Sample Business Contracts


Purchase and Sale Agreement - El Paso Production Co., Noric LP and Chesapeake EP Corp.


                           PURCHASE AND SALE AGREEMENT

                                 By And Between

                           EL PASO PRODUCTION COMPANY

                                       and

                                   NORIC, L.P.

                                    AS SELLER

                                       and

                            CHESAPEAKE EP CORPORATION

                                    AS BUYER

                                PROPERTY PACKAGE

                 Mid Continent / Weatherford / Oklahoma & Texas


<PAGE>

                                TABLE OF CONTENTS

                                                                       PAGE

1. SALE AND PURCHASE OF THE ASSETS...................................     1
     1.1 Acquired Assets.............................................     1
     1.2 Excluded Assets.............................................     2
     1.3 Assumed Liabilities.........................................     2
2. PURCHASE PRICE....................................................     3
     2.1 Purchase Price..............................................     3
     2.2 Adjustments to the Base Purchase Price......................     3
     2.3 Allocation..................................................     5
     2.4 Allocation For Tax Purposes.................................     5
3. CLOSING...........................................................     5
     3.1 Closing.....................................................     5
     3.2 Delivery by Seller..........................................     5
     3.3 Delivery by Buyer...........................................     6
     3.4 Further Cooperation.........................................     6
4. ACCOUNTING ADJUSTMENTS............................................     6
     4.2 Strapping and Gauging.......................................     6
     4.4 Post-Closing Adjustments....................................     7
     4.5 Suspended Funds.............................................     8
     4.6 Audit Adjustments...........................................     8
     4.7 Tax Refunds.................................................     8
     4.8 Cooperation.................................................     8
5. DUE DILIGENCE; TITLE MATTERS......................................     8
     5.1 General Access..............................................     8
     5.2 Seller's Title..............................................     9
     5.3 Good and Marketable Title...................................     9
7. REPRESENTATIONS AND WARRANTIES OF SELLER..........................    12
     7.1 Seller's Representations and Warranties.....................    12
     7.2 Scope of Representations of Seller..........................    13
8. REPRESENTATIONS AND WARRANTIES OF BUYER...........................    14
     8.1 Buyer's Representations and Warranties......................    14
9. CERTAIN AGREEMENTS OF SELLER......................................    15
     9.1 Maintenance of Assets.......................................    15
     9.2 Consents....................................................    17
     9.3 Preferential Rights.........................................    17
     9.4 Hart-Scott-Rodino...........................................    18

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     9.5   Records and Contracts.....................................    18
10. CERTAIN AGREEMENTS OF BUYER......................................    18
     10.1  Plugging Obligation.......................................    18
     10.2  Plugging Bond.............................................    18
     10.3  Seller's Logos............................................    18
     10.5  Like-Kind Exchanges.......................................    18
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.....................    19
     11.1  No Litigation.............................................    19
     11.2  Representations and Warranties............................    19
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER................    19
     12.1  No Litigation.............................................    19
     12.2  Representations and Warranties............................    19
13. TERMINATION......................................................    19
     13.1  Causes of Termination.....................................    19
     13.2  Effect of Termination.....................................    20
14. INDEMNIFICATION..................................................    20
     14.1  Indemnification By Seller.................................    20
     14.2  Indemnification By Buyer..................................    22
     14.3  Physical Inspection.......................................    23
     14.4  Notification..............................................    23
15. MISCELLANEOUS....................................................    24
     15.1  Casualty Loss.............................................    24
     15.2  Confidentiality...........................................    24
     15.3  Competition...............................................    25
     15.4  Notice....................................................    25
     15.5  Press Releases and Public Announcements...................    26
     15.6  Personnel.................................................    26
     15.7  Compliance With Express Negligence Test...................    26
     15.8  Governing Law.............................................    26
     15.9  Exhibits..................................................    26
     15.10 Fees, Expenses, Taxes and Recording.......................    26
     15.11 Assignment................................................    27
     15.12 Entire Agreement..........................................    27
     15.13 Severability..............................................    27
     15.14 Captions..................................................    27
     15.15 Counterpart Execution.....................................    27
     15.16 Waiver of Certain Damages.................................    27
     15.17 Amendments and Waivers....................................    27


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Exhibits:

1.1(A)-1    Leases
1.1(A)-2    Wells
1.1(C)      Contracts
1.1(D)      Related Assets
1.2         Excluded Assets
2.3         Allocation
3.2(A)      Forms of Assignments and Deeds
3.2(B)      Certification of Non-Foreign Status 3.2(B)i & 3.2(B)ii
7.1(D)      AFE's
7.1(F)      Litigation
7.1(I)      Tax Liability
15.6        Personnel


<PAGE>


                             INDEX OF DEFINED TERMS





                 DEFINED TERM                                 SECTION                              PAGE
----------------------------------------------- ------------------------------------ ----------------------------------
                                                                                             
Agreement                                                    Preamble                                1
----------------------------------------------- ------------------------------------ ----------------------------------
Allocated Value/Allocated Values                                2.3                                  5
----------------------------------------------- ------------------------------------ ----------------------------------
Assets                                                          1.1                                  1
----------------------------------------------- ------------------------------------ ----------------------------------
Assumed Liabilities                                             1.3                                  3
----------------------------------------------- ------------------------------------ ----------------------------------
Buyer                                                        Preamble                                1
----------------------------------------------- ------------------------------------ ----------------------------------
Buyer Group                                                    14.1                                 28
----------------------------------------------- ------------------------------------ ----------------------------------
Casualty                                                      15.1(A)                               32
----------------------------------------------- ------------------------------------ ----------------------------------
Casualty Loss                                                 15.1(B)                               32
----------------------------------------------- ------------------------------------ ----------------------------------
Closing                                                         3.1                                  5
----------------------------------------------- ------------------------------------ ----------------------------------
Closing Date                                                    3.1                                  5
----------------------------------------------- ------------------------------------ ----------------------------------
Code                                                            2.4                                  5
----------------------------------------------- ------------------------------------ ----------------------------------
Confidential Information                                      15.2(A)                               33
----------------------------------------------- ------------------------------------ ----------------------------------
Contracts                                                     1.1(C)                                 2
----------------------------------------------- ------------------------------------ ----------------------------------
Effective Time                                              2.2(A)(iii)                              3
----------------------------------------------- ------------------------------------ ----------------------------------
Excluded Assets                                                 1.2                                  2
----------------------------------------------- ------------------------------------ ----------------------------------
Excluded Records                                                9.5                                 26
----------------------------------------------- ------------------------------------ ----------------------------------
Deposit                                                         2.1                                  3
----------------------------------------------- ------------------------------------ ----------------------------------
HSR Act                                                         9.4                                 26
----------------------------------------------- ------------------------------------ ----------------------------------
Imbalance                                                     2.2(B)                                 4
----------------------------------------------- ------------------------------------ ----------------------------------
Interest                                                    2.2(A)(vii)                              3
----------------------------------------------- ------------------------------------ ----------------------------------
Leases                                                        1.1(A)                                 1
----------------------------------------------- ------------------------------------ ----------------------------------
Loss/Losses                                                   14.1(A)                               29
----------------------------------------------- ------------------------------------ ----------------------------------
NORM                                                        6.1 5.3(B)                              15
----------------------------------------------- ------------------------------------ ----------------------------------
Notice                                                        5.4(A)                                11
----------------------------------------------- ------------------------------------ ----------------------------------
Occurrence                                                    6.5(G)                                19
----------------------------------------------- ------------------------------------ ----------------------------------
Oil and Gas                                                   1.1(B)                                 1
----------------------------------------------- ------------------------------------ ----------------------------------


<PAGE>





                 DEFINED TERM                                 SECTION                              PAGE
----------------------------------------------- ------------------------------------ ----------------------------------
                                                                                             
Party/Parties                                                Preamble                                1
----------------------------------------------- ------------------------------------ ----------------------------------
Permitted Encumbrances                                      5.3(B)(ii)                              10
----------------------------------------------- ------------------------------------ ----------------------------------
Post-Closing Adjustment Statement                             4.4(A)                                 7
----------------------------------------------- ------------------------------------ ----------------------------------
Preferential Rights                                        9.3(A) 9.2(A)                            25
----------------------------------------------- ------------------------------------ ----------------------------------
Purchase Price                                                2.2 2.1                                3
----------------------------------------------- ------------------------------------ ----------------------------------
Records                                                       1.1(F)                                 2
----------------------------------------------- ------------------------------------ ----------------------------------
Related Assets                                                1.1(D)                                 2
----------------------------------------------- ------------------------------------ ----------------------------------
Seller                                                       Preamble                                1
----------------------------------------------- ------------------------------------ ----------------------------------
Seller Group                                                6.2(B) 5.4                              15
----------------------------------------------- ------------------------------------ ----------------------------------
Survival Period                                        14.1(D)(i) 14.1(D)(1)                        29
----------------------------------------------- ------------------------------------ ----------------------------------
Tax/Taxes                                                     7.1(I)                                21
----------------------------------------------- ------------------------------------ ----------------------------------
Threshold Amount                                            14.1(E)(iv)                             30
----------------------------------------------- ------------------------------------ ----------------------------------
Units                                                         1.1(A)                                 1
----------------------------------------------- ------------------------------------ ----------------------------------
Wells                                                         1.1(A)                                 1
----------------------------------------------- ------------------------------------ ----------------------------------


<PAGE>

                           PURCHASE AND SALE AGREEMENT

     This Purchase and Sale Agreement (this "Agreement") is entered into this
21st day of February, 2003, by and between EL PASO PRODUCTION COMPANY, a
Delaware corporation and NORIC, L.P. a Delaware limited partnership
(collectively "Seller") and CHESAPEAKE EP CORPORATION, an Oklahoma corporation,
("Buyer"). Buyer and Seller are collectively referred to herein as the "Parties"
and sometimes individually referred to as a "Party."

                                    RECITALS:

A.   Seller desires to sell to Buyer certain oil, gas and mineral properties and
     other assets on the terms and conditions set forth in this Agreement.

B.   Buyer desires to purchase from Seller such assets on the terms and
     conditions set forth in this Agreement.

                                   WITNESSETH:

     In consideration of the mutual agreements contained in this Agreement,
Buyer and Seller agree as follows:

1.   SALE AND PURCHASE OF THE ASSETS.

1.1  Acquired Assets. Subject to the terms and conditions of this Agreement,
     Seller agrees to sell, convey and deliver to Buyer and Buyer agrees to
     purchase and acquire from Seller all of Seller's or Seller's affiliate's
     right, title and interest in and to the following (collectively, the
     "Assets"):

     (A)  (i) All of the mineral interests, leasehold interests, royalty
          interests, overriding royalty interests, payments out of production,
          reversionary rights, and contractual rights to production in and to
          the leases, subleases, assignments and other instruments described in
          Exhibit 1.1(A)-1 (collectively, "Leases"); (ii) those wells described
          in Exhibit 1.1(A)-2 (the "Wells"); (iii) all easements, rights of way,
          and other rights, privileges, benefits and powers with respect to the
          use and occupation of the surface of, and the subsurface depths under,
          the land covered by the Leases; (iv) any pooled or unitized acreage
          located in whole or in part within each Lease, including all Oil and
          Gas production from the pool or unit allocated to any such Lease and
          all interests in any wells within the unit or pool associated with
          such Lease (the "Units"), regardless of whether such unit or pool
          production comes from wells located within or without the Leases;

     (B)  All of the oil and gas and associated hydrocarbons ("Oil and Gas") in
          and under or otherwise attributable that are covered by the Leases and
          the Units or produced from the Wells;

                                                                               1

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     (C)  To the extent assignable and applicable to the Assets, all licenses,
          servitudes, gas purchase and sale contracts (including interests and
          rights, if any, with respect to any prepayments, take-or-pay, buydown
          and buyout agreements) to the extent that the same pertain or relate
          to periods after the Effective Time, as hereinafter defined, crude
          purchase and sale agreements, farmin agreements, farmout agreements,
          bottom hole agreements, acreage contribution agreements, operating
          agreements, unit agreements, processing agreements, options, leases of
          equipment or facilities, joint venture agreements, pooling agreements,
          transportation agreements, gathering and compression agreements,
          rights-of-way and other contracts, agreements and rights, which are
          owned by Seller, in whole or in part, and are appurtenant to the
          Leases including but not limited to those described on Exhibit 1.1(C)
          (collectively, the "Contracts");

     (D)  All of the real, personal and mixed property and facilities located in
          or on the Leases used solely in the operation thereof which are owned
          by Seller, in whole or in part, including, without limitation, well
          equipment, vehicles, field offices, casing; tanks; crude oil, natural
          gas, condensate or products in storage severed after the Effective
          Time; tubing; compressors; pumps; motors; fixtures; machinery and
          other equipment; pipelines; field processing equipment; inventory and
          all other improvements used in the operation thereof described on
          Exhibit 1.1(D) (the "Related Assets");

     (E)  To the extent assignable, all governmental permits, licenses and
          authorizations, as well as any applications for the same, related to
          the Leases or the use thereof; and

     (F)  All of Seller's files, records and data relating to the items
          described in subsections (A), (B), (C), (D) and (E) above, including,
          without limitation, title records (title curative documents); surveys,
          maps and drawings; contracts; correspondence; geological records and
          information; production records, electric logs, core data, pressure
          data, decline curves, graphical production curves and all related
          matters and construction documents except (i) to the extent the
          transfer, delivery or copying of such records may be restricted by
          contract with a third party; (ii) all documents and instruments of
          Seller that may be protected by the attorney-client privilege; (iii)
          all accounting and Tax files, books, records, Tax returns and Tax work
          papers related to such items; and (iv) all of Seller's proprietary
          geophysical and seismic records, data and information (for which
          Seller agrees to grant Buyer a license on Seller's license form to the
          extent, in Seller's reasonable opinion, it is entitled to provide such
          a license without cost to Seller or liability to a third party)
          (collectively, the "Records").

1.2  Excluded Assets. Notwithstanding the foregoing, the Assets shall not
     include, and there is excepted, reserved and excluded from the purchase and
     sale contemplated herein those items listed in Exhibit 1.2 (the "Excluded
     Assets").

1.3  Assumed Liabilities. On the Closing Date, Buyer shall assume and agree to
     timely and fully pay, perform and otherwise discharge, without recourse to
     Seller or its affiliates, all of the liabilities and obligations of Seller
     and its affiliates, successors, assigns or representatives, direct or
     indirect, known or unknown, asserted or unasserted, absolute or contingent,
     accrued
                                                                               2

<PAGE>

     or unaccrued, which relate, directly or indirectly, to the Assets, whether
     such liabilities and obligations accrue before, on or after the Effective
     Time (collectively, the "Assumed Liabilities"). Notwithstanding the
     foregoing, Assumed Liabilities shall not include, and there is excepted,
     reserved and excluded from such liabilities assumed by Buyer, the
     liabilities and obligations for which Seller indemnifies Buyer against
     pursuant to Section 14.1 and interest and penalties on suspense funds under
     Section 4.5, liabilities arising out of employment issues related to
     Seller's employees, liabilities arising out of Seller's shareholder
     matters, any hedging obligations burdening the production from the Assets
     and any matters subject to post-closing adjustments under Section 4.

2.   PURCHASE PRICE.

2.1  Purchase Price. The purchase price for the Assets is Five Hundred Million
     Dollars ($500,000,000.00) (the "Purchase Price"), subject to the
     adjustments provided for in this Agreement. The Purchase Price shall be
     paid as follows: Buyer shall pay to Seller a deposit ("Deposit") of five
     percent (5%) of the Purchase Price upon execution of this Agreement and
     shall pay the balance of the Purchase Price at Closing. The Deposit shall
     be refundable to Buyer in the event the contemplated sale of the Assets
     fails to close unless the failure to close is due to the default of Buyer.

2.2  Adjustments to the Purchase Price. For purposes of determining the
     Post-Closing Adjustments provided for in Section 4, appropriate adjustments
     to the Purchase Price shall be made as follows:

     (A) The Purchase Price shall be adjusted upward by:

         (i)   any amount determined to be due Seller pursuant to Section 4.2;

         (ii)  Taxes paid by Seller attributable to the period after April 1,
               2003 ("Effective Time") which are apportioned to Buyer pursuant
               to Section 4.3.

         (iii) an amount equal to the costs, expenses and other expenditures
               (whether capitalized or expensed) paid by Seller in accordance
               with this Agreement that are attributable to the Assets for the
               period from 9:00 a.m. (Central Time) on April 1, 2003 (the
               "Effective Time") to the Closing Date;

         (iv)  all amounts owed to Seller by third parties with respect to any
               Imbalances existing at the Effective Time, such amounts to be
               determined for Imbalances by multiplying the Imbalance volume by
               $1.50 per mcf for Well Imbalances and $3.00 per mcf for pipeline
               imbalances;

         (v)   an amount equal to the amount of proceeds derived from the sale
               of Oil and Gas, actually received by Buyer and directly
               attributable to the Wells which are, in accordance with generally
               accepted accounting procedures, attributable to the period of
               time prior to the Effective Time.

                                                                               3

<PAGE>

         (vi)  interest on the Base Purchase Price in an amount equal to the
               lesser of (A) the prime rate of Chase Manhattan Bank plus two
               percent (2%) or (B) the maximum legal rate (the "Interest"), with
               such Interest accruing from the scheduled Closing Date set forth
               in Section 3.1 until the actual Closing Date to the extent that
               the conditions set forth in Article 11 have been satisfied or
               waived and Buyer refuses or otherwise fails to proceed to Closing
               on or before the scheduled Closing Date set forth in Section 3.1,
               other than as a result of Seller's breach of this Agreement; and

         (vii) any other amount agreed upon in writing by Seller and Buyer.

    (B)  The Purchase Price shall be adjusted downward by:

         (i)   an amount equal to the amount of proceeds derived from the sale
               of Oil and Gas, actually received by Seller and directly
               attributable to the Wells which are, in accordance with generally
               accepted accounting procedures, attributable to the period of
               time from and after the Effective Time;

         (ii)  an amount equal to all expenditures, liabilities and costs
               (whether capitalized or expensed) relating to the Assets (other
               than Taxes related to the Assets) that are unpaid as of the
               Closing Date and assessed for or attributable to periods of time
               prior to the Effective Time;

         (iii) all amounts owed by Seller to third parties with respect to any
               Imbalances existing as of the Effective Time, such amounts to be
               determined for Imbalances by multiplying the Imbalance volume by
               $1.50 per mcf for well imbalances and $3.00 per mcf for pipeline
               imbalances;

         (iv)  Exercised Preferential Rights as determined pursuant to Section
               9.3 and Casualty Losses as determined pursuant to Section 15.1;
               and

         (v)   Taxes attributable to the period beginning on the Closing
               Date and ending on the Effective Time which are apportioned to
               Seller pursuant to Section 4.3.

         (vi)  any other amount agreed upon in writing by Seller and Buyer.

         The term "Imbalance" means any Oil and Gas production and pipeline
         imbalance existing as of the Effective Time with respect to any of the
         Assets, together with any related rights or obligations as to future
         cash and/or gas or product balancing, as a result of, in the case of
         production imbalances, Seller having taken and sold for Seller's
         account cumulative production which is greater or less than Seller's
         share in cumulative production.

    (C)  Seller shall have the right to collect any receivable, refund or other
         amounts associated with periods prior to the Effective Time to the
         extent Seller has not

                                                                               4

<PAGE>

          received credit for such amounts from Buyer. To the extent that Buyer
          collects any such receivable, refund or other amounts, then Buyer
          shall promptly remit any such amounts to Seller.

2.3  Allocation. The Purchase Price shall be allocated to the Assets as set
     forth in Exhibit 2.3. Seller and Buyer covenant and agree that the values
     allocated to various portions of the Assets, which are set forth on Exhibit
     2.3 (singularly with respect to each item, the "Allocated Value" and
     collectively, the "Allocated Values"), shall be binding on Seller and Buyer
     and shall be used for the purposes of adjusting the Purchase Price pursuant
     to Sections 9.3 (relating to Preferential Rights) and 15.1 (relating to
     Casualty Losses) and is not intended as a measure of value for any other
     purpose.

2.4  Allocation For Tax Purposes. For the purpose of making the requisite
     filings under Section 1060 of Internal Revenue Code of 1986, as amended,
     (the "Code") and the regulations thereunder, Seller and Buyer shall make a
     good faith effort, within one hundred-twenty (120) days following the
     Closing Date, to agree to allocate, the Purchase Price (as adjusted by
     Section 2.2) and all obligations assumed by Buyer pursuant to Section 1.3
     among the Assets. Seller and Buyer each agree to report the federal, state
     and local income and other Tax consequences of the transactions
     contemplated herein, and in particular to report the information required
     by Section 1060(b) of the Code, and to jointly prepare Form 8594 (Asset
     Acquisition Statement under Section 1060) in a manner consistent with such
     allocation and shall not take any position inconsistent therewith upon
     examination of any Tax return, in any refund claim, in any litigation,
     investigation or otherwise. Seller and Buyer agree that each shall furnish
     the other a copy of Form 8594 (Asset Acquisition Statement under Section
     1060) proposed to be filed with the Internal Revenue Service by such Party
     or any affiliate thereof within ten (10) days prior to the filing of such
     form with the Internal Revenue Service.

3.   CLOSING.

3.1  Closing. Subject to the conditions precedent set forth in Articles 11 and
     12 and any termination pursuant to Article 13 or Section 15.1, the sale and
     purchase of the Assets ("Closing") shall be held on the later of March 12,
     2003 or the first business day after Seller's receipt of releases of all
     mortgage and financing instruments burdening the Assets, provided that if
     such releases are not obtained by April 30, 2003, the Parties shall on that
     date close as to all Assets not burdened by such instruments and delay
     closing on the Assets burdened by such instruments for a time to be
     mutually agreed upon ("Closing Date"). The Closing will take place at the
     offices of Seller at Nine Greenway Plaza, Houston, Texas 77046.

3.2  Delivery by Seller. At Closing, Seller shall deliver to Buyer:

     (A)  An Assignment and Bill of Sale or other appropriate conveyances
          substantially in the forms attached hereto as Exhibit 3.2(A),
          effecting the sale, transfer, conveyance and assignment of the Assets;
          and
                                                                               5

<PAGE>

       (B)   a Certification of Non-Foreign Status substantially in the form
             attached hereto as Exhibit 3.2(B)i and Exhibit 3.2(B)ii.

       (C)   Executed Letters in lieu of Transfer Orders.

       (D)   Change of Operator Forms required to be filed with the Oklahoma
             Corporation Commission or Texas Railroad Commission.

3.3    Delivery by Buyer. At Closing, Buyer shall deliver to Seller per Seller's
       wiring instructions with separate payments to Noric and to El Paso
       Production Company (based upon the valuations set out on Exhibit 2.3) or
       Seller's designee the Purchase Price less the Deposit by wire transfer in
       immediately available funds.

3.4    Further Cooperation. At the Closing and thereafter as may be necessary,
       Seller and Buyer shall execute and deliver such other instruments and
       documents and take such other actions as may be reasonably necessary to
       evidence and effectuate the transactions contemplated by this Agreement.

4.     ACCOUNTING ADJUSTMENTS.

4.1    Adjustments shall be made to the Purchase Price in accordance with
       Section 2.2.

4.2    Strapping and Gauging. Seller has caused the Oil and Gas in the storage
       facilities located on, or utilized in connection with, the Leases to be
       measured, gauged or strapped as of the Effective Time. Seller has caused
       the production meter charts (or if such do not exist, the sales meter
       charts) on the pipelines transporting Oil and Gas from the Leases to be
       read as of such time. The Oil and Gas in such storage facilities above
       the pipeline connection or through the meters on the pipelines prior to
       the Effective Time shall belong to Seller, and the Oil and Gas placed in
       such storage facilities from and after the Effective Time and production
       upstream of the aforesaid meters shall belong to Buyer and become part of
       the Assets.

4.3    Tax Matters.

4.3(A) Apportionment of Tax Liability. For purposes of this Agreement, "Tax" or
       "Taxes" shall mean all ad valorem, property, production, excise, net
       proceeds, severance and all other taxes and similar obligations assessed
       against the Assets or based upon or measured by the ownership of the
       Assets or the production of hydrocarbons or the receipt of proceeds
       therefrom, other than income taxes. All Taxes based on or attributable
       to the ownership of, or based on production of hydrocarbons shall be
       deemed attributable to the period during which such Taxes are assessed.
       With respect to the Assets, all Taxes shall be prorated between Buyer
       and Seller as of the Effective Time for all taxable periods that include
       the Effective Time. Accordingly, for the purpose of apportioning the
       liability for Taxes and the resulting Purchase Price adjustment pursuant
       to Section 2, (i) Buyer shall be responsible for all Taxes related to
       the Assets that are attributable to the period of time after the
       Effective Time and (ii) Seller shall be responsible for all Taxes
       related to the Assets that are attributable to the period of time on or
       before the Effective Time.

                                                                               6

<PAGE>


4.3(B) Apportionment of Taxes/Purchase Price Adjustment. Based on the best
       current information available as of Post-Closing, the pro-ration of Taxes
       shall be made between the Parties as an adjustment to the Purchase Price
       pursuant to Section 2 and that pro-ration shall be deemed to be a final
       settlement between the Parties with respect to Taxes. Accordingly, after
       Post-Closing.

4.3(C) Tax Reports and Returns. For the tax period in which the Effective Time
       occurs, Seller agrees to immediately forward to Buyer any such tax
       reports and returns received by Seller after Closing and provide Buyer
       with appropriate information which is necessary for Buyer to file any
       required tax reports and returns related to the Assets. Buyer agrees to
       file all tax returns and reports applicable to the Assets that are
       required to be filed after the Closing, and pay all required Taxes
       payable with respect to the Assets.

4.3(D) Sales Taxes. Buyer shall be liable for and shall indemnify Seller for any
       sales and use taxes, conveyance, transfer and recording fees and real
       estate transfer stamps or taxes that may be imposed on any transfer of
       the Assets pursuant to this Agreement. If required by applicable law,
       Seller shall, in accordance with applicable law, calculate and remit any
       sales of similar taxes that are required to be paid as a result of the
       transfer of the Assets to Buyer and Buyer shall promptly reimburse Seller
       therefore. If Seller receives notice that any sales and/or use taxes are
       due, Seller shall promptly forward such notice to Buyer for handling.

4.4    Post-Closing Adjustments.

       (A)  Seller shall prepare and deliver to Buyer not later than July 11,
            2003 a statement of adjustments to the Purchase Price (the "Post-
            Closing Adjustment Statement") which shall be based on the actual
            income and expenses attributable to the Assets. Seller or Buyer, as
            the case may be, shall be given access to and shall be entitled to
            review and audit the other Party's records pertaining to the
            computation of amounts claimed in such Post-Closing Adjustment
            Statement.

       (B)  On or before July 28, 2003, Buyer shall deliver to Seller a written
            statement describing in reasonable detail its objections (if any) to
            any amounts or items set forth on or omitted from the Post-Closing
            Adjustment Statement. If Buyer does not raise objections within such
            period, then the Post-Closing Adjustment Statement shall become
            final and binding upon the Parties at the end of such period.

       (C)  If Buyer raises objections, the Parties shall negotiate in good
            faith to resolve any such objections. If the Parties are unable to
            resolve any disputed item by August 15, 2003 any such disputed item
            shall be submitted to a nationally recognized independent accounting
            firm mutually agreeable to the Parties who shall be instructed to
            resolve such disputed item within thirty (30) days. The resolution
            of disputes by the accounting firm so selected shall be set forth
            in writing and shall be conclusive, binding and non-appealable upon
            the Parties and the Post-Closing Adjustment Statement shall become
            final and binding upon the Parties on the date of such resolution.
            The fees and expenses of such accounting firm shall be paid one-half
            by Buyer and one-half by Seller.

<PAGE>

     (D)  After the Post Closing Adjustment Statement has become final and
          binding on the Parties, Seller or Buyer, as the case may be, shall pay
          to the other such sums as are due to settle accounts between the
          Parties due to final adjustments to the Purchase Price.

4.5  Suspended Funds. No later than June 30, 2003, Seller shall provide to Buyer
     a computer readable listing showing all proceeds from production
     attributable to the Leases which are currently held in suspense and shall
     transfer to Buyer all of those suspended proceeds without deducting any
     receivables, provided that Buyer agrees to use its best efforts to recoup
     and remit to Seller such receivables out of proceeds attributable to such
     accounts receivable, if any, after recoupment of amounts such party may owe
     Buyer. BUYER SHALL BE RESPONSIBLE FOR PROPER DISTRIBUTION OF ALL THE
     SUSPENDED PROCEEDS, TO THE EXTENT TURNED OVER TO IT BY SELLER, TO THE
     PARTIES LAWFULLY ENTITLED TO THEM AND ANY CLAIMS RELATED THERETO EXCEPT FOR
     ANY STATUTORY INTEREST AND PENALTIES DUE THEREON WHICH SHALL BE SELLER'S
     RESPONSIBILITY, AND BUYER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD
     HARMLESS SELLER FROM AND AGAINST ANY AND ALL LOSSES AS DEFINED BELOW
     ARISING OUT OF OR RELATING TO THOSE SUSPENDED PROCEEDS.

4.6  Audit Adjustments. Seller retains all rights to adjustments resulting from
     any operating agreement and other audit claims asserted against third party
     operators on transactions occurring prior to the Effective Time (which
     includes Buyer, if applicable). Any credit received by Buyer pertaining to
     such an audit claim shall be paid to Seller within thirty (30) days after
     receipt.

4.7  Tax Refunds. Refunds of Taxes paid or payable with respect to or
     attributable to the Assets shall be promptly paid as follows (or to the
     extent payable but not paid due to offset against other Taxes shall be
     promptly paid by the Party receiving the benefit of the offset as follows):
     (i) to Seller if attributable to Taxes with respect to any Tax year or
     portion thereof ending on or before the Effective Time; and (ii) to Buyer
     if attributable to Taxes with respect to any Tax year or portion thereof
     beginning from and after the Effective Time.

4.8  Cooperation. Each Party covenants and agrees to promptly inform the other
     with respect to amounts owing under Sections 4.4, 4.6 and 4.7 hereof.

5.   ACCESS TO ASSETS AND RECORDS.

5.1  General Access. Not later than March 3, 2003, Seller shall:

     (A)  Give Buyer and its representatives, employees, consultants,
          independent contractors, attorneys and other advisors reasonable
          access to the Leases (to the extent same are Seller operated) and
          other Assets during regular office hours to assist Buyer's preparation
          to assume operations;

                                                                              8

<PAGE>

     (B)  Make available to Buyer all other information with respect to the
          Assets as Buyer may from time to time reasonably request, unless
          Seller is prohibited therefrom by any agreement, contract, obligation
          or duty by which it is bound or by the necessity of any third party
          approval; provided that, if requested by Buyer, Seller shall use
          reasonable efforts to obtain the waiver of any such prohibition or the
          granting of any such approval.

5.2  Seller's Title.

     (A)  The documents to be executed and delivered by Seller to Buyer
          transferring the Assets to Buyer shall be substantially in the form
          set forth in Exhibit 3.2(A). Such documents shall provide that for a
          period of two (2) years after the Effective Time, Seller shall warrant
          and defend the Assets unto Buyer against every person lawfully
          claiming the Assets or any part thereof, by, through or under Seller,
          but not otherwise. However, all of Seller's interests in the Assets
          are to be sold AS IS AND WHERE IS AND WITHOUT WARRANTY OF
          MERCHANTABILITY, CONDITION OR FITNESS FOR A PARTICULAR PURPOSE, EITHER
          EXPRESS OR IMPLIED.

     (B)  Buyer acknowledges and agrees that Seller cannot and does not covenant
          or warrant that Buyer shall become successor operator of all or any
          portion of the Assets, since the Assets or portions thereof may be
          subject to unit, pooling, communization, operating or other agreements
          which control the appointment of a successor operator.

     (C)  After Closing, Seller shall use best efforts to cause its affiliates
          to provide documents necessary to vest title to the Assets into Buyer.

5.3  Encumbrances on Title to the Assets, Matters to which the Assets are
     Subject and Condition of the Assets.

     (A)  Title and Matters to which the Assets are Subject. As of the date of
          execution of this Agreement and as of Closing Buyer accepts the Assets
          and Seller's title to the Assets "as is where is", without examination
          or inspection and subject to any and all encumbrances on Seller's
          title, whether such encumbrances are or are not of public record. In
          addition, Seller accepts the Assets subject to any and all agreements
          to which the Assets may be subject including but not limited to the
          following:

          (1)  The terms and conditions of the Leases, including without
               limitation lessors' royalties, overriding royalties, net profits
               interests, carried interests, production payments, reversionary
               interests and similar burdens;

          (2)  The division orders and sales contracts;

          (3)  Preferential Rights and required third party consents;

          (4)  Materialman's, mechanic's, repairman's, employee's, contractor's,
               operator's

                                                                               9

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               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;

          (5)  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;

          (6)  Easements, rights-of-way, servitudes, permits, surface leases and
               other rights in respect of surface operations;

          (7)  Except for hedging contracts that burden production from the
               Assets, all operating agreements, unit agreements, unit operating
               agreements, pooling agreements and pooling designations, gas and
               crude oil sales and marketing agreements (including gathering,
               treating, processing, storage, transportation agreements) and all
               other agreements affecting the Assets whether or not they are of
               record in Seller's chain of title or are reflected or referenced
               in Seller's files;

          (8)  Conventional rights of reassignment prior to release or surrender
               requiring notice to the holders of the rights;

          (9)  All rights reserved to or vested in any governmental, statutory
               or public authority to control or regulate any of the Assets in
               any manner, and all applicable laws, rules and orders of
               governmental authority;

          (10) All other liens, charges, encumbrances, contracts, agreements,
               instruments, obligations, defects and irregularities affecting
               the Assets;

     Notwithstanding the foregoing, at and as of Closing, Seller's title shall
be free and clear of mortgage and financing encumbrances and undisputed vendor
liens.

     (B)  Environmental Condition of the Assets.

          As of the date of execution of this Agreement and as of Closing Buyer
          accepts the Assets in their present environmental condition, "as is
          where is", without examination or inspection and subject to any and
          all adverse environmental conditions.

          Buyer acknowledges that the Assets have been used for oil and gas
          drilling and production operations and possibly for the storage and
          disposal of waste materials or hazardous substances related to
          standard oil field operations. Physical changes in or under the Assets
          or adjacent lands may have occurred as a result of such uses. The

                                                                              10

<PAGE>

          Assets also may contain buried pipelines and other equipment, whether
          or not of a similar nature, the locations of which may not now be
          known by Seller or be readily apparent by a physical inspection of the
          Assets. Buyer understands that Seller does not have the requisite
          information with which to determine the exact nature or condition of
          the Assets nor the effect any such use has had on the physical
          condition of the Assets. Pursuant to the Safe Water Drinking and Toxic
          Enforcement Act of 1986, Buyer is hereby notified and assumes the risk
          that detectable amounts of chemicals known to cause cancer, birth
          defects and other reproductive harm may be found in, on or around the
          Assets. Buyer shall assume the risk that the Assets may contain waste
          or contaminants and that adverse physical conditions, including the
          presence of waste or contaminants, may not have been revealed by
          Buyer's investigation, if any. All responsibility and liability
          related to disposal, spills, waste or contamination on or below the
          Assets shall be transferred from Seller to Buyer.

          In addition, Buyer acknowledges that some oil field production
          equipment located on the Assets may contain asbestos and/or naturally
          occurring radioactive material ("NORM"). In this regard, Buyer
          expressly understands that NORM may affix or attach itself to inside
          of wells, materials and equipment as scale or in other forms, and that
          wells, materials and equipment located on the Assets described herein
          may contain NORM and that NORM-containing materials may be buried or
          have been otherwise disposed of on the Assets. Buyer also expressly
          understands that special procedures may be required for the removal
          and disposal of asbestos and NORM from the Assets where they may be
          found, and that Buyer assumes all liability when such activities are
          performed.

5.4  Buyer's Activities on the Assets and on Seller's Premises Until Closing.

     Buyer waives and releases all claims against Seller, its parent and
     subsidiary companies, and each of their respective directors, officers,
     employees, agents and other representatives and their successor and assigns
     (collectively, the "Seller Group"), for injury to or death of persons, or
     damage to property, arising in any way from the exercise of rights granted
     to Buyer with respect to the Assets or the activities of Buyer or its
     employees, agents or contractors on the Assets or on Seller's premises.
     BUYER SHALL INDEMNIFY THE SELLER GROUP AGAINST AND HOLD EACH AND ALL OF
     SAID INDEMNITEES HARMLESS FROM ANY AND ALL LOSSES WHATSOEVER ARISING OUT OF
     (I) ANY AND ALL STATUTORY OR COMMON LAW LIENS OR OTHER ENCUMBRANCES FOR
     LABOR OR MATERIALS FURNISHED IN CONNECTION WITH SUCHACTIVITIES AS BUYER MAY
     CONDUCT WITH RESPECT TO THE ASSETS; AND (II) ANY INJURY TO OR DEATH OF
     PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON OR ABOUT THE ASSETS AS A
     RESULT OF SUCH EXERCISE OR ACTIVITIES.

6.   Section 6 has been intentionally deleted by the Parties.

                                                                              11

<PAGE>

7.   REPRESENTATIONS AND WARRANTIES OF SELLER.

7.1  Seller's Representations and Warranties. Subject to the disclosures set
     forth in the Exhibits referred to in this Section 7, Seller represents and
     warrants (which representations and warranties shall not survive the
     Closing except as expressly provided in Section 14) as follows:

     (A)  Status of Incorporation. Seller is a corporation duly incorporated,
          validly existing and in good standing under the laws of the State of
          Delaware.

     (B)  Corporate Authority. Seller owns the Assets and has the requisite
          power and authority to enter into this Agreement, to carry out the
          transactions contemplated hereby, to transfer the Assets in the manner
          contemplated by this Agreement, and to undertake all of the
          obligations of Seller set forth in this Agreement.

     (C)  Validity of Obligations. This Agreement and any documents or
          instruments delivered by Seller at the Closing shall constitute legal,
          valid and binding obligations of Seller, enforceable in accordance
          with their terms.

     (D)  AFE's. With respect to the joint, unit or other operating agreements
          relating to the Assets, to Seller's knowledge, except as set forth in
          Exhibit 7.1(D), there are no material outstanding calls or payments
          under authorities for expenditures for payments relating to the Assets
          which exceed FiftyThousand Dollars ($50,000.00) (net to Seller's
          interest) and which are due or which Seller has committed to make
          which have not been made.

     (E)  Contractual Restrictions. Seller has not entered into any contracts
          for or received prepayments, take-or-pay arrangements, buydowns,
          buyouts for Oil and Gas, or storage of the same relating to the Assets
          which Buyer shall be obligated to honor and make deliveries of Oil and
          Gas or pay refunds of amounts previously paid under such contracts or
          arrangements.

     (F)  Litigation. Except as set forth in Exhibit 7.1(F), there is no suit or
          action pending, arising out of, or with respect to the ownership,
          operation or environmental condition of the Assets that would have an
          adverse affect upon the Assets and for which Buyer has not been
          indemnified by Seller in accordance with Section 14.

     (G)  Permits and Consents. To Seller's knowledge, with respect to the
          Assets Seller or Operator (i) has acquired all material permits,
          licenses, approvals and consents from appropriate governmental bodies,
          authorities and agencies to conduct operations on the Assets in
          compliance with applicable laws, rules, regulations, ordinances and
          orders; and (ii) is in material compliance with all such permits,
          licenses, approvals and consents and with applicable Environmental
          Laws.

     (H)  Broker's Fees. Seller shall retain the obligation or liability,
          contingent or otherwise, for brokers' or finders' fees in respect of
          the matters provided for in this Agreement and Buyer shall have no
          responsibility therefor.

                                                                              12

<PAGE>

     (I)  Taxes. Except as set forth in Exhibit 7.1(I), (i) Seller has filed
          (with respect to the Assets) all material Tax returns that are due,
          (ii) all Taxes (with respect to the Assets) shown to be due on such
          returns have been paid, and (iii) there is no material dispute or
          claim concerning any Tax liability of the Seller (with respect to the
          Assets) claimed or raised by any Tax authority in writing. For
          purposes of this Agreement, the term "Tax" or "Taxes" means any
          federal, state, local or tribal, income, gross receipts, license,
          payroll, employment, excise, severance, stamp, occupation, premium,
          windfall profits, environmental (including taxes under Section 59A of
          the Code), custom duties, capital stock, franchise, profits,
          withholding, social security (or similar excises), unemployment,
          disability, real property, personal property, sales, use, transfer,
          registration, value added, alternative or add-on minimum, estimated,
          or other tax of any kind whatsoever, including any interest, penalty
          or addition thereto, whether disputed or not.

     (J)  Seller shall use best efforts to obtain releases of all mortgage and
          financing instruments burdening the Assets during the period prior to
          April 30, 2003.

7.2  Scope of Representations of Seller.

     (A)  Information About the Assets. Except as expressly set forth in this
          Agreement, Seller disclaims all liability and responsibility for any
          representation, warranty, statements or communications (orally or in
          writing) to Buyer, including any information contained in any opinion,
          information or advice that may have been provided to Buyer by any
          employee, officer, director, agent, consultant, engineer or
          engineering firm, trustee, representative, investment banker,
          financial advisor, partner, member, beneficiary, stockholder or
          contractor of Seller wherever and however made, including those made
          in any data room or internet site and any supplements or amendments
          thereto or during any negotiations with respect to this Agreement or
          any confidentiality agreement previously executed by the Parties with
          respect to the Asset. EXCEPT AS SET FORTH IN THIS ARTICLE 7 OF THIS
          AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS,
          STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS OR
          MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO BUYER IN
          CONNECTION WITH THE ASSETS OR OTHERWISE CONSTITUTING A PORTION OF THE
          ASSETS; (ii) THE PRESENCE, QUALITY AND QUANTITY OF HYDROCARBON
          RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS, INCLUDING WITHOUT
          LIMITATION SEISMIC DATA AND SELLER'S INTERPRETATION AND OTHER ANALYSIS
          THEREOF; (iii) THE ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS,
          INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND
          RECOMPLETION OPPORTUNITIES; (iv) IMBALANCE OR PAYOUT ACCOUNT
          INFORMATION, ALLOWABLES, OR OTHER REGULATORY MATTERS; (v) THE PRESENT
          OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY,
          TO BE DERIVED FROM THE ASSETS; (vi) THE ENVIRONMENTAL CONDITION OF THE
          ASSETS; (vii) ANY PROJECTIONS AS TO EVENTS THAT COULD OR

                                                                              13

<PAGE>

          COULD NOT OCCUR; (viii) THE TAX ATTRIBUTES OF ANY ASSET; (ix) ANY
          OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY INFORMATION OR MATERIAL
          FURNISHED TO BUYER BY SELLER OR OTHERWISE CONSTITUTING A PORTION OF
          THE ASSETS; AND (x) THE COMPLETENESS OR ACCURACY OF THE INFORMATION
          CONTAINED IN ANY EXHIBIT HERETO. ANY DATA, INFORMATION OR OTHER
          RECORDS FURNISHED BY SELLER ARE PROVIDED TO BUYER AS A CONVENIENCE AND
          BUYER'S RELIANCE ON OR USE OF THE SAME IS AT BUYER'S SOLE RISK.

     (B)  Independent Investigation. Buyer has, or by Closing will have, made
          its own independent investigation, analysis and evaluation of the
          transactions contemplated by this Agreement (including Buyer's own
          estimate and appraisal of the extent and value of Seller's Oil and Gas
          reserves attributable to the Assets and an independent assessment and
          appraisal of the environmental risks and liabilities associated with
          the acquisition of the Assets). Buyer has had access to all
          information necessary to perform its investigation and has not relied
          on any representations by Seller other than those expressly set forth
          in this Agreement.

     (C)  Waiver of Deceptive Trade Practices Acts. BUYER WAIVES ITS RIGHTS
          UNDER THE DECEPTIVE TRADE PRACTICES ACT SECTION 17.41 et seq., TEXAS
          BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS,
          AND UNDER SIMILAR STATUTES ADOPTED IN OTHER STATES, TO THE EXTENT THEY
          HAVE APPLICABILITY TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
          AFTER CONSULTATION WITH AN ATTORNEY OF ITS SELECTION, BUYER CONSENTS
          TO THIS WAIVER.

8.   REPRESENTATIONS AND WARRANTIES OF BUYER.

8.1  Buyer's Representations and Warranties. Buyer represents and warrants
     (which representations and warranties shall survive the Closing) as
     follows:

     (A)  Status of Incorporation. Buyer is a corporation duly incorporated,
          validly existing and in good standing under the laws of the State of
          Oklahoma.

     (B)  Corporate Authority. Buyer has the corporate power and authority to
          enter into this Agreement, to carry out the transactions contemplated
          hereby and to undertake all of the obligations of Buyer set out in
          this Agreement.

     (C)  Validity of Obligations. The execution, delivery and performance of
          this Agreement and the performance of the transactions contemplated by
          this Agreement will not in any respect violate, nor be in conflict
          with, any provision of Buyer's charter, by-laws or other governing
          documents, or any agreement or instrument to which Buyer is a party or
          is bound, or any judgment, decree, order, statute, rule or regulation
          applicable to Buyer (subject to governmental consents and approvals
          customarily

                                                                              14

<PAGE>

          obtained after the Closing). This Agreement constitutes legal, valid
          and binding obligations of Buyer, enforceable in accordance with its
          terms.

     (D)  Qualification and Bonding. Buyer is in compliance with the bonding and
          liability insurance requirements in accordance with all applicable
          state or federal laws or regulations and that it is and henceforth
          will continue to be qualified to own any federal, Indian or state oil
          and gas leases that constitute part of the Assets.

     (E)  Non-Security Acquisition. Buyer intends to acquire the Assets for its
          own benefit and account and is not acquiring said Assets with the
          intent of distributing fractional undivided interests thereof such as
          would be subject to regulation by federal or state securities laws,
          and that if, in the future, it should sell, transfer or otherwise
          dispose of said Assets or fractional undivided interests therein, it
          will do so in compliance with any applicable federal and state
          securities laws.

     (F)  Evaluation. Buyer represents that by reason of Buyer's knowledge and
          experience in the evaluation, acquisition and operation of oil and gas
          properties, Buyer has evaluated the merits and risks of purchasing the
          Assets from Seller and has formed an opinion based solely upon Buyer's
          knowledge and experience and not upon any representations or
          warranties by Seller.

     (G)  Financing. Buyer has sufficient cash, available lines of credit or
          other sources of immediately available funds to enable it to pay the
          Purchase Price to Seller at the Closing.

     (H)  Broker's Fees. Buyer has incurred no obligation or liability,
          contingent or otherwise, for brokers' or finders' fees in respect of
          the matters provided for in this Agreement, and, if any such
          obligation or liability exists, it shall remain an obligation of
          Buyer, and Seller shall have no responsibility therefor.

     (I)  No Knowledge of Sellers' Breach. Buyer has no knowledge of any breach
          by Seller of any representation or warranty of Seller, or of any other
          fact, event, condition or circumstance that would excuse Buyer from
          the timely performance of its obligations hereunder.

9.   CERTAIN AGREEMENTS OF SELLER. Seller agrees and covenants that, unless
     Buyer shall have otherwise agreed in writing, the following provisions
     shall apply:

9.1  Maintenance of Assets. From the date of this Agreement until Closing,
     Seller agrees that, for those Wells which Seller operates, it shall:

     (A)  Administer and operate the Wells in accordance with the applicable
          operating agreements.

     (B)  Not introduce any new methods of management, operation or accounting
          with respect to any or all of the Assets.

                                                                              15

<PAGE>

     (C)  Use commercially reasonable efforts to maintain and keep the Assets in
          full force and effect; and fulfill all contractual or other covenants,
          obligations and conditions imposed upon Seller with respect to the
          Assets, including, but not limited to, payment of royalties, delay
          rentals, shut-in gas royalties and any and all other required
          payments.

     (D)  Except to the extent necessary or advisable to avoid forfeiture or
          penalties, not enter into agreements to drill new wells or to rework,
          plug back, deepen, plug or abandon any Well, nor commence any
          drilling, reworking or completing or other operations on the Leases
          which requires expenditures exceeding Fifty Thousand Dollars
          ($50,000.00) (net to Seller's interest) for each operation (except for
          emergency operations and operations required under presently existing
          contractual obligations) without obtaining the prior written consent
          of Buyer (which consent shall not be unreasonably withheld, delayed or
          conditioned); provided that the terms of this paragraph (D) shall not
          apply to any expenditures of Seller which will not be charged to
          Buyer.

     (E)  Not voluntarily relinquish its position as operator to anyone other
          than Buyer with respect to any of the Wells or voluntarily abandon any
          of the Wells other than as required pursuant to the terms of a Lease
          or by regulation.

     (F)  Not, without the prior written consent of Buyer (which consent shall
          not be unreasonably withheld, delayed or conditioned), (i) enter into
          any agreement or arrangement transferring, selling or encumbering any
          of the Assets (other than in the ordinary course of business,
          including ordinary course sales of production, inventory or salvage or
          with respect to any Assets with a value less than Fifty Thousand
          Dollars ($50,000) or pursuant to any agreements existing on the date
          hereof); (ii) grant any preferential or other right to purchase or
          agree to require the consent of any party not otherwise required to
          consent to the transfer and assignment of the Assets to Buyer; (iii)
          enter into any new sales contracts or supply contracts which cannot be
          cancelled upon sixty (60) days prior notice; or (iv) incur or agree to
          incur any contractual obligation or liability (absolute or contingent)
          with respect to the Assets except as otherwise provided herein
          (including ordinary course sales of production, inventory or salvage
          or with respect to any Assets with a value less than Fifty Thousand
          ($50,000) or pursuant to any disclosed AFE's covering the Assets)

     (G)  To the extent known to Seller, provide Buyer with written notice of
          (i) any claims, demands, suits or actions made against Seller which
          materially affect the Assets; or (ii) any proposal from a third party
          to engage in any material transaction (e.g., a farmout) with respect
          to the Assets.

     (H)  Continue to market free of charge Buyer's gas produced from the Assets
          for the month of April 2003 in a manner not materially inconsistent
          with past practices provided that: 1) Buyer shall defend, hold
          harmless and indemnify Seller, its affiliated companies and its and
          their directors, officers, employees, agents and representatives from
          and against all cost and liability arising out of the marketing of

                                                                             16

<PAGE>

          said gas, save and except for Seller's obligation to pay Buyer the
          proceeds from such gas sales in a timely manner; and 2) Seller shall
          not be required to provide any collateral or security in marketing
          Buyer's gas.

     (I)  Consult with Seller's designated representative prior to taking any
          regulatory action to the extent it is practical to do so under the
          circumstances.

9.2  Consents. Seller shall exercise reasonable commercial efforts to obtain all
     such permissions, approvals and consents by governmental authorities and
     others which are reasonably obtainable by Closing and are required to vest
     title to the Assets in Buyer or as may be otherwise reasonably requested by
     Buyer. Seller will execute all necessary or appropriate transfer orders (or
     letters in lieu thereof) designating Buyer as the appropriate party for
     payment effective as of the Effective Time.

9.3  Preferential Rights.

     (A)  Seller agrees that it will (i) use reasonable efforts, consistent with
          industry practices in transactions of this type, to identify all
          preferential rights to purchase ("Preferential Rights") applicable to
          the transaction contemplated hereby, and the names and addresses of
          such parties holding the same, and (ii) request, from the parties so
          identified (and in accordance with the documents creating such
          rights), execution of waivers of Preferential Rights.

     (B)  If the holder of a Preferential Right exercises such right, Seller
          shall tender to such party 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 Seller, 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 party so exercising such right, such interest in
          the Asset will be deemed an Excluded Asset and shall be excluded from
          the transaction contemplated hereby and the Purchase Price will be
          adjusted downward by the amount actually paid to Seller by the party
          exercising the Preferential Right.

     (C)  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, then 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. BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD
          HARMLESS SELLER FROM AND AGAINST ANY AND ALL LOSSES ARISING OUT OF OR
          RELATING TO BUYER'S FAILURE TO COMPLY WITH THE TERMS OF SUCH
          PREFERENTIAL RIGHTS.

                                                                              17

<PAGE>

9.4  Hart-Scott-Rodino. The parties agree that this Agreement and the subject
     transaction do not require filings or approvals under the Hart-Scott-Rodino
     Antitrust Improvements Act of 1976 (the "HSR Act") and the rules and
     regulations of the Federal Trade Commission thereunder.

9.5  Records and Contracts. Seller shall have the right to make and retain
     copies of the Records and Contracts as Seller may desire prior to the
     delivery of the Records and Contracts to Buyer. Buyer, for a period of five
     (5) years after the Closing Date, shall make available to Seller (at the
     location of such Records and Contracts in Buyer's organization) access to
     such Records and Contracts as Buyer may have in its possession (or to which
     it may have access) upon written request of Seller, during normal business
     hours; provided, however, that Buyer shall not be liable to Seller for the
     loss of any Records or Contracts by reason of clerical error or inadvertent
     loss or destruction of Records or Contracts. Seller, for a period of five
     (5) years after the Closing Date, shall make available to Buyer (at the
     location of such records in Seller's organization) access to records
     described in Section 1.1(F)(iii) (the "Excluded Records") as Seller may
     have in its possession (or to which it may have access) upon written
     request of Buyer, during normal business hours; provided, however, that
     Seller shall not be liable to Buyer for the loss of any Excluded Records by
     reason of clerical error or inadvertent loss or destruction of Excluded
     Records.

10.  CERTAIN AGREEMENTS OF BUYER. Buyer agrees and covenants that unless Seller
     shall have consented otherwise in writing, the following provisions shall
     apply:

10.1 Plugging Obligation. Buyer shall perform and assume all liability for the
     necessary and proper plugging and abandonment of all Wells.

10.2 Plugging Bond. Buyer shall post, prior to Closing, the necessary bonds or
     letters of credit as required by the state in which the Leases are located
     for the plugging of all Wells, and provide Seller with a copy of same, and
     provide proof satisfactory to Seller that the applicable state has accepted
     such bonds or letters of credit as sufficient assurance to cover the
     plugging of all Wells and related matters. Further, Buyer shall provide to
     Seller copies of the approval by any applicable regulatory agencies
     concerning change of operatorship of the Wells.

10.3 Seller's Logos. Commencing no later than thirty (30) days after Closing,
     Buyer shall promptly cover or cause to be covered by decals or new signage
     any names and marks used by Seller, and all variations and derivatives
     thereof and logos relating thereto, from the Assets and shall not
     thereafter make any use whatsoever of such names, marks and logos.

10.4 Like-Kind Exchanges. Buyer shall cooperate fully, as and to the extent
     reasonably requested by Seller, in connection with the transactions
     contemplated herein to make such modifications as may be necessary to
     qualify such transactions, in whole or in part, as a "like-kind" exchange
     pursuant to Section 1031 of the Code.

                                                                              18

<PAGE>

11.  CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All obligations of Buyer
     under this Agreement are, at Buyer's election, subject to the fulfillment,
     prior to or at the Closing, of each of the following conditions:

11.1 No Litigation. At the Closing, no suit, action or other proceeding shall be
     pending before any court or governmental agency which attempts to prevent
     the occurrence of the transactions contemplated by this Agreement.

11.2 Representations and Warranties. All representations and warranties of
     Seller contained in this Agreement shall be true in all material aspects as
     of the Closing as if such representations and warranties were made as of
     the Closing Date (except for those representations or warranties that are
     expressly made only as of another specific date, which representations and
     warranties shall be true in all material respects as of such other date)
     and Seller shall have performed and satisfied in all material respects all
     covenants and fulfilled all conditions required by this Agreement to be
     performed and satisfied by Seller at or prior to the Closing.

12.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All obligations of
     Seller under this Agreement are, at Seller's election, subject to the
     fulfillment, prior to or at the Closing, of each of the following
     conditions:

12.1 No Litigation. At the Closing, no suit, action or other proceeding shall be
     pending before any court or governmental agency which attempts to prevent
     the occurrence of the transactions contemplated by this Agreement.

12.2 Representations and Warranties. All representations and warranties of Buyer
     contained in this Agreement shall be true in all material aspects as of the
     Closing, as if such representations and warranties were made as of the
     Closing Date (except for those representations or warranties that are
     expressly made only as of another specific date, which representations and
     warranties shall be true in all material respects as of such other date)
     and Buyer shall have performed and satisfied in all material respects all
     covenants and fulfilled all conditions required by this Agreement to be
     performed and satisfied by Buyer at or prior to the Closing.

13.  TERMINATION.

13.1 Causes of Termination. This Agreement and the transactions contemplated
     herein may be terminated:

     (A)  At any time by mutual consent of the Parties.

     (B)  By either Party if the Closing shall not have occurred by April 30,
          2003, despite the good faith reasonable efforts of the Parties, and if
          the Party desiring to terminate is not in breach of this Agreement.

     (C)  By either Party in the event of a Casualty Loss pursuant to Section
          15.1(B).

                                                                              19

<PAGE>

     (D)  By Buyer if, on the Closing Date, any of the conditions set forth in
          Article 11 hereof shall not have been satisfied or waived.

     (E)  By Seller if, on the Closing Date, any of the conditions set forth in
          Article 12 hereof shall not have been satisfied or waived.

13.2 Effect of Termination. In the event of the termination of this Agreement
     pursuant to the provisions of this Article 13 or elsewhere in this
     Agreement, this Agreement shall become void and have no further force and
     effect and, except for the indemnities provided for in Section 5.4, any
     breach of this Agreement prior to such termination and any continuing
     confidentiality requirement, neither Party shall have any further right,
     duty or liability to the other hereunder. Upon termination, Buyer agrees to
     use its best efforts to return to Seller or destroy, all materials,
     documents and copies thereof provided, obtained or discovered in the course
     of any due diligence investigations.

14.  INDEMNIFICATION.

14.1 INDEMNIFICATION BY SELLER. UPON CLOSING, SELLER SHALL, TO THE FULLEST
     EXTENT PERMITTED BY LAW, RELEASE, DEFEND, INDEMNIFY, AND HOLD HARMLESS
     BUYER, ITS PARENT AND SUBSIDIARY COMPANIES, AND EACH OF THEIR RESPECTIVE
     DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES (THE
     "BUYER GROUP") FROM AND AGAINST THE FOLLOWING:

     (A)  MISREPRESENTATIONS. ALL CLAIMS, DEMANDS, LIABILITIES, JUDGMENTS,
          LOSSES AND REASONABLE COSTS, EXPENSES AND ATTORNEYS' FEES
          (INDIVIDUALLY A "LOSS" AND COLLECTIVELY, THE "LOSSES") ARISING FROM
          THE BREACH BY SELLER OF ANY REPRESENTATION OR WARRANTY SET FORTH IN
          THIS AGREEMENT THAT SURVIVES CLOSING;

     (B)  BREACH OF COVENANTS. ALL LOSSES ARISING FROM THE BREACH BY SELLER OF
          ANY COVENANT SET FORTH IN THIS AGREEMENT; AND

     (C)  OWNERSHIP AND OPERATION. THAT PORTION OF ALL LOSSES ATTRIBUTABLE TO
          PERIODS PRIOR TO CLOSING AND ARISING FROM SELLER'S OWNERSHIP AND
          OPERATION OF THE ASSETS ASSOCIATED WITH THE FOLLOWING MATTERS:

          (i)   DAMAGES TO PERSONS OR PROPERTY;

          (ii)  THE VIOLATION BY SELLER OF ANY LAW OR REGULATION OR THE TERMS OF
                ANY AGREEMENT BINDING UPON SELLER;

          (iii) CLAIMS OF SELLER'S CO-OWNERS, PARTNERS, JOINT VENTURERS AND
                OTHER PARTICIPANTS IN THE WELLS AND OR ASSETS;

                                                                              20

<PAGE>

          (iv)  THE INCORRECT PAYMENT OF ROYALTIES UNDER THE LEASES.

     (D)  THAT PORTION OF ALL LOSSES ATTRIBUTABLE TO PERIODS PRIOR TO THE
          EFFECTIVE TIME RESULTING FROM (i) LITIGATION, or (ii) OR TAXES.

     (E)  Notwithstanding the above, the following limitations shall apply to
          Seller's indemnification obligations:

          (i)  Seller shall not be obligated to indemnify Buyer Group for any
               Loss unless Buyer has delivered a written notice of such Loss
               within the Survival Period (as defined below) applicable to such
               Loss. Any Loss for which Seller does not receive written notice
               before the end of the Survival Period shall be deemed to be an
               Assumed Liability.

               (1)  The "Survival Period" applicable to Losses shall mean:

                    (i)  With regard to a breach of representations and
                         warranties relating to Taxes, for a period ending
                         ninety (90) days following the expiration of the
                         statute of limitations applicable to the underlying Tax
                         matter giving rise to that claim.

                    (ii) With regard to breach of representations and warranties
                         made in Sections 7.1(D)[AFEs] for a period ending on
                         May 7, 2003.

                   (iii) With regard to breach of representations and
                         warranties made in Sections 7.1(F)[Litigation],
                         7.1(G)[Permits and Consents], 7.1(H)[Broker's Fees] and
                         7.1(E) [Contractual Restriction], a period ending
                         eighteen months after Closing.

                    (iv) All other Representations and Warranties of Seller
                         shall not survive Closing.

               (2)  With regard to a breach of covenants and matters covered by
                    14.1(D), an indefinite period following the Closing; and

               (3)  With regard to the matters covered by Section 14.1(C)(i)
                    through (iii) for a period of eighteen months after Closing.

               (4)  With regard to the matters covered by Section 14.1(C)(iv)
                    for a period not to exceed the earlier of four years after
                    the Effective Time or the applicable statute of limitations.

          (ii) The indemnification obligations of Seller pursuant to this
               Agreement shall be limited to actual Losses and shall not include
               incidental, consequential,

                                                                              21

<PAGE>

                indirect, punitive, or exemplary Losses or damages to the extent
                such types of Losses pertain to periods after the Effective
                Time;

          (iii) Seller's aggregate liabilities and obligations under this
                Article 14 shall not exceed twenty percent (20%) of the Purchase
                Price;

          (iv)  Seller shall have no liability or obligation for any Losses,
                unless and until the aggregate Losses for which Buyer is
                entitled to recover under this Agreement excluding losses
                covered by Section 14.1(D) [Litigation for which this subsection
                (iv) shall not apply] exceeds two percent (2%) of the Base
                Purchase Price (the "Threshold Amount"); provided, however,
                once such amount exceeds the Threshold Amount, the Buyer Group
                will be entitled to recover all amounts to which they are
                entitled in excess of the Threshold Amount;

          (v)   Seller's indemnification obligations shall not cover any
                liabilities, duties and obligations relating to properly
                plugging and abandoning wells, removal of all pipelines,
                equipment, and platforms and related facilities now or
                hereafter located on the Assets, and cleaning up, restoring and
                Remediation of the Assets in accordance with the Environmental
                Laws and the relevant Leases, including but not limited to
                liabilities, duties and obligations (including but not limited
                to the payment of fines, penalties, monetary sanctions or other
                amounts payable for failure to comply with the requirements of
                applicable Environmental Laws) related to any violation of any
                Environmental Laws or the presence, disposal, release or
                threatened release of any hazardous substance or hazardous waste
                from the Assets into the atmosphere or into or upon land or any
                water course or body of water, including groundwater, whether or
                not attributable to Seller's activities or the activities of
                third parties;

          (vi)  Buyer acknowledges and agrees that the indemnification
                provisions in this Article 14 and the termination rights in
                Article 13 shall be the exclusive remedies of Buyer with respect
                to the transactions contemplated by this Agreement.

14.2 INDEMNIFICATION BY BUYER. UPON CLOSING, BUYER SHALL TO THE FULLEST EXTENT
     PERMITTED BY LAW, RELEASE, DEFEND, INDEMNIFY, AND HOLD HARMLESS SELLER
     GROUP FROM AND AGAINST THE FOLLOWING:

     (A)  MISREPRESENTATIONS. ALL LOSSES ARISING FROM THE BREACH BY BUYER OF ANY
          REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT THAT SURVIVES
          CLOSING;

     (B)  BREACH OF COVENANTS. ALL LOSSES ARISING FROM THE BREACH BY BUYER OF
          ANY COVENANT SET FORTH IN THIS AGREEMENT;
                                                                              22

<PAGE>



     (C)  OWNERSHIP AND OPERATION. ALL LOSSES ARISING FROM THE ASSUMED
          LIABILITIES, AND THE OWNERSHIP OR OPERATION OF THE ASSETS BY BUYER
          FROM AND AFTER CLOSING.

     (D)  THAT PORTION OF ALL LOSSES ATTRIBUTABLE TO PERIODS AFTER THE EFFECTIVE
          TIME RESULTING FROM LITIGATION.

14.3 PHYSICAL INSPECTION. BUYER INDEMNIFIES AND AGREES TO RELEASE, DEFEND,
     INDEMNIFY AND HOLD HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND ALL
     LOSSES ARISING FROM BUYER'S INSPECTING AND OBSERVING THE ASSETS, INCLUDING
     (A) LOSSES 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) LOSSES FOR
     PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF THE SELLER GROUP OR THIRD
     PARTIES, AND DAMAGE TO THE PROPERTY OF THE SELLER GROUP OR THIRD PARTIES.
     THE FOREGOING INDEMNITY INCLUDES, AND THE PARTIES INTEND IT TO INCLUDE, AN
     INDEMNIFICATION OF THE SELLER GROUP FROM AND AGAINST LOSSES ARISING OUT OF
     OR RESULTING, IN WHOLE OR PART, FROM THE CONDITION OF THE ASSETS OR THE
     SELLER GROUP'S SOLE, JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE, STRICT
     LIABILITY OR FAULT.

14.4 Notification. As soon as reasonably practical after obtaining knowledge
     thereof, the 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, it shall be entitled to have its own counsel and defend such
     action, suit or proceeding with respect to itself at its own expense.
     Subject to the foregoing provisions of this Article 14, neither 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
     proceeding,

                                                                              23

<PAGE>

     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.

15.  MISCELLANEOUS.

15.1 Casualty Loss.

     (A)  An event of casualty means volcanic eruptions, acts of God, terrorist
          action, fire, explosion, earthquake, wind storm, flood, drought,
          condemnation, the exercise of any right of eminent domain,
          confiscation and seizure (a "Casualty"). A Casualty does not include
          depletion due to normal production and depreciation or failure of
          equipment or casing.

     (B)  If, prior to Closing, a Casualty occurs (or Casualties occur) which
          results in a reduction in the value of the Assets in excess of
          twenty-five percent (25%) of the Base Purchase Price ("Casualty
          Loss"), Buyer or Seller may elect to terminate this Agreement. If this
          Agreement is not so terminated, then this Agreement shall remain in
          full force and effect notwithstanding any such Casualty Loss, and,
          upon agreement of the Parties, (i) Seller may retain such Asset and
          such Asset shall be the subject of an adjustment to the Base Purchase
          Price in the same manner set forth in Section 5.5 hereof, or (ii) at
          the Closing, Seller shall pay to Buyer all sums paid to Seller by
          reason of such Casualty Loss; provided, however, that the Base
          Purchase Price shall not be adjusted by reason of such payment, and
          Seller shall assign, transfer and set over unto Buyer all of the
          right, title and interest of Seller in and to such Asset and any
          unpaid awards or other payments arising out of such Casualty Loss.

     (C)  For purposes of determining the diminution in value of an Asset as a
          result of a Casualty Loss, the Parties shall use the Allocations set
          out on Exhibit 2.3.

15.2 Confidentiality.

     (A)  Prior to Closing and until all matters relating to the Final
          Settlement Date including all adjustments to the Base Purchase Price
          are finalized between the parties, to the extent not already public,
          Buyer shall exercise all due diligence in safeguarding and maintaining
          secure all engineering, geological and geophysical data, seismic data,
          reports and maps, the results and findings of Buyer with regard to its
          due diligence associated with the Assets (including without limitation
          with regard to due diligence associated with environmental and title
          matters) and other data relating to the Assets (collectively, the
          "Confidential Information"). Buyer acknowledges that all Confidential
          Information shall be treated as confidential and shall not be
          disclosed to third parties without the prior written consent of
          Seller.

     (B)  In the event of termination of this Agreement for any reason, Buyer
          shall not use or knowingly permit others to use such Confidential
          Information in a manner detrimental to Seller, and will not disclose
          any such Confidential Information to any

                                                                              24

<PAGE>

          person, firm, corporation, association or other entity for any reason
          or purpose whatsoever, except to Seller or to a governmental agency
          pursuant to a valid subpoena or other order or pursuant to applicable
          governmental regulations, rules or statutes.

     (C)  The undertaking of confidentiality shall not diminish or take
          precedence over any separate confidentiality agreement between the
          Parties. Should this Agreement terminate, such separate
          confidentiality agreement shall remain in full force and effect.

15.3 Competition. Buyer acknowledges that Seller may presently own interests or
     have leads, prospects, information or ideas on properties or leaseholds
     adjacent to, adjoining or in the vicinity of the Assets. Seller shall not
     be prohibited in any way from competing with Buyer or pursuing any activity
     or business opportunity on property not being transferred to Buyer pursuant
     to this Agreement.

15.4 Notice. Any notice, request, demand, or consent required or permitted to be
     given hereunder shall be in writing and delivered in person or by certified
     letter, with return receipt requested or by prepaid overnight delivery
     service, or by facsimile addressed to the Party for whom intended at the
     following addresses:

     SELLER:

         El Paso Production Company
         Nine Greenway Plaza, Suite 2782
         Houston, Texas 77046
         Attn:    Joe Mills
                  Sr. V.P. Acquisitions
         Tel:     (832) - 676-6367
         Fax:     (832) - 676-1192

     BUYER:

         Chesapeake Energy Corporation
         6100 N. Western Ave.
         Oklahoma City, OK 73118
         Attn:    Douglas J. Jacobson
                  Sr. Vice President
         Tel:     (405) 879-9233
         Fax:     (405) 879-9546

                                                                              25

<PAGE>


       With copy to:     Chesapeake Energy Corporation
                         6100 N. Western Ave.
                         Oklahoma City, OK 73118
                         Attn:  Henry Hood
                         Tel:   (405) 879-4000
                         Fax:   (405) 879-9561

       or at such other address as any of the above shall specify by like notice
       to the other.

15.5   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 prior to the Closing 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).

15.6   Personnel. Without Seller's prior written consent, for a period of
       eighteen (18) months from the Effective Time, Buyer will not directly or
       indirectly solicit for employment any person who is now employed by
       Seller or its affiliates involved in the exploration and production
       business in an executive, management, technical or professional position
       or otherwise considered by Seller to be a key employee. Attached hereto
       as Exhibit 15.6 is a listing of employees that Buyer may consider for
       employment. If Buyer chooses to extend offers to any of Seller's
       employees, those offers shall be at a base salary or hourly wages at
       least equal to their base salary or hourly wage level in effect on the
       Closing Date.

15.7   COMPLIANCE WITH EXPRESS NEGLIGENCE TEST. THE PARTIES AGREE THAT THE
       INDEMNIFICATION OBLIGATIONS OF THE INDEMNIFYING PARTY SHALL BE WITHOUT
       REGARD TO THE NEGLIGENCE OR STRICT LIABILITY OF THE INDEMNIFIED
       PERSON(S), WHETHER THE NEGLIGENCE OR STRICT LIABILITY IS ACTIVE, PASSIVE,
       JOINT, CONCURRENT OR SOLE.

15.8   Governing Law. This Agreement is governed by and must be construed
       according to the laws of the State of Texas, excluding any conflicts-of-
       law rule or principle that might apply the law of another jurisdiction.
       All disputes related to this Agreement shall be submitted to the
       jurisdiction of the courts of the State of Texas and venue shall be in
       the civil district courts of Harris County, Texas.

15.9   Exhibits. The Exhibits attached to this Agreement are incorporated into
       and made a part of this Agreement.

15.10  Fees, Expenses, Taxes and Recording.

       (A)  Each Party shall be solely responsible for all costs and expenses
            incurred by it in connection with this transaction (including, but
            not limited to fees and expenses of

                                                                              26

<PAGE>

            its counsel and accountants) and shall not be entitled to any
            reimbursements from the other Party, except as otherwise provided in
            this Agreement.

       (B)  Buyer shall, at its own cost, immediately record all instruments of
            conveyance and sale in the appropriate office of the state and
            county in which the lands covered by such instrument are located.
            Buyer shall immediately file for and obtain the necessary approval
            of all federal, Indian, tribal or state government agencies to the
            assignment of the Assets. The assignment of any state, federal or
            Indian tribal oil and gas leases shall be filed in the appropriate
            governmental offices on a form required and in compliance with the
            applicable rules of the applicable government agencies. Buyer shall
            supply Seller with a true and accurate photocopy reflecting the
            recording information of all the recorded and filed assignments
            within a reasonable period of time after their recording and filing.

15.11  Assignment. This Agreement or any part hereof may not be assigned by
       either Party without the prior written consent of the other Party;
       provided, however, upon notice to the other Party, either Party shall
       have the right to assign all or part of its rights (but none of its
       obligations) under this Agreement in order to qualify transfer of the
       Assets as a "like-kind" exchange for federal tax purposes. Subject to
       the foregoing, this Agreement is binding upon the Parties hereto and
       their respective successors and assigns.

15.12  Entire Agreement. This Agreement constitutes the entire agreement reached
       by the Parties with respect to the subject matter hereof, superseding all
       prior negotiations, discussions, agreements and understandings, whether
       oral or written, relating to such subject matter, except that the
       Confidentiality Agreement dated February 12, 2003, between the Parties
       shall remain in full force and effect in accordance with its terms
       through and until the Closing.

15.13  Severability. In the event that any one or more covenants, clauses or
       provisions of this Agreement shall be held invalid or illegal, such
       invalidity or unenforceability shall not affect any other provisions of
       this Agreement.

15.14  Captions. The captions in this Agreement are for convenience only and
       shall not be considered a part of or affect the construction or
       interpretation of any provision of this Agreement.

15.15  Counterpart Execution. This Agreement may be executed in any number of
       counterparts, and each such counterpart hereof shall be deemed to be an
       original, and all of which together shall constitute one and the same
       instrument.

15.16  Waiver of Certain Damages. Each of the Parties hereby waives and agrees
       not to seek consequential or punitive damages with respect to any claim,
       controversy, or dispute arising out of or relating to this Agreement or
       the breach thereof.

15.17  Amendments and Waivers. This Agreement may not be modified or amended
       except by an instrument in writing signed by both parties. Any party
       hereto may, only by an instrument in writing, waive compliance by another
       party with any term or provision of this Agreement on

                                                                              27

<PAGE>


       the part of such other party hereto to be performed or complied with. The
       waiver by any party hereto of a breach of any term or provision of this
       Agreement shall not be construed as a waiver of any subsequent breach.

15.18  PARENT GUARENTEE. Chesapeake Energy Corporation, an Oklahoma corporation
       as of the date of this Agreement as of and after Closing guarantees
       without reservation of condition all of the obligations of Buyer under
       this Agreement.

                            -Signature Page Follows-

                                                                              28

<PAGE>

Executed as of the day and year first above written.

                                       SELLER:

                                       EL PASO PRODUCTION COMPANY

                                       By:   /s/ J.A. Mills
                                           ------------------------------------
                                             J. A. Mills
                                             Senior Vice President


                                       NORIC, L.P.

                                       By:   Palomino, L.L.C.
                                             as its general partner

                                       By:   NORIC, L.L.C.
                                             as its sole member

                                       By:   /s/ J.A. Mills
                                           ------------------------------------
                                             J. A. Mills
                                             Attorney-in-Fact


                                       BUYER:

                                       CHESAPEAKE EP CORPORATION

                                       By:   /s/ Douglas J. Jacobson
                                           ------------------------------------
                                             Douglas J. Jacobson
                                             Vice President


                                       GUARANTOR:

                                       CHESAPEAKE ENERGY CORPORATION

                                       By:    /s/ Douglas J. Jacobson
                                           ------------------------------------
                                              Douglas J. Jacobson
                                              Sr. Vice President

                                                                              29


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