Document:

EXHIBIT 10-4

[AIPN LOGO GOES HERE]

                  MODEL FORM INTERNATIONAL OPERATING AGREEMENT

                                      1995

                                   DISCLAIMER
THIS MODEL FORM HAS BEEN PREPARED ONLY AS A SUGGESTED GUIDE AND MAY NOT CONTAIN
ALL OF THE PROVISIONS THAT MAY BE REQUIRED BY THE PARTIES TO AN ACTUAL
AGREEMENT. THIS MODEL FORM HAS NOT BEEN ENDORSED BY THE ASSOCIATION OF
INTERNATIONAL PETROLEUM NEGOTIATORS (AIPN) OR BY ANY MEMBERS OF THE AIPN. USE OF
THIS MODEL FORM OR ANY PORTION OR VARIATION THEREOF SHALL BE AT THE SOLE
DISCRETION AND RISK OF THE USER PARTIES. USERS OF THE MODEL FORM OR ANY
VARIATION THEREOF ARE ENCOURAGED TO SEEK THE ADVICE OF LEGAL COUNSEL TO ENSURE
THAT THE FINAL DOCUMENT REFLECTS THE ACTUAL AGREEMENT OF THE PARTIES. THE AIPN
DISCLAIMS ANY AND ALL INTERESTS OR LIABILITY WHATSOEVER FOR LOSS OR DAMAGES THAT
MAY RESULT FROM USE OF THIS MODEL FORM OR PORTIONS OR VARIATIONS THEREOF. ALL
LOGOS AND REFERENCES TO THE AIPN MUST BE REMOVED FROM THIS MODEL FORM WHEN USED
AS AN ACTUAL AGREEMENT.

             (C) Association of International Petroleum NegotiatorS

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                                 1995 MODEL FORM

                        INTERNATIONAL OPERATING AGREEMENT

                   COMPANIA CONSULTORA DE PETROLEO ("CCP") (1)

                         ZIEGLER-PERU, INC. ("ZPI") (2)

                       RADIAL ENERGY, INC. ("RADIAL") (3)

        OPERATING AGREEMENT COVERING: HUAYA ANTICLINE PROJECT ("PROJECT")

                              LOCATED IN BLOCK 100

                             LORETO DEPARTMENT, PERU

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

                                TABLE OF CONTENTS
                                                                            PAGE

ARTICLE I - DEFINITIONS ..................................................... 1
ARTICLE II - EFFECTIVE DATE AND TERM ........................................ 3
ARTICLE III - SCOPE ......................................................... 4
     3.1      Scope ......................................................... 4
     3.2      Participating Interest ........................................ 4
     3.3      Ownership, Obligations and Liabilities ........................ 4
     3.4      Government Participation ...................................... 4

ARTICLE IV    - OPERATOR .................................................... 5
     4.1      Designation of Operator ....................................... 5
     4.2      Rights and Duties of Operator ................................. 5
     4.3      Employees of Operator ......................................... 5
     4.4      Contractors ................................................... 6
     4.5      Information Supplied by Operator .............................. 6
     4.6      Settlement of Claims and Lawsuits ............................. 6
     4.7      Limitation on Liability of Operator ........................... 6
     4.8      Insurance Obtained by Operator ................................ 7
     4.9      Commingling of Funds .......................................... 8
     4.10     Resignation of Operator ....................................... 8
     4.11     Removal of Operator ........................................... 8
     4.12     Appointment of Successor ...................................... 8

ARTICLE V - OPERATING COMMITTEE ............................................. 9
     5.1      Establishment of Operating Committee .......................... 9
     5.2      Powers and Duties of Operating Committee ...................... 9
     5.3      Authority to Vote ............................................. 9
     5.4      Subcommittees ................................................. 9
     5.5      Notice of Meeting ............................................. 9
     5.6      Contents of Meeting Notice..................................... 9
     5.7      Location of Meetings .......................................... 9
     5.8      Operator's Duties for Meetings ................................ 9
     5.9      Voting Procedure ............................................. 10
     5.10     Record of Votes .............................................. 10
     5.11     Minutes ...................................................... 10
     5.12     Voting by Notice ............................................. 10
     5.13     Effect of Vote ............................................... 10

ARTICLE VI - WORK PROGRAMS AND BUDGETS ..................................... 11
     6.1      Drilling of Obligation Well One .............................. 11
     6.2      Drilling of Obligation Wells Two and Three ................... 11
     6.3      Development Program and Drilling ............................. 12
     6.4      Production ................................................... 12
     6.5      Itemization of Expenditures .................................. 12
     6.6      Contract Awards .............................................. 13
     6.7      Authorization for Expenditure ("AFE") Procedure .............. 13
     6.8      Overexpenditures of Work Programs and Budgets ................ 13

ARTICLE VII - OPERATIONS BY LESS THAN ALL PARTIES .......................... 13
     7.1      Limitation on Applicability .................................. 13

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

ARTICLE VIII - DEFAULT ..................................................... 14
     8.1      Default and Notice ........................................... 14
     8.2      Operating Committee Meetings and Data ........................ 14
     8.3      Allocation of Defaulted Accounts ............................. 14
     8.4      Remedies ..................................................... 15
     8.5      Survival ..................................................... 16
     8.6      No Right of Set Off .......................................... 16

ARTICLE IX  - DISPOSITION OF PRODUCTION .................................... 16
     9.1      Right and Obligation to Take in Kind ......................... 16
     9.2      Agreement for Crude Oil Sales ................................ 16
     9.3      Separate Agreement for Natural Gas ........................... 17

ARTICLE X  -  ABANDONMENT .................................................. 17
     10.1     Abandonment of Wells Drilled as Joint Operations ............. 17

ARTICLE XI -  SURRENDER, EXTENSIONS AND RENEWALS ........................... 17
     11.1     Surrender .................................................... 17
     11.2     Extension of the Term ........................................ 18

ARTICLE XII - TRANSFER OF INTEREST OR RIGHTS ............................... 18
     12.1     Obligations .................................................. 18
     12.2     Rights ....................................................... 19

ARTICLE XIII - WITHDRAWAL FROM AGREEMENT ................................... 19
     13.1     Right of Withdrawal .......................................... 19
     13.2     Partial or Complete Withdrawal ............................... 19
     13.3     Rights of a Withdrawing Party ................................ 20
     13.4     Obligations and Liabilities of a Withdrawing Party ........... 20
     13.5     Emergency .................................................... 20
     13.6     Assignment ................................................... 20
     13.7     Approvals .................................................... 21
     13.8     Security ..................................................... 21
     13.9     Withdrawal or Abandonment by all Parties ..................... 21

ARTICLE XIV - RELATIONSHIP OF PARTIES AND TAX .............................. 21
     14.1     Relationship of Parties ...................................... 21
     14.2     Tax   ........................................................ 21
     14.3     United States Tax Election ................................... 21

ARTICLE XV  - CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY ............ 22
     15.1     Confidential Information ..................................... 22
     15.2     Continuing Obligations ....................................... 22
     15.3     Proprietary Technology ....................................... 22
     15.4     Trades of Information ........................................ 23

ARTICLE XVI - FORCE MAJEURE ................................................ 23
     16.1     Obligations .................................................. 23
     16.2     Definition of Force Majeure .................................. 23

ARTICLE XVII - NOTICES ..................................................... 23

ARTICLE XVIII - APPLICABLE LAW AND DISPUTE RESOLUTION ...................... 24
     18.1     Applicable Law ............................................... 24
     18.2     Dispute Resolution ........................................... 24

ARTICLE XIX - ALLOCATION OF COST RECOVERY RIGHTS ........................... 25

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995
     19.1     Allocation of Production ..................................... 25
ARTICLE XX - GENERAL PROVISIONS ............................................ 25
     20.1     Warranties as to no Payments, Gifts and Loans ................ 25
     20.2     Conflicts of Interest ........................................ 25
     20.3     Public Announcements ......................................... 26
     20.4     Successors and Assigns ....................................... 26
     20.5     Waiver ....................................................... 26
     20.6     Severance of Invalid Provisions .............................. 26
     20.7     Modifications ................................................ 26
     20.8     Headings ..................................................... 26
     20.9     Singular and Plural .......................................... 26
     20.10    Gender ....................................................... 26
     20.11    Counterpart Execution ........................................ 26
     20.12    Entirety ..................................................... 26

     Signature Page ........................................................ 27

Exhibit "A" - Contract Area for Huaya Anticline Project - Map

Exhibit "B" - License Contract for Block 100 Exhibit "C" -

Accounting Procedure

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

                           OPERATING AGREEMENT ("JOA")

     THIS AGREEMENT (hereinafter "Agreement") is made as of the Effective Date
among Compania Consultora de Petroleo, S.A. (hereinafter "CCP"), a company
incorporated in the Republic of Peru; Radial Energy, Inc., a company
incorporated in Nevada, United States of America (hereinafter referred to as
"Radial"); and Ziegler-Peru, Inc., a company incorporated in Texas, United
States of America (hereinafter referred to as "ZPI"). The companies named above
may sometimes individually be referred to as "Party" and collectively as the
"Parties".

                                   WITNESSETH:

     WHEREAS, the Parties have entered into contracts and agreements for oil and
gas exploration, exploitation, development, and production as regards a License
Contract (hereinafter the "License Contract" or "Contract") with the Republic of
Peru, Ministry of Mines, and/or PeruPetro covering certain areas located in the
Loreto Department, Peru - Ucayali Basin called Block 100, with the "Contract
Area" being the Huaya Anticline Project. Exhibit A to this Agreement is a map
showing the Huaya Anticline Project (hereinafter "Project"), and Exhibit B is a
copy of the License Contract for Block 100; and
     WHEREAS, the Parties desire to define their respective rights and
obligations with respect to their operations under the Contract Area;
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements and obligations set out below and to be performed, the Parties
agree as follows:

                             ARTICLE I - DEFINITIONS

     As used in this Agreement, the following words and terms shall have the
meaning ascribed to them below:
I.1  ACCOUNTING PROCEDURE means the rules, provisions and conditions set forth
     and contained in Exhibit C to this Agreement.
I.2  AFE means an authorization for expenditure pursuant to Article 6.6.
I.3  AFFILIATE means a company, partnership or other legal entity which
     controls, or is controlled by, or which is controlled by an entity which
     controls, a Party. Control means the ownership directly or indirectly of
     fifty (50) percent or more of the voting rights in a company, partnership
     or legal entity.
I.1  AGREED INTEREST RATE means interest compounded on a monthly basis, at the
     rate per annum equal to the one (1) month term, London Interbank Offered
     Rate (LIBOR rate) for U.S. dollar deposits, as published by THE WALL STREET
     JOURNAL or if not published there, then by the FINANCIAL TIMES OF LONDON,
     plus N/A ( ) percentage points, applicable on the first Business Day prior
     to the due date of payment and thereafter on the first Business Day of each
     succeeding calendar month. If the aforesaid rate is contrary to any
     applicable usury law, the rate of interest to be charged shall be the
     maximum rate permitted by such applicable law.
I.2  AGREEMENT means this agreement, together with the Exhibits attached to this
     agreement, and any extension, renewal or amendment hereof agreed to in
     writing by the Parties.
I.3  APPRAISAL WELL means any well (other than an Exploration Well or a
     Development Well) whose purpose at the time of commencement of drilling
     such well is to appraise the extent or the volume of Hydrocarbon reserves
     contained in an existing Discovery.
 I.4 BARREL means a quantity consisting of forty-two (42) United States
     gallons, corrected to a  temperature of sixty (60) degrees Fahrenheit under
     one (1) atmosphere of pressure.
I.5  BUSINESS DAY means a day on which the banks in LIMA, PERU are customarily
     open for business.
I.6  CALENDAR QUARTER means a period of three (3) months commencing with January
     1 and ending on the following March 31, a period of three (3) months
     commencing with April 1 and ending on the following June 30, a period of
     three (3) months commencing with July 1 and ending on the following
     September 30, or a period of three (3) months commencing with October 1 and
     ending on the following December 31 according to the Gregorian Calendar.
I.7  CALENDAR YEAR means a period of twelve (12) months commencing with January
     1 and ending on the following December 31.
I.8  CASH PREMIUM means the payment made pursuant to Article 7.5(B) by a
     Non-Consenting Party to reinstate its rights to participate in an Exclusive
     Operation.
I.9  COMMERCIAL DISCOVERY means any Discovery which is sufficient to entitle the
     Parties to apply for authorization from the Government to commence
     exploitation.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

I.10 COMPLETION means an operation intended to complete a well through the
     Christmas tree as a producer of Hydrocarbons in one or more Zones,
     including, but not limited to, the setting of production casing,
     perforating, stimulating the well and production Testing conducted in such
     operation. COMPLETE and other derivatives shall be construed accordingly.
I.11 CONSENTING PARTY means a Party who agrees to participate in and pay its
     share of the cost of a Joint Operation.
I.12 CONTRACT means the License Contract awarded for Block 100 as concluded
     between the Republic of Peru, Ministry of Mines, and/or PeruPetro and CCP
     as identified in the second paragraph of this Agreement, and any extension,
     renewal or amendment thereof agreed to in writing by or for the Parties,
     and those laws, statutes, rules and regulations with respect to the
     exploration, exploitation, development, and production of Hydrocarbons that
     govern such instrument or are incorporated by the terms of such instrument.
I.13 CONTRACT AREA means as of the Effective Date the surface area of the Huaya
     Anticline Project which is described in Exhibit A to this Agreement, and
     formations to all depths below that surface area on which Joint Operations
     will be conducted.

I.14 DAY means a calendar day unless otherwise specifically provided.
I.15 DEFAULT NOTICE shall have the meaning ascribed in Article 8.1.
I.16 DEFAULTING PARTY shall have the meaning ascribed in Article 8.1.
I.17 DEEPENING means an operation whereby a well is drilled to an objective Zone
     below the deepest Zone in which the well was previously drilled, or below
     the deepest Zone proposed in the associated AFE, whichever is the deeper.
     DEEPEN and other derivatives shall be construed accordingly.
I.18 DEVELOPMENT PLAN means a plan for the development of Hydrocarbons from the
     Contract Area.
I.19 DEVELOPMENT WELL means any well drilled for the production of Hydrocarbons
     pursuant to a Development Plan.
I.20 DISCOVERY means the discovery of an accumulation of Hydrocarbons whose
     existence until that moment was unproven by drilling.
I.21 EFFECTIVE DATE means the date this Agreement comes into effect as stated in
     Article II.
I.22 ENTITLEMENT means a quantity of Hydrocarbons of which a Party has the right
     and obligation to take delivery pursuant to the Contract or, if applicable,
     an offtake agreement, and the terms of this Agreement, after adjustment for
     overlifts and underlifts.
I.23 EXCLUSIVE OPERATION means those operations and activities carried out
     pursuant to this Agreement, the costs of which are chargeable to the
     account of less than all the Parties.
I.24 EXCLUSIVE WELL means a well drilled pursuant to an Exclusive Operation.
I.25 EXPLOITATION AREA means that part of the Contract Area which is established
     for development of a Commercial Discovery pursuant to the Contract or if
     the Contract does not establish an exploitation area, then that part of the
     Contract Area which is delineated as the exploitation area in a Development
     Plan approved as a Joint Operation or as an Exclusive Operation.
I.26 EXPLOITATION PERIOD means any and all periods of exploitation during which
     the production and removal of Hydrocarbons is permitted under the Contract.
I.27 EXPLORATION PERIOD means any and all periods of exploration set out in the
     Contract.
I.28 EXPLORATION WELL means any well whose purpose at the time of the
     commencement of drilling is to explore for an accumulation of Hydrocarbons
     whose existence was at that time unproven by drilling.
I.29 G & G DATA means only geological, geophysical and geochemical data and
     other similar information that is not obtained through a well bore.
I.30 GOVERNMENT means the government the Republic of Peru and any political
     subdivision or agency or instrumentality thereof, including without
     limitation the Government Oil Company.
I.31 GOVERNMENT OIL COMPANY means PeruPetro.
I.32 GROSS NEGLIGENCE means any act or failure to act (whether sole, joint or
     concurrent) by any person or entity which was intended to cause, or which
     was in reckless disregard of or wanton indifference to, harmful
     consequences such person or entity knew, or should have known, such act or
     failure would have on the safety or property of another person or entity.
I.33 HYDROCARBONS means all substances including liquid and gaseous hydrocarbons
     which are subject to and covered by the Contract.
I.34 IN KIND PREMIUM means the grant of an interest in production made pursuant
     to Article 7.5(C) by a Non-Consenting Party to reinstate its rights under
     an Exclusive Operation.
I.35 JOINT ACCOUNT means the accounts maintained by Operator in accordance with
     the provisions of this Agreement and of the Accounting Procedure for
     Joint Operations.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

I.36 JOINT OPERATIONS means those operations and activities carried out by
     Operator pursuant to this Agreement, the costs of which are chargeable to
     all Parties unless otherwise defined in this Agreement or agreed to by the
     Parties.
I.37 JOINT PROPERTY means, at any point in time, all wells, facilities,
     equipment, materials, information, funds and the property held for use in
     Joint Operations.
I.38 MINIMUM WORK OBLIGATIONS means those work and/or expenditure obligations
     specified in the Contract which must be performed during the then current
     Contract phase or period in order to satisfy the obligations of the
     Contract, and may become part of or become the MINIMUM DEVELOPMENT PROGRAM
     as the Project moves to the development phase.
I.39 MINIMUM DEVELOPMENT PROGRAM means the program that is applied for by CCP
     and approved by the Government as the development plan for proceeding to
     that phase of the Project and is the minimum that the Parties agree to
     participate in going forward beyond Obligation Well Three.
1.39A NON-CONSENTING PARTY OR NON-PARTICIPATING PARTY means a Party who elects
     not to participate in a Joint Operation.
1.39B NON-OPERATOR(S) means the Party or Parties to this Agreement other than
     Operator.
I.40 OPERATING COMMITTEE means the committee constituted in accordance with
     Article V.
I.41 OPERATOR means a Party to this Agreement designated as such in accordance
     with this Agreement.
I.42 PARTICIPATING INTEREST means the undivided percentage interest of each
     Party in the rights and obligations derived from the Contract and this
     Agreement.
I.43 PARTY means any of the entities named in the first paragraph to this
     Agreement and any respective permitted successors or assigns.
I.44 PETROLEUM COSTS means costs and expenses incurred by the Parties and
     allowed to be recovered pursuant to the Contract.
I.45 PLUGGING BACK means a single operation whereby a deeper Zone is abandoned
     in order to attempt a Completion in a shallower Zone. Plug Back and other
     derivatives shall be construed accordingly.
I.46 PRODUCTION BONUS includes any funds payable by the Parties under any
     provision of the Contract.
I.47 PROFIT OIL means that portion of the total production of Hydrocarbons, in
     excess of Cost Oil, which is allocated to the Parties under the terms of
     the Contract, if applicable.
I.48 REALLOCATION COST OIL shall have the meaning ascribed in Article 19.2.
I.49 RECOMPLETION means an operation whereby a Completion in one Zone is
     abandoned in order to attempt a Completion in a different Zone within the
     existing wellbore. RECOMPLETE and other derivatives shall be construed
     accordingly.
I.50 REWORKING means an operation conducted in the wellbore of a well after it
     is Completed to secure, restore, or improve production in a Zone which is
     currently open to production in the wellbore. Such operations include, but
     are not limited to, well stimulation operations, but exclude any routine
     repair or maintenance work, or drilling, Sidetracking, Deepening,
     Completing, Recompleting, or Plugging Back of a well. REWORK and other
     derivatives shall be construed accordingly.
I.51 SENIOR SUPERVISORY PERSONNEL means with respect to a Party, any individual
     who functions as such Party's designated manager or supervisor who is
     responsible for, or in charge of onsite drilling, construction or
     production and related operations, or any other field operations; and any
     individual who functions for such Party or one of its Affiliates at a
     management level equivalent to or superior to the tier selected, or any
     officer or director of such Party or one of its Affiliates.
1.51 SIDETRACKING means the directional control and intentional deviation of a
     well from vertical so as to change the bottom hole location unless done to
     straighten the hole or to drill around junk in the hole or to overcome
     other mechanical difficulties. SIDETRACK and other derivatives shall be
     construed accordingly.
1.52 TESTING means an operation intended to evaluate the capacity of a Zone to
     produce Hydrocarbons. TEST and other derivatives shall be construed
     accordingly.
1.53 WORK PROGRAM AND BUDGET means a work program for Joint Operations and
     budget therefore as described and approved in accordance with Article VI.
1.54 ZONE means a stratum of earth containing or thought to contain an
     accumulation of Hydrocarbons separately producible from any other
     accumulation of Hydrocarbons.

                      ARTICLE II - EFFECTIVE DATE AND TERM
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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     This Agreement shall have effect from May, 10 2006, and shall continue in
effect until the Contract terminates or all Joint Operations are concluded, and
all materials, equipment and personal property used in connection with the Joint
Operations have been removed and disposed of, and final settlement has been made
among the Parties.
     Notwithstanding the preceding sentence:
     (A) Article X shall remain in effect until all wells have been properly
abandoned; and
     (B) Article 4.5 and Article XVIII shall remain in effect until all
obligations, claims, arbitrations and lawsuits have been settled or otherwise
resolved.

                               ARTICLE III - SCOPE

3.1  SCOPE
     (A) The purpose of this Agreement is to establish the respective rights and
obligations of the Parties with regard to operations under the Contract and in
the Contract Area, including without limitation the joint exploration,
appraisal, development and production of Hydrocarbon reserves from the Contract
Area.
     (B) Without limiting the generality of Article 3.1(A), the following
activities are outside of the scope of this Agreement and are not addressed
herein:
          (1) Construction, operation, maintenance, repair and removal of
          facilities downstream from the point of delivery of the Parties'
          shares of Hydrocarbons under the offtake agreement provided for in
          Article 9.2;
          (2) Transportation of Hydrocarbons beyond the point of delivery of the
          Parties' shares of Hydrocarbons under the offtake agreement provided
          for in Article 9.2;
          (3) Marketing and sales of Hydrocarbons, except as expressly provided
          in Articles 7.5, 7.11(E) and 8.4 and in Article IX;
          (4) Acquisition of rights to explore for, appraise, develop or produce
          Hydrocarbons outside of the Contract Area (other than as a consequence
          of unitization with an adjoining contract area under the terms of the
          Contract); and
          (5) Exploration, appraisal, development or production of minerals
          other than Hydrocarbons, whether inside or outside of the Contract
          Area.

3.2  PARTICIPATING INTEREST
     (A) The Participating Interests of the Parties as of the Effective Date
are:
                     CCP                    70          %
                     ---                    --
                    RADIAL                  20          %
                    ------                  --
                    ZPI                     10          %
                    ---                     --

     (B) If a Party transfers all or part of its Participating Interest pursuant
to the provisions of this Agreement and the Contract, the Participating
Interests of the Parties shall be revised accordingly.

3.3  OWNERSHIP,OBLIGATIONS AND LIABILITIES
     (3) Unless otherwise provided in this Agreement, all the rights and
interests in and under the Contract, all Joint Property and any Hydrocarbons
produced from the Contract Area shall, subject to the terms of the Contract, be
owned by the Parties in accordance with their respective Participating
Interests.
     (3) Unless otherwise provided in this Agreement, the obligations of the
Parties under the Contract and all liabilities and expenses incurred by Operator
in connection with Joint Operations shall be charged to the Joint Account and
all credits to the Joint Account shall be shared by the Parties, as among
themselves, in accordance with their respective Participating Interests.
     (3) Each Party shall pay when due, in accordance with the Accounting
Procedure, its Participating Interest share of Joint Account expenses, including
cash advances and interest, accrued pursuant to this Agreement. The Parties
agree that time is of the essence for payments owing under this Agreement. A
Party's payment of any charge under this Agreement shall be without prejudice to
its right to later contest the charge.

3.4  GOVERNMENT PARTICIPATION
     If Government Oil Company elects to participate in the rights and
obligations of Parties pursuant to provisions of or requirements of the
Contract, the Parties shall contribute, in proportion to their respective
Participating Interests, to the interest to be acquired by Government Oil
Company and shall execute such documents as may be necessary to effect such
transfer of interests and the joinder of the Government Oil Company as a party
to this Agreement. All payments received for the transfer of such interests
shall be credited to the Parties in proportion to their Participating Interests.
57

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

                                                           ARTICLE IV - OPERATOR

4.1  DESIGNATION OF OPERATOR
     CCP is designated as Operator, and agrees to act as such.

4.2  RIGHTS AND DUTIES OF OPERATOR
     (A) Subject to the terms and conditions of this Agreement, Operator shall
     have all of the rights, functions and duties of Operator under the Contract
     and shall have exclusive charge of and shall conduct all Joint Operations.
     Operator may employ independent contractors and/or agents (which may
     include Affiliates of Operator) in such Joint Operations.
     (B) In the conduct of Joint Operations, Operator shall:
          (1) Perform Joint Operations in accordance with the provisions of the
          Contract, this Agreement and the instructions of the Operating
          Committee not in conflict with this Agreement;
          (2) Conduct all Joint Operations in a diligent, safe and efficient
          manner in accordance with good and prudent oil field practices and
          conservation principles generally followed by the international
          petroleum industry under similar circumstances;
          (3) Subject to Article 4.6 and the Accounting Procedure, neither gain
          a profit nor suffer a loss as a result of being the Operator in its
          conduct of Joint Operations, provided that Operator may rely upon
          Operating Committee approval of specific accounting practices not in
          conflict with the Accounting Procedure;
          (4) Perform the duties for the Operating Committee set out in Article
          V, and prepare and submit to the Operating Committee the proposed Work
          Programs, Budgets and AFEs as provided in Article VI;
          (5) Acquire all permits, consents, approvals, surface or other rights
          that may be required for or in connection with the conduct of Joint
          Operations;
          (6) Upon receipt of reasonable advance notice, permit the
          representatives of any of the Parties to have at all reasonable times
          and at their own risk and expense reasonable access to the Joint
          Operations with the right to observe all such Joint Operations and to
          inspect all Joint Property and to conduct financial audits as provided
          in the Accounting Procedure;
          (7) Maintain the Contract in full force and effect. Operator shall
          promptly pay and discharge all liabilities and expenses incurred in
          connection with Joint Operations and use its reasonable efforts to
          keep and maintain the Joint Property free from all liens, charges and
          encumbrances arising out of Joint Operations;
          (8) Pay to the Government for the Joint Account, within the periods
          and in the manner prescribed by the Contract and all applicable laws
          and regulations, all periodic payments, royalties, taxes, fees and
          other payments pertaining to Joint Operations, but excluding any taxes
          measured by the incomes of the Parties;
          (9) Carry out the obligations of Operator pursuant to the Contract,
          including, but not limited to, preparing and furnishing such reports,
          records and information as may be required pursuant to the Contract;
          (10) Have in accordance with the decisions of the Operating Committee,
          the exclusive right and obligation to represent the Parties in all
          dealings with the Government with respect to matters arising under the
          Contract and Joint Operations. Operator shall notify the other Parties
          as soon as possible of such meetings. Non-Operators shall have the
          right to attend such meetings but only in the capacity of observers.
          Nothing contained in this Agreement shall restrict any Party from
          holding discussions with the Government with respect to any issue
          peculiar to its particular business interests arising under the
          Contract or this Agreement, but in such event such Party shall
          promptly advise the Parties, if possible, before and in any event
          promptly after such discussions, provided that such Party shall not be
          required to divulge to the Parties any matters discussed to the extent
          the same involve proprietary information on matters not affecting the
          Parties; and
          (11) Take all necessary and proper measures for the protection of
          life, health, the environment and property in the case of an
          emergency; provided, however, that Operator shall immediately notify
          the Parties of the details of such emergency and measures.

4.3  EMPLOYEES OF OPERATOR
          Subject to the Contract and this Agreement, Operator shall determine
     the number of employees, the selection of such employees, the hours of work
     and the compensation to be paid all such employees in connection with Joint
     Operations. Operator shall employ only such employees, agents and
     contractors as are reasonably necessary to conduct Joint Operations.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

4.4  CONTRACTORS
     Operator shall employ only such agents and contractors as are reasonably
     necessary to conduct Joint Operations.
4.5  INFORMATION SUPPLIED BY OPERATOR
     (A) Operator shall provide Non-Operators the following data and reports as
     they are currently produced or compiled from the Joint Operations:
          (1) Copies of all logs or surveys;
          (2) Daily drilling progress reports;
          (3) Copies of all Tests and core analysis reports;
          (4) Copies of the plugging reports;
          (5) Copies of the final geological and geophysical maps and reports;
          (6) Engineering studies, development schedules and annual progress
          reports on development projects;
          (7) Field and well performance reports, including reservoir studies
          and reserve estimates;
          (8) Copies of all reports relating to Joint Operations furnished by
          Operator to the Government, except magnetic tapes or computer
          generated or other electronic data which shall be stored by Operator
          and made available for inspection and/or copying at the sole expense
          of the Non-Operator requesting same;
          (9) Other reports as frequently as is justified by the activities or
          as instructed by the Operating Committee; and
          (10) Subject to Article 15.3, such additional information for
          Non-Operators as they or any of them may request, provided that the
          requesting Party or Parties pay the costs of preparation of such
          information and that the preparation of such information will not
          unduly burden Operator's administrative and technical personnel. Only
          Non-Operators who pay such costs shall receive such additional
          information.
     (B) Operator shall give Non-Operators access at all reasonable times to all
     other data acquired in the conduct of Joint Operations. Any Non-Operator
     may make copies of such other data at its sole expense.
4.6  SETTLEMENT OF CLAIMS AND LAWSUITS
     (A) Operator shall promptly notify the Parties of any and all material
     claims or suits and such other claims and suits as the Operating Committee
     may direct which arise out of Joint Operations or relate in any way to
     Joint Operations. Operator shall represent the Parties and defend or oppose
     the claim or suit. Operator may in its sole discretion compromise or settle
     any such claim or suit or any related series of claims or suits for an
     amount not to exceed the equivalent of U.S. dollars ten thousand (U.S. $
     10,000) exclusive of legal fees. Operator shall obtain the approval and
     direction of the Operating Committee on amounts in excess of the above
     stated amount. Each Non-Operator shall have the right to be represented by
     its own counsel at its own expense in the settlement, compromise or defense
     of such claims or suits.
     (B) Any Non-Operator shall promptly notify the other Parties of any claim
     made against such Non- Operator by a third party which arises out of or may
     affect the Joint Operations, and such Non-Operator shall defend or settle
     the same in accordance with any directions given by the Operating
     Committee. Those costs, expenses and damages incurred pursuant to such
     defense or settlement which are attributable to Joint Operations shall be
     for the Joint Account.
     (C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party shall
     have the right to participate in any such suit, prosecution, defense or
     settlement conducted in accordance with Article 4.5(A) and Article 4.5(B)
     at its sole cost and expense; provided always that no Party may settle its
     Participating Interest share of any claim without first satisfying the
     Operating Committee that it can do so without prejudicing the interests of
     the Joint Operations.
4.7  LIMITATION ON LIABILITY OF OPERATOR
     (A) Except as set out in this Article 4.6, NEITHER THE PARTY DESIGNATED AS
     OPERATOR NOR ANY OTHER INDEMNITEE (AS DEFINED BELOW) SHALL BEAR (EXCEPT AS
     A PARTY TO THE EXTENT OF ITS PARTICIPATING INTEREST SHARE) ANY DAMAGE,
     LOSS, COST, EXPENSE OR LIABILITY RESULTING FROM PERFORMING (OR FAILING TO
     PERFORM) THE DUTIES AND FUNCTIONS OF THE OPERATOR, AND THE INDEMNITEES ARE
     HEREBY RELEASED FROM LIABILITY TO NON-OPERATORS FOR ANY AND ALL DAMAGES,
     LOSSES, COSTS, EXPENSES AND LIABILITIES ARISING OUT OF, INCIDENT TO OR
     RESULTING FROM SUCH PERFORMANCE OR FAILURE TO PERFORM, EVEN THOUGH CAUSED
     IN WHOLE OR IN PART BY A PRE-EXISTING DEFECT, THE NEGLIGENCE (WHETHER SOLE,
     JOINT OR

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     CONCURRENT), GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT OF
     OPERATOR (OR ANY SUCH INDEMNITEE). (B) Except as set out in this Article
     4.6, THE PARTIES SHALL IN PROPORTION TO THEIR PARTICIPATING INTERESTS
     DEFEND AND INDEMNIFY OPERATOR AND ITS AFFILIATES, AND THE OFFICERS AND
     DIRECTORS OF BOTH (COLLECTIVELY, THE "INDEMNITEES"), FROM ANY AND ALL
     DAMAGES, LOSSES, COSTS, EXPENSES (INCLUDING REASONABLE LEGAL COSTS,
     EXPENSES AND ATTORNEYS' FEES) AND LIABILITIES INCIDENT TO CLAIMS, DEMANDS
     OR CAUSES OF ACTION BROUGHT BY OR ON BEHALF OF ANY PERSON OR ENTITY, WHICH
     CLAIMS, DEMANDS OR CAUSES OF ACTION ARISE OUT OF, ARE INCIDENT TO OR RESULT
     FROM JOINT OPERATIONS, EVEN THOUGH CAUSED IN WHOLE OR IN PART BY A
     PRE-EXISTING DEFECT, THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT),
     GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT OF OPERATOR (OR ANY
     SUCH INDEMNITEE).
     (C) Nothing in this Article 4.6 shall be deemed to relieve the Party
     designated as Operator from its Participating Interest share of any damage,
     loss, cost, expense or liability arising out of, incident to or resulting
     from Joint Operations.
     (D) Notwithstanding Articles 4.6(A) and 4.6(B), if any Senior Supervisory
     Personnel of Operator or its Affiliates engage in Gross Negligence that
     proximately causes the Parties to incur damage, loss, cost, expense or
     liability for claims, demands or causes of action referred to in Articles
     4.6(A) or 4.6(B), then, in addition to its Participating Interest share,
     Operator shall bear only the actual damage, loss, cost, expense and
     liability to repair, replace and/or remove Joint Property so damaged or
     lost, if any.
4.8  INSURANCE OBTAINED BY OPERATOR
     (A) Operator shall procure and maintain or cause to be procured and
     maintained for the Joint Account all insurance in the types and amounts
     required by the Contract and applicable laws, rules and regulations.
     (B) Operator shall obtain such further insurance, at competitive rates, as
     the Operating Committee may from time to time require.
     (C) Any Party may elect not to participate in the insurance to be procured
     under Article 4.7(B) provided such Party:
          (1) gives prompt notice to that effect to Operator;
          (2) does nothing which may interfere with Operator's negotiations for
          such insurance for the other Parties; and
          (3) obtains and maintains such insurance (in respect of which an
          annual certificate of adequate coverage from a reputable insurance
          broker shall be sufficient evidence) or other evidence of financial
          responsibility which fully covers its Participating Interest share of
          the risks that would be covered by the insurance procured under
          Article 4.7 (B), and which the Operating Committee may determine to be
          acceptable. No such determination of acceptability shall in any way
          absolve a non-participating Party from its obligation to meet each
          cash call including any cash call in respect of damages and losses
          and/or the costs of remedying the same in accordance with the terms of
          this Agreement. If such Party obtains other insurance, such insurance
          shall contain a waiver of subrogation in favor of all the other
          Parties, the Operator and their insurers but only in respect of their
          interests under this Agreement.
     (D) The cost of insurance in which all the Parties are participating shall
     be for the Joint Account and the cost of insurance in which less than all
     the Parties are participating shall be charged to the Parties participating
     in proportion to their respective Participating Interests.
     (E) Operator shall, in respect of all insurance obtained pursuant to this
     Article 4.7:
          (1) promptly inform the participating Parties when such insurance is
          obtained and supply them with certificates of insurance or copies of
          the relevant policies when the same are issued;
          (2) arrange for the participating Parties, according to their
          respective Participating Interests, to be named as co-insureds on the
          relevant policies with waivers of subrogation in favor of all the
          Parties; and
          (3) duly file all claims and take all necessary and proper steps to
          collect any proceeds and credit any proceeds to the participating
          Parties in proportion to their respective Participating Interests.
     (F) Operator shall use its reasonable efforts to require all contractors
     performing work in respect of Joint Operations to obtain and maintain any
     and all insurance in the types and amounts required by any applicable laws,
     rules and regulations or any decision of the Operating Committee and shall
     use its reasonable efforts to require all such contractors to name the
     Parties as additional insureds on such contractors' insurance policies

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     or to obtain from their insurers waivers of all rights of recourse against
     Operator, Non-Operators and their insurers.

4.9  COMMINGLING OF FUNDS
     Operator may not commingle with Operator's own funds the monies which
     Operator receives from or for the Joint Account pursuant to this Agreement.
     Operator will establish a separate bank account or accounts for the Joint
     Operation.

4.10 RESIGNATION OF OPERATOR
     Subject to Article 4.11, Operator may resign as Operator at any time by so
     notifying the other Parties at least one hundred and twenty (120) Days
     prior to the effective date of such resignation.

4.11 REMOVAL OF OPERATOR
     (A) Subject to Article 4.11, Operator shall be removed upon receipt of
     notice from any Non-Operator if:
          (1) An order is made by a court or an effective resolution is passed
          for the reorganization under any bankruptcy law, dissolution,
          liquidation, or winding up of Operator;
          (2) Operator dissolves, liquidates, is wound up, or otherwise
          terminates its existence;
          (3) Operator becomes insolvent, bankrupt or makes an assignment for
          the benefit of creditors; or
          (4) A receiver is appointed for a substantial part of Operator's
          assets.
     (B) Subject to Article 4.11, Operator may be removed by the decision of the
     Non-Operators if Operator has committed a material breach of this Agreement
     and has either failed to commence to cure that breach within thirty (30)
     Days of receipt of a notice from Non-Operators detailing the alleged breach
     or failed to diligently pursue the cure to completion. Any decision of
     Non-Operators to give notice of breach to Operator or to remove Operator
     under this Article 4.10(B) shall be made by an affirmative vote of all of
     the non-Operator interest in the Joint Operations.
CHECK IF DESIRED.
     [X]     OPTIONAL PROVISION
          (C) If Operator together with any Affiliate of Operator is or becomes
          the holder of a Participating Interest of less than TEN percent
          (___10__%), then Operator shall be required to promptly notify the
          other Parties. The Operating Committee shall then vote within THIRTY
          (_30___) Days of such notification on whether or not a successor
          Operator should be named pursuant to Article 4.11.
CHECK IF DESIRED.
      [X]    OPTIONAL PROVISION
          (D) If there is a direct or indirect change in control of Operator
          (other than a transfer of control to an Affiliate of Operator),
          Operator shall be required to promptly notify the other Parties. The
          Operating Committee shall vote within THIRTY (__30__) Days of such
          notification on whether or not a successor Operator should be named
          pursuant to Article 4.11. For purposes of this Article 4.10(D),
          control means the ownership directly or indirectly of: fifty percent
          (50%) or more of the voting rights in Operator.

4.12 APPOINTMENT OF SUCCESSOR
     When a change of Operator occurs pursuant to Article 4.9 or Article 4.10:
     (A) The Operating Committee shall meet as soon as possible to appoint a
     successor Operator pursuant to the voting procedure of Article 5.9.
     However, no Party may be appointed successor Operator against its will. (B)
     If the Operator disputes commission of or failure to rectify a material
     breach alleged pursuant to Article 4.10(B) and proceedings are initiated
     pursuant to Article XVIII, no successor Operator may be appointed pending
     the conclusion or abandonment of such proceedings, subject to the terms of
     Article 8.3 with respect to Operator's breach of its payment obligations.
     (C) If an Operator is removed, other than in the case of Article 4.10(C) or
     Article 4.10(D), neither Operator nor any Affiliate of Operator shall have
     the right to vote for itself on the appointment of a successor Operator,
     nor be considered as a candidate for the successor Operator.
     (D) A resigning or removed Operator shall be compensated out of the Joint
     Account for its reasonable expenses directly related to its resignation or
     removal, except in the case of Article 4.10(B).
     (E) The resigning or removed Operator and the successor Operator shall
     arrange for the taking of an inventory of all Joint Property and
     Hydrocarbons, and an audit of the books and records of the removed
     Operator. Such inventory and audit shall be completed, if possible, no
     later than the effective date of the change of Operator and shall be
     subject to the approval of the Operating Committee. The liabilities and
     expenses of such inventory and audit shall be charged to the Joint Account.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     (F) The resignation or removal of Operator and its replacement by the
     successor Operator shall not become effective prior to receipt of any
     necessary Government approvals. (G) Upon the effective date of the
     resignation or removal, the successor Operator shall succeed to all duties,
     rights and authority prescribed for Operator. The former Operator shall
     transfer to the successor Operator custody of all Joint Property, books of
     account, records and other documents maintained by Operator pertaining to
     the Contract Area and to Joint Operations. Upon delivery of the
     above-described property and data, the former Operator shall be released
     and discharged from all obligations and liabilities as Operator accruing
     after such date. 9
                         ARTICLE V - OPERATING COMMITTEE

5.1  ESTABLISHMENT OF OPERATING COMMITTEE
          To provide for the overall supervision and direction of Joint
     Operations, there is established an Operating Committee composed of
     representatives of each Party holding a Participating Interest in the
     Project. Each Party shall appoint one (1) representative and one (1)
     alternate representative to serve on the Operating Committee. Each Party
     shall as soon as possible after the date of this Agreement give notice in
     writing to the other Parties of the name and address of its representative
     and alternate representative to serve on the Operating Committee. Each
     Party shall have the right to change its representative and alternate at
     any time by giving notice to such effect to the other Parties in writing.
     Based on the voting procedure in Section 5.9 below, fractional subsequent
     interests of the original Party interests may have only a fractional vote
     on the Operating Committee.
5.2  POWERS AND DUTIES OF OPERATING COMMITTEE
          The Operating Committee shall have power and duty to authorize and
     supervise Joint Operations that are necessary or desirable to fulfill the
     Contract License and properly exploit the Project in accordance with this
     Agreement and in a manner appropriate in the circumstances.
5.3  AUTHORITY TO VOTE
          The representative of a Party, or in his absence his alternate
     representative, shall be authorized to represent and bind such Party with
     respect to any matter which is within the powers of the Operating Committee
     and that is properly brought before the Operating Committee. Each such
     representative shall have a vote equal to the voting rights of the
     Participating Interest of the Party such person represents as shown in the
     section covering the Voting Procedure in Section 5.9 below. Each alternate
     representative shall be entitled to attend all Operating Committee meetings
     but shall have no vote at such meetings except in the absence of the
     representative for whom he is the alternate. In addition to the
     representative and alternate representative, each Party may also bring to
     any Operating Committee meetings such technical and other advisors as it
     may deem appropriate.
5.4  SUBCOMMITTEES
          The Operating Committee may establish such subcommittees, including
     technical subcommittees, as the Operating Committee may deem appropriate.
     The functions of such subcommittees shall be in an advisory capacity or as
     otherwise determined unanimously by the Parties.
5.5  NOTICE OF MEETING
     (A) Operator may call a meeting of the Operating Committee by giving notice
     to the Parties at least fifteen (15) Days in advance of such meeting.
     (B) Any Non-Operator may request a meeting of the Operating Committee by
     giving notice to all the other Parties. Upon receiving such request by an
     Party or Participating Interest, Operator shall call such meeting for a
     date not less than fifteen (15) Days nor more than twenty (20) Days after
     receipt of the request.
     (C) The notice periods above or any meeting dates or schedule may only be
     waived or modified with the unanimous written consent of all the Parties.
5.6  CONTENTS OF MEETING NOTICE
     (A) Each notice of a meeting of the Operating Committee as provided by
     Operator shall contain:
          (1) The date, time and location of the meeting; and
          (2) An agenda of the matters and proposals to be considered and/or
          voted upon.
     (B) A Party, by notice to the other Parties given not less than seven (7)
     Days prior to a meeting, may add additional matters to the agenda for a
     meeting.
     (C) On the request of a Party, and with the unanimous consent of all
     Parties, the Operating Committee may consider at a meeting a proposal not
     contained in such meeting agenda.

5.7  LOCATION OF MEETINGS

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

          All meetings of the Operating Committee shall be held in Lima, Peru,
     or elsewhere as decided by the Operating Committee.

5.8  OPERATOR'S DUTIES FOR MEETINGS
     (A) With respect to meetings of the Operating Committee and any
     subcommittee, Operator's duties shall include, but not be limited to:
          (1) Timely preparation and distribution of the agenda;
          (2) Organization and conduct of the meeting; and
          (3) Preparation of a written record or minutes of each meeting.
     (B) Operator shall have the right to appoint the chairman of the Operating
     Committee and all subcommittees.

 5.9 VOTING PROCEDURE
          At the time this agreement is signed, there are three (3) Parties with
     Participating Interests. The number of votes of the Operating Committee
     will not be increased by any sale or division of interests in the Project,
     but will stay at three (3) total, with any interests created after the
     effective date of this Agreement having a fractional share of the original
     interest from which the new or acquired interest is derived, and the total
     of those fractional interests so subdivided from one vote will still or
     only count as one total vote. All affirmative or approving votes of the
     Operating Committee will be either unanimous or by a two vote to one vote
     margin. However, the CCP vote, or its successor or the total of any created
     fractional interests of that one vote, shall have a veto vote that may be
     exercised over any affirmative vote of the other two voting interests with
     which it does not agree. Once the CCP interest votes in the affirmative on
     any vote, the veto vote may not be later exercised to negate that decision.
     CCP thus has three voting options, one is to agree, one is to veto, and the
     third is to vote to not participate but to allow the operation to proceed
     without its participation as is set forth in Article 7.1 (D) and (E) below.
     If any Party or Parties withdraw from the Project, the same successor
     interest will be created for voting as for any sale or division of
     interests as set forth above.

5.10 RECORD OF VOTES
          The chairman of the Operating Committee shall appoint a secretary who
     shall make a record of each proposal voted on and the results of such
     voting at each Operating Committee meeting. Each representative shall sign
     and be provided a copy of such record at the end of such meeting and it
     shall be considered the final record of the decisions of the Operating
     Committee.

5.11 MINUTES
          The secretary shall provide each Party with a copy of the minutes of
     the Operating Committee meeting within fifteen (15) Days after the end of
     the meeting. Each Party shall have fifteen (15) Days after receipt of such
     minutes to give notice of its objections to the minutes to the secretary. A
     failure to give notice specifying objection to such minutes within said
     fifteen (15) Day period shall be deemed to be approval of such minutes. In
     any event, the votes recorded under Article 5.10 shall take precedence over
     the minutes described above.

5.12 VOTING BY NOTICE
     (A) In lieu of a meeting, any Party may submit any proposal to the
     Operating Committee for a vote by notice. The proposing Party or Parties
     shall notify Operator who shall give each representative notice describing
     the proposal so submitted. Each Party shall communicate its vote by notice
     to Operator and the other Parties within five (5) Days after receipt of
     Operator's notice.
     (B) Except in the case of Article 5.12(A)(1), any Non-Operator may by
     notice delivered to all Parties within three (3) Days of receipt of
     Operator's notice request that the proposal be decided at a meeting rather
     than by notice. In such an event, that proposal shall be decided at a
     meeting duly called for that purpose.
     (C) Except as provided in Article X, any Party failing to communicate its
     vote in a timely manner shall be deemed to have voted against such
     proposal.
     (D) If a meeting is not requested, then at the expiration of the
     appropriate time period, Operator shall give each Party a confirmation
     notice stating the tabulation and results of the vote.

5.13 EFFECT OF VOTE
          All decisions taken by the Operating Committee pursuant to this
     Article V, shall be conclusive and - binding on all the Parties, except
     that:
     (A) If pursuant to this Article V, a Joint Operation, other than an
     operation to fulfill the Minimum Work Obligations, has been properly
     proposed to the Operating Committee and the Operating Committee has not
     approved such proposal in a timely manner, then any Party may conduct
     procedures to implement operations essentially the same as those proposed
     for such Joint Operation within the time frame as follows:

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

          (1) For proposals involving the use of a contractor's drilling rig
          that is standing by in the Contract Area, such right shall be
          exercisable for twenty-four (24) hours after the time specified in
          Article 5.12(A)(1) has expired or after receipt of Operator's notice
          given pursuant to Article 5.13(D), as applicable.
          (2) For all other proposals, such right shall be exercisable for ten
          (10) Days after the date the Operating Committee was required to
          consider such proposal pursuant to Article 5.6 or Article 5.12.
     (B) If a Party voted against any proposal which was approved by the
     Operating Committee and which could be conducted as an Exclusive Operation
     pursuant to Article VII, other than any proposal relating to Minimum Work
     Obligations, then such Party shall have the right not to participate in the
     operation contemplated by such approval. The Parties that were not entitled
     to give or did not give notice of non- consent shall be Consenting Parties
     as to the operation contemplated by the Operating Committee approval, and
     shall conduct such operation as an Exclusive Operation under Article VII.
     Any Party that gave notice of non-consent shall be a Non-Consenting Party
     as to such Exclusive Operation.
     (C) The Operating Committee may, at any time, pursuant to this Article V,
     reconsider and approve, decide or take action on any proposal that the
     Operating Committee declined to approve earlier, or modify or revoke an
     earlier approval, decision or action.
     (D) Once a Joint Operation for the drilling, Deepening, Testing,
     Sidetracking, Plugging Back, Completing, Recompleting, Reworking or
     plugging of a well, has been approved and commenced, such operation shall
     not be discontinued without the consent of the Operating Committee;
     provided, however, that such operation may be discontinued, if
     circumstances occur which in the reasonable judgment of Operator cause the
     continuation of such operation to be unwarranted and after notice the
     Operating Committee within the period required under Article 5.12(A)(1)
     approves discontinuing such operation. On the occurrence of either of the
     above, Operator shall promptly notify the Parties that such operation is
     being discontinued pursuant to the foregoing.
     (E) For any operation for which a Party can go non-consent or decide to not
     participate, any such Party wishing to exercise its right of non-consent
     must give notice of non-consent to all other Parties within five (5) Days
     (or within twenty-four (24) hours if the drilling rig or well service rig
     to be used in such operation is standing by in the Contract Area) following
     Operating Committee approval of such proposal.
                                          ARTICLE VI - WORK PROGRAMS AND BUDGETS

6.1  DRILLING OF OBLIGATION WELL ONE
     (A) Within thirty (30) days after the effective date of this Agreement,
     Operator shall deliver to the Parties a proposed initial schedule detailing
     the Joint Operations to be performed for the mobilization of a rig and
     equipment and for the drilling, testing, and evaluation of Obligation Well
     One. It is the goal of the Project/Joint Operation to begin the drilling of
     Obligation Well One by September 1, 2006.
     (B) After obtaining the results of Obligation Well One including after any
     part of the test period allowed by the Contract, Operator shall as soon as
     possible submit to the Operating Committee and to the Parties a report
     containing available details concerning the results of and data from
     Obligation Well One and Operator's recommendation as to whether the result
     merits the drilling of Obligation Wells Two and Three.
     (C) Parties agree that participating in Obligation Well One includes
     approval for the drilling, testing, logging, setting casing on, and a test
     or completion attempt for the well, with no Casing Point Election.
     (D) By unanimous agreement of the Parties, Obligation Well One may be
     abandoned at any point without finishing the drilling of, testing,
     evaluation, or completion of the well.
     (E) If the attempt to drill and evaluate Obligation Well One is abandoned
     for any reason, the Parties or remaining Party or Parties (if any Party or
     Parties withdraw from the Project as provided in this Agreement), may
     propose a replacement or alternate Obligation Well One and proceed then as
     set forth in this Agreement during and after that well as though it was the
     originally proposed Obligation Well One.
     (F) Parties agreeing to do so within thirty (30) Days of being presented
     with the Operator's recommendation as in Section 6.1(B) above will continue
     the Project and proceed to the drilling of Obligation Wells Two and Three.

6.2  DRILLING OF OBLIGATION WELLS TWO AND THREE
     (A) Once a vote is taken as set forth in Article V as to whether to proceed
     with the drilling of Obligation Wells Two and Three, and if the result is
     positive, the drilling, testing, and evaluation of those wells shall
     proceed under the direction of the Operator, with the Operator reporting on
     the operations and results of those wells as provided elsewhere in this
     Agreement.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     (B) Parties agree that approval to drill Obligation Wells Two and Three
     includes approval for the drilling, testing, logging, setting casing on,
     and a test or completion attempt for the well(s), with no Casing Point
     Election.
     (C) Any Party may decide after Obligation Well Two to not continue with
     Obligation Well Three, and then may withdraw from the Project.
     (D) By unanimous vote of the Operating Committee as is set forth in Article
     V, any operation on Obligation Well Two or Obligation Well Three may be
     stopped, modified, or abandoned.

6.3  DEVELOPMENT PROGRAM AND DRILLING
     (A) If after the drilling, testing, and evaluation of Obligation Wells Two
     and Three the Operating Committee determines that the Project merits
     development, the Parties agree to vote within thirty (30) Days whether to
     continue the Project, and those Parties voting to continue the Project
     agree to move to the development phase of the project and agree to
     participate in at least the Minimum Development Plan as approved by the
     Government or Government Oil Company. The Operator shall as soon as
     practical propose and seek approval of a Minimum Development Plan as is
     required by the Contract License. Within thirty (30) Days after obtaining
     approval of the mandated Contract License Minimum Development Plan,
     Operator shall deliver to the Parties a proposed Work Program and Budget
     for the development of and for producing from the Project during the first
     calendar year or part thereof. Within thirty (30) Days of such delivery, or
     earlier if necessary to meet any applicable deadline under the Contract
     License, the Operating Committee shall meet to consider, modify and then
     either approve or reject the initial development Work Program and Budget.
     Once the initial year's development Work Program and Budget is approved by
     the Operating Committee, Operator shall take such steps as may be required
     under the Contract License to secure approval of the development Work
     Program and Budget by the Government, if required. In the event the
     Government requires changes in the development Work Program and Budget, the
     matter shall be resubmitted to the Operating Committee for further
     consideration.
     (B) The Work Program and Budget agreed pursuant to this Article 6.3 shall
     include all of the Minimum Work Obligations, or at least that part of such
     Minimum Work Obligations required to be carried out during the Calendar
     Year in question under the terms of the Contract License or approved
     Minimum Development Program. If within the time periods prescribed in this
     Article 6.3 the Operating Committee is unable to agree on such a Work
     Program and Budget, then the proposal capable of satisfying the Minimum
     Work Obligations for the Calendar Year in question that receives the
     largest Participating Interest vote (even if less than the applicable
     percentage under Article 5.9) shall be deemed adopted as part of the annual
     Work Program and Budget. If competing proposals receive equal votes, then
     Operator shall choose between those competing proposals. Any portion of a
     Work Program and Budget adopted pursuant to this Article 6.3(B) instead of
     Article 5.9 shall include only such operations for the Joint Account as are
     necessary to maintain the Contract License in full force and effect,
     including such operations as are necessary to fulfill the Minimum Work
     Obligations, if any, required for the given Calendar Year.
     (C) The Operator will submit to the Parties a proposed Work Program and
     Budget by October 31 of each Calendar Year for the following year, and the
     Operating Committee will vote on and approve the presented Work Program and
     Budget or an agreed or compromise program for drilling, production and
     other operations of the Project/Joint Operations within thirty (30) Days of
     the presentation.
     (D) Any approved Work Program and Budget may be revised by the Operating
     Committee from time to time. To the extent such revisions are approved by
     the Operating Committee, the Work Program and Budget shall be amended
     accordingly. The Operator shall prepare and submit a corresponding work
     program and budget amendment to the Government if required by the terms of
     the Contract.
     (E) During the development Work Program, any Party or Participating
     Interest may determine to not participate in an operation and the Party
     will be a non-participating Party or interest as defined in Article VII.

6.4  PRODUCTION
          On or before the 31stt day of October of each Calendar Year, Operator
     shall deliver to the Parties a proposed Work Program and Budget as set
     forth in Article 6.3, which will include production operations to be
     performed for the Project and the projected production schedule for the
     following Calendar Year. Within thirty (30) days of such delivery, the
     Operating Committee shall agree upon a production Work Program and Budget.
     The production Work Program and Budget, during any year in which
     development may occur, may be part of the development Work Program and
     Budget.
6.5  ITEMIZATION OF EXPENDITURES
     (A) During the preparation of the proposed Work Programs and Budgets and
     Development Plans contemplated in this Article VI, Operator shall consult
     with the Operating Committee or the appropriate subcommittees regarding the
     contents of such Work Programs and Budgets and Development Plans.

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     (B) Each Work Program and Budget submitted by Operator shall contain an
     itemized estimate of the costs of Joint Operations and all other
     expenditures to be made for the Joint Account during the Calendar Year in
     question and shall:
          (1) Identify each work category in sufficient detail to afford the
          ready identification of the nature, scope and duration of the activity
          in question;
          (2) Include such reasonable information regarding Operator's
          allocation procedures and estimated manpower costs as the Operating
          Committee may determine; and
          (3) Comply with the current and minimum requirements of the Contract.
     (C) The Work Program and Budget shall designate the portion or portions of
     the Contract Area (i.e., drilling locations) in which Joint Operations
     itemized in such Work Program and Budget are to be conducted and shall
     specify the kind and extent of such operations in such detail as the
     Operating Committee may deem suitable. Any well location set forth in any
     development plan may be modified or relocated by the Operating Committee.
6.6  CONTRACT AWARDS
     Operator shall award each contract for approved Joint Operations to the
     best qualified contractor as determined by cost and ability to perform the
     contract without the obligation to tender and without informing or seeking
     the approval of the Operating Committee, except that before entering into
     contracts with Affiliates of the Operator exceeding U.S. dollars ten
     thousand (U.S. $ 10,000), Operator shall obtain the approval of the
     Operating Committee. Upon the request of a Party, Operator shall within ten
     (10) Days provide such Party with a copy of the final version any contract.
6.7  AUTHORIZATION FOR EXPENDITURE ("AFE") PROCEDURE
     (A) Prior to incurring any commitment or expenditure for the Joint Account,
     which is estimated to be:
          (1) In excess of U.S. dollars ten thousand (US$ 10,000) in a
          development Work Program and Budget; and
          (2) In excess of U.S. dollars ten thousand (US$ 10,000) in a
          production Work Program and Budget. Operator shall send to each
          Non-Operator an AFE as described in Article 6.7(C). Notwithstanding
          the above, Operator shall not be obliged to furnish for approval an
          AFE to the Parties with respect to any Minimum Work Obligations,
          workovers of wells and general and administrative costs that are
          listed as separate line items in an approved Work Program and Budget.
     (B) All AFEs shall be for informational purposes only where approval of an
     operation in the current Work Program and Budget authorizes Operator to
     conduct the operation (subject to Article 6.7) without further
     authorization from the Operating Committee.
     (C) Each AFE required to be proposed and prepared by the Operator shall and
     any other AFE for Joint Operations shall:
          (1) Identify the operation by specific reference to the applicable
          line items in the Work Program and Budget; or
          (2) Describe the work in detail;
          (3) Contain proposer's best estimate of the total funds required to
          carry out such work;
          (4) Outline the proposed work schedule;
          (5) Provide a timetable of expenditures, if known; and
          (6) Be accompanied by such other supporting information as is
          necessary for an informed decision.

6.8  OVEREXPENDITURES OF WORK PROGRAMS AND BUDGETS
     (A) For expenditures on any line item of an approved Work Program and
     Budget, Operator shall be entitled to incur without further approval of the
     Operating Committee an overexpenditure for such line item up to ten percent
     (10%) of the authorized amount for such line item; provided that the
     cumulative total of all overexpenditures for a Calendar Year shall not
     exceed five percent (5%) of the total Work Program and Budget in question.
     (B) At such time that Operator is certain that the limits of Article 6.7(A)
     will be exceeded, Operator shall furnish a supplemental AFE for the
     estimated overexpenditures to the Operating Committee for its approval and
     shall provide the Parties with full details of such overexpenditures.
     Operator shall promptly give notice of the amounts of overexpenditures when
     actually incurred.
     (C) The restrictions contained in this Article VI shall be without
     prejudice to Operator's rights to make expenditures as set out in Article
     4.2(B)(11) and Article 13.5.

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                ARTICLE VII - OPERATIONS BY LESS THAN ALL PARTIES

7.1  LIMITATION ON APPLICABILITY - NON-PARTICIPATING SITUATIONS BUT NO EXCLUSIVE
     OPERATIONS
     (A) No operations may be conducted in furtherance of the License Contract
     except as Joint Operations under Article V or Article VI which are:
          (1) Operations, including the drilling of wells, included in the
          required and approved Government/Contract License minimum development
          plan, including any modifications of that plan, or
          (2) Operations, including the drilling of wells and production
          operations, included in an annual Work Program and Budget, or
          (3) Operations which are proposed by and approved by the Operating
          Committee as modifications of the annual Work Program and Plan, or
          (4) Operations to which the CCP vote has not been exercised as a veto.
     (B) Operations which are required to fulfill the Minimum Work Obligations
     or minimum development plan must be proposed and conducted as Joint
     Operations under Article V, including those proposed or approved by the
     Operating Committee, and may not be proposed or conducted as Exclusive
     Operations.
     (C) As is set forth in Article V, any Joint Operation which is proposed by
     the Operating Committee or a Party, must be approved within five (5) days
     of the proposal, or within twenty-four (24) hours if a drilling rig or well
     service rig is on the well, or any Party not approving the operation will
     be in a non-participating status.
     (D) Any Party voting to not participate in any well or operation on a well,
     including a recorded no vote by default as is set forth in Section 7.1 (C)
     above, will have no interest from that point in time forward in the subject
     well and for any future work, operation, or production from that well.
     Consenting Party(ies) will provide metering means to segregate the measured
     production volumes (but not necessarily the physical production) for the
     subject well from other Project production.
     (E) If CCP determines to not participate in a well or other operation and
     determines not to veto that proposal, the Operator shall operate the well
     or wells in which CCP is non-participating unless the Operating Committee
     sets forth another procedure.

                             ARTICLE VIII - DEFAULT

8.1 DEFAULT AND NOTICE
          Any Party that fails to pay when due its Participating Interest share
     of Joint Account expenses, including cash advances and interest, shall be
     in default under this Agreement (a "Defaulting Party"). Operator, or any
     non-defaulting Party in the case Operator is the Defaulting Party, shall
     promptly give notice of such default to the Defaulting Party and each of
     the non-defaulting Parties (the "Default Notice"). The amount not paid by
     the Defaulting Party shall bear interest from the date due until paid in
     full at the Agreed Interest Rate.

8.2 OPERATING COMMITTEE MEETINGS AND DATA.
          Beginning five (5) Business Days from the date of the Default Notice,
     and thereafter while the Defaulting Party remains in default, the
     Defaulting Party shall not be entitled to attend Operating Committee or
     subcommittee meetings or to vote on any matter coming before the Operating
     Committee or any subcommittee until all of its defaults have been remedied
     (including payment of accrued interest). Unless agreed otherwise by the
     non-defaulting Parties, the voting interest of each non- defaulting Party
     during this period shall be its percentage of the total Participating
     Interests of the non- defaulting Parties. Any matters requiring a unanimous
     vote of the Parties shall not require the vote of the Defaulting Party. In
     addition, beginning five (5) Business Days from the date of the Default
     Notice, and thereafter while the Defaulting Party remains in default, the
     Defaulting Party shall not have access to any data or information relating
     to Joint Operations. During this period, the non-defaulting Parties shall
     be entitled to trade data without such Defaulting Party's consent, and the
     Defaulting Party shall have no right to any data received in such a trade
     unless and until its default is remedied in full. The Defaulting Party
     shall be deemed to have elected not to participate in any Joint Operations
     or Exclusive Operations that are voted upon at least five (5) Business Days
     after the date of the Default Notice but before all of its defaults have
     been remedied to the extent such an election would be permitted by Article
     5.13(B) of this Agreement. The Defaulting Party shall be deemed to have
     approved, and shall join with the non-defaulting Parties in taking, any
     other actions voted on during that period.

8.3 ALLOCATION OF DEFAULTED ACCOUNTS

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     (A) The Party providing the Default Notice pursuant to Article 8.1 shall
     include in the Default Notice to each non-defaulting Party a statement of
     the sum of money that the non-defaulting Party is to pay as its portion
     (such portion being in the ratio that each non-defaulting Party's
     Participating Interest bears to the Participating Interests of all
     non-defaulting Parties) of the amount in default (excluding interest),
     subject to the terms of this Article 8.3. If the Defaulting Party remedies
     its default in full within five (5) Business Days from the date of the
     Default Notice, the notifying Party shall promptly notify each
     non-defaulting Party by telephone and facsimile, and the non-defaulting
     Parties shall be relieved of their obligation to pay a share of the amounts
     in default. Otherwise, each non-defaulting Party shall pay Operator, within
     five (5) Business Days after receipt of the Default Notice, its share of
     the amount which the Defaulting Party failed to pay. If any non-defaulting
     Party fails to pay its share of the amount in default as aforesaid, such
     Party shall thereupon be a Defaulting Party subject to the provisions of
     this Article VIII. The non-defaulting Parties which pay the amount owed by
     any Defaulting Party shall be entitled to receive their respective shares
     of the principal and interest payable by such Defaulting Party pursuant to
     this Article VIII.
     (B) If Operator is a Defaulting Party, then all payments otherwise payable
     to Operator for Joint Account costs pursuant to this Agreement shall be
     made to the notifying Party instead until the default is cured or a
     successor Operator appointed. The notifying Party shall maintain such funds
     in a segregated account separate from its own funds and shall apply such
     funds to third party claims due and payable from the Joint Account of which
     it has notice, to the extent Operator would be authorized to make such
     payments under the terms of this Agreement. The notifying Party shall be
     entitled to bill or cash call the other Parties in accordance with the
     Accounting Procedure for proper third party charges that become due and
     payable during such period to the extent sufficient funds are not
     available. When Operator has cured its default or a successor Operator is
     appointed, the notifying Party shall turn over all remaining funds in the
     account to Operator and shall provide Operator and the other Parties with a
     detailed accounting of the funds received and expended during this period.
     The notifying Party shall not be liable for damages, losses, costs,
     expenses or liabilities arising as a result of its actions under this
     Article 8.3(B) except to the extent Operator would be liable under Article
     4.6.
8.4  REMEDIES
     (A) During the continuance of a default, the Defaulting Party shall not
     have a right to its Entitlement, which shall vest in and be the property of
     the non-defaulting Parties. Operator (or the notifying Party if Operator is
     a Defaulting Party) shall be authorized to sell such Entitlement in an
     arm's-length sale on terms that are commercially reasonable under the
     circumstances and, after deducting all costs, charges and expenses incurred
     in connection with such sale, pay the net proceeds to the non-defaulting
     Parties in proportion to the amounts they are owed by the Defaulting Party
     hereunder (and apply such net proceeds toward the establishment of a
     reserve fund under Article 8.4(C), if applicable) until all such amounts
     are recovered and such reserve fund is established. Any surplus remaining
     shall be paid to the Defaulting Party,and any deficiency shall remain a
     debt due from the Defaulting Party to the non-defaulting Parties. When
     making sales under this Article 8.4(A), the non-defaulting Parties shall
     have no obligation to share any existing market or obtain a price equal to
     the price at which their own production is sold.
     (B) If Operator disposes of any Joint Property or any other credit or
     adjustment is made to the Joint Account while a Party is in default,
     Operator (or the notifying Party if Operator is a Defaulting Party) shall
     be entitled to apply the Defaulting Party's Participating Interest share of
     the proceeds of such disposal, credit or adjustment against all amounts
     owing by the Defaulting Party to the non-defaulting Parties hereunder (and
     toward the establishment of a reserve fund under Article 8.4(C), if
     applicable). Any surplus remaining shall be paid to the Defaulting Party,
     and any deficiency shall remain a debt due from the Defaulting Party to the
     non-defaulting Parties.
     (C) The non-defaulting Parties shall be entitled to apply proceeds received
     under Articles 8.4(A) and 8.4(B) toward the creation of a reserve fund in
     an amount equal to the Defaulting Party's Participating Interest share of
     (i) the estimated cost to abandon any wells and other property in which the
     Defaulting Party participated, (ii) the estimated cost of severance
     benefits for local employees upon cessation of operations and (iii) any
     other identifiable costs that the non-defaulting Parties anticipate will be
     incurred in connection with the cessation of operations.
     (D) If a Defaulting Party fails to remedy its default by the sixtieth
     (60th) Day following the date of the Default Notice, then, without
     prejudice to any other rights available to the non-defaulting Parties to
     recover amounts owing to them under this Agreement, each non-defaulting
     Party shall have the option, exercisable at anytime thereafter until the
     Defaulting Party has completely cured its defaults, to require that the
     Defaulting Party completely withdraw from this Agreement and the Contract.
     Such option shall be exercised by notice to the Defaulting Party and each
     non-defaulting Party. If such option is exercised, the Defaulting Party
     shall

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     be deemed to have transferred, pursuant to Article 13.6, effective on the
     date of the non-defaulting Party's notice, all of its right, title and
     beneficial interest in and under this Agreement and the Contract Area to
     the non-defaulting Parties. The Defaulting Party shall, without delay
     following any request from the non- defaulting Parties, do any and all acts
     required to be done by applicable law or regulation in order to render such
     transfer legally valid, including, without limitation, obtaining all
     governmental consents and approvals, and shall execute any and all
     documents and take such other actions as may be necessary in order to
     effect a prompt and valid transfer of the interests described above. The
     Defaulting Party shall be obligated to promptly remove any liens and
     encumbrances which may exist on such transferred interests. For purposes of
     this Article 8.4(D), each Party constitutes and appoints each other Party
     its true and lawful attorney to execute such instruments and make such
     filings and applications as may be necessary to make such transfer legally
     effective and to obtain any necessary consents of the Government. Actions
     under this power of attorney may be taken by any Party individually without
     the joinder of the others. This power of attorney is irrevocable for the
     term of this Agreement and is coupled with an interest. If requested, each
     Party shall execute a form prescribed by the Operating Committee setting
     forth this power of attorney in more detail. In the event all Government
     approvals are not timely obtained, the Defaulting Party shall hold its
     Participating Interest in trust for the non-defaulting Parties who are
     entitled to receive the Defaulting Party's Participating Interest.
     Notwithstanding the terms of Article XIII, in the absence of an agreement
     among the non- defaulting Parties to the contrary, any transfer to the
     non-defaulting Parties following a withdrawal pursuant to this Article
     8.4(D) shall be in proportion to the Participating Interests of the
     non-defaulting Parties. The acceptance by a non-defaulting Party of any
     portion of a Defaulting Party's Participating Interest shall not limit any
     rights or remedies that the non-defaulting Party has to recover all amounts
     (including
     (E) The non-defaulting Parties shall be entitled to recover from the
     Defaulting Party all reasonable attorneys' fees and all other reasonable
     costs sustained in the collection of amounts owing by the Defaulting Party.
     (F) The rights and remedies granted to the non-defaulting Parties in this
     Agreement shall be cumulative, not exclusive, and shall be in addition to
     any other rights and remedies that may be available to the non- defaulting
     Parties, whether at law, in equity or otherwise. Each right and remedy
     available to the non- defaulting Parties may be exercised from time to time
     and so often and in such order as may be considered expedient by the
     non-defaulting Parties in their sole discretion.
8.5  SURVIVAL
          The obligations of the Defaulting Party and the rights of the
     non-defaulting Parties shall survive the surrender of the Contract Area,
     abandonment of Joint Operations and termination of this Agreement.
8.6  NO RIGHT OF SET OFF
          Each Party acknowledges and accepts that a fundamental principle of
     this Agreement is that each Party pays its Participating Interest share of
     all amounts due under this Agreement as and when required. Accordingly, any
     Party which becomes a Defaulting Party undertakes that, in respect of
     either any exercise by the non-defaulting Parties of any rights under or
     the application of any of the provisions of this Article VIII, such Party
     hereby waives any right to raise by way of set off or invoke as a defense,
     whether in law or equity, any failure by any other Party to pay amounts due
     and owing under this Agreement or any alleged claim that such Party may
     have against Operator or any Non-Operator, whether such claim arises under
     this Agreement or otherwise. Each Party further agrees that the nature and
     the amount of the remedies granted to the non-defaulting Parties hereunder
     are reasonable and appropriate in the circumstances.

                     ARTICLE IX - DISPOSITION OF PRODUCTION

9.1  RIGHT AND OBLIGATION TO TAKE IN KIND
          Except as otherwise provided in this Article IX or in Article VIII,
     each Party shall have the right and obligation to own, take in kind and
     separately dispose of the share of total production available to it from
     the Project pursuant to the Contract and this Agreement in such quantities
     and in accordance with such procedures as may be set forth in the offtake
     agreement referred to in Article 9.2. If Government Oil Company is party to
     the offtake agreement, then the Parties shall endeavor to obtain its
     agreement to the principles set forth in this Article IX.
9.2  AGREEMENT FOR CRUDE OIL SALES
          If crude oil is produced from the Project, the Operator shall in good
     faith, and not less than thirty (30) -16- Days prior to first delivery of
     crude oil, negotiate and conclude the terms of an agreement to cover the
     sale of crude oil produced under the Contract and for the Contract Area.
     The Government may, if necessary and

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     practicable, also be party to the sales agreement. This sales or "offtake"
     agreement shall, to the extent consistent with the Contract, make provision
     for:
     (A) The delivery point, at which title and risk of loss of Participating
     Interest shares of crude oil shall pass to the Parties interested (or as
     the Parties may otherwise agree);
     (B) Operator's regular periodic advice to the Parties of estimates of total
     available production for suc- 6 ceeding periods, quantities of each grade
     of crude oil and each Party's share for as far ahead as is necessary for
     Operator and the Parties to plan offtake arrangements. Such advice shall
     also cover for each grade of crude oil total available production and
     deliveries for the preceding period, inventory and overlifts and
     underlifts;
     (C) Nomination by the Parties to Operator of acceptance of their shares of
     total available production for the succeeding period. Such nominations
     shall in any one period be for each Party's entire share of available
     production during that period subject to operational tolerances and agreed
     minimum economic cargo sizes or as the Parties may otherwise agree;
     (D) Elimination of overlifts and underlifts;
     (E) If a river terminal for vessel loading is involved, risks regarding
     acceptability of barges, tankers, demurrage and (if applicable)
     availability of berths;
     (F) Distribution to the Parties of available grades, gravities and
     qualities of Hydrocarbons to ensure, to the extent Parties take delivery of
     their Entitlements as they accrue, that each Party shall receive in each
     period Entitlements of grades, gravities and qualities of Hydrocarbons from
     the Project similar to the grades, gravities and qualities of Hydrocarbons
     received by each other Party from the Project in that period.
     (G) To the extent that distribution of Entitlements on such basis is
     impracticable due to availability of facilities and minimum cargo sizes, a
     method of making periodic adjustments; and
     (H) The option and the right of the other Parties to sell an Entitlement
     which a Party fails to nominate for acceptance pursuant to (C) above or of
     which a Party fails to take delivery, in accordance with applicable agreed
     procedures, provided that such failure either constitutes a breach of
     Operator's or Parties' obligations under the terms of the Contract, or is
     likely to result in the curtailment or shut-in of production. Such sales
     shall be made only to the limited extent necessary to avoid disruption in
     Joint Operations. Operator shall give all Parties as much notice as is
     practicable of such situation and that a sale option has arisen. Any sale
     shall be of the un-nominated or undelivered Entitlement as the case may be
     and for reasonable periods of time as are consistent with the minimum needs
     of the industry and in no event to exceed twelve (12) months. The right of
     sale shall be revocable at will subject to any prior contractual
     commitments. Payment terms for production sold under this option shall be
     established in the offtake agreement. If a sales agreement has not been
     entered into by the date of first delivery of crude oil, the Parties shall
     be bound by the principles set forth in this Article 9.2 until a sales
     agreement has been entered into.
9.3  SEPARATE AGREEMENT FOR NATURAL GAS
          The Parties recognize that if natural gas is discovered it may be
     necessary for the Parties to enter into special arrangements for the
     disposal of the natural gas, which are consistent with this Agreement and
     subject to the terms of the Contract.

                             ARTICLE X - ABANDONMENT

10.1 ABANDONMENT OF WELLS DRILLED AS JOINT OPERATIONS
     (A) A decision to plug and abandon any well which has been drilled as a
     Joint Operation shall require the approval of the Operating Committee.
     (B) Should any Party fail to reply within the period prescribed in Article
     5.12(A)(1) or Article 5.12(A)(2), whichever is applicable, after delivery
     of notice of the Operator's proposal to plug and abandon such well, such
     Party shall be deemed to have consented to the proposed abandonment.
     (C) Any well plugged and abandoned under this Agreement shall be plugged
     and abandoned in accordance with applicable regulations and at the cost,
     risk and expense of the Parties who participated in the cost of drilling
     such well.
                 ARTICLE XI - SURRENDER, EXTENSIONS AND RENEWALS

11.1 SURRENDER
     (A) If the Contract requires the Parties to surrender any portion of the
     Contract Area, Operator shall advise the Operating Committee of such
     requirement at least one hundred and twenty (120) Days in advance of the
     earlier of the date for filing irrevocable notice of such surrender or the
     date of such surrender. Prior to

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     the end of such period, the Operating Committee shall determine pursuant to
     Article V the size and shape of the surrendered area, consistent with the
     requirements of the Contract. If a sufficient vote of the Operating
     Committee cannot be attained, then the proposal supported by a simple
     majority of the Participating Interests shall be adopted. If no proposal
     attains the support of a simple majority of the Participating Interests,
     then the proposal receiving the largest aggregate Participating Interest
     vote shall be adopted. In the event of a tie, the Operator shall choose
     among the proposals receiving the largest aggregate Participating Interest
     vote. The Parties shall execute any and all documents and take such other
     actions as may be necessary to effect the surrender. Each Party renounces
     all claims and causes of action against Operator and any other Parties on
     account of any area surrendered in accordance with the foregoing but
     against its recommendation if Hydrocarbons are subsequently discovered
     under the surrendered area.
     (B) A surrender of all or any part of the Contract Area which is not
     required by the Contract shall require the unanimous consent of the
     Parties.
11.2 EXTENSION OF THE TERM
     (A) A proposal by any Party to enter into or extend the term of any
     requirement, period, or any phase of the Contract, or a proposal to extend
     the term of the Contract, shall be brought before the Operating Committee
     pursuant to Article V.
     (B) Any Party shall have the right to enter into an agreement to extend the
     term of the Contract, regardless of the level of support in the Operating
     Committee. If any Party or Parties take such action, any Party not wishing
     to extend shall have a right to withdraw from the Project, subject to the
     requirements of Article XIII.

                      ARTICLE XII - TRANSFER OF INTEREST OR RIGHTS

12.1 OBLIGATIONS
     (A) Subject always to the requirements of the Contract, the transfer of all
     or part of a Party's Participating Interest, excepting transfers pursuant
     to Article VIII or Article XIII, shall be effective only if it satisfies
     the terms and conditions of this Article XII.
     (B) Except in the case of a Party transferring all of its Participating
     Interest, no transfer shall be made by any Party which results in the
     transferor or the transferee holding a Participating Interest of less than
     one percent (1%) or holding any interest other than a Participating
     Interest the same as other Parties in the Contract, the Project, and this
     Agreement.
     (C) The transferring Party shall, notwithstanding the transfer, be liable
     to the other Parties for any obligations, financial or otherwise, which
     have vested, matured or accrued under the provision of the Contract or this
     Agreement prior to such transfer. Such obligations shall include, without
     limitation, any proposed expenditure approved by the Operating Committee
     prior to the transferring Party notifying the other Parties of its proposed
     transfer.
     (D) The transferee shall have no rights in and under the Contract, the
     Contract Area or this Agreement unless and until it obtains any necessary
     Government approval and expressly undertakes in an instrument satisfactory
     to the other Parties to perform the obligations of the transferor under the
     Contract and this Agreement in respect of the Participating Interest being
     transferred and furnishes any guarantees required by the Government or the
     Contract.
     (E) A transferee other than an Affiliate shall have no rights in and under
     the Contract, the Contract Area or this Agreement unless each Party has
     consented in writing to such transfer, which consent shall be denied only
     if such transferee fails to establish to the reasonable satisfaction of
     each Party its capability to perform its obligations under the Contract and
     this Agreement.
     (F) Nothing contained in this Article XII shall prevent a Party from
     mortgaging, pledging, charging or otherwise encumbering all or part of its
     interest in the Contract Area and in and under this Agreement for the
     purpose of security relating to finance provided that:
          (1) Such Party shall remain liable for all obligations relating to
          such interest;
          (2) The encumbrance shall be subject to any necessary approval of the
          Government and be expressly subordinated to the rights of the other
          Parties under this Agreement; and
          (3) Such Party shall ensure that any such mortgage, pledge, charge or
          encumbrance shall be expressed to be without prejudice to the
          provisions of this Agreement.
          (4) No interest in the Contract Area larger in any extent than that
          owned by Such Party shall be encumbered in any way.

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     (G) Any transfer of all or a portion of a Party's Participating Interest
     whether directly or indirectly by assignment, merger, consolidation, sale
     of stock, or other conveyance, other than with or to an Affiliate shall be
     subject to the following procedure:
          (1) In the event that a Party wishes to transfer any part or all of
          its Participating Interest, it shall send all other Parties notice of
          its intention and invite them to submit offers therefore. The other
          Parties shall have thirty (30) Days from the date of such notification
          to deliver a counter-notification with a binding offer in accordance
          with Article 12.1(G) (3). If the prospective transferor Party accepts
          the offer, the prospective transferor and the offering Party shall
          have the next sixty (60) Days in which to negotiate in good faith and
          execute the terms and conditions of a mutually acceptable transfer
          agreement. If the prospective transferor does not find any Party's
          offer acceptable, or if sixty (60) Days elapse and it is evident to
          the prospective transferor that a fully negotiated agreement with an
          offering Party is not imminent, the prospective transferor shall be
          entitled for a period of one hundred eighty (180) Days, plus such
          reasonable additional period as may be necessary to secure
          governmental approvals, to transfer its Participating Interest to a
          third party subject to the obligations set forth in this Article XII,
          so long as terms and conditions of the transfer to a third party are
          more favorable to the prospective transferor than the best terms and
          conditions offered by any Party;
          (2) If more than one Party counter-notifies the prospective transferor
          that it intends to acquire the Participating Interest which is the
          subject of the proposed transfer, then each such Party shall acquire a
          proportion of the Participating Interest to be transferred equal to
          the ratio of its own Participating Interest to the total Participating
          Interests of all the counter-notifying Parties, unless they otherwise
          agree;
          (3) All Parties giving such counter-notice shall meet to formulate a
          joint offer. Each such Party shall make known to the other Parties the
          highest price or value in which it is willing to offer to the
          prospective transferor. The proposal with the highest price or value
          shall be offered to the prospective transferor as the joint proposal
          of the Parties still willing to participate in such offer under the
          provisions of (1) and (2) above;
          (4) In the event that a Party's proposed transfer of part or all of
          its Participating Interest involves consideration other than cash or
          involves other properties included in a wider transaction (package
          deal), then the Participating Interest (or part thereof) shall be
          allocated a reasonable and justifiable cash value by the prospective
          transferor in any notification to the other Parties. Such other
          Parties may satisfy the requirements of this Article 12.1(G) by
          agreeing to pay such cash value in lieu of the consideration payable
          in the third-party offer.
12.2 RIGHTS
     (A) Each Party shall have the right, subject to the provisions of Article
     12.1, to freely transfer its Participating Interest.

                    ARTICLE XIII - WITHDRAWAL FROM AGREEMENT

13.1 RIGHT OF WITHDRAWAL
     (A) Subject to the provisions of this Article XIII, other than for the
     various agreements and proposals between or among the parties by which
     their original participation in the Project occurred, any Party may
     withdraw from this Agreement and the Contract Area by giving notice to all
     other Parties stating its decision to withdraw. Such notice shall be
     unconditional and irrevocable when given, except as may be provided in
     Article 13.7.
     (B) The effective date of withdrawal for a withdrawing Party shall be the
     end of the calendar month following the calendar month in which the notice
     of withdrawal is given, provided that if all Parties elect to withdraw, the
     effective date of withdrawal for each Party shall be the date determined by
     Article 13.9.
13.2 PARTIAL OR COMPLETE WITHDRAWAL
     (A) Within thirty (30) Days of receipt of each withdrawing Party's
     notification, each of the other Parties may also give notice that it
     desires to withdraw from this Agreement, the Project, and the Contract.
     Should all Parties give notice of withdrawal, the Parties shall proceed to
     abandon the Contract Area and terminate the Contract and this Agreement. If
     less than all of the Parties give such notice of withdrawal, then the
     withdrawing Parties shall take all steps to withdraw from the Contract and
     this Agreement on the earliest possible date and execute and deliver all
     necessary instruments and documents to assign their Participating Interest
     to the Parties which are not withdrawing, without any compensation
     whatsoever, in accordance with the provisions of Article 13.6.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     (B) Any Party withdrawing under Article 11.2 or under this Article XIII
     shall withdraw from the entirety of the Contract Area and Project, and thus
     abandon to the other Parties not joining in its withdrawal all its rights
     to Cost Oil and Profit Oil generated by operations after the effective date
     of such withdrawal and all rights in associated Joint Property.
13.3 RIGHTS OF A WITHDRAWING PARTY
          A withdrawing Party shall have the right to receive its Entitlement of
     Hydrocarbons produced through the effective date of its withdrawal. The
     withdrawing Party shall be entitled to receive all information to which
     such Party is otherwise entitled under this Agreement until the effective
     date of its withdrawal. After giving its notification of withdrawal, a
     Party shall not be entitled to vote on any matters coming before the
     Operating Committee, other than matters for which such Party has financial
     responsibility. Any withdrawal may be subject to prior agreements between
     or among the Parties, and include, where applicable, the provisions of
     Article 20.12.
13.4 OBLIGATIONS AND LIABILITIES OF A WITHDRAWING PARTY
     (A) A withdrawing Party shall, following its notification of withdrawal,
     remain liable only for its share of the following:
          (1) Costs of Joint Operations, and Exclusive Operations in which it
          has agreed to participate, that were approved by the Operating
          Committee or Consenting Parties as part of a Work Program and Budget
          or AFE prior to such Party's notification of withdrawal, regardless of
          when they are actually incurred;
          (2) Any Minimum Work Obligations for the current period or phase of
          the Contract, and for any subsequent period or phase which has been
          approved pursuant to Article 11.2 and with respect to which such Party
          has failed to timely withdraw under Article 13.4(B);
          (3) Emergency expenditures as described in Articles 4.2(B)(11) and
          13.5;
          (4) All other obligations and liabilities of the Parties or Consenting
          Parties, as applicable, with respect to acts or omissions under this
          Agreement prior to the effective date of such Party's withdrawal for
          which such Party would have been liable, had it not withdrawn from
          this Agreement.
     The obligations and liabilities for which a withdrawing Party remains
     liable shall specifically include its share of any costs of plugging and
     abandoning wells or portions of wells in which it participated (or was
     required to bear a share of the costs pursuant to Article 13.4(A)(1)), to
     the extent such costs of plugging and abandoning are payable by the Parties
     under the Contract. Any liens, charges and other encumbrances which the
     withdrawing Party placed on such Party's Participating Interest prior to
     its withdrawal shall be fully satisfied or released, at the withdrawing
     Party's expense, prior to its withdrawal. A Party's withdrawal shall not
     relieve it from liability to the non-withdrawing Parties with respect to
     any obligations or liabilities attributable to the withdrawing Party under
     this Article XIII merely because they are not identified or identifiable at
     the time of withdrawal.
     (B) Notwithstanding the foregoing, a Party shall not be liable for any
     operations or expenditures it voted against (other than operations and
     expenditures described in Article 13.4(A)(2) or 13.4(A)(3)) if it sends
     notification of its withdrawal within five (5) Days (or within twenty-four
     (24) hours if the drilling rig to be used in such operation is standing by
     on the Contract Area) of the Operating Committee vote approving such
     operation or expenditure. Likewise, a Party voting against voluntarily
     entering into or extending any phase of the Contract or voluntarily
     extending the Contract shall not be liable for the Minimum Work Obligations
     associated therewith provided that it sends notification of its withdrawal
     within thirty (30) Days of such vote pursuant to Article 11.2.
13.5 EMERGENCY
          If a well goes out of control or a fire, blow out, sabotage or other
     emergency occurs prior to the effective date of a Party's withdrawal, the
     withdrawing Party shall remain liable for its Participating Interest share
     of the costs of such emergency, regardless of when they are actually
     incurred.
13.6 ASSIGNMENT
          A withdrawing Party shall assign its Participating Interest free of
     cost to each of the non-withdrawing Parties in the proportion which each of
     their Participating Interests (prior to the withdrawal) bears to the total
     Participating Interests of all the non-withdrawing Parties (prior to the
     withdrawal), unless the non- withdrawing Parties agree otherwise. The
     expenses associated with the withdrawal and assignments shall be borne by
     the withdrawing Party. If any withdrawing Party acquired its interests
     through either CCP or Ziegler-Peru, then those entities may reacquire
     through the withdrawal those interests in their entirety, unless CCP or
     Ziegler-Peru wish to offer part or all of the interest to the other under
     the terms of withdrawal stated in other parts of this section. No
     obligations of the interest thus transferred will increase the
     responsibility of CCP or Ziegler-Peru by the pass through or interest.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

13.7 APPROVALS
          As this is a private contract, no Government approvals are required of
     a withdrawing party.
13.8 SECURITY
     (A) A Party withdrawing from this Agreement and the Contract pursuant to
     this Article XIII shall provide Security satisfactory to the other Parties
     to satisfy any obligations or liabilities which were approved or accrued
     prior to notice of withdrawal, but which become due after its withdrawal,
     including, without limitation, Security to cover the costs of an
     abandonment, if applicable.
     (B) Failure to provide Security shall constitute default under this
     Agreement.
     (C) "Security" means a standby letter of credit issued by a bank or an on
     demand bond issued by a surety corporation, such bank or corporation having
     a credit rating indicating it has sufficient worth to pay its obligations
     in all reasonably foreseeable circumstances, or, failing the provision of
     either of those, cash contributed to an account approved by the Operating
     Committee.
13.9 WITHDRAWAL OR ABANDONMENT BY ALL PARTIES
          In the event all Parties decide to withdraw, the Parties agree that
     they shall be bound by the terms and conditions of this Agreement for so
     long as may be necessary to wind up the affairs of the Parties with the
     Government, to satisfy any requirements of applicable law and to facilitate
     the sale, disposition or abandonment of property or interests held by the
     Joint Account. ARTICLE XIV - RELATIONSHIP OF PARTIES AND TAX 14.1
     RELATIONSHIP OF PARTIES The rights, duties, obligations and liabilities of
     the Parties under this Agreement shall be individual, not joint or
     collective. It is not the intention of the Parties to create, nor shall
     this Agreement be deemed or construed to create a mining or other
     partnership, joint venture or association or (except as explicitly provided
     in this Agreement) a trust. This Agreement shall not be deemed or construed
     to authorize any Party to act as an agent, servant or employee for any
     other Party for any purpose whatsoever except as explicitly set forth in
     this Agreement. In their relations with each other under this Agreement,
     the Parties shall not be considered fiduciaries except as expressly
     provided in this Agreement.
14.2 TAX
          Each Party shall be responsible for reporting and discharging its own
     tax measured by the profit or income of the Party and the satisfaction of
     such Party's share of all contract obligations under the Contract and under
     this Agreement. Each Party shall protect, defend and indemnify each other
     Party from any and all loss, cost or liability arising from the
     indemnifying Party's failure to report and discharge such taxes or satisfy
     such obligations. The Parties intend that all income and all tax benefits
     (including, but not limited to, deductions, depreciation, credits and
     capitalization) with respect to the expenditures made by the Parties
     hereunder will be allocated by the Government tax authorities to the
     Parties based on the share of each tax item actually received or borne by
     each Party. If such allocation is not accomplished due to the application
     of the laws and regulations of the Government or other Government action,
     the Parties shall attempt to adopt mutually agreeable arrangements that
     will allow the Parties to achieve the financial results intended. Operator
     shall provide each Party, in a timely manner and at such Party's sole
     expense, with such information with respect to Joint Operations as such
     Party may reasonably request for preparation of its tax returns or
     responding to any audit or other tax proceeding.
14.3 UNITED STATES TAX ELECTION
     (A) If, for United States federal income tax purposes, this Agreement and
     the operations under this Agreement are regarded as a partnership (and if
     the Parties have not agreed to form a tax partnership), each "U.S. Party"
     (as defined below) elects to be excluded from the application of all of the
     provisions of Subchapter "K", Chapter 1, Subtitle "A" of the United States
     Internal Revenue Code of 1986, as amended (the "Code"), as permitted and
     authorized by Section 761(a) of the Code and the regulations promulgated
     under the Code. Each Party is authorized and directed to execute and file
     for each U.S. Party such evidence of this election as may be required by
     the Internal Revenue Service, including specifically, but not by way of
     limitation, all of the returns, statements, and the data required by United
     States Treasury Regulations Sections 1.761-2 and 1.6031-1(d)(2), and shall
     provide a copy thereof to each U.S. Party. Should there be any requirement
     that any U.S. Party give further evidence of this election, each U.S. Party
     shall execute such documents and furnish such other evidence as may be
     required by the Internal Revenue Service or as may be necessary to evidence
     this election.
     (B) No Party shall give any notice or take any other action inconsistent
     with the election made above. If -21- any income tax laws of any state or
     other political subdivision of the United States or any future income tax

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

     laws of the United States or any such political subdivision contain
     provisions similar to those in Subchapter "K", Chapter 1, Subtitle "A" of
     the Code, under which an election similar to that provided by Section
     761(a) of the Code is permitted, each U.S. Party shall make such election
     as may be permitted or required by such laws. In making the foregoing
     election, each U.S. Party states that the income derived by it from
     operations under this Agreement can be adequately determined without the
     computation of partnership taxable income.
     (C) For the purposes of this Article XIV, "U.S. Party" shall mean any Party
     which is subject to the income tax law of the United States in respect of
     operations under this Agreement.
     (D) No activity shall be conducted under this Agreement that would cause
     any Party that is not a U.S. Party to be deemed to be engaged in a trade or
     business within the United States under applicable tax laws and
     regulations.
     (E) A Party which is not a U.S. Party shall not be required to do any act
     or execute any instrument which might subject it to the taxation
     jurisdiction of the United States.

         ARTICLE XV - CONFIDENTIAL INFORMATION -- PROPRIETARY TECHNOLOGY

15.1 CONFIDENTIAL INFORMATION
     (A) Subject to the provisions of the Contract, the Parties agree that all
     information and data acquired or obtained by any Party in respect of Joint
     Operations shall be considered confidential and shall be kept confidential
     and not be disclosed during the term of the Contract to any person or
     entity not a Party to this Agreement, except:
          (1) To an Affiliate, provided such Affiliate maintains confidentiality
          as provided in this Article XV;
          (2) To a governmental agency or other entity when required by the
          Contract;
          (3) To the extent such data and information is required to be
          furnished in compliance with anyapplicable laws or regulations, or
          pursuant to any legal proceedings or because of any order of any court
          binding upon a Party;
          (4) To prospective or actual contractors, consultants and attorneys
          employed by any Party where disclosure of such data or information is
          essential to such contractor's, consultant's or attorney's work;
          (5) To a bona fide prospective transferee of a Party's Participating
          Interest (including an entity with whom a Party or its Affiliates are
          conducting bona fide negotiations directed toward a merger,
          consolidation or the sale of a majority of its or an Affiliate's
          shares);
          (6) To a bank or other financial institution to the extent appropriate
          to a Party arranging for funding;
          (7) To the extent such data and information must be disclosed pursuant
          to any rules or requirements of any government or stock exchange
          having jurisdiction over such Party, or its Affiliates; provided that
          if any Party desires to disclose information in an annual or periodic
          report to its or its Affiliates' shareholders and to the public and
          such disclosure is not required pursuant to any rules or requirements
          of any government or stock exchange, then such Party shall comply with
          Article 20.3;
          (8) To its respective employees for the purposes of Joint Operations,
          subject to each Party taking customary precautions to ensure such data
          and information is kept confidential;
          (9) Any data or information which, through no fault of a Party,
          becomes a part of the public domain.
     (B) Disclosure as pursuant to Article 15.1(A)(4), (5), and (6) shall not be
     made unless prior to such disclosure the disclosing Party has obtained a
     written undertaking from the recipient party to keep the data and
     information strictly confidential for at least five (5) years and not to
     use or disclose the data and information except for the express purpose for
     which disclosure is to be made. 15.2 CONTINUING OBLIGATIONS
          Any Party ceasing to own a Participating Interest during the term of
     this Agreement shall nonetheless remain bound by the obligations of
     confidentiality in Article 15.1 and any disputes shall be resolved
     inaccordance with Article XVIII.
15.3 PROPRIETARY TECHNOLOGY
          Nothing in this Agreement shall require a Party to divulge proprietary
     technology to the other Parties; provided that where the cost of
     development of proprietary technology has been charged to the Joint
     Account, such proprietary technology shall be disclosed to all Parties
     bearing a portion of such cost and may be used by any such Party or its
     Affiliates in other operations.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

15.4 TRADES OF INFORMATION
          Notwithstanding the foregoing provisions of this Article XV, Operator
     may, with approval of the Operating Committee, make trade or sell Project
     and well information, logs, and other data or information for the benefit
     of the Parties, with any data so obtained to be furnished to all Parties
     who participated in the cost of the data that was traded. Operator shall
     cause any third party to such trade to enter into an undertaking to keep
     the traded data confidential. Data that is sold may or may not be
     confidential depending on the arrangement the Operator makes with the
     acquiring entity or person. Any value or benefit from the sale will be paid
     pro-rata to the Parties.

                           ARTICLE XVI- FORCE MAJEURE

16.1 OBLIGATIONS
          If as a result of Force Majeure any Party is rendered unable, wholly
     or in part, to carry out its obligations under this Agreement, other than
     the obligation to pay any amounts due or to furnish security, then the
     obligations of the Party giving such notice, so far as and to the extent
     that the obligations are affected by such Force Majeure, shall be suspended
     during the continuance of any inability so caused and for such reasonable
     period thereafter as may be necessary for the Party to put itself in the
     same position that it occupied prior to the Force Majeure, but for no
     longer period. The Party claiming Force Majeure shall notify the other
     Parties of the Force Majeure within a reasonable time after the occurrence
     of the facts relied on and shall keep all Parties informed of all
     significant developments. Such notice shall give reasonably full
     particulars of the Force Majeure, and also estimate the period of time
     which the Party will probably require to remedy the Force Majeure. The
     affected Party shall use all reasonable diligence to remove or overcome the
     Force Majeure situation as quickly as possible in an economic manner, but
     shall not be obligated to settle any labor dispute except on terms
     acceptable to it and all such disputes shall be handled within the sole
     discretion of the affected Party.
16.2 DEFINITION OF FORCE MAJEURE
          For the purposes of this Agreement, "Force Majeure" shall have the
     same meaning as:
     (A) Is set out in the Contract, or;
     (B) Circumstances which were beyond the reasonable control of the Party
     concerned and shall include strikes, lockouts and other industrial
     disturbances even if they were not "beyond the reasonable control" of the
     Party.

                             ARTICLE XVII - NOTICES

          Except as otherwise specifically provided, all notices authorized or
     required between the Parties by any of the provisions of this Agreement,
     shall be in writing, in English and delivered in person or by courier
     service or by any electronic means of transmitting written communications,
     but electronic means, including emails, are only effective notices if the
     sender of the notice actually receives a return email that acknowledges
     receipt of the notice. All notices must be addressed to such Parties as
     designated below. Oral communication does not constitute notice for
     purposes of this Agreement, and telephone numbers for the Parties are
     listed below as a matter of convenience only. The originating notice given
     under any provision of this Agreement shall be deemed delivered only when
     received by the Party to whom such notice is directed, and the time for
     such Party to deliver any notice in response to such originating notice
     shall run from the date the originating notice is received. The second or
     any responsive notice shall be deemed delivered when received. "Received"
     for purposes of this Article XVII shall mean actual delivery of the notice
     to the address of the Party to be notified specified in accordance with
     this Article XVII. Each Party shall have the right to change its address at
     any time and/or designate that copies of all such notices be directed to
     another person at another address, by giving written notice thereof to all
     other Parties.

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MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

      COMPANIA CONSULTORA DE PETROLEO, S.A.             RADIAL ENERGY, INC.
      -------------------------------------             -------------------

                                  Attention:                      Attention:

                                                          Ziegler-Peru, Inc.

                                                  5065 Westheimer, Suite 810
       Houston, Texas 77056
       Attention: Edward R. Ziegler 12
                                                        Fax: 713 - 850 - 1235

                                                  Telephone: 713 - 850 - 0960

                                                     Email: EZSAFEOIL@AOL.COM

              ARTICLE XVIII - APPLICABLE LAW AND DISPUTE RESOLUTION

18.1 APPLICABLE LAWS
          This Agreement shall be governed by, construed, interpreted and
     applied in accordance with the laws of the Republic of Peru, excluding any
     choice of law rules which would refer the matter to the laws of another
     jurisdiction.
18.2 DISPUTE RESOLUTION
     (A) Any dispute, controversy or claim arising out of or in relation to or
     in connection with this Agreement or the operations carried out under this
     Agreement, including without limitation any dispute as to the construction,
     validity, interpretation, enforceability or breach of this Agreement, shall
     be exclusively and finally settled by arbitration in accordance with this
     Article 18.2. Any Party may submit such a dispute, controversy or claim to
     arbitration by notice to the other Parties.
     (B)The arbitration shall be heard and determined by three (3) arbitrators.
     Each side shall appoint an arbitrator of its choice within thirty (30) Days
     of the submission of a notice of arbitration. The Party-33appointed
     arbitrators shall in turn appoint a presiding arbitrator of the tribunal
     within sixty (60) Days following the appointment of both Party-appointed
     arbitrators. If the Party-appointed arbitrators cannot reach agreement on a
     presiding arbitrator of the tribunal and/or one Party refuses to appoint
     its Party-36appointed arbitrator within said sixty (60) Day period, the
     appointing authority for the implementation of such procedure shall be the
     American Arbitration Association, who shall appoint an independent
     arbitrator who does not have any financial interest in the dispute,
     controversy or claim.
     (C) Unless otherwise expressly agreed in writing by the Parties to the
     arbitration proceedings:
          (1) The arbitration proceedings shall be held in Lima, Peru;
          (2) The arbitration proceedings shall be conducted in the English
          language and the arbitrator(s) shall be fluent in the English
          language;
          (3) The arbitrator(s) shall be and remain at all times wholly
          independent and impartial;
          (4) The arbitration proceedings shall be conducted under the
          Arbitration Rules of the American Arbitration Association in effect on
          the Effective Date of this Agreement.
          (5) Any procedural issues not determined under the arbitral rules
          selected pursuant to Article 18.2(C)(4) shall be determined by the
          arbitration act and any other applicable laws of the Republic of Peru,
          other than those laws which would refer the matter to another
          jurisdiction;
          (6) The costs of the arbitration proceedings (including attorneys'
          fees and costs) shall be borne in the manner determined by the
          arbitrator(s);
          (7) The decision of the sole arbitrator or a majority of the
          arbitrators, as the case may be, shall be reduced to writing; final
          and binding without the right of appeal; the sole and exclusive remedy
          regarding any claims, counterclaims, issues or accountings presented
          to the arbitrator; made and promptly paid in U.S. dollars free of any
          deduction or offset; and any costs or fees incident to enforcing the
          award, shall to the maximum extent permitted by law be charged against
          the Party resisting such enforcement;

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          (8) Consequential, punitive or other similar damages shall not be
          allowed except those payable to third parties for which liability is
          allocated among the Parties by the arbitral award;
          (9) The award shall include interest from the date of any breach or
          violation of this Agreement, as determined by the arbitral award, and
          from the date of the award until paid in full, at the Agreed Interest
          Rate; and
          (10) Judgment upon the award may be entered in any court having
          jurisdiction over the person or the assets of the Party owing the
          judgment or application may be made to such court for a judicial
          acceptance of the award and an order of enforcement, as the case may
          be.
          (11) Whenever the Parties are of more than one nationality, the single
          arbitrator or the presiding arbitrator, as the case may be, shall not
          be of the same nationality as any of the Parties or their ultimate
          parent entities.
          (12) For purposes of allowing the arbitration provided in this Article
          XVIII, the enforcement and execution of any arbitration decision and
          award, and the issuance of any attachment or other interim remedy, no
          government agency will be involved as to the Contract License as this
          is a private contract for the Contract Area and Project.
          (13) The arbitration shall proceed in the absence of a Party who,
          after due notice, fails to answer or appear. An award shall not be
          made solely on the default of a Party, but the arbitrator(s) shall
          require the Party who is present to submit such evidence as the
          arbitrator(s) may determine is reasonably required to make an award.
          (14) If an arbitrator should die, withdraw or otherwise become
          incapable of serving, or refuse to serve, a successor arbitrator shall
          be selected and appointed in the same manner as the original
          arbitrator.
                ARTICLE XIX - ALLOCATION OF COST RECOVERY RIGHTS

19.1 ALLOCATION OF PRODUCTION
          Where applicable or necessary, each Party's share of Cost Oil, Profit
     Oil, or similar concepts during each Calendar Quarter shall be determined
     pursuant to this Article XIX as follows: (A) Oil available to the Parties
     from the Contract Area during each Calendar Quarter shall be allocated
     equitably for any and all purposes by type and grade on a pro-rata share of
     Participating Interests owned, and any oil or interest that is allocated to
     or re-allocated to the Government in the future will be allocated pro-rata
     based on the various Party shares of Participating Interests in the
     Project.
                         ARTICLE XX - GENERAL PROVISIONS

20.1 WARRANTIES AS TO NO PAYMENTS, GIFTS AND LOANS
          Each of the Parties warrants that neither it nor its affiliates has
     made or will make, with respect to the matters provided for hereunder, any
     offer, payment, promise to pay or authorization of the payment of any
     money, or any offer, gift, promise to give or authorization of the giving
     of anything of value, directly or indirectly, to or for the use or benefit
     of any official or employee of the Government or to or for the use or
     benefit of any political party, official, or candidate unless such offer,
     payment, gift, promise or authorization is authorized by the written laws
     or regulations the Republic of Peru, of Canada, or of the United States of
     America.
20.2 CONFLICTS OF INTEREST
     (A) Operator undertakes that it shall avoid any conflict of interest
     between its own interests (including the interests of Affiliates) and the
     interests of the other Parties in dealing with suppliers, customers and all
     other organizations or individuals doing or seeking to do business with the
     Parties in connection with activities contemplated under this Agreement.
     (B) The provisions of the preceding paragraph shall not apply to:
          (1) Operator's performance which is in accordance with the local
          preference laws or policies of the Government; or
          (2) Operator's acquisition of products or services from an Affiliate,
          or the sale thereof to an Affiliate, made in accordance with the terms
          of this Agreement.

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20.3 PUBLIC ANNOUNCEMENTS
     (A) Operator shall be responsible for the preparation and release of all
     public announcements and statements regarding this Agreement or the Joint
     Operations; provided that, no public announcement or statement shall be
     issued or made unless prior to its release all the Parties have been
     furnished with a copy of such statement or announcement and the approval of
     at least two (2) non-affiliated Parties holding fifty percent (50%), or
     more, of the Participating Interests has been obtained. Where a public
     announcement or statement becomes necessary or desirable because of danger
     to or loss of life, damage to property or pollution as a result of
     activities arising under this Agreement, Operator is authorized to issue
     and make such announcement or statement without prior approval of the
     Parties, but shall promptly furnish all the Parties with a copy of such
     announcement or statement.
     (B) If a Party wishes to issue or make any public announcement or statement
     regarding this Agreement or the Joint Operations, it shall not do so unless
     prior to its release, such Party furnishes all the Parties with a copy of
     such announcement or statement, and obtains the approval of at least two
     (2) Parties which are not Affiliates holding fifty percent (50%) or more of
     the Participating Interests; provided that, notwithstanding any failure to
     obtain such approval, no Party shall be prohibited from issuing or making
     any such public announcement or statement if it is necessary to do so in
     order to comply with the applicable laws, rules or regulations of any
     government, legal proceedings or stock exchange having jurisdiction over
     such Party or its Affiliates as set forth in Articles 15.1(A)(3) and (7).
     (C) Notwithstanding the provisions of this Article XIX, any Party may issue
     or make public announcements or may make regulatory filings as required by
     securities or similar laws in any jurisdiction in which it operates or is
     regulated.
20.4 SUCCESSORS AND ASSIGNS
          Subject to the limitations on transfer contained in Article XII, this
     Agreement shall inure to the benefit of and be binding upon the successors
     and assigns of the Parties.
20.5 WAIVER
          No waiver by any Party of any one or more defaults by another Party in
     the performance of this Agreement shall operate or be construed as a waiver
     of any future default or defaults by the same Party, whether of a like or
     of a different character. Except as expressly provided in this Agreement no
     Party shall be deemed to have waived, released or modified any of its
     rights under this Agreement unless such Party has expressly stated, in
     writing, that it does waive, release or modify such right.
20.6 SEVERANCE OF INVALID PROVISIONS
          If and for so long as any provision of this Agreement shall be deemed
     to be judged invalid for any reason whatsoever, such invalidity shall not
     affect the validity or operation of any other provision of this Agreement
     except only so far as shall be necessary to give effect to the construction
     of such invalidity, and any such invalid provision shall be deemed severed
     from this Agreement without affecting the validity of the balance of this
     Agreement.
20.7 MODIFICATIONS
          Except as is provided in Articles 11.2(B) and 20.6, there shall be no
     modification of this Agreement or the Contract except by written consent of
     all Parties.
20.8 HEADINGS
          The topical headings used in this Agreement are for convenience only
     and shall not be construed as having any substantive significance or as
     indicating that all of the provisions of this Agreement relating to any
     topic are to be found in any particular Article.
20.9 SINGULAR AND PLURAL
          Reference to the singular includes a reference to the plural and vice
     versa.
20.10 GENDER
          Reference to any gender includes a reference to all other genders.
20.11 COUNTERPART EXECUTION
          This Agreement is executed in three (3) original counterparts and each
     such counterpart shall be deemed an original Agreement for all purposes;
     provided no Party shall be bound to this Agreement unless and until all
     Parties have executed a counterpart. For purposes of assembling all
     counterparts into one document, Operator is authorized to detach the
     signature page from one or more counterparts and, after signature thereof
     by the respective Party, attach each signed signature page to a
     counterpart. Any Party may file this document of record in any forum or
     jurisdiction that they desire or require, and Parties agree to sign
     additional original or notarized copies of the signature page to facilitate
     recording requirements of other Party(ies).

20.12 ENTIRETY

                                      -26-
<PAGE>

MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

          This Agreement is the entire agreement of the Parties with respect to
     the subject matter contained herein and supersedes all prior understandings
     and negotiations of the Parties, except as to agreements among and/or
     between the various Parties in entering into the original investments and
     interest acquisition in the Project which other or additional agreements
     survive this Agreement until those other agreements are completed or
     satisfied.

     IN WITNESS of their agreement each Party has caused its duly authorized
representative to sign this instrument on the date indicated below such
representative's signature.

   Notary                          Compania Consultora de Petroleo, S.A. ("CCP")

                                   By:

                                        Efren Tomaylla Martinez

                                  Title: President

                                  Date:

                                      -27-

<PAGE>

MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

Radial Energy, Inc. ("Radial")
Ziegler-Peru, Inc. ("ZPI") By:
 (Company Name)
(Print or type name)

Notary                                                 Radial

                                                           By:
                                                                  G. Leigh Lyons

                                                           Title: President

                                                           Date:

Notary    I, the undersigned Notary
          have verified that the signer is
          Edward R. Ziegler, and he swore,
          verified, and affirmed that he signed
          this document for the purposes
          stated therein.

---------------------------------------------
          Notary in and for the State of Texas,
          Signed in Harris County.

           My Commission Expires:

           Seal

                                Form For Other Later Signatories Below

                                                               (Company Name)
                                                   By:     (Print or type name)

                                                   Title: Date:

                                      -28-

<PAGE>

MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

NOTARY                                          Radial Energy, Inc. ("Radial")

                                                By:  /s/ G. LEIGH LYONS
 [NOTORY SEAL GOES HERE]                        ------------------------------
                                                         G. Leigh Lyons
 /s/ JAMES L. CARNEY
     James L. Carney                            Title:   President

                                                Date:    May 11, 2006
To witness signature of G.                      ------------------------------
Leigh Lyons

Notary   I, the undersigned Notary              Ziegler-Peru, Inc. ("ZPI")
         have verified that the signer is
         Edward R. Ziegler, and he swore,       By:
         verified, and affirmed that he         ------------------------------
         signed this document for the
         purposes stated therein.               Edward R. Ziegler

         --------------------------------       Date:
         Notary in and for the State of         ------------------------------
         Texas
         Signed in Harris County.

         My Commission Expires:

Seal

                      Form For Other Later Signatories Below

                                ------------------------------------
                                        (Company Name)

                                By:
                                   ---------------------------------

                                   ---------------------------------
                                        (Print or type name)

                                Title: -----------------------------

                                Date:  -----------------------------

                                      -28-

<PAGE>

MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

NOTARY                                          Radial Energy, Inc. ("Radial")

                                                By:
                                                ------------------------------
                                                G. Leigh Lyons

                                                Title:   President

                                                Date:
                                                ------------------------------

Notary   I, the undersigned Notary              Ziegler-Peru, Inc. ("ZPI")
         have verified that the signer is
         Edward R. Ziegler, and he swore,       By: /s/ EDWARD R. ZIEGLER
         verified, and affirmed that he         ------------------------------
         signed this document for the
         purposes stated therein.               Edward R. Ziegler
         /s/ SHARI P. WADE
         --------------------------------       Date: 5-10-2006
         Notary in and for the State of         ------------------------------
         Texas
         Signed in Harris County.

         My Commission Expires:

Seal

[NOTARY SEAL GOES
 HERE]
                      Form For Other Later Signatories Below

                                ------------------------------------
                                        (Company Name)

                                By:
                                   ---------------------------------

                                   ---------------------------------
                                        (Print or type name)

                                Title: -----------------------------

                                Date:  -----------------------------

                                      -28-
<PAGE>

MODEL FORM INTERNATIONAL OPERATING AGREEMENT - 1995

          This Agreement is the entire agreement of the Parties with respect to
     the subject matter contained herein and supercedes all prior understandings
     and negotiations of the Parties, except as to agreements among and/or
     between the various Parties in entering into the original investments and
     interest acquisition in the Project which other or additional agreements
     survive this Agreement until those other agreements are completed or
     satisfied.

     IN WITNESS of their agreement each Party has caused the duly authorized
representative to sign the instrument on the date indicated below each
representative's signature.

{NOTARY SEAL GOES HERE]              COMPANIA CONSULTORA DE PETROLEO, SA ("CCP")

                                        By: /s/ EFREN TOMAYLIA MARTINEZ
                                           -----------------------------
                                                Efren Tomaylia Martinez
                                                DNI: 07851597

                                        Title:  President

                                        Date:   May 11, 2006
                                             ---------------------------

<PAGE>

                                                                       EXHIBIT C
                           ACCOUNTING PROCEDURE TO JOA
                             HUAYA ANTICLINE PROJECT
                              EFFECTIVE MAY 5, 2006

                                TABLE OF CONTENTS

SECTION                                                                     PAGE

SECTION I.   GENERAL PROVISIONS ............................................. 1
        1.1      PURPOSE. . ................................................. 1
        1.2      CONFLICT WITH AGREEMENT. . ................................. 1
        1.3      DEFINITIONS.. .............................................. 1
        1.4      JOINT ACCOUNT RECORDS AND CURRENCY EXCHANGE.. .............. 2
        1.5      STATEMENTS AND BILLINGS... ................................. 2
        1.6      PAYMENTS AND ADVANCES.. .................................... 3
        1.7      ADJUSTMENTS .................. ............................. 6
        1.8      AUDITS. . .................................................. 6
        1.9      ALLOCATIONS. . ............................................. 8

SECTION II.   DIRECT CHARGES ................................................ 8
        2.1      LICENSES, PERMITS, ETC. . .................................. 8
        2.2      SALARIES, WAGES AND RELATED COSTS.... ...................... 8
        2.3      EMPLOYEE RELOCATION COSTS. . ............................... 9
        2.4      OFFICES, CAMPS, AND MISCELLANEOUS FACILITIES.. ............. 9
        2.5      MATERIAL.. ................................................. 9
        2.6      EXCLUSIVELY OWNED EQUIPMENT AND FACILITIES OF OPERATOR
                   AND AFFILIATES. ...........................................9
        2.7      SERVICES .................................................. 10
        2.8      INSURANCE. . .............................................. 10
        2.9      DAMAGES AND LOSSES TO PROPERTY ............................ 11
        2.10     LITIGATION AND LEGAL EXPENSES.... ......................... 11
        2.11     TAXES AND DUTIES.. ........................................ 11
        2.12     ECOLOGICAL AND ENVIRONMENTAL. . ........................... 11
        2.13     DECOMMISSIONING (ABANDONMENT) AND RECLAMATION. . .......... 12
        2.14     OTHER EXPENDITURES. . ..................................... 12

SECTION III.   INDIRECT CHARGES ............................................ 12
        3.1      PURPOSE. . ................................................ 12
        3.2      AMOUNT.. .................................................. 12
        3.3      EXCLUSIONS. . ............................................. 13

<PAGE>

SECTION IV.   ACQUISITION OF MATERIAL ...................................... 13
        4.1      ACQUISITIONS.. ............................................ 13
        4.2      MATERIALS FURNISHED BY OPERATOR. . ........................ 13
        4.3      PREMIUM PRICES. . ......................................... 14
        4.4      WARRANTY OF MATERIAL FURNISHED BY OPERATOR. . ............. 14

SECTION V.   DISPOSAL OF MATERIALS ......................................... 15
        5.1      DISPOSAL. . ............................................... 15
        5.2      MATERIAL PURCHASED BY A PARTY OR AFFILIATE ................ 15
        5.3      DIVISION IN KIND. . ....................................... 15
        5.4      SALES TO THIRD PARTIES... ................................. 15

SECTION VI.   INVENTORIES .................................................. 16
        6.1      PERIODIC INVENTORIES - NOTICE AND REPRESENTATION. . ....... 16
        6.2      SPECIAL INVENTORIES... .................................... 16

<PAGE>

                              ACCOUNTING PROCEDURE

                                  INTRODUCTION

Attached to and made part of the  Operating  Agreement,  hereinafter  called the
"Agreement,"  effective  as of the 5th day of May,  2006,  by and  between  Cia.
Consultora De Petroleo,  S.A.,  Ziegler-Peru,  Inc., and Radial Energy, Inc. Any
other Party or Participating  Interest  subsequently created will as required in
the Agreement, also follow this Accounting Procedure.

                                   SECTION I.
                               GENERAL PROVISIONS

1.1  PURPOSE.

     1.1.1     The  purpose  of  this  Accounting   Procedure  is  to  establish
               equitable methods for determining  charges and credits applicable
               to  operations  under the  Agreement  which  reflect the costs of
               Joint  Operations  to the end that no Party shall gain or lose in
               relation to other Parties. 20
     1.1.2     The Parties agree,  however,  that if the methods prove unfair or
               inequitable to Operator or Non-Operators,  the Parties shall meet
               and in good faith  endeavor to agree on changes in methods deemed
               necessary to correct any unfairness or inequity.

1.2  CONFLICT WITH AGREEMENT.

     In the  event of a  conflict  between  the  provisions  of this  Accounting
     Procedure  and the  provisions  of the  Agreement to which this  Accounting
     Procedure is attached, the provisions of the Agreement shall prevail.

1.3  DEFINITIONS.

     The  definitions  contained  in  ARTICLE I of the  Agreement  to which this
     Accounting  Procedure is attached shall apply to this Accounting  Procedure
     and have the same meanings when used herein.  Certain terms used herein are
     defined as follows:

     "ACCRUAL  BASIS"  means  that basis of  accounting  under  which  costs and
     benefits are regarded as  applicable  to the period in which the  liability
     for the cost is incurred or the right to the benefit arises,  regardless of
     when invoiced, paid, or received.

     "AGREEMENT" means the Huaya Anticline Project JOA with an effective date of
     May 5, 2006.

     "CASH BASIS" means that basis of accounting under which only costs actually
     paid and revenue actually received are included for any period.

     "COUNTRY OF OPERATIONS" means the Republic of Peru.

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE
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                                                                          PAGE 1

<PAGE>

     "MATERIAL"  means machinery,  equipment and supplies  acquired and held for
     use in Joint Operations.

     "SECONDEES"  means  technical  and  professional  personnel  employed  by a
     Non-Operator or its Affiliate(s) who, with Operator's approval,  are loaned
     to Operator to perform  services  for, and under the  direction and control
     of, Operator under a secondment agreement.

     JOINT ACCOUNT RECORDS AND CURRENCY EXCHANGE.

     1.4.1     Operator  shall at all times  maintain  and keep true and correct
               records  of the  production  and  disposition  of all  liquid and
1.4            gaseous Hydrocarbons, and of all costs and expenditures under the
               Agreement,  as well as other  data  necessary  or proper  for the
               settlement of accounts  between the Parties  hereto in connection
               with their  rights and  obligations  under the  Agreement  and to
               enable Parties to comply with their respective  applicable income
               tax and other laws.
     1.4.2     Operator shall maintain  accounting  records  pertaining to Joint
               Operations  in  accordance  with  generally  accepted  accounting
               practices used in the  international  petroleum  industry and any
               applicable statutory  obligations of the Country of Operations as
               well as the provisions of the Contract and the Agreement.
     1.4.3     The  Joint  Account  financial  records  shall be  maintained  by
               Operator in the Spanish  language and in United States of America
               ("U.S.")  currency and in such other language and currency as may
               be  required  by the laws of the  Country  of  Operations  or the
               Contract.  Conversions  of currency shall be recorded at the rate
               actually  experienced in that conversion.  Currency  translations
               for expenditures and receipts shall be recorded at the arithmetic
               average of the buying and selling  exchange rates at the close of
               business  on the  last day of the  month  preceding  the  current
               accounting period
     1.4.4     Any  currency  exchange  gains or  losses  shall be  credited  or
               charged to the Joint  Account,  except as otherwise  specified in
               this Accounting Procedure.
     1.4.5     This  Accounting  Procedure  shall apply,  to  Non-Participating,
               Non-Consent,  or Exclusive Operations, if any, in the same manner
               that it applies to Joint Operations;  provided, however, that the
               charges and credits  applicable  to  Consenting  Parties shall be
               distinguished by an Exclusive Operation Account.  For the purpose
               of determining and calculating the remuneration of the Consenting
               Parties,  including  the premiums for Exclusive  Operations,  the
               costs  and  expenditures  shall  be  expressed  in U.S.  currency
               (irrespective  of the  currency  in  which  the  expenditure  was
               incurred).
     1.4.6     The cash basis for accounting shall be used in preparing accounts
               concerning the Joint Operations. If a "cash" basis for accounting
               is used,  Operator  shall show  accruals,  if any, as  memorandum
               items.

     STATEMENTS AND BILLINGS.

1.5

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                                                                          PAGE 2

<PAGE>

     1.5.1     Unless  otherwise  agreed by the Parties,  Operator  shall submit
               monthly to each  Party,  on or before the 15th Day of each month,
               statements  of the costs and  expenditures  incurred  during  the
               prior month, indicating by appropriate  classification the nature
               thereof,  the corresponding  budget category,  and the portion of
               such costs charged to each of the Parties.

               These  statements,  as a minimum,  shall  contain  the  following
               information:

               - advances of funds  setting forth the  currencies  received from
                 each Party,

               - the share of each Party in total expenditures,

               - the accrued expenditures,

               - the current account balance of each Party,

               - summary of costs, credits, and expenditures on a current month,
                 year-to-date,  and  inception-to-date  basis or other  periodic
                 basis, as agreed by Parties (such expenditures shall be grouped
                 by the  categories  and line items  designated  in the approved
                 Work  Program and Budget  submitted  by Operator in  accordance
                 with  ARTICLE  6.4  of  the   Agreement  so  as  to  facilitate
                 comparison of actual expenditures against that work Program and
                 Budget), and

               - details  of  unusual  charges  and  credits  in  excess of U.S.
                 dollars ten thousand (U.S. $ 10,000).

     1.5.2     Operator  shall,  upon  request,  furnish  a  description  of the
               accounting  classifications  or account  numbers and  definitions
               used by it on the statements provided to Parties.

     1.5.3     Amounts   included  in  the  statements  and  billings  shall  be
               expressed  in U.S.  currency  and  reconciled  to the  currencies
               advanced.

     1.5.4     Each Party shall be responsible  for preparing its own accounting
               and tax  reports  to meet  the  requirements  of the  Country  of
               Operations and of all other countries to which it may be subject.
               Operator,  to the  extent  that  the  information  is  reasonably
               available   from  the  Joint  Account   records,   shall  provide
               Non-Operators  in a timely manner with the necessary  information
               to facilitate the discharge of such responsibility.

1.6  PAYMENTS AND ADVANCES.

     1.6.1     Upon  approval of any Work  Program  and  Budget,  if Operator so
               requests,  each Non-Operator shall advance its share of estimated
               cash  requirements  for the  succeeding  one month of operations.
               Each such cash call shall be equal to the Operator's  estimate of
               the money to be spent in the  currencies  required to perform its
               duties  under the  approved  Work  Program and Budget  during the
               month concerned.  For informational  purposes the cash call shall
               contain an estimate of the funds  required for the succeeding two
               (2) months detailed by

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE
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                                                                          PAGE 3

<PAGE>

               the categories designated in the approved Work Program and Budget
               submitted  by  Operator  in  accordance  with  Article  6 of  the
               Agreement.

     1.6.2     Each such cash call, detailed by the categories designated in the
               approved  Work  Program  and  Budget  submitted  by  Operator  in
               accordance  with  Article  6 of the  Agreement  shall  be made in
               writing and delivered to all  Non-Operators not less than fifteen
               (15) Days before the  payment due date.  The due date for payment
               of such advances  shall be set by Operator but shall be no sooner
               than the first  Business  Day of the month for which the advances
               are  required.  All advances  shall be made without bank charges.
               Any charges  related to receipt of advances  from a  Non-Operator
               shall be borne by that Non-Operator.

     1.6.3     Each  Non-Operator  shall  wire  transfer  its  share of the full
               amount of each such cash call to  Operator  on or before  the due
               date,  in  the  currencies  requested  or  any  other  currencies
               acceptable to Operator and at a bank  designated by Operator.  If
               currency  provided by a Non-Operator  is other than the requested
               currency,  then the entire cost of  converting  to the  requested
               currency shall be charged to that Non-Operator.

     1.6.4     Notwithstanding  the provisions of Section 1.6.2, should Operator
               be  required  to pay any sums of money for the  Joint  Operations
               which were unforeseen at the time of providing the  Non-Operators
               with said  estimates  of its  requirements,  Operator  may make a
               written  request  of  the   Non-Operators  for  special  advances
               covering the  Non-Operators'  share of such  payments.  Each such
               Non-Operator shall make its proportional  special advances within
               ten (10) Days after receipt of such notice.

     1.6.5     If  a   Non-Operator's   advances   exceed   its  share  of  cash
               expenditures,  the next  succeeding  cash  advance  requirements,
               after such determination, shall be reduced accordingly.

     1.6.6     If  Non-Operator's  advances  are  less  than  its  share of cash
               expenditures,  the deficiency  shall,  at Operator's  option,  be
               added  to  subsequent  cash  advance  requirements  or be paid by
               Non-Operator  within  ten (10)  Days  following  the  receipt  of
               Operator's billing to Non-Operator for such deficiency.

     1.6.7     If, under the provisions of the  Agreement,  Operator is required
               to  segregate  funds  received  from the  Parties,  any  interest
               received  on  such  funds  shall  be  applied  against  the  next
               succeeding cash call or, if directed by the Operating  Committee,
               distributed  quarterly.  The  interest  thus  received  shall  be
               allocated  to the  Parties  on an  equitable  basis  taking  into
               consideration  date of funding by each Party to the  accounts  in
               proportion  to the  total  funding  into the  account.  A monthly
               statement summarizing receipts, disbursements,  transfers to each
               joint bank  account and  beginning  and ending  balances  thereof
               shall be provided by Operator to the Parties.

     1.6.8     If Operator does not request Non-Operators to advance their share
               of estimated cash  requirements,  each Non-Operator shall pay its
               share of cash expenditures within ten (10) Days following receipt
               of Operator's billing.

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE
MAY 17, 2000
                                                                          PAGE 4

<PAGE>

     1.6.9     Payments of  advances or billings  shall be made on or before the
               due date. In accordance  with ARTICLE VIII of the  Agreement,  if
               these  payments  are not  received  by the due  date  the  unpaid
               balance  shall bear and accrue  interest  from the due date until
               the payment is received by Operator at the Agreed  Interest Rate.
               For the purpose of  determining  the unpaid  balance and interest
               owed,  Operator shall translate to U.S. currency all amounts owed
               in other  currencies  using the  currency  exchange  rate readily
               available to Operator at the close of the last Business Day prior
               to  the  due  date  for  the  unpaid  balance  as  quoted  by the
               applicable  authority identified in Section 1.4.3 of this Section
               I.

     1.6.10    Subject  to  governmental  regulation,  Operator  shall  have the
               right,  at any time and from time to time,  to convert  the funds
               advanced or any part  thereof to other  currencies  to the extent
               that such currencies are then required for  operations.  The cost
               of any such conversion shall be charged to the Joint Account.

     1.6.11    Operator  shall  endeavor  to  maintain  funds held for the Joint
               Account in bank accounts at a level consistent with that required
               for the prudent conduct of Joint Operations.

     1.6.12    If under the Agreement,  Operator is required to segregate  funds
               received from or for the Joint Account, the provisions under this
               Section 1.6 for  payments  and  advances by  Non-Operators  shall
               apply also to Operator.

     1.6.13    Funding by Operator

               1.6.13.1  Notwithstanding any of the provisions of Sections 1.6.1
                         through  1.6.6 to the  contrary,  Operator may elect to
                         fund the  costs of the  Joint  Operations  and bill the
                         Non-Operators   for  such   funding   pursuant  to  the
                         provisions  of  this  Section  1.6.13.  Operator  shall
                         exercise  such  election by submission of notice to the
                         Non-Operators at the time of submission of any proposed
                         Work  Program  and Budget to the  Parties  pursuant  to
                         ARTICLE VII of the Agreement. In consideration for such
                         funding,  each  Non-Operator  shall  pay  Operator  the
                         financing charge specified in Section 1.6.13.3.

               1.6.13.2  Not later  than the tenth  (10th)  Day after the end of
                         any month for which the  Operator  has funded the Joint
                         Operations,  Operator shall bill each  Non-Operator for
                         (1) its  share  of the  cash  expenditure,  and (2) the
                         financing charge  calculated in accordance with Section
                         1.6.13.3.

               1.6.13.3  Operator may charge the Joint Operations  interest at a
                         maximum of the  monthly  LIBOR rate as  determined  and
                         defined  in the  Agreement  for  any  Joint  Operations
                         funded by the Operator.

               1.6.13.4  Notwithstanding  the provisions of Section 1.6.8,  each
                         bill  under  this  Section  1.6.13  shall be due on the
                         twentieth (20th) day of the month in which the bill was
                         issued, or if such day is not a Business

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE
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                                                                          PAGE 5

<PAGE>

               Day  in  the  Country  of  Operations,  the  first  Business  Day
               thereafter.

     1.6.13.5  In any subsequent  Calendar  Year,  Operator may elect to adopt a
               cash call  procedure in accordance  with  Sections  1.6.1 through
               1.6.6 by notice  submitted  to the  Non-Operators  at the time of
               submission  of  any  proposed  Work  Program  and  Budget  to the
               Parties.

ADJUSTMENTS.

Payments  of any  advances  or  billings  shall not  prejudice  the right of any
Non-Operator to protest or question the correctness thereof; provided,  however,
all bills and  statements  rendered  to  Non-Operators  by  Operator  during any
Calendar  Year shall  conclusively  be  presumed  to be true and  correct  after
twenty-four (24) months  following the end of such Calendar Year,  unless within
the said  twenty-four (24) month period a Non-Operator  takes written  exception
thereto  and makes claim on Operator  for  adjustment.  Failure on the part of a
Non-Operator  to make claim on Operator for adjustment  within such period shall
establish the correctness  thereof and preclude the filing of exceptions thereto
or making claims for  adjustment  thereon.  No adjustment  favorable to Operator
shall  be  made  unless  it is made  within  the  same  prescribed  period.  The
provisions of this  paragraph  shall not prevent  adjustments  resulting  from a
physical inventory of the Material as provided for in Section VI. Operator shall
be allowed to make  adjustments to the Joint Account after such twenty-four (24)
month period if these adjustments  result from audit exceptions  outside of this
Agreement,   third  party  claims,  or  Government  or  Government  Oil  Company
requirements.  Any such  adjustments  shall be subject to audit  within the time
period specified in Section 1.8.1.

AUDITS.

     1.8.1     A  Non-Operator,  upon at least sixty (60) Days advance notice in
               writing to Operator and all other  Non-Operators,  shall have the
               right to  audit  the  Joint  Accounts  and  records  of  Operator
               relating to the accounting hereunder for any Calendar Year within
               the  twenty-four  (24)  month  period  following  the end of such
               Calendar  Year except as  otherwise  provided in Section  3.1. As
               provided in ARTICLE  4.2(B)(6)  of the  Agreement,  Non-Operators
               shall have reasonable  access to Operator's  personnel and to the
               facilities,   warehouses,  and  offices  directly  or  indirectly
               serving  Joint  Operations.  The cost of each such audit shall be
               borne by Non-Operators  conducting the audit. Where there are two
               or  more  Non-Operators,   the  Non-Operators  shall  make  every
               reasonable  effort to conduct joint or  simultaneous  audits in a
               manner  that will  result in a minimum  of  inconvenience  to the
               Operator.  Non-Operators  must take written exception to and make
               claim upon the Operator for all  discrepancies  disclosed by said
               audit within said twenty-four  (24) month period.  Operator shall
               endeavor to produce  information  from its Affiliates  reasonably
               necessary to support  charges from those  Affiliates to the Joint
               Account other than those  charges  referred to in Section 3.1. If
               an  Affiliate   considers  such   information   confidential   or
               proprietary or if such Affiliate will not allow the Non-

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               Operators to audit its  accounts,  the  statutory  auditor of the
               Affiliate  shall be used to  confirm  the  details  and  facts as
               required,  provided such statutory auditor is an  internationally
               recognized firm of public accountants.  The auditing Non-Operator
               may  instruct  the  statutory   auditor  on  the  scope  of  such
               confirmation; however, the scope shall be subject to the approval
               of  the   Affiliate  in  question,   such   approval  not  to  be
               unreasonably  withheld.  Should  the  statutory  auditor  of  the
               Affiliate  decline  to  act  in  such  capacity,  or  not  be  an
               internationally    recognized    independent   firm   of   public
               accountants,   the   auditing   Non-Operators   shall  select  an
               internationally recognized independent firm of public accountants
               to carry out such  confirmation,  subject to the  approval of the
               Affiliate  in  question,  such  approval  not to be  unreasonably
               withheld.  The cost of such audit by the statutory auditor or the
               independent firm of public accountants, as the case may be, shall
               be charged to the Joint Account.

     1.8.3     Any information  obtained by a Non-Operator  under the provisions
               of this  Section 1.8 which does not relate  directly to the Joint
               Operations shall be kept  confidential and shall not be disclosed
               to any  party,  except as would  otherwise  be  permitted  by the
               Agreement.

     1.8.4     In the event that the Operator is required by law or the Contract
               to employ a public accounting firm to audit the Joint Account and
               records of Operator  relating to the  accounting  hereunder,  the
               cost thereof shall be a charge against the Joint  Account,  and a
               copy of the audit shall be furnished to each Party.

     1.8.5     At the  conclusion of each audit,  the Parties shall  endeavor to
               settle outstanding matters expeditiously. To this end the Parties
               conducting the audit will make a reasonable effort to prepare and
               distribute  a written  report to the Operator and all the Parties
               who  participated  in the  audit as soon as  possible  and in any
               event within ninety (90) Days after the conclusion of each audit.
               The  report  shall  include  all claims  arising  from such audit
               together with comments pertinent to the operation of the accounts
               and records.  Operator shall make a reasonable effort to reply to
               the  report in writing  as soon as  possible  and in any event no
               later than ninety (90) Days after  receipt of the report.  Should
               the  Non-Operators  consider  that the  report or reply  requires
               further  investigation  of any item  therein,  the  Non-Operators
               shall have the right to conduct further investigation in relation
               to such matter notwithstanding the provisions of Sections 1.7 and
               1.8.1  that  the  period  of  twenty-four  (24)  months  may have
               expired. However, conducting such further investigation shall not
               extend  the  twenty-four  (24) month  period  for taking  written
               exception  to and  making  a  claim  upon  the  Operator  for all
               discrepancies    disclosed   by   said   audit.    Such   further
               investigations  shall be commenced within thirty (30) Days and be
               concluded within sixty (60) Days after the receipt of such report
               or reply, as the case may be.

     1.8.6     All  adjustments  resulting  from an  audit  agreed  between  the
               Operator  and the  Non-Operator  conducting  the  audit  shall be
               reflected  promptly  in the Joint  Account  by the  Operator  and
               reported to the  Non-Operator(s).  If any dispute  shall arise in
               connection  with an audit,  it shall be reported to and discussed
               by the Operating  Committee,  and, unless otherwise agreed by the
               parties  to  the  dispute,   resolved  in  accordance   with  the
               provisions  of  Article  XVIII  of  the  Agreement  (Dispute  and
               Arbitration sections). If all the parties to the dispute so

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               agree, the adjustment(s) may be referred to an independent expert
               agreed to by the parties to the  dispute.  At the election of the
               parties  to the  dispute,  the  decision  of the  expert  will be
               binding upon such parties.  Unless otherwise agreed,  the cost of
               such expert will be shared equally by all parties to the dispute.

1.9  ALLOCATIONS.

     If it becomes necessary to allocate any costs or expenditures to or between
     Joint Operations and any other operations, such allocation shall be made on
     an equitable basis. For informational purposes only, Operator shall furnish
     a description of its allocation procedures pertaining to these costs and
     expenditures and its rates for personnel and other charges, along with each
     proposed Work Program and Budget.

                                   SECTION II.
                                 DIRECT CHARGES

Operator shall charge the Joint Account with all costs and expenditures incurred
in connection  with Joint  Operations.  It is also  understood  that charges for
services normally provided by an operator such as those contemplated in Sections
2.7.2 and 2.7.3 which are provided by a Party's Affiliate shall reflect the cost
to the Affiliate,  excluding  profit,  for performing  such services,  except as
otherwise provided in Section 2.6, Section 2.7.1, and Section 2.5.1 if selected.
26

The costs and  expenditures  shall be recorded as required for the settlement of
accounts   between  the  Parties  hereto  in  connection  with  the  rights  and
obligations under this Agreement and for purposes of complying with the tax laws
of the Country of  Operations  and of such other  countries  to which any of the
Parties  may be  subject.  Without in any way  limiting  the  generality  of the
foregoing, chargeable costs and expenditures shall include:

2.1  LICENSES, PERMITS, ETC.

     All costs, if any, attributable to the acquisition, maintenance, renewal or
     relinquishment  of licenses,  permits,  contractual  and/or  surface rights
     acquired  for Joint  Operations  and bonuses  paid in  accordance  with the
     Contract  when paid by Operator in  accordance  with the  provisions of the
     Agreement.

2.2  SALARIES, WAGES AND RELATED COSTS.

     Salaries,  wages and related  costs  include  everything  constituting  the
     employees' total compensation,  as well as the cost to Operator of holiday,
     vacation,  sickness,  disability  benefits,  living and housing allowances,
     travel time,  bonuses,  and other  customary  allowances  applicable to the
     salaries and wages chargeable  hereunder,  as well as the costs to Operator
     for employee  benefits,  including  but not limited to employee  group life
     insurance, group medical insurance, hospitalization,  retirement, severance
     payments

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     required by the laws or  regulations of the Country of Operations and other
     benefit plans of a like nature applicable to labor costs of Operator.

     All costs associated with organizational  restructuring  (e.g.,  separation
     benefits,  relocation costs,  asset  disposition  costs) of Operator or its
     Affiliates,  other than those costs which are directly related to employees
     of Operator who are  directly  engaged in Joint  Operations  on a full time
     basis,  will  require the approval of the Parties to be  chargeable  to the
     Joint Account.

     Any costs associated with Country of Operations benefit plans which are not
     currently funded shall be accrued and not be paid by Non-Operators,  unless
     otherwise approved by the Operating  Committee,  until the same are due and
     payable  to the  employee,  upon  withdrawal  of a  Party  pursuant  to the
     Agreement and then only by the withdrawing  Party,  or upon  termination of
     the Agreement, whichever occurs first.

2.3  EMPLOYEE RELOCATION COSTS.

     No employee relocation costs will be charged to the Joint Operations unless
     approved by the Operating  Committee.  Employee  relocation costs are those
     costs to permanently  move an employee and his family and  dependents  from
     one area of residence to another.  Employee  relocation costs are different
     than  travel  and  housing/camp  expenses  that  may be set  forth in other
     sections.

2.4  OFFICES, CAMPS, AND MISCELLANEOUS FACILITIES.

     Cost of maintaining any offices, sub-offices, camps with meals and lodging,
     warehouses, housing, and other facilities of the Operator and/or Affiliates
     directly serving the Joint Operations.  If such facilities serve operations
     in addition to the Joint  Operations  the costs shall be  allocated  to the
     properties served on an equitable basis.

2.5  MATERIAL.

     Cost,  net of  discounts  taken  by  Operator,  of  Material  purchased  or
     furnished by Operator.  Such costs shall  include,  but are not limited to,
     export  brokers' fees,  transportation  charges,  loading,  unloading fees,
     export and import duties and license fees  associated  with the procurement
     of Material and in-transit losses, if any, not covered by insurance. So far
     as it is reasonably  practical and consistent with efficient and economical
     operation,  only such Material shall be purchased for, and the cost thereof
     charged to, the Joint Account as may be required for immediate use.

2.6  EXCLUSIVELY OWNED EQUIPMENT AND FACILITIES OF OPERATOR AND AFFILIATES.

     Charges for  exclusively  owned  equipment,  facilities,  and  utilities of
     Operator  or any of its  Affiliates  at rates  not to  exceed  the  average
     commercial rates of  non-affiliated  third parties then prevailing for like
     equipment, facilities, and utilities for use in the area where the same are
     used hereunder. On request,  Operator shall furnish Non-Operators a list of
     rates and the basis of  application.  Such rates shall be revised from time
     to time if found to be either excessive or insufficient,  but not more than
     once every six months.

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     Exclusively  owned drilling  tools and other  equipment lost in the hole or
     damaged beyond repair may be charged at replacement cost less  depreciation
     plus  transportation  costs to deliver like equipment to the location where
     used.

2.7  SERVICES.

     2.7.1     The charges for services provided by third parties, including the
               Affiliates of the respective  Parties which have  contracted with
               Operator to perform services that are normally  provided by third
               parties,  other than those services  covered by Section 2.7.2 and
               Section  2.7.3,  shall be chargeable to the Joint  Account.  Such
               charges for services by the Affiliates of the respective  Parties
               shall not exceed  those  currently  prevailing  if  performed  by
               non-affiliated    third   parties,    considering   quality   and
               availability of services.

     2.7.2     The cost of services performed by Operator's Affiliates technical
               and  professional  staffs  not  located  within  the  Country  of
               Operation   shall  be  chargeable  to  the  Joint  Account.   The
               individual  rates  shall  include  salaries  and  wages  of  such
               technical and  professional  personnel,  lost time,  governmental
               assessments,  and employee benefits. Costs shall also include all
               support  costs  necessary  for such  technical  and  professional
               personnel to perform such services,  such as, but not limited to,
               rent,  utilities,  support staff,  drafting,  telephone and other
               communication expenses, computer support, supplies, depreciation,
               and other reasonable expenses.

     2.7.3     The cost of services  performed  with the approval of Operator by
               the technical and professional  staffs of the  Non-Operators  and
               the  Affiliates of the  respective  Non-Operators,  including the
               cost to such  Affiliates and  Non-Operators  of their  respective
               Secondees,   shall  be  chargeable  to  the  Joint  Account.  The
               individual  rates  shall  include  salaries  and  wages  of  such
               technical and  professional  personnel and Secondees,  lost time,
               governmental  assessments,  and employee  benefits.  Costs (other
               than  for  Secondees)   shall  also  include  all  support  costs
               necessary  for  such  technical  and  professional  personnel  to
               perform  such  services,  such  as,  but not  limited,  to  rent,
               utilities,   support   staff,   drafting,   telephone  and  other
               communication expenses, computer support, supplies, depreciation,
               and other reasonable expenses.

     2.7.4     A  Non-Operator  shall bill Operator for direct costs of services
               and of Secondees charged under the provisions of Section 2.7.3 on
               or  before  the  last  day of  each  month  for  charges  for the
               preceding month, to which charges  Non-Operator  shall not add an
               administrative  overhead  rate.  Within  thirty  (30) Days  after
               receipt of a bill for such charges, Operator shall pay the amount
               due thereon.

     INSURANCE.

     Premiums paid for insurance  required by law or the Agreement to be carried
     for the benefit of the Joint Operations.

2.8

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2.9  DAMAGES AND LOSSES TO PROPERTY.

     2.9.1     All costs or expenditures  necessary to replace or repair damages
               or losses incurred by fire, flood, storm, theft, accident, or any
               other cause shall be chargeable to the Joint Account. Costs shall
               be  listed  separately  in the  monthly  statement  of costs  and
               expenditures.

     2.9.2     Credits for settlements  received from insurance  carried for the
               benefit of Joint Operations and from others for losses or damages
               to Joint  Property or Materials  shall be chargeable to the Joint
               Account.  Each Party  shall be  credited  with its  Participating
               Interest  share  thereof  except where such  receipts are derived
               from insurance purchased by Operator for less than all Parties in
               which event such proceeds  shall be credited to those Parties for
               whom the  insurance  was  purchased  in the  proportion  of their
               respective contributions toward the insurance coverage.

     2.9.3     Expenditures  incurred in the  settlement of all losses,  claims,
               damages,  judgments,  and other expenses for the account of Joint
               Operations shall be chargeable to the Joint Account.

2.10 LITIGATION AND LEGAL EXPENSES.

     The costs and expenses of litigation and legal  services  necessary for the
     protection of the Joint Operations under this Agreement as follows:

     2.10.1    Legal  services  necessary or expedient for the protection of the
               Joint  Operations,  and all costs  and  expenses  of  litigation,
               arbitration or other alternative  dispute  resolution  procedure,
               including reasonable attorneys' fees and expenses,  together with
               all judgments obtained against the Parties or any of them arising
               from the Joint Operations.

     2.10.2    If the  Parties  hereunder  shall so  agree,  actions  or  claims
               affecting  the Joint  Operations  hereunder may be handled by the
               legal  staff of one or any of the  Parties  hereto;  and a charge
               commensurate   with  the   reasonable   costs  of  providing  and
               furnishing  such  services  rendered  may be  made  by the  Party
               providing such service to Operator for the Joint Account,  but no
               such charges shall be made until approved by the Parties.

2.11 TAXES AND DUTIES.

     All taxes, duties,  assessments and governmental charges, of every kind and
     nature, assessed or levied upon or in connection with the Joint Operations,
     other than any that are measured by or based upon the revenues,  income and
     net worth of a Party.

2.12 ECOLOGICAL AND ENVIRONMENTAL.

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     Costs incurred on the Joint  Property as a result of statutory  regulations
     for archaeological  and geophysical  surveys relative to identification and
     protection of cultural  resources and/or other  environmental or ecological
     surveys as may be  required by any  regulatory  authority.  Also,  costs to
     provide or have available pollution  containment and removal equipment plus
     costs  of  actual  control,   clean  up  and  remediation   resulting  from
     responsibilities  associated with Hydrocarbon  contamination as required by
     all applicable laws and regulations.

2.13 DECOMMISSIONING (ABANDONMENT) AND RECLAMATION.

     Costs incurred for  decommissioning  (abandonment)  and  reclamation of the
     Joint   Property,   including  costs  required  by  governmental  or  other
     regulatory authority or by the Contract.

2.14 OTHER EXPENDITURES.

     Any other costs and expenditures incurred by Operator for the necessary and
     proper  conduct of the Joint  Operations in  accordance  with approved Work
     Programs  and Budgets and not covered in this Section II or in Section III.
     20

                                  SECTION III.
                                INDIRECT CHARGES

3.1  PURPOSE.

     Operator  shall charge the Joint  Account  monthly for the cost of indirect
     services and related  office costs of Operator  not  otherwise  provided in
     this Accounting Procedure. Indirect costs chargeable under this Section III
     represent the cost of general  assistance and support services  provided by
     Operator and its Affiliates.  These costs are such that it is not practical
     to identify or associate  them with specific  projects but are for services
     which  provide the Joint  Operations  with needed and  necessary  resources
     which Operator requires and provide a real benefit to Joint Operations.  No
     cost or  expenditure  included  under  Section  II  shall  be  included  or
     duplicated  under this Section III. The charges  under  Section III are not
     subject to audit under  Sections  1.8.1 and 1.8.2 other than to verify that
     the overhead percentages are applied correctly to the expenditure basis.

3.2  AMOUNT.

     3.2.1 The indirect charge defined in Section 3.1 shall be U.S.  dollars six
     thousand (U.S. $ 6,000) per month for the 100% Joint Operation and Project,
     plus an additional  charge of 0.35% of the  Hydrocarbon  gross revenues for
     the  Project  from each  preceding  month  billed  with the  current  month
     indirect charge.

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     3.2.2 The Operating Committee may adjust the amount or basis of calculation
     for the charge in Section 3.1 and 3.2.1 every six months.

     3.2.3 No annual assessment will be made based on the cost of expenditures.

3.3  EXCLUSIONS.

     The  expenditures  used to calculate the monthly  indirect charge shall not
     include  the  indirect  charge   (calculated  either  as  a  percentage  of
     expenditures  or as a minimum  monthly  charge),  rentals on surface rights
     acquired and maintained for the Joint Account, guarantee deposits, pipeline
     tariffs,  concession acquisition costs, bonuses paid in accordance with the
     Contract, royalties and taxes on production or revenue to the Joint Account
     paid by Operator,  expenditures associated with major construction projects
     for which a separate indirect charge is established hereunder,  payments to
     third parties in settlement of claims, and other similar items.

     Credits  arising  from any  government  subsidy  payments,  disposition  of
     Material,  and receipts from third  parties for  settlement of claims shall
     not be  deducted  from total  expenditures  in  determining  such  indirect
     charge.
                                   SECTION IV.
                             ACQUISITION OF MATERIAL

4.1  ACQUISITIONS.

     Materials purchased for the Joint Account shall be charged at net cost paid
     by the Operator.  The price of Materials purchased shall include, but shall
     not be limited to export broker's fees, insurance,  transportation charges,
     loading and unloading  fees,  import  duties,  license fees,  and demurrage
     (retention  charges)  associated  with the  procurement  of Materials,  and
     applicable taxes, less all discounts taken.

4.2  MATERIALS FURNISHED BY OPERATOR.

     Materials  required for operations  shall be purchased for direct charge to
     the Joint  Account  whenever  practicable,  except the Operator may furnish
     such Materials from its stock under the following conditions:

     4.2.1     NEW MATERIALS (CONDITION "A").

               New Materials  transferred from the warehouse or other properties
               of Operator shall be priced at net cost  determined in accordance
               with  Section 4.1 above as if  Operator  had  purchased  such new
               Material just prior to its  transfer.  Such net costs shall in no
               event exceed the then current market price.

     4.2.2     USED MATERIALS (CONDITIONS "B" AND "C").

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     4.2.2.1   Material which is in sound and serviceable condition and suitable
               for use  without  repair or  reconditioning  shall be  classed as
               Condition  "B" and priced at  seventy-five  percent (75%) of such
               new purchase net cost at the time of transfer.
     4.2.2.2   Materials not meeting the  requirements of Section 4.2.2.1 above,
               but which can be made  suitable  for use after being  repaired or
               reconditioned,  shall be classed as  Condition  "C" and priced at
               fifty  percent (50%) of such new purchase net cost at the time of
               transfer. The cost of reconditioning shall also be charged to the
               Joint  Account  provided the  Condition  "C" price,  plus cost of
               reconditioning,  does not exceed  the  Condition  "B" price;  and
               provided that Material so classified  meet the  requirements  for
               Condition "B" Material upon being repaired or reconditioned.

     4.2.2.3   Material which cannot be classified as Condition "B" or Condition
               "C", shall be priced at a value commensurate with its use.

     4.2.2.4   Tanks, derricks, buildings, and other items of Material involving
               erection costs, if transferred in knocked-down  condition,  shall
               be graded as to condition  as provided in this  Section  4.2.2 of
               Section IV, and priced on the basis of knocked-down price of like
               new Material.

     4.2.2.5   Material  including  drill pipe,  casing and tubing,  which is no
               longer  useable for its original  purpose but is useable for some
               other  purpose,  shall be graded as to  condition  as provided in
               this Section 4.2.2 of Section IV. Such  Material  shall be priced
               on the basis of the current price of items normally used for such
               other purpose if sold to third parties.

     PREMIUM PRICES.

4.3
     Whenever Material is not readily obtainable at prices specified in Sections
     4.1 and 4.2 of this Section IV because of national emergencies,  strikes or
     other  unusual  causes over which  Operator  has no control,  Operator  may
     charge the Joint  Account for the required  Material at  Operator's  actual
     cost incurred  procuring such Material,  in making it suitable for use, and
     moving it to the Contract Area, provided that notice in writing,  including
     a detailed  description of the Material  required and the required delivery
     date, is furnished to Non-Operators of the proposed charge. Operator is not
     required to accept  Material  furnished  in kind by that  Non-Operator.  If
     Operator fails to submit proper notification prior to billing Non-Operators
     for such  Material,  Operator  shall only  charge the Joint  Account on the
     basis of the price allowed  during a "normal"  pricing  period in effect at
     time of movement.

     WARRANTY OF MATERIAL FURNISHED BY OPERATOR.

4.4
     OPERATOR NOR OTHER  SUPPLYING  PARTIES WARRANT THE CONDITION OR FITNESS FOR
     THE PURPOSE  INTENDED OF ANY MATERIAL  FURNISHED  TO THE  PROJECT.  IN CASE
     DEFECTIVE

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     MATERIAL IS FURNISHED BY OPERATOR FOR THE JOINT  ACCOUNT,  CREDIT SHALL NOT
     BE  PASSED TO THE JOINT  ACCOUNT  UNTIL  ADJUSTMENT  HAS BEEN  RECEIVED  BY
     OPERATOR FROM THE MANUFACTURERS OR THEIR AGENTS.

                                   SECTION V.
                              DISPOSAL OF MATERIALS

5.1  DISPOSAL.

     Operator  shall  be  under  no  obligation  to  purchase  the  interest  of
     Non-Operators  in new or used surplus  Materials.  Operator  shall have the
     right to dispose of Materials  but shall advise and secure prior  agreement
     of the Operating Committee of any proposed  disposition of Materials having
     an  original  cost  to the  Joint  Account  either  individually  or in the
     aggregate of ten thousand U.S.  Dollars (U.S. $ 10,000) or more. When Joint
     Operations are relieved of Material charged to the Joint Account,  Operator
     shall advise each Non-Operator of the original cost of such Material to the
     Joint Account so that the Parties may eliminate such costs from their asset
     records.  Credits for Material sold by Operator  shall be made to the Joint
     Account in the month in which  payment is received  for the  Material.  Any
     Material  sold or  disposed  of under this  Section  shall be on an "as is,
     where is" basis  without  guarantees  or  warranties of any kind or nature.
     Costs and expenditures incurred by Operator in the disposition of Materials
     shall be charged to the Joint Account.

5.2  MATERIAL  PURCHASED BY A PARTY OR AFFILIATE.

     Proceeds  received from  Material  purchased  from the Joint  Property by a
     Party or an  Affiliate  thereof  shall be credited by Operator to the Joint
     Account,  with new Material valued in the same manner as new Material under
     Section 4.2.1 and used Material  valued in the same manner as used Material
     under Section 4.2.2, unless otherwise agreed by the Operating Committee.

5.3  DIVISION IN KIND.

     Division of  Material in kind,  if made  between the  Parties,  shall be in
     proportion to their respective interests in such Material.  Each Party will
     thereupon be charged  individually with the value (determined in accordance
     with the  procedure  set forth in Section 5.2) of the Material  received or
     receivable by it.

5.4  SALES TO  THIRD  PARTIES.

     Proceeds received from Material  purchased from the Joint Property by third
     parties  shall be  credited  by  Operator  to the Joint  Account at the net
     amount  collected  by Operator  from the buyer.  If the sales price is less
     than that  determined in accordance with the procedure set forth in Section
     5.2, then approval by the Operating  Committee  shall be required  prior to
     the sale.  Any claims by the buyer for  defective  materials  or  otherwise
     shall be charged back to the Joint Account if and when paid by Operator.

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                                   SECTION VI.
                                   INVENTORIES

6.1  PERIODIC INVENTORIES - NOTICE AND REPRESENTATION.

     At reasonable intervals, but at least annually,  inventories shall be taken
     by Operator  of all  Material  held in  warehouse  stock on which  detailed
     accounting  records are  normally  maintained.  The  expense of  conducting
     periodic inventories shall be charged to the Joint Account.  Operator shall
     give  Non-Operators  written  notice at least sixty Days (60) in advance of
     its intention to take inventory, and Non-Operators,  at their sole cost and
     expense,  shall each be  entitled  to have a  representative  present.  The
     failure of any  Non-Operator to be represented at such inventory shall bind
     such  Non-Operator to accept the inventory taken by Operator,  who shall in
     that event furnish each Non- Operator with a reconciliation of overages and
     shortages.  Inventory  adjustments  to the Joint  Account shall be made for
     overages and  shortages.  Any  adjustment  equivalent  to ten thousand U.S.
     Dollars  (U.S.  $ 10,000) or more shall be brought to the  attention of the
     Operating Committee.

6.2  SPECIAL INVENTORIES.

     Whenever there is a sale or change of interest in the Agreement,  a special
     inventory may be taken by the Operator provided the seller and/or purchaser
     of such interest agrees to bear all of the expense thereof.  In such cases,
     both the seller and the purchaser  shall be entitled to be represented  and
     shall be governed by the inventory so taken. END OF ACCOUNTING PROCEDURE

AIPN MODEL INTERNATIONAL ACCOUNTING PROCEDURE
MAY 17, 2000
                                                                         PAGE 16EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 10th day of March, 2006, by and between BV Pharmaceutical Inc., a Nevada
corporation (hereinafter called "Corporation"), and Gregory Leigh Lyons
(hereinafter called "Executive").

                                   WITNESSETH:
                                   __________

     In consideration of the compensation payable to Executive by the
Corporation pursuant to this Agreement, and the mutual promises, covenants,
representations and warranties contained herein, and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
Parties hereto agree as follows:

     1. EMPLOYMENT AND POSITION. The Corporation hereby employs the Executive as
Chief Executive Officer of the Corporation, and the Executive hereby accepts
said employment and agrees to render such services to the Corporation on the
terms and conditions set forth in this Agreement. During the term of this
Agreement, the Executive shall report directly and solely to the board of
directors and shall have such executive responsibilities to and shall perform
such executive services for the Corporation as may be consistent with his
titles. All other officers (excluding the President) and employees of the
Corporation shall report, directly or indirectly, to the Executive.

     2. TERM. Subject to the provisions for extension and termination set forth
in this Agreement, the initial term of this Agreement will begin on April 1,
2006 and shall terminate on April 1, 2009 unless sooner terminated ("Initial
Term"), provided that the term of this Agreement and the Executive's employment
hereunder shall be deemed to be extended for additional terms of one-year each
(each, an "Additional Term") commencing on the day after the expiration of the
Initial Term or the previous Additional Term unless either party elects to
terminate this Agreement at the end of the Initial Term or any Additional Term
by giving the other party written notice of such election at least sixty (60)
days before the expiration thereof. The Initial Term and all Additional Terms
shall be referred to collectively as the "Term".

     3. COMPENSATION. As compensation for all services to be performed by the
Executive under this Agreement, the Corporation shall compensate Executive as
follows:

     (a) BASE COMPENSATION. The Corporation shall pay the Executive base
compensation ("Base Salary") equal to One Hundred Eighty Thousand U.S. Dollars
($180,000) per annum, which may be increased from time to time in such amounts
as are determined by the Board of Directors of the Corporation and shall not be
decreased without the Executive's written consent. The term "Base Salary" shall
refer to the Base Salary as so increased. The Base Salary will be payable in
installments in accordance with the Corporation's regular payroll practices from
time to time. The Base Salary and all other remuneration paid to the Executive
shall be subject to applicable employment and income tax withholding taxes.

<PAGE>

     (b) BONUS. In addition to the Base Salary, the Corporation shall pay the
Executive during the term of this Agreement on each anniversary of the
commencement of the Initial Term such bonus payments as may be determined by the
Board of Directors of the Corporation based upon the Corporation's achievement
of the goals set forth in the Corporation's business plan as in effect from time
to time.

     (c) STOCK GRANT. The Board of Directors of the Corporation may, from time
to time, in the Board's sole discretion grant the Executive shares of the
Corporation's restricted Common Stock, and/or warrants and/or options to
purchase restricted shares of Common Stock, in amounts deemed appropriate by the
Board, based on the Executive's performance of his duties (the "Stock Grant")
The stock included in the Stock Grant shall be duly authorized, legally issued,
fully paid and non-assessable upon the issuance thereof. The Corporation is
under no obligation or duty to issue any Stock Grant to Executive.

     (d) BENEFITS. During the Term of this Agreement, the Executive shall be
eligible to participate in the standard fringe benefits package and incentive
compensation plans generally made available to the executive management
employees of the Corporation, as such benefits may be determined or changed from
time to time by the Board of Directors of the Corporation. The fringe benefit
programs will include at a minimum reasonable hospital and major medical
insurance coverage for Executive and the family of the Executive. Without
limiting the generality of the foregoing, the Corporation shall at a minimum
reimburse the Executive for the amount of Blue Cross insurance coverage costing
approximately $800 per month at the time this Agreement is entered into and
shall increase such reimbursement as the cost of such coverage is increased by
the provider thereof from time to time.

     (e) EXPENSES. During the Term of this Agreement, the Corporation shall
reimburse the Executive for any and all expenses reasonably incurred by the
Executive incident to the performance of the duties imposed upon Executive
hereunder and which are substantiated in accordance with reasonable policies and
procedures of the Corporation in effect from time to time.

     (f) AUTO ALLOWANCE. During the Term of this Agreement, the Corporation
shall pay to the Executive an automobile allowance of Four Hundred Dollars
($400) a month in addition to the Executive's Base Salary.

     4. OFFICE. The Corporation will maintain an appropriately appointed and
furnished executive office in a location selected by the Executive at his
discretion from time to time, with a computer and such additional equipment and
office furnishings as are necessary to carry out the responsibilities of the
office of the Chief Operating Officer The Corporation shall provide the
Executive with secretarial and other administrative staff and support services
suitable to the Executive's duties and responsibilities hereunder. Without
limiting the generality of the foregoing sentence, the Corporation shall at a
minimum pay One Thousand Dollars ($1,000.00) per month towards the rental and
administrative expense of the Executive's office.

     5. TERMINATION.

     (a) DEATH OR DISABILITY.

     This Agreement shall terminate automatically upon the Executive's death.

                                      -2-

<PAGE>

     The Corporation shall be entitled to terminate this Agreement because of
the Executive's disability during the Term. Such termination shall only become
effective if (i) one hundred and eighty (180) days shall elapse after the date
on which the Corporation gives the Executive written notice of its intention to
effect such a termination based on disability, and (ii) during such 180-day
period the Executive shall not have returned to full-time performance of the
Executive's duties.

     (b) TERMINATION BY THE CORPORATION.

     The Corporation may terminate this Agreement for Cause at any time during
the Term, at which time the Term shall end. The Corporation shall give the
Executive written notice of such termination, setting forth in reasonable detail
the specific conditions that it considers to constitute Cause, and termination
shall be effective thirty (30) days after the delivery of such notice.

     For purposes of this Agreement, the term "Cause" shall mean, when used with
respect to the termination of this Agreement by the Corporation, the conviction
of the Executive by a court of competent jurisdiction of a felony involving a
crime of fraud or a financial crime against the Corporation, such as
embezzlement or other theft from the Corporation.

     (c) TERMINATION BY EXECUTIVE.

     The Executive may terminate this Agreement for Good Reason at any time
during the Term, at which time the Term shall end. The Executive shall give the
Corporation written notice of such termination, setting forth in reasonable
detail the specific conditions that the Executive considers to constitute Good
Reason, and termination shall be effective thirty (30) days after the delivery
of such notice.

     For purposes of this Agreement, the term "Good Reason" means (a) any
failure by the Corporation to comply with any provision of this Agreement, other
than an isolated, insubstantial and inadvertent failure that is not taken in bad
faith and is remedied by the Corporation within thirty (30) days after receipt
of notice thereof from the Executive; or (b) the assignment to the Executive of
any duties or responsibilities inconsistent in any material respect with those
customarily associated with the positions held by the Executive during the Term.

     6. OBLIGATIONS OF THE CORPORATION UPON TERMINATION

     (a) TERMINATION FOR OTHER THAN GOOD REASON, FOR DEATH OR DISABILITY, OR FOR
CAUSE. If, during the Term, the Corporation terminates this Agreement due to the
death or disability of the Executive in accordance with Section 5(a) or for
Cause in accordance with Section 5(b), or the Executive terminates this
Agreement other than for Good Reason in accordance with Section 5(c), then the
Corporation shall pay to the Executive (or in the event of termination of
employment by reason of the Executive's death, his legal representative or his
estate if no representative has been appointed) in a lump sum in cash, within 30
days after the date of Termination, an amount equal to the accrued but unpaid
salary pursuant to Section 3(a) and the bonuses as to which the goals set forth
on Exhibit B have been achieved but which have not been paid in accordance with
Section 3(b) (even if the deadline for such achievement has not yet occurred).

     (b) TERMINATION FOR GOOD REASON OR OTHER THAN FOR CAUSE. If the Executive
terminates this Agreement for Good Reason pursuant to Section 5(c) or the
Corporation terminates this Agreement other than pursuant to Section 5(b) for

                                      -3-

<PAGE>

Cause, then the Corporation shall pay to the Executive, in a lump sum in cash
within 30 days after the date of Termination, an amount equal to two hundred
fifty percent (250%) of the salary that the Corporation would have been
obligated to pay the Executive pursuant to Section 3(a) during the Calculation
Period if the Agreement had remained unterminated until the end of the
Calculation Period plus the amount of all bonuses set forth on Exhibit B, except
for any bonus for which the deadline for achievement has passed that was not
earned on such deadline, and less any salary that has already been paid.

     As used herein, "Calculation Period" shall mean the period (i) beginning on
the first day of the Initial Term and (ii) ending on (A) the last day of the
Initial Term if termination occurs more than sixty (60) days before the end of
the Initial Term, (B) the last day of the first Additional Term if termination
occurs sixty (60) days or fewer from the end of the Initial Term or during such
Additional Term before sixty (60) days from the end thereof, or (C) the last day
of the next succeeding Additional Term if termination occurs sixty (60) days or
less from the end of any Additional Term.

     (c) OBLIGATION TO REIMBURSE EXPENSES. The obligation of the Corporation
under Sections 3(d)-(f) shall survive the termination of this agreement.

     7. CONFIDENTIAL INFORMATION.

     (a) NONDISCLOSURE. The Executive shall not, during or after the period
during which he is employed by the Corporation, and for five (5) years
thereafter, disclose any Confidential Information (as such term is defined
herein) to any Person for any reason or purpose whatsoever, other than in
connection with the performance of his duties under this Agreement. The term
"Confidential Information" shall mean all confidential information of or
relating to the Corporation and any of its Affiliates, including without
limitation, financial information and data, business plans and information
regarding prospects and opportunities (such as, by way of example only, client
and customer lists and acquisition, disposition, expansion, product development
and other strategic plans), but does not include any information that is or
becomes public knowledge by means other than the Executive's breach or
nonobservance of his obligations described in this Section 7. Notwithstanding
the foregoing, the Executive may disclose such Confidential Information as he
may be legally required to do so in connection with any legal or regulatory
proceeding; provided, however, that the Executive shall provide the Corporation
with prior notice of any such required or potentially required disclosure and
the Corporation may at its own expense seek appropriate confidential treatment
of any such Confidential Information that may be so required to be disclosed in
connection with any such legal or regulatory proceeding. The Executive's
obligation to refrain from disclosing any Confidential Information under this
Section 7 shall continue in effect in accordance with its terms following any
termination of this Agreement. The Executive acknowledges that he will not use
any Confidential Information for any reason after his employment with the
Corporation is terminated other than as permitted in this Section 7.

     (b) INJUNCTIVE RELIEF. The Executive acknowledges and agrees that the
Corporation will have no adequate remedy at law, and would be irreparably
harmed, if the Executive breaches or threatens to breach any of the provisions
of this Section 7. The Executive agrees that the Corporation shall be entitled
to equitable and/or injunctive relief, on an ex parte basis, without notice and
without bond, to prevent any breach or threatened breach of this Section 7, and
to specific performance of each of the terms of this Section 7 in addition to
any other legal or equitable remedies that the Corporation may have. The

                                      -4-

<PAGE>

Executive further agrees that he shall not, in any equity proceeding relating to
the enforcement of the terms of this Section 7, raise the defense that the
Corporation has an adequate remedy at law.

     (c) SPECIAL SEVERABILITY; SURVIVABILITY. The terms and provisions of this
Section 7 are intended to be separate and divisible provisions and if, for any
reason, any one or more of them is held to be invalid or unenforceable, neither
the validity nor the enforceability of any other provision of this Agreement
shall thereby be affected. This Section 7 shall survive the expiration or
termination of this Agreement.

     8. FULL SETTLEMENT; MITIGATION. The Corporation's obligation to make the
payments provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Corporation may have against
the Executive or others other than a claim, right or action for fraud. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced,
regardless of whether the Executive obtains other employment.

     10. INDEMNIFICATION. The Corporation shall pay or indemnify the Executive
to the full extent permitted by Nevada law for all expenses, costs, liabilities
and legal fees which the Executive may incur in the discharge of his duties
hereunder.

     11. NOTICES. All demands, notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
and shall be personally delivered or sent by facsimile machine (with a
confirmation copy sent by one of the other methods authorized in this Section
11), commercial (including FedEx) or U.S. Postal Service overnight delivery
service, or, deposited with the U.S. Postal Service mailed first class,
registered or certified mail, postage prepaid, as set forth below:

         If to Corporation, addressed to:

                                            BV Pharmaceutical Inc.
                                            Suite 2410
                                            West Georgia Street
                                            Vancouver, British Columbia
                                            Canada V6E 2N7
                                            Attention: CEO
                                            Fax: (604) 682-5564

         If to the Executive:
                                            Gregory Leigh Lyons
                                            6932 Holeman Avenue
                                            Blaine, WA 98230
                                            Cell: (360) 305-5438

Notices shall be deemed given upon the earliest to occur of (i) receipt by the
party to whom such notice is directed; (ii) if sent by facsimile machine, on the
day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) such notice is sent if sent (as evidenced by the

                                      -5-

<PAGE>

facsimile confirmed receipt) prior to 5:00 p.m. Pacific Time and, if sent after
5:00 p.m. Pacific Time, on the day (other than a Saturday, Sunday or legal
holiday in the jurisdiction to which such notice is directed) after which such
notice is sent; (iii) on the first business day (other than a Saturday, Sunday
or legal holiday in the jurisdiction to which such notice is directed) following
the day the same is deposited with the commercial carrier if sent by commercial
overnight delivery service; or (iv) the fifth day (other than a Saturday, Sunday
or legal holiday in the jurisdiction to which such notice is directed) following
deposit thereof with the U.S. Postal Service as aforesaid. Each party, by notice
duly given in accordance therewith may specify a different address for the
giving of any notice hereunder.

     12. BINDING EFFECT; BENEFITS. This Agreement will be binding upon and will
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators or assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. There are no
third party beneficiaries to this Agreement.

     13. ENTIRE AGREEMENT. This Agreement constitutes the final written
expression of all of the agreements between the Parties with respect to the
subject matter hereof and supersedes all understandings and negotiations
concerning the matters specified herein. No addition to or modification of any
provision of this Agreement will be binding upon any party unless made in
writing and signed by the party to be bound.

     14. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Washington, without reference
to principles of conflict of laws. Executive expressly consents to the sole and
exclusive jurisdiction of the state courts in the State of Washington for
resolution of any dispute hereunder, and consents to sole and exclusive venue in
Whatcom County, Washington. The prevailing party in any dispute resolution
process shall be entitled, in addition to an award determined by such process,
to an award of attorneys' fees, costs and expenses incurred in such process.

     15 WITHHOLDING. The Corporation may withhold from any amounts payable under
this Agreement such taxes as shall be required to be withheld pursuant to any
applicable law or regulation.

     16. HEADINGS. Headings of the Sections of this Agreement are for the
convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.

     17. NO CONFLICT. The Executive represents and warrants that performance of
the terms of this Agreement will not breach or conflict with any agreement
entered into by the Executive, and that the Executive will not enter into any
agreement in conflict herewith.

     18. ASSIGNABILITY. Neither party hereto may assign any of its or his rights
or obligations hereunder without the prior written consent of the other party
hereto, which consent may be withheld in the sole discretion of such other
party.

     19. WAIVERS. The failure or delay of the Corporation at any time to require
performance by the Executive of any provision of this Agreement, even if known,
will not affect the right of the Corporation to require performance of that

                                      -6-

<PAGE>

provision or to exercise any right, power or remedy hereunder, and any waiver by
the Corporation of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on the Executive in any case will,
of itself, entitle the Executive to any other or further notice or demand in
similar or other circumstances.

     20. CONSTRUCTION. Unless the context of this Agreement otherwise clearly
requires, (i) references in this Agreement to the plural include the singular,
the singular the plural, the masculine the feminine, the feminine the masculine
and the part the whole and (ii) the word "or" will not be construed as exclusive
and the word "including" will not be construed as limiting.

     21. NO STRICT CONSTRUCTION. This Agreement has been prepared jointly and
will not be strictly construed against either party.

     22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which shall together constitute one and the same agreement.

     IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement on the day and year first above written.

                                        BV PHARMACEUTICAL INC.

                                     By: /s/ LEE SOUTHERN
                                         ----------------
                                         Lee Southern, Member Board of Directors

                                        EXECUTIVE

                                        /s/ G. LEIGH LYONS
                                        -------------------
                                        Gregory Leigh Lyons

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