Document:

Exhibit 10.7

                                                                     OCS-G 24335

                        ASSIGNMENT OF RECORD TITLE INTEREST

UNITED STATES OF AMERICA

OUTER CONTINENTAL SHELF

OFFSHORE TEXAS

      KNOW ALL MEN BY THESE PRESENTS THAT:

      GRYPHON EXPLORATION COMPANY, OCS Qualification Number 2466, whose address
is 1200 Smith Street, Suite 1700, Houston, Texas 77002-4312, (hereinafter
referred to as "Assignor"), for and in consideration of the sum of One Hundred
Dollars ($100.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, does hereby grant, bargain, sell,
convey, assign, transfer, set over and deliver unto RIDGEWOOD ENERGY
CORPORATION, OCS Qualification Number 1308, whose address is The Ridgewood
Commons, 947 Linwood Avenue, Ridgewood, New Jersey 07450, (hereinafter referred
to as "Assignee") an undivided 25.00% of 8/8ths Record Title Interest in and to
the following Oil and Gas Lease:

      That particular Oil and Gas Lease dated October 1, 2002, from the United
      States Department of the Interior, Minerals Management Service, as Lessor,
      to Gryphon Exploration Company, as Lessee, covering all of Block 619,
      Matagorda Island Area, OCS Leasing Map, Texas Map No.4, containing
      5,760.00 acres, more or less, and bearing Serial No. OCS-G 24335 (the
      "Lease").

This Assignment is made by Assignor and accepted by Assignee subject to the
following:

            (i)   The terms and provisions of the Lease;

            (ii)  That particular Participation Agreement effective May 18,
                  2004, by and between Gryphon Exploration Company and Ridgewood
                  Energy Corporation covering the Matagorda Area, Block 619;

            (iii) That particular Joint Operating Agreement dated February 25,
                  2004, between Gryphon Exploration Company, as Operator, and
                  Stephens Production Company, LLC and Fidelity Exploration &
                  Production Company, as Non-Operators, covering Matagorda
                  Island Area, Block 619, Offshore Texas; and

<PAGE>

            (iv)  That particular Assignment of Overriding Royalty Interest
                  dated effective October 1, 2002, from Gryphon Exploration
                  Company to Seitel Data, Ltd. of 1% of 8/8ths in and to the
                  Lease.

Reference to such documents is here made for all purposes and shall be
considered as part hereof as if written herein in its entirety.

Assignor hereby reserves and excepts from Assignment and retains unto itself,
its successors and assigns an overriding royalty interest of two-percent of
eight-eights (2% of 8/8ths) of the value of production saved, marketed and sold
from or attnbutable to the assigned interest. Such overriding royalty shall be
free and clear of all costs and expenses of development and operation of the
lands covered by the Lease but shall bear its proportionate part of all
applicable taxes. The reserved overriding royalty interest shall be
proportionally reduced to the extent of the assigned interest.

The terms and provisions of this Assignment shall be binding upon and inure to
the benefit of the Parties hereto, their respective successors, legal
representatives and assigns. This Assignment is subject to approval by the
Minerals Management Service of the United States Department of the Interior or
any other governmental agency having jurisdiction.

      IN WITNESS WHEREOF, this Assignment is executed on this_______________day
of _________, 2005, but effective as of 7:00 a.m. on the 1st day of October
2004.

WITNESSES:                               ASSIGNOR:

                                         Gryphon Exploration Company

                                         By:
----------------------------------          ------------------------------------
                                            Charles H. Odom
                                            Vice President
__________________________________

                                         ASSIGNEE:

                                         Ridgewood Energy Corporation

[SIGNATURE ILLEGIBLE]                    By: /s/ Robert E. Swanson
----------------------------------          ------------------------------------
                                            Robert E. Swanson
[SIGNATURE ILLEGIBLE]                       President and Chairman of the Board
----------------------------------

                                       2
<PAGE>

STATE OF TEXAS

COUNTY OF HARRIS

      ON THIS _____________________ day of ______________________, 2005, before
me, appeared Charles H. Odom, to me personally known, who, by me duly sworn, did
say that he is the Vice President of Gryphon Exploration Company, and that said
instrument was signed in behalf of said corporation by authority of its Board of
Directors and said Charles H. Odom acknowledged said instrument to be the free
act and deed of said corporation.

                       ----------------------------------
                            NOTARY PUBLIC IN AND FOR
                              HARRIS COUNTY,TEXAS
                         MY COMMISSION EXPIRES ____________

STATE OF  NEW JERSEY

COUNTY OF BERGEN

      ON THIS 11 day of February, 2005, before me, appeared Robert E. Swanson,
to me personally known, who, by me duly sworn, dld say that he is the President
and Chairman of the Board of Ridgewood Energy Corporation, and that said
instrument was signed in behalf of said corporation by authority of its Board of
Directors and said Robert E. Swanson acknowledged said instrument to be the free
act and deed of said corporation.

<TABLE>
<S>                                                                <C>
                                                                   --------------------------------
                            /s/ Jeanne Thompson                           JEANNE THOMPSON
                       ----------------------------------           A Notary Public of New Jersey
                            NOTARY PUBLIC IN AND FOR               My Commisson Expries May 3, 2007
                              HARRIS COUNTY,TEXAS                  --------------------------------
                         MY COMMISSION EXPIRES ____________
</TABLE>

                                       3

<PAGE>

[SEAL OMITTED]      United States Department of the Interior      [SEAL OMITTED]

                           MINERALS MANAGEMENT SERVICE
                           Gulf of Mexico OCS Region
                           1201 Elmwood Park Boulevard
                        New Orleans, Louisiana 70123-2394

In Reply Refer To: OCS-G 24335

                                              Instrument:

                                                   Filed:       March 14, 2005
                                                   Executed:    February 22,2005
                                                   Approved:    March 25, 2005
                                                   Effective:   October 1, 2004

Gryphon Exploration Company
                       Assignor

Ridgewood Energy Corporation
                       Assignee

ACTION: ASSIGNMENT APPROVED                                          Oil and Gas

The approval of this assignment is restricted to record title interest only, and
by virtue of this approval, the Assignee is subject to, and shall fully comply
with, all applicable regulations now or to be issued under the Outer
Continental Shelf Lands Act, as amended. Notwithstanding any agreement between
the Assignor and Assignee, the parties remain subject to the liability
provisions of the Minerals Management Service regulations codified at 30 CFR
256.62 (d) and (e).

Assignor assigned unto Assignee 25% of 8/8ths record title interest. Record
title interest is now held as follows:

OCS-G 24335 All of Block 619, Matagorda Island Area

         Gryphon Exploration Company            62.50%
         Stephens Production Company, LLC       12.50%
         Ridgewood Energy Corporation           25.00%

                                        /s/ Steven K. Waddell

                                        Steven K. Waddell, CPL
                                        Supervisor, Adjudication Unit
                                        Leasing and Environment

cc:   Assignor
      Assignee
      Case File

                                 TAKE PRIDE(R)[LOGO]
                                 IN AMERICALLC OPERATING AGREEMENT

                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                          RIDGEWOOD ENERGY L FUND, LLC

     THIS LIMITED  LIABILITY  COMPANY  AGREEMENT (this  "Agreement") is made and
entered as of July 6, 2004 by and among Ridgewood Energy Corporation, a Delaware
Corporation ("Manager"), and the Investors as defined below.

     WHEREAS,  the  Manager has formed and the  Investors  have agreed to become
members of RIDGEWOOD  ENERGY L FUND, LLC, a Delaware limited  liability  company
(the  "Fund")  and the  Manager  has caused a  certificate  of  formation  to be
executed  and filed with the  Delaware  Secretary  of State  pursuant to Section
18-201 of the Delaware Limited Liability Company Act ("Delaware Act").

     NOW,  THEREFORE,  in  consideration  of the  mutual  terms,  covenants  and
conditions contained herein, the parties agree as follows:

                       ARTICLE 1: ORGANIZATION AND POWERS

     1.1  Name.  The name of the Fund is  "RIDGEWOOD  ENERGY L FUND,  LLC".  The
Manager may conduct the  business of the Fund or hold its  property  under other
names as necessary to comply with law or to further the affairs of the Fund,  as
it deems advisable in its sole discretion.  This Agreement,  the Certificate and
any other documents, and any amendments of any of the foregoing, required by law
or appropriate, shall be recorded in all offices or jurisdictions where the Fund
shall  determine  such recording to be necessary or advisable for the conduct of
the business of the Fund.

     1.2 Purpose  (a) The Fund's  purpose is to acquire,  drill,  construct  and
develop  natural gas and oil  prospects,  including  natural gas  infrastructure
projects,  in the offshore  waters of Texas and  Louisiana in the Gulf of Mexico
("Oil and Gas  Projects").  In addition  to these  acquisition  and  development
activities,  the Fund may participate in  pre-development  and other preparatory
activities  for  the  Oil  and  Gas  Projects,   including  without  limitation,
evaluation,  investigation,  due  diligence  activities,  permitting,  and other
development  activities.  The Fund may effect any of these  transactions  on its
own, together with Affiliates,  or together with  non-Affiliates,  and may do so
with the encouragement or consent of management or controlling equity holders of
the entity it invests in or without such consent.

                                       A-1

<PAGE>

     (b) In carrying out its purposes, the Fund has the power to perform any act
that is necessary,  advisable, customary or incidental thereto. It may invest in
a passive or active  manner  in,  develop,  plan,  construct,  manage,  operate,
advise,  transfer or dispose of, any  facility or interest and produce or market
products  or  services.  The  Fund  may act  independently,  through  subsidiary
organizations,  in cooperation with others or through business entities in which
others have  interests  whether as principal,  agent,  partner,  owner,  member,
associate,  joint venturer or otherwise.  When related to its purposes, the Fund
may also guarantee  obligations of other  persons,  supply  collateral for those
obligations or for the issuance of letters of credit or surety bonds  benefiting
other  persons,  enter  into  leases as lessor  or  lessee or  acquire  goods or
services for the use or benefit of other persons.

     (c)  Without the prior  affirmative  vote or written  consent of  Investors
whose aggregate  Capital  Contributions  constitute more than 50% of all Capital
Contributions  to the Fund at such time,  the Fund will not take any action that
would cause it to be required to register as an "investment  company" subject to
the requirements of the Investment  Company Act of 1940 and will not hold itself
out as an "investment company."

     (d) The Fund may make interim investments of funds in any vehicle otherwise
permitted  by this  Agreement  and may take all action  necessary,  advisable or
appropriate to maintain its existence,  enforce this Agreement and its rights or
the rights of the Shareholders and comply with legal requirements.

     1.3 Relationship among Shareholders; No Partnership. As among the Fund, the
Shareholders  and the  officers  and  agents  of the Fund,  a limited  liability
company and not a partnership is created by this  Agreement and the  Certificate
irrespective  of  whether  any  different  status may be held to exist as far as
others  are  concerned  or  for  tax  purposes  or in  any  other  respect.  The
Shareholders  hold only the  relationship  of members of the Fund with only such
rights as are conferred on them by this Agreement and the Delaware Act.

     1.4 Organization Certificates. The parties hereto have or shall cause to be
executed and filed (a) the Certificate, (b) such certificates as may be required
by so-called  "assumed name" laws in each  jurisdiction  in which the Fund has a
place of business, (c) all such other certificates, notices, statements or other
instruments  required by law or appropriate for the formation and operation of a
Delaware limited liability company in all jurisdictions where the Fund may elect
to do business,  and (d) any amendments of any of the foregoing  required by law
or otherwise appropriate.

                                       A-2

<PAGE>

     1.5 Principal  Place of Business.  The  principal  place of business of the
Fund shall be 1314 King Street, Wilmington,  Delaware 19801, or such other place
as the Fund may  designate  from time to time by notice.  The Fund may  maintain
such other  offices at such other places as the Fund may  determine to be in the
best interests of the Fund.

     1.6 Admission of Investors.  (a) The Fund shall have the unrestricted right
at all times prior to the  Termination  Date to admit to the Fund such Investors
as it may deem  advisable.  One Investor  Share will be issued for each accepted
subscription  for  $150,000  of  Capital   Contributions  (before  discounts  or
incentives) and fractional Shares may be issued in the Manager's sole discretion
for proportional amounts of Capital  Contributions.  After the Termination Date,
the sale of Shares or  different  classes of Shares shall be governed by Section
9.6.

     (b) The aggregate  subscriptions  received for Capital Contributions of the
Investors  and  accepted  by the  Fund  will  not  exceed  350  Investor  Shares
($52,500,000  nominal),  immediately  following the admission of such Investors.
However,  at any  time  prior  to the  Termination  Date,  the  Fund in its sole
discretion may increase the number of Investor  Shares to 670 Investor Shares or
more.

     (c) (i) If, by the close of business  on March 31,  2005,  Investor  Shares
representing  Investor Capital Contributions in the aggregate amount of at least
$1,500,000  have not been sold, the Fund shall be  immediately  dissolved at the
expense of the Manager and all subscription funds shall be forthwith returned to
the respective subscribers together with any interest earned thereon.

          (ii) If the Fund  withdraws  the Offering  after the Fund has received
Investor Shares  representing  Investor  Capital  Contributions in the aggregate
amount of at least  $1,500,000,  but before the Termination Date, the Fund shall
be  immediately  dissolved  at the expense of the  Manager and all  subscription
funds, net of third party fees, shall be returned to the respective  subscribers
together  with  any  interest  earned  thereon.  For  purposes  of this  Section
1.6(c)(ii),  third party fees do not include any fees paid to the Manager or its
affiliates.

     (d) Each Investor  shall execute a  Subscription  Agreement and will make a
Capital  Contribution to the Fund equal to $150,000 per Investor Share. The Fund
may  accept  or  reject  any  subscription  in  whole  or in  part  in its  sole
discretion.  Each Investor who executes an accepted Subscription Agreement shall
be  admitted  to the  Fund  as a  Shareholder.  All  funds  received  from  such
subscriptions  until used by the Fund will be deposited in the Fund's name in an
account at a commercial bank.

     (e) The Capital  Contribution  for Investor Shares must be paid to the Fund
at the time of subscription.

                                       A-3

<PAGE>

     1.7 Term of the Fund. For all purposes,  this Agreement  shall be effective
on and after its date and the Fund shall  continue in existence  until  December
31, 2040, at which time the Fund shall terminate unless sooner  terminated under
any other provision of this Agreement.

     1.8 Powers of the Fund.  Without  limiting  any powers  granted to the Fund
under this  Agreement or  applicable  law, in carrying out its purposes the Fund
has all  powers  granted  to a limited  liability  company  organized  under the
Delaware Act, including, without limitation:

     (a) To borrow  money or to loan money and to pledge or mortgage any and all
Fund  Property  and to  execute  conveyances,  mortgages,  security  agreements,
assignments and any other contract or agreement deemed proper and in furtherance
of the Fund's purposes and affecting it or any Fund Property; provided, however,
that the Fund shall not loan money to the Manager, or any other Managing Person;

     (b) To pay all  indebtedness,  taxes and  assessments due or to be due with
regard  to Fund  Property  and to give or  receive  notices,  reports  or  other
communications  arising out of or in connection with the Fund's business or Fund
Property;

     (c) To collect all monies due the Fund;

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

     (e) To employ accountants to prepare required tax returns and provide other
professional services and to pay their fees at the Fund's expense;

     (f) To make any election  relating to adjustments in basis on behalf of the
Fund  or  the  Shareholders  which  is or  may  be  permitted  under  the  Code,
particularly with respect to Sections 743, 754 and 771 of the Code;

     (g) To employ  legal  counsel for Fund  purposes  and to pay their fees and
expenses at the Fund's expense; and

     (h) To invest in any asset  consistent  with the  objectives of the Fund as
described in the Memorandum; and

                             ARTICLE 2: DEFINITIONS

                                       A-4

<PAGE>

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

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

     "Adjusted Capital Account Deficit"--- with respect to any Shareholder,  the
deficit balance, if any, in such Shareholder's  Capital Account as of the end of
the relevant Fiscal Year, with the following adjustments:

A credit to such  Capital  Account  of any  amounts  which such  Shareholder  is
obligated to restore  pursuant to any  provision of this  Agreement or is deemed
obligated  to restore  pursuant  to the  penultimate  sentences  of  Regulations
Section 1.704-2(g)(1) and 1.704-2(i)(5); and

A  debit  from  such  Capital  Account  for  the  items  described  in  Sections
1.704-1(b)(2)(ii)(d)(4),  1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.

The foregoing  definition of "Adjusted  Capital Account  Deficit" is intended to
comply with the provisions of Section  1.704-1(b)(2)(ii)(d)  of the  Regulations
and shall be interpreted consistently therewith.

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

     "Agreement"---This  Limited Liability Company Agreement, as further amended
from time to time.

     "Available  Cash from  Dispositions"---  The amount by which (a) the sum of
(i) the  total  cash  proceeds  received  by the  Fund in  connection  with  the
transfer,  injury,  distribution,  condemnation,  or other  disposition  of Fund
Property (or interest therein) that is made other than in the ordinary course of
the  Fund's  business,  plus (ii) the  proceeds  of any  insurance  payments  or
financing  transactions  that are not otherwise  used to  construct,  replace or
repair  Fund  Property,  exceed (b) the amount that the  Manager  determines  is
necessary to be retained by the Fund (i) to satisfy any debt or other obligation
of the Fund that is secured by,  attributable to or otherwise connected with the
Fund Property  disposed of  (including  Shareholder  loans,  if any) and (ii) to
establish reasonable reserves for actual or contingent obligations of the Fund.

                                       A-5

<PAGE>

     "Available  Cash from  Operations"---  The total cash  received by the Fund
from  operation  of the  business  in the  ordinary  course (but  excluding  any
Available  Cash  Flow from  Dispositions  and  excluding  any  Investor  Capital
Contributions), less (i) all operating expenses and other cash expenditures, and
(ii) such  reserves  for  operating  expenses,  debt service and other actual or
contingent  obligations and liabilities of the Fund as the Manager may determine
are necessary or advisable.

     "Capital   Account"---The   amount  representing  a  Shareholder's  capital
interest in the Fund, as determined under Article 6 hereof.

     "Capital  Contributions"---The   aggregate  capital  contributions  of  the
Investors  accepted by the Fund in payment of the purchase  price of one or more
whole or  fractional  Investor  Shares,  minus any return of capital by the Fund
pursuant to Section 5.3.

     "Certificate"---The  Certificate  of Formation of the Fund, as amended from
time to time.

     "Code"---The  United States Internal  Revenue Code of 1986, as amended from
time to time, or any corresponding provision or provisions of any succeeding law
and, to the extent applicable, any rules and regulations promulgated thereunder.

     "Delaware  Act"---The  Delaware Limited  Liability  Company Act, as amended
from time to time  (currently  codified as Title 6,  Chapter 18 of the  Delaware
Code).

     "Dry-Hole Costs" --- The cost of drilling a well.

     "Escrow  Date" --- The  later of the  dates on which  the Fund (i)  accepts
Investor subscriptions of at least $1,500,000 in the aggregate,  and (ii) has in
deposit at least  $1,500,000 in collected  funds in escrow under Section 1.6(c),
provided, however, the Escrow Date shall not be later than March 31, 2005.

     "Fiscal Year"---The calendar year ending December 31st.

     "Fund"---Ridgewood  Energy  L  Fund,  LLC,  a  Delaware  limited  liability
company.

     "Fund Property" --- All property owned or acquired by the Fund.

     "Investor"---A purchaser of whole or fractional Investor Shares (which will
include  the  Manager  to the  extent it  acquires  Investor  Shares for its own
account) whose subscription is accepted by the Fund.

     "Investor  Share" --- A Investor Share in the Fund  representing a required
Capital Contribution (before any discounts or waivers of fees) of $150,000.

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

     "Management  Share" - The equity  interest in the Profits and Losses of the
Fund and in  distributions  granted to Ridgewood as compensation  for organizing
and sponsoring the Fund and acting as its Manager.

     "Managing  Person"---Any  of the  following:  (a)  Fund  officers,  agents,
consultants  or  Affiliates,  the  Manager  and  (b)  any  directors,  trustees,
officers,  agents or Affiliates of any  organizations  named in (a), above, when
acting on behalf of the Fund.

                                       A-6

<PAGE>

     "Manager"--  Ridgewood Energy Corporation and any successor,  substitute or
different Manager under this Agreement.

     "Memorandum"---The Confidential Memorandum dated April 1, 2004 of the Fund,
as the same may be amended or supplemented from time to time.

     "1940 Act"---The federal  Investment  Company Act of 1940, as amended,  and
the rules and regulations promulgated thereunder.

     "Non-recourse Deductions"---Shall have the meaning set forth in Regulations
Section 1.704-2(b)(1) and 1.704-2(c).

     "Non-recourse Liability"--- Shall have the meaning set forth in Regulations
Section 1.752-1(a)(2).

     "Oil and Gas  Projects"  --- The natural gas or oil  projects  acquired and
developed by the Fund.

     "Partnership  Minimum  Gain"  ---  Shall  have  the  meaning  set  forth in
Regulations Section 1.704-(2)(b)(2) and 1.704-2(d).

     "Placement    Agent"---Ridgewood   Securities   Corporation,   a   Delaware
corporation, or any successor.

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

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

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

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

          (d) Notwithstanding any other provision of this definition,  any items
that are  specially  allocated  pursuant to Sections  4.3,  and 7.3 shall not be
taken into account in computing Profits or Losses.

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

     "Ridgewood   Energy   Corporation"  or  "Ridgewood"  --  Ridgewood   Energy
Corporation, a Delaware corporation.

     "Salvage  Fund" --- As used  herein  shall  have the  meaning  set forth in
Section 9.7.

                                       A-7

<PAGE>

     "Shareholder"  --- The Investors and the owner of the Management Share. The
Shareholders are the members of the Fund.

     "Share"---A Shareholder's interest as a member of the Fund.

     "Subscription Agreement"---The form of subscription agreement (contained in
Exhibit D to the Memorandum,  which is separately  bound) which each prospective
Investor  must complete and execute in order to subscribe for an interest in the
Fund.

     "Supplemental  Offering" --- A supplemental  offering by the Fund at a date
to be determined and as further described in Section 9.6.

     "Termination  Date" --- The date on which the initial  offering of Investor
Shares is ended,  as set or  extended  from time to time by the Fund in its sole
discretion,  provided that the Termination  Date may not occur before the Escrow
Date, and that if the Offering is withdrawn,  the  Termination  Date is the date
the Fund elects to do so. In no event shall the  Termination  Date extend beyond
ninety (90) days beyond March 31, 2005.

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

                             ARTICLE 3: LIABILITIES

     3.1  Liability of Investors  in General.  Except as expressly  set forth in
this  Agreement or required by law, no Investor  shall be personally  liable for
any debt, obligation, or liability of the Fund whether arising in contract, tort
or  otherwise,  in any amount beyond the unpaid  amount,  if any, of the Capital
Contribution  subscribed for by him,  solely by reason of being a Shareholder of
the Fund.

     3.2  Liability of Investors  to Fund and  Shareholders.  No Investor in his
capacity  as such  shall be liable,  responsible  or  accountable  in damages or
otherwise to any other Shareholder or the Fund for any claim, demand, liability,
cost,  damage or cause of action of any nature  whatsoever that arises out of or
that is incidental to the management of the Fund's affairs.

     3.3 Liability of Managing Persons to Third Person,  Fund and  Shareholders.
No  Managing  Person  shall be liable  to any  person  other  than the Fund or a
Shareholder  for any  obligation  of the Fund.  No  Managing  Person  shall have
liability to the Fund or to any  Shareholder  for any loss  suffered by the Fund
that arises out of any action or inaction of the Managing Person if the Managing
Person, in good faith,  determined that such course of conduct was in the Fund's

                                       A-8

<PAGE>

best  interest and such course of conduct did not  constitute  bad faith,  gross
negligence  or  willful  misconduct  of such  Managing  Person.  Nothing in this
Section 3.3, however, shall limit or supersede any contractual or other defenses
a Managing Person may have against the Fund or a Shareholder.

     3.4 Indemnification of Managing Persons.  (a) Each Managing Person shall be
indemnified  from Fund  Property  against  any losses,  liabilities,  judgments,
expenses  and  amounts  paid in  settlement  of any claims  sustained  by him in
connection with the Fund or claims by the Fund, in right of the Fund or by or in
right of any  Shareholder,  if the Managing Person would not be liable under the
standards of Section 3.3, or with respect to any criminal  action or  proceeding
he had no reasonable cause to believe his conduct was unlawful, and, in the case
of Managing Persons other than the Manager, they were acting within the scope of
authority  validly  delegated  to them by the  Manager  or this  Agreement.  The
termination of any action,  suit or proceeding by judgment,  order or settlement
shall not, of itself,  create a presumption that the Managing Person charged did
not act in good faith and in a manner  that he  reasonably  believed  was in the
Fund's best  interests.  To the extent that any Managing Person is successful on
the merits or  otherwise  in defense of any  action,  suit or  proceeding  or in
defense of any claim,  issue or matter  therein,  the Fund shall  indemnify that
Managing  Person against the expenses,  including  reasonable  attorneys'  fees,
actually and  reasonably  incurred by him in connection  therewith.  The Manager
shall have full and  complete  discretion  to authorize  indemnification  of any
Managing Person  consistent with the requirements of this Agreement at any time,
regardless  of whether a claim is pending or  threatened  and  regardless of any
conflict of  interest  between the Manager and the Fund that may arise in regard
to the decision to indemnify a Managing Person.

     (b) Notwithstanding the foregoing,  no Managing Person, the Placement Agent
or any broker-dealer  entitled to  indemnification  pursuant to Section 12.10 of
this Agreement  shall be  indemnified,  for any losses,  liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws,
unless (i) there has been a successful  adjudication on the merits of each count
involving  alleged  securities law  violations as to the particular  indemnitee,
(ii) those claims have been dismissed with prejudice on the merits by a court of
competent  jurisdiction  as to the  particular  indemnitee  or  (iii) a court of
competent   jurisdiction  approves  a  settlement  of  the  claims  against  the
particular  indemnitee.  In any  claim  for  federal  or  state  securities  law
violations,  the party seeking  indemnification shall place before the court the
positions  of the  Securities  and  Exchange  Commission  and  other  securities
administrators  to the  extent  required  by them with  respect  to the issue of
indemnification for securities law violations.

     (c) The  restrictions  of this  Section 3.4 do not apply to the purchase of
directors and officers'  insurance or any other insurance or bond by the Fund or
by

                                       A-9

<PAGE>

a Managing  Person on behalf of the Fund, nor do they apply to any claim against
or proceeds of that insurance or bond.

     3.5 General Provisions.  The following provisions shall apply to all rights
of  indemnification  and advances of expenses  under this  Agreement  and to all
liabilities described in this Article 3:

     (a) Expenses,  including  attorneys' fees, incurred by a Managing Person in
defending any action, suit or proceeding shall be paid by the Fund in advance of
the final  disposition  of the action,  suit or  proceeding  upon  receipt of an
undertaking  by the  recipient  to repay such amount if it shall  ultimately  be
determined  that the Managing  Person is not entitled to be  indemnified  by the
Fund under this  Agreement  or  otherwise  and if it is  reasonable  to make the
advance.  It is  reasonable to make the advance if at least one of the following
conditions is satisfied:

               (i) The Managing  Person  provides  appropriate  security for the
undertaking;

               (ii) The Managing Person is insured against losses or expenses of
defense or settlement so that the advances may be recovered;

               (iii) The Managing  Person was not a "controlling  person" of the
Fund,  as  defined  by the  federal  securities  laws;  or

               (iv) There are other reasonable grounds for making the advance.

     (b) Rights to indemnification and advances of expenses under this Agreement
are not exclusive of any other rights to  indemnification or advances to which a
Managing Person may be entitled,  both as to action in a representative capacity
or as to action in  another  capacity  taken  while  representing  another.  The
restrictions  of Section  3.5(a) or of any other  provision of this Article 3 do
not apply to the  purchase of  directors  and  officers'  insurance or any other
insurance or bond by the Fund or by a Managing Person on behalf of the Fund, nor
do they apply to any claim against or proceeds of that insurance or bond.

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

     3.6 Dealings  with the Fund.  With regard to all rights of the Fund and all
actions to be taken on its behalf,  the Fund, the Fund's officers and agents, or
the

                                      A-10

<PAGE>

Shareholders,  shall be the  principal and the Fund shall be entitled as such to
the extent  permitted by law to enforce the same,  collect  damages and take all
other  action.  All  agreements,  obligations  and  actions of the Fund shall be
executed or taken in the name of the Fund or by an  appropriate  nominee.  Money
may be paid and property  delivered to any duly  authorized  officer or agent of
the Fund who may receive  same in the name of the Fund and no person  dealing in
good faith  thereby  shall be bound to see to the  application  of any moneys so
paid or property so delivered.  No entity whose  securities are held by the Fund
shall be affected by notice of such fact or be bound to see to the  execution of
the Fund or to  ascertain  whether any transfer of its  securities  by or to the
Fund is authorized.

                    ARTICLE 4: ALLOCATION OF PROFIT AND LOSS

     4.1  General.  The rules set forth below in this  Article 4 shall apply for
the purposes of determining each  Shareholder's  allocable share of the items of
income,  gain, loss and expense of the Fund comprising  Profits or Losses of the
Fund for each Fiscal Year,  determining  special  allocations  of other items of
income,  gain, loss and expense, and adjusting the balance of each Shareholder's
Capital Account to reflect the aforementioned  general and special  allocations.
For each Fiscal  Year,  the special  allocations  in Section 4.3 and Section 7.4
hereof shall be made immediately prior to the general allocations of Section 4.2
hereof.  Allocations  to the Investors  shall be made in  accordance  with their
relative Investor Shares.

     4.2 General Allocations.

     (a)  General.  Except as  provided  in Section  4.3  hereof and  subject to
Article 7, 8 and 9 hereof, all items of income,  gain, expense,  loss, deduction
and  credit of the Fund shall be  allocated  15% to the  Manager  and 85% to the
Investors.

     (b) Loss Limitation.  Notwithstanding anything to the contrary contained in
this Section 4.2, the amount of Fund Losses allocated pursuant to Section 4.2(b)
to any Shareholder shall not exceed the maximum amount of such items that can be
so  allocated  without  causing  such  Shareholder  to have an Adjusted  Capital
Account  Deficit at the end of any Fiscal Year.  All such items in excess of the
limitation  set  forth in the  previous  sentence  shall be  allocated  first to
Shareholders who would not have an Adjusted  Capital Account Deficit,  pro rata,
until no Shareholder  would be entitled to any further  allocation,  and then to
the Manager.

     (c) No Deficit Restoration Obligation.  Except as provided in Section 14.7,
at no time  during  the term of the  Fund or upon  dissolution  and  liquidation
thereof shall a Shareholder  with a negative  balance in his, her or its Capital

                                      A-11

<PAGE>

Account have any  obligation  to the Fund or the other  Shareholders  to restore
such negative balance, except as may be required by law.

     (d) Items.  Except as otherwise  provided in this  Agreement,  all items of
Fund income, gain, expense, loss, and deduction for a particular Fiscal Year and
any other  allocations  not  otherwise  provided for shall be divided  among the
Shareholders  in the same  proportions  as they share Profits or Losses,  as the
case may be, for such Fiscal Year.

     (e) Tax  Reporting.  The  Shareholders  shall be bound by the provisions of
this Agreement in reporting their shares of Fund Profits, Losses and other items
for income tax purposes.

     (f) Allocation to Fiscal Periods.  The Fund may use any permissible  method
under Code Section 706(d) and the Regulations  thereunder to determine  Profits,
Losses and other items on a daily, monthly or other basis for any Fiscal Year in
which there is a change in a Shareholder's interest in the Fund.

     (g) Capital Account  Regulations.  The definition of "Capital  Account" and
certain  other  provisions  of  this  Agreement  are  intended  to  comply  with
Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied
in  a  manner  consistent  with  such  Regulations.  These  Regulations  contain
additional  rules  governing  maintenance of Capital  Accounts that may not have
been provided for in this Agreement because,  in part, these rules may relate to
transactions that are not expected to occur and in some instances are prohibited
by this Agreement.  If the Fund after consultation with its regular  accountants
or tax counsel  determines  that it is prudent to modify the manner in which the
Capital  Accounts,  or any debits or credits  thereto,  are computed in order to
comply with such  Regulations,  or to avoid the effects of unanticipated  events
that might otherwise  cause this Agreement not to comply with such  Regulations,
the Fund shall make such  modification  without  the need of prior  notice to or
consent of any Shareholder;  so long as no such modification is likely to have a
material effect on the amounts distributable to any Shareholder.

     4.3 Capital Contribution  Allocations.  Subject to Section 1.6 and Articles
7,  8,  and  9  hereof,  all  items  of  expense,  loss,  deduction  and  credit
attributable to the expenditure of any Capital  Contributions and all income and
gains derived from temporary investment of the Fund's funds prior to application
of such funds to the  business of the Fund shall be  allocated 1% to the Manager
and 99% to the Investors.

     4.4 Tax Allocations.  The tax allocations made pursuant to this Section 4.4
shall be solely for tax purposes and shall not affect any Shareholder's  Capital
Account or share of non-tax allocations or distributions under this Agreement.

                                      A-12

<PAGE>

     (a) Section  704(c)  Allocations.  In the event any property of the Fund is
credited to the Capital  Account of a Shareholder  at a value other than its tax
basis, the allocations of taxable income, gain, loss and deductions with respect
to such  property  shall be made in a manner that will comply with Code  Section
704(b) and  704(c) and the  Regulations  thereunder.  The Fund,  in the sole and
absolute  discretion  of the  Manager,  may  make,  or not make,  "curative"  or
"remedial" allocations (within the meaning of the Regulations under Code Section
704(c) including, but not limited to:

     (i)  "curative"  allocations  which offset the effect of the "ceiling rule"
for  a  prior   Fiscal  Year   (within  the  meaning  of   Regulations   Section
1.704-3(c)(3)(ii)); and

     (ii)  "curative"  allocations  from  dispositions  of contributed  property
(within the meaning of Regulations Section 1.704-3(c)(3(iii)(B)).

     (b)  Depreciation  Recapture.  To the maximum extent permitted by the Code,
income  realized by the Fund in the nature of recapture of depreciation or other
cost recovery  allowances (other than of Non-recourse  Deductions or Shareholder
Non-recourse  Deductions)  shall  be  allocated  to  Shareholders  in  the  same
proportions  as  depreciation  allowances  were  allocated  to them  pursuant to
Section 4.3(a).

                ARTICLE 5: CAPITAL CONTRIBUTIONS OF SHAREHOLDERS

     5.1 Additional  Capital  Contributions.  Investors shall not be required or
permitted to make additional contributions to the Fund.

     5.2 Manager's Capital Contributions. The Manager in its capacity as Manager
shall only be required to make Capital  Contributions in accordance with Section
14.7.

     5.3.  Returns of  Capital.  If the Fund for any reason at any time does not
find it necessary or appropriate to retain or expend all Capital  Contributions,
the Manager in its sole  discretion may cause the Fund to return any or all such
excess  Capital  Contributions  ratably  to  Investors.  The  Investors  will be
notified of the source of the payment.  The Fund is not  obligated to return the
amount of any fees charged in connection with the Investor Capital  Contribution
and the return of a Investor Capital Contribution is net of any fees so charged.

                                      A-13

<PAGE>

                           ARTICLE 6: CAPITAL ACCOUNTS

     6.1 Capital Accounts. A Capital Account shall be established and maintained
for each Shareholder and shall be adjusted as follows:

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

     (1) The amount of such Shareholder's Capital Contributions to the Fund;

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

     (3) The fair market value of property contributed by the Shareholder to the
Fund (net of liabilities secured by the contributed property that the Fund under
Code Section 752 is considered to have assumed or taken subject to);

     (4) Any items in the nature of income or gain that are specially  allocated
to such Shareholder or adjusted pursuant to Sections 4.3 and 7.4; and

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

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

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

     (3) Any  items in the  nature of  expenses  or  losses  that are  specially
allocated to such Shareholder pursuant to Sections 4.3 and 7.4; and

     (4) Any return of a Capital Contribution under Section 5.3.

     6.2 Calculation of Capital  Account.  Whenever it is necessary to determine
the Capital Account of any Shareholder,  the Capital Account of such Shareholder
shall be determined in accordance with the rules of Regulation  Sections 1.704-1
(b) (2) (iv) and 1.704-2 (as amended from time to time).  If necessary to comply
with the Code, an adjusted Capital Account may be employed.

     6.3  Effect of Loans.  Loans by any  Shareholder  to the Fund  shall not be
considered contributions to the capital of the Fund.

                                      A-14

<PAGE>

     6.4 Withdrawal of Capital. No Shareholder shall be entitled to withdraw any
part of his Capital Account or to receive any distribution from the Fund, except
as specifically provided herein.

     6.5 Capital  Accounts  of New  Shareholders.  Any person who shall  acquire
Shares in  accordance  with the  terms  and  conditions  of  Article  13 of this
Agreement  shall have the Capital  Account of his transferor  after  adjustments
reflecting the transfer, if any, except as specifically provided herein.

     6.6 Limitation.  Neither the Manager nor any other Managing Person shall be
required or shall have any personal liability to fund any or all of any negative
Capital Account of any Investor,  including without limitation  Investor Capital
Contributions.

           ARTICLE 7: ADDITIONAL PROVISIONS APPLICABLE TO ALLOCATIONS

     7.1  Determination  of Income and Loss. At the end of each Fiscal Year, and
at such other times as the Fund shall deem necessary or  appropriate,  each item
of Fund income,  gain, expense,  loss,  deduction and credit shall be determined
for the period then ending and shall be allocated to the Capital Account of each
Shareholder in accordance with this Agreement.  With respect to the admission of
Shareholders,  the Fund will use the "interim closing date" method of accounting
as permitted by the Regulations.

     7.2 Determination of Income and Loss in the Event of Transfer. In the event
that a Shareholder  transfers  his interest in the Fund in  accordance  with the
terms of this Agreement,  the determination and allocation  described in Section
7.1  shall  be made as of the  date of such  transfer  and  thereafter  all such
allocations  shall be made to the account of the  transferee  of such  interest;
provided,  however,  that the Fund may  determine  that such  determination  and
allocation shall be pro rata to the Shareholders based upon the actual number of
days in such  Fiscal  Year that each such  Shareholder  held an  interest in the
Fund. In the event of a pro rata  determination  and  allocation,  the foregoing
provisions of this Section relating to a pro rata  determination  and allocation
will not be applicable to the  distributive  shares,  with respect to the Shares
transferred,  of items of Fund income, gain, expense, loss, deduction and credit
arising out of (a) the sale or other  disposition  of all or  substantially  all
Fund Property, or (b) other extraordinary  nonrecurring items, all of which will
be allocated to the holder of such Trust interest on the date such items of Fund
income, gain, expense, loss, deduction and credit are earned or incurred.

     7.3  Allocation  of Net Income and Net Losses.  All items of income,  gain,
expense,  loss,  deduction  and  credit of the Fund from  operations  and in the

                                      A-15

<PAGE>

ordinary  course of operation  of Fund  Property  shall be  allocated  among the
Shareholders in accordance with Article 4.

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

     (b) If during  any  fiscal  period of the Fund a  Shareholder  unexpectedly
receives an  adjustment,  allocation  or  distribution  described in  Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit
balance in the  Shareholder's  Capital Account,  there shall be allocated to the
Shareholder  items of income and gain  (consisting of a pro rata portion of each
item of Fund income,  including  gross  income,  and gain for such period) in an
amount and manner  sufficient  to eliminate  such deficit  balance as quickly as
possible.  The foregoing is intended to be a "qualified income offset" provision
as  described  in  Regulation   Section   1.704-1(b)(2)(ii)(d),   and  shall  be
interpreted and applied in all respects in accordance with such Regulation.

                                      A-16

<PAGE>

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

     (d) To the extent that any item of income, gain, loss or deduction has been
specially  allocated  pursuant to paragraph  (a), (b) or (c) of this Section 7.4
("Required  Allocations")  and such allocation is inconsistent with how the same
amount  otherwise  would  have  been  allocated  under  Sections  4.1  and  4.2,
subsequent  allocations  under Sections 4.1 and 4.2 shall be made, to the extent
possible,  in a  manner  consistent  with  paragraphs  (a),  (b) and (c) of this
Section  7.4 which  negates as rapidly as  possible  the effect of all  previous
Required Allocations.

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

                    ARTICLE 8: DISTRIBUTIONS TO SHAREHOLDERS

     8.1  Distributions of Available Cash from Operations.  Subject to the terms
of this  Agreement,  the  Fund  shall  make  distributions  to  Shareholders  of
Available  Cash from  Operations  with respect to each Fiscal Year in the manner
and at the time  determined  by the Manager.  The amount of Available  Cash From
Operations  determined to be available,  if any, will be distributed  15% to the
Manager and 85% to the Investors.

     8.2 Distribution of Available Cash from Dispositions.  Subject to the terms
of this Agreement, the Fund shall make distribution to Shareholders of Available
Cash from  Dispositions  with respect to each Fiscal Year,  in the manner and at
the times determined by the Manager, as follows:

     (i)  Before   Investors  have  received  total   distributions   (including
     distributions  from Available Cash From Operations)  equal to their Capital
     Contributions,  99% of Available Cash From Dispositions will be distributed
     to Investors and 1% to the Manager.

                                      A-17

<PAGE>

     (ii) After Investors have received total distributions (including Available
     Cash  From  Operations  and  any   distributions  of  Available  Cash  From
     Dispositions) equal to their Capital  Contributions,  85% of Available Cash
     From Dispositions will be distributed to Investors and 15% to the Manager.

     8.3 Interim  Distributions Based on Estimates.  To the extent that the Fund
makes  interim  distributions  prior  to  the  end  of  any  Fiscal  Year,  such
distributions  are  provisional  and may be made  based  upon  estimates  of the
Manager of the results of  operations  of the Fund for the balance of the Fiscal
Year,  subject to a true-up at the end of such Fiscal  Year.  To the extent that
the Fund subsequently  determines that any amounts were improperly  distributed,
and not repaid to the Fund by any Shareholder,  the Fund may take such action as
the  Manager  shall  determine  to  recover  such  amounts,  including,  without
limitation,  the offset any amounts of future  distributions to such Shareholder
to satisfy such repayment obligation.

     8.4  Distribution in Kind. If the Fund elects to make  distribution in kind
of any of the assets of the Fund,  it shall give notice of its  election to each
Shareholder,  specifying  the  nature  and  value  of  all  such  assets  to  be
distributed  in kind,  the  deadline  for  giving  notice of refusal to accept a
distribution in kind and to the extent  advisable,  the estimated time necessary
for the Fund to liquidate  assets if those assets are not  distributed and other
information as required. In making such election, the Fund shall not arbitrarily
value  assets  to be  distributed  in kind nor  shall it  specify  assets  to be
distributed  in  kind  in  such  a  manner  as  to  unreasonably   advantage  or
disadvantage any Shareholder.  A Shareholder may refuse to accept a distribution
in kind by giving  written  notice to the Fund not later  than 30 days after the
effective date of the Fund's notice of  distribution.  If a Shareholder  refuses
distribution  in kind,  the Fund shall  retain in the Fund's name the portion of
the assets which were to be  distributed  in kind and which were to be allocated
to the refusing  Shareholder  (the  "Retained  Assets") and shall  liquidate the
Retained  Assets in accordance  with this  Agreement.  Upon  liquidation  of the
Retained  Assets,  the sum  realized  shall be  distributed  to the  Shareholder
refusing  distribution  in kind in full  discharge of the Fund's  obligation  to
distribute  the Retained  Assets.  In  determining  the Capital  Accounts of the
Shareholders, a distribution of assets in kind shall be considered a sale of the
property  distributed so that any  unrealized  gain or loss with respect to such
property  shall  be  deemed  to have  been  realized  and  allocated  among  the
Shareholders in accordance with Article 4.

     8.5  Amounts  Withheld.  All amounts  withheld  pursuant to the Code or any
provision  of any  state  or  local  tax law  with  respect  to any  payment  or
distribution  to the  Fund or the  Shareholders  shall  be  treated  as  amounts
distributed  to the  Shareholders  pursuant to this  Article 8 for all  purposes
under

                                      A-18

<PAGE>

this Agreement. The Fund may allocate any such amounts among the Shareholders in
any manner that is in accordance with applicable law.

     8.6  Limitations.  Distributions  to Shareholders  shall not be made to the
extent they are  prohibited  by  restrictions  contained  in the Delaware Act or
other provisions of this Agreement.  Further,  distribution shall not be made to
any Investor to the extent that the effect of such distributions would cause the
balance of such Investor's Capital Account to be below zero unless such Investor
undertakes an affirmative  obligation to make a cash contribution to the Fund in
the amount of any negative balance in such Investor's  Capital Account and posts
security satisfactory to the Manager to satisfy such restoration obligation.

                           ARTICLE 9:OPERATION OF FUND

     9.1  Investment  Fee. The Fund shall pay  Ridgewood out of Fund Property an
investment  fee in an amount  equal to 4.5% of the base  amount of each  Capital
Contribution  per Investor  Share.  The base amounts are computed at the rate of
$150,000 of Capital  Contributions per Investor Share,  without  considering any
discounts or waivers of fees. The investment fee payable in respect of Investors
whose  subscriptions  for  Shares  are  accepted  by the Fund in 2004 is for the
Manager's  services provided in that year and the fee payable by Investors whose
subscriptions  for Shares are  accepted by the Fund in a later year is for those
services for capital  contributed  in that year.  The fee in respect of services
performed  by the  Manager  during any year in which such  additional  funds are
received by the Fund under  Section 9.5 shall be payable  upon the later of each
date  on  which  payment  is  accepted  by the  Fund or the  fulfillment  of any
applicable escrow conditions.

     9.2 Placement Agent and other Selling  Commissions.  (a) The Fund shall pay
out of Fund Property to Ridgewood Securities Corporation or to any broker-dealer
who effects the sale of one or more whole or  fractional  Shares,  cash  selling
commissions  in an  aggregate  amount  equal  to 8% of the base  amount  of each
Capital  Contribution.  The base amounts are computed at the rate of $150,000 of
Capital  Contributions per Investor Share,  without considering any discounts or
waivers  of  fees.  For  serving  as  Placement  Agent,   Ridgewood   Securities
Corporation  shall in addition be entitled to receive out of Fund Property a fee
in an amount equal to 1% of each Capital Contribution.  Such commissions payable
on each  Capital  Contribution  in  respect  of  sales  of  Shares  prior to the
Termination Date and shall be due and payable promptly after the latest to occur
of (i)  acceptance  by the Fund of an Investor's  subscription,  (ii) the Escrow
Date, or (iii) the receipt by the Fund of the Investor's  Capital  Contribution.
Except as set forth in this Section 9.2(a),  the Placement Agent is not entitled
to any other fee or reimbursement from the Fund.

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     (b) Ridgewood may pay additional compensation to registered  broker-dealers
assisting  in the sale of  Investor  Shares  out of its own funds,  including  a
portion of the cash otherwise distributable to the Manager hereunder or the fees
payable to it by the Fund. In addition,  Ridgewood, in its sole discretion,  may
waive or pay over to certain  Investors a portion of  distributions or fees from
the Fund otherwise payable to it.

     9.3 Other Expenses.

     (a) Subject to Sections 9.3(b) and (c), the Fund shall reimburse  Ridgewood
for all actual and necessary direct expenses paid or incurred in connection with
the  operation  of the Fund,  including  but not limited to travel  expenses and
third party  accounting,  legal and  consulting  fees,  to the extent that those
expenses were incurred by Ridgewood in carrying out responsibilities assigned to
it by this Agreement and were consistent with such Agreement.

     (b) The Fund shall pay the Manager out of Fund Property an  organizational,
distribution  and  offering  fee in an  amount  equal  to 3.5%  of each  Capital
Contribution  to cover all  expenses  incurred  in the offer and sale of Shares,
including legal, accounting,  and consulting fees, printing, filing, postage and
other  expenses of  organizing  the Fund,  distribution  and  selling  costs and
closing costs for the  offering.  The fee shall be payable on the Escrow Date as
to Shares  purchased  through that date and on each date thereafter on which the
Fund receives and collects full payment for  additional  accepted  subscriptions
for  Shares.   If  these   expenses   exceed  3.5%  of  the  aggregate   Capital
Contributions, the Manager shall pay such excess.

     (c) The  Fund  shall  reimburse  Ridgewood  for  direct  expenses  actually
incurred for operational or project  development  services provided by Ridgewood
to the extent (i) the charges for the services do not exceed  amounts that would
be charged by unrelated firms offering similar services and (ii) the Oil and Gas
Projects do not reimburse the Manager for those expenses.

     (d) In respect of the acquisition or disposition of all or a portion of the
Fund Property, the Fund may be required to or may find it advantageous to and is
authorized to, engage a broker or similar  adviser and to pay a brokerage fee to
the  broker  or other  persons  responsible  for  bringing  the  acquisition  or
disposition opportunity to the Fund's attention or for investigating, evaluating
or negotiating the acquisition or disposition of the Fund's interest therein.

     9.4  Management  Fee. For each  12-month  period  beginning on the date the
offering of Investor Shares is commenced,  and ending upon the winding up of the
Fund's business,  the Fund shall pay the Manager from Fund Property a Management
Fee,  payable in advance in equal  monthly  installments,  at the annual rate of
2.5% of the aggregate of Capital Contributions.

                                      A-20

<PAGE>

     9.4.1. The fee will be payable by the Fund in equal monthly installments in
advance beginning on the date the offering  commences,  and is payable from Fund
cash flow,  if any, or from other Fund  assets,  including  without  limitation,
contributed capital and interest earned on interim investments.

     9.4.2  The  Management  Fee  shall be in lieu of any  reimbursement  to the
Manager for administrative  and overhead expenses,  including without limitation
postage, communication,  computer service, accounting,  regulatory reporting and
compensation costs of the Manager allocable to the Fund.

     9.4.3 The Management  Fee does not defray fees,  expenses and payments such
as legal, outside accounting and consulting expenses,  including amounts paid by
the Fund to persons other than Ridgewood or any Affiliate of Ridgewood, the Fund
or Robert E. Swanson for  performing  due  diligence or  identifying  investment
opportunities   for  the  Fund.   The   Management  Fee  also  does  not  defray
extraordinary  expenses  incurred by  Ridgewood  or any  expenses  described  in
Section 9.3(a). Amounts not defrayed by the Management Fee shall be borne by the
Fund or Ridgewood under Section 9.3.

     9.5 Payment and  Recoupment of Fees. As soon as funds have been released to
the Fund from the escrow account referred to in Section 1.6(c), they may be used
to pay the fees  referred  to in  Sections  9.1,  9.2 and 9.4 then  due.  If the
Manager  withdraws  the  offering  of Shares,  or rejects any  subscription  for
Shares,  any person that has received payments from the proceeds of the offering
shall return such payments to the Fund upon demand by the Manager.

     9.6 Supplemental  Offering of Shares. The Fund from time to time may create
and sell additional Investor Shares or additional classes or series of Shares if
the Manager in its sole  discretion  determines  that the best  interests of the
Fund so require.  The Manager is  authorized to determine or alter any or all of
the powers,  rights,  qualifications,  limitations  or  restrictions  granted or
imposed upon any such series or supplemental Shares or the offering thereof, and
to fix,  alter or  reduce  the  number of Shares  comprising  any such  class or
series,  and to provide for the rights and terms of  redemption or conversion of
the Shares of any such class or series.  Any such  Shares may be offered to such
persons and on such terms and conditions as the Fund may determine.

     9.7 Salvage Fund. The Fund will (and may be required by the operator of any
Oil and Gas  Project  to)  reserve  and  set  aside  each  month  in a  separate
interest-bearing  account  ("Salvage Fund") a portion of the Fund's net revenue,
if any,  that the  Fund may  receive  form  the  production  and sale of oil and
natural gas from each Oil and Gas Project in which the Fund has  invested  until
such time as the Salvage Fund contains an amount equal to the Fund's anticipated
salvage value of dismantling  production platforms,  plugging and abandoning the
platform wells, and removing the platforms and platform wells in respect of each
such Oil

                                      A-21

<PAGE>

and Gas Project after its useful life, in accordance with applicable federal and
state law and  regulations.  Any portion of the Salvage Fund that remains  after
the Fund  pays  its  share  of the  salvage  costs  will be  distributed  to the
Investors in accordance with the provisions of Section 8.1.

                             ARTICLE 10: ACCOUNTING

     10.1 Elections.  The Fund shall elect the calendar year as its Fiscal Year.
The Fund shall adopt the accrual  method of  accounting  or such other method of
accounting as the Fund shall determine. The Fund shall elect to be taxed only as
a  partnership  unless this  provision  is amended with the consent of Investors
whose aggregate  Capital  Contributions  constitute more than 50% of all Capital
Contributions  to the Fund.  The Fund may but shall not be  required  to make an
election under Section 754 of the Code or corresponding state taxation laws. The
Manager is empowered  to make any other  election  permitted  by law,  including
without  limitation an election under Code Section 771,  without prior notice to
or consent by any other Shareholder.

     10.2 Books and Records.  The Fund's books and records  shall be kept at the
principal  place of business of the Fund and shall be  maintained  in accordance
with generally accepted accounting  principles,  consistently  applied. The Fund
shall  maintain  supplemental  records on the basis  utilized in  preparing  the
Fund's  federal  income tax return with such  adjustments  in  accounting as are
required  by this  Agreement  or as the  Fund  determines  would  be in the best
interests of the Fund.

     10.3 Reports.  The Fund will keep each  Shareholder and assignee  complying
with Article 13 currently advised as to activities of the Fund by communications
furnished at least quarterly.  An independent  certified public  accounting firm
selected by the Fund will prepare the Fund's  federal  income tax return as soon
as practicable  after the conclusion of each year and each  Shareholder  will be
furnished,  at that time,  with the necessary  accounting  information  for each
Shareholder  to take into  account  and  report  separately  such  Shareholder's
distributive  share of the income and  deductions of the Fund. The Fund will use
its  reasonable  best  efforts  to  obtain  the  information  necessary  for the
accounting firm as soon as practicable and to transmit the resulting  accounting
and tax  information to the  Shareholders as soon as possible after receipt from
the accounting firm.

     10.4 Bank Accounts. The Fund shall maintain separate segregated accounts in
its name at one or more commercial banks, and the cash of the Fund shall be kept
in any of those accounts as determined by the Fund.

     10.5  Interim  Assets.  To the  extent  the  Fund's  liquid  capital is not
otherwise committed to transactions or required for other purposes, the Fund may

                                      A-22

<PAGE>

invest such liquid  capital in any manner it deems prudent,  including,  but not
limited to, the following:

          (a)  Obligations  of banks or savings and loan  associations  that are
insured in their entirety by agencies of the United States government;

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

          (c)  Money  market  or  other  short-term   obligations  or  financial
instruments (having a maturity of one year or less).

                 ARTICLE 11: RIGHTS AND OBLIGATIONS OF INVESTORS

     11.1  Participation in Management.  No Shareholder  (other than the Manager
acting in its  capacity  as such)  shall have the  right,  power,  authority  or
responsibility  to  participate  in the ordinary and routine  management  of the
Fund's affairs or to bind the Fund in any manner.

     11.2  Rights to Engage  in Other  Ventures.  No  Investor  or any  officer,
director,  shareholder or other person holding a legal or beneficial interest in
any Investor shall, by virtue of his ownership of a direct or indirect  interest
in the Fund,  be in any way  prohibited  from or  restricted  in engaging in, or
possessing  an  interest  in,  any other  business  venture of a like or similar
nature including any other oil and gas fund, project or property.

     11.3 Limitations on Transferability.  The interest of an Investor shall not
be transferable except under the conditions set forth in Article 13 hereof.

     11.4  Information.  (a) In addition  to  information  to be provided  under
Section 10.3, the Fund will provide each Investor with  information as specified
in this Section  11.4. No Investor has any rights to  information  from the Fund
except as provided in this Section 11.4 and Section  10.3,  or by law other than
the Delaware Act.

     (b) No Investor or other  person  acting in the right of or for the benefit
of an  Investor  is  entitled  to  receive  from  the  Fund or its  Manager  any
information  concerning any other Investor or offeree of the Fund's  securities,
without the prior written consent of the other Investor or offeree.

     (c) The Fund may withhold,  redact or summarize  other types of information
so as to prevent  Investor  information  from being  disclosed  in  violation of
Section 11.4.(b).

     (d) Each Investor is entitled to obtain the following  information from the
Fund upon  reasonable  written  demand  stating the purpose of the demand (which
must be reasonably related to the Investor's interest in the Fund):

                                      A-23

<PAGE>

     (i) True and full  information  regarding the Fund's business and financial
condition and the contributions to the Fund;

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

     (iii) A copy of the  Certificate  and  this  Agreement  and all  amendments
thereto;

     (iv) Copies of material  agreements  between the Fund and Ridgewood  Energy
Corporation or other Ridgewood  Programs;  and

     (v) Other  reasonable  information  regarding  the Fund,  but not including
information that the Fund is entitled to withhold under this Section 11.4.

     (e) Investors are not entitled to agreements,  technical information, trade
secrets and other confidential information relating to the Fund's development of
the Oil and Gas Projects, or to the acquisition or transaction documents related
thereto, unless the Manager, in its sole discretion,  determines that disclosure
will not harm the Fund or the Oil and Gas Projects.

     (f)  Notwithstanding  Section 11.4(d),  the Fund may keep confidential from
Investors for such period of time as it deems  reasonable any other  information
that it  reasonably  believes  to be in the  nature  of trade  secrets  or other
information  that  the  Fund in good  faith  believes  would  not be in the best
interests  of the Fund to disclose or that could damage the Fund or its business
or that the Fund is required by law or by  agreement  with a third party to keep
confidential.

     (g) This Section 11.4 sets out all rights that  Investors have to demand or
receive  information from the Fund, except as provided by the federal securities
laws or other laws that are not superseded by this Agreement.

     (h)  The  Fund  may  establish  reasonable  standards  governing,   without
limitation,  the  information and documents to be furnished and the time and the
location, if appropriate, of furnishing that information and documents. Costs of
providing  information and documents  shall be borne by the requesting  Investor
except for de minimis amounts consistent with the Fund's ordinary practices. The
Fund shall be entitled to reimbursement for its direct,  out-of-pocket  expenses
incurred  in  declining   unreasonable  requests  (in  whole  or  in  part)  for
information.

     (i) Providing  information  to one Investor or to persons  outside the Fund
does not act as a waiver of the Fund's rights to withhold information to another
Investor.

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

                                      A-24

<PAGE>

                                   ARTICLE 12:
                    POWERS, DUTIES AND LIMITATIONS OF MANAGER

     12.1  Management of the Fund.  The Manager  shall have full,  exclusive and
complete  discretion  in the  management  and  control  of the  Fund,  except as
otherwise  provided herein. The Manager agrees to manage and control the affairs
of  the  Fund  to the  best  of  its  ability  and  to  conduct  the  operations
contemplated  under  this  Agreement  in a careful  and  prudent  manner  and in
accordance with good industry practice. The Manager may bind the Fund.

     12.2 Acceptance of  Subscriptions.  The Manager shall not cause the Fund to
accept any subscription for Shares except as provided in Article 1 or in Section
9.6, as the case may be.

     12.3  Specific  Limitations.  (a) The  Manager  shall  not  take any of the
following  actions  without  the  affirmative  vote or  written  consent  of all
Investors pursuant to the procedures set forth in Article 15 of this Agreement:

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

     (2)  Causing  the  dissolution  or  termination  of the  Fund  prior to the
expiration of its term, except as provided under Article 14;

     (3) Possessing Fund Property or assigning  rights in specific Fund Property
for  other  than a Fund  purpose;  or

     (4)  Constituting  any other  person as a Manager,  except as  provided  in
Article 14.

     (b) The  Manager  shall not take any action that would cause the Fund to be
regulated as an  "investment  company"  under the 1940 Act, nor will the Manager
take any action  that would cause the Fund to change its  investment  objectives
and  policies  without  the  approval  of  Investors  whose  aggregate   Capital
Contributions  constitute more than 50% of all Capital Contributions to the Fund
at such time.

     (c) The  Manager  shall  not sell,  exchange,  lease,  mortgage,  pledge or
transfer all or a substantially  all of the Fund's assets if not in the ordinary
course of  operation  of Fund  Property  without  the  approval  of a 50% of all
Capital Contributions to the Fund at such time.

     (d) The Fund and the  Fund's  agents  shall  not  take any  action  that is
prohibited to the Manager by this or any other provision of this Agreement.

     12.4  Specific  Powers.  In  addition  to the powers  and duties  otherwise
provided for in this Agreement, the Manager has the following powers and duties:

                                      A-25

<PAGE>

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

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

     (c) To amend  this  Agreement  as  specified  in  Section  15.7(a) or other
provisions of this Agreement;

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

     (e) To approve in its sole discretion any transfer of Investor Shares;

     (f)  To  terminate  the  offering  of  Shares  at  any  time  prior  to the
Termination Date;

     (g) To withdraw  the offering of Shares at any time as provided for in this
Agreement;

     (h) To acquire such assets or properties,  real or personal, as the Manager
in its sole  discretion  deems  necessary or appropriate  for the conduct of the
Fund's  business and to sell,  exchange,  hedge or distribute to Shareholders in
kind or otherwise dispose of any part of the Fund Property;

     (i) To operate any Oil and Gas Project or other Fund  Property  acquired by
the  Fund,  or to  contract  for  operation  under  Section  12.5,  or to engage
non-Affiliates  to operate any  Project or other Fund  Property on such terms as
they may determine in their sole discretion;

     (j) To waive any fees or  compensation  payable  to it and to  credit  such
waived  amount  in  its  discretion  against  any  obligations  it may  have  to
contribute capital under Section 14.7;

                                      A-26

<PAGE>

     (k) To provide,  or arrange for the provision of, managerial  assistance to
the Oil and Gas Projects in which the Fund invests; and

     (l) To retain and own Working  Interests  in oil and natural gas wells that
are in the same lease  block as, but are not part of, Fund  Property  and to own
Working  Interests  in oil  and  natural  gas  wells  that  may be  part of Fund
Property.

     (m) To  establish  valuation  principles  and to  periodically  apply  such
principles to the Fund's investment portfolio.

     12.5  Operation by an Affiliate.  The Fund,  by action of the Manager,  may
engage  an  Affiliate  of the  Manager  to  provide  development,  construction,
operating, management,  purchasing, planning and administrative services for any
or all Oil and Gas Projects  operated by the Fund.  The Affiliate of the Manager
under this Section  12.5 shall act under the  supervision  and  direction of the
Manager and does not have the  authority to bind the Fund or act directly in its
name except as authorized by the Manager or an officer of the Fund.  The Manager
under this  Section  12.5 shall be  reimbursed  for all costs  incurred by it as
provided in Section 9.3(c) but shall not receive any  compensation  in excess of
its costs. The Fund may enter into an Operation Agreement or other agreements to
implement  this Section  12.5.  The Manager under this Section 12.5 shall not be
compensated or reimbursed for any services related to the  administration of the
Fund as a whole, to relations with Investors or the offering of Shares or to the
identification, acquisition or disposition of Oil and Gas Projects.

     12.6 Officers of Fund.  (a) The Manager  shall appoint a President,  one or
more Vice Presidents, a Secretary and such other officers and agents of the Fund
as the Manager may from time to time consider appropriate,  none of whom need be
a  Shareholder.  Except  as  otherwise  prescribed  by the  Manager  or in  this
Agreement, each officer shall have the powers and duties usually appertaining to
a similar officer of a Delaware  corporation  under the direction of the Manager
and shall hold office at the pleasure of the Manager. Unless otherwise specified
by the Manager,  the President of the Fund shall be its chief executive officer.
Any two or more offices may be held by the same  person.  Any officer may resign
by delivering a written  resignation to the Manager and such  resignation  shall
take effect upon delivery or as otherwise specified therein.

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

                                      A-27

<PAGE>

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

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

     12.8  Obligations  Not Exclusive.  The Manager and the officers of the Fund
shall be required to devote only such part of their time as is reasonably needed
to  manage  the  business  of the  Fund or  discharge  their  duties,  it  being
understood  that  Ridgewood,  as Manager,  and the officers of the Fund have and
shall have other  business  interests  and  therefore  shall not be  required to
devote their time exclusively to the Fund.  Ridgewood Energy Corporation and the
officers  of the  Fund  shall  in no way be  prohibited  from or  restricted  in
engaging in, or possessing an interest in, any other business  venture of a like
or similar nature.  Nothing in this Section 12.8 shall relieve  Ridgewood Energy
Corporation  of  its  or  their  fiduciary  or  contractual  obligations  to the
Investors,  except as  limited in Article  3.  Notwithstanding  anything  to the
contrary  contained in this Article or  elsewhere in this  Agreement,  Ridgewood
Energy  Corporation has no duty to take any  affirmative  action with respect to
management  of the Fund's  business or Fund  Property  which  might  require the
expenditure  of monies by the Fund or Ridgewood  Energy  Corporation  unless the
Fund is then  possessed of such monies  available for the proposed  expenditure.
Except as otherwise  provided in this Agreement,  under no  circumstances  shall
Ridgewood  Energy  Corporation be required to expend its own funds in connection
with the day to day operation of Fund business.

     12.9 Removal or Incapacity  of a Manager.  (a)  Investors  whose  aggregate
Capital  Contributions  constitute at least 25% of all Capital  Contributions to
the Fund at such time may propose the removal of the Manager,  either by calling
a meeting or soliciting consents in accordance with the terms of this Agreement.
On the  affirmative  vote of Investors  whose  aggregate  Capital  Contributions
constitute more than 50% of all Capital  Contributions  to the Fund at

                                      A-28

<PAGE>

such time the  Manager  shall be  removed  effective  as of the date the vote is
completed.

     (b) If Ridgewood is removed as Manager or is incapable of acting as Manager
as enumerated in Section  14.1(c),  or it resigns for cause, it may elect in its
sole  discretion  to take  and to cause  the  Fund to take one of the  following
courses of action:

     (1) The former  Manager may elect to exchange  its  Management  Share for a
series of cash payments from the Fund to the former  Manager in amounts equal to
the amounts of  distributions  to which the former Manager would  otherwise have
been entitled under this  Agreement in respect of  investments  made by the Fund
prior to the date of the removal or other  incapacity.  Such  payments  shall be
payable out of the Fund's  available cash before any  distributions  are made to
the  Investors  pursuant  to  this  Agreement.  For  purposes  of  this  Section
12.9(b)(1), from and after the date of any such removal or other incapacity: (i)
the former Manager's  interest in the Fund  attributable to its Management Share
shall be terminated and its Capital Account shall be reduced by the amount which
is  attributable  to its  Management  Share and (ii) the  former  Manager  shall
continue to receive its pro rata share of all allocations to Investors  provided
in this  Agreement  that are  attributable  to Investor  Shares  acquired by the
Manager.

     (2)  In  the  alternative,  the  former  Manager  may  engage  a  qualified
independent  appraiser  and  cause  the  Fund to  engage  a  separate  qualified
independent  appraiser (at the Fund's expense in each case),  who together shall
value the Fund Property as of the date of such removal or other incapacity as if
the Fund  Property  had been sold at its fair market  value so as to include all
unrecognized  gains or losses.  If the two  appraisers  cannot agree on a value,
they shall appoint a third  independent  appraiser (whose cost shall be borne by
the  Fund)  whose  determination,  made on the same  basis,  shall be final  and
binding.  Based on the appraisal,  the Fund shall make allocations to the former
Manager's  Capital Account of Profits,  Losses and other items as of the date of
such removal or other incapacity as if the Fund's Fiscal Year had ended,  solely
for the purpose of determining  the former  Manager's  Capital  Account.  If the
former Manager has a positive  Capital Account after such  allocation,  the Fund
shall  deliver  a  promissory  note of the Fund to the  former  Manager,  with a
principal  amount equal to the balance in that  Capital  Account and which shall
bear  interest  at a rate per annum  equal to the prime  rate in effect at Chase
Manhattan Bank, N.A. on the date of removal or other  incapacity,  with interest
payable annually and principal payable annually only to the extent of 25% of any
available cash before any distributions  thereof are made to the Investors under
this  Agreement.  If the  Capital  Account of the former  Manager has a negative
balance  after such  allocation,  the former  Manager  shall  contribute  to the
capital of the Fund,  in its  discretion,  either cash in an amount equal to the
negative balance in its Capital Account or a promissory note to the Fund in such
principal  amount  maturing  five years after the date of such  removal or other
incapacity,  bearing  interest payable annually at the rate

                                      A-29

<PAGE>

specified  above.  For purposes of this Section  12.9(b)(2),  from and after the
date of any such removal or other  incapacity,  the former Manager's  Management
Share in the Fund shall be  terminated  and the former  Manager  shall no longer
have any  interest  in the Fund other than the right to receive  the  promissory
note and payments thereunder as provided above.

     (c) In the event  that the  Manager  is  removed  or no longer  serves as a
Manager due to an incapacity  enumerated in Section 14.1(c),  the former Manager
shall not be  entitled to any  uncollected  fees  specified  in Article 9 to the
extent not accrued before the date of such removal or other incapacity.

     12.10 Indemnification of Placement Agent. (a) The Placement Agent shall not
have any duty,  responsibility or obligation to the Fund or any Shareholder as a
consequence of its right to receive any selling  commissions or placement  agent
fees from the Fund in  connection  with any  offering  of Shares,  except to the
extent provided under applicable  Federal and State law. The Placement Agent has
not assumed,  and will not assume, any  responsibility  with respect to the Fund
nor will it be permitted by the Fund to assume any duties,  responsibilities  or
obligations regarding the management,  operations or any of the business affairs
of the Fund, subsequent to any offering of Shares.

     (b) The Placement  Agent shall be indemnified and held harmless by the Fund
against  any  losses,  damages,   liabilities  or  costs  (including  reasonable
attorneys' fees) arising from any threatened, pending or completed action, suit,
claim or proceeding by any  Shareholder  against the Placement  Agent (except as
may be  limited  by the  Act or  applicable  state  statutes),  based  upon  the
assertion  that the  Placement  Agent  has any  continuing  duty or  obligation,
subsequent  to any  offering  of  Shares,  to the  Fund  or any  Shareholder  or
otherwise to monitor Fund  operations  or report to  Investors  concerning  Fund
operations.

     12.11 Potential Conflicts of Interest. (a) There are potential conflicts of
interest involved in the operation of the Fund, including but not limited to:

     (i)  competing  demands for  management  resources of  Ridgewood  and other
Affiliates;

     (ii)  conflicts  between the interests of Ridgewood  and its  Affiliates in
receiving  compensation  from  the  Fund for  investment  activities,  operating
activities,  and divestitures,  as well as reimbursement  for expenses,  and the
interests of the Investors;

     (iii)  conflicts  relating to the  allocation  of costs and expenses  among
Ridgewood's other investment programs;

     (iv) conflicts arising from the fact that Ridgewood will not make a capital
contribution  in  respect  of its  interest  as such in the  Fund  and  that the
Investors will supply all of the capital of the Fund;

                                      A-30

<PAGE>

     (v) conflicts  caused by the fact that  Ridgewood  shares in gains realized
from the Oil and Gas  Projects  but does not  share in losses  realized  on such
projects;

     (vi) conflicts  caused by the fact that  Ridgewood has broad  discretion to
determine distributions, allocations of profit and loss and other items and that
the  entitlements  of  Ridgewood to fees,  distributions  and other items can be
increased or decreased as a result of the use of that discretion;

     (vii)  conflicts  caused by the fact  that  Ridgewood  may make  subjective
determinations  of the value of the Fund's  assets,  and any such  determination
affects the performance record of the Fund;

     (viii)  conflicts  between the interests of the Fund and of other  programs
when Ridgewood allocates favorable or unfavorable investment opportunities among
them,  and  conflicts  arising if one  program or Fund  supplies  capital for an
investment  and  another  program or Fund later is  allocated  a portion of that
investment and returns a proportionate amount of capital to the first;

     (ix)  conflicts  between  the  interests  of the  Fund and  other  programs
sponsored by Ridgewood and its Affiliates;

     (x)  potential  interests  of  Ridgewood  or its  Affiliates  in  competing
investment programs;

     (xii) the lack of  independent  representation  of Investors in structuring
this  offering  and in  determining  compensation  or with  respect to  material
transactions  between the Fund and other programs sponsored by Ridgewood,  which
would require only the approval of Ridgewood for authorization; and

     (xiii)  the  Fund's  Oil and Gas  Projects  may be  competing  against  the
projects of other programs sponsored by Ridgewood and, additionally, officers of
Ridgewood and of the Fund may be directors or advisers to competing projects.

     (b)  In   determining  a  course  of  action  or  deciding   among  various
alternatives, the Manager will consider these and other conflicts that may exist
and  exercise  reasonable  business  judgment  when  determining  such action or
choosing  among  various  alternatives.  The  Manager  shall  not be  liable  to
Shareholders  hereunder  regarding such action unless the Manager  exercised bad
faith, gross negligence or willful misconduct.

                         ARTICLE 13: TRANSFERS OF SHARES

     13.1 Transfer or Resignation by a Manager. A Manager shall not sell, assign
or otherwise  transfer its Management Share or resign without cause (which cause
shall not include the fact or the determination  that continued service would be
unprofitable  to the Manager)  without first obtaining the consent of a Majority
of the Voting Shares,  except that (i) a Manager may pledge its Management Share
for a loan;  provided that such pledge does not reduce the cash flow of the Fund
distributable  to other  Shareholders  and (ii) a  Manager  may  waive or assign
compensation or fees payable to it.

                                      A-31

<PAGE>

     13.2 Transfers by Investors. An Investor may sell, exchange or transfer his
Shares except as restricted by and upon  compliance with all applicable laws and
all of the following provisions of this Section 13.2:

     (a) Shares may not be transferred to any person or entity if, as determined
by the Fund, such assignment would have adverse  regulatory  consequences to the
Fund or any Fund Property.

     (b) Within 30 days after written notice of a proposed sale or assignment is
received  by the  Fund  from an  Investor,  the  Fund  may  request  in its sole
discretion  an  opinion  of  counsel  acceptable  to the Fund that the  proposed
transfer (i) would not invalidate the exemption  afforded by Section 4(2) of the
Act or by Regulation D promulgated  under the Act and the exemption  afforded by
any applicable state securities laws as to any offering of interests in the Fund
and (ii)  complies  with the  exemption  afforded by Section 4(1) of the Act and
qualifies  for  an  exemption  from  registration  under  any  applicable  state
securities laws (including any investor  suitability  standard applicable to the
transferee or the Fund).

     (c) The written  approval of the Manager must be obtained,  the granting or
denial of which shall be within its sole and absolute discretion.

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

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

     (f) The Fund may require as a condition to any  transfer  that may create a
future  interest that an opinion of counsel  acceptable to the Fund be delivered
to the Fund confirming that the proposed  transfer does not have adverse effects
on the Fund under the rule against  perpetuities  or similar  provisions of law.
Transfers shall be effective and recognized upon fulfillment of the requirements
of clauses (a) through (f) above and the transferee  shall be an Investor owning
Investor  Shares  with the same rights as  appertained  to the  transferor.  Any
purported sale or transfer consummated without first complying with this Section
13.2 shall be void.

     13.3  Assignments  by Operation of Law. If any Investor  shall die, with or
without leaving a will, or become non compos mentis,  bankrupt or insolvent,  or
if a corporate,  partnership or trust Investor dissolves during the Fund term or
if

                                      A-32

<PAGE>

any other  involuntary  transfer  of an  Investor's  Shares  is made,  the legal
representatives,  heirs  and  legatees  (and  spouse,  if the  Shares  have been
community  property  of  such  Investor  and  his  or  her  spouse),  bankruptcy
assignees,  successors, assigns and corporate, partnership or trust distributees
or such other  involuntary  transferees  shall not become  transferees but shall
have  (subject  to the other  terms and  provisions  hereof)  such rights as are
provided with respect to such persons  under the law;  provided,  however,  that
such legal representatives,  heirs and legatees,  spouse,  bankruptcy assignees,
successors,  assigns  and  corporate,   partnership  or  trust  distributees  or
involuntary transferees may become transferees in accordance with the provisions
of Section 13.2.

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

     13.5 Survival of Liabilities. No sale or assignment of Shares shall release
the transferor from those  liabilities to the Fund which survive such assignment
or sale as a matter of law or that are imposed under Section 3.4.

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

                                   ARTICLE 14
                    DISSOLUTION, TERMINATION AND LIQUIDATION

     14.1  Dissolution.  Unless the provisions of Section 14.2 are elected,  the
Fund shall be dissolved and its business  shall be wound up upon the decision of
the Manager to withdraw the offering of Shares  described in the  Memorandum  in
accordance with Section 12.4(g) or on the earliest to occur of:

     (a) December 31, 2040;

     (b) The sale of all or substantially all of the Fund Property;

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

                                      A-33

<PAGE>

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

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

     14.2  Continuation  of the  Fund.  Upon  the  occurrence  of any  event  of
dissolution  described  in Sections  14.1 (a) through (e),  inclusive,  the Fund
shall be  dissolved  and wound up unless (i) the  Manager  and a Majority of the
Voting  Shares  within  90 days  after  the  occurrence  of any  such  event  of
dissolution  elect  to  continue  the Fund or,  (ii) if there  are no  remaining
Manager  within 90 days after the  occurrence of any such event of  dissolution,
holders of a Majority of the Voting  Shares  shall elect,  in writing,  that the
Fund shall be continued on the terms and conditions  herein  contained and shall
designate one or more persons  willing to be  substituted  as a Manager.  In the
event there is no remaining  Manager and a Majority of the Voting  Shares elects
to continue the Fund, it shall be continued  with the new Manager or Manager who
shall succeed to and assume all of the powers, privileges and obligations of the
previous Manager  hereunder except as specified in Section 12.9. In the event of
a dissolution  under this Section 14.2, the former Manager shall have the rights
specified in Section 12.9.

     14.3  Obligations  on  Dissolution.  The  dissolution of the Fund shall not
release any of the parties hereto from their contractual  obligations under this
Agreement.

     14.4 Liquidation Procedure. Upon dissolution of the Fund for any reason:

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

     (b) The  Shareholders  shall  continue to receive  Available Cash Flow from
Operations or Available Cash From  Dispositions,  as the case may be, subject to
the other  provisions of this  Agreement and to the provisions of subsection (c)
hereof, and shall share Profits and Losses for all tax and other purposes during
the period of liquidation; and

     (c) The  Manager  shall act as  liquidating  Manager  and shall  proceed to
liquidate  the Fund  Properties  to the extent that they have not  already  been
reduced to cash unless the liquidating  Manager elects to make  distributions in
kind to the extent and in the manner herein  provided and such cash, if any, and
property in kind,  shall be applied and  distributed to the  Shareholders to the
extent of, and in proportion to, the positive balances of their Capital Accounts
and then in accordance with Article 8.

                                      A-34

<PAGE>

     14.5 Liquidating  Trustee.  (a) If the dissolution of the Fund is caused by
circumstances  under which no Manager is available to act as liquidating Manager
or if all  liquidating  Manager  are unable or refuse to act,  the  holders of a
Majority of the Voting  Shares  shall  appoint a  liquidating  trustee who shall
proceed to wind up the business  affairs of the Fund. If no liquidating  trustee
is appointed within 180 days after the event of dissolution, any Shareholder may
petition the Court of Chancery of Delaware to appoint a liquidating trustee. The
liquidating  trustee  shall have no liability to the Fund or to any  Shareholder
for any loss  suffered by the Fund which arises out of any action or inaction of
the liquidating trustee if the liquidating  trustee,  in good faith,  determined
that such course of conduct was in the best  interests of the  Shareholders  and
such  course of conduct  did not  constitute  negligence  or  misconduct  of the
liquidating  trustee.  The liquidating  trustee shall be indemnified by the Fund
against  any  losses,  judgments,  liabilities,  expenses  and  amounts  paid in
settlement of any claims  sustained by it in connection with the Fund,  provided
that the same were not the result of negligence or misconduct of the liquidating
trustee.

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

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

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

     14.6 Death, Insanity,  Dissolution or Insolvency of an Investor. The death,
insanity, dissolution, winding up, insolvency, bankruptcy, receivership or other
legal  termination  of an Investor who is not a Manager  shall have no effect on
the life of the Fund and the Fund shall not be dissolved thereby.

                                      A-35

<PAGE>

     14.7  Manager's  Capital   Contributions.   Upon  or  prior  to  the  first
distribution in liquidation,  the Manager shall contribute to the capital of the
Fund an amount  equal to any  deficit in the  Capital  Account  of such  Manager
calculated  just  prior  to the date of such  distribution,  to the  extent  not
previously  contributed.  The Manager,  in its discretion,  may comply with this
Section  14.7  by  waiving  all or a  portion  of a  distribution  or any  other
compensation to which it is entitled under this Agreement.

     14.8  Withdrawal  of  Offering.  Dissolution  of the  Fund  resulting  from
withdrawal  of the offering of Shares is governed by Section  1.6(c) and Section
12.4(g).

                                   ARTICLE 15
                                  MISCELLANEOUS

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

     15.2 Meetings of Shareholders.  (a) Meetings. The Manager may call meetings
of the Shareholders, the Investors or any subgroup thereof concerning any matter
on which they may vote as provided by this Agreement or by law or to receive and
act upon a report of the Manager on matters  pertaining  to the Fund's  business
and activities.  Investors holding 10% or more of the outstanding  securities or
Shares entitled to vote on the matter may also call meetings by giving notice to
the Fund demanding a meeting and stating the purposes therefore. After calling a
meeting or within 20 days after receipt of a written request or requests meeting
the  requirements  of  the  preceding  sentence,  the  Fund  shall  mail  to all
Shareholders  entitled  to vote on the  matter  written  notice of the place and
purposes of the meeting, which shall be held on a date not less than 15 days nor
more  than  45  days  after  the  Fund  mails  the  notice  of  meeting  to  the
Shareholders. Any Shareholder entitled to vote on the matter may appear and vote
or consent at a meeting by proxy,  provided that such  authority is granted by a
writing signed by the  Shareholder  and delivered to the Fund at or prior to the
meeting.

     (b) Consents.  Any consent required by this Agreement or any vote or action
by the Shareholders or any subgroup thereof may be effected without a

                                      A-36

<PAGE>

meeting by a consent or  consents in writing  signed by the persons  required to
give such consent,  to vote or to take action.  The Manager may solicit consents
or  Investors  holding  10% or  more of the  outstanding  securities  or  Shares
entitled to vote on the matter may demand a  solicitation  of consents by giving
notice to the Fund  stating the  purpose of the consent and  including a form of
consent.  The Fund shall  effect a  solicitation  of  consents  by giving  those
Shareholders  who may vote a notice of  solicitation  stating the purpose of the
consent,  a form  of  consent  and the  date on  which  the  consents  are to be
tabulated,  which shall be not less than 15 days nor more than 45 days after the
Fund transmits the notice of solicitation for consents. If Investors holding 10%
or more of the  outstanding  securities or Shares entitled to vote on the matter
demand a solicitation,  the Fund shall transmit the notice of  solicitation  not
later than 20 days after receipt of the demand.

     (c) General.  To the extent not inconsistent with this Agreement,  Delaware
law  governing  stockholders'  meetings,  proxies and consents for  corporations
shall  apply as to the  procedure,  validity  and use of  meetings,  proxies and
consents.  Any  Shareholder  may waive notice of or attendance at any meeting or
notice of any consent,  whether before or after any action is taken. The date on
which the Fund  transmits  the notice of meeting or notice  soliciting  consents
shall be the record date for determining the right to vote or consent. A list of
the names,  addresses and shareholdings of all Shareholders  shall be maintained
as part of the Fund's books and records.

     (d) Interested  Parties.  A Shareholder  may vote Shares owned by it on any
question permitted under this Agreement  regardless of whether that Shareholder,
Affiliates of that  Shareholder or other persons  associated  with or related to
that  Shareholder  have  a  personal  interest  in  the  subject  matter  of the
transaction.  Delaware law governing the voting of shares in a corporation shall
determine  the  legal  effect  of a vote by a  Shareholder  having  an  interest
described in the preceding sentence.

     15.3 Loan to Fund by Shareholder.  If any Shareholder shall, in addition to
his Capital Contribution to the Fund, lend any monies to the Fund, the amount of
any such loan shall not increase his Capital Account nor shall it entitle him to
any increase in his share of the  distributions  of the Fund,  but the amount of
any such loan shall be an obligation on the part of the Fund to such Shareholder
and shall be repaid to him on the terms and at the interest  rate  negotiated at
the time of the loan,  and the loan  shall be  evidenced  by a  promissory  note
executed by the Fund except that no Shareholder shall be personally obligated to
repay the loan, which shall be payable and collectible only out of the assets of
the Fund.

     15.4 Delaware Laws Govern.  This Agreement  shall be governed and construed
in accordance  with the laws of the State of Delaware.  Each Party hereto

                                      A-37

<PAGE>

agrees and consents (i) to be subject to the personal jurisdiction of the courts
of the State of Delaware,  (ii) that venue for any litigation between or against
any of the parties hereto may be maintained in New Castle County,  Delaware, and
(iii) that service of process may be achieved by mail return receipt  requested,
overnight delivery or personal hand delivery.

     15.5 Limited Power of Attorney.  Each Investor irrevocably  constitutes and
appoints  the  Manager  as his true and  lawful  attorney-in-fact  and agents to
effectuate and to act in his name, place and stead, in effectuating the purposes
of the Fund including the  execution,  verification,  acknowledgment,  delivery,
filing and  recording  of this  Agreement as well as all  authorized  amendments
thereto and hereto, all assumed name and doing business certificates, documents,
bills of  sale,  assignments  and  other  instruments  of  conveyances,  leases,
contracts,  loan documents and  counterparts  thereof,  and all other  documents
which may be  required to effect a  continuation  of the Fund and which the Fund
deems necessary or reasonably  appropriate,  including  documents required to be
executed  in order to  correct  typographical  errors  in  documents  previously
executed by such Investor and all  conveyances  and other  instruments  or other
certificates  necessary or appropriate to effect an authorized  dissolution  and
liquidation of the Fund. The power of attorney granted herein shall be deemed to
be coupled with an interest,  shall be irrevocable  and shall survive the death,
incompetency or legal disability of an Investor.

     15.6  Disclaimer.  In forming this Fund,  all Investors  recognize that the
Fund's  businesses  are highly  speculative  and that  neither  the Fund nor the
Manager nor any other Managing  Person makes any guaranty or  representation  to
any Investor as to the probability or amount of gain or loss from the conduct of
Fund business.

     15.7  Amendment and  Construction  of Agreement.  (a) This Agreement may be
amended by the Manager, without notice to or the approval of the Investors, from
time to time  for the  following  purposes:  (1) to cure any  ambiguity,  formal
defect or omission or to correct or supplement any provision  herein that may be
inconsistent  with any other provision  contained herein or in the Memorandum or
to effect any amendment without notice to or approval by Investors, as specified
in other  provisions  of this  Agreement;  (2) to make  such  other  changes  or
provisions in regard to matters or questions  arising under this  Agreement that
will not  materially and adversely  affect the interest of any Investor;  (3) to
otherwise  equitably  resolve  issues  arising  under  the  Memorandum  or  this
Agreement so long as similarly  situated  Investors  are not treated  materially
differently;  (4) to maintain  the federal tax status of the Fund and any of its
Shareholders (so long as no Investor's liability is materially increased without
his consent) or as provided in Section 4.3(d); (5) as otherwise provided in this
Agreement or (6) to comply with law.

                                      A-38

<PAGE>

     (b) Other  amendments  to this  Agreement  may be  proposed  by either  the
Manager or Investors whose  aggregate  Capital  Contributions  constitute 10% or
more  of the  Capital  Contributions,  in each  case by  calling  a  meeting  or
requesting  consents under Section 15.2 and specifying the text of the amendment
and the  reasons  therefore.  No  amendment  under  this  Section  15.7(b)  that
increases  any  Shareholder's  liability,   changes  the  Capital  Contributions
required of him or his rights in interest in the  Profits,  Losses,  deductions,
credits, revenues or distributions of the Fund in more than a de minimis manner,
his rights on dissolution,  or any voting or management rights set forth in this
Agreement  shall  become  effective as to that  Shareholder  without his written
approval thereof. Unless otherwise provided herein, all other amendments must be
approved by the holders of a Majority of the  outstanding  Voting Shares and, if
the terms of a series of Shares or  securities  so  require,  by the vote of the
holders of such class, series or group specified therein.

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

     15.8 Bonds and  Accounting.  The Manager shall not be required to give bond
or  otherwise  post  security for the  performance  of their duties and the Fund
waives all  provisions of law requiring or permitting  the same. No person shall
be entitled at any time to require  the Fund or any  Shareholder  to submit to a
judicial or other accounting or otherwise elect any judicial,  administrative or
executive supervisory proceeding applicable to non-business trusts.

     15.9 Binding  Effect.  This Agreement shall be binding upon and shall inure
to the  benefit of the  Shareholders  (and  their  spouses if the Shares of such
Shareholders  shall be community  property) as well as their  respective  heirs,
legal  representatives,  successors and assigns.  This Agreement constitutes the
entire  agreement  among  the  Fund and the  Shareholders  with  respect  to the
formation  and  operation  of the Fund,  other than the  Subscription  Agreement
entered into between the Fund and each Investor and the Management Agreement.

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

     15.11 Tax Matters  Partner.  The Manager is the tax matters  partner of the
Fund under Code Section 6221.

RIDGEWOOD ENERGY CORPORATION

                                      A-39

<PAGE>

Initial Manager

By:
    -------------------------------------
    Robert E. Swanson, President

                                      A-40

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