Memorandum No. __________

Submitted to _______________

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

REDHAWK RESOURCES - FUND III, LP A Delaware Limited Partnership

1,200 Units of Limited Partner and General Partner Partnership Interests

Subscription Price per Unit: $12,500

Total Offering: $15,000,000

October 22, 2015

Redhawk Resources Management III, LLC 6060 N. Central Expressway, Suite 302

Dallas, Texas 75206 1-844-952-7363

Redhawk Resources - Fund III, LP, a Delaware limited partnership (the “Partnership”), is offering up to

$15,000,000 of General Partner Units and Limited Partner Units in the Partnership. The Partnership was formed to acquire working interests in both producing and nonproducing oil and gas leases in and around Pecos County, Texas. See “Proposed Activities.” Redhawk Resources Management III, LLC, a Delaware limited liability company, will be the managing partner of the Partnership (“Managing Partner”).

A maximum of 1,200 Units will be sold in the Offering at a purchase price of $12,500 per Unit. The

minimum investment is one Unit ($12,500). While there is no minimum amount of funds required to be tendered to the Partnership before it begins

implementation of the business plan described herein, it is the current intention of the Managing Partner, acting in its sole discretion, not to begin implementation of the business plan described herein until such time as it determines that sufficient funds have been invested into the Partnership by investors to enable the Partnership to conduct meaningful activities. When the Managing Partner decides to implement the business plan, it will utilize the funds in the Partnership’s account in the manner described herein under “Use of Proceeds.”

The offering period will begin on October 22, 2015, the date of this Memorandum, and will terminate on

January 22, 2016, unless terminated earlier if all the Units are sold or if the Partnership otherwise decides to terminate the Offering. The Partnership may extend the offering period up to an additional 90 days without notice to prior investors. THE MANAGING PARTNER RESERVES THE RIGHT TO COMMENCE THE IMPLEMENTATION OF THE BUSINESS PLAN WITH FUNDS RAISED AT ANY TIME PRIOR TO THE COMPLETION OF THE OFFERING OR, IN THE ALTERNATIVE, TO TERMINATE THE OFFERING AND TO REFUND, WITHOUT INTEREST, ALL TENDERED SUBSCRIPTION PROCEEDS.

Only “accredited investors” (as defined in Regulation D promulgated under the Securities Act of 1933, as

amended (the “Securities Act”)) are eligible to invest in the Partnership. Potential investors will be required to verify their status as accredited investors before being allowed to acquire Units in the Partnership.

The Managing Partner reserves the right to reject the application of any investor for any reason or for no

reason in its sole discretion. Investors whose subscriptions are accepted will be admitted, based on their election, as General Partners or

Limited Partners in the Partnership. Limited Partners will receive “passive” income and loss tax treatment (and their ability to deduct certain Partnership expenses will be limited) but they will have no personal liability for the liabilities and recourse obligations of the Partnership. General Partners will receive “active” income and loss tax

treatment before their conversion to Limited Partners but may be jointly and severally liable for the liabilities and recourse obligations of the Partnership. See “Federal Income Tax Aspects – Limitations on Deductions.”

For the meanings of certain italicized terms used in this Memorandum, see “Definitions.”

THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. SEE “RISK FACTORS.” INVESTORS WHO ELECT TO BECOME GENERAL PARTNERS COULD BE SUBJECT TO UNLIMITED LIABILITY FOR THE PARTNERSHIP’S OBLIGATIONS DURING CERTAIN PHASES OF THE PARTNERSHIP’S ACTIVITIES. THE SECURITIES HEREBY OFFERED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3(b) AND 4(a)(2) OF THAT ACT AND RULE 506 OF REGULATION D PROMULGATED THEREUNDER. THE SECURITIES ARE BEING OFFERED TO PROSPECTIVE PURCHASERS WHO ARE “ACCREDITED INVESTORS” DEFINED IN REGULATION D UNDER THE SECURITIES ACT. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES LAW ADMINISTRATOR HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THESE SECURITIES ARE ALSO SUBJECT TO RESTRICTIONS ON TRANSFERS CONTAINED IN THE AMENDED AND RESTATED PARTNERSHIP AGREEMENT. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

____________________________ THE INFORMATION CONTAINED IN THIS MEMORANDUM HAS BEEN PREPARED BY THE MANAGING PARTNER AND IS BEING FURNISHED FOR THE CONFIDENTIAL USE OF PROSPECTIVE PURCHASERS IN CONNECTION WITH THIS OFFERING. ANY REPRODUCTION OR DISTRIBUTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, IS PROHIBITED. A PROSPECTIVE PURCHASER, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES TO RETURN IT AND ALL ENCLOSED DOCUMENTS TO THE MANAGING PARTNER IF THE PROSPECTIVE PURCHASER DOES NOT UNDERTAKE TO PURCHASE UNITS.

____________________________ PROSPECTIVE PURCHASERS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM AS LEGAL, BUSINESS, OR TAX ADVICE. EACH PERSON SHOULD CONSULT HIS OR HER OWN ATTORNEY, INVESTMENT ADVISOR, AND TAX ADVISOR AS TO LEGAL, BUSINESS, TAX, AND RELATED MATTERS CONCERNING THIS INVESTMENT. THE INVESTMENT DESCRIBED HEREIN INVOLVES A HIGH DEGREE OF RISK AND ONLY THOSE PERSONS WHO ARE ABLE TO BEAR THE FINANCIAL RISKS REFERRED TO IN THIS MEMORANDUM SHOULD CONSIDER PURCHASING A UNIT.

____________________________ NO PERSONS OTHER THAN THE OFFICERS OR DIRECTORS OF THE MANAGING PARTNER HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS MEMORANDUM IN CONNECTION WITH THE OFFER AND SALE OF THE UNITS DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

____________________________ ALL DOCUMENTS REFERENCED IN THIS MEMORANDUM BUT NOT ATTACHED HERETO AS EXHIBITS SHALL BE AVAILABLE FOR INSPECTION BY ANY PROSPECTIVE PURCHASER OR HIS PURCHASER REPRESENTATIVE AT THE PRINCIPAL OFFICE OF THE MANAGING PARTNER.

____________________________ THE MANAGERS OF THE MANAGING PARTNER HAVE AGREED TO MAKE THEMSELVES AVAILABLE, PRIOR TO THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREIN, TO GIVE PROSPECTIVE PURCHASERS THE OPPORTUNITY TO ASK QUESTIONS AND TO RECEIVE ANSWERS CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING, TO OBTAIN ANY ADDITIONAL INFORMATION, OR TO REVIEW SUCH OTHER WRITTEN INFORMATION RELATING TO THE OFFERING, TO THE EXTENT THAT THEY POSSESS SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE.

____________________________ THE USE OF FORECASTS OR PROJECTIONS OTHER THAN THOSE SET FORTH IN THIS MEMORANDUM IS PROHIBITED. ANY ORAL REPRESENTATION OR PREDICTION AS TO THE AMOUNT OR CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE THAT MAY FLOW FROM AN INVESTMENT IN THE UNITS IS NOT PERMITTED TO THE EXTENT SUCH ORAL REPRESENTATION DEVIATES FROM THE SPECIFIC WRITTEN DISCLOSURES SET FORTH IN THIS MEMORANDUM.

____________________________ THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION OF AN OFFER TO ACCEPT AND/OR MAKE SUBSCRIPTIONS FOR THE UNITS OR TO SELL AND/OR BUY THE UNITS. ACCEPTANCE OF YOUR SUBSCRIPTION FOR THE UNITS SHALL BE MADE ONLY AFTER THE MANAGING PARTNER HAS DETERMINED THAT YOU SATISFY THE REQUIREMENTS FOR AN EXEMPTION FROM REGISTRATION AND THE SUITABILITY FACTORS SET FORTH IN “TERMS OF THE OFFERING – SUITABILITY REQUIREMENTS.” IF YOU HAVE A PURCHASER REPRESENTATIVE, HE MUST COMPLETE AND EXECUTE A PURCHASER REPRESENTATIVE QUESTIONNAIRE AND OTHER DOCUMENTS.

FORWARD-LOOKING INFORMATION

THE MANAGING PARTNER MAY, FROM TIME TO TIME, DISCUSS FORWARD-LOOKING INFORMATION IN THE MEMORANDUM. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON MANY ASSUMPTIONS AND FACTS AND ARE SUBJECT TO MANY CONDITIONS, INCLUDING THE RECEIPT OR ENFORCEABILITY OF CONTRACTS, THE AVAILABILITY OF PRODUCTS AND SERVICES, THE LOCAL POLITICAL, ECONOMIC, AND EMPLOYMENT ENVIRONMENT, THE MARKET FOR OIL, AND THE AMOUNT OF POTENTIAL PRODUCTION OF WELLS OWNED BY THE PARTNERSHIP. EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THE MEMORANDUM, ALL FORWARD-LOOKING INFORMATION INVOLVES ESTIMATES BY THE MANAGING PARTNER’S MANAGEMENT AND IS SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES THAT MAY BE BEYOND ITS CONTROL AND MAY CAUSE RESULTS TO DIFFER FROM CURRENT EXPECTATIONS. ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE PARTNERSHIP MAY MATERIALLY DIFFER FROM THE FORWARD-LOOKING INFORMATION AND FROM FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.

____________________________

FOR RESIDENTS OF ALL STATES

THE UNITS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF CERTAIN STATES OR OTHER JURISDICTIONS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE UNITS ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

TABLE OF CONTENTS PAGE

SUMMARY OF THE OFFERING ............................................................................................................................ 1 RISK FACTORS ......................................................................................................................................................... 4 TERMS OF THE OFFERING ................................................................................................................................. 13 WHO MAY INVEST ................................................................................................................................................. 14 PLAN OF DISTRIBUTION ..................................................................................................................................... 16 PROPOSED ACTIVITIES ....................................................................................................................................... 17 OPERATION OF THE WELLS .............................................................................................................................. 19 ALLOCATION OF INTERESTS ............................................................................................................................ 22 USE OF PROCEEDS ................................................................................................................................................ 23 COMPENSATION AND BENEFITS TO THE MANAGING PARTNER AND ITS AFFILIATES ................ 25 MANAGEMENT AND OWNERSHIP .................................................................................................................... 25 CONFLICTS OF INTEREST .................................................................................................................................. 27 FEDERAL INCOME TAX ASPECTS .................................................................................................................... 28 COMPETITION, MARKETS, AND REGULATION ........................................................................................... 39 SUMMARY OF THE PARTNERSHIP AGREEMENT ....................................................................................... 40 OTHER MATTERS .................................................................................................................................................. 46 RELATED PARTY TRANSACTIONS ................................................................................................................... 46 DEFINITIONS ........................................................................................................................................................... 47

EXHIBITS: A – Form of Operating Agreement with StableRock Energy L.L.C. B – Form of Drilling and Completion Contracts C – Amended and Restated Agreement of Limited Partnership of Redhawk Resources – Fund III, LP D – Subscription Documents for U.S. Investors E – Geological Reports and Maps

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SUMMARY OF THE OFFERING This Summary of the Offering does not purport to be a complete description of the terms and

conditions of an investment in the Partnership and is qualified in its entirety by the more detailed information appearing throughout this Confidential Private Placement Memorandum (the “Memorandum”). See the “Definitions” Section of this Memorandum for the definitions of certain italicized terms used herein.

The Partnership Redhawk Resources – Fund III, LP is a Delaware limited partnership

Managing Partner Redhawk Resources Management III, LLC, a Delaware limited liability company. The Managing Partner will be managed by a board of managers consisting of Jack Nichols, C. Jarrod Rogers and Charles Rougeau.

Purpose The Partnership was formed to acquire Working Interests in both producing and nonproducing oil and gas leases in and around Pecos County, Texas. (the “Leases”). A “Working Interest” is an ownership interest under a Lease covering a specific tract or tracts of land that grants the owner of such interest the right to explore for oil, gas, and other minerals on or under such land and has the obligation to pay the cost of exploration, drilling, and operating the property or a part thereof.

The Partnership will own its proportionate share of production from the existing wells and may also proportionately participate in the further development of the Leases by drilling additional wells, working over existing wells and/or implementing enhanced recovery operations with the Leases, and or resell or farmout the Leases. The Managing Partner will use its best efforts to acquire on behalf of the Partnership an average 96% Working Interest in approximately 3,800 net acres of producing developed oil, gas and mineral leases and non-producing undeveloped oil, gas and mineral leases in and around Pecos County, Texas (collectively, the “Purchased Working Interest”). See “Proposed Activities.”

Type of Security The securities being offered are units of general partner partnership interests and limited partner partnership interests in the Partnership (collectively, the “Units”).

Maximum Offering Amount

$15,000,000

Maximum Number of Units Offered

Up to 1,200 units of general partner and limited partner partnership interest in the Partnership

Offering Price $12,500 per Unit

Minimum Subscription The minimum subscription is one (1) Unit ($12,500).

Offering Period The offering period will begin on October 22, 2015, the date of this Memorandum, and will terminate on January 22, 2016, unless terminated earlier if all the Units are sold or if the Partnership otherwise decides to terminate the Offering. The Partnership may extend the offering period up to an additional 90 days without notice to prior investors.

Closing The Managing Partner may elect to close the offering at any time and operate with the funds raised at that time or, in the alternative, may elect to terminate the offering and refund, without interest, all tendered investment proceeds. While there is no minimum amount of funds required to be tendered to the Partnership before it begins implementation of the business plan described herein, it is the current intention of the Managing Partner, acting in its sole discretion, not to begin

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implementation of the business plan described herein until such time as it determines that sufficient funds have been invested into the Partnership by investors to enable the Partnership to conduct meaningful activities. When the Managing Partner decides to implement the business plan, it will utilize the funds in the Partnership’s account in the manner described herein under “Use of Proceeds.”

Managing Partner Commitment

The Managing Partner is not obligated to purchase any Units or make any capital contribution to the Partnership.

Operator StableRock Energy L.L.C., an affiliate of the Managing Partner (“StableRock” or the “Operator”), will be the operator on record for all work associated with drilling wells, workovers, re-completions and any activities needed to further enhance hydrocarbon recovery and to maintain the Leases. The Partnership will enter into an operating agreement with StableRock, in the form attached as Exhibit A (the “Operating Agreement”), pursuant to which StableRock will manage and supervise the well operations, including contracting for labor, materials and equipment for the wells and other activities necessary to the operation of the wells. In addition, StableRock will be the drilling operator of the wells drilled on the Leases. The Partnership will enter into contracts including drilling, workover/completion and secondary enhancement contracts with StableRock, in the forms attached as Exhibit B (the “Drilling and Completion Contracts”), which will govern StableRock’s services as the operator and the Partnership’s payment for the drilling, testing, completion, and equipping costs associated with the development of wells on the Leases. See “Operation of the Wells.”

Investors Only “accredited investors” (as defined in Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”)) are eligible to invest in the Partnership. Each investor must return to the Managing Partner an executed set of subscription documents together with payment for each Unit subscribed. Potential investors will be required to verify their status as accredited investors before being allowed to acquire Units in the Partnership. Money Map Press may, but is not required to, introduce investors, including subscribers of Money Map Press, to the Offering. The Partnership has agreed to accept subscriptions only from eligible investors who are subscribers of Money Map Press publications for up to the first 30 days of the Offering. The Partnership will hold any subscriptions it receives from investors eligible to participate in the Offering who are not subscribers to Money Map Press publications until the end of this 30 day period. If the Offering is fully subscribed by such Money Map Press investors during this 30 day period, the Partnership will reject the application from any other investors and will return any funds remitted by such investors. The Partnership may elect to terminate this 30 days exclusivity period for Money Map Press investors and, if it does so, will accept subscriptions from other eligible investors at any time after the termination of such exclusivity period. The Managing Partner reserves the right to reject the application of any investor for any reason or for no reason in its sole discretion. Investors whose subscriptions are accepted will be admitted, based on their election, as general partners or limited partners in the Partnership. Investors admitted to the Partnership as general partners or limited partners are known as “Investor Partners.” Limited Partners will receive “passive” income and loss tax treatment (and their ability to deduct certain Partnership expenses will be limited) but they will have no personal

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liability for the liabilities and recourse obligations of the Partnership. General Partners will receive “active” income and loss tax treatment before their conversion to Limited Partners but may be jointly and severally liable for the liabilities and recourse obligations of the Partnership.

Use of Proceeds The aggregate offering proceeds, assuming all of the Units being offered are sold, will be $15,000,000. Assuming that all of the Units are sold, the Partnership anticipates it the proceeds will be utilized as follows: Percentage Description of Use Amount of Proceeds Management/Administration Fee $1,050,000 7.00% Geological/Geophysical Allotment $955,500 6.37% Organization/Offering Allotment $1,125,000 7.50% Drilling and Completion Contract Expenses $4,480,500 29.87% Lease Acquisition Costs $3,499,500 23.33% Waterflood Preparation/Installation Costs $3,889,500 25.93% $15,000,000 100% It is the current intention of the Managing Partner, acting in its sole discretion, to implement the business plan described herein before the Offering is closed and at a point in time when less than the entire number of Units are sold. See “Use of Proceeds.”

Partnership Agreement The Units are issued pursuant to the Amended and Restated Agreement of Limited Partnership of Redhawk Resources – Fund III, LP, a copy of which is attached as Exhibit C to this Memorandum (the “Partnership Agreement”). Purchasers of Units will, based upon their election, become Limited Partners or General Partners of the Partnership and will be entitled to the rights and subject to the restrictions of the Partnership Agreement. See “Summary of Partnership Agreement.”

Participation in Profits, Losses, and Distributions

All items of profit and losses will be allocated to the Investor Partners in accordance with this Unit ownership.

After providing for the satisfaction of the current debts and obligations of the Partnership in the manner required by the Partnership Agreement and after withholding any cash reserves required by the Partnership in the opinion of the Managing Partner, the Managing Partner will make distributions of cash, out of the Partnership’s net cash flow, 100% to the Investor Partners in proportion to their Units held. Distributions will be allocated to each Investor Partner based upon a fraction, the numerator of which is the number of Units held by such Investor Partner and the denominator of which is the number of Units held by all Investor Partners or their transferees receiving such distribution.

Expenses The Partnership will incur the expenses set forth under “Use of Proceeds” described above in this Summary of the Offering and in the section entitled “Use of Proceeds.”

Risk Factors There are substantial risks associated with the purchase of Units in a Partnership. See the “Risk Factors” section of this Memorandum.

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RISK FACTORS An investment in the Partnership involves a high degree of risk. You should not invest in the Units if

you cannot afford the loss of your entire investment. You should carefully consider the following information about these risks, together with the other information contained in this Memorandum and the attached Exhibits before deciding whether to purchase any Units in the Partnership. The tax consequences of an investment in the Units are complex and you may incur taxable income without any corresponding distributions during the initial development phases of the Partnership because the Partnership will utilize, to the extent available, revenues generated from oil and/or gas production earned by the Partnership to finance the development of new wells. You should consult with your own legal, tax, and financial advisors about an investment in the Units. If any of the events described in the following risks actually occurs, the value of the Units could decline, and you could lose all or part of your investment. The risks described below are not the only risks associated with an investment in the Units. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business prospects, financial condition, and operating results, and you could lose all or part of your investment.

Risks Relating to the Oil and Gas Industry Oil and gas investments are risky.

Operations in the oil and gas industry involve a high degree of risk. Oil and gas exploration and

development is a highly speculative activity marked by numerous unproductive efforts. Many wells will be dry, and there is no assurance that sufficient oil and/or gas production will be obtained or maintained to pay the expenses of the Partnership or to provide any return to investors. The Partnership assumes the risk that any commercial production achieved will decline over time. Additionally, it is expected that commodity prices for oil and/or gas will fluctuate, thus causing cash flow from the sale of oil and/or gas to fluctuate. Therefore, any return on the investment will fluctuate. Information acquired after the acquisition of the Purchased Working Interest may indicate that less oil and/or gas reserves exist than thought at the time of acquisition.

The Partnership’s ability to acquire and develop profitable wells is subject to many uncertainties.

The Partnership’s financial success depends on its ability to find, acquire and develop oil and natural gas

reserves that are economically recoverable. The Partnership’s operations will depend upon many factors including the identification and acquisition of prospective mineral leases, the timing, sequencing and success of drilling future wells on those leases, the ability of those wells to produce and maintain production of hydrocarbons, a ready transportation system and ultimate purchaser of the hydrocarbons and the amount of ultimate recoverable reserves in the wells. In addition, the Partnership’s operations may be impacted, delayed or cancelled due to lack of sufficient capital, weather, compliance with governmental regulations, environmental regulations, price controls, mechanical difficulties, shortages or delays in the delivery of equipment, sales, marketing and transportation of hydrocarbons and other factors. No assurances can be given that the Partnership will be successful in acquiring and developing wells at acceptable costs.

There are natural hazards involved in oil and gas exploration and development, and uninsured liabilities may be incurred.

Natural hazards and risks involved in oil and gas development and exploration are great and include

unusual or unexpected formations, pressures, and other conditions which are not anticipated. The Partnership may be subject to liability for pollution and other similar damages or may lose portions of leases due to hazards against which the Operator cannot insure or against which it may elect not to insure due to the premium costs involved or for other reasons. Uninsured liabilities could reduce the funds available in the Partnership, or result in the loss of properties acquired by the Partnership. Such liabilities could result in personal liability for a General Partner.

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Drilling oil and natural gas wells has numerous risks and is subject to a variety of factors that the Partnership cannot control.

The Partnership’s profitability depends upon locating oil and natural gas reserves capable of producing in

commercial quantities and successfully drilling in the fields where these reserves are located. However, drilling for oil and natural gas is a highly speculative venture and involves numerous risks, including the risk that the Partnership may not locate commercially productive oil and natural gas reservoirs. The presence of unanticipated pressures or irregularities in formations, miscalculations or accidents may cause the Partnership’s drilling activities to be unsuccessful. In addition, there can be uncertainty as to the future cost or timing of drilling, completing and operating wells. The Partnership cannot predict all possible drilling problems; however, some factors that may limit, delay or cancel drilling operations include:

• unexpected drilling conditions; • pressure or irregularities in formations; • equipment failures or accidents; • adverse weather conditions; • compliance with governmental requirements; and • shortages or delays in the availability of drilling rigs, tubular materials and equipment.

In addition, circumstances may occur that would prevent production from a well that would otherwise be

productive or would cause production from a well to be deemed prohibitively expensive. If the Partnership is unable to drill successfully for hydrocarbons, its operating results could be materially adversely impacted.

Prices for oil and gas have been and are likely to remain volatile.

Numerous factors create volatile prices for oil and gas. Oil and natural gas prices may fluctuate

significantly in response to minor changes in supply, seasonal demand, market uncertainty, political conditions in oil-producing countries, activities of oil-producing countries to limit or increase production, global economic conditions, government regulations, weather conditions and other factors that are beyond the Partnership’s control. From time to time, a surplus of oil and gas occurs in areas of the U.S. The effect of a surplus may be to reduce the price the Partnership receives for production or to reduce the amount of production. The prices for domestic oil and natural gas may decline. All of these factors are beyond the Partnership’s control. Changes in oil and gas prices will significantly affect the revenue generated by the Partnership.

The market for oil and natural gas is highly volatile and subject to global pressures and economic and political risks.

The Partnership’s revenues will depend greatly upon the prices received for oil and natural gas production

from operating wells. Historically, the oil and natural gas market has been volatile and is likely to continue to be volatile in the future. Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in supply and demand, market uncertainty and other factors beyond the Partnership’s control. Market prices of oil and natural gas depend on many factors beyond the Partnership’s control, including:

• worldwide and domestic supplies of oil and natural gas; • political instability and/or armed conflict in oil and natural gas-producing regions; • the price and level of foreign imports; • the level of consumer demand; • the price and availability of alternative fuels or alternative technology; • weather conditions; • domestic and foreign governmental regulation and taxes; and • the overall economic environment in the United States and elsewhere.

In addition, major oil and natural gas companies continuously seek new or larger oil and natural gas fields

offshore and in remote areas of the world. The discovery of a highly productive field could have a significant

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impact on the prices for oil and natural gas. All of these factors may cause producing wells, if any, to become unprofitable due to lower-than-expected prices.

The Partnership may experience delays in obtaining materials and equipment or in marketing production.

The inability of the Operator to promptly obtain materials and equipment essential to the conduct of drilling

operations could cause delays in operations and could impair the ability of the Partnership to begin or continue production operations. If production from a well is achieved, numerous factors can delay the marketing of production and, consequently, delay the receipt of proceeds from production. These factor include, among others, negotiating contracts for the sale of production, obtaining the facilities (such as surface equipment and pipeline connections) through which production can be marketed, receiving title opinions, curing title problems, and executing division orders. The Operator may encounter substantial competition to find purchasers for its production. Thus, many months may pass between the date of establishment of production and the date of marketing such production.

The marketing of the oil or gas produced will be affected by a number of factors.

The marketing of any oil or gas produced will be affected by a number of factors, some of which are

beyond the Partnership’s control, and whose exact effect cannot be accurately predicted. There can be no assurance that optimal, or the reported, pricing will be received for actual production. Actual prices received at the wellhead may vary widely based upon, among other things:

• trading commodity prices; • fluctuating differentials to NYMEX and/or Henry Hub; • access to markets; • distance from markets; • quality of oil and gas; • impurities in the oil and gas stream; and • rates, terms, conditions, and deductions in marketing contracts over which the Partnership has no

control.

The sale of oil and gas depends on gas transportation facilities, which may not be available. The production and marketing of oil and gas will depend upon the availability, proximity, and capacity of

gathering systems, pipelines, and processing and storage facilities that are owned by third parties. The absence of such systems or the lack of available capacity on these systems and facilities could result in the shut-in of producing wells or the delay or discontinuance of development plans. Federal and state regulation of oil and gas production and transportation, tax and energy policies, changes in supply and demand, pipeline pressures, disruption to facilities due to maintenance or weather, damage to or destruction of pipelines, and general economic conditions could adversely affect the ability to transport gas. If any of these third-party pipelines and other facilities become partially or fully unavailable to transport production, the Partnership’s investment could be adversely affected.

Production from wells will decline.

Some of the available data on oil and gas wells might refer to “initial production” or “initial potential,”

which are terms of art in the oil and gas business to describe the rate of flow of oil or gas from a newly completed well. The initial potential test conducted after completion of a well indicates a theoretical rate of production in barrels of oil and cubic feet of gas. Initial potential should not be considered indicative of the amount of oil or gas a well can be expected to produce on a sustained basis. It is calculated on a mathematical formula assuming perfect conditions. Such data is typically recorded after drilling and testing operations and after a target well formation has been completed. This information is used as a potential indicator of the maximum ability of a well to produce in commercial quantities upon completing and equipping of the well. Historically, however, the actual sustained production of oil and gas realized from a well is usually less, and may be substantially less on an ongoing basis, than “initial production” or “initial potential.” Therefore, there can be no assurance that the actual production to be realized from a well on an ongoing basis will be equal to or approximate the well’s “initial production.”

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Further, production from all wells by its very nature will decline over time. The actual decline curve is

subject to numerous factors and cannot, under normal circumstances, be calculated in advance. The production from oil and gas wells is also subject to fluctuation for a myriad of reasons. Oil and/or gas production may not be stable on a month-to-month basis. All investors should understand that, over the economic life of a well, any oil or gas production obtained will decline and the well may, as a result of such decline, become non-commercial.

Regulation of the oil and gas industry may adversely affect the Partnership’s profitability.

The oil and gas industries are subject to extensive governmental regulation at the local, state, and national

levels which relate to, among others, environmental standards, pollution control, remediation of contamination, preservation of natural resources, and worker safety. This regulation may fix rates of production from wells and the prices for oil and gas may be limited. Oil and gas operations are also subject to stringent laws and regulations relating to containment, disposal and controlling the discharge of hazardous oilfield waste and other non-hazardous waste material into the environment, requiring removal and cleanup under certain circumstances or otherwise relating to the protection of the environment. Governmental regulations relating to environmental matters could affect operations by increasing the costs of operations or by requiring the modification of operations in certain areas. Any such government regulation could adversely affect the production and sale of oil and gas, which in turn could adversely affect the Partnership’s cash flow.

Climate change is receiving increasing attention from scientists and legislators alike. The debate is

ongoing as to the extent to which the world’s climate is changing, the potential causes of this change and its potential impacts. Some attribute global warming to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. The outcome of federal and state actions to address global climate change could result in new regulations, additional charges to fund energy efficiency activities, or other regulatory actions. These actions could result in increased costs associated with the production of natural resources or affect the demand for oil and gas. Any action by federal or state governments mandating a substantial reduction in greenhouse gas emissions could have far-reaching and significant impacts on the energy industry and the U.S. economy. The Partnership cannot predict the potential impact of such laws or regulations.

Drilling, logging and testing of a well location does not guarantee its completion or productivity.

Following the drilling, testing, and logging of a well, the Operator may conclude that an attempt to

complete the well should not be made. The fact that an attempt to complete a well is made does not mean that the well will be a well capable of producing products recoverable in commercial quantities. A decision to make a completion attempt will be based upon the data then available to the Operator which indicates the existence of gas or hydrocarbons in one or more of the zones through which a well was drilled. Any attempt to complete a well may be unsuccessful for any number of operational reasons. The fact that a well is successfully drilled to the required depth and tests thereafter indicate hydrocarbon-bearing formations or gas formations sufficient to warrant a completion attempt does not, in and of itself, provide assurance that commercial oil and/or gas production will be obtained.

Risks Related to the Partnership’s Business

Working Interests the Partnership acquires ultimately may have no value.

The Partnership intends to acquire Working Interests under Leases in and around Pecos County, Texas or in

areas where the Partnership expects to engage in future drilling activity. The Partnership will take the risk that:

• anticipated drilling does not take place within the term of a given Lease and the Lease terminates; • wells drilled on the Leases may encounter obstacles such as impermeable formations; • wells drilled on the Leases may not produce oil or gas in commercial quantities; • prices for oil or gas may decrease to such an extent that production from a well is not economical;

and • the Leases could have defects which substantially reduce or destroy their value.

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The Partnership may acquire non-productive Working Interests.

Development and exploratory drilling and production activities are subject to many risks, including the risk

that no commercially productive reservoirs will be discovered. The Partnership cannot assure you that all of the Purchased Working Interests will be economically viable or that the Partnership will not abandon its initial investments in some of the Purchased Working Interests. Additionally, there can be no assurance that all of the Leases can be profitably developed, that new wells drilled will be productive or that the Partnership will recover all or any portion of its investment in such Leases.

The Partnership may not be able to farmout or sell the Purchased Working Interests.

The Partnership may seek to sell or farmout some of the Purchased Working Interests instead of

participating in development of the Leases. However, the Partnership may find that no other person is willing to acquire the Purchased Working Interests, or to enter into a farmout arrangement, on terms acceptable to us. If the Partnership is not able to sell or farmout a Lease, the Partnership may not recover its investment in the Lease or obtain any production from the Lease.

The Purchased Working Interests may be subject to defects.

The Partnership will buy Working Interests in their present condition, and the sellers may disclaim any

warranty, express, implied, at common law or by statute, relating to (a) the accuracy of any data or records relating to the Leases, including those received from third parties, (b) the environmental condition of the underlying properties, or (c) title to the underlying property. The Partnership will rely upon existing title opinions, if available and provided, affecting the underlying properties or upon other parties which acquire Working Interests. However, even a detailed review of all records or a title opinion may not reveal existing or potential problems, nor will it permit us to become sufficiently familiar with the Working Interests to assess fully their deficiencies and capabilities. Defects in the Purchased Working Interests could substantially reduce or destroy the value of the Purchased Working Interests or make them difficult or impossible to develop or sell.

The Partnership will have no rights with respect to other properties acquired by affiliates of the Managing Partner.

There is no area of mutual interest agreement between the Partnership and StableRock or between the

Partnership and any affiliate of the Managing Partner. Therefore, StableRock and the Managing Partner or its affiliates could acquire and/or develop oil and gas properties in the same areas as the Purchased Working Interests acquired by the Partnership potentially in competition with the Partnership either alone or with other persons.

The proceeds of the Offering may not be sufficient to fund the Partnership’s operations.

The Partnership will be required to make substantial expenditures for the acquisition, exploration and

development of oil and natural gas properties. The proceeds of the Offering may be insufficient to fund such expenditures and the Partnership may be required to obtain additional funds. The Partnership would have to raise additional funds, if at all, through additional equity offerings, which require the approval of the Investor Partners. There can be no assurance that the Investor Partners would approve an additional equity offering or that the Partnership would be successful in raising such additional funds on terms favorable to the Partnership, if at all. If the Partnership requires additional capital and is unable to raise it, it may be unable to execute its business plan and such event would likely significantly limit prospect development and drilling activities until additional capital is obtained.

Information concerning anticipated reserves and future net cash flow estimates is uncertain.

There are numerous uncertainties inherent in estimating quantities and values of proved oil and gas

reserves, including many factors beyond the Partnership’s control. Estimates are by their nature uncertain. Although the Partnership believes it will be able to estimate potential reserves in acquisitions, actual production, revenues and costs to develop will likely vary from estimates and these variances could be material.

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The number of wells that generate revenue may fluctuate for reasons beyond the Partnership’s control.

The number of actual, active oil and gas wells that will ultimately generate revenues for the Partnership

will fluctuate for a variety of reasons outside of its control, including, among other reasons, the life of a given well and its declining productivity. For example, as the productivity of a well declines, it may be shut-in and, as such, will no longer generate revenue for the Partnership. The value of the Purchased Working Interests is likely to fluctuate with any fluctuation in production.

The Partnership is in the process of identifying and acquiring rights to Working Interests.

The Partnership will use a portion of the proceeds from this Offering to acquire Working Interests.

However, the Partnership does not intend to provide specific information about Working Interests the Partnership is acquiring so that its ability to acquire these assets at competitive prices is not affected. As a result, you will not have the opportunity to evaluate specific Working Interests before you invest nor will you have a voice in making the selection after you invest. Consequently, you will be relying upon the Partnership’s judgment for such decisions.

The Partnership may curtail production of oil and natural gas on its completed wells if there is not sufficient market demand.

If the price of oil were to drop, the Partnership may curtail production and may even “shut-in” producing

wells. Wells that are shut-in or producing on a restricted or limited basis may be subject to reservoir problems that could eventually lead to significant mechanical problems or even complete well or reservoir failure. Should the Partnership curtail production and reservoir problems were to occur, the Partnership may be unable to reestablish production on the shut in wells, which could adversely affect its operations.

Risks Relating to an Investment in the Partnership

The Units have not been registered under applicable federal and state securities laws.

The Units have not been, nor will they be, registered under applicable federal or state securities laws, but

instead are being offered and sold in reliance upon exemptions from such registration under the law. Consequently, no regulatory authority has reviewed the nature and amounts of compensation to be paid to the Managing Partner, the disclosure of risks and tax consequences inherent in such investment, or the other terms of this Offering.

The Units are not freely transferrable.

You will not be permitted to transfer, assign, or pledge your Units without the Managing Partner’s consent,

which consent can be given or withheld in our sole discretion. Further, a transferee of Units may be substituted as a Partner only with the Managing Partner’s consent. Because you will not own a direct interest in any Purchased Working Interests acquired by the Partnership, you will not be able to transfer, assign, or pledge your proportionate share of such Purchased Working Interests.

The Units will be subject to restrictions on resale.

The Partnership is offering the Units in a private placement. Therefore, the Units will be subject to

restrictions on resale. Restricted securities cannot be re-sold or otherwise transferred absent registration under the Securities Act of 1933, as well as applicable state securities statutes, or pursuant to exemptions from the registration requirements under those statutes. In addition, the Units will be subject to restrictions on resale under the Partnership Agreement. Such restrictions could prevent or delay a re-sale of any Units or reduce the amount of proceeds that might otherwise be realized from a sale of Units. You should not invest in this Offering if you anticipate you will need to sell the Units in the near future.

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The Managing Partner may be removed in certain circumstances. The Managing Partner may be removed by the Investor Partners owning more than fifty percent (50%) of

the Units at any time it is subject to an Event of Withdrawal (defined in the Partnership Agreement). In the event of a removal of the Managing Partner from the Partnership, the Investor Partners would then have to elect a successor managing partner or risk dissolution of the Partnership. There can be no assurance that any other person would be willing to serve as the managing partner of the Partnership. In that event, the Partnership would be dissolved and its business wound up.

General Partners may become personally liable for Partnership obligations.

Under Delaware law, creditors must first look to the Partnership’s assets for collections of claims. If the

Partnership’s assets will not satisfy all claims, then each General Partner could be jointly and severally liable for the liabilities and recourse obligations of the Partnership, and in connection with operations, including damages to property and persons from blowouts and other hazards. Although the Partnership intends to maintain certain liability and other insurance with respect to the activities to be conducted by the Partnership, the General Partners could become subject to liability for injury or damage in excess of the amounts of insurance provided for under such policies. The General Partners also may be subject to liabilities for hazards against which the Managing Partner elects not to insure because of high premium costs or other reasons. As such, an General Partner’s obligations may exceed the amount of his capital contributions to the Partnership. This excess liability could result in the necessity for a General Partner to make additional payments to the Partnership for the amount of such obligations, and it is not possible to determine the probable amount of any such obligations, if any. See “Proposed Activities” and “Summary of the Partnership Agreement–Liability of Partners–General Partners.”

The Managing Partner and the Partnership have no prior operating history.

The Partnership is newly-organized solely for the purposes of this Offering and has no assets or prior

operating history. The Partnership’s proposed operations are subject to all of the risks inherent in the establishment of a new business. The Partnership may not successfully implement its business plan.

The Managing Partner is a newly-organized entity with no operating history. While affiliates of the

Managing Partner have substantial oil and gas experience, each Lease may bring about its own risks, which the affiliates of the Managing Partner may not have encountered previously.

Distributions will be made in the sole discretion of the Managing Partner.

You may not receive the cash flow expected or as needed to pay tax due on taxable but undistributed

income since cash distributions will be made in the sole discretion of the Managing Partner.

Control persons of the Managing Partner cannot be relied upon for financial assistance to the Managing Partner.

The members and the managers of the Managing Partner cannot be relied upon to provide material

financial assistance to the Managing Partner, even if such assistance is required. The Managing Partner should not be relied upon for significant financial contributions to the Partnership, in the event such contributions were required in order to maintain the Partnership’s operations. The Managing Partner is thinly capitalized and has no significant net worth. Under the terms of the Partnership Agreement, the Managing Partner is not obligated to make any financial contributions to the Partnership. All of the financial obligations of the Partnership must be borne by the Investor Partners.

The Partnership will be dependent upon certain key personnel.

The Managing Partner’s ability to manage the Partnership depends significantly on the skills and

experiences of its managers. If the managers were unable or unwilling to manage the Managing Partner and the Partnership for any reason, the Partnership’s chances for profitability would be severely limited.

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There is no market for the Units. There will not be any established resale market for the Units. Further, unlike certain other oil and gas

programs, the Managing Partner has no obligation to purchase, or cause anyone to repurchase, the Units from any Investor Partner at any time. The Units are being offered and sold for investment only and should not be acquired with a view to any resale or distribution thereof. The Units will not be registered under federal or state securities laws. The Units are being offered and sold pursuant to specific exemptions from registration provided in federal and state securities laws for transactions involving a private or limited offering, and the availability of such exemptions depends in part upon the investment intent of each investor. Accordingly, investors will need to bear the financial risks of their investments for an indefinite period of time unless either the Managing Partner or another Investor Partner wants to acquire additional interests in the Partnership.

The Partnership has indemnified the Managing Partner.

The Partnership Agreement provides, subject to certain conditions, for indemnification of the Managing

Partner against claims arising from certain conduct on behalf of the Partnership.

The Managing Partner may be subject to conflicts of interest. The Managing Partner, in its capacity as such, will act on behalf of the Partnership in making decisions and

elections on behalf of the Partnership. StableRock is a member and affiliate of the Managing Partner. It is possible that the interests of the Managing Partner and Investor Partners could conflict in such circumstances. The Managing Partner may, in the future, act as sponsor of additional oil and/or gas exploratory drilling joint ventures of programs which may be in competition with this Partnership insofar as investment opportunities, general management, time and attention are concerned. Consequently, there is a possibility of conflicts of interest. The Managing Partner will, however, act in a prudent manner when acting in its capacity as Managing Partner. In addition, the terms of the Drilling and Completion Contracts between the Partnership and StableRock were not determined as a result of arm’s length negotiations. Other conflicts could arise. See the “Conflicts of Interest” section of this Memorandum.

The Partnership Agreement limits the Managing Partner’s liability to the Investor Partners.

The Partnership Agreement limits the Managing Partner’s liability to the Investor Partners. The Managing

Partner will have no liability to the Partnership for any loss suffered by the Partnership, and it will be indemnified by the Partnership against losses sustained by in connection with the management of the Partnership, unless the Managing Partner has engaged in intentional misconduct or a knowing violation of law or a transaction in which the Managing Partner and its affiliate, receive a personal benefit in violation or breach of the Partnership Agreement.

The purchase price of a Unit has been arbitrarily determined by the Managing Partner in its sole discretion.

The purchase price of a Unit has been arbitrarily determined by the Managing Partner in its sole discretion

and is not the result of arm’s length negotiations. The purchase price bears no relationship to any established criteria of value, such as the book value or earnings of a Unit or any combination thereof, and does not necessarily reflect any market value for a Unit.

The Managing Partner may become involved in other partnerships.

The Managing Partner may become involved in the offer and sale of interests in future partnerships and

programs. Information obtained from the results of Partnership operations may be of benefit to the Managing Partner in proving up other acreage that it might acquire or manage. No interest that the Managing Partner or its affiliates may acquire through other partnerships in other prospects or leasehold acreage will be transferred to or in any way be committed to this Partnership.

There is no independent representation of purchasers of Units.

The interests of the Investor Partners in this Offering have not been separately represented by legal counsel

or others in connection with the organization of the Partnership and the offering of Units. Counsel for the Managing

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Partner and the Partnership do not represent the Investor Partners. Accordingly, the terms of the Offering, or of the Units, or the management of the Partnership may not have been structured in the most favorable manner to the Investor Partners and do not include legal protections for the Investor Partners, which might have been obtained if they had retained independent counsel.

You should not rely on projections or opinions.

No one has been authorized to make any projections or express any opinion concerning future events or

expected oil and/or gas production except as set forth within this Memorandum and any other document utilized in connection with the placement of these Units. No oral opinions which differ from the written data provided prospective Investor Partners have been authorized and in no event should be relied upon. Opinions of possible future events are based upon various subjective determinations and assumptions. All projections by their very nature are inherently subject to uncertainty, and a prospective Investor Partner should understand that written projections, if provided, may not be achieved, that underlying assumptions may prove inaccurate, that historical production levels may not be sustained, and that operations of the Partnership may be unprofitable, in the aggregate, because oil and/or gas is not discovered in commercial quantities.

Tax Risks

At-Risk Limitations.

Certain provisions of tax law limit a taxpayer’s deductions for losses attributable to oil and gas operations

to an amount not in excess of a taxpayer’s amount “at risk” in connection with such operations. These and other material U.S. federal income tax consequences of owning Units are discussed more fully in “Federal Income Tax Aspects.”

Passive Activity Loss Limitations.

The so called “passive activity” loss limitation applies to individuals, personal service corporations, and

corporations 50% or more owned by five or fewer persons. Generally, a “passive activity” is an activity in which the investor does not “materially participate” on a “regular, continuous and substantial basis.” Losses from “passive activities” may not be deducted by the investor against his salary income, income from investments in other activities in which the investor does materially participate, or dividend and interest income; losses from “passive activities” may be deducted only against net income (if any) from other “passive activities” or upon the eventual disposition of the taxpayer’s entire interest in the passive activity. Working Interests in oil and gas properties, however, are ordinarily not regarded as “passive activities,” regardless of whether the investor “materially participates,” if the investor’s liability with respect to such interest is not limited. As a result, the passive activity loss limitations should not apply to General Partners who are individuals with respect to the drilling or operation of a well pursuant to a Working Interest, provided such General Partner has not previously participated in the drilling of a well through an entity which limits his liability if such well enhanced the prospects that the well to be drilled by the Partnership will be commercially productive and if such well produces from the same reservoir as the reservoir into which the Partnership’s well is to be completed. The passive activity loss limitation will apply to each Limited Partner and therefor Partnership losses may only be deducted against passive income realized by such Limited Partner.

Intangible Drilling and Development Costs.

The Managing Partner believes that the Partnership should have its allocable share of any benefits and

burdens attributable to the ownership of a Working Interest in the wells. The Managing Partner also believes (but can give no assurance) that the Partnership should be allowed intangible drilling and development cost deductions for some portion of the costs it pays to the Managing Partner. There can be no assurance that the Internal Revenue Service (“IRS”) will not challenge the amounts paid for a well or the allocation thereof between intangible drilling costs and tangible drilling costs or that the IRS will not assert that some portion of the costs paid should be re-characterized as Lease Acquisition Costs or other costs which are not deductible in whole or in part.

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Percentage Depletion. Certain Investor Partners will be allowed to use percentage depletion in calculating their taxable income

resulting from Partnership oil and gas production, subject to certain qualifications and limitations. Because the availability of percentage depletion depends upon each Investor Partner’s individual situation, each prospective Investor Partner should consult his personal tax advisor to determine whether percentage depletion will be available to him.

Audit by the IRS.

If the Partnership’s information return is audited, this could give rise to coordinated audits of the returns of

Investor Partners.

IRA Investors. Investors that invest through an individual retirement account (“IRA”) may experience adverse tax

consequences. An investment in the Partnership by an IRA may generate taxable income referred to as “unrelated business taxable income” (“UBTI”). Such income is taxable as ordinary income at the corporate tax rate, and is payable by the IRA. If an IRA generates gross income from UBTI of more than $1,000 it must obtain an Employer Identification Number and file a tax return. It may be necessary for investors who invest through an IRA to make quarterly estimated tax payments with respect to such income. Also, any IRA-related ordinary income that is subject to tax will not create any additional basis in the investor’s IRA account, so there is a possibility of double tax with respect to such income. Before investing through an IRA, investors should consult with their tax and investment advisers to determine whether an investment in the Partnership is appropriate for their IRA. See “Federal Income Tax Aspects - Other Tax and ERISA Considerations” below for more information.

TERMS OF THE OFFERING

General We are offering up to $15,000,000 of General Partner Units and Limited Partner Units in the Partnership, at

a price of $12,500 per Unit. Investors whose subscriptions are accepted will be admitted, based on their election, as general partners or limited partners in the Partnership.

A maximum of 1,200 Units will be sold in the Offering at a purchase price of $12,500 per Unit. The

minimum investment is one Unit ($12,500). The Partnership has established a bank account with Interbank (“InterBank”). All funds tendered by

investors will be deposited initially into an account in the name of the Partnership at InterBank, pending the acceptance of investors as Investor Partners of the Partnership, at which time the subscribed amount will be transferred to the Partnership’s operating account at InterBank.

While there is no minimum amount of funds required to be tendered to the Partnership before it begins

implementation of the business plan described herein, it is the current intention of the Managing Partner, acting in its sole discretion, not to begin implementation of the business plan described herein until such time as it determines that sufficient funds have been invested into the Partnership by investors to enable the Partnership to conduct meaningful activities. When the Managing Partner decides to implement the business plan, it will utilize the funds in the Partnership’s account in the manner described herein under “Use of Proceeds.”

The offering period will begin on October 22, 2015, the date of this Memorandum, and will terminate on

January 22, 2016, unless terminated earlier if all the Units are sold or if the Partnership otherwise decides to terminate the Offering. The Partnership may extend the offering period up to an additional 90 days without notice to prior investors. The Managing Partner reserves the right to commence the implementation of the business plan with funds raised at any time prior to the completion of the offering or, in the alternative, to terminate the offering and to refund, without interest, all tendered subscription proceeds.

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WHO MAY INVEST

Units are only being offered to:

• Natural persons who are citizens or residents of the U.S. (including certain former citizens and former long-term residents);

• Corporations (and other entities taxable as a corporation for U.S. federal income tax purposes)

created or organized in or under the laws of the U.S. or of any political subdivision thereof;

• Estates, the income of which is subject to U.S. federal income taxation regardless of the source of such income; and

• Trusts, if (i) the administration of the trust is subject to the primary supervision of a U.S. court and

the trust has one or more U.S. persons with authority to control all substantial decisions or (ii) the trust has a valid election in effect under applicable Regulations to be treated as a U.S. person.

The Managing Partner will accept a subscription from an IRA that is a Traditional IRA or Roth IRA. Subscriptions from any other type of IRA, including SEP or SIMPLE or Keogh Plans, will not be accepted. No employee benefit plans within the meaning of the Employee Retirement Income Security Act of 1974, as amended, will be accepted.

In addition, investors must meet the conditions for investment discussed below under Suitability

Requirements.

Suitability Requirements Investment in the Partnership involves a very high degree of risk and is suitable only for persons of

substantial means who have no need for liquidity in their investment and can afford a complete loss of their investment. In particular, investment as a General Partner is recommended only to those persons who are in a position to benefit from the treatment afforded such an investment under current federal income tax laws and are willing to assume the liabilities of a general partner in the Partnership.

The following suitability requirements represent the minimum suitability requirements for investors in the

Partnership. The Managing Partner may modify the investor suitability requirements in its sole discretion, which may include raising the suitability requirements for prospective purchasers in any one or more jurisdictions. The satisfaction of these requirements by a prospective investor does not necessarily mean that an investment in the Partnership is a suitable investment for that investor. The Managing Partner reserves the right to reject in its sole discretion a potential investor’s subscription.

The Units being offering by this Memorandum have not been registered under the Securities Act in reliance

on an exemption from registration provided in Sections 3(b) and 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act. The Units are being offered only to prospective investors who the Partnership believes are “accredited investors” within the meaning of Rule 501(a) of Regulation D under the Securities Act. An accredited investor under Rule 501(a) of Regulation D under the Securities Act includes:

• Any natural person whose individual net worth (or joint net worth with his or her spouse),

excluding the equity value of the primary residence of the Investor, exceeds $1,000,000 at the time of this investment;

• Any natural person who had an individual income in excess of $200,000 in each of the two most

recent years or joint income with that person’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year;

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• Any bank, savings and loan association or similar institution whether acting in its individual or fiduciary capacity;

• Any insurance company and any registered securities broker or dealer;

• Any registered investment company or business development company as defined in the

Investment Company Act of 1940 or any small business investment company licensed by the U.S. Small Business Administration;

• Any private business development company (as defined in Section 202(a)(22) of the Investment

Advisors Act of 1940, as amended);

• Any non-profit organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership not formed for the specific purpose of acquiring the investment, with total assets in excess of $5,000,000;

• Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of

acquiring the investment, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D of the Securities Act;

• Any revocable trust whose grantor is individually qualified as an accredited investor; or

• Any entity other than a trust in which all of the equity owners are individually qualified as

accredited investors; Each prospective Investor Partner that tenders a Subscription Agreement will be required to tender

sufficient documentation to the Managing Partner to verify his status as an accredited investor. This verification process may be accomplished in a number of different ways. The Subscription Documents attached to this Memorandum as Exhibit D contain instructions to enable persons who tender Subscription Agreements to obtain such verification from certain third parties familiar with their status as accredited investors. No Subscription Agreement will be accepted from any person or entity that is unable to provide the verification of accredited investor status.

The Managing Partner does not intend to sell Units to any number of record owners that would thereafter

require the Partnership to register as a reporting company under the Securities Exchange Act of 1934, as amended. The requirement that a person subscribing to purchase Units be an accredited investor is a minimum

requirement. The fact that a person is deemed to be an accredited investor does not necessarily mean that the Units are a suitable investment for him or her. Accordingly, each prospective investor is urged to consult with his or her own professional advisors to determine whether the purchase of the Units is appropriate in light of such prospective investor’s particular financial, tax and legal situation.

How to Subscribe

An eligible investor may subscribe for Units before the end of the offering period by properly completing,

executing, and delivering the following documents to the Managing Partner at the address set forth in the Subscription Documents attached to this Memorandum as Exhibit D:

• The Subscription Agreement, together with the related signature pages, questionnaires, and

materials; and

• Payment directed to “Redhawk Resources – Fund III, LP” in an amount equal to the purchase price for the Unit(s) to be purchased by such investor.

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The remittance of tendered funds accompanied by a Subscription Agreement will not immediately confer the right of an investor to participate in the Offering. The Managing Partner must thereafter review the tendered Subscription Agreement and either accept or reject said agreement. In the event that a Subscription Agreement is accepted, the funds tendered will become assets of the Partnership. In the event that a Subscription Agreement is rejected, the funds tendered will be immediately refunded, without interest, to the investor.

The Managing Partner may reject any Subscription Agreement. Subscription Agreements tendered to the

Partnership before the end of the offering period which are acceptable to the Managing Partner will be accepted, and tendered Subscription Agreements that are not so accepted will be deemed rejected. By its terms, the Subscription Agreement constitutes a binding agreement of the investor. If any Subscription Agreement is rejected, the funds tendered in connection therewith will be promptly returned to such investor without interest.

Subscription funds tendered to the Partnership will be held in a bank account in the name of the Partnership

at InterBank until such time as the Managing Partner authorizes their release in the implementation of the business plan described herein. The Managing Partner may accept additional subscriptions after commencement of operations, until such time as the Offering is closed, which will be no later than January 22, 2016, unless terminated earlier if all the Units are sold or if the Partnership otherwise decides to terminate the Offering. The Partnership may extend the offering period up to an additional 90 days without notice to prior investors.

Once the Managing Partner authorizes the release of those funds, it is the Managing Partner’s intention to

utilize the funds in the manner described under “Use of Proceeds” set forth within this Memorandum.

PLAN OF DISTRIBUTION Units in the Partnership are being offered to accredited investors in accordance with Rule 506(c) of

Regulation D, promulgated under the Securities Act. The Units are being offered to persons who can establish, with “verifiable” documentation, that they are

accredited investors as defined in Rule 501(a) of Regulation D. The Managing Partner will entertain offers for subscriptions from such persons on a case-by-case basis, with the right to accept or reject any Subscription Agreement for any reason, including the lack of verifiable accredited investor status. Potential investors must complete the Subscription Documents accompanying this Memorandum as Exhibit D and must provide verification documentation acceptable to the Managing Partner to enable the Managing Partner to determine such investor’s accredited investor status.

No transaction-based compensation will be paid by the Partnership or the Managing Partner, or any of its

affiliates, on account of any offer or sale of any of the Units. No securities broker-dealer registered with the Securities and Exchange Commission or with any state regulatory authority will be utilized in the offer or sale of the Units, unless the Managing Partner elects to do so at some point during the offering period. In that event, transaction-based compensation in the form of sales commissions will be paid to such parties but only pursuant to negotiated selling agreements between such broker-dealers and the Partnership. Any transaction-based compensation paid on account of any offer or sale of a Unit through a securities broker-dealer will be paid by the Managing Partner, not by the Partnership. As such, the offer or sale of a Unit through the services of such broker-dealers will have no impact upon the Partnership’s use of proceeds.

Money Map Press may, but is not required to, introduce investors, including subscribers of Money Map

Press, to the Offering. The Partnership has agreed to accept subscriptions only from eligible investors who are subscribers of Money Map Press publications for up to the first 30 days of the Offering. The Partnership will hold any subscriptions it receives from investors eligible to participate in the Offering who are not subscribers to Money Map Press publications until the end of this 30 day period. If the Offering is fully subscribed by such Money Map Press investors during this 30 day period, the Partnership will reject the application from any other investors and will return any funds remitted by such investors. The Partnership may elect to terminate this 30 days exclusivity period for Money Map Press investors and, if it does so, will accept subscriptions from other eligible investors at any time after the termination of such exclusivity period.

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In the course of determining the precise terms and conditions of this Offering and the proposed business plan of the Partnership, an affiliate of the Managing Partner consulted with ASIDA, Inc. and its president, Kent F. Moors, Ph.D. Dr. Moors and Money Map Press may, but are not required to, introduce investors, including subscribers of Money Map Press to the Offering. None of the payments to ASIDA will be related to or in consideration for the introduction of potential investors or recommending the Offering. No payments of any kind will be made directly to Dr. Moors or Money Map Press from the Managing Partner or its affiliates. While Dr. Moors and Money Map Press will make no recommendations of a personalized nature concerning the Offering, Dr. Moors and Money Map Press may generally discuss the merits of the Offering and the proposed business plan of the Partnership in their publications.

PROPOSED ACTIVITIES

General Operations The Partnership was formed to acquire Working Interests in both producing and nonproducing oil and gas

leases in and around Pecos County, Texas. The Partnership will own its proportionate share of production from the existing wells and may also proportionately participate in the further development of the Leases by drilling additional wells, working over existing wells and/or implementing enhanced recovery operations on the Leases, and or resell or farmout the Leases. The Managing Partner will use its best efforts to acquire on behalf of the Partnership an average 96% Working Interest in approximately 3,800 net acres of producing developed oil, gas and mineral Leases and non-producing undeveloped oil, gas and mineral Leases. The Partnership may not acquire a 96% Working Interest in each individual Lease; however, it will acquire an average 96% Working Interest across all of the acquired Leases. The Purchased Working Interest on average across all Leases will be subject to an average 22% in Lease burdens, which include mineral owner royalty interest, existing overriding royalty interest, and a 3% overriding royalty interest payable to the Managing Partner.

In addition, the Managing Partner will receive a “Carried Working Interest” equal to 15% of the Purchased

Working Interest. A “Carried Working Interest” is a Working Interest that does not pay for its proportionate part of the drilling, testing, completing, and equipping costs of the lease or well to which it relates. As a result, the Partnership will receive 85% of the net revenues payable on only the Purchased Working Interest (which is 96% of Total Working Interest) less and after the average 22% in Lease burdens are paid. The Managing Partner will receive the remaining 15% of such revenues after the Lease burdens are paid.

Consequently, the Partnership’s proportionate share of the net revenues (the “Net Revenue Interest”) in the

Total Working Interest will be an average of 63%. The Partnership's proportionate share of Net Revenue Interest is the product of the following: After Lease burdens totaling an average of 22% have been deducted, the Working Interest holders will received on average 78% of the Net Revenue Interest. The Partnership will own an average of 96% of the Working Interests in the Leases and, consequently, will be entitled to 96% of the 78% Net Revenue Interest payable to the Working Interest holders, or a 75% Net Revenue Interest. The Managing Partner will receive 15% of the 75% Net Revenue Interest and the Partnership will receive the remaining 85%. As a result, the Partnership will be entitled to receive on average a 63% Net Revenue Interest in the revenue from the sale of all oil and gas from the Leases payable to the Partnership. The Partnership will be responsible for an average 96% of the total drilling, testing, completion, equipping and operating costs of each well drilled or operated on the Leases and will receive approximately 63% of the net revenues generated from the sale of oil and gas.

The Purchased Working Interest will be subject to the terms of an Operating Agreement substantially in the

form of Exhibit A, pursuant to which StableRock will operate the wells drilled by the Partnership. See “Operation of the Wells.”

The Partnership plans to focus on properties located in Texas, including portions of Pecos and surrounding

counties. The anticipated acquisition cost for the Purchased Working Interest is $3,500,000

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Area of Focus The area of focus is scattered across a broad spectrum of geological provinces common to Texas and

includes portions of Pecos and surrounding counties. The Leases cover a multitude of geological environments that the Managing Partner believes will be conducive for the development and exploitation of major oil reserves and numerous additional drilling opportunities that have been defined and identified by 3D seismic.

There is no area of mutual interest agreement between the Partnership and any other person related to the

area of focus, and, therefore, StableRock and other affiliates of the Managing Partner could acquire and/or develop oil and gas properties in the area of focus in competition with the Purchased Working Interest.

Business Plan

The number of Working Interests to be acquired and the number of wells drilled, worked over, or enhanced

on the Leases will depend upon the amount of capital raised by the Partnership. It is possible that revenues generated by the first wells drilled by the Partnership could be utilized to further develop Leases by drilling additional wells. The Investor Partners will not be required to contribute additional capital to the Partnership over and above their initial capital contributions.

If all of the Units are sold and the Partnership is capitalized with the maximum of $15,000,000, the

Managing Partner believes it can drill and complete approximately six (6) wells and can complete the workover of an additional approximately twenty (20) existing wells. This combined drilling program is expected to utilize the initial $8,370,000 allocated for the Partnership’s share of the expenses in the drilling, workover, enhancement through secondary recovery, and development of the Leases. Revenues generated from these initial wells may potentially be utilized to participate in the development, to the extent commercially reasonable, of additional wells and additional secondary recovery enhancement of the established producing lease units in Texas.

To the extent that the Partnership does not elect to participate in the development of additional wells with

revenues generated from the initial wells, the Managing Partner will have the right, in its sole discretion, to either sell or farmout Working Interests to third parties, including affiliates of the Managing Partner, in exchange for a Carried Working Interest delivered to the Partnership. The Managing Partner in its sole discretion will in good faith negotiate the terms of the sale or farmout of the Purchased Working Interest. The Managing Partner will retain its proportionate share of the Carried Working Interest equal to the proportionate percentage share of the original Purchased Working Interest in the sold or farmed-out Working Interest.

With respect to any portion of the Purchased Working Interest not developed by the Partnership, including

that farmed-out to a third party, including affiliates of the Managing Partner, the Managing Partner will attempt to negotiate a Carried Working Interest for the Partnership. With respect to such farmed out interest, the Managing Partner will also negotiate a Carried Working Interest for its own account, which will be held by it outside of the Partnership. Any such Carried Working Interest negotiated by the Managing Partner for its own account will reduce the Partnership’s Carried Working Interest in the farmed out interest.

A Geological Review of the Leases has been prepared and is attached as Exhibit E. Before investing

in the Offering, investors should read the Geological Review with great care, as well as the maps and other information which accompany the review. In addition, investors should consult with an independent petroleum geologist of their own choosing to secure a second opinion with respect to the viability of the Partnership’s proposed business plan.

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OPERATION OF THE WELLS

Operator. StableRock Energy L.L.C., an affiliate of the Managing Partner, may be the operator on record for all work

associated with drilling wells, workovers, re-completions and any activities needed to further enhance hydrocarbon recovery and to maintain the Leases. The Partnership will enter into an Operating Agreement with StableRock, in the form attached as Exhibit A, pursuant to which StableRock will manage and supervise the well operations, including contracting for labor, materials and equipment for the wells and other activities necessary to the operation of the wells. In addition, StableRock will be the drilling operator of the wells drilled on the Leases. The Partnership will enter into Drilling and Completion Contracts with StableRock, in the forms attached as Exhibit B, which will govern StableRock’s services as the operator and the Partnership’s payment for the drilling, testing, completion, and equipping costs associated with the development of wells on the Leases.

The Operator may resign at any time by giving notice to the Partnership of its resignation and such

resignation will be effective 90 days after the notice of resignation was given. The Operator may be removed, at any time without or without cause, by the Partnership and a successor Operator may be appointed by the Partnership.

General Operations.

Operation of the wells drilled by the Partnership will be governed by an Operating Agreement

substantially in the form attached as Exhibit A. The Operating Agreement should be read in its entirety for a full understanding of its terms.

Under the terms of the Operating Agreement, the Operator is appointed to perform or cause to be

performed all services in connection with the supervision and management of the wells, including contracting for labor, materials, tools, machinery and equipment incidental to the wells, and other activities necessary to such operations. The Operator may delegate any or all of its duties to third parties; however, the Operator will remain responsible for the performance of such functions for as long as it serves as Operator.

The Operating Agreement is not fixed-cost contract but is set up on a billable cost plus ten percent (10%)

basis. That is, for any project estimated to cost more than $25,000, the Partnership will be required to pay up to 110% of the billable costs invoiced by StableRock. In addition, the Partnership will reimburse StableRock for the actual operating costs, including but not limited to materials, supplies, fuel, electrical costs, equipment, transportation costs, repair costs, and/or water disposal costs, and will pay the Operator an overhead charge not to exceed $2,000 per month per well.

The Operating Agreement also grants the Operator a lien on the interest of the Partnership in the wells to

secure payment of the Partnership’s obligation for its proportionate share of Lease Operating Costs (as defined below).

Remedial Assessments.

The Operating Agreement further provides that the Operator may incur Lease Operating Costs of up to

$25,000 for any single project without approval of the Partnership. In the event work in excess of that amount is recommended by the Operator, notice will be forwarded to the Partnership. The Partnership will have the option of non-consenting in such work by virtue of its failure to give written notice of its participation to the Operator. In addition, in the case of explosion, fire, flood or other sudden emergency, the Operator is authorized to incur expenses required to deal with the emergency.

Lease Operating Costs.

“Lease Operating Costs” are all of the expenditures made and costs incurred by the Partnership in

connection with operation of a well, as more fully set forth in the Operating Agreement for such well. Such costs could include the cost of labor, fuel, repairs, hauling, materials, supplies, utility charges, and other similar costs; ad valorem, severance, and other applicable taxes; insurance and casualty loss expense; and compensation to the

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Managing Partner, or others, for services rendered in conducting such operations (which compensation may include the Partnership’s proportionate share of any monthly operating fee and reimbursement of all direct costs). Lease Operating Costs include lease bonus payments and lease extension and renewal, the costs of any Special Projects (as defined below), and the costs of any remedial cementing in which cement is pumped to specified points behind the casing to isolate a productive zone, seal off water, or repair casing leaks. Lease Operating Costs exclude Lease Acquisition Costs (as defined in “Use of Proceeds”), drilling and completion costs, and the costs of Subsequent Operations (as defined below).

The Partnership will pay on average 96% of the Lease Operating Costs for the wells and its pro rata share

of the taxes on production from the wells. Lease Operating Costs will be charged against revenues in accordance with generally accepted accounting procedures, and in accordance with the Accounting Procedure attached as an exhibit to the Operating Agreement. All production revenues will, after payment of royalties and severance taxes levied at the wellhead, be paid to the Partnership.

Subsequent Operations.

The Operating Agreement contains provisions for the assessment of the parties, including the Partnership

and other Working Interest owners, for Subsequent Operations and Other Operations. A “Subsequent Operation” would typically involve the completion, reworking, sidetracking (including the sidetracking of an existing lateral hole), deepening of the wells before and after obtaining production, plugging back, or the drilling and/or completion of a well on the Lease other than the wells. “Other Operations” would typically involve repair work, the undertaking of the installation of additional artificial lift equipment, ancillary production facilities such as salt water disposal wells, conducting additional work with respect to the wells, and other similar projects (but not including the installation of gathering lines or other transportation or marketing facilities the installation of which shall be governed by separate agreement between the parties to the Operating Agreement). At any time any party to the Operating Agreement may propose additional projects other than normal and customary drilling and producing operations and Subsequent Operations, such as the installation of gathering lines or other transportation or marketing facilities the installation of which shall be governed by separate agreement between the parties. These additional projects are known as “Special Projects.” Special Projects might include the construction of compressor plants, source water stations, gas production plants, pipelines or other transmission facilities and other “special projects,” such as shooting for seismic data, as distinguished from the more usual drilling, workover and/or producing operations. The cost of a Special Project shall be governed by separate agreement between the parties which agree and authorize the Special Project.

Over the course of the producing life of the wells to be drilled by the Partnership, an assessment for such a

purpose could be required. In the event of a determination that a Subsequent Operation, Other Operation or Special Project might be desirable to be carried out, any Working Interest owner can propose such a project or operation. The other Working Interest owners can then either consent or refrain from participating in the Subsequent Operation or Special Project or in any Other Operation where the cost is estimated to exceed $25,000. In the case of a Subsequent Operation on a well, a Non-Consenting Party (as defined in the Operating Agreement) will be penalized with respect to his interest in the well. A Consenting Party (as defined in the Operating Agreement) will be required to pay the costs assessed to fund the Subsequent Operation which could be substantial. It should be noted that the Consenting Parties have the option to participate for their proportionate share of the Non-Consenting Parties’ interest in the proposed Subsequent Operation, but no proposed Subsequent Operation will be performed unless such Consenting Parties have agreed to pay for 100% of the costs. The Operating Agreement should be read for the penalty for the failure to pay an assessment for any Other Operation. Penalties for the failure to pay an assessment for a Special Project will be governed by the separate agreement entered into at the time such Special Project is approved.

Sale of Oil and Gas Production.

If the Partnership does not elect to take in-kind or separately dispose of its share of oil or gas production,

the Operator may purchase the production from the wells or may sell such production to others for the account of the Partnership. Oil and gas produced from the wells will be sold on a competitive basis to third parties, such as pipeline companies, gathering companies, gas marketing companies, refineries, major oil companies and utilities and will not be sold to or otherwise acquired by the Operator or the Partnership. Any such purchase or sale by the

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Operator may be terminated by the Operator or the Partnership upon ten days’ notice to the other party, unless the Operator has executed a purchase contract with a third party that extends beyond the 10 day notice period, in which case, the Operator will have 90 days in which to terminate such sale. The Operator may enter into contracts on behalf of the Partnership for the sale of production from the wells, the term of such contracts not to exceed one year.

Lease Abandonment.

The Operator may in the future determine that a well is not capable, or is no longer capable, of producing

oil or gas in commercial quantities, and thereupon proceed to abandon and plug the well. Plugging expense will be shared by the owners of the Working Interest in accordance with their respective interests and any proceeds accruing from the sale of salvage equipment and casing will be distributed in the same manner. Thus, the Managing Partner will distribute the salvage proceeds less any unpaid expenses and plugging and abandoning costs to the Investor Partners in accordance with the terms of the Partnership Agreement.

Claims and Lawsuits.

The Operator may settle any single uninsured third party damage claim or suit arising for the operations

under the Operating Agreement if the expenditure does not exceed $25,000 and if the payment is in complete settlement of the claim or suit. If the amount required for settlement exceeds this amount, the Partnership may assume and take over the further handling of the claim or suit, unless it has delegated such authority to the Operator.

Drilling and Completion.

The Partnership will enter into Drilling and Completion Contracts with StableRock or another operator

pursuant to which StableRock will perform or cause to be performed all drilling, testing, completion and equipping activities concerning a specific well on behalf of the Partnership. The Drilling and Completion Contracts are not fixed-cost contracts but are set up on a billable cost plus ten percent (10%) basis. That is, the Partnership and the other Working Interest owners will be required to pay 110% of the billable costs invoiced by StableRock (the Partnership will be responsible for a minimum of 96% of such payments) during the drilling, testing, completion and equipping phases. If actual costs exceed estimated costs, the Partnership will be required to pay its proportionate share of such costs. Preliminary forms of the Drilling and Completion Contracts are attached to this Memorandum as Exhibit B.

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ALLOCATION OF INTERESTS The following tables set forth the estimated percentage allocation of expenses of and Net Revenue Interest

in the Working Interest:

PARTY ALLOCATION OF EXPENSES

OF THE WORKING INTEREST NET REVENUE INTEREST IN THE WORKING INTEREST4

The Partnership1 96% 63% Non-Operating Working Interest Owners1 4% 3% Managing Partner’s Carried Working Interest2 0% 12% Managing Partner’s Overriding Royalty Interest3 0% 3% Mineral Owner Royalty Interest and all other Existing Overriding Royalty Interests3

0% 19%

Total 100.00% 100.00% 1 The Partnership will be allocated an average of 96% of the revenue and expenses from the Total Working Interest

(96% is the Purchased Working Interest) and the Non-Operating Working Interest Owners will be allocated an average of 4% of the revenues and expenses.

2 The Managing Partner will receive a Carried Working Interest equal to an average 15% proportionate of the

Purchased Working Interest (15% of the average 96% Purchased Working Interest). The Managing Partner will not be responsible for Lease Operating Costs or any other costs and expenses associated with the Purchased Working Interest. This interest has been assigned by the Partnership to the Managing Partner.

3 The Purchased Working Interest on average will be subject to an average 22% total Lease burden (which includes existing Mineral Owner Royalty Interest, existing overriding royalty interest, and a 3% overriding royalty interest payable to the Managing Partner.)

4 The Partnership will receive an average 63% Net Revenue Interest in the Total Working Interests, which means

that the Partnership will be entitled to receive an average 63% of the revenue generated from the Total Working Interest. The Partnership's proportionate share of Net Revenue Interest is the product of the following: After Lease burdens totaling an average of 22% have been deducted, the Working Interest holders will received on average 78% of the Net Revenue Interest. The Partnership will own an average of 96% of the Working Interests in the Leases and, consequently, will be entitled to 96% of the 78% Net Revenue Interest payable to the Working Interest holders, or a 75% Net Revenue Interest. The Managing Partner will receive 15% of the 75% Net Revenue Interest and the Partnership will receive the remaining 85%. As a result, the Partnership will be entitled to receive on average a 63% Net Revenue Interest in the revenue from the sale of all oil and gas from the Leases payable to the Partnership. The Partnership will be responsible for an average 96% of the total drilling, testing, completion, equipping and operating costs of each well drilled or operated on the Leases and will receive approximately 63% of the net revenues generated from the sale of oil and gas.

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USE OF PROCEEDS The Partnership was formed to acquire working interests in both producing and nonproducing oil and gas

leases in and around Pecos County, Texas. The aggregate offering proceeds, assuming all of the Units being offered are sold, will be $15,000,000. Assuming that all of the Units are sold, the proceeds will be utilized by the Partnership as follows:

SOURCE OF FUNDS AMOUNT PERCENTAGE Investor Partners’ Contributions $15,000,000 100% USES OF FUNDS AMOUNT PERCENTAGE Management/Administration Fee $1,050,000 7.00% Geological/Geophysical Allotment $955,500 6.37% Organization/Offering Allotment $1,125,000 7.50% Drilling and Completion Contract Expenses $4,480,500 29.87% Lease Acquisition Costs $3,499,500 23.33% Waterflood Preparation/Installation Costs $3,889,500 25.93% $15,000,000 100%

Management/Administration Fee The management and administration fee is a fee paid to the Managing Partner to compensate the Managing

Partner for the management and administration of the Partnership. The Managing Partner will utilize this fee to pay administrative expenses incurred in the management of the Partnership. Administrative fees generally include all bookkeeping, accounting, and auditing expenses of the Partnership incurred in maintaining the Partnership’s financial and operation records; expenses of collection and distribution of revenues; expenses of preparation and mailing of reports; expenses (including legal fees and accounting fees) of preparation and mailing of tax returns to Partners; legal fees for services rendered to the Partnership; expenses of obtaining independent engineering evaluations; and all other expenses for services rendered by third parties to the Partnership or the Managing Partner on behalf of the Partnership. This fee is a fixed, non-accountable amount of 7.00% of the investment made by Investor Partners.

The Managing Partner will be responsible for paying all administrative expenses incurred by the

Partnership at any time prior to the initial offering of Units and during the eighteen-month period beginning on the date of the Partnership Agreement. During such period, all such administrative expenses will be borne by the Managing Partner out of the management/administrative fee and the Partnership will pay no portion of such costs over and above the fixed management/administrative fee payable to the Managing Partner. After the end of the eighteen month period, the Partnership will pay the costs of any administrative expenses or will reimburse the Managing Partner for any administrative costs its pays on behalf of the Partnership. The management/administrative fee to be paid to the Managing Partner may have no bearing or relationship to actual costs the Managing Partner may incur. Rather, the fee being charged to the Partnership reflect those charges the Managing Partner has determined, in its sole discretion, constitute appropriate charges, on a fixed, non-accountable basis, for the administration, supervision and management of the Partnership.

Geological/Geophysical Allotment

The geological and geophysical fee is a fee paid to the Managing Partner for the legal, geological,

geophysical data expenses and the costs of engineering data and studies used by the Managing Partner in the selection and evaluation of the Leases to be acquired by the Partnership. This fee is a fixed, non-accountable amount of 6.37% of the investment made by Investor Partners.

The Managing Partner will be responsible for paying all geological and geophysical expenses incurred by

the Partnership at any time prior to the initial offering of Units and during the eighteen-month period beginning on

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the date of the Partnership Agreement. During such period, all such geological and geophysical expenses will be borne by the Managing Partner out of the geological/geophysical fee and the Partnership will pay no portion of such costs over and above the fixed geological/geophysical fee payable to the Managing Partner. After the end of the eighteen month period, the Partnership will pay the costs of any geological or geophysical expenses or will reimburse the Managing Partner for any geological or geophysical costs its pays on behalf of the Partnership. The geological/geophysical fee to be paid to the Managing Partner may have no bearing or relationship to actual costs the Managing Partner may incur in connection with the geological/geophysical expenses. Rather, the fee being charged to the Partnership reflect those charges the Managing Partner has determined, in its sole discretion, constitute appropriate charges, on a fixed, non-accountable basis, for the acquisition and analysis of the geological/geophysical data..

Organization/Offering Allotment

The organization and offering fee is a fee paid to the Managing Partner for all costs and expenses paid or to

be paid by the Managing Partner in connection with the organization of the Partnership, including, but not limited to, salaries, legal, printing, accounting, contract personnel, and travel costs and other general expenses of the Managing Partner, and this Offering. This fee to the Managing Partner is intended to provide the funds necessary for the Managing Partner to implement the development plan and to compensate it for its efforts in doing so. The fee is a fixed, non-accountable amount of 7.50% of the investment made by Investor Partners.

The Managing Partner will be responsible for paying all organization and offering expenses incurred by the

Partnership at any time prior to the initial offering of Units and during the eighteen-month period beginning on the date of the Partnership Agreement. During such period, all such fees will be borne by the Managing Partner out of the organization/offering fee and the Partnership will pay no portion of such costs over and above the fixed organization/offering fee payable to the Managing Partner. After the end of the eighteen month period, the Partnership will pay the costs of any organization and offering expenses or will reimburse the Managing Partner for any organization and offering costs its pays on behalf of the Partnership. The organization/offering fee to be paid to the Managing Partner may have no bearing or relationship to actual costs the Managing Partner may incur. Rather, the fee being charged to the Partnership reflect those charges the Managing Partner has determined, in its sole discretion, constitute appropriate charges, on a fixed, non-accountable basis, for the costs expected to be incurred in connection with the organization of the Partnership and the offer and sale of Units.

Drilling and Completion Contract Expenses

The Partnership intends to enter into Drilling and Completion Contracts, the forms of which are attached as

Exhibit B, with StableRock for each well the Partnership intends to drill, workover, re-complete or enhance for secondary recovery. Under the Drilling and Completion Contracts, StableRock will perform all drilling, testing, workover, completion, and equipping activities concerning a specific well on behalf of the Partnership in exchange for payments made by the Partnership. The Drilling and Completion Contracts are not fixed-cost contracts but are set up on a billable cost plus ten percent (10%) basis. That is, the Partnership and the other Working Interest owners will be required to pay 110% of the billable costs invoiced by StableRock (the Partnership will be responsible for a minimum of 96% of such payments) during the drilling, testing, workover, completion and equipping phases. If actual costs exceed estimated costs, the Partnership will be required to pay its proportionate share of such costs. These payments represent the costs of the Partnership’s participation in the drilling an oil and gas well on a Lease and preparing it for production.

Lease Acquisition Costs

“Lease Acquisition Costs” are the payments and expenses incurred in connection with the acquisition of a

Lease or an interest in a Lease, including, but not limited to, lease bonuses, brokers’ fees and commissions, abstracting costs, title examination and filing fees, costs incurred in curing or defending title, capitalized screening, seismic, geological, and geophysical expenses incident to either the evaluation or the acquisition of a Lease or an interest in a Lease, and delay rentals. Lease Acquisition Costs may include costs incurred to evaluate a property that ultimately is not acquired.

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Waterflood Preparation/Installation Costs The Partnership intends to initiate secondary recovery efforts on many of the wells that have previously

been drilled on the Leases, primarily by the use of waterflooding. A waterflood is a method of oil extraction in which water is injected into a reservoir formation to produce the recoverable oil (using existing wells that have been converted to enable them to inject large quantities of water into the geological formation in which the recoverable oil resides). StableRock will convert certain existing wells to injector wells, provide waterhandling services and prepare the water pumping stations to begin the waterflood for secondary recovery. These services are part of the services StableRock will provide under the Drilling and Completion Contracts.

COMPENSATION AND BENEFITS TO THE MANAGING PARTNER AND ITS AFFILIATES The Managing Partner will be paid a fixed, non-accountable Management/Administration Fee, a fixed, non-

accountable Geological/Geophysical Allotment and a fixed, non-accountable Organization/Offering Allotment. With these fees, the Managing Partner will be required to pay the general and administrative, geological and geophysical, organization and offering expenses of the Partnership for the first eighteen months after the date of the Partnership Agreement. Thereafter, the Partnership will reimburse the Managing Partner for reasonable general and administrative expenses and all geological and geophysical expenses incurred by it in conducting the operations of the Partnership. All of these costs are described in the “Use of Proceeds” section of this Memorandum.

The Partnership will assign the Managing Partner an average 15% Carried Working Interest in the

Purchased Working Interest. In addition, the Managing Partner may receive an overriding royalty interest equal to 3% and will be held by the Managing Partner outside of the Partnership.

StableRock will receive payments under the Operating Agreement for services it performs in connection

with the supervision and management of the wells. See Exhibit A. StableRock will receive payments under the Drilling and Completion Contracts for drilling, testing, completion and equipping activities related to the wells to be drilled by the Partnership. See Exhibit B.

The Partnership plans to acquire the Purchased Working Interest from affiliates and/or members of the

Managing Partner. The affiliates may receive the net profit from the difference in total costs, expenses, and developmental value of the Working Interest being sold and the value received from this transaction, or the affiliates may receive value from this transaction in the form of reserved interest or overriding royalty interest. Although not an arms-length transaction, the Managing Partner believes that this pricing is consistent with third party transactions in the area. See “Conflicts of Interest.”

MANAGEMENT AND OWNERSHIP The Managing Partner of the Partnership is Redhawk Resources Management III, LLC, a Delaware limited

liability company formed for the purposes of managing the Partnership. Its members are Redhawk Investment Group, LLC (“RIG”) and StableRock.

Board of Manager of the Managing Partner

The Managing Partner is managed by a three person board of managers comprised of representatives

appointed by the entities that are members of the Managing Partner. Biographies of the members of the board of managers follow:

Jack W. Nichols, age 67, is a manager and the executive chairman of the Managing Partner. Mr. Nichols is

also the founder, President and owner of Nichols Progressive Equities, LLC (dba Progressive Equities, LLC) and is a founder and manager of Redhawk Investment Group, LLC an oil and gas investment holding and advisory company. He held Series 22 and Series 63 securities licenses until July 2013. In that capacity, he served as a registered representative with several registered broker/dealers and was principal of an additional broker/dealer that he subsequently sold. Mr. Nichols has been involved in the oil and gas business since the late 1980s. He began his

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energy career as a private drilling and development partner in South Central Texas. He has been active in real estate, real estate development and real estate finance throughout the South Central and Western United States until he made oil and gas investments his full-time business in 2001. Mr. Nichols has been a manager/owner/participant in oil and gas projects in South Texas, Oklahoma, Kansas, New Mexico, Louisiana and the Bakken Shale in North Dakota. He is a Member of the Texas Oil and Gas Association, the Kansas Independent Oil and Gas Association and the Oklahoma Independent Petroleum Association.

C. Jarrod Rogers, age 36, is a manager and the chief business development officer for the Managing

Partner. Mr. Rogers is a founder and manager of Redhawk Investment Group, LLC, , an oil and gas investment holding and advisory company and also manages oil and gas investment and development under Redhawk Asset Series, LLC, and affiliated Redhawk Resources, LLC. Mr. Rogers is a licensed attorney and owns CJR Law Offices, PLLC. He serves as general counsel and managing partner for Kandletop Properties, LLC and Phroso Mineral Management, LLC, both of which are mineral acquisition and investment funds. Mr. Rogers is responsible for overseeing all mineral investment financing and acquisition for Kandletop Properties and Phroso Mineral Management. His background includes mineral management and contract negotiation for large mineral owner groups, legal experience in oil and gas acquisition and divestment agreements, legal mineral ownership title, and surface damage negotiations.

Charles Rougeau, age 48, is a manager of the Managing Partner. In addition, Mr. Rougeau is President of

StableRock and Vice President of Business Development for GMS Contract Services, LLC. He is responsible for identifying and developing new, large-scale upstream and downstream business opportunities, including mergers and acquisitions. Mr. Rougeau began his career with Schlumberger in 1990 as an open and cased hole engineer in the Gulf Coast Division and later became a Senior Field Engineer responsible for tough logging conditions for U.S. Land Operations. Charles managed Integrated Power System, Inc. from 1994 to 2001 and increased company revenues from two-million dollars to 18-million dollars. The company was sold to National Oil Well. In 2001, Mr. Rougeau was appointed V.P. of Rig Systems and Controls for National Oil Well. In this capacity, he managed the manufacturing of Drilling Rig Systems and Controls for both land and offshore drilling rigs. Charles has held numerous managerial positions as well as developed markets in China and Mexico. He earned his Bachelor of Science degree from Centenary College in 1989.

Key Personnel

In addition to the managers on the Board of Managers, there are certain personnel who will be key to the

success of the Partnership. Richard Coleman, age 60, is the Vice President of Engineering for StableRock. Prior to his affiliation with

StableRock in 2012, Richard was with Black Elk Energy where he served as Reservoir Engineering Manager and Central GOM Asset Manager. Richard’s energy career began in 1977 as a drilling and operations engineer with Amoco Production Company in Brownfield, Texas. He subsequently held increasingly responsible positions in reservoir operations and engineering with Williams Exploration, CSX Oil and Gas and Nerco Oil and Gas through 1993. Mr. Coleman accepted a position with Hunt Petroleum as reservoir and operations engineer and graduated to Offshore Development Manager where he remained until 2006. Following his experience with Hunt Petroleum, Richard joined Nippon Oil Exploration as General Manager of Engineering and General Manager of Production, a position he held through 2010. Mr. Coleman holds a B.S. in Chemical Engineering from Texas A&M. He is a Member of the Society of Petroleum Engineers, API and the Exploration Society of Great Britain. He is a Registered Professional Engineer in the states of Texas and Louisiana.

Gary Stevenson, age 56, is the founder of GMS Contract Services, LLC, an engineering consulting firm

and an affiliate of StableRock. Mr. Stevenson has been active in the oil and gas industry since 1977. Mr. Stevenson was a leader in the development of harsh environment technologies at Baker Oil Tools. His experience includes production, drilling, workover and completions, abandonments and corporate management in Texas, Wyoming, throughout the Gulf Coast area and the Continental Shelf in the Gulf of Mexico. During that time, Mr. Stevenson formed GW Completion Services which provided turn-key installations of production equipment, tank batteries, pumping units, gas lift systems and compressor installations. He successfully sold GW Completions Services and founded GMS Contract Services in 1994 which he owns and serves as President. Mr. Stevenson’s most recent work has been in front end development and project management of workover, completion, abandonment and production

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on both land and on the Continental Shelf in the Gulf of Mexico. His company, GMS Contract Services LLC, offers Professional Engineering, Project Engineering and employs a staff of 30 plus engineers and on-site field consultants to supervise and manage projects.

Members of the Managing Partner and Control Entities

The sole members of the Managing Partner are Progressive Equities, LLC, Redhawk Asset Series, LLC and

StableRock. Each entity owns one-third of the equity interests of the Managing Partner. Mr. Nichols is the sole member of Progressive Equities, LLC. Mr. Rogers is the sole member of Redhawk Asset Series, LLC. StableRock is managed by Charles Rougeau, Richard Coleman and Gary Stevenson.

The Operator

StableRock is a mid-continent independent oil and gas limited liability company formed in January 2011

and will serve as contract operator for the Partnership. The President of StableRock is Charles Rougeau. From 2011 to 2015, StableRock along with GMS Contract Services was responsible for evaluating all development activity for several large independent operators in the Gulf of Mexico and Gulf Coast and executing capital budgets of $70 to $120 million. From 2007 thru 2012 the principles of StableRock through GMS was responsible for all production operations, construction and maintenance projects, workovers, and abandonment activity for an International Based Offshore Oil and Gas Operator in the Gulf of Mexico and Gulf Coast Region and its operations included 50 platforms (12 manned) and 15,000 BOEPD (barrels oil equivalent per day). In addition, StableRock was responsible for generating operating, workover, construction, and P&A (plug and abandon) budgets, and providing quarterly updates to senior management. StableRock was also responsible for generating capital and operating budgets, year-end reserve reports, and providing quarterly updates to senior management. Since 2011, StableRock has provided operation and engineering management for drilling/workover/completions for a Houston-based exploration and production company. During this time, StableRock has completed/recompleted 60 wells onshore along the Texas/Louisiana Gulf Coast. In addition, StableRock has provided project management services for P&A and 18 Platform Decommission Project and 140 Well P&A Project, 12 Well HWO Recompletion Project and 2 New Drills.

CONFLICTS OF INTEREST The contemplated activities of the Partnership will involve decisions by the Managing Partner on behalf of

the Partnership and transactions between the Partnership, the Managing Partner and affiliates. Because of the common control of the Partnership and the Managing Partner and certain of their affiliates, any such decisions or transactions will lack the benefits of arm’s length bargaining and will necessarily involve conflicts of interest.

Conflicting Activities

The Managing Partner and its affiliates intend in the future to engage in the exploration and development of

oil and gas properties for their own accounts or on behalf of other oil and gas programs sponsored by them. Spending their time on activities other than those of the Partnership, which non Partnership activities may be more profitable to them, could conceivably affect their work for the Partnership.

There is no area of mutual interest agreement between the Partnership and any other person related to the

area of focus, and, therefore, StableRock and other affiliates of the Managing Partner could acquire and/or develop oil and gas properties in the area of focus in competition with the Purchased Working Interest.

Drilling and Completion Contracts with StableRock

Pursuant to Drilling and Completion Contracts, StableRock, an affiliate of the Managing Partner, will drill

the wells on the Leases. The terms of these contracts were not the subject of arms-length negotiations between the Partnership and StableRock. Nonetheless, the Managing Partner is of the opinion that the terms of the Drilling and Completion Contracts represent reasonable and customary terms generally negotiated in arms-length transactions.

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Operating Agreement with StableRock Pursuant to the Operating Agreement, StableRock, an affiliate of the Managing Partner, will operate the

wells on the Lease. The terms of the Operating Agreement were not the subject of arms-length negotiations between the Partnership and StableRock. Nonetheless, the Managing Partner is of the opinion that the terms of the Operating Agreement represent reasonable and customary terms generally negotiated in arms-length transactions.

Acquisition of Working Interests from Redhawk Investment Group, LLC

The Managing Partner anticipates that it will acquire, on behalf of the Partnership, the Purchased Working

Interest from Redhawk Investment Group, LLC, an affiliate of the Managing Partner. The purchase terms will not be the subject of arms-length negotiations between the Managing Partner and Redhawk Investment Group. Nonetheless, the Managing Partner believes that the terms of the purchase of such leases represent reasonable and customary terms generally negotiated in arms-length transactions and that the price to be paid for such leases is consistent with third party transactions in the area.

Benefits to the Managing Partner and its affiliates Regardless of Profitability

The Managing Partner and its affiliates are entitled to receive the benefits described in “Compensation and

Benefits to the Managing Partner and its affiliates” even if the Partnership operates at a loss.

Vesting of Management Authority The Investor Partners will not have any voice in conducting the operations of the Partnership, and the

General Partners will not be involved in the day to day operations of the Partnership. Potential conflict of interest situations are thereby created.

Indirect Control over Expense Allocations and Cost Classifications

A conflict may arise when the Managing Partner is required to determine when general and administrative

expenses are properly allocable to the business and operations of and reimbursable by, the Partnership. In this connection, it should be noted that the Managing Partner is currently engaged in the operation of a number of other energy programs and that certain of its general and administrative expenses will be allocable to those programs as well as other programs formed by the Managing Partner. Conflicts could arise when the Managing Partner is required to determine what portion of those costs should be borne by the Partnership.

Other Activities

A conflict of interest could also arise when the Managing Partner makes a decision that additional wells

should be drilled on the Leases, or that the undertaking of a Special Project is warranted. In an attempt to resolve such conflicts, the Partnership Agreement provides that the Managing Partner will decide to drill, complete additional wells, and undertake Special Projects that, in the exercise of prudent business judgment under the particular circumstances, would be in the best interest of the Partnership to undertake.

FEDERAL INCOME TAX ASPECTS

THE TAX SUMMARY CONTAINED IN THIS MEMORANDUM WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE MATTERS ADDRESSED HEREIN AND WAS NOT INTENDED TO BE USED FOR THE PURPOSE OF AVOIDING ANY UNITED STATES FEDERAL TAX PENALTIES. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

It is not feasible to comment on all aspects of federal, state, and local tax laws that may affect each Investor

Partner in the Partnership. Accordingly, the following discussion covers only the principal U.S. federal income tax consequences of participating in the Partnership by U. S. citizens and individuals residing in the U.S. (and not corporations or other investors) and is based on U.S. federal income tax laws as currently interpreted, including the

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Internal Revenue Code of 1986, as amended (the “Code”). There is no assurance that the present federal income tax laws affecting the Investor Partners and the Partnership’s operations will not be changed prospectively or retroactively by new legislation, regulations, judicial decisions, or administrative interpretations that would adversely affect an Investor Partner or the Partnership; nor is there any assurance there will not be a difference of opinion as to the interpretation or application of present federal income tax laws.

This summary addresses the consequences to individual, non-corporate U.S.-resident/citizen Investor

Partners. Other investors such as S corporations, insurance companies, tax-exempt entities, and IRAs, should consult their tax advisor before investing in the Partnership. Each prospective investor should determine the suitability of this investment by obtaining advice regarding the income and other tax consequences from his own tax counsel. Such personal tax advice is important because an Investor Partner’s specific tax circumstances (including the potential for change therein) may affect the advisability of an investment in the Partnership.

Although the tax aspects of ownership of Limited Partner Units and of General Partner Units are similar in

many respects, certain of the tax consequences may vary significantly. In particular, it is anticipated that the treatment of income and deductions attributable to ownership of Limited Partner Units will be more restrictive than the treatment afforded income and deductions attributable to ownership of General Partner Units under provisions applicable to “passive activities.” See “Federal Income Tax Aspects–Limitations on Deductions” below.

Partnership Classification

The rules for classifying entities for federal income tax purposes were significantly simplified through the

Regulations commonly referred to as the “check-the-box regulations.” Limited partnership entities such as the Partnership are treated as a partnership rather than an association for federal income tax purposes unless (a) the limited partnership expressly elects to be treated as an association or (b) a limited partnership is classified as a publicly traded partnership under Section 7704 of the Code. The Partnership does not intend to make the affirmative election to be treated as an association and it is not anticipated that the Partnership will be classified as a publicly traded partnership under Section 7704 of the Code. Therefore, it is anticipated that the Partnership will be characterized as a partnership for federal income tax purposes.

Section 7704 of the Code generally treats “publicly traded partnerships” as corporations for federal income

tax purposes. Section 7704 defines a publicly traded partnership as a partnership in which the interests are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent of a secondary market. The rule taxing publicly traded partnerships as corporations, however, is specifically inapplicable to a partnership for any year if at least 90% of the partnership’s gross income for such year and all preceding years consists of “qualifying income.” Qualifying income includes, among other things, interest or income from the exploration, development, production, processing, refining, transportation, or marketing of oil and gas and gains from the sale of assets used to generate that income.

The Managing Partner believes that the Partnership will not qualify as a “publicly traded partnership” under

Section 7704 of the Code, and thus, will not be treated as a corporation. The Managing Partner does not plan to list Units with or trade Units on an established securities exchange, nor does it intend to make a secondary market in Units. Further, the Managing Partner does not anticipate that any such markets will develop. In addition, the Managing Partner anticipates that at least 90% of the gross income of the Partnership in each taxable year will consist of either (a) income from the exploration, development, production, processing, refining, transportation, or marketing of oil and gas or (b) gains from the sale of assets used to generate that income. However, there can be no assurance that the IRS will not assert that the Partnership is a “publicly traded partnership” subject to treatment as a corporation pursuant to Section 7704 of the Code. No ruling has been or will be sought from the IRS and the Managing Partner has not obtained and does not intend to obtain an opinion that the Partnership will not be treated as a “publicly traded partnership.”

THE FOLLOWING DISCUSSION ASSUMES THAT THE PARTNERSHIP WILL BE TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES AND WILL NOT BE TREATED AS A “PUBLICLY TRADED PARTNERSHIP.”

General Principles of Partnership Taxation

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Flow-Through of Taxable Income. The Partnership will not pay any U.S. federal income tax. For U.S.

federal income tax purposes, each Investor Partner will be required to report on his income tax return his share of the Partnership’s income, gains, losses and deductions without regard to whether we make cash distributions to such Investor Partner. Consequently, the Partnership may allocate income to an Investor Partner even if that Investor Partner has not received a cash distribution. Each Investor Partner will be required to include in income his allocable share of the Partnership’s income, gains, losses and deductions for his taxable year or years ending with or within the Partnership’s taxable year. The Partnership’s taxable year ends on December 31.

Allocation of Income, Gain, Loss and Deduction. In general, the Partnership’s items of income, gain,

loss and deduction will be allocated among the Investor Partners in proportion to their Unit ownership. Specified items of the Partnership’s income, gain, loss and deduction will be allocated to account for the

difference between the tax basis and fair market value of the Partnership’s assets (such different, a “Book-Tax Disparity”) at the time of this Offering and any future offerings or certain other transactions. The effect of these allocations, referred to as Section 704(c) Allocations, to an Investor Partner acquiring Units in this Offering will be essentially the same as if the tax bases of the Partnership’s assets were equal to their fair market values at the time of this Offering. However, in connection with providing this benefit to any future Investor Partners, similar allocations will be made to all holders of Interests immediately prior to a future offering or certain other transactions, including purchasers of Units in this Offering, to account for any Book-Tax Disparity at the time of such transaction. In addition, items of recapture income will be allocated to the extent possible to the Investor Partner who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to minimize the recognition of ordinary income by other Investor Partners.

An allocation of items of the Partnership’s income, gain, loss or deduction, other than an allocation

required by the Code to eliminate a Book-Tax Disparity, will generally be given effect for U.S. federal income tax purposes only if the allocation has substantial economic effect. In any other case, an Investor Partner’s share of an item will be determined on the basis of his interest in the Partnership, which will be determined by taking into account all the facts and circumstances, including:

• his relative contributions to the Partnership; • the Interests of all the Partners in profits and losses; • the Interest of all the Partners in cash flow; and • the rights of all the Partners to distributions of capital upon liquidation.

Distributions to Investor Partners. A distribution of cash to an Investor Partner generally is not taxable

to such Investor Partner unless the amount of the distribution exceeds the Investor Partner’s adjusted tax basis in his Interest immediately before the distribution. Any such excess generally will be considered to be gain from the sale or exchange of an Interest, taxable in accordance with the rules described under “Federal Income Tax Aspects–Sale of Units” below. Any reduction in an Investor Partner’s share of Partnership liabilities, for which no Partner, including the General Partners, bears the economic risk of loss, known as “nonrecourse liabilities,” will be treated as a distribution by the Partnership of cash to that Investor Partner. An Investor Partner subject to these limitations must recapture any losses deducted in previous years to the extent that cash distributions made by the Partnership cause the Investor Partner’s “at risk” amount to be less than zero at the end of any taxable year,. See “Federal Income Tax Aspects–Limitations on Deductions.”

A decrease in an Investor Partner’s percentage Interest because of the issuance of additional Units will

decrease his share of Partnership nonrecourse liabilities, and thus will result in a corresponding deemed distribution of cash. This deemed distribution may constitute a non-pro rata distribution. A non-pro rata distribution of money or property, including a deemed distribution, may result in ordinary income to an Investor Partner, regardless of that Investor Partner’s tax basis in its Units, if the distribution reduces the Investor Partner’s share of the Partnership’s “unrealized receivables,” including depreciation recapture, depletion recapture and/or substantially appreciated “inventory items,” as defined in Section 751 of the Code, and collectively, “Section 751 Assets.” To the extent of such reduction, an Investor Partner will be treated as having received his proportionate share of the Section 751 Assets and then having exchanged those assets with the Partnership in return for an allocable portion of the non-pro rata distribution made to such Investor Partner. This latter deemed exchange generally will result in the Investor

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Partner’s realization of ordinary income in an amount equal to the excess of (1) the non-pro rata portion of that distribution over (2) the Investor Partner’s tax basis (generally zero) in the Section 751 Assets deemed relinquished in the exchange.

Basis of Units. An Investor Partner’s initial tax basis in his Units will be the amount he paid for those

Units plus his share of Partnership’s nonrecourse liabilities. That basis generally will be (i) increased by the Investor Partner’s share of Partnership income and by any increases in such Investor Partner’s share of Partnership nonrecourse liabilities, and (ii) decreased, but not below zero, by distributions to him, by his share of Partnership losses, by depletion deductions taken by him to the extent such deductions do not exceed his proportionate share of the adjusted tax basis of the underlying properties, by any decreases in his share of Partnership nonrecourse liabilities and by his share of Partnership expenditures that are not deductible in computing taxable income and are not required to be capitalized. An Investor Partner will have no share of Partnership’s debt that is recourse to the General Partners to the extent of the General Partners’ “net value” as defined in regulations under Section 752 of the Code, but will have a share, generally, based on his share of Partnership profits, of Partnership nonrecourse liabilities.

Entity-Level Collections of Investor Partner Taxes. If the Partnership is required or elect under

applicable law to pay any U.S. federal, state, local or non-U.S. tax on behalf of any Investor Partner or any former Investor Partner, the Partnership is authorized to pay those taxes from its funds. That payment, if made, will be treated as a distribution of cash to the Investor Partner on whose behalf the payment was made. If the payment is made on behalf of an Investor Partner whose identity cannot be determined, the Partnership is authorized to treat the payment as a distribution to all current Investor Partners. Payments by the Partnership as described above could give rise to an overpayment of tax on behalf of an individual Investor Partner in which event the Investor Partner would be required to file a claim in order to obtain a credit or refund.

Tax Consequences of Partnership Operations

Accounting Method and Taxable Year. The Partnership will use the year ending December 31 as its

taxable year and the accrual method of accounting for federal income tax purposes. Each Investor Partner will be required to include in income his share of our income, gain, loss and deduction for our taxable year ending within or with his taxable year. In addition, an Investor Partner who has a taxable year ending on a date other than December 31 and who disposes of all of his Units following the close of the Partnership’s taxable year but before the close of his taxable year must include his share of the Partnership’s income, gain, loss and deduction in income for his taxable year, with the result that he will be required to include in income for his taxable year his share of more than one year of our income, gain, loss and deduction.

Intangible Drilling and Development Costs. The Partnership will elect to deduct currently intangible

drilling and development costs (“IDCs”) in determining net income or loss, and in turn each Investor Partner should be entitled to deduct his share of such IDCs (assuming that such allocation is sustained and subject to the deduction restrictions discussed below). IDCs include such items as labor, fuel, repairs, hauling, supplies, etc., incident to, and necessary for, the drilling and the preparation of wells for the production of oil and gas and which do not have a salvage value.

Integrated oil companies have limitations on their ability to deduct currently IDCs. The Managing Partner

does not expect the Partnership to be treated as an integrated oil company. IDCs previously deducted that are allocable to property (directly or through ownership of an interest in a

partnership) and that would have been included in the adjusted tax basis of the property had the IDC deduction not been taken are recaptured as ordinary income to the extent of any gain realized upon the disposition of the property or upon the disposition by an Investor Partner of Units. Recapture is generally determined at the Investor Partner level. Where only a portion of the recapture property is sold, any IDCs related to the entire property are recaptured to the extent of the gain realized on the portion of the property sold. In the case of a disposition of an undivided interest in a property, a proportionate amount of the IDCs with respect to the property is treated as allocable to the transferred undivided interest to the extent of any gain recognized.

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Depletion Deductions. Subject to the general limitations on deductions, Investor Partners will be entitled to deductions for the greater of either cost depletion or (if otherwise allowable) percentage depletion with respect to the Partnership’s oil and natural gas interests. Although the Code requires each Investor Partner to compute his own depletion allowance and maintain records of his share of the adjusted tax basis of the underlying property for depletion and other purposes, the Partnership intends to furnish each Investor Partner with information relating to this computation for federal income tax purposes. Each Investor Partner, however, remains responsible for calculating his own depletion allowance and maintaining records of his share of the adjusted tax basis of the underlying property for depletion and other purposes.

Percentage depletion is generally available with respect to Investor Partners who qualify under the

independent producer exemption. Each Investor Partner should consult its own tax advisors to determine if it will qualify as an “independent producer” eligible for percentage depletion. Percentage depletion is calculated as an amount generally equal to 15% (and, in the case of marginal production, potentially a higher percentage) of the Investor Partner’s gross income from the depletable property for the taxable year. The percentage depletion deduction with respect to any property is limited to 100% of the taxable income of the Investor Partner from the property for each taxable year, computed without the depletion allowance. An Investor Partner that qualifies as an independent producer may deduct percentage depletion only to the extent the Investor Partner’s average net daily production of domestic crude oil, or the natural gas equivalent, does not exceed 1,000 barrels. This depletable amount may be allocated between oil and natural gas production, with 6,000 cubic feet of domestic natural gas production regarded as equivalent to one barrel of crude oil. The 1,000-barrel limitation must be allocated among the independent producer and controlled or related persons and family members in proportion to the respective production by such persons during the period in question.

In addition to the foregoing limitations, the percentage depletion deduction otherwise available is limited to

65% of an Investor Partner’s total taxable income from all sources for the year, computed without the depletion allowance, net operating loss carrybacks, or capital loss carrybacks. Any percentage depletion deduction disallowed because of the 65% limitation may be deducted in the following taxable year if the percentage depletion deduction for such year plus the deduction carryover does not exceed 65% of the Investor Partner’s total taxable income for that year. The carryover period resulting from the 65% net income limitation is unlimited.

Investor Partners that do not qualify under the independent producer exemption are generally restricted to

depletion deductions based on cost depletion. Cost depletion deductions are calculated by (i) dividing the Investor Partner’s share of the adjusted tax basis in the underlying mineral property by the number of mineral units (barrels of oil and thousand cubic feet, or Mcf, of natural gas) remaining as of the beginning of the taxable year and (ii) multiplying the result by the number of mineral units sold within the taxable year. The total amount of deductions based on cost depletion cannot exceed the Investor Partner’s share of the total adjusted tax basis in the property.

All or a portion of any gain recognized by an Investor Partner as a result of either the disposition by some

or all of Partnership’s oil and natural gas interests or the disposition by the Investor Partner of some or all of his Units may be taxed as ordinary income to the extent of recapture of depletion deductions, except for percentage depletion deductions in excess of the tax basis of the property. The amount of the recapture is generally limited to the amount of gain recognized on the disposition.

The foregoing discussion of depletion deductions does not purport to be a complete analysis of the complex

legislation and Regulations relating to the availability and calculation of depletion deductions by the Investor Partners. Further, because depletion is required to be computed separately by each Investor Partner and not by Partnership, no assurance can be given with respect to the availability or extent of depletion deductions to the Investor Partners for any taxable year.

Geophysical Costs. The cost of geophysical exploration incurred in connection with the exploration and

development of oil and natural gas properties in the U.S. are deducted ratably over a 24-month period beginning on the date that such expense is paid or incurred.

Operating and Administrative Costs. Amounts paid for operating a producing well are deductible as

ordinary business expenses, as are administrative costs, to the extent they constitute ordinary and necessary business expenses that are reasonable in amount.

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Tax Basis, Depreciation and Amortization. The tax basis of the Partnership’s assets will be used for

purposes of computing depreciation and cost recovery deductions and, ultimately, gain or loss on the disposition of these assets.

To the extent allowable, the Partnership may elect to use the depreciation and cost recovery methods,

including bonus depreciation to the extent applicable, that will result in the largest deductions being taken in the early years after assets subject to these allowances are placed in service. Property the Partnership subsequently acquires or constructs may be depreciated using accelerated methods permitted by the Code.

If the Partnership disposes of depreciable property by sale, foreclosure or otherwise, all or a portion of any

gain, determined by reference to the amount of depreciation previously deducted and the nature of the property, may be subject to the recapture rules and taxed as ordinary income rather than capital gain. Similarly, an Investor Partner who has taken cost recovery or depreciation deductions with respect to property the Partnership owns will likely be required to recapture some or all of those deductions as ordinary income upon a sale of his Units.

Syndication expenses, which are the costs incurred in selling the Units, must be capitalized and cannot be

deducted currently, ratably or upon Partnership’s termination. There are uncertainties regarding the classification of costs as organization expenses, which may be amortized by the Partnership, and as syndication expenses, which may not be amortized by the Partnership.

Valuation and Tax Basis of Our Properties. The federal income tax consequences of the ownership and

disposition of Units will depend in part on the Partnership’s estimates of the relative fair market values and the initial tax bases of the Partnership’s assets. Although the Partnership may from time to time consult with professional appraisers regarding valuation matters, the Partnership will make many of the relative fair market value estimates itself. These estimates and determinations of basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value or basis are later found to be incorrect, the character and amount of items of income, gain, loss or deduction previously reported by Investor Partners might change, and Investor Partners might be required to adjust their tax liability for prior years and incur interest and penalties with respect to those adjustments.

Limitations on Deductions

The deduction by an Investor Partner of that Investor Partner’s share of the Partnership’s losses will be

limited to the lesser of (i) the tax basis such Investor Partner has in his Units, and (ii) in the case of an individual, estate, trust or corporate Investor Partner (if more than 50% of the corporate Investor Partner’s stock is owned directly or indirectly by or for five or fewer individuals or some tax exempt organizations) to the amount for which the Investor Partner is considered to be “at risk” with respect to the Partnership’s activities. An Investor Partner subject to these limitations must recapture losses deducted in previous years to the extent that distributions cause the Investor Partner’s at risk amount to be less than zero at the end of any taxable year. Losses disallowed to an Investor Partner or recaptured as a result of these limitations will carry forward and will be allowable as a deduction in a later year to the extent that the Investor Partner’s tax basis or at risk amount, whichever is the limiting factor, is subsequently increased. Upon the taxable disposition of a Unit, any gain recognized by an Investor Partner can be offset by losses that were previously suspended by the at risk limitation but may not be offset by losses suspended by the basis limitation. Any loss previously suspended by the at risk limitation in excess of that gain would no longer be utilizable.

In general, an Investor Partner will be at risk to the extent of the tax basis of his Units, excluding any

portion of that basis attributable to the Investor Partner’s share of the Partnership’s nonrecourse liabilities, reduced by (1) any portion of that basis representing amounts otherwise protected against loss because of a guarantee, stop loss agreement or other similar arrangement and (2) any amount of money the Investor Partner borrows to acquire or hold his Units, if the lender of those borrowed funds owns an Interest in the Partnership, is related to the Investor Partner or can look only to the Units for repayment. An Investor Partner’s at risk amount will increase or decrease as the tax basis of the Investor Partner’s Units increases or decreases, other than tax basis increases or decreases attributable to increases or decreases in the Investor Partner’s share of the Partnership’s liabilities.

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The at risk limitation applies on an activity-by-activity basis, and in the case of oil and natural gas properties, each property is treated as a separate activity. Thus, a taxpayer’s interest in each oil or natural gas property is generally required to be treated separately so that a loss from any one property would be limited to the at risk amount for that property and not the at risk amount for all the taxpayer’s oil and natural gas properties. It is uncertain how this rule is implemented in the case of multiple oil and natural gas properties owned by a single entity treated as a partnership for federal income tax purposes. However, for taxable years ending on or before the date on which further guidance is published, the IRS will permit aggregation of oil or natural gas properties the Partnership owns in computing an Investor Partner’s at risk limitation with respect to the Partnership. If an Investor Partner were required to compute his at risk amount separately with respect to each oil or natural gas property the Partnership owns, he might not be allowed to utilize his share of losses or deductions attributable to a particular property even though he has a positive at risk amount with respect to his Units as a whole.

In addition to the basis and at risk limitations on the deductibility of losses, the passive loss limitations

generally provide that individuals, estates, trusts and some closely-held corporations and personal service corporations may deduct losses from passive activities, which are generally defined as trade or business activities in which the taxpayer does not materially participate, only to the extent of the taxpayer’s income from those passive activities. Passive losses that are not deductible because they exceed an Investor Partner’s share of passive income generated may be deducted in full when he disposes of his entire investment in the Partnership in a fully taxable transaction with an unrelated party. The passive loss limitations are applied after other applicable limitations on deductions, including the at risk rules and the basis limitation.

In the case of the General Partners, their activities with respect to a well (prior to any conversion of their

General Partner Interests to Limited Partner Interests) are not passive because a special rule provides that activities by a taxpayer with respect to a Working Interest in an oil and gas property are not passive, if the taxpayer owns the Working Interest directly or indirectly through an entity that does not limit the taxpayer’s liability with respect to the Working Interest. Accordingly, the passive activity loss limitations should not apply to General Partners in the Partnership who are individuals.

Limitations on Investment Interest Deductions. The deductibility of a non-corporate taxpayer’s

“investment interest expense” is generally limited to the amount of that taxpayer’s “net investment income.” Investment interest expense includes:

• interest on indebtedness properly allocable to property held for investment; • the Partnership’s interest expense attributed to portfolio income; and • the portion of interest expense incurred to purchase or carry an interest in a passive activity to the

extent attributable to portfolio income. The computation of an Investor Partner’s investment interest expense will take into account interest on any

margin account borrowing or other loan incurred to purchase or carry a Unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment or (if applicable) qualified dividend income.

Sale of Units. An Investor Partner will recognize gain or loss on a sale of Units equal to the difference

between the Investor Partner’s amount realized and the Investor Partner’s adjusted tax basis for the Units sold. An Investor Partner’s amount realized will equal the sum of the cash or the fair market value of other property he receives plus his sold Unit’s share of Partnership liabilities. Because the amount realized includes a Unit’s share of the Partnership’s liabilities, the gain recognized on the sale of Units could result in a tax liability in excess of any cash received from the sale.

Prior distributions from the Partnership that in the aggregate were in excess of the cumulative net taxable

income allocated for a Unit that decreased an Investor Partner’s tax basis in that Unit will, in effect, become taxable income if the Unit is sold at a price greater than the Investor Partner’s tax basis in the Unit, even if the price received is less than his original cost.

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Except as noted below, gain or loss recognized by an Investor Partner on the sale or exchange of a Unit held for more than one year will generally be taxable as long-term capital gain or loss. However, a portion of this gain or loss, which will likely be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or “inventory items” that the Partnership owns. The term “unrealized receivables” includes potential recapture items, including depreciation, depletion or IDC recapture. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain realized on the sale of a Unit and may be recognized even if there is a net taxable loss realized on the sale of a Unit. Thus, an Investor Partner may recognize both ordinary income and a capital loss upon a sale of Units. Capital losses may offset capital gains and no more than $3,000 of ordinary income each year, in the case of individuals.

The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must

combine those interests and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of that tax basis must be allocated to the interests sold using an “equitable apportionment” method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partner’s tax basis in his entire interest in the partnership as the value of the interest sold bears to the value of the partner’s entire interest in the partnership. Regulations under Section 1223 of the Code allow a selling Investor Partner who can identify Units transferred with an ascertainable holding period to elect to use the actual holding period of the Units transferred. Thus, according to the ruling discussed above, an Investor Partner will be unable to select high or low basis Units to sell as would be the case with corporate stock, but, according to the Regulations, he may designate specific Units sold for purposes of determining the holding period of Units transferred. An Investor Partner electing to use the actual holding period of Units transferred must consistently use that identification method for all subsequent sales or exchanges of the Units. An Investor Partner considering the purchase of additional Units or a sale of Units purchased in separate transactions should consult his tax advisor as to the possible consequences of this ruling and application of the Regulations.

Constructive Termination. The Partnership will be considered to have terminated its tax partnership for

U.S. federal income tax purposes upon the sale or exchange of Interests that, in the aggregate, constitute 50% or more of the total Interests in the Partnership’s capital and profits within a twelve-month period. For purposes of measuring whether the 50% threshold has been met, multiple sales of the same Unit are counted only once. A constructive termination results in the closing of the Partnership’s taxable year for all Investor Partners. In the case of an Investor Partner reporting on a taxable year other than a fiscal year ending December 31, the closing of the Partnership’s taxable year may result in more than twelve months of the Partnership’s taxable income or loss being includable in such Investor Partner’s taxable income for the year of termination. A constructive termination occurring on a date other than December 31 will result in the Partnership filing two tax returns (and Investor Partners could receive two Schedules K-1) for one fiscal year and the cost of the preparation of these returns will be borne by all Investor Partners. The Partnership would be required to make new tax elections after a termination, including a new election under Section 754 of the Code, and a termination would result in a deferral of certain deductions for depreciation. A termination could also result in penalties if the Partnership is unable to determine that the termination had occurred.

Alternative Minimum Tax. Each Investor Partner will be required to take into account the Investor

Partner’s distributive share of any items of the Partnership’s income, gain, loss or deduction for purposes of the alternative minimum tax. The current minimum tax rate for non-corporate taxpayers is 26% on the first $185,000 (for taxable years beginning in 2015) of alternative minimum taxable income in excess of the exemption amount and 28% on any additional alternative minimum taxable income. Prospective Investor Partners should consult with their tax advisors with respect to the impact of an investment in the Units on their liability for the alternative minimum tax.

Conversion of General Partner Interests. As discussed under “Summary of the Partnership

Agreement–Conversion of General Partner Units,” the General Partner Interests may be converted to Limited Partner Interests on January 1 of the year following the completion of the Partnership’s drilling activities. Such a conversion should not result in adverse tax consequences to a General Partner, unless (a) the General Partner’s relative share of any Partnership liabilities is reduced as a result of such conversion or (b) the fact that net income will thereafter be considered active for passive activity purposes and net losses will be considered passive is considered to be an adverse tax consequence. The reduction of the General Partner’s relative share of any

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Partnership liabilities would be treated as a constructive distribution of cash to that General Partner, which would reduce the tax basis of his interests and would be taxable to the extent it exceeds his adjusted tax basis or at-risk amount.

The IRS has ruled that a conversion of a general partner interest to a limited partner interest does not result

in a deemed sale or exchange of the converted interest and therefore does not give rise to a constructive termination of the partnership provided the partner’s interest in capital, profits, and losses is not significantly changed.

Tax Rules. Under current law, the highest marginal U.S. federal income tax rate applicable to ordinary

income of individuals is 39.6% and the highest marginal U.S. federal income tax rate applicable to long-term capital gains (generally, gains from the sale or exchange of certain investment assets held for more than one year) of individuals is 20%. However, these rates are subject to change by new legislation at any time.

A 3.8% Medicare tax also applies to certain investment income earned by individuals, estates, and trusts.

For these purposes, investment income generally includes an Investor Partner’s allocable share of the Partnership’s income and gain realized by an Investor Partner from a sale of their Units. In the case of an individual, the tax will be imposed on the lesser of (i) the Investor Partner’s net investment income from all investments, or (ii) the amount by which the Investor Partner’s modified adjusted gross income exceeds specified threshold levels depending on an Investor Partner’s federal income tax filing status. In the case of an estate or trust, the tax will be imposed on the lesser of (i) undistributed net investment income, or (ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins.

Other Tax and ERISA Considerations

Tax-Exempt Organizations and Other Investors. Ownership of Units by employee benefit plans, other

tax-exempt organizations, non-resident aliens, non-U.S. corporations and other non-U.S. persons raises issues unique to those investors and, as described below, may have substantially adverse tax consequences to them. Prospective Investor Partners who are tax-exempt entities or non-U.S. persons should consult their tax advisor before investing in Units.

Employee benefit plans and most other organizations exempt from federal income tax, including individual

retirement accounts and other retirement plans, are subject to federal income tax on unrelated business taxable income. Virtually all of the Partnership’s income allocated to an Investor Partner that is a tax-exempt organization will be unrelated business taxable income and will be taxable to it.

Non-resident aliens and foreign corporations, trusts or estates that own Units will be considered to be

engaged in business in the U.S. because of the ownership of Units. As a consequence, they will be required to file federal tax returns to report their share of the Partnership’s income, gain, loss or deduction and pay federal income tax at regular rates on their share of the Partnership’s net income or gain. Each non-U.S. Investor Partner must obtain a taxpayer identification number from the IRS and submit that number to the Partnership on a Form W-8BEN or applicable substitute form in order to obtain credit for withholding taxes.

A foreign corporation that owns Units will be treated as engaged in a U.S. trade or business and may be

subject to the U.S. branch profits tax at a rate of 30%, in addition to regular federal income tax, on its share of the Partnership’s income and gain. That tax may be reduced or eliminated by an income tax treaty between the U.S. and the country in which the foreign corporate Investor Partner is a “qualified resident.” In addition, this type of Investor Partner is subject to special information reporting requirements.

A foreign Investor Partner who sells or otherwise disposes of a Unit will be subject to U.S. federal income

tax on gain from the sale or disposition of its Units. Returns and Audits. We intend to furnish to each Investor Partner, within 90 days after the close of each

taxable year, specific tax information, including a Schedule K-1, which describes his share of the Partnership’s income, gain, loss and deduction for the Partnership’s preceding taxable year. In preparing this information, which will not be reviewed by counsel, the Partnership will take various accounting and reporting positions, some of which have been mentioned earlier, to determine each Investor Partner’s share of income, gain, loss and deduction. The

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Managing Partner cannot assure the Investor Partners that those positions will yield a result that conforms to the requirements of the Code, Regulations or administrative interpretations of the IRS. The Managing Partner cannot assure prospective Investor Partners that the IRS will not successfully contend in court that those positions are impermissible.

The IRS may audit the Partnership’s federal income tax information returns. Adjustments resulting from an

IRS audit may require each Investor Partner to adjust a prior year’s tax liability, and possibly may result in an audit of his own return. Any audit of an Investor Partner’s return could result in adjustments not related to the Partnership’s returns as well as those related to the Partnership’s returns.

Partnerships generally are treated as separate entities for purposes of U.S. federal income tax audits,

judicial review of administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and deduction are determined in a partnership proceeding rather than in separate proceedings with the partners. The Code requires that one partner be designated as the “Tax Matters Partner” for these purposes. The Partnership Agreement designates the Managing Partner as its Tax Matters Partner.

The Tax Matters Partner will make some elections on the Partnership’s behalf and on behalf of Investor

Partners. In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against Investor Partners for items in the Partnership’s returns. The Tax Matters Partner may bind an Investor Partner with less than a 1% profits interest in the Partnership to a settlement with the IRS unless that Investor Partner elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review, by which all the Investor Partners are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any Investor Partner having at least a 1% interest in profits or by any group of Investor Partners having in the aggregate at least a 5% interest in profits. However, only one action for judicial review will go forward, and each Investor Partner with an interest in the outcome may participate in that action.

An Investor Partner must file a statement with the IRS identifying the treatment of any item on his federal

income tax return that is not consistent with the treatment of the item on the Partnership’s return. Intentional or negligent disregard of this consistency requirement may subject an Investor Partner to substantial penalties.

Penalties. An additional tax equal to 20% of the amount of any portion of an underpayment of tax that is

attributable to one or more specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation misstatements, is imposed by the Code. No penalty will be imposed, however, for any portion of an underpayment if it is shown that there was a reasonable cause for the underpayment of that portion and that the taxpayer acted in good faith regarding the underpayment of that portion.

For individuals, a substantial understatement of income tax in any taxable year exists if the amount of the

understatement exceeds the greater of 10% of the tax required to be shown on the return for the taxable year or $5,000 ($10,000 for most corporations). The amount of any understatement subject to penalty generally is reduced if any portion is attributable to a position adopted on the return (1) for which there is, or was, “substantial authority”; or (2) as to which there is a reasonable basis and the pertinent facts of that position are disclosed on the return.

If any item of income, gain, loss or deduction included in the distributive shares of Investor Partners might

result in that kind of an “understatement” of income for which no “substantial authority” exists, the Partnership must disclose the pertinent facts on its return. In addition, the Partnership will make a reasonable effort to furnish sufficient information for Investor Partners to make adequate disclosure on their returns and to take other actions as may be appropriate to permit Investor Partners to avoid liability for this penalty. More stringent rules apply to “tax shelters,” which the Partnership does not believe includes it, or any of its investments, plans or arrangements.

A substantial valuation misstatement exists if (a) the value of any property, or the tax basis of any property,

claimed on a tax return is 150% or more of the amount determined to be the correct amount of the valuation or tax basis, (b) the price for any property or services (or for the use of property) claimed on any such return with respect to any transaction between persons described in Code Section 482 is 200% or more (or 50% or less) of the amount determined under Section 482 to be the correct amount of such price, or (c) the net Code Section 482 transfer price adjustment for the taxable year exceeds the lesser of $5 million or 10% of the taxpayer’s gross receipts. No penalty

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is imposed unless the portion of the underpayment attributable to a substantial valuation misstatement exceeds $5,000 ($10,000 for a corporation other than an S Corporation or a personal holding company). The penalty is increased to 40% in the event of a gross valuation misstatement. We do not anticipate making any valuation misstatements.

In addition, the 20% accuracy-related penalty also applies to any portion of an underpayment of tax that is

attributable to transactions lacking economic substance. To the extent that such transactions are not disclosed, the penalty imposed is increased to 40%. Additionally, there is no reasonable cause defense to the imposition of this penalty to such transactions.

If the Partnership engages in a “reportable transaction,” it (and possibly the Investor Partners and others)

would be required to make a detailed disclosure of the transaction to the IRS. A transaction may be a reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a “listed transaction” or that it produces certain kinds of losses in excess of $2 million in any single tax year, or $4 million in any combination of six successive tax years. Participation in a reportable transaction could increase the likelihood that the Partnership’s federal income tax information return (and possibly Investor Partners’ tax returns) would be audited by the IRS. The Partnership does not expect to engage in any “reportable transactions.”

Nominee Reporting. Section 6031(c)(1) of the Code requires a person who holds a partnership interest as

a nominee for another person to furnish to the partnership the name and address of the beneficial owner, as well as any other information that the Secretary of the Treasury may prescribe by form or Regulations. The nominee is also required to provide certain information to the beneficial owner of the interest, and the partnership must furnish certain information to the nominee. Any prospective investor who is acting as a nominee for another person should consult his personal tax advisor regarding the requirements of these provisions.

Recent Legislative Developments. Legislation has been proposed that would, if enacted, make significant

changes to U.S. federal income tax laws, including the elimination of certain key U.S. federal income tax incentives currently available to oil and natural gas exploration and production companies. These changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and natural gas properties, (ii) the elimination of current deductions for IDCs, (iii) the elimination of the deduction for certain domestic production activities, and (iv) an extension of the amortization period for certain geological and geophysical expenditures. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could become effective. The passage of any legislation as a result of these proposals or any other similar changes in U.S. federal income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development, and any such change could increase the taxable income allocable to our Investor Partners and negatively impact the value of an investment in Units.

State Taxes. An Investor Partner may incur an income tax, imposed by the jurisdiction of his residence,

upon his share of the Partnership’s income without regard to the source of such income. Deductions that are available to an Investor Partner for federal income tax purposes may not be available to an Investor Partner for state income tax purposes. Each potential Investor Partner should consult his own tax advisor regarding the state and local tax consequences of arising Units.

Summary

The foregoing is only a summary of certain U.S. federal income tax considerations generally affecting

individual Investor Partners. No attempt is made herein to present a detailed explanation of the federal income tax treatment of partnerships engaged in oil and gas exploration and development activities of the type contemplated for the Partnership or the tax treatment of investments in the Partnership. Moreover, the tax matters discussed above are, as stated, subject to change by legislation, administrative action, or judicial decision. Many of the provisions have not been completely clarified by interpretive regulations. No assurance is given that any deduction or other federal income tax advantage that is described herein or that prospective Purchasers may contemplate will be available. The foregoing analysis of the federal income tax considerations of the Partnership are not intended as a substitute for careful planning. Accordingly, persons contemplating an investment in the Partnership should consult their personal tax advisors with specific reference to their own tax situations.

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COMPETITION, MARKETS, AND REGULATION

Competition There are a large number of companies and individuals engaged in the acquisition of oil and gas leases,

exploration for oil and gas, and the development of oil and gas properties. Many of the companies so engaged have financial resources and staffs considerably larger than those available to the Partnership. There are likewise numerous companies and individuals engaged in the organization and conduct of oil and gas programs, and there is a high degree of competition among such companies in the offering of their programs.

Markets for Sale of Production

The ability of the Partnership to market any oil or gas produced from wells drilled on the Leases will

depend on numerous factors beyond the control of the Partnership, the effect of which factors cannot be accurately predicted or anticipated. These factors include the availability of other domestic and foreign production, the marketing of competitive fuels, the proximity and capacity of pipelines, fluctuations in supply and demand, the availability of a ready market, the effect of federal and state regulation of production, refining, transportation, and sales, and general national and worldwide economic conditions. In view of the many uncertainties affecting the supply and demand for crude oil, natural gas, and refined petroleum products, the Managing Partner is unable to predict future oil and gas prices.

Regulation of Production

The production of oil and gas from the wells drilled on the Leases, if any, will be subject to federal and

state laws and regulations (and orders of regulatory bodies pursuant thereto) governing a wide variety of matters, including the drilling and spacing of wells on producing acreage, allowable rates of production, marketing, pricing, prevention of waste and pollution, and protection of the environment. These laws, regulations, and orders may restrict the rate of oil and gas production below the rate that would otherwise exist in the absence of such laws, regulations, and orders.

Possible Legislation

Currently, there are many legislative proposals pertaining to the regulation of the oil and gas industry,

which proposals may directly or indirectly affect the activities of the Partnership. No prediction can be made as to what additional energy legislation may be proposed, if any, or which bills may be enacted or when any such bills, if enacted, would become effective.

Regulation of the Environment

The exploration, development, and production of oil and gas is subject to various federal and state laws and

regulations to protect the environment. Various states and governmental agencies are considering, and some have adopted, other laws and regulations regarding environmental control which could adversely affect the business of the Partnership. Compliance with such legislation and regulations, together with any penalties resulting from noncompliance therewith, will increase the cost of oil and gas development and production. Certain of these costs may ultimately be borne by the Partnership. The preceding discussion of the regulation of the oil and gas industry is necessarily brief, and is not intended to constitute a complete discussion of the various statutes, rules, regulations, or governmental orders to which the Partnership’s operations may be subject. See “Risk Factors–Risks Relating to the Oil and Gas Industry.”

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SUMMARY OF THE PARTNERSHIP AGREEMENT The following is a summary of certain provisions of the Partnership Agreement. The summary is not

definitive; therefore, a prospective investor should carefully read the full text of the Partnership Agreement, a copy of which is attached to this Memorandum as Exhibit C. Formation

The Partnership was formed on September 21, 2015 as a Delaware limited partnership under the Delaware

Revised Uniform Limited Partnership Act, as amended from time to time. The Partnership was effective as a limited partnership on the date of the filing of the certificate with the Delaware Secretary of State.

Term

The term of the Partnership commenced upon the filing of the certificate of formation with the Delaware

Secretary of State and will continue until it is dissolved and its affairs wound up in accordance with the provisions of the Partnership Agreement

Units

The Partnership is authorized to issue up to 1,200 Units as Limited Partner Units or General Partner Units.

With the approval of the Investor Partners owning more than fifty percent (50%) of the Units (such number of Investor Partners, a “Majority-in-Interest”), the Partnership may authorize additional Units or may create additional classes or series of Units. The Units are uncertificated.

Capital; Capital Contributions

If all of the Units are sold, the Partnership will be capitalized with Investor Partners making a total capital

contribution of $15,000,000. Investor Partners are not required to make any additional capital contribution beyond their initial investment in the Units being sold in the Offering. The Managing Partner is not required to make a capital contribution to the Partnership. No interest will be paid on any capital contributions to the Partnership. No Investor Partner will have the option to withdraw any portion of his capital contribution.

Capital Accounts

Each Investor Partner and the Managing Partner will have a capital account which will be credited with its

capital contributions and the amount of income and gain allocated to it, and will be charged with the amount of deductions and losses allocated to such Investor Partner and the Managing Partner and the amount of distributions or deemed distributions to it.

Grant of License to Certain Intellectual Property

The Managing Partner has granted the Partnership access to and use of all maps, drilling logs, and other

geological and geophysical information it has acquired or will acquire with respect to areas of acquisition or Oil and Gas Properties acquired by the Partnership. The Managing Partner has granted to the Partnership a perpetual, non-exclusive, non-transferable, royalty-free license to use the geological and geophysical information the Managing Partner develops or acquires with respect to areas of acquisition or Oil and Gas Properties acquired by the Partnership.

Participation in Profits, Losses, and Distributions

All items of profit and losses will be allocated to the Investor Partners in accordance with this Unit

ownership. After providing for the satisfaction of the current debts and obligations of the Partnership in the manner

required by the Partnership Agreement and after withholding any cash reserves required by the Partnership in the

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opinion of the Managing Partner, the Managing Partner will make distributions of cash, out of the Partnership’s net cash flow, 100% to the Investor Partners in proportion to their Units held. Distributions will be allocated to each Investor Partner based upon a fraction, the numerator of which is the number of Units held by such Investor Partner and the denominator of which is the number of Units held by all Investor Partners or their transferees receiving such distribution.

Conversion of General Partner Units

On January 1 of the calendar year following the calendar year that the drilling activities of the Partnership

have been completed, as determined by the Managing Partner, the Units held by the General Partners will automatically be converted to Limited Partner Units, unless the Managing Partner determines that such conversion at that time would not be in the best interests of the General Partners or the Partnership. If conversion is so delayed, the Managing Partner will continue to have the power and authority to cause such conversion on January 1 of any subsequent year during the term of the Partnership. The Managing Partner will have the power to convert any General Partner on any interim date with the written consent of such converted Partner, if the Managing Partner determines that conversion is in the best interests of such General Partner and the Partnership.

Management

The Managing Partner will serve as the general partner for all purposes under the Delaware Revised

Uniform Limited Partnership Act, as amended. The Managing Partner will have complete and exclusive power (except as limited by the Partnership Agreement and applicable law) to manage and control the business, properties, and affairs of the Partnership. The Managing Partner will control the day to day operations of the Partnership, subject to the power of a Majority-in-Interest of the Investor Partners to first approve certain activities as further described below. The Managing Partner will have the authority to enter into the Drilling and Completion Contracts and Operating Agreement on behalf of the Partnership.

The Managing Partner is prohibited from performing or authorizing any of the following actions without

the approval of a Majority-in-Interest of the Investor Partners:

• increase the number of authorized Units; • create new or additional classes or series of Units; • act in contravention of the Partnership Agreement; • perform any act which would make it impossible to carry on the ordinary business of the

Partnership, with certain exceptions; • continue the business with Partnership property on the occurrence of an Event of Withdrawal (as

defined in the Partnership Agreement) of the Managing Partner, except in certain circumstances; • change or reorganize the Partnership into any other legal form; • receive any benefit from an arrangement for marketing of oil and gas production, unless such

benefits are fairly and equitably apportioned among the Managing Partner and the Partnership; • require any Limited Partner to make any capital contribution to the Partnership not provided for in

the Partnership Agreement; or • make any loans or advances from the Partnership to the Managing Partner or to its affiliates.

Outside Activities

Each Partner may have other business interests or other activities other than those relating to the

Partnership (including business interests or other activities that are competitive with the business of the Partnership). The Managing Partner and its affiliates may engage in the exploration for and production of oil, gas, and other minerals for their own accounts, jointly or with others, or as partners or managers of any other entity. The Managing Partner and its affiliates have no obligation to offer any future investment opportunity to any of the Investor Partners, and no Investor Partner, by virtue of its purchase of Units, has any right to invest in any future investment opportunity created by the Managing Partner or its affiliates.

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Payments to the Managing Partner The Managing Partner is authorized to receive an management/administration fee, a geological/geophysical

allotment, and an organization/offering allotment from the Partnership, as compensation for its services and on a fixed, non-accountable basis. The Managing Partner will pay for all organization and offering expenses, management and administrative expenses and all geological/geophysical expenses (but will not pay any Lease Acquisition Costs and Lease Operating Costs) incurred by the Partnership at any time prior to the initial offering of Units and during the eighteen-month period beginning on the date of the Partnership Agreement out of the proceeds of such fees and allotments. See “Use of Proceeds.”

Except as otherwise provided in the Partnership Agreement, the Partnership will be responsible for paying

all direct costs and expenses it incurs related to acquiring, holding, owning, developing, and operating the Leases and conducting all other business activities pursued by the Partnership, including, without limitation, all costs incurred by the Partnership related to drilling, completion, reworking, equipping, marketing, Special Projects, and producing and selling oil and gas from the wells. The Managing Partner will be reimbursed for all General and Administrative Expenses, Organization and Offering Expenses and Geological and Geophysical Expenses of the Partnership incurred after eighteen months from the date of the Partnership Agreement.

Operator

StableRock is authorized to be the Operator of any well under the terms of the Operating Agreement and to

receive compensation for services under such agreement. StableRock is also authorized to be the contract driller of any well for the benefit of the Partnership under the terms of the Drilling and Completion Contracts, and to receive compensation for services under such agreements.

Removal of the Managing Partner

The Managing Partner may be removed by a Majority-in-Interest of the Partners at any time it is subject to

an Event of Withdrawal, whereupon the Partners will elect and substitute a new managing partner. The Managing Partner’s interest in the Partnership, either upon withdrawal or removal will be automatically converted into a Limited Partner interest and will be entitled to all allocations and distributions to which it was formerly entitled, including any change in the interest in allocations and distributions that would accrue to the original Managing Partner. Upon removal of the Managing Partner, the Managing Partner will be relieved and released from all obligations and liabilities as a General Partner accruing after the date of removal.

Delegation of Management by General Partners

The General Partners have elected to delegate to the Managing Partner authority to manage, control,

administer and operate the property and business of the Partnership. Each General Partner agrees that no General Partner has the right to act as an agent of the Partnership or to execute documents on behalf of the Partnership. Further, each General Partner agrees that no General Partner or group of General Partners will have the right to act (other than as specifically provided in the Partnership Agreement) to cause the Managing Partner on behalf of the Partnership to convey Partnership property or to take any other action binding on the Partnership. Still further, each General Partner agrees that no General Partner or group of General Partners may cause any Partner to be authorized to act on behalf of the Partnership without such Partner having become the duly elected and appointed Managing Partner. Any Investor Partner who takes action contravening these provisions agrees to indemnify the Partnership and all other Partners from any loss, liability or expense caused by such action.

Fiscal Year and Partnership Books

The fiscal year of the Partnership will be the calendar year. The books of account of the Partnership will be maintained at its principal office and will be open during

reasonable business hours for inspection by the Investor Partners and their representatives, who will have the right to make copies thereof at their expense.

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Dissolution of the Partner The Partnership will be dissolved on the earlier to occur of (a) a determination by the Managing Partner,

with the consent of a Majority-in-Interest of the Investor Partners, that the Partnership should be dissolved, (b) the Managing Partner becoming subject to an Event of Withdrawal, as defined in the Partnership Agreement (subject to continuation as described below under “Summary of the Partnership—Continuation of the Partnership”), (c) the insolvency or bankruptcy of the Partnership, (d) the sale or other disposition of all or substantially all of the assets of the Partnership, or (e) any other event that would require dissolution under the Delaware Revised Uniform Limited Partnership Act, as amended from time to time. The Partnership will not be dissolved and terminated upon the merger, consolidation, recapitalization, or reorganization of the Managing Partner.

Continuation of the Partnership

The Managing Partner (or any reconstituted successor to the Managing Partner) will agree to serve as

managing partner of the Partnership until the Partnership is terminated without reconstitution. If the Managing Partner is subject to an Event of Withdrawal, the Partnership will continue if there remains at least one General Partner willing to serve as Managing Partner, in which case the business of the Partnership may be carried on by the remaining General Partner (or General Partners) (in which case, a Majority-in-Interest will determine which General Partner will serve as Managing Partner), or if, within 90 days after such event, all of the Investor Partners elect to continue the Partnership and designate one or more substitute managing partners. In such event, the interest in the Partnership of the Managing Partner will be converted to a Limited Partner Interest.

Assignability of the Investor Partners’ Interests

An Investor Partner must obtain the prior written consent of the Managing Partner for any transfer of his

Units other than by operation of law (which consent can be given or withheld in the sole discretion of the Managing Partner). Any attempt to transfer any Units in violation of the Partnership Agreement or any applicable state or federal law will be void and of no effect, except that a transferee of a transfer by operation of law will have the rights of an assignee who has not been admitted as a Partner. Further, the effectiveness of any transfer by an Investor Partner of his Units may be conditioned upon receipt by the Partnership of a written opinion of counsel (the cost of which must be borne by the transferor) to the effect that such transaction will not violate the Securities Act or any other applicable federal or state securities laws.

An assignee will be permitted to become a substituted Investor Partner with the consent of the Managing

Partner. The Managing Partner may, without notice to or consent from the Investor Partners, transfer or assign a all

or any part of its interest in the Partnership and such transferred will be deemed admitted as a Limited Partner. The Managing Partner and its affiliates may, without notice to or consent from the Investor Partners, transfer or assign any Units held by any of them as an Investor Partner.

Withdrawal of a Partner

An Investor Partner may withdraw as a Partner at any time and, thereafter, will have the rights of a

transferee who has not been admitted as a Partner. A Partner who is subject to an Event of Withdrawal, as defined in the Partnership Agreement, will cease to be a Partner as of the date of the Event of Withdrawal and will thereafter have the rights of a transferee of an Interest who is not admitted as a Partner. Any Partner who is subject to an Event of Withdrawal may at any time thereafter request that the Partnership redeem the capital account of such Partner, or the Managing Partner may at its discretion determine to redeem such capital account, at the greater of (a) its tangible book value, without adjustment for goodwill, intellectual property or other intangibles not reflected in the financial records of the Partnership or (b) five (5) times the amount of cash distributed to such Partner during the preceding twelve (12) months. If the Managing Partner grants such request or determines to redeem such capital account, the Partnership will redeem the capital account, as of the end of the next calendar quarter, and may pay the redemption amount in quarterly installments over a period not to exceed twenty-four (24) calendar months, with interest at the Delaware judgment rate.

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Partnership Trade Secrets Each Partner and other person bound by the Partnership Agreement agrees with the Partnership that it will

not disclose Partnership Trade Secrets, nor use the Partnership Trade Secrets other than as may reasonably be required in the normal course of the business of the Partnership; provided, that any Partner may disclose any such information: (a) as has become generally available to the public other than through violation of the Partnership Agreement; (b) as may be required or appropriate in any report, statement, or testimony submitted to any governmental authority having or claiming to have jurisdiction over such Partner (or its representative) but only that portion of the data and information which, in the written opinion of counsel for such Partner or representative is required or would be required to be furnished to avoid liability for contempt or the imposition of any other material judicial or governmental penalty or censure; (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation; (d) as expressly permitted under the Partnership Agreement; or (e) as to which the Partnership has consented in writing. Any Partner (and representative of such Partner) may disclose to appropriate state and federal tax authorities such Partner’s U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated hereby relating to such Partner and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure.

Information About Partners

The Partnership will not be required to provide the name, address or other identifying personal or financial

information about a Partner, or any information about the Interest of any Partner, to any person. If at any time the Partnership agrees, or is required, to provide any information about Partners or their Interest, the Partnership will first obtain (a) the written representation of the person seeking such information that the information is sought for a proper purpose related to Partnership business or management (specifically stating such purpose) or valid governmental proceedings and, (b) if deemed appropriate by the Managing Partner, the agreement by such person that the person will not disclose such information to non-Partners and/or will not use such information for anything other than matters related to Partnership business or management or for valid governmental proceedings.

Power of Attorney

In signing the Partnership Agreement, each Investor Partner will appoint the Managing Partner as his

attorney-in-fact for purposes of signing and filing on his behalf such documents as are necessary to qualify the Partnership as a limited partnership, under applicable laws, documents of transfer of any Investor Partner’s Interest, and amendments to the Partnership Agreement regarding changes of names and/or addresses or the admission and/or withdrawal of Investor Partners and certain other matters, all subject to compliance with the applicable Partnership Agreement.

Amendment

The Partnership Agreement may not be amended for any purpose without the prior consent of the

Managing Partner; provided that those provisions of the Partnership Agreement which affect the right of Investors Partners to share income, gain, distributions, loss and deductions or require Investors Partners to make additional Capital Contributions may be amended only upon the written consent of all Investor Partners adversely affected thereby

Reports to Investor Partners

As soon as practical after the end of the fiscal year of the Partnership, the Managing Partner will deliver to

each Investor Partner such information as is necessary for the preparation of his federal, state, and local income or other tax returns.

The Managing Partner will, within 10 days after receipt thereof, forward to each Investor Partner a copy of

any notice received by the Managing Partner or the Partnership of any material default under any material instrument to which the Partnership is a party or which materially affects the assets of the Partnership, and will report to the Investor Partners any other developments materially affecting the Partnership, its business or assets, as soon as practicable following the occurrence of each such development.

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The Managing Partner will furnish reports on a monthly basis in the form of summaries indicating the

status of the drilling and, if applicable, completion of the wells until such drilling and completion activities are completed.

Indemnification of the Managing Partner

The Partnership Agreement provides that the Managing Partner will not be liable, responsible, or

accountable in damages or otherwise to the Partnership or any Investor Partner for any act performed or failure to act by the Managing Partner if the Managing Partner, in good faith, determined that such act or failure to act was in the best interests of the Partnership and such act or failure to act did not constitute gross negligence or misconduct of the Managing Partner. The Partnership (but not any Investor Partner) is required to indemnify and hold harmless the Managing Partner for any losses, judgments, liabilities, expenses, and amounts paid in settlement of any claims sustained by the Managing Partner in connection with the Partnership, provided that the same were not the result of gross negligence or misconduct on the part of the Managing Partner. Notwithstanding the above, the Managing Partner will not be indemnified for liabilities arising under federal and state securities laws unless (a) there has been a successful adjudication on the merits of each count involving securities law violations, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction. Moreover, the Partnership will not incur the costs of the portion of any insurance which insures the Managing Partner against any liability as to which the Managing Partner is prohibited from being indemnified.

Liability of Investor Partners

General Partners. The Partnership will be treated as an entity. Creditors generally must deplete

Partnership assets before asserting claims against General Partners. Each General Partner of the Partnership is jointly and severally liable for the liabilities (including tort liabilities) and recourse obligations of the Partnership. Generally, a joint liability is one in which co-obligors must be joined as co-defendants in an action, usually sharing any liability in proportion to their respective interests, whereas a joint and several liability is one in which a claimant, at his option, may sue any and all of the co-obligors. Accordingly, because General Partners can be held jointly and severally liable, one or more General Partners may be held liable for more than his or their pro rata share of the liabilities and obligations of the Partnership. Further, under certain circumstances, joint Working Interest owners may be jointly and severally liable for obligations arising in connection with the development and operation of a prospect in which they own an interest. Because the Partnership may own a Working Interest in the same oil and gas properties in which others own a Working Interest, if all of the Partnership Units are not sold, the Partnership, and therefore the General Partners, could be liable for the obligations of all such joint Working Interest owners. Pursuant to the terms of the Partnership Agreement, the General Partners will agree that as among themselves each General Partner will be responsible only to pay his pro rata share of Partnership liabilities and obligations. Notwithstanding such agreement, each General Partner will continue to have unlimited liability, even though such liability may exceed the amount of such General Partner’s capital contributions and his share of the Partnership’s assets and undistributed income. To the extent liability in excess of such amount is incurred, such General Partner may be obligated to make payments in excess of his contractual obligations pursuant to the terms of the Partnership Agreement. Due to the uncertain nature of any such liability, it is not possible to determine its magnitude. Further, each General Partner will be obligated to restore to the Partnership any negative balance that exists in his capital account after the liquidation of his Interest.

Limited Partners. Under Delaware law, upon the due organization of the Partnership as a limited

partnership under the laws of the State of Delaware and the admission of the Limited Partners, the Limited Partners will not generally be personally liable for the debts or other obligations of the Partnership unless they take part in the control of the Partnership’s business, and then only to a person who transacts business with the Partnership reasonably believing that the Limited Partners are general partners. The Partnership Agreement permits the Limited Partners to take certain actions affecting the basic structure of the Partnership by vote of the Limited Partners. The exercise of certain of these rights might constitute “taking part in the control of the business” of the Partnership, thereby rendering the Limited Partners liable for all debts and obligations of the partnership.

Under Delaware law, the Limited Partners should have no liability in excess of the capital contributions to

the Partnership and their shares of the Partnership’s assets and undistributed Partnership income, except generally to

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the extent of (a) any part of a capital contribution “rightfully” returned without violation of the Partnership Agreement or Delaware law, together with interest thereon, but only to the extent necessary to discharge the Partnership’s liabilities to creditors who extended credit to the Partnership or whose claims arose before such return of the capital contribution, and (b) any capital contribution “wrongfully” returned to a Limited Partner in violation of the Partnership Agreement or Delaware law or any distribution to the Limited Partners to the extent that, after giving effect to such distribution, all liabilities of the Partnership, other than liabilities to the Limited Partners on account of their contributions and to the Managing Partner, exceed Partnership assets. Limited Partners will not be obligated to restore any negative balances that exist in their capital accounts after liquidation of their Interests in the Partnership.

In addition, under Delaware law if the certificate of limited partnership of a limited partnership contains

any false statement, a person who suffers loss by reliance on such statement can recover damages from such loss from a limited partner who executed (or caused another to execute on his behalf) such certificate and knew the statement to be false at the time the certificate was executed, or knew subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate or to file a petition for its cancellation or amendment by court order, and failed to do so.

OTHER MATTERS This Memorandum does not purport to restate all of the relevant provisions of the documents referred to or

relevant to the matters discussed herein. All of these documents must be read for a thorough understanding of the terms of all matters relevant to the purchase of Units. Each prospective Investor Partner is invited to ask questions of, and receive answers from, the manager of the Managing Partner, and may inspect the books and records of the Partnership at any reasonable time upon written request in order to obtain such information concerning the terms and conditions of the Offering, to the extent the Managing Partner possesses the same or can obtain it without unreasonable effort and expense. The Partnership will maintain at its office a list of the names and addresses of all Investor Partners and their designated representatives.

RELATED PARTY TRANSACTIONS The contemplated activities of the Partnership will involve transactions between the Partnership, the

Managing Partner, and affiliates. Because of the common control of the Partnership and the Managing Partner and certain of their affiliates, any such decisions or transactions will lack the benefits of arm’s length negotiations. See “Conflicts of Interest.”

The Partnership will enter into Drilling and Completion Contracts with StableRock pursuant to which it

will drill the wells on acquired by the Partnership. Although the terms of these contracts were not the subject of arms-length negotiations, the Managing Partner believes that the terms of the Drilling and Completion Contracts represent reasonable and customary terms.

The Partnership will also enter into Operating Agreements with StableRock pursuant to which it will

operate the wells on the Leases after completion of the wells. Although the terms of the Operating Agreements were not the subject of arms-length negotiations between the Partnership and StableRock, the Managing Partner is of the opinion that the terms of the Operating Agreements will represent reasonable and customary terms.

With respect to any portion of the Purchased Working Interest not developed by the Partnership, including

that farmed-out to a third party, including affiliates of the Managing Partner, the Managing Partner will attempt to negotiate a Carried Working Interest for the Partnership. With respect to such farmed out interest, the Managing Partner will also negotiate a Carried Working Interest for its own account, which will be held by it outside of the Partnership. Any such Carried Working Interest negotiated by the Managing Partner for its own account will reduce the Partnership’s Carried Working Interest in the farmed out interest

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DEFINITIONS Whenever used in this Memorandum, the following terms have the meanings set forth below. Area of Mutual Interest Agreement. A “area of mutual interest” is a geographic location in which more

than one oil and/or natural gas company has a stake. The area of mutual interest agreement is a contract that describes the geographic area contained in the area of mutual interest, the rights each party has in the area of mutual interest (such as the a percentage of the interest allocated to each company), the length of time during which the contract will be in effect, and how the contract provisions are to be implemented

Commercial quantities. The amount of production of products that an ordinarily prudent person

experienced in oil and gas exploration would, taking into consideration all pertinent surrounding facts and circumstances, deem sufficient to yield a return in excess of Lease Operating Costs, even if drilling and completion costs may never be repaid.

Farmout. To assign interests in an oil and gas property to another party while retaining some part of its

original interest (such as an overriding royalty interest, oil or gas payment, offset acreage, back-in working interest, or other type of interest), subject to the drilling of one or more specified wells or other performance by the prospective assignee as a condition of the assignment.

Overriding Royalty Interest. A non-operating interest in a Lease entitling the holder to receive a share of

the proceeds of production of oil and/or gas from a Lease without being obligated to pay any costs, unless otherwise provided in the grant of the overriding royalty interest. It is a non-possessory interest and terminates when the Lease that created it terminates.

Regulations. The final, temporary, or proposed regulations of the Department of the Treasury promulgated

under the Code as such regulations may be lawfully changed from time to time. Workover. The “workover” of a well occurs when the operator pulls the pumping unit from the well and

conducts any remedial work necessary to improve the production from such well.

444363v11

Exhibit A

Form of Operating Agreement with StableRock Energy L.L.C.

(See attached)

OPERATING AGREEMENT

DATED

October 6, 2015

OPERATOR STABLEROCK ENERGY L.L.C. CONTRACT AREA LANDS IDENTIFIED ON EXHIBIT “A” COUNTY OF PECOS , STATE OF TEXAS

TABLE OF CONTENTS

I. DEFINITIONS

II. EXHIBITS

III. INTERESTS OF PARTIES A. OIL AND GAS INTERESTS B. INTERESTS OF PARTIES IN COSTS AND PRODUCTION C. SUBSEQUENTLY CREATED INTERESTS

IV. TITLES

A. TITLE EXAMINATION B. LOSS OR FAILURE OF TITLE

1. Failure of Title 2. Loss by Non Payment or Erroneous Payment of Amount Due 3. Other Losses 4. Curing Title

V. OPERATOR

A. DESIGNATION AND RESPONSIBILITIES OF OPERATOR B. RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR

1.A Resignation of Operator 1.B Removal of Operator

(Option 1) Removal for Cause (Option 2) Removal without Cause (Option 3) Change for Economic Reasons

2. Selection of Successor Operator 3. Effect of Bankruptcy

C. EMPLOYEES AND CONTRACTORS D. RIGHTS AND DUTIES OF OPERATOR

1. Competitive Rates and Use of Affiliates 2. Discharge of Joint Account Obligations 3. Protection from Liens 4. Custody of Funds 5. Access to Contract Area and Records 6. Filing and Furnishing Governmental Reports 7. Drilling and Testing Operations 8. Cost Estimates 9. Insurance

VI. DRILLING AND DEVELOPMENT

A. INITIAL WELL 1. Vertical Well 2. Horizontal Well

B. SUBSEQUENT OPERATIONS 1. Proposed Operations

2. Operations by Less than All Parties 3. Stand-By Costs 4. Deepening 5. Sidetracking 6. Order of Preference of Operations 7. Conformity to Spacing Pattern 8. Paying Wells

C. COMPLETION OF WELLS; REWORKING AND PLUGGING BACK

1. Completion 2. Rework, Recomplete or Plug Back

D. OTHER OPERATIONS E. ABANDONMENT OF WELLS

1. Abandonment of Dry Holes 2. Abandonment of Wells That Have Produced 3. Abandonment of Non-Consent Operations

F. TERMINATION OF OPERATIONS G. TAKING PRODUCTION IN KIND

(Option 1) Gas Balancing Agreement (Option 2) No Gas Balancing Agreement

VII. EXPENDITURES AND LIABILITY OF PARTIES

A. LIABILITY OF PARTIES B. LIENS AND SECURITY INTERESTS C. ADVANCES D. DEFAULTS AND REMEDIES

1. Suspension of Rights 2. Suit for Damages 3. Deemed Non-Consent 4. Advance Payment 5. Costs and Attorneys’ Fees

E. RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES F. TAXES

VIII. ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

A. SURRENDER OF LEASES B. RENEWAL OR EXTENSION OF LEASES C. ACREAGE OR CASH CONTRIBUTIONS D. ASSIGNMENT; MAINTENANCE OF UNIFORM INTEREST E. WAIVER OF RIGHTS TO PARTITION F. PREFERENTIAL RIGHT TO PURCHASE G. AREA OF MUTUAL INTEREST

IX. INTERNAL REVENUE CODE ELECTION

X. CLAIMS AND LAWSUITS

XI. FORCE MAJEURE

XII. NOTICES

XIII. TERM OF AGREEMENT

XIV. COMPLIANCE WITH LAWS AND REGULATIONS A. LAWS, REGULATIONS AND ORDERS B. GOVERNING LAW C. REGULATORY AGENCIES

XV. MISCELLANEOUS

A. EXECUTION B. SUCCESSORS AND ASSIGNS C. COUNTERPARTS D. SEVERABILITY

XVI. OTHER PROVISIONS A. ADVANCE BILLING FOR CERTAIN OPERATIONS B. CONSENTS TO ABANDONMENT C. REWORKING OR PLUGBACK OPERATIONS D. ASSIGNMENT OF INTERESTS E. DISBURSEMENTS OF ROYALTIES F. FINANCING STATEMENT G. DESIGNATED OPERATOR

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OPERATING AGREEMENT

THIS AGREEMENT is between REDHAWK RESOURCES – FUND III, LP (“Redhawk”) and STABLEROCK ENERGY L.L.C. (“StableRock”) designated and referred to in this Agreement as the “Operator,” and the signatory Party or Parties to this Agreement other than the Operator, sometimes referred to individually as “Non-Operator,” and collectively as “Non-Operators.” Operator and Non-Operator may sometimes be referred to in this Agreement, individually as a “Party,” or collectively as the “Parties.”

The Parties to this Agreement are owners of Oil and Gas Leases and/or Oil and Gas Interests in the lands identified in Exhibit “A.” The Parties have reached an agreement to explore and develop the Leases and/or Oil and Gas Interests for the production of Oil and Gas to the extent and as provided for in this Agreement. The Parties agree as follows:

ARTICLE I. DEFINITIONS

As used in this Agreement, the following words and terms shall have the meanings:

A. The term “AFE” shall mean Authority for Expenditure prepared by a Party to this Agreement for the purpose of estimating the costs to be incurred in conducting an operation under this Agreement.

B. The term “Affiliate” shall mean a company, partnership, or other legal entity which controls, or is

controlled by or which is controlled by an entity which controls a party to this Agreement. Control means the ownership, directly or indirectly, or more than 50% of the shares or voting rights in a company, partnership, or legal entity.

C. The term “Completion” or “Complete” shall mean a single operation intended to complete a well

as a producer of Oil and Gas in one or more Zones, including, but not limited to, the setting of production casing, perforating, well stimulation, and production testing conducted in an operation.

D. The term “Contract Area” shall mean all of the lands, Oil and Gas Leases and/or Oil and Gas

Interests intended to be developed and operated for Oil and Gas purposes under this Agreement. The lands, Oil and Gas Leases, and Oil and Gas Interests are described in Exhibit “A.”

E. The term “Deepen” when applicable to a vertical well, shall mean a single operation in which 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 lesser. The term “Deepen” when applicable to a Horizontal Well is drilled to a targeted horizontal distance beyond the horizontal distance in which the well was previously drilled, or beyond the targeted horizontal distance proposed in the associated AFE, whichever is the lesser.

F. The terms “Drilling Party” and “Consenting Party” shall mean a Party who agrees to join in and

pay its share of the cost of any operation conducted under the provisions of this Agreement.

G. The term “Drilling Unit” shall mean the area fixed for the drilling of one well by order or rule of any state or federal body having authority. If a Drilling Unit is not fixed by any rule or order, a Drilling Unit shall be the Drilling Unit established by the pattern of drilling in the Contract Area

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unless fixed by express agreement of the Drilling Parties.

H. The term “Drill site” shall mean the Oil and Gas Lease or Oil and Gas Interest on which a proposed well is to be located.

I. The term “Horizontal Well” shall mean a well in which the horizontal component of the gross completion interval in the reservoir exceeds the vertical component of the gross completion interval. Any reference in this Agreement to a well, shall apply to a “Horizontal Well” if the well to which the reference is made meets the definition of a “Horizontal Well.”

J. The term “Initial Well” shall mean the well required to be drilled by the Parties as provided in

Article VI.A. (Drilling and Development; Initial Well).

K. The term “Non-Consent Well” shall mean a well in which less than all Parties have conducted an operation as provided in Article VI.B.2. (Drilling and Development; Subsequent Operations; Operations by Less than All Parties.)

L. The terms “Non-Drilling Party” and “Non-Consenting Party” shall mean a Party who elects not to

participate in a proposed operation.

M. The term “Oil and Gas” shall mean oil, gas, casing head gas, gas condensate, and/or all other liquid or gaseous hydrocarbons and other marketable substances produced with them, unless there is an express intent to limit the inclusiveness of this term specifically stated in this Agreement.

N. The term “Oil and Gas Interests” or “Interests” shall mean unleased fee and mineral interests in

Oil and Gas in tracts of land lying within the Contract Area which are owned by a Party or Parties to this Agreement.

O. The terms “Oil and Gas Lease,” Lease,” and “Leasehold” shall mean the oil and gas leases or

interests in tracts of land lying within the Contract Area which are owned by a Party or Parties to this Agreement.

P. The term “Plug Back” shall mean a single operation in which a deeper Zone is abandoned in order

to attempt a Completion in a shallower Zone.

Q. The term “Recompletion” or “Recomplete” shall mean an operation in which a Completion in one Zone is abandoned in order to attempt a Completion in a different Zone within the existing wellbore.

R. The term “Rework” shall mean 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. These 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.

S. The term “Sidetrack” shall mean 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 to overcome other mechanical difficulties.

T. The term “Zone” shall mean a stratum of earth containing or thought to contain a common

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accumulation of Oil and Gas separately producible from any other common accumulation of Oil and Gas.

Unless the context clearly indicates otherwise, words in this Agreement, used in the singular

include the plural, the word “person” includes natural and artificial persons, the plural includes the singular, and any gender includes the masculine, feminine, and neuter.

ARTICLE II. EXHIBITS

The following Exhibits, indicated below, are attached to and incorporated in and made a part

of this Agreement: X A. Exhibit “A,” shall include the following information:

(1) Description of the lands subject to this Agreement, (2) Restrictions, if any, as to depths, formations, or substances, (3) Parties to this Agreement with addresses and telephone numbers for notice purposes, (4) Percentages or fractional interests of the Parties to this Agreement, (5) Oil and Gas Leases and/or Oil and Gas Interests subject to this Agreement, (6) Burdens on production.

B. Exhibit “B,” Form of Oil and Gas Lease. X C. Exhibit “C,” Accounting Procedures. X D. Exhibit “D,” Insurance. E. Exhibit “E,” Gas Balancing Agreement. X F. Exhibit “F,” Non-Discrimination and Certification of Non-Segregated Facilities. G. Exhibit “G,” Tax Partnership. _ H. Exhibit “H,” Memorandum of Operating Agreement and Financing Statement. I. Other:

If any provision of any Exhibit, except Exhibits “E,”“F,”“G,” and “H” is inconsistent with any provision contained in the text of this Agreement, the provisions in the text of this Agreement shall prevail.

ARTICLE III. INTERESTS OF PARTIES

A. Oil and Gas Interests:

If any Party owns an Oil and Gas Interest in the Contract Area, that Interest shall be treated for all

purposes of this Agreement, during its term, as if it were covered by the form of Oil and Gas Lease attached as Exhibit “B,” and the owner shall be deemed to own both royalty interest in the Lease and the interest of the lessee in the Lease.

B. Interests of Parties in Costs and Production:

Unless changed by other provisions, all costs and liabilities incurred in operations under this Agreement shall be borne and paid, and all equipment and materials acquired in operations on the Contract Area shall be owned, by the Parties as their interests are set out in Exhibit “A.” In the same manner, the Parties shall also own all production of Oil and Gas from the Contract Area; subject, however, to the payment of royalties and other burdens on production as described below.

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Regardless of which Party has contributed any Oil and Gas Lease or Oil and Gas Interest on which

royalty or other burdens may be payable, unless expressly provided otherwise in this Agreement, each Party shall pay or deliver, or cause to be paid or delivered, all burdens on its share of the production from the Contract Area up to, but not in excess of existing burdens, and shall indemnify, defend, and hold the other Parties harmless and free from any liability associated with those burdens. Unless provided otherwise in this Agreement, if any Party has contributed any Lease or Interest which is burdened with any royalty, overriding royalty, production payment, or other burden on production in excess of the amounts stipulated above, that Party shall assume and alone bear all the excess obligations and shall indemnify, defend, and hold the other Parties harmless from any and all claims attributable to the excess burden.

No Party shall ever be responsible, on a price basis higher than the price received by the Party, to any other Party’s lessor or royalty owner, and if the other Party’s lessor or royalty owner should demand and receive settlement on a higher price basis, the Party contributing the affected Lease shall bear the additional royalty burden attributable to the higher price.

Nothing contained in this Article III.B. shall be deemed an assignment or cross-assignment of interests, and in the event two or more Parties contribute to this Agreement jointly owned Leases, the Parties’ undivided interests in those Leaseholds shall be deemed separate leasehold interests for the purposes of this Agreement.

C. Subsequently Created Interests:

If any Party has contributed a Lease or Interest that is burdened with an assignment of production given as security for the payment of money, or if, after the date of this Agreement, any Party creates an overriding royalty, production payment, net profits interest, assignment of production, or other burden payable out of production attributable to its working interest, that burden shall be deemed a “Subsequently Created Interest.” Further, if any Party has contributed a Lease or Interest burdened with an overriding royalty, production payment, net profits interest, or other burden payable out of production, created prior to the date of this Agreement, and the burden is not shown on Exhibit “A,” the burden shall be deemed a Subsequently Created Interest to the extent the burden causes the burdens on the Party’s Lease or Interest to exceed the amount stipulated in Article III.B. above.

The Party whose interest is burdened with the Subsequently Created Interest (the “Burdened Party”) shall assume and alone bear, pay, and discharge the Subsequently Created Interest and shall indemnify, defend, and hold harmless the other Parties from and against any liability on those interests. Further, if the Burdened Party fails to pay, when due, its share of expenses provided for in this Agreement, all provisions of Article VII.B. shall be enforceable against the Subsequently Created Interest in the same manner as they are enforceable against the working interest of the Burdened Party. If the Burdened Party is required under this Agreement to assign or relinquish to any other Party, or Parties, all or a portion of its working interest and/or the production attributable to its working interest, the other Party, or Parties, shall receive the assignment and/or production free and clear of the Subsequently Created Interest, and the Burdened Party shall indemnify, defend, and hold harmless the other Party, or Parties, from any and all claims and demands for payment asserted by owners of the Subsequently Created Interest.

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ARTICLE IV. TITLES

A. Title Examination:

Title examination shall be made on the Drill site of any proposed well prior to commencement of drilling operations and, if a majority in interest of the Drilling Parties request or Operator elects, the title shall be examined on the entire Drilling Unit, or maximum anticipated Drilling Unit of the well. The opinion will include the ownership of the working interest, minerals, royalty, overriding royalty, and other payments out of production under the applicable Leases. Each Party contributing Leases and/or Oil and Gas Interests to be included in the Drill site or Drilling Unit, if appropriate, shall furnish to Operator all abstracts (including federal lease status reports), title opinions, title papers, and curative material in its possession, free of charge. All information not in the possession of or made available to Operator by the Parties, but necessary for the examination of the title, shall be obtained by Operator. Operator shall cause title to be examined by attorneys on its staff or by outside attorneys. Copies of all title opinions shall be furnished to each Drilling Party. Costs incurred by Operator in procuring abstracts, fees paid outside attorneys for title examination (including preliminary, supplemental, shut-in royalty opinions, and division order title opinions) and other direct charges as provided in Exhibit “C” shall be borne by the Drilling Parties in the proportion that the interest of each Drilling Party bears to the total interest of all Drilling Parties as their interests appear in Exhibit “A.” Operator shall make no charge for services rendered by its staff attorneys or other personnel in the performance of these functions.

Each Party shall be responsible for securing curative matters and pooling amendments or agreements required in connection with Leases or Oil and Gas Interests contributed by the Party. Operator shall be responsible for the preparation and recording of pooling designations or declarations and communization agreements as well as the conduct of hearings before governmental agencies for the securing of spacing or pooling orders or any other orders necessary or appropriate to the conduct of operations under the terms of this Agreement. This shall not prevent any Party from appearing on its own behalf at any hearings. Costs incurred by Operator, including fees paid to outside attorneys, which are associated with hearings before governmental agencies, and which costs are necessary and proper for the activities contemplated under this Agreement shall be direct charges to the joint account and shall not be covered by the administrative overhead charges provided in Exhibit “C.” Operator shall make no charge for services rendered by its staff attorneys or other personnel in the performance of the above functions.

No well shall be drilled on the Contract Area until after: (1) the title to the Drill site or Drilling Unit, if appropriate, has been examined as provided for above; and, (2) the title has been approved by the examining attorney or accepted by all of the Drilling Parties in the well. B. Loss or Failure of Title:

1. All Title Losses. All losses incurred shall be joint losses and shall be borne by all parties in proportion to their interest. There shall be no readjustment of interests in the remaining portion of the Contract Area.

2. Losses by Non Payment or Erroneous Payment of Amount Due. [Intentionally Omitted.]

3. Other Losses. [Intentionally Omitted.]

4. Curing Title. [Intentionally Omitted.]

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ARTICLE V. OPERATOR

A. Designation and Responsibilities of Operator:

The Party designated as Operator in the first paragraph of this Agreement shall be the

Operator of the Contract Area, and shall conduct and direct and have full control of all operations on the Contract Area permitted, required by, and within the limits of this Agreement. In its performance of services for the Non-Operators, Operator shall be an independent contractor not subject to the control or direction of the Non-Operators except as to the type of operation to be undertaken in accordance with the election procedures contained in this Agreement. Operator shall not be deemed, or hold itself out as, the agent of the Non-Operators with authority to bind them to any obligation or liability assumed or incurred by Operator as to any third party. The specific duty of Operator to Non- Operators shall depend on the service performed as follows:

1. In the handling of all moneys received from Non-Operators or from other Parties for the benefit of the joint account, Operator shall have the duties of a fiduciary.

2. In the performance of all other duties on the Contract Area, the Operator shall act as a reasonably

prudent Operator in a good and workmanlike manner with due diligence and dispatch in accordance with good oilfield practice and in accordance with applicable law and regulation; PROVIDED, HOWEVER, EXCEPT FOR OPERATOR’S INTEREST IN THE CONTRACT AREA, NON-OPERATORS SHALL INDEMNIFY OPERATOR FOR, FROM, AND AGAINST ANY AND ALL CLAIMS, DAMAGES, AND LIABILITY OF EVERY KIND AND CHARACTER (INCLUDING ALL COSTS AND EXPENSES, INCLUDING BUT NOT LIMITED TO ATTORNEYS FEES), RESULTING FROM, ARISING OUT OF, OR INCIDENTAL TO OPERATOR’S PERFORMANCE OF DUTIES ON THE CONTRACT AREA EVEN IF THOSE LIABILITIES ARISE FROM OR ARE ATTRIBUTED TO OPERATOR’S NEGLIGENCE. THE ONLY LIABILITIES TO WHICH THIS INDEMNITY OBLIGATION DOES NOT APPLY ARE THOSE RESULTING FROM OPERATOR’S GROSS NEGLIGENCE AND INTENTIONAL TORTS FOR WHICH OPERATOR SHALL BE SOLELY RESPONSIBLE.

3. For all other duties and responsibilities under this Agreement, Operator shall conduct its activities

as a reasonable and prudent operator in a good and workmanlike manner, with due diligence and dispatch in accordance with good oil field practices and in compliance with all applicable laws and regulations.

B. Resignation or Removal of Operator and Selection of Successor:

1.A Resignation of Operator:

Operator may resign at any time by giving written notice of it resignation to Non-Operators. If Operator terminates its legal existence, no longer owns an interest in the Contract Area, or is no longer capable of serving as Operator, Operator shall be deemed to have resigned without any action by Non-Operators, except the selection of a successor. Subject to Article VII.D.1., (Expenditures and Liabilities of Parties; Defaults and Remedies; Suit for Damages), the resignation, or removal as provided for in V.1.B. below, shall not become effective until 7:00 a.m. on the first day of the calendar month following the expiration of ninety (90) days after notice of resignation is given by the Operator or action

7

by the Non-Operators to remove Operator, unless a successor Operator has been selected and assumes the duties of Operator at an earlier date. Operator, after the effective date of a resignation or removal, shall be bound by the terms of this Agreement as a Non-Operator. A change of a corporate name or structure of Operator, or transfer of Operator’s interest to any single subsidiary, parent, or successor corporation shall not be the basis for removal of Operator.

1.B Removal of Operator: (Select one of the Alternatives)

☐ Option 1: (Removal for Cause) Operator may be removed only for good cause by the affirmative vote of Non-Operators owning a majority interest based on ownership as shown on Exhibit “A” remaining after excluding the voting interest of Operator. The vote shall not be deemed effective until a written notice has been delivered to the Operator by a Non-Operator detailing the alleged default and Operator has failed to cure the default within thirty (30) days from its receipt of the notice or, if the default concerns an operation then being conducted, within forty-eight (48) hours of its receipt of the notice. For purposes of this provision, “good cause” shall mean not only gross negligence or willful misconduct but also the material breach of or inability to meet the standards of operation contained in Article V.A. (Operator; Designation and Responsibilities of Operator), or material failure or inability to perform the obligations of Operator under this Agreement.

☒ Option 2: (Removal without Cause) Operator may be removed without cause, at any time, by the

affirmative vote of Non-Operators owning at least fifty percent (50%) interest effective as of the time stated in V.B.1.A. above. The Successor Operator selected shall own no less than zero percent (0%) of the Contract Area.

☐ Option 3: (Change for Economic Reasons) Once each calendar year, any Non-Operator owning

not less than ten percent (10%) of the Contract Area may inform the Operator, in writing, that it is willing to assume the position of Operator and operate at a savings from then existing operator costs of ten percent (10%) or more. Operator may remain and continue to act as Operator if it elects within fifteen (15) days after receipt of that notice to continue to operator at the savings for a year. If Operator fails to respond by making that election, in writing, the Party proposing the savings shall become the successor Operator on the first day of the month after thirty (30) days from the date of Operator’s receipt of the original proposal. The Non-Operator taking over operations under this Agreement shall be bound for one (1) year from the date of this change of Operator to operate at the (savings) rate proposed in the original notice to the Operator.

In the event of the removal of the Operator under any of the three Options stated, the successor

Operator is expressly authorized to sign on behalf of the removed Operator, any and all necessary Change of Operator forms, on behalf of the former Operator, for the purpose of having the successor Operator recognized as Operator for all purposes under this Agreement.

2. Selection of Successor Operator: On the resignation or removal of Operator under Options 1 or 2 under 1.B. above of this Agreement, a successor Operator shall be selected by the Parties. The successor Operator shall be selected from the Parties owning an interest in the Contract Area at the time the successor Operator is selected. The successor Operator shall be selected by the affirmative vote of two (2) or more Parties owning a majority interest based on the ownership as shown on Exhibit “A”; provided, however, if an Operator, which has been removed or is deemed to have resigned, fails to vote or votes only to succeed itself, the successor Operator shall be selected by the affirmative vote of the Party or Parties owning a majority interest based on the ownership, as shown on Exhibit “A,” remaining after excluding the voting interest of the Operator that was removed or resigned. The former Operator shall promptly deliver to the successor Operator all records and data

8

relating to the operations conducted by the former Operator to the extent the records and data are not already in the possession of the successor Operator. Any cost of obtaining or copying the former Operator’s records and data shall be charged to the joint account.

3. Effect of Bankruptcy: If Operator becomes insolvent, bankrupt, or is placed in receivership, it shall be deemed to have resigned without any action by Non-Operators, except the selection of a successor. If a petition for relief under the federal bankruptcy laws is filed by or against Operator, and the removal of Operator is prevented by the federal bankruptcy court, all Non-Operators and Operator shall comprise an interim operating committee to serve until Operator has elected to reject or assume this Agreement pursuant to the Bankruptcy Code. An election to reject this Agreement by Operator as a debtor in possession, or by a trustee in bankruptcy for Operator, shall be deemed a resignation as Operator without any action by Non-Operators, except the selection of a successor. During the period of time the operating committee controls operations, all actions shall require the approval of two (2) or more Parties owning a majority interest based on the ownership shown on Exhibit “A.” In the event there are only two (2) Parties to this Agreement, during the period of time the operating committee controls operations, a third Party, acceptable to Operator, the Non-Operator, and the federal bankruptcy court, shall be selected as a member of the operating committee, and all actions shall require the approval of two (2) members of the operating committee without regard for their interest in the Contract Area as set out on Exhibit “A.” C. Employees and Contractors:

The number of employees or contractors used by Operator in conducting operations under the terms of this Agreement, their selection, and the hours of labor and the compensation for services performed shall be determined by Operator. All employees or contractors shall be the employees or contractors of Operator. D. Rights and Duties of Operator:

1. Competitive Rates and Use of Affiliates: All wells drilled on the Contract Area shall be drilled

on a competitive contract basis at the usual rates prevailing in the area. If it so desires, Operator may employ its own tools and equipment in the drilling of wells, but its charges shall not exceed the prevailing rates in the area, and the work shall be performed by Operator under the same terms and conditions as are customary and usual in the area in contracts of independent contractors who are doing work of a similar nature. All work performed or materials supplied by Affiliates of Operator shall be performed or supplied at competitive rates, pursuant to written agreement, and in accordance with customs and standards prevailing in the industry.

2. Discharge of Joint Account Obligations: Unless specifically provided otherwise in this

Agreement, Operator shall promptly pay and discharge expenses incurred in the development and operations of the Contract Area pursuant to this Agreement, and shall charge each of the Parties with their respective proportionate shares on the expense basis provided in Exhibit “C.” Operator shall keep an accurate record of the joint account, showing expenses incurred and charges and credits made and received.

3. Protection from Liens: Operator shall pay, or cause to be paid, as and when they become due

and payable, all accounts of contractors and suppliers, wages and salaries for services rendered or performed, and for materials supplied on, to, or for the Contract Area or any operations for the joint account, and shall keep the Contract Area free from liens and encumbrances resulting from them, except for those resulting from a bona fide dispute as to services rendered or materials supplied.

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4. Custody of Funds: Operator shall hold for the account of the Non-Operators any funds of the

Non-Operators advanced or paid to the Operator, either for the conduct of operations under this Agreement, or as a result of the sale of production from the Contract Area, and those funds shall remain the funds of the Non-Operators on whose account they are advanced or paid until used for their intended purpose or otherwise delivered to the Non- Operators or applied toward the payment of debts as provided in Article VII.B. (Expenditures and Liabilities of Parties; Liens and Security Interests). Nothing in this paragraph shall be construed to establish a fiduciary relationship between Operator and Non-Operators for any purpose other than to account for Non-Operator funds as specifically provided. Nothing in this paragraph shall require the maintenance by Operator of separate accounts for the funds of Non-Operators unless the Parties specifically agree otherwise.

5. Access to Contract Area and Records: Operator shall permit each Non-Operator or its duly

authorized representative, at the Non-Operator’s sole risk and cost, full and free access at all reasonable times to all operations of every kind and character being conducted for the joint account on the Contract Area, and to the records of operations conducted on the Contract Area, or production from it, including Operator’s related books and records. These access rights shall not be exercised in a manner interfering with Operator’s conduct of an operation and shall not obligate Operator to furnish any geologic or geophysical data of an interpretive nature to any Non-Consenting Party unless the cost of preparation of the interpretive data was charged to the joint account, and a Non-Consenting Party paid its share of those costs. Operator will furnish to each Non-Operator, on written request, copies of any and all reports and information obtained by Operator in connection with production and related items, including, meter and chart reports, production purchaser statements, run tickets and monthly gauge reports, but excluding purchase contracts and pricing information to the extent not applicable to the production of the Non-Operator seeking the information. Any audit of Operator’s records relating to amounts expended and the appropriateness of the expenditures shall be conducted in accordance with the audit provisions provided in Exhibit “C.”

6. Filing and Furnishing Governmental Reports: Operator will file, and on written request,

promptly furnish copies to each requesting Non-Operator, not in default of its payment obligations under this Agreement, all operational notices, reports, or applications required to be filed by local, State, Federal or Indian agencies or authorities having jurisdiction over operations of the Contract Area. Each Non-Operator shall provide Operator, on a timely basis, all information necessary to permit Operator to make all filings.

7. Drilling and Testing Operations: The following provisions shall apply to each well drilled

under the terms of this Agreement, including but not limited to the Initial Well:

(a) Operator will promptly advise Non-Operators of the date on which the well is spudded, or the date on which drilling operations are commenced.

(b) Operator will send Non-Operators the reports, test results, and notices regarding the progress of operations on the well as the Non-Operators shall reasonably request, including, but not limited to, daily drilling reports, completion reports, and well logs.

(c) Operator shall adequately test all Zones encountered which may reasonably be expected to be capable of producing Oil and Gas in paying quantities as a result of examination of the electric log or any other logs or cores or tests conducted on a well.

8. Cost Estimates: On the request of any Consenting Party, Operator shall furnish estimates of current and cumulative costs incurred for the joint account at reasonable intervals during the

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conduct of any operation conducted under the terms of this Agreement. Operator shall not be held liable for good faith errors in estimates.

9. Insurance: At all times while operations are conducted under this Agreement, Operator shall

comply with the workers compensation law of the state where the operations are being conducted; provided, however, Operator may be a self-insurer for liability under those compensation laws in which event the only charge that shall be made to the joint account shall be as provided in Exhibit “C.” Operator shall also carry or provide insurance for the benefits of the joint account of the Parties as outlined in Exhibit “D” to this Agreement. Operator shall require all contractors engaged in work on or for the Contract Area to comply with the workers compensation law of the state where the operations are being conducted and to maintain other insurance as Operator may require.

In the event automobile liability insurance is specified in Exhibit “D,” or subsequently

receives the approval of the Parties, no direct charge shall be made by Operator for premiums paid for insurance for Operator’s automotive equipment.

ARTICLE VI. DRILLING AND DEVELOPMENT

A. Initial Well:

1. Vertical Well: [Intentionally omitted]

2. Horizontal Well: [Intentionally omitted]

B. Subsequent Operations:

1. Proposed Operations: If any Party should desire to drill any well on the Contract Area

other than the Initial Well, or if any Party should desire to Rework, Sidetrack, Deepen, Recomplete or Plug Back a dry hole or a well no longer capable of producing in paying quantities in which the Party has not otherwise relinquished its interest in the proposed objective Zone under this Agreement, the Party desiring to drill, Rework, Sidetrack, Deepen, Recomplete or Plug Back the a well shall give written notice of the proposed operation to the Parties who have not otherwise relinquished their interest in the objective Zone under this Agreement and to all other Parties in the case of a proposal for Sidetracking or Deepening, specifying the work to be performed, the location, proposed depth, objective Zone, and the estimated cost of the operation. The Parties to whom the notice is delivered shall have thirty (30) days after receipt of the notice within which to notify the Party proposing to do the work if they elect to participate in the cost of the proposed operation. If a drilling rig is on location, notice of a proposal to Rework, Sidetrack, Recomplete, Plug Back or Deepen may be given by telephone and the response period shall be limited to forty-eight (48) hours, exclusive of Saturday, Sunday, and legal holidays. Failure of a Party to whom a notice is delivered to reply within the stated fixed period shall be deemed to constitute an election by that Party not to participate in the cost of the proposed operation. Any proposal by a Party to conduct an operation conflicting with the operation initially proposed shall be delivered to all Parties within the time and in the manner provided in Article VI.B.6. (Drilling and Development; Subsequent Operations; Order of Preference of Operations)

If all Parties, to whom a notice is delivered, elect to participate in the proposed operation, the

Parties shall be contractually committed to participate in the operations, provided the operations are commenced within the time period set forth below, and Operator shall, no later than ninety (90) days after expiration of the notice period of thirty (30) days (or as promptly as practicable after the expiration

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of the forty-eight (48) hour period when a drilling rig is on location, as the case may be), actually commence the proposed operation and complete it with due diligence at the risk and expense of the Parties participating in the operation; provided, however, the commencement date may be extended on written notice of the extension by Operator to the other Parties, for a period of up to thirty (30) additional days if, in the sole opinion of Operator, the additional time is reasonably necessary to obtain permits from governmental authorities, for dealing with surface rights (including rights-of-way), obtaining or contracting for appropriate drilling equipment, or to complete a title examination or curative matters required for title approval or acceptance. If the actual operation has not been commenced within the time provided (including any extension specifically permitted, or in the force majeure provisions of Article IX [Force Majeure]) and if any Party desires to conduct the operation, written notice proposing the operation must be resubmitted to the other Parties in accordance with the provisions of this Article VI.B.1., as if no prior proposal has been made. Those Parties that did not participate in the drilling of a well for which a proposal to Deepen or Sidetrack is made shall, if Parties desire to participate in the proposed Deepening or Sidetracking operation, reimburse the Drilling Parties in accordance with Article VI.B.4. (Drilling and Development; Subsequent Operations; Deepening) in the event of a Deepening operation, and in accordance with Article VI.B.5. (Drilling and Development; Subsequent Operations; Sidetracking) in the event of a Sidetracking operation.

2. Operations by Less Than All Parties:

(a) Determination of Participation. If any Party to whom a notice is delivered as provided in Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations), or VI.C.1. (Drilling and Development; Completion of Wells; Reworking and Plugging Back; Completion),(Option No. 2) elects not to participate in the proposed operation, then, in order to be entitled to the benefits of this Article, the Party or Parties giving the notice and the other Parties electing to participate in the operation shall, no later than thirty (30) days after the expiration of the notice period of thirty (30) days (or as promptly as practicable after the expiration of the forty- eight (48) hour period when a drilling rig is on location, as the case may be) actually commence the proposed operation and complete it with due diligence. Operator shall perform all work for the account of the Consenting Parties; provided, however, if no drilling rig or other equipment is on location, and if Operator is a Non-Consenting Party, the Consenting Parties shall either: (i) request Operator to perform the work required by the proposed operation for the account of the Consenting Parties; or, (ii) designate one of the Consenting Parties as Operator to perform the work. The rights and duties granted to and imposed on the Operator under this Agreement are granted to and imposed on the Party designated as Operator for an operation in which the original Operator is a Non- Consenting Party. Consenting Parties, when conducting operations on the Contract Area pursuant to this Article VI.B.2 shall comply with all terms and conditions of this Agreement.

If less than all Parties approve any proposed operation, the proposing Party, immediately after

the expiration of the applicable notice period, shall advise all Parties of the total interest of the Parties approving the operation and its recommendation as to whether the Consenting Parties should proceed with the operation as proposed. Each Consenting Party, within forty-eight (48) hours (exclusive of Saturday, Sunday, and legal holidays) after delivery of this notice, shall advise the proposing Party of its desire to (i) limit participation to the Party’s interest as shown on Exhibit “A,” (ii) carry only its proportionate part (determined by dividing the Party’s interest in the Contract Area by the interests of all Consenting Parties in the Contract Area) of the Non-Consenting Parties’ interests, or (iii) carry its proportionate part (determined as provided in (ii)) of Non-Consenting Parties’ interests together with all or a portion of its proportionate part of any Non-Consenting Parties’ interests that any Consenting Party did not elect to take. Any interest of Non-Consenting Parties that is not carried by a Consenting Party shall be deemed to be carried by the Party proposing the operation if the Party does not withdraw its proposal. Failure to advise the proposing Party within the time required shall be deemed an election

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under (i). In the event a drilling rig is on location, notice may be given by telephone, and the time permitted for a response shall not exceed a total of forty-eight (48) hours. The proposing Party, at its election, may withdraw a proposal if there is less than 100% participation and shall notify all Parties of that decision within ten (10) days, or within twenty-four (24) hours if a drilling rig is on location, following expiration of the applicable response period. If 100% subscription to the proposed operation is obtained, the proposing Party shall promptly notify the Consenting Parties of their proportionate interests in the operation and the Party serving as Operator shall commence the operation within the period provided in Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations), subject to the same extension right as provided in that Article.

(b) Relinquishment of Interest for Non-Participation. The entire cost and risk of conducting

the operations shall be borne by the Consenting Parties in the proportions they have elected to bear them under the terms of the preceding paragraph. Consenting Parties shall keep the leasehold estates involved in these operations free and clear of all liens and encumbrances of every kind created by or arising from the operations of the Consenting Parties. If an operation results in a dry hole, then subject to Articles VI.B.6. (Drilling and Development; Subsequent Operations; Order of Preference of Operations) and VI.E.3. (Drilling and Development; Abandonment of Wells; Abandonment of Non-Consent Operations), the Consenting Parties shall plug and abandon the well and restore the surface location at their sole cost, risk, and expense; provided, however, the Non-Consenting Parties that did not participate in the Drilling, Deepening, or Sidetracking of the well shall remain liable for, and shall pay, their proportionate shares of the cost of plugging and abandoning the well and restoring the surface location insofar only as those costs were not increased by the subsequent operations of the Consenting Parties. If any well Drilled, Reworked, Sidetracked, Deepened, Recompleted, or Plugged Back under the provisions of this Article results in a well capable of producing Oil and/or Gas in paying quantities, the Consenting Parties shall Complete and equip the well to produce at their sole cost and risk, and the well shall then be turned over to Operator (if the Operator did not conduct the operation) and shall be operated by it at the expense and for the account of the Consenting Parties. On commencement of operations for the Drilling, Reworking, Sidetracking, Recompleting, Deepening, or Plugging Back of any well by Consenting Parties in accordance with the provisions of this Article, each Non-Consenting Party shall be deemed to have relinquished to Consenting Parties, and the Consenting Parties shall own and be entitled to receive, in proportion to their respective interests, all of the Non-Consenting Party’s interest in the well and share of production from it or, in the case of a Reworking, Sidetracking, Deepening, Recompleting, or Plugging Back, or a Completion pursuant to Article VI.C.1. (Drilling and Development; Completion of Wells; Reworking and Plugging Back; Completion) Option No. 2, all of the Non-Consenting Party’s interest in the production obtained from the operation in which the Non-Consenting Party did not elect to participate. This relinquishment shall be effective until the proceeds of the sale of that share, calculated at the well, or its market value if that share is not sold (after deducting applicable ad valorem, production, severance, and excise taxes, royalty, overriding royalty, and other interests not excepted by Article III.C. [Interest of Parties; Subsequently Created Interests] payable out of or measured by the production from the well accruing with respect to the interest until it reverts), shall equal the total of the following:

(i) Four hundred percent (400%) of each Non-Consenting Party’s share of the cost of any

newly acquired surface equipment beyond the wellhead connections (including but not limited to stock tanks, separators, treaters, pumping equipment, and piping), plus 100% of each Non-Consenting Party’s share of the cost of operation of the well commencing with first production and continuing until each Non-Consenting Party’s relinquished interest shall revert to it under other provisions of this Article; it being agreed that each Non-Consenting Party’s share of these costs and equipment will be that interest which would have been chargeable to the Non-Consenting Party had it participated in the well from the beginning of the operations; and,

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(ii) Four hundred percent (400%) of (a) that portion of the costs and expenses of Drilling, Reworking, Sidetracking, Deepening, Plugging Back, Testing, Completing, and Recompleting, after deducting any cash contributions received under Article VIII.C. (Acquisition; Maintenance or Transfer of Interest; Acreage or Cash Contributions); and, of (b) that portion of the cost of newly acquired equipment in the well (to and including the wellhead connections), which would have been chargeable to the Non-Consenting Party if it had participated in the acquisition of the equipment.

Notwithstanding anything to the contrary in this Article VI.B., if the well does not reach the

deepest objective Zone described in the notice proposing the well for reasons other than the encountering of granite or practically impenetrable substance or other condition in the hole rendering further operations impracticable, Operator shall give notice of this to each Non-Consenting Party who submitted or voted for an alternative proposal under Article VI.B.6. (Drilling and Development; Subsequent Operations; Order of Preference of Operations) to drill the well to a shallower Zone than the deepest objective Zone proposed in the notice under which the well was drilled, and each Non-Consenting Party shall have the option to participate in the initial proposed Completion of the well by paying its share of the cost of drilling the well to its actual depth, calculated in the manner provided in Article VI.B.4.(a) (Drilling and Development; Subsequent Operations; Deepening). If any Non-Consenting Party does not elect to participate in the first Completion proposed for the well, the relinquishment provisions of this Article VI.B.2.(b) (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties), shall apply to the Party’s interest.

(c) Reworking, Recompleting, or Plugging Back. An election not to participate in the

Drilling, Sidetracking, or Deepening of a well shall be deemed an election not to participate in any Reworking or Plugging Back operation proposed in a well, or portion of it, to which the initial non-consent election applied, that is conducted at any time prior to full recovery by the Consenting Parties of the Non-Consenting Party’s recoupment amount. Similarly, an election not to participate in the Completing or Recompleting of a well shall be deemed an election not to participate in any Reworking operation proposed in a well, or portion of it, to which the initial non-consent election applied that is conducted at any time prior to full recovery by the Consenting Parties of the Non-Consenting Party’s recoupment amount. Any Reworking, Recompleting, or Plugging Back operation conducted during the recoupment period shall be deemed part of the cost of operating of the well and there shall be added to the sums to be recouped by the Consenting Parties 800% of that portion of the costs of the Reworking, Recompleting, or Plugging Back operation which would have been chargeable to the Non-Consenting Party had it participated in the operation. If a Reworking, Recompleting, or Plugging Back operation is proposed during the recoupment period, the provisions of this Article VI.B shall be applicable as between the Consenting Parties in the well.

(d) Recoupment Matters. During the period of time Consenting Parties are entitled to

receive Non-Consenting Party’s share of production, or the proceeds of that production; Consenting Parties shall be responsible for the payment of all ad valorem, production, severance, excise, gathering and other taxes, and all royalty, overriding royalty, and other burdens applicable to Non-Consenting Party’s share of production not excepted by Article III.C. (Interests of Parties; Subsequently Created Interests).

In the case of any Reworking, Sidetracking, Plugging Back, Recompleting, or Deepening

operation, the Consenting Parties shall be permitted to use, free of cost, all casing, tubing, and other equipment in the well, but the ownership of all that equipment shall remain unchanged; and on abandonment of a well after the Reworking, Sidetracking, Plugging Back, Recompleting or Deepening, the Consenting Parties shall account for all the equipment to the owners of it, with each Party receiving its proportionate part in kind or in value, less cost of salvage.

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Within ninety (90) days after the completion of any operation under this Article, the Party conducting the operations for the Consenting Parties shall furnish each Non-Consenting Party with an inventory of the equipment in and connected to the well, and an itemized statement of the cost of Drilling, Sidetracking, Deepening, Plugging Back, Testing, Completing, Recompleting, and equipping the well for production; or, at its option, the operating Party, in lieu of an itemized statement of the costs of operation, may submit a detailed statement of monthly billings. Each following month, during the time the Consenting Parties are being reimbursed, as provided above, the Party conducting the operations for the Consenting Parties shall furnish the Non-Consenting Parties with an itemized statement of all costs and liabilities incurred in the operation of the well, together with a statement of the quantity of Oil and Gas produced from it and the amount of proceeds realized from the sale of the well’s working interest production during the preceding month. In determining the quantity of Oil and Gas produced during any month, Consenting Parties shall use industry accepted methods such as, metering or periodic well tests. Any amount realized from the sale or other disposition of newly acquired equipment in connection with any operation which would have been owned by a Non-Consenting Party had it participated in its acquisition shall be credited against the total unreturned costs of the work done and of the equipment purchased in determining when the interest of the Non- Consenting Party shall revert to it, as provided above; and, if there is a credit balance, it shall be paid to the Non- Consenting Party.

If and when the Consenting Parties recover from a Non-Consenting Party’s relinquished interest the amounts provided for above, the relinquished interests, of the Non-Consenting Party shall automatically revert to it as of 7:00 a.m. on the day following the day on which the recoupment occurs, and, from and after the reversion, the Non-Consenting Party shall own the same interest in the well, the material and equipment in or pertaining to it, and the production from it as the Non-Consenting Party would have been entitled to had it participated in the Drilling, Sidetracking, Reworking, Deepening, Recompleting, or Plugging Back of the well. After that time, the Non- Consenting Party shall be charged with and shall pay its proportionate part of the further costs of the operation of well in accordance with the terms of this Agreement and Exhibit “C.”

☒ Optional Alternative to Article VI.B.2. If this Option is selected, it shall supersede and control over Article VI.B.2.

Notwithstanding anything in Article VI.B.2 to the contrary, any Non-Consenting Party, shall forfeit and convey to the Consenting Parties all of its interest in the proposed well and lands constituting the Contract Area.

3. Stand-By Costs: When a well which has been Drilled or Deepened has reached its authorized

depth, and all tests have been completed and the results of those tests furnished to the Parties, or when operations on the well have been otherwise terminated pursuant to Article VI.F. (Drilling and Development; Termination of Operations), stand-by costs incurred pending response to a Party’s notice proposing a Reworking, Sidetracking, Deepening, Recompleting, Plugging Back or Completing operation in a well (including the period required under Article VI.B.6. [Drilling and Development; Subsequent Operations; Order of Preference of Operations] to resolve competing proposals) shall be charged and borne as part of the Drilling or Deepening operation just completed. Stand-by costs subsequent to all Parties responding, or expiration of the response time permitted, whichever occurs first, and prior to agreement as to the participating interests of all Consenting Parties pursuant to the terms of the second grammatical paragraph of Article VI.B.2.(a) (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties; Determination of Participation), shall be charged to and borne as part of the proposed operation, but if the proposal is subsequently withdrawn because of insufficient participation, the stand-by costs shall be allocated between the Consenting Parties in the proportion each Consenting Party’s interest, as shown on Exhibit “A,” bears to the total interest, as

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shown on Exhibit “A,” of all Consenting Parties. In the event a notice for a Sidetracking operation is given while the drilling rig to be utilized is on location, any Party may request and receive up to five (5) additional days after expiration of the forty-eight (48) hour response period specified in Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations) within which to respond by paying for all stand-by costs and other costs incurred during the extended response period. Operator may require the requesting Party to pay the estimated stand-by time in advance as a condition to extending the response period. If more than one Party elects to take additional time to respond to the notice, standby costs shall be allocated between the Parties taking the additional time to respond on a day-to-day basis in the proportion each electing Party’s interest, as shown on Exhibit “A,” bears to the total interest shown on Exhibit “A,” of all the electing Parties.

4. Deepening: If less than all the Parties elect to participate in a Drilling, Sidetracking, or Deepening operation proposed pursuant to Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations), the interest relinquished by the Non-Consenting Parties to the Consenting Parties under Article VI.B.2. (Drilling and Development; Subsequent Operations; Operation by Less Than All Parties) shall relate only and be limited to the lesser of: (i) the total depth actually drilled; or, (ii) the objective depth or Zone of which the Parties were given notice under Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations) (the “Initial Objective”). The well shall not be Deepened beyond the Initial Objective without first complying with this Article to afford the Non-Consenting Parties the opportunity to participate in the Deepening operation. In the event any Consenting Party desires to drill or Deepen a Non-Consent Well to a depth below the Initial Objective, the Party shall give notice of that, complying with the requirements of Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations), to all Parties (including Non-Consenting Parties). Then, Articles VI.B.1 and 2. (Drilling and Development; Subsequent Operations; Proposed Operations; and Operations by Less Than All Parties) shall apply and all Parties receiving the notice shall have the right to participate or not participate in the Deepening of the well pursuant to Articles VI.B.1 and 2. (Drilling and Development; Subsequent Operations; Proposed Operations; and Operations by Less Than All Parties). If a Deepening operation is approved pursuant to those provisions, and if any Non-Consenting Party elects to participate in the Deepening operation, the Non-Consenting Party shall pay or make reimbursement (as the case may be) of the following costs and expenses:

(a) If the proposal to Deepen is made prior to the Completion of the well as a well capable of producing in paying quantities, the Non-Consenting Party shall pay (or reimburse Consenting Parties for, as the case may be) that share of costs and expenses incurred in connection with the drilling of the well from the surface to the Initial Objective which Non-Consenting Party would have paid had the Non-Consenting Party agreed to participate in it, plus the Non-Consenting Party’s share of the cost of Deepening and of participating in any further operations on the well in accordance with the other provisions of this Agreement; provided, however, all costs for testing and Completion or attempted Completion of the well incurred by Consenting Parties prior to the point of actual operations to Deepen beyond the Initial Objective shall be for the sole account of Consenting Parties.

(b) If the proposal is made for a Non-Consent Well that has been previously Completed as a well

capable of producing in paying quantities, but is no longer capable of producing in paying quantities, the Non- Consenting Party shall pay (or reimburse Consenting Parties for, as the case may be) its proportionate share of all costs of Drilling, Completing, and Equipping the well from the surface to the Initial Objective, calculated in the manner provided in paragraph (a)

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above, less those costs recouped by the Consenting Parties from the sale of production from the well. The Non-Consenting Party shall also pay its proportionate share of all costs of re-entering the well. The Non-Consenting Parties’ proportionate part (based on the percentage of the well the Non-Consenting Party would have owned had it previously participated in the Non-Consent Well) of the costs of salvable materials and equipment remaining in the hole and salvable surface equipment used in connection with the well shall be determined in accordance with Exhibit “C.” If the Consenting Parties have recouped the cost of Drilling, Completing, and Equipping the well at the time the Deepening operation is conducted, then a Non-Consenting Party may participate in the Deepening of the well with no payment for costs incurred prior to re-entering the well for Deepening.

The foregoing shall not imply a right of any Consenting Party to propose any Deepening for a Non-Consent Well prior to the drilling of a well to its Initial Objective without the consent of the other Consenting Parties as provided in Article VI.F. (Drilling and Development; Termination of Operations).

5. Sidetracking: Any Party having the right to participate in a proposed Sidetracking operation that does not own an interest in the affected wellbore at the time of the notice shall, on electing to participate, tender to the wellbore owners its proportionate share (equal to its interest in the Sidetracking operation) of the value of that portion of the existing wellbore to be utilized as follows:

(a) If the proposal is for sidetracking an existing dry hole, reimbursement shall be on the basis of the actual costs incurred in the initial drilling of the well down to the depth at which the Sidetracking operation is initiated.

(b) If the proposal is for sidetracking a well which has previously produced, reimbursement shall be

on the basis of the Party’s proportionate share of drilling and equipping costs incurred in the initial drilling of the well down to the depth at which the Sidetracking operation is conducted, calculated in the manner described in Article VI.B.4 (b) above. The Party’s proportionate share of the cost of the well’s salvable materials and equipment down to the depth at which the Sidetracking operation is initiated shall be determined in accordance with the provisions of Exhibit “C.”

6. Order of Preference of Operations. Except as otherwise specifically provided in this

Agreement, if any Party desires to propose the conduct of an operation that conflicts with a proposal that has been made a Party under this Article VI. (Drilling and Development), the Party shall have fifteen (15) days from delivery of the initial proposal, in the case of a proposal to drill a well or to perform an operation on a well where no drilling rig is on location, or twenty-four (24) hours, from delivery of the initial proposal, if a drilling rig is on location for the well on which the operation is to be conducted, to deliver to all Parties entitled to participate in the proposed operation the Party’s alternative proposal, with the alternate proposal to contain the same information required to be included in the initial proposal. Each Party receiving the proposals shall elect, by delivering a notice to Operator within five (5) days after expiration of the proposal period, or within twenty-four (24) hours if a drilling rig is on location for the well that is the subject of the proposals, to participate in one of the competing proposals. Any Party not electing within the time required shall be deemed not to have voted. The proposal receiving the vote of Parties owning the largest aggregate percentage interest of the Parties voting shall have priority over all other competing proposals; in the case of a tie vote, the initial proposal shall prevail. Operator shall deliver notice of the result to all Parties entitled to participate in the operation within five (5) days after expiration of the election period (or within twenty-four (24) hours, if a drilling rig is on location). Each Party shall then have two (2) days (or twenty-four (24) hours if a rig is on location) from receipt of that notice to elect, by delivering a notice to Operator, to participate in the operation or to relinquish interest

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in the affected well pursuant to the provisions of Article VI.B.2. (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties). The failure by a Party to deliver a notice within that time period shall be deemed an election not to participate in the prevailing proposal.

7. Conformity to Spacing Pattern. Notwithstanding the provisions of this Article VI.B.2., it is agreed that no wells shall be proposed to be Drilled to or Completed in or produced from a Zone from which a well located elsewhere on the Contract Area is producing, unless the proposed well conforms to the then-existing well spacing pattern for the Zone.

8. Paying Wells. No Party shall conduct any Reworking, Deepening, Plugging Back, Completion, Recompletion, or Sidetracking operation under this Agreement with respect to any well then capable of producing in paying quantities except with the consent of all Parties that have not relinquished their interests in the well at the time of the operation. C. Completion of Wells; Reworking and Plugging Back:

1. Completion: Without the consent of all Parties, no well shall be Drilled, Deepened, or Sidetracked, except any well Drilled, Deepened, or Sidetracked pursuant to the provisions of Article VI.B.2. (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties) of this Agreement. Consent to the Drilling, Deepening, or Sidetracking shall include:

☒ Option No. 1: All necessary expenditures for the Drilling, Deepening, or Sidetracking, Testing, Completing, and Equipping of the well, including necessary tankage and/or surface facilities.

☐ Option No. 2: All necessary expenditures for the Drilling, Deepening, or Sidetracking and Testing of the well. When the well has reached its authorized depth, and all logs, cores, and other tests have been completed, and the results of them furnished to the Parties, Operator shall give immediate notice to the Non- Operators having the right to participate in a Completion attempt whether or not Operator recommends attempting to Complete the well, together with Operator’s AFE for Completion costs if not previously provided. The Parties receiving the notice shall have forty-eight (48) hours in which to elect by delivery of notice to Operator to participate in a recommended Completion attempt or to make an alternate Completion proposal with an accompanying AFE. Operator shall deliver any completion proposal, or any Completion proposal conflicting with Operator’s proposal, to the other Parties entitled to participate in the Completion in accordance with the procedures specified in Article VI.B.6. (Drilling and Development; Subsequent Operations; Order of Preference of Operations). Election to participate in a Completion attempt shall include consent to all necessary expenditures for the Completing and Equipping of a well, including necessary tankage and/or surface facilities, but excluding any stimulation operation not contained on the Completion AFE. Failure of any Party receiving the notice to reply within the period above fixed shall constitute an election by that Party not to participate in the cost of the Completion attempt; provided, that Article VI.B.6. (Drilling and Development; Subsequent Operations; Order of Preference of Operations) shall control in the case of conflicting Completion proposals. If one or more, but less than all of the Parties, elect to attempt a Completion, the provisions of Article VI.B.2. (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties) (the phrase “Reworking, Sidetracking, Deepening, Recompleting or Plugging Back” as contained in Article VI.B.2. shall be deemed to include “Completing”) shall apply to the operations later conducted by less than all Parties; provided, however, that Article VI.B.2 shall apply separately to each separate Completion or Recompletion attempt undertaken, and an election to become a Non- Consenting Party as to one Completion or Recompletion attempt shall not prevent a Party from becoming a Consenting Party in subsequent Completion or

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Recompletion attempts regardless of whether the Consenting Parties as to earlier Completions or Recompletions have recouped their costs pursuant to Article VI.B.2.; provided further, that any recoupment of costs by a Consenting Party shall be made solely from the production attributable to the Zone in which the Completion attempt is made. Election by a previous Non-Consenting Party to participate in a subsequent Completion or Recompletion attempt shall require a Party to pay its proportionate share of the cost of salvable materials and equipment installed in the well pursuant to the previous Completion or Recompletion attempt, insofar and only insofar as the materials and equipment benefit the Zone in which the Party participates in a Completion attempt. 2. Rework, Recomplete or Plug Back: No well shall be Reworked, Recompleted, or Plugged Back,

except a well Reworked, Recompleted, or Plugged Back pursuant to the provisions of Article VI.B.2. (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties) of this Agreement. Consent to the Reworking, Recompleting, or Plugging Back of a well shall include all necessary expenditures in conducting the operations and Completing and Equipping the well, including necessary tankage and/or surface facilities. D. Other Operations: Operator shall not undertake any single project reasonably estimated to require an expenditure in excess of Twenty-five Thousand Dollars ($25,000.00) except in connection with the Drilling, Sidetracking, Reworking, Deepening, Completing, Recompleting, or Plugging Back of a well that has been previously authorized by the terms of this Agreement; provided, however, that, in case of explosion, fire, flood, or other sudden emergency, whether of the same or different nature, Operator may take all steps and incur all expenses as, in its opinion, are required, to deal with the emergency to safeguard life and property, but Operator, as promptly as possible, shall report the emergency to the other Parties. If Operator prepares an AFE for its own use, Operator shall furnish any Non- Operator requesting it an information copy of that AFE for any single project costing in excess of Twenty-Five Thousand Dollars ($25,000.00). Any Party who has not relinquished its interest in a well shall have the right to propose that Operator perform repair work or undertake the installation of artificial lift equipment or ancillary production facilities such as salt water disposal wells or to conduct additional work with respect to a well drilled or other similar project (but not including the installation of gathering lines or other transportation or marketing facilities, the installation of which shall be governed by a separate agreement between the Parties) reasonably estimated to require an expenditure in excess of the amount set forth above in this Article VI.D. except in connection with an operation required to be proposed under Articles VI.B.1. (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties) or VI.C.1. Option No. 2, [Drilling and Development; Subsequent Operations; Completion of Wells; Reworking and Plugging Back] which shall be governed exclusively by those Articles). Operator shall deliver the proposal to all Parties entitled to participate in them. If within thirty (30) days after that time Operator secures the written consent of any Party or Parties owning at least 50% of the interests of the Parties entitled toparticipate in the operation, each Party having the right to participate in the project shall be bound by the terms of the proposal and shall be obligated to pay its proportionate share of the costs of the proposed project as if it had consented to the project pursuant to the terms of the proposal. E. Abandonment of Wells:

1. Abandonment of Dry Holes: Except for any well drilled or Deepened pursuant to Article VI.B.2. (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties), any well which has been Drilled or Deepened under the terms of this Agreement and is proposed to be completed as a dry hole shall not be plugged and abandoned without the consent of all Parties. Should Operator, after diligent effort, be unable to contact any Party, or should any Party fail to reply within

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forty-eight (48) hours after delivery of a notice of the proposal to plug and abandon the well, the Party shall be deemed to have consented to the proposed abandonment. All wells shall be plugged and abandoned in accordance with applicable regulations at the cost, risk, and expense of the Parties who participated in the cost of Drilling or Deepening the well. Any Party who objects to plugging and abandoning a well by notice delivered to Operator within forty-eight (48) hours after delivery of notice of the proposed plugging shall take over the well as of the end of the forty-eight (48) hour notice period and conduct further operations in search of Oil and/or Gas subject to the provisions of Article VI.B. (Drilling and Development; Subsequent Operations). The failure of a Party to provide proof reasonably satisfactory to Operator of the Party’s financial capability to conduct the operations or to take over the well within the period or to then conduct operations on the well or plug and abandon the well, shall entitle Operator to retain or take possession of the well and plug and abandon the well. The Party taking over the well shall indemnify Operator (if Operator is an abandoning Party) and the other abandoning Parties against all liability for further operations conducted on the well except for the costs of plugging and abandoning the well and restoring the surface, for which the abandoning Parties shall remain proportionately liable.

2. Abandonment of Wells That Have Produced: Except for any well in which a Non-Consent operation has been conducted for which the Consenting Parties have not been fully reimbursed, as provided for in this Agreement, any well which has been completed as a producer shall not be plugged and abandoned without the consent of all Parties. If all Parties consent to the abandonment, the well shall be plugged and abandoned in accordance with applicable regulations and at the cost, risk, and expense of all the Parties. Failure of a Party to reply within sixty (60) days of delivery of a notice of proposed abandonment shall be deemed an election to consent to the proposal. If, within sixty (60) days after delivery of the notice of the proposed abandonment of any well, all Parties do not agree to the abandonment of the well, those wishing to continue its operation from the Zone then open to production shall be obligated to take over the well as of the expiration of the applicable notice period and shall indemnify Operator (if Operator is an abandoning Party) and the other abandoning Parties against liability for any further operations on the well conducted by those Parties. Failure of the Party or Parties to provide proof reasonably satisfactory to Operator of their financial capability to conduct those operations, or to take over the well within the required period, or to later conduct operations on the well, shall entitle Operator to retain or take possession of the well and plug and abandon the well. Parties taking over a well, as provided above, shall tender to each of the abandoning Parties their proportionate share of the value of the well’s salvable material and equipment, determined in accordance with the provisions of Exhibit “C,” less the estimated cost of salvaging and the estimated cost of plugging and abandoning and restoring the surface; provided, however, in the event the estimated plugging and abandoning and surface restoration costs and the estimated cost of salvaging are higher than the value of the well’s salvable material and equipment, each of the abandoning Parties shall tender to the non-abandoning Parties, their proportionate shares of the estimated excess cost. Each abandoning Party shall assign to the non-abandoning Parties, without warranty, express or implied, as to title or as to quantity, or fitness for use of the equipment and material, all of its interest in the wellbore of the well and related equipment, together with its interest in the Leasehold insofar and only insofar as the Leasehold covers the right to obtain production from that wellbore in the Zone then open to production. If the interest of the abandoning Party is or includes an Oil and Gas Interest, that Party shall execute and deliver to the non-abandoning Party or Parties an oil and gas lease, limited to the wellbore and the Zone then open to production, for a term of one (1) year and so long thereafter as Oil and/or Gas is produced from the Zone covered, the lease to be on the form attached as Exhibit “B.” The assignments or leases shall encompass the Drilling Unit on which the well is located. The payments by, and the assignments or leases to, the assignees shall be in a ratio based on the relationship of their respective percentage of participation in the Contract Area to the aggregate of the percentages of participation in the Contract Area of all assignees. There shall be no readjustment of interests in the

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remaining portions of the Contract Area. Afterwards, abandoning Parties shall have no further responsibility, liability, or interest in the operation of or production from the well in the Zone then open other than the royalties retained in any lease made under the terms of this Article. On request, Operator shall continue to operate the assigned well for the account of the non- abandoning Parties at the rates and charges provided for in this Agreement, plus any additional cost and charges which may arise as the result of the separate ownership of the assigned well. On the proposed abandonment of the producing Zone assigned or leased, the assignors or lessors shall then have the option to repurchase their prior interests in the well (using the same valuation formula) and participate in further operations, subject to the provisions of this Agreement.

3. Abandonment of Non-Consent Operations: The provisions of Article VI.E.1. or VI.E.2. above (Drilling and Development; Abandonment of Wells; Abandonment of Dry Holes; and Abandonment of Wells That Have Produced) shall be applicable as between Consenting Parties in the event of the proposed abandonment of any well excepted from those Articles; provided, however, no well shall be permanently plugged and abandoned unless and until all Parties having the right to conduct further operations have been notified of the proposed abandonment and afforded the opportunity to elect to take over the well in accordance with the provisions of this Article VI.E. (Drilling and Development; Abandonment of Wells); and provided further, that Non-Consenting Parties who own an interest in a portion of the well shall pay their proportionate shares of abandonment and surface restoration costs for the well as provided in Article VI.B.2.(b) (Drilling and Development; Subsequent Operations; Operations by Less Than All Parties). F. Termination of Operations: On the commencement of an operation for the Drilling, Reworking, Sidetracking, Plugging Back, Deepening, Testing, Completion, or Plugging of a well, including but not limited to the Initial Well, the operation shall not be terminated without consent of Parties bearing at least fifty percent (50%) of the costs of the operation; provided, however, in the event granite or other practically impenetrable substance or condition in the hole is encountered which renders further operations impractical, Operator may discontinue operations and give notice of that condition in the manner provided in Article VI.B.1. (Drilling and Development; Subsequent Operations; Proposed Operations), and the provisions of Article VI.B. (Drilling and Development; Subsequent Operations) or VI.E. (Drilling and Development; Abandonment of Wells) shall then apply to operation, as appropriate. G. Taking Production in Kind: (Select One of the Two Options)

☐ Option No. 1: Gas Balancing Agreement Attached: Each Party shall take in kind or separately dispose of its proportionate share of all Oil and Gas produced from the Contract Area, exclusive of production which may be used in development and producing operations and in preparing and treating Oil and Gas for marketing purposes and exclusive of production unavoidably lost. Any extra expenditure incurred in the taking in kind or separate disposition by any Party of its proportionate share of the production shall be borne by that Party. Any Party taking its share of production in kind shall be required to pay for only its proportionate share of the part of Operator’s surface facilities which it uses. Each Party shall execute division orders and contracts as may be necessary for the sale of its interest in production from the Contract Area, and, except as provided in Article VII.B. (Expenditures and Liabilities of Parties; Liens and Security Interests), shall be entitled to receive

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payment directly from the purchaser for its share of all production. If any Party fails to make the arrangements necessary to take in kind or separately dispose of its proportionate share of the Oil produced from the Contract Area, Operator shall have the right, but not the obligation, subject to the revocation at will by the Party owning it but not the obligation, to purchase the Oil or sell it to others at any time and from time to time, for the account of the non-taking Party. Any purchase or sale by Operator may be terminated by Operator on at least ten (10) days written notice to the owner of the production and shall be always subject to the right of the owner of the production on at least ten (10) days written notice to Operator to exercise at any time its right to take in kind, or separately dispose of, its share of all Oil not previously delivered to a purchaser. Any purchase or sale by Operator of any other Party’s share of Oil shall be only for reasonable periods of time as are consistent with the minimum needs of the industry under the particular circumstances, but in no event for a period in excess of one (1) year. Any sale by Operator shall be in a manner commercially reasonable under the circumstances but Operator shall have no duty to share any existing market or to obtain a price equal to that received under any existing market. The sale or delivery by Operator of a non-taking Party’s share of Oil under the terms of any existing contract of Operator shall not give the non-taking Party any interest in or make the non-taking Party a Party to the contract. No purchase shall be made by Operator without first giving the non-taking Party at least ten (10) days written notice of the intended purchase and the price to be paid or the pricing basis to be used. All Parties shall give timely written notice to Operator of their Gas marketing arrangements for the following month, excluding price, and shall notify Operator immediately in the event of a change in those arrangements. Operator shall maintain records of all marketing arrangements, and of volumes actually sold or transported, which records shall be made available to Non-Operators on reasonable request. In the event one or more Parties’ separate disposition of its share of the Gas causes split-stream deliveries to separate pipelines and/or deliveries which on a day-to-day basis for any reason are not exactly equal to a Party’s respective proportionate share of total Gas sales to be allocated to it, the balancing or accounting between the Parties shall be in accordance with any Gas balancing agreement between the Parties, whether the agreement is attached as Exhibit “E,” or is a separate agreement. Operator shall give notice to all Parties of the first sales of Gas from any well under this Agreement.

☒ Option No. 2: No Gas Balancing Agreement: Each Party shall take in kind or separately dispose of its proportionate share of all Oil and Gas produced from the Contract Area, exclusive of production which may be used in development and producing operations and in preparing and treating Oil and Gas for marketing purposes and production unavoidably lost. Any extra expenditure incurred in the taking in kind or separate disposition by any Party of its proportionate share of the production shall be borne by that Party. Any Party taking its share of production in kind shall be required to pay for only its proportionate share of the part of Operator’s surface facilities which it uses. Each Party shall execute division orders and contracts as may be necessary for the sale of its interest in production from the Contract Area, and, except as provided in Article VII.B. (Expenditures and Liabilities of Parties; Liens and Security Interests), shall be entitled to receive payment directly from the purchaser for its share of all production. If any Party fails to make the arrangements necessary to take in kind or separately dispose of its

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proportionate share of the Oil and/or Gas produced from the Contract Area, Operator shall have the right, subject to the revocation at will by the Party owning it, but not the obligation, to purchase the Oil and/or Gas or sell it to others at any time and from time to time, for the account of the non-taking Party. Any purchase or sale by Operator may be terminated by Operator on at least ten (10) days written notice to the owner of the production and shall always be subject to the right of the owner of the production, on at least ten (10) days written notice to Operator, to exercise its right to take in kind, or separately dispose of, its share of all Oil and/or Gas not previously delivered to a purchaser; provided, however, that the effective date of any revocation may be deferred, at Operator’s election, for a period not to exceed ninety (90) days if Operator has committed the production to a purchase contract having a term extending beyond a ten (10) day period. Any purchase or sale by Operator of any other Party’s share of Oil and/or Gas shall only be for reasonable periods of time as are consistent with the minimum needs of the industry under the particular circumstances, but in no event for a period in excess of one (1) year. Any sale by Operator shall be in a manner commercially reasonable under the circumstances, but Operator shall have no duty to share any existing market or transportation arrangement or to obtain a price or transportation fee equal to that received under any existing market or transportation arrangement. The sale or delivery by Operator of a non-taking Party’s share of production under the terms of any existing contract of Operator shall not give the non-taking Party any interest in or make the non-taking Party a Party to a contract. No purchase of Oil and Gas and no sale of Gas shall be made by Operator without first giving the non-taking Party ten (10) days written notice of the intended purchase or sale, and the price to be paid or the pricing basis to be used. Operator shall give notice to all Parties of the first sale of Gas from any well under this Agreement. All Parties shall give timely written notice to Operator of their Gas marketing arrangements for the following month, excluding price, and shall notify Operator immediately in the event of a change in the arrangements. Operator shall maintain records of all marketing arrangements, and of volumes actually sold or transported, which records shall be made available to Non-Operators on reasonable request.

ARTICLE VII.

EXPENDITURES AND LIABILITY OF PARTIES A. Liability of Parties: The liability of the Parties to this Agreement shall be several, not joint or collective. Each Party shall be responsible only for its own obligations, and shall be liable only for its proportionate share of the costs of developing and operating the Contract Area. Accordingly, the liens granted among the Parties in Article VII.B. (Expenditures and Liabilities of Parties; Liens and Security Interests) are given to secure only the debts of each severally, and no Party shall have any liability to third Parties to satisfy the default of any other Party in the payment of any expense or obligation under the terms of this Agreement. It is not the intention of the Parties to create, nor shall this Agreement be construed as creating, a mining or other partnership, joint venture, agency relationship or association, or to render the Parties liable as partners, co-ventures, or principals. EXCEPT AS IT RELATES TO MARKETING AND THE HANDLING OF MONIES AS SPECIFIED IN ARTICLE V.A. (OPERATOR; DESIGNATION AND RESPONSIBILITIES OF OPERATOR), THE PARTIES SHALL NOT BE CONSIDERED FIDUCIARIES OR TO HAVE ESTABLISHED A CONFIDENTIAL RELATIONSHIP, BUT RATHER SHALL BE FREE TO ACT ON AN ARM’S LENGTH BASIS IN ACCORDANCE WITH THEIR OWN RESPECTIVE INTERESTS. B. Liens and Security Interests:

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Each Party grants to the other Parties a lien on any and all interest it now owns or later acquires in Oil and Gas Leases and Oil and Gas Interests in the Contract Area, and a security interest and/or purchase money security interest in any and all interest it now owns or later acquires in the personal property and fixtures on or used or obtained for use in connection with any interest, to secure performance of all of its obligations under this Agreement, including payment of expense, interest and fees, the proper disbursement of all monies paid under the terms of this Agreement, the assignment or relinquishment of interest in Oil and Gas Leases as required by this Agreement, and the proper performance of operations under the terms of this Agreement. The lien and security interest granted by each Party shall include the Party’s leasehold interests, working interests, operating rights, and royalty and overriding royalty interests in the Contract Area now owned or later acquired and in the lands pooled or unitized with the Contract Area or otherwise becoming subject to this Agreement, the Oil and Gas when extracted, and equipment situated on or used or obtained for use in connection with it (including, without limitation, all wells, tools, and tubular goods), and accounts (including, without limitation, accounts arising from gas imbalances or from the sale of Oil and/or Gas at the wellhead), contract rights, inventory, and general intangibles relating to or arising from it, and all proceeds and products of the foregoing. To perfect the lien and security agreement granted, each Party shall execute and acknowledge the Memorandum of Agreement, recording supplement, and/or any financing statement prepared and submitted by any Party in conjunction with this Agreement or at any time following execution of this Agreement, and Operator is authorized to file this Agreement or the executed Memorandum of Agreement, or recording supplement as a lien or mortgage in the applicable real estate records and as a financing statement with the proper officer under the Uniform Commercial Code in the state in which the Contract Area is situated and all other states as Operator shall deem appropriate to perfect the security interest granted. Any Party may file this Agreement, the executed Memorandum of Agreement, recording supplement, or any other documents it deems necessary as a lien or mortgage in the applicable real estate records and/or a financing statement with the proper officer under the Uniform Commercial Code. Each Party represents and warrants to the other Parties that the lien and security interest granted by the Party to the other Parties shall be a first and prior lien, and each Party agrees to maintain the priority of the lien and security interest against all persons acquiring an interest in Oil and Gas Leases and Interests covered by this Agreement by, through, or under the Party. All Parties acquiring an interest in Oil and Gas Leases and Oil and Gas Interests covered by this Agreement, whether by assignment, merger, mortgage, operation of law, or otherwise, shall be deemed to have taken subject to the lien and security interest granted by this Article VII.B as to all obligations attributable to the interest whether or not the obligations arise before or after the interest is acquired. To the extent Parties have a security interest under the Uniform Commercial Code of the state in which the Contract Area is situated, they shall be entitled to exercise the rights and remedies of a secured party under the Code. Bringing of a suit and obtaining a judgment by a Party for the secured indebtedness shall not be deemed an election of remedies or otherwise affect the lien rights or security interest as security for the payment of any amounts due. In addition, on default by any Party in the payment of its share of expenses, interests or fees, or on the improper use of funds by the Operator, the other Parties shall have the right, without prejudice to other rights or remedies, to collect from the purchaser the proceeds from the sale of the defaulting Party’s share of Oil and Gas until the amount owed by the Party, plus interest as provided in Exhibit “C,” has been received, and shall have the right to offset the amount owed against the proceeds from the sale of the defaulting Party’s share of Oil and Gas. All purchasers of production may rely on a notification of default from the non-defaulting Party or Parties stating the amount due as a result of the default, and all Parties waive any and all recourse available against purchasers for releasing production proceeds as provided in this paragraph.

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If any Party fails to pay its share of cost within fifteen (15) days after rendition of a statement for costs by Operator, the non-defaulting Parties, including Operator, shall, on request by Operator, pay the unpaid amount in the proportion that the interest of each Party bears to the interest of all Parties. The amount paid by each Party paying its share of the unpaid amount shall be secured by the liens and security rights described in this Article VII.B and each paying Party may independently pursue any remedy available under this Agreement or otherwise. If any Party does not perform all of its obligations under this Agreement, and the failure to perform subjects the Party to foreclosure or execution proceedings pursuant to the provisions of this Agreement, to the extent allowed by governing law, the defaulting Party waives any available right of redemption from and after the date of judgment, any required valuation or appraisement of the mortgaged or secured property prior to sale, any available right to stay execution or to require a marshalling of assets and any required bond in the event a receiver is appointed. In addition, to the extent permitted by applicable law, each Party grants to the other Parties a power of sale as to any property that is subject to the lien and security rights granted by this Agreement, this power to be exercised in the manner provided by applicable law or otherwise in a commercially reasonable manner and on reasonable notice. Each Party agrees that the other Parties shall be entitled to utilize the provisions of all Oil and Gas lien laws or other lien laws of any state in which the Contract Area is situated to enforce the obligations of each Party subject to this Agreement. Without limiting the generality of the foregoing, to the extent permitted by applicable law, Non- Operators agree that Operator may invoke or utilize the mechanic’s or materialmen’s lien laws of the state in which the Contract Area is situated in order to secure the payment to Operator of any sum due for services performed or materials supplied by Operator. C. Advances: Operator, at its election, shall have the right from time to time to demand and receive, in advance, from one or more of the other Parties payments of their respective shares of the estimated amount of the expense to be incurred in operations during the next succeeding month, which right may be exercised only by submitting to each Party an itemized statement of the estimated expense, together with an invoice for the Party’s share of the estimated amount of expenses. Each statement and invoice for the advance payment of estimated expense shall be submitted on or before the 20th day of the next preceding month. Each Party shall pay to Operator its proportionate share of the estimate within fifteen (15) days after the estimate and invoice is received. If any Party fails to pay its share of the estimate within that time, the amount due shall bear interest as provided in Exhibit “C” until paid. Proper adjustment shall be made monthly between advances and actual expense to the end that each Party shall bear and pay its proportionate share of actual expenses incurred, and no more. D. Defaults and Remedies: If any Party fails to discharge any financial obligation under this Agreement, including without limitation the failure to make any advance payment as provided for in Article VII.C. above, or any other provision of this Agreement, within the period required for payment, then in addition to the remedies provided in Article VII.B. (Expenditures and Liabilities of Parties; Liens and Security Interests) or elsewhere in this Agreement, the remedies specified below shall be applicable. For purposes of this Article VII.D., all notices and elections shall be delivered only by Operator, except that Operator shall deliver any notice and election requested by a non-defaulting Non- Operator, and when Operator is the Party in default, the applicable notices and elections can be delivered by any Non-Operator. Election of any one or more of the following remedies shall not preclude the subsequent use of any other remedy specified below or otherwise available to a non-defaulting Party.

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1. Suspension of Rights: Any Party may deliver to the Party in default a Notice of Default, which

shall specify the default, specify the action to be taken to cure the default, and specify that failure to take the action will result in the exercise of one or more of the remedies provided in this Article. If the default is not cured within thirty (30) days of the delivery of the Notice of Default, all of the rights of the defaulting Party granted by this Agreement may, on notice, be suspended until the default is cured, without prejudice to the right of the non- defaulting Party or Parties to continue to enforce the obligations of the defaulting Party previously accrued or later accruing under this Agreement. If Operator is the Party in default, the Non-Operators shall have in addition this right, by vote of Non-Operators owning a majority in interest in the Contract Area, after excluding the voting interest of Operator, to appoint a new Operator effective immediately. The rights of a defaulting Party that may be suspended at the election of the non-defaulting Parties shall include, without limitation, the right to receive information as to any operation conducted under this Agreement during the period of the default, the right to elect to participate in an operation proposed under Article VI.B. (Drilling and Development; Subsequent Operations) of this Agreement, the right to participate in an operation being conducted under this Agreement even if the Party has previously elected to participate in the operation, and the right to receive proceeds of production from any well subject to this Agreement.

2. Suit for Damages: Non-defaulting Parties, or Operator for the benefit of non-defaulting Parties,

may sue (at joint account expense) to collect the amounts in default, plus interest accruing on those amounts recovered, from the date of default until the date of collection, at the rate specified in Exhibit “C.” Nothing shall prevent any Party from suing any defaulting Party to collect consequential damages accruing to the Party as a result of the default.

3. Deemed Non-Consent: The non-defaulting Party may deliver a written Notice of Non-Consent

Election to the defaulting Party at any time after the expiration of the thirty (30) day cure period following delivery of the Notice of Default, in which event if the billing is for the drilling of a new well or the Plugging Back, Sidetracking, Reworking, or Deepening of a well which is to be or has been plugged as a dry hole, or for the Completion or Recompletion of any well, the defaulting Party will be conclusively deemed to have elected not to participate in the operation and to be a Non-Consenting Party under Article VI.B. or VI.C. (Drilling and Development; Subsequent Operations; and Completion of Wells; Reworking and Plugging Back), as the case may be, to the extent of the costs unpaid by the Party, notwithstanding any election to participate previously made. If an election is made to proceed under this provision, then the non-defaulting Parties may not elect to sue for the unpaid amount pursuant to Article VII.D.2. (Expenditures and Liabilities of Parties; Defaults and Remedies; Suit for Damages).

Until the delivery of the Notice of Non-Consent Election to the defaulting Party, the Party shall

have the right to cure its default by paying its unpaid share of costs plus interest at the rate set forth in Exhibit “C”; provided, however, the payment shall not prejudice the rights of the non-defaulting Parties to pursue remedies for damages incurred by the non-defaulting Parties as a result of the default. Any interest relinquished pursuant to this Article VII.D.3. shall be offered to the non-defaulting Parties in proportion to their interests, and the non-defaulting Parties electing to participate in the ownership of the interest shall be required to contribute their shares of the defaulted amount on their election to participate in the interest.

4. Advance Payment: If a default is not cured within thirty (30) days of the delivery of a Notice of

Default, Operator, or Non-Operators if Operator is the defaulting Party, may then require advance payment from the defaulting Party of the defaulting Party’s anticipated share of any item of expense for which Operator, or Non- Operators, as the case may be, would be entitled to reimbursement under any provision of this Agreement, whether or not the expense was the subject of the previous default.

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The right includes, but is not limited to, the right to require advance payment for the estimated costs of drilling a well or Completion of a well for which an election to participate in drilling or Completion has been made. If the defaulting Party fails to pay the required advance payment, the non-defaulting Parties may pursue any of the remedies provided for in this Article VII.D. or any other default remedy provided elsewhere in this Agreement. Any excess of funds advanced remaining when the operation is completed and all costs have been paid shall be promptly returned to the advancing Party.

5. Costs and Attorneys’ Fees: If any Party is required to bring legal proceedings to enforce any

financial obligation of a Party to this Agreement, the prevailing Party in the action shall be entitled to recover all court costs, costs of collection, and reasonable attorney’s fees, which shall also be secured by the lien provided for in this Agreement. E. Rentals, Shut-in Well Payments and Minimum Royalties: Rentals, shut-in well payments, and minimum royalties which may be required under the terms of any Lease shall be paid by the Party or Parties who subjected the Lease to this Agreement at its or their expense. In the event two or more Parties own and have contributed interests in the same Lease to this Agreement, the Parties may designate one of the Parties to make payments for and on behalf of all the Parties. Any Party may request, and shall be entitled to receive proper evidence of all these payments. In the event of a failure to make a proper payment of any rental, shut-in well payment, or minimum royalty through mistake or oversight where the payment is required to continue the Lease in force, any loss which results from the non-payment shall be borne in accordance with the provisions of Article IV.B.2. (Titles; Loss or Failure of Title; Loss by Non-Payment or Erroneous Payment of Amount Due). Operator shall notify Non-Operators of the anticipated completion of a shut-in well, or the shutting in or return to production of a producing well, at least five (5) days prior to taking the action, or at the earliest opportunity permitted by circumstances, but assumes no liability for the failure to do so. In the event of a failure by Operator to so notify Non-Operators, the loss of any Lease contributed by Non-Operators for failure to make timely payments of any shut-in well payment shall be borne jointly by the Parties under the provisions of Article IV.B.3. (Titles; Loss or Failure of Title; Other Losses). F. Taxes: Beginning with the first calendar year after the effective date of this Agreement, Operator shall render for ad valorem taxation all property subject to this Agreement which by law should be rendered for taxes, and it shall pay all taxes assessed before they become delinquent. Prior to the rendition date, each Non-Operator shall furnish Operator information as to burdens (to include, but not be limited to, royalties, overriding royalties, and production payments) on Leases and Oil and Gas Interests contributed by Non-Operator. If the assessed valuation of any Lease is reduced by reason of its being subject to outstanding excess royalties, overriding royalties, or production payments, the resulting reduction in ad valorem taxes shall inure to the benefit of the owner or owners of that Lease, and Operator shall adjust the charge to the owner or owners to reflect the benefit of the reduction. If the ad valorem taxes are based in whole or in part on separate valuations of each Party’s working interest, then charges to the joint account shall be made and paid by the Parties in accordance with the tax value generated by each Party’s working interest. Operator shall bill the other Parties for their proportionate shares of all tax payments in the manner provided in Exhibit “C.” If Operator considers any tax assessment improper, Operator may, at its discretion, protest within the time and manner prescribed by law, and prosecute the protest to a final determination, unless all Parties agree to abandon the protest prior to final determination. During the pendency of an

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administrative or judicial proceeding, Operator may elect to pay, under protest, all taxes and any interest and penalty. When any protested assessment has been finally determined, Operator shall pay the tax for the joint account, together with any interest and penalty accrued, and the total cost shall then be assessed against the Parties, and be paid by them, as provided in Exhibit “C.” Each Party shall pay or cause to be paid all production, severance, excise, gathering, and other taxes imposed on or with respect to the production or handling of a Party’s share of Oil and Gas Produced under the terms of this Agreement.

ARTICLE VIII. ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

A. Surrender of Leases: The Leases covered by this Agreement, insofar as they embrace acreage in the Contract Area, shall not be surrendered in whole or in part unless all Parties consent to it. However, should any Party desire to surrender its interest in any Lease or in any portion of a Lease, the Party shall give written notice of the proposed surrender to all other Parties, and the Parties to whom the notice is delivered shall have thirty (30) days after delivery of the notice within which to notify the Party proposing the surrender whether they elect to consent to the surrender. The failure of a Party to whom a notice is delivered to reply within the 30-day period shall be deemed to constitute a consent to the surrender of the Lease(s) described in the notice. If all Parties do not agree or consent to the surrender, the Party desiring to surrender shall assign, without warranty of title express or implied, all of its interest in the Lease, or portion of the Lease, and any well, material, and equipment which may be located on it and any rights in production after the effective date of the assignment to the Parties not consenting to the surrender. If the interest of the assigning Party is or includes an Oil and Gas Interest, the assigning Party shall execute and deliver to the Party or Parties not consenting to the surrender an oil and gas lease covering the Oil and Gas Interest for a term of one (1) year and so long thereafter as Oil and/or Gas is produced from the land covered by that lease, which lease is to be on the form attached as Exhibit “B.” On the assignment or lease, the assigning Party shall be relieved from all obligations accruing after (but not before) the effective date of the assignment or lease, with respect to the interest assigned or leased and the operation of any well, and the assigning Party shall have no further interest in the assigned or leased premises and its equipment and production other than the royalties retained in any lease made under the terms of this Article. The Party that is the assignee or lessee shall pay to the Party that is the assignor or lessor the reasonable salvage value of the latter’s interest in any well’s salvable materials and equipment attributable to the assigned or leased acreage. The value of all salvable materials and equipment shall be determined in accordance with the provisions of Exhibit “C,” less the estimated cost of salvaging and the estimated cost of plugging and abandoning and restoring the surface. If the value is less than those costs, then the Party that is the assignor or lessor shall pay to the Party that is the assignee or lessee the amount of the deficit. If the assignment or lease is in favor of more than one Party, the interest shall be shared by those Parties in the proportions that the interest of each bears to the total interest of all the Parties. If the interest of the Parties to whom the assignment is to be made varies according to depth, then the interest assigned shall similarly reflect those variances. Any assignment, lease, or surrender made under this provision shall not reduce or change the assignor’s, lessor’s, or surrendering Party’s interest as it was immediately before the assignment, lease, or surrender in the balance of the Contract Area; and, the acreage assigned, leased, or surrendered, and subsequent operations on the assigned, leased, or surrendered Lease shall no longer be subject to the terms and provisions of this Agreement but shall be deemed subject to an Operating Agreement in the form of this Agreement.

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B. Renewal or Extension of Leases: If any Party secures a renewal or replacement of an Oil and Gas Lease or Interest subject to this Agreement, then all other Parties shall be promptly notified of the acquisition or, in the case of a replacement Lease taken before expiration of an existing Lease, promptly on expiration of the existing Lease. The Parties notified shall have the right for a period of thirty (30) days following delivery of the notice in which to elect to participate in the ownership of the renewal or replacement Lease, insofar as the Lease affects lands within the Contract Area, by paying to the Party who acquired it their proportionate shares of the acquisition cost allocated to that part of the Lease within the Contract Area, which shall be in proportion to the interests held at that time by the Parties in the Contract Area. Each Party who participates in the purchase of a renewal or replacement Lease shall be given an assignment of its proportionate interest in it by the acquiring Party. If some, but less than all, of the Parties elect to participate in the purchase of a renewal or replacement Lease, it shall be owned by the Parties, who elect to participate, in a ratio based on the relationship of their respective percentage of participation in the Contract Area to the aggregate of the percentages of participation in the Contract Area of all Parties participating in the purchase of the renewal or replacement Lease. The acquisition of a renewal or replacement Lease by all of the Parties shall not cause a readjustment of the interests of the Parties stated in Exhibit “A,” but any renewal or replacement Lease in which less than all Parties elect to participate shall not be subject to this Agreement but shall be deemed subject to a separate Operating Agreement in the form of this Agreement. If the interests of the Parties in the Contract Area vary according to depth, then their right to participate proportionately in any renewal or replacement Leases and their right to receive an assignment of interest shall also reflect those depth variances. The provisions of this Article shall apply to renewal or replacement Leases whether they are for the entire interest covered by the expiring Lease or cover only a portion of its area or an interest in the area. Any renewal or replacement Lease taken before the expiration of its predecessor Lease, or taken or contracted for or becoming effective within six (6) months after the expiration of the existing Lease, shall be subject to this provision so long as this Agreement is in effect at the time of the acquisition or at the time the renewal or replacement Lease becomes effective; but any Lease taken or contracted for more than six (6) months after the expiration of an existing Lease shall not be deemed a renewal or replacement Lease and shall not be subject to the provisions of this Agreement. The provisions in this Article shall also be applicable to extensions of Oil and Gas Leases. C. Acreage or Cash Contributions: While this Agreement is in force, if any Party contracts for a contribution of cash towards the drilling of a well or any other operation on the Contract Area, the contribution shall be paid to the Party who conducted the drilling or other operation and shall be applied by it against the cost of the drilling or other operation. If the contribution is in the form of acreage, the Party to whom the contribution is made shall promptly tender an assignment of the acreage, without warranty of title, to the Drilling Parties in the proportions the Drilling Parties shared the cost of drilling the well. The acreage shall become a separate Contract Area and, to the extent possible, be governed by provisions identical to this Agreement. Each Party shall promptly notify all other Parties of any acreage or cash contributions it may obtain in support of any well or any other operation on the Contract Area. These provisions shall also be applicable to optional rights to earn acreage outside the Contract Area which are in support of well drilled inside the Contract Area.

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If any Party contracts for any consideration relating to disposition of the Party’s share of produced substances, the consideration shall not be deemed a contribution as contemplated in this Article VIII.C. D. Assignment; Maintenance of Uniform Interest: In the event any Party to this Agreement creates a necessity for separate measurement facilities by virtue of any encumbrance or conveyance, that Party and its assignees shall, alone, bear the costs of acquisition, operation, maintenance, and repairs of the facility. Every sale, encumbrance, transfer or other disposition made by any Party shall be made expressly subject to this Agreement and shall be made without prejudice to the right of the other Parties, and any transferee of an ownership interest in any Oil and Gas Lease or Interest shall be deemed a Party to this Agreement as to the interest conveyed, from and after the effective date of the transfer of ownership; provided, however, that the other Parties shall not be required to recognize any sale, encumbrance, transfer, or other disposition for any purpose until thirty (30) days after they have received a copy of the instrument of transfer or other satisfactory evidence in writing from the transferor or transferee. No assignment or other disposition of interest by a Party shall relieve the assigning Party of obligations previously incurred by that Party with respect to the interest transferred, including without limitation the obligation of that Party to pay all costs attributable to an operation conducted under the terms of this Agreement in which the Party has agreed to participate prior to making an assignment, and the lien and security interest granted by Article VII.B. (Expenditures and Liability of Parties; Liens and Security Interests) shall continue to burden the transferred interest to secure payment of any of those obligations. If, at any time the interest of any Party is divided among and owned by four or more co-owners, Operator, at its discretion, may require co-owners to appoint a single trustee or agent with full authority to receive notices, approve expenditures, receive billings for, and approve and pay the Parties’ share of the joint expenses, and to deal generally with, and with power to bind, the co-owners of the Party’s interest within the scope of the operations covered or subject to this Agreement; however, all the co-owners shall have the right to enter into and execute all contracts or agreements for the disposition of their respective shares of the Oil and Gas produced from the Contract Area and they shall have the right to receive, separately, payment of the sale proceeds from Oil and Gas produced. If a trustee or agent is not appointed within thirty (30) days after written notice from Operator to the Parties, Operator shall have the right to appoint a trustee or agent from the group of Parties and the appointment shall be binding on all of those Parties. E. Waiver of Rights to Partition: If permitted by the laws of the state or states in which the property covered by this Agreement is located, each Party owning an undivided interest in the Contract Area waives any and all rights it may have to partition and have set aside to it in severalty its undivided interest. F. Preferential Right to Purchase: Check one: ☐ Applicable.

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☒ Not Applicable. If the Preferential Right to Purchase provision is marked “Applicable,” should any Party desire to sell all or any part of its interests under this Agreement, or its rights and interests in the Contract Area, it shall promptly give written notice to the other Parties, with full information concerning its proposed disposition, which shall include the name and address of the prospective transferee (who must be ready, willing and able to purchase), the purchase price, a legal description sufficient to identify the property, and all other terms of the offer. The other Parties shall then have an optional prior right, for a period of ten (10) days after the notice is delivered, to purchase for the stated consideration, on the same terms and conditions, the interest which the other Party proposes to sell; and, if this optional right is exercised, the purchasing Parties shall share the purchased interest in the proportions that the interest of each bears to the total interest of all purchasing Parties. However, there shall be no preferential right to purchase in those cases where any Party wishes to mortgage its interests, to transfer title to its interests to its mortgagee in lieu of or pursuant to foreclosure of a mortgage of its interests, sell the properties included in a “large transaction,” as defined below, to dispose of its interests by merger, reorganization, consolidation, or by sale of all or substantially all of its Oil and Gas assets to any Party, or by transfer of its interests to a subsidiary or parent company or to a subsidiary of a parent company, or to any company in which the Party owns a majority of the stock. For the purposes of this provision, a “large transaction” shall mean a sale of an interest in more than well(s), wherever located, and if a Party’s interest in the Contract Area is included in a “large transaction,” the preferential purchase right provided for in this provision shall not be applicable. G. Area of Mutual Interest: Check one: ☐ Applicable. ☒ Not Applicable. If the Area of Mutual Interest provision is marked “Applicable,” except for acquisitions made pursuant to Article IV.B.1. (Titles; Loss or Failure of Title; Failure of Title) and Article VIII.B., C. and F., any Party who acquires an interest in oil and gas within the Contract Area or within one-half (l/2) mile of the outer perimeter of the Contract Area shall give notice in writing to all of the other Parties which notice shall contain the description of the interest acquired, the consideration paid for it and all other pertinent information necessary to describe the acquisition. All Parties receiving the notice shall have fifteen (15) days from receipt to advise the acquiring Party in writing of its election to participate in the acquisition. Any Party failing to provide timely notice shall then waive all rights have no right to participate in the acquisition. All Parties electing to participate in the acquisition shall furnish the acquiring Party notice of their election to participate to the extent of their proportionate part (the same interest which they have in the Contract Area) of the cost of the acquisition, failing in which their affirmative responses shall not be deemed effective and shall not entitle the Party to participate in the acquisition. If any Party elects not to participate in the acquisition, the acquiring Party shall notify all other Parties of the refusal and all other Parties shall have the same right to respond within the following fifteen (15) days as required in the case of the first notice. The acquiring Parties agree to execute all assignments and conveyances as are necessary to reflect the acquisition as a matter of record as soon as reasonably possible after determination of the interests of the Parties pursuant to the foregoing provisions. There shall be no obligation of any Party with respect to acquisitions outside the area covered by this provision. The provisions of this paragraph shall terminate at the earlier of: (1) termination of this Operating Agreement; or, (2) twenty (20) years from the date of this Agreement. Parties participating in

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an acquisition shall be subject to the provisions of this Operating Agreement which shall be referenced in the documents of title reflecting the acquisition.

ARTICLE IX. INTERNAL REVENUE CODE ELECTION

If, for federal income tax purposes, this Agreement and the operations under it are regarded as a partnership, and if the Parties have not otherwise agreed to form a tax partnership pursuant to Exhibit “G” or other agreement between them, each affected Party elects to be excluded from the application of all of the provisions of Subchapter “K,” Chapter 1, Subtitle “A,” of the Internal Revenue Code of 1986, as amended (the “Code”), as permitted and authorized by Section 761 of the Code and the regulations promulgated under it. Operator is authorized and directed to execute on behalf of each affected Party the evidence of this election as may be required by the Secretary of the Treasury of the United States or the Federal Internal Revenue Service, including specifically, but not by way of limitation, all of the returns, statements, and the data required by Treasury Regulations §1.761. Should there be any requirement that each affected Party give further evidence of this election, each Party shall execute documents and furnish any other evidence as may be required by the Federal Internal Revenue Service or as may be necessary to evidence this election. No Party shall give any notices or take any other action inconsistent with this election. If any present or future income tax laws of the state or states in which the Contract Area is located or any future income tax laws of the United States 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 of the Code is permitted, each affected Party shall make this election as may be permitted or required by those laws. In making this election, each Party states that the income derived by the Party from operations under this Agreement can be adequately determined without the computation of partnership taxable income.

ARTICLE X. CLAIMS AND LAWSUITS

Operator may settle any single uninsured third Party damage claim or suit arising from operations under this Agreement if the expenditure does not exceed Twenty-five Thousand Dollars ($25,000.00), and if the payment is in complete settlement of the claim or suit. If the amount required for settlement exceeds this amount, the Parties shall assume and take over the further handling of the claim or suit, unless that authority is delegated to Operator. All costs and expenses of handling, settling, or otherwise discharging a claim or suit shall be at the joint expense of the Parties participating in the operation from which the claim or suit arises. If a claim is made against any Party or if any Party is sued on account of any matter arising from operations under this Agreement over which the individual has no control because of the rights given Operator by this Agreement, the Party shall immediately notify all other Parties, and the claim or suite shall be treated as any other claim or suit involving operations under this Agreement.

ARTICLE XI. FORCE MAJEURE

If any Party is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement, other than the obligation to indemnify or make money payments or furnish security, that Party shall give all other Parties prompt written notice of the force majeure with reasonably full particulars concerning it; the obligations of the Party giving the notice, so far as it is affected by the force majeure, shall be suspended during, but no longer than, the continuance of the force majeure. The term “force majeure,” shall mean an act of God, strike, lockout, or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightning, fire, storm, flood, or other

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act of nature, explosion, governmental action, governmental delay, restraint, or inaction, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of the Party claiming suspension. The affected Party shall use all reasonable diligence to remove the force majeure situation as quickly as practicable. The requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts, or other labor difficulty by the Party involved, contrary to its wishes; how all difficulties shall be handled shall be entirely within the discretion of the Party concerned.

ARTICLE XII.

NOTICES All notices authorized or required between the Parties by any of the provisions of this Agreement, unless otherwise specifically provided, shall be in writing and delivered in person or by United States mail, courier service, facsimile or any other form of electronic delivery, postage or charges prepaid, and addressed to the Parties at the addresses listed on Exhibit “A.” All telephone, electronic delivery, or oral notices permitted by this Agreement shall be confirmed immediately by written notice. The originating notice given under any provision of this Agreement shall be deemed delivered only when received by the Party to whom the notice is directed, and the time for the Party to deliver any notice in response to the notice received shall run from the date the originating notice is received. “Receipt” for purposes of this Agreement with respect to a written notice delivered shall be actual delivery of the notice to the address of the Party to be notified specified in accordance with this Agreement, or to the telecopy or facsimile of the Party. The second or any responsive notice shall be deemed delivered when deposited in the United States mail or at the office of the courier, or on transmittal by facsimile, or when personally delivered to the Party to be notified, provided, that when a response is required within 24 or 48 hours, the response shall be given orally or by telephone, telecopy or other facsimile within that period. Each Party shall have the right to change its address at any time, and from time to time, by giving written notice of the change to all other Parties. If a Party is not available to receive notice orally or by telephone when a Party attempts to deliver a notice required to be delivered within 24 or 48 hours, the notice may be delivered in writing by any other method and shall be deemed delivered in the same manner provided above for any responsive notice.

ARTICLE XIII. TERM OF AGREEMENT

This Agreement shall remain in full force and effect as to the Oil and Gas Leases and/or Oil and Gas Interests subject to it for the period of time selected below; provided, however, no Party shall ever be construed as having any right, title, or interest in or to any Lease or Oil and Gas Interest contributed by any other Party beyond the term of this Agreement. ☒ Option No. 1: So long as any of the Oil and Gas Leases subject to this Agreement remain or are

continued in force as to any part of the Contract Area, whether by production, extension, renewal, or otherwise.

☐ Option No. 2: In the event the well described in Article VI.A. (Drilling and Development; Initial

Well), or any subsequent well drilled under any provision of this Agreement, results in the completion of a well as a well capable of production of Oil and/or Gas in paying quantities, this Agreement shall continue in force so long as any well is capable of production, and for an additional period of days after that time; provided, however, if, prior to the expiration of

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additional period, one or more of the Parties are engaged in Drilling, Reworking, Deepening, Sidetracking, Plugging Back, testing or attempting to Complete or Recomplete a well or wells, this Agreement shall continue in force until the operations have been completed and if production results, this Agreement shall continue in force as provided in this Agreement. In the event the well described in Article VI.A. (Drilling and Development; Initial Well), or any subsequent well drilled, results in a dry hole, and no other well is capable of producing Oil and/or Gas from the Contract Area, this Agreement shall terminate unless Drilling, Deepening, Sidetracking, Completing, Recompleting, Plugging Back, or Reworking operations are commenced within 180 days from the date of abandonment of the well. “Abandonment” for these purposes shall mean either: (i) a decision by all Parties not to conduct any further operations on the well; or, (ii) the lapse of 180 days from the conduct of any operations on the well, whichever first occurs.

The termination of this Agreement shall not relieve any Party from any expense, liability, or other obligation or any remedy which has accrued or attached prior to the date of termination. On termination of and the satisfaction of all obligations under this Agreement, in the event a Memorandum of this Operating Agreement has been filed of record, Operator is authorized to file of record in all necessary recording offices a notice of termination, and each Party agrees to execute a notice of termination as to Operator’s interest, on request of Operator, if Operator has satisfied all its financial obligations.

ARTICLE XIV. COMPLIANCE WITH LAWS AND REGULATIONS

A. Laws, Regulations, and Orders: This Agreement shall be subject to the applicable laws of the state in which the Contract Area is located, to the valid rules, regulations, and orders of any duly constituted regulatory body of that state; and, to all other applicable federal, state, and local laws, ordinances, rules, regulations, and orders. B. Governing Law: This Agreement and all matters pertaining to it, including but not limited to matters of performance, non-performance, breach, remedies, procedures, rights, duties, and interpretation or construction, shall be governed and determined by the law of the state in which the Contract Area is located. If the Contract Area is in two or more states, the law of the state of Texas shall govern. C. Regulatory Agencies: Nothing in this Agreement shall grant, or be construed to grant, Operator the right or authority to waive or release any rights, privileges, or obligations which Non-Operators may have under federal or state laws or under rules, regulations, or orders promulgated under those laws in reference to oil, gas, and mineral operations, including the location, operation, or production of wells, on tracts offsetting or adjacent to the Contract Area. With respect to the operations under this Agreement, Non-Operators agree to release Operator from any and all losses, damages, injuries, claims, and causes of action arising out of, incident to, or resulting directly or indirectly from Operator’s interpretation or application of rules, rulings, regulations, or orders of the Department of Energy or Federal Energy Regulatory Commission or predecessor or successor agencies to the extent the interpretation or application was made in good faith and does not

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constitute gross negligence. Each Non-Operator further agrees to reimburse Operator for the Non-Operator’s share of production or any refund, fine, levy, or other governmental sanction that Operator may be required to pay as a result of an incorrect interpretation or application, together with interest and penalties owing by Operator as a result of any incorrect interpretation or application.

ARTICLE XV. MISCELLANEOUS

A. Execution: This Agreement shall be binding on each Non-Operator when this Agreement or a counterpart of it has been executed by the Non-Operator and Operator even though this Agreement is not then or later executed by all of the Parties to which it is tendered or which are listed on Exhibit “A” as owning an interest in the Contract Area or which in fact, own an interest in the Contract Area. Operator may, however, by written notice to all Non-Operators who have become bound by this Agreement, which notice is given at any time prior to the actual spud date of the Initial Well but in no event later than five (5) days prior to the date specified in Article VI.A. (Drilling and Development; Initial Well) for commencement of the Initial Well, terminate this Agreement if Operator in its sole discretion determines that there is insufficient participation to justify commencement of drilling operations. In the event of a termination by Operator, all further obligations of the Parties to this Agreement shall cease as of the termination. In the event any Non-Operator has advanced or prepaid any share of drilling or other costs, all sums advanced shall be returned to the Non-Operator without interest. In the event Operator proceeds with drilling operations for the Initial Well without the execution of this Agreement by all persons listed on Exhibit “A” as having a current working interest in the well, Operator shall indemnify Non-Operators with respect to all costs incurred for the Initial Well which would have been charged to that person under this Agreement if the person had executed the same and Operator shall receive all revenues which would have been received by that person under this Agreement if the person had executed this Agreement. B. Successors and Assigns: This Agreement shall be binding on and shall inure to the benefit of the Parties to it and their respective heirs, devisees, legal representatives, successors, and assigns, and the terms of this Agreement shall be deemed to run with the Leases or Interests included within the Contract Area. However, notwithstanding the provisions of the immediate preceding sentence, in the event of a sale by the Operator of all of its interest in the Contract Area, the provisions of Article V.B. (Operator; Resignation or Removal of Operator and Selection of Successor) shall apply to the end that there shall be an election of a Successor Operator pursuant to the provisions of Article V.B. C. Counterparts: No assignment or transfer shall be effective unless and until the assignee or transferee agrees in writing to take the assigned or transferred interest subject to this Agreement and to assume its proportionate share of all obligations and restrictions created by this Agreement with respect to the interest assigned or transferred from the effective date of the transfer, and copies of the written agreement have been delivered to the Parties. Notwithstanding any provision to the contrary and unless waived in writing by each of the non-transferring Parties, the assigning or transferring Party shall remain jointly and severally liable with the assignee or transferee to the parties to this Agreement for the performance and satisfaction of all obligations attributable to the interest assigned or transferred, whether the obligation arises before or after the effective date of the assignment or transfer. The provisions of this paragraph shall not apply to any transfer by operation of law or the grant of a mortgage

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or security interest in any oil and gas interest subject to this Agreement, but shall apply to any transfer of legal title to the interest pursuant to or in lieu of any mortgage or security interest. This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes. D. Severability: For the purposes of assuming or rejecting this Agreement as an executory contract pursuant to federal bankruptcy laws, this Agreement shall not be severable, but rather must be assumed or rejected in its entirety, and the failure of any Party to this Agreement to comply with all of its financial obligations provided it in shall be a material default.

ARTICLE XVI. OTHER PROVISIONS

A. Advance Billing For Certain Operations: In addition to the rights granted to Operator pursuant to Article VII.C., Operator, at its election, shall have the right from time to time to demand and receive in advance from the Non-Operators payment of their respective proportionate shares of the estimated cost to be incurred by Operator in connection with any drilling, reworking, deepening, sidetracking, plugging back, or completion operation proposed hereunder or any other operation undertaken pursuant hereto (“cash call”). Each Non-Operator shall pay to Operator its proportionate share of such estimated costs within fifteen (15) days of receipt of an invoice therefor (or 48 hours if a drilling rig is on location). Proper adjustment between such advances and the actual expenses incurred shall be made upon completion of the relevant operation to the end that each party shall bear and pay its proportionate share of the actual expenses incurred, and no more. Notwithstanding anything to the contrary contained in this Agreement, the failure of a party either to advance its share of such costs, or to make other satisfactory credit arrangements within the time provided shall, at the option of Operator, constitute a withdrawal by the party of its prior election to participate in the proposed operation and an election by such party to become a non-consenting party with respect to such operation in accordance with Article VI.B.2. Such withdrawal by Operator shall be subject to Operator granting the party who failed to timely make necessary financial arrangements with Operator a second notice period for twenty-four (24) hours in which to do so. If Operator makes an election under this Article XVI.D., the other Non-Operators shall immediately be afforded the elections provided in the second paragraph of Article VI.B. The provisions of this Article XVI.D. shall be in addition to and not in lieu of other provisions of the Operating Agreement, and particularly Articles VII.B. and C. and the exhibits and attachments hereto. It is further understood that Operator will be under no liability to the Non-Operators for Operator’s failure to carry out any proposed operation if such operation is not fully subscribed. The rights and obligations as between Operator and other parties, Non-Operators, hereto who participate in the proposed operation shall not be affected for reason of Operator’s failure to require any other party to make advance payment, or make other credit arrangements. B. Consent to Abandonment: If any party fails to reply within 30 days of receipt of said written notice of the proposed abandonment of any well pursuant to Article VI.E.2. hereof such party shall be deemed to have consented to the proposed abandonment.

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C. Reworking or Plugback Operations: For all wells in which operations are to be conducted specifically for the purpose of reworking or plugback and which are not Obligatory Wells or Operations, a Party who does not participate in such an operation, shall be subject to the Non-Consent provisions of Article VI.B. If the proposed re-working or plugback operation is an Obligatory Operation, then the provisions of Article XVI.D shall apply. D. Assignment of Interests:

1. If any party is required under this Agreement to assign or relinquish to any other party or parties all or a portion of its working interest or production attributable thereto, the interest or production so assigned or relinquished shall be free and clear, not only of “subsequently created interests” as defined in Article III.C., but also of all mortgages, liens or other similar burdens placed thereon (other than those listed on Exhibit “A”) by the assigning party or resulting from its ownership and operation of such lease or interest on and after the date of this Agreement, but otherwise without warranty of title, express or implied.

2. Each party hereto covenants and agrees for itself, its successors and assigns, that any

sale, assignment, sublease, mortgage, pledge or other instrument affecting the leases and lands subject to this instrument (whether of an operating or non-operating interest or a mortgage, pledge or other security interest) will be made and accepted subject to this Agreement and the party acquiring the interest or security shall expressly agree to be bound by all of the terms and provisions of this Agreement. Should any party, and any transaction of such party, not comply with the provisions of this paragraph, such party shall indemnify, defend and hold the other parties hereto harmless from and against any and all claims or causes of action which arise out of the failure of such party to comply with these provisions.

3. Notwithstanding the provisions of this Agreement and of the COPAS accounting

procedure attached as Exhibit “C”, the parties to this Agreement specifically agree that in no event during the term of this Agreement shall Operator be required to make more than one billing for the entire interest credited to each party on Exhibit “A”. It is further agreed that if any party to this Agreement (hereafter referred to as “Selling Party”) disposes of part of the interest credited to Selling Party on Exhibit “A”, the Selling Party will be solely responsible for billing its assignee or assignees, and shall remain primarily liable to the other parties for the interest or interests assigned and shall make prompt payment to it until a copy of the recorded assignment is sent from the Selling Party to the Operator. It is further understood and agreed that if Selling Party disposes of all its interest as set out on Exhibit “A”, whether to one or several assignees, Operator shall continue to issue statements and billings to the Selling Party for the interest conveyed until such time as Selling Party has designated and qualified an assignee to receive the billing for the entire interest. In order to qualify one assignee to receive the billing for the entire interest credited to Selling Party on Exhibit “A”, Selling Party shall furnish to Operator the following:

(a) written notice of the conveyance and photo static or certified copies of the assignments by which the transfer was made;

(b) the name of the assignee to be billed and a written statement signed by the assignee to be billed in

which such assignee consents to receive statements and billings for the entire interest credited to Selling Party or the partial interest owned.

37

The parties agree that the sale of any interest in the leases covered by this Agreement shall be made specifically subject to the provisions of this section. E. Disbursements of Royalties: If a purchaser of any oil, gas or other hydrocarbons produced from the Contract Area declines to make disbursement of all royalties, overriding royalties and other payments out of, or with respect to production which are payable on the Contract Area, Operator will, if any Non-Operator so desires, make such disbursements on behalf of said Non- Operator at his direction, provided, Non-Operator shall execute such documents as may be necessary in the opinion of Operator to enable Operator to receive all payment for oil, gas or other hydrocarbons directly from said purchaser. In that event, Operator will use its best efforts to make disbursements correctly but will not be liable for incorrect disbursements. F. Financing Statement: The parties hereto agree to execute simultaneously herewith a Financing Statement and Memorandum of Operating Agreement in the same form as Exhibit “H” attached hereto. The parties shall have a continuing obligation to execute additional Memoranda of Operating Agreement accurately to reflect the current properties covered by the Operating Agreement and the current working interests of the parties. The Statement and Memorandum of Operating Agreement and any amendment thereof may be filed of record in the appropriate jurisdictions by any party. G. Designated Operator The parties acknowledge and agree that StableRock is hereby designated as Operator and does not own any Oil and Gas Interest. As such, any language contained in this Agreement that provides or requires that the Operator own an Oil and Gas Interest is null and void. Notwithstanding any other provision in this Agreement, provisions contained in this Agreement that furnish the Operator with control over operations and other decision-making authority shall be modified to vest control over operations and decision-making authority exclusively to Redhawk.

(Remainder of Page Intentionally Left Blank – Signature Page Follows)

This Agreement shall be effective as of October 6, 2015.

PARTIES:

STABLEROCK: STABLEROCK ENERGY L.L.C., a Texas Limited Liability Company By: ___________________________ Name: Charles Rougeau Title:President REDHAWK: REDHAWK RESOURCES – FUND III, LP, a Delaware limited partnership By: Redhawk Resources Management III, LLC, its managing partner By: ___________________________ Name: Jack W. Nichols Title: Executive Chairman OTHER NON-OPERATORS (if any) _______________________________, a ________________________ By: ___________________________ Name: _________________________ Title: __________________________ _______________________________, a ________________________ By: ___________________________ Name: _________________________ Title: __________________________

EXHIBIT “A” Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP and American Resources, Inc., as Non-Operators Interests of the Parties: Working Interest % Attention: Facsimile: Email: % Attention: Facsimile: Email: CONTRACT ARE

EXHIBIT “B”

Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

THERE IS NO EXHIBIT “B” TO THIS OPERATING AGREEMENT

Exhibit C- 1

EXHIBIT “C”

Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

ACCOUNTING PROCEDURE

JOINT OPERATIONS

I. GENERAL PROVISIONS

1. Definitions "Joint Property" shall mean the real and personal property subject to the agreement to which this Accounting Procedure is attached. "Joint Operations" shall mean all operations necessary or proper for the development, operation, protection and maintenance of the Joint Property. "Joint Account" shall mean the account showing the charges paid and credits received in the conduct of the Joint Operations and which are to be shared by the Parties. "Operator" shall mean the party designated to conduct the Joint Operations. "Non-Operators" shall mean the Parties to this agreement other than the Operator. "Parties" shall mean Operator and Non-Operators. "First Level Supervisors" shall mean those employees whose primary function in Joint Operations is the direct supervision of other employees and/or contract labor directly employed on the Joint Property in a field operating capacity. "Technical Employees" shall mean those employees having special and specific engineering, geological or other professional skills, and whose primary function in Joint Operations is the handling of specific operating conditions and problems for the benefit of the Joint Property. "Personal Expenses" shall mean travel and other reasonable reimbursable expenses of Operator's employees. "Material" shall mean personal property, equipment or supplies acquired or held for use on the Joint Property. "Controllable Material" shall mean Material which at the time is so classified in the Material Classification Manual as most recently recommended by the Council or Petroleum Accountants Societies.

2. Statement and Billings Operator shall bill Non-Operators on or before the last day of each month for their proportionate share of the Joint Account for the preceding month. Such bills will be accompanied by statements which identify the authority for expenditure, lease or facility, and all charges and credits summarized by appropriate classifications of investment and expense except that items of Controllable Material and unusual charges and credits shall be separately identified and fully described in detail.

3. Advances and Payments by Non-Operators A. Unless otherwise provided for in the agreement, the Operator may require the Non-Operators to

advance their share of estimated cash outlay for the succeeding month's operation within fifteen (15) days after receipt of the billing or by the first day of the month for which the advance is required, whichever is later. Operator shall adjust each monthly billing to reflect advances received

Exhibit C- 2

from the Non-Operators. B. Each Non-Operator shall pay its proportion of all bills within fifteen (15) days after receipt. If

payment is not made within such time, the unpaid balance shall bear interest monthly at the prime rate in effect at Interbank on the first day of the month in which delinquency occurs plus 1% or the maximum contract rate permitted by the applicable usury laws in the state in which the Joint Property is located, whichever is the lesser, plus attorney's fees, court costs, and other costs in connection with the collection of unpaid amounts.

4. Adjustments

Payment of any such bills 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 any 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. 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 Controllable Material as provided for in Section V.

5. Audits A. A Non-Operator, upon notice in writing to Operator and all other Non-Operators, shall have the

right to audit Operator's accounts and records relating to the Joint Account for any calendar year within the twenty-four (24) month period following the end of such calendar year; provided, however, the making of an audit shall not extend the time for the taking of written exception to and the adjustments of accounts as provided for in Paragraph 4 of this Section I. Where there are two or more Non-Operators, the Non-Operators shall make every reasonable effort to conduct a joint audit in a manner which will result in a minimum of inconvenience to the Operator. Operator shall bear no portion of the Non-Operators' audit cost incurred under this paragraph unless agreed to by the Operator. The audits shall not be conducted more than once each year without prior approval of Operator, except upon the resignation or removal of the Operator, and shall be made at the expense of those Non-Operators approving such audit.

B. The Operator shall reply in writing to an audit report within 180 days after receipt of such report.

6. Approval by Non-Operators Where an approval or other agreement of the Parties or Non-Operators is expressly required under other sections of this Accounting Procedure and if the agreement to which this Accounting Procedure is attached contains no contrary provisions in regard thereto, Operator shall notify all Non-Operators of the Operator's proposal, and the agreement or approval of a majority in interest of the Non-Operators shall be controlling on all Non-Operators.

II. DIRECT CHARGES

Operator shall charge the Joint Account with the following items:

1. Ecological and Environmental Costs incurred for the benefit of the Joint Property as a result of governmental or regulatory

Exhibit C- 3

requirements to satisfy environmental considerations applicable to the Joint Operations. Such costs may include surveys of an ecological or archaeological nature and pollution control procedures as required by applicable laws and regulations.

2. Rentals and Royalties Lease rentals and royalties paid by Operator for the Joint Operations.

3. Labor A. (1) Salaries and wages of Operator's field employees directly employed on the Joint Property in

the conduct of Joint Operations.

(2) Salaries of First level Supervisors in the field.

(3) Salaries and wages of Technical Employees directly employed on the Joint Property if such charges are excluded from the overhead rates.

(4) Salaries and wages of Technical Employees either temporarily or permanently assigned to and

directly employed in the operation or the Joint Property if such charges are excluded from the overhead rates.

B. Operator's cost of holiday, vacation, sickness and disability benefits and other customary

allowances paid to employees whose salaries and wages are chargeable to the Joint Account under Paragraph 3A of the Section II. Such costs under this Paragraph 3B may be charged on a "when and as paid basis" or by “percentage assessment” on the amount of salaries and wages chargeable to the Joint Account under Paragraph 3A of this Section II. If percentage assessment is used, the rate shall be based on the Operator’s cost experience.

C. Expenditures or contributions made pursuant to assessments imposed by governmental authority which are applicable to Operator's costs chargeable to the Joint Account under Paragraphs 3A and 3B of this Section II.

D. Personal Expenses of those employees whose salaries and wages are chargeable to the Joint Account under Paragraphs 3A and 3B of this Section II.

4. Employee Benefits Operator's current costs of established plans for employees' group life insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus, and other benefit plans of a like nature, applicable to Operator's labor cost chargeable to the Joint Account under Paragraph 3A and 3B of this Section II shall be Operator's actual cost not to exceed the percent most recently recommended by the Council of Petroleum Accountants Societies.

5. Material Material purchased or furnished by Operator for use on the Joint Property as provided under Section IV. Only such Material shall be purchased for or transferred to the Joint Property as may be required for immediate use and is reasonably practical and consistent with efficient and economical operations. The accumulation of surplus stocks shall be avoided.

Exhibit C- 4

6. Transportation Transportation of employees and Material necessary for the Joint Operations but subject to the following limitations: A. If Material is moved to the Joint Property from the Operator's warehouse or other properties, no

charge shall be made to the Joint Account for a distance greater than the distance from the nearest reliable supply store where like material is normally available or railway receiving point nearest the Joint Property unless agreed to by the Parties.

B. If surplus Material is moved to Operator's warehouse or other storage point, no charge shall be

made to the Joint Account for a distance greater than the distance to the nearest reliable supply store where like material is normally available, or railway receiving point nearest the Joint Property unless agreed to by the Parties. No charge shall be made to the Joint Account for moving Material to other properties belonging to Operator, unless agreed to by the Parties.

C. In the application of subparagraphs A and B above, the option to equalize or charge actual

trucking cost is available when the actual charge is $400 or less excluding accessorial charges. The $400 will be adjusted to the amount most recently recommended by the Council of Petroleum Accountants Societies.

7. Services

The cost of contract services, equipment and utilities provided by outside sources, except services excluded by Paragraph 10 of Section II and Paragraph i, ii, and iii, of Section III. The cost of professional consultant services and contract services of technical personnel directly engaged on the Joint Property if such charges are excluded from the overhead rates. The cost of professional consultant services or contract services of technical personnel not directly engaged on the Joint Property shall not be charged to the Joint Account unless previously agreed to by the Parties.

8. Equipment and Facilities Furnished By Operator

A. Operator shall charge the Joint Account for use of Operator owned equipment and facilities at rates commensurate with costs of ownership and operation. Such rates shall include costs of maintenance, repairs, other operating expense, insurance, taxes, depreciation, and interest on gross investment less accumulated depreciation not to exceed twelve percent (12%) per annum. Such rates shall not exceed average commercial rates currently prevailing in the immediate area of the Joint Property.

B. In lieu of charges in Paragraph 8A above, Operator may elect to use average commercial rates

prevailing in the immediate area of the Joint Property less 20% published by the Petroleum Motor Transport Association.

9. Damages and Losses to Joint Property

All costs or expenses necessary for the repair or replacement of Joint Property made necessary because of damages or losses incurred by fire, flood, storm, theft, accident, or other cause, except those resulting from Operator's gross negligence or willful misconduct. Operator shall furnish Non-Operator written notice of damages or losses incurred as soon as practicable after a report thereof has been received by Operator.

Exhibit C- 5

10. Legal Expense

Expense of handling, investigating and settling litigation or claims, discharging of liens, payment of judgments and amounts paid for settlement of claims incurred in or resulting from operations under the agreement or necessary to protect or recover the Joint Property.

11. Taxes

All taxes of every kind and nature assessed or levied upon or in connection with the Joint Property, the operation thereof, or the production therefrom, and which taxes have been paid by the Operator for the benefit of the Parties, If the ad valorem taxes are based in whole or in part upon separate valuations of each party's working interest, then notwithstanding anything to the contrary herein, charges to the Joint Account shall be made and paid by the Parties hereto in accordance with the tax value generated by each party's working interest.

12. Insurance

Net premiums paid for insurance required to be carried for the Joint Operations for the protection of the Parties. In the event Joint Operations are conducted in a state in which Operator may act as self-insurer for Worker's Compensation and/or Employers Liability under the respective state's laws, Operator may, at its election, include the risk under its self-insurance program and in that event, Operator shall include a charge at Operator's cost not to exceed manual rates.

13. Abandonment and Reclamation

Costs incurred for abandonment of the Joint Property, including costs required by governmental or other regulatory authority.

14. Communications

Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems, including radio and microwave facilities directly serving the Joint Property. In the event communication facilities/systems serving the Joint Property are Operator owned, charges to the Joint Account shall be made as provided in Paragraph 8 of this Section II.

15. Other Expenditures

Any other expenditure not covered or dealt with in the foregoing provisions of this Section II, or in Section III and which is of direct benefit to the Joint Property and is incurred by the Operator in the necessary and proper conduct of the Joint Operations.

III. OVERHEAD 1. Overhead – Drilling and Producing Operations

i. As compensation for administrative, supervision, office services and warehousing costs, Operator shall charge drilling and producing operations on either:

(X) Fixed Rate Basis, Paragraph 1A, or ( ) Percentage Basis, Paragraph 1B

Exhibit C- 6

Unless otherwise agreed to by the Parties, such charge shall be in lieu of costs and expenses of all offices and salaries or wages plus applicable burdens and expenses of all personnel, except those directly chargeable under Paragraph 3A, Section II. The cost and expense of services from outside sources in connection with matters of taxation, traffic, accounting or matters before or involving governmental agencies shall be considered as included in the overhead rates provided for in the above selected Paragraph of this Section III unless such cost and expense are agreed to by the Parties as a direct charge to the Joint Account.

ii. The salaries, wages and Personal Expenses of Technical Employees and/or the cost of

professional consultant services and contract services of technical personnel directly employed on the Joint Property:

( ) shall be covered by the overhead rates, or

( ) shall not be covered by the overhead rates.

iii. The salaries, wages and Personal Expenses of Technical Employees and/or costs of professional consultant services and contract services of technical personnel either temporarily or permanently assigned to and directly employed in the operation of the Joint Property:

( ) shall be covered by the overhead rates, or ( ) shall not be covered by the overhead rates.

A. Overhead - Fixed Rate Basis

(1) Operator shall charge the Joint Account at the following rates per well per month:

Drilling Well Rate: not to exceed $ 2,000.00 (Prorated for less than a full month)

Producing/Injection Well Rate: not to exceed $ 2,000.00

(2) Application of Overhead - Fixed Rate Basis shall be as follows:

(a) Drilling Well Rate

(1) Charges for drilling wells shall begin on the date the well is spudded and terminate

on the date the drilling rig, completion rig, or other units used in completion of the well is released, whichever is later, except that no charge shall be made during suspension of drilling or completion operations for fifteen (15) or more consecutive calendar days.

(2) Charges for wells undergoing any type of workover or recompletion for a period of

five (5) consecutive work days or more shall be made at the drilling well rate. Such charges shall be applied for the period from date workover operations, with rig or other units used in workover, commence through date of rig or other unit release, except that no charge shall be made during suspension of operations for fifteen (15) or more consecutive calendar days.

Exhibit C- 7

(b) Producing Well Rates

(1) An active well either produced or injected into for any portion of the month shall be considered as a one-well charge for the entire month.

(2) Each active completion in a multi-completed well in which production is not

commingled down hole shall be considered as a one-well charge providing each completion is considered a separate well by the governing regulatory authority.

(3) An inactive gas well shut in because of overproduction or failure of purchaser to take

the production shall be considered as a one-well charge providing the gas well is directly connected to a permanent sales outlet.

(4) A one-well charge shall be made for the month in which plugging and abandonment

operations are completed on any well. This one-well charge shall be made whether or not the well has produced except when drilling well rate applies.

(5) All other inactive wells (including but not limited to inactive wells covered by unit

allowable, lease allowable, transferred allowable, etc.) shall not qualify for an overhead charge.

(3) The well rates shall be adjusted as of the first day of April each year following the effective

date of the agreement to which this Accounting Procedure is attached. The adjustment shall be computed by multiplying the rate currently in use by the percentage increase or decrease in the average weekly earnings of Crude Petroleum and Gas Production Workers for the last calendar year compared to the calendar year preceding as shown by the index of average weekly earnings of Crude Petroleum and Gas Production Workers as published by the United States Department of Labor, Bureau of Labor Statistics, or the equivalent Canadian index as published by Statistics Canada, as applicable. The adjusted rates shall be the rates currently in use, plus or minus the computed adjustment.

B. Overhead – Percentage Basis

(1) Operator shall charge the Joint Account at the following rates.

(a) Development

NA Percent (NA%) of the cost of development of the Joint Property exclusive of costs provided under Paragraph 10 of Section II and all salvage credits.

(b) Operating

NA Percent (NA%) of the cost of operating the Joint Property exclusive of costs provided under Paragraphs 2 and 10 of Section II, all salvage credits, the value of injected substances purchased for secondary recovery and all taxes and assessments which are levied assessed and paid upon the mineral interest in and to the Joint Property.

(2) Application of Overhead - Percentage Basis shall be as follows:

For the purpose of determining charges on a percentage basis under Paragraph 1B of this Section III, development shall include all costs in connection with drilling, redrilling,

Exhibit C- 8

deepening or any remedial operations on any or all wells involving the use of drilling crew capable of drilling to the producing interval on the Joint Property; also, preliminary expenditures necessary in preparation for drilling and expenditures incurred in abandoning when the well is not completed as a producer, and original cost of construction or installation of fixed assets, the expansion of fixed assets and any other project clearly discernible as a fixed asset, except Major Construction as defined in Paragraph 2 of this Section III. All other costs shall be considered as operating.

2. Overhead – Major Construction

To compensate Operator for overhead costs incurred in the construction and installation of fixed assets, the expansion of fixed assets, and any other project clearly discernible as a fixed asset required for the development and operation of the Joint Property, Operator shall either negotiate a rate prior to the beginning of construction, or shall charge the Joint Account for overhead for any Major Construction project in excess of $ 25,000.00 at rates not to exceed the following:

A. 10 % of first $100,000 or total cost if less, plus

B. 10 % of costs in excess of $100,000 but less than $1,000,000, plus

C. 10 % of costs in excess of $1,000,000.

Total cost shall mean the gross cost of any one project. For the purpose of this paragraph, the component parts of a single project shall not be treated separately and the cost of drilling and workover wells and artificial lift equipment shall be excluded.

3. Catastrophe Overhead

To compensate Operator for overhead costs incurred in the event of expenditures resulting from a single occurrence due to oil spill, blowout, explosion, fire, storm, hurricane, or other catastrophes as agreed to by the Parties, which are necessary to restore the Joint Property to the equivalent condition that existed prior to the event causing the expenditures. Operator shall either negotiate a rate prior to charging the Joint Account or shall charge the Joint Account for overhead at rates not to exceed the following:

A. 10 % of total costs through $100,000; plus

B. 10 % of total costs in excess of $100,000 but less than $1,000,000; plus

C. 10 % of total costs in excess of $l,000,000.

Expenditures subject to the overheads above will not be reduced by insurance recoveries, and no other overhead provisions of this Section III shall apply.

4. Amendment of Rates

The overhead rates provided for in this Section III may be amended from time to time only by mutual agreement between the Parties hereto if, in practice, the rates are found to be insufficient or excessive.

Exhibit C- 9

IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS

Operator is responsible for Joint Account Material and shall make proper and timely charges and credits for all Material movements affecting the Joint Property. Operator shall provide all Material for use on the Joint Property; however, at Operator's option, such Material may be supplied by the Non-Operator. Operator shall make timely disposition of idle and/or surplus Material, such disposal being made either through sale to Operator or Non-Operator, division in kind, or sale to outsiders. Operator may purchase, but shall be under no obligation to purchase, interest of Non-Operators in surplus condition A or B Material. The disposal of surplus Controllable Material not purchased by the Operator shall be agreed to by the Parties. 1. Purchases

Material purchased shall be charged at the price paid by Operator after deduction of all discounts received. In case of Material found to be defective or returned to vendor for any other reasons, credit shall be passed to the Joint Account when adjustment has been received by the Operator.

2. Transfers and Dispositions

Material furnished to the Joint Property and Material transferred from the Joint Property or disposed of by the Operator, unless otherwise agreed to by the Parties, shall be priced on the following basis exclusive of cash discounts:

A. New Material (Condition A)

(1) Tubular Goods Other than Line Pipe

(a) Tubular goods, sized 2 3/8 inches OD and larger, except line pipe, shall be priced at

Eastern mill published carload base prices effective as of date of movement plus transportation cost using the 80,000 pound carload weight basis to the railway receiving point nearest the Joint Property for which published rail rates for tubular goods exist. If the 80,000 pound rail rate is not offered, the 70,000 pound or 90,000 pound rail rate may be used. Freight charges for tubing will be calculated from Lorain, Ohio and casing from Youngstown, Ohio.

(b) For grades which are special to one mill only, prices shall be computed at the mill base of

that mill plus transportation cost from that mill to the railway receiving point nearest the Joint Property as provided above in Paragraph 2.A.(l)(a). For transportation cost from points other than Eastern mills, the 30,000 pound Oil Field Haulers Association interstate truck rate shall be used.

(c) Special end finish tubular goods shall be priced at the lowest published out-of-stock

price, f.o.b. Houston, Texas, plus transportation cost, using Oil Field Haulers Association interstate 30,000 pound truck rate, to the railway receiving point nearest the Joint Property.

(d) Macaroni tubing (size less than 2 3/8 inch OD) shall be priced at the lowest published

out-of-stock prices f.o.b. the supplier plus transportation costs, using the Oil Field Haulers Association interstate truck rate per weight of tubing transferred, to the railway receiving point nearest the Joint Property.

Exhibit C- 10

(2) Line Pipe

(a) Line pipe movements (except size 24 inch OD and larger with walls 3/4 inch and over)

30,000 pounds or more shall be priced under provisions of tubular goods pricing in Paragraph A.(l)(a) as provided above. Freight charges shall be calculated from Lorain, Ohio.

(b) Line Pipe movements (except size 24 inch OD) and larger with walls 3/4 inch and over)

less than 30,000 pounds shall be priced at Eastern mill published carload base prices effective as of date of shipment, plus 20 percent, plus transportation costs based on freight rates as set forth under provisions of tubular goods pricing in Paragraph A.(l)(a) as provided above. Freight charges shall be calculated from Lorain, Ohio.

(c) Line pipe 24 inch OD and over and 3/4 inch wall and larger shall be priced f.o.b. the

point of manufacture at current new published prices plus transportation cost to the railway receiving point nearest the Joint Property.

(d) Line pipe, including fabricated line pipe, drive pipe and conduit not listed on published

price lists shall be priced at quoted prices plus freight to the railway receiving point nearest the Joint Property or at prices agreed to by the Parties.

(3) Other Material shall be priced at the current new price, in effect at date of movement, as

listed by a reliable supply store nearest the Joint Property, or point of manufacture, plus transportation costs, if applicable, to the railway receiving point nearest the Joint Property.

(4) Unused new Material, except tubular goods, moved from the Joint Property shall be

priced at the current new price, in effect on date of movement, as listed by a reliable supply store nearest the Joint Property, or point of manufacture, plus transportation costs, if applicable, to the railway receiving point nearest the Joint Property. Unused new tubulars will be priced as provided above in Paragraph 2.A.(1) and (2).

B. Good Used Material (Condition B)

Material in sound and serviceable condition and suitable for reuse without reconditioning:

(1) Material moved to the Joint Property

At seventy-five percent (75%) of current new price, as determined by Paragraph A.

(2) Material used on and moved from the Joint Property

(a) At seventy-five percent (75%) of current new price, as determined by Paragraph A, if Material was originally charged to the Joint Account as new Material or

(b) At sixty-five percent (65%) of current new price, as determined by Paragraph A, if Material

was originally charged to the Joint Account as used Material

(3) Material not used on and moved from the Joint Property

Exhibit C- 11

At seventy-five percent (75%) of current new price as determined by Paragraph A.

The cost of reconditioning, if any, shall be absorbed by the transferring property. C. Other Used Material

(1) Condition C Material which is not in sound and serviceable condition and not suitable for its original function until after reconditioning shall be priced at fifty percent (50%) of current new price as determined by Paragraph A. The cost of reconditioning shall be charged to the receiving property, provided Condition C value plus cost of reconditioning does not exceed Condition B value.

(2) Condition D

Material, excluding junk, no longer suitable for its original purpose, but usable for some other purpose shall be priced on a basis commensurate with its use. Operator may dispose of Condition D Material under procedures normally used by Operator without prior approval of Non-Operators.

(a) Casing, tubing, or drill pipe used as line pipe shall be priced as Grade A and B seamless line

pipe of comparable size and weight. Used casing, tubing or drill pipe utilized as line pipe shall be priced at used line pipe prices.

(b) Casing, tubing or drill pipe used as higher pressure service lines than standard line pipe, e.g.

power oil lines, shall be priced under normal pricing procedures for casing, tubing, or drill pipe. Upset tubular goods shall be priced on a non upset basis.

(3) Condition E

Junk shall be priced at prevailing prices. Operator may dispose of Condition E Material under procedures normally utilized by Operator without prior approval of Non-Operators.

D. Obsolete Material

Material which is serviceable and usable for its original function but condition and/or value of such Material is not equivalent to that which would justify a price as provided above may be specially priced as agreed to by the Parties. Such price should result in the Joint Account being charged with the value of the service rendered by such Material.

E. Pricing Conditions

(1) Loading or unloading costs may be charged to the Joint Account at the rate of twenty-five cents (25c) per hundred weight on all tubular goods movements, in lieu of actual loading or unloading costs sustained at the stocking point. The above rate shall be adjusted as of the first day of April each year following January 1, 1985 by the same percentage increase or decrease used to adjust overhead rates in Section III, Paragraph l-A.(3). Each year, the rate calculated shall be rounded to the nearest cent and shall be the rate in effect until the first day of April next year. Such rate shall be published each year by the Council of Petroleum Accountants Societies.

Exhibit C- 12

(2) Material involving erection costs shall be charged at applicable percentage of the current knocked-down price of new Material.

3. Premium Prices

Whenever Material is not readily obtainable at published or listed prices because of national emergencies, strikes or other unusual causes over which the Operator has no control, the Operator may charge the Joint Account for the required Material at the Operator's actual cost incurred in providing such Material, in making it suitable for use, and in moving it to the Joint Property; provided notice in writing is furnished to Non-Operators of the proposed charge prior to billing Non-Operators for such Material. Each Non-Operator shall have the right, by so electing and notifying Operator within ten days after receiving notice from Operator, to furnish in kind all or part of his share of such Material suitable for use and acceptable to Operator.

4. Warranty of Material Furnished By Operator

Operator does not warrant the Material furnished. In case of defective Material, credit shall not be passed to the Joint Account until adjustment has been received by Operator from the manufacturers or their agents.

V. INVENTORIES The Operator shall maintain detailed records of Controllable Material. 1. Periodic Inventories, Notice and Representation

At reasonable intervals, inventories shall be taken by Operator of the Joint Account Controllable Material. Written notice of intention to take inventory shall be given by Operator at least thirty (30) days before any inventory is to begin so that Non-Operators may be represented when any inventory is taken. Failure of Non-Operators to be represented at any inventory shall bind Non-Operators to accept the inventory taken by Operator.

2. Reconciliation and Adjustment of Inventories

Reconciliation of a physical inventory with the Joint Account shall be made, and a list of overages and shortages shall be furnished to the Non-Operators within six months following the taking of the inventory. Inventory adjustments shall be made by Operator with the Joint Account for overages and shortages, but Operator shall be held accountable only for shortages due to lack of reasonable diligence.

3. Special Inventories

Special inventories may be taken whenever there is any sale, change of interest, or CHANGE of Operator in the Joint Property. It shall be the duty of the party selling to notify all other Parties as quickly as possible after the transfer of interest takes place. In such cases, both the seller and the purchaser shall be governed by such inventory. In cases involving a change of Operator, all Parties shall be governed by such inventory.

Exhibit C- 13

4. Expense of Conducting Inventories

A. The expense of conducting periodic inventories shall not be charged to the Joint Account unless agreed to by the Parties.

B. The expense of conducting special inventories shall be charged to the Parties requesting such

inventories, except inventories required due to change of Operator shall be charged to the Joint Account.

Exhibit D- 1

EXHIBIT “D” Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

INSURANCE At all times while operations are conducted under the Joint Operating Agreement to which this Exhibit is attached, Operator shall comply with the workers compensation law of the state where operations are being conducted; provided, however, Operator may be a self-insurer for liability under the compensation laws in which event the only charge that shall be made to the joint account shall be as provided for in the Accounting Procedures. Operator shall also carry or provide insurance for the benefit of the joint account of the Parties employer’s, liability insurance covering each employee engaged in operations under this Agreement in at lease the amount of ONE MILLION DOLLARS ($1,000,000), and any other insurance as outlined in the provisions below which are selected by the parties: Check Applicable Provisions: ☒ Automobile bodily injury liability insurance in the amount of ONE MILLION DOLLARS

($1,000,000) each person, ONE MILLION DOLLARS ($1,000,000) each occurrence. ☐ Automobile property damage liability in the amount of $ per occurrence. ☒ General liability insurance in the amount of ONE MILLION DOLLARS ($1,000,000) per

occurrence including all operations, independent contractors, completed operations, and blanket contractual liability (including oral contracts).

☐ Broad form property damage liability insurance in the amount of $ per occurrence, including all

operations, independent contractors, completed operations, and blanket contractual liability (including oral contracts).

☒ Umbrella liability insurance in the amount of EIGHT MILLION DOLLARS ($8,000,000)

covering liability of the parties for loss or damage exceeding the insurance coverage specified above or otherwise not covered by insurance maintained by Operator or any third-party contractor.

☐ Control of well insurance in the amount of THREE MILLION DOLLARS ($3,000,000) for each

occurrence including expense for clean-up, containment, seepage and pollution; coverage for this insurance shall be subject to a deductible of FIVE HUNDRED THOUSAND DOLLARS ($500,000).

Operator shall require all contractors engaged in work on or for the Contract Area to comply with the workers compensation law of the state where the operations are being conducted and to maintain appropriate employer’s liability insurance and all other insurance as Operator may require, including at a minimum the insurance shown below subject to customary limits:

Exhibit D- 2

Coverage

Workers Compensation

Employer’s Liability

General Liability

Contractual Liability As required to cover all liability assumed. Automobile Public Liability

Contractor’s Equipment

Actual cash value, or per rental or lease contract, as appropriate.

In the event automobile liability insurance is specified above, or subsequently receives the approval of the Parties, no direct charge shall be made by Operator for premiums paid for that insurance for Operator’s automotive equipment. Each Party shall be responsible for maintaining its own insurance in excess of the amounts or coverage specifically selected above, and unless provided otherwise above, each Party shall be responsible for insuring its own interest in the Contract Area with respect to physical damage to property, theft, or loss of income. Each insurance policy obtained by Operator with respect to operations shall name the Non-Operators as additional insureds and shall contain a waiver of subrogation with respect to the Non-Operators. On request, Operator shall cause a certificate of the insurance obtained for the joint account to be delivered to Non-Operators. The certificate shall describe the coverage obtained, any exclusions from the coverage, and the parties insured, and shall provide at least thirty (30) days prior notice to Non-Operators in the event of cancellation.

EXHIBIT “E” Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

THERE IS NO EXHIBIT “E” TO THIS OPERATING AGREEMENT

Exhibit F - 1

EXHIBIT “F” Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

NON-DISCRIMINATION AND CERTIFICATION OF NON-SEGREGATED FACILITIES

1. During the performance of this Contract, the Operator agrees as follows:

A. The Operator will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. The Operator will take affirmative action to ensure that applicants are employed, and that employees are treated during employment without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to, the following: employment, upgrading, demotion or transfer, recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training including apprenticeship. The Operator agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting office setting forth the provisions of this non-discrimination clause.

B. The Operator will, in all solicitations or advertisements for employees’ places by or on

behalf of the Operator, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.

C. The Operator will send to each labor union or representative or workers with which he

has a collective bargaining agreement or other contract or understanding, a notice to be provided by the agency contracting office, advising the labor union or worker’s representatives of the Operator’s commitments under Section 202 of Executive Order No. 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places available to employees and applicants for employment.

D. The Operator will comply with all provisions of Executive Order No. 11246 of

September 24, 1965, and by the rules, regulations and relevant orders of the Secretary of Labor.

E. The Operator will furnish all information and reports required by Executive Order No. 11246 of September 24, 1965, and by the rules, regulations and orders of the Secretary of Labor, or pursuant thereto, and will permit access to his books, records and accounts by the contracting agency and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations and orders.

F. In the event of Operator’s non-compliance with the non-discrimination of this contract

or with any of such rules, regulations or orders, this contract may be canceled, terminated or suspended, or in whole or in part, and the Operator may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order No. 11246 of September 24, 1965, and such other sanctions may be imposed and remedies invoked as provided in said Executive Order No. 11246 of September 24, 1965, or by rules, regulation or order of the Secretary of Labor, or as otherwise provided by law.

G. The Operator will include the provisions of Paragraphs (1) through (7) in every

subcontract or purchase order unless exempted by rules, regulations or orders of the

Exhibit F - 2

Secretary of Labor issued pursuant to Section 204 of Executive Order No. 11246 of September 24, 1965, so that such provisions will be binding upon each contractor or vendor. The Operator will take such action with respect to any contract or purchase order as the contracting agency may direct as a means of enforcing such provisions, including sanctions for non-compliance; provided, however, that in the even the Operator becomes involved in or is threatened with litigation with a contractor or vendor as a result of such direction by the contracting agency, the Operator may request the United States to enter into such litigation to protect the interest of the United States.

2. Equal Employment Opportunity Reporting. The Operator, unless exempt, agrees to file with the appropriate federal agency a complete and accurate report on Standard Form 100 (EEO-1) within thirty (30) days after the signing of this Agreement or the award of any such purchase order, as the case may be, (unless such a report has been filed in the last 12 months), and agrees to continue to file such reports annual, on or before March 31st. (41 CFR 60-1.7(a)). 3. Affirmative Action Compliance Program. The Operator agrees to develop and maintain a current written affirmative action compliance program for each of its establishments in accordance with the regulations of the Secretary of Labor promulgated under Executive Order No. 11246, as amended (41 CFR 60-01.40). 4. Veteran’s Employment. In the event the agreement to which this exhibit is attached is for the purpose of carrying with any department or agency of the United States for the procurement of personal property and non-personal services (including construction) for the United States as provided by Section 2012 of Title 38 USC, Operator agrees to give special emphasis to the employment of qualified disabled veterans and veterans of the Vietnam era and to list immediately with the appropriate local employment service office all of its suitable employment openings. 5. Equal Opportunity in Employment Certification of Non-Segregated Facilities. Operator, by entering into the contract to which this Exhibit D is attached, certifies that he does not maintain or provide for his employees any segregated facilities at any of his establishments, and that he does not permit his employees to perform their services at any location, under his control, where segregated facilities are maintained. Operator agrees that a breach of this certification is a violation of the Equal Opportunity clause in this contract. As used in this certification, the term “segregated facilities” means, but is not limited to, any waiting rooms, work areas, restrooms and washrooms, restaurants, and other eating areas, time clocks, locker rooms, and other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment areas, transportation, and housing facilities provided for employees which are segregated by explicit directive or are in fact segregated on the basis of race, creed, color or national origin, because of habit, local custom, or otherwise. He further agrees that (except where he has obtained identical certifications from proposed contracts for specific time periods) he will obtain identical certifications from proposed contractors prior to the award of contracts exceeding $10,00.00 which are not exempt from the provisions of the Equal Opportunity clause, that he will retain such certifications in his files; and that he will forward the following notice to such proposed contractors (except where the proposed contractors have submitted identical certifications for specific time periods):

Exhibit F - 3

6. Notice to Prospective Contractors of Requirement for Certifications of Facilities. A Certification of Non-Segregated Facilities, as required by the May 9, 1967 Order (32 F.R. 7439, May 19, 1967) on Elimination of Segregated Facilities, by the Secretary of Labor, must be submitted prior to the award of a contract exceeding $10,000.00 which is not exempt from the provisions of the Equal Opportunity clause. The certification may be submitted either for each contract or for all contracts during a period (i.e., quarterly, semi-annually, or annually).

EXHIBIT “G”

Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

THERE IS NO EXHIBIT “G” TO THIS OPERATING AGREEMENT

EXHIBIT “H”

Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

THERE IS NO EXHIBIT “h” TO THIS OPERATING AGREEMENT

EXHIBIT “I”

Attached to and made a part of that certain Operating Agreement dated effective October 6, 2015, by and between StableRock Energy L.L.C., as Operator, and Redhawk Resources – Fund III, LP, as Non-Operator

THERE IS NO EXHIBIT “I” TO THIS OPERATING AGREEMENT

Exhibit B

Forms of Drilling And Completion Contracts

(See attached.)

1

Preliminary Form (To be modified as necessary)

DRILLING AND TESTING CONTRACT

REDHAWK RESOURCES - FUND III, LP

REDHAWK RESOURCES - FUND III, LP, a Delaware limited partnership 6060 N. Central Expwy, Suite 302 Dallas, Texas 75206 STABLEROCK ENERGY L.L.C., a Texas limited liability company 11511 Katy Freeway, Suite 300 Houston, Texas 77079 Re: The ____________________Well , ___________ County, State of Texas Gentlemen: This will constitute the entire agreement (the “Agreement”) between you, REDHAWK RESOURCES - FUND III, LP, a Delaware limited partnership (the “Partnership”) and the undersigned, STABLEROCK ENERGY L.L.C., a Texas limited liability company (“StableRock”), concerning your participation in the drilling and testing of the Well (the “Well”), in ___________ County, State of Texas, more particularly described in Exhibit “A” attached hereto (herein referred to as the “Prospect”). The Well is being drilled and tested pursuant to the Operating Agreement entered into by and between Redhawk Resources – Fund III, LP and StableRock Energy L.L.C. dated October 6, 2015 covering both producing and non-producing oil and gas leases in Texas. For a sufficient consideration received by each, StableRock and the Partnership hereby covenant and agree as follows:

1. Contemporaneously herewith, the Partnership has, as a precondition to the consummation of this Agreement, paid to StableRock the sum of $___________ in cash, the receipt and sufficiency of which are hereby acknowledged by StableRock, which amount represents the estimated amount which the Partnership shall pay to StableRock for (a) drilling of the Well in the manner and to the minimum depth specified in paragraph 2 of this Agreement, (b) testing and logging the Well as StableRock shall deem necessary or desirable, (c) if no completion attempt is made on the Well, plugging and abandoning the Well (together with such services set forth in (a) and (b), the “Services”) and (d) the estimated Operations Fee. For purposes of this Agreement the term “Operations Fee” means 10% of the actual cost and expenses of StableRock in performing the Services for the Partnership (“Actual Costs”).

2. In consideration of the sum paid by the Partnership to StableRock pursuant to the provisions of paragraph 1 of this Agreement, StableRock shall, for the benefit of the Partnership, cause to be drilled or drill (i.e., spud in with equipment capable of drilling to the minimum depth hereinafter specified) the Well in search of oil or gas and shall prosecute or cause to be prosecuted the drilling of the Well in a good and workmanlike manner and with reasonable diligence until the Well has been drilled to a total subsurface depth of (a) feet, more or less, or such greater or lesser depth as may be sufficient to penetrate the or (b) such lesser depth at which further drilling becomes impractical or unreasonably hazardous by reason of encountering salt, igneous rock, heaving shale, salt water flow, excessively high pressures or temperatures, lost circulation, cavity, or other formation or condition (whether natural or

2

mechanical) which cannot be penetrated by the use of tools and techniques conventionally used in the industry for such purposes, and in connection with such drilling operations shall perform or cause to be performed such testing and logging as is deemed necessary or desirable. Upon the completion of the drilling, testing, and logging of the Well as contemplated in this paragraph 2, if StableRock concludes that a completion attempt is justified, the Partnership shall participate in the completion of the Well pursuant to the terms of a Completion and Equipping Contract to be entered into between StableRock and the Partnership. If StableRock concludes that a completion attempt is not justified, neither StableRock nor the Partnership shall have any further character of right or obligation relative to the other with respect to the Well.

3. In the event that Actual Costs incurred during Operations on the Well exceed, in the aggregate, the estimated costs of $________________ , StableRock will notify the Partnership, in writing, of the amount of said overage and the Partnership must remit said amount (plus an amount equal to the proportionate increase in the Operations Fee corresponding to such overage) to StableRock within ten (10) calendar days after having been requested to do so. THIS IS NOT A FIXED COST TURNKEY CONTRACT. The Partnership is obligated to pay all actual costs incurred during the drilling, testing and logging of the Well plus the Operations Fee. In the event that actual costs are less than those estimated (such difference, the “Excess Cost Amount”), StableRock shall remit to the Partnership the Excess Cost Amount (plus an amount equal to the proportionate decrease in the Operations Fee corresponding to such Excess Cost Amount). StableRock shall maintain all documentation of invoiced costs incurred by it with respect to the Well and shall provide copies to the Partnership.

4. In connection with all operations contemplated by paragraph 2 of this Agreement, StableRock shall, as between StableRock and the Partnership, act as an independent contractor, having complete control of the manner and method of conducting all such operations, and StableRock shall further faithfully observe and comply with the following:

(a) StableRock shall comply with all of the valid rules and regulations of any and all regulatory bodies having jurisdiction over such operations;

(b) The duly authorized agents or representatives of the Partnership shall have free access to the Well at any and all times for the purpose of observing such operations;

(c) StableRock will disclose to the Partnership at all times all information StableRock has concerning the progress of the Well and shall promptly disclose to the Partnership all information StableRock has in connection with all tests made and the results thereof; and

(d) StableRock will cause to be paid promptly all costs and expenses incurred for labor done, materials or supplies furnished, and services performed, and will protect the Well against any liens or similar encumbrances on account thereof.

5. If either party is rendered unable, wholly or in part, by Force Majeure to carry out its

obligations under this Agreement, other than the obligation to indemnify or make money payments or furnish security, that party shall give the other party prompt written notice of the Force Majeure with reasonably full particulars concerning it; thereupon, the obligations of the party invoking this Force Majeure provision, so far as they are affected by the Force Majeure, shall be suspended during, but no longer than, the continuance of the Force Majeure. The term “Force Majeure” as here employed, shall mean an act of God, strike, lockout, or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightening, fire, storm, flood or other act of nature, explosion, governmental action, governmental delay, restraint or inaction, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of the party

3

claiming suspension. The party affected shall use all reasonable diligence to remove the Force Majeure situation as quickly as practicable. The requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts or other labor-related difficulties by the party involved, contrary to its wishes; rather the resolution of all such labor difficulties shall be entirely within the discretion of the party concerned.

6. Notwithstanding anything in this Agreement to the contrary, StableRock makes no, and disclaims any, representations and warranties, express or implied, with respect to the performance of the Services, and StableRock shall have no liability for or in connection with any and all claims arising out of or resulting directly or indirectly from the Services performed by StableRock or its contractors, other than matters caused by or resulting from the willful misconduct or gross negligence of StableRock. NOTWITHSTANDING ANY OTHER TERMS IN THIS AGREEMENT, EXCEPT FOR MATTERS CAUSED BY OR RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF STABLEROCK, THE PARTNERSHIP HEREBY RELEASES STABLEROCK FROM AND SHALL FULLY PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS STABLEROCK AND ITS CONTRACTORS FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RESULTING FROM THE SERVICES OR THE PERFORMANCE THEREOF, INCLUDING ANY AND ALL CLAIMS RELATING TO (A) INJURY, ILLNESS OR DEATH OF ANY PERSON, STABLEROCK OR ITS REPRESENTATIVES, (B) DAMAGES TO OR LOSS OF ANY PROPERTY OR RESOURCES (INCLUDING DAMAGE TO PROPERTY OR RESOURCES OF THIRD PARTIES, THE PARTNERSHIP, STABLEROCK OR THEIR RESPECTIVE REPRESENTATIVES), (C) BREACH OF CONTRACT, (D) COMMON LAW CAUSES OF ACTION SUCH AS ACTIVE OR PASSIVE, SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, NUISANCE OR TRESPASS, (E) STATUTORY CAUSES OF ACTION OR (F) VIOLATION OF LAW OR OTHERWISE. THESE INDEMNITY AND DEFENSE OBLIGATIONS APPLY REGARDLESS OF CAUSE OR OF ANY NEGLIGENT ACTS OR OMISSIONS (INCLUDING ACTIVE OR PASSIVE, SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE), STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR OTHERWISE), VIOLATION OF LAW, OR OTHER FAULT OF STABLEROCK OR ITS CONTRACTORS, OR ANY PRE-EXISTING DEFECT.

7. This Agreement is intended to create a separate agreement between StableRock and the Partnership. It is not intended nor shall this Agreement ever be construed to create any character of partnership or joint venture between any of the parties hereto.

8. No change, modification, or alteration of this Agreement shall be binding upon either StableRock or the Partnership, unless made in writing and executed by both StableRock and the Partnership to which such change, modification, or alteration relates.

(Continued on following page.)

If the foregoing correctly represents your understanding of our agreement, please evidence your acceptance by executing a counterpart of this letter agreement in the space provided below for your signature and returning it to StableRock, thus constituting this a contract binding upon and inuring to the benefit of StableRock and the Partnership and upon our respective successors and assigns.

Yours very truly, STABLEROCK ENERGY L.L.C., a Texas limited liability company By: Name: Charles Rougeau Title: President Address: 11511 Katy Freeway, Suite 300 Houston, Texas 77079

ACCEPTED AND AGREED TO on , 20 .

REDHAWK RESOURCES - FUND III, LP, a Delaware limited partnership By: Redhawk Resources Management III, LLC, its managing partner By: Name: Jack W. Nichols Title: Executive Chairman Address: 6060 N. Central Expressway, Suite 302 Dallas, Texas 75206

EXHIBIT “A” Description of Lands

Well

1

Preliminary Form (To be modified as necessary)

COMPLETION AND EQUIPPING CONTRACT

REDHAWK RESOURCES - FUND III, LP

REDHAWK RESOURCES - FUND III, LP, a Delaware limited partnership 6060 N. Central Expwy, Suite 302 Dallas, Texas 75206 STABLEROCK ENERGY L.L.C., a Texas limited liability company 11511 Katy Freeway, Suite 300 Houston, Texas 77079 Re: The ____________________Well , ___________ County, State of Texas Gentlemen:

This will constitute the entire agreement (the “Agreement”) between you, REDHAWK

RESOURCES - FUND III, LP, a Delaware limited partnership (the “Partnership”) and the undersigned, STABLEROCK ENERGY L.L.C., a Texas limited liability company (“StableRock”), concerning the completion and equipping of the a certain well, namely, the _______________ Well, located in ____________ County, State of Texas (the “Well”), hereto drilled in search of oil or gas on the ______________ (the “Prospect”), as more particularly described on Exhibit “A” attached hereto pursuant to the terms of that certain Drilling and Testing Contract between StableRock and the Partnership. The Well is being completed and equipped pursuant to the Operating Agreement entered into by and between Redhawk Resources – Fund III, LP and StableRock Energy L.L.C. dated October 6, 2015 covering both producing and non- producing oil and gas leases in Texas.

For a sufficient consideration received, StableRock and the Partnership hereby covenant and

agree, as follows:

1. Contemporaneously herewith the Partnership has, as a precondition to the consummation of this Agreement between StableRock and the Partnership, paid to StableRock the sum of $_____________ in cash, the receipt and sufficiency of which is hereby acknowledged by StableRock, which amount represents the estimated amount which the Partnership shall pay to StableRock for (a) its completion and equipping of the Well for production or, if such completion attempt is unsuccessful, the plugging and abandoning of the Well (“Services”) plus (b) the estimated Operations Fee, all as more particularly specified in paragraph 2 of this Agreement. For purposes of this Agreement, the term “Operations Fee” means 10% of the actual cost and expenses of StableRock in performing the Services for the Partnership (“Actual Costs”).

2. In consideration of the sum paid by the Partnership to StableRock pursuant to the provisions of paragraph 1 of this Agreement, StableRock shall, as soon as is practical after the execution of this Agreement by the Partnership, attempt to complete, and if successful thereafter equip, the Well. If the completion attempt is unsuccessful, neither the Partnership nor StableRock shall have any further right or obligation relative to the other with respect to the Well. The activities to be performed pursuant to this paragraph 2 shall be those activities normally associated with, and incurred by the person or entity

2

responsible for, the completion of an oil or gas well, including those activities associated with the following items to the extent not associated with the drilling or operating of such well: surveying, building roads, pits, and tank locations; location damages; cementing of production casing, including stage collar and liner; rig costs, including day-work costs and completion unit; mud, chemicals, and water; evaluation services such as cased hole logging and perforating; well stimulation costs, including acidizing and fracturing; transportation; welding, labor, and miscellaneous services; engineering, geological services, overhead, and accounting associated with completion activities; pro- duction casing; well tubing; tubing anchor; wellhead equipment; packer and downhole flow control; surface equipment; high low shutoff; storage tanks; tractor; gas meter; cattle guard or gate; thread protectors; packer; separator; dehydrator; water tanks; and installation costs and other miscellaneous tangibles associated with the completion phase of a single producer completion. The objective zone shall mean the (believed to lie below the surface of the earth from approximately _____________ feet, more or less). Notwithstanding anything to the contrary above, the activities to be undertaken by StableRock pursuant to this paragraph 2 shall not include those activities associated with the completion of any zone subsequent to the first zone completed for the Well; Lease Operating Costs (including, but not limited to, the costs of acquiring and installing a compressor and a gas pipeline [other than an ordinary flowline] to deliver and transport any natural gas production from the Well or a pumping Unit); special project costs or any costs associated with “squeeze cementing” the Well, which is a remedial cementing method in which cement is pumped into specified points behind the casing to isolate a production zone, seal off water or prepare casing leaks.

3. In the event that Actual Costs incurred in completing and equipping the Well exceed, in the aggregate, the estimated costs of $_______________, StableRock will notify the Partnership, in writing, of the amount of said overage and the Partnership must remit said amount (plus an amount equal to the proportionate increase in the Operations Fee corresponding to such overage) to StableRock within ten (10) calendar days after having been requested to do so. THIS IS NOT A FIXED COST TURNKEY CONTRACT. The Partnership is obligated to pay all actual costs incurred during the completion and equipping of the Well. In the event that actual costs are less than those estimated (such difference, the “Excess Cost Amount”), StableRock shall remit to the Partnership the Excess Cost Amount (plus an amount equal to the proportionate decrease in the Operations Fee corresponding to such Excess Cost Amount). StableRock shall maintain all documentation of invoiced costs incurred by it with respect to the Well and shall provide copies to the Partnership.

4. In connection with all operations contemplated by paragraph 2 of this Agreement, StableRock shall, as between StableRock and the Partnership, act as an independent contractor, having complete control of the manner and method of conducting all operations, and StableRock shall further faithfully observe and comply with the following:

(a) StableRock shall comply with all of the valid rules and regulations of any and all regulatory bodies having jurisdiction over such operations;

(b) The duly authorized agents or representatives of the Partnership shall have free access to the Well at any and all times for the purpose of observing such operations;

(c) StableRock will disclose to the Partnership at all times all information StableRock has concerning the progress of the Well and shall promptly disclose to the Partnership all information StableRock has in connection with all tests made and the results thereof; and

(d) StableRock will cause to be paid promptly all costs and expenses incurred for labor done, materials or supplies furnished, and services performed, and will protect the Well against any liens or similar encumbrances on account thereof.

3

5. If either party is rendered unable, wholly or in part, by Force Majeure to carry out its

obligations under this Agreement, other than the obligation to indemnify or make money payments or furnish security, that party shall give the other party prompt written notice of the Force Majeure with reasonably full particulars concerning it; thereupon, the obligations of the party invoking this Force Majeure provision, so far as they are affected by the Force Majeure, shall be suspended during, but no longer than, the continuance of the Force Majeure. The term “Force Majeure” as here employed, shall mean an act of God, strike, lockout, or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightening, fire, storm, flood or other act of nature, explosion, governmental action, governmental delay, restraint or inaction, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of the party claiming suspension. The party affected shall use all reasonable diligence to remove the Force Majeure situation as quickly as practicable. The requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts or other labor-related difficulties by the party involved, contrary to its wishes; rather the resolution of all such labor difficulties shall be entirely within the discretion of the party concerned.

6. Notwithstanding anything in this Agreement to the contrary, StableRock makes no, and disclaims any, representations and warranties, express or implied, with respect to the performance of the Services, and StableRock shall have no liability for or in connection with any and all claims arising out of or resulting directly or indirectly from the Services performed by StableRock or its contractors, other than matters caused by or resulting from the willful misconduct or gross negligence of StableRock. NOTWITHSTANDING ANY OTHER TERMS IN THIS AGREEMENT, EXCEPT FOR MATTERS CAUSED BY OR RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF STABLEROCK, THE PARTNERSHIP HEREBY RELEASES STABLEROCK FROM AND SHALL FULLY PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS STABLEROCK AND ITS CONTRACTORS FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RESULTING FROM THE SERVICES OR THE PERFORMANCE THEREOF, INCLUDING ANY AND ALL CLAIMS RELATING TO (A) INJURY, ILLNESS OR DEATH OF ANY PERSON, STABLEROCK OR ITS REPRESENTATIVES, (B) DAMAGES TO OR LOSS OF ANY PROPERTY OR RESOURCES (INCLUDING DAMAGE TO PROPERTY OR RESOURCES OF THIRD PARTIES, THE PARTNERSHIP, STABLEROCK OR THEIR RESPECTIVE REPRESENTATIVES), (C) BREACH OF CONTRACT, (D) COMMON LAW CAUSES OF ACTION SUCH AS ACTIVE OR PASSIVE, SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, NUISANCE OR TRESPASS, (E) STATUTORY CAUSES OF ACTION OR (F) VIOLATION OF LAW OR OTHERWISE. THESE INDEMNITY AND DEFENSE OBLIGATIONS APPLY REGARDLESS OF CAUSE OR OF ANY NEGLIGENT ACTS OR OMISSIONS (INCLUDING ACTIVE OR PASSIVE, SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE), STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR OTHERWISE), VIOLATION OF LAW, OR OTHER FAULT OF STABLEROCK OR ITS CONTRACTORS, OR ANY PRE-EXISTING DEFECT.

7. This Agreement is intended to create a separate agreement between StableRock and the Partnership. It is not intended nor shall this Agreement ever be construed to create any character of partnership or joint venture between any of the parties hereto.

8. No change, modification, or alteration of this Agreement shall be binding upon either StableRock or the Partnership, unless made in writing and executed by both StableRock and the Partnership.

(Continued on following page.)

If the foregoing correctly represents your understanding of our agreement, please evidence your acceptance by executing a counterpart of this letter agreement in the space provided below for your signature and returning it to StableRock, thus constituting this a contract binding upon and inuring to the benefit of StableRock and the Partnership and upon our respective successors and assigns.

Yours very truly, STABLEROCK ENERGY L.L.C., a Texas limited liability company By: Name: Charles Rougeau Title: President Address: 11511 Katy Freeway, Suite 300 Houston, Texas 77079

ACCEPTED AND AGREED TO on , 20 .

REDHAWK RESOURCES - FUND III, LP, a Delaware limited partnership By: Redhawk Resources Management III, LLC, its managing partner By: Name: Jack W. Nichols Title: Executive Chairman Address: 6060 N. Central Expressway, Suite 302 Dallas, Texas 75206

EXHIBIT “A” Description of Lands

Well

Exhibit C

Amended and Restated Agreement of Limited Partnership of

Redhawk Resources – Fund III, LP

(See attached)

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

REDHAWK RESOURCES - FUND III, LP a Delaware Limited Partnership

Dated as of October [___], 2015

THE GENERAL PARTNER AND LIMITED PARTNER INTERESTS IN THIS PARTNERSHIP HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY STATE SECURITIES LAWS, OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION AS PROVIDED IN THOSE LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. THE SALE OR OTHER DISPOSITION OF THE INTERESTS IS RESTRICTED, AS SET FORTH IN THIS AGREEMENT OF LIMITED PARTNERSHIP, AND THE EFFECTIVENESS OF ANY SUCH SALE OR OTHER DISPOSITION MAY BE CONDITIONED UPON RECEIPT BY THE PARTNERSHIP OF A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE LAWS OF ANY STATE OR OTHER JURISDICTION.

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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

OF REDHAWK RESOURCES – FUND III, LP

This Amended and Restated Agreement of Limited Partnership of Redhawk Resources – Fund III, LP, dated as of October [___], 2015, is made and entered into by and among the Managing Partner, the Organizational Limited Partner, and those Persons who execute or adopt this Agreement as Investor Partners.

RECITALS:

WHEREAS, the Managing Partner and the Organizational Limited Partner previously formed the Partnership upon the filing of a Certificate of Formation with the Secretary of State of Delaware on September 21, 2015, and the execution of the Agreement of Limited Partnership of Redhawk Resources – Fund III, LP on September 21, 2015;

WHEREAS, the Managing Partner and the Organizational Limited Partner wish to admit the Investor Partners to the Partnership on the terms and conditions hereinafter set forth, and upon such admission of the Investor Partners, the Organizational Limited Partner wishes to withdraw from the Partnership; and

WHEREAS, the Managing Partner, the Organizational Limited Partner and the Investor Partners wish to amend and restate the Agreement of Limited Partnership of Redhawk Resources – Fund III, LP in its entirety.

AGREEMENT:

NOW, THEREFORE, for and in consideration of the foregoing and the respective covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, amend and restate in its entirety the Agreement of Limited Partnership of Redhawk Resources – Fund III, LP as follows:

SECTION I GENERAL

1.1 Formation, Continuation. Pursuant to a certificate of formation filed on September 21, , 2015 with Secretary of State of the State of Delaware pursuant to the Act, the Managing Partner and Organizational Limited Partner created and established the Partnership as a limited partnership pursuant to the Act for the purposes described in Section 1.6. Pursuant to this Agreement, the Partners continue the Partnership under the Act.

1.2 Name. The name of the Partnership is “Redhawk Resources – Fund III, LP,” or such other name as the Managing Partner may later adopt upon (i) causing an amendment to the certificate to be filed with the Secretary of State of the State of Delaware and (ii) sending notice of such amendment to the Investor Partners. The Managing Partner may change the name of the Partnership or adopt such trade or fictitious names as it may determine appropriate.

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1.3 Registered Agent. The registered agent of the Partnership will be Capitol Services, Inc., and the registered office of the Partnership will be 1675 South State Street, Suite B, Dover, Delaware 19901, or such other registered agent as the Managing Partner, in its discretion, may select.

1.4 Principal Office. The principal place of business of the Partnership will be at 6060 N. Central Expressway, Suite 302, Dallas, Texas 75206, or at such other location as the Managing Partner, in its discretion, may determine. The Managing Partner must notify the Investor Partners in writing within 30 days of any such change in location.

1.5 Term. The term of the Partnership commenced on the date the certificate of formation was filed with the Secretary of State of the State of Delaware and will continue until the Partnership is dissolved and its affairs are wound up in accordance with the provisions of this Agreement or the Act.

1.6 Activities. The Partnership has the authority to engage in any activities permitted generally to limited partnerships. The Partnership has been formed to engage in the acquisition of oil and gas Leases in and around Pecos County, Texas for development by drilling wells and/or implementing enhanced secondary recovery operations on the Leases and/or for re-sale of the Leases]. The Partnership may, without limitation, (a) invest in drilling projects sponsored by Affiliates or non-affiliated parties; (b) acquire leasehold acreage as sole owner or in participation with Affiliates or non-affiliated parties; (c) develop leasehold acreage alone or in participation with Affiliates or non-affiliated parties; (d) enter into participation or Farmout Agreements with Affiliates or non-affiliated parties; (e) acquire producing Mineral Interests; (f) act as a common carrier in the pipeline business for the purpose of transporting oil, oil products, gas, carbon dioxide, soft brine, fuller’s earth, sand, clay, liquefied minerals, or other mineral solutions; and (g) engage in such other activities necessary or incident to carrying out the Partnership’s purpose, as discussed above. The Partnership may not engage in any significant activity other than those described in this Section 1.6 without the consent of a Majority-in-Interest.

1.7 Property. All property owned by the Partnership will be deemed to be owned by the Partnership as an entity, and no Partner, individually, will have any ownership of such property. The Partnership will hold its assets in its own name, unless the Managing Partner elects to place the assets in the name of a nominee for the Partnership.

SECTION II DEFINITIONS

2.1 Definitions. Certain terms (and the singular or plural thereof) used in this Agreement have the meanings designated below.

Act. The Delaware Revised Uniform Limited Partnership Act, as amended from time to time.

Additional Zone. A Zone, other than the intended Zone, in which completion was initially anticipated to be attempted in accordance with the Operating Agreement for that well.

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Adjusted Capital Account. The Capital Account maintained for each Partner which is determined as of the end of each Fiscal Year, or other appropriate occasion, (a) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or Regulation § 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulation §§ 1.704-2(g)(1) and 1.704-2(i)(5), and (b) decreased by the items described in Regulation §§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of “Adjusted Capital Account” is intended to comply with the provisions of Regulation § 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

Adjusted Capital Account Deficit, With respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Fiscal Year or other appropriate occasion.

Affiliate. An “affiliate” of, or Person “affiliated” with, a specified Person means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.

Agreement. This Agreement of Limited Partnership dated as of October [___], 2015, as amended from time to time.

Book Depreciation. For any asset for any Fiscal Year or other period, an amount that bears the same ratio to the Gross Asset Value of that asset at the beginning of such Fiscal Year or other period as the federal income tax depreciation, amortization, Simulated Depletion (with respect to Oil and Gas Properties), or other cost recovery deduction allowable for that asset for such year or other period bears to the adjusted tax basis of that asset at the beginning of such year or other period. If the federal income tax depreciation, amortization, Simulated Depletion, or other cost recovery deduction allowable for any asset for such year or other period is zero, then Book Depreciation for that asset will be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Partner.

Capital Account. The account maintained by the Partnership for a Partner or transferee as provided in Section III of this Agreement.

Capital Contribution. The amount of cash and fair market value of property contributed to the Partnership by a Partner (or the predecessor Partner). The Capital Contribution of a substituted Investor Partner will be that amount attributable to the Interest assigned to such substituted Investor Partner, and any additional amounts thereafter contributed to the Partnership by the substituted Investor Partner.

Carried Working Interest. A Working Interest that does not pay for its proportionate part of the drilling, testing, completing, and equipping costs of the Lease or well to which it relates.

Cash Reserves. The amount of cash deemed reasonably necessary by the Managing Partner to pay General and Administrative Expenses, plugging and abandoning costs, amounts due under any Drilling and Completion Contracts, equipment costs, Lease Operating Costs, taxes, insurance, principal and interest on Partnership indebtedness (if any), and all other

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costs and expenses incident to the ownership, development, drilling, production, and sale of oil and gas by the Partnership for which the cash to make such payments is not expected to be received (in the good faith opinion of the Managing Partner) by the Partnership subsequent to the determination of such Cash Reserves and prior to the time such payments are required to be made.

Code. The Internal Revenue Code of 1986, as amended from time to time.

Completion Activities. Completion Activities are generally those activities normally associated with, and incurred by the Person responsible for, the completion of an oil or gas well, including those activities associated with the following items to the extent not associated with the drilling or operating of such well: surveying; building roads, pits, and tank locations; location damages; cementing of production casing, including stage collar and liner; rig costs, including day work costs and completion unit; mud, chemicals, and water; evaluation services, such as cased hole logging and perforating; well stimulation costs, including acidizing and fracturing; transportation; welding, labor, and miscellaneous services; engineering, geological services, overhead, and accounting associated with completion activities; production casing; well tubing; tubing anchor; wellhead equipment; packer and downhole flow controls; surface equipment; Christmas tree; high low shut off; storage tanks; tractor; gas meter; cattle guard or gate; thread protectors; packer; separator; dehydrator; water tanks; and installation costs and other miscellaneous tangibles associated with the completion phase of a well. A well may be completed in one or more separate producing formations at different depths. Notwithstanding anything to the contrary above, the term Completion Activities does not include Lease Operating Costs, the costs of completing Additional Zones, the costs of Special Projects or Subsequent Operations, the costs of acquiring and installing a compressor and a gas pipeline, other than an ordinary flow line, to deliver and transport natural gas production, the costs of pumping equipment, or General and Administrative Expenses of the Partnership.

DGCL. Delaware General Corporations Law.

Drilling and Completion Contracts. The contracts anticipated to be executed by the Partnership and StableRock or another Operator obligating the Operator to perform or cause to be performed all drilling, testing, completion, and equipping activities concerning a specific well on behalf of the Partnership. The Drilling and Completion Contracts are not fixed-cost contracts; that is, the Partnership will be responsible for paying its proportionate share of all actual costs incurred by the Operator during the drilling, testing, completion and equipping phases. If actual costs exceed estimated costs, the Partnership will be required to pay its proportionate share of such costs.

DUCC. Delaware Uniform Commercial Code.

Event of Withdrawal. As to all Partners, when a Partner: makes an assignment for the benefit of creditors; files a voluntary petition in bankruptcy; is adjudged as bankrupt or insolvent or has entered against such Partner an order for relief in any bankruptcy or insolvency proceeding which order is not dissolved within 90 days; files a petition or answer or certificate seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief; files an answer or other pleading failing to contest the material allegations in any

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bankruptcy or insolvency proceeding; seeks or consents to the appointment of a receiver or trustee or liquidator of all or a substantial part of the Partner’s property; fails to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the Partner or of all or substantially all of the Partner’s property within 90 days of the appointment; has been expelled from the Partnership by a final judicial decree as provided under the Act; is subject to any order or judgment not stayed within 30 days of issuance attaching or foreclosing upon any part of its Interest; commences any Proceeding adverse to the Partnership; or Transfers any Interest. As to a Partner who is a natural person, the Partner’s death, the appointment of a guardian or general conservator for the Partner, or an adjudication of incompetency of the Partner. As to a Partner who is an entity, the termination, dissolution, or cessation of business of the Partner.

Farmout Agreement. An agreement whereby the owner of an Oil and Gas Property agrees to assign its interest in such property to another party while retaining some part of its original interest (such as an Overriding Royalty Interest, oil or gas payment, offset acreage, back-in working interest, or other type of interest), subject to the drilling of one or more specified wells or other performance by the prospective assignee as a condition of the assignment.

Fiscal Year. The Partnership’s fiscal year means the calendar year and ending on December 31.

General and Administrative Expenses. All bookkeeping, accounting, and auditing expenses of the Partnership actually and necessarily incurred by the Partnership or by the Managing Partner on behalf of the Partnership in maintaining Partnership financial and operation records; expenses of collection and distribution of revenues; expenses of preparation and mailing of reports; expenses (including legal fees and accounting fees) of preparation and mailing of tax returns to Partners; legal fees for services rendered to the Partnership other than those characterized as Organization and Offering Expenses; expenses of obtaining independent engineering evaluations; and all other expenses for services rendered by third parties to the Partnership or the Managing Partner on behalf of the Partnership. Such expenses may include that portion of administrative overhead of the Managing Partner actually and necessarily pertaining to the business of the Partnership and such expenses may include compensation to employees of the Managing Partner or its Affiliates for services rendered to the Partnership.

General Partner. Each Investor Partner who executes or adopts this Agreement, or a counterpart of this Agreement, as a general partner and is accepted by the Managing Partner as such, or any Person who becomes a substituted General Partner in accordance with this Agreement. The term General Partner does not include the Managing Partner, except to the extent that the Managing Partner owns General Partner Units in the Partnership.

General Partner Interest. Any ownership interest in the Partnership held by a General Partner, whether or not expressed in Units.

General Partner Unit. A General Partner’s unit of interest in the Partnership.

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Geological and Geophysical Expenses. All geological and geophysical expenses actually and necessarily incurred by the Partnership or by the Managing Partner on behalf of the Partnership, including legal geological, geophysical and engineering data expenses.

Geological and Geophysical Allotment. The fixed, non-accountable amount of 6.37% of all Capital Contributions made by Investor Partners, to be paid by the Partnership to the Managing Partner. This payment to the Managing Partner is intended to provide the funds necessary for the Managing Partner to pay Geological and Geophysical Expenses and to provide compensation to the Managing Partner for its selection and evaluation of the Leases to be acquired by the Partnership.

Gross Asset Value. For any asset, the asset’s adjusted basis for federal income tax purposes, except as set forth below:

(a) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership will be the gross fair market value of the asset on the date of determination, as determined by the contributing Partner and the Managing Partner.

(b) The Gross Asset Values of all assets of the Partnership will be adjusted to equal their gross fair market values, as determined by the Managing Partner, as of the following times: (1) the contribution of more than a de minimis amount of money or other property to the Partnership as a Capital Contribution by a new or existing Partner, or the distribution by the Partnership to a retiring or continuing Partner of more than a de minimis amount of property as consideration for an Interest, if the Managing Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; or (2) the liquidation of the Partnership within the meaning of the Regulations.

(c) The Gross Asset Values of Partnership assets will be increased (or decreased) to reflect any adjustment to the adjusted basis of such assets pursuant to the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to the Regulations; provided, however, that Gross Asset Values will not be adjusted pursuant to this subparagraph (c) to the extent the Managing Partner determines that an adjustment pursuant to subparagraph (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (c).

(d) If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (a), (b) or (c), above, such Gross Asset Value will thereafter be adjusted by the Book Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

(e) The Gross Asset Value of any Partnership asset distributed to any Partner will be the gross fair market value of such asset on the date of distribution.

(f) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes will be computed by

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reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of the property differs from the Gross Asset Value of the property.

Intangible Drilling Costs. Those expenditures associated with property acquisition and the drilling and completion of oil and gas wells that under present law are generally accepted as fully deductible currently for federal income tax purposes. This includes all expenditures made with respect to any well before the establishment of production in commercial quantities for wages, fuel, repairs, hauling, supplies, and other costs and expenses incident to and necessary for the drilling of the well and the preparation of the well for the production of oil or gas, that are currently deductible pursuant to the Code and Regulations, which are generally termed “intangible drilling and development costs,” including the expense of plugging and abandoning any well before a completion attempt. Intangible Drilling Costs also include, for all purposes under this Agreement, any and all Intangible Drilling Costs that are attributable to Mineral Interests owned by third parties in any wells, but are charged to, and paid by, the Partnership under participation agreements, Farmout Agreements, Operating Agreements, fixed cost drilling contracts, and any other agreements or any other interest in favor of third parties which burdens any well or to which the Partnership is subject, even though payment by the Partnership of those Intangible Drilling Costs which are in excess of the Partnership’s permanent share of the Working Interest in the wells is treated under the Code as payment of depletable Lease Acquisition Costs for tax purposes and cannot be currently deducted by the Partnership or its Partners as Intangible Drilling Costs.

Interest. Any ownership interest in the Partnership, whether or not expressed in Units.

Investor Partners. The General Partners and Limited Partners, other than the Managing Partner. If an Affiliate of the Managing Partner should acquire an Interest as an Investor Partner, such Affiliate will, with respect to such Interest, enjoy all of the rights and, except as otherwise provided in this Agreement, be subject to all of the obligations and duties of an Investor Partner to the extent of such Interest.

Lease. Any interest in land, excepting a Mineral Interest, which permits the owner of such right or interest, or Person participating with such owner under a Farmout Agreement, to explore or drill for, or to produce, oil or gas located on or under such land, or to enter upon such land for the purpose of exploring or drilling for or producing oil and gas.

Lease Acquisition Costs. Those payments and expenses incurred in connection with the acquisition of a Lease or an interest in a Lease, including, but not limited to, lease bonuses, brokers’ fees and commissions, abstracting costs, title examination and filing fees, costs incurred in curing or defending title, capitalized screening, seismic, geological, and geophysical expenses incident to either the evaluation or the acquisition of a Lease or an interest in a Lease, and delay rentals. Lease Acquisition Costs may include costs incurred to evaluate a property that ultimately is not acquired. Any Intangible Drilling Costs that are treated under the Code as lease acquisition costs for tax purposes because they are attributable to Carried Working Interests of other co-owners of any Lease will continue to be treated as Drilling and Completion Costs for all purposes under this Agreement, other than for tax reporting purposes.

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Lease Operating Costs. All expenditures made and costs incurred by the Partnership in connection with operation of a well, as more fully set forth in the Operating Agreement for such well, but excluding Lease Acquisition Costs, Drilling and Completion Costs, and the costs of Subsequent Operations. Such costs could include the cost of labor, fuel, repairs, hauling, materials, supplies, utility charges, and other similar costs; ad valorem, severance, and other applicable taxes; insurance and casualty loss expense; and compensation to the Managing Partner, or others, for services rendered in conducting such operations (which compensation may include the Partnership’s proportionate share of any monthly operating fee and reimbursement of all direct costs). Lease Operating Costs include lease bonus payments and lease extension and renewal payments. Lease Operating Costs also include the costs of any Special Projects, and the costs of any remedial cementing in which cement is pumped to specified points behind the casing to isolate a productive zone, seal off water, or repair casing leaks.

Limited Partner. An Investor Partner who executes or adopts this Agreement, or a counterpart of this Agreement, as a limited partner and is accepted by the Managing Partner as such, any General Partner who is converted to a Limited Partner, and any Person who becomes a substituted Limited Partner in accordance with the terms of this Agreement.

Limited Partner Interest. Any ownership interest in the Partnership held by a Limited Partner, whether or not expressed in Units.

Limited Partner Unit. A Limited Partner’s unit of interest in the Partnership.

Majority-in-Interest. Investor Partners owning more than fifty percent (50%) of the Units, as of the date such determination is made. Units held by Transferees who have not been admitted as Partners will not be included in the numerator or the denominator for the purpose of determining the consent of a Majority-in-Interest.

Management Fee. The fixed, non-accountable amount of 7.0% of all Capital Contributions made by Investor Partners, to be paid by the Partnership to the Managing Partner in consideration for the efforts of the Managing Partner in the formation, structuring, and future management of the Partnership.

Managing Partner. Redhawk Resources Management III, LLC, a Delaware limited liability company with its principal office located at 6060 N. Central Expressway, Suite 302, Dallas, Texas 75206, in its capacity as managing partner of the Partnership. The telephone number of the Managing Partner is (844) 952-7363.

Managing Partner Interest. Any ownership interest in the Partnership held by the Managing Partner, whether or not expressed in Units.

Mineral Interest. Outright ownership of the oil and gas in and under a tract of land, or of an undivided fractional interest therein, or any option or right to acquire such ownership. Mineral Interests also include Royalty Interests but not Overriding Royalty Interests.

Oil and Gas Property. Any Lease or Mineral Interest.

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Operating Agreement. Any agreement between the Partnership and an affiliated or non-affiliated party under which a licensed operator undertakes to operate a well.

Operator. The party responsible for operating a well under an Operating Agreement. The Partnership anticipates that StableRock, an Affiliate of the Managing Partner, will be the Operator under most, if not all, Operating Agreements.

Organization and Offering Expenses. All expenses of the Partnership actually and necessarily incurred by the Partnership or by the Managing Partner on behalf of the Partnership in connection with the organization of the Partnership, including, but not limited to, salaries, legal, printing, accounting, contract personnel, and travel costs and other general expenses of the Managing Partner.

Organization and Offering Allotment. The fixed, non-accountable amount of 7.5% of all Capital Contributions made by Investor Partners to be paid by the Partnership to the Managing Partner for Organization of Offering Expenses. This payment to the Managing Partner is intended to provide the funds necessary for the Managing Partner to pay Organization and Offering Expenses, to implement the development plan and to compensate it for its efforts in doing so.

Organizational Limited Partner. Jack W. Nichols, in his capacity as organizational limited partner.

Overriding Royalty Interest. A non-operating interest in a Lease entitling the holder to receive a share of the proceeds of production of oil and/or gas from a Lease without being obligated to pay any costs, unless otherwise provided in the grant of the Overriding Royalty Interest. It is a non-possessory interest and terminates when the Lease that created it terminates.

Partner. The Managing Partner or an Investor Partner.

Partnership. Redhawk Resources - Fund III, LP, a Delaware limited partnership formed pursuant to the terms of this Agreement.

Partnership Trade Secrets. The non-public information pertaining to the Partnership, as such term is more definitely defined in Section 10.2 of this Agreement.

Person. An individual, trust, estate, or any incorporated or unincorporated entity, including any general or limited partnership, limited liability company, corporation, joint venture, association, cooperative, government or governmental subdivision or agency and any other legally cognizable entity, and all heirs, executors, administrators, legal representatives, successors and assigns of such Person where permitted or required by the context.

Proceeding. Any administrative, judicial, or other proceeding, including, without limitation, litigation, arbitration, administrative adjudication, mediation, any investigation that could lead to a proceeding, and appeal or review of any of the foregoing. A proceeding also includes any governmental or quasi-governmental process by which rights are granted, established, or terminated.

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Profits and Losses. For each Fiscal Year or other period, an amount equal to the Partnership’s taxable income or loss for such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code will be included in taxable income or loss), but with the following adjustments for such Fiscal Year or other period:

(a) Income of the Partnership that is exempt from federal income tax as described in Section 705(a)(1)(B) of the Code and not otherwise taken into account in computing Profits and Losses pursuant to Section V will be added to such taxable income or loss as if it were taxable income.

(b) Any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code, or treated as expenditures under Section 705(a)(2)(B) of the Code pursuant to Regulations 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits and Losses, will be subtracted from such taxable income or loss as if such expenditures were deductible items.

(c) If the Gross Asset Value of any asset of the Partnership is adjusted pursuant to this Agreement, the amount of the adjustment will be taken into account as (i) gain or loss from the disposition of the asset for purposes of computing such taxable income or loss if the asset is not an Oil and Gas Property, or (ii) Simulated Gain or Simulated Loss if the asset is an Oil and Gas Property.

(d) Gain or loss resulting from any disposition of an asset of the Partnership with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of the asset differs from the Gross Asset Value of the asset.

(e) In lieu of the deduction for depreciation, cost recovery, or amortization taken into account in computing such taxable income or loss, there will be taken into account Book Depreciation for such Fiscal Year or other period.

(f) Notwithstanding any other provision of this Agreement, any items that are specially allocated pursuant to Section 5.1(c) of this Agreement will not be taken into account as taxable income or loss for purposes of computing Profits and Losses.

If the Partnership’s taxable income or taxable loss for the year or period, as adjusted pursuant to subparagraphs (a)-(f) above, is a positive amount, that amount will be the Partnership’s Profit for such Fiscal Year or other period; and if negative, that amount will be the Partnership’s Loss for such Fiscal Year or other period.

Regulations. The final, temporary, or proposed regulations of the Department of the Treasury promulgated under the Code as such regulations may be lawfully changed from time to time.

Royalty Interest. An interest in oil and/or gas (or other mineral) produced from an oil and gas Lease, or the proceeds from the sale of such production, to be received free and clear of the expense of all costs of development, operation, or maintenance. A Royalty Interest

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is typically created from a fee simple interest in land, unlike an Overriding Royalty Interest, which is created from the lessee’s interest in a Lease.

Securities Act. The Securities Act of 1933, as amended.

Service. The Internal Revenue Service.

Simulated Adjusted Tax Basis. Adjusted tax basis of Oil and Gas Properties as computed for Capital Account purposes, as such term is more definitively defined in Section III of this Agreement.

Simulated Depletion. Depletion as computed for Capital Account purposes, as such term is more definitively defined in Section III of this Agreement.

Simulated Gain. Gain attributable to Oil and Gas Properties as computed for Capital Account purposes, as such term is more definitively defined in Section III of this Agreement.

Simulated Loss. Loss attributable to Oil and Gas Properties as computed for Capital Account purposes, as such term is more definitively defined in Section III of this Agreement.

Special Projects. An activity of the Partnership other than normal and customary drilling and producing operations and Subsequent Operations, including, without limitation, acquiring and installing a compressor, pumping equipment or other gas processing equipment, pipelines (other than ordinary flowlines), and other transmission or major storage facilities. All costs of the Partnership related to a Special Project, including, without limitation, the costs of installation, acquisition, or charges for the use of Special Project facilities, will be classified as Lease Operating Costs.

StableRock. StableRock Energy L.L.C., acting in its individual capacity and not as Operator of the Partnership.

Start-Up Costs. All expenditures classified as syndication or organizational expenses under Section 709 of the Code or as start-up expenditures under Section 195 of the Code, but only to the extent such costs or expenditures are treated as amortizable costs or Section 705(a)(2)(B) expenditures for purposes of maintaining Capital Accounts pursuant to Regulations §1.704-1(b)(2)(iv)(i)(2).

Subsequent Operations. Projects of a nature or scale exceeding normal operations. A Subsequent Operation would typically involve the completion, the reworking, sidetracking (including the sidetracking of an existing lateral hole), or deepening of a well before or after obtaining commercial production.

Transfer. A Transfer includes any sale, assignment, pledge, hypothecation, exchange, or other transaction in which any record or beneficial interest in the Interests is transferred to another Person and includes any transfer by operation of law in connection with a probate, bankruptcy, receivership, divorce, or guardianship.

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Unit. An Investor Partner’s unit of interest in the Partnership. Units are not required to be proportionate to Capital Contributions.

Working Interest. An ownership interest under a Lease, or otherwise, covering a specific tract or tracts of land, the owner of which interest has the right to explore for oil, gas, and other minerals on or under such land and has the obligation to pay the cost of exploration, drilling, and operating the property or a part thereof. A Working Interest created by the execution of an oil and gas Lease must bear all costs of operations and development of that Lease, unlike a Person who owns a Royalty Interest or an Overriding Royalty Interest, unless another Person has agreed to pay such costs for all or part of the Working Interest.

Zone. A geological formation indicating the presence of hydrocarbons, based on, but not limited to, an analysis of electrical logs, mud logs, samples, and drill stem tests, which can be identified as distinct and separate from other such formations within a wellbore.

SECTION III CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS

3.1 Managing Partner. The Managing Partner will not be required to make a Capital Contribution to the Partnership but has granted the Partnership access to and use of all maps, drilling logs, and other geological and geophysical information it has acquired or will acquire with respect to areas of acquisition or Oil and Gas Properties acquired by the Partnership. The Managing Partner hereby grants to the Partnership a perpetual, non-exclusive, non-transferable, royalty-free license to use the geological and geophysical information the Managing Partner develops or acquires with respect to areas of acquisition or Oil and Gas Properties acquired by the Partnership.

3.2 Admission of Investor Partners.

(a) Admission of Investor Partners in Initial Offering of Units. The Managing Partner may issue Units or partial Units, up to the amount of authorized Units, and may admit those Persons investing in the initial offering as General or Limited Partners.

(b) Admission of Additional Partners. The Managing Partner may issue Units, up to the amount of authorized Units, as may be increased from time to time, and admit Persons as new General or Limited Partners, at any time or from time to time after the initial offering of Units has closed upon such terms and for such consideration as the Managing Partner in its sole discretion determines. The Units issued to such other Partners are not required to be proportionate to the Capital Contributions for previously issued Units. No Partner will have any preferential or preemptive rights to acquire Units or other debt or equity securities issued by the Partnership.

3.3 Units and Interests.

(a) Authorized Units. The Partnership is authorized to issue 1,200 Units as General or Limited Partner Units. Units or partial Units may be issued only upon payment of the Capital Contribution for such Unit or partial Unit. Subject to the

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provisions of Section 4.10, the number of authorized Units may be increased from time to time.

(b) Additional Classes of Units. Subject to the provisions of Section 4.10, the Partnership may create additional authorized Units and/or classes or series of Units or other Interests having such relative rights, powers, and duties as the Partnership may establish, including rights, powers, and duties senior to existing classes and series of Units.

(c) Issued Units. The books and records of the Partnership will be prima facie evidence of the amount of issued Units and the holders of such Units. Schedule A, attached to this Agreement, will be amended to reflect the Partners and their Interests as changes to the ownership and membership of the Partnership occur.

(d) Units Uncertificated. Units and other Interests issued by the Partnership will not be represented by certificates.

3.4 Additional Capital Contributions. The Partnership will not require additional Capital Contributions from any Investor Partner. If the Partnership requires additional capital in excess of capital raised in the initial offering of Units and revenues generated from Oil and Gas Properties acquired by the Partnership, the Managing Partner is authorized to issue and sell additional Units, up to the number of authorized Units set forth in Section 3.3(a), as such amount may be increased from time to time.

3.5 Capital Accounts. An individual Capital Account will be established and maintained by the Partnership for each Partner in accordance with the applicable provisions of the Regulations.

(a) Credits. The Capital Account of each Partner will be credited with (i) an amount equal to such Partner’s Capital Contributions and the fair market value of property contributed to the Partnership by such Partner, (ii) such Partner’s allocable share of the Partnership’s items of income and gain, (iii) the amount of any Partnership liabilities assumed by such Partner or that are secured by property distributed to such Partner, and (iv) any other item of income or gain, including Simulated Gain, allocated to such Partner pursuant to this Agreement.

(b) Debits. The Capital Account of each Partner will be debited by (i) the amount of cash and the fair value of property distributed or deemed distributed to such Partner, (ii) such Partner’s allocable share of the Partnership’s items of loss and deduction, (iii) the amount of any liabilities of such Partner assumed by the Partnership or that are secured by any property contributed by such Partner to the Partnership, and (iv) any other item of loss or deduction, including Simulated Depletion and Simulated Loss, allocated to such Partner pursuant to this Agreement.

(c) Adjusted Tax Basis. In addition, for purposes of computing the Capital Accounts of the Partners only: (i) the Investor Partners will be allocated 100% of the Partnership’s adjusted tax basis in the Partnership’s Oil and Gas Properties (notwithstanding the foregoing, the Partners will at all times be allocated those

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percentages of such adjusted tax basis as is necessary to insure that subsequent adjustments to each Partner’s Capital Account for allocations of Simulated Depletion, Simulated Gain, and Simulated Loss do not lack substantial economic effect for purposes of Section 704(b) of the Code); (ii) the Partners will be allocated Simulated Depletion, based upon cost or percentage depletion as the Managing Partner may elect, in the same percentages as the adjusted tax basis of the Oil and Gas Properties is allocated, but not in excess of such adjusted tax basis; (iii) the Partners will be allocated Simulated Gain in proportion to each Partner’s allocable share of the portion of the total amount realized from a taxable disposition of the Oil and Gas Properties by the Partnership that exceeds the Partnership’s Simulated Adjusted Tax Basis in such properties; and (iv) the Partners will be allocated Simulated Loss in proportion to each Partner’s allocable share of the total amount realized from the disposition of the Oil and Gas Properties that represents a recovery of the Partnership’s Simulated Adjusted Tax Basis in such properties. The amount realized by the Partnership from the taxable disposition of the Oil and Gas Properties that represents recovery of the Partnership’s Simulated Adjusted Tax Basis in the Oil and Gas Properties will be allocated to the Partners in the same proportions as the aggregate adjusted tax basis of such properties was allocated to the Partners. The portion of the amount realized by the Partnership on its taxable disposition of the Oil and Gas Properties that exceeds the Simulated Adjusted Tax Basis of such properties will be allocated to the Partners in accordance with rights to distributions. All amounts allocated to the Investor Partners will be allocated among the Investor Partners in proportion to Units held. For purposes of this Section 3.5, Simulated Adjusted Tax Basis, Simulated Depletion, Simulated Gain, and Simulated Loss will have the meanings set forth in Regulations § 1.704-1(b)(2)(iv)(k)(2). The foregoing rules regarding Capital Account adjustments for Simulated Depletion, Simulated Gain, and Simulated Loss are intended to comply with the requirement of Regulationsh §§ 1.704-1(b)(2)(iv)(k) and 1.704-1(b)(4)(v) and will be interpreted and applied in a manner consistent with such Regulations.

(d) Modification. The Managing Partner is authorized to modify the manner in which the Capital Accounts are maintained if the Managing Partner determines that such modification (i) is required or prudent to comply with the Code or Regulations and (ii) is not likely to have a material effect on the amounts distributable to any Partner upon the dissolution of the Partnership.

3.6 Determination of Capital Accounts. Except as otherwise provided in this Agreement, whenever it is necessary to determine the Capital Account of any Partner, the Capital Account of the Partner will be determined after giving effect to all allocations of Profits, Simulated Gains, income, gains, Losses, deductions, Simulated Losses, Simulated Depletion, and distributions of the Partnership for the current year and all allocations and distributions with respect to transactions effected prior to the date as of which such determination is to be made. Any Partner, including any additional or substitute Partner, who will receive an Interest or whose Interest will be increased by means of a Transfer to him of all or part of the Interest of another Partner, will have a Capital Account that reflects such Transfer.

3.7 No Additional Liability. No Investor Partner (other than Investor Partners who are General Partners) will be liable for any of the debts of the Partnership or will be required to

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contribute any capital to the Partnership in addition to the contributions required of him by the provisions of Sections 3.1 and 3.2 of this Agreement. If any Partner has a negative balance in its Capital Account on the date of the liquidation of such Partner’s “interest in the partnership” (within the meaning of Regulations § 1.704-1(b)(2)(ii)(g)) after taking into account allocations of Profits and Losses, and other items of Simulated Gain, income, gain, Simulated Loss, Simulated Depletion, deduction or credit, and distributions of cash or property (in each case as provided in Sections V and VI), that Partner will have no obligation to restore the negative balance or to make any Capital Contribution by reason thereof, and the negative balance will not be considered an asset or a liability of the Partnership or of any Partner. Notwithstanding the previous sentence, in the event of the liquidation of the Managing Partner Interest, the Managing Partner will contribute to the Partnership an amount of cash equal to (but in no event will it be obligated to contribute more than) the negative balance (if any) in the Managing Partner’s Capital Account. Any amount contributed by the Managing Partner will be paid to the creditors of the Partnership or distributed to the other Partners, in either case as provided in Section 9.4. Any Capital Contribution required under this Agreement will be made on or before the later of (a) the end of the Fiscal Year of the Partnership in which the Managing Partner Interest is liquidated, or (b) the ninetieth day following the date of such liquidation. Notwithstanding any of the foregoing to the contrary, to the extent required by applicable law, a Partner receiving a distribution in part or full return of his Capital Contribution will be liable to the Partnership for any sum, not in excess of such amount returned plus interest, necessary to discharge the liabilities of the Partnership to creditors who extended credit or whose claims arose before such distribution. Notwithstanding any provision in this Agreement to the contrary, in the event that all or a part of the Partnership’s Working Interest in a Lease is lost through failure of title, and if it is finally determined that the Partnership is liable to account to a third party for production by reason of the failure of such title, such liability will be borne by the General Partners in the proportions in which they shared in such production revenues.

3.8 Return of Capital/Interest on Capital. Except upon dissolution and liquidation of the Partnership, there is no agreement for, nor time set for, return of any Capital Contribution of any Partner or distribution of the Capital Account to any Partner. No Partner will have the right to withdraw its Capital Contributions or all or any part of its Capital Account or to receive any distribution, except as specifically provided in this Agreement. No Partner will be entitled to receive interest on the amount of any Capital Contribution or any Capital Account.

3.9 No Right of Partition. Each Partner expressly waives any right such Partner might have to cause a partition or other distribution of property to it, except as otherwise expressly set forth in this Agreement.

SECTION IV CONTROL AND MANAGEMENT

4.1 General. The Managing Partner will serve as the general partner of the Partnership for all purposes under the Act. Except as specifically limited in this Agreement, the Managing Partner will have full, exclusive, and complete discretion in the management and control of the Partnership for the purposes set forth. No Person dealing with the Partnership will be required to inquire into the authority of the Managing Partner to take any action or make any decision.

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4.2 Specific Authority. The Managing Partner will manage and control the affairs of the Partnership in a careful and prudent manner and in accordance with good industry practice, and will use its reasonable best efforts to carry out the purposes of the Partnership set forth in Section 1.6. In connection with such management and subject to the limitations set forth elsewhere in this Agreement, the Managing Partner will have full power and authority:

(a) to determine which Oil and Gas Properties to acquire, develop, operate, sell, assign to other Persons, or abandon, subject to such contingencies or defects in title as the Managing Partner determines, and whether to participate, and on what basis, in any proposed operations, and in connection therewith to enter into any partnership agreement, sharing arrangement, Farmout Agreement, or joint venture with any Person acceptable to the Managing Partner, including Affiliates of the Managing Partner, and which is engaged in any business or transaction in which the Partnership is authorized to engage; provided that such partnership agreement, sharing arrangement, Farmout Agreement or joint venture does not constitute, in the opinion of the Managing Partner, an association taxable as a corporation under the Code;

(b) to enter into and execute Leases and assignments thereof, Drilling and Completion Contracts, Operating Agreements, contracts for pumping equipment, contracts for Special Projects, contracts for the completion of Additional Zones, Farmout Agreements, unitization agreements, pooling agreements, unit or pooling designations, recycling contracts, acreage contribution letters and agreements, participation agreements, agreements and conveyances respecting rights-of-way, agreements respecting the acquisition, installation, and operation of surface facilities, agreements respecting surface and subsurface storage, and any other agreements customarily employed in the oil and gas industry in connection with the acquisition, exploration, development, completion, operation, production, sale, or abandonment of Oil and Gas Properties, and any and all other instruments or documents considered by the Managing Partner to be necessary or appropriate to conduct the business of the Partnership;

(c) to participate in the drilling, testing, and, if applicable, completion and equipping of any well that the Managing Partner determines, in the exercise of prudent business judgment under the particular circumstances, would be in the best interest of the Partnership;

(d) to undertake such Special Projects which, under the particular circumstances in the Managing Partner’s exercise of prudent business judgment, would be in the best interest of the Partnership to undertake;

(e) to offer and sell, pledge, lease, farmout or otherwise dispose of oil, gas, and other minerals produced, and any interests therein or rights thereto, for periods and on other terms and conditions consistent with industry practices, and subject to such contingencies or defects in title as the Managing Partner determines, including dispositions to Affiliates of the Managing Partner, and, in connection with such dispositions, to execute division orders and transfer orders necessary or incident to any such sale;

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(f) to sell, farmout, exchange, contribute, mortgage, or pledge any or all of the Partnership’s Oil and Gas Properties or any interest in such Oil and Gas Properties, when and on such terms and conditions as it deems to be in the best interests of the Partnership;

(g) to acquire or dispose of any other property, real or personal, in fee or under a Lease, or any rights therein or appurtenant thereto, necessary or appropriate, in the opinion of the Managing Partner, for the business of the Partnership;

(h) to serve as “tax matters partner” pursuant to the Code and to make such elections under the Code, state tax laws, and other relevant tax laws as to the treatment of items of Partnership income, gain, loss, deduction and credit, and as to all other relevant matters, as may be provided in this Agreement or as the Managing Partner deem necessary or appropriate; including, without limitation, elections referred to in Section 754 of the Code, determination of which items of cash outlay are to be capitalized or treated as current expenses, and selection of the method of accounting and bookkeeping procedures to be used by the Partnership;

(i) to open, maintain, and close accounts with brokers, dealers, banks and others and to issue all instructions and authorizations regarding the purchase and sale or entering into, as the case may be, of assets, instruments, or agreements consistent with the objectives and purposes of the Partnership, and to invest in short-term obligations or savings accounts (including, but not limited to, obligations of federal and state governments and their agencies, commercial paper, money market accounts, and certificates of deposit) such funds as are temporarily not required for Partnership purposes;

(j) to maintain, at the expense of the Partnership, complete and accurate records of all correspondence, documents, or instruments of any nature relating to the Partnership’s business. Such records, together with such supporting evidence of such records as is in the control and possession of the Partnership, will be kept in the principal office of the Partnership or the Managing Partner for such periods as the Managing Partner deems appropriate;

(k) to purchase, at the expense of the Partnership, or decline to purchase such liability and other insurance as the Managing Partner deems advisable to protect the Partnership’s assets and business or as may be required by the laws of any jurisdiction to which the Partnership is subject, it being the intent hereof to permit the Managing Partner in its discretion to cause the Partnership to elect not to purchase insurance against all risks;

(l) to control any matters affecting the rights and obligations of the Partnership, including instituting or defending litigation and settling claims or litigation, and in connection with such activities, employ attorneys or other professionals to advise and otherwise represent the Partnership;

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(m) to make payment or, in the exercise of its discretion, omit to make payment of delay rentals on any Lease(s) or leasehold interests acquired by the Partnership;

(n) to hold title to the Partnership’s Oil and Gas Properties in the name of the Partnership or its own name or in the name of a nominee or agent chosen by the Managing Partner, as the Managing Partner deems appropriate;

(o) subject to the obligations of the Operator(s) under the terms of any Operating Agreement, to perform or cause to be performed for the Partnership all services customarily performed by a management company for Oil and Gas Properties in accordance with sound management practices, including, without limitation, the hiring and firing of personnel, the furnishing of general and administrative services in connection with the drilling, completion, marketing, operating, producing, selling of production and maintenance of Oil and Gas Properties, preparation of the tax returns of the Partnership, bookkeeping, purchasing of goods, equipment, and supplies, and such other duties as are required for the proper management of operations similar to those of the Partnership; and

(p) to incur all costs and make all expenditures in any way related to any of the foregoing.

4.3 Other Activities. Each Partner may be engaged in or have other business interests or other activities other than those relating to the Partnership (including business interests or other activities that are competitive with the business of the Partnership). The Managing Partner and its Affiliates currently manage oil and gas programs, and may organize, contract with, and manage other oil and gas programs in the future. In addition, the Managing Partner and its Affiliates may engage in the exploration for and production of oil, gas, and other minerals for their own accounts, jointly or with others, or as partners or managers of any other entity. The terms and provisions contained in this Agreement shall not limit the activities of Affiliates, partners, shareholders, members, managers, officers, directors or employees, of the Partners. The Managing Partner and its Affiliates shall have no obligation to offer any future investment opportunity to any of the Investor Partners, and no Investor Partner, by virtue of its purchase of Units, shall have any right to invest in any future investment opportunity created by the Managing Partner or any of its Affiliates.

4.4 Employment of Others. With respect to Partnership operations, the Managing Partner may employ or retain such legal counsel, accountants, petroleum engineers, geologists, geophysicists, landmen, appraisers, or other experts or advisors as it may reasonably deem appropriate for the purpose of discharging its duties with respect to Partnership operations, and will be entitled to pay the fees of any such Persons from the funds of the Partnership. The Managing Partner may act, and will be protected if acting in good faith, on the opinion or advice of, or information obtained from, any such legal counsel, accountant, engineer, geologist, geophysicist, appraiser, or other expert or advisor, whether retained or employed by the Partnership, the Managing Partner, the Operator, or otherwise, in relation to any matter connected with the administration or operation of the business and affairs of the Partnership.

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4.5 Transactions with Affiliates.

(a) The Partnership may purchase or acquire drilling and completion equipment and other equipment necessary in the drilling, completion, equipping, or operation of the Partnership’s Oil and Gas Properties from an Affiliate of the Managing Partner; provided, however, that the Partnership may only be charged for such drilling and completion equipment and other equipment at rates equal to or better than the rates that would be charged by unaffiliated third parties in in the industry in such area.

(b) The Managing Partner and its Affiliates may sell, assign or convey any Oil and Gas Properties to the Partnership and, in doing so, may:

convey less than all of its interest in an Oil and Gas Property to the (i)Partnership; and

convey other portions of its interest in an Oil and Gas Property to (ii)Persons (including Affiliates of the Managing Partner) other than the Partnership and on terms different from those received from the Partnership.

4.6 Other Compensation. The Managing Partner will not be deemed to have received commissions, fees, or other compensation paid to any firm, proprietorship, partnership, or corporation that is an Affiliate, or in which the Managing Partner, or any officer or shareholder of the Managing Partner, or any member of any such Person’s respective immediate family, owns a beneficial interest, except to the extent specific assignments of such compensation are made to the Managing Partner. Nothing contained in this Agreement will be deemed to prevent or restrict the Managing Partner, or any Affiliate, from obtaining or sharing in all or any part of any brokerage fees, commissions, or other sums payable in connection with any property purchased or sold by the Partnership; provided that the Partnership will not be charged or directly or indirectly pay any brokerage fees, commissions, or other sums in excess of competitive rates in the industry for the same geographical area.

4.7 Debt for Borrowed Money. All needed Partnership funds are expected to be derived from income of the Partnership or Capital Contributions to the Partnership; however, the Partnership will be permitted to borrow money to fund its operations if the Managing Partner determines, in its sole discretion, that such borrowings are desirable or necessary in the interest of the Partnership.

4.8 Payments to the Managing Partner. The Managing Partner is authorized to receive an Organization and Offering Allotment, a Geological and Geophysical Allotment and a Management Fee from the Partnership as compensation for its services and on a fixed, non-accountable basis. The Managing Partner will be responsible for paying the Organization and Offering Expenses, General and Administrative Expenses, Geological and Geophysical Expenses incurred by the Partnership prior to the initial offering of Units and through the eighteen-month period beginning on the date of this Agreement. The Managing Partner will pay such expenses out of the proceeds of the Organization and Offering Allotment, Geological and Geophysical Allotment and Management Fee paid to the Managing Partner. For the avoidance of doubt, the Managing Partner is not responsible for paying any other expenses of the Partnership (including

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without limitation the Lease Acquisition Costs and Lease Operating Costs) and shall be reimburse for any such expenses pursuant to the provisions of Section 4.9.

4.9 Reimbursement of General and Administrative Expenses. Except as otherwise provided in this Agreement, the Partnership will be responsible for paying all direct costs and expenses incurred by the Partnership related to acquiring, holding, owning, developing, and operating the Oil and Gas Properties and conducting all other business activities pursued by the Partnership, including, without limitation, all costs incurred by the Partnership related to drilling, completion, reworking, equipping, marketing, Special Projects, and producing and selling oil and gas from the wells. The Managing Partner will be reimbursed for all General and Administrative Expenses, Organization and Offering Expenses and Geological and Geophysical Expenses of the Partnership incurred after eighteen months from the date of this Agreement.

4.10 Prohibited Acts. Notwithstanding the generality of the foregoing, the Managing Partner is prohibited from doing, performing, or authorizing any of the following actions without the consent of a Majority-in-Interest of the Investor Partners:

(a) increase the number of authorized Units;

(b) create new or additional classes or series of Units;

(c) act in contravention of this Agreement;

(d) perform any act which would make it impossible to carry on the ordinary business of the Partnership, except as specifically permitted by Sections IV or IX,;

(e) continue the business with Partnership property on the occurrence of an Event of Withdrawal of the Managing Partner, except as specifically permitted in this Agreement;

(f) change or reorganize the Partnership into any other legal form;

(g) receive any benefit from an arrangement for marketing of oil and gas production, unless such benefits are fairly and equitably apportioned among the Managing Partner and the Partnership;

(h) require any Limited Partner to make any Capital Contribution to the Partnership not provided for in this Agreement; or

(i) make any loans or advances from the Partnership to the Managing Partner or to its Affiliates.

4.11 No Management by Investor Partners. The Investor Partners may not take part in the conduct or control of the Partnership’s business, and they have no right or authority to act for or to bind the Partnership. The exercise of any of the rights and powers of the Investor Partners pursuant to the terms of this Agreement will not be deemed taking part in the day-to-day affairs of the Partnership or the exercise of control over Partnership affairs.

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4.12 No Liability for Capital Contributions. The Managing Partner will not be liable for the return of any portion of the Capital Contributions of the Investor Partners.

4.13 Indemnity of Managing Partner. Notwithstanding anything in this Agreement to the contrary or any provision of the Act, none of the Managing Partner or its Affiliates will be liable, responsible, or accountable in damages or otherwise to the Partnership or any other Partner for any act performed or failure to act by the Managing Partner or any Affiliate of the Managing Partner if the Managing Partner or its Affiliate, as the case may be, in good faith, determined that such act or failure to act was in the best interests of the Partnership and such act or failure to act did not constitute gross negligence or misconduct of the Managing Partner or such Affiliate, as the case may be. The Partnership (but not any Partner) will indemnify and hold harmless the Managing Partner and its Affiliates for any losses, judgments, liabilities, expenses, and amounts paid in connection with any Proceeding arising out of the formation, management, operation, allocations, distributions, or dissolution of the Partnership, provided that the same were not the result of gross negligence or misconduct on the part of the Managing Partner of its Affiliates. Notwithstanding the above, none of the Managing Partner or its Affiliates will be indemnified for liabilities arising under federal and state securities laws unless (a) there has been a successful adjudication on the merits of each count involving securities law violations, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction. Moreover, the Partnership will not incur the costs of the portion of any insurance which insures the Managing Partner or its Affiliates against any liability as to which the Managing Partner or any of its Affiliates, as the case may be, is prohibited from being indemnified.

4.14 Liability of General Partners. Notwithstanding the joint and several liability between the Managing Partner and the General Partners, they hereby agree that each will be solely and individually responsible only for his pro rata share (based on Capital Contributions) of liabilities and obligations of the Partnership, and any Partner who incurs liability in excess will be entitled to contribution from other such Partners.

SECTION V ALLOCATIONS OF INCOME, GAINS, PROFITS, AND LOSSES

5.1 Allocation of Profits and Losses.

(a) After giving effect to the allocations set forth in Section 5.1(c), and except as otherwise provided in Section 3.5, Profits and Losses for any Fiscal Year or other period will be allocated to the Partners in accordance with their Unit ownership.

(b) (i) Notwithstanding any provision of this Agreement to the contrary, Partnership Losses allocated pursuant to Section 5.1(a) to any Partner for any taxable year will not exceed the maximum amount of Partnership Losses that may be allocated to such Partner without causing such Partner to have an Adjusted Capital Account Deficit at the end of such taxable year.

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All Partnership Losses in excess of the limitation set forth in (ii)Section 5.1(b)(i) will be allocated solely to the other Partners pursuant to Section 5.1(a).

If no other Partner may receive an additional allocation of (iii)Partnership Losses pursuant to Section 5.1(b)(ii), such additional Losses not allocated pursuant to Section 5.1(b)(ii) will be allocated solely to the Managing Partner. If any Losses are allocated to the Managing Partner hereunder, future Partnership Profits, if any, will first be allocated to the Managing Partner to offset such Loss allocations before Profits are allocated pursuant to Section 5.1(a).

(c) (i) If there is a net decrease in Partnership minimum gain (as defined in Regulations §1.704-2(d)) during any Partnership taxable year, certain items of income and gain will be allocated (on a gross basis) to the Partners in the amounts and manner described in Regulations §1.704-2(f). This Section 5.1(c)(i) is intended to comply with the minimum gain chargeback requirement (set forth in Regulations §1.704-2(f) relating to partnership nonrecourse liabilities, as defined in Regulations §1.704-2(b)(3)) and will be so interpreted.

If there is a net decrease in minimum gain attributable to partner (ii)nonrecourse debt (as determined pursuant to Regulations §1.704-2(i)) during any Partnership taxable year, certain items of income and gain will be allocated (on a gross basis) as quickly as possible to those Partners who had a share of the minimum gain attributable to the partner nonrecourse debt (determined pursuant to Regulations §1.704-2(i)(5)) in the amounts and manner described in Regulations §1.704-2(i)(4)). This Section 5.1(c)(ii) is intended to comply with the minimum gain chargeback requirement set forth in Regulations §1.704-2(i)(4), as it relates to partner nonrecourse debt (as defined in Regulations §1.704-2(b)(4)), and this Section 5.1(c)(ii) will be so interpreted.

If, after applying Sections 5.1(c)(i) and (ii), any Partner has an (iii)Adjusted Capital Account Deficit, items of Partnership income and gain will be specially allocated (on a gross basis) to each such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit of such Partner as quickly as possible. It is intended that this Section 5.1(c)(iii) constitute a “qualified income offset” within the meaning of Regulations §1.704-1(b)(2)(ii)(d), and this Section 5.1(c)(iii) will be interpreted and implemented in accordance with such Regulations.

Partner nonrecourse deductions (as determined pursuant to (iv)Regulations §1.704-12(i)(2)) will be allocated, pursuant to Regulations §1.704-2(i)(1), to the Partner who bears the economic risk of loss with respect to such deductions.

Intangible drilling and development costs deductible under (v)Section 263(c) of the Code, deductions attributable to costs incurred in connection with Completion Activities, and any depreciation deductions attributable to Lease

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Acquisition Costs or assets acquired in connection with Completion Activities will be specially allocated 100% to the Investor Partners.

Deductions attributable to Start-Up Costs for any Fiscal Year or (vi)other period will be specially allocated 100% to the Investor Partners admitted to the Partnership on or before the last day of the first tax year of the Partnership in proportion to their Capital Contributions; provided, however, if any Investor Partners are admitted to the Partnership on subsequent dates, all Start-Up Costs will be divided among such Investor Partners, to the extent possible, so that the cumulative Start-Up Costs allocated to such Investor Partners at any time are always in proportion to their Capital Contributions. In the event the Managing Partner determines that such result is not likely to be achieved through the future allocations of Start-Up Costs, the Managing Partner may allocate a portion of Profits or Losses so as to achieve the same effect on the Capital Accounts of such Investor Partners, notwithstanding any other provision of this Agreement to the contrary.

Pursuant to the provisions of Section 613A(c)(7)(D) of the Code, (vii)all depletion deductions with respect to Partnership Oil and Gas Properties will be computed by the Partners separately. Simulated Depletion, Simulated Loss, and Simulated Gain will be allocated as set forth in Section 3.5.

5.2 Allocations Among Investor Partners. For each item of Partnership Profit, Simulated Gain, income, revenue, gain, Loss, Simulated Loss, Simulated Depletion, deduction, cost, and expense allocable to the Investor Partners, each Investor Partner will be allocated and bear an amount of each such item based upon a fraction, the numerator of which is the number of Units held by such Investor Partner and the denominator of which is the number of Units held by all Investor Partners or their transferees receiving such allocation.

5.3 Timing of Allocations. For purposes of determining the Profits, Losses, or any other item allocable to any period (including periods before and after the admission of a new Partner), Profits, Losses, and any such other item will be determined on a daily, monthly, or other basis, as determined and allocated by the Managing Partner using any permissible method under Section 706 of the Code and the corresponding Regulations.

5.4 Compliance with Tax Code. For federal income tax purposes, every item of income, gain, loss, and deduction will be allocated among the Partners in accordance with the allocations under Section V of this Agreement. It is intended that the allocations in Section V of this Agreement effect an allocation for federal income tax purposes consistent with Section 704 of the Code and comply with any limitations or restrictions therein. The Managing Partner will have complete discretion to make the allocations pursuant to this Section V in any reasonable manner consistent with Section 704 of the Code and to amend the provisions of this Agreement as appropriate to comply with the Regulations promulgated under Section 704 of the Code, if in the opinion of counsel to the Partnership, such an amendment is advisable to reflect allocations among the Partners consistent with those Regulations.

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SECTION VI DISTRIBUTIONS

6.1 Distributions.

(a) Except as otherwise provided in this Agreement, after providing for the satisfaction of the current debts and obligations of the Partnership in the manner required by this Agreement and after withholding any Cash Reserves required by the Partnership in the opinion of the Managing Partner, the Managing Partner will, as expeditiously as possible, make distributions of cash, out of the Partnership’s net cash flow, 100% to the Investor Partners in proportion to their Units held. The Managing Partner’s determination of the net cash flow available for distribution by the Partnership will be conclusive and binding upon all Partners. Distributions will be allocated to each Investor Partner based upon a fraction, the numerator of which is the number of Units held by such Investor Partner and the denominator of which is the number of Units held by all Investor Partners or their transferees receiving such distribution.

(b) Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the Managing Partner on behalf of the Partnership, may not make a distribution to any Partner if such distribution would violate Section 17-607 of the Act or other applicable law.

6.2 Adjusted Capital Account Deficit. Notwithstanding Section 6.1(a), if at any time distributions to a Partner would create or increase an Adjusted Capital Account Deficit and if other Partners have positive Capital Account balances (after such Adjusted Capital Account Deficit and Capital Account balances have been adjusted to reflect the allocation of Profits and Losses pursuant to Section V, taking into account interim Profits and Losses (determined using such accounting methods selected by the Managing Partner for the period ending on or before such distribution), such cash will be distributed first to the Partners having a positive Capital Account balance in an amount equal to, and in proportion to, such positive balances, and the remaining cash, if any, will be distributed in accordance with Section 6.1(a).

SECTION VII SERVICES AND COMPENSATION OF OPERATOR

AND STABLEROCK

7.1 Operator. StableRock is hereby authorized to be the Operator of any well under the terms of the Operating Agreement and to receive compensation for services under such agreement.

7.2 Drilling Contractor. StableRock is hereby authorized to be the contract driller of any well for the benefit of the Partnership under the terms of the Drilling and Completion Contracts, and to receive compensation for services under such agreements.

SECTION VIII TRANSFERS OF INTERESTS OF PARTNERS

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8.1 General. This Section VIII does not apply to the initial admission of Partners pursuant to Section III of this Agreement, and Section 8.4 will not apply to Transfers of Interests between existing Partners. An Interest, and any interest in the Interests, may not be Transferred, voluntarily or involuntarily (including by operation of law or otherwise), except in accordance with the provisions of this Section VIII. A Partner must obtain the prior written consent of the Managing Partner, which consent may be given or withheld for any reason or for no reason in the Managing Partner’s sole discretion, for any Transfer subject to this Section VIII other than a Transfer by operation of law. Any attempt to Transfer any interest in the Interests in violation of this Agreement or any applicable state or federal law will be void and of no effect, except that any Transfer by operation of law will result in the transferee having the rights of an assignee who has not been admitted as a Partner, as to allocations and distributions, but not the rights of a Partner under this Agreement, unless admitted as a Partner by the Managing Partner. The transferee must provide to the Managing Partner its taxpayer identification number, passport and related information of any natural person transferee or control person of any transferee, and any other information reasonably necessary to permit the Partnership to file required tax returns or comply with anti-money laundering laws. A Partner that is an entity may change its name, or merge or consolidate with an Affiliate, without the prior consent of the Managing Partner, and such action will not be considered a Transfer subject to this Section VIII. A Partner may Transfer all, but not less than all, of its Interest to a trust or other entity established for the benefit of the Partner or the members of such Partner’s immediate family without the prior consent of the Managing Partner or any Partner, subject to the provisions of Sections 8.2 and 8.3.

8.2 Interests Are Restricted Securities. The Interests have not been registered under the Securities Act or under the securities laws of any state or other jurisdiction, and may not be offered or Transferred unless and until registered under such act and laws or, in the opinion of counsel in form and substance satisfactory to the Partnership, such offer or Transfer is in compliance with such securities laws.

8.3 Other Restrictions on Transfers. No Transfer will be made that, in the opinion of counsel to the Partnership, would (a) result in the Partnership being considered to have been terminated for purposes of Section 708 of the Code; (b) not satisfy any applicable safe harbor under the Regulations from “publicly traded partnership” status; or (iii) otherwise result in materially adverse tax consequences to the Partnership or the Partners. The Partnership may require a Partner desiring to Transfer its Interest to provide an opinion of counsel in form and substance satisfactory to the Partnership that such transaction would not result in the Partnership being considered terminated under the Code and Regulations. No Transfer will be made which, in the opinion of counsel to the Partnership, would result in the assets of the Partnership being considered plan assets for purposes of ERISA. No Transfer will be made that, in the opinion of counsel to the Partnership, would require the Partnership to register as an investment company under the Investment Company Act of 1940. Any Transfer must satisfy all of the following conditions:

such transferee constitutes only one beneficial owner of the (i)Partnership’s securities for purposes of the Securities Exchange Act of 1934 and only one partner of the Partnership within the meaning of Regulations §1.7704-1(h);

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such transferee is an “Accredited Investor” within the meaning of (ii)Regulations D promulgated under the Securities Act;

such Transfer does not cause the Managing Partner, any of its (iii)Affiliates, the Partnership, or any of the Partners to be subjected to any regulations or reporting requirements that the Managing Partner reasonably believes to be significant or burdensome or to any tax obligation; and

the transferee, in the Managing Partner’s judgment, has the (iv)financial ability to hold the Interest and perform in a timely manner all of its obligations as a Partner under this Agreement.

The transferee will provide to the Managing Partner its taxpayer identification number, passport and related information of any natural person transferee or control person of any transferee, and any other information reasonably necessary to permit the Partnership to file required tax returns. The Managing Partner may withhold consent to any Transfer to a transferee who does not provide appropriate identifying information regarding itself or any control person or other information required by the Managing Partner to comply with any currency transaction laws, financial privacy laws, anti-money laundering laws, or similar laws.

8.4 Consent Required for Substitution of New Partner. Subject to Sections 8.1, 8.2, and 8.3, a transferee of any Interest may become a Partner only upon (a) execution and delivery by the transferee of a written acceptance and adoption of this Agreement, as the same may be amended, together with such other documents, if any, as the Managing Partner may require; (b) the payment to the Partnership by the Partner Transferring its Interest of all reasonable expenses incurred by the Partnership in connection with such Transfer; and (c) the consent of the Managing Partner, which may, in each case, be given or denied in the absolute discretion of the Managing Partner. Upon such execution, payment, and consent, the transferee will, with respect to the Interest assigned, be admitted to the Partnership and become a substituted Partner in the Partnership. A transferee who is not admitted as a Partner will be entitled to allocations and distributions in respect to the Interest transferred but will not have any other rights under this Agreement.

8.5 Allocations upon Transfer. If an Interest is Transferred during a year, the rights and obligations to share in Profits and Losses, to receive distributions, and to receive such other allocations of income, gain, loss, deduction, credit, Simulated Gain, Simulated Loss, or Simulated Depletion deduction attributable to the transferred Interest will, for federal income tax purposes, be prorated between the transferor and the transferee on a reasonable basis as determined by the Managing Partner and as is required by Code Section 706; provided, however, that gain or loss on a sale or other disposition of all or a substantial portion of the assets of the Partnership will be allocated to the record holder of the Interest on the date of sale.

8.6 Transfers by Trusts. A Partner that is a trust under an employee benefit plan may, upon prior written notice to the Managing Partner, Transfer a beneficial interest in all (but not less than all) of its Interest to any other trust under such employee benefit plan, provided that such trust satisfies each of the requirements described in Section 8.3. For purposes of this Section 8.6, a change in any trustee or fiduciary of a Partner will not be deemed to be a Transfer

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pursuant to this Agreement; provided any such replacement trustee or fiduciary is also a fiduciary as defined under applicable state law; and provided further that income and loss allocable to the Partner will continue to be included in filings under the same employer identification number with the Internal Revenue Service. Accordingly, such a change in a trustee or fiduciary may be made without the prior written consent of the Managing Partner; provided that the Partner provides prior written notice (or if prior written notice is not feasible, written notice as quickly as is feasible) of such change to the Managing Partner. Notwithstanding anything in this Section 8.6 to the contrary, the transferor will remain liable for all liabilities and obligations relating to the transferred beneficial interest (unless the transferee becomes a substitute Partner or the Managing Partner otherwise consents in its sole discretion), and such transferee will become an assignee of only a beneficial interest in Partnership allocations and distributions and will not become a substitute Partner, except with the consent of the Managing Partner. No consent of any other Partner will be required as a condition precedent to any Transfer. The voting rights of any Partner’s Interest will automatically terminate upon any Transfer unless the Managing Partner in its sole discretion has consented in writing to such transferee becoming a substitute Partner. As a condition to any Transfer of Interests (including a Transfer not requiring the consent of the Managing Partner), the transferor and the transferee will provide such legal opinions and documentation as the Managing Partner will reasonably request; provided that if the Transfer is to be made from a Partner that is an employee benefit plan to another trust under the same employee benefit plan as contemplated above, a certificate in a form reasonably satisfactory to the Managing Partner will be delivered by the Partner in lieu of such legal opinions and other documentation.

8.7 Transfers by Managing Partner and its Affiliates. The Managing Partner may, without notice to or consent from the Investor Partners, reallocate, Transfer or assign all or any part of its Managing Partner Interest at any time or from time to time, including to any Person who is not at the time a Partner in the Partnership, whereupon such Managing Partner Interest will be deemed a Limited Partner Interest not expressed in Units, and such Person will be deemed admitted as a Limited Partner in the Partnership without the approval of the Managing Partner or any other Partner and without compliance with any other provision of this Agreement except that the Person must provide a written adoption of this Agreement and provide its taxpayer identification number and any other information required by the Managing Partner to file required tax returns or to comply with any currency transaction laws, financial privacy laws, anti-money laundering laws, or similar laws. Such Limited Partner will be entitled to its proportionate share of allocations and distributions with respect to the Managing Partner Interest, including any change in such allocations and distributions, but such Limited Partner will not share in special allocations or distributions to Investor Partners. Affiliates of the Managing Partner may, without notice to or consent from the Investor Partners, Transfer or assign any Units then held by the Affiliates as Investor Partners.

SECTION IX DISSOLUTION AND TERMINATION

9.1 Dissolution. Except as provided in Section 9.2, the Partnership will be dissolved and its business wound up upon the earliest to occur of:

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(a) the Managing Partner, with the consent of a Majority-in-Interest of the Investor Partners, determines that the Partnership should be dissolved;

(b) the Managing Partner becomes subject to an Event of Withdrawal;

(c) the Partnership becomes insolvent or bankrupt;

(d) all or substantially all of the Partnership’s assets are sold or otherwise disposed of; or

(e) any other event that, under the Act, would cause the Partnership’s dissolution.

The Partnership will not be dissolved and terminated upon the merger, consolidation, recapitalization, or reorganization of the Managing Partner.

For the purposes of Section 9.1(d), a bankruptcy of an entity will be deemed to occur when such entity (w) files a petition in bankruptcy, (x) voluntarily takes advantage of any bankruptcy or insolvency law, (y) is adjudicated as bankrupt, or (z) if a petition or answer is filed proposing the adjudication of such entity as bankrupt and such entity either consents to the filing thereof or such petition or answer is not discharged or denied prior to the expiration of 60 days from the date of such filing. The insolvency of an entity will be deemed to occur when the assets of such entity are insufficient to pay its liabilities and it so admits in writing.

9.2 Reconstitution. The Managing Partner agrees to serve as Managing Partner of the Partnership until the Partnership is terminated without reconstitution as provided below. Upon the occurrence of any event set forth in Section 9.1(b) or (e), the Managing Partner must deliver written notice thereof to all Investor Partners and the Partnership will be deemed to be dissolved and reconstituted if (a) there remains at least one General Partner willing to serve as Managing Partner, in which case the business of the Partnership may be carried on by the remaining General Partner (or General Partners) (in which case a Majority-in-Interest will determine which General Partner will serve as Managing Partner), or (b) within 90 days after such event, all of the remaining Partners (i) elect in writing to continue the business of the Partnership and, (ii) if there are no remaining General Partners, agree to the appointment, effective as of the date of withdrawal of the Managing Partner, of one or more new Managing Partners. If the remaining General Partners, if any, do not elect to carry on the business of the Partnership, or if no election to continue the Partnership is made by all remaining Partners, within 90 days of the event of dissolution, the Partnership will only conduct activities necessary to wind up its affairs. If an election to continue the Partnership is made upon the occurrence of an event described in Section 9.1(c) or (f) of this Agreement, then:

(a) the Partnership will be deemed to be reconstituted and will continue until the end of the term for which it is formed unless earlier dissolved in accordance with this Section IX;

(b) going forward, the Interest of the former Managing Partner will be treated as a Limited Partner Interest and converted in the manner provided in Section 16.3 of this Agreement; and

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(c) all necessary steps will be taken to amend or restate this Agreement and the certificate of limited partnership, and the successor Managing Partner may for this purpose exercise the power of attorney granted pursuant to Section XIV of this Agreement.

9.3 Continuing Obligations. The dissolution of the Partnership will not release or relieve any of the parties hereto of their contractual obligations under this Agreement.

9.4 Distribution of Assets.

(a) Upon any dissolution requiring the winding up of the business of the Partnership, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership's business and affairs. The liquidator shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership's liabilities and property and the Partnership’s assets, including its Oil and Gas Properties, shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom shall be applied and distributed in the following order, subject to any different requirements of law: (a) first, to the payment and discharge of all of the Partnership's obligations and liabilities to creditors, other than liabilities for which reasonable provision for payment has been made and liabilities owed to Partners; and (b) the balance, if any, in accordance with Section 6.1.

(b) Notwithstanding the provisions of Section 9.2(a) which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if, prior to or following dissolution of the Partnership, the liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership and/or distribute to the Partners in lieu of cash, as tenants in common and in accordance with the provisions of Section 9.2(a), undivided interests in such assets as the liquidator deems not suitable for liquidation. Any such distributions in kind shall be made subject to such conditions relating to the disposition and management of such assets as the liquidator deems reasonable and equitable and to any agreements governing the operation of such assets at such time. The liquidator shall determine the fair market value of any property distributed using such reasonable method of valuation as it may adopt.

9.5 Debt of Partner. Notwithstanding the foregoing, if any Partner is indebted to the Partnership, then until such indebtedness is repaid by him, the liquidator will offset any amounts otherwise distributable to such Partner and apply such offset to the Partner’s debt until paid; however, if such debt has not been paid or otherwise liquidated at the expiration of six months after the final statement for which provision is made in Section 9.4(a) has been given to such Partner, the liquidator may sell the Interest in the Partnership of such Partner at public or private sale at the best price immediately obtainable, which will be determined in the sole judgment of

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the liquidator. So much of the proceeds of such sale as is necessary will be applied to the liquidation of the amount then due under this Section 9.5, and the balance of such proceeds, if any, will be delivered to such Partner.

9.6 Completion of Liquidation. The liquidator will comply with any requirements of the Act or other applicable law pertaining to the winding up of a limited partnership, upon the completion of which the Partnership will be deemed terminated.

SECTION X INVESTOR PARTNERS

10.1 Withdrawal of Partner. An Investor Partner may withdraw as a Partner at any time, and thereafter will have the rights of a transferee who has not been admitted as a Partner. A Partner who is subject to an Event of Withdrawal will cease to be a Partner as of the date of the Event of Withdrawal and will thereafter have the rights of a transferee of a Partnership Interest who is not admitted as a Partner. Any Partner who is subject to an Event of Withdrawal may, at any time thereafter, request that the Partnership redeem the Capital Account of such Partner, or the Managing Partner may, at its discretion, determine to redeem such Capital Account, at the greater of (a) its tangible book value, without adjustment for goodwill, intellectual property, or other intangibles not reflected in the financial records of the Partnership or (b) five (5) times the amount of cash distributed to such Partner during the preceding twelve (12) months. If the Managing Partner grants such request or determines to redeem such Capital Account, the Partnership will redeem the Capital Account, as of the end of the next calendar quarter, and may pay the redemption amount in quarterly installments over a period not to exceed 24 calendar months, with interest at the Delaware judgment rate.

10.2 Trade Secrets. Each Partner acknowledges that it may have access to and may be entrusted with certain non-public information pertaining to the present and contemplated business activities of the Partnership or of third parties with whom it contracts, which includes, but is not limited to, information regarding industry relationships, areas of interest, geological and engineering information, drilling and completion operations, Subsequent Operations, capital markets contacts, infrastructure and logistics, and information regarding potential investors and other Partners, including their names, addresses, telephone numbers, contact information, investment policies, financial condition and investment portfolio (together, “Partnership Trade Secrets”). Each Partner and other Person bound by these provisions acknowledges that the disclosure of such Partnership Trade Secrets to any other party would be detrimental to the interests of the Partnership. Each Partner and other Person bound by these provisions acknowledges and agrees that (a) Partnership Trade Secrets are the proprietary information of the Partnership and/or of the third parties, (b) Partnership Trade Secrets will be treated as confidential information of the Partnership, and (c) none of the Partnership Trade Secrets or the facts contained therein will be transmitted verbally or in writing by any Person except as may reasonably be required in the ordinary course of conducting business on behalf of the Partnership. Each Partner and other Person bound by these provisions covenants and agrees that it will not disclose such Partnership Trade Secrets or use the Partnership Trade Secrets other than as may reasonably be required in the normal course of the business of the Partnership; provided, that any Partner may disclose any such information: (a) as has become generally available to the public other than through violation of this Agreement; (b) as may be required or appropriate in

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any report, statement, or testimony submitted to any governmental authority having or claiming to have jurisdiction over such Partner (or its representative), but only that portion of the data and information that, in the written opinion of counsel for such Partner or representative, is required or would be required to be furnished to avoid liability for contempt or the imposition of any other material judicial or governmental penalty or censure; (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation; (d) as expressly permitted under this Agreement; or (e) as to which the Partnership has consented in writing. Notwithstanding anything in this Agreement to the contrary, any Partner (and representative of such Partner) may disclose to appropriate state and federal tax authorities such Partner’s U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated by this Agreement relating to such Partner and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. These provisions will continue to bind any Partner who is subject to an Event of Withdrawal, and will bind any transferee of a Partner.

If for any reason, any Person violates any of the provisions contained in this Section 10.2, such Person acknowledges and agrees that the Partnership and each other Partner will have the right to require that the violating Person immediately comply with the terms and conditions set forth in this Section 10.2. Each Person acknowledges and agrees that, in the event of a violation of this Section 10.2, monetary and other damages would be difficult or impossible to determine. As such, each Person further acknowledges and agrees that in the event of a real or threatened breach by such Person of any of the provisions contained in this Section 10.2, the Partnership will be entitled to commence proceedings in a court of competent jurisdiction located in Dallas, Dallas County, Texas for and be entitled to obtain preliminary and/or permanent injunctive relief or other appropriate equitable remedies, which rights and remedies will be in addition to any other rights or remedies to which they may be justly entitled at law.

10.3 Competing Activities of Partners. Each Partner may engage or continue to engage in activities within the oil and gas industry, and in businesses related to such industries. Any Managing Partner or Partner or its Affiliates may have business dealings with the Partnership. These activities will not be construed as a conflict of interest with the Partnership or as a conflict of interest regarding any vote within the Partnership or as a violation of any duty to the Partnership or to any other Partner.

10.4 Record Date. For the purpose of determining Partners entitled to notice of or to give consent, or Partners entitled to receive payment of any distribution, or in order to make a determination of Partners for any other purpose, the date on which notice of the meeting is mailed or the date on which such distribution is made, as the case may be, will be the record date for such determination of Partners unless the Managing Partner will otherwise specify another record date.

10.5 Representations of Partners. Each Partner hereby represents and warrants to the Partnership and each other Partner as follows:

(a) in the case of a Partner that is an entity: (i) that the Partner is duly incorporated, organized, or formed, validly existing, and (if applicable) in good standing under the laws of the jurisdiction of its incorporation, organization, or formation; (ii) if

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required by applicable law, that the Partner is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation, organization, or formation; and (iii) that the Partner has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, managers, members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by that Partner have been duly taken;

(b) that the Partner has duly executed and delivered this Agreement, and that it constitutes the legal, valid, and binding obligation of that Partner enforceable against it in accordance with its terms (except as may be limited by bankruptcy, insolvency, or similar laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity);

(c) that Partner’s authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default, or violation of, (1) the organizational documents of such Partner (if it is an entity), (2) any contract or agreement to which that Partner is a party or is otherwise subject, or (3) any law, order, judgment, decree, writ, injunction, or arbitral award to which that Partner is subject; or (ii) require any consent, approval, authorization from, filing or registration with, or notice to any governmental authority or any other Person, unless such requirement has already been satisfied;

(d) that the Partner is familiar with the existing or proposed business, financial condition, properties, operations, and prospects of the Partnership; it has asked such questions, and conducted such due diligence, concerning such matters and concerning its acquisition of an Interest as it has desired to ask and conduct, and all such questions have been answered to its full satisfaction; it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Partnership; it understands that owning an Interest involves various risks, including the restrictions on Transfers, the lack of any public market for the Interests, the risk of owning its Interest for an indefinite period of time and the risk of losing its entire investment in the Partnership; it is able to bear the economic risk of such investment; it is acquiring its Interest solely for investment for its own beneficial account and not with a view to or any present intention of directly or indirectly selling, Transferring, offering to sell or to Transfer, participating in any distribution, or otherwise Transferring all or a portion of its Interest; and it acknowledges that the Interest has not been registered under the Securities Act or any other applicable federal or state securities laws, and that the Partnership has no intention, and will not have any obligation, to register or to obtain an exemption from registration of the Interest or to take action so as to permit sales pursuant to the Securities Act (including Rules 144 and 144A under the Securities Act).

10.6 Examination of Books and Records. At all times, the books and records of the Partnership must be maintained at the principal office of the Partnership and be open to the reasonable inspection and examination of the Partners, or their duly authorized representatives, during reasonable business hours. An authorized representative must be a Person reasonably

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competent to examine such books and records. Any Partner desiring to inspect and examine such records must make a written request to the Partnership a reasonable time in advance of any time requested for such inspection. If such inspection may include access to confidential information of the Partnership or of other Partners (including personal identifying information), the Partnership may require the Partner requesting the inspection to execute an agreement to keep such information confidential and not to use such information other than for legitimate purposes in connection with the ownership or management of the Partnership. Any Partner may, at its own expense, obtain an audit of the books and records of the Partnership for the current and two prior years by a firm of independent certified public accountants selected by the Partner, subject to an appropriate confidentiality agreement. The Partnership must fully cooperate with any qualified accountants appointed by the Partner to conduct such audit.

10.7 Information About Partners. The Partnership will not be required to provide the name, address, or other identifying personal or financial information about a Partner, or any information about the Interest of any Partner, to any Person. If at any time the Partnership agrees, or is required, to provide any information about Partners or their Interest, the Partnership must first obtain (a) the written representation of the Person seeking such information that the information is sought for a proper purpose related to Partnership business or management (specifically stating such purpose) or valid governmental proceedings and (b), if deemed appropriate by the Managing Partner, the agreement by such Person that the Person will not disclose such information to non-Partners and/or will not use such information for anything other than matters related to Partnership business or management or for valid governmental proceedings. The Managing Partner will determine, in its sole discretion, whether the representation and agreement is sufficient to protect the Partnership and its Partners and/or preserve the privacy of information about the Partners, and whether the stated purpose is a proper purpose.

10.8 Partnership Withholding. Should the Partnership be required, pursuant to the Code, the laws of any state or any other provision of law, to withhold any amount from amounts otherwise distributable to any Partner or on the basis of income allocable to any Partner, the Partnership will withhold those amounts, and any amounts so withheld will be deemed to have been distributed to that Partner under this Agreement. If any sums are withheld pursuant to this provision, the Partnership will remit the sums so withheld to, and file the required forms with, the Service, or the appropriate authority of any such state or other applicable government agency. In the event of any claimed over-withholding, a Partner will be limited to an action against the Service, or the appropriate authority of any such state or other applicable government agency, for a refund and each Partner hereby waives any claim or right of action against the Partnership on account of such withholding. Furthermore, if the amounts required to be withheld exceed the amounts which would otherwise have been distributed to a Partner, the Partner must contribute any deficiency to the Partnership within ten (10) days after notice from the Partnership. If the deficiency is not contributed within that time, such failure will constitute a liability of that Partner, and the Partner will be liable for interest on the amount of such deficiency from the date of notice until paid at an annual rate equal to the lesser of twelve percent (12%) or the highest rate permitted by law. This deficiency must be repaid in full within ten (10) days after demand, and otherwise must be repaid, without prejudice to any other remedies at law or in equity that the Partnership may have, out of distributions to which the debtor Partner would otherwise subsequently be entitled under this Agreement.

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10.9 Withdrawal of Organizational Limited Partner. Upon the admission of any other Partner, the Organizational Limited Partner will withdraw from the Partnership and be entitled to the return of any capital contribution, without interest or deduction. Upon such withdrawal, the Organizational Limited Partner will cease to be a Limited Partner. Each Investor Partner hereby waives and releases the Organizational Limited Partner and the Managing Partner from every right, claim or action that it may have against either as a consequence of such withdrawal

SECTION XI ACCOUNTING

11.1 Fiscal Year. The fiscal year of the Partnership is the Fiscal Year.

11.2 Records. The Managing Partner must keep, or cause to be kept, full and accurate records of all transactions of the Partnership in accordance with the principles and practices generally accepted for the accrual method of accounting. At all times, all of such books of account must be maintained in the principal office of the Partnership. Upon the written request of any Partner to the Managing Partner, the Partnership will provide, without charge, copies of this Agreement and the certificate of formation, with all amendments, and U.S. federal tax returns for the preceding six years.

11.3 Tax Matters. The Managing Partner will prepare, or cause to be prepared, a partnership income tax return in compliance with Section 6031 of the Code and any required state and local income tax returns of the Partnership for each tax year of the Partnership. In connection therewith, except as otherwise provided in this Section 11.3, the Managing Partner is authorized to make any available or necessary elections as it deems appropriate, in its sole discretion, including elections with respect to the useful lives of the properties of the Partnership, the rates of depreciation or depletion on such properties, and whether to elect to adjust the tax basis of Partnership property upon the sale of Units by Investor Partners. To the maximum extent possible, expenditures of the Partnership will be treated as expenses for federal, state, and local income tax purposes. The Managing Partner will elect to expense the Intangible Drilling Costs paid by the Partnership in accordance with the Code and the Regulations.

SECTION XII

REPORTS AND STATEMENTS

12.1 Tax Information. As soon as reasonably practicable after the end of the Partnership’s Fiscal Year, the Managing Partner, at the expense of the Partnership, will cause to be delivered to the Investor Partners such information (including a statement for that year of each Investor Partner’s share of the Profits, Simulated Gain, income, gains, Losses, Simulated Loss, Simulated Depletion, and other items of the Partnership) as is necessary for the preparation by the Investor Partners of their federal, state, and local income tax returns.

12.2 Material Developments. The Managing Partner will, within 10 days after receipt thereof, forward to each Investor Partner a copy of any notice received by the Managing Partner or the Partnership of any material default under any material instrument to which the Partnership

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is a party or which materially affects the assets of the Partnership, and report to the Investor Partners any other developments materially affecting the Partnership, its business, or assets, as soon as practicable following the occurrence of each such development.

12.3 Development Activities. The Managing Partner will furnish reports on a monthly basis in the form of summaries indicating the status of the drilling and, if applicable, completion of the wells until such drilling and Completion Activities are completed.

SECTION XIII BANK ACCOUNTS

The Managing Partner will open and maintain a special bank account(s) in a bank or savings and loan association, the deposits of which are insured by an agency of the United States government, in which all funds of the Partnership will be deposited. Withdrawals from such accounts may be made upon the signature or signatures of such Person or Persons as the Managing Partner designates.

SECTION XIV POWER OF ATTORNEY

Each Investor Partner hereby irrevocably makes, constitutes, and appoints the Managing Partner as his true and lawful attorney-in-fact for him and in his name, place, and stead and for his use and benefit to create, prepare, complete, sign, execute, acknowledge, swear to, file, deliver, endorse, and record, with respect to the Partnership:

(a) all documents of Transfer of an Investor Partner’s interest and all other instruments to effect such Transfer, including, but not limited to, Transfers effectuated pursuant to the provisions of Section 9.5 of this Agreement, but only if in compliance with all applicable provisions of this Agreement;

(b) all certificates as are required by law and all amendments to this Agreement and to the Partnership’s certificate of formation required or necessary to change the name of the Partnership’s registered office or registered agent, change the address of the Managing Partner or any General Partner, or the admission or withdrawal of any General Partner, to qualify the Partnership as a limited partnership, to convert any General Partner into a Limited Partner, and to conduct business under the laws of any jurisdiction in which the Managing Partner elects to qualify the Partnership or conduct business;

(c) all amendments adopted in accordance with this Agreement;

(d) all documents (including counterparts of this Agreement) that the Managing Partner deems appropriate to qualify or continue the Partnership as a limited partnership in the jurisdictions in which the Partnership may conduct business; and

(e) all conveyances and other documents, instruments, and certificates that the Managing Partner deems appropriate to effect the certification, dissolution, liquidation, and termination of the Partnership.

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The foregoing grant of authority is hereby declared to be irrevocable and a power coupled with an interest, which will survive the death and disability of any Investor Partner. In the event of a conflict between the provisions of this Agreement and any document executed or filed by the Managing Partner pursuant to the power of attorney granted in this Section XIV, this Agreement will govern.

SECTION XV CONSENTS; GENERAL PARTNERS

15.1 Majority-in-Interest. Any action requiring the consent or approval of all or a Majority-in-Interest of the Investor Partners under the provisions of this Agreement will be taken only if the consent or approval of the requisite number of Investor Partners is evidenced by written instruments executed by such consenting or approving Investor Partners.

15.2 General Partners. The General Partners have elected to delegate to the Managing Partner authority to manage, control, administer and operate the property and business of the Partnership. Each General Partner agrees that no General Partner has the right to act as an agent of the Partnership or to execute documents on behalf of the Partnership. Further, each General Partner agrees that no General Partner or group of General Partners will have the right to act (other than as specifically provided in this Agreement) to cause the Managing Partner on behalf of the Partnership to convey Partnership property or to take any other action binding on the Partnership. Still further, each General Partner agrees that no General Partner or group of General Partners may cause any Partner to be authorized to act on behalf of the Partnership without such Partner having become the duly elected and appointed Managing Partner. Any Investor Partner who takes action contravening this Section 15.2 agrees to indemnify the Partnership and all other Partners from any loss, liability or expense caused by such action.

15.3 Conversion of General Partners. On January 1 of the year immediately following the calendar year of the Partnership with respect to which the Managing Partner has determined that all Drilling and Completion Contracts have been fulfilled with respect to the Partnership’s Oil and Gas Properties, all or any General Partners shall be converted to Limited Partners, unless the Managing Partner determines that such conversion at that time would not be in the best interests of the General Partners or the Partnership. If conversion is so delayed, the Managing Partner will continue to have the power and authority to cause such conversion on January 1 of any subsequent year during the term of the Partnership. The Managing Partner will have the power to convert any General Partner on any interim date with the written consent of such converted Partner, if the Managing Partner determines that conversion is in the best interests of such General Partner and the Partnership. Thereafter, the Managing Partner will (a) file a certificate of amendment to its certificate of formation with the Secretary of State of the State of Delaware removing the converted General Partners as general partners of the Partnership, and (b) take such other actions as are necessary or appropriate to accomplish conversion of the Interests. Upon filing the certificate of amendment reflecting conversion of the Interests, if any, held by former General Partners to Limited Partners, the conversion will be effective, and thereafter each converted General Partner will have the rights and obligations of a Limited Partner and will be entitled to limited liability to the extent provided by the Act; provided, however, that General Partners will remain liable to the Partnership for their

LIMITED PARTNERSHIP AGREEMENT OF REDHAWK RESOURCES – FUND III, LP PAGE 37

proportionate share of Partnership obligations and liabilities arising prior to the conversion of their Interests in the Partnership to Limited Partner Interests.

SECTION XVI REMOVAL OF MANAGING PARTNER

16.1 Removal. The Managing Partner may be removed by a Majority-in-Interest of the Partners at any time it is subject to an Event of Withdrawal whereupon the Partners, by the affirmative vote of a Majority-in-Interest, will elect and substitute a new managing partner.

16.2 Conversion of Interest. The Managing Partner Interest in the Partnership, either upon withdrawal or removal will be automatically converted into a Limited Partner Interest and will be entitled to all allocations and distributions to which it was formerly entitled, including any change in the interest in allocations and distributions that would accrue to the original Managing Partner. Upon removal of the Managing Partner, the Managing Partner will be relieved and released from all obligations and liabilities as a General Partner accruing after the date of removal.

SECTION XVII GENERAL PROVISIONS

17.1 Governing Law. This Agreement, and the application or interpretation hereof, will be governed by its terms, by the Act and by the laws of the state of Delaware without reference to the laws of any other jurisdiction. The Partnership hereby elects, pursuant to the DUCC §8-103(c), that each Interest constitutes a security governed by DUCC §8.

17.2 Execution of Additional Instruments. Each Partner hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney, and other instruments necessary to comply with any laws, rules, or regulations.

17.3 Construction. Whenever the singular number is used in this Agreement and when required by the context, the same includes the plural and vice versa, and each gender includes all other genders.

17.4 Headings. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision of this Agreement.

17.5 Waivers. No waiver of any breach or condition of this Agreement will constitute a waiver of any further breach or condition or of any other breach or condition. No failure to enforce a right or remedy will constitute a waiver of that or any other right or remedy.

17.6 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party will not preclude or waive the right to use that right or remedy again or to use any or all other rights or remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance, or otherwise.

LIMITED PARTNERSHIP AGREEMENT OF REDHAWK RESOURCES – FUND III, LP PAGE 38

17.7 Exhibits. All exhibits referred to in this Agreement and attached to this Agreement are incorporated in this Agreement by this reference.

17.8 Heirs, Successors, and Assigns. Each and all of the covenants, terms, provisions, and agreements contained in this Agreement will be binding upon and inure to the benefit of the parties to this Agreement and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors, and assigns.

17.9 Creditors. None of the provisions of this Agreement will be for the benefit of or enforceable by any creditor of the Partnership or by any Person not a party to this Agreement.

17.10 Execution and Counterparts. An electronic signature or any electronic copy of a signature to this Agreement or any other notice or document regarding the Partnership will be given legal effect and deemed valid and binding on the Person authorizing or transmitting such signature and any Person to whom the signature is attributable, whether or not such signature is encrypted or otherwise verified. This Agreement may be executed in counterparts, each of which will be deemed an original but all of which will constitute one and the same instrument.

17.11 Federal Income Tax Elections. All elections required or permitted to be made by the Partnership under the Code, any state tax laws, or any other relevant tax laws will be made by the tax matters partner in its sole discretion. The provisions on limitations of liability of the Managing Partner and indemnification set forth in Section V of this Agreement will be fully applicable to the tax matters partner in its capacity as such.

17.12 Notice. Each Partner and other Person bound by this Agreement agrees that the Partnership may transmit information about or from the Partnership, disclosures and notices electronically on an unencrypted basis (a) via email to the email address designated by the Partner in its initial subscription or subsequently designated by the Partner by a written notice made in accordance with the following sentence, (b) by access to a web site that the Partnership designates in an email notice the Partnership sends to a Partner at the time the information is available, or (c) to the extent permissible by law, by access to a web site that the Partnership designates in advance for such purpose. In addition, any notice or document sent to or by the Partnership or any Managing Partner or Partner may be sent by hand delivery or by facsimile providing confirmation of receipt or by Federal Express or similar courier delivery or by U.S. Postal Service certified mail, return receipt requested, to the party entitled to receive such notice or other document at the address provided in this Agreement for the Partnership for any notice to the Partnership or any Managing Partner and at the address provided to the Partnership by any Partner in its initial subscription agreement for any notice to any Partner, or any such other address as such Person may request in a written notice made in compliance with this Section 17.12. Such notice or document will be deemed received on the date actually received, if provided by email, through a web site, sent by hand delivery, confirmed facsimile or courier delivery, or three business days after it is deposited in the U.S. mail properly addressed and sent by certified mail, return receipt requested. Notice provided in accordance with this Section 17.12 will be effective notwithstanding anything in the Act to the contrary. A Partner may withdraw its consent to receipt of information, disclosures, or notices via unencrypted email by notice to the Managing Partner sent in accordance with the second sentence of this Section 17.12.

LIMITED PARTNERSHIP AGREEMENT OF REDHAWK RESOURCES – FUND III, LP PAGE 39

17.13 Invalidity. The invalidity or inability to enforce any particular provision of this Agreement will not affect the other provisions of this Agreement, and this Agreement will be construed in all respects as if such invalid or unenforceable provision were omitted. If any particular provision herein is construed to be in conflict with the provisions of the Act, the provisions of this Agreement will control to the fullest extent permitted by applicable law.

17.14 Amendments to the Agreement. This Agreement may not be amended for any purpose without the prior consent of the Managing Partner; provided that those provisions of this Agreement which affect the right of Investors Partners to share income, gain, distributions, loss and deductions or require Investors Partners to make additional Capital Contributions may be amended only upon the written consent of all Investor Partners adversely affected thereby

17.15 Venue. Each Partner hereby consents to the exclusive jurisdiction of the United States District Court for the Northern District of Texas, Dallas Division, or a Texas state district court located in Dallas, Dallas County, Texas and irrevocably agrees that all Proceedings arising out of or relating to this Agreement or the formation, management, allocations, distributions, operations or dissolution of the Partnership (whether such Proceedings are based in statute, tort, contract, or otherwise), will be litigated in such courts. Each Partner (a) consents to submit itself to the personal jurisdiction of such courts for such Proceedings, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it will not bring any such Proceeding in any court other than such courts. Each Partner accepts for itself and each transferee, generally and unconditionally, the exclusive and irrevocable jurisdiction and venue of the aforesaid courts and waives any defense of forum non conveniens. A copy of any service of process served upon the parties will be mailed by registered mail to the respective party; provided that any failure to mail such copy will not affect the validity of any other service of process. If any agent appointed by a party refuses to accept service, each party agrees that service upon the appropriate party by registered mail will constitute sufficient service. Nothing in this Section 17.15 will affect the right of a party to serve process in any other manner permitted by law.

17.16 Waiver of Jury Trial. To the maximum extent permitted by applicable law, each Partner hereby waives its respective rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement; the formation, management, allocations, distributions, operations or dissolution of the Partnership; any dealings between them relating to the Partnership; or the relationship of the Partners. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any forum and that relate to the subject matter of this Agreement, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each Partner acknowledges that this waiver is a material inducement to enter into a business relationship that each has already relied on the waiver in entering into this Agreement, and that each will continue to rely on the waiver in their related future dealings. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and the waiver will apply to any subsequent amendments, renewals, supplements or modifications to this Agreement. Each Partner acknowledges that the right to a jury is a constitutional right, they have had an opportunity to consult with independent counsel, and this jury waiver has been entered into knowingly and voluntarily by all of the parties to this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

LIMITED PARTNERSHIP AGREEMENT OF REDHAWK RESOURCES – FUND III, LP PAGE 40

17.17 Advancement of Legal Fees. Each Partner understands and acknowledges that the Partnership may be required or may be allowed to indemnify the Managing Partner, its Members, its officers and directors or employees for any reasonable expenses incurred, judgment, or settlement pursuant to, the provisions of DGCL §145 or the governing documents of the Partnership. In addition, each Partner consents to, understands and acknowledges that the Partnership may advance legal fees incurred in any proceeding pursuant to the provisions of DGCL §145 or the governing documents of the Partnership.

17.18 Determination of Matters not provided for in this Agreement. The Managing Partner will decide any and all questions arising with respect to the Partnership and this Agreement that are not specifically or expressly provided for in this Agreement.

(Signature page follows.) 444365v6

SIGNATURE PAGE LIMITED PARTNERSHIP AGREEMENT OF REDHAWK RESOURCES – FUND III, LP

IN WITNESS WHEREOF, this Agreement was executed on the date first written above.

MANAGING PARTNER:

REDHAWK RESOURCES MANAGEMENT III, LLC By: Name: Jack W. Nichols Title: Executive Chairman GENERAL PARTNERS:

REDHAWK RESOURCES MANAGEMENT III, LLC, as Attorney-in-fact for the General Partners By: Name: Jack W. Nichols Title: Executive Chairman LIMITED PARTNERS:

REDHAWK RESOURCES MANAGEMENT III, LLC, as Attorney-in-fact for the Limited Partners By: Name: Jack W. Nichols Title: Executive Chairman ORGANIZATIONAL LIMITED PARTNER:

Jack W. Nichols

SCHEDULE A – LIMITED PARTNERSHIP AGREEMENT OF REDHAWK RESOURCES – FUND III, LP

SCHEDULE A

REDHAWK RESOURCES - FUND III, LP, A DELAWARE LIMITED PARTNERSHIP

INVESTOR PARTNERS

Name Residence Address

Social Security or Federal Taxpayer

Identification Number

Number of Units of Investor

Partnership Interest

Subscribed Capital

Obligation

GENERAL PARTNERS:

LIMITED PARTNERS:

Exhibit D

Subscription Documents for U.S. Investors

(See attached)

REDHAWK RESOURCES – FUND III, LP Page 1 of 16 INVESTOR INITIALS______

REDHAWK RESOURCES FUND III, LP A DELAWARE LIMITED PARTNERSHIP

SUBSCRIPTION DOCUMENTS

To subscribe for Units issued by Redhawk Resources – Fund III, LP, you should read the following Offering Materials and take the steps identified below:

The Memorandum

The Confidential Private Placement Memorandum, dated October 22, 2015 (the “Memorandum”), contains information regarding this offering (the “Offering”) of units of partnership interest (the “Units”) in Redhawk Resources – Fund III, LP (the “Partnership”). Please read carefully the entire Memorandum and the exhibits thereto, including the form of Agreement of Limited Partnership attached as Exhibit B to the Memorandum (as amended from time to time, the “Partnership Agreement”) and request any additional information or documents that you believe are necessary or advisable in order for you to understand the terms of the Offering, the proposed plan of business and the risks of an investment in the Partnership.

The Suitability Questionnaire

The Suitability Questionnaire requires that you provide written answers to specific questions which are intended to provide information sufficient for Redhawk Resources Management III, LLC (the “Managing Partner”) to determine if you qualify as an Accredited Investor (as defined in Section B of the Suitability Questionnaire). In addition, you must provide verification of your Accredited Investor status. See Accredited Investor Verification below.

Accredited Investor Verification

The Partnership is required by law to take reasonable steps to verify that purchasers in the offering are Accredited Investors. Please return to the Managing Partner the Accredited Investor Verification on pages 6 and 7 completed and executed by your accountant, your attorney, your SEC-registered investment adviser, or your registered securities broker/dealer (a “Certified Third Party Verifier”). If you do not have a Certified Third Party Verifier, please see Schedule B for a list of qualifying documents to submit with your Subscription Documents. Each individual investor must provide financial documents supporting accredited investor status before they may participate in the offering.

The Subscription Agreement

The Subscription Agreement sets forth the terms and conditions you must agree to in order to subscribe for Units. You must acknowledge the terms and conditions of the Offering and make certain representations and warranties to the Managing Partner. If you will be using the services of a purchaser representative, you must also send completed and signed purchaser representative documents, forms of which will be provided to you upon request. Please sign the Subscription Agreement page and indicate whether you are subscribing as a Limited Partner or a General Partner.

REDHAWK RESOURCES – FUND III, LP Page 2 of 16 INVESTOR INITIALS______

PLEASE NOTE: PAGES 1 – 14 MUST BE RETURNED

COMPLETED AND PROPERLY EXECUTED

WITH YOUR FUNDS AT THE ADDRESS BELOW.

YOU MAY RETURN DOCUMENTS AND FUNDS TO THE ADDRESS BELOW, BY EMAIL, IN PERSON, BY DELIVERY SERVICE, OR BY UNITED STATES POSTAL SERVICE.

PAYMENT:

Payment in the amount of the subscription price of the Units subscribed for may be delivered by and must meet the following criteria:

1. Check or cashier’s check payable to “Redhawk Resources – Fund III, LP”

a. Your check must match the legal name of the subscriber as set forth on the Subscription Agreement

b. If you are investing through your IRA, please see Schedule A for more information on funding your

investment 2. Wire transfer to the Partnership’s escrow account (wiring instructions below)

a. If you are wiring funds, please advise with a note attached to your subscription documents and/or provide a

copy of the wire transfer confirmation. In addition, please account for any bank fees associated with the wire that would drop your investment under your requested subscription amount.

This Offering will be subscribed to on a first come, first served basis.

SEND COMPLETED AND EXECUTED DOCUMENTS AND FUNDS TO:

REDHAWK RESOURCES – FUND III, LP 6060 N. Central Expressway, Suite 302

Dallas, Texas 75206 Telephone: 1-844-952-7363

Fax: 214-451-6035 E-mail: docs@redhawkinvestmentgroup.com

WIRING INSTRUCTIONS

ABA #: 103000703 Account #:1755330445

Account Name: Redhawk Resources – Fund III, LP Bank Name: Park Cities Interbank

Bank Address: 5307 E. Mockingbird Lane, Suite 110, Dallas, TX 75206 Please Note: An Investor’s documents are not considered for review and acceptance into the Offering until complete and executed documents and funds are received by the Managing Partner. The Managing Partner reserves the right to reject the application of any subscriber for any reason or for no reason in its sole discretion.

REDHAWK RESOURCES – FUND III, LP Page 3 of 16 INVESTOR INITIALS______

SUITABILITY QUESTIONNAIRE

INDIVIDUAL INVESTORS: COMPLETE SECTION A AND SECTION B ONLY.

SECTION A – BACKGROUND INFORMATION

Section A must be provided by each individual responsible for making the decision to purchase this investment, whether purchasing individually or jointly with a spouse or another person, in a revocable trust or in an individual retirement account, or as the representative of an entity such as a corporation, partnership or limited liability company.

Please make additional copies, if necessary, and return completed pages for all subscribers contained within.

Biographical Information Full Legal Name: Date of Birth: Social Security Number: Married? ☐ Yes ☐ No

Home Phone: Cell Phone: Business Phone:

Email Address:

Present Address:

Street Address: City: State/Province: Zip Code: Country: Citizenship: ☐ USA ☐ Other ______________ (specify) Mailing Address: Correspondence and distribution checks, unless direct deposit is selected, will be sent to the address specified below

☐ Use Present Address above ☐ Use Preferred Mailing Address below

Street Address:

City: State/Province: Zip Code:

Country:

Verification of Records (specify the state in which you perform the following):

Pay Taxes: Register To Vote: Hold a Driver License:

PRIVACY POLICY

We consider privacy to be fundamental to our relationship with our investors. We are committed to maintaining the confidentiality, integrity and security of our current and former investors’ non-public information. Accordingly, we have developed internal policies to protect confidentiality while allowing investors needs to be met. We respect your right to privacy. We also know, however, that you expect us to conduct our investment program in an accurate and efficient manner. To do so, we must collect and maintain certain non-public information about you and our other investors. We collect this information from sources such as subscription agreements and other documents.

We will not disclose any non-public personal information about investors who are individuals, except to our affiliates and service providers as allowed by applicable law or regulation. In the normal course of serving our investors, information we collect may be shared with companies that perform various services such as our accountants, auditors, attorneys, broker-dealers and fund administrator. Specifically, we may disclose to these service providers non-public personal information including:

• Information we receive on subscription agreements or other documents, such as name, address, account or tax identification number and the types and amounts of investments; and • Information about transactions with us, our affiliates or others, such as participation in other investment programs, ownership of certain types of accounts or other account data.

Any party that receives this information must agree to use it only for the services required and as allowed by applicable law or regulation, and is not permitted to share or use this information for any other purpose. To protect the personal information of individuals, we permit access only by authorized employees who need access to that information to provide services to us and our investors. In order to guard investors non-public personal information, we maintain physical, electronic and procedural safeguards that comply with U.S. federal standards. An individual investor’s right to privacy extends to all forms of contact with us, including telephone, written correspondence and electronic media, such as the Internet.

We note, however, that notwithstanding the foregoing, we reserve the right to disclose non-public personal information about investors to any person or entity,

including without limitation any governmental agency, regulatory authority or self- regulatory organization having jurisdiction over us or our affiliates, if (i) we determine in our discretion that such disclosure is necessary or advisable pursuant to or in connection with any United States federal, state or local, or non U.S., law, rule, regulation, executive order or policy, including without limitation any anti-money laundering law and the USA PATRIOT Act of 2001 and such disclosure is not otherwise prohibited by law, rule, regulation, executive order or policy.

REDHAWK RESOURCES – FUND III, LP Page 4 of 16 INVESTOR INITIALS______

SECTION B – SUITABILITY AND ACCREDITED INVESTOR STATUS Method of Accreditation

Please indicate whether you fall within any one of the following categories of an accredited investor:

a. I am a natural person whose individual net worth, or joint net worth with that of my spouse, exceeds $1,000,000. For purposes of calculating your net worth you should exclude as an asset the value of your primary residence and exclude as a liability any debt secured by your primary residence that you incurred more than 60 days prior to the time or your investment (up to the amount of debt not exceeding the fair market value of your primary residence). All liabilities necessary to make a verification of net worth have been disclosed to the person completing the Accredited Investor Verification for me. PLEASE INITIAL: ________________

□ Yes □ No

b. I am a natural person who had an individual income in excess of $200,000 in each of the two most recent years or had joint income with my spouse in excess of $300,000 in each of those years and I have a reasonable expectation of reaching the same income level in the current year. PLEASE INITIAL: ________________

□ Yes □ No

c. I am an entity in which all of the equity owners are accredited investors. □ Yes □ No

d. I am an individual retirement account (“an IRA”) (including traditional IRAs or Roth IRA, but not Simple or SEP Plans) and the owner is accredited under (a) or (b) above. □ Yes □ No

e. I am a revocable trust and each grantor is accredited under “a” or “b” above. □ Yes □ No

f. I am a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units offered. □ Yes □ No

g. I am a bank as defined in section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) or any savings and loan association or other institution as defined in section 3(a)(5)(A) or the Securities Act whether acting in its individual or fiduciary capacity; a broker dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; an insurance company as defined in section 2(a)(48) of that Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; a Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; an employee benefit plan within the meaning of the plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or if a self-directed plan, with investment decisions made solely by persons that are Accredited Investors.

□ Yes □ No

h. I am a private business development company as defined in section 202(a) (22) of the Investment Advisers Act of 1940. □ Yes □ No

i. I am an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Units offered, with total assets in excess of $5,000,000.

□ Yes □ No

j. I am a manager, director, or executive officer of Redhawk Resources Management III, LLC. □ Yes □ No

REDHAWK RESOURCES – FUND III, LP Page 5 of 16 INVESTOR INITIALS______

SECTION C – INFORMATION FOR ENTITIES ONLY Entity Information *Account correspondence and distribution checks, unless direct deposit is selected, will be sent to the address you provide in Section A.

Name of Entity: Organization

Type of Entity: □ Corporation ☐ Limited Liability Company ☐ Partnership ☐ Trust ☐ Estate Date & Place of Formation:

Taxpayer Identification Number: Net Worth of Entity: $

Beneficial Ownership Number of Equity Owners: All of the equity owners are accredited investors: True False This entity was not established solely to invest in this offering True False Representation (the person signing the Subscription Agreement for the entity): Representative’s full name: Representative’s title: Supporting Documents

CORPORATION

Must attach copies of: (i) certificate of formation (ii) company bylaws (iii) resolutions or consents authorizing the purchase of this investment. (iv) Section A & Section B (pages 3 & 4) for each beneficial owner of the corporation and, (v) Financial documents supporting accredited investor status for each beneficial owner of the corporation (see page 6 & 7)

Attached Not Attached

LIMITED LIABILITY COMPANY

(LLC)

Must attach copies of: (i) certificate of formation (ii) limited liability company agreement (iii) resolutions or consents authorizing the purchase of this investment. (iv) Section A & Section B (pages 3 & 4) for each beneficial owner of the limited liability company and, (v) Financial documents supporting accredited investor status for each beneficial owner of the limited liability company (see page 6 & 7)

Attached Not Attached

LIMITED PARTNERSHIP

Must attach copies of: (i) certificate of formation (ii) partnership agreement (iii) resolutions or consents authorizing the purchase of this investment

(iv) Section A & Section B (pages 3 & 4) for each beneficial owner of the limited partnership and,

(v) Financial documents supporting accredited investor status for each beneficial owner of the limited partnership (see page 6&7)

Attached Not Attached

TRUST OR ESTATE Must attach a copy of:

(i) the applicable trust instrument or letters testamentary. The title and signature pages must be included.

Attached Not Attached

REDHAWK RESOURCES – FUND III, LP Page 6 of 16 INVESTOR INITIALS______

REDHAWK RESOURCES – FUND III, LP ACCREDITED INVESTOR VERIFICATION

Pages 6 & 7 are to be completed by a Certified Third Party Verifier, as certified in the first section below. Please see Section B should you require a Certified Third Party Verifier.

[insert name of potential investor, which may be a natural person, a traditional or Roth IRA (but not a Simple or SEP Plan), a revocable trust, or an entity with total assets in excess of $5,000,000] (“Client”) has requested that the undersigned provide REDHAWK RESOURCES - Fund III, LP (the “Partnership”) with this Accredited Investor Verification (this “Verification Letter”) to assist the Partnership in verifying Client’s status as an “accredited investor” within the meaning of Rule 501(a) of the Securities Act of 1933, in connection with Client’s potential purchase of Units (the “Securities”) offered for sale by the Partnership.

[I/We] hereby certify that [I/we] [am/are] (please check the appropriate blank):

□ a registered broker-dealer, as defined in the Securities Exchange Act of 1934, as amended;

□ an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended;

□ a licensed attorney in good standing under the laws of the jurisdictions in which I am admitted to practice law; or

□ a certified public accountant duly registered and in good standing under the laws of the place of my residence or principal office.

Based solely on a review of the Client Materials (as defined below) within the last three months, the undersigned hereby advises you that Client satisfies one or more of the following criteria (check all blanks that apply):

□ a natural person whose individual net worth, or joint net worth with Client’s spouse, exceeds $1,000,000 (for purposes of calculating net worth exclude as an asset the value of Client’s primary residence and exclude as a liability any debt secured by Client’s primary residence that was incurred more than 60 days prior to the time of the investment (up to the amount of debt not exceeding the fair market value of Client's primary residence).

□ a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint

income with Client’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

□ a revocable trust where the grantor is a natural person, and the natural person meets at least one of the two criteria listed

above.

□ a corporation, limited or general partnership, limited liability company, or a trust with total assets in excess of $5,000,000, which was not formed for the specific purpose of acquiring the Securities.

In order to provide this Verification Letter, the undersigned has reviewed the original or photocopies of the following documents as supplied by Client (the “Client Materials”).

VERIFICATION OF INCOME (Please check ALL appropriate blanks):

□ Form 1040 filed with the Internal Revenue Service by Client (and spouse) for the two most recent years;

□ Form 1099 filed with the Internal Revenue Service by Client (and spouse) for the two most recent years;

□ Schedule K-1 of Form 1065 filed with the Internal Revenue Service on behalf of Client (and spouse) for the two most recent years;

REDHAWK RESOURCES – FUND III, LP Page 7 of 16 INVESTOR INITIALS______

□ Form W-2 filed with the Internal Revenue Service by Client (and a second form W-2 for the spouse, if applicable) for the two most recent years;

□ Other Internal Revenue Service documents (please specify):

VERIFICATION OF NET WORTH:

□ bank statements, brokerage statements and other statements of securities holdings, certificates of deposit, tax assessments, or appraisal reports issued by independent third parties to Client, dated within three months of the date of this Verification Letter;

PLUS

□ a consumer or credit report from at least one of the nationwide consumer reporting agencies indicating Client’s liabilities,

dated within three months of the date of this Verification Letter, and a written representation from such Client that all liabilities necessary to make a determination of net worth have been disclosed;

□ other documents (please specify):

OR [for entities only] □ An audited financial statement signed by a certified public accountant accompanied by an unqualified opinion, dated as

of a date within three months of the date of this Verification Letter.

Disclaimers and Limitations: In delivering this Verification Letter, [I/we] have relied upon and assumed the accuracy of the Client Certifications below. [I/We] do not have any basis which causes [me/us] to believe the Client Materials are not accurate or complete or that the Client is unaccredited. [I/We] make no representation or warranty that Client Materials were accurately prepared, agree with source documents, or were properly filed, or otherwise vouch for the accuracy of the Client Materials.

[I/We] retain adequate records regarding the steps [I/we] have taken to verify that the Client was an accredited investor.

This Verification Letter is limited to the matters expressly set forth herein and speaks only as of the date set forth below. Nothing may be inferred or implied beyond the matters expressly contained herein. This Verification Letter may be relied upon by the Partnership in connection with the Offering and sale of the Securities. This Verification Letter may not be used, quoted from, referred to, or relied upon by any other person for any other purpose. The undersigned assumes no obligation to update this letter.

Name: Dated:

Signature:

Title: (if applicable)

State Bar Number and Issuing State: (if applicable)

Or CPA Certificate Number and Issuing State: (if applicable)

Or CRD Number or SEC Registration Number: (if applicable)

REDHAWK RESOURCES – FUND III, LP Page 8 of 16 INVESTOR INITIALS______

REDHAWK RESOURCES - FUND III, LP SUBSCRIPTION AGREEMENT

I/We, [insert name(s)/name of entity], acknowledge that I/we have received and reviewed carefully the Confidential Private Placement Memorandum, dated October 22, 2015, and all exhibits thereto (collectively, the “Memorandum”), relating to the private offering (the “Offering”) of units of partnership interest (“Units”) issued by Redhawk Resources – Fund III, LP, a Delaware limited partnership (the “Partnership”). I/We understand that the Units are being privately offered on the terms and in the manner described in the Memorandum only to “Accredited Investors,” as such term is defined in Regulation D promulgated under Securities Act of 1933, as amended (the “Securities Act”), who are acceptable to the Partnership. Investors subscribing for Units will be subject to the provisions of the Agreement of Limited Partnership of the Partnership, as amended from time to time (the “Partnership Agreement”).

Capitalized terms used in this Subscription Agreement will have the meanings given to such terms in the Memorandum. If I/we am/are executing this Subscription Agreement on behalf of a partnership, limited liability company, corporation, trust or other entity, representations, acknowledgments and warranties made by me/us herein are deemed to be representations, acknowledgments and warranties of such entity.

1. Subscription. Subject to the terms and conditions hereof and the provisions of the Memorandum, I/we hereby

irrevocably subscribe for and agree to purchase Units in accordance with the terms and conditions of the Memorandum and this Subscription Agreement. I/we hereby irrevocably (a) tender payment to the Partnership in the amount set forth above my signature to cover the subscription price of the Units I/we intend to purchase along with (b) a duly completed and executed copy of (i) the Suitability Questionnaire; (III) the purchaser representative documents; and (III) the Accredited Investor Verification Letter.

I/We acknowledge that the Signature Page will not become binding unless this Subscription Agreement is accepted by

the Managing Partner. If this Subscription Agreement is accepted, I/we will be bound by the provision of the Partnership Agreement and the funds I/we have invested will be deposited into a the Partnership’s operating account and will become available for use by the Partnership. If this Subscription Agreement is rejected, the funds I/we have invested will be returned promptly to me/us , without interest; and this Subscription Agreement will be rendered void and of no further force or effect.

I/We am/are submitting the attached Suitability Questionnaire (this “Questionnaire”) in connection with a proposed

purchase of Units from the Partnership. I/We understand that this Questionnaire will be reviewed by Redhawk Resources Management III, LLC, the managing partner of the Partnership (the “Managing Partner”), to determine whether my/our purchase of Units, in light of my/our/its qualifications, would qualify for an exemption from registration afforded issuers of securities under the Securities Act, as well as other exemptions from the securities registration provisions of applicable state securities statutes and regulations.

I/We understand that (a) the Managing Partner will rely upon the accuracy and completeness of the information

contained herein for the purposes of such determination, (b) the Units will not be registered under the Securities Act or any state securities registration statutes, (c) the completion of this Questionnaire does not constitute a binding commitment on the part of the Managing Partner to accept a subscription for Units from me, (d) the Units are subject to certain transfer restrictions and are not transferable and I/we will be required to hold the Units for an indefinite period of time, and (e) the Units will be subject to the provisions of the Partnership Agreement.

2. Acceptance of Subscription; Compliance with Partnership Agreement. I/We understand and agree that

this Subscription Agreement is made subject to the following terms and conditions: (a) The Managing Partner, in its sole discretion, has the right to accept or reject this Subscription Agreement in

whole or in part, and my/our subscription will be accepted only when it is signed by the Managing Partner;

(b) The Managing Partner has no obligation to accept Subscription Agreements for Units in the order received; and

(c) I/We ratify, adopt, accept and agree to be bound by the terms of the Partnership Agreement and to execute any

and all further documents necessary in connection with becoming a Partner.

REDHAWK RESOURCES – FUND III, LP Page 9 of 16 INVESTOR INITIALS______

3. My Representations and Warranties. I/We hereby acknowledge, and represent and warrant to, and covenant with, the Managing Partner and the other Partners, and each governing person or equity owner of each of the foregoing, as applicable, that:

(a) I/We recognize that this Offering has not been scrutinized or recommended by any state or federal securities authority, and understand that no federal or state agency has passed upon the offering or has made any finding or determination as to the fairness of the terms or the merits of an investment in the Partnership.

(b) I/We am/are an “Accredited Investor” under Rule 501 of Regulation D promulgated under the

Securities Act, and meet each of the suitability standards set forth in the Memorandum and any additional suitability standards required by the securities laws of the state of my residence.

(c) I/We understand the speculative nature and the risks involved in an investment in the Partnership, including the risk that I/we may lose all of my/our investment in the Partnership. I/We have carefully evaluated my/our financial resources and investments and am/are able to bear the economic risks of this investment for an indefinite period of time. I/We have a sufficient net worth to sustain a total loss of my/our entire investment in the Units if such loss should occur.

(d) I/We understand that the Units have not been registered under the Securities Act, or under the

securities laws of any state, and, therefore, cannot be re-sold unless they are subsequently so registered or an exemption from such registration is available. Additionally, I/we understand that the effectiveness of any sale or other disposition may be conditioned upon my providing to the Partnership an opinion of counsel satisfactory to the Partnership that such disposition can be made without registration under applicable securities statutes and laws.

(e) I/We understand that any transfer of the Units is subject to the terms set forth in the Partnership Agreement.

(f) I/We have received and read carefully the Memorandum in its entirety. The Partnership has, during the course of the Offering and before the sale of the Units, afforded me/us and my/our advisors, if any, the opportunity to ask questions of and receive answers from the Managing Partner concerning the terms and conditions of the Offering and to obtain any additional information from the Managing Partner, to the extent the Managing Partner possesses such information or could have acquired it without unreasonable effort or expense, necessary to verify the accuracy of the information contained in the Memorandum.

(g) I/We have received no written or oral representations or information from the Managing Partner which

were in any way inconsistent with the information stated in the Memorandum, and in deciding to purchase the Units subscribed for hereby, I/we have relied solely upon my/our review of the Memorandum and any supplemental information I/we received from the Managing Partner and independent investigations made by me/us, my/our purchaser representative(s), if any, and my/our advisors, if any, and have not relied upon oral statements of the Managing Partner or its agents.

(h) I/We have not distributed the Memorandum to any other person or entity, except my advisors, if any.

(i) If I/we have employed a purchaser representative in connection with evaluating the merits and risks of an

investment in the Units, I/we have acknowledged who such person is and that such person is my/our “purchaser representative” as such term is used in Rule 501(i) of Regulation D of the Securities and Exchange Commission’s rules and regulations.

(j) I/we, either alone or together with my/our purchaser representative or representatives, if any, have such

knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Units.

(k) My/Our purchase of Units is not financed by any third party. (l) No other person or entity has any right, title, interest, participation, or claim in or to the Units for which

I/we am/are subscribing, except (as applicable) for any interest my spouse may have under community property laws. I/We understand that the Partnership has no significant assets or income. I/We understand that the Partnership must generate cash flow from its operations to be able to make cash distributions to the Partners and that it is uncertain whether the Partnership can generate any cash flow. I/We am/are acquiring the Units for investment solely for my own account and without any intention of reselling, distributing, subdividing, or fractionalizing them, and have no present intention of reselling or otherwise disposing of any portion of the Units.

REDHAWK RESOURCES – FUND III, LP Page 10 of 16 INVESTOR INITIALS______

(m) I/We understand that the information and explanations related to the terms and conditions of the Units provided in the documents related to the offering of Units is not investment advice or a recommendation to purchase the Units.

(n) I/We acknowledge that no assurances have been made to me by the Managing Partner or its manager, or any

of their representatives or agents, regarding the tax advantages, if any, that may inure to the benefit of the Partners, nor has any assurance been made by any of those persons that existing tax laws and regulations will not be modified in the future, thus denying the Partners all or a portion of any tax benefits which they may hope to receive, and I/we understand that some of the deductions claimed by the Partnership, or the allocation of items of income, gain, loss or deduction among the participants in the Partnership, may be challenged and disallowed by the Internal Revenue Service and that the discussion of the tax consequences in the Memorandum is limited and general in nature and that the tax consequences to me will depend on my particular circumstances.

(o) If I/we am/are investing as a General Partner, I/we understand the risks associated therewith, including that,

as a General Partner, I/we may be subject to joint and several liability for the liabilities of the Partnership. I/we have discussed my/our situation with my/our tax adviser and have concluded that subscribing as a General Partner is in my/our best interest.

(p) If the undersigned is a partnership, corporation, trust or other entity, the undersigned was not

organized for the specific purpose of acquiring the Units. (q) If I/we am/are purchasing in an individual capacity, I/we am/are at least 21 years of age and a bona fide

resident and domiciliary (not a temporary or transient resident) of the state or jurisdiction set forth below my/our signature(s) hereto, have no present intention of becoming a resident of any other state or jurisdiction, and am not acquiring the Units as a nominee or agent or otherwise for any other person.

(r) I/we have all the requisite authority (and in the case of an individual, the capacity) to purchase the Units,

enter into this Subscription Agreement and to perform all the obligations required to be performed by me/us under this Subscription Agreement and such actions have been authorized by all necessary corporate or other actions. Such purchase will not contravene any law, rule or regulation binding on me/us or any investment guideline or restriction applicable to me/us.

(s) I/we represent and warrant that I/we am/are not, nor will I/we at any time become, subject to any law,

regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control List) that prohibits or limits the Managing Partner from making any advance or extension of credit to me or from otherwise conducting business with me/us. I/We agree to provide documentary and other evidence of my identity and the identity of any other joint subscriber as may be requested by the Managing Partner at any time to enable the Managing Partner to verify identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

(t) I/We acknowledge that I/we have been encouraged to and should obtain independent legal, income tax and

investment advice with respect to its subscription for these Units and accordingly, have had the opportunity to obtain any necessary advice as to the meanings of all terms contained herein relevant to myself/ourselves for purposes of giving representations, warranties and covenants under this Subscription Agreement and in the Partnership Agreement.

(u) The foregoing representations and warranties, together with all other representations and warranties made or

given by me/us in any other written statement or document delivered in connection with the offering, are true and correct in all respects on and as of the date of the admission of the undersigned to the Partnership as if made on and as of such date and will survive such date indefinitely.

4. Indemnification. I/We acknowledge and understand the meaning and legal consequences of the

representations, warranties, and agreements set forth herein and that the Partnership, the Managing Partner, and each member, manager, officer, director, controlling person, representative, agent, and/or employee of the foregoing, have relied or will rely upon such representations, warranties, and agreements, and I/we hereby agree to indemnify and hold harmless such persons, and each of them, from and against any and all losses, claims, damages, liabilities, or expenses, and any actions in respect thereof, joint or several, to which any such person may become subject, due to or arising out of a breach of any such representation, warranty, or agreement, together with all reasonable costs and expenses (including attorneys’ fees) incurred by any such person in connection with any investigation, action, suit, proceeding, demand, assessment, or judgment incident to any of the matters so indemnified against. Notwithstanding the foregoing, however, no representation, warranty, acknowledgment, or agreement made herein by me shall in any manner be deemed to constitute a waiver of the rights granted to me under federal or state securities laws. All representations, warranties, and agreements contained in this Subscription Agreement, and the indemnification contained in this Section 4, will survive the acceptance of this Subscription Agreement and the sale of the Units.

REDHAWK RESOURCES – FUND III, LP Page 11 of 16 INVESTOR INITIALS______

5. Revocation. I/We agree that this Subscription Agreement may not be cancelled, terminated, or revoked, and

will survive my/our death or disability and will be binding upon my/our heirs, executors, and administrators, and the successors and assigns of any entity on behalf of which I/we am/are executing this Subscription Agreement.

6. Assignment. I/We agree that I/we will not transfer or assign this Subscription Agreement, or any of my/our

rights or interest herein or hereunder, and further agree that the transfer or assignment of any Units acquired pursuant hereto will be made only in accordance with the provisions hereof, the Partnership Agreement and all applicable laws.

7. General.

(a) All notices or other communications given or made hereunder shall be in writing and shall be delivered by hand delivery providing confirmation of receipt or by Federal Express or similar courier delivery or by U.S. Postal Service certified mail, return receipt requested, to the undersigned, at such address provide by the undersigned in the Suitability Questionnaire, or to the Managing Partner, at 6060 North Central Expressway, Suite 302, Dallas, Texas 75206.

(b) An electronic signature or any electronic copy of a physical signature to this Agreement shall be given legal

effect and deemed valid and binding on the person authorizing or transmitting such signature and on any person or entity to whom the signature is attributable, whether or not such signature is encrypted or verified.

(c) This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of

Delaware and the federal laws of the United States governing the private placement of securities, without reference to the laws of any other jurisdiction.

8. Venue Waiver and Jury Trial. I/We consent to the exclusive jurisdiction of the United States District

Court for the Northern District of Texas, Dallas Division, or of any Texas state district court located in Dallas, Dallas County, Texas and irrevocably agree that all proceedings arising out of or relating to this Subscription Agreement, my/our purchase of any Units, the Partnership Agreement or the formation, management, operations or dissolution of the Partnership (whether such proceedings are based in statute, tort, contract or otherwise), shall be litigated in such courts. I/We accept, generally and unconditionally, the exclusive and irrevocable jurisdiction and venue of the aforesaid courts and waive any defense of forum non conveniens. To the maximum extent permitted by applicable law, I/We waive my/our respective rights to a jury trial of any claim or cause of action based upon or arising out of the Partnership Agreement, the formation, management, allocations, distributions or liquidation of the Partnership, any dealings relating to the Partnership, or the relationship of the Partners. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and the waiver shall apply to any subsequent amendments, renewals, supplements or modifications to the Partnership Agreement. I/We acknowledge that the right to a jury is a constitutional right and that I/we have had an opportunity to consult with independent counsel and that this jury waiver has been entered into knowingly and voluntarily by me/us. My/our signature(s) below indicates my/our acknowledgement of these provisions.

9. DELIVERY OF INFORMATION. I/We understand that the Partnership intends to provide me/us with

information about my/our investment and Partnership activities via unencrypted email. End of year tax documents are mailed via United States Postal Service.

REDHAWK RESOURCES – FUND III, LP Page 12 of 16 INVESTOR INITIALS______

REDHAWK RESOURCES – FUND III, LP

INVESTMENT ELECTIONS PAGE

Complete the following based on your elections as to the ownership of units in Redhawk Resources – Fund III, LP.

OWNERSHIP ELECTION

[I/We] __________________________________________ [am/are] subscribing as a: (please check and initial ONE) □ General Partner __________ □ Limited Partner __________

[I/We] hereby subscribe for and agree to purchase Units and tender this Subscription Agreement, together with a payment representing [my/our] Capital Contribution, made payable to the order of “Redhawk Resources, Fund III, LP” in the amount of $_ _________________($12,500 times the number of Units purchased).

I/We are subscribing as [a/an] (specify one of the following):

□ Individual Account ☐ Joint Account ☐ IRA Account** (IRA investors – see below and page 18)

□ Trust Account ☐ Corporation/Limited Liability Company/Limited Partnership

**401(k), Defined Benefit Pension Plans, SEP & Simple Plans will not be accepted as subscribers**

REVENUE DISTRIBUTION ELECTION I/We understand that I/we may have distributions directly deposited into my/our checking or brokerage account, unless the investment is held through a custodial account such as an IRA. I/We understand that if I/we do not check either box below, all distributions will be paid by check to the address listed in the Subscription Agreement.

□ I/We prefer distributions to be paid to me/us by check at my/our preferred mailing address listed on page 3.

□ I/We prefer distributions to be direct deposited into my/our checking or brokerage account. • Please attach either a copy of a voided check, an actual voided check, or a letter of instructions on bank

letterhead with your completed Subscription Documents. Do not send deposit slips.

□ I am making this investment through a custodial IRA account. I understand the custodian of my IRA account will receive my distribution via check to the custodial account listed below.

ACCOUNTS HELD WITH CUSTODIANS (IRA ACCOUNTS ONLY)

Distributions for accounts held with custodians (such as IRAs) must be paid to the respective custodian or clearing firm. Name of Custodian: Custodial Account Number: Address of Custodian: Name of Account:

[name of custodian “for benefit of” or “as custodian for” followed by name of beneficiary of account]

REDHAWK RESOURCES – FUND III, LP Page 13 of 16 INVESTOR INITIALS______

REDHAWK RESOURCES – FUND III, LP

SIGNATURE PAGE

[I/We], the undersigned, agree to become a General Partner or a Limited Partner, as reflected by my/our selection on the Investment Elections Page, in the Partnership on the terms provided, make the applicable representations, warranties, and agreements set forth in the Partnership Agreement, attached as Exhibit B to the Memorandum, and grant the power of attorney provided in the Partnership Agreement. [I/We] represent to the Managing Partner that (a) the information contained in these Subscription Documents is complete and accurate and may be relied upon by the Managing Partner, and (b) [I/we] will notify the Managing Partner immediately of any material change in any of such information occurring prior to any acceptance of [my/our] Subscription Agreement.

In substitution of a W-9, [I/we] understand that under penalties of perjury, by signing below [I/we] hereby certify that:

(a) the subscriber has provided herein its correct Social Security or Taxpayer Identification Number, (b) the subscriber is not subject to backup withholding due to a failure to report interest and dividend income, (c) the subscriber is a U.S. person, and (d) the subscriber is exempt from Foreign Account Tax Compliance Act reporting. If the IRS has notified you that backup withholding applies, then you must strike out the language in clause (b) above that relates to underreporting.

If [I/we] elected to have the Partnership verify my Accredited Investor status, [I/we] authorize Redhawk Resources Management III, LLC to run a credit report on [my/our] behalf, if necessary. INDIVIDUAL SUBSCRIBER (Primary Owner) Print Name Signature Date

JOINT/SPOUSE SUBSCRIBER (Spouse or Joint Purchaser requires the names and signatures of each subscriber) Print Name Signature Date

TRUST/CORPORATION/PARTNERSHIP/OTHER ENTITY (Requires the names & signatures of each Trustee/Executor, Agent, Member or Partner. Please make copies of this page if additional signature lines are required) Entity Name Print Name & Title Signature Date Print Name & Title Signature Date Print Name & Title Signature Date

REDHAWK RESOURCES – FUND III, LP Page 14 of 16 INVESTOR INITIALS______

SUBSCRIPTION ACCEPTED:

By: Redhawk Resources Management III, LLC Managing Partner of Redhawk Resources – Fund III, LP __________________________________________ __________________________ Jack W. Nichols, Executive Chairman Date

REDHAWK RESOURCES – FUND III, LP Page 15 of 16 INVESTOR INITIALS______

SCHEDULE A

Investing through your IRA

Use this page only if you are investing through your Individual Retirement Account (IRA). Your custodian will open your self-directed IRA, assist with the transfer or rollover of your qualified retirement funds, process your direct oil and gas investment, provide the necessary IRA reporting to the Internal Revenue Service, and issue periodic account statements and/or provide you with online account access so you can monitor your IRA investment.

If you'd like to use your own IRA custodian, your financial advisor should be able to help you make the proper arrangements.

If you do not have a custodial relationship two qualified and highly competent custodian companies, all of whom are very familiar with the process as it relates to direct oil and gas investments, are the following:

Self-Directed IRA Services 215 Mary Ave. Ste. 311 Waco, TX 76701 1-866-928-9394 Business Development: Amanda Efird (amanda.efird@sdiraservices.com) Ryan Schneider (ryan.schneider@sdiraservices.com) President: Kelli Click Email: info@sdiraservices.com Website: www.SDIRAServices.com

IRA Services Trust Company 1160 Industrial Road San Carlos, CA 94070 650-591-3335 Michael McNair Email: michael@iraservices.com Website: www.iraservices.com

Please note: • 401(k), Defined Benefit Pension Plans, SEP & Simple Plans will not be accepted as subscribers • Your subscription will be funded through your IRA. The relationship with the IRA custodian will be established

upon your acceptance into the partnership and funds will be transferred at that time. Do NOT send funds when you return your subscription documents.

REDHAWK RESOURCES – FUND III, LP Page 16 of 16 INVESTOR INITIALS______

SCHEDULE B

Qualifying Documentation for Accreditation

Use this page only if you do not have a licensed financial professional (CPA, licensed attorney, investment advisor, registered- broker dealer) to review your supporting financial documents and verify you as an “accredited investor.”

You must provide the following documents dated within the last 90 days for our review based on the following criteria:

VERIFICATION OF INCOME: Individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 in each of those two years and has a reasonable expectation of reaching the same income level in the current year.

You must provide: (please provide ALL that apply)

□ Form W-2 filed with the Internal Revenue Service by Client (and spouse) for the two most recent years; □ Form 1040 filed with the Internal Revenue Service by Client (and spouse) for the two most recent years; □ Form 1099 filed with the Internal Revenue Service by Client (and spouse) for the two most recent years; □ Schedule K-1 of Form 1065 filed with the Internal Revenue Service by Client (and spouse) for the two most

recent years; □ Other Internal Revenue Service Documents Please list:_________________________

VERIFICATION OF NET WORTH: Individual net worth, or joint net worth with Client’s spouse, exceeds $1,000,000 (for

purposes of calculating net worth exclude as an asset the value of Client’s primary residence and exclude as a liability any debt (i) incurred more than 60 days before the time of this investment, and (iii) secured by Client’s primary residence up to the amount of debt not exceeding the fair market value of Client’s primary residence).

You must provide: (please provide ALL that apply)

□ Bank statements dated within three months □ Brokerage statements and other statements dated within three months □ Statements of securities holdings dated within three months □ Certificates of deposit dated within three months □ Tax assessments dated within three months □ Appraisal reports issued by independent third parties to Client, dated within three months

Please note:

• Screenshots of documents will not be accepted. The Client’s name, account number(s) and dollar values must be clearly identified on the documentation provided. If name is not clearly defined, the name is to be clearly printed and a signature of the Client must be on the document.

• Please only submit account summary pages and not all account statement pages

Exhibit E

Geological Maps and Reports

(See attached.)

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REDHAWK RESOURCES FUND - III, LP GEOLOGICAL OVERVIEW Fort Stockton, Texas

6060 N. Central Expressway Ste. 302 Dallas, Texas 75206

Toll-Free: 844-952-7363 Direct: 972-684-5707

jnichols@redhawkinvestmentgroup.com www.redhawkinvestmentgroup.com

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LOCATION: THE PERMIAN BASIN Redhawk Resources Fund III is located in the Permian Basin, notably one of the most

famously productive oil fields in the world. Located in West Texas and the adjoining

area of Southwestern New Mexico, it is an area approximately 250 miles wide and 300

miles long and includes 52 counties in Texas and Southwestern New Mexico. Much of

the Permian Basin area had been home to the Apache Indians until they were forced

out by the US Army in about 1875.

In those days, as ranchers drilled shallow wells searching for water to sustain The first

PURPOSE:

Enhance, Workover and Drill

The purpose of the project is to acquire the 3,800 acres in Pecos County, Texas and

move immediately to correct mechanical, physical and engineering shortfalls to the

existing wells. 20 wells will be worked over which will include pulling pumping units,

cleaning and tuning the wells, and opening more well bores to existing zones. 39 wells

will be converted into injection wells and 6 new wells are to be drilled and

subsequently converted into injection wells. 5 pumping stations will be built. We plan

to increase production from the existing 40 bopd to something in the range of 725 –

750 bopd by the end of 2018.

The first commercial well in the Permian was completed in 1921 in Mitchell County at a

total depth of 2,498 feet. By the year 1929, enough wells had been drilled to give a

sketchy outline for a subsurface map of the Permian Basin. Because of the great

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distance to markets and the lack of pipelines to move the oil, the field did not develop

very quickly. In 1928, the key BIG LAKE oil field was discovered producing large flows

of oil and gas at the 8,500-foot level. The Great Depression came along and slowed the

Permian Basin development, but the onslaught of World War II accelerated it.

Development and new discoveries have continued throughout the decades. In 1966

alone, the entire Permian Basin produced a total of 607 million barrels of oil and 2.3

trillion cubic feet of gas. By then, a cumulative total of 11.3 billion barrels of oil had

been produced. Intrastate and interstate pipeline systems were expanded throughout

the area.

To date, the Permian Basin has produced over 29 billion barrels of oil and 75 trillion

cubic feet of gas. Today, it is estimated by industry experts that the Permian Basin still

contains recoverable oil and natural gas reserves exceeding the amount produced in the

last 90 years!1

Permian Basin

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FUND III LOCATION – THE QUEEN FIELD

The Queen Field is in the Permian Basin in Pecos County just outside of Fort Stockton,

Texas. The field consists of 70 wells, holding 3,800 acres with 64 producing wells and 6

disposal wells. The Queen Field has produced, to date, 2.5 million barrels of oil

constituting only 4% of the oil in place. The subject leases are located in the Delaware

Basin, which is currently producing roughly 539,000 barrels of oil a day. That is more

than double the 241,000 barrels a day the play was producing in July 2010.

The leasehold acreage is surrounded by developed fields owned by Apache Corporation

and Energen Resources among others. The field has excellent infrastructure and is

easily accessed by drilling and service companies.

Adjacent Water Floods Owned by Apache Corp. and Energen Resources

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The Permian Basin’s 250 by 300-mile area is separated into eastern and western halves

by a north-south trending Central Basin Platform. In cross section, the basin is an

asymmetrical feature; the western half contains a thicker and more structurally

deformed sequence of sedimentary rock.

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The subject leases lie in the southern portions of the Delaware Basin.

Basin Layout of the Permian

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Fort Stockton Tract Map – Legal Descriptions on File

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STABLEROCK ENERGY Fort Stockton Field Visit

9-24-15 thru 9-28-15 Field visit and review was conducted by Don North, Clayton Stevenson and Gary Stevenson. Glad to say all 72 wellbores listed on assignment from American Resources have been located and Lat / Long taken on each. This will be used to cross reference with RRC records to confirm correct location and well name. Also located 3 wells listed as plugged. In addition we found 3 Drilling Pads that could be used…. There are several Pumping units sitting thru-out the field. They would need to be gone thru and serviced, then could use as replacements or on new drills. We have 28 wells down, 8 for surface / elect problems and 20 for downhole issues. 10 of the 20 are on the list for first 10 workovers planned.

We visited with several services companies that will be needed, gathered valuable info on wells in this field and surrounding fields.

Lease roads and cosmetic view on Units are good. There is old pipe, flow lines, electric boxes, drums and other trash thru-out the field. Weeds have taken over most lease pads. There is very little oil on ground around well heads, this is a good thing….Tank Batteries are in fair shape, and issues can be addressed as we move forward.

My recommendation for plan forward is as follows, for approval: Phase 1: Location

prep

October 12 move in cleaning crew and equipment:

GMS: 2 men, one of which will be an operator for Backhoe, One ton flatbed truck, 28’ flatbed trailer, Job-Box w/ Generator, Pressure Washer, Air Compressor, General Tools and Saw-Zaw.

The backhoe will be a Monthly rental w/ forks from local workover rig vendor.

Junk Iron bin will be delivered to a central location to load with Junk iron. Found and received approval to use trash pit on Ranch for all other. This crew and equipment will clean 10 workover sites, wellhead prep and Rig anchor prep…… this will save a lot of time for Rig and Crew that will have a much higher hourly cost. Plus set pad for 2 BR quarter w/ Office.

October 22 Demob cleaning crew…… Phase 2: Set Quarters.

October 27 Move in and set Quarters building, Sewage system and potable water system. Stock quarters with supplies. Set up Office.

October 30 Complete set-up

Phase 3: Surface / Electric repair on 8 down wells

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November 2 start repairs to down wells that can be addressed from surface. Return to production. Also set-up new testing system.

Phase 4: Workover campaign November 2 MI Workover Rig

10 of the 20 down wells are on workover list to add perf. and pump acid treatment. After these 10 are completed, order of others would be as directed. Workover Rig vendor has been located and cost in….they understand and have worked this field in the past.

February 2 completion of 20 well workover planned AFE’s will be submitted along with a daily cost estimation on each Phase…..note Workover AFE’s will be on each well and Surface / Electric repairs are by well also.

There will also be an AFE for Maintenance on all Pumping Units…. This has been neglected and has to be done. Should be worked in over the next few months…..

I believe this plan will utilize our time and services to benefit both Production and cost saving…….

We will also have two pumpers, one lead and 2nd for relief and testing……They will work 12 days on and 4 days off. The 8 days they are on duty together, will be repair and testing days. This is an H2S environment and safety will be of utmostimportance. We will be adding production w/ new perfs and the unknown needs to be guarded for, on the Safety side……..

After reviewing the way wells have been serviced with a rig in the past, I really feel like we are going to make a huge difference, Improvement……..Yeah Baby

There are no Tubing Anchors to prevent tubing movement, they have not washed to bottom to remove solids, Note: I have been told by several that these wells will hold a full fluid level…..Timers are all set about the same 45 min to 1 Hr on and 2:15 to 3 Hr off…….no rhyme or reason. Paraffin has not been treated causing lost production……. Please review and give approvals on both Timing and path forward……AFE’s Gary Stevenson