PARALLEL PETROLEUM CORP
PURCHASE AND SALE AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>form8k113004exhibit10.txt
<DESCRIPTION>PURCHASE AND SALE AGREEMENT
<TEXT>
                                                                  EXHIBIT 10.1
                           PURCHASE AND SALE AGREEMENT


         This Purchase and Sale Agreement ("Agreement"), dated as of September
21, 2004, is by and between EASTLAND OIL COMPANY, whose address is P.O. BOX
3488, Midland, Texas 79702 ("Seller"), and PARALLEL L.P., whose address is 1004
N. Big Spring Street, Midland, Texas 79701 ("Buyer"). Seller and Buyer are
sometimes together referred to herein as "Parties".

                                   WITNESSETH:

         WHEREAS, Seller owns certain oil and gas leasehold interests and
related assets more fully described on the exhibits hereto; and

         WHEREAS, Seller desires to sell and Buyer desires to acquire these
interests and related assets on the terms and conditions hereinafter provided;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller and Buyer hereby agree as follows:

                             ARTICLE 1. DEFINITIONS
                            -----------------------

         1.1. "Agreement" shall mean this Purchase and Sale Agreement between
Seller and Buyer.

         1.2. "Assets" shall mean the following-described assets and properties
(except to the extent constituting Excluded Assets):

         (a) the Leases;

         (b) the Personal Property and Incidental Rights; and

         (c) the Inventory Hydrocarbons

         1.3. "Assumed Obligations" shall mean:

         (a) all Environmental Obligations or Liabilities;

         (b) all obligations with respect to gas production, sales or, subject
to Article 18, processing imbalances with third parties; and

         (c) all liabilities, duties, and obligations that arise out of the
ownership, operation or use of the Assets after the Effective Time.

         1.4. "Closing" shall be as defined in Section 13.1.

         1.5. "Closing Date" shall be as defined in Section 13.1.

         1.6. "Effective Time" shall mean 7:00 a.m., local time, on October 1,
2004.

                                                                          Page 1
<PAGE>


         1.7. "Environmental Defect" shall mean: (i) a condition or activity
with respect to an Asset that is in violation, or reasonably likely to violate,
any federal, state or local statute or regulation ("Environmental Law") relating
to natural resources, conservation, the environment, or the emission, release,
storage, treatment, disposal, transportation, handling or management of
industrial or solid waste, hazardous waste, hazardous or toxic substances,
chemicals or pollutants, petroleum, including crude oil, natural gas, natural
gas liquids, or liquefied natural gas, and any wastes associated with the
exploration and production of oil and gas ("Regulated Substances"); or (ii) the
presence of Regulated Substances in the soil, groundwater, or surface water in,
on, at or under an Asset in any manner or quantity which is required to be
remediated by Environmental Law or by any applicable action or guidance levels
or other standards published by any governmental agency with jurisdiction over
the Assets. Buyer and Seller agree that for a condition to be in violation of
any statute or regulation referred to in the preceding sentence, it shall not be
necessary that Seller shall be under notice of violation from a federal or state
regulatory agency.

         1.8. "Environmental Obligations or Liabilities" shall mean all
liabilities, obligations, expenses (including, without limitation, all
attorneys' fees), fines, penalties, costs, claims, suits or damages (including
natural resource damages) of any nature, associated with the Assets, whether
arising before or after the Effective Time, and attributable to or resulting
from: (i) pollution or contamination of soil, groundwater or air, on the Assets
and any other contamination of or adverse effect upon the environment, (ii)
underground injection activities and waste disposal, (iii) clean-up responses,
remedial, control or compliance costs, including the required cleanup or
remediation of spills, pits, ponds, or lagoons, including any subsurface or
surface pollution caused by such spills, pits, ponds, or lagoons, (iv)
noncompliance with applicable land use, permitting, surface disturbance,
licensing or notification requirements, (v) all obligations for plugging,
replugging and abandoning any wells, the restoration of any well sites, tank
battery sites and gas plant sites, the proper removal, disposal and abandonment
of any wastes or fixtures, and the proper capping and burying of all flow lines,
which are included in the Assets; and (vi) violation of any federal, state or
local environmental or land use law. Notwithstanding anything to the contrary
set forth in, or implied by, this Section 1.8, "Environmental Obligations or
Liabilities" does not include (i) personal injury or wrongful death occurring
prior to the Closing or (ii) offsite waste disposal occurring prior to the
Closing Date.

         1.9. "Excluded Assets" shall mean the following:

         (a) (i) all trade credits, accounts receivable, notes receivable and
other receivables attributable to Seller's interest in the Assets with respect
to any period of time prior to the Effective Time; (ii) all deposits, cash,
checks in process of collection, cash equivalents and funds attributable to
Seller's interest in the assets with respect to any period of time prior to the
Effective Time; and (iii) all proceeds, benefits, income or revenues accruing
(and any security or other deposits made) with respect to the Assets prior to
the Effective Time;

         (b) all corporate, financial, and tax records of Seller; however, Buyer
shall be entitled to receive copies of any tax records which directly relate to
any Assumed Obligations, or which are necessary for Buyer's ownership,
administration, or operation of the Assets;

         (c) all claims and causes of action of Seller arising from acts,
omissions or events, or damage to or destruction of the Assets, occurring prior
to the Effective Time except to the extent directly related to the Assumed
Obligations;

                                                                          Page 2
<PAGE>


         (d) except as otherwise provided in Article 15, all rights, titles,
claims and interests of Seller relating to the Assets prior to the Effective
Time (i) under any policy or agreement of insurance or indemnity; (ii) under any
bond; or (iii) to any insurance or condemnation proceeds or awards;

         (e) all Hydrocarbons produced from or attributable to the Assets with
respect to all periods prior to the Effective Time, together with all proceeds
from or of such Hydrocarbons, except the Inventory Hydrocarbons;

         (f) claims of Seller for refund of or loss carry forwards with respect'
to production, windfall profit, severance, ad valorem or any other taxes
attributable to any period prior to the Effective Time, or income or franchise
taxes;

         (g) all amounts due or payable to Seller as adjustments or refunds
under any contracts or agreements (including take-or-pay claims) affecting the
Assets, respecting periods prior to the Effective Time;

         (h) all amounts due or payable to Seller as adjustments to insurance
premiums related to the assets with respect to any period prior to the Effective
Time;

         (i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to the Assets, and all accounts
receivable attributable to the Assets, prior to the Effective Time;

         (j) all of Seller's intellectual property, including, but not limited
to, proprietary computer software, patents, trade secrets, copyrights, names,
marks and logos;

         (k) all of Seller's remote terminal units, radio control alarms, radio
towers located on the leases, areas, and lands described in Exhibit A.

         1.10. "Hydrocarbons" shall mean crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids and other liquid or gaseous
hydrocarbons (including CO2), and shall also refer to all other minerals of
every kind and character which may be covered by or included in the Leases and
Assets.

         1.11. "Inventory Hydrocarbons" shall mean all merchantable oil and
condensate (for oil or liquids in storage tanks, being only that oil or liquids
physically above the top of the pipeline connection from such tanks) produced
from or attributable to the Leases prior to the Effective Time which have not
been sold by Seller and are in storage at the Effective Time.

         1.12. "Leases" shall mean, except to the extent constituting Excluded
Assets, any and all interests owned by Seller and set forth on Exhibit A, or
which Seller is entitled to receive by reason of any participation, joint
venture, farm-in, farm-out, joint operating agreement or other agreement, in and
to the oil, gas and/or mineral leases, permits, licenses, concessions, leasehold
estates, royalty interests, overriding royalty interests, net revenue interests,
executory interests, net profit interests, working interests, reversionary
interests, fee and term mineral interests, and any other interests of

                                                                          Page 3
<PAGE>


Seller in Hydrocarbons, it being the intent hereof if the legal descriptions and
depth limitations set forth on Exhibit A do not correctly describe such leases
or interests or all of the lands covered thereby, that the "Leases" shall
nevertheless include all of Seller's right, title and interest in the Leases and
other interests described on Exhibit A and all land and depths covered thereby
even though such interests may be incorrectly described.

         1.13. "Performance Deposit" shall be as defined in Section 3.2.

         1.14. "Personal Property and Incidental Rights" shall mean all right,
title and interest of Seller in and to or derived from the following insofar as
the same do not constitute Excluded Assets and are attributable to, appurtenant
to, incidental to, or used for the operation of the Leases:

         (a) all easements, rights-of-way, permits, licenses, servitudes,
surface leases and fee parcels or other interests;

         (b) all wells, equipment and other personal property, inventory, spare
parts, tools, fixtures, pipelines, wellhead equipment, casing, tubing, pumps,
motors, machinery, gathering lines and facilities, telephone lines, boilers,
buildings, injection wells and facilities, saltwater disposal wells and
facilities, central processing facilities, metering facilities, compression
facilities, platforms, tank batteries, appurtenances, and improvements now or as
of the Effective Time situated upon the Leases or the land covered by the
instruments described in Section 1.14(a) or used or held for use in connection
with the development or operation of the Leases or the production, treatment,
storage, compression; processing or transportation of Hydrocarbons from or in
the Leases;

         (c) all contracts, agreements, and title instruments to the extent,
attributable to and affecting the Assets in existence at Closing, including all
Hydrocarbon sales, purchase, gathering, transportation, treating, marketing,
exchange, processing, and fractionating contracts, and joint operating
agreements, unitization, pooling and communitization agreements; and

         (d) originals of all lease files, land files, well files, production
records, division order files, abstracts, title opinions, and contract files,
insofar as the same are directly related to the Leases; including, without
limitation, all seismic, geological, geochemical, and geophysical information
and data, to the extent that such data is not subject to any third party
restrictions, but excluding Seller's proprietary interpretations of same.

         1.15. "Purchase Price" shall be as defined in Section 3.1.

         1.16. "Retained Obligations" shall mean all liabilities, duties, and
obligations that arise out of the ownership, operation or use of the Assets
prior to the Effective Time (including, without limitation, (i) all indebtedness
of Seller for borrowed money which is secured by liens on or security interests
in the Assets; and (ii) the following to the extent the same are attributable to
periods prior to the Effective Time in accordance with generally accepted
accounting principles: liabilities for royalties, overriding royalties and other
burdens on production; production expenses, operating expenses and all
expenditures attributable to the operation of the Assets; personal injuries; and
Taxes (provided, that all Taxes based on or measured by production or the value
thereof shall be deemed for purposes of this Agreement to be attributable to the
period when such production was produced, notwithstanding that such Taxes may
not be assessed or paid in a subsequent period); but not

                                                                          Page 4
<PAGE>


including any such items to the extent the Purchase Price is reduced therefor
pursuant to Section 3.3(b)(2 or 5), except those specifically included in the
definition of "Assumed Obligations."


                    ARTICLE 2. AGREEMENT TO PURCHASE AND SELL

         Subject to the terms and conditions of this Agreement, Seller agrees to
sell and convey to Buyer and Buyer agrees to purchase and pay for the Assets and
to assume the Assumed Obligations.


                      ARTICLE 3. PURCHASE PRICE AND PAYMENT

         3.1.     Purchase Price.

         Subject to adjustment as set forth below, the Purchase Price for the
Assets shall be Thirty Thousand, Two Hundred Fifty Dollars ($30,250.00),
allocated among the Assets as provided in Exhibit B.

         3.2.     Performance Deposit.

         Immediately upon the execution hereof, Buyer shall tender to the trust
account of Turner, Davis & Gerald, by bank wire transfer, a Performance Deposit
equal to ten percent (10%) of the Purchase Price, which Performance Deposit
shall be non-interest-bearing and non-refundable except as provided herein.

         3.3.     Final Settlement/Purchase Price Adjustments.

         Within 90 days after Closing, Seller shall provide to Buyer, for
Buyer's concurrence, an accounting (the "Final Settlement Statement") of the
actual amounts of Seller's and Buyer's Credits for the adjustment set out in
this Section 3.3. Buyer shall have the right for 30 days after receipt of the
Final Settlement Statement to audit and take exceptions to such adjustments. The
Parties shall attempt to resolve any disagreements on a best efforts basis.
Those credits agreed upon by Buyer and Seller shall be netted and the final
settlement shall be paid as directed in writing by the receiving party, on final
adjustment by the party owing it (the "Final Settlement").

         The Purchase Price shall be adjusted as follows:

         (a) The Purchase Price shall be adjusted upward by the following
("Seller's Credits"):

                  (1) the value of (i) all Inventory Hydrocarbons, such value to
be based upon actual sales receipts if available or, in the absence thereof,
upon the prevailing market value for crude oil in effect as of the Effective
Time adjusted for grade and gravity, less taxes and transportation fees deducted
by the purchaser of such oil, such oil to be measured at the Effective Time by
the operators of the Assets; and (ii) the value of all of Seller's unsold
inventory of gas plant products, if any, attributable to the Leases at the
Effective Time valued in the same manner as if such products had been sold under
the contract then in existence between Seller and the purchaser of

                                                                          Page 5
<PAGE>


such products or, if there is no such contract, valued in the same manner as if
said products had been sold at the posted price for said products;

                  (2) the amount of all production expenses, operating expenses
and all expenditures attributable to the operation of the Assets after August 1,
2004, and actually paid by Seller in accordance with generally accepted
accounting principles;

                  (3) an amount equal to the sum of any upward adjustments
provided elsewhere in this Agreement; and

                  (4) any other amount agreed upon by Seller and Buyer in
writing prior to Closing.

         (b) The Purchase Price shall be adjusted downward by the following
("Buyer's Credits"):

                  (1) the total collected sales value of all Hydrocarbons sold
by the Seller after August 1, 2004, all of which are attributable to the Assets,
and any other monies collected by the Seller with respect to the ownership or
operation of the Assets after August 1, 2004, but excepting interest income. To
the extent collected as of Closing, such revenue shall be included in the
preliminary statement referenced in Section 3.3(c). To the extent collected
after Closing such revenue, less Seller's reasonable estimate of amounts then
owing to Seller, shall be delivered to Buyer within five (5) business days after
receipt of such revenue by Seller. Delivery or acceptance of such revenue shall
not be considered a waiver of any rights to further adjustments or calculations
a party may have pursuant to this Agreement;

                  (2) the amount of all unpaid ad valorem, property, production,
net profits, excise, severance and similar taxes and assessments (but not
including income taxes) ("Taxes"), which taxes and assessments become due and
payable or accrue to the Assets prior to the Effective Time, which amount shall,
where possible, be computed based upon the tax rate and values applicable to the
tax period in question; otherwise, the amount of the adjustment under this
paragraph shall be computed based upon such Taxes assessed against the
applicable portion of the Assets for the immediately preceding tax period just
ended;

                  (3) an amount equal to the sum of any downward adjustments
provided elsewhere in this Agreement;

                  (4) an amount equal to the sum of amounts held in suspense by
Seller for the account of third parties as set forth in Schedule 3.3(b)(4)
hereto (subject to reasonable updating through the Closing Date) (obligations
for payment of which amounts to such third parties Buyer shall assume at
Closing);

                  (5) an amount equal to all unpaid royalties, overriding
royalties and other burdens on production, production expenses, operating
expenses and all expenditures attributable to the operation of the Assets prior
to the Effective Time in accordance with generally accepted accounting
principles; and

                  (6) any other amount agreed upon by Seller and Buyer in
writing prior to Closing.

                                                                          Page 6
<PAGE>


         (c) Seller shall prepare and deliver to Buyer, at least five "Business
Days" prior to Closing, Seller's estimate of the adjusted Purchase Price to be
paid at Closing, together with a preliminary statement setting forth Seller's
estimate of the amount of each adjustment to the Purchase Price to be made
pursuant to this Section 3.3. The Parties shall negotiate in good faith and
attempt to agree on such estimated adjustments prior to Closing. In the event
any estimated adjustment amounts are not agreed upon prior to Closing, the
estimate of the adjusted Purchase Price for purposes of Closing shall be
calculated based on Seller's and Buyer's agreed upon estimated adjustments (and
any disputes shall be resolved by the parties in connection with the resolution
of the Final Settlement Statement).


               ARTICLE 4. SELLER'S REPRESENTATIONS AND WARRANTIES

         Seller represents and warrants to Buyer as of the date hereof, and the
Closing Date that:

         (a) Seller is a limited partnership, duly organized, validly existing,
and in good standing under the laws of the state of Texas, and is duly qualified
to carry on its business in those states where it is required to do so.

         (b) Seller has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement and the other
documents and agreements contemplated hereby, and to perform its obligations
under this Agreement and the other documents and agreements contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not violate, nor be in conflict
with, any provision of its governing documents or any agreement or instrument to
which it is a party or by which it is bound (except any provision contained in
agreements customary in the oil and gas industry relating to (1) the
Preferential Purchase Rights (defined below) covering all or any portion of the
Assets; (2) required consents to transfer the Assets; (3) maintenance of uniform
interest provisions; and (4) any other third-party approvals or consents
contemplated herein), or any judgment, decree, order, statute, rule, or
regulation applicable to Seller.

         (c) This Agreement, and all documents and instruments required
hereunder to be executed and delivered by Seller at Closing, constitute legal,
valid and binding obligations of Seller and is enforceable in accordance with
its respective terms, subject to applicable bankruptcy and other similar laws of
general application with respect to creditors.

         (d) There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by, or to the actual knowledge of Seller threatened
against Seller.

         (e) The execution, delivery and performance of this Agreement and the
transaction contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, partnership or otherwise, on the part
of Seller.

         (f) Except as shown on Exhibit G, there are no claims, demands,
actions, suits, or proceedings (including condemnation, expropriation, or
forfeiture proceedings) pending, or to the knowledge of Seller threatened,
against Seller or any of its affiliates, or any Asset (a) seeking to

                                                                          Page 7
<PAGE>


prevent the
consummation of the transactions contemplated hereby, or (b) which, singly or in
the aggregate, would adversely affect the Assets.

         (g) Except for contracts or arrangements terminable on 30 days' notice
and except as specifically indicated in Schedule 4(g), no hydrocarbons produced
from the Assets are subject to a sales contract or other agreement relating to
the production, gathering, transporting, processing, treating or marketing of
hydrocarbons, and no person has any call upon or option to purchase the Assets
or the production therefrom.

         (h) Seller is not obligated, by virtue of a prepayment arrangement, a
"take or pay" arrangement, a production payment or any other arrangement, to
deliver hydrocarbons produced from the Assets at some future time without then
or thereafter receiving full payment therefor.

         (i) All information pertaining to expenses and revenues associated with
the Assets as contained in the Divestiture Package describing the Assets
prepared by Riviera Energy Corporation concerning the Assets is accurate and
complete in all material respects.


                ARTICLE 5. BUYER'S REPRESENTATIONS AND WARRANTIES

         Buyer represents and warrants to Seller as of the date hereof, and the
Closing Date that:

         (a) Buyer is a limited partnership, duly organized, validly existing,
and in good standing under the laws of the state of Texas, and as of the Closing
Date is duly qualified to carry on its business in those states where it is
required to do so.

         (b) Buyer has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement and the other
documents and agreements contemplated hereby, and to perform it obligations
under this Agreement and the other documents and agreements contemplated hereby.
The consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with, any provision of Buyer's articles of
incorporation, partnership agreement(s), by-laws or governing documents or any
material agreement or instrument to which it is a party or by which it is bound,
or any judgment, decree, order, statute, rule, or regulation applicable to
Buyer.

         (c) The execution, delivery and performance of this Agreement and the
transactions contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, company, partnership or otherwise, on
the part of Buyer.

         (d) This Agreement, and all documents and instruments required
hereunder to be executed and delivered by Buyer at Closing, constitute legal,
valid and binding obligations of Buyer in accordance with their respective
terms, subject to applicable bankruptcy and other similar laws of general
application with respect to creditors.

         (e) There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by, or to the actual knowledge of Buyer threatened
against Buyer.

                                                                          Page 8
<PAGE>


         (f) Buyer has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees in connection with this Agreement and
the transaction provided herein.

         (g) Buyer is an experienced and knowledgeable investor and operator in
the oil and gas business. Prior to entering into this Agreement, Buyer was
advised by and has relied on its own expertise and legal, tax, reservoir
engineering, and other professional counsel concerning this Agreement, the
Assets and the value thereof; however, Buyer has relied and based its offer to
purchase the Assets on information furnished to Buyer by Seller and Riviera
Energy Corporation.

         (h) Buyer has the financial resources to close the transaction
contemplated by this Agreement, and if third party financing is a requirement
for Buyer's ability to close, Buyer has obtained such financing or will have
obtained such financing before the Closing Date.


                ARTICLE 6. ACCESS TO INFORMATION AND INSPECTIONS

         6.1.     Title Files.

         Promptly after the execution of this Agreement and until the Closing
Date, Seller shall permit Buyer and its representatives at reasonable times
during normal business hours to examine and copy, in Seller's offices at their
actual location, all abstracts of title, title opinions; title files, ownership
maps, lease files, assignments, division orders, payout statements and
agreements pertaining to the Assets as requested by Buyer, insofar as the same
may now be in existence and in the possession of Seller. No warranty of any kind
is made by Seller as to the information so supplied, and Buyer agrees that any
conclusions drawn therefrom are the result of its own independent review and
judgment.

         6.2.     Other Files.

         Promptly after the execution of this Agreement and until the Closing
Date, Seller shall permit Buyer and its representatives at reasonable times
during normal business hours to examine, in Seller's offices at their actual
location, all production, well, regulatory, engineering, seismic, geological,
geophysical and geochemical information, accounting information and other
information, files, books, records, and data pertaining to the Assets as
requested by Buyer, insofar as the same may now be in existence and in the
possession of Seller, excepting economic evaluations, reserve reports and any
such information that is subject to the attorney/client and work product
privileges. Seller shall use its commercially reasonable efforts to cause third
party operators of the Assets to afford Buyer similar access to their files and
records relating to the Assets.

         6.3.     Confidentiality Agreement.

         All such information made available to Buyer shall be maintained
confidential by Buyer until Closing. The information protected by such
confidentiality obligation does not include any information that (i) at the time
of disclosure is generally available to and known by the public (other than as a
result of a disclosure by Buyer), or (ii) is or was available to Buyer on a
nonconfidential basis. Buyer may disclose the information or portions thereof to
those employees, agents or representatives of Buyer or its lenders who need to
know such information for the purpose of assisting Buyer in connection with its
performance of this Agreement. Further, in the event that

                                                                          Page 9
<PAGE>


Buyer is requested or required (by deposition, interrogatory, request for
documents, subpoena, civil investigative demand or similar process) to disclose
any of the information, Buyer shall provide Seller with prompt written notice of
such request or requirement, so that Seller may seek such protective order or
other appropriate remedy as it may desire. Buyer shall further take whatever
reasonable steps which may be necessary to ensure that Buyer's employees,
consultants and agents comply with the provisions of this Section 6.3.

         6.4.     Inspections.

         Promptly after the execution of this Agreement and until Closing,
Seller, subject to any necessary third-party operator approval, shall permit
Buyer and its representatives at reasonable times and at their sole risk, cost
and expense, to conduct reasonable inspections of the Assets.


                ARTICLE 7. ENVIRONMENTAL MATTERS AND ADJUSTMENTS

         7.1. Upon execution of and pursuant to the terms of this Agreement,
Buyer shall have the right, at reasonable times during normal business hours, to
conduct its investigation into the status of the physical and environmental
condition of the Assets. If, in the course of conducting such investigation,
Buyer discovers that any Asset is subject to a material Environmental Defect,
Buyer may raise such Environmental Defect in the manner set forth hereafter. No
later than 5:00 p.m., three (3) business days prior to Closing (the
"Environmental Defect Notice Date"), Buyer shall notify Seller in writing
specifying such Environmental Defects, if any, the Assets affected thereby, and
Buyer's good faith estimate of the net reduction in value of the Assets affected
by such defects (the "Environmental Defect Value"). Prior to Closing, Buyer and
Seller shall treat all information regarding any environmental conditions as
confidential, whether material or not, and shall not make any contact with any
governmental authority or third party regarding same without the written consent
of the other party unless required by law.

         7.2. If Buyer fails to notify Seller prior to or on the Environmental
Defect Notice Date, of any Environmental Defects, all Environmental Defects not
timely noticed to Seller pursuant to Section 7.1 will be deemed waived, Seller
shall be released from any liability therefor, the Parties shall proceed with
Closing, Seller shall be under no obligation to correct the defects, and Buyer
shall assume the risks, liability and obligations associated with such defects.
Seller may, but shall be under no obligation to, correct at its own cost and
expense such defects on or before the Closing Date.

         7.3. In the event that Buyer provides Seller with an Environmental
Defect Notice, Seller, at its sole option, shall, (i) agree to cure or remediate
any Environmental Defect within a reasonable time after Closing as provided in
Section 7.4; or, (ii) reduce the Purchase Price by the amount of the
Environmental Defect Value; provided, however, if an Environmental Defect poses
a material risk of any claims by third parties for damages, injunctive relief or
any other remedy other than the remediation contemplated in determining the
Environmental Defect Value, or if the estimated Environmental Defect Value
exceeds 20% of the Allocated Value of the affected Asset, then Buyer shall have
the right to delete the affected Asset from the Assets to be conveyed under this
Agreement, and receive a reduction of the Purchase Price in the amount of the
Allocated Value of such Asset, in which event 100% of the Allocated Value of
such Asset shall be included in the

                                                                         Page 10
<PAGE>


calculation of total defects for purposes of Article 9. Regardless of Seller's
intention to cure or remediate an Environmental Defect after Closing, the value
of all Environmental Defects not cured or remediated by Closing shall be
included in the calculation of total defects for purposes of Article 9.

         7.4 If Seller elects to proceed under Section 7.3(i) with respect to an
Environmental Defect, Seller shall remediate such Environmental Defect as soon
as reasonably practicable after Closing in accordance with applicable law, in
which case the following provisions will govern the remediation:

         (a) An amount equal to the Environmental Defect Value of such
Environmental Defect shall be placed in escrow by Buyer, with an escrow agent
and pursuant to an escrow agreement mutually acceptable to the Parties, and the
Purchase Price shall be reduced by such amount.

         (b) Buyer will grant access to the Assets after Closing to Seller, and
third parties conducting assessments or remediation, to the extent and as long
as necessary to conduct and complete the assessment or remediation work, to
remove equipment and facilities, and to perform any other activities reasonably
necessary in connection with assessment or remediation. Buyer will use its
commercially reasonable efforts not to interfere with Seller's ingress and
egress or assessment or remediation activities. Seller will make reasonable
efforts to perform the work so as to minimize disruption to Buyer's business
activities and to the Assets.

         (c) Seller shall retain the liability for, and shall indemnify, defend
and hold harmless Buyer from any Claims with respect to the Environmental
Defect, until such time as the remediation has been completed and accepted by
Buyer, and upon such acceptance by Buyer (which acceptance shall not be
unreasonably withheld or delayed), the amount escrowed on account of such
Environmental Defect shall be released to Seller (together with all interest
earned thereon .in the escrow account), and Seller shall have no further
liability or indemnification obligation with respect to such Environmental
Defect.

         (d) Until Seller completes remediation of an Environmental Defect,
Seller and Buyer will each notify the other of any pending or threatened claim,
action, or proceeding by any authority or private party that relates to or would
affect the Environmental Defect or the remediation of the Assets affected by the
Environmental Defect.

         (e) If Seller undertakes remediation as to any Asset in which Seller's
ownership is less than 100%, Buyer will bill the other working interest owners
for their share of the remediation expenses in advance of Seller beginning such
remediation to the extent permitted under the applicable operating agreement and
will pay over to Seller any amount so received provided that Buyer shall have no
obligation to initiate any legal proceeding to collect such amounts and shall be
entitled to deduct any reasonable costs of collection from the amount received
to be paid to Seller.

                                                                         Page 11
<PAGE>


                    ARTICLE 8. TITLE DEFECTS AND ADJUSTMENTS

         8.1.     Definitions.

         For purposes hereof, the terms set forth below shall have the meanings
assigned thereto.

         (a) "Allocated Value" shall mean the dollar amount allocated to each
producing Asset as set forth on Exhibit B.

         (b) "Defensible Title", subject to and except for the Permitted
Encumbrances (as hereinafter defined), means: As to the Leases, such title held
by Seller and reflected by appropriate documentation properly filed in the
official records of the jurisdiction in which the Lease or Leases are located
that (a) entitles Seller and will entitle Buyer, after Closing, to own and
receive and retain, without suspension, reduction or termination, payment of
revenues for not less than the net revenue interest shown on Exhibit B of all
oil and gas produced, saved and marketed from or attributable to the well or
unit indicated through the plugging, abandonment and salvage of such wells; (b)
obligates Seller, and will obligate Buyer after Closing, to bear the costs and
expenses relating to the maintenance, development and operation of such well or
unit through the plugging, abandonment and salvage of such wells in an amount
not greater than the expense interest of Seller set forth in Exhibit B (unless
Seller's net revenue interest therein is proportionately increased); and (c) the
Assets are free and clear of any liens, burdens or encumbrances of any kind or
character.

         (c) "Title Defect" shall mean any matter which (i) causes Seller to
have less than Defensible Title to any of the Assets as of the Closing Date, or
(ii) causes any of the following to be untrue:

                  (A) Leases. The Leases are in full force and effect, are valid
and subsisting. Except for the matters described in Schedule 8.1(c)(A), within
the last two years Seller has not been notified by any lessor under any Lease or
by any other party of a default under any Lease that has not been resolved or of
any requirements or demands to drill additional wells on any of the Leases.
Further, all contracts affecting the Assets are of the type generally found in
the oil and gas industry in the geological area in which the Assets in question
are located, do not (individually or in the aggregate) contain unusual or unduly
burdensome provisions which may operate in a materially adverse manner with
respect to the Assets or to the Buyer, and are in form and substance considered
conventional within the oil and gas industry in the geographical area in which
the Assets are located.

                  (B) Material Contracts; Required Capital Expenditures. Seller
is not in default, and within the last two years has not received any written
notice from any person alleging that Seller is in default, in any material
respect under any material contract or agreement pertaining to the Assets except
for those alleged defaults described in Schedule 8.1(c)(B).

                  (C) Proration. The production from the wells has not been
prorated.

                  (D) Tax Partnerships. To the best of Seller's knowledge, no
portion of the Assets (1) has been contributed to and is currently owned by a
tax partnership; (2) is subject to any form of agreement (whether formal or
informal, written or oral) deemed by any federal tax statute, rule or regulation
to be or to have created a tax partnership; or (3) otherwise constitutes
"partnership

                                                                         Page 12
<PAGE>


property" (as that term is used throughout Subchapter K of Chapter 1 of Subtitle
A of the Code) of a tax partnership. For purposes of this Section 8.1(c)(D) a
"tax partnership" is any entity, organization or group deemed to be a
partnership within the meaning of section 761 of the Code or any similar federal
statute, rule or regulation, and that is not excluded from the application of
the partnership provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code by reasons of elections made, pursuant to section 761 (a) of the Code and
all such similar federal statutes, rules and regulations, to be excluded from
the application of all such partnership provisions.

         (d) "Title Defect Property" shall mean any Lease or portion thereof
burdened by a Title Defect.

         (e) "Permitted Encumbrances" shall mean any of the following matters:

                  (i) defects in the early chain of title consisting of failure
to recite marital status or the omission of succession or heirship proceedings;

                  (ii) defects or irregularities arising out of prior oil and
gas leases which, on their face, expired more than ten (10) years prior to the
Effective Time, and which have not been released of record;

                  (iii) tax liens and mechanic's liens for amounts not yet due
and payable, or those that are being contested in good faith by Seller in the
ordinary course of business (which contests and contested amounts are described
in Schedule 8.1 (e)(iii) hereto);

                  (iv) to the-extent any of the following do not materially
diminish the value of, or impair the conduct of operations on, any of the Assets
and do not impair Seller's right to receive the revenues attributable thereto:
(x) easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations, pipelines, grazing, hunting, fishing,
logging, canals, ditches, reservoirs or the like, and (y) easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways and other
similar rights-of-way, on, over or in respect of property owned or leased by
Seller or over which Seller owns rights of way, easements, permits or licenses;

                  (v) all lessors' royalties, overriding royalties, net profits
interests, carried interest, production payments, reversionary interests and
other burdens on or deductions from the proceeds of production if the net
cumulative effect of such burdens or deductions does not reduce the net revenue
interest of Seller in any well affected thereby to a percentage less than that
percentage reflected in Exhibit B or impair the right to receive revenues
attributable thereto;

                  (vi) preferential rights to purchase and required third party
consents to assignments and similar agreements with respect to which waivers or
consents are obtained from the appropriate parties prior to the Closing Date, or
the appropriate time period for asserting the rights has expired without an
exercise of the rights prior to the Closing Date;

                  (vii) all rights to consent by, required notices to, filings
with, or other actions by governmental entities and tribal authorities in
connection with the sale or conveyance of oil and gas leases or interests if
they are customarily obtained subsequent to the sale or conveyance;

                                                                         Page 13
<PAGE>


                  (viii) defects or irregularities of title arising out of
events or transactions which have been barred by limitations;

                  (ix) any encumbrance or other matter (other than liens
securing indebtedness originated by or expressly assumed by Seller or its
affiliates, which shall not be subject to any deductible) having an aggregate
adverse effect on the value of the Assets of less than $10,000, the parties
agreeing that such amount will be a per Asset deductible rather than a
threshold; and

                  (x) any encumbrance or other matter (whether or not
constituting a "Title Defect") expressly waived in writing by Buyer.

         8.2.     Notice of Title Defects.

         No later than 5:00 p.m., three (3) business days prior to Closing (the
"Title Defect Notice Date"), Buyer may provide Seller written notice of any
Title Defect along with a description of those matters which, in Buyer's
reasonable opinion, constitute Title Defects and setting forth in detail Buyer's
calculation of the value for each Defect. Seller may elect, at its sole cost and
expense, but without obligation, to cure all or any portion of such Title
Defects. Buyer's failure to deliver to Seller such notice on or before the
Defect Notice Date shall be deemed a waiver by Buyer of all Title Defects that
Seller does not have notice of on such date. Any defect or deficiency concerning
Seller's title to the Assets not asserted by Buyer prior to the Title Defect
Notice Date shall be deemed waived by Buyer for all purposes.

         8.3.     Title Defect Adjustment.

         Seller shall have the opportunity to cure, until sixty (60) days after
Closing ("Cure Period"), any Title Defect. If Seller elects to attempt to cure a
Title Defect after Closing, Closing with respect to the portion of the Assets
affected by such Title Defect will be deferred (the "Closing Deferred
Property"). Closing with respect to all other Assets will proceed as provided in
this Agreement (subject to Article 9 and the other provisions of this
Agreement), but the Base Purchase Price delivered to Seller at such initial
Closing will be reduced by the Allocated Value of all Closing Deferred
Properties. If Seller cures any Title Defect within the Cure Period, then the
Closing with respect to the Closing Deferred Property for which such Title
Defect has been cured will proceed and will be finalized within seven (7) days
following the end of the Cure Period. If Seller fails or refuses to cure any
Title Defect prior to the expiration of the Cure Period, Buyer may separately
elect with respect to each affected Closing Deferred Property, by notice to
Seller delivered within seven (7) days after receipt by Buyer of Notice from
Seller of such failure or refusal to cure any such Title Defect, to waive all of
the Title Defects applicable to such Closing Deferred Property (which waived
Title Defects shall be deemed Permitted Encumbrances) and proceed to Closing on
such Closing Deferred Property. If Buyer does not elect to waive an existing
Title Defect, Seller shall retain the affected Closing Deferred Property and the
Parties shall have no further obligation with respect thereto. In the event that
any such property is retained by Seller and such property has been receiving
revenue, without complaint, for a period in excess of two years, then Buyer
agrees (i) not to take any action to interfere with such revenue stream, and
(ii) to the extent that Buyer becomes payor of such revenue, to pay Seller such
revenue upon receipt of an indemnity agreement from Seller.

                                                                         Page 14
<PAGE>


         8.4.     Title Defect Values.

         In determining the value of a Title Defect, it is the intent of the
Parties to include, to the extent possible, only that portion of the lands,
leases and wells, whether an undivided interest, separate interest or otherwise,
materially and adversely affected by the defect. The Title Defect value shall in
no event exceed the Allocated Value of the affected Asset. Subject to such
limitation; the "Title Defect Value" shall be determined by the parties in good
faith taking into account all relevant factors, including, but not limited to,
the following:

                  (i)   the Allocated Value of the leases, lands and well
affected by the Title Defect;

                  (ii)  the reduction in the warranted NRI of the Title Defect
Property, or the amount by which the cost sharing percentage for such property
is greater than the warranted WI;

                  (iii) the productive status of the Title Defect Property
(i.e., proved developed producing, etc.) and the present value of the future
income expected to be produced therefrom;

                  (iv)  if the Title Defect represents only a possibility of
title failure, the probability that such failure will occur;

                  (v)   the legal effect of the Title Defect; and

                  (vi)  if the Title Defect is a lien or encumbrance on the
leases, lands or wells, the cost of removing such lien or encumbrance.

         8.5.     Title Warranty.

         SELLER SHALL CONVEY SELLER'S INTERESTS IN AND TO THE ASSETS TO BUYER
SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS AND ENCUMBRANCES. SELLER
SHALL WARRANT TITLE TO THE ASSETS AGAINST ALL ADVERSE CLAIMS, LIENS, BURDENS AND
ENCUMBRANCES ARISING BY, THROUGH OR UNDER SELLER, BUT NOT OTHERWISE. IMBALANCES
WITH RESPECT TO OIL OR NATURAL GAS ARE GOVERNED BY ARTICLE 18 HEREOF. THE
PARTIES AGREE THAT THE EXISTENCE OF ANY SUCH IMBALANCES SHALL NOT BE DEEMED A
TITLE DEFECT.

           ARTICLE 9. THRESHOLD AMOUNT FOR DEFECTS/OPTION TO TERMINATE

         9.1 For the purpose of determining adjustments to the Purchase Price or
triggering Seller's obligation to respond to asserted Environmental Defects
pursuant to Article 7.1 and asserted Title Defects pursuant to Article 8.2, the
asserted Environmental Defects and/or asserted Title Defects (together referred
to as "Aggregate Asserted Defects") must exceed three percent (3%) of the
Purchase Price before there shall be any adjustments to the Purchase Price for
any such Asserted Alleged Defects or further action required by Seller under
Articles 7 or 8 with respect to such asserted Environmental Defects and/or
asserted Title Defects. Upon the Aggregate Asserted Defects exceeding the Defect
Threshold Amount, asserted Environmental Defects and asserted Title Defects
shall be handled pursuant to the applicable Article hereof; provided, however,
that the amount of

                                                                         Page 15
<PAGE>


Aggregate Asserted Defects up to the Defect Threshold Amount under either one of
the referenced Articles, or both collectively, shall be treated as a deductible
amount to be satisfied by Buyer prior to Seller having any obligation under
either or both of such Articles.

         9.2 If (i) the aggregate of the values attributable to all Title
Defects determined pursuant to Article 8 plus the value of all Environmental
Defects determined pursuant to Article 7 shall exceed ten percent (10%) of the
Purchase Price or (ii) the aggregate value of a reduction to the Purchase Price
pursuant to Article 10 exceeds ten percent (10%) of the Purchase Price, then
either Buyer or Seller may, at its sole option, terminate this Agreement without
any further obligation by giving written notice of termination. In the event of
such termination, Seller shall return the Performance Deposit to Buyer, without
interest, within five (5) days of receipt of the notice of termination and
neither party shall have any further obligation or liability hereunder.


              ARTICLE 10. PREFERENTIAL PURCHASE RIGHTS AND CONSENTS

         10.1.    Actions and Consents.

         (a) Seller and Buyer agree that each shall use all reasonable efforts
to take or cause to be taken all such action as may be necessary to consummate
and make effective the transaction provided in this Agreement and to assure that
it will not be under any material corporate, legal, or contractual restriction
that could prohibit or delay the timely consummation of such transaction.

         (b) Seller shall notify all holders of (i) preferential rights to
purchase the Assets ("Preferential Purchase Rights"), (ii) rights of consent to
the assignment, or (iii) rights of approval to the assignment of the Assets, and
of such terms and conditions of this Agreement to which-the holders of such
rights are entitled. Seller shall promptly notify Buyer if any Preferential
Purchase Rights are exercised, any consents or approvals denied, or if the
requisite period has elapsed without said rights having been exercised or
consents or approvals having been received. If prior to Closing, any such
Preferential Purchase Rights are timely and properly exercised, or Seller is
unable to obtain a necessary consent or approval prior to Closing, the interest
or part thereof so affected shall be eliminated from the Assets and the Purchase
Price reduced by the portion of the Purchase Price allocated to such interest or
part thereof as provided in Exhibit B. If any additional Preferential Purchase
Rights are discovered after Closing, or if a third party Preferential Purchase
Rights holder alleges improper notice, then Buyer agrees to cooperate with
Seller in giving effect to any such valid third party Preferential Purchase
Rights. In the event any such valid third party preferential purchase rights are
validly exercised after Closing, Buyer's sole remedy against Seller shall be
return by Seller to Buyer of that portion of the Purchase Price allocated under
Exhibit B to the portion of the assets on which such rights are exercised and
lost by Buyer to such third party. The parties agree that the Allocated Values
for properties subject to Preferential Purchase Rights shall be the sole
responsibility of Buyer, and Buyer agrees to indemnify and hold Seller harmless
from all liability and claims related to the reasonableness of such values.

         (c) With respect to any portion of the Assets for which a Preferential
Purchase Right has not been asserted prior to Closing or a consent or other
approval to assign has not been granted and for which the time for election to
exercise such Preferential Purchase Right or to grant such consent has not
expired, Closing with respect to the portion of the Assets subject to such
outstanding

                                                                         Page 16
<PAGE>


obligations will be deferred (the "Third Party Interests"). Closing with respect
to all other Assets will proceed as provided in this Agreement, but the Base
Purchase Price delivered to Seller at Closing will be reduced by the allocated
value of the Third Party Interests. In the event that within ninety (90) days
after Closing any such Preferential Purchase Right is waived or consent or
approval is obtained or the time for election to purchase or to deliver a
consent or approval passes (such that under the applicable documents, Seller may
sell the affected Third Party Interest to Buyer), then the Closing with respect
to the applicable portion of the Third Party Interests will proceed promptly. If
such waivers, consents or approvals as are necessary are not received by Seller
within the applicable ninety (90) day period, Seller shall retain such Third
Party Interests and the parties shall have no further obligation to each other
with respect thereto.


                         ARTICLE 11. COVENANTS OF SELLER

         11.1.    Covenants of Seller Pending Closing.

         (a) From and after the date of execution of this Agreement and until
the Closing, and subject to Section 11.2 and the constraints of applicable
operating and other agreements, Seller shall operate, manage, and administer the
Assets in a good and workmanlike manner consistent with its past practices, and
shall carry on its business with respect to the Assets in substantially the same
manner as before execution of this Agreement. Seller shall use all reasonable
efforts to preserve in full force and effect all Leases, operating agreements,
easements, rights-of-way, permits, licenses, and agreements which relate to the
Assets in which Seller owns an interest, and shall perform all obligations of
Seller in or under all such agreements relating to the Assets; provided,
however, Buyer's sole remedy for Seller's breach of its obligations under this
Section 10.1(a) shall be limited to the amount of that portion of the Purchase
Price allocated in Exhibit B to that portion of the Assets affected by such
breach. Seller shall, except for emergency action taken in the face of serious
risk to life, property, or the environment (1) submit to Buyer, for prior
written approval, all requests for operating or capital expenditures and all
proposed contracts and agreements relating to the Assets which involve
individual commitments of more than $25,000; (2) consult with, inform, and
advise Buyer regarding all material matters concerning the operation,
management, and administration of the Assets; (3) obtain Buyer's written
approval prior to voting under any operating, unit, joint venture, partnership
or similar agreement; and (4) not approve or elect to go nonconsent as to any
proposed well or plug and abandon or agree to plug and abandon any well without
Buyer's prior written approval. On any matter requiring Buyer's approval under
this Section 10.1(a), Buyer shall respond within five (5) days to Seller's
request for approval and failure of Buyer to respond to Seller's request for
approval within such time shall release Seller from the obligation to obtain
Buyer's approval before proceeding on such matter.

         (b) Seller shall promptly notify Buyer of any suit, lessor demand
action, or other proceeding before any court, arbitrator, or governmental agency
and any cause of action which relates to the Assets or which might result in
impairment or loss of Seller's interest in any portion of the Assets or which
might hinder or impede the operation of the Assets.

         11.2. Limitations on Seller's Covenants Pending Closing.

                                                                         Page 17
<PAGE>


         To the extent Seller is not the operator of any of the Assets, the
obligations of Seller in Section 11.1 concerning operations or activities which
normally or pursuant to existing contracts are carried out or performed by the
operator, shall be construed to require only that Seller use all reasonable
efforts (without being obligated to incur any expense or institute any cause of
action) to cause the operator of such Assets to take such actions or render such
performance within the constraints of the applicable operating agreements and
other applicable agreements.


                         ARTICLE 12. CLOSING CONDITIONS

         12.1.    Seller's Closing Conditions.

         The obligations of Seller under this Agreement are subject, at the
option of Seller, to the satisfaction, at or prior to the Closing, of the
following conditions:

         (a) all representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Buyer shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Buyer at or prior to the Closing;

         (b) the execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by all
necessary action, corporate, partnership or otherwise, on the part of Buyer;

         (c) all necessary consents of and filings with any state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, except to the extent that such consents and filings are
normally obtained, accomplished or waived after Closing; and

         (d) as of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Seller) shall be pending or threatened
before any court or governmental agency seeking to restrain Seller or prohibit
the Closing or seeking damages against Seller as a result of the consummation of
this Agreement.

         12.2.    Buyer's Closing Conditions.

         The obligations of Buyer under this Agreement are subject, at the
option of Buyer, to the satisfaction, at or prior to the Closing, of the
following conditions:

         (a) all representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Seller shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Seller at or prior to the Closing;

         (b) the execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by all
necessary action, corporate, partnership or otherwise, on the part of Seller;

                                                                         Page 18
<PAGE>


         (c) all necessary consents of and filings with any state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, except to the extent that such consents and filings are
normally obtained, accomplished or waived after Closing;

         (d) as of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Buyer) shall be pending or threatened
before any court or governmental agency seeking to restrain Buyer or prohibit
the Closing or seeking damages against Buyer as a result of the consummation of
this Agreement.


                               ARTICLE 13. CLOSING

         13.1.    Closing.

         The closing of this transaction (the "Closing") shall be held at the
offices of Turner, Davis & Gerald, 400 W. Illinois, Suite 1400, Midland, Texas
79701, at 10:00 a.m., local time, on December 31, 2004, or at such earlier date
or place as the Parties may agree in writing (herein called "Closing Date").
Time is of the essence and the Closing Date shall not be extended unless by
written agreement of the Parties. On or before five (5) business days prior to
Closing, Buyer and Seller shall use their best efforts to provide each other
copies of all closing documents.

         13.2.    Seller's Closing Obligations.

         At Closing, except to the extent comprising the Excluded Assets, Seller
shall deliver to Buyer the following:

         (a) the Assignment and Conveyance substantially in the form attached
hereto as Exhibit C and such other documents as may be reasonably necessary to
convey all of Seller's interest in the Assets to Buyer in accordance with the
provisions hereof;

         (b) a nonforeign affidavit executed by Seller in the form attached as
Exhibit D;

         (c) appropriate regulatory forms appointing Buyer as the operator for
those Assets which Seller operates;

         (d) copies of all third-party waivers, consents, approvals, permits and
actions obtained;

         (e) exclusive possession of the Assets;

         (f) letters-in-lieu of transfer orders in form acceptable to Seller and
Buyer;

         (g) a Reporting and Accounting Memorandum executed by Seller in the
form attached as Exhibit E; and

         (h) releases of all liens and encumbrances burdening the Assets in form
and substance reasonably satisfactory to Buyer.

                                                                         Page 19
<PAGE>


         13.3. Buyer's Closing Obligations.

         At Closing, Buyer shall deliver to Seller (i) by wire transfer in
immediately available funds to an Account designated by Seller, the Purchase
Price (less the Performance Deposit) as adjusted by Section 3.3, and (ii) a
Reporting and Accounting Memorandum executed by Buyer in the form attached as
Exhibit E.

         13.4.    Joint Closing Obligations.

         Both Parties at Closing shall execute a Settlement Statement evidencing
the amount actually wire transferred and all adjustments to the Purchase Price
taken into account at Closing. All events of Closing shall each be deemed to
have occurred simultaneously with the other, regardless of when actually
occurring, and each shall be a condition precedent to the other.


               ARTICLE 14. LIMITATIONS ON WARRANTIES AND REMEDIES

         THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF
THE RESERVES, IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE LEASES,
OR THE ENVIRONMENTAL CONDITION OF THE ASSETS. THE ITEMS OF PERSONAL PROPERTY,
EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE
ASSETS ARE SOLD HEREUNDER "AS IS, WHERE IS, AND WITH ALL FAULTS" AND NO
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR CONDITION, ARE GIVEN BY OR ON BEHALF OF SELLER. IT IS UNDERSTOOD AND
AGREED THAT PRIOR TO CLOSING BUYER SHALL HAVE INSPECTED THE ASSETS FOR ALL
PURPOSES AND HAS SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL
CONDITION, BOTH SURFACE AND SUBSURFACE, AND THAT BUYER ACCEPTS SAME IN ITS "AS
IS, WHERE IS AND WITH ALL FAULTS" CONDITION. THE WARRANTIES OF SELLER CONTAINED
IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, AND BUYER HEREBY WAIVES ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR CONDITION, OR CONFORMITY TO SAMPLES.


                   ARTICLE 15. CASUALTY LOSS AND CONDEMNATION

         If, prior to the Closing, all or any portion of the Assets is destroyed
by fire or other casualty or if any portion of the Assets shall be taken by
condemnation or under the right of eminent domain (all of which are herein
called "Casualty Loss" and limited to property damage or taking only),

                                                                         Page 20
<PAGE>


Buyer and Seller must agree prior to Closing either (i) to delete that portion
of the Assets which is subject to the Casualty Loss from the Assets, and the
Purchase Price shall be reduced by the value allocated to the deleted interest
as set out in Exhibit B, or (ii) for Buyer to proceed with the purchase of such
Assets, notwithstanding any such destruction or taking (without reduction of the
Purchase Price) in which case Seller shall pay, at the Closing, to Buyer all
sums paid to Seller by third parties by reason of the destruction or taking of
such Assets and shall assign, transfer and set over unto Buyer all insurance
proceeds received by Seller as well as all of the right, title and interest of
Seller in and to any claims, causes of action, unpaid proceeds or other payments
from third parties arising out of such destruction or taking; provided, however,
if the value of that portion of the Assets affected by the Casualty Loss, not to
exceed that allocated in Exhibit B, exceeds $3,000,000, Buyer and Seller shall
each have the right to terminate this Agreement upon written notification to the
other, Seller shall return the Performance Deposit to Buyer, the transaction
shall not close and thereafter neither Buyer nor Seller shall have any liability
or further obligations to the other hereunder. Prior to Closing, Seller shall
not voluntarily compromise, settle or adjust any amounts payable by reason of
any Casualty Loss without first obtaining the written consent of Buyer.


                        ARTICLE 16. DEFAULT AND REMEDIES

         16.1.    Seller's Remedies.

         Upon failure of Buyer to consummate the transactions contemplated
hereby by the Closing Date, as it may be extended in accordance herewith,
Seller's sole and exclusive remedy for such breach and any other breach of this
Agreement by Buyer other than Section 6.3 shall be to retain the Performance
Deposit as a liquidated damage and not as a penalty, and terminate this
Agreement, all other remedies being expressly waived by Seller. Notwithstanding
any provision hereof to the contrary Seller may retain the Deposit as a
liquidated damage only in the event the transaction contemplated by this
Agreement is terminated due solely to the breach hereof by Buyer in the absence
of any material breach hereof by Seller. If the transaction contemplated by this
Agreement fails to close or is terminated for any other reason, the Performance
Deposit shall be returned to Buyer.

         16.2.    Buyer's Remedies.

         Upon failure of Seller to comply herewith by the Closing Date, as it
may be extended in accordance herewith, Buyer, at its sole option and in
addition to any other remedies it may have at law or equity, may (i) enforce
specific performance, or (ii) terminate this Agreement. In the event Buyer
elects to terminate this Agreement as set forth above, Seller shall immediately
return the Performance Deposit to Buyer.

         16.3.    Other Remedies.

         Notwithstanding the foregoing, termination of this Agreement shall not
prejudice or impair Buyer's obligations under Section 6.3 (and the
confidentiality agreements referenced therein). The prevailing party in any
legal proceeding brought under or to enforce this Agreement shall be
additionally entitled to recover court costs and reasonable attorneys' fees from
the non-prevailing party.

                                                                         Page 21
<PAGE>


         16.4.    Effect of Termination.

         In the event of termination of this Agreement under this Article 16,
the transaction shall not close and neither Buyer nor Seller shall have any
further obligations, remedies, liabilities, rights or duties to the other
hereunder, except as expressly provided herein.


                      ARTICLE 17. ASSUMPTION AND INDEMNITY

         17.1.    Assumed Obligations; Pre-Closing Liabilities.

         Upon and after Closing Buyer shall own the Assets, together with all
the rights, duties, obligations, and liabilities accruing after Closing,
including the Assumed Obligations and Buyer's indemnity obligations hereunder.
Buyer agrees to assume and pay, perform, fulfill and discharge all Assumed
Obligations. Seller agrees to retain and pay, perform, fulfill and discharge all
Retained Obligations.

         17.2.    Buyer's Indemnity.

         Buyer agrees to indemnify, defend and hold Seller harmless from and
against any and all claims, demands, losses, damages, punitive damages, costs,
expenses, causes of action or judgments of any kind or character including,
without limitation, any interest, penalty, reasonable attorneys' fees and other
costs and expenses incurred in connection therewith or the defense thereof
(collectively the "Claims"), with respect to all liabilities and obligations or
alleged or threatened liabilities and obligations caused by, related to,
attributable to, or arising out of the Assumed Obligations.

         17.3.    Seller's Indemnity.

         Seller agrees to indemnify, defend and hold Buyer harmless from and
against any and all Claims for or with respect to all liabilities and
obligations or alleged or threatened liabilities and obligations caused by,
related to, attributable to, or arising out of the Retained Obligations.

         17.4.    Negligence.

         THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN
THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES
AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE,
COMPARATIVE, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE
PARTIES HERETO.

         17.5.    Broker or Finder's Fee.

         Each party hereby agrees to indemnify and hold the other harmless from
and against any claim for a brokerage or finder's fee or commission in
connection with this Agreement or the transactions contemplated by this
Agreement to the extent such claim arises from or is attributable to the actions
of such indemnifying party, including, without limitation, any and all losses,
damages,

                                                                         Page 22
<PAGE>


punitive damages, attorneys' fees, costs and expenses of any kind or
character arising out of or incurred in connection with any such claim or
defending against the same.


                           ARTICLE 18. GAS IMBALANCES

         Seller and Buyer will use their best efforts to update (to the
Effective Time) the gas imbalance volume amounts listed on Exhibit F. If, prior
to the Final Settlement Date, either party hereto notifies the other party
hereto that the volumes set forth in Exhibit F are incorrect, then Buyer or
Seller will pay the other at the Final Settlement, as appropriate, an amount
equal to $4.00 per net mmbtu variance from the net imbalance shown on Exhibit F.
Subject to such adjustment on the Final Settlement Date, as of the Closing Buyer
agrees to assume any liability and obligation for gas production imbalances
(whether over or under) attributable to the Assets. Except as set forth in this
Article 18, in assuming this liability at Closing, Buyer shall not be obligated
to make any additional payment over the Purchase Price to Seller, and Seller
shall not be obligated to refund any of said price to reimburse Buyer for any
over-balances existing at the time of sale.


                            ARTICLE 19. MISCELLANEOUS

         19.1.    Public Announcements.

         The parties hereto agree that prior to Closing, prior to making any
public announcement or statement with respect to the transaction contemplated by
this Agreement, the party desiring to make such public announcement or statement
shall consult with the other party hereto and exercise its best efforts to (i)
agree upon the text of a joint public announcement or statement to be made by
both of such parties; or (ii) obtain written approval of the other party hereto
to the text of a public announcement or statement to be made solely by Seller or
Buyer, as the case may be. Nothing contained in this paragraph shall be
construed to require either party to obtain approval of the other party hereto
to disclose information with respect to the transaction contemplated by this
Agreement to any state or federal governmental authority or agency to the extent
(i) required by applicable law or by any applicable rules, regulations or orders
of any governmental authority or agency having jurisdiction; or (ii) necessary
to comply with disclosure requirements of the New York Stock Exchange or other
recognized exchange or over the counter, and applicable securities laws.

         19.2.    Filing and Recording of Assignments, etc.

         Buyer shall be solely responsible for all filings and recording of
assignments and other documents related to the Assets and for all fees connected
therewith, and Buyer shall furnish copies of all such filed and/or recorded
documents to Seller. Seller shall not be responsible for any loss to Buyer
because of Buyer's failure to file or record documents correctly or promptly.
Buyer shall promptly file all appropriate forms, declarations or bonds with
federal and state agencies relative to its assumption of operations and Seller
shall cooperate with Buyer in connection with such filings.

         19.3. Further Assurances and Records.

                                                                         Page 23
<PAGE>


        (a) After the Closing each of the parties will execute, acknowledge and
deliver to the other such further instruments, and take such other action, as
may be reasonably requested in order to more effectively assure to said party
all of the respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered or inuring to the benefit of such
party in consummation of the transactions contemplated hereby.

         (b) Buyer agrees to maintain the files and records of Seller that are
acquired pursuant to this Agreement for seven (7) years after Closing. Buyer
shall provide Seller and its representatives reasonable access to and the right
to copy such files and records for the purposes of (i) preparing and delivering
any accounting provided for under this Agreement and adjusting, prorating and
settling the charges and credits provided for in this Agreement; (ii) complying
with any law, rule or regulation affecting Seller's interest in the Assets prior
to the Closing Date; (iii) preparing any audit of the books and records of any
third party relating to Seller's interest in the Assets prior to the Closing
Date, or responding to any audit prepared by such third parties; (iv) preparing
tax returns; (v) responding to or disputing any tax audit; or (vi) asserting,
defending or otherwise dealing with any claim or dispute under this Agreement.

         (c) Buyer agrees that within thirty (30) days after Closing or within
thirty (30) days after operations are actually transferred, whichever is later,
it will remove or cause to be removed the names and marks used by Seller and all
variations and derivatives thereof and logos relating thereto from the Assets
and will not thereafter make any use whatsoever of such names, marks and logos.

         (d) To the extent not obtained or satisfied as of Closing, Seller
agrees to continue to use all reasonable efforts, and to cooperate with Buyer's
efforts to obtain for Buyer (i) access to files, records and data relating to
the Assets in the possession of Seller or third parties, including, but not
limited to, information required by Buyer in order for Buyer to comply with
requirements of the Securities and Exchange Commission, which, among other
things, require Buyer to provide information regarding the Assets for up to the
three (3) calendar years prior to the calendar year of the Effective Time
hereof; and (ii) access to wells constituting a part of the Assets operated by
third parties for purposes of inspecting same.

         (e) Buyer shall comply with all current and subsequently amended
applicable laws, ordinances, rules, and regulations applicable to the Assets and
shall promptly obtain and maintain all permits required by governmental
authorities in connection with the Assets.

         19.4. Notices.

         Except as otherwise expressly provided herein, all communications
required or permitted under this Agreement shall be in writing and any
communication or delivery hereunder shall be deemed to have been duly given and
received when actually delivered to the address of the parties to be notified as
set forth below and addressed as follows:

         If to Seller, as follows:
         Eastland Oil Company
         P.O. Box 3488
         Midland, Texas 79702
         Attention:  Robin Donnelly

                                                                         Page 24
<PAGE>


         If to Buyer:
         Parallel L.P.
         1004 N. Big Spring, Suite 400
         Midland, Texas 79701
         Attention:   Mr. John Rutherford


         Provided, however, that any notice required or permitted under this
Agreement will be effective if given verbally within the time provided, so long
as such verbal notice is followed by written notice thereof in the manner
provided herein within twenty-four (24) hours following the end of such time
period. Any party may, by written notice so delivered to the other, change the
address to which delivery shall thereafter be made.

         19.6.    Incidental Expenses.

         Buyer shall bear and pay (i) all state or local government sales,
transfer, gross proceeds, or similar taxes incident to or caused by the transfer
of the Assets to Buyer, (ii) all documentary, transfer and other state and local
government taxes incident to the transfer of the Assets to Buyer; and (iii) all
filing, recording or registration fees for any assignment or conveyance
delivered hereunder. Each party shall bear its own respective expenses incurred
in connection with the negotiation and Closing of this transaction, including it
own consultants' fees, attorneys' fees, accountants' fees, and other similar
costs and expenses.

         19.7.    Waiver.

         Any of the terms, provisions, covenants, representations, warranties or
conditions hereof may be waived only by a written instrument executed by the
party waiving compliance. Except as otherwise expressly provided in this
Agreement, the failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect such party's right to enforce
the same. No waiver by any party of any condition, or of the breach of any term,
provision, covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty.

         19.8.    Binding Effect; Assignment.

         All the terms, provisions, covenants, obligations, indemnities,
representations, warranties and conditions of this Agreement shall be
enforceable by the parties hereto and their respective successors and assigns.
The rights of each party under this Agreement are personal to that party and may
not be assigned or transferred to any other party, firm, corporation or other
entity, without the prior, express and written consent of the other party, and
such consent may be withheld for any reason, including convenience. Any attempt
to assign this Agreement over the objection or without the express written
consent of the other party shall be absolutely void. Seller may condition its
consent to assign this Agreement on Buyer providing Seller with an appropriate
guarantee of its

                                                                         Page 25
<PAGE>


assignee's performance. In the event Buyer sells or assigns all or a portion of
the Assets, this Agreement shall remain in effect between Buyer and Seller as to
all the Assets regardless of such assignment.

         19.9. Taxes.

         (a) Seller and Buyer agree that this transaction is not subject to the
reporting requirement of Section 1060 of the Internal Revenue Code of 1986, as
amended, and that, therefore, IRS Form 8594, Asset Acquisition Statement, is not
required to be and will not be filed for this transaction. In the event the
parties mutually agree that a filing of Form 8594 is required, the parties will
confer and cooperate in the preparation and filing of their respective forms to
reflect a consistent reporting of the agreed upon allocation.

         (b) Seller shall be responsible for and shall pay all taxes
attributable to or arising from the ownership or operation of the Assets prior
to the Effective Time. Buyer shall be responsible for and shall pay all taxes
attributable to or arising from the ownership or operation of the Assets after
the Effective Time. Any party which pays such taxes for the other party shall be
entitled to prompt reimbursement upon evidence of such payment.

         Each party shall be responsible for its own federal income taxes, if
any, as may result from this transaction.

         (c) If this transaction is determined to result in state sales or
transfer taxes, Buyer shall be solely responsible for any and all such taxes due
on the Assets acquired by Buyer by virtue of this transaction. If Buyer is
assessed such taxes, Buyer shall promptly remit same to the taxing authority. If
Seller is assessed such taxes, Buyer shall reimburse Seller for any such taxes
paid by Seller to the taxing authority.

         19.10.   Confidentiality of Agreement.

         Except as otherwise provided herein, this Agreement and the terms and
provisions thereof, including the Purchase Price, shall be maintained
confidential by Buyer and Seller until Closing; provided, however, that this
Agreement and the terms and provisions thereof may be disclosed to Buyer's
lenders, if any, and their consultants, who shall be required to keep such
information confidential.

         19.11.   Audits.

         It is expressly understood and agreed that Seller retains its right to
receive its proportionate share of the proceeds from any audits relating to
activities prior to the Effective Time, except to the extent such proceeds are
directly related to the Assumed Obligations.

         19.12.   Like-Kind Exchanges.

         Each party consents to the other party's assignment of its rights and
obligations under this Agreement to its Qualified Intermediary (as that term is
defined in Section 1.1031 (k)-I(g)(4)(v) of the Treasury Regulations) in
connection with effectuation of a like-kind exchange. However, Seller

                                                                         Page 26
<PAGE>


and Buyer acknowledge and agree that any assignment of this Agreement to a
Qualified Intermediary does not release either party from any of their
respective liabilities and obligations to each other under this Agreement. Each
party agrees to cooperate with the other to attempt to structure the transaction
as a like-kind exchange.

         19.13.   Governing Law.

         THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.

         19.14.   Entire Agreement.

         This Agreement embodies the entire agreement between the Parties and
replaces and supersedes all prior agreements, arrangements and understandings
related to the subject matter hereof, whether written or oral. No other
agreement, statement, or promise made by any party, or to any employee, officer
or agent of any party, which is not contained in this Agreement shall be binding
or valid. This Agreement may be supplemented, altered, amended, modified or
revoked by writing only, signed by the Parties hereto. The headings herein are
for convenience only and shall have no significance in the interpretation
hereof. The Parties stipulate and agree that this Agreement shall be deemed and
considered for all purposes, as prepared through the joint efforts of the
Parties, and shall not be construed against one party or the other as a result
of the preparation, submittal or other event of negotiation, drafting or
execution thereof. It is understood and agreed that there shall be no
third-party beneficiary of this Agreement, and that the provisions hereof do not
impart enforceable rights in anyone who is not a party or a successor or
assignee of a party hereto.

         19.15.   Exhibits.

         All Exhibits attached to this Agreement, and the terms of those
Exhibits which are referred to in this Agreement, are made a part hereof and
incorporated herein by reference.

         19.16. Delivery of Files After Closing.

         The Assets set out in Section 1.14(d) shall be provided by Seller to
Buyer as soon as reasonably possible after the Closing Date at a location to be
specified by Seller. Any transportation, postage, or delivery costs from
Seller's offices shall be at Buyer's sole cost, risk and expense.

         19.17.   Survival.

         The representations contained in Section 4(i) shall terminate at
Closing. All of the other representations, warranties, indemnities, covenants
and agreements of or by the parties hereto, shall survive the execution and
delivery of the Assignment and Conveyance indefinitely.

         19.18.   Subsequent Adjustments.

                                                                         Page 27
<PAGE>


         Regardless of the date set for the Final Settlement, Buyer and Seller
agree that their intent is to allow for the earliest practical forwarding of
revenue and reimbursement of expenses between them, and Seller and Buyer
recognize that either may receive funds or pay expenses after the Final
Settlement Date which are properly the property or obligation of the other.
Therefore, upon receipt of net proceeds or payment of net expenses due to or
payable by the other party hereto, whichever occurs first, Seller or Buyer, as
the case may be, shall submit a statement to the other party hereto showing the
relevant items of income and expense. Payment of any net amount due by Seller or
Buyer, as the case may be, on the basis thereof shall be made within ten days of
receipt of the statement.

         19.19.   Counterparts.

         This Agreement may be executed in any number of counterparts, and each
and every counterpart shall be deemed for all purposes one (1) agreement.

         IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.


                            SELLER:

                            EASTLAND OIL COMPANY

                            By: /s/ Robert R. Donnelly
                                --------------------------

                            Printed Name: Robert R. Donnleyy

                            Title: President


                            BUYER:

                            PARALLEL L.P.
                            By: Parallel Petroleum Corporation,
                                its General Partner

                            By: /s/ Larry C. Oldham
                            -----------------------------------

                            Printed Name: Larry C. Oldham

                            Title: President


                                                                         Page 28
<PAGE>


                                    EXHIBIT A

                  Attached to and made a part of that certain Purchase and Sale
                  Agreement dated September 21, 2004, by and EASTLAND OIL
                  COMPANY, as Seller, and PARALLEL L.P., as Buyer

                       ANDREWS AND GAINES COUNTIES, TEXAS

MAST LEASE:
----------

1.       Oil and Gas Lease dated May 20, 1938, from E. R. Crews Estate et al, as
         Lessors, to Sinclair Prairie Oil Company, as Lessee, recorded in Volume
         43, page 531 of the Deed Records of Andrews County, Texas, covering the
         following-described land in Andrews and Gaines Counties, Texas:

         First Tract:    SW/4 of Section 13 and SW/4 of Section 15, Block A-36;
                         NE/4 of  Section 2,  SW/4 of Section 10 and N/2 NW/4
                         of Section 8, Block A-34; and

         Second Tract:   S-3/4 of W/2 of Section 8, Block A-34.

2.       Oil and Gas Lease dated May 20, 1938, from Lou Ella Crews, as Lessor,
         to Sinclair Prairie Oil Company, as Lessee, recorded in Volume 43, page
         528 of the Deed Records of Andrews County, Texas, covering the same
         lands described immediately above.

3.       Oil and Gas Lease dated June 1, 1999, from NationsBank, N.A., Trustee
         of V. P. Baker Family Royalty Trust, as Lessor, to Caprock Operating,
         Inc., as Lessee, recorded in Volume 739, page 846 of the Deed Records
         of Andrews County, Texas, covering the NE/4 of Section 2, Block A-34,
         PSL, Andrews and Gaines Counties, Texas.

4.       Oil and Gas Lease dated December 20, 1999, from Winston Partners, Ltd.,
         as Lessor, to Caprock Operating, Inc., as Lessee, recorded in Volume
         745, page 883 of the Deed Records of Andrews County, Texas, covering
         the NE/4 of Section 2, Block A-34, PSL, Andrews and Gaines Counties,
         Texas.

5.       Oil and Gas Lease dated December 16, 1956, from V.P. Baker, as Lessor,
         to Sinclair Oil & Gas Company, as Lessee, recorded in Volume 191, page
         206 of the Deed Records of Andrews County, Texas, covering the NE/4 of
         Section 2, Block A-34, PSL, Andrews and Gaines Counties, Texas.

6.       Oil and Gas Lease dated December 16, 1956, from Donald Winston, Trustee
         under the agreement dated December 31, 1941, between Francisca S.
         Winston and Charles S. Whitaker, Trustee, as Lessor, to Sinclair Oil &
         Gas Company, as Lessee, recorded in Volume 191, page 209 of the Deed
         Records of Andrews County, Texas, covering the NE/4 of Section 2, Block
         A-34, PSL, Andrews and Gaines Counties, Texas.

                        Working Interest          Net Revenue Interest

                           .2500000                  .1996094

                                                                          Page 1
<PAGE>


                                    EXHIBIT B

              Attached to and made a part of that certain Purchase and
                    Sale Agreement dated September 21, 2004, by and between
              EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P.,
                                    as Buyer

<table>

--------------------------------------------- ----------------------------------------- ---------------------------
<s>                                           <c>                                       <c>
                                                                                           Allocated Price,
Lease Name                                              EASTLAND'S                                M$
----------                                              INTERESTS                             To NRI & ORRI
                                                    W.I.                  N.R.I.
Mast                                              0.2500000              0.1996094              $30,250.00
--------------------------------------------- --------------------- ------------------- ---------------------------
Total                                                                                           $30,250.00
--------------------------------------------- --------------------- ------------------- ---------------------------

</table>


                                                                               1
<PAGE>


                                    EXHIBIT C

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer

                     CONVEYANCE, ASSIGNMENT AND BILL OF SALE

STATE OF ______________ ss.
                        ss.
COUNTY OF ______________ss.


         THAT, _______________________________________________________ , whose
address is ______________________________________________________ (collectively,
"Assignor"), in consideration of Ten Dollars ($10.00) and other good and
valuable consideration to it in hand paid, the receipt and sufficiency of which
are hereby acknowledged, does hereby grant, bargain, convey, sell, assign, and
transfer unto ____________________________________________ , whose address is
___________________________________________________________ ("Assignee"), the
following interests (the "Assets"):

         1.       all of Assignor's right, title, and interest, if any, in and
                  to, except to the extent constituting Excluded Assets, the
                  following (the "Leases"): any and all interests owned by
                  Assignor and set forth on "Exhibit A" hereto, or which
                  Assignor is entitled to receive by reason of any
                  participation, joint venture, farm-in, farm-out, joint
                  operating agreement or other agreement, in and to the oil, gas
                  and/or mineral leases, permits, licenses, concessions,
                  leasehold estates; royalty interests, overriding royalty
                  interests, net revenue interests, executory interests, net
                  profit interests, working interests, reversionary interests,
                  fee and term mineral interests, and any other interests of
                  Assignor in crude oil, natural gas, casinghead gas,
                  condensate, sulphur, natural gas liquids and other liquid or
                  gaseous hydrocarbons (including CO2), and shall also refer to
                  all other minerals of every kind and character which may be
                  covered by or included in the Leases and Assets (collectively,
                  "Hydrocarbons"), it being the intent hereof if the legal
                  descriptions and depth limitations set forth on "Exhibit A" do
                  not correctly describe such leases or interests or all of the
                  lands covered thereby, that the "Leases" shall nevertheless
                  include all of Assignor's right, title and
                  interest in the Leases and other interests described on
                  Exhibit A and all land and depths covered thereby even though
                  such interests may be incorrectly described;

         2.       all of Assignor's right, title and interest in and to or
                  derived from the following insofar as the same do not
                  constitute Excluded Assets and are attributable to,
                  appurtenant to, incidental to, or used for the operation of
                  the Leases: (a) all easements, rights-of-way, permits,
                  licenses, servitudes, surface leases and fee parcels or other
                  interests; (b) all wells located upon the Leases or on lands
                  pooled or unitized with any portion thereof, or on lands
                  located within any governmental drilling and spacing units
                  which includes any portion thereof, and all equipment

                                                                               1
<PAGE>


                  and other personal property, inventory, spare parts, tools,
                  fixtures, pipelines, wellhead equipment, casing, tubing,
                  pumps, motors, machinery, gathering lines and facilities,
                  telephone lines, boilers, buildings, injection wells and
                  facilities, saltwater disposal wells and facilities, central
                  processing facilities, metering facilities, compression
                  facilities, platforms, tank batteries, appurtenances, and
                  improvements now or as of 7:00 a.m., local time, on October 1,
                  2004 (the "Effective Time") situated upon the Leases or the
                  land covered by the easements, rights-of-way, permits,
                  licenses, servitudes, surface leases and fee parcels or other
                  interests described below or used or held for use in
                  connection with the development or operation of the Leases or
                  the production, treatment, storage, compression, processing or
                  transportation of Hydrocarbons from or in the Leases; (d) all
                  contracts, agreements, and title instruments to the extent
                  attributable to and affecting the Assets in existence on the
                  date hereof, including all Hydrocarbon sales, purchase,
                  gathering, transportation, treating, marketing, exchange,
                  processing, and fractionating contracts, and joint operating
                  agreements, unitization, pooling and communitization
                  agreements; and (e) originals of all lease files, land files,
                  well files, production records, division order files,
                  abstracts, title opinions, and contract files, insofar as the
                  same are directly related to the Leases; including, without
                  limitation, all seismic, geological, geochemical, and
                  geophysical information and data, to the extent that such data
                  is not subject to any third party restrictions, but excluding
                  Assignor's proprietary interpretations of same;

         3.       all of Assignor's right, title and interest in all
                  merchantable oil and condensate (for oil or liquids in storage
                  tanks, being only that oil or liquids physically above the top
                  of the pipeline connection from such tanks) produced from or
                  attributable to the Leases prior to the Effective Time which
                  have not been sold by Assignor and are in storage at the
                  Effective Time;

SAVE AND EXCEPT, the following (the "Excluded Assets"):

         1.       (i) all trade credits, accounts receivable, notes receivable
                  and other receivables attributable to Assignor's interest in
                  the Assets with respect to any period of time prior to the
                  Effective Time; (ii) all deposits, cash, checks in process of
                  collection, cash equivalents and funds attributable to
                  Assignor's interest in the assets with respect to any period
                  of time prior to the Effective Time; and (iii) all proceeds,
                  benefits, income or revenues accruing (and any security or
                  other deposits made) with respect to the Assets prior to the
                  Effective Time;

         2.       all corporate, financial, and tax records of Assignor;
                  however, Assignor shall be entitled to receive copies of any
                  tax records which directly relate to any Assumed Obligations,
                  or which are necessary for Assignee's ownership,
                  administration, or operation of the Assets;

         3.       all claims and causes of action of Assignor arising from acts,
                  omissions or events, or damage to or destruction of the
                  Assets, occurring prior to the Effective Time except to the
                  extent directly related to the Assumed Obligations;

                                                                               2
<PAGE>


         4.       except as otherwise provided in Article 15 of the P&S
                  Agreement, all rights, titles, claims and interests of Seller
                  relating to the Assets prior to the Effective Time (i) under
                  any policy or agreement of insurance or indemnity; (ii) under
                  any bond; or (iii) to any insurance or condemnation proceeds
                  or awards; (f) all Hydrocarbons produced from or attributable
                  to the Assets with respect to all periods prior to the
                  Effective Time, together with all proceeds from or of such
                  Hydrocarbons, except the Inventory Hydrocarbons;

         5.       claims of Assignor for refund of or loss carry forwards with
                  respect to production, windfall profit, severance, ad valorem
                  or any other taxes attributable to any period prior to the
                  Effective Time, or income or franchise taxes;

         6.       all amounts due or payable to Assignor as adjustments or
                  refunds under any contracts or agreements (including
                  take-or-pay claims) affecting the Assets, respecting periods
                  prior to the Effective Time;

         7.       all amounts due or payable to Assignor as adjustments to
                  insurance premiums related to the assets with respect to any
                  period prior to the Effective Time;

         8.       all proceeds, benefits, income or revenues accruing (and any
                  security or other deposits made) with respect to the Assets,
                  and all accounts receivable attributable to the Assets, prior
                  to the Effective Time;

         9.       all of Assignor's intellectual property, including, but not
                  limited to, proprietary computer software, patents, trade
                  secrets, copyrights, names, marks and logos;

         10.      all of Assignor's remote terminal units, radio control alarms,
                  radio towers, [and leased automobiles and trucks] located on
                  the leases, areas, and lands described in "Exhibit A" hereto.

         Assignee, in consideration of the mutual benefits to be derived
hereunder by its acceptance hereof, understands and agrees to the following
terms and conditions:

         1.       This Assignment is made subject to that certain Purchase and
                  Sale Agreement (the "P&S Agreement") dated
                  ______________________, between Assignor and Assignee, and all
                  terms and conditions, of said P&S Agreement are incorporated
                  herein by reference to the same extent and with the same
                  effect as if copied in full herein. In the event of a conflict
                  between the terms and conditions of this Assignment and the
                  P&S Agreement, the P&S Agreement shall govern and control.
                  Capitalized terms used herein but not defined herein shall
                  have the respective meanings set forth in the P&S Agreement.

         2.       Assignee assumes all rights or obligations associated with gas
                  imbalances attributable to the Assets, regardless of when such
                  imbalances occurred or accrued.

         3.       Assignee hereby assumes all duties, liabilities and
                  obligations, express or implied, imposed upon Assignor under
                  the provisions of the Leases and any and all

                                                                               3
<PAGE>


                  assignments, subleases, farmout agreements, assignments of
                  overriding royalty, joint operating agreements, easements,
                  rights-of-way, and all other contracts, agreements and
                  instruments affecting the Property, whether recorded or
                  unrecorded, and under all applicable laws, rules, regulations,
                  orders and ordinances; including, but not limited to, the
                  plugging and abandonment of the wells included in this
                  assignment as well as any other wells drilled hereafter on the
                  Leases, and the clean-up and restoration of the premises on
                  which the wells are located.

         4.       THIS ASSIGNMENT IS MADE WITHOUT WARRANTY OF ANY TYPE, EXPRESS,
                  STATUTORY, OR IMPLIED, INCLUDING BUT NOT LIMITED TO,
                  WARRANTIES OF TITLE, EXCEPT THAT ASSIGNOR WARRANTS TITLE TO
                  THE ASSETS AGAINST ALL ADVERSE CLAIMS, LIENS, BURDENS AND
                  ENCUMBRANCES ARISING BY, THROUGH OR UNDER ASSIGNOR, BUT NOT
                  OTHERWISE. This Assignment is made with full substitution and
                  subrogation to Assignee in and to all covenants and warranties
                  by others heretofore given or made with respect to the subject
                  Assets.

         5.       Assignor and Assignee will execute, acknowledge and deliver to
                  the other such further instruments, and take such other
                  action, as may be reasonably requested in order to more
                  effectively assure to said party all of the respective
                  properties, rights, titles, interest, estates and privileges
                  intended to be assigned, delivered or inuring to the benefit
                  of such party in consummation of the transaction contemplated
                  hereby.

         TO HAVE AND TO HOLD the same unto the said Assignee forever. The
provisions hereof shall be covenants running with the land and shall inure to
the benefit of and be binding upon Assignor and Assignee, their respective
personal representatives, successors and assigns.

                                                                               4
<PAGE>



         IN WITNESS HEREOF, the undersigned have executed this instrument on the
date of the acknowledgments annexed hereto, but to be effective for all purposes
as of the Effective Time.

                                      ASSIGNOR:

                                      --------------------------------


                                      By:
                                      --------------------------------
                                      -------------, -----------------


                                      ASSIGNEE:

                                      --------------------------------


                                      By:
                                      --------------------------------
                                      -------------, -----------------



ACKNOWLEDGMENTS

                                                                               5
<PAGE>


                                    EXHIBIT D

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer


                              NON-FOREIGN AFFIDAVIT
                      Exemption from Withholding of Tax For
                  Dispositions of U.S. Real Property Interests

         Section 1445 of the Internal Revenue Code provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform ____________________ that withholding of tax is not required
upon the disposition of U.S. real property interests by
___________________________________ the undersigned hereby certifies the
following:

         1.       The undersigned are not foreign corporations, foreign
                  partnerships, foreign trusts, or foreign estates for purposes
                  of U.S. income taxation;

         2.       The undersigned's taxpayer identification number is:




         3.       The home or office address of the undersigned is
                  _________________________.

         The undersigned understand that this certification may be disclosed to
the Internal Revenue Service by _____________________________ and that any false
statement contained herein could be punished by fine, imprisonment, or both.

         Under penalties of perjury, I declare that I have examined this
certificate and, to the best of my knowledge and belief, it is true, correct,
and complete, and I further declare that I have authority to sign this document.

         DATED this _____ day of __________, 200___.





                                            By:
                                                -------------, -----------------

                                                                               1
<PAGE>


                                    EXHIBIT E

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
             EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as
                                     Buyer


                       Reporting and Accounting Memorandum

         In connection with the Purchase and Sale Agreement (the "P&S
Agreement") between _____________________________________________________
("Buyer") and ____________ ___________________________________________________
(collectively, "Seller"), and contingent upon a _____________, 200___, closing,
the following is hereby agreed between the parties:

         1.       Seller will prepare and submit state production reports for
                  the field for the production month of ___________, 200_____.
                  All subsequent monthly production reports will be the
                  responsibility of Buyer. Seller will send a copy of the
                  _________, 200___ reports as filed to Buyer.

         2.       Change of operator forms will be prepared by Seller showing
                  __________ as the new operator of the Assets effective
                  ______________, 200____. ________'s State of ___________
                  operator number is _____________.

         3.       Letters-in-lieu, effective with ___________, 200____
                  production will be sent to the purchasers by Buyer. Seller
                  shall prepare the letters and provide them at closing.

         4.       Seller will make royalty distributions for the production
                  month of ________, 200____. Royalty distributions for the
                  production month of __________, 200____ will be the
                  responsibility of Buyer.

         5.       Seller will pay severance taxes for the production month of
                  _________, 200____. Severance tax payments for the production
                  month of __________, 200____ will be the responsibility of
                  Buyer.

         6.       Seller will make rental, minimum royalty and any other lease
                  (including surface) obligation payments due on or before
                  __________, 200____. Buyer will make subsequent monthly
                  payments. Buyer agrees to indemnify and hold Seller harmless
                  for any missed lease rental and/or minimum royalty payments
                  from closing through ____________, 200____.

         7.       Buyer will take any royalty monies in suspense accounts.

         8.       Seller will make gas nominations for the production month of
                  __________, 200____. Buyer will make gas nominations beginning
                  for the production month of ________, 200____.

                                                                               1
<PAGE>


         9.       Seller will have their measurement service agent process the
                  volumes for the wellhead meter points to be used in reporting
                  and allocating for __________, 200____ production which will
                  be closed out in __________, 200____ accounting. Buyer will
                  take over this measurement function effective __________,
                  200____. Seller will provide Buyer with volume and integration
                  statements for___________, 200____ production.

         10.      Joint interest billings (JIBs) for the month of
                  __________covering expenses incurred through ___________,
                  200____, will be prepared by Seller. Buyer will prepare JIBs
                  for___________, 200____ activity forward. Such JIB's will be
                  mailed out to working interest owners in early ________,
                  200____.

         11.      Buyer will assume actual field operations at 7:00 am the day
                  after the Closing Date.

         12.      If either party receives revenue or other payments for the
                  benefit of the other party, the party receiving revenue shall
                  promptly forward such revenue to the other party. If either
                  party pays invoices or otherwise incurs expenses for the
                  benefit of the other party and provides supporting
                  documentation related thereto, the party for whose benefit the
                  payment in question was made shall promptly reimburse the
                  party making such payment. For purposes of this paragraph,
                  "promptly" shall be understood to mean within five (5)
                  business days, in the absence of extenuating circumstances.

         13.      This agreement is intended to set forth the division of
                  reporting and other responsibilities between the parties, but
                  is not intended to alter any provisions of the P&S Agreement
                  related to which party will be ultimately financially
                  responsible for payments made before or after the Effective
                  Time of the P&S Agreement. In the event of any conflict
                  between the provisions of this memorandum and the P&S
                  Agreement, the P&S Agreement shall control. All capitalized
                  terms not defined herein shall have the meanings given in the
                  P&S Agreement.

         Signed the ______day of ____________, 200____.

                                                                               2
<PAGE>


                                    EXHIBIT F

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
             EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as
                                     Buyer


                                 GAS IMBALANCES

None.

                                                                               1
<PAGE>


                                    EXHIBIT G

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer


                                   LITIGATION



Jackson v. Caprock Operating, Inc. and Caprock Oil & Gas, Inc., Cause No.
03-08-14642 in the 106th Judicial District Court of Gaines County, Texas

                                                                               1
<PAGE>


                               Schedule 3.3(b)(4)

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer

                                 Suspense Funds


None.

                                                                               2
<PAGE>


                                  Schedule 4(g)

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer

                           Production Sales Contracts


None.


                                                                               3
<PAGE>


                               Schedule 8.1(c)(A)

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer

                          Notice of Lease Terminations


None.

                                                                               4
<PAGE>


                               Schedule 8.1(c)(B)

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer

                               Material Contracts


None.

                                                                               5

<PAGE>


                               Schedule 8.1(c)(D)

          Attached to and made a part of that certain Purchase and Sale
               Agreement dated September 21, 2004, by and between
          EASTLAND OIL COMPANY, as Seller, and PARALLEL L.P., as Buyer

                                Tax Partnerships


None.


                                                                               6

</TEXT>
</DOCUMENT>
