Document:

Exhibit 4.1

                             1999 Stock Option Plan

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                           SAN JOAQUIN RESOURCES INC.
                             1999 STOCK OPTION PLAN

1.       PURPOSE; EFFECTIVENESS OF THE PLAN.

         (a)      The  purpose of this Plan is to advance the  interests  of the
                  Company and its stockholders by helping the Company obtain and
                  retain the services of employees,  officers,  consultants, and
                  directors,  upon whose  judgment,  initiative  and efforts the
                  Company  is  substantially  dependent,  and to  provide  those
                  persons with further  incentives  to advance the  interests of
                  the Company.

         (b)      This Plan will become effective on the date of its adoption by
                  the Board,  provided the Plan is approved by the  stockholders
                  of the Company (excluding holders of shares of Stock issued by
                  the Company  pursuant to the exercise of options granted under
                  this Plan) within  twelve months before or after that date. If
                  the  Plan  is  not so  approved  by  the  stockholders  of the
                  Company, any options granted under this Plan will be rescinded
                  and will be void.  This Plan will remain in effect until it is
                  terminated   by  the  Board  or  the   Committee  (as  defined
                  hereafter)  under  section  9 hereof,  except  that no ISO (as
                  defined herein) will be granted after the tenth anniversary of
                  the date of this Plan's adoption by the Board.  This Plan will
                  be governed by, and construed in accordance  with, the laws of
                  the State of Nevada.

2.       CERTAIN DEFINITIONS.

         Unless the context  otherwise  requires,  the  following  defined terms
         (together with other  capitalized terms defined elsewhere in this Plan)
         will  govern the  construction  of this Plan,  and of any stock  option
         agreements entered into pursuant to this Plan:

         (a)      "10% Stockholder"  means a person who owns, either directly or
                  indirectly by virtue of the ownership  attribution  provisions
                  set forth in Section  424(d) of the Code at the time he or she
                  is granted an Option,  stock  possessing more than ten percent
                  (10%)  of the  total  combined  voting  power  or value of all
                  classes of stock of the Company and/or of its subsidiaries;

         (b)      "1933  Act"  means  the  federal  Securities  Act of 1933,  as
                  amended;

         (c)      "Board" means the Board of Directors of the Company;

         (d)      "Called  for under an  Option,"  or words to  similar  effect,
                  means issuable pursuant to the exercise of an Option;

         (e)      "Code"  means the Internal  Revenue  Code of 1986,  as amended
                  (references  herein to  Sections  of the Code are  intended to
                  refer to  Sections  of the Code as enacted at the time of this
                  Plan's adoption by the Board and as subsequently  amended,  or
                  to any substantially  similar successor provisions of the Code
                  resulting from recodification, renumbering or otherwise);

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         (f)      "Committee"  means a  committee  of two or more  Disinterested
                  Directors, appointed by the Board, to administer and interpret
                  this Plan;  provided that the term  "Committee"  will refer to
                  the Board  during such times as no  Committee  is appointed by
                  the Board;

         (g)      "Company"  means San  Joaquin  Resources  Inc.  (formerly  LEK
                  International, Inc.), a Nevada corporation;

         (h)      "Disability"  has the same  meaning  as  "permanent  and total
                  disability," as defined in Section 22(e)(3) of the Code;

         (i)      "Disinterested  Director"  means a member  of the Board who is
                  not during the period of one year prior to his or her  service
                  as an  administrator of the Plan, or during the period of such
                  service,  granted or awarded Stock,  options to acquire Stock,
                  or similar equity securities of the Company under this Plan or
                  any  similar  plan of the  Company,  other than the grant of a
                  Formula Option pursuant to section 6(m) of this Plan;

         (j)      "Eligible  Participants"  means  persons  who, at a particular
                  time, are employees,  officers,  consultants,  or directors of
                  the Company or its subsidiaries;

         (k)      "Fair Market Value" means, with respect to the Stock and as of
                  the date an ISO or a Formula Option is granted hereunder,  the
                  market  price  per  share  of  such  Stock  determined  by the
                  Committee,  consistent with the requirements of Section 422 of
                  the Code and to the extent consistent therewith, as follows:

                  (i)      If the Stock was  traded on a stock  exchange  on the
                           date in question,  then the Fair Market Value will be
                           equal to the closing price reported by the applicable
                           composite-transactions report for such date;

                  (ii)     If the Stock was traded  over-the-counter on the date
                           in question and was  classified as a national  market
                           issue,  then the Fair  Market  Value will be equal to
                           the  last-transaction  price  quoted  by  the  NASDAQ
                           system for such date;

                  (iii)    If the Stock was traded  over-the-counter on the date
                           in  question  but was not  classified  as a  national
                           market  issue,  then the Fair  Market  Value  will be
                           equal   to  the   average   of  the   last   reported
                           representative  bid and  asked  prices  quoted by the
                           NASDAQ system for such date; and

                  (iv)     If none of the foregoing  provisions  is  applicable,
                           then the Fair Market Value will be  determined by the
                           Committee  in good  faith  on such  basis as it deems
                           appropriate.

         (l)      "Formula  Option"  means  an NSO  granted  to  members  of the
                  Committee pursuant to section 6(m) hereof;

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         (m)      "ISO" has the same  meaning as  "incentive  stock  option," as
                  defined in Section 422 of the Code;

         (n)      "Just Cause Termination" means a termination by the Company of
                  an Optionee's  employment by and/or service to the Company (or
                  if the Optionee is a director,  removal of the  Optionee  from
                  the Board by action of the  stockholders  or, if  permitted by
                  applicable  law and the  by-laws  of the  Company,  the  other
                  directors), in connection with the good faith determination of
                  the  Company's   board  of  directors  (or  of  the  Company's
                  stockholders  if the Optionee is a director and the removal of
                  the Optionee from the Board is by action of the  stockholders,
                  but in either case excluding the vote of the Optionee if he or
                  she is a director  or a  stockholder)  that the  Optionee  has
                  engaged in any acts involving dishonesty or moral turpitude or
                  in any acts that materially and adversely affect the business,
                  affairs or reputation of the Company or its subsidiaries;

         (o)      "NSO"  means  any  option  granted  under  this  Plan  whether
                  designated by the Committee as a "non-qualified stock option,"
                  a  "non-statutory  stock option" or  otherwise,  other than an
                  option designated by the Committee as an ISO, or any option so
                  designated but which,  for any reason,  fails to qualify as an
                  ISO  pursuant  to  Section  422 of the Code and the  rules and
                  regulations thereunder;

         (p)      "Option"  means  an  option  granted  pursuant  to  this  Plan
                  entitling the option holder to acquire  shares of Stock issued
                  by the Company pursuant to the valid exercise of the option;

         (q)      "Option  Agreement" means an agreement between the Company and
                  an  Optionee,  in  form  and  substance  satisfactory  to  the
                  Committee in its sole discretion, consistent with this Plan;

         (r)      "Option Price" with respect to any particular Option means the
                  exercise price at which the Optionee may acquire each share of
                  the Option Stock called for under such Option;

         (s)      "Option  Stock"  means Stock issued or issuable by the Company
                  pursuant to the valid exercise of an Option;

         (t)      "Optionee"  means an Eligible  Participant to whom Options are
                  granted  hereunder,  and any transferee  thereof pursuant to a
                  Transfer authorized under this Plan;

         (u)      "Plan" means this 1999 Stock Option Plan of the Company;

         (v)      "QDRO" has the same meaning as "qualified  domestic  relations
                  order" as defined in Section 414(p) of the Code;

         (w)      "Stock"  means shares of the Company's  Common Stock,  $0.0001
                  par value;

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         (x)      "Subsidiary" has the same meaning as "Subsidiary  Corporation"
                  as defined in Section 424(f) of the Code;

         (y)      "Transfer,"  with respect to Option Stock,  includes,  without
                  limitation,  a  voluntary  or  involuntary  sale,  assignment,
                  transfer,  conveyance,  pledge,  hypothecation,   encumbrance,
                  disposal, loan, gift, attachment or levy of such Option Stock,
                  including without  limitation an assignment for the benefit of
                  creditors  of the  Optionee,  a transfer by  operation of law,
                  such as a transfer  by will or under the laws of  descent  and
                  distribution,  an  execution  of  judgment  against the Option
                  Stock or the  acquisition  of record or  beneficial  ownership
                  thereof  by a lender or  creditor,  a transfer  pursuant  to a
                  QDRO,  or to any decree of  divorce,  dissolution  or separate
                  maintenance, any property settlement, any separation agreement
                  or any  other  agreement  with a  spouse  (except  for  estate
                  planning  purposes) under which a part or all of the shares of
                  Option Stock are  transferred  or awarded to the spouse of the
                  Optionee or are required to be sold;  or a transfer  resulting
                  from the filing by the Optionee of a petition  for relief,  or
                  the filing of an involuntary  petition  against such Optionee,
                  under the bankruptcy laws of the United States or of any other
                  nation.

3.       ELIGIBILITY.

         The Company may grant  Options  under this Plan only to persons who are
         Eligible  Participants  as of the time of such  grant.  Subject  to the
         provisions of sections 4(d), 5 and 6 hereof,  there is no limitation on
         the number of Options that may be granted to an Eligible Participant.

4.       ADMINISTRATION.

         (a)      COMMITTEE.  The  Committee,  if appointed  by the Board,  will
                  administer this Plan. If the Board,  in its  discretion,  does
                  not appoint such a Committee, the Board itself will administer
                  this Plan and take such  other  actions  as the  Committee  is
                  authorized to take hereunder; provided that the Board may take
                  such  actions  hereunder  in the same  manner as the Board may
                  take  other   actions   under  the   Company's   Articles   of
                  Incorporation and By-laws generally.

         (b)      AUTHORITY AND DISCRETION OF COMMITTEE. The Committee will have
                  full and final  authority in its  discretion,  at any time and
                  from  time  to  time,  subject  only  to  the  express  terms,
                  conditions and other  provisions of the Company's  Articles of
                  incorporation,   by-laws  and  this  Plan,  and  the  specific
                  limitations on such discretion set forth herein:

                  (i)      to select and approve the persons who will be granted
                           Options  under  this  Plan from  among  the  Eligible
                           Participants,  and to grant to any person so selected
                           one or more Options to purchase such number of shares
                           of Option Stock as the Committee may determine;

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                  (ii)     to  determine  the period or  periods of time  during
                           which Options may be exercised,  the Option Price and
                           the duration of such Options, and other matters to be
                           determined  by  the  Committee  in  connection   with
                           specific  Option  grants and  Options  Agreements  as
                           specified under this Plan;

                  (iii)    to  interpret  this  Plan,  to  prescribe,  amend and
                           rescind rules and regulations  relating to this Plan,
                           and to make all  other  determinations  necessary  or
                           advisable  for the operation  and  administration  of
                           this Plan; and

                  (iv)     to delegate all or a portion of its  authority  under
                           subsections  (i) and (ii) of this section 4(b) to one
                           or more  directors  of the Company who are  executive
                           officers of the Company,  but only in connection with
                           Options granted to Eligible  Participants who are not
                           subject to the reporting and liability  provisions of
                           Section 16 of the Securities Exchange Act of 1934, as
                           amended,  and the rules and  regulations  thereunder,
                           and  subject  to such  restrictions  and  limitations
                           (such as the  aggregate  number  of  shares of Option
                           Stock called for by such Options that may be granted)
                           as  the  Committee  may  decide  to  impose  on  such
                           delegate directors.

         (c)      LIMITATION ON AUTHORITY. Notwithstanding the foregoing, or any
                  other  provision  of this  Plan,  the  Committee  will have no
                  authority:

                  (i)      to grant  Options to any of its  members,  whether or
                           not approved by the Board; and

                  (ii)     to determine any matters, or exercise any discretion,
                           in connection  with the Formula Options under section
                           6(m)  hereof,  to the  extent  that the power to make
                           such  determinations  or to exercise such  discretion
                           would cause one or more  members of the  Committee no
                           longer to be  "Disinterested  Directors"  within  the
                           meaning of section 2(i) above.

         (d)      DESIGNATION OF OPTIONS.  Except as otherwise  provided herein,
                  the  Committee  will  designate any Option  granted  hereunder
                  either  as an ISO or as an NSO.  To the  extent  that the Fair
                  Market Value (determined at the time the Option is granted) of
                  Stock with respect to which all ISOs are  exercisable  for the
                  first  time  by  any  individual   during  any  calendar  year
                  (pursuant  to this  Plan and all  other  plans of the  Company
                  and/or its subsidiaries) exceeds $100,000, such option will be
                  treated as an NSO.  Notwithstanding  the  general  eligibility
                  provisions  of section 3 hereof,  the Committee may grant ISOs
                  only to persons who are  employees  of the Company  and/or its
                  subsidiaries.

         (e)      OPTION  AGREEMENTS.  Options will be deemed granted  hereunder
                  only upon the execution and delivery of an Option Agreement by
                  the  Optionee  and a duly  authorized  officer of the Company.
                  Options will not be deemed granted  hereunder  merely upon the
                  authorization of such grant by the Committee.

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5.       SHARES RESERVED FOR OPTIONS.

         (a)      OPTION POOL.  The  aggregate  number of shares of Option Stock
                  that may be issued pursuant to the exercise of Options granted
                  under this Plan  initially  will not exceed  One  Million  One
                  Hundred  Seventy-Six  Thousand Nine Hundred  (1,176,900)  (the
                  "Option Pool"),  provided that such number automatically shall
                  be adjusted  annually on the beginning of the Company's fiscal
                  year to a number equal to 10% of the number of shares of Stock
                  of the Company  outstanding  at the end of the Company's  last
                  completed  fiscal  year,  or  1,176,900  shares,  whichever is
                  greater,  and  provided  further  that  such  number  will  be
                  increased  by the  number of shares of Option  Stock  that the
                  Company  subsequently  may  reacquire  through  repurchase  or
                  otherwise.  Shares  of  Option  Stock  that  would  have  been
                  issuable pursuant to Options,  but that are no longer issuable
                  because  all or part  of  those  Options  have  terminated  or
                  expired,  will be deemed not to have been issued for  purposes
                  of computing the number of shares of Option Stock remaining in
                  the Option Pool and available for issuance.

         (b)      ADJUSTMENTS  UPON CHANGES IN STOCK. In the event of any change
                  in the outstanding Stock of the Company as a result of a stock
                  split, reverse stock split, stock dividend,  recapitalization,
                  combination  or  reclassification,  appropriate  proportionate
                  adjustments will be made in:

                  (i)      the aggregate number of shares of Option Stock in the
                           Option  Pool  that  may  be  issued  pursuant  to the
                           exercise of Options granted hereunder;

                  (ii)     the  Option  Price and the number of shares of Option
                           Stock called for in each  outstanding  Option granted
                           hereunder; and

                  (iii)    other  rights and matters  determined  on a per share
                           basis  under  this  Plan  or  any  Option   Agreement
                           hereunder.  Any such adjustments will be made only by
                           the  Board,  and  when  so made  will  be  effective,
                           conclusive  and binding for all purposes with respect
                           to this Plan and all  Options  then  outstanding.  No
                           such  adjustments  will be  required by reason of the
                           issuance  or sale by the  Company  for  cash or other
                           consideration  of  additional  shares of its Stock or
                           securities   convertible  into  or  exchangeable  for
                           shares of its Stock.

6.       TERMS OF STOCK OPTION AGREEMENTS.

         Each  Option  granted  pursuant  to this Plan will be  evidenced  by an
         agreement (an "Option Agreement") between the Company and the person to
         whom such Option is granted, in form and substance  satisfactory to the
         Committee in its sole  discretion,  consistent with this Plan.  Without
         limiting the foregoing,  each Option Agreement (unless otherwise stated
         therein) will be deemed to include the following terms and conditions:

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         (a)      COVENANTS OF OPTIONEE. At the discretion of the Committee, the
                  person to whom an Option is granted hereunder,  as a condition
                  to the granting of the Option, must execute and deliver to the
                  Company a confidential  information  agreement approved by the
                  Committee.   Nothing   contained  in  this  Plan,  any  Option
                  Agreement  or in any other  agreement  executed in  connection
                  with the  granting  of an Option  under this Plan will  confer
                  upon any Optionee  any right with respect to the  continuation
                  of  his  or  her  status  as an  employee  of,  consultant  or
                  independent  contractor to, or director of, the Company or its
                  subsidiaries.

         (b)      VESTING PERIODS.  Except as otherwise  provided  herein,  each
                  Option  Agreement  may  specify  the period or periods of time
                  within which each Option or portion  thereof will first become
                  exercisable  (the "Vesting  Period") with respect to the total
                  number of shares of Option  Stock called for  thereunder  (the
                  "Total Award  Option  Stock").  Such  Vesting  Periods will be
                  fixed  by  the  Committee  in  its  discretion,   and  may  be
                  accelerated or shortened by the Committee in its discretion.

                  Unless the Option Agreement  executed by an Optionee expressly
                  otherwise  provides and except as set forth herein,  the right
                  to exercise an Option granted hereunder will be subject to the
                  following Vesting Periods,  subject to the Optionee continuing
                  to be an Eligible  Participant and the occurrence of any other
                  event (including the passage of time) that would result in the
                  cancellation or termination of the Option:

                  (i)      no portion of the Option will be exercisable prior to
                           four (4) months  from the Grant Date set forth in the
                           Option Agreement;

                  (ii)     upon and after the expiration of four (4) months from
                           the Grant  Date,  the  Optionee  may  purchase  up to
                           sixteen and two-thirds percent (approximately 16.67%)
                           of the Total Award Option Stock; and

                  (iii)    the Option will become  exercisable  on a  cumulative
                           basis   as  to   sixteen   and   two-thirds   percent
                           (approximately  16.67%)  of the  Total  Award  Option
                           Stock,  at the end of every period of four (4) months
                           that elapses after such first four-month  period,  so
                           that the Option will have become  fully  exercisable,
                           subject  to  the  Optionee's  remaining  an  Eligible
                           Participant,  on the second anniversary of such Grant
                           Date; and

                  (iv)     such additional  vesting periods as may be determined
                           by the Committee in its sole discretion.

         (c)      EXERCISE OF THE OPTION.

                  (i)      MECHANICS  AND NOTICE.  An Option may be exercised to
                           the extent  exercisable  (1) by giving written notice
                           of exercise to the Company,  specifying the number of
                           full  shares  of  Option  Stock to be  purchased  and
                           accompanied by

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                           full  payment of the  Option  Price  thereof  and the
                           amount of  withholding  taxes  pursuant to subsection
                           6(c)(ii)   below;   and  (2)  by  giving   assurances
                           satisfactory to the Company that the shares of Option
                           Stock to be  purchased  upon such  exercise are being
                           purchased  for  investment  and  not  with a view  to
                           resale in connection  with any  distribution  of such
                           shares  in  violation  of  the  1933  Act;  provided,
                           however,  that in the event the Option  Stock  called
                           for under the  Option  is  registered  under the 1933
                           Act,  or in the  event  resale of such  Option  Stock
                           without   such   registration   would   otherwise  be
                           permissible,    this   second   condition   will   be
                           inoperative  if, in the  opinion of  counsel  for the
                           Company,  such  condition is not  required  under the
                           1933 Act, or any other applicable law,  regulation or
                           rule of any governmental agency.

                  (ii)     WITHHOLDING  TAXES. As a condition to the issuance of
                           the  shares of  Option  Stock  upon  full or  partial
                           exercise  of an NSO  granted  under  this  Plan,  the
                           Optionee  will pay to the Company in cash, or in such
                           other  form as the  Committee  may  determine  in its
                           discretion,   the   amount  of  the   Company's   tax
                           withholding  liability  required in  connection  with
                           such  exercise.   For  purposes  of  this  subsection
                           6(c)(ii),  "tax withholding  liability" will mean all
                           federal and state income taxes,  social security tax,
                           and any other taxes  applicable  to the  compensation
                           income  arising  from  the  transaction  required  by
                           applicable law to be withheld by the Company.

         (d)      PAYMENT OF OPTION PRICE.  Each Option  Agreement  will specify
                  the Option  Price with respect to the exercise of Option Stock
                  thereunder,  to be fixed by the  Committee in its  discretion,
                  but in no  event  will the  Option  Price  for an ISO  granted
                  hereunder  be less than the Fair Market Value (or, in case the
                  Optionee is a 10% Stockholder,  one hundred ten percent (110%)
                  of such Fair  Market  Value) of the  Option  Stock at the time
                  such ISO is granted, and in no event will the Option Price for
                  an NSO  granted  hereunder  be less than  eighty-five  percent
                  (85%) of Fair Market  Value.  The Option Price will be payable
                  to the  Company in United  States  dollars in cash or by check
                  or, such other legal  consideration  as may be approved by the
                  Committee, in its discretion.

                  (i)      For example,  the Committee,  in its discretion,  may
                           permit a particular  Optionee to pay all or a portion
                           of the  Option  Price,  and/or  the  tax  withholding
                           liability  set forth in  subsection  6(c)(ii)  above,
                           with respect to the  exercise of an Option  either by
                           surrendering  shares of Stock  already  owned by such
                           Optionee or by  withholding  shares of Option  Stock,
                           provided that the Committee  determines that the fair
                           market  value of such  surrendered  Stock or withheld
                           Option Stock is equal to the corresponding portion of
                           such Option Price and/or tax  withholding  liability,
                           as the case may be, to be paid for therewith.

                  (ii)     If the  Committee  permits  an  Optionee  to pay  any
                           portion of the Option  Price  and/or tax  withholding
                           liability with shares of Stock with respect to the

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                           exercise  of an Option (the  "Underlying  Option") as
                           provided  in  subsection   6(d)(i)  above,  then  the
                           Committee,  in its  discretion,  may  grant  to  such
                           Optionee  (but only if  Optionee  remains an Eligible
                           Participant at that time) additional NSOs, the number
                           of shares of Option Stock called for thereunder to be
                           equal to all or a portion of the Stock so surrendered
                           or   withheld   (a   "Replacement   Option").    Each
                           Replacement  Option  will be  evidenced  by an Option
                           Agreement.  Unless otherwise set forth therein,  each
                           Replacement  Option will be  immediately  exercisable
                           upon such grant (without any Vesting Period) and will
                           be  coterminous  with  the  Underlying   Option.  The
                           Committee, in its sole discretion, may establish such
                           other terms and conditions for Replacement Options as
                           it deems appropriate.

         (e)      TERMINATION  OF  THE  OPTION.  Except  as  otherwise  provided
                  herein, each Option Agreement will specify the period of time,
                  to be fixed by the Committee in its  discretion,  during which
                  the Option granted therein will be exercisable,  not to exceed
                  ten  years  from  the date of grant in the case of an ISO (the
                  "Option  Period");  provided  that the Option  Period will not
                  exceed five years from the date of grant in the case of an ISO
                  granted to a 10%  Stockholder.  To the  extent not  previously
                  exercised,  each Option will  terminate upon the expiration of
                  the Option Period specified in the Option Agreement; provided,
                  however, that each such Option will terminate, if earlier:

                  (i)      ninety days after the date that the  Optionee  ceases
                           to be an Eligible  Participant for any reason,  other
                           than by reason of death or disability or a Just Cause
                           Termination;

                  (ii)     twelve months after the date that the Optionee ceases
                           to be an  Eligible  Participant  by  reason  of  such
                           person's death or disability; or

                  (iii)    immediately  as of the date that the Optionee  ceases
                           to be an  Eligible  Participant  by  reason of a Just
                           Cause Termination.

                  In the  event  of a sale  or all or  substantially  all of the
                  assets of the Company,  or a merger or  consolidation or other
                  reorganization  in  which  the  Company  is not the  surviving
                  corporation,  or in which the Company  becomes a subsidiary of
                  another corporation (any of the foregoing events, a "Corporate
                  Transaction"),  then notwithstanding anything else herein, the
                  right to  exercise  all then  outstanding  Options  will  vest
                  immediately  prior  to such  Corporate  Transaction  and  will
                  terminate   immediately  after  such  Corporate   Transaction;
                  provided,  however, that if the Board, in its sole discretion,
                  determines  that  such  immediate  vesting  of  the  right  to
                  exercise  outstanding  Options is not in the best interests of
                  the  Company,  then the  successor  corporation  must agree to
                  assume  the   outstanding   Options  or  substitute   therefor
                  comparable  options of such successor  corporation or a parent
                  or subsidiary of such successor corporation.

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         (f)      OPTIONS NONTRANSFERABLE. No Option will be transferable by the
                  Optionee  otherwise  than by will or the laws of  descent  and
                  distribution,  or in the case of an NSO,  pursuant  to a QDRO.
                  During  the  lifetime  of the  Optionee,  the  Option  will be
                  exercisable only by him or her, or the transferee of an NSO if
                  it was transferred pursuant to a QDRO.

         (g)      QUALIFICATION  OF STOCK.  The right to exercise an Option will
                  be further subject to the requirement  that if at any time the
                  Board  determines,  in  its  discretion,   that  the  listing,
                  registration  or  qualification  of the shares of Option Stock
                  called for thereunder  upon any  securities  exchange or under
                  any state or federal  law,  or the  consent or approval of any
                  governmental  regulatory authority,  is necessary or desirable
                  as a condition of or in  connection  with the granting of such
                  Option or the purchase of shares of Option  Stock  thereunder,
                  the Option may not be exercised,  in whole or in part,  unless
                  and until such listing, registration,  qualification,  consent
                  or approval is effected or obtained free of any conditions not
                  acceptable to the Board, in its discretion.

         (h)      ADDITIONAL  RESTRICTIONS  ON TRANSFER.  By  accepting  Options
                  and/or  Option  Stock under this Plan,  the  Optionee  will be
                  deemed to represent, warrant and agree as follows:

                  (i)      SECURITIES ACT OF 1933. The Optionee understands that
                           the shares of Option  Stock have not been  registered
                           under the 1933  Act,  and that  such  shares  are not
                           freely tradeable and must be held indefinitely unless
                           such shares are either  registered under the 1933 Act
                           or an exemption from such  registration is available.
                           The Optionee understands that the Company is under no
                           obligation to register the shares of Option Stock.

                  (ii)     OTHER   APPLICABLE   LAWS.   The   Optionee   further
                           understands   that   Transfer  of  the  Option  Stock
                           requires full  compliance  with the provisions of all
                           applicable laws.

                  (iii)    INVESTMENT INTENT. Unless a registration statement is
                           in effect  with  respect to the sale of Option  Stock
                           obtained   through   exercise   of  Options   granted
                           hereunder:  (1)  Upon  exercise  of any  Option,  the
                           Optionee  will  purchase  the Option Stock for his or
                           her own account  and not with a view to  distribution
                           within the meaning of the 1933 Act, other than as may
                           be effected in  compliance  with the 1933 Act and the
                           rules and regulations promulgated thereunder;  (2) no
                           one else will  have any  beneficial  interest  in the
                           Option  Stock;  and  (3)  he or she  has  no  present
                           intention  of  disposing  of the Option  Stock at any
                           particular time.

         (i)      COMPLIANCE  WITH LAW.  Notwithstanding  any other provision of
                  this Plan,  Options may be granted  pursuant to this Plan, and
                  Option Stock may be issued pursuant to the exercise thereof by
                  an  Optionee,  only after there has been  compliance  with all
                  applicable  federal and state  securities laws, and all of the
                  same will be subject to this

San Joaquin Resources Inc. 1999 Stock Option Plan - Page 10

<PAGE>

                  overriding  condition.  The  Company  will not be  required to
                  register  or  qualify  Option  Stock with the  Securities  and
                  Exchange  Commission  or any  State  agency,  except  that the
                  Company will register  with, or as required by local law, file
                  for  and   secure  an   exemption   from   such   registration
                  requirements from, the applicable securities administrator and
                  other  officials  of each  jurisdiction  in which an  Eligible
                  Participant would be granted an Option hereunder prior to such
                  grant.

         (j)      STOCK CERTIFICATES. Certificates representing the Option Stock
                  issued  pursuant  to the  exercise  of  Options  will bear all
                  legends  required  by law and  necessary  to  effectuate  this
                  Plan's  provisions.  The Company  may place a "stop  transfer"
                  order   against   shares  of  the  Option   Stock   until  all
                  restrictions  and conditions set forth in this Plan and in the
                  legends  referred to in this section  6(k) have been  complied
                  with.

         (k)      NOTICES. Any notice to be given to the Company under the terms
                  of an Option Agreement will be addressed to the Company at its
                  principal executive office, Attention: Corporate Secretary, or
                  at such other address as the Company may designate in writing.
                  Any notice to be given to an Optionee will be addressed to the
                  Optionee  at  the  address  provided  to  the  Company  by the
                  Optionee.  Any such  notice  will be  deemed to have been duly
                  given if and when  enclosed  in a  properly  sealed  envelope,
                  addressed as aforesaid,  registered and deposited, postage and
                  registry fee  prepaid,  in a post office or branch post office
                  regularly maintained

         (l)      OTHER PROVISIONS.  The Option Agreement may contain such other
                  terms,  provisions  and  conditions,  including  such  special
                  forfeiture conditions,  rights of repurchase,  rights of first
                  refusal and other  restrictions  on  Transfer of Option  Stock
                  issued upon  exercise of any Options  granted  hereunder,  not
                  inconsistent  with  this  Plan,  as may be  determined  by the
                  Committee in its sole discretion.

         (m)      FORMULA OPTIONS. [Reserved for future consideration]

7.       PROCEEDS FROM SALE OF STOCK.

         Cash  proceeds from the sale of shares of Option Stock issued from time
         to time upon the exercise of Options granted pursuant to this Plan will
         be added to the  general  funds of the Company and as such will be used
         from time to time for general corporate purposes.

8.       MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.

         Subject to the terms and conditions and within the  limitations of this
         Plan,  and except with respect to Formula  Options,  the  Committee may
         modify, extend or renew outstanding Options granted under this Plan, or
         accept  the  surrender  of  outstanding  Options  (to  the  extent  not
         theretofore  exercised)  and  authorize  the granting of new Options in
         substitution  therefor  (to  the  extent  not  theretofore  exercised).
         Notwithstanding  the foregoing,  however, no modification of any Option
         will, without the consent of the holder of the Option,  alter or impair
         any rights or obligations  under any Option  theretofore  granted under
         this Plan.

San Joaquin Resources Inc. 1999 Stock Option Plan - Page 11

<PAGE>

9.       AMENDMENT AND DISCONTINUANCE.

         The Board may amend,  suspend or  discontinue  this Plan at any time or
         from time to time; provided that no action of the Board will cause ISOs
         granted  under  this Plan not to comply  with  Section  422 of the Code
         unless the Board specifically  declares such action to be made for that
         purpose and  provided  further  that no such  action  may,  without the
         approval of the stockholders of the Company, materially increase (other
         than by reason of an  adjustment  pursuant to section  5(b) hereof) the
         maximum  aggregate  number of shares of Option Stock in the Option Pool
         that may be  issued  under  Options  granted  pursuant  to this Plan or
         materially  increase  the  benefits  accruing to Plan  participants  or
         materially  modify  eligibility   requirements  for  the  participants.
         Provided,  further,  that the provisions of section 6(m) hereof may not
         be amended more often than once during any six (6) month period,  other
         than to comport  with  changes  in the Code,  the  Employee  Retirement
         Income Security Act, or the rules and regulations thereunder. Moreover,
         no such action may alter or impair any Option previously  granted under
         this Plan without the consent of the holder of such Option.

10.      PLAN COMPLIANCE WITH RULE 16B-3.

         With  respect  to  persons  subject  to  Section  16 of the  Securities
         Exchange  Act of 1934,  transactions  under this plan are  intended  to
         comply with all  applicable  conditions of Rule 16b-3 or its successors
         under the 1934 Act. To the extent any  provision  of the plan or action
         by the plan administrators  fails so to comply, it shall be deemed null
         and void,  to the extent  permitted by law and deemed  advisable by the
         plan administrators.

11.      COPIES OF PLAN.

         A copy of this Plan will be delivered to each Optionee at or before the
         time he or she executes an Option Agreement.

 ***
Date Plan Adopted by Board of Directors:             ________________, 1999
Date Plan Approved by Stockholders:                  January 17, 1999

San Joaquin Resources Inc. 1999 Stock Option Plan - Page 12

<PAGE>Exhibit 10.1

                 Operating Agreement of Hilton Petroleum Greater
                       San Joaquin Basin Joint Venture LLC

<PAGE>

                               OPERATING AGREEMENT
                                       OF
                                HILTON PETROLEUM
                            GREATER SAN JOAQUIN BASIN
                                JOINT VENTURE LLC

THIS  AGREEMENT  is made and  entered  into this 6th day of July,  1999,  by and
between HILTON PETROLEUM GREATER SAN JOAQUIN BASIN JOINT VENTURE LLC, a Colorado
limited  liability  company (the "Company") and those persons whose names appear
on Schedule A attached hereto, hereinafter referred to as "Members."

                                    RECITALS:

The Company has the right to acquire a 3% participating  interest in the Greater
San Joaquin  Joint Venture (the "Joint  Venture"),  which is a consortium of oil
companies headed by Berkley  Petroleum Ltd. as the joint venture  operator.  The
working  interest  and net revenue  interest  of the  Company  for a  particular
prospect  will  vary  depending  upon the  terms  of the  lease  related  to the
prospect.  The Company shall be bound by the Joint Venture operating  agreement.
Hilton Petroleum Ltd., a Yukon corporation  ("Hilton Petroleum") is appointed as
the permanent Manager of the Company.

The cost of this interest is $1,550,000  and the agreement of the Company to pay
its share of all costs  associated  with the Joint Venture.  These costs include
but may not be limited to  drilling  costs  associated  with each well;  acreage
costs for any  additional  acreage  acquired  in  addition  to the 20,000  acres
already leased by the Joint Venture;  and operating expenses associated with any
commercially  developed  well(s).  The Company shall pay 4% of all costs to earn
its  working  interest  in the first three wells and 3% of all costs to earn its
working  interest in wells  four,  five,  and six.  The  Company's  share of the
estimated cost for the first well is $400,000. Accordingly, the Company is to be
capitalized initially with $1,950,000 by selling 20 Units of Membership interest
in the Company at $97,500 per Unit.  Each Unit shall  represent a 5% interest in
the Company.

The  Company's  share  of the  estimated  costs  for the  first  three  wells is
$1,200,000.  The estimated cost of drilling any future wells will be based on an
Authority for Expenditure provided by the well's operator.  Calls for additional
capital  contributions  are typically due within 10 days of  notification by the
operator as described in the Joint Venture operating agreement.

For its services as Manager of the  Company,  Hilton  Petroleum  shall be paid a
monthly management fee following the completion of the sixth well of $5,000 plus
actual costs.

IT IS AGREED,  in consideration  of the promises,  covenants,  performance,  and
mutual consideration herein as follows:

<PAGE>

                                        I
                              FORMATION OF COMPANY

1.1.     ARTICLES OF  ORGANIZATION.  This Company is  organized  pursuant to the
         provisions  of the  Limited  Liability  Company  Laws of the  State  of
         Colorado  and  pursuant  to  Articles  of  Organization  filed with the
         Secretary of State on June __, 1999. The rights and  obligations of the
         Company  and  the  Members   shall  be  provided  in  the  Articles  of
         Organization and this Operating  Agreement of Hilton Petroleum  Greater
         San Joaquin Basin Joint Venture LLC.

1.2.     CONFLICT BETWEEN ARTICLES OF ORGANIZATION AND THIS AGREEMENT.  If there
         is any conflict  between the provisions of the Articles of Organization
         and this Operating Agreement, the terms of the Articles of Organization
         shall control.

1.3      RECITALS  PART OF THIS  AGREEMENT.  The  recitals  set forth  above are
         incorporated  in this  Agreement by this reference and shall be used as
         necessary to interpret the meaning of this Agreement.

                                       II
                              CAPITAL CONTRIBUTIONS

2.1      CONTRIBUTIONS.  The minimum capital contribution to be made by a Member
         is $97,500  for one Unit or 5%  interest  in the  Company.  The capital
         contributions  to be made by the  Members  and with  which the  Company
         shall begin business are set forth on Schedule A attached hereto:

2.2.     ADDITIONAL CAPITAL CONTRIBUTIONS. In the event that the operator of the
         Joint  Venture  notifies  the Company that a cash call is due or in the
         event that the cash funds of the Company are  insufficient  to meet its
         operating  expenses,  the Manager shall notify each of the Members,  by
         registered mail or overnight delivery service, of its share of the cash
         required and the Members shall make additional  capital  contributions,
         in the proportion of their capital  contributions within 10 days of the
         Member's receipt of the notification from the Manager.

2.3      FAILURE TO PAY  ADDITIONAL  CAPITAL  CONTRIBUTION.  In the event that a
         Member fails to pay its additional  capital  contribution,  on the 11th
         day after having received  notification  pursuant to Section 2.2 above,
         with no right to cure such failure,  that defaulting  Member's interest
         in the  Company  shall be  deemed  to have  been  purchased  by  Hilton
         Petroleum  for shares of common  stock of Hilton  Petroleum or shall be
         designated as "nonparticipatory" as set forth below:

         2.3.1    If such failure  should occur within the first 12 months after
                  the defaulting Member's initial capital  contribution,  Hilton
                  Petroleum  shall  pay the  defaulting  Member's  share  of the
                  additional  capital  contribution,  but the  shares  of Hilton
                  Petroleum shall not be

          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 2

<PAGE>

                  issued  until  12-month  anniversary  of the  initial  capital
                  contribution.  The value of the  shares  shall be based on the
                  30-day  average  closing  price of the shares on the Vancouver
                  Stock Exchange  immediately prior to the 12-month  anniversary
                  date. The amount of the defaulting Member's investment divided
                  by the average  price shall be the number of shares issued for
                  the defaulting Member's interest in the Company.

         2.3.2    If such  failure  should  occur  after the first 12 months but
                  within  the first 24  months  after  the  defaulting  Member's
                  initial capital  contribution,  Hilton Petroleum shall pay the
                  defaulting   Member's   share   of  the   additional   capital
                  contribution,  and the value of the shares shall be determined
                  by using the 30-day average closing price of the shares on the
                  Vancouver  Stock  Exchange  immediately  prior  to the date of
                  default.

         2.3.3    If such  failure  should occur after the first 24 months after
                  the defaulting Member's initial capital  contribution,  Hilton
                  Petroleum  shall  pay the  defaulting  Member's  share  of the
                  additional capital  contribution,  and the defaulting Member's
                  interest shall be designated as "nonparticipatory"  until that
                  Member's share of cash flow, if any, from an ongoing operation
                  has paid  Hilton  Petroleum  300% of the  defaulted  cash call
                  amount(s).  If no cash flow can be  credited  to the  Member's
                  interest from ongoing production for a period of 120 days from
                  the date of default,  the  defaulting  Member's  interest will
                  default to Hilton Petroleum.

2.4.     LOANS.  In lieu of voting an  additional  assessment of capital to meet
         operating  expenses or to finance new investments,  the Company may, as
         determined by the Manager, borrow money from one or any of the Manager,
         Members, or third persons.  However,  the Company may only borrow funds
         for expenses or investments relating to the Joint Venture. In the event
         that a loan agreement is negotiated with a Manager or Member, he or she
         shall be entitled to receive  interest at a rate and upon such terms to
         be  determined  by the  Manager,  and said loan  shall be repaid to the
         Manager or Member, with unpaid interest, if any, as soon as the affairs
         of the Company will permit. The loan shall be evidenced by a promissory
         note obligating the assets of the Company.  Such interest and repayment
         of the amounts so loaned are to be entitled to priority of payment over
         the division and distribution of capital contributions and profit among
         Members.

                                       III
                        MEMBERS' ACCOUNTS; ALLOCATION OF
                         PROFIT AND LOSS; DISTRIBUTIONS

3.1.     CAPITAL  ACCOUNTS.  A separate  capital account shall be maintained for
         each  Member.  The  capital  accounts of each  Member  shall  initially
         reflect the amounts  specified in Section 2.1. No Member shall withdraw
         any part of his or her capital account, except upon the approval of the
         Manager. If the capital account of a Member becomes impaired,  or if he
         or she withdraws said capital account with approval of the Manager, his
         or her share of subsequent

          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 3

<PAGE>

         Company  profits shall be credited first to his or her capital  account
         until that account has been restored,  before such profits are credited
         to his or her income  account.  If,  during the period  when a Member's
         capital  account is impaired or he or she has withdrawn funds therefrom
         as hereinbefore provided, an additional contribution is required of the
         Member for the purposes  specified in Section 2.2, then the Member with
         such  withdrawn  or  impaired  capital  account  shall be  required  to
         contribute his or her  proportionate  share of the  additional  capital
         contribution  and the  deficiency  then  existing in his or her capital
         account,  so as to return the  capital  account to the same  proportion
         existing  as of the date of the  additional  contribution.  No interest
         shall be paid on any capital contributions to the Company.

3.2.     INCOME ACCOUNTS. A separate income account shall be maintained for each
         Member. Company profits, losses, gains,  deductions,  and credits shall
         be charged or credited to the separate income accounts  annually unless
         a Member has no credit balance in his or her income  account,  in which
         event losses shall be charged to his or her capital account,  except as
         provided in Section 3.1. The profits,  losses, gains,  deductions,  and
         credits of the Company shall be  distributed  or charged to the Members
         as  provided in Section  3.3.  No interest  shall be paid on any credit
         balance in an income account.

3.3.     ALLOCATIONS  AMONG MEMBERS.  The profits and gains of the Company shall
         be divided and the losses, deductions, and credits of the Company shall
         be borne in the proportion of their capital contributions.

3.4.     DISPROPORTIONATE CAPITAL ACCOUNTS. No interest or additional allocation
         profits,  losses,  gains,  deductions,  and credits  shall inure to any
         Member by reason of his or her capital account being proportionately in
         excess of the capital accounts of the other Members.

3.5.     DISTRIBUTIONS OF ASSETS.

         3.5.1.   All  distributions  of assets of the Company,  including cash,
                  shall  be  made  in the  same  allocations  among  Members  as
                  described in Section 3.3.

         3.5.2.   Within  30  days  from  the end of each  fiscal  quarter,  the
                  Manager shall make a distribution  to the Members that portion
                  of the net revenues of the Company, or any other assets, which
                  the  Manager  determines,  in its  sole  discretion,  are  not
                  necessary for the  Company's  on-going  operations;  provided,
                  however,  that  no  distribution  of  assets  may be made to a
                  Member  if,  after  giving  effect  to the  distribution,  all
                  liabilities of the Company,  other than liabilities to Members
                  on account of their capital and income accounts,  would exceed
                  the fair value of the Company assets.

         3.5.3.   A Member has no right to demand and receive  any  distribution
                  from the Company in any form other than cash.

          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 4

<PAGE>

                                       IV
                          RULES RELATING TO THE MEMBERS

4.1.     ADMISSION OF NEW MEMBERS.  Additional  Members (i.e. those who purchase
         their  interests  directly  from the Company) may be admitted  upon the
         unanimous written consent of all Members.

4.2.     VOTING OF MEMBERS. A Member shall be entitled to vote the percentage of
         ownership  interest held by that Member on any matter for which Members
         are  required  to vote.  A member may vote in person or by proxy at any
         meeting of  Members.  All  decisions  of the  Members  shall be made by
         Members  holding a majority  in  interest  of the Company at a properly
         called  meeting  of the  Members  at which a quorum is  present,  or by
         unanimous written consent of the Members.

4.3.     MEETINGS OF MEMBERS.

         4.3.1.   Meetings of Members may be held at such time and place, either
                  within or without the State of Colorado,  as may be determined
                  by the Manager or the person or persons calling the meeting.

         4.3.2.   An annual  meeting of the  Members  shall be held at such time
                  and  place as  shall  be  determined  by a  resolution  of the
                  Manager  during each fiscal year of the Company.  A Member may
                  petition any court of competent  jurisdiction  in the State of
                  Colorado  to order that an annual  meeting  of the  Members be
                  held if an annual  meeting  is not held  within six (6) months
                  after the end of the  Company's  fiscal  year or fifteen  (15)
                  months after the Company's last annual  meeting,  whichever is
                  earlier.

         4.3.3.   A special  meeting of the Members may be called by the Manager
                  or by at least  one-tenth  of all of the  Members  entitled to
                  vote at the meeting.

         4.3.4.   Written notice stating the place, day, and hour of the meeting
                  and, in the case of a special  meeting,  the purpose for which
                  the meeting is called,  shall be  delivered  not less than ten
                  (10) days nor more than fifty (50) days before the date of the
                  meeting,  either personally or by mail, by or at the direction
                  of the Manager or any other  person  calling the  meeting,  to
                  each  Member of record  entitled  to vote at such  meeting.  A
                  waiver of notice in writing,  signed by the Member before, at,
                  or after the time of the meeting stated in the notice shall be
                  equivalent to the giving of such notice.

         4.3.5.   By attending a meeting,  a Member waives objection to the lack
                  of  notice or  defective  notice  unless  the  Member,  at the
                  beginning  of  the  meeting,  objects  to the  holding  of the
                  meeting or the  transacting  of  business  at the  meeting.  A
                  Member who attends a

          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 5

<PAGE>

                  meeting also waives objection to consideration at such meeting
                  of a particular matter not within the purpose described in the
                  notice  unless the Member  objects to  considering  the matter
                  when it is presented.

4.4.     QUORUM AND  ADJOURNMENT.  Members holding a majority in interest of the
         Company  entitled to vote shall  constitute  a quorum at the meeting of
         Members.  If a quorum is not represented at any meeting of the Members,
         such  meeting may be  adjourned  for a period not to exceed  sixty (60)
         days at any one adjournment; provided, however, that if the adjournment
         is for more than thirty (30) days,  a notice of the  adjourned  meeting
         shall be given to each Member entitled to vote at the meeting.

4.5      SALE OF INTEREST IN JOINT VENTURE OR OTHER  ASSETS.  The Members of the
         Company may vote to sell the Company's interest in the Joint Venture or
         other assets of the Company so long as Members  holding at least 60% of
         the interest in the Company vote in favor of this action and so long as
         Hilton Petroleum remains as the Manager of the Company.

                                        V
                           RULES RELATING TO MANAGERS

5.1.     GENERAL  POWERS.  Management  and the  conduct of the  business  of the
         Company shall be vested in the Manager,  Hilton Petroleum.  The Manager
         may adopt  resolutions to govern its activities and the manner in which
         it shall perform its duties to the Company.

5.2.     DUTIES OF MANAGER.

         5.2.1.   The  Manager  shall have the duties  and  responsibilities  as
                  described in the Colorado  Limited  Liability  Company Act, as
                  amended from time to time.

         5.2.2.   The  Manager  shall  execute  any   instruments  or  documents
                  providing for the acquisition, mortgage, or disposition of the
                  property of the Company.

         5.2.3.   Any debt contracted or liability incurred by the Company shall
                  be  authorized  only by a resolution  of the Manager,  and any
                  instruments  or  documents  required  to be  executed  by  the
                  Company shall be signed by the Manager.

         5.2.4.   The  Manager   may   delegate  an  employee  or  agent  to  be
                  responsible  for the daily and  continuing  operations  of the
                  business affairs of the Company.  All decisions  affecting the
                  policy and  management of the Company,  including the control,
                  employment,  compensation,  and  discharge of  employees;  the
                  employment of contractors and subcontractors;  and the control
                  and  operation  of the premises and  property,  including  the
                  improvement, rental, lease, maintenance, and all other matters
                  pertaining  to the  operation  of the property of the business
                  shall be made by the Manager.

          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 6

<PAGE>

         5.2.5.   Any  Manager  may draw  checks  upon the bank  accounts of the
                  Company  and  may  make,  deliver,   accept,  or  endorse  any
                  commercial  paper in connection  with the business  affairs of
                  the Company.

5.3.     DEVOTION TO DUTY. At all times during the term of Manager,  the Manager
         shall give reasonable time, attention, and attendance to, and shall use
         reasonable  efforts in the business of the said  Company;  shall,  with
         reasonable shall and power, exert itself for the interest, benefit, and
         advantage of said Company;  and shall truly and  diligently  pursue the
         Company objectives.

5.4.     INDEMNIFICATION.  The  Manager,  employees,  and agents of the  Company
         shall be  entitled  to be  indemnified  by the  Company  to the  extent
         provided in the Colorado Limited Liability Company Act, as amended from
         time to time,  and  shall  be  entitled  to the  advance  of  expenses,
         including  attorneys'  fees, in the defense or  prosecution  of a claim
         against it, him or her in the capacity of Manager, employee, or agent.

                                       VI
                                      BOOKS

6.1.     LOCATION OF RECORDS.  The books of the Company  shall be  maintained at
         the registered office of the Company.

6.2.     ACCESS TO RECORDS AND  ACCOUNTING.  Each Member shall at all times have
         access to the books and  records  of the  Company  for  inspection  and
         copying. Each Member shall also be entitled:

         6.2.1.   To obtain  from the  Manager  upon  reasonable  demand for any
                  purpose such  information  reasonably  related to the Member's
                  Membership Interest in the Company;

         6.2.2.   To have true and full  information  regarding the state of the
                  business and  financial  condition  and any other  information
                  regarding the affairs of the Company;

         6.2.3.   To have a copy of the  Company's  federal,  state,  and  local
                  income  tax  returns  for each year  promptly  after  they are
                  available to the Company; and

         6.2.4.   To have a formal  accounting of the Company  affairs  whenever
                  circumstances render an accounting just and reasonable.

6.3.     ACCOUNTING  RULES.  The books shall be maintained on a cash basis.  The
         fiscal year of the Company shall be the calendar year. Distributions to
         income  accounts shall be made annually by the 15th of March  following
         the end of the fiscal  year.  The books shall be closed and balanced at
         the end of each calendar year and, if an audit is determined to be

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         necessary by vote or consent of the Manager, it shall be made as of the
         closing date.  The Manager may authorize  the  preparation  of year-end
         profit-and-loss statements,  balance sheet, and tax returns by a public
         accountant.  Any tax forms  required to be sent to the Members shall be
         sent no later than the 15th of March following the fiscal year end.

                                       VII
                                   DISSOLUTION

7.1.     CAUSES  OF  DISSOLUTION.  The  Company  shall  be  dissolved  upon  the
         occurrence of any of the following events:

         7.1.1. At any time by unanimous agreement of the Members;

         7.1.2.   Upon the termination of the Joint Venture; or

         7.1.3.   Upon the dissolution of the Manager.

7.2.     DISTRIBUTION  OF ASSETS IF BUSINESS UPON  DISSOLUTION.  In the event of
         dissolution of the Company,  the Manager shall proceed with  reasonable
         promptness to sell the real and personal  property owned by the Company
         and to liquidate  the business of the Company.  Upon  dissolution,  the
         assets of the Company  business  shall be used and  distributed  in the
         following order:

         7.2.1.   Any liabilities  and liquidating  expenses of the Company will
                  first be paid;

         7.2.2.   The  reasonable  compensation  and  expenses of the Manager in
                  liquidation shall be paid;

         7.2.3.   The amount then  remaining  shall be paid to and divided among
                  the  Members  in  accordance  with the  statutory  scheme  for
                  distribution and liquidation of the Company under the Colorado
                  Limited Liability Company Act, as amended from time to time.

                                      VIII
                              EXPULSION OF A MEMBER

8.1.     CAUSES OF EXPULSION. A Member may be expelled from the Company upon the
         occurrence of any of the following events:

         8.1.1.   If a  Member  shall  violate  any of the  provisions  of  this
                  Agreement; or

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         8.1.2.   If a  Member's  Membership  Interest  shall  be  subject  to a
                  charging order or tax lien, which is not dismissed or resolved
                  to the  satisfaction  of the  Manager  of the  Company  within
                  thirty (30) days after assessment or attachment.

8.2.     NOTICE OF  EXPULSION.  Upon the  occurrence  of an event  described  in
         Section  8.1,  written  notice  of  expulsion  shall  be  given  to the
         violating Member either by serving the same by personal  delivery or by
         mailing  the same by  certified  mail to his or her last known place of
         residence,  as shown on the books of said Company.  Upon the receipt of
         personal  notice,  or the date of the postmark for certified  mail, the
         violating  Member  shall be  considered  expelled,  and  shall  have no
         further rights as a Member of the Company, except to receive the amount
         described in Section 8.3 below.

8.3      PAYMENT FOR MEMBERSHIP INTEREST. The violating Member shall be entitled
         to the  amount  of  his  or her  capital  account  as of  the  date  of
         expulsion,  plus his or her  income  account as of the end of the prior
         fiscal  year,  decreased  by his or her  share of the  Company  losses,
         deductions,  and  credits  to  the  Company  computed  to the  date  of
         expulsion, and decreased by withdrawals such as would have been charged
         to his or her income  account  during the  present  year to the date of
         expulsion. This amount is subject to setoff for any damages incurred as
         the result of the violating Member's actions.

                                       IX
                             BANKRUPTCY OF A MEMBER

9.1.     BANKRUPTCY DEFINED. A Member shall be considered bankrupt if the Member
         files  a  petition  in  bankruptcy  (or  an  involuntary   petition  in
         bankruptcy  is  filed  against  the  Member  and  the  petition  is not
         dismissed  within  sixty  (60)  days) or makes  an  assignment  for the
         benefit of creditors or otherwise  takes any  proceeding or enters into
         any  agreement  for  compounding  his or her  debts  other  than by the
         payment of them in the full amount thereof, or is otherwise regarded as
         insolvent under any Colorado insolvency act.

9.2.     EFFECTIVE  DATE  FOR  BANKRUPTCY.  The  Effective  Date  of a  Member's
         bankruptcy  shall be the date that the Manager,  having  learned of the
         Member's bankruptcy, gives notice in writing stating that the Member is
         regarded as  bankrupt  under this  Agreement,  such notice to be served
         personally  or by  leaving  the same at the  place of  business  of the
         Company.  As of the Effective  Date, the bankrupt  Member shall have no
         further  rights  as a Member of the  Company,  except  to  receive  the
         amounts to which he or she is entitled under Section 8.3.

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                                        X
                      RETIREMENT OR RESIGNATION OF A MEMBER

10.1.    RIGHT TO RETIRE OR RESIGN.  A Member shall have the right, at any time,
         to retire or resign  as a Member  of the  Company  by giving  three (3)
         months' notice to the Company at the Company's place of business.

10.2.    CONSEQUENCES  OF  RETIREMENT OR  RESIGNATION.  Upon giving notice of an
         intention  to retire or  resign,  the  Withdrawn  Member  shall only be
         entitled to the payments provided in Section 8.3.

                                       XI
                                DEATH OF A MEMBER

11.1.    DEATH OF A MEMBER.  Upon the death of a Member,  the deceased  Member's
         rights as Member of the  Company  shall cease and  terminate  except as
         provided in this Article XI.

11.2.    CONSEQUENCES  OF DEATH.  The  Company  shall  purchase  the  Membership
         Interest of the  deceased  Member as provided in Section  8.3,  and the
         closing of such purchase shall be within thirty (30) days of the notice
         of such election, except in the event the Company has life insurance on
         the  decedent,  in which event the amount and method of payment for the
         Membership  Interest  of the  deceased  Member  will be as  provided in
         Section 11.3.

11.3.    INSURANCE.  The Company may, but is not obligated to, contract for life
         insurance  on the  lives  of each  of the  Members,  or any  individual
         Member,  in any  amount  not  disproportionate  to the  value  of  each
         Member's  Membership  Interest.  In the  event of  death  of a  Member,
         insurance  proceeds  paid to the Company  will be used to purchase  the
         Membership Interest of the deceased Member. The purchase price shall be
         the greater of the amount determined under Section 8.3 or the amount of
         insurance proceeds received by the Company. The payment of the purchase
         price to the decedent's  representatives  or heirs shall be made within
         thirty (30) days  following  receipt of the  insurance  proceeds by the
         Company.

                                       XII
                           SALE OF A MEMBER'S INTEREST

12.1.    PROVISIONS RESTRICTING SALE OF MEMBERSHIP INTERESTS.  In the event that
         a Member  desires to sell,  assign,  or  otherwise  transfer his or her
         Membership  Interest in the Company and has  obtained a bona fide offer
         for the sale thereof made by some person not a member of this  Company,
         he or she shall first offer to sell,  assign, or otherwise transfer the
         Membership  Interest to the other  Members at the price and on the same
         terms as  previously  offered him or her, and each of the other Members
         shall have the right to purchase his or her proportionate  share of the
         selling Member's Membership Interest. The selling Member shall

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<PAGE>

         notify the other Members of such offer by registered  mail or overnight
         delivery  within 10 days of the receipt of the offer.  Any Member which
         desires to purchase  his or her  proportionate  interest in the selling
         Member's  Membership  Interest  shall  notify  the  selling  Member  in
         writing,  by registered mail or overnight  delivery,  within 30 days of
         receipt of the offer from the  selling  Member.  If any Member does not
         desire to  purchase  the  Membership  Interest on such terms or at such
         price and the entire Membership  Interest is not purchased by the other
         Members,  no other  Member  may  purchase  any  part of the  Membership
         Interest,  and the selling Member may then sell,  assign,  or otherwise
         transfer  his or her entire  Membership  Interest in the Company to the
         person making the said offer at the price  offered.  The intent of this
         provision is to require that the entire Membership Interest of a Member
         be sold intact, without fractionalization.  A purchaser of a Membership
         Interest  of the  Company  shall  not  become a Member  and  shall  not
         participate  in the  management  of the Company,  without the unanimous
         consent of the  non-selling  Members,  but shall be entitled to receive
         the  share  of  profits,  gains,  losses,   deductions,   credits,  and
         distributions to which the selling Member would be entitled.

12.2     SALE OF MEMBERSHIP  INTEREST TO HILTON  PETROLEUM.  After 12 months but
         before 25 months after a Member's  initial  capital  contribution,  the
         Member may sell the interest to Hilton Petroleum in exchange for shares
         of Hilton  Petroleum  common  stock.  The  value of the stock  shall be
         determined by the average  closing price for the stock on the Vancouver
         Stock Exchange for the 30 days  immediately  after Hilton Petroleum has
         received notification in writing of a Member's desire to sell to Hilton
         Petroleum.  The number of shares issued to the selling  Member shall be
         the 30-day  average  closing  price  divided into the selling  Member's
         total investment amount.

                                      XIII
                               MEMBERS' COVENANTS

13.1.    MEMBER'S PERSONAL DEBTS. In order to protect the property and assets of
         the Company from any claim  against any Member for personal  debts owed
         by such Member,  each Member shall  promptly pay all debts owing by him
         or her and shall  indemnify  the  Company  from any claim that might be
         made to the  detriment of the Company by any personal  creditor of such
         Member.

13.2.    ALIENATION OF MEMBERSHIP INTEREST.  No Member shall, except as provided
         in Article XII, sell,  assign,  mortgage,  or otherwise encumber his or
         her  Membership  Interest in the  Company or in its  capital  assets or
         property;  or enter into any  agreement of any kind that will result in
         any person, firm, or other organization becoming interested with him or
         her in the Company;  or do any act detrimental to the best interests of
         the Company.

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                                       XIV
                                   ARBITRATION

14.1.    ARBITRATION.  Any  dispute,  claim,  or  controversy  arising out of or
         relating to this  Agreement or the breach  thereof  shall be settled by
         arbitration in accordance with the rules then obtaining of the American
         Arbitration  Association.  Judgment  upon the  award  rendered  by said
         arbitration  may be entered in any court having  jurisdiction  thereof.
         Costs of arbitration shall be paid by the loser. If one Member notifies
         the other Member in writing of a dispute,  claim, or controversy within
         six (6) months of the arising of such dispute,  claim,  or  controversy
         and requests that the same be  arbitrated,  no legal action may then be
         commenced thereon, except to obtain judgment on the arbitration award.

                                       XV
                            MISCELLANEOUS PROVISIONS

15.1.    INUREMENT.  This Agreement shall be binding upon the parties hereto and
         their respective  heirs,  executors,  administrators,  successors,  and
         assigns, and each person entering into this Agreement acknowledges that
         this Agreement constitutes the sole and complete representation made to
         him or her regarding the Company, its purpose and business, and that no
         oral or written  representations  or  warranties  of any kind or nature
         have been made  regarding the proposed  investments,  nor any promises,
         guarantees, or representations regarding income or profit to be derived
         from any future investment.

15.2.    MODIFICATION.  This  Agreement  may be  modified  from  time to time as
         necessary only by the written agreement of the Company,  acting through
         the vote or consent of its Managers, and the Members.

15.3.    SEVERABILITY.  The  provisions  of this  Agreement  are  severable  and
         separate,  and if one or more is voidable or void by statute or rule of
         law, the  remaining  provisions  shall be severed  therefrom  and shall
         remain in full force and effect.

15.4.    GOVERNING  LAW.  This  Agreement  and  its  terms  are to be  construed
         according to the laws of the State of Colorado.

15.5.    COUNTERPARTS. This Agreement has been executed in counterparts and each
         such  counterpart  shall be deemed an original of the Agreement for all
         purposes.

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IN  WITNESS  WHEREOF, we  have hereunto set our hands and seals on the day first
written above, in _______________________.

                              HILTON PETROLEUM GREATER SAN
                              JOAQUIN BASIN JOINT VENTURE LLC

                              By:    /s/ Donald Busby
                                 -------------------------------------------
                                 Authorized officer of Hilton
                                 Petroleum Ltd., Manager

                              Members:

                              By: /s/ Nick DeMare
                                 -----------------------------------------
                                 Authorized officer of Hilton
                                 Petroleum Ltd., attorney-in-fact for the
                                 Members

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                                   SCHEDULE A

Members                         Contribution                 Units of Interest

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                          Operating Agreement - Page 14

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