete such well and
Apache would operate the production as a contract operator.

2.   Apache Option. Apache shall have thirty (30) days from receipt of the
proposal under Paragraph 1(b) within which to elect in writing to either:

     a.   To participate in the drilling of the initial Well. If Apache decides
to participate, then:

          (i) The Initial Test Well, subsequent wells and related development
costs, if any, within the Contract Area, shall be funded fifty percent (50%) by
Newfield and fifty percent (50%) by Apache; and,

          (ii) If the Initial Test Well, or its Substitute Well (as described in
4.a), is timely drilled to Contract Depth and qualifies as a well capable of
producing in paying quantities in accordance with 30 CFR 250.115 or 30 CFR
250.116 and Newfield elects to complete said well, with the intention to produce
hydrocarbons to sales (an "Earning Well"), Newfield shall earn an assignment of
fifty percent (50%) of Apache's operating rights in the portion of the EI 346
Acreage comprising the Contract Area down to total depth drilled in said well
and its stratigraphic equivalent plus one hundred (100) feet. Likewise, Apache
shall be entitled to an equivalent assignment of operating rights in and to the
Newfield Acreage; and,

          (iii) All operations will be governed by a mutually acceptable
Operating Agreement covering the Contract Area limited in depth from the surface
to the Contract Depth or to the top of salt, whichever is shallower, under which
Newfield and Apache shall own their respective interests as set out above. The
operator would be in accordance with Article 1.c. above.

     b.   Or to farmout to Newfield the EI 346 Acreage within the Contract Area
on the following terms and conditions:

          (i) Newfield shall be designated Operator of the Contract Area, except
as to aliquots and/or wellbores associated with Apache's existing Eugene Island
Block 346 production operations. In the event the Initial Test Well is drilled
from an Apache owned platform, Apache would be designated contract operator of
the production in accordance with Article l.c. above;

<PAGE>

Apache Corporation
September 14, 2006
Page 3

          (ii) If the Initial Test Well, or its Substitute Well (as described in
4.a.), is an Earning Well, Newfield shall earn an assignment of one hundred
percent (100%) of Apache's operating rights in the EI 346 Acreage from the
surface down to total depth drilled in said well and its stratigraphic
equivalent plus one hundred (100) feet. Apache shall retain a five percent of
six-sixths (5.0% of 6/6ths) overriding royalty interest ("ORRI") in the EI 346
Acreage as to those depths included in the assignment of operating rights earned
by Newfield. Newfield will also assign to Apache a five percent of six-sixths
(5.0% of 6/6ths) ORRI in the Newfield Acreage from the surface down to a total
depth drilled in the Earning Well and its stratigraphic equivalent plus one
hundred (100) feet.

In the event Apache owns less than one hundred percent (100%) of the record
title and/or operating rights interest in the EI 346 Acreage comprising the
Contract Area, Apache's retained ORRI shall be proportionately reduced;

          (iii) Newfield will have the option to earn rights to deeper depths in
the Contract Area by commencing drilling operations on or before six (6) months
from the date on which the drilling rig is released from the Earning Well. Any
such additional well to earn the deeper rights shall be drilled in accordance
with the terms and conditions of this Option Agreement, except that the Contract
Depth shall be revised, as appropriate. Failure to drill or participate in the
drilling of an optional deeper test well during said period shall result in loss
by Newfield of any option to earn such deeper rights. Notwithstanding anything
herein to the contrary, Newfield shall not have the right to earn any depths
below the top of salt and any farmout agreement entered into between Apache and
Newfield shall be limited to those depths from the surface to the Contract Depth
or the top of salt whichever is shallower.

3.   Production Handling.

     Newfield, subject to capacity limitations of the facilities located on
Apache's Platform, shall have the option, but not the obligation, to process its
Contract Area production through Apache's existing production handling
facilities located on the Platform, under the terms of a mutually acceptable
production handling agreement which shall incorporate, among other provisions,
processing and handling rates of $.15/mcf for gas, $1.00/bbl for oil and
condensate, $1.00/bbl for water, and $.05/mcf per stage of compression, if
available and a monthly contract operating fee of $10,000.00 for the first well
and $5,000.00 for each additional well for a manned -facility or $12,500.00 for
the first well and $5,000.00 for each additional well for an unmanned facility
(collectively "Fees"). In any month in which there is production from the
Contract Area, if the Fees do not equal or exceed fifteen thousand dollars
($15,000.00) in any calendar month, then a minimum fee of fifteen thousand
dollars ($15,000.00) shall be charged to Newfield in lieu of fees based upon
throughput for such month, regardless of actual throughput. In any month in
which there is no production from the Contract Area, the minimum monthly fee
shall not exceed ten thousand dollars ($10,000.00). The Fees shall be adjusted
on the first day of April of each year by multiplying the rate currently in use
by the percentage increase in the average weekly earnings of Crude Petroleum and
Gas Production Workers for the last calendar year compared to the calendar year
preceding as shown by the index of average weekly earnings of Crude Petroleum
and Gas Production Workers as published by the United States Department of
Labor, Bureau of Labor Statistics. The increase in the Fees will be prorated to
the date of initial production during the first year of operation.
Notwithstanding the above, in the event Apache determines in its sole judgment

<PAGE>

Apache Corporation
September 14, 2006
Page 4

that it is uneconomic to continue to process Newfield's production at Apache's
production facilities, then Apache may discontinue the production handling
services upon sixty (60) days written notice to Newfield and the parties will
attempt to negotiate a sale or platform sublease agreement to allow continued
Contract Area production.

4.   General Terms and Conditions. Whether Apache agrees to participate or to
farmout under Paragraph 2, the parties agree that:

     a. Newfield will have the option to commence the drilling of another well
(a "Substitute Well") in the event the Initial Test Well is unable to reach
Contract Depth due to conditions beyond Newfield's control as a prudent
operator, within ninety (90) days of the date the rig is released on the well.
If the Initial Test Well, or any Substitute Well therefor, reaches Contract
Depth but does not qualify as an Earning Well, Newfield shall have ninety (90)
days after the plugging and abandonment of such well to commence the drilling of
an additional well in an attempt to earn an interest in the Contract Area; and,

     b. Subject to weather conditions, rig availability and acquiring all
necessary permits, Newfield must commence, or cause to be commenced, the
drilling of the Initial Test Well within one hundred eighty (180) days after
execution of this Option Agreement at a location of its choice on the Contract
Area. Drilling of the Initial Test Well shall thereafter continue in a
workmanlike manner to Contract Depth with the option to drill the Initial Test
Well or subsequent wells to a deeper depth. Newfield's only penalty for failure
to commence the Initial Test Well as provided herein shall be loss of all rights
to earn an interest in the EI 346 Acreage.

     c. Newfield shall not earn an interest in nor assume any additional
liability associated with any well, platform, facility, or pipeline currently
located on the Contract Area, except as may be provided under any production
handling agreement or platform sublease agreement that may be entered into
pursuant to this Option Agreement. Apache shall retain one hundred percent
(100%) of its rights and interests in any such well, platform, facility or
pipeline currently located on the EI 346 Acreage including the obligation to
abandon same.

     d. Newfield and Apache, if Apache elects to participate pursuant to Article
2. (a) above, shall not drill and produce, or cause to be drilled and produced,
from the Contract Area any reserves that are being produced or capable of being
produced by recompletion or other means of recovery from Apache's existing wells
in the EI 346 Acreage. Likewise, Apache shall not drill and produce, or cause to
be drilled and produced, any new wells on Eugene Island Block 346 which would
compete with and drain reserves discovered by any wells drilled pursuant hereto
on the Contract Area. Newfield shall not drill and produce or cause to be
drilled and produced, any new wells on Eugene Island Block 347 which would
compete with and drain reserves discovered by any wells drilled pursuant hereto
on the Contract Area,

     e. Following Apache's election to farmout or participate in the drilling of
the Initial Test Well, Newfield and Apache shall in good faith and in a timely
manner negotiate and execute a comprehensive farmout agreement or operating
agreement, as appropriate, consistent and in line with the terms hereof.

<PAGE>

Apache Corporation
September 14, 2006
Page 5

     f. The terms of this Option Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
No assignment shall be effective without the prior written approval of the
non-assigning party, which approval shall not be unreasonably withheld.

     g. Any assignment earned by Newfield pursuant to Article 2.a.(ii) or
2.b.(ii) of this agreement shall be without warranty of title, either express or
implied, except for a limited warranty by, through or under Apache, but not
otherwise. Any assignment earned by Apache pursuant to Article 2.a.(ii) of this
agreement shall be without warranty of title, either express or implied, except
for a limited warranty by, through or under Newfield, but not otherwise.

     h. For the purpose of giving notice of termination, or any other notice
that may be necessary in the performance of this agreement, notice shall be
deemed delivered when received. Notice shall be given at the following addresses
until written notice is provided by either party to the other of a change of
such address:

     Apache Corporation                         Newfield Exploration Company
     2000 Post Oak Blvd. Ste. 100               363 N. Sam Houston Parkway East,
     Houston, TX  77056                         Suite 2020
     ATTN: Mrs. Becky Harden                    Houston, TX  77060
     Phone: 713-296-6349                        ATTN: Mrs. Christina Linscomb
     Fax: 713-296-7024                          Phone: 281-847-6074
                                                Fax: 281-405-4207

If the terms and conditions described above are acceptable, please indicate your
agreement by signing in the space provided below and returning a signed copy of
this letter to the attention of the undersigned.

We appreciate your consideration of this proposal and look forward to hearing
from you soon. This offer shall expire at 4:00 p.m. C.S.T. on September 22,
2006. If you have any questions, please feel free to contact Christina Linscomb
at (281) 847-6074.

Sincerely,

/s/ John H. Jasek
John H. Jasek
General Manager - GOM

<PAGE>

Apache Corporation
September 14, 2006
Page 6

AGREED AND ACCEPTED this 19th day of September, 2006.

APACHE CORPORATION

By:     /s/ C.R. Harden
        ---------------
          C.R. Harden
Title:  Attorney-In-Fact
        ----------------

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                                                       [APACHE CORPORATION LOGO]

2000 POST OAK BOULEVARD / SUITE 100 / HOUSTON, TEXAS 77056-4400
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                                                                  (713) 296 6000
                                                              WWW.APACHECORP.COM

February 28, 2007

Newfield Exploration Company
Attn: Ms. Christina B. Linscomb
363 N. Sam Houston Parkway East, Suite 2020
Houston, Texas 77060

Re:  Farmout Agreement
     OCS-G 14482
     Eugene Island Block 346
     Offshore Louisiana

Dear Chris,

Apache Corporation ("Apache") is the owner of the following oil and gas
lease situated Offshore Louisiana ("Apache Lease"):

     OCS-G 14482, dated effective June 1, 1994, between the United States
     of America, acting through the Director, Bureau of Land Management, as
     LESSOR, and Anadarko Petroleum Corporation and Phillips Petroleum
     Company, as LESSEE, covering and affecting lands described as all of
     Block 346, Eugene Island Area, containing 5,000 acres, more or less;
     limited specifically to the West Half of the Southwest Quarter of the
     Northwest Quarter (W/2 SW/4 NW/4), the Southeast Quarter of the
     Southwest Quarter of the Northwest Quarter (SE/4 SW/4 NW/4), the
     Northwest Quarter of the Southwest Quarter (NW/4 SW/4) and the West
     Half of the Southwest Quarter of the Southwest Quarter (W/2 SW/4 SW/4)
     of Eugene Island Block 346, being hereinafter described as the
     "Farmout Area".

Newfield Exploration Company ("Newfield") is the owner of the following oil and
gas lease situated Offshore Louisiana ("Newfield Lease"):

     OCS-G 27919, dated effective June 1, 2006, between the United States of
     America, acting through the Director, Bureau of Land Management, as LESSOR,
     and Newfield Exploration Company, as LESSEE, covering and affecting lands
     described as all of Block 347, Eugene Island Area, containing 5,000 acres,
     more or less; limited specifically to the Southeast Quarter of the
     Northeast Quarter (SE/4 NE/4), the Southeast Quarter of the Northeast
     Quarter of the Southeast Quarter (SE/4 NE/4 SE/4), the North Half of the
     Northeast Quarter of the Southeast Quarter (N/2 NE/4 SE/4) and the East
     Half of the Southeast Quarter of the Southeast Quarter (E/2 SE/4 SE/4) of
     Eugene Island Block 346.

                                   EXHIBIT "B"
                   Attached to and made a part of that certain
                     Participation Agreement dated effective
                         March 15, 2007, by and between
                        Newfield Exploration Company and
                          Ridgewood Energy Corporation

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 2 of 20

The Apache Lease and the Newfield Lease are hereinafter collectively described
as the "Contract Area".

Upon acceptance of this Farmout Agreement ("Agreement"), Apache grants to
Newfield the right to acquire one hundred percent (100%) of Apache's interests
in the Farmout Area, under the terms and conditions set out below. Apache and
Newfield are herein sometimes referred to collectively as "Parties" and
individually as "Party".

Newfield represents and warrants to Apache that Newfield is duly qualified with
the United States Minerals Management Service ("MMS") to do business in the
Outer Continental Shelf, Gulf of Mexico.

This Agreement implements an election by Apache pursuant to that certain Option
Agreement dated September 14, 2006, ("Option Agreement") between the Parties not
to participate in Newfield's proposed OCS-G 14482 Well No. 7.

                                       I.
                                INITIAL TEST WELL
                                -----------------

     Subject to rig availability, weather conditions and acquiring all necessary
permits, Newfield will commence or cause to be commenced the drilling of the
OCS-G 14482 Well No. 7 ("Initial Test Well"), on or before May 30, 2007, at a
surface and bottomhole location of 6,150' FSL and 900' FWL of Eugene Island
Block 346. The well will be drilled in accordance with Newfield's AFE dated
October 27, 2006, and to a proposed total depth of 12,890' TVD/MD or to a depth
sufficient to fully evaluate the "GA-1" Sand whichever is lesser depth
("Contract Depth"). The "GA-1" Sand correlates to the shale interval which
occurs at 10,550' MD (10,459' SSTVD) in the El 346, Anadarko Petroleum
Corporation Well No. 1 ST-1 (OCS-G 14482).

     Newfield shall not commence operations under this Agreement until Apache
has received a fully executed copy of this Agreement, Newfield has been
designated as Operator for conducting operations under this Agreement, and
Newfield has acquired all the necessary permits.

     The Initial Test Well, Subsequent Well(s) (defined in Section II below) or
any Substitute Well (defined in Section II below) drilled under the terms of
this Agreement, shall be drilled free of any cost and/or liability of any kind
or character to Apache, and all risk, liability, costs or expenses incurred in
connection with drilling, testing, completing, operating and associated tie-in
of said well or wells and/or plugging or abandoning said well or wells shall be
borne solely by Newfield.

     Newfield shall not be obligated to drill or commence drilling the Initial
Test Well or any other well under the terms of this Agreement. If Newfield fails

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 3 of 20

to timely commence drilling the Initial Test Well, Newfield will suffer no
penalty other than the forfeiture of all rights under this Agreement.

                                       II.
                     SUBSTITUTE WELL and SUBSEQUENT WELL(S)
                     --------------------------------------

     If, during the drilling of the Initial Test Well, or a Substitute Well
(defined in this paragraph), Newfield is unable to reach Contract Depth due to
conditions beyond Newfield's control, which in the opinion of a reasonably
prudent Operator under the same or similar conditions would render further
drilling impracticable or hazardous, and such condition prevents further
drilling of the well, Newfield may commence a "Substitute Well", provided actual
drilling of this Substitute Well is commenced within ninety (90) days after
release of the drilling rig used for the Initial Test Well or any Substitute
Well, and is drilled pursuant to all the terms and provisions of this Agreement
applicable to the well for which it is substituted.

     If the Initial Test Well or any Substitute Well therefore, reaches Contract
Depth but does not qualify as an Earning Well as described in Section III below,
Newfield shall have the continuing right to drill "Subsequent Well(s)" on the
Contract Area provided that each such Subsequent Well shall be subject to all
the terms and provisions of this Agreement, and further provided that Newfield
commences actual drilling operations on such Subsequent Well within ninety (90)
days from plugging and abandonment of the prior well. In the event Newfield does
not commence a Substitute Well or Subsequent Well within the applicable ninety
(90) day period, this Agreement and Contract Area and all the terms and
conditions contained herein shall terminate except for Newfield's obligation to
plug and abandon any wells and/or platforms drilled and/or installed on the
Contract Area by Newfield,

     Newfield will have the option to earn rights to deeper depths in the
Contract Area by commencing drilling operations on or before one hundred eighty
(180) days from the date on which the drilling rig is released from the Earning
Well. Any such "Additional Well" to earn the deeper rights shall be drilled in
accordance with the terms and conditions of this Agreement. Failure to drill or
participate in the drilling of an Additional Well during said period shall
result in loss by Newfield of any option to earn such deeper rights.
Notwithstanding anything contained herein to the contrary, Newfield shall not
have the right to earn any depths below the Deepest Earning Depth (defined in
Section III below).

     Notwithstanding anything herein to the contrary, Newfield shall not have
the right to drill any Substitute Well, Subsequent Well or Additional Well from
Apache's Eugene Island Block 346 "A" platform ("Platform") located at 3,298' FNL
and 3,543' FWL of Eugene Island 346.

                                      III.
                                 INTEREST EARNED
                                 ---------------

     Should Newfield drill the Initial Test Well or a Subsequent Well (or a
Substitute Well for either the Initial Test Well or a Subsequent Well) to the
Contract Depth, comply with the terms of this Agreement, and obtain MMS

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 4 of 20

determination that said well is a well capable of commercial production as
provided under 30 CFR ss.250 115 or 116 and Newfield commences actual production
within one hundred eighty (180) days of release of the drilling rig, or failing
to obtain this determination, should Newfield elect to complete the well and
equip same for the production of oil and/or gas in commercial quantities and
Newfield commences actual production within one hundred eighty (180) days of
release of the drilling rig, then said well shall be deemed the "Earning Well"
and Apache shall execute and deliver an "Assignment" assigning to Newfield an
interest in the operating rights to the Farmout Area. The Assignment shall:

A.   Be prepared by Apache and delivered to Newfield within sixty (60) days of a
     well being deemed an Earning Well, with the effective date of the
     Assignment being the date that the well is deemed an Earning Well.

B.   Be without warranty of title, statutory, express or implied, other than by,
     through and under Apache, and subject to all terms and conditions contained
     in all contracts (including but not limited to that certain Oil Purchase
     and Sale Agreement between Anadarko Petroleum Corporation and Texaco
     Trading and Transportation Inc. dated December 23, 1995) and agreements
     (recorded and unrecorded) attributable to the assigned interest, to the MMS
     reserved royalty interest, and the overriding royalty interest reserved by
     Apache as provided in Section III.(F) below and any overriding royalty
     interest or similar burdens affecting the Contract Area and filed of record
     as of December 5, 2006. Newfield acknowledges that it has reviewed Apache's
     files and is familiar with the Apache Lease and all agreements relating to
     the Farmout Area and takes cognizant of all matters relating to same.

C.   Be subject to the approval of the authorized officer of the MMS.

D.   Convey to Newfield one hundred percent (100%) of Apache's interest in and
     to the operating rights in the Farmout Area, from the surface down to the
     stratigraphic equivalent of the total depth drilled in the Earning Well
     plus one-hundred feet (100'), but in no event deeper than the top of salt.
     "Deepest Earning Depth" is defined as Contract Depth plus one hundred feet
     (100') or the top of salt, whichever is shallower.

E.   Reserve to Apache all rights to drill through the Farmout Area in order to
     explore, develop and/or operate all rights owned by Apache below the
     Contract Area or on lands pooled, or to be pooled, unitized or communitized
     therewith.

F.   Reserve to Apache an overriding royalty interest in the Apache Lease,
     including the Earning Well, of five percent of six-sixths (5.0% of 6/6ths)
     of all liquid and/or gaseous hydrocarbon substances produced and/or saved,
     either through testing or production on the Apache Lease.

     Simultaneously with Apache's execution of the Assignment, Newfield shall
     assign to Apache an overriding royalty interest of five percent of

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 5 of 20

     six-sixths (5 0% of 6/6ths) of all liquid and/or gaseous hydrocarbon
     substances produced and/or saved, either through testing or production on
     the Newfield Lease.

     Both the overriding royalty reserved by Apache on the Apache Lease and the
     overriding royalty assigned to Apache on the Newfield Lease shall be
     collectively referred to as the overriding royalty interest ("ORRI").

G.   Apache's ORRI shall be computed in the same manner and paid at the same
     time as the Lessor's royalty under the Apache Lease and the Newfield Lease
     and shall be free and clear of all royalty (other than MMS royalty),
     overriding royalty, and other burdens associated with production and all
     costs and expenses of drilling and production, except that the ORRI shall
     be charged with and bear its proportionate part of ad valorem, production,
     severance, excise, and other similar taxes on production. In the event the
     interest owned by Apache in the Farmout Area is less than a full leasehold
     interest, then the overriding royalty interest retained by Apache in the
     Apache Lease and the interest earned by Newfield shall each be
     proportionately reduced.

H.   Newfield shall not earn an interest in nor assume any additional liability
     associated with any well, platform, facility or pipeline currently located
     on the Farmout Area, except as provided in the PHA, as herein defined.
     Newfield shall not drill and produce or cause to be drilled and produced,
     from the Contract Area, any reserves that are being produced or capable of
     being produced from Apache's existing wells in the Contract Area or wells
     drilled in the Contract Area pursuant to this Agreement by recompletion of
     existing wells or the drilling of new wells for reserves that are capable
     of being produced in existing wells. Apache shall not drill and produce or
     cause to be drilled and produced, any new wells or the sidetrack of an
     existing well on the Contract Area, which would compete with and drain
     reserves discovered by any wells drilled hereunder pursuant to this
     Agreement.

I.   In the event Newfield fails to commence production from the Earning Well
     within one (1) year from rig release on the Earning Well then, unless
     Newfield can demonstrate a good faith effort on its part in attempting to
     initiate the sale of production from the Contract Area, the Contract Area
     shall terminate and Newfield will reassign to Apache any interest assigned
     to Newfield in the Farmout Area.

J.   Upon the total cessation of production from all wells drilled under this
     Agreement for a consecutive period of one hundred twenty days (120) days,
     during which period of time no operations are being conducted on the
     Contract Area in a good faith effort to re-establish production, the
     Contract Area shall terminate and at the request of Apache Newfield will
     re-assign to Apache any interest earned under this Agreement unless
     Newfield can demonstrate to Apache that reasonable circumstances exist
     which prohibit Newfield from conducting operations to re-establish
     production, but that Newfield is preparing to conduct such operations no
     later than one hundred fifty (150) days following such total cessation of
     production. Additionally, Apache will re-assign to Newfield any

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 6 of 20

     overriding royalty interest previously assigned to Apache by Newfield
     pursuant to III. F. above.

K.   Any interest assigned from Newfield to Apache shall be free and clear of
     any liens, claims, encumbrances or any other burdens created by, through or
     under Newfield, but shall be subject to the interests reserved herein by
     Apache and all burdens of record as of December 5, 2006.

                                       IV.
                               PRODUCTION HANDLING
                               -------------------

     Newfield, subject to capacity limitations of the facilities located on the
Platform, shall have the option, but not the obligation, to process its
production from the Contract Area ("Farmout Production") through Apache's
existing production handling facilities located on the Platform, under the terms
of a mutually acceptable production handling agreement ("PHA") which shall
incorporate, among other provisions, processing and handling rates of $.15/mcf
for gas, $1.00/bbl for oil and condensate, $1.00/bbl for water, and $.05/mcf per
stage of compression, if available and a monthly contract operating fee of
$10,000.00 for the first well and $5,000.00 for each additional well for a
manned facility or $12,500.00 for the first well and $5,000.00 for each
additional well for an unmanned facility (collectively "Fees"). In any month in
which there is Farmout Production, if the Fees do not equal or exceed fifteen
thousand dollars ($15,000.00) in any calendar month, then a minimum fee of
fifteen thousand dollars ($15,000.00) shall be charged to Newfield in lieu of
fees based upon throughput for such month, regardless of actual throughput. In
any month in which there is no Farmout Production, the minimum monthly fee shall
not exceed ten thousand dollars ($10,000.00). The Fees shall be adjusted on the
first day of April of each year by multiplying the rate currently in use by the
percentage increase in the average weekly earnings of Crude Petroleum and Gas
Production Workers for the last calendar year compared to the calendar year
preceding as shown published by the United States Department of Labor, Bureau of
Labor Statistics. The increase in the Fees will be prorated to the date of
initial Farmout Production during the first year of operation. Notwithstanding
the above, in the event Apache determines in its sole judgment that it is
uneconomic to continue to process Newfield's Farmout Production at Apache's
production facilities, then Apache may discontinue the production handling
services upon sixty (60) days written notice to Newfield and the parties will
attempt to negotiate a sale or platform sublease agreement to all continued
Farmout Production from wells drilled pursuant to this Agreement. The PHA shall
provide that in the event such an agreement cannot be reached, then Apache shall
designate Newfield as operator of the necessary Platform and facilities to
enable Newfield to continue to process and handle its Farmout Production and in
lieu of any fees under the PHA, Newfield shall bear and pay all actual LOE
incurred in operating and maintaining the relevant Platform and facilities until
Newfield's Farmout Production has depleted and Newfield has plugged and
abandoned its wells at which time Apache shall be responsible for the plugging
and abandonment of its wells and for the removal of its Platform. Newfield shall
be responsible for all maintenance and repairs of the Platform, the facilities
and its wells during Newfield's operation of the Platform and facilities.
Newfield shall also be responsible for emergency and spill response as

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 7 of 20

required by regulatory authorities and shall be responsible for regulatory
report while such Platform and facilities are operated by Newfield. NEWFIELD
SHALL DEFEND, INDEMNIFY, RELEASE AND HOLD HARMLESS APACHE FROM AND AGAINST ANY
SUCH DUTIES, RESPONSIBILITIES AND LIABILITIES.

     In the event installation of additional facilities for the separation,
dehydration, compression, water disposal, measurement and sales ("Processing")
of the Farmout Production or any modifications or upgrades to the Platform are
necessary for the Processing of the Farmout Production, Newfield will incur all
costs associated with such modifications and/or upgrades.

     In the event Apache's production of oil and gas from the Platform is
interrupted for a period exceeding forty-eight (48) consecutive hours for each
interruption as a result of Newfield's operations including but not limited to
construction, installation, maintenance, well abandonment operations or removal
of any facilities which belong to Newfield, then Newfield shall make a payment
("Downtime Fee") to Apache within thirty (30) days of receipt of a bill with
supporting information from Apache. The Downtime Fee is to be calculated
according to the number of hours of downtime per downtime event exceeding
forty-eight (48) consecutive hours on the basis of Apache's average daily
production for the previous forty-five (45) days and on the basis of the average
published commodity price, for like kind and grade of product, which would have
been received during such downtime period, as follows:

     (A x B) x (C) divided by (45 x 24)

     Where:    A  =  number of hours of downtime after consecutive forty-eight
                     (48) hour free period
               B  =  total daily production for previous forty-five (45) days
               C  =  Apache's average commodity sale price during downtime
                     period

                                       V.
                            INFORMATION REQUIREMENTS
                            ------------------------

Newfield shall deliver to Apache, free of cost, the information set out in
Exhibit "A", attached hereto, and all other geological and geophysical,
engineering, technical, production test, exploratory, and reservoir information,
and any logs or other information and data that Newfield might acquire from the
Initial Test Well or any other well drilled by Newfield on the Contract Area but
only to the extent that such information is not restricted by licensing
agreements. Delivery of such information to Apache shall be a condition of
Newfield earning the Assignment provided for in Section III.

                                       VI.
                                 CONFIDENTIALITY
                                 ---------------

A.   The term "Confidential Information" shall include any geological,
     geophysical, engineering, technical, production test, exploratory, or
     reservoir information, or any logs or other information delivered to

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 8 of 20

     Apache by Newfield pursuant to Section V above. Confidential Information
     shall be the property of the Parties and shall be maintained by Apache as
     confidential for a period of two (2) years from the effective date of this
     Agreement or until such information is made public by a governmental
     authority, whichever is earlier. Each Party shall use at least the same
     degree of care in protecting the Confidential Information as it uses in
     protecting its own proprietary materials.

B.   Apache shall not have any obligation to limit disclosure or use of any
     portion of Confidential Information which:

     1.   Is already in Apache's possession prior to receipt hereunder;

     2.   Is now in or hereafter becomes publicly available through no fault of
          Apache;

     3.   Is disclosed to Apache without obligation of confidence by a third
          party which has the right to make such disclosure; or

     4.   Is independently developed by or for Apache without reference to
          Confidential Information received under this Agreement.

C.   Any Party may make Confidential Information available to third parties
     without the consent of the other Party as follows:

     1.   To a consultant or engineering firm for hydrocarbon reserve or other
          technical evaluation, analysis or interpretation or for reprocessing,
          provided that such consultant or engineering firm is not allowed to
          retain a copy of the Confidential Information after completion of its
          services and agrees in writing to treat it as confidential.

     2.   To show, but not provide copies, to a third party with which a Party
          is negotiating sale of all or part of its interest in the Contract
          Area, or a possible merger or consolidation or sale of its business
          operations; provided that such third party or parties agree in
          writing, to hold all such Confidential Information in confidence. In
          the event of completion of a transaction contemplated by this Section
          VI.C.2., a copy of all Confidential Information may be provided to the
          successor in interest of such Party and such Party may also retain
          copies of the Confidential Information with all the rights and
          obligations which it had prior to the completion of the transaction.

     3.   To show and provide copies of the Confidential Information to
          affiliates or financial institutions provided that such affiliates or
          financial institutions agree to be bound by the confidentiality
          provisions of this Agreement.

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 9 of 20

     4.   To show the Confidential Information to and provide copies thereof to
          agencies of federal and state governments having jurisdiction to the
          extent required by applicable law, rule or regulation, provided that
          such Party shall take all actions to require the confidential
          treatment of the Confidential Information which must be disclosed.

                                      VII.
                                CONSENT TO ASSIGN
                                -----------------

     Except for assignments to affiliates of Newfield, internal partners of
Newfield or financial institutions as part of a financing arrangement, Newfield
may not assign any rights Agreement without the prior written consent of Apache,
and any assignment made without such consent shall be void. Such request shall
contain the name, address and percentage of participation of the proposed
assignee. Should Newfield request Apache's consent to assign to a willing and
financially able party, Apache's consent shall not be unreasonably withheld.
Notwithstanding Apache's consent to assign, Newfield shall remain fully liable
to Apache for the performance of all obligations incurred prior to the effective
date of the Assignment under this Agreement. All assignments shall be made
expressly subject to this Agreement and Apache shall not be under any obligation
to recognize any assignment of this Agreement pursuant to the terms hereof
unless and until it has received from Newfield a true and correct copy of same
and assignee has ratified this Agreement.

                                      VIII.
                                    INDEMNITY
                                    ---------

     NEWFIELD SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD APACHE, ITS AFFILIATES
AND CONTRACTORS, AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, OR REPRESENTATIVES, CONTRACTORS, SUBCONTRACTORS, SUCCESSORS AND ASSIGNS
HARMLESS, TO THE MAXIMUM EXTENT PERMITTED BY LAW, FROM AND AGAINST ANY CLAIMS,
LIABILITIES, AND LOSSES FOR INJURY, DEATH OR DAMAGE OF EVERY KIND AND CHARACTER
TO PERSONS, PROPERTY OR THE ENVIRONMENT (INCLUDING, BUT NOT LIMITED TO THE COST
OF LITIGATION AND ATTORNEY'S FEES INCURRED IN CONNECTION WITH THE SAME) ARISING
OUT OF OR IN CONNECTION WITH NEWFIELD'S OPERATIONS UNDER THE TERMS OF THIS
AGREEMENT, OR NEWFIELD, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
REPRESENTATIVES, CONTRACTORS, SUBCONTRACTORS, SUCCESSORS, AND ASSIGNS; PROVIDED
THAT IF ANY SUIT IS FILED ON ANY CLAIM, NEWFIELD SHALL IMMEDIATELY NOTIFY APACHE
AND PERMIT APACHE TO PARTICIPATE IN THE DEFENSE THEREOF WITHOUT WAIVER OR
IMPAIRMENT OF NEWFIELD INDEMNITIES TO APACHE; HOWEVER, THE ABOVE SHALL NOT APPLY
TO APACHE IN THE EVENT OF APACHE'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 10 of 20

                                       IX.
                            ASSUMPTION OF LIABILITIES
                            -------------------------

     It is understood that Newfield shall assume all duties, responsibilities
and liabilities in connection with all of its operations on the Contract Area
limited to the interests subject to this Agreement, and that Newfield shall
perform all duties and make any and all filings and reports as necessary and
obtain all necessary permits in connection with the drilling and plugging and
abandoning of any well or wells drilled under the terms of this Agreement.
NEWFIELD DOES HEREBY AGREE TO DEFEND, INDEMNIFY, RELEASE AND HOLD HARMLESS
APACHE FROM AND AGAINST ANY SUCH DUTIES, RESPONSIBILITIES AND LIABILITIES.

     Although Apache, as the current Operator of the Farmout Area, will provide
Newfield copies of permits and site data (including any shallow hazard surveys,
bathymetry reports, and soil boring reports) if and when available, APACHE MAKES
NO WARRANTY, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND HEREBY EXPRESSLY
DISCLAIMS ALL SUCH WARRANTIES, AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION, PERMITS OR DATA SO FURNISHED. NEWFIELD HEREBY EXPRESSLY ASSUMES THE
RISK OF THE INACCURACY OR INCOMPLETENESS OF SUCH INFORMATION, PERMITS OR DATA,
WAIVES ANY CLAIMS AGAINST APACHE REGARDING SUCH INFORMATION, PERMITS OR DATA,
AND ACKNOWLEDGES THAT, WITHOUT SUCH WAIVER, APACHE WOULD NOT FURNISH SUCH
INFORMATION, PERMITS OR DATA.

     Notwithstanding the above, neither Party hereto shall be liable in an
action initiated by one (1) against the other for special, indirect,
consequential, exemplary or punitive damages resulting from or arising out of
this Agreement, including, without limitation, loss of profit or business
interruptions, however same may be caused.

                                       X.
                                SEVERAL LIABILITY
                                -----------------

     The Parties hereby agree that the respective obligations and liabilities of
the Parties under this Agreement shall be several, not joint or collective, and
each Party shall be responsible for its own obligations. It is not the intention
of the Parties to create, nor shall this Agreement be construed as creating, a
mining or other partnership, agency or association between the Parties or liable
as partners, agents or associates.

                                       XI.
                                   COMPLIANCE
                                   ----------

     Newfield shall comply with the laws and regulations applicable to any
activities carried out by Newfield under the provisions of this Agreement and
any amendments hereto. Newfield agrees to immediately notify Apache of any
material failures to comply with applicable laws or regulations, AND AGREES TO

<PAGE>

Newfield Exploration Company
February 28, 2007
Page l1 of 20

RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS APACHE FROM AND AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS, DEMANDS, ORDERS, JUDGMENTS, NOTICES, DAMAGES OR
OTHER MATTERS, WHETHER SIMILAR OR DISSIMILAR IN NATURE WHICH MAY ARISE FROM
NEWFIELD'S FAILURE TO COMPLY WITH SUCH LAWS AND REGULATIONS.

                                      XII.
                                    INSURANCE
                                    ---------

     During the term of this Agreement, Newfield shall maintain insurance
coverage, with reasonable deductibles and insurers acceptable to Apache, as set
forth in Exhibit "B". Newfield also require its contractors and subcontractors
to carry prudent insurance coverage for the types of operations undertaken. Any
deficiencies in the insurance policies of Newfield's contractors and
subcontractors shall be the sole responsibility of Newfield. It is expressly
understood and agreed that the coverages required in Exhibit "B" represent
Newfield's minimum insurance requirements and are not to be construed to fund or
limit the liability or any indemnity obligations that are undertaken by Newfield
in this Agreement.

     With respect to the liabilities assumed in this Agreement, the insurers of
the specified policies of insurance hereunder, including those insurance
policies required of Newfield's contractors and/or subcontractors, shall waive
their rights of subrogation against Apache, their subsidiary and affiliated
companies, their directors, officers, employees, agents, representatives,
invitees, co-lessees, co-owners, partners, joint venturers, contractors and
subcontractors, and their insurers, and each of their respective successors,
spouses, relatives, dependents, heirs and

     With respect to the liabilities assumed in this Agreement, the insurers of
the specified policies of insurance required hereunder shall include Apache and
their subsidiary and affiliated companies as additional insureds. However, this
provision shall not apply to the Workers' Compensation policies of either
Newfield or of its contractors and/or subcontractors.

     Prior to any work commencing under this Agreement, Newfield shall furnish
Apache with certificates of insurance indicating that the required insurance
policies are in full force, and that such policies shall not be cancelled
without thirty (30) days prior written notice to Apache.

                                      XII.
                               REPORTING ACCURACY
                               ------------------

     All financial settlements, billings and reports rendered to Apache by
Newfield and all bills given to Newfield by Apache pursuant to this Agreement
and/or any amendments, shall reflect properly the facts about all activities and
transactions. Each Party agrees to notify the other Party promptly upon
discovery of any instance where it has reason to believe data supplied is no
longer accurate or complete.

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 12 of 20

                                      XIV.
                                  AUDIT RIGHTS
                                  ------------

     Apache, upon written notice to Newfield, shall have the right, for a period
of twenty-four (24) months from the end of the calendar year in which a payout
statement or ORRI disbursement is or should have been received, to audit
Newfield's records of all proceeds, operating expenses and any other data or
information attributable to such payout statement, ORRI disbursement and the
rights of Apache pursuant to this Agreement.

                                       XV.
                                  WELL TAKEOVER
                                  -------------

     If, at any time, Newfield elects to permanently abandon any well drilled
under this Agreement, then Apache shall have the option to take over said well
for any purpose. If Newfield elects to abandon such a well, it shall give notice
to Apache within forty-eight (48) hours (inclusive of weekends and holidays) of
making its decision to so abandon. Within ten (10) business days after receipt
of such notice, or if a drilling rig is on location, within forty-eight 48)
hours, exclusive of weekends and holidays, Apache shall notify Newfield whether
it elects to exercise its option. Failure to respond timely shall be deemed a
negative election.

     If Apache exercises the option to take over the well, it shall be entitled
to operate the well in conjunction with any facilities which are or would have
been connected with operation of the well, and Apache shall further be entitled
to produce the well from any zone, formation, or reservoir previously
encountered in the well to be taken over whether or not the zone, formation, or
reservoir has been previously completed. In the event Apache exercises such well
takeover option, it shall pay Newfield the salvage value of the well and
associated equipment (including the salvage value of the platform and facilities
associated with the well), if any, less the estimated costs of salvaging and
shall thereafter assume all further risk, responsibility and expense of plugging
and abandoning the well. If Apache elects not to take over the well, then
Newfield shall thereafter promptly plug and abandon it and any associated
flowline or pipeline in accordance with all rules and regulations of the MMS.

                                      XVI.
                              RIGHTS TO PRODUCTION
                              --------------------

     Each Party shall own and have the right to receive in-kind and to
separately dispose of its proportionate share of the oil and gas production from
the Contract Area.

                                      XVII.
                           LEASE MAINTENANCE PAYMENTS
                           --------------------------

     Prior to the time Newfield receives an Assignment under this Agreement,
Apache shall pay any rentals and/or minimum royalty necessary to perpetuate the
Apache Lease. Subsequent to such Assignment, Apache will continue to make such
payments; provided however, Apache may be relieved of such obligation at such

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 13 of 20

time as all wells on the Apache Lease in which Apache has a working interest are
no longer capable of producing in Apache's sole judgment and Apache gives
Newfield notice at least sixty (60) days prior to any payment due date, and
thereafter Newfield shall be responsible for such payments. Any payments made by
Apache prior or subsequent to any Assignment hereunder, shall be reimbursed to
Apache by Newfield within thirty (30) days of its receipt of invoice for such
payment. Upon the written request of a non-paying Party, the Party responsible
for making the rental or minimum royalty payments shall provide proof of any
such payment.

                                     XVIII.
                                 APPLICABLE LAW
                                 --------------

     THE APACHE LEASE AND NEWFIELD LEASE AND ALL OPERATIONS CONDUCTED HEREUNDER
BY NEWFIELD SHALL BE SUBJECT TO ALL VALID AND APPLICABLE FEDERAL LAWS, RULES,
REGULATIONS AND ORDERS ("FEDERAL LAW"). TO THE EXTENT REQUIRED BY FEDERAL LAW,
THE LAWS OF THE STATE ADJACENT TO THE LEASE SHALL APPLY. THIS AGREEMENT SHALL
OTHERWISE BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS
OF THE STATE OF TEXAS, EXCLUSIVE OF ANY PROVISIONS THAT WOULD DIRECT THE
APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. In the event this
Agreement or such operations, or any part thereof, contemplated hereby are found
to be inconsistent with or contrary to any such laws, rules, regulations or
orders, the laws, rules, regulations or orders shall be deemed to control and
this Agreement shall be regarded as modified accordingly and as so modified
shall continue in full force and effect.

                                      XIX.
                                  MISCELLANEOUS
                                  -------------

A.   Except as otherwise provided for in this Agreement, this Agreement contains
     and comprises the entire agreement between the Parties regarding the Apache
     Lease, Newfield Lease and Contract Area and supersedes any previous
     negotiations or documents related thereto. Any amendments, changes or
     modifications to the rights and obligations of the Parties hereto shall be
     in writing and shall be effective only when agreed in writing by all
     Parties. Apache makes no warranty, statutory, express or implied, with
     respect to its ownership in the Apache Lease, except by, through or under
     Apache.

B.   The section headings used herein are for convenience only and shall not be
     construed as having any substantive significance or as indicating that all
     of the provisions of this Agreement relating to any particular topic are to
     be found in any particular section.

C.   All notices given hereunder, except information as specified in Exhibit
     "A", shall be given to the Parties at the following addresses:

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 14 of 20

                        Apache Corporation
                        2000 Post Oak Blvd, Suite 100
                        Houston, Texas 77056
                        Attn: Land Manager - Gulf Coast Region
                        Telephone:   (713) 296-6349
                        Facsimile:   (713) 296-7024

                        Newfield Exploration Company
                        363 North Sam Houston Pkwy. E., Suite 2020
                        Houston, Texas 77060
                        Attn: Ms. Christina Linscomb
                        Telephone:   (281) 847-6074
                        Facsimile:   (281) 405-4207

     All notices hereunder shall be deemed given for all purposes if in writing
     and delivered personally, sent by documented mail or overnight delivery
     service or, to the extent receipt is confirmed, telecopy, facsimile or
     other electronic transmission service to the appropriate address or number
     set forth above, and deemed delivered when received.

D.   All obligations imposed by this Agreement on each Party, except for the
     payment of money and providing of indemnification, shall be suspended and
     all periods of time for exercising any rights hereunder shall be extended
     while compliance is prevented, in whole or in part, by a labor dispute,
     fire, food, hurricane, war, civil disturbance, or act of God; by laws; by
     governmental rules, regulations, or orders; by governmental action or
     governmental delay; by inability to obtain a rig or secure materials; or by
     any other cause, whether similar or dissimilar, beyond the reasonable
     control of the said Party; provided, however, that performance shall be
     resumed within a reasonable time after such cause has been removed; and
     provided further that no Party shall be required against its will to settle
     any labor dispute ("Force Majeure"). Whenever a Party's obligations or
     rights are suspended or extended hereunder, such Party shall immediately
     notify the other Party, giving full particulars of the reason for such
     suspension or extension, and such Party shall hereafter diligently endeavor
     to remove or correct the cause of such Force Majeure event as soon as
     reasonably possible: If necessary to maintain the Apache Lease in full
     force and effect, Apache will provide Newfield with all reasonable
     assistance in filing for and seeking MMS approval of a Suspension of
     Operations/Production ("SOP") (or such other documents, applications and
     requisite governmental permits) to cover a time period adequate to allow
     Newfield to obtain all necessary drilling permits and until a rig is in
     place. In the event an SOP is obtained, which extends the time period
     during which drilling operations and/or production must be commenced or
     obtained in order to maintain the Apache Lease, the Parties shall amend
     the first paragraph of Section I of this Agreement to replace "May 30,
     2007" with a date consistent with any extension provided under the
     MMS-approved SOP or other authority.

<PAGE>

Newfield Exploration Company
February 28, 2007
Page 15 of 20

E.   Any overriding royalty, production payment, or net profits interest burden
     that may be created by Apache subsequent to the date of this Agreement
     other than the ORRI reserved by Apache under this Agreement ("Excess
     Burdens") shall not burden, in any manner, the interests that Newfield may
     earn.

F.   The Exhibits to this Agreement, listed below, are hereby incorporated
     herein for all intents and purposes.

           Exhibit "A" - Well Information
           Exhibit "B" - Newfield's Insurance Provisions

If the foregoing terms and conditions are acceptable to Newfield, please execute
and return an original to Apache.

Very truly yours,

Apache Corporation

By:  /s/ C. R. Harden
     ----------------
Name:    C. R. Harden
Title: Land Manager - Gulf Coast Region

AGREED TO AND ACCEPTED this day 8th day of March, 2006.

Newfield Exploration Company

By:  /s/ Mark Blumenshine
     --------------------
Name:    Mark Blumenshine
Title:   Vice President

<PAGE>

                                   EXHIBIT "A"

         ATTACHED TO AND MADE A PART OF THAT CERTAIN FARMOUT AGREEMENT
           DATED FEBRUARY 28, 2007, BY AND BETWEEN APACHE CORPORATION
                       AND NEWFIELD EXPLORATION COMPANY.

                          WELL INFORMATION REQUIREMENTS
                          -----------------------------
                                 (NON-OPERATED)
                                 --------------

TO:                     Newfield Exploration Company

WELL:                   Eugene Island 346 #7

PROSPECT:               Eugene Island 346

COUNTY/STATE:           Offshore Louisiana

PLEASE SEND THE NUMBER OF COPIES INDICATED ON EACH OF THE DATA LISTED BELOW TO:

                        Apache Corporation
                        2000 Post Oak Blvd., Suite 100
                        Houston, Texas 77056-4400
                        Attn: Joe Young

PRIOR TO SPUDDING
NUMBER OF COPIES
   To Apache                    DATA
   ---------                    ----

        1               Application for Well Permit
        1               Wellsite Survey Plat
        1               Drilling AFE with Drilling Program
        1               Drilling Geological Prognosis
        1               Notice of Spudding

AFTER SPUDDING
NUMBER OF COPIES
   To Apache
   ---------
DATA
----
        1               Daily Well Report:
                        Telecopy to: Joe Young (713) 296-6467
                             AND
                             ---
        2                Mail to: Apache Corporation
                                  2000 Post Oak Blvd., Suite 100
                                  Houston, Texas 77056-4400
                                  Attn: Ms. Kathy Mangum
                                  ----------------------

                                       1
<PAGE>

AFTER SPUDDING
NUMBER OF COPIES
   To Apache                    DATA
   ---------                    ----

        1               Geologist or Mud Logger Reports (If facilities permit,
                        Apache Requires daily transmission of mud log data c/o:
                        Joe Young at (713) 296-6467.

AFTER SPUDDING
NUMBER OF COPIES
   To Apache                    DATA
   ---------                    ----

        1               LAS Format 3.5" floppy disk
        4               DST or FT Data
        4               Field Print of all Log Runs: Lognet Yes
        4               Preliminary Core and Fluid Analyses
        4               Directional Surveys
        1               Notice of Abandonment
        1               Completion Program

DURING COMPLETION
NUMBER OF COPIES
   To Apache                    DATA
   ---------                    ----

        1               All Logs Run After Setting Production Casing
        1               Perforation Records
        1               Complete Description of Stimulation Treatments
        1               Daily Reports During Production

AFTER COMPLETION OR ABANDONMENT
NUMBER OF COPIES
   To Apache                    DATA
   ---------                    ----

        1               Drilling and Completion Reports, DST Charts
        4               Final Copy of:
                           Fluid and Core Analyses
                           Sample Descriptions
                           Paleo
                           Mud Logs
                           Directional Surveys, etc.
        4               Final copies of 1 " and 5" Log Prints 1 Sepia of Film of
                        all Wireline Logs and Tests
        1               Composite LAS Format 3.5" floppy disk
        1               Copies of all Reports Sent to Regulatory Bodies

                                       2
<PAGE>

PRIOR TO LOGGING, PLEASE NOTIFY

Geologist:
----------
                           Joe Young      Office: (713) 296-6567
                                          Home: (281) 360-9568
                                          Cell: (713) 501-9866

Reservoir Engineer:
-------------------
                           Dan Moore      Office: (713) 296-6351
                                          Home: (281) 373-9044
                                          Cell: (281) 627-0312

             The remainder of this page is left blank intentionally

                                       3
<PAGE>

                                   EXHIBIT "B"

          ATTACHED TO AND MADE A PART OF THAT CERTAIN FARMOUT AGREEMENT
         DATED FEBRUARY 28, 2007, BY AND BETWEEN APACHE CORPORATION AND
                          NEWFIELD EXPLORATION COMPANY.

                         NEWFIELD'S INSURANCE PROVISIONS
                         -------------------------------

     Newfield shall secure and maintain and/or cause its contractors and
subcontractors to arrange and maintain the following insurance coverages:

     A.   Newfield will ensure that all personnel, whether employees, agents,
representatives, consultants, contractors or subcontractors involved with the
operations contemplated in this Agreement are covered by Worker's Compensation
and Employer's Liability Insurance in accordance with all applicable federal,
state and maritime laws (including the Longshoremen's and Harbor Worker's Act
and its extension by the Outer Continental Shelf Lands Act, the Death on the
High Seas Act and the Jones Act) covering Newfield's personnel, with limits for
Employer's Liability Insurance, including Maritime Employer's Liability, of not
less than $1,000,000 per occurrence. If applicable, such insurance shall include
a territorial extension covering the area of the Gulf of Mexico where the
operations under this Agreement are to be performed.

     B.   General Liability Insurance, with limits of liability for bodily
injury and property damage of not less than $1,000,000 any occurrence. Such
insurance shall provide coverage for pollution liability and contractual
liability, and should also include the following:
     1.   Territorial extension to include coverage for the area of the Gulf of
          Mexico where the operations under this Agreement are to be performed.
     2.   "In rem" endorsement, stating that an action "in rem" shall be treated
          as a claim against the insured "in personam".

     C.   Aircraft Liability insurance for any of Newfield's operations that may
require the use of aircraft, including helicopters, secured by either Newfield
or the aircraft owner, with a combined single limit of not less than $5,000,000
per occurrence covering public liability, passenger liability, and property
damage liability. Such insurance shall cover all owned and non-owned aircraft,
including helicopters, used by Newfield or its contractors or subcontractors in
connection with its operations contemplated in this Agreement.

     D.   Excess liability insurance over the liability insurance policies
listed above with limits of not less than $25,000,000.

     E.   During any drilling, completion, plugging, workover or recompletion
activity on any well drilled hereunder, Operator's Extra Expense insurance, with
a minimum limit of $35,000,000, which includes coverage for Control of Well,
Pollution Liability and Cleanup, Deliberate Well Firing, Making Wells Safe and
voluntary Removal of Wreck/Debris whether such removal is at the request of a
government authority or Apache.

<PAGE>

     F.   Vessel P&I and Hull Insurance secured by Newfield or the vessel owner
for all vessels owned, chartered or operated by Newfield, its contractors or
subcontractors in performance of operations contemplated in this Agreement
secured by either Newfield or the vessel owner. The Hull insurance shall be in
an amount equal to the value of the vessel(s), and the P&I insurance shall be in
an amount equal to the value of the vessel(s) or $10,000,000, whichever is
greater.

     G.   With respect to its offshore operations, Newfield shall comply with
all applicable governmental regulations including the demonstration of Oil Spill
Financial Responsibility for its offshore facilities. Apache has agreed to
undertake the obligation to assume OSFR demonstration to the MMS on behalf of
Newfield with respect to the operations contemplated herein.

     H.   Operators Care Custody and Control Limit of not less than $2,000,000.

             The remainder of this page is left blank intentionally

                                       2Exhibit 10.1

     

    

    THE
      PROPERTY OPTION AGREEMENT

    

    

    

    

    WILLIAM
      A. HOWELL

    

    AND

    

    HRE
      EXPLORATION LTD.

    

    

    

    

    

    THE
      NOR 

    MINERAL
      PROPERTY

    

    PROVINCE
      OF BRITISH COLUMBIA

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

     

    
      	
              DEFINITIONS

            	
              3

            
	
               

            	 
	
              REPRESENTATIONS
                AND WARRANTIES OF HOWELL

            	
              5

            
	
               

            	 
	
              REPRESENTATIONS
                AND WARRANTIES OF HRE 

            	
              6

            
	
               

            	
               

            
	
              GRANT
                AND EXERCISE OF OPTION

            	
              6

            
	
               

            	
               

            
	
              RIGHT
                OF ENTRY

            	
              8

            
	
               

            	 
	
              OBLIGATIONS
                OF HOWELL DURING PROPERTY OPTION PERIOD

            	
              8

            
	
               

            	
               

            
	
              TERMINATION
                OF PROPERTY ACQUISITION 

            	
              8

            
	
               

            	
               

            
	
              TRANSFERS

            	
              8

            
	
               

            	
               

            
	
              FORCE
                MAJEURE 

            	
              9

            
	
               

            	
               

            
	
              CONFIDENTIAL
                INFORMATION 

            	
              10

            
	
               

            	
               

            
	
              ARBITRATION

            	
              10

            
	
               

            	
               

            
	
              DEFAULT
                AND TERMINATION 

            	
              11

            
	
               

            	
               

            
	
              NOTICES

            	
              11

            
	
               

            	
               

            
	
              GENERAL

            	
              11

            
	
               

            	 
	
              SCHEDULE
                “A” 

              DESCRIPTION
                OF PROPERTY RIGHTS AND PROPERTY 

            	 
	 	 
	
              SCHEDULE
                “B” 

              JOINT
                VENTURE AGREEMENT 

            	 

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    OPTION
      AGREEMENT

    

    

    THIS
      AGREEMENT made
      effective as of the 4th
      day of
      April, 2007.

    BETWEEN:

    WILLIAM
      A. HOWELL
      an
      individual having a residence at 15294 96A Avenue, Surrey, in the Province
      of
      British Columbia, V3R, 8P5, Canada;

    

    (hereafter
      “Howell”)

     

    -
      and
      -

    

    HRE
      EXPLORATION LTD..,
      a body
      corporate, incorporated under the laws of British Columbia and having offices
      located at 401 - 1917 West 4th
      Avenue,
      Vancouver, British Columbia, V6T 1M7, Canada;

    

    (hereafter
      “HRE”)

    

    

    WHEREAS:

    

    A.
       Howell
      is
      the holder of or is entitled to become the holder of all Property Rights related
      to the Property; and

    

    B.
       Howell
      has agreed to grant an Option to HRE to acquire an interest in and to the
      Property Rights and the Property, on the terms and conditions hereinafter set
      forth;

    

    NOW
      THEREFORE THIS AGREEMENT WITNESSETH that
      in
      consideration of the sum of $1.00 now paid by HRE to Howell (the receipt of
      which is hereby acknowledged), the parties agree as follows:

    

    DEFINITIONS

    

    1.1
       For
      the
      purposes of this Agreement the following words and phrases shall have the
      following meanings, namely:

    

    
      	a)  	
              “Agreement”
                means this agreement and any amendments thereto from time to
                time;

            

    

    

    
      	b)  	
              “Commencement
                Date” means the date of this
                Agreement;

            

    

    

    
      	c)  	
              “Completion
                Date” means the date on which HRE fulfills all of its obligations with
                respect to proper exercise of the Option as contemplated in Article
                4
                hereof;

            

    

    

    
      	d)  	
              “Exploration
                Expenditures” means the sum of (i) all costs of acquisition and
                maintenance of the Property, all exploration and development expenditures
                and all other costs and expenses of whatsoever kind or nature including
                those of a capital nature, incurred or chargeable by HRE with respect
                to
                the exploration and development of the Property and the placing of
                the
                Property into Commercial Production.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	e)  	
              “Feasibility
                Report” means a detailed written report of the results of a comprehensive
                study on the economic feasibility of placing the Property or a portion
                thereof into Commercial Production and shall include a reasonable
                assessment of the mineral ore reserves and their amenability to
                metallurgical treatment, a description of the work, equipment and
                supplies
                required to bring the Property or a portion thereof into Commercial
                Production and the estimated cost thereof, a description of the mining
                methods to be employed and a financial appraisal of the proposed
                operations supported by an explanation of the data used
                therein;

            

    

    

    
      	f)  	
              “Howell”
                means William A. Howell

            

    

    

    
      	g)  	
              “HRE”
                means HRE Exploration Ltd.;

            

    

    

    
      	h)  	
              “Joint
                Venture Agreement” means the agreement substantially in the form as
                attached hereto as Schedule “B”;

            

    

    

    
      	i)  	
              “Mine”
                means the workings established and assets acquired, including, without
                limiting the generality of the foregoing, development headings, plant
                and
                concentrator installations, infrastructure, housing, airport and
                other
                facilities in order to bring the Property into Commercial
                Production;

            

    

    
      	a.  	
              “Mineral
                Products” means the end products derived from operating the Property as a
                Mine;

            

    

    
      	b.  	
              “Mining
                Operations” means every kind of work
                done:

            

    

    
      	c.  	
              on
                or in respect of the Property in accordance with a Feasibility Report;
                or

            

    

    
      	d.  	
              if
                not provided for in a Feasibility Report, unilaterally and in good
                faith
                to maintain the Property in good standing, to prevent waste or to
                otherwise discharge any obligation which is imposed upon it pursuant
                to
                this Agreement;

            

    

    

    
      	j)  	
              including,
                without limiting the generality of the foregoing, investigating,
                prospecting, exploring, developing, property maintenance, preparing
                reports, estimates and studies, designing, equipping, improving,
                surveying, construction and mining, milling, concentrating,
                rehabilitation, reclamation, and environmental
                protection;

            

    

    
      	a.  	
              “Option”
                means the irrevocable option for HRE to earn in and acquire a net
                undivided interest in and to the Property as provided in this
                Agreement;

            

    

    
      	b.  	
              “Option
                Period” means the period commencing on the Commencement Date to and
                including March 31, 2010;

            

    

    

    
      	k)  	
              “Property”
                means the exploration properties and lands located in the Province
                of
                British Columbia all as more particularly described in Schedule “A”
                hereto;

            

    

    

    
      	l)  	
              “Property
                Rights” means all applications for permits for general reconnaissance,
                permit for general reconnaissance, interim approvals, applications
                for
                contracts of work, contracts of work, licenses, permits, easements,
                rights-of-way, certificates and other approvals obtained by either
                of the
                parties either before or after the date of this Agreement and necessary
                for the exploration and development of the Property, or for the purpose
                of
                placing the Property into production or continuing production
                therefrom;

            

    

    

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

REPRESENTATIONS
      AND WARRANTIES OF HOWELL

    

    2.1
       Howell
      hereby acknowledges and confirms that it holds the Property Rights related
      to an
      undivided one hundred (100%) percent interest in the Property as at the date
      hereof.

    

    
      	2.2  	
              Howell
                represents and warrants to HRE
                that:

            

    

    
      	a)  	
              Howell
                is lawfully authorized to hold his interest in the Property and will
                remain so entitled until 85% of the interests of Howell in the Property
                have been duly transferred to HRE as contemplated by the terms
                hereof;

            

    

    
      	b)  	
              Howell
                is
                an individual, has attained the age of majority and is legally competent
                to execute this agreement and to take all actions required pursuant
                thereto and that upon the execution and delivery, this agreement,
                will
                constitute a legal, valid and binding contract of Howell enforceable
                against Howell in accordance with its
                terms;

            

    

    
      	c)  	
              as
                at the date hereof and at the time of transfer to HRE of an interest
                in
                the mineral claims and/or exploration licenses comprising the Property
                Howell is and will be the beneficial owner of its interest in the
                Property
                free and clear of all liens, charges, claims, royalties or net profit
                interests of whatsoever nature, and no taxes or rentals will be due
                in
                respect of any thereof;

            

    

    
      	d)  	
              Howell
                has the right and capacity to deal with the Property and the right
                to
                enter into this Agreement and to dispose of his right, title and
                interest
                in the Property as herein
                contemplated;

            

    

    
      	e)  	
              there
                is no adverse claim or challenge against or to Howell’s interest in the
                Property, nor to the knowledge of Howell is there any basis therefor,
                and
                there are no outstanding agreements or options to acquire or purchase
                such
                interest in the Property or any portion thereof other than this
                Agreement;

            

    

    
      	f)  	
              no
                person has any royalty, net profit interests or other interest whatsoever
                in the Property;

            

    

    
      	g)  	
              Howell
                is duly authorized to execute this Agreement and for the performance
                of
                this Agreement by him, and the consummation of the transactions herein
                contemplated will not conflict with or result in any breach of any
                covenants or agreements contained in, or constitute a default under,
                or
                result in the creation of any encumbrance under the provisions of
                its
                articles or constating documents or any indenture, agreement or other
                instrument whatsoever to which Howell is a party or by which he is
                bound
                or to which he or the Property may be
                subject;

            

    

    
      	h)  	
              no
                proceedings are pending for, and it is unaware of any basis for the
                institution of any proceedings leading to, the placing of Howell
                in
                bankruptcy or subject to any other laws governing the affairs of
                and
                insolvent person;

            

    

    
      	i)  	
              there
                are no claims, proceedings, actions or lawsuits in existence and
                to the
                best of Howell’s information and belief none are contemplated or
                threatened against or with respect to the right, title, estate and
                interest of Howell in the Property;

            

    

    
      	j)  	
              to
                the best of his information and belief, all laws, regulations and
                orders
                of all governmental agencies having jurisdiction over the Property
                have
                been complied with by Howell;

            

    

    
      	k)  	
              to
                the best of his information and belief Howell is in good standing
                under
                all agreements and instruments affecting the Property to which he
                is a
                party or is bound.

            

    

    

    2.3
      The
      representations and warranties contained in this section are provided for the
      exclusive benefit of HRE, and a breach of any one or more thereof may be waived
      by HRE in whole or in part at any time without prejudice to its rights in
      respect of any other breach of the same or any other representation or warranty,
      and the representations and warranties contained in this section shall survive
      the execution hereof.

    

    2.4
      The
      representations and warranties contained in this section shall be deemed to
      apply to all assignments, transfers, conveyances or other documents transferring
      to HRE the interest to be acquired hereunder and there shall not be any merger
      of any covenant, representation or warranty in such assignments, transfers,
      conveyance or documents, any rule or law, in equity or statute to the contrary
      notwithstanding.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    REPRESENTATIONS
      AND WARRANTIES OF HRE

    

    3.1
      HRE
      represents and warrants to Howell that:

    
      	a)  	
              it
                has been duly incorporated and validly exists as a corporation in
                good
                standing under the laws of its jurisdiction of
                incorporation;

            

    

    
      	b)  	
              it
                is or will be prior to acquiring any undivided interest in the Property
                hereunder, lawfully authorized to hold mineral claims and real property
                under the laws of the jurisdiction in which the Property is
                situate;

            

    

    
      	c)  	
              it
                has duly obtained all corporate authorizations for the execution
                of this
                Agreement and for the performance of this Agreement by it, and the
                consummation of the transaction herein contemplated by it will not
                conflict with or result in any breach of any covenants or agreements
                contained in, or constitute a default under, or result in the creation
                of
                any encumbrance under the provisions of the articles or the constating
                documents of it or any shareholders' or directors' resolution, indenture,
                agreement or other instrument whatsoever to which it is a party or
                by
                which they are bound or to which it or the Property may be subject;
                and,

            

    

    
      	d)  	
              no
                proceedings are pending for, and it is unaware of any basis for the
                institution of any proceedings leading to, the dissolution or winding
                up
                of HRE or the placing of HRE in bankruptcy or subject to any other
                laws
                governing the affairs of insolvent corporations.
                

            

    

    

    3.2
      The
      representations and warranties contained in this section are provided for the
      exclusive benefit of Howell and a breach of any one or more thereof may be
      waived by Howell in whole or in part at any time without prejudice to its rights
      in respect of any other breach of the same or any other representation or
      warranty, and the representations and warranties contained in this section
      shall
      survive the execution hereof.

    

    3.3
      The
      representations and warranties contained in this section shall be deemed to
      apply to all assignments, transfers, conveyances or other documents transferring
      to Howell the interest to be acquired hereunder and there shall not be any
      merger of any covenant, representation or warranty in such assignments,
      transfers, conveyance or documents, any rule or law, in equity or statute to
      the
      contrary notwithstanding.

    

    GRANT
      AND EXERCISE OF OPTION

    

    4.1
      Howell hereby irrevocably grants to HRE the sole and exclusive right and Option
      to acquire up to and including a eighthly five percent (85%) right, title,
      estate and interest of Howell’s one hundred (100%) percent net undivided
      interest) in and to the Property Rights and Property, free and clear of all
      charges, encumbrances, claims, royalties and net profit interests of whatsoever
      nature.

     

    4.2
      If at
      any time after the date hereof Howell determines in its sole discretion to
      commission a Feasibility Report recommending the Construction of a Mine, Howell
      shall give written notice thereof to HRE.

     

    4.3
      The
      Option may be exercised at any time (subject to the terms as stated herein)
      by
      HRE: 

    a)
      paying
      Howell two thousand dollars ($2,000) upon the execution of this
      agreement;

    b)
      paying
      Howell twenty thousand dollars ($20,000) on or before March 31,
      2009

    c)
      incurring Exploration Expenditures on the Property as follows:

    i)
      aggregate Exploration Expenditures of not less than fourteen thousand dollars
      ($14,000) on or before March 31, 2008; 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    ii)
      aggregate Exploration Expenditures (including Exploration Expenditures as
      described in paragraph 4.3(c)(i) above) of not less twenty eight thousand
      dollars ($28,000) on or before March 31, 2009;

    iii)
      aggregate Exploration Expenditures (including Exploration Expenditures as
      contemplated in paragraph 4.3(c)(i) and (ii) above) of not less than one hundred
      and twenty eight thousand dollars ($128,000) on or before March 31, 2010;
      and

    iv)
      aggregate Exploration Expenditures (including Exploration Expenditures as
      contemplated in paragraph 4.3(c)(i), (ii) and (iii) above) of not less than
      three hundred and twenty eight thousand dollars ($328,000) on or before March
      31, 2011

    .

    4.4
      Prior
      to the exercise of the Option as herein provided, Howell is hereby appointed
      as
      operator of the

    Property
      and shall carry out exploration and development programs on the Property on
      the
      following terms:

    a)
      Howell
      shall have the same powers, duties and obligations in carrying out such programs
      asset out in Article 7 of the Joint Venture Agreement attached hereto as
      Schedule “B”, excepting thereout Section 7.5 and 7.6 thereof;

    b)
      For
      income tax purposes, all Exploration Expenditures incurred by Howell pursuant
      to
      such programs shall be incurred for the benefit of HRE; and

    c)
      Until
      such time as the Option is exercised in accordance with the terms hereof, HRE
      shall have no interest of whatsoever nature in the Property Rights or the
      Property.

    

    4.5
      If
      and when the Option has been exercised in accordance with Section 4.3 and
      commencing on the

    Completion
      Date:

    a)
      The
      undivided right, title and interest of the parties in the Property shall be
      as
      follows:

    Before
      Completion Date (net)  After
      Completion Date (net)

    
      
        	Howell 100% 	Howell 15%
	HRE 0%	HRE 85%
	Total 100% 	Total
                100%

      

    b)
      the
      undivided right, title and interest in and to the Property Rights and the
      Property acquired by HRE upon the Completion Date shall vest in HRE free and
      clear of all charges, encumbrances, claims, royalties or net profit interests
      of
      whatsoever nature other than as set forth and described in the Joint Venture
      Agreement substantially in the form attached hereto as Schedule
“B”;

    c)
      for
      the purposes of the Joint Venture Agreement:

    i)
      Howell
      will be deemed to have contributed forty nine thousand two hundred dollars
      ($49,200)and HRE will be deemed to have contributed three hundred and twenty
      eight thousand dollars ($328,000) of Costs to the Joint Venture for purposes
      thereof;

    ii)
      Howell will be the initial operator of the Joint Venture and will have the
      option to remain as operator of the Joint Venture for so long as Howell holds
      a
      participating interest of fifteen (15%) percent or greater in the Joint
      Venture;

    

    4.6
      Within 30 days after the Completion Date, Howell shall deliver to HRE such
      number of duly executed transfers which in the aggregate convey Howell's
      interest to be acquired hereunder in the Property in favour of HRE. In the
      event
      that Howell shall deliver notice to HRE that it has exercised the Option
      pursuant to the terms hereof, HRE shall be entitled to receive and to record
      such of the transfers contemplated hereby at its own cost with the appropriate
      governmental office to effect legal transfer of such interest in the Property
      into the name of HRE.

    

    4.7
      If,
      during the Option Period, Howell:

    a)
      makes
      a voluntary or involuntary assignment into bankruptcy or takes advantage of
      any
      legislation for the winding-up or liquidation of the affairs of insolvent or
      bankrupt persons or has a bankruptcy petition filed against it; or 

    b)
      fails
      to perform in a manner that is consistent with good mining practice or fails
      to
      perform in a manner consistent with its duties and responsibilities under this
      Agreement and does not remedy such default within 45 days of receipt of notice
      from HRE specifying such default;

    HRE
      shall
      have the right to terminate Howell as the Operator of the Property.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    RIGHT
      OF ENTRY

    

    5.1
      During the term of this Agreement, the directors and officers of Howell and
      HRE
      and their servants, agents and independent contractors, shall have the sole
      and
      exclusive right in respect of the Property to:

    a)
      enter
      thereon at their sole risk and expense;

    b)
      do
      such prospecting, exploration, development and other mining work thereon and
      thereunder as Howell, as operator, in its sole discretion may determine
      advisable;

    c)
      bring
      upon and erect upon the Property such buildings, plant, machinery and equipment
      as Howell and HRE may deem advisable and for a period of six months following
      the termination of this Agreement, to remove such buildings, plant, machinery
      and equipment; and

    d)
      remove
      therefrom and dispose of reasonable quantities of ores, minerals and metals
      for
      the purposes of obtaining assays or making other tests. 

    

    OBLIGATIONS
      OF HOWELL DURING OPTION PERIOD

    

    6.1
      During the term of this Agreement, Howell shall:

    a)
      maintain in good standing those mineral claims and/or exploration licenses
      comprised in the Property by the doing and filing of assessment work or the
      making of payments in lieu thereof, and the performance of all other actions
      which may be necessary in that regard and in order to keep such mineral claims
      free and clear of all liens and other charges arising from Howell’s activities
      thereon except those at the time contested in good faith by HRE; 

    b)
      permit
      the directors, officers, employees and designated consultants of HRE, at their
      own risk and expense, access to the Property at all reasonable times, and HRE
      agrees to indemnify Howell against and to save it harmless from all costs,
      claims, liabilities and expenses that HRE may incur or suffer as a result of
      any
      injury (including injury causing death) to any director, officer, employee
      or
      designated consultant of HRE while on the Property;

    c)
      permit
      HRE, at its own expense, reasonable access to the results of the work done
      on
      the Property during the last completed calendar year;

    d)
      do all
      work on the Property in a good and workmanlike fashion and in accordance with
      all applicable laws, regulations, orders and ordinances of any governmental
      authority;

    e)
      indemnify and save HRE harmless in respect of any and all costs, claims,
      liabilities and expenses arising out of Howell's activities on the
      Property;

    

    TERMINATION
      OF OPTION

    

    7.1
      Provided that HRE is not in default pursuant to the provisions hereof, HRE
      shall
      have the right at any time during the term of this Agreement to terminate the
      Option by providing not less than forty five (45) days written notice to
      Howell.

    7.2
      Notwithstanding the termination of the Option, HRE shall have the right, within
      a period of one hundred and eighty (180) days following the end of the Option
      Period, to remove from the Property all buildings, plant, equipment, machinery,
      tools, appliances and supplies which have been brought upon the Property by
      or
      on behalf of HRE, and any such property not removed within such 180 day period
      shall thereafter become the property of Howell.

    

    TRANSFERS

    

    8.1
      If
      Howell (the “Proposed Seller”) should receive a bona fide offer from an
      independent third party (the “Proposed Purchaser”) dealing at arm's length with
      the Proposed Seller to purchase all or a part of its interest in the Property,
      which offer the Proposed Seller desires to accept, or if the Proposed Seller
      intends to sell all or a part of its interest in the Property: 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    a)
      The
      Proposed Seller shall first offer (the “Offer”) such interest in writing to HRE
      upon terms no less favourable than those offered by the Proposed Purchaser
      or
      intended to be offered by the Proposed Seller, as the case may be;

    b)
      The
      Offer shall specify the price, terms and conditions of such sale, the name
      of
      the Proposed Purchaser and shall, in the case of an intended offer by the
      Proposed Seller, disclose the person or persons to whom Howell intends to offer
      its interest and, if the offer received by the Proposed Seller from the Proposed
      Purchaser provides for any consideration payable to the Proposed Seller
      otherwise than in cash, the Offer shall include the Proposed Seller's good
      faith
      estimate of the cash equivalent of the non-cash consideration; 

    c)
      If
      within a period of sixty (60) days of the receipt of the Offer and HRE notifies
      the Proposed Seller in writing that it will accept the Offer, the Proposed
      Seller shall be bound to sell such interest to HRE on the terms and conditions
      of the Offer. If the Offer so accepted by HRE contains the Proposed Seller's
      good faith estimate of the cash equivalent of the non-cash consideration as
      aforesaid, and if HRE disagrees with the Proposed Seller's best estimate, HRE
      shall so notify Howell at the time of acceptance and HRE shall, in such notice,
      specify what it considers, in good faith, the fair cash equivalent to be and
      the
      resulting total purchase price. If HRE so notifies the Proposed Seller, the
      acceptance by HRE shall be effective and binding upon HRE, and the cash
      equivalent of any such non-cash consideration shall be determined by binding
      arbitration and shall be payable by HRE, subject to prepayment as hereinafter
      provided, within 60 days following its determination by arbitration. HRE shall
      in such case pay to the Proposed Seller, against receipt of an absolute transfer
      of clear and unencumbered title to the interest of the Proposed Seller being
      sold, the total purchase price which is specified in its notice to the Proposed
      Seller and such amount shall be credited to the amount determined following
      arbitration of the cash equivalent of any non-cash consideration;

    d)
      If HRE
      fails to notify the Proposed Seller before the expiration of the time limited
      therefor that it will purchase the interest offered, the Proposed Seller may
      sell and transfer such interest to the Proposed Purchaser at the price and
      on
      the terms and conditions specified in the Offer for a period of sixty (60)
      days,
      but the terms of this paragraph shall again apply to such interest if the sale
      to the Proposed Purchaser is not completed within such sixty (60)
      days;

    e)
      Any
      sale hereunder shall be conditional upon the Proposed Purchaser delivering
      to
      the nonselling party, its agreement related to this Agreement and to the
      Property, containing: 

    i)
      a
      covenant by the Proposed Purchaser to perform all the obligations of the
      Proposed Seller to be performed under this Agreement in respect of the interest
      to be acquired by it from the Proposed Seller to the same extent as if this
      Agreement had been originally executed by the Proposed Purchaser;
      and

    ii)
      a
      provision subjecting any further sale, transfer or other disposition of such
      interest

    in
      the
      Property and this Agreement or any portion thereof to the restrictions contained
      in this paragraph (e).

    8.2
      The
      provision of Section 8.1 shall apply to a proposed sale by HRE of its interest
      in the Property

    mutatis
      mutandis such
      that
      Howell shall have a right of first refusal to acquire such interest in
      proportion to the then current interest.

    8.3
      No
      assignment by a party of any interest less than its entire interest in this
      Agreement and in the

    Property
      shall discharge it from any of its obligations hereunder, but upon the transfer
      by a party of the entire interest at the time held by it in this Agreement,
      whether to one or more transferees and whether in one or in a number of
      successive transfers, the party shall be deemed to be discharged from all
      obligations hereunder save and except for fulfilment of contractual commitments
      accrued due prior to the date on which the party shall have no further interest
      in this Agreement.

    

    FORCE
      MAJEURE

    

    9.1
      If
      Howell is at any time either during the term of this Agreement or thereafter
      prevented or delayed in complying with any provisions of this Agreement by
      reason of strikes, lock-outs, labour shortages, power shortages, fuel shortages,
      fires, wars, acts of God, governmental regulations restricting normal
      operations, shipping delays or any other reason or reasons, other than lack
      of
      funds, beyond the control of Howell, the time limits for the performance by
      HRE
      of its obligations hereunder shall be extended by a period of time 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    equal
      in
      length to the period of each such prevention or delay, but nothing herein shall
      discharge Howell from its obligations hereunder to maintain the Property in
      good
      standing.

    9.2
      Howell shall give prompt notice to HRE of each event of force majeure under
      Section 9.1 and upon cessation of such event shall furnish to HRE with notice
      to
      that effect together with particulars of the number of days by which the
      obligations of HRE hereunder have been extended by virtue of such event of
      force
      majeure and all preceding events of force majeure.

    

    CONFIDENTIAL
      INFORMATION

    

    10.1
      The
      parties to this Agreement shall keep confidential all books, records, files
      and
      other information supplied by any party to one of the other parties or to their
      employees, agents or representative in connection with this Agreement or in
      respect of the activities carried out on the Property by a party, or related
      to
      the sale of minerals, or other products derived from the Property, including
      all
      analyses, reports, studies or other documents prepared by a party or its
      employees, agents or representatives, which contain information from, or
      otherwise reflects such books, records, files or other information. The parties
      shall not and shall ensure that their employees, agents or representatives
      do
      not disclose, divulge, publish, transcribe, or transfer such information, all
      or
      in part, without the prior written consent of the other parties, which may
      not
      be arbitrarily withheld and which shall not apply to such information or any
      part thereof to the extent that: 

    a)
      prior
      to its receipt by a party such information was already in the possession of
      such
      party or its employees, agents or representatives; or

    b)
      in
      respect of such information required to be publicly disclosed pursuant to
      applicable securities or corporate laws.

    

    ARBITRATION

    

    11.1
      The
      parties agree that all questions or matters in dispute with respect to any
      dispute shall be settled by arbitration and shall be submitted to arbitration
      pursuant to the terms hereof. 

    11.2
      It
      shall be a condition precedent to the right of any parties, to submit any matter
      to arbitration pursuant to the provisions hereof, that any party intending
      to
      refer any matter to arbitration shall have given not less than ten (10) days'
      prior notice of its intention to do so to the other party, together with
      particulars of the matter in dispute. On the expiration of such ten (10) days,
      the party who gave such notice may proceed to refer the dispute to arbitration
      as provided in 11.3.

    11.3
      The
      party desiring arbitration shall appoint one arbitrator, and shall notify the
      other party of such appointment, and such other party shall, within fifteen
      (15)
      days after receiving such notice, either consent to the appointment of such
      arbitrator which shall then carry out the arbitration or appoint an arbitrator,
      and the two arbitrators so named, before proceeding to act, shall, within thirty
      (30) days of the appointment of the last appointed arbitrator, unanimously
      agree
      on the appointment of a third arbitrator to act with them and be chairman of
      the
      arbitration herein provided for. If the other parties shall fail to appoint
      an
      arbitrator within fifteen (15) days after receiving notice of the appointment
      of
      the first arbitrator, the first arbitrator shall be the only arbitrator, and
      if
      the two arbitrators appointed by the party shall be unable to agree on the
      appointment of the chairman, the chairman shall be appointed under the
      provisions of the Arbitration
      Act of
      British Columbia. Except as specifically otherwise provided in this section,
      the
      arbitration herein provided for shall be conducted in accordance with such
      Act.
      The chairman, or in the case where only one arbitrator is appointed, the single
      arbitrator, shall fix a time and place in Vancouver, British Columbia, for
      the
      purpose of hearing the evidence and representations of the parties, and he
      shall
      preside over the arbitration and determine all questions of procedure not
      provided for under such Act or this section. After hearing any evidence and
      representations that the parties may submit, the single arbitrator, or the
      arbitrators, as the case may be, shall make an award and reduce the same to
      writing, and deliver one copy thereof to each of the parties. The expense of
      the
      arbitration shall be paid as specified in the award 

    11.4
      The
      parties agree that the award of a majority of the arbitrators, or in the case
      of
      a single arbitrator, of such arbitrator, shall be final and binding upon each
      of
      them.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    DEFAULT
      AND TERMINATION

    

    12.1
      If
      at any time during the term of this Agreement Howell fails to perform any
      obligation required to be performed by it hereunder or is in breach of a
      warranty given by it hereunder, which failure or breach materially interferes
      with the implementation of this Agreement, HRE may terminate this Agreement
      but
      only if:

    a)
      it
      shall have first given to the defaulting Howell a notice of default containing
      particulars of the obligation which the defaulting Howell has not performed,
      or
      the warranty breached; and

    b)
      the
      defaulting Howell has not, within forty-five (45) days following delivery of
      such notice of default, cured such default or commenced proceedings to cure
      such
      default by appropriate payment or performance, the defaulting Howell hereby
      agreeing that should it so commence to cure any default it will prosecute the
      same to completion without undue delay, provided however, that this paragraph
      shall not be extended to a default by Howell to exercise an Option pursuant
      to
      Article 4 thereof.

    12.2
      Notwithstanding Section 12.1 hereof, if at any time Howell fails to perform
      a
      condition precedent to the exercise of the Option, HRE shall be entitled to
      forthwith terminate this Agreement.

    

    NOTICES

    

    13.1
      Each
      notice, demand or other communication required or permitted to be given under
      this Agreement shall be in writing and shall be sent by prepaid registered
      mail
      deposited in a Post Office in Canada addressed to the party entitled to receive
      the same, or delivered, telexed, telegraphed or telecopied to such party at
      the
      address for such party specified on the face page hereof. The date of receipt
      of
      such notice, demand or other communication shall be the date of delivery thereof
      if delivered, telexed, telegraphed or telecopied, or, if given by registered
      mail as aforesaid, shall be deemed conclusively to be the third business day
      after the same shall have been so mailed except in the case of interruption
      of
      postal services for any reason whatever, in which case the date of receipt
      shall
      be the date on which the notice, demand or other communication is actually
      received by the addressee.

    13.2
      Either party may at any time and from time to time notify the other party in
      writing of a change or address and the new address to which notice shall be
      given to it thereafter until further change.

    

    GENERAL

    

    14.1
      This
      Agreement shall supersede and replace any other agreement or arrangement,
      whether oral or written, heretofore existing between the parties in respect
      of
      the subject matter of this Agreement. 

    14.2
      No
      consent or waiver expressed or implied by any party in respect of any breach
      or
      default by any other party in the performance by such other of its obligations
      hereunder shall be deemed or construed to be a consent to or a waiver of any
      other breach of default.

    14.3
      The
      parties shall promptly execute or cause to be executed all documents, deeds,
      conveyances and other instruments of further assurance and do such further
      and
      other acts which may be reasonably necessary or advisable to carry out fully
      and
      effectively the intent and purpose of this Agreement or to record wherever
      appropriate the respective interest from time to time of the parties in the
      Property.

    14.4
      This
      Agreement shall enure to the benefit of and be binding upon the parties and
      their respective successors and permitted assigns.

    14.5
      This
      Agreement shall, (i) be governed by and construed in accordance with the laws
      of
      British Columbia and the parties hereby irrevocably attorn to the jurisdiction
      of the said province and (ii) be subject to the approval of all securities
      regulatory authorities having jurisdiction, such approvals to be sought in
      a
      timely and diligent manner.

    14.6
      Time
      shall be of the essence in this Agreement.

    14.7
      Wherever the neuter and singular is used in this Agreement it shall be deemed
      to
      include the plural, masculine and feminine, as the case may be.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    14.8
      The
      rights and obligations of each party shall be in every case several and not
      joint or joint and several.

    

    IN
      WITNESS WHEREOF the
      parties hereto have executed this Agreement as of the day and year first above
      written.

    

    
      
        	WILLIAM A.HOWELL	 
	 	/s/ Tomiea Rukavinq
	
                /s/
                  William A. Howell

              	witness
	 	 
	 	Tomiea Rukavinq
	 	name of
                witenss

      

    

     

    
      	HRE EXPLORATION
              LTD.
	/s/
              Les Scott
	Les Scott, Pres. &
              CE0

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    SCHEDULE
      “A”

    

    THE
      OPTION AGREEMENT

    

    

    DESCRIPTION
      OF PROPERTY RIGHTS AND PROPERTY

    

    

    

    The
      NOR 1
      mineral claim is located within the New Westminster Mining Division of British
      Columbia

    Latitude:
      49 deg 16’33’’N

    Longitude:
      122 deg 03’02’’W

    

    
      	
              Title

            	
              Name

            	
              Owner

            	
              Expiry

            	
              Status

            	
              Cells

            	
              Area
                (Hectares)

            
	
              553972

            	
              NOR
                1

            	
              112364

            	
              March
                9, 2008

            	
              GOOD

            	
              25

            	
              527

            

    

    

    Owner
      112364 is William A. Howell

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    SCHEDULE
      “B”

    TO

    THE
      PROPERTY OPTION AGREEMENT

    

    

    

    

    

    JOINT
      VENTURE AGREEMENT

    

    between

    

    HOWELLCO
      (a company to be formed)

    

    and

    

    HRE
      EXPLORATION LTD.

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

    
      	
              DEFINITIONS

            	
              4

            
	
               

            	 
	
              REPRESENTATIONS
                AND WARRANTIES

            	
              6

            
	
               

            	 
	
              PURPOSE
                AND CREATION OF THE JOINT VENTURE

            	
              6

            
	
               

            	
               

            
	
              DILUTION

            	
              7

            
	
               

            	
               

            
	
              MANAGEMENT
                COMMITTEE

            	
              8

            
	
               

            	 
	
              OPERATOR

            	
              10

            
	
               

            	
               

            
	
              POWER,
                DUTIES AND OBLIGATIONS OF OPERATOR

            	
              11

            
	
               

            	
               

            
	
              PROGRAMS

            	
              13

            
	
               

            	
               

            
	
              MINE
                FINANCING

            	
              14

            
	
               

            	
               

            
	
              CONSTRUCTION
                OF MINE

            	
              14

            
	
               

            	
               

            
	
              OPERATION
                OF MINE

            	
              14

            
	
               

            	
               

            
	
              PAYMENT
                OF CONSTRUCTION AND OPERATING COSTS

            	
              15

            
	
               

            	
               

            
	
              DISTRIBUTION
                IN KIND

            	
              15

            
	
               

            	
               

            
	
              SURRENDER
                OF INTEREST

            	
              
                16

              

            
	
               

            	
               

            
	
              TERMINATION
                OR SUSPENSION OF MINING OPERATIONS

            	
              16

            
	 	
               

            
	
              INFORMATION
                AND DATA

            	
              17

            
	 	
               

            
	
              PARTITION

            	
               17

            
	
            	
               

            
	
              TAXATION

            	
              18

            
	
               

            	
               

            
	
              RIGHT
                OF FIRST REFUSAL

            	
              18

            
	
               

            	
               

            
	
              FORCE
                MAJEURE

            	
              19

            
	
               

            	
               

            
	
              NOTICE

            	
              19

            
	
               

            	
               

            
	
              WAIVER

            	
              20

            
	
               

            	
               

            
	
              FURTHER
                ASSURANCES

            	
              20

            
	
               

            	
               

            
	
              USE
                OF NAME

            	
              20

            
	
               

            	
               

            
	
              ENTIRE
                AGREEMENT

            	
              20

            
	
               

            	
               

            
	
              AMENDMENT

            	
              20

            
	
               

            	
               

            
	
              ARBITRATION

            	
              20

            
	
               

            	
               

            
	
              RIGHT
                TO AUDIT

            	
              20

            
	
               

            	
               

            
	
              TIME

            	
              21

            
	
               

            	
               

            
	
              RULE
                AGAINST PERPETUITIES

            	
              21

            
	
               

            	
               

            
	
              DOCUMENT
                RETENTION ON TERMINATION

            	
              21

            
	
               

            	
               

            
	
              ENUREMENT

            	
              21

            
	
               

            	
               

            
	
              GOVERNING
                LAW

            	
              21

            
	
               

            	
               

            
	
              NUMBER
                AND GENDER

            	
              21

            
	
               

            	
               

            
	
              HEADINGS

            	
              21

            
	
               

            	
               

            
	
              TIME
                OF THE ESSENCE

            	
              21

            
	
               

            	
               

            
	
              SCHEDULE
                “A”

              DESCRIPTION
                OF PROPERTY RIGHTS AND PROPERTY

            	 
	 	 
	
              SCHEDULE
                “B”

              DEFINITION
                OF NET PROFITS

            	 
	 	 
	
              SCHEDULE
                “C”

              ACCOUNTING
                PROCEDURES

            	 

    

    

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

    

    JOINT
      VENTURE AGREEMENT

    

    THIS
      AGREEMENT made
      as
      of the_____________ day of________________ , 20________.

    

    BETWEEN:

    

    HOWELLCO,
      a
      corporation to be formed having offices at 15294, 96A Avenue, in the City of
      Surrey, in the Province of British Columbia, (hereafter referred to as
“Howellco”);

    

    OF
      THE
      FIRST PART

    

    AND:

    

    HRE
      EXPLORATION LTD.,,
      a body
      corporate, incorporated under the laws of British Columbia and having offices
      located at 401 - 1917 West 4th
      Avenue,
      Vancouver, British Columbia, V6T 1M7, Canada;

    

    (hereafter
      “HRE”)

    OF
      THE
      SECOND PART

    

    WHEREAS:

    A.
      Howellco owns a 15 % and HRE owns a 85% undivided right, title and interest
      in
      and to the Property;

    B.
      The
      parties wish to create a joint venture to carry out the continued operation
      of
      the Property on the terms and subject to the conditions hereinafter set
      forth.

    

    NOW
      THEREFORE THIS AGREEMENT WITNESSETH that
      in
      consideration of the premises, and of the mutual covenants and agreements herein
      contained, the parties hereto have agreed and do hereby agree as
      follows:

    

    DEFINITIONS

    1.1
      In
      this Agreement, including the Recitals and Schedules hereto the following words
      and expressions shall have the following meanings: 

    a)
      “Accounting Procedure” means the accounting procedure attached to this Agreement
      as Schedule “C”;

    b)
      “Affiliate” shall have the same meaning as under the Business
      Corporations Act (Alberta)
      as at the date hereof;

    c)
      “Agreement” means this Joint Venture Agreement as amended from time to time;

    d)
      “Commercial Production” means the operation of the Property as a producing mine
      and the production of Mineral Products therefrom (excluding bulk sampling,
      pilot
      plant or test

    operations);

    e)
      “Completion Date” means the date on which it is demonstrated to the satisfaction
      of the Management Committee that the preparing and equipping of a Mine for
      Commercial Production is complete;

    f)
      “Construction” means every kind of work carried out during the Construction
      Period by the Operator in accordance with a Feasibility Report approved by
      the
      Management Committee;

    g)
      “Construction Period” means the period beginning on the date of a Feasibility
      Report and ending on the Completion Date;

    h)
      “Costs” means all items of outlay and expense whatsoever, direct or indirect,
      with respect to Mining Operations in accordance with this Agreement, without
      limiting the generality of the foregoing, the following categories of Costs
      shall have the following meanings

    j).”Howellco”
      means a corporation to be formed

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    j)
”HRE”
      means HRE Exploration Ltd.

    k)“Mine
      Construction Costs” means those Costs incurred during the Construction
      Period;

    l)“Mine
      Costs” means Mine Construction Costs and Operating Costs; and

    m)
      “Operating Costs” means those Costs incurred subsequent to the Completion
      Date;

    n)
      “Feasibility Report” means a detailed written report of the results of a
      comprehensive study on the economic feasibility of placing the Property or
      a
      portion thereof into Commercial Production and shall include a reasonable
      assessment of the mineral ore reserves and their amenability to metallurgical
      treatment, a description of the work, equipment and supplies required to bring
      the Property or a portion thereof into Commercial Production and the estimated
      cost thereof, a description of the mining methods to be employed and a financial
      appraisal of the proposed operations supported by an explanation of the data
      used therein;

    o)
      “Interest” means the undivided beneficial percentage interest from time to time
      of a party in the Joint Venture and the Property, and Mineral Products, as
      set
      out hereunder; 

    p)
“Joint
      Venture” means the joint venture created pursuant to this
      Agreement;

    q)
      “Management Committee” means the management committee constituted in
      accordance

    with
      the
      provisions of Article 5 hereof to manage or supervise the management of the
      business and affairs of the Joint Venture;

    r)
“Mine”
      means the workings established and assets acquired, including, without limiting
      the generality of the foregoing, development headings, plant and concentrator
      installations, infrastructure, housing, airport and other facilities in order
      to
      bring the Property into Commercial Production;

    s)
      “Mineral Products” means the end products derived from operating the Property as
      a Mine;

    t)
      “Mining Operations” means every kind of work done by the Operator:

    i)
      on or
      in respect of the Property in accordance with a Feasibility Report;
      or

    ii)
      if
      not provided for in a Feasibility Report, unilaterally and in good faith to
      maintain the Property in good standing, to prevent waste or to otherwise
      discharge any obligation which is imposed upon it pursuant to this Agreement
      and
      in respect of which the Management Committee has not given it directions;
      including, without limiting the generality of the foregoing, investigating,
      prospecting, exploring, developing, property maintenance, preparing reports,
      estimates and studies, designing, equipping, improving, surveying, Construction
      and mining, milling, concentrating, rehabilitation, reclamation, and
      environmental protection.

    u)
“Net
      Profits” shall mean net profits calculated in accordance with Schedule “B”
hereto

    v)
      “Operating Year” shall mean a twelve-month period, the first Operating Year to
      commence on the Completion Date and each succeeding Operating Year commencing
      at
      the expiration of the preceding Operating Year.

    w)
      “Operating Plan” shall mean a plan in accordance with Section 11.2.

    x)
      “Operator” means the operator appointed pursuant to Article 6;

    y)
      “Option Agreement” means the option agreement, made as of the 3th
      day of
      April, 2007. between William A. Howell and HRE;

    z)
“Other
      Tenements” means (i) all surface rights of and to any lands within or outside
      the Property including surface held in fee or under lease, licence, easement,
      right of way or other rights of any kind (and all renewals, extensions and
      amendments thereof or substitutions therefor) acquired by or on behalf of the
      parties with respect to the Property, (ii) all information obtained from Mining
      Operations, and (iii) those rights and benefits appurtenant to the Property
      that
      are acquired for the purpose of conducting Mining Operations;

    aa)
      “Party” or “Parties” means the parties to this Agreement and their respective
      successors and permitted assigns which become parties to this
      Agreement;

    bb)
      “Program” means a plan, including budgets, for the Project or any part thereof
      as approved by the Management Committee pursuant to this Agreement;

    cc)
      “Project” means the exploration and development of the Property, preparation and
      deliveryof a Feasibility Report and the Construction and operation of facilities
      to put the Propertyinto Commercial Production;

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    dd)
      “Property” means those certain mining claims and related rights and interests
      set out and more particularly described in Schedule “A” hereto and Other
      Tenements and shall includeany renewal thereof and any form of substitute or
      successor title thereto;

    ee)
      “Royalty” means a royalty on the Net Profits calculated in accordance with
      Schedule “B”hereto;

    ff)
      “Simple Majority” means a decision made by the parties hereof or the Management
      Committee by greater than 50% of the votes entitled to be cast.

    

    REPRESENTATIONS
      AND WARRANTIES

    2.1
      Each
      of the parties represents each to the other that:

    a)
      it is
      the legal and beneficial owner of the Interest as set forth and described in
      the
      recitals hereto free and clear of all liens, charges and encumbrances except
      as
      set forth in Schedule “A” attached hereto and the Option Agreement;
      and

    b)
      save
      and except as set out herein, there is no adverse claim or challenge against
      or
      to the ownership of or title to its Interest or any portion thereof, nor is
      there any basis therefor, and there are no outstanding agreements or options
      to
      acquire or purchase its Interest or any portion thereof.

    2.2
      Each
      of the parties represents each to the other that:

    a)
      it is
      a company duly incorporated, organized and validly subsisting under the laws
      of
      its incorporating jurisdiction;

    b)
      it has
      full power and authority to carry on its business and enter into this Agreement
      and any agreement or instrument referred to or contemplated by this Agreement
      and to carry out and perform all of its obligations hereunder; and

    c)
      it has
      duly obtained all corporate authorizations for the execution, delivery and
      performance of this Agreement and the consummation of the transactions herein
      contemplated will not conflict with or result in any breach of any covenants
      or
      agreements contained in, or constitute a default under, or result in the
      creation of any encumbrance, lien or charge under the provisions of its
      constating documents or any indenture, agreement or other instrument whatsoever
      to which it is a party or by which it is bound or to which it may be subject
      and
      will not contravene any applicable laws.

    2.3
      The
      representations and warranties hereinbefore set out are conditions on which
      the
      parties have relied in entering into this Agreement, are to be construed as
      both
      conditions and warranties and shall, regardless of any investigation which
      may
      have been made by or on behalf of any party as to the accuracy of such
      representations and warranties, survive the closing of the transactions
      contemplated hereby and each of the parties will indemnify and save the other
      harmless from all loss, damage, costs, actions and suits arising out of or
      in
      connection with any breach of any representation or warranty contained in this
      Agreement and each party shall be entitled, in addition to any other remedy
      to
      which it may be entitled, to set off any such loss, damage or costs suffered
      by
      it as a result of any such breach against any payment required to be made by
      it
      to the other party hereunder.

    

    PURPOSE
      AND CREATION OF THE JOINT VENTURE

    3.1
      The
      parties agree each with the other to use their best efforts to develop and
      operate the Property with the goal of eventually putting the Property into
      Commercial Production should a Feasibility Report recommending Commercial
      Production be obtained and a decision to commence Commercial Production be
      made,
      and for this purpose the parties hereby agree to associate and participate
      in a
      single purpose joint venture to carry out all such acts which are necessary
      or
      appropriate, directly or indirectly, to carry out the Project.

    

    3.2
      The
      parties have not created a partnership and nothing contained in this Agreement
      shall in any manner whatsoever constitute a party the partner, agent or legal
      representative of any other party or create any fiduciary relationship between
      them for any purpose whatsoever. No party shall have any authority to act for
      or
      to assume any obligations or responsibility on behalf of any other party except
      as may be, from time to time, agreed upon in writing between the parties or
      as
      otherwise expressly provided. 

    

    3.3
      The
      rights and obligations of each party shall be in every case several and not
      joint or joint and several.

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    3.4
      Beneficial ownership of the Property shall remain in each party in proportion
      to
      its respective Interest and any legal title to the Property held by any party
      shall be subject to this Agreement. All property held, acquired or contributed
      by or on behalf of the parties under or pursuant to this Agreement shall be
      beneficially owned by the parties as tenants in common in proportion to their
      respective Interests. 

    

    3.5
      Each
      party shall make available its Interest for the purposes of the Project and,
      in
      particular, each party agrees to grant a mortgage, charge, lien, encumbrance
      on,
      or a security Interest in, its Interest to and in favour of any lender or party
      hereto to facilitate financing of the Project or any portion
      thereof.

    

    3.6
      The
      rights and obligations of the parties created under this Agreement shall be
      strictly limited to the Property and shall not be extended by implication or
      otherwise, except with the unanimous written consent of the
      parties.

    

    3.7
      Except as may be otherwise expressly provided in this Agreement, nothing herein
      shall restrict in any way the freedom of any party, except with respect to
      its
      Interest, to conduct as it sees fit any business or activity whatsoever,
      including the development or application of any process, and the exploration
      for, development, mining, extraction, production, handling, processing or any
      treatment, transportation or marketing of any ore, mineral or other product
      for
      any other purpose, without any accountability to any other party.

    

    3.8
      Each
      party shall do all things and execute all documents necessary in order to
      maintain the Property and the Property Rights in good standing.

     

    3.9
      Except as may be otherwise expressly specified in this Agreement, each party,
      in
      proportion to its Interest, shall indemnify and hold harmless each other party
      and each director, officer, employee, agent and representative of each other
      party, from and against any claim of or liability to any third person asserted
      on the ground that action taken under this Agreement has resulted in or will
      result in any loss or damage to such third person to the extent, but only to
      the
      extent that such claim or liability is paid by such other party in the amount
      in
      excess of that amount payable by reason of such other party's Interest, but
      the
      foregoing shall not prejudice any claim of any party against the
      Operator.

    

    3.10
      Each
      party covenants and agrees with the others:

    
      	(a)  	
              to
                perform or cause to be performed its obligations and commitments
                under
                this Agreement and, without limiting the generality of the foregoing,
                to
                pay Costs in proportion to its Interest except as may be otherwise
                provided in Article 4 and Article 9 hereof;
                and

            

    

    
      	(b)  	
              not
                to engage either alone or in association with others in any activity
                in
                respect of the Property or the Project except as provided or authorized
                by
                this Agreement.

            

    

    

    3.11
      For
      administrative convenience, and without, altering or affecting the rights,
      titles and interests created hereby, the parties agree that the Operator may
      hold the Property, in trust, for the use and benefit of the parties in
      accordance with the terms and provisions of this Agreement and in proportion
      to
      their respective Interests as adjusted from time to time, until such times
      as
      the Management Committee shall determine that it is appropriate or advisable
      for
      the Property to be held or registered in the name of the parties, another
      trustee or nominee which the Management Committee may select. Such holding
      of
      the Property in trust shall not prevent the vesting of the legal and beneficial
      title hereto in the parties in the manner and at the times as otherwise herein
      provided.

    

    DILUTION

    4.1
      Upon
      formation of the Joint Venture, Howelco
      will be deemed to have contributed forty nine thousand and two hundred dollars
      ($49,200)and HRE will be deemed to have contributed three hundred and twenty
      eight thousand dollars ($328,000)of Costs to the Joint Venture for purposes
      thereof 

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    4.2
      The
      respective Interests of the parties shall be subject to variation from time
      to
      time in the event:

    
      	(a)  	
              of
                failure by a party to pay its proportionate share of
                Costs;

            

    

    
      	(b)  	
              subject
                to Section 4.5 and Section 8.7 hereof, of the election by a party
                not to
                participate in a Program, or;

            

    

    
      	(c)  	
              subject
                to Section 4.5 and Section 8.7 hereof, of the election by a party
                to pay
                less than its proportionate share of Costs in respect of a Program
                adopted
                by the Management Committee.

            

    

    

    4.3
      Upon
      the happening of any of the events set forth in subsection 4.2(a)-(b), inclusive
      hereof, each party's Interest shall be varied to equal the product obtained
      by
      multiplying 100% by a fraction of which the numerator shall be the amount of
      Costs paid by such party and of which and the denominator shall be the total
      amount of Costs paid by all parties. For the purposes of this section, the
      amount of Costs paid by a party shall include the amount of Costs deemed to
      have
      been paid by that party as set forth in Section 4.1.

    

    4.4
      In
      the event that a party's Interest is reduced to five (5%) percent or less by
      the
      operation of Section 4.3 hereof, such party shall forthwith relinquish its
      Interest and shall transfer such Interest to the other parties hereto in
      proportionate shares and shall receive as consideration therefor a Royalty
      equal
      to two and one-half (2.5%) percent of Net Profits. In the event of such
      relinquishment, such party shall have no further right to participate in any
      Programs and shall have no further Interest in the Property, except the
      Royalty.

    

    4.5
      A
      party which forfeits or reduces its Interest in the Property pursuant to Section
      4.2 shall have the rights to redeem its position if the actual Costs expended
      is
      less costly by at least 25% than the budget as set out in the Program to which
      the party had not agreed, otherwise the forfeiture is final. The Operator shall
      not later than thirty (30) days after completion of a Program, provide a
      complete statement of expenditures incurred to date and an estimate of
      expenditures to be incurred to completion of the Operating Year (such
      expenditures to be verified by audit within six (6) months if the forfeiting
      party request and agrees to pay for same) to all parties including the
      forfeiting party. Within twenty (20) days of receipt of the foregoing statement,
      the forfeiting party shall inform the Operator of its wish to redeem its
      Interest or to require an audit. A party redeeming its Interest shall pay the
      Costs it would have paid had it participated in the Program, plus interest
      thereon at a rate per annum of prime plus one percent thereon from the date
      of
      the Operator's invoices to the date of payment to the Operator. Payment shall
      be
      made by the redeeming party to the Operator within thirty (30) days of providing
      notice of such redemption. The Operator shall pay the proceeds to the other
      parties in proportion to the manner in which their Interests related to the
      participation in the subject Program.

    

    MANAGEMENT
      COMMITTEE

    5.1
      A
      Management Committee, consisting of one representative of each party, and one
      or
      more alternate representatives, shall be constituted and appointed within
      fourteen (14) days after the formation of the Joint Venture. The Management
      Committee shall manage, or supervise the management of, the business and affairs
      of the Joint Venture and shall exercise all such powers and do all such acts
      as
      the Joint Venture may exercise and do. The Management Committee shall meet
      within fifteen (15) days of its constitution (at which time a chairman shall
      be
      elected from among their number) and may otherwise meet at such places as it
      thinks fit for the dispatch of business, adjourn and otherwise regulate its
      meetings and proceedings as the members thereof deem fit. Unless otherwise
      provided herein, questions arising at any meeting of the Management Committee
      shall be decided by a Simple Majority of votes with each party's representatives
      being entitled to cast that number of votes which is equal to that party's
      Interest. Unless agreed to in writing by the parties hereto, all meetings of
      the
      Management Committee shall be held in Vancouver, British Columbia or such other
      place as the parties may agree. Any meetings may, if the parties so consent,
      be
      held by conference telephone.

    

    5.2
      Management Committee Quorum:

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    
      	a)  	
              A
                quorum for any meeting of the Management Committee shall consist
                of a
                representative or representatives of a party or parties whose Interests
                aggregate one hundred (100%) percent. No business other than the
                election
                of a chairman, if any, and the adjournment or termination of the
                meeting
                shall be dealt with if a quorum is not present at the commencement
                of the
                meeting but the quorum need not be present throughout the
                meeting;

            

    

    
      	b)  	
              If
                a quorum is not present at the opening of a meeting, the parties
                present
                or represented shall adjourn the meeting for a period of seven (7)
                days
                from the date of the adjourned meeting, but shall not transact any
                other
                business. A quorum for any such adjourned meeting shall consist of
                a
                representative or representatives of a party or parties who attend
                such
                reconvened meeting.

            

    

    

    5.3
      A
      meeting of the Management Committee at which a quorum is present shall be
      competent to exercise all or any of the authorities, powers and discretion
      bestowed upon the Management Committee in this Agreement.

    

    5.4
      No
      questions submitted to the Management Committee need be seconded and the
      chairman, if any, of the meeting shall be entitled to submit the questions
      to a
      vote during the meeting.

    

    5.5
      The
      decision on any question by consent in writing of the representatives of all
      parties shall be as valid as if it had been decided at a duly called and held
      meeting of the Management Committee. Each decision may be in counterparts each
      consented to in writing by one or more representatives which together shall
      be
      deemed to constitute one decision.

    

    5.6
      At
      the time of any decision by the Management Committee to adopt a Program, the
      parties shall pay, subject to the provisions of Article 8 hereof, their
      proportionate share of the estimated Costs of such Program by depositing the
      same into the interest bearing bank account opened and maintained pursuant
      to
      Section 5.7 hereof.

    

    5.7
      The
      Management Committee shall open and maintain an interest bearing bank account
      with a Canadian Chartered bank in the name of the Joint Venture and shall use
      the funds on deposit therein for the purposes of the Joint Venture. The
      Management Committee shall appoint signing officers on the said account as
      shall
      be required and shall advise the parties of the particulars of the said
      account.

    

    5.8
      Each
      of the parties hereby agrees that:

    
      	a)  	
              any
                interest earned on any sums deposited in the bank account opened
                and
                maintained pursuant to Section 5.7 hereof shall be shared in proportion
                to
                their respective Interests; and

            

    

    
      	b)  	
              each
                shall, following formation of the Joint Venture, deposit in such
                account
                in proportion to their Interests any of the actual Costs in excess
                of the
                estimated Costs when requested to do so by the Management
                Committee.

            

    

    

    5.9
      Any
      party (the “Paying Party”) may pay any reasonable Costs due to maintain the
      Property or the Project in good standing and the other parties shall, in
      proportion to their Interest and within fifteen (15) days of being given notice
      of such payment, reimburse the Paying Party for such payment, failing such
      reimbursement the parties not paying shall, for purposes of Section 4.2 hereof,
      be deemed to have elected not to participate in a Program in accordance with
      Section 8.3 hereof, and the provisions of Article 4 hereof shall
      apply.

    

    5.10
      In
      the event that the Operator or the consultant appointed pursuant to Section
      7.4
      recommends that further work be conducted on the Property, then the Management
      Committee shall prepare or cause to be prepared a Program.

    

    5.11
      At
      any time during the currency of this Agreement the Management Committee may
      cause a Feasibility Report to be prepared by a substantial and well recognized
      engineering firm in such form as the Management Committee may require. The
      Management Committee shall, forthwith upon receipt of a Feasibility Report,
      provide each of the parties with a copy thereof. Upon request of any party
      and
      at reasonable intervals and times the parties shall meet in order to discuss
      such a report.

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    OPERATOR

    6.1
      The
      initial Operator shall be Howellco. An Operator shall continue as Operator
      until
      changed pursuant to the terms hereof or by a decision of the Management
      Committee with parties representing a Simple Majority voting in favour if the
      Operator has failed to perform in a manner that is consistent with good mining
      practice or has failed to perform in a manner consistent with its duties and
      responsibilities under this Agreement, and the Management Committee has given
      to
      the Operator written notice setting forth particulars of the Operator's default
      and the Operator has not within 30 days of receipt of such notice commenced
      to
      remedy the default and thereafter to proceed continuously and diligently to
      complete all required remedial action. 

     

    6.2
      The
      Operator may at any time on sixty (60) days notice to the Management Committee
      resign as Operator, in which event the Management Committee shall select another
      party or person to be Operator (hereinafter called the “new Operator”) upon the
      thirtieth (30th) day after receipt of the Operator's notice of resignation
      or
      such sooner date as the Management Committee may establish and give notice
      of to
      the resigning Operator. The resigning Operator shall thereupon be released
      and
      discharged from all its duties and obligations as Operator upon the appointment
      of the new Operator except those duties and obligations that it theretofore
      should have performed.

    

    6.3
      Upon
      the Operator making a voluntary or involuntary assignment into bankruptcy or
      taking advantage of any legislation for the winding-up or liquidation of the
      affairs of insolvent or bankrupt companies the Operator shall automatically
      be
      terminated as operator and the other party or its nominee appointed as
      Operator.

    

    6.4
      The
      new Operator shall assume all of the rights, duties, obligations and status
      of
      the Operator as provided in this Agreement, other than the previous Operator's
      Interest, if any, without obligation to retain or hire any of the employees
      of
      the former Operator or to indemnify the former Operator for any costs or
      expenses which the previous Operator will incur as a result of the termination
      of employment of any of its employees resulting from this change of Operator,
      and shall continue to act as Operator until its replacement or
      resignation.

    

    6.5
      Upon
      the effective time of a resignation, removal or cessation, the departing
      Operator shall within sixty (60) days of such resignation, removal or cessation,
      turn over to its successor, or if no successor has been designated, to the
      Management Committee, control and possession of the Property together with
      (i)
      all documents, books, records and accounts (or copies thereof) pertaining to
      the
      performance of its functions as Operator and (ii) all monies held by it in
      its
      capacity as the Operator. Upon transfer and delivery thereof, the departing
      Operator shall be released and discharged from, and the successor Operator
      shall
      assume, all duties and obligations of Operator except the unsatisfied duties
      and
      obligations of the departing Operator accrued prior to the effective date of
      the
      change of Operator and for which the departing Operator shall, notwithstanding
      its release or discharge, continue to remain liable, it being understood and
      agreed that the departing and successor Operators respectively shall co-operate
      in finalizing all outstanding matters and completing the transition. If the
      title to any real or personal property included in the Property is held in
      the
      name of the departing Operator, it shall transfer such property to the successor
      Operator in trust for the parties hereto unless otherwise directed by the
      Management Committee.

    

    6.6
      Within sixty (60) days of the effective time of an Operator's resignation,
      removal or cessation as Operator, the Management Committee may cause an audit
      to
      be made of the records maintained by the departing Operator and the cost of
      such
      audit shall be for the joint account of the parties hereto. 6.7 Except as
      authorized by the Management Committee or as otherwise herein provided, the
      Operator shall not assign its operating rights or obligations under this
      Agreement.

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    POWER,
      DUTIES AND OBLIGATIONS OF OPERATOR

    7.1
      Subject to the control and direction of the Management Committee, the Operator
      shall have full right, power and authority to do everything necessary or
      desirable to carry out a Program and the Project and to determine the manner
      of
      exploration and development of the Property and, without limiting the generality
      of the foregoing, the right, power and authority to: 

    
      	a)  	
              regulate
                access to the Property subject only to the right of representatives
                of the
                parties to have access to the Property at all reasonable times for
                the
                purpose of inspecting work being done thereon but at their own risk
                and
                expense;

            

    

    
      	b)  	
              employ
                and engage such employees, agents and independent contractors as
                it may
                consider necessary or advisable to carry out its duties and obligations
                hereunder and in this connection to delegate any of its powers and
                rights
                to perform its duties and obligations hereunder, but the Operator
                shall
                not enter into contractual relationships with another person except
                on
                terms which are commercially
                competitive;

            

    

    
      	c)  	
              execute
                all documents, deeds and instruments, do or cause to be done all
                such acts
                and

            

    

    
      	d)  	
              things
                and give all such assurances as may be necessary to maintain good
                and
                valid title to the Property. Each party hereby irrevocably constitutes
                the
                Operator its true and lawful attorney to give effect to the foregoing
                and
                hereby agrees to indemnify and save the Operator harmless from any
                and all
                costs, loss or damage sustained or incurred without gross negligence
                or
                bad faith by the Operator directly or indirectly as a result of its
                exercise of its powers pursuant to this subsection;
                and

            

    

    
      	e)  	
              conduct
                such title examination and cure such title defects as may be advisable
                in
                the reasonable judgment of the
                Operator.

            

    

    

    7.2
      The
      Operator shall have the following duties and obligations during the term
      hereof:

    
      	a)  	
              to
                diligently manage, direct and control all exploration, development
                and
                producing operations in and under the Property in a prudent and
                workmanlike manner and in compliance with all applicable laws, rules,
                orders and regulations;

            

    

    
      	b)  	
              to
                prepare and deliver to each of the parties during the periods of
                active
                field work, monthly progress and expense reports of the work in progress,
                on or before the day which is forty-five (45) days following each
                calendar
                month with respect to work done in such month and on or before the
                first
                day of every calendar year, comprehensive annual reports covering
                the
                activities and expenses hereunder and such report shall include the
                results obtained during the twelve (12) month period ending on !
                immediately preceding;

            

    

    
      	c)  	
              to
                provide and deliver to each of the parties, together with the reports
                referred to in subparagraph (b), copies of all assays, maps and drill
                logs;

            

    

    
      	d)  	
              subject
                to the terms and conditions of this Agreement, to keep the Property
                in
                good standing, free and clear of all liens, charges and encumbrances
                of
                every character arising from operations (except for those which are
                in
                effect on the date of this Agreement or are created pursuant to this
                Agreement, liens for taxes not yet due, other inchoate liens and
                liens
                contested in good faith by the Operator) and to proceed with all
                diligence
                to contest or discharge any lien that is filed by reason of the Operator's
                failure to perform its obligations
                hereunder;

            

    

    
      	e)  	
              to
                maintain true and correct books, accounts and records of operations
                hereunder in accordance with the Accounting Procedure, separate and
                apart
                from any other books, accounts and records maintained by the Operator,
                provided that the judgment of the Operator as to matters related
                to
                accounting, for which provision is not made in the Accounting Procedure
                shall govern if the Operator's accounting practices are in accordance
                with
                accounting principles generally accepted in the mining industry in
                Canada;

            

    

    
      	f)  	
              to
                permit one representative of the parties appointed in writing at
                all
                reasonable times and at their expense to inspect, audit and copy
                the
                Operator's accounts and records relating to the accounting for production
                or to the determination of the proceeds from the sale thereof for
                any
                fiscal year of the Operator within 9 months following the end of
                such
                fiscal year. The Operator shall maintain its accounts and records
                for a
                period of at least two (2) years or such longer period as required
                by the
                laws of Canada or its Provinces. The parties shall be entitled to
                inspect,
                audit and copy the accounts and records upon giving the Operator
                ten (10)
                days notice of their intention to do
                so;

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      	g)  	
              to
                obtain and maintain or cause any contractor engaged hereunder to
                obtain
                and maintain during any period in which active work is carried out
                hereunder such insurance coverage as the Management Committee deems
                advisable;

            

    

    
      	h)  	
              to
                permit the parties or their representatives appointed in writing,
                at all
                reasonable times, at their own expense and risk, reasonable access
                to the
                Property and all data derived from carrying out work
                thereon;

            

    

    
      	i)  	
              to
                open and maintain on behalf of the Joint Venture such bank account
                or bank
                accounts as the Management Committee may direct with a Canadian chartered
                bank;

            

    

    
      	j)  	
              to
                prosecute and defend, but not to initiate without the consent of
                the
                Management Committee, all litigation or administrative proceedings
                arising
                out of the Property, or Project;

            

    

    
      	k)  	
              to
                transact, undertake and perform all transactions, contracts, employments,
                purchases, operations, negotiations with third parties and any other
                matter or thing undertaken by or on behalf of the Joint Venture hereunder
                in the Operator's name and to pay all expenditures incurred in connection
                therewith promptly when due;

            

    

    
      	l)  	
              to
                transact, undertake and perform all transactions, contracts, employments,
                purchases, operations, negotiations with third parties and any other
                matter or thing undertaken on behalf of the parties in the Operators
                name;
                m) to maintain in good standing those mineral claims comprised in
                the
                Property by the doing and filing of all assessment work or the making
                of
                payments in lieu thereof and by the payment of all taxes and other
                like
                charges;

            

    

    
      	m)  	
              to
                take all proper and reasonable steps for the protection of rights
                of
                surface owners against damage occasioned by operations to be conducted
                hereunder and pay such damages as may lawfully be determined as resulting
                from such operations.

            

    

    

    7.3
      Subject to any specific provisions of this Agreement, the Operator, in carrying
      out its duties and obligations hereunder, shall at all times be subject to
      the
      direction and control of the Management Committee and shall perform its duties
      hereunder in accordance with the instructions and directions as from time to
      time communicated to it by the Management Committee and shall make all reports
      to the Management Committee except where otherwise specifically provided
      herein.

    

    7.4
      The
      Operator shall commence and diligently complete the Project and without limiting
      the generality of the foregoing, may retain an independent consulting geologist
      acceptable to the Management Committee to prepare a report in respect of the
      Project, the results thereof, the conclusions derived therefrom and the
      recommendation as to whether or not further work should be conducted on the
      Property.

    

    7.5
      Subject to Section 7.3, the Operator may charge the following sums in return
      for
      its head office overhead functions which are not charged directly as provided
      in
      the Accounting Procedure: a) with respect to Mine Construction, an amount equal
      to 5.0% of all Construction Costs; and b) subsequent to the Completion Date,
      an
      amount equal to 2.5% of all Operating Costs.

    

    7.6
      Notwithstanding Section 7.5, if a party gives notice in writing to the
      Management Committee that the party holds a bona fide belief that the sums
      charged under Section 7.5 are either excessive or insufficient then the
      Management Committee shall call a meeting to be held within ninety (90) days
      of
      receipt of such notice for the purpose of amending or ratifying the amounts
      charged under Section 7.5 hereof.

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    PROGRAMS

    8.1
      Expenditures shall only be incurred under and pursuant to Programs prepared
      by
      the Operator and approved by the Management Committee. Any Feasibility Report
      shall be prepared pursuant to a separate Program.

    

    8.2
      The
      Operator shall prepare and submit to the Management Committee a Program within
      90 days of the completion of the previous Program. If the Operator does not
      prepare a Program within the time limited, then the other parties shall have
      the
      right to prepare a Program for submission to the Management Committee at which
      time the party submitting the Program shall become the Operator. 

    

    8.3
      Within sixty (60) days of the approval by the Management Committee of a Program,
      each party shall give written notice to the Operator stating whether or not
      it
      elects to contribute its respective Costs of such Program or requesting the
      Operator to revise this Program provided that each party may only make such
      requests once in respect of each Program. Subject to Section 8.7, failure by
      any
      of the parties to give notice pursuant to this subsection within such sixty
      (60)
      day period shall be deemed an election by that party not to contribute to such
      Program.

    

    8.4
      If
      the party elects or is deemed to have elected not to contribute its Costs of
      a
      Program, the other parties may give notice in writing to the Operator stating
      that it or they will contribute all expenditures under or pursuant to such
      Program and the Operator will proceed with such Program and thereafter the
      interests of the parties shall be adjusted in accordance with Article 4. The
      Operator will not proceed with any Program which is not fully
      subscribed.

    8.5
      If
      the parties elect or contribute their respective Costs of a Program, the
      Operator will proceed with the Program. 

    8.6
      If
      any party requests the Operator to revise a Program in accordance with Section
      8.3, the Operator will revise such Program at once and resubmit the revised
      Program to the parties on the same terms and conditions as any other Program,
      except that the parties shall not have the right to request any further
      revisions.

    

    8.7
      If
      any party elects or is deemed to have elected not to contribute to a Program
      its
      Interest will not be subject to adjustment if, within sixty (60) days of such
      election or deemed election it elects to pay to the contributing party or
      parties one hundred and fifty (150%) percent of what would otherwise have been
      its contribution to such Program, but any amount so paid in excess of what
      would
      otherwise have been its contribution to such Program shall be deemed not to
      be a
      contribution to Costs by the party making it.

    

    8.8
      An
      election by a party to contribute to a Program shall make that party liable
      to
      pay its proportionate share of Costs actually incurred under or pursuant to
      the
      Program including Program Overruns, as herein after defined, of up to but not
      exceeding ten (10%) percent.

    

    8.9
      After
      having elected to contribute to a Program which is proceeded with, a party
      shall, within 30 days after being invoiced therefor by the Operator, pay such
      portion of its share of Costs as the Operator may require but the Operator
      shall
      not require payment of any funds more than one month in advance.

    

    8.10
      If
      it appears that Costs will exceed by greater than ten (10%) percent those
      estimated under a program the Operator shall immediately give written notice
      to
      the party or parties contributing to that program outlining the nature and
      extent of the additional costs and expenses (hereinafter called “Program
      overruns”). If Program Overruns are approved by the party or parties
      contributing to that Program, then within thirty (30) days after the receipt
      of
      a written request from the Operator, the party or parties contributing to that
      Program shall provide the Operator with their respective shares of such Program
      overruns. If Program Overruns are not approved by the party or parties
      contributing to that Program, the Operator shall have a right to curtail or
      abandon such Program. Any costs incurred by the Operator due to a curtailment
      or
      abandonment of the Program shall be paid by the parties pursuant to their
      respective Interests in the Program.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    
8.11
      If
      any party at any time fails to pay its share of Costs in accordance with
      Sections 8.9 or 8.10, the Operator may give written notice to that party
      demanding payment, and if the party has not paid such amount within fifteen
      (15)
      days of the receipt of such notice, that party shall be deemed to: 

     

    
      	(a)  	
              be
                in default under Section 8.9 or 8.10 as applicable;
                and

            

    

    
      	(b)  	
              have
                elected not to contribute to that Program for the purpose of Article
                4 and
                the Interest of the parties shall be adjusted in accordance with
                Article 4
                and the Operator shall have the right to curtail or abandon the Program
                and that party shall not be entitled to contribute to any subsequent
                Programs.

            

    

    

    MINE
      FINANCING

    9.1
      The
      parties hereto shall be responsible for providing or arranging the financing
      of
      a Mine. In providing or arranging the financing for a Mine, the Property and
      Mine may be pledged, hypothecated, mortgaged, charged, or otherwise encumbered
      in order to secure monies borrowed and used for the sole purpose of enabling
      the
      Mine to be financed. Subject to this Article any party may pledge, mortgage,
      hypothecate, charge or otherwise encumber its interest in order to secure by
      way
      of floating charge as a part of the general corporate assets of that party's
      money borrowed for its general corporate purposes, provided that the pledgee,
      mortgagee, holder of the charge or encumbrance (in this paragraph referred
      to as
      a “Chargee”) shall hold the same subject to the provisions of this Agreement and
      that if the Chargee realizes upon any of its security it will comply with this
      Agreement. The agreement between the party, as borrower, and the Chargee shall
      contain specific provisions to the same effect as the provisions of this
      Article.

    

    CONSTRUCTION
      OF MINE

    10.1
      Upon
      approval by the Management Committee of the Feasibility Report recommending
      the
      Construction of a Mine, the Management Committee shall cause the Operator to,
      and the Operator shall, proceed with Construction with all reasonable dispatch.
      Construction shall be substantially in accordance with the Feasibility Report
      subject to any variations agreed upon by the parties and subject also to the
      right of the Management Committee to cause such other reasonable variations
      in
      Construction to be made as the Management Committee deems
      advisable.

    

    OPERATION
      OF MINE

    11.1
      Commencing with the Completion Date, all Mining Operations shall be planned
      and
      conducted and all estimates, reports and statements shall be prepared and made
      on the basis of an Operating Year.

    

    11.2
      With
      the exception of the first Operating Year, an Operating Plan for each Operating
      Year shall be submitted by the Operator to the parties not later than ninety
      (90) days prior to the end of the year immediately preceding the Operating
      Year
      to which the Operating Plan relates. Each Operating Plan shall contain the
      following:

     

    
      	a)  	
              a
                plan for the proposed Mining
                Operations;

            

    

    
      	b)  	
              a
                detailed estimate of all Mine Costs plus a reasonable allowance for
                contingencies;

            

    

    
      	c)  	
              an
                estimate of the quantity and quality of the ore to be mined and the
                concentrates or metals to be produced; and such other facts as may
                be
                necessary to reasonably illustrate the results intended to be achieved
                by
                the Operating Plan; and upon request of any party the Operator shall
                meet
                with that party to discuss the Operating Plan and shall provide such
                additional or supplemental information as that party may reasonably
                require with respect thereto.

            

    

    

    11.3
      The
      Management Committee shall adopt each Operating Plan, with such changes as
      it
      deems necessary, on or prior to ninety (90) days prior to the end of the year
      immediately preceding the Operating Year to which the Operating Plan relates;
      provided, however, that the Management Committee may from time to time and
      at
      any time amend any Operating Plan.

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    11.4
      The
      Operator shall be entitled to include in the estimate of Mine Costs referred
      to
      in Section 11.2 hereof the reasonably estimated costs of satisfying continuing
      obligations that may remain after this Agreement terminates, in excess of
      amounts actually expended. Such continuing obligations are or will be incurred
      as a result of the Joint Venture and shall include such things as monitoring,
      stabilization, reclamation or restoration obligations, severance and other
      employee benefit costs and all other obligations incurred or imposed as a result
      of the Joint Venture which continue or arise after termination of this Agreement
      and settlement of all accounts. The amount accrued from time to time for the
      satisfaction of such continuing obligations shall be classified as Costs
      hereunder but shall be segregated into a separate account.

    

    PAYMENT
      OF CONSTRUCTION AND OPERATING COSTS

    12.1
      The
      parties hereto shall, from time to time, pay for all Mine Construction Costs
      incurred to the date of invoice, or at the beginning of each month for an
      advance equal to the estimated cash disbursements to be made during the month.
      Each party shall pay the Mine Construction Costs or the estimated cash
      disbursements within thirty (30) days after receipt of the invoice.

    

    12.2
      The
      Operator may invoice the parties, from time to time, for Operating Costs
      incurred to the date of the invoice, or at the beginning of each month for
      an
      advance equal to the estimated cash disbursements to be made during the month.
      The parties shall pay the Operating Costs or the estimated cash disbursements
      aforesaid to the Operator within thirty (30) days after receipt of the invoice.
      If the payment or advance requested is not so made, the amount of the payment
      or
      advance shall bear interest calculated monthly not in advance from the 30th
      day
      after the date of receipt of the invoice thereof by the parties at a rate
      equivalent to the weighted average prime rate for the month plus two percent
      until paid. The Operator shall have a lien on a party or parties' aggregate
      Interest in order to secure any payment or advance required hereunder together
      with interest which has accrued thereon. 12.4 If a party or parties fail (i)
      to
      pay an invoice contemplated in Section 9.3 within the time period herein
      provided, or (ii) to pay an invoice contemplated in Section 12.3 within the
      thirty (30) day period aforesaid, the Operator may, by notice, demand payment.
      If no payment is made within fifteen (15) days of the Operator's demand notice,
      the Operator may, without limiting its other rights at law, enforce the lien
      created by Section 12.3 by taking possession of all or any part of the parties'
      aggregate Interest. The Operator may sell and dispose of the Interest which
      it
      has so taken into its possession by:

    
      	a)  	
              first
                offering that Interest to the other parties, if more than one then
                in
                proportion to the respective Interests of the parties which wish
                to accept
                that offer, for that price which is the fair market value stated
                in the
                lower of two appraisals obtained by the Operator from independent,
                well
                recognized appraisers competent in the appraisal of mining properties;
                and

            

    

    
      	b)  	
              if
                the parties have not purchased all or part of that Interest as aforesaid,
                then by selling the balance, if any, either in whole or in part or
                in
                separate parcels at public auction or by private tender (the parties
                being
                entitled to bid) at a time and on whatever terms the Operator shall
                arrange, having first given notice to the parties of the time and
                place of
                the sale. As a condition of the sale as contemplated in Article 12.4(b),
                the purchaser shall agree to be bound by this Agreement and, prior
                to
                acquiring the Interest, shall deliver notice to that effect to the
                parties, in form acceptable to the Operator. The proceeds of the
                sale
                shall be applied by the Operator in payment of the amount due from
                the
                parties and interest as aforesaid, and the balance remaining, if
                any,
                shall be paid to the parties after deducting reasonable costs of the
                sale.
                Any sale or disposal made as aforesaid shall be a perpetual bar both
                at
                law and in equity by the parties and its successors and assigns against
                all other parties and the Operator.

            

    

    

    DISTRIBUTION
      IN KIND

    13.1
      It
      is expressly intended that, upon approval of a Feasibility Report recommending
      the Construction of a Mine, the association of the parties shall be limited
      to
      the efficient production of Mineral Products from the Property and that each
      of
      the parties shall be entitled to use, dispose of or otherwise deal with its
      proportionate share of Mineral Products as it sees fit. Each party shall take
      in
      kind the Mineral Products produced from the Mine, f.o.b. truck or railcar on
      the
      Property, and separately dispose of its proportionate share of the Mineral
      Product. Extra costs and expenses incurred by reason of the parties taking
      in
      kind and making separate dispositions shall be paid by each party directly
      and
      not through the Operator or Management Committee.

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    13.2
      Each
      party shall construct, operate and maintain, all at its own cost and expense,
      any and all facilities which may be necessary to receive and store and dispose
      of its proportionate share of the Mineral Product at the rate the same are
      produced.

     

    13.3
      If a
      party has not made the necessary arrangements to take in kind and store its
      share of production as aforesaid the Operator shall, at the sole cost and risk
      of that party store, in any location where it will not interfere with Mining
      Operations, the production owned by that party. The Operator and the other
      parties shall be under no responsibility with respect thereto. All of the Costs
      involved in arranging and providing storage shall be billed directly to, and
      be
      the sole responsibility of the party whose share of production is so stored.
      The
      Operator's charges for such assistance and any other related matters shall
      be
      billed directly to and be the sole responsibility of the party. All such
      billings shall be subject mutatis mutandis to the provisions of Paragraphs
      12.3.

    

    SURRENDER
      OF INTEREST

    14.1
      Any
      party may, at any time upon notice, surrender its entire Interest to the other
      parties by giving those parties notice of surrender. The notice of surrender
      shall:

    
      	a)  	
              indicate
                a date for surrender not less than three months after the date on
                which
                the notice is given; and

            

    

    
      	b)  	
              contain
                an undertaking that the surrendering party
                will:

            

    

    
      	i)  	
              satisfy
                its proportionate share, based on its then Interest, of all obligations
                and liabilities which arose at any time prior to the date of
                surrender;

            

    

    
      	ii)  	
              if
                the Operator has not included in Mine Costs the costs of continuing
                obligations as set out in Section 11.4 hereof, pay its reasonably
                estimated proportionate share, based on the surrendering party's
                then
                Interest, of the Costs of rehabilitating the Mine site and of reclamation
                as at the date of surrender; and

            

    

    
      	iii)  	
              will
                hold in confidence, for a period of two years from the date of surrender,
                all information and data which it acquired pursuant to this
                Agreement.

            

    

    

    14.2
      Upon
      the surrender of its entire Interest as contemplated herein and upon delivery
      of
      a release in writing, in form acceptable to counsel for the Operator, releasing
      the other parties from all claims and demands hereunder, the surrendering party
      shall be relieved of all obligations or liabilities hereunder except for those
      which arose or accrued or were accruing due on or before the date of the
      surrender.

    

    14.3
      A
      party to whom a notice of surrender has been given as contemplated herein may
      elect, by notice within ninety (90) days to the party which first gave the
      notice, to accept the surrender, in which case Article 11.4 and 14.2 shall
      apply, or to join in the surrender.

    

    TERMINATION
      OR SUSPENSION OF MINING OPERATIONS

    15.1
      The
      Operator may, at any time subsequent to the Completion Date, on at least thirty
      (30) days notice to all parties, recommend that the Management Committee approve
      the suspension of Mining Operations. The Operator's recommendation shall include
      a plan and budget (in this Article 15 called the “Mine Maintenance Plan”) in
      reasonable detail of the activities to be performed to maintain the Property
      during the period of suspension and the Costs to be incurred. The Management
      Committee may, at any time subsequent to the Completion Date, cause the Operator
      to suspend Mining Operations in accordance with the Operator's recommendation
      with such changes to the Mine Maintenance Plan as the Management Committee
      deems
      necessary. The parties shall be committed to contribute their proportionate
      share of the Costs incurred in connection with the Mine Maintenance Plan. The
      Management Committee may cause Mining Operations to be resumed at any
      time.

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    15.2
      The
      Operator may, at any time following a period of at least ninety (90) days during
      which Mining Operations have been suspended, upon at least thirty (30) days
      notice to all parties, or in the events described herein, recommend that the
      Management Committee approve the permanent termination of Mining Operations.
      The
      Operator's recommendation shall include a plan and budget (in this Article
      15
      called the “Mine Closure Plan”) in reasonable detail of the activities to be
      performed to close the Mine and reclaim the Property. The Management Committee
      may, by unanimous approval of the representatives of all parties, approve the
      Operator's recommendation with such changes to the Mine Closure Plan as the
      Management Committee deems necessary.

    

    15.3
      If
      the Management Committee approves the Operator's recommendation as aforesaid,
      it
      shall cause the Operator to:

    
      	a)  	
              implement
                the Mine Closure Plan whereupon the parties shall be committed to
                pay, in
                proportion to their respective Interests, such Costs as may be required
                to
                implement that Mine Closure Plan;

            

    

    
      	b)  	
              remove,
                sell and dispose of such assets as may reasonably be removed and
                disposed
                of profitably and such other assets as the Operator may be required
                to
                remove pursuant to applicable environmental and mining laws; and
                sell,
                abandon or otherwise dispose of the Property. The disposal price
                for the
                Property shall be the best price obtainable and the net revenues,
                if any,
                from the removal and sale shall be credited to the parties in proportion
                to their respective Interests.

            

    

    

    15.4
      If
      the Management Committee does not approve the Operator's recommendation
      contemplated herein, the Operator shall maintain Mining Operations in accordance
      with the Mine Maintenance Plan pursuant to this Article 1

    

    INFORMATION
      AND DATA

    16.1
      At
      all times during the subsistence of this Agreement the duly authorized
      representatives of each party shall have access to the Property and the Project
      at its and their sole risk and expense and at reasonable intervals and times,
      and shall further have access at all reasonable time to all technical records
      and other factual engineering data and information relating to the Property
      and
      the Project in the possession of the Management Committee or the Operator.
      In
      exercising the right of access to the Property or the Project the
      representatives of a party shall abide by the rules and regulations laid down
      by
      the Management Committee and by the Operator relating to matters of safety
      and
      efficiency. If any representative of a party is not an employee, the party
      shall
      so advise the Operator so that the Operator may require the representative,
      before giving him access to the Property or the Project or to data or
      information relating thereto, to sign and undertaking in favour of the Joint
      Venture, in form and substance satisfactory to the Operator, to maintain
      confidentiality to the same extent as each party is required to do under Section
      16.2 hereof.

    

    16.2
      All
      records, reports, accounts and other documents referred to herein with respect
      to the Property and the Project and all information and data concerning or
      derived from the Property and the Project shall be kept confidential and each
      party shall take or cause to be taken such reasonable precautions as may be
      necessary to prevent the disclosure thereof to any person other than each party,
      the Operator, an Affiliate and any financial institution or other person having
      made, making or negotiating loans to one or more of the foregoing or any trustee
      for any such person, or as may be required by laws, by regulation or policy
      of
      any governmental agency, securities commission or stock exchange, or in
      connection with the filing of a prospectus or statement of material facts by
      a
      party, an Affiliate or the Operator or to a prospective assignee as permitted
      hereunder, or as may be required in the performance of obligations under this
      Agreement without prior consent of all parties, which consent shall not be
      unreasonably withheld.

    

    PARTITION

    17.1
      No
      party shall, during the term of this Agreement, exercise any right to apply
      for
      any partition of the Property or for sale thereof in lieu of
      partition.

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    TAXATION

    18.1
      Each
      party on whose behalf any Costs have been incurred shall be entitled to claim
      all tax benefits, write-offs and deductions with respect thereto.

    

    RIGHT
      OF FIRST REFUSAL

    19.1
      Save
      and except as provided in Section 3.5 and Article 4 hereof, the parties shall
      not transfer, convey, assign, mortgage or grant an option in respect of or
      grant
      a right to purchase or in any manner transfer or alienate all or any portion
      of
      its Interest or rights under this Agreement otherwise in accordance with this
      Article.

    

    19.2
      Nothing in this Article shall prevent a sale by a party of all of its Interest
      or an assignment of all its rights under this Agreement to an Affiliate provided
      that such Affiliate first complies with the provisions of Section.

    

    19.10
      and
      agrees with the other party in writing to retransfer such interest to the
      originally assigning party before ceasing to be an Affiliate of such
      party;

     

    
      	a)  	
              a
                variation pursuant to Section 4.3;
                or

            

    

    
      	b)  	
              a
                disposition pursuant to an amalgamation or corporate reorganization
                which
                will have the effect in law of the amalgamating or surviving company
                possessing all the property, rights and interests and being subject
                to all
                the debts, liabilities and obligations of each amalgamating or predecessor
                company.

            

    

    

    19.3
      Should a party (the “transferring party”) intend to dispose of all or any
      portion of its Interest or rights under this Agreement it shall first give
      notice in writing to the parties (the “other parties”) of such intention
      together with the terms and conditions on which the transferring party intends
      to dispose of its Interest or a portion thereof or rights under this
      Agreement.

    

    19.4
      If a
      party (the “transferring party”) receives any offer to dispose of all or any
      portion of its Interest or rights under this Agreement which it intends to
      accept, the transferring party shall not accept the same unless and until it
      has
      first offered to sell such Interest or rights to the parties (the “other
      parties”) on the same terms and conditions as in the offer received and the same
      has not been accepted by the other parties in accordance with Section
      19.6.

    

    19.5
      Any
      communication of an intention to sell pursuant to Section 19.3 and 19.4 (the
      “Offer”) for the purpose of this Article only shall be in writing delivered in
      accordance with Article 21 and shall:

    
      	a)  	
              set
                out in reasonable detail all of the terms and conditions of any intended
                sale;

            

    

    
      	b)  	
              if
                it is made pursuant to Section 19.3, include a photocopy of the Offer;
                and

            

    

    
      	c)  	
              if
                it is made pursuant to Section 19.4, clearly identify the offering
                party
                and include such information as is known by the transferring party
                about
                such offering party; and such communication will be deemed to constitute
                an Offer by the transferring party to the other parties to sell the
                transferring party's Interest or its rights (or a portion thereof
                as the
                case may be) under this Agreement to the other parties on the terms
                and
                conditions set out in such Offer. For greater certainty it is agreed
                and
                understood that any Offer hereunder shall deal only with the disposition
                of the Interest or rights of the transferring party hereunder and
                not with
                any other interest, right or property of the transferring party and
                such
                disposition shall be made solely for a monetary
                consideration.

            

    

    

    19.6
      Any
      Offer made as contemplated in Section 19.5 shall be open for acceptance by
      the
      other parties in accordance with their respective Interests for a period of
      sixty (60) days from the date of receipt of the Offer by the transferring
      party.

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    19.7
      If
      the other parties accept the Offer within the period provided for in Section
      19.6, such acceptance shall constitute a binding agreement of purchase and
      sale
      between the transferring party and the other parties for the Interest or its
      rights (or a portion thereof as the case may be) under this Agreement on the
      terms and conditions set out in such Offer.

    

    19.8
      If
      the other parties do not accept the Offer within the period provided for in
      Section 19.6 or do accept but fail to close the transaction contemplated thereby
      within ninety (90) days following receipt of such Offer, the transferring party
      may complete a sale and purchase of its Interest or a portion thereof on terms
      and conditions not less favourable to the transferring party than those set
      out
      in the Offer and, in the case of an Offer under Section 19.4, only to the party
      making the original offer to the transferring party and in any event such sale
      and purchase shall be completed within nine months from the expiration of the
      right of the other party to accept such Offer of the transferring party must
      again comply with the provisions of this Article.

    

    19.9
      While any Offer is outstanding no other Offer may be made until the first
      mentioned Offer is disposed of and any sale resulting therefrom completed or
      abandoned in accordance with the provisions of this Article.

    

    19.10
      Before the completion of any sale by the transferring party of its Interest
      or
      rights or any portion thereof under this Agreement, the purchasing party shall
      enter into an agreement with the parties agreeing not to sell except on the
      same
      terms and conditions as set out in this Agreement.

    

    FORCE
      MAJEURE

    20.1
      No
      party will be liable for its failure to perform any of its obligations under
      this Agreement due to a cause beyond its reasonable control (except those caused
      by its own lack of funds) including, but not limited to acts of God, fire,
      flood, explosion, strikes, lockouts or other industrial disturbances, laws,
      rules and regulations or orders of any duly constituted governmental authority
      or non-availability of materials or transportation (each an “Intervening
      Event”).

    

    20.2
      All
      time limits imposed by this Agreement, excepting those set out in Article 15,
      will be extended by a period equivalent to the period of delay resulting from
      an
      Intervening Event. 20.3 A party relying on the provisions of Section 20.1 will
      take all reasonable steps to eliminate any Intervening Event and, if possible,
      will perform its obligations under this Agreement as far as practical, but
      nothing herein will require such party to settle or adjust any labour dispute
      or
      to question or to test the validity of any law, rule, regulation or order of
      any
      duly constituted governmental authority or to complete its obligations under
      this Agreement if an Intervening Event renders completion
      impossible.

    

    NOTICE

    21.1
      Any
      notice, direction, cheque or other instrument required or permitted to be given
      under this Agreement shall be in writing and may be given by the delivery of
      the
      same or by mailing the same by prepaid registered or certified mail or by
      sending the same by telegram, telex, telecommunication or other similar form
      of
      communication, in each case addressed to the intended recipient at the address
      of the respective party set out on the front page hereof.

    

    21.2
      Any
      notice, direction, cheque or other instrument aforesaid will, if delivered,
      be
      deemed to have been given and received on the day it was delivered, and if
      mailed, be deemed to have been given and received on the third business day
      following the day of mailing, except in the event of disruption of the postal
      service in which event notice will be deemed to be received only when actually
      received and, if sent by telegram, telex, telecommunication or other similar
      form of communication, be deemed to have been given or received on the day
      it
      was so sent.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    
21.3
      Any
      party may at any time give to the other notice in writing of any change of
      address of the party giving such notice and from and after the giving of such
      notice the address or addresses therein specified will be deemed to be the
      address of such party for the purposes of giving notice hereunder.

    

    WAIVER
      

    22.1
      If
      any provision of this Agreement shall fail to be strictly enforced or any party
      shall consent to any action by any other party or shall waive any provision
      as
      set out herein, such action by such party shall not be construed as a waiver
      thereof other than at the specific time that such waiver or failure to enforce
      takes place and shall at no time be construed as a consent, waiver or excuse
      for
      any failure to perform and act in accordance with this Agreement at any past
      or
      future occasion.

    

    FURTHER
      ASSURANCES

    23.1
      Each
      of the parties hereto shall form time to time and at all times do all such
      further acts and execute and deliver all further deeds and documents as shall
      be
      reasonably required in order to fully perform and carry out the terms of this
      Agreement. For greater certainty, this section shall not be construed as
      imposing any obligation on any party to provide guarantees.

    

    USE
      OF NAME

    24.1
      No
      party shall, except when required by this Agreement or by any law, by-law,
      ordinance, rule, order or regulation, use, suffer or permit to be used, directly
      or indirectly, the name of any other party for any purpose related to the
      Property or the Project.

    

    ENTIRE
      AGREEMENT

    25.1
      This
      Agreement embodies the entire agreement and understanding among the parties
      hereto and supersedes all prior agreements and undertakings, whether oral or
      written, relative to the subject matter hereof.

    

    AMENDMENT

    26.1
      This
      Agreement may not be changed orally but only by an agreement in writing, by
      the
      party or parties against which enforcement, waiver, change, modification or
      discharge is sought.

    

    ARBITRATION

    27.1
      If
      any question, difference or dispute shall arise between the parties or any
      of
      them in respect of any matter arising under this Agreement or in relation to
      the
      construction hereof the same shall be determined by the award of three
      arbitrators to be named as follows:

    
      	a)  	
              the
                party or parties sharing one side of this dispute shall name an arbitrator
                and give notice thereof to the party or parties sharing the other
                side of
                the dispute;

            

    

    
      	b)  	
              the
                party or parties sharing the other side of the dispute shall, within
                14
                days of receipt of the notice, name an arbitrator;
                and

            

    

    
      	c)  	
              the
                two arbitrators so named shall, within 15 days of the naming of the
                latter
                of them, select a third arbitrator. The decision of the majority
                of these
                arbitrators shall be made within 30 days after the selection of the
                latter
                of them. The expense of the arbitration shall be borne equally by
                the
                parties to the dispute. If the parties on either side of the dispute
                fail
                to name their arbitrator within the time limited or proceed with
                the
                arbitration, the arbitrator named may decide the question. The arbitration
                shall be conducted in accordance with the provisions of the Arbitration
                Act of
                British Columbia and the decision of the arbitrator or amajority
                of the
                arbitrators, as the case may be, shall be conclusive and binding
                upon all
                the parties.

            

    

    

    RIGHT
      TO AUDIT

    28.1
      Any
      party acquiring a Royalty pursuant to this Agreement shall have the right to
      audit at its expense the books and records in respect of such Royalty of the
      Operator or the other parties, if it is not the Operator in respect of such
      Royalty.

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    TIME

    29.1
      Unless earlier terminated by agreement of all parties or as a result of one
      party acquiring a 100% Interest, the Joint Venture and this Agreement shall
      remain in full force and effect for so long as any part of the Property or
      Project is held in accordance with this Agreement. Termination of the Agreement
      shall not, however, relieve any party from any obligations theretofore accrued
      but unsatisfied.

    

    RULE
      AGAINST PERPETUITIES

    30.1
      If
      any right, power or interest of any party in any Property under this Agreement
      would violate the rule against perpetuities, then such right, power or interest
      shall terminate at the expiration of 20 years after the death of the survivor
      of
      all the lineal descendants of her Majesty, Queen Elizabeth II of the United
      Kingdom, living on the date of execution of this Agreement.

    

    DOCUMENT
      RETENTION ON TERMINATION

    31.1
      Prior to the distribution of the Property or the Project or the net revenues
      received on the disposal thereof on termination of this Agreement, the
      Management Committee shall meet any may approve a procedure for the retention,
      maintenance and disposal of documents maintained by the Management Committee
      (the “Documents”) and shall appoint such party as may consent thereto to ensure
      that all proper steps are taken to implement and maintain that procedure. If
      a
      quorum is not present at the meeting or if he Management Committee fails to
      approve a procedure as aforesaid, the Operator, if a party, otherwise the party
      holding the largest Interest as at the day immediately preceding the date the
      Management Committee was called to meet, shall retain, maintain and dispose
      of
      the Documents according to such procedure, in compliance with all applicable
      laws, as it deems fit. The party entrusted with the retention, and expenses
      incidental thereto and shall be entitled to receive payment of those costs
      and
      expenses prior to any distribution being made of the Property and Project or
      the
      net revenues received on the disposal thereof.

    

    ENUREMENT

    32.1
      This
      Agreement shall enure to the benefit of and be binding upon the parties hereto
      and their respective successors and permitted assigns.

    

    GOVERNING
      LAW

    33.1
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the Province of British Columbia and the parties irrevocably attorn to the
      jurisdiction of the said province.

    

    SEVERABILITY

    34.1
      If
      any one or more of the provisions contained herein should be invalid, illegal
      or
      unenforceable in any respect in any jurisdiction, the validity, legality and
      enforceability of such provision shall not in any way be affected or impaired
      thereby in any other jurisdiction and the validity, legality and enforceability
      of the remaining provisions contained herein shall not in any way be affected
      or
      impaired thereby.

    

    NUMBER
      AND GENDER

    35.1
      Words used herein importing the singular number only shall include the plural,
      and vice versa, and words importing the masculine gender shall include the
      feminine and neuter genders, and vice versa, and words importing persons shall
      include firms and corporations.

    

    HEADINGS

    36.1
      The
      division of this Agreement into articles and sections and the insertion of
      headings are for convenience of reference only and shall not affect the
      construction or interpretation of this Agreement.

    

    TIME
      OF THE ESSENCE

    37.1
      Time
      shall be of the essence in the performance of this Agreement.

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF the
      parties hereto have executed this Agreement as of the day, month and year first
      above written.

    

    

    HOWELLCO

    

    

    per______________________________________

    William
      A. Howell, Pres. & CEO

    

    

    HRE
      EXPLORATION LTD.

    

    

    per______________________________________

    Les
      Scott, Pres. & CE0

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    

      SCHEDULE
        “A”

      TO
        

      THE
        JOINT
        VENTURE AGREEMENT

      

      

      DESCRIPTION
        OF PROPERTY RIGHTS AND PROPERTY

      

      

      

      The
        NOR 1
        mineral claim is located within the New Westminster Mining Division of British
        Columbia

      Latitude:
        49 deg 16’33’’N

      Longitude:
        122 deg 03’02’’W

      

      
        	
                Title

              	
                Name

              	
                Owner

              	
                Expiry

              	
                Status

              	
                Cells

              	
                Area
                  (Hectares)

              
	
                553972

              	
                NOR
                  1

              	
                112364

              	
                March
                  9, 2008

              	
                GOOD

              	
                25

              	
                527

              

      

      

      Owner
        112364 is William A. Howell

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      

        SCHEDULE
          “B” 

        TO
          

        THE
          JOINT
          VENTURE AGREEMENT

         

        

        

        DEFINITION
          OF NET PROFITS

        

        1.
“Net
          Profits” means the aggregate of:

        	(a)  	
                all
                  revenues from the sale or other disposition of ores, metals or
                  minerals
                  mined or extracted from the Property or any portion thereof and
                  any
                  concentrates produced therefrom; and

              

        	b)  	
                all
                  revenues from the operation, sale or other disposition of any Facilities
                  the cost of which is included in the definition of “Operating Expenses”,
                  “Capital Expenses” or “Exploration Expenses”, less (without duplication)
                  Working Capital, Operating Expenses, Capital Expenses and Exploration
                  Expenses.

              

        

        2.
          “Working Capital” means the amount reasonably necessary to provide for the
          operation of the mining operation on the Property and for the operation
          and
          maintenance of the Facilities for a period of six months.

        

        3.
          “Operating Expenses” means all costs, expenses, obligations, liabilities and
          charges of whatsoever nature or kind incurred or chargeable directly or
          indirectly in connection with Commercial Production from the Property and
          in
          connection with the maintenance and operation of the Facilities, all in
          accordance with generally accepted accounting principles, consistently
          applied,
          including, without limiting the generality of the foregoing, all amounts
          payable
          in connection with mining, handling, processing, refining, transporting
          and
          marketing of ore, concentrates, metals, minerals and other products produced
          from the Property, all amounts payable for the operation and maintenance
          of the
          Facilities including the replacement of items which by their nature require
          periodic replacement, all taxes (other than income taxes), royalties and
          other
          imposts and all amounts payable or chargeable in respect of reasonable
          overhead
          and administrative services.

        

        4.
          “Capital Expenses” means all expenses, obligations and liabilities of whatsoever
          kind (being of a capital nature in accordance with generally accepted accounting
          principles) incurred or chargeable, directly or indirectly, with respect
          to the
          development, acquisition, redevelopment, modernization and expansion of
          the
          Property and the Facilities, including, without limiting the generality
          of the
          foregoing, interest thereon from the time so incurred or chargeable at
          a rate
          per annum from time to time equal to “prime rate” of the Royal Bank of Canada
          plus two (2%) percent per annum, but does not include Operating Expenses
          nor
          Exploration Expenses.

        

        5.
          “Exploration Expenses” means all costs, expenses, obligations, liabilities and
          charges of whatsoever nature or kind incurred or chargeable, directly or
          indirectly, in connection with the exploration and development of the Property
          including, without limiting the generality of the foregoing, all costs
          reasonably attributable, in accordance with generally accepted accounting
          principles, to the design, planning, testing, financing, administration,
          marketing, engineering, legal, accounting, transportation and other incidental
          functions associated with the exploration and mining operation contemplated
          by
          this Agreement and with the Facilities, but does not include Operating
          Expenses
          nor Capital Expenses.

        

        6.
          “Facilities” means all plant, equipment, structures, roads, rail lines, storage
          and transport facilities, housing and service structures, real property
          or
          interest therein, whether on the Property or not, acquired or constructed
          exclusively for the mining operation on the Property contemplated by this
          Agreement (all commonly referred to as “infrastructure”).

         

        
          
            
            

          

          
            36

            
              

            

          

          
            
            

          

        

        

        

        SCHEDULE
          “C”

        TO

        THE
          JOINT
          VENTURE AGREEMENT

        

        

        

        ACCOUNTING
          PROCEDURES

        

        

        

        TABLE
          OF CONTENTS

        

        

        1.
          Interpretation 1

        2.
          Statements and Billings2

        3.
          Direct
          Charges2

        4.
          Purchase of Material3

        5.
          Disposal of Material4

        6.
          Inventories4
          

        7.
          Adjustments4
          

        

        

        1.
          INTERPRETATION

        In
          this
          Schedule the following words, phrases and expressions shall have the following
          meanings:

        
          	a)  	
                  “Agreement”
                    means the Agreement to which this Accounting Procedure is attached
                    as
                    Schedule “C”.

                

        

        
          	b)  	
                  “Count”
                    means a physical inventory count.

                

        

        
          	c)  	
                  “Employee”
                    means those employees of the Operator who are assigned to and
                    directly
                    engaged in the conduct of Mining Operations, whether on a full-time
                    or
                    part-time basis.

                

        

        
          	d)  	
                  “Employee
                    Benefits” means the Operator's cost of holiday, vacation, sickness,
                    disability benefits, field bonuses, paid to Employees and the
                    Operator's
                    costs of established plans for employee's group life insurance,
                    hospitalization, pension, retirement and other customary plans
                    maintained
                    for the benefit of Employees and Personnel, as the case may be,
                    which
                    costs may be charged as a percentage assessment on the salaries
                    and wages
                    of Employees or Personnel, as the case may be, on a basis consistent
                    with
                    the Operator's cost experience.

                

        

        
          	e)  	
                  “Field
                    Offices” means the necessary sub-office or suboffices in each place where
                    a Program or Construction is being conducted or a Mine is being
                    operated.

                

        

        
          	f)  	
                  “Government
                    Contributions” means the cost or contributions made by the Operator
                    pursuant to assessments imposed by governmental authority which
                    are
                    applicable to the salaries or wages of Employees or Personnel,
                    as the case
                    may be.

                

        

        
          	g)  	
                  “Joint
                    Account” means the books of account maintained by the Operator to record
                    all costs, expenses, credits and other transactions arising out
                    of or in
                    connection with the Mining
                    Operations.

                

        

        
          	h)  	
                  “Material”
                    means the personal property, equipment and supplies acquired
                    or held, at
                    the direction or with the approval of the Management Committee,
                    for use in
                    the Mining Operations and, without limiting the generality, more
                    particularly “Controllable Material” means such Material which is
                    ordinarily classified as Controllable Material, as that classification
                    is
                    determined or approved by the Management Committee, and controlled
                    in
                    mining operations.

                

        

        
          	i)  	
                  “Personnel”
                    means those management, supervisory, administrative, clerical
                    or other
                    personnel of the Operator normally associated with the Supervision
                    Offices
                    whose salaries and wages are charged directly to the Supervision
                    Office in
                    question.

                

        

        
          	j)  	
                  “Reasonable
                    Expenses” means the reasonable expenses of Employee or Personnel, as the
                    case may be, for which those Employees or Personnel may be reimbursed
                    under the Operator's usual expense account practice; including
                    without
                    limiting the generality of the foregoing, any relocation expenses
                    necessarily incurred in order to properly staff the Mining Operations
                    if
                    the relocation is approved by the Management
                    Committee.

                

        

         

        
          
            
            

          

          
            37

            
              

            

          

          
            
            

          

        

         

        
          	k)  	
                  “Supervision
                    Office” means the Operator's offices or department within the Operator's
                    offices from which the Mining Operations are generally
                    supervised.

                

        

        

        2.
          STATEMENTS AND BILLINGS

        2.1
          The
          Operator shall, by invoice, charge each party with its proportionate share
          of
          Exploration Costs and Mine Costs in the manner provided in the
          Agreement.

        

        2.2
          The
          Operator shall deliver, with each invoice rendered for Costs incurred a
          statement indicating:

        a)
          all
          charges or credits to the Joint Account relating to Controllable Material
          in
          detail; and

        b)
          all
          other charges and credits to the Joint Account summarized by appropriate
          classification indicative of the nature of the charges and credits.

        

        2.3
          The
          Operator shall deliver with each invoice for an advance of Costs a statement
          indicating:

        
          	a)  	
                  the
                    estimated Exploration Costs or, in the case of Mine Costs, the
                    estimated
                    cash disbursements, to be made during the next succeeding
                    month;

                

        

        
          	b)  	
                  the
                    addition thereto or subtraction therefrom, as the case may be,
                    made in
                    respect of Exploration Costs or Mine Costs actually having been
                    incurred
                    in an amount greater or lesser than the advance which was made
                    by each
                    party for the penultimate month preceding the month of the invoice;
                    and

                

        

        
          	c)  	
                  the
                    advances made by each party to date and are Exploration Costs
                    or Mine
                    Costs incurred to the end of the penultimate month preceding
                    the month of
                    the invoice.

                

        

        

        3.
          DIRECT CHARGES

        3.1
          The
          Operator shall charge the Joint Account with the following items:

        
          	a)  	
                  Contractor's
                    Charges:

                

        

        All
          proper costs relative to the Mining Operations incurred under contracts
          entered
          into by the Operator with third parties.

        
          	b)  	
                  Labour
                    Charges:

                

        

        
          	i)  	
                  The
                    salaries and wages of Employees in an amount calculated by taking
                    the full
                    salary or wage of each Employee multiplied by that fraction which
                    has as
                    its numerator the total time for the month that the Employees
                    were
                    directly engaged in the conduct of Mining Operations and as its
                    denominator the total normal working time for the month of the
                    Employee;

                

        

        
          	ii)  	
                  The
                    Reasonable Expenses of the Employees;
                    and

                

        

        
          	iii)  	
                  Employee
                    Benefits and Government Contributions in respect of the Employees
                    in an
                    amount proportionate to the charge made to the Joint Account
                    in respect to
                    their salaries and wages.

                

        

        
          	c)  	
                  Office
                    Maintenance:

                

        

        
          	i)  	
                  The
                    cost or a pro rata portion of the costs, as the case may be,
                    of
                    maintaining and operating the Offices. The basis for charging
                    the Joint
                    Account for Office maintenance costs shall be as
                    follows:

                

        

        the
          expense of maintaining and operating Field Offices, less any revenue therefrom;
          and

        that
          portion of maintaining and operating the Supervision Offices which is equal
          to
          the anticipated total operating expenses of the Supervision Offices divided
          by
          the anticipated total staff man days for the Employees whether in connection
          with the Mining Operations or not; multiplied by the actual total time
          spent on
          the Mining Operations by the Employee expressed in man days.

        ii)
          Without limiting generality of the foregoing, the anticipated total operating
          expenses of the Supervision Offices shall include:

        A.
          the
          salaries and wages of the Operator's Personnel which have been directly
          charged
          to those Offices;

        B.
          the
          Reasonable Expenses of the Personnel; and

        C.
          Employee Benefits

        iii)
          The
          Operator shall make an adjustment in respect of the Office Maintenance
          cost
          forthwith after the end of each Operating Year upon having determined the
          actual
          operating expenses and actual total staff man days referred to in Clause
          3.1(c)(2)(b) of this Schedule “C”.

        d)
          Material:

        Material
          purchased or furnished by the Operator for use on the Property as provided
          under
          Section 4 of this Schedule “C”.

         

        
          
            
            

          

          
            38

            
              

            

          

          
            
            

          

        

         

        e)
          Transportation
          Charges:

        The
          cost
          of transporting Employees and Material necessary for the Mining
          Operations.

        f)
          Service
          Charges:

        
          	i)  	
                  The
                    cost of services and utilities procured from outside sources
                    other than
                    services covered by Paragraph 3.1 h). The cost of consultant
                    services
                    shall not be charged to the Joint Account unless the retaining
                    of the
                    consultant is approved in advance by the Management Committee
                    but if not
                    so charged the cost of such services shall be included as Costs
                    of the
                    party retaining such consultant;
                    and

                

        

        
          	ii)  	
                  Use
                    and service of equipment and facilities furnished by the Operator
                    as
                    provided in Subsection 4.5 of this Schedule
“C”.

                

        

        g)
          Damages
          and Losses to Joint Property:

        All
          costs
          necessary for the repair or replacement of Assets made necessary because
          of
          damages or losses by fire, flood, storms, theft, accident or other cause.
          The
          Operator shall furnish each party with written particulars of the damages
          or
          losses incurred as soon as practicable after the damage or loss has been
          discovered. The proceeds, if any, received on claims against any policies
          of
          insurance in respect of those damages or losses shall be credited to the
          Joint
          Account.

        h)
          Legal
          Expense:

        All
          costs
          of handling, investigating and settling litigation or recovering the assets,
          including, without limiting generality, attorney's fees, court costs, costs
          of
          investigation or procuring evidence and amounts paid in settlement or
          satisfaction of any litigation or claims; provided, however, that, unless
          otherwise approved in advance by the Management Committee, no charge shall
          be
          made for the services of the Operator's legal staff or the fees and expenses
          of
          outside solicitors.

        i)
          Taxes:

        All
          taxes, duties or assessments of every kind and nature (except income taxes)
          assessed or levied upon or in connection with a Property, the Mining Operations
          thereon, or the production therefrom, which have been paid by the Operator
          for
          the benefit of the parties.

        j)
          Insurance:

        Net
          premiums paid for

        
          	i)  	
                  such
                    policies of insurance on or in Operations as may be required
                    to be carried
                    by law; and

                

        

        
          	ii)  	
                  such
                    other policies of insurance as the Operator may carry in accordance
                    with
                    the Agreement; and

                

        

        
          	iii)  	
                  the
                    applicable deductibles in event of an insured
                    loss.

                

        

        k)
          Rentals:

        Fees,
          rentals and other similar charges required to be paid for acquiring, recording
          and maintaining permits, mineral claims and mining leases and rentals and
          of the
          Mining Operations.

        l)
          Permits:

        Permit
          costs, fees and other similar charges which are assessed by various governmental
          agencies.

        m)
          Other
          Expenditures:

        Such
          other costs and expenses which are not covered or dealt with in the foregoing
          provisions of this Subsection 3.1 of this Schedule “C” as are incurred with the
          approval of the Management Committee for Mining Operations or as may be
          contemplated in the Agreement.

        

        4.
          PURCHASE
          OF MATERIAL

        4.1
          Subject to Subsection 4.4 of this Schedule “C” the Operator shall purchase all
          Materials for Mining Operations.

        

        4.2
          Materials purchased and services procured by the Operator directly for
          the
          Mining Operations shall be charged to the Joint Account at the price paid
          by the
          Operator less all discounts actually received. 

        

        4.3
          So
          far as it is reasonably practical and consistent with efficient and economical
          operations, the Operator shall purchase, furnish or otherwise acquire only
          such
          Material and the Operator shall attempt to minimize the accumulation of
          surplus
          stocks of Material.

        

        4.4
          Any
          party may sell Material or services required in the Mining Operations to
          the
          Operator for such price and upon such terms and conditions as the Management
          Committee may approve.

         

        
          
            
            

          

          
            39

            
              

            

          

          
            
            

          

        

         

        4.5
          Notwithstanding the foregoing provisions of this Section 4, the Operator
          shall
          be entitled to supply for use in connection with the Mining Operations
          equipment
          and facilities which are owned by the Operator and to charge the Joint
          Account
          with such reasonable costs as are commensurate with the ownership and use
          thereof.

        

        5.
          DISPOSAL
          OF MATERIAL

        5.1
          The
          Operator, with the approval of the Management Committee may, from time
          to time,
          sell any Material which has become surplus to the reasonably foreseeable
          needs
          of the Mining Operations for such price and upon such terms and conditions
          as
          are available.

        

        5.2
          Any
          party may purchase from the Operator any Material which may from time to
          time
          become surplus to the reasonably foreseeable need of the Mining Operations
          for
          such price and upon such terms and conditions as the Management Committee
          may
          approve.

        

        5.3
          Upon
          termination of the Agreement, the Management Committee may approve the
          division
          of any Material held by the Operator at that date may be taken by the parties
          in
          kind or be taken by a party in lieu of a portion of its Proportionate Share
          of
          the net revenues received from the disposal of the Property. If such a
          division
          to a party be in lieu of a portion of its proportionate share, it shall
          be for
          such price and on such terms and conditions as the Management Committee
          may
          approve.

        

        5.4
          The
          net revenues received from the sale of any Material to third parties or
          to a
          party shall be credited to the Joint Account.

        

        6.
          INVENTORIES

        6.1
          The
          Operator shall maintain records of Material in reasonable detail and records
          of
          Controllable Material in detail.

        

        6.2
          The
          Operator shall perform Counts from time to time at reasonable intervals
          and in
          connection therewith shall give notice of its intention to perform a Count
          to
          each party at least 30 days in advance of the date set for performing of
          the
          Count. Each party shall be entitled to be represented at the performing
          of a
          Count upon giving notice thereof to the Operator within 20 days of the
          Operator's notice. A party who is not represented at the performing of
          the Count
          shall be deemed to have approved the Count as taken.

        

        6.3
          Forthwith after performing a Count, the Operator shall reconcile the inventory
          with the Joint Account and provide each party with a statement listing
          the
          overages and shortages of inventory except such shortages as may have arisen
          due
          to a lack of diligence on the part of the Operator.

        

        7.
          ADJUSTMENTS

        7.1
          Payment of any invoice by a party shall not prejudice the right of that
          party to
          protest the correctness of the statement supporting the payment; provided,
          however, that all invoices and statements presented to each party by the
          Operator during any Operating Year shall conclusively be presumed to be
          true and
          correct upon the expiration of 12 months following the end of the Operating
          Year
          to which the invoice or statement relates, unless within that 12 month
          period
          that party gives notice to the Operator making claim on the Operator for
          an
          adjustment to the invoice or statement.

        

        7.2
          The
          Operator shall not adjust any invoice or statement in favour of itself
          after the
          expiration of 12 months following the end of the Operating Year to which
          the
          invoice or statement relates. 

        

        7.3
          Notwithstanding Subsections 7.1 and 7.2 of this Schedule “C”, the Operator may
          make adjustments to an invoice or statement which arise out of a physical
          inventory of Material or Assets.

        

        7.4
          A
          party shall be entitled upon notice to the Operator to request that the
          independent external auditor of the Operator provide that party with its
          opinion
          that any invoice or statement delivered pursuant to the Agreement in respect
          of
          the period referred to in Subsection 7.1 of this Schedule “C” has been prepared
          in accordance with this Agreement.

         

        7.5
          The
          time for giving the audit opinion contemplated in Subsection 7.4 of this
          Schedule “C” shall not extend the time for the taking of exception to and making
          claims on the Operator for adjustment as provided in Subsection 7.1 of
          this
          Schedule “C”.

        

        7.6
          The
          cost of the auditor's opinion referred to in Subsection 7.4 of this Schedule
“C”
shall be solely for the account of the party requesting the auditor's opinion,
          unless the audit disclosed a material error adverse to that party, in which
          case
          the cost shall be solely for the account of the
          Operator.

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