EXPLORATION AND DEVELOPMENT AGREEMENT

EXHIBIT 10.9

EXPLORATION AND DEVELOPMENT AGREEMENT

This Exploration and Development Agreement (“Agreement”), dated and effective the 21^st day of November, 2005 (the “Effective Date”), is entered into by and between Ohio Triangle, L.P., a Texas limited partnership (“Ohio Triangle”) and GEM-CBM Company f/k/a Harken Gulf Exploration Company, a Delaware corporation (“GEM”). Ohio Triangle and GEM are sometimes referred to individually as a “Party”, and collectively as “Parties.” Ute Oil Company, d/b/a. A.C.T. Operating Company, a Texas corporation (“Ute Oil”) is a party to this Agreement because it is to be designated as Operator under the applicable operating agreement and, therefore, will be bound by this Agreement.

RECITALS

WHEREAS, Ohio Triangle and GEM have identified a particular area of land located in the State of Ohio, described as the “Triangle Prospect Area”, which is believed to be prospective for hydrocarbon exploration and more particularly coalbed methane; and

WHEREAS, the Parties desire to jointly explore and develop the Triangle Prospect Area in accordance with the terms and provisions of this Agreement;

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by all parties, Ohio Triangle and GEM hereby agree as follows:

ARTICLE I.

AGREEMENT TO PARTICIPATE

1.1 Ohio Triangle and GEM each agrees to participate in the Triangle Prospect Area as set forth in this Agreement, according to the terms and provisions set forth in this Agreement, and all Exhibits hereto.

ARTICLE II.

TRIANGLE PROSPECT AREA

2.1 The Triangle Prospect Area. The Triangle Prospect Area consists of the lands, located in Carroll, Jefferson, and Harrison Counties, Ohio, and included within the red outline on the map as Exhibit A hereto. The only depth restriction applied to the Triangle Prospect Area shall be those, if any, contained in the applicable Leases (as hereinafter defined), those leases acquired in Phase II (as hereinafter defined), and in leases acquired pursuant to Section 5.4.

2.2 Leases. Ohio Triangle is the current beneficial owner of certain Oil, Gas, Coalseam Gas, and Coal Bed Methane Leases covering approximately                  gross acres of land within the Triangle Prospect Area, which are depicted in yellow on Exhibit A and which are

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more particularly described on Exhibit B hereto. The Oil, Gas, Coalseam Gas, and Coal Bed Methane Leases which are identified in Exhibit B are, sometimes, collectively referred to as the “Leases.”

ARTICLE III.

DEVELOPMENT OF THE TRIANGLE PROSPECT AREA

3.1 Exploration Phases. Ohio Triangle and GEM shall initially explore and develop the Triangle Prospect Area in three (3) phases, in accordance with the terms of this Agreement. “Phase I” shall mean and refer to all the obligations and rights of all Parties in Section 3.2, along with the activities described therein. “Phase II” shall mean and refer to all the obligations and rights of all Parties in Section 3.3, along with the activities described therein. “Phase III” shall mean and refer to all the obligations and rights of all Parties in Section 3.4, along with the activities described therein. Phase I, Phase II, Phase III and the Subsequent Operations (as defined hereinafter) shall constitute the “Project.” GEM agrees to pay to Ohio Triangle for the purchase of GEM’s proportionate share (as set forth in Section 4.1 below) of the Leases the total sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) which shall be paid in three (3) installments in accordance with the terms set forth in Sections 3.2, 3.3 and 3.4.

3.2 Phase I. Contemporaneous with the execution of this Agreement, GEM shall pay to Ohio Triangle the sum of One Hundred Thousand And No/100 Dollars ($100,000.00) as the first payment of the initial Lease costs (“First Lease Payment”). Said First Lease Payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Ohio Triangle. Subject to Section 9.16 of this Agreement, failure by GEM to timely make said payment shall cause this Agreement to terminate and become null and void as between the Parties.

(a) Within ninety (90) days following execution of this Agreement, GEM shall direct the Operator to commence the drilling of                          core holes to be located in the Triangle Prospect Area. The                          core holes (each a “Phase I Core Hole,” and together with any other core holes drilled during Phase I, the “Phase I Core Holes”) shall be continuous wireline retrievable whole core holes which shall be drilled from the shallowest to the deepest structural position on the Triangle Prospect Area. Each Phase I Core Hole will be drilled to a depth sufficient to penetrate the #5 coal (as determined by GEM),                                                                                                                                                                                                                                                                                                                       , and at the written request of GEM, may be drilled deeper. The Phase I Core Holes will be drilled on the Leases or on such other lands as may be acquired by the Operator, at GEM’s cost, which is agreed to between the Parties. Commencement of the operations for the Phase I Core Holes is expressly subject to the Operator’s receipt of permission from all applicable federal, state and local governmental authorities, rig and ancillary equipment availability. GEM may choose to direct the Operator to drill more                                  Phase I Core Holes at a location and at a depth to be determined by GEM, the drilling of additional Phase I Core Holes shall also be considered to be a part of Phase I for all purposes under this Agreement. All Phase I Core Holes shall be plugged and abandoned in compliance with all state and federal rules, regulations and/or procedures and in accordance with standard industry customs and

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practices. The plugging and abandonment of all Phase I Core Holes shall also be considered to be part of Phase I for all purposes under this Agreement.

(b) In conjunction with the Phase I Core Hole operations, the Operator will use its best efforts to collect a sufficient quantity of coal samples in gas desorption canisters. Thereafter, the Operator shall have all Phase I Core Hole samples analyzed by a laboratory approved by the Parties. The analysis will include, without limitation, gas content, gas and coal qualitative analyses, and desorption isotherm determination. The Operator shall obtain reports of such laboratory analysis and shall deliver such reports to the Parties no later than ten (10) days after receipt of the reports. Within thirty (30) days of the completion of the Phase I Core Holes and the delivery of the laboratory analysis of all samples taken in the Triangle Prospect Area, the Operator and Ohio Triangle shall prepare and deliver to GEM a report detailing the Operator’s recommendations (which shall account for environmental issues) for Phase II of the Triangle Prospect (hereinafter referred to as the “Phase I Report”). The Phase I Report shall account for all aspects of the Phase II Pilot Projects (as defined hereinafter), which shall include, with out limiting the generality of the foregoing, location of each pilot project, schedule for drilling of all wells and construction of facilities, location of each well to be drilled (including surface and bottomhole locations, if applicable), all zones to be tested, drill depth of each well, prognosis of drilling operations for each well, method of drilling each well, completion procedures to be utilized for each well, any stimulation procedures to be utilized, equipping of each well, electrical services, production facilities, flowlines, gathering systems and facilities, compression, dehydration and other treating facilities, pipeline taps, transmission lines and facilities. GEM shall have thirty (30) days after receiving the Phase I Report from the Operator and Ohio Triangle to elect to proceed with Phase II (the “Phase II Election Window”) and must make such election pursuant to the terms of Section 3.2(d). Within the Phase II Election Window, GEM shall review the Phase I Report and make any modifications to the recommendations (the “Phase I Report Modifications”) set forth in the Phase I Report. Notwithstanding the foregoing, GEM’s modifications, if any, shall be solely limited to the technical aspects of the Phase I Report, and shall in no manner modify or change the schedule for the drilling or construction of facilities set forth in the Phase I Report. If GEM does not deliver any Phase I Report Modifications within the Phase II Election Window, it shall be deemed to have no Phase I Report Modifications, and the Phase I Report shall stand as it was submitted to GEM. However, if, within the Phase II Election Window, GEM delivers to Ohio Triangle, written Phase I Modifications, then the version submitted by the Operator and Ohio Triangle along with the Phase I Report Modifications shall constitute the Phase I Report. Unless mutually agreed to by the Ohio Triangle and GEM, no Phase I Report Modifications shall have the effect of extending the time of the Phase II Election Window.

(c) Following the execution of this Agreement and within ten (10) days of the receipt by GEM of the written request by Ohio Triangle, GEM shall deliver to the Operator, a fully executed Authority For Expenditure (“AFE I”) attached hereto as Exhibit C. GEM shall pay to the Operator the total AFE I amount within thirty (30) days from its delivery of the fully executed AFE I. Subject to Section 9.16 of this Agreement, failure by GEM to timely make said payment shall cause this Agreement to terminate and become null and void as between the Parties. Subject to the provisions of Section 3.7 below, GEM is responsible for all of the actual

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costs incurred even if they exceed the amounts shown in the AFE I, and all such costs actually paid or credited shall be considered in the calculation of the Carried Interest Amount (as defined below). All costs in excess of the AFE I shall be billed to GEM in accordance with the provisions of the Triangle Prospect Joint Operating Agreement and shall be paid by GEM within fifteen (15) days of receipt of an invoice for any such costs. At the end of operations for Phase I, any overpayment will be returned, unless GEM elects otherwise, and any underpayment will be paid promptly.

(d) GEM shall have the option, but not the obligation, to elect to proceed with Phase II of the Triangle Prospect. GEM must provide Ohio Triangle with written notice of its election to proceed with Phase II within the Phase II Election Window. If GEM fails to respond within the Phase II Election Window, Ohio Triangle shall send GEM a termination notice. If GEM fails to elect to proceed with Phase II following three (3) business days after receipt of such termination notice, then GEM shall be deemed to have elected not to proceed with Phase II, and this Agreement shall terminate and be null and void as of the date that the Phase II Election Window expired.

3.3 Phase II. If GEM elects to participate in Phase II, it shall pay to Ohio Triangle, within ten (10) days of receipt by Triangle of GEM’s written election to participate, the sum of Two Hundred Thousand And No/100 Dollars ($200,000.00) as the second payment of the initial Lease costs (“Second Lease Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified in writing by Ohio Triangle. Subject to Section 9.16, GEM’s failure to pay timely shall cause this Agreement to terminate and become null and void as between the Parties.

(a) Within ten (10) days after GEM’s written election to participate in Phase II, the Operator shall submit to GEM a                      AFE in the amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) which will be payable by GEM to the Operator as follows: (i) the first payment in the amount of $200,000.00 shall be paid within thirty (30) days from its receipt by GEM of the                      AFE; (ii) the second payment in the amount of $150,000.00 shall be paid to the Operator within twenty (20) days from GEM’s receipt of written notice that the Operator has spent seventy five percent (75%) of the first payment; (iii) the third and final payment in the amount of $150,000.00 shall be paid within thirty (30) days from GEM’s receipt of written notice that the Operator has spent seventy five percent (75%) of the second payment. Subject to Section 9.16 of this Agreement, failure by GEM to timely make each such payment shall

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cause this Agreement to terminate and become null and void as between the Parties. Subject to the provisions of Section 3.7 below, GEM is responsible for all of the                                           costs incurred in accordance with the provisions of this Section 3.3(a), even if they exceed the amounts shown in                                           AFE, and all such costs actually paid or credited shall be considered in the calculation of the Carried Interest Amount. At the end of operations for Phase II, any overpayment will be returned, unless GEM elects otherwise, and any underpayment will be paid promptly.                                                               Phase II shall be considered by the Parties as completed upon the acquisition of Additional Acreage covering                                           acres                                          , or two hundred forty (240) days after Ohio Triangle’s receipt of the Second Lease Payment, whichever is the first to occur.

(b) Within sixty (60) days of the completion of the lease acquisition portion of Phase II, the Operator shall commence operations for Phase II which will consist of                      pilot projects. The first pilot project (the “First Pilot Project”) shall be at a location in the general vicinity of a Phase I Core Hole and will consist of five (5) wells in a “five-spot” pattern spaced on 40 acres, more or less, per well. The second pilot project (the “Second Pilot Project”; together with the First Pilot Project, referred to as the “Phase II Pilot Projects”) shall be located in the general vicinity of where a Phase I Core Hole (but a different Phase I Core Hole than chosen for the First Pilot Project) and will consist of five (5) wells in a “five-spot” pattern spaced on 40 acres, more or less, per well. The purpose of Phase II will be to determine the commercial viability of actual producing wells in the Triangle Prospect Area. The Parties agree to market and sell, to the extent commercially viable, all liquid and gaseous hydrocarbons produced and save from Phase II wells. The Operator, within ninety (90) days after completion of the Phase II Pilot Projects, or other such time as may be mutually agreed between GEM and Ohio Triangle not to exceed one hundred eighty (180) days after completion of the Phase II Pilot Projects, shall prepare and deliver to Ohio Triangle and GEM a report detailing the Operator’s recommendations (which shall account for, among other things, environmental issues, if any) for Phase III of the Triangle Prospect (hereinafter referred to as the “Phase II Report”). The Phase II Report shall account for all aspects of the development drilling of the Triangle Prospect Area, which shall include a development plan scheduling the drilling and development of the Triangle Prospect Area, which shall include without limiting the generality of the foregoing, a schedule for drilling of all wells, a schedule for the construction of gathering, production, and treatment facilities, location of all wells to be drilled (including surface and bottomhole locations, if applicable), all zones to be tested, drill depth of each well, prognosis of drilling operations for each well, method of drilling each well, completion procedures to be utilized for each well, any stimulation procedures to be utilized, equipping of each well, electrical services, production facilities, flowlines, gathering systems and facilities, compression, dehydration and other treating facilities, pipeline taps, transmission lines and facilities and any other operations necessary to the development of the Triangle Prospect Area. GEM shall have thirty (30) days after receiving the Phase II Report from the Operator and Ohio Triangle to elect to proceed with Phase III (the “Phase III Election Window”) and must make the election pursuant to the terms of Section 3.3(b). Within the Phase III Election Window, GEM shall review the Phase II Report and make any modifications to the recommendations (the “Phase II Report Modifications”) set forth in the Phase II Report. Notwithstanding the foregoing, GEM’s modifications, if any, shall be

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solely limited to technical aspects of the Phase II Report, and shall in no way modify or change the schedule for the drilling of wells or construction of production, gathering, or treating facilities as set forth in the Phase II Report. If GEM does not deliver the Phase II Report Modifications within the Phase III Election Window, then GEM shall be deemed to have no modifications to the Phase II Report, and the Phase II Report shall stand as it was submitted to GEM. However, if, within the Phase III Election Window, GEM delivers to Ohio Triangle written Phase II Report Modifications, then the version submitted by the Operator along with GEM’s Phase II Report Modifications shall constitute the Phase II Report. . Unless mutually agreed to by the Ohio Triangle and GEM, no Phase II Report Modifications shall have the effect of extending the time of the Phase III Election Window.

(i) Within ten (10) days after the written request of Ohio Triangle, following GEM’s written election to participate in Phase II, GEM shall execute and deliver to the Operator the Authority For Expenditure II (“AFE II”) for 100% of the estimated costs for the First Pilot Project which is attached hereto as Exhibit D. AFE II may be modified by the Operator to account for any increase or reduction in third party services prices that may have incurred prior to the execution of the AFE II. In the event AFE II is modified Ohio Triangle shall submit the modified AFE II along with the request. GEM shall pay to the Operator the 100% of AFE amounts for tangible and intangible costs within thirty (30) days from its delivery of the fully executed AFE. That portion of the AFE attributable to field facilities cost shall be paid within five (5) business days of GEM’s receipt of a written request from the Operator. Subject to Section 9.16 of this Agreement, failure by GEM to timely execute and deliver AFE II or make said payment shall cause this Agreement to terminate and become null and void as between the Parties.

(ii) After the fifth well in the First Pilot Project has been spudded, the Operator shall submit an additional AFE (“AFE III”) for 100% of the estimated costs for the Second Pilot Project. GEM shall deliver a fully executed AFE III to the Operator within ten (10) days after the receipt of AFE III from the Operator. GEM shall pay to the Operator the 100% of the AFE amounts for tangible and intangible costs within thirty (30) days from its delivery of the fully executed AFE III. Should GEM elect not to proceed with the Second Pilot Project or, if GEM fails to return the executed AFE III to the Operator within the specified time, then Ohio Triangle shall send GEM a written termination notice. If GEM fails to deliver the executed AFE III within three (3) business days after receipt of a termination notice, then GEM shall be deemed to have elected not to proceed with the Second Pilot Project and with Phase III and this Agreement shall terminate and be null and void except, with respect to the wells drilled in the First Pilot Project. GEM shall earn an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled and completed in the First Pilot Project. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well.

(iii) Subject to the provisions of Section 3.7 below, GEM is responsible for all

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of the costs incurred even if they exceed the amounts shown in AFE II or AFE III, and all such costs actually paid or credited shall be considered in the calculation of the Carried Interest Amount. At the end of operations for Phase II, any overpayment will be returned, unless GEM elects otherwise, and any underpayment will be paid promptly.

(c) GEM shall have the option, but not the obligation, to elect to proceed with Phase III of the Triangle Prospect. GEM must provide Ohio Triangle with written notice of its election to proceed with Phase III within the Phase III Election Window. If GEM fails to respond within the Phase III Election Window, then Ohio Triangle shall send GEM a written termination notice. If GEM fails to elect to proceed within three (3) days after receipt of a termination notice, then GEM shall be deemed to have elected not to proceed with Phase III and this Agreement shall terminate and be null and void as of the date that the Phase III Election Window expired except, with respect to the wells drilled in Phase II, as to a forty (40) acre production unit, as to all depths, for each well drilled and completed in the Triangle Prospect Area in Phase II. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well.

3.4 Phase III. If GEM elects to participate in Phase III, it shall pay to Ohio Triangle, within ten (10) days of receipt by Ohio Triangle of GEM’s written election to participate, the sum of Two Hundred Thousand And No/100 Dollars ($200,000.00) as the third and final payment of the initial Lease costs (“Third Lease Payment”). Said payment shall be via wire transfer of immediately available funds to the banking coordinates identified, in writing by Ohio Triangle. Subject to Section 9.16, GEM’s failure to pay timely shall cause this Agreement to terminate and become null and void as between the Parties.

(a) Notwithstanding the operator replacement provisions in the Triangle Prospect Operating Agreement, GEM shall have the option at any time, after GEM makes the Third Lease Payment and after consultation with Ohio Triangle, to become the contract operator or to appoint a designee as contract operator. For the purposes of this Agreement the term “Contract Operator” shall mean GEM, if it elects to become the contract operator or its designee contract operator and shall not be interchanged with the term “Operator” as hereinafter defined. If GEM elects to become the Contract Operator, then Ohio Triangle and the Operator shall be obligated to take all reasonably necessary actions to make GEM or a designee the contract operator for the Triangle Prospect Area for the purposes of this Agreement; such contract operating agreement shall be consistent with industry standards, have a term of one year (and may be renewable, unless terminated earlier by Ohio Triangle pursuant to Section 3.4(c) hereinbelow), provide that all Overhead charges under the Triangle Prospect Operating Agreement shall be paid to the Contract Operator, but shall provide for distribution of production revenues by the Contract Operator only if the first purchaser of production who is not a Party, refuses to distribute directly to the Parties. If GEM elects to become the Contract Operator or elects a designee to be the Contract Operator, neither GEM nor its designee shall in any manner change or modify the scheduling or implementation of the Phase II Report or change or modify any AFE previously submitted to GEM pursuant to the terms of this Agreement.

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(b) Within ninety (90) days of Ohio Triangle’s receipt of the Third Lease Payment, the Operator shall commence operations for Phase III, in accordance with the Phase II Report. The Phase III operations will begin the development drilling of the Triangle Prospect Area. Phase III will end at the point in time when GEM has met the Carried Interest Amount as defined in Section 3.5 below.

(c) In addition to the payment of the Third Lease Payment, GEM shall pay all of the costs for all operations to be conducted in Phase III until GEM has paid the Carried Interest Amount. Subject to the provisions of Section 3.7, GEM shall pay 100% of the actual costs incurred for Phase III until GEM has paid the Carried Interest Amount. Within ten (10) days after Ohio Triangle’s receipt of the Third Lease Payment, the Operator shall submit to GEM an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the first calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall contemporaneously deliver a fully executed AFE. Thereafter the Operator shall submit to GEM at least thirty (30) days prior to the next calendar quarter an AFE for 100% of the estimated costs for all operations to be conducted pursuant to the Phase II Report for the next calendar quarter. GEM shall pay to the Operator the total AFE amount within thirty (30) days from its receipt of the AFE and shall deliver an executed AFE with its payment. The Operator shall continue to submit AFE’s on a quarterly basis until such time as the Carried Interest Amount has been reached. Once the Carried Interest Amount is met, then Phase III shall end. Subject to Section 9.16 of this Agreement, failure by GEM to timely pay the full amount of each AFE submitted by the Operator for the Phase III costs shall cause the Agreement to terminate and become null and void as between the Parties. GEM shall only be entitled to an assignment of a forty (40) acre production unit, as to all depths, surrounding each well drilled. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well.

3.5 Ohio Triangle’s Carried Interest. Notwithstanding anything to the contrary contained herein, GEM hereby agrees to pay for or carry Ohio Triangle’s interest in all operations conducted in Phases I, II, and III in the Triangle Prospect Area until such time as GEM has expended a total amount of Seven Million Five Hundred Thousand And No/100 Dollars ($7,500,000.00) in the Triangle Prospect Area (the “Carried Interest Amount”), without regard to any production proceeds or other income received by GEM with respect to the Triangle Prospect. For the purpose of calculating the total amount expended by GEM, the sum shall include the First, Second, and Third Lease Payments, all costs expended in Phase I, II and III, all lease acquisition costs in Phase II, any costs under the indemnity provisions of Section 8.2 and Section 8.3, all actual costs (including salaries and benefits per COPAS guidelines) incurred and paid by GEM for its technical employees but only to the extent they are used directly on the Project, any reimbursement paid to surface owners for damages caused by the Project’s activities, any expenses for expenditures related to any bond or letter of credit required by any governmental authority or any rule, law, statute, or administrative regulations, and all other costs paid by GEM to Ohio Triangle or to the Operator or to any other person or entity providing services to the Triangle Prospect Area, other than persons or entities related to GEM, except as specified above. GEM shall provide to Ohio Triangle on a quarterly basis a statement identifying the total amounts expended in the Triangle Prospect

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Area; such amounts shall be subject to audit by Ohio Triangle pursuant to the Triangle Prospect Operating Agreement. At such time as GEM has expended $7,500,000.00 in the Triangle Prospect Area, the Parties shall thereafter share all costs in proportion to their interests as set forth in Section 4.1 below; with respect to costs or services incurred or contracted for prior to the final payment of the Carried Interest Amount, Ohio Triangle shall pay its share of such costs or services that become due after such final payment, regardless of whether it signed an AFE or consented to the operation. In addition, as interests are assigned to GEM under Section 4.2, Ohio Triangle shall be responsible for direct operating expenses on the well(s) related to the assignment in accordance with its ownership interest under Section 4.1, regardless of whether the full amount of the Carried Interest Amount has been paid. For this purpose, operating expenses do not include costs of deepening, side tracking, re-completing a well, overhead costs, or any capital expenditures; such costs of deepening, side tracking, re-completing a well, overhead costs, or any capital expenditures are to be paid by GEM as part of the Carried Interest Amount.

3.6 Subsequent Operations. After the completion of Phase III, all subsequent wells and facilities within the Triangle Prospect Area, and the reworking, deepening, side tracking, re-equipping or re-completion of prior wells drilled within the Triangle Prospect Area (the “Subsequent Operations”) shall be subject to the Triangle Prospect Operating Agreement.

3.7 Limit on Expenditures under AFEs. Notwithstanding the foregoing, in the event any single operation covered by a multiple operation AFE provided hereunder, or under the Triangle Prospect Operating Agreement, experiences an excess of actual costs over the AFE’d amounts for a single operation which is in excess of 20% of the AFE’d amounts (exclusive of any costs for plugging and abandonment and/or reclamation for any such single well or operation) or if the single operation is projected to be in excess of 20% of the AFE’d amount (exclusive of any costs for plugging and abandonment and/or reclamation for any such single well or operation), either Party may elect to require the Operator to cease that operation (and plug and abandon any well).

ARTICLE IV.

PARTIES AND INTEREST IN PROSPECT AREA

4.1 Parties and Interests. The interest of each Party hereto in and to the Triangle Prospect Area (“Triangle Prospect Area Interest”) shall be as follows:

Notwithstanding the interests of the Parties set forth above, Ohio Triangle owns 100% of the Leases subject to GEM’s right to earn interest in the Leases as a result of GEM’s full participation in Phase II and Phase III and full compliance with the terms of this Agreement.

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4.2 Interests Earned by GEM. Subject to Section 9.16, if GEM timely pays all sums as required in Section 3.2 and Section 3.3, GEM shall earn an assignment of its proportionate interest as set forth in Section 4.1 as to forty (40) acre production unit, as to all depths, surrounding each well drilled and completed in the Triangle Prospect Area in Phase II and all Additional Acreage acquired. Said forty (40) acre production unit shall be the closest quarter (1/4) quarter (1/4) section of land surrounding each such well. Should GEM either elect or be deemed to have elected to not proceed with Phase III or fails to expend the total Carried Interest Amount, GEM shall hereby grant Ohio Triangle a continuing option, which option shall expire one hundred eighty (180) days after GEM either elects or is deemed to have elected not to proceed with Phase III, to acquire all of GEM’s interest in the Leases for the payment of Two Hundred Thousand and No/100 Dollars ($200,000.00) and/or acquire GEM’s interest in any Additional Acreage, by paying to GEM, GEM’s proportionate share, as set forth in Section 4.1, of the actual costs incurred for the Additional Acreage (i.e., Ohio Triangle would pay to GEM sixty five percent (65%) of the actual costs incurred for the Additional Acreage). At the completion of Phase III pursuant to Section 3.5 and if GEM has paid all sums required in Section 3.4 GEM shall earn an assignment of its propor