GALAXY ENERGY CORP
EXH 10-1 AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>exh10-1_agreement.txt
<DESCRIPTION>EXH 10-1 AGREEMENT
<TEXT>









                           PURCHASE AND SALE AGREEMENT


                                  by and among


                   TOWER COLOMBIA CORPORATION, NORTH FINN, LLC

                                       and

                      AMERICAN OIL & GAS, INC., as SELLERS


                                       and


                      DOLPHIN ENERGY CORPORATION, as BUYER




                                  July 15, 2004





<PAGE>

                           PURCHASE AND SALE AGREEMENT


         This Purchase and Sale  Agreement  (this  "Agreement"),  dated July 15,
2004, is by and among Tower Colombia Corporation, a Colorado corporation,  North
Finn, LLC, a Wyoming limited liability  company,  and American Oil & Gas Inc., a
Nevada corporation  (individually,  a "Seller" and collectively,  "Sellers") and
Dolphin Energy Corporation,  a Nevada corporation  ("Buyer").  Buyer and Sellers
are sometimes referred to herein  collectively as the "Parties" and individually
as a "Party."

                                    RECITALS:

         A.       Sellers own interests in the Assets.

         B.       Sellers and Buyer have entered into the Letter Agreement.

         C.       This Agreement  contemplates a transaction in which Buyer will
                  purchase  from  Sellers,  and  Sellers  will sell to Buyer,  a
                  portion of Sellers'  interests  in the Assets,  subject to the
                  terms  and  conditions  contained  herein  and in  the  Letter
                  Agreement.


                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration of the premises and mutual promises
herein made, and in consideration of the representations,  warranties, covenants
and indemnities herein contained, the Parties agree as follows:

                                    Article 1
                               CERTAIN DEFINITIONS

         Section  1.1  CERTAIN  DEFINED  TERMS.  Unless  the  context  otherwise
requires,  the  respective  terms  defined in  Appendix  A  attached  hereto and
incorporated  herein  shall,  when used  herein,  have the  respective  meanings
therein  specified,  with each such definition to be equally  applicable both to
the singular and plural forms of the term so defined.

                                    Article 2
                           SALE AND PURCHASE OF ASSETS

         Section  2.1  SALE  AND  PURCHASE.  On and  subject  to the  terms  and
conditions of this  Agreement,  Sellers  agree to sell and convey to Buyer,  and
Buyer agrees to purchase from Sellers, the Assets, effective as of the Effective
Date.


<PAGE>


                                    Article 3
                                 PURCHASE PRICE

         Section 3.1 PURCHASE PRICE.  The total  consideration  for the sale and
conveyance  to Buyer of the Assets shall be One Million  Nine  Hundred  Thousand
Dollars  ($1,900,000)  cash (the  "Purchase  Price"),  subject to  adjustment in
accordance  with the terms of this Agreement,  plus the Drilling  Commitment and
the Carried Interest.

         Section 3.2  ADJUSTMENTS TO PURCHASE  PRICE.  At closing,  the Purchase
Price shall be adjusted as follows and the resulting amount shall be referred to
herein as the "Adjusted Purchase Price."

         (a)  The Purchase Price shall be adjusted upward by the following:

                  (i) The amount of all actual operating or capital expenditures
              or  prepaid  expenses  attributable  to the  Assets  paid by or on
              behalf of Sellers in  connection  with the operation of the Assets
              and which are,  according to GAAP,  attributable  to the period of
              time  between  the  Effective  Date  and the  Closing  Date.  Such
              expenditures  and  expenses  shall  include,  without  limitation,
              royalties, rentals and other charges; ad valorem, property, excise
              and any other taxes based upon or measured by the ownership of the
              Assets,  the production of Hydrocarbons or the receipt of proceeds
              therefrom; and expenses payable to a third person under applicable
              joint  operating   agreements,   including,   without  limitation,
              overhead  charges  and  royalty   disbursement   fees  payable  to
              operator, or similar payments to third party operators, or, in the
              absence of any joint operating agreement,  those items customarily
              billed under such an agreement.

                   (ii) The value,  less taxes (other than taxes on net income),
              of all  marketable  Hydrocarbons  attributable  to the  Assets  in
              storage facilities above or upstream from the pipeline  connection
              in each storage facility,  or downstream of delivery point,  sales
              meters  on  gas  pipelines,  as of  the  Effective  Date,  at  the
              prevailing market value at the time of sale in the area,  adjusted
              for grade and gravity.

                  (iii) An amount  equal to the value  (determined  by Buyer and
              Sellers  prior to the Closing Date) of the  underproduction  as of
              the Effective Date of Hydrocarbons  produced from the Assets under
              any operating agreement,  gas balancing and storage agreement, gas
              processing or dehydration agreement or similar agreement.

                  (iv) Expenditures  incurred by Sellers and not described above
              that are directly associated or connected with owning, developing,
              exploring,  operating  or  maintaining  the  Assets or  producing,
              transporting  and  marketing  the  Hydrocarbons  therefrom for all
              periods on and after the Effective Date.

                  (v) Any Seller Title Credits pursuant to Section 7.4.

                  (v) Any other amounts agreed upon by Sellers and Buyer.


                                       2

<PAGE>

         (b)  The Purchase Price shall be adjusted downward by the following:

                  (i) An  amount  equal to the  value  (determined  by Buyer and
              Sellers prior to the Closing Date) of the overproduction as of the
              Effective Date of Hydrocarbons  produced from the Assets under any
              operating  agreement,  gas  balancing and storage  agreement,  gas
              processing or dehydration agreement or similar agreement.

                  (ii) Any Environmental Defects pursuant to Section 6.5.

                  (iii) Any Title Defects pursuant to Sections 7.2 and 7.5.

                  (iv)  For  the exercise of any Preferential Rights pursuant to
              Section 8.3.

                  (iv) The gross proceeds received by Sellers, net of applicable
              severance and production taxes and compression  charges,  from the
              sale of Hydrocarbons  derived from the Assets  attributable to the
              period of time after the Effective Date.

                  (v) An amount equal to all expenditures, liabilities and costs
              relating to the Assets that are unpaid as of the Closing  Date and
              are  assessed for or  attributable  to the period of time prior to
              the Effective Date.

                  (vi) An  amount  equal to all  unpaid  ad  valorem,  property,
              production,  severance and similar taxes and assessments  (but not
              including income taxes) based upon or measured by the ownership of
              the Assets,  the  production  of  Hydrocarbons,  or the receipt of
              proceeds  therefrom,  which  taxes or  assessment  become  due and
              payable or accrue (but have not yet become due and  payable)  with
              respect to the Assets prior to the  Effective  Date,  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 addressed against the applicable  portion of
              the Assets for the immediately preceding tax period just ended.

                  (vii) Any other amounts agreed upon by Sellers and Buyer.

         Section 3.3 PAYMENT AND  CALCULATION  OF  ESTIMATED  ADJUSTED  PURCHASE
PRICE; PAYMENT AT CLOSING.  Sellers shall prepare and deliver to Buyer, at least
three (3)  Business  Days prior to the Closing  Date,  Sellers'  estimate of the
Adjusted  Purchase  Price,  together  with a statement  setting  forth  Sellers'
estimate  of the  amount of each  adjustment  to the  Purchase  Price to be made
pursuant to Section 3.2. 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 Adjusted
Purchase  Price shall be  established  based on Sellers' and Buyer's agreed upon
estimated  adjustments  and Sellers'  good faith  estimation  of any disputed or
undetermined amount.


                                       3
<PAGE>

                                    Article 4
                    DRILLING COMMITMENT AND CARRIED INTEREST

         Section 4.1 DRILLING  COMMITMENT.  Irrespective  of whether the Parties
have executed this Agreement and Closing occurs  hereunder,  Buyer has agreed in
the Letter  Agreement  to drill,  complete,  equip,  and connect (or, if dry, to
properly  plug and abandon and reclaim),  either as producers or dry holes,  not
less than twelve (12) new oil and gas wells on the Leases and Lands on or before
September 1, 2004 (the "Commitment Wells"), at locations of Buyer's choice. Each
Commitment  Well shall be drilled at Buyer's sole cost and expense to a depth at
least  sufficient to test the Canyon  Formation.  North Finn,  LLC, shall act as
contract  operator for the drilling of each  Commitment  Well and shall  conduct
such drilling  operations in compliance  with  applicable laws and in a good and
workmanlike manner.

         Section 4.2 CARRIED  INTEREST.  Sellers  shall have a ten percent (10%)
"carried  interest,"  i.e.,  Buyer shall pay Sellers' ten percent  (10%) Working
Interest  share of all costs  and  expenses  incurred,  through  completion  and
connection to the sales line of each of the wells  described below (the "Carried
Interest"),  without  recoupment  by Buyer of such costs and  expenses  from the
production proceeds from each such well. The Carried Interest shall apply to the
following wells (collectively, the "Wells"):

                 (i)     the  Existing  Wells  (but  not as to  amounts  already
                         expended  by  Sellers  with  respect  to  the  Existing
                         Wells);

                 (ii)    the  Commitment  Wells  (irrespective  of  whether  the
                         Parties  have  executed  this   Agreement  and  Closing
                         occurs); and

                 (iii)   all additional wells drilled by Buyer or its successors
                         and  assigns  on  the  Lands  (including  renewals  and
                         extensions of the Leases  covering such Lands) from the
                         date of this  Agreement to and including  September 30,
                         2019 (the "Development Wells").

         Section  4.3  ASSIGNMENT  OF  WELLBORE  INTERESTS.  As set forth in the
Letter Agreement, as to each Commitment Well that is connected to the sales line
prior to Closing, Sellers shall assign to Buyer an undivided fifty percent (50%)
wellbore  Working  Interest  in such  Well,  limited  to the depth  drilled  and
proportionately  reduced to the extent  Sellers own less than the entire Working
Interest in such Well, using the form of Wellbore  Assignment attached hereto as
Exhibit "D" (the "Wellbore  Assignment").  If production  proceeds from any such
Well are received  prior to Closing,  Sellers shall receive ten percent (10%) of
such proceeds,  Buyer shall receive fifty percent (50%) of such proceeds and the
remaining  forty percent (40%) of such proceeds  shall be held in escrow pending
Closing (the "Escrowed Amount").  If Closing occurs or if Closing fails to occur
through no fault of Buyer, the Escrowed Amount shall be released from escrow and
remitted to Buyer and Sellers  shall assign to Buyer an undivided  forty percent
(40%) wellbore Working Interest in each such Well,  limited to the depth drilled
and proportionately reduced, using the Wellbore Assignment.  If Closing fails to
occur  because of a breach or default by Buyer  hereunder,  the Escrowed  Amount
shall be paid to Sellers and no additional  wellbore  Working  Interest shall be
assigned to Buyer.



                                       4

<PAGE>

         Section 4.4 OPERATING AGREEMENT.  Subject to the Carried Interest,  the
form of  Operating  Agreement  attached  hereto as Exhibit "E" shall  govern the
operations of each Well in which Sellers and Buyer have an interest.

         Section 4.5  GATHERING  FEES.  In no event shall Sellers be required to
pay gathering fees with respect to their share of production from the Wells that
exceed  fees  charged  for  comparable   gathering   services   performed  under
arm's-length contracts in the geographical area in which the Assets are located.

         Section  4.6  MAINTENANCE  OF LEASES.  Buyer  shall not be  required to
maintain,  renew or extend  any of the  Leases  which,  in  Buyer's  good  faith
judgment,  should not be  maintained,  renewed  or  extended.  Sellers'  Carried
Interest shall,  however,  burden any renewal or extension leases that Buyer may
obtain. For this purpose, a renewal or extension lease is a lease obtained prior
to, or within six months after,  the expiration or termination of an older lease
that covered all or a portion of the oil and gas  interest  leased under the new
lease.


                                    Article 5
                         REPRESENTATIONS AND WARRANTIES

         Section 5.1  REPRESENTATIONS AND WARRANTIES OF SELLERS.  Each Seller
represents and warrants to Buyer as follows:

                  (a)  ORGANIZATION  AND  QUALIFICATION.  Each  Seller  is  duly
         organized,  validly  existing,  in good standing  under the laws of its
         state of incorporation or organization, as the case may be.

                  (b)  POWER AND AUTHORITY.  Each Seller has all requisite power
         and  authority  to  enter  into  this  Agreement  and  to  perform  its
         obligations hereunder. The execution,  delivery and performance of this
         Agreement and the transactions  contemplated  hereby have been duly and
         validly authorized by all requisite action on the part of each Seller.

                  (c)  ENFORCEABILITY.  This  Agreement  constitutes a valid and
         binding  agreement  of each Seller  enforceable  against each Seller in
         accordance  with  its  terms,  subject  to (i)  applicable  bankruptcy,
         insolvency,  reorganization,  moratorium  and  other  similar  laws  of
         general application with respect to creditors,  (ii) general principles
         of  equity,  and  (iii)  the  power of a court to deny  enforcement  of
         remedies generally based upon public policy.

                  (d) NO  CONFLICT  OR  VIOLATION.  Neither  the  execution  and
         delivery of this Agreement nor the consummation of the transactions and
         performance of the terms and conditions contemplated hereby by a Seller
         will (i)  conflict  with or  result  in a  violation  or  breach of any
         provision  of  its  governing  documents,  or  of  any  other  material
         agreement, indenture or other instrument under which a Seller is bound,
         or (ii) violate or conflict with any law  applicable to a Seller or the
         Assets.


                                       5

<PAGE>

                  (e)  CONSENTS.  To  the  Knowledge  of  Sellers,  no  consent,
         approval,  authorization  or permit of, or filing with or  notification
         to, any person is required for or in connection  with the execution and
         delivery of this  Agreement by any Seller or for or in connection  with
         the  consummation of the  transactions and performance of the terms and
         conditions  contemplated  hereby by any such  Seller,  except  for such
         consents, approvals, authorizations, permits, filings and notifications
         the  failure  of which to obtain or make are not  reasonably  likely to
         have a  material  adverse  effect  on the  ability  of that  Seller  to
         consummate and perform the transactions contemplated by this Agreement.

                  (f) MATERIAL CONTRACTS. To the Knowledge of Sellers,  Schedule
         5.1(f)  attached hereto sets forth a list of all contracts to which any
         Seller is a party or by which any Seller is bound or subject  which are
         material to the conduct and operations of the Assets (collectively, the
         "Material  Contracts").  All of the  Material  Contracts  are valid and
         binding upon such Seller in  accordance  with their terms,  and, to the
         Knowledge of Sellers, neither Seller nor any other Person is in default
         in any material way, nor has Seller  received or sent notice of default
         or of any unresolved claim, under any such Material Contracts.

                  (g)  LITIGATION.  To the  Knowledge  of  Sellers,  except  for
         matters  disclosed  on Schedule  5.1(g)  attached  hereto,  there is no
         action,  suit or  proceeding  pending or, to the  Knowledge of Sellers,
         threatened against or affecting the Asset.

                  (h) LICENSES,  PERMITS,  ETC. To the Knowledge of Sellers, the
         Sellers possess such valid franchises,  certificates of convenience and
         necessity,   operating  rights,  rights  of  way,  licenses,   permits,
         consents,   authorizations,   exemptions  and  orders  of  Governmental
         Authorities  as are  necessary to operate the Assets as they  currently
         are being operated.

                  (i) ENCUMBRANCES.  To the Knowledge of Sellers,  no Seller has
         caused or allowed any mortgage,  lien or other encumbrance to be placed
         upon or against  the Assets  that will not be  released  at or prior to
         Closing, other than Permitted Encumbrances.

                  (j)  COMPLIANCE   WITH  LAW.  To  the  Knowledge  of  Sellers,
         operations on the Assets have been and are being  conducted in material
         accordance with all applicable Laws.

                  (k)  ENVIRONMENTAL  MATTERS.  Except for matters  disclosed on
         Schedule 5.1(k) attached hereto, operations conducted by Sellers on the
         Assets,  and, to the  Knowledge  of Sellers,  by any Person  conducting
         operations on the Assets,  have been  conducted in material  compliance
         with  Environmental  Laws.  Except for  matters  disclosed  on Schedule
         5.1(k), to the Knowledge of Sellers,  the Assets are not the subject of
         any  existing,  pending or, to the  Knowledge  of  Sellers,  threatened
         Environmental Claim. To the Knowledge of Sellers, all material notices,
         permits, licenses, and similar authorizations,  required to be obtained
         or filed in connection with Sellers ownership or current  operations of
         the  Assets,  and each  item of  personal  property  owned,  leased  or
         operated by Sellers which is included in the Assets, including, without
         limitation,  notices,  licenses, permits and authorizations required in
         connection with treatment,  storage,

                                       6

<PAGE>

         disposal, or release of Hazardous Materials into the environment,  have
         been duly obtained or filed. To the Knowledge of Sellers, all Hazardous
         Materials  generated at each tract of real property and by each item of
         personal  property  owned,  leased or  operated  by  Sellers  which are
         included in the Assets have been transported,  treated, and disposed of
         only by carriers or facilities maintaining valid permits under RCRA and
         all other Environmental Laws for the conduct of such activities. Except
         for matters  disclosed on Schedule 5.1(k), to the Knowledge of Sellers,
         there have been no Hazardous  Discharges  which were not in  compliance
         with  Environmental  Laws.  Except for  matters  disclosed  on Schedule
         5.1(k),  to the  Knowledge  of  Sellers,  Sellers  have  no  contingent
         liability in connection with any Hazardous Discharge from the Assets.

                  (l) AFE'S.  Schedule  5.1(l)  attached  hereto  sets forth the
         outstanding  authorizations for expenditures ("AFE's") that (i) require
         the drilling of wells or other development  operations in order to earn
         or to  continue  to hold  all or any  portion  of the  Assets,  or (ii)
         obligate a Seller to make  payments of any amounts in  connection  with
         the  drilling  of wells or other  capital  expenditures  affecting  the
         Assets.

                  (m)  TAXES.   To  the   Knowledge  of  Sellers,   all  excise,
         occupation,  franchise,  severance,  production, sales and other taxes,
         duties or  charges  levied,  assessed  or imposed  upon or against  the
         Assets by any Governmental  Authority have been duly paid or adequately
         provided for or are being timely and properly  contested,  as described
         on Schedule 5.1(m) attached hereto, and all excise, franchise and other
         tax reports or other reports required by law or regulation with respect
         thereto have been duly filed or extensions have been duly obtained.

                  (n) GAS IMBALANCES,  PREPAYMENTS.  Except as shown on Schedule
         5.1(n)  attached  hereto,  there are no gas  imbalances  affecting  the
         Assets which would require  Buyer to deliver any gas without  receiving
         full payment  therefor,  nor has any Seller received any prepayments or
         other  payments  which  would  require  Buyer to deliver any oil or gas
         without receiving full payment therefor.

                  (o) WELL STATUS.  To the Knowledge of Sellers,  as of the date
         of this  Agreement,  with  respect  to Assets for which a Seller is the
         operator,  there are no Existing  Wells that (i) a Seller is  currently
         obligated by law or contract to presently plug and abandon,  or (ii) to
         Sellers'  Knowledge,  have been plugged and abandoned but have not been
         plugged in  accordance  in all material  respects  with all  applicable
         requirements of each regulatory  authority having jurisdiction over the
         Assets.

                  (p) PREFERENTIAL  RIGHTS. To the Knowledge of Sellers,  except
         as shown on Schedule 5.1(q) attached hereto,  there are no Preferential
         Rights or  Transfer  Requirements  required  to be obtained or complied
         with prior to the Closing.

                  (q) EVENTS  SUBSEQUENT TO EFFECTIVE DATE.  Except in each case
         as set forth in Schedule  5.1(r) attached  hereto,  since the Effective
         Date, to the Knowledge of Sellers, there has not been any:


                                       7
<PAGE>

                           (i)      destruction, material damage to, or material
                                    loss of the Assets;

                           (ii)     sale  or  other  disposition  of  any of the
                                    Assets except (a) in the ordinary  course or
                                    business,   or  (b)  any  item  of  personal
                                    property or equipment having a value of more
                                    than $10,000; or

                           (iii)    material  adverse  change  in the  aggregate
                                    production  volumes from the Existing  Wells
                                    beyond the production  decline reasonably to
                                    be anticipated under the forecast production
                                    decline curve.

                  (r)  ROYALTIES.  To the Knowledge of Sellers,  all  royalties,
         overriding  royalties  and other  similar  payments  due and payable on
         production  with  respect to a Lease have been  timely and fully  paid,
         except amounts that are being held in suspense which will not result in
         grounds for cancellation of Sellers' rights in such Lease.

                  (s)  DISCLOSURE.  To the  Knowledge  of Sellers,  neither this
         Agreement nor any Appendix,  Schedule, Exhibit or certificate delivered
         in accordance  with the terms  hereof,  or any document or statement in
         writing  which  has  been  supplied  by  or on  behalf  of  Sellers  in
         connection  with the  transactions  contemplated  hereby,  contain  any
         untrue  statement of a material fact.  Sellers have provided,  and will
         continue  to  provide  Buyer  to the  Closing  Date,  access  to all of
         Sellers'  Records that Buyer has  requested or  reasonably  requests in
         connection with the transactions contemplated by this Agreement.

                  (t) ADVISORS' AND BROKERS' FEES. Sellers have not retained any
         advisor or broker in respect of the  transactions  contemplated by this
         Agreement for which Buyer shall incur any liability.

                  (u)  BANKRUPTCY.  There are no  bankruptcy  or  reorganization
         proceedings  pending  against,   being  contemplated  by,  or,  to  the
         Knowledge of Sellers, threatened against any Seller.

         Section 5.2     REPRESENTATIONS AND WARRANTIES OF BUYER.  Buyer agrees,
represents and warrants to Sellers as follows:

                  (a)  ORGANIZATION AND  QUALIFICATION.  Buyer is a corporation,
         duly organized, validly existing and in good standing under the laws of
         the State of Colorado,  and is duly  qualified to carry on its business
         and is in good standing under the laws of the State of Wyoming.

                  (b) AUTHORITY.  Buyer has all requisite power and authority to
         execute and deliver this Agreement and to perform its obligations under
         this  Agreement.  The  execution,  delivery  and  performance  of  this
         Agreement and the transactions  contemplated  hereby have been duly and
         validly authorized by all requisite action on the part of Buyer.

                  (c)  ENFORCEABILITY.  This  Agreement  constitutes a valid and
         binding agreement of Buyer enforceable against Buyer in accordance with
         its terms, subject to (i) applicable

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<PAGE>

         bankruptcy,  insolvency,  reorganization,  moratorium and other similar
         laws of general  application  with respect to  creditors,  (ii) general
         principles of equity, and (ii) the power of a court to deny enforcement
         of remedies generally based upon public policy.

                  (d) NO  CONFLICT  OR  VIOLATION.  Neither  the  execution  and
         delivery of this Agreement nor the consummation of the transactions and
         performance  of the terms and conditions  contemplated  hereby by Buyer
         will (i)  conflict  with or  result  in a  violation  or  breach of any
         provision of the certificate of incorporation,  bylaws or other similar
         governing  documents of Buyer or any material  agreement,  indenture or
         other  instrument  under  which  Buyer is  bound,  or (ii)  violate  or
         conflict with any law  applicable to Buyer or the  properties or assets
         of Buyer.

                  (e) CONSENTS.  No consent,  approval,  authorization or permit
         of, or filing with or notification to, any person is required for or in
         connection  with the execution and delivery of this  Agreement by Buyer
         or for or in connection with the  consummation of the  transactions and
         performance of the terms and conditions  contemplated  hereby by Buyer,
         except for such consents, approvals,  authorizations,  permits, filings
         and  notifications  the  failure  of  which to  obtain  or make are not
         reasonably  likely to have a material  adverse effect on the ability of
         Buyer to consummate and perform the  transactions  contemplated by this
         Agreement.

                  (f) ACTIONS.  There is no action,  suit or proceeding  pending
         or, to the Knowledge of Buyer,  threatened against Buyer which would be
         likely to have a  material  adverse  effect on the  ability of Buyer to
         consummate and perform the transactions contemplated by this Agreement.

                  (g)  ADVISORS' AND BROKERS'  FEES.  Buyer has not retained any
         advisor or broker in respect of the  transactions  contemplated by this
         Agreement for which Sellers shall incur any liability.

                  (h) INDEPENDENT  INVESTIGATION.  Buyer has been advised by and
         has  relied  upon its own legal  counsel,  tax,  engineering  and other
         professional  counsel and consultants  concerning  this Agreement,  the
         Assets  and the  value  thereof.  By reason of  Buyer's  knowledge  and
         experience in the evaluation, acquisition, and operation of oil and gas
         properties,  it has evaluated  the merits and risks of  purchasing  the
         Assets from  Sellers and has formed an opinion  based solely on Buyer's
         knowledge and experience and not on any  representations  or warranties
         by Sellers,  other than those  representations and warranties expressly
         set forth herein. Buyer acknowledges that Sellers have made no warranty
         or representation,  express or implied,  statutory or otherwise,  as to
         the accuracy or completeness of any description of pricing assumptions,
         quality or quantity of the Hydrocarbon  reserves,  if any, attributable
         to the  Assets,  the  ability  or  potential  of the  Assets to produce
         Hydrocarbons,   or   geologic   and/or   geophysical   data   and   any
         interpretations thereof.


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<PAGE>


                  (i) FUNDS AVAILABLE.  The Buyer has sufficient cash to pay the
         Purchase  Price at the  Closing,  and the  necessary  funds are readily
         available   to  the  Buyer  and  are  not  subject  to  any   financing
         contingencies, other conditions or Encumbrances.

                                    Article 6
                  ACCESS TO INFORMATION; ENVIRONMENTAL MATTERS

         Section 6.1 GENERAL ACCESS AND SPECIAL INDEMNITY. Through and until the
Closing Date,  Sellers shall permit Buyer and its  representatives to have, upon
reasonable  advance notice,  access at reasonable times in Sellers' offices and,
in a manner  so as not to  interfere  unduly  with the  business  operations  of
Sellers, to Sellers' Records, insofar as the Sellers may do so without violating
legal constraints or any legal obligation,  or waiving any attorney/client  work
product or like  privilege,  and  subject to any  required  consent of any third
person.  Buyer hereby indemnifies and agrees to release,  defend,  indemnify and
hold harmless  Sellers from and against any and all claims  arising from Buyer's
inspecting and observing the Assets,  including (a) claims for personal injuries
to or death of employees of the Buyer, its contractors,  agents, consultants and
representatives,  and damage to the property of Buyer or others acting on behalf
of Buyer; and (b) claims,  demands,  losses,  damages,  liabilities,  judgments,
causes  of  action,  costs or  expenses  for  personal  injuries  to or death of
employees of Sellers or third parties, and damage to the property of the Sellers
or third parties. The foregoing indemnity includes, and the Parties intend it to
include,  an  indemnification of the Sellers from and against claims arising out
of or  resulting,  in whole or part,  from the condition of the Assets caused by
Buyer's  inspection  thereof or by the Sellers'  sole,  joint,  comparative,  or
concurrent negligence, strict liability or fault.

         Section 6.2  CONFIDENTIAL  INFORMATION.  Buyer  agrees to maintain  all
information made available to it pursuant to this Agreement confidential, and to
cause its  officers,  employees,  representatives,  consultants  and advisors to
maintain  all  information  made  available to them  pursuant to this  Agreement
confidential if this Agreement terminates for a period of one (1) year following
such  termination.  Notwithstanding  anything to the contrary,  any  information
pertaining  to or relating to the "tax  treatment" or "tax  structure"  (in each
case, within the meaning of Treasury  Regulation Sec.  1.6011-4) arising from or
in respect of this Agreement and any related transactions  contemplated pursuant
thereto,  shall  not  be  subject  to  the  confidentiality  obligation  imposed
hereunder.

         Section 6.3 RYDER SCOTT STUDIES.  As set forth in the Letter Agreement,
Sellers have provided Buyer's  consultant,  Ryder Scott Company ("Ryder Scott"),
with such  information in Sellers'  possession that Ryder Scott has requested in
connection with the studies of the Assets  (individually,  a "Ryder Scott Study"
and  collectively,  the "Ryder Scott Studies") that have been requested prior to
the date hereof by Buyer.  The costs of the Ryder Scott Studies have been shared
equally by Sellers and Buyer,  i.e.,  each Party has paid fifty percent (50%) of
such costs.  Buyer has  provided  Sellers  with a copy of each Ryder Scott Study
after it has been  completed.  There shall be no restrictions on either Buyer or
Sellers with respect to their use or dissemination of the Ryder Scott Studies.

                                       10

<PAGE>

         Section 6.4   ENVIRONMENTAL REVIEW AND AUDIT.

                  (a)  ENVIRONMENTAL  ACCESS.  From the  date of this  Agreement
         until  five (5)  Business  Days  prior  to  Closing  (the  "Examination
         Period"),  and subject to the restrictions  contained in this Agreement
         and any required  consent or waiver of any third person,  Sellers shall
         (i)  permit  Buyer and its  representatives  to have,  upon  reasonable
         advance  notice,  reasonable  access at  reasonable  times in  Sellers'
         offices,  and in a  manner  so as  not to  interfere  unduly  with  the
         business  operations of Sellers,  to Sellers'  environmental  files and
         records  relating  to the Assets  insofar as Sellers  may do so without
         waiving any attorney/client,  work product or like privilege,  and (ii)
         permit Buyer and its  representatives or consultants to have reasonable
         access  to the  Assets  for the  purpose  of  allowing  Buyer  and such
         representatives  or  consultants to inspect and/or audit the Assets for
         any  Environmental  Defects   (collectively,   "Buyer's   Environmental
         Review"), all at Buyer's sole risk, cost and expense.  Sellers or their
         representatives   shall  have  the  right  to  be  present  during  any
         inspection of the Assets and shall have the right,  at their option and
         expense,  to split samples with Buyer. Buyer shall provide Sellers with
         a copy of each environmental  report and any other written  information
         concerning inspections by its environmental  consultants promptly after
         Buyer receives such material.

                  (b) BUYER'S  RESPONSIBILITY  FOR REVIEW.  In  connection  with
         Buyer's   Environmental   Review,  Buyer  agrees  that  Buyer  and  its
         representatives  or  consultants  shall  comply with all laws and shall
         exercise  due care with  respect  to the  Assets  and their  condition,
         taking  into  consideration  the   characteristics  of  any  wastes  or
         substances  found  thereon,  and in light  of all  relevant  facts  and
         circumstances.  Promptly after completing Buyer's Environmental Review,
         Buyer  shall,  at its sole  cost and  expense,  restore  the  Assets to
         substantially  the same  condition  the  Assets  were in at the time of
         Buyer's entry thereon, in accordance with good engineering practice, if
         changed due to Buyer's Environmental Review. Buyer shall maintain,  and
         shall  cause  its  representatives  or  consultants  to  maintain,  all
         information  obtained by Buyer  pursuant  to the Buyer's  Environmental
         Review as  confidential  and shall not disclose same to any third party
         without  the prior  written  consent of  Sellers,  except to the extent
         required by law.

         Section 6.5  ENVIRONMENTAL DEFECTS.

                  (a) BUYER'S ASSERTIONS OF ENVIRONMENTAL  DEFECTS.  On or prior
         to  September  15, 2004,  Buyer shall notify  Sellers in writing of any
         matters which, in Buyer's reasonable opinion,  constitute Environmental
         Defects;   provided,   however,   that  Buyer   shall  not  assert  any
         Environmental  Defects  until the aggregate  Remediation  Amount of all
         alleged Environmental Defects exceeds one-half of one percent (0.5%) of
         the Purchase Price,  and, if not exceeded,  such alleged  Environmental
         Defects will be deemed waived. Buyer's written notice must include: (i)
         a specific  description  of each  Asset (or  portion  thereof)  that is
         affected by the alleged Environmental Defect, (ii) a description of the
         alleged   Environmental   Defect,   and  (iii)  a  calculation  of  the
         Remediation   Amount  that  Buyer  asserts  is   attributable  to  such
         Environmental Defect.



                                       11
<PAGE>

                  (b) SELLERS'  RIGHTS AND ELECTIONS.  If Buyer timely  notifies
         Sellers in writing of any  Environmental  Defect as required by Section
         6.5(a),  Sellers  shall have the right to dispute the existence of such
         Environmental  Defect and/or the alleged  Remediation  Amount  asserted
         with respect  thereto in accordance  with the provisions of Section 7.5
         of this Agreement. In addition, Sellers, at their option, may elect, at
         or prior to the Closing,  one of the following  options with respect to
         the Asset or portion thereof (the "Environmental Defect Property"):

                           (i)      leave such Environmental  Defect Property in
                                    the Assets and assume responsibility for the
                                    Remediation of such Environmental Defect; or

                           (ii)     withdraw such Environmental  Defect Property
                                    from  this  Agreement,  delete  it from  the
                                    Assets,   and   retain   and  not  sell  the
                                    Environmental Defect Property.

                  (c)  REMEDIATION.  If  Sellers  elect the  option set forth in
         clause (b)(i) above, Sellers shall use commercially  reasonable efforts
         to implement such  Remediation in a manner which is consistent with the
         requirements of Environmental Laws and the provisions of any applicable
         Lease,  and  Sellers  shall  have  access to the  Environmental  Defect
         Property  after  the  Closing  Date  to  implement  and  complete  such
         Remediation in accordance with this Section.  Sellers will be deemed to
         have adequately  completed the Remediation  required in the immediately
         preceding  paragraph (a) upon receipt of a certificate  from a licensed
         professional engineer.

                  (d) REDUCTION AMOUNT. If Sellers elect the option set forth in
         Section 6.5(b)(ii) with respect to one or more  Environmental  Defects,
         then  as  Buyer's  sole  and  exclusive  remedy  with  respect  to such
         Environmental  Defects,  Buyer shall be entitled to reduce the Purchase
         Price by the Allocated Value for such  Environmental  Defect  Property,
         subject to Section 6.5(a).

                                    Article 7
                                TITLE ADJUSTMENTS

         Section 7.1 TITLE WARRANTY.  Sellers shall warrant  Defensible Title to
the Assets in the Wellbore  Assignments  and in the  Conveyance,  Assignment and
Bill of Sale  referred  to in  Sections  10.2(a)  and (b) from and  against  all
Persons claiming by, through and under Sellers, but not otherwise.

         Section 7.2  BUYER'S TITLE REVIEW.

                  (a) BUYER'S  ASSERTION OF TITLE DEFECTS.  Until  September 15,
         2004,  Buyer  shall have the right to furnish  Sellers  written  notice
         meeting the  requirements  of this Section  7.2(a) (the "Title  Defects
         Notice")  setting  forth  any  matters  which,  in  Buyer's  reasonable
         opinion,  constitute  Title  Defects and which Buyer asserts as a Title
         Defect with respect to any Assets  pursuant to this Article 7; provided
         however  Buyer shall not assert any Title


                                       12
<PAGE>

         Defect until the  aggregate  Title Defect  Amount of all alleged  Title
         Defects  exceeds  one-half of one percent (0.5%) of the Purchase Price,
         and if not exceeded,  such alleged Title Defects will be deemed waived.
         For all  purposes  of this  Agreement,  Buyer  shall be  deemed to have
         waived any Title  Defect  which Buyer fails to assert as a Title Defect
         by a Title Defect  Notice given to Sellers on or before the  expiration
         of the Examination Period. To be effective, Buyer's Title Defect Notice
         of a Title  Defect must include (i) a brief  description  of the matter
         constituting  the asserted Title Defect,  (ii) the claimed Title Defect
         Amount  attributable   thereto,   and  (iii)  reference  to  supporting
         documents  reasonably  necessary for Sellers to verify the existence of
         such asserted Title Defect.

                  (b) PURCHASE  PRICE  ALLOCATIONS.  The Purchase Price has been
         allocated to the Assets in accordance  with the  respective  values set
         forth  in  Exhibit   "E"   (individually,   an   Allocated   Value  and
         collectively, the "Allocated Values"). If any adjustment is made to the
         Purchase Price pursuant to this Section 7.2, a corresponding adjustment
         shall be made to the Allocated Value for the affected Assets. Buyer and
         Sellers  shall  prepare  and file all tax returns  consistent  with the
         Allocated Values.

                  (c) SELLERS'  RIGHTS AND  OPPORTUNITY TO CURE. If Buyer timely
         gives  Sellers  Title Defect  Notice(s)  of one or more Title  Defects,
         Sellers  shall  have  the  right  to then  or  thereafter  dispute  the
         existence of such Title Defect  and/or the alleged  Title Defect Amount
         asserted  with respect  thereto in  accordance  with the  provisions of
         Section 7.5 of this  Agreement.  In addition,  the following  terms and
         conditions  shall apply with  respect to any Title  Defect  asserted by
         Buyer in a timely Title Defect Notice:

                           (i)  Sellers  shall have until the Closing  Date,  at
                  their  cost  and  expense,   if  they  so  elect  but  without
                  obligation,  to cure all or a portion of such  asserted  Title
                  Defects.  Any asserted Title Defects which are waived by Buyer
                  within  such  time  shall be deemed  "Permitted  Encumbrances"
                  hereunder. Subject to Section 7.2(c)(ii) and Sellers' right to
                  dispute  the  existence  of a Title  Defect  and/or  the Title
                  Defect Amount asserted with respect thereto under Section 7.5,
                  if Sellers  within such time fail to cure any Title  Defect of
                  which Buyer has given timely written notice as required above,
                  and  Buyer has not and does not  waive  same on or before  the
                  Closing Date, each Asset affected by such uncured and unwaived
                  Title Defect shall be a "Title Defect Property."

                           (ii) If  Buyer  furnishes  to  Sellers  timely  Title
                  Defect Notice(s) of one or more Title Defects and the same are
                  not  waived or cured as  provided  in  Section  7.2(c)(i),  as
                  applicable,  Sellers  may  elect  to  close  the  transactions
                  contemplated  hereby  and  retain  the  right to cure any such
                  Title Defects  after  Closing.  In such event,  but subject to
                  Sellers'  right to dispute  the  existence  of a Title  Defect
                  and/or the Title Defect Amount  asserted with respect  thereto
                  under  Section  7.5,  the  Purchase  Price shall be subject to
                  reduction pursuant to Section 7.2(d),  taking into account all
                  Title  Defect  Amounts   attributable   to  the  Title  Defect
                  Properties  affected by the Title  Defects  which  Sellers may
                  elect to cure after  Closing.  Sellers  shall have ninety (90)
                  calendar  days after the  Closing  Date in which to attempt to
                  cure any such Title  Defect.  If  Sellers  cure any such Title
                  Defect, then


                                       13

<PAGE>

                  Buyer  shall promptly pay Sellers the Title Defect Amount with
                  respect  to  the  Title  Defect  that  is  so  cured,  but not
                  exceeding  the  aggregate  amount of  the  reductions  in  the
                  Purchase Price as a result of any Title Defects.

                  (d) BUYER'S TITLE  ADJUSTMENTS.  As Buyer's sole and exclusive
         remedy with respect to Title Defects, Buyer shall be entitled to reduce
         the Purchase Price by the aggregate Title Defect Amounts. "Title Defect
         Amount" shall mean, with respect to a Title Defect Property, the amount
         by which the value of such  Title  Defect  Property  is  impaired  as a
         result of the  existence  of one or more  uncured  and  unwaived  Title
         Defects, which amount shall be determined as follows and subject to the
         following conditions:

                           (i) If the Title Defect results from Sellers having a
                  lesser Net Revenue Interest in such Title Defect Property than
                  the Net Revenue  Interest  specified  therefor in Exhibit "A,"
                  the Title Defect Amount shall be equal to the product obtained
                  by  multiplying  the  Allocated  Value for such  Title  Defect
                  Property  by  a  fraction,  the  numerator  of  which  is  the
                  reduction in the Net Revenue  Interest and the  denominator of
                  which is the Net  Revenue  Interest  specified  for such Title
                  Defect Property in Exhibit "A."

                           (ii) If the Title Defect  results from Sellers having
                  a greater Working  Interest in such Title Defect Property than
                  the Working  Interest  specified  therefor in Exhibit "A," the
                  Title Defect Amount shall be equal to the product  obtained by
                  multiplying the Allocated Value for such Title Defect Property
                  by a fraction,  the  numerator of which is the increase in the
                  Working  Interest and the  denominator of which is the Working
                  Interest  specified for such Title Defect  Property in Exhibit
                  "A."

                           (iii) If the Title Defect  results from the existence
                  of a mortgage,  lien or other  encumbrance,  the Title  Defect
                  Amount shall be an amount sufficient to discharge same.

                           (iv) If the Title Defect  results from any matter not
                  described in  paragraphs  (i) or (ii) above,  the Title Defect
                  Amount shall be an amount equal to the difference  between the
                  value of the Title  Defect  Property  affected  by such  Title
                  Defect  with such  Title  Defect  and the value of such  Title
                  Defect Property without such Title Defect (taking into account
                  the Allocated Value for such Title Defect Property); provided,
                  that if such Title Defect is reasonably  susceptible  of being
                  cured,  the Title Defect Amount shall be the  reasonable  cost
                  and expense of curing such Title Defect, if less.

                           (v) The Title Defect Amount  attributable  to a Title
                  Defect  Property shall not exceed the Allocated Value for such
                  Title Defect Property.

                  (e)  TITLE  ADJUSTMENT  THRESHOLD.   Notwithstanding  anything
         herein to the contrary,  any downward  adjustment to the Purchase Price
         provided  for in 7.2(d) shall be

                                       14

<PAGE>

         made  only to the  extent  and  only as to that  amount  by  which  the
         aggregate  amount of the Title Defect Amounts  exceeds  one-half of one
         percent (0.5%) of the Purchase Price.

         Section  7.3  DETERMINATION  OF TITLE  DEFECTS.  An Asset  shall not be
deemed to have a "Title  Defect"  if the  following  statements  are true in all
material respects with respect to such Asset as of the Closing Date:

                           (i) Sellers have Defensible Title thereto;

                           (ii) all rentals,  Pugh clause payments,  shut-in gas
                  payments and other  similar  payments  (other than  royalties,
                  overriding royalties and other similar payments on production)
                  due with  respect to such Asset have been  properly and timely
                  paid; and

                           (iii)  Sellers are not in default  under the material
                  terms of any Leases,  farmout agreements or other contracts or
                  agreements  respecting  such  Asset  which  could (a)  prevent
                  Sellers from receiving the proceeds of production attributable
                  to Sellers' interest therein, or (b) result in cancellation of
                  Sellers' interest therein.

         Notwithstanding  any other provision in this Agreement to the contrary,
the following matters shall not be asserted as, and shall not constitute,  Title
Defects:

                  (a)  defects  in  the  chain  of  title  such  as  minor  name
         discrepancies, the mere failure to recite marital status in a document,
         or  omissions  of  successions  of heirship  proceedings,  unless Buyer
         provides  affirmative evidence that such failure or omission results in
         another  party's  superior claim of title to the relevant Asset portion
         thereof;

                  (b) defects arising out of lack of survey;

                  (c) defects arising out of a lack of corporate  authorization,
         unless  Buyer   provides   affirmative   evidence  that  such  lack  of
         authorization results in another party's superior claim of title to the
         relevant Assets or portion thereof;

                  (d)  defects  that have  been  cured by  possession  under the
         applicable statutes of limitations or statutes for prescription; and

                  (e) defects that have a Title Defect Amount less than $5,000.

         Section 7.4 SELLERS' TITLE CREDIT.  A "Seller Title Credit" shall mean,
with  respect  to an Asset,  the  amount  by which  the  value of such  Asset is
increased by virtue of (a) Sellers having a greater Net Revenue Interest in such
Asset than the Net Revenue  Interest  specified  therefor in Exhibit "A"; or (b)
Sellers having a lesser Working Interest in such Asset than the Working Interest
specified  therefor in Exhibit "A" without a  corresponding  decrease in the Net
Revenue Interest in such Asset from the Net Revenue Interest  specified therefor
in Exhibit  "A." Seller Title  Credits  will first be applied  dollar for dollar
against any Title Defect Amounts.  After such application,  any remaining Seller
Title Credits shall be the basis for a Purchase Price  adjustment


                                       15

<PAGE>

as provided in  Section 3.2(a);  provided,  however,  that any upward adjustment
to the Purchase  Price  shall  be  made  only  to the extent and only as to that
amount by which the aggregate amount of Seller Title Credits exceeds one-half of
one percent (0.5%) of the Purchase Price.

         Section 7.5 DEFERRED CLAIMS AND DISPUTES. Sellers shall notify Buyer of
any Title  Defects  or  Environmental  Defects  that it  disputes  no later than
October  1,  2004.  Otherwise,  Sellers  shall be deemed to have  accepted  such
Defects.  In the event  that  Buyer and  Sellers  have not  agreed  upon (i) the
existence of one or more Title  Defects or one or more  adjustments,  credits or
offsets  claimed  by Buyer or Sellers  pursuant  to and in  accordance  with the
requirements  of  this  Article  7,  or  (ii)  the  existence  of  one  or  more
Environmental  Defects,  any Remediation,  Remediation Amount or plan therefore,
any such dispute or claim (a  "Disputed  Defect")  shall be settled  pursuant to
this Section 7.5, and shall not prevent or delay Closing.

         The amount attributable to any Disputed Defects shall be a reduction in
the Purchase  Price.  Buyer shall place such amount in an escrow account pending
resolution  of the dispute as  provided  for  herein.  If the  Parties  have not
resolved the dispute by informal  discussions fourteen (14) days before Closing,
then the arbitration procedure set forth in Section 16.10 shall apply.

                                    Article 8
                         COVENANTS OF SELLERS AND BUYER

         Section  8.1  CONDUCT  OF  BUSINESS  PENDING  CLOSING.  Subject  to the
constraints of applicable  operating  agreements  and other existing  agreements
with third parties, from the date of this Agreement through the Closing,  except
as consented to or approved by Buyer, Sellers covenant and agree that:

                  (a) LIENS.  Sellers shall not create any new liens or security
         interests  on the Assets,  except to the extent  required or  permitted
         incident to the exploration, operation or development of the Assets.

                  (b) OPERATION OF ASSETS. Sellers shall:

                           (i) cause the Assets to be maintained and operated in
                  the ordinary  course of business in  accordance  with Sellers'
                  past  practices   (including  the  repair  or  replacement  of
                  damaged,  destroyed,  obsolete,  depreciated,  non-working  or
                  non-economical items of equipment or other personal property),
                  maintain insurance now in force with respect to the Assets and
                  pay or cause to be paid all costs and  expenses in  connection
                  therewith promptly when due;

                           (ii)  cause,  or,  in the event  Sellers  are not the
                  operator,  use reasonable  efforts to cause,  the Assets to be
                  maintained and operated in material compliance with all laws;

                           (iii) (A) not commit to  participate  in the drilling
                  of any new  well  or  other  new  capital  expenditure  on the
                  Assets,  without Buyer's consent, which


                                       16
<PAGE>

                  consent  shall  not  be  unreasonably  withheld,   delayed  or
                  conditioned, or  (B) elect  to become  a non-consenting  party
                  with respect to any operation or  capital expenditure proposed
                  by a third party;

                           (iv)  maintain  and keep the Assets in full force and
                  effect, except where such failure is due to the failure to pay
                  a delay rental,  royalty,  shut in royalty or other payment by
                  mistake  or  oversight,  unless  caused  by  Sellers'  willful
                  misconduct; and

                           (v)  use  reasonable   diligence  to  maintain  their
                  relationships  with  suppliers,  customers  and others  having
                  material  business  relations with Sellers with respect to the
                  Assets so that they will be  preserved  for Buyer on and after
                  the Closing Date.

                  (c) CONTRACTS AND AGREEMENTS. Sellers shall not:

                           (i)  enter  into  any  Hydrocarbon  sales,  exchange,
                  processing  or  transportation  contract  with  respect to the
                  Assets  having  a term in  excess  of one  year  which  is not
                  terminable  without  penalty on notice of thirty  (30) days or
                  less; or

                           (ii)  voluntarily  relinquish  Sellers'  position  as
                  operator with respect to any of the Assets.

         Section 8.2 NOTICES AND CONSENTS. Sellers agree to give any notices to,
make any  filings  with,  and use their  reasonable  best  efforts to obtain any
Transfer  Requirements in connection with the transactions  contemplated by this
Agreement.

         Section  8.3   PREFERENTIAL   RIGHTS.   Sellers  have   identified  all
preferential  rights known to Sellers which are  applicable to the  transactions
contemplated   hereby,   and  will  request,   from  the  Persons  holding  such
preferential rights (and in accordance with the documents creating such rights),
execution of waivers  thereof.  If the holders of a preferential  right exercise
such right,  Sellers  shall tender to such Person the  required  interest in the
affected Asset at a price equal to the Allocated  Value (reduced  appropriately,
as determined by mutual agreement of Buyer and Sellers,  if less than the entire
Asset must be  tendered),  and to the  extent  that such  preferential  right is
exercised  and such  interest  in such Asset is  actually  sold to the Person so
exercising  such right,  such  interest  in the Asset will be excluded  from the
transactions  contemplated  hereby  and the  Purchase  Price  will  be  adjusted
downward by the amount  actually  paid to Sellers by the Person  exercising  the
preferential  right. If, on the Closing Date, the holder of a preferential right
has not indicated  whether or not it will exercise such  preferential  right and
the time period within which the holder of the preferential  right must exercise
its right has not lapsed, the Parties shall proceed with Closing on those Assets
affected by the preferential right and Buyer shall assume the responsibility for
conveying the Assets to the holder of the  preferential  right should the holder
timely exercise its preferential right.

                                       17
<PAGE>

         Section  8.4 ACTIONS BY PARTIES.  The Parties  agree to use  reasonable
diligence  to satisfy  the  conditions  to Closing set forth in Article 9 and to
refrain from taking any action  within their  control which would cause a breach
by a Party of a representation or warranty set forth herein; provided,  however,
that  Sellers  shall not be  required to expend any funds nor incur any costs to
prevent  or cure a breach of the  representations  and  warranties  set forth in
Section 5.1.

         Section 8.5 CASUALTY LOSS. In the event of a Casualty to an Asset prior
to Closing,  this Agreement  shall remain in full force and effect,  and (unless
Buyer and Sellers shall otherwise agree), at Buyer's election,  such Asset shall
be  treated as if it had a Title  Defect  associated  with it and the  procedure
provided for in Section 7.2 shall be applicable thereto.

                                    Article 9
                               CLOSING CONDITIONS

         Section 9.1 SELLERS' CLOSING  CONDITIONS.  The obligation of Sellers to
proceed  with the  Closing  contemplated  hereby is  subject,  at the  option of
Sellers,  to the  satisfaction  on or  prior to the  Closing  Date of all of the
following conditions:

                  (a)  REPRESENTATIONS,   WARRANTIES  AND  COVENANTS.   The  (i)
         representations  and  warranties of Buyer  contained in this  Agreement
         shall be true and  correct in all  material  respects  on and as of the
         Closing  Date,  and  (ii)  covenants  and  agreements  of  Buyer  to be
         performed  on or  before  the  Closing  Date in  accordance  with  this
         Agreement shall have been duly performed in all material respects.

                  (b) NO ACTION.  On the Closing Date, no suit,  action or other
         proceeding  (excluding  any such  matter  initiated  by  Sellers  or an
         Affiliate)  shall  be  pending  or  threatened   before  any  court  or
         governmental agency or body of competent jurisdiction seeking to enjoin
         or restrain  the  consummation  of the Closing or recover  damages from
         Sellers resulting therefrom.

                  (c) COMMITMENT  WELLS.  Buyer shall have timely  satisfied its
         commitment to drill, complete,  equip and connect (or plug, abandon and
         reclaim) at least twelve (12) Commitment Wells, as described in Section
         4.1.

         Section 9.2 BUYER'S  CLOSING  CONDITIONS.  The  obligations of Buyer to
proceed with the Closing contemplated hereby is subject, at the option of Buyer,
to the  satisfaction  on or prior to the  Closing  Date of all of the  following
conditions:

                  (a)  REPRESENTATIONS,   WARRANTIES  AND  COVENANTS.   (i)  The
         representations  and  warranties  of  each  Seller  contained  in  this
         Agreement  shall be true and correct on and as of the  Closing  Date as
         though  made  as of the  Closing  Date,  and  (ii)  the  covenants  and
         agreements  of Sellers to be performed on or before the Closing Date in
         accordance  with this  Agreement  shall have been duly performed in all
         material respects.

                  (b) NO ACTION.  On the Closing Date, no suit,  action or other
         proceeding  (excluding  any such matter  initiated  by Buyer)  shall be
         pending or threatened  before any


                                       18
<PAGE>

         court or governmental agency or body of competent  jurisdiction seeking
         to enjoin or  restrain  the  consummation  of the  Closing  or  recover
         damages from Buyer or resulting therefrom.

                  (c)  RELEASES.  Buyer shall have been  provided with copies of
         releases in forms reasonably  satisfactory to Buyer and its counsel, of
         any mortgages, security interests, indebtedness or similar encumbrances
         or burdens affecting the Assets.

                  (d) NO ADVERSE CHANGE. There shall have been no adverse change
         in the aggregate  volumes of production of Hydrocarbons from the Assets
         since the Effective Date.

         9.3 REGULATORY  APPROVALS.  If Buyer or Sellers determine that approval
is required to permit  Buyer to continue to use any  governmental  permits  with
respect to the Assets after  Closing,  Buyer and Sellers  shall,  as promptly as
practicable  after the date of this Agreement,  cooperate in filing the required
applications and notices with the appropriate  governmental  authorities seeking
authorization  to  confirm  Buyer's  continued  right to use such  permits or to
transfer or assign such permits to Buyer as necessary.

                                   Article 10
                                     CLOSING

         Section 10.1 CLOSING.  The closing of the transactions  contemplated by
this Agreement (the  "Closing")  shall be held at 10:00 a.m.,  MST, on or before
November  1, 2004 (the  "Closing  Date"),  at the  offices of Sellers in Denver,
Colorado,  or at such  other time or place as  Sellers  and Buyer may  otherwise
agree in writing.

         Section 10.2 SELLERS' CLOSING  OBLIGATIONS.  At Closing,  Sellers shall
execute  and  deliver,  or cause to be  executed  and  delivered,  to Buyer  the
following:

                  (a)  a  Wellbore  Assignment  for  each  Well  that  has  been
         connected  to the sales line prior to the Closing  Date,  conveying  to
         Buyer an additional  undivided  forty percent  (40%)  wellbore  Working
         Interest  in such Well,  limited to the depth  drilled in such Well and
         proportionately reduced;

                  (b) a Conveyance,  Assignment and Bill of Sale,  substantially
         in the form  attached  hereto as  Exhibit  "F,"  assigning  to Buyer an
         undivided  ninety  percent  (90%)  Working  Interest  in the  remaining
         Assets,  proportionally  reduced to the  extent  Sellers do not own the
         entire Working Interest in a particular Asset;

                  (c) the Escrowed Amount;

                  (d) the releases, if any, referred to in Section 9.2(c);


                                       19
<PAGE>

                  (e) on forms supplied by Buyer,  transfer orders or letters in
         lieu  thereof,  directing  the  operator  to make  payment of  proceeds
         attributable  to production from the Assets after the Effective Date to
         Buyer; and

                  (f) a non-foreign affidavit,  as such affidavit is referred to
         in Section 1445(b)(2) of the Code, dated as of the Closing Date.

         Section  10.3  BUYER'S  CLOSING  OBLIGATIONS.  At Closing,  Buyer shall
deliver,  or cause to be delivered,  to Sellers the Adjusted  Purchase  Price in
immediately available funds.

         Section 10.4 SUSPENSE PROCEEDS. Sellers shall remit to Buyer at Closing
all  proceeds  from  production  attributable  to the  Assets  which are held in
suspense by Sellers as of the Effective Date. Buyer shall be responsible for the
proper  distribution  of all such  suspended  proceeds and agrees to  indemnify,
defend  and  hold  harmless  Sellers  from  and  against  any  and  all  claims,
liabilities  and losses  related to such  suspended  proceeds  unless the claims
allege that the proceeds were improperly suspended by Sellers.

                                   Article 11
                              POST-CLOSING MATTERS

         Section 11.1  SELLERS'  RECORDS.  Within five (5)  business  days after
Closing,  Sellers shall deliver to Buyer the Sellers' Records.  Sellers shall be
entitled  to keep a copy of any such  Sellers'  Records for their  files.  Buyer
agrees to maintain the Sellers'  Records until the seventh (7th)  anniversary of
the Closing  Date (or for such  longer  period of time as Sellers  shall  advise
Buyer is necessary in order to have the Sellers' Records  available with respect
to open  years  for tax audit  purposes),  or,  if any of the  Sellers'  Records
pertain to any claim or dispute pending on the seventh (7th)  anniversary of the
Closing Date,  Buyer shall  maintain any of the Sellers'  Records  designated by
Sellers  until such claim or  dispute is finally  resolved  and the time for all
appeals   has  been   exhausted.   Buyer   shall   provide   Sellers  and  their
representatives  reasonable access at reasonable times to, and the right to copy
all or any portion of, the Sellers' Records.

         Section 11.2 FINAL SETTLEMENT  STATEMENT.  As soon as practicable after
the Closing, but in no event later than ninety (90) days after Closing,  Sellers
shall prepare and deliver to Buyer,  in accordance with this Agreement and GAAP,
a statement (the "Final  Settlement  Statement")  setting forth each adjustment,
finally  determined  as  of  Closing,   and  showing  the  calculation  of  such
adjustments.  Within  thirty  (30) days after  receipt  of the Final  Settlement
Statement,  Buyer  shall  deliver to  Sellers a written  report  containing  any
changes that Buyer  proposes be made in good faith to resolve any questions with
respect to the amounts due pursuant to such Final Settlement  Statement.  If the
Parties reach agreement on such Final  Settlement  Statement,  the obligor Party
thereunder  shall  immediately  pay the other  Party(s) the amount owed.  If the
Parties fail to agree upon such Final  Settlement  Statement  within one hundred
fifty (150) days after the Closing, the matters in dispute shall be submitted to
arbitration pursuant to Section 16.10.

         Section 11.3  REMITTANCE  OF PROCEEDS BY SELLERS.  Notwithstanding  the
provisions of Section 11.2, if,  following  Closing,  Sellers  receive  proceeds
attributable  to production  from the

                                       20

<PAGE>

Assets after the Effective Date that Buyer  is entitled to under this Agreement,
they shall immediately remit such proceeds to Buyer, together with a copy of the
purchaser detail.

         Section  11.4  Buyer's  Assumption.  Buyer  shall,  from and  after the
Closing,  assume  and  perform  its  Working  Interest  share of all  duties and
obligations  arising  in  connection  with  the  Assets  and all  contracts  and
agreements relating thereto.

         Section 11.5  FURTHER  ASSURANCES.  Sellers and Buyer agree that,  from
time to time after the Closing Date,  they will execute and deliver such further
instruments, and take or cause to take, such other action as may be necessary to
carry out the purposes and intents of this Agreement.

                                   Article 12
                                    SURVIVAL

         Section 12.1 SURVIVAL. The representations, warranties, indemnities and
the  covenants and  agreements  made herein by the Parties shall not survive the
Closing, except that the covenants, representations,  warranties and indemnities
in Sections 4.1, 5.1 (but  excluding  Section 5.1(k) to the extent that the acts
or omissions giving rise to the Environmental Claim arose prior to the Effective
Date), 5.2, 6.2, 8.1, 16.2 and 16.10 and in Articles 11, 13 and 14 shall survive
for a period of one year following the Closing and, if no arbitration proceeding
is then  pending  in  respect  of  such  surviving  covenants,  representations,
warranties  and  indemnities,  all such  surviving  covenants,  representations,
warranties  and  indemnities  shall then terminate and be of no further force or
effect. If such arbitration proceeding is pending on the one year anniversary of
the Closing,  then the  representations,  warranties and indemnities in Sections
4.1,  5.1  (subject  to the  limitation  set forth  above in  respect of Section
5.1(k)),  5.2,  6.2,  8.1,  16.2 and 16.10 and in  Articles  11, 13 and 14 shall
survive solely for purposes of the pending arbitration proceeding, and then only
until such arbitration proceeding is finally and fully resolved.

                                   Article 13
                                   LIMITATIONS

         Section 13.1  DISCLAIMER OF  WARRANTIES.  IT IS THE EXPLICIT  INTENT OF
EACH PARTY  HERETO THAT  SELLERS ARE NOT MAKING ANY  REPRESENTATION  OR WARRANTY
WHATSOEVER,   EXPRESS,   IMPLIED,   STATUTORY   OR   OTHERWISE,   BEYOND   THOSE
REPRESENTATIONS  OR  WARRANTIES  EXPRESSLY  GIVEN IN THIS  AGREEMENT,  AND IT IS
UNDERSTOOD THAT, SUBJECT TO SUCH EXPRESS  REPRESENTATIONS AND WARRANTIES,  BUYER
TAKES THE ASSETS "AS IS" AND "WHERE IS." WITHOUT  LIMITING THE GENERALITY OF THE
IMMEDIATELY  PRECEDING  SENTENCE,  SELLERS  HEREBY (i) EXPRESSLY  DISCLAIM,  AND
NEGATE ANY  REPRESENTATION  OR WARRANTY,  EXPRESS OR IMPLIED,  AT COMMON LAW, BY
STATUTE OR OTHERWISE,  RELATING TO (a) THE  CONDITION OF THE ASSETS  (INCLUDING,
WITHOUT  LIMITATION,  ANY  IMPLIED OR EXPRESS  WARRANTY  OF  MERCHANTABILITY  OR
FITNESS  FOR A  PARTICULAR  PURPOSE,  OR OF  CONFORMITY  TO MODELS OR SAMPLES OF
MATERIAL), or (b) ANY INFRINGEMENT BY SELLERS OF ANY PATENT OR PROPRIETARY RIGHT
OF ANY


                                       21

<PAGE>

THIRD  PARTY,  and (ii)  NEGATE  ANY  RIGHTS  OF  BUYER  UNDER STATUTES TO CLAIM
DIMINUTION  OF  CONSIDERATION  AND ANY  CLAIMS BY BUYER FOR  DAMAGES  BECAUSE OF
REDHIBITORY VICES OR DEFECTS,  WHETHER KNOWN OR UNKNOWN,  IT BEING THE INTENTION
OF  SELLERS  AND BUYER  THAT THE  ASSETS  ARE TO BE  ACCEPTED  BY BUYER IN THEIR
PRESENT CONDITION AND STATE OF REPAIR.

         Section  13.2  DAMAGES.   NOTWITHSTANDING  ANYTHING  CONTAINED  TO  THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT,  SELLERS AND BUYER AGREE THAT
THE  RECOVERY OF ANY  DAMAGES  SUFFERED OR INCURRED AS A RESULT OF ANY BREACH BY
ANY PARTY OF ANY OF ITS  REPRESENTATIONS,  WARRANTIES OR OBLIGATIONS  UNDER THIS
AGREEMENT  SHALL BE LIMITED TO THE ACTUAL  DAMAGES  SUFFERED OR INCURRED  (WHICH
SHALL  INCLUDE  ANY  INDIRECT,  CONSEQUENTIAL,  SPECIAL,  EXEMPLARY  OR PUNITIVE
DAMAGES  AWARDED  AGAINST OR PAID BY THE  INDEMNIFIED  PARTY  SEEKING  INDEMNITY
HEREUNDER TO ANY THIRD PARTY) AS A RESULT OF THE BREACH BY THE  BREACHING  PARTY
OF ITS  REPRESENTATIONS,  WARRANTIES  OR  OBLIGATIONS  HEREUNDER AND IN NO EVENT
SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR ANY INDIRECT,
CONSEQUENTIAL,  SPECIAL,  EXEMPLARY  OR  PUNITIVE  DAMAGES  (INCLUDING,  WITHOUT
LIMITATION,  ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR  OPPORTUNITIES OR LOST OR
DELAYED PRODUCTION)  SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT
OF THE BREACH BY THE BREACHING PARTY OF ANY OF ITS  REPRESENTATIONS,  WARRANTIES
OR OBLIGATIONS HEREUNDER.

                                   Article 14
                                 INDEMNIFICATION

         Section 14.1  INDEMNIFICATION BY SELLERS.  Sellers shall to the fullest
extent permitted by law, release,  defend, indemnify and hold harmless Buyer and
its Affiliates, and their respective directors,  officers, employees, agents and
other representatives, from and against the following:

                  (a) All  claims,  demands,  damages,  liabilities,  judgments,
         losses and reasonable costs, expenses and attorneys' fees (individually
         a "Loss" and  collectively,  the  "Losses")  proximately  caused by the
         breach by Sellers of any surviving representation, warranty or covenant
         of the Seller under Section 12.1; and

                  (b) All Losses  arising from the ownership or operation of the
         Assets prior to the Effective  Date,  but  excluding (i)  Environmental
         Claims,  except to the extent  covered in Section  4.1, and (ii) losses
         arising  from  documents,  instruments,  conduct,  acts or omissions of
         which Buyer had Knowledge at Closing.

         Section  14.2  INDEMNIFICATION  BY BUYER.  Buyer  shall to the  fullest
extent permitted by law, release, defend,  indemnify and hold harmless,  Sellers
and their Affiliates, and their


                                       22
<PAGE>

respective  directors,  officers,  employees,  agents and other representatives,
from and against the following:

                  (a) All  Losses  proximately  caused by the breach by Buyer of
         any surviving  representation,  warranty or covenant of the Buyer under
         Section 12.1; and

                  (b) Buyer's Working  Interest share of all Losses arising from
         the  ownership or  operation  of the Assets on and after the  Effective
         Date.

         Section  14.3  NOTIFICATION.  As soon  as  reasonably  practical  after
obtaining  knowledge thereof, an indemnified Party shall notify the indemnifying
Party of any claim or demand  which the  indemnified  Party has  determined  has
given or could give rise to a claim for  indemnification  under this Article 14.
Such notice shall specify the agreement, representation or warranty with respect
to which the claim is made,  the facts  giving rise to the claim and the alleged
basis for the  claim,  and the  amount  (to the  extent  then  determinable)  of
liability  for which  indemnity  is asserted.  In the event any action,  suit or
proceeding  is brought  with  respect to which a Party may be liable  under this
Article  14, the  defense  of the  action,  suit or  proceeding  (including  all
settlement  negotiations and arbitration,  trial,  appeal,  or other proceeding)
shall be at the  discretion of and conducted by the  indemnifying  Party.  If an
indemnified Party shall settle any such action,  suit or proceeding  without the
written  consent  of  the  indemnifying   Party  (which  consent  shall  not  be
unreasonably  withheld),  the right of the  indemnified  Party to make any claim
against the  indemnifying  Party on account of such  settlement  shall be deemed
conclusively denied. An indemnified Party shall have the right to be represented
by its own counsel at its own expense in any such  action,  suit or  proceeding,
and if an  indemnified  Party is named as the  defendant in any action,  suit or
proceeding  with respect to itself at its own expense.  Subject to the foregoing
provisions of this Article 14, a Party shall,  without the other Party's written
consent, settle,  compromise,  confess judgment or permit judgment by default in
any  action,  suit or  proceeding  if such  action  would  create or attach  any
liability or obligation to the other Party.  The Parties agree to make available
to each other, and to their respective counsel and accountants,  all information
and documents  reasonably  available to them which relate to any action, suit or
proceedings,  and the Parties  agree to render to each other such  assistance as
they may  reasonably  require  of each  other in order to ensure  the proper and
adequate defense of any such action, suit or proceeding.


                                   Article 15
                       TERMINATION; REMEDIES; LIMITATIONS

         Section 15.1   TERMINATION.

                  (a)   TERMINATION   OF  AGREEMENT.   This  Agreement  and  the
         transactions  contemplated  hereby may be  terminated at any time at or
         prior to the Closing:

                           (i) by mutual written consent of Sellers and Buyer;


                                       23
<PAGE>

                           (ii) by either Sellers or Buyer if the combined total
                  of all Remediation  Amounts asserted under Article 6 above and
                  all Title Defect Amounts asserted under Article 7 above exceed
                  twenty-five percent (25%) of the Purchase Price;

                           (iii)  by  Sellers  if  any  condition  specified  in
                  Section 9.1 have not been  satisfied on or before  Closing and
                  shall not have been waived by Sellers; or

                           (iv) by Buyer if any  condition  specified in Section
                  9.2 has not been  satisfied on or before Closing and shall not
                  have been waived by Buyer.

                  (b) EFFECT OF TERMINATION. In the event of termination of this
         Agreement  by Sellers,  on the one hand,  or Buyer,  on the other hand,
         pursuant to Section 15.1(a),  written notice thereof shall forthwith be
         given by the terminating  Party to the other Party,  and this Agreement
         shall  thereupon  terminate;  provided,  however,  that  following such
         termination  Buyer will  continue  to be bound by its  obligations  set
         forth in  Sections  4.1 and 6.2. If this  Agreement  is  terminated  as
         provided herein,  all filings,  applications and other submissions made
         to any  Governmental  Authority  shall, to the extent  practicable,  be
         withdrawn from the Governmental Authority to which they were made.

         Section 15.2  REMEDIES.

                  (a)  SELLERS'   REMEDIES.   Notwithstanding   anything  herein
         provided  to the  contrary,  upon the  failure by Buyer to satisfy  the
         conditions to Closing or the Closing  obligations,  as the case may be,
         on account of breaches  of any of the  representations  and  warranties
         made by Buyer in this  Agreement,  or the  failure  to comply  with the
         covenants or other  obligations of Buyer set forth herein,  Sellers may
         enforce their legal and  equitable  remedies for such breach or failure
         including specific performance of this Agreement.

                  (b) BUYER'S REMEDIES. Notwithstanding anything herein provided
         to the contrary,  upon failure of the Sellers to satisfy the conditions
         to Closing or the Closing  obligations,  as the case may be, on account
         of  breaches  of any of the  representations  and  warranties  made  by
         Sellers in this Agreement, or the failure by Sellers to comply with the
         covenants or other  obligations of Sellers set forth herein,  Buyer may
         enforce its legal and  equitable  remedies  for such breach or failure,
         including specific performance of this Agreement.

                                   Article 16
                                  MISCELLANEOUS

         Section  16.1   COUNTERPARTS.   This   Agreement  may  be  executed  in
counterparts,  each of which shall be deemed an original  instrument,  but which
together shall  constitute but one and the same  instrument.  Any counterpart of
this Agreement or any document or other  instrument  delivered  hereunder may be
delivered  by  facsimile.  Any  facsimile  signature  shall be replaced  with an
original signature as promptly as practical.


                                       24

<PAGE>

         Section 16.2  GOVERNING LAW; JURISDICTION; PROCESS.

                  (a) THIS AGREEMENT AND THE  TRANSACTIONS  CONTEMPLATED  HEREBY
         SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
         STATE OF COLORADO WITHOUT GIVING EFFECT TO PRINCIPLES  THEREOF RELATING
         TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE APPLICATION OF THE LAWS
         OF ANOTHER JURISDICTION.

                  (b) SUBJECT TO THE ARBITRATION  AGREEMENT SET FORTH IN SECTION
         16.10, BUYER AND SELLERS CONSENT TO PERSONAL  JURISDICTION IN ANY LEGAL
         ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT IN ANY COURT,
         FEDERAL OR STATE, LOCATED IN THE CITY AND COUNTY DENVER, HAVING SUBJECT
         MATTER  JURISDICTION  AND WITH  RESPECT  TO ANY SUCH  CLAIM,  BUYER AND
         SELLERS  IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
         CLAIM,  OR ANY  OBJECTION  THAT BUYER OR SELLERS  MAY NOW OR  HEREAFTER
         HAVE, THAT VENUE OR JURISDICTION IS NOT PROPER WITH RESPECT TO ANY SUCH
         LEGAL ACTION,  SUIT OR PROCEEDING BROUGHT IN SUCH COURT,  INCLUDING ANY
         CLAIM THAT SUCH LEGAL ACTION,  SUIT OR PROCEEDING BROUGHT IN SUCH COURT
         HAS BEEN BROUGHT IN AN  INCONVENIENT  FORUM AND ANY CLAIM THAT BUYER OR
         SELLERS ARE NOT SUBJECT TO PERSONAL  JURISDICTION OR SERVICE OF PROCESS
         IN SUCH FORUM.

         Section  16.3 ENTIRE  AGREEMENT.  This  Agreement  and the  Appendices,
Schedules  and  Exhibits  hereto and the  Letter  Agreement  contain  the entire
agreement  between the Parties  with  respect to the subject  matter  hereof and
supersedes  all prior written or oral  understandings  pertaining to the subject
matter  hereof.  There are no  agreements,  understandings,  representations  or
warranties between the Parties other than those set forth or referred to herein.
To the extent the  provisions  of the Letter  Agreement are in conflict with the
provisions of this Agreement or the Appendices,  Schedules and Exhibits  hereto,
the provisions of this Agreement or such Appendices, Schedules or Exhibits shall
control.

         Section 16.4 EXPENSES. Buyer shall be responsible for (i) all transfer,
stamp,  documentary and similar taxes imposed on the parties hereto with respect
to the purchase and sale of the Assets  contemplated  pursuant to this Agreement
and,  (ii) all  recording,  filing or  registration  fees for any  assignment or
conveyance  delivered to Buyer under or pursuant to this Agreement.  Buyer shall
be responsible  for all sales tax, if any,  resulting from the purchase and sale
of the  Assets;  provided  Sellers  shall  join in a sales tax  return,  if any,
required  to be filed.  Buyer  shall  file any  required  sales tax  return.  As
provided  in the Letter  Agreement,  Buyer has agreed to  reimburse  Sellers for
Sellers'  attorneys'  fees and related costs and expenses in connection with the
preparation  and  negotiation  of the Letter  Agreement,  this Agreement and the
Appendices,  Schedules  and  Exhibits  hereto up to a  maximum  of  $15,000.  In
addition,  as provided in Section 6.3, Sellers and Buyer have shared equally the
costs of the Ryder Scott

                                       25

<PAGE>

Studies.  All  other  costs  and  expenses  incurred  by the  Parties hereunder,
including the expense of environmental and title examination,  shall be borne by
the Party incurring same.

         Section 16.5 NOTICES. All notices hereunder shall be sufficiently given
for all  purposes  hereunder  if in writing and  delivered  personally,  sent by
documented overnight delivery service or, to the extent receipt is confirmed, by
United States mail, telecopy,  telefax or other electronic  transmission service
to the appropriate address or number as set forth below:

         TO SELLERS:

         Tower Colombia Corporation
         1050 Seventeenth Street, Suite 1850
         Denver, Colorado 80265
         Attention:  Patrick D. O'Brien
         Telephone: (303) 595-0125
         Facsimile: (303) 595-0709


         TO BUYER:

         Dolphin Energy Corporation
         1001 Brickell Bay Drive, Suite 2202
         Miami, Florida 33131
         Attention: Marc E. Bruner, Chairman and CEO
         Telephone: (305) 373-5725
         Facsimile:  (305) 373-5726
         E-mail: mbruner@galaxyenergy.com

or at such other  address and to the  attention  of such other person as a Party
may designate by written notice to the other Party.

         Section 16.6 PRESS  RELEASES AND PUBLIC  ANNOUNCEMENTS.  No Party shall
issue any press release or make any public announcement  relating to the subject
matter of this Agreement  without the prior written approval of the other Party;
provided,  however, that any Party may make any public disclosure it believes in
good faith is required  by  applicable  law or any listing or trading  agreement
concerning its or its Affiliates'  publicly-traded securities (in which case the
disclosing Party shall use all reasonable efforts to advise the other Party, and
give the other Party an opportunity to comment on the proposed disclosure, prior
to making the disclosure).

         Section 16.7  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding
upon and  inure to the  benefit  of the  Parties  hereto  and  their  respective
successors  and  permitted  assigns.  This  Agreement may not be assigned by any
Party except with the prior  written  consent of the other Party,  which consent
shall not be unreasonably  withheld or delayed,  and any such assignment without
such consent shall be void and of no force or effect.


                                       26
<PAGE>

         Section 16.8 AMENDMENTS AND WAIVERS. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the Party
against whom  enforcement  of any such  modification  or amendment is sought.  A
Party may, only by an instrument in writing, waive compliance by the other Party
with any term or provision of this  Agreement on the part of such other Party to
be performed or complied  with. The waiver by a Party of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.

         Section  16.9  APPENDICES,  SCHEDULES  AND  EXHIBITS.  All  Appendices,
Schedules  and  Exhibits  hereto  which are referred to herein are hereby made a
part hereof and incorporated herein by such reference.

         Section  16.10  ARBITRATION.  Except as  otherwise  expressly  provided
herein,  any dispute,  controversy,  or claim (a "Dispute") arising out of or in
connection  with  this  Agreement,   except  for  a  suit  to  enforce  specific
performance,  shall be referred to and determined by binding arbitration, as the
sole and  exclusive  remedy  of the  Parties  as to the  Dispute,  conducted  in
accordance  with the AAA Rules,  which are deemed to be  incorporated  herein by
reference,  except that in the event of any  conflict  between the Rules and the
arbitration  provisions  set forth below,  the  provisions set forth below shall
govern and  control.  Any Party may submit a Dispute to  arbitration  by written
notice (the  "Arbitration  Notice")  provided the other Party.  The  arbitration
shall be heard and determined by one arbitrator agreed to by the Parties. If the
Parties  cannot  agree on a single  arbitrator  within  ten (10) days  after the
receipt of the  Arbitration  Notice,  then the AAA shall submit to the Parties a
list of arbitrators who are  knowledgeable  experts in the oil and gas industry.
Sellers (acting  collectively)  and Buyer shall each rank the arbitrators on the
AAA list and shall  submit  such  ranking  to the AAA within ten (10) days after
receipt of the AAA list.  The AAA shall select the  arbitrator  with the highest
ranking on both the Sellers' and Buyer's ranking lists. The AAA shall disqualify
any  arbitrator  if the AAA  determines  that such  arbitrator  has a  financial
interest  in the  outcome  of the  dispute,  controversy  or  claim  or has  any
business,  social or family relationship with any of the Parties or is otherwise
not disinterested.  The arbitration shall be held in Denver,  Colorado,  and the
proceedings shall be conducted and concluded as soon as reasonably  practicable,
based upon the  schedule  established  by the  arbitrator,  but in any event the
decision of the  arbitrator  shall be rendered  within sixty (60) days following
his or her selection.  The decision of the arbitrator shall be final and binding
upon the Parties.  Judgment  upon the award  rendered by the  arbitrator  may be
entered in, and enforce by, any court of competent jurisdiction.

         Section  16.11  ATTORNEYS'  FEES.  The  prevailing  Party in any  legal
proceeding  brought  under or to enforce this  Agreement  shall be  additionally
entitled to recover court costs,  reasonable costs of arbitration and reasonable
attorneys' fees from the nonprevailing Party.

         Section  16.12  SEVERABILITY.  If any term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect so long as the  economic  or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to any Party. Upon such determination that any term or other provision is
invalid,  illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify

                                       27

<PAGE>

this  Agreement so as to effect the original  intent of the  Parties as  closely
as  possible  in  an  acceptable  manner  to  the  end  that  the   transactions
contemplated hereby are fulfilled to the extent possible.

         IN WITNESS  WHEREOF,  this Agreement has been signed by or on behalf of
each Party as of the date first above written.

                           BUYER:

                           DOLPHIN ENERGY CORPORATION


                           By:  /s/ MARC E. BRUNER
                              -------------------------------------------
                                    Marc E. Bruner, President


                           SELLERS:

                           TOWER COLOMBIA CORPOATION


                           By: /s/ PATRICK D. O'BRIEN
                              -------------------------------------------
                                     Patrick D. O'Brien, President



                           NORTH FINN, LLC


                           By: /s/ WAYNE NEUMILLER
                              -------------------------------------------
                                      Wayne Neumiller, Manager


                           AMERICAN OIL & GAS, INC.


                           By: /s/ ANDREW CALERICH
                              --------------------------------------------
                                      Andrew Calerich, President



                                       28
<PAGE>



                               Appendix A, page 8
                                   APPENDIX A
                                       TO
                           PURCHASE AND SALE AGREEMENT

                                   DEFINITIONS

"AAA" shall mean the American Arbitration Association.

"AAA Rules" shall mean the AAA arbitration rules for commercial disputes.

"Adjusted Purchase Price" shall mean as defined in Section 3.2.

"Affiliate"  shall  mean,  as to the Party  specified,  any entity  controlling,
controlled by or under common control with such specified  Party or a partner of
such  Party.  Control,  controlling  or  controlled  as used  herein  means  the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of another,  whether through the ownership of voting
securities, by contract or otherwise.

"Allocated Value" or "Allocated Values" shall mean as defined in Section 7.2(b).

"Arbitration Notice" shall mean as defined in Section 16.10.

"Assets" shall mean Sellers' interest in the Leases, Lands, Units, Equipment and
Incidental Rights, but shall exclude the Excepted Property.

"Business  Days"  shall  mean any day which is not a  Saturday,  Sunday or legal
holiday recognized in Denver, Colorado.

"Carried Interest" shall mean as defined in Section 4.2.

"Casualty"  shall  mean  volcanic  eruptions,  acts  of  God,  fire,  explosion,
earthquake,  windstorm, flood, drought,  condemnation, the exercise of any right
of  eminent  domain,  confiscation  and  seizure.  A Casualty  does not  include
depletion due to normal  production and  depreciation or failure of equipment or
casing.

"CERCLA" shall mean the Comprehensive  Environmental Response,  Compensation and
Liability Act, as amended.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Commitment Wells" shall mean as defined in Section 4.1.

"Defensible Title" shall mean, respectively as to each Asset, such title held by
Sellers that, subject to and except for the Permitted Encumbrances, (i) entitles
Sellers,  and will entitle Buyer after  Closing,  to own and receive and retain,
without  suspension,  reduction  or  termination,  not less than the Net Revenue
Interest  specified for such Asset on Exhibit


                               Appendix A, page 1
<PAGE>

"A"; (ii) obligates Sellers,  and will obligate Buyer after Closing, to bear the
costs and  expenses  relating  to such Asset in an amount not  greater  than the
Working  Interest  specified for such Asset on Exhibit "A" (unless  Sellers' Net
Revenue Interest therein is  proportionately  increased);  and (iii) is free and
clear of all liens and encumbrances.

"Development Wells" shall mean as defined in Section 4.2.

"Dispute" shall mean as defined in Section 16.10.

"Effective Date" shall mean June 1, 2004.

"Environmental  Claim" shall mean any action or written notice  threatening same
by any third party  alleging  potential  liability of Sellers  arising out of or
resulting from any actual or alleged  violation of, or liability  under,  or any
remedial obligation under, any Environmental Law as a result of an Environmental
Condition with respect to the Assets or an Offsite Environmental Matter.

"Environmental  Condition" shall mean an existing condition or circumstance with
respect to the air,  soil,  subsurface,  surface  waters,  groundwaters,  and/or
sediments  that  causes  (i)  an  Asset  not  to  be  in  compliance   with  any
Environmental  Law,  including any permits  issued  thereunder,  in all material
respects, or (ii) the Asset to be required to be remediated (or other corrective
action taken with respect to such Asset) under any Environmental Law.

"Environmental Defect" shall mean an Environmental Condition with respect to the
Assets, provided that if, after taking into account any Remediation performed by
or on behalf of Sellers,  the  reasonably  anticipated  Remediation  Amount with
respect to such  Environmental  Condition (or all Environmental  Conditions with
respect to an Asset) is not in excess of $5,000,  such  Environmental  Condition
shall not constitute an Environmental Defect.

"Environmental  Laws"  shall  mean all Laws  relating  to (a) the control of any
potential pollutant,  or protection of the air, water, land,  wetlands,  natural
resources,  wildlife and endangered species,  (b) solid, gaseous or liquid waste
generation,  handling, treatment,  storage, disposal or transportation,  and (c)
exposure to hazardous,  toxic,  radioactive  or other  substances  alleged to be
harmful.  "Environmental  Laws" shall include, but are not limited to, the Clean
Air  Act,  the  Clean  Water  Act,  the  RCRA,  the  Superfund   Amendments  and
Reauthorization  Act, the Toxic Substances  Control Act, the Safe Drinking Water
Act,  and CERCLA and shall also  include  all state,  local and  municipal  Laws
dealing  with the  subject  matter  of the  above  listed  Federal  statutes  or
promulgated by any governmental or quasigovernmental  agency thereunder in order
to carry out the purposes of any  Federal,  state,  local or municipal  Law. The
above reference to Laws relating to natural resources is not intended to include
non-Environmental  Laws relating to the  exploration,  development,  production,
proration,  allocation,  pooling,  unitization or correlative rights relating to
oil, gas and other Hydrocarbons.



                               Appendix A, page 2
<PAGE>

"Environmental  Liabilities"  shall mean any and all costs  (including  costs of
Remediation),   damages,   settlements,   expenses,   penalties,  fines,  taxes,
prejudgment and post-judgment interest, court costs and attorneys' fees incurred
or imposed  (i)  pursuant  to any  order,  notice of  responsibility,  directive
(including requirements embodied in Environmental Laws), injunction, judgment or
similar act (including  settlements) by any Governmental Authority to the extent
arising  out of or under  Environmental  Laws or (ii)  pursuant  to any claim or
cause of action by a Governmental  Authority or third party for personal injury,
property damage,  damage to natural resources,  remediation or response costs to
the extent arising out of or  attributable  to any violation of, or any remedial
obligation under, any Environmental Law.

"Environmental  Matters"  shall  mean (i) any order,  notice of  responsibility,
directive (including  requirements embodied in Environmental Laws),  injunction,
judgment or similar act (including  settlements) by any  Governmental  Authority
arising out of or under any Environmental  Laws or (ii) pursuant to any claim or
cause of action by a Governmental  Authority or third party for personal injury,
property  damage,  damage to natural  resources,  remediation  or response costs
arising out of or attributable  to any Hazardous  Materials or any violation of,
or any remedial obligation under, any Environmental Law.

"Equipment" shall mean all the tangible  personal  property,  tools,  machinery,
materials,  pipelines,  gas plants, gathering systems,  equipment,  fixtures and
improvements,  or interests therein, which are owned by Sellers and held for use
solely in connection with the other Assets,  or with the production,  treatment,
sale or  disposal  of  Hydrocarbons  produced  from the Lands or water  produced
therefrom or attributable thereto, on the Effective Date.

"Escrowed Amount" shall mean as defined in Section 4.3.

"Excepted Property" means the following:

         (a)      (i) all trade credits,  accounts receivable,  notes receivable
                  and other receivables  attributable to the Assets with respect
                  to any period of time prior to the  Effective  Date,  and (ii)
                  all  deposits,  cash,  checks in process of  collection,  cash
                  equivalents and funds  attributable to the Assets with respect
                  to any period prior to the Effective Date;

         (b)      all claims and causes of action of Sellers  arising from acts,
                  omissions or events,  or damage to or destruction of property,
                  occurring  prior to the Effective  Date with respect to any of
                  the Assets;

         (c)      all rights,  titles, claims and interests of Sellers (i) under
                  any policy or agreement of insurance or indemnity,  (ii) under
                  any bond or (iii) to any insurance or condemnation proceeds or
                  awards  attributable  to the Assets with respect to any period
                  prior to the Effective Date;


                               Appendix A, page 3

<PAGE>

         (d)      all (i)  Hydrocarbons  produced  from or  attributable  to the
                  Assets  with  respect to all  periods  prior to the  Effective
                  Date, together with all proceeds from or of such Hydrocarbons,
                  and (ii) Hydrocarbons  which, at the Effective Date, are owned
                  by Sellers and are in storage, within processing plants, or in
                  gathering lines or pipelines;

         (e)      seismic  data or  license  agreements,  which are  subject  to
                  prohibitions on assignment by Sellers;

         (f)      claims of Sellers  for refund of or  credits  with  respect to
                  production,   severance,   ad  valorem,  or  any  other  taxes
                  attributable to the Assets with respect to any period prior to
                  the Effective Date;

         (g)      all  amounts  due or  payable to  Sellers  as  adjustments  or
                  refunds  under any  contracts  or  agreements  relating to the
                  Assets (including joint operating  agreements) with respect to
                  any period prior to the Effective Date (excluding  adjustments
                  for gas imbalances  for which  Purchase  Price  adjustment has
                  been made hereunder);

         (h)      all  amounts  due or  payable to  Sellers  as  adjustments  to
                  insurance  premiums  related to the Assets with respect to any
                  period prior to the Effective Date; and

         (i)      all proceeds,  benefits,  income or revenues accruing (and any
                  security or other  deposits  made) with  respect to the Assets
                  prior to the Effective Date.

"Existing  Wells"  means  each  oil  and gas  well  (whether  or not  completed,
producing,  or abandoned) located on the Leases and Lands on the Effective Date,
including the wells described on Exhibit "B" to the Agreement.

"Final Settlement Statement" shall mean as defined in Section 11.2.

"Governmental  Authority" shall mean (i) the United States of America,  (ii) any
state, county,  municipality or other governmental subdivision within the United
States  of  America,  and  (iii)  any  court  or  any  governmental  department,
commission,  board, bureau, agency or other instrumentality of the United States
of  America  or  of  any  state,  county,  municipality  or  other  governmental
subdivision within the United States of America.

"Hazardous Discharge" means any releasing,  spilling, leaking, pumping, pouring,
emitting,  emptying,  discharging injecting,  escaping,  leaching,  disposing or
dumping of any Hazardous  Materials from or onto any real property owned, leased
or operated at any time by Seller or any real property owned, leased or operated
by any other Person.


                               Appendix A, page 4

<PAGE>

"Hazardous Materials" shall mean any explosives, radioactive materials, asbestos
material,  urea  formaldehyde,   hydrocarbon  contaminants,  underground  tanks,
pollutants,  contaminants,  hazardous,  corrosive or toxic  substances,  special
waste or waste of any kind,  including compounds known as  chlorobiophenyls  and
any  material  or  substance  the  storage,  manufacture,  disposal,  treatment,
generation,  use, transport,  mediation or release into the environment of which
is  prohibited,  controlled,  regulated or licensed  under  Environmental  Laws,
including,  but not limited to, (i) all  "hazardous  substances" as that term is
defined in Section 101(14) of CERCLA, and (ii) petroleum and petroleum products.

"Hydrocarbons"  means crude oil,  natural gas,  casinghead gas, coalbed methane,
condensate,  helium,  sulphur,  SO2, CO2, natural gas liquids, and other gaseous
and liquid hydrocarbons or any combination thereof.

"Incidental  Rights" shall mean all right,  title and interest of Sellers in and
to or derived  from the  following:  (a) all rights with  respect to the use and
occupancy of the surface of and the subsurface  depths under the Lands;  (b) all
rights with respect to any pooled, communitized or unitized acreage by virtue of
any of the  Assets  being a part  thereof;  (c) all  agreements  and  contracts,
easements,  rights-of-way,  servitudes and other estates related or attributable
to the Assets or Equipment.

"Knowledge"  shall mean,  as to each Seller (and, in Section  14.(b),  as to the
Buyer),  the  actual  knowledge  of its  chief  operating  officer  of any fact,
circumstance or condition.

"Lands" shall mean the lands covered by or subject to the Leases.

"Law" or "Laws" shall mean any applicable  statute,  law (including common law),
ordinance,  regulation,  rule, ruling, order, writ, injunction,  decree or other
official act of or by any Governmental Authority.

"Leases" shall mean the fee mineral interests,  leasehold interests, royalty and
overriding royalty interests described on Exhibit "A" attached to the Agreement.

"Letter Agreement" shall mean that certain letter agreement dated June 16, 2004,
among Sellers and Buyer  pertaining  to the Assets  attached to the Agreement as
Exhibit "C."

"Material  Contracts"  shall be as defined in Section 5.1(f) and as set forth in
Schedule 5.1(f).

 "Net Revenue  Interest"  shall mean an interest  (expressed  as a percentage or
decimal  fraction)  in  and to all  Hydrocarbons  produced  and  saved  from  or
attributable to an Asset.

 "Permitted Encumbrances" shall mean any of the following matters:

                  (a)   all   agreements,    instruments,    documents,   liens,
         encumbrances,  and other matters which are described in any Schedule or
         Exhibit to the Agreement,  to


                               Appendix A, page 5
<PAGE>

         the  extent that the net cumulative effect  of  such  matter  does  not
         operate to reduce the Net Revenue  Interest in  the  affected  Asset to
         less than the Net Revenue  Interest  specified in  Exhibit "A" for such
         Asset;

                  (b)  preferential  Rights and required third party consents to
         assignment  and similar  agreements  with  respect to which  waivers or
         consents are obtained from the appropriate  parties, or the appropriate
         time  period  for  asserting  any such  right has  expired  without  an
         exercise of the right;

                  (c) any liens for taxes not yet  delinquent or, if delinquent,
         that are  being  contested  in good  faith in the  ordinary  course  of
         business and which are described on Schedule 5.1(m);

                  (d)  materialman's,   mechanic's,   repairman's,   employee's,
         contractor's,  operator's and other similar liens or charges arising in
         the ordinary course of business for obligations that are not delinquent
         or that will be paid and discharged in the ordinary course of business,
         or if delinquent, that are being contested in good faith by appropriate
         action of which Buyer is notified in writing before Closing;

                  (e) all  Transfer  Requirements  with  respect  to  which  (i)
         waivers or consents are obtained from the appropriate  parties, or (ii)
         the  appropriate  time  period for  asserting  such  rights has expired
         without an exercise of such rights;

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

                  (g)  any  easements,   rights-of-way,   servitudes,   permits,
         licenses,  surface  leases  and other  rights  with  respect to surface
         operations  to the extent such matters do not interfere in any material
         respect with Sellers'  operation of the portion of the Assets  burdened
         thereby;

                  (h)  all   royalties,   overriding   royalties,   net  profits
         interests, carried interests,  reversionary interests and other burdens
         to the extent that the net cumulative  effect of such burdens,  as to a
         particular  Asset,  does not operate to reduce the Net Revenue Interest
         of Seller in such Asset as specified in Exhibit "A";

                      (i) rights of  reassignment  requiring  notice  and/or the
                  reassignment   (or  granting  an   opportunity  to  receive  a
                  reassignment)  of a leasehold  interest to the holders of such
                  reassignment  rights prior to  surrendering  or releasing such
                  leasehold interest; and


                               Appendix A, page 6
<PAGE>

                  (j)  all  other  liens,  charges,   encumbrances,   contracts,
         agreements,   instruments,   obligations,  defects  and  irregularities
         affecting the Assets that individually or in the aggregate are not such
         as to materially  interfere with the operation,  value or use of any of
         the  Assets,  do not  prevent  Buyer from  receiving  the  proceeds  of
         production  from any of the Wells, do not reduce the interest of Seller
         with respect to all  Hydrocarbons  produced from any Well below the Net
         Revenue Interest set forth in Exhibit "A" for such Asset, and/or do not
         materially  increase the portion of the costs and expenses  relating to
         any Asset that Seller is  obligated  to pay above the Working  Interest
         set  forth in  Exhibit  "A" for such  Asset  (without  a  proportionate
         increase in Net Revenue Interest).

"Person" means an individual, a corporation,  a partnership,  an association,  a
trust or any other entity or organization, including a Government Authority.

"Preferential  Right" shall mean any right or  agreement  that enables any third
party to  purchase  or  acquire  any Asset or any  interest  therein  or portion
thereof as a result of or in connection with the sale,  assignment,  encumbrance
or other transfer of any Asset or any interest therein or portion thereof.

"RCRA" shall mean the Resource Conservation Recovery Act, as amended.

"Remediation"  shall  mean,  with  respect to an  Environmental  Condition,  the
implementation  and completion of any actions required under  Environmental Laws
to correct or remove such Environmental  Condition.  "Remediation  Amount" shall
mean, with respect to an  Environmental  Condition,  the present value as of the
Closing Date (using an annual discount rate of 10%) of the cost of the most cost
effective Remediation of such Environmental  Condition which is reasonable under
the circumstances.

"Ryder Scott Studies" shall mean as defined in Section 6.3.

"Sellers'  Records" shall mean any of the Sellers'  books,  records,  contracts,
agreements and files that are directly related to the Assets.

"Transfer Requirement" shall mean any consent, approval, authorization or permit
of, or filing  with or  notification  to, any  person  which is  required  to be
obtained,  made or complied with for or in connection with any sale, assignment,
transfer or encumbrance of any Asset or any interest therein other than any such
consent,  approval,  authorization  or permit of, or filing with or notification
to, any person which is required to be obtained, made or complied with for or in
connection  with  the  sale  of the  Assets  to  Buyer  as  contemplated  by the
Agreement.

"Units" means all  unitization,  communitization,  pooling  agreements,  working
interest units created by operating agreements, and orders covering the Lands or
Leases or any portion  thereof,  and the units and pooled or communitized  areas
created thereby.



                               Appendix A, page 7
<PAGE>


"Wellbore Assignment" shall mean as defined in Section 4.3.

"Working  Interest" shall mean the percentage of costs and expenses attributable
to the maintenance, development and operation of an Asset.




























                               Appendix A, page 8

</TEXT>
</DOCUMENT>
