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MEMORANDUM OF OPERATING AGREEMENTAND FINANCING STATEMENT STATE: COUNTY:1. This Memorandum of Operating Agreement and Financing Statement (called the “Memorandum”), shall be effective when the Operating Agreement referred to in Paragraph 2. below becomes effective, that being (Date) . 2.The Parties have entered into an Operating Agreement, providing for the development and production of crude oil, natural gas, and associated substances from the lands described in Exhibit “A” to this Memorandum (the “Contract Area”), designating _____ as Operator, whose address is ______, to conduct operations. 3. The Operating Agreement provides for certain liens and/or security interests to secure payment by the parties to that Agreement of their respective share of costs under the Operating Agreement. The Operating Agreement contains an Accounting Procedure along with other provisions which supplement the lien and/or security interest provisions, including non-consent clauses which provide that Parties who elect not to participate i n certain operations shall be deemed to have relinquished their interest until the consenting Parties are able to recover their costs of the operations plus a specified amount. Any person or firm desiring additional information regarding the Operating Agreement or who wish to inspect a copy of the Operating Agreement should contact the Operator. 4. The purpose of this Memorandum is to more fully describe and implement the liens and/or security interests provided for in the Operating Agreement, and to place third parties on notice of them. 5. In consideration of the mutual rights and obligations of the Parties, they agree as follows: 5.1.The Operator shall conduct, direct, and have full control of all Operations on the Contract Area as permitted, required by, and within the limits of the Operating Agreement. 5.2. The liability of the Parties shall be several, not joint or collective. Eac h Party shall be responsible only for its obligations and shall be liable only for its proportionate share of costs. 5.3. Each Non-Operator grants to Operator a lien on its oil and gas rights in the Contract Area, and a security interest in its share of oil and or gas when extract ed and its interest in all equipment, to secure payment of its share of expenses, together with any interest at the rate provided in the Accounting Procedure referred to in Paragraph 3. above. To the extent that Operator has a security interest under the Uniform Commercial Code of the State in which properties subject to the Operating Agreement are located (the “Code”), Operator shall be entitled to exercise the rights and remedies of a secured party under the Code. The bringing of a suit and the obtaining of judgment by Operator for the secured indebtedness shall not be deemed an election of remedies or otherwise affect the rights or security interest for the payment thereof. 5.4. If any Non-Operator fails to pay its share of costs when due, Operator may require other Non-Operators to pay their proportionate part of the unpaid share, and the other Non-Operators shall be subrogated to Operator’s lien and security interest. 5.5. The Operator grants to Non-Operators a lien and security interest equivalent to that granted to Operator as described in Paragraph 5.3 above, to secure payment by Operator of its own share of costs when due. 6.For purposes of protecting the liens and security interest, the Parties agree that this Memorandum shall cover all right, title, and interest of the debtor(s) in: 6.1.Property Subject to Security Interests (a) All personal property located on or used in connection with the Contract Area. (b) All fixtures on the Contract Area. (c) All oil, gas, and associated substances of value in, on, or under the Contract Area which may be extracted from it. (d) All accounts resulting from the sale of the items described in subparagraph (c) at the wellhead of every well located on the Contract Area or on lands pooled with it. (e) All items used, useful, or purchased for the production, treatment, storage, transportation, manufacture, or sale of the items described in subparagraph (c). (f) All accounts, contract rights, rights under any gas balancing agreement, general intangibles, equipment, inventory, farmout rights, option farmout rights, acreage and or cash contributions, and conversion rights, whether now owned or existing or later acquired or arising, including but not limited to all interest in any partnership, limited partnership, association, joint venture, or other entity or enterprise that holds, owns, or controls any interest in the Contract Area or in any property encumbered by this Memorandum. (g) All severed and extracted oil, gas, and associated substances now or later produced from or attributable to the Contract Area, including, without limitation, oil, gas, and associated substances in tanks or pipelines or otherwise held for treatment, transportation, manufacture, processing or sale. (h) All the proceeds and products of the items described in the foregoing paragraphs now existing or later arising, and all substitutions, replacements thereof, or accessions thereto. (i) All personal property and fixtures now and later acquired in furtherance of the purposes of this Operating Agreement. Certain of the above-described items are or are to become fixtures on the Contract Area. (j) The proceeds and products of collateral are also covered. 6.2. Property Subject to Liens (a) All real property within the Contract Area, including all oil, gas and associated substances of value in, on or under the Contract Area which may be extracted from the real property. (b) All fixtures within the Contract Area. (c) All real property and fixtures now and later acquired in furtherance of the purposes of the Operating Agreement. 7. The above items will be financed at the wellhead of the well or wells loca ted on the Contract Area, and this Memorandum is to be filed for record in the real estate records of the county or counties in which the Contract Area is located, and in the appropria te Uniform Commercial Code records. All Parties who have executed the Operating Agreement and all farmors and option farmors who have granted support within the Contract Area are identified on Exhibit “A.” 8.On default of any covenant or condition of the Operating Agreement, in addition to any other remedy afforded by law or the practice of the State in which the Contract Area is located, each Party to the Agreement and any successor to a Party by assignment, operation of law, or otherwise, shall have, and is given and vested with, the power and authority to take possession of and sell any interest which the defaulting Party has in the subject lands and to foreclose this lien in the manner provided by law. 9. On expiration of the Operating Agreement and the satisfaction of all debts, the Operator shall file of record a release and termination of that Agreement on behalf of all parties concerned. On the filing of the release and termination, all benefits and obligati ons under this Memorandum shall terminate as to all Parties who have executed or ratified this Memorandum. In addition, the Operator shall have the right to file a continuation statement on behalf of all Parties who have executed or ratified this Memorandum. 10. It is understood and agreed by the Parties that if any part, term, or provision of this Memorandum is held by the courts to be illegal or in conflict with any law of the State where the Contract Area is located, the validity of the remaining portions or provisions shall not be affected, and the rights and obligations of the Parties shall be construed a nd enforced as if the Memorandum did not contain the particular part, term or provision hel d to be invalid. 11. This Memorandum shall be binding on and shall inure to the benefit of the Parties and their respective heirs, devisees, legal representatives, successors and assigns. The failure of one or more persons owning an interest in the Contract Area to execute this Memorandum shall not in any manner affect the validity of the Memorandum as to those persons who have executed this Memorandum. 12. A Party having an interest in the Contract Area can ratify this Memorandum by execut ion and delivery of an instrument of ratification, adopting and entering into this Memorandum, and the ratification shall have the same effect as if the ratifying pa rty had executed this Memorandum or a counterpart of it. By execution or ratification of this Memorandum, the Party consents to its ratification and adoption by any Party who may have or may acquire any interest in the Contract Area. 13. This Memorandum may be executed or ratified in one or more counterparts and all of the executed or ratified counterparts shall together constitute one instrument. For purposes of recording, only one copy of this Memorandum with individual signature pages attached to it needs to be filed of record. (NAME AND ADDRESS) By: Name: Title: (NAME AND ADDRESS) By: Name: Title: (acknowledgments) Exhibit “A” – Schedule of all Parties to the Contract Area