AGREEMENT FOR PURCHASE AND SALE

Purchase and Sale Agreement

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US ENERGY CORP | HI-PRO PRODUCTION, LLC | ROCKY MOUNTAIN GAS, INC.

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Title: AGREEMENT FOR PURCHASE AND SALE
Governing Law: Wyoming Date: 2/18/2004
Industry: Oil and Gas Operations Sector: Energy

AGREEMENT FOR PURCHASE AND SALE

BY AND BETWEEN

HI-PRO PRODUCTION, LLC

as Seller

and

ROCKY MOUNTAIN GAS, INC.

as Buyer

December 18, 2003

<PAGE>

TABLE OF CONTENTS

Page

1. Sale and Purchase of the Gas Properties

1.1. The Gas Properties 1

1.2. Excluded Assets 2

2. Purchase Price 3

2.1. Basic Amount 3

2.2. Adjustments to Purchase Price 3

2.3. Closing Statement 4

2.4. Title Procedure 4

3. Representations and Warranties of Seller 4

3.1. Organization 4

3.2. Authority and Authorization 4

3.3. Enforceability 4

3.4 Conflicts 4

3.5. Contracts 5

3.6. Litigation and Claims 5

3.7. Approvals and Preferential Rights 5

3.8. Compliance with Law and Permits 5

3.9. Environmental Compliance 6

3.10. Status of Contracts 6

3.11. Production Burdens, Taxes, Expenses and Revenues 6

3.12. Current Commitments 6

3.13. Liens and Encumbrances 7

4. Representations and Warranties of Buyer 7

4.1. Organization 7

4.2. Authorization and Authority 7

4.3. Enforceability 7

4.4. Conflicts 7

4.5. Reliance 8

4.6. Qualified Leaseholder 8

4.7. Qualified Purchaser 8

4.8. Available Funds 8

5. Covenants of Seller Pending Closing 8

5.1. Conduct of Business Pending Closing 8

5.2. Access 9

5.3 Notification 9

6. Covenants of Buyer Pending Closing 9

6.1. Notifications 9

6.2. Governmental Bonds 10

7. Conditions Precedent to the Obligations of Buyer 10

7.1. Representations and Warranties 10

7.2. Compliance 10

7.3. Consents 10

7.4. No Pending Suits 10

7.5. Liens and Encumbrances 10

8. Conditions Precedent to the Obligations of Seller 10

8.1. Representations and Warranties 10

8.2. Compliance 10

8.3. Consents 11

8.4. No Pending Suits 11

9. Closing 11

9.1 The Closing 11

9.2. Documents to be Delivered at Closing 11

9.3. Possession 12

9.4. Payment of Purchase Price 12

10. Termination 12

10.1. Events of Termination 12

11. Taxes, Prorations and Assumption of Obligations 12

11.1. Tax Prorations 12

11.1.1 Severance/Ad Valorem Taxes 13

11.1.2 Conservation Taxes 13

11.2 Assumption of Obligations 13

11.3 Suspense and/or Escrow Accounts 13

11.4 Gas Transactions 14

12. Final Accounting 14

12.1. Settlement Statement 14

12.2. Arbitration of Final Settlement 14

12.3. Payment 14

13. Survival and Indemnification 15

13.1. Survival 15

13.2. Liabilities 15

13.3. Indemnification by Seller 15

13.4. Indemnification by Buyer 15

13.5. Liability Limitations 16

13.6. Waiver of Representations 18

14. Environmental Review and Remedies for Environmental Defects 19

14.1. Environmental Review 19

14.2. Conduct of Review 20

15. Further Assurances 20

15.1. General 20

15.2. Filings, Notices and Certain Governmental Approvals 20

15.3. Logos and Names 20

16. Access by Buyer after Closing 20

17. Notices 21

18. Assignment 22

19. Governing Law 22

20. Expenses and Fees 22

21. Integration 22

22. Waiver or Modification 22

23. Headings 23

24. Invalid Provisions 23

25. Waiver of Jury Trial 23

26. Multiple Counterparts 23

27. Confidentiality. 23

<PAGE>

TABLE OF DEFINED TERMS

Term Section

---- -------

Adjusted Purchase Price 2.1

Agreement Page 1

Business Day 17

Buyer Page 1

Buyer Indemnified Parties 13.3

Closing 9.1

Closing Date 9.1

Closing Period 2.2.1

Closing Statement 2.3

Contracts 1.1.7

Data 1.1.6

Dispute 28.1

Effective Date 1

Equipment 1.1.5

Equitable Limitations 3.3

Excluded Assets 1.2

Final Settlement Statement 12.1

Liabilities 13.2

Gas Properties 1.1.1

Permits 1.1.8

Properties 1

Purchase Price 2.1

Seller Page 1

Seller Indemnified Parties 13.4

Substances 1.1.3

Surface Rights 1.1.4

Wells 1.1.2

<PAGE>

AGREEMENT FOR PURCHASE AND SALE

This Agreement for Purchase and Sale ("Agreement") is made and entered

into on this the 18th day of December, 2003, by and between Hi-Pro Production,

LLC ("Seller"), and Rocky Mountain Gas, Inc. ("Buyer").

1. SALE AND PURCHASE OF THE PROPERTIES. Subject to the terms and conditions

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

and for the consideration herein set forth, and other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged,

Seller agrees to sell, assign, convey and deliver to Buyer, and Buyer agrees to

purchase and acquire from Seller at Closing, but effective as of 8:00 a.m. at

the location of each of the Gas Properties on November 1, 2003 (the "Effective

Date"), all of the interest of Seller in and to the following properties, other

than the Excluded Assets ("Proper-ties"):

1.1. THE PROPERTIES.

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

1.1.1. GAS PROPERTIES. All right, title and interest in and to any

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

agreements or contracts granting the right or option to explore for and produce

coalbed methane gas, including but not limited to lease-hold interests, fee

mineral interests or operating rights in the oil and gas and coalbed methane gas

leases described in Part I of the Exhibit (the "Gas Properties").

1.1.2. WELLS. All --coalbed methane gas wells located on the Gas

-----

Proper-ties, whether producing, operating, shut-in or temporarily abandoned

(the "Wells").

1.1.3. SEVERED SUBSTANCES. All severed coalbed methane gas produced

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

from the Gas Properties and sold on or after the Effective Date (the

"Substances").

1.1.4. SURFACE RIGHTS. All surface use agreements, right-of-way

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

agreements or other agreements relating to the use or ownership of surface

properties that are used or held for use for access, roads, discharge of water,

pipelines, flow lines, or any other purpose in connection with the production of

Substances from the Gas Properties, including the rights-of-way agreements and

other agreements described in the Exhibit and all fee interests in those surface

parcels described on the Exhibit (the "Surface Rights").

1.1.5. EQUIPMENT. All equipment, fixtures and physical facilities of

---------

every type and description located on the Gas Properties (the "Equipment").

1.1.6. INFORMATION AND DATA. All engineering, geological and

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

geophysical data, title opinions, lease and land files, filings with and reports

to regulatory agencies, gas and sales contract files, division order files and

other books, files and records to the extent that they are related to Gas

Properties and the transfer thereof is not prohibited by existing contractual

obligations (the "Data").

1.1.7. CONTRACTS. All con-tracts and arrangements that relate to the

---------

Gas Properties and the production, storage, treatment, transportation,

processing, purchase, sale, disposal or other disposition of Substances

therefrom, including but not limited to joint operating agreements, pooling

agreements, communitization agreements, unit agreements and farmouts, and any

and all amendments, ratifications or extensions of the fore-going, to the extent

that any of the foregoing relate to periods on or after the Effective Date (the

"Contracts"), and all rights to make claims and receive proceeds under any

insurance policy held by or on behalf of Seller in connection with the Gas

Properties for any claim that arises from the Effective Date through the Closing

Date in connection with the Proper-ties.

1.1.8. PERMITS. All franchises, licenses, permits, approvals,

-------

consents, certificates and other authorizations and other rights granted by

governmental authorities and all certificates of convenience or necessity,

immunities, privileges, grants and other rights, that relate to the Gas

Properties or the ownership or operation of any thereof (the "Permits").

1.1.9. WINGS GATHERING, COMPRESSION AND TRANSMISSION FACILITIES

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

("WGCTF"). All easements, rights-of-way, contracts, pipelines, discharge

pipeline, compressor leases, service agreements and other rights and personal

property serving as the gathering and compression facility for the Wings field

together with the high pressure gas transmission line acquired by Seller from

Western Gas Resources, Inc. on December 11, 2003, and as described in Part I.B

of the Exhibit.

1.2. EXCLUDED ASSETS. As used herein, "Excluded Assets" means (a) all

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

trade credits and all accounts, instruments and general intangibles (as such

terms are defined in the Wyoming Uniform Commercial Code) attributable to the

Gas Properties with respect to any period of time prior to the Effective Date;

(b) all claims and causes of action of Seller (i) arising from acts, omissions

or events, or damage to or destruction of property, occurring prior to the

Effective Date, (ii) arising under or with respect to any of the Contracts that

are attributable to periods of time prior to the Effective Date (including

claims for adjustments or refunds), or (iii) with respect to any of the Excluded

Assets; (c) all rights and interests of Seller (i) under any policy or agreement

of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or

condemnation proceeds or awards arising, in each case, from acts, omissions or

events, or damage to or destruction of property, occurring prior to the

Effective Date; (d) all Substances produced and sold from the Gas Properties

with respect to all periods prior to the Effective Date, together with all

proceeds from or of such Substances; (e) claims of Seller for refunds of or loss

carry forwards with respect to (i) production or any other taxes attributable to

any period prior to the Effective Date, (ii) income or franchise taxes, or (iii)

any taxes attributable to the Excluded Assets; (f) all amounts due or payable to

Seller as adjustments to insurance premiums related to the Properties with

respect to any period prior to the Effective Date; (g) all proceeds, income or

revenues (and any security or other deposits made) attributable to (i) the

Properties for any period prior to the Effective Date, or (ii) any Excluded

Assets; (h) all personal computers and associated peripherals and all radio and

telephone equipment; (i) all of Seller's proprietary computer software, patents,

trade secrets, copyrights, names, trademarks, logos and other intellectual

property; (j) all documents and instruments of Seller that may be protected by

an attorney-client privilege; (k) data that cannot be disclosed or assigned to

Buyer as a result of confidentiality arrangements under agreements with persons

unaffiliated with Seller; (l) all audit rights arising under any of the

Contracts or otherwise with respect to any period prior to the Effective Date or

to any of the Excluded Assets; and (m) all equipment and personal property not

located on the Gas Properties or not currently utilized in connection with the

Gas Properties.

2. PURCHASE PRICE.

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

2.1. BASIC AMOUNT. The purchase price for the Gas Proper-ties, subject

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

to adjustment as provided in Section 2.2, shall be $7,250,000.00 (the "Purchase

Price"), of which the Buyer will make a down payment of $375,000.00 into escrow

in accordance with Section 2.1.1, leaving a remaining purchase price to be paid

at closing of $6,875,000.00, consisting of 376,000 common shares of unregistered

stock in U.S. Energy Corp. and $5,875,000.00 in cash. The remaining purchase

price as adjusted pursuant to Section 2.2 is referred to in this Agreement as

the "Adjusted Purchase Price."

2.1.1. DOWN PAYMENT ESCROW. Buyer will pay, on or before December

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

29, 2003, the sum of $375,000.00 as a down payment to an account at the First

National Bank, Buffalo, Wyoming, and the parties have instructed the First

National Bank, Buffalo, Wyoming, to pay $75,000.00 to Seller, per week,

beginning December 29, 2003, and each Friday thereafter until the Closing, at

which time any remaining balance shall be paid to Seller, unless Buyer gives

written notice to Seller and the First National Bank, Buffalo, Wyoming, as

allowed by Article 7.6.

2.2. ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be

adjusted as provided in this Section 2.2.

2.2.1. The Purchase Price shall be increased by the following

amounts (without duplication):

(a) An amount equal to the costs and expenses that are (i)

attributable to the Properties for the period from the Effective Date to

the Closing Date (the "Closing Period"), whether paid before or after the

Effective Date, and (ii) paid by Seller, including, without limitation,

bond and insurance premiums paid by or on behalf of Seller attributable to

coverage during the Closing Period.

(b) An amount equal to the revenue received by the Buyer for gas sales

prior to the Effective Date attributable to the Seller's interest in the

Gas Properties.

2.2.2. The Purchase Price shall be decreased by the following

amounts (without duplication):

(a) An amount equal to the proceeds received by Seller for the sale

during the Closing Period of Substances, net of all applicable taxes not

reimbursed to Seller by a purchaser of Substances.

(b) An amount equal to all proceeds received by Seller from whatever

source derived that relate to the Properties and are attributable to

periods on or after the Effective Date, other than operator's overhead

reimbursements received by Seller under joint operating agreements in which

Seller is designated as the operator.

Section 11.

(d) The amount, if any, allowed for title defects as described in

Section 2.4,below.

2.3. CLOSING STATEMENT. Seller shall de-liver to Buyer not less than

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

four Business Days before the Closing Date a statement (the "Closing Statement")

setting forth the adjustments to the Purchase Price provided in Section 2.2 and

those that have been agreed to by Seller and Buyer, if any, prior to such date

or determined by arbitration prior to such date. The Closing Statement shall be

prepared in accordance with customary ac-counting principles used in the oil and

gas industry.

2.4 TITLE PROCEDURE. If any of the information or materials supplied

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

by Seller pursuant to this Agreement, or any other information or data,

including the Buyer's due diligence examination of title, reflects the existence

of any encumbrance, encroachment, defect in or objection to title that renders

title to the gas properties defective or encumbered, and not capable of being

conveyed due to a title defect that would make the Gas Properties unmarketable

("Title Defects"), then:

(a) Buyer shall notify Seller in writing of the Title Defects as they

are identified, providing Seller with adequate information to enable Seller

to go forward with curing the Title Defects. Within five (5) days prior to

closing, Seller shall furnish Buyer all documentation reasonably satisfying

the Title Defects.

(b) If Seller is unable to cure the Title Defects, Buyer shall have

the option to: accept the Gas Properties with the Title Defects and adjust

the Purchase Price in an amount to be agreed upon between Buyer and Seller

or terminate this Purchase and Sale Agreement and receive a refund from the

Seller of the down payment described in Section 2.1, above. The value of

the Title Defects must exceed $100,000 in value before any adjustment in

the Purchase Price will be made. The value of Title Defects as to all

producing Gas Properties shall be based on Buyer's bid amount as it relates

to each producing well. The value of Title Defects as to all non-producing

Gas Properties shall be based on Buyer's bid amount as it relates to the

mineral leases covering the non-producing Gas Properties. In the event

Buyer identifies Title Defects having a value of $100,000, or more, and the

same are not cured within five (5) days prior to closing and the Buyer and

Seller have not negotiated a reduction of the Purchase Price in exchange

for a waiver of the Title Defects within two (2) days prior to closing,

either party may terminate this Agreement as allowed in Section 10.1.

Notwithstanding this limitation, Seller shall always have the option to

remove any of the Gas Properties upon which there are Title Defects from

this transaction, reducing the Purchase Price by the value assigned to the

Title Defects and the affected interests. As to all producing Gas

Properties, Buyers shall not identify a title defect as to any Gas Property

that has been producing for more than two (2) years and as to which

Seller's title has not been challenged.

3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants

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

to Buyer as follows (any representation of Seller in this Section that relates

to Gas Properties in which Seller is a non-operator under a joint operating

agreement or similar agreement is limited to the knowledge of Seller):

3.1. ORGANIZATION. Seller is a limited liability company duly organized,

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

validly existing and in good standing under the laws of the State of Wyoming.

Seller is qualified to do business in and is in good standing under the laws of

each state in which the Properties are located.

3.2. AUTHORITY AND AUTHORIZATION. Seller has full power and authority to

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

carry on its business as presently con-ducted, to enter into this Agreement and

to perform its obligations under this Agreement. The execution and delivery of

this Agreement by Seller have been, and the performance by Seller of this

Agreement and the transactions contemplated hereby shall be at the time required

to be per-formed hereunder, duly and validly authorized by all requisite action

on the part of Seller.

3.3. ENFORCEABILITY. This Agreement has been duly executed and delivered on

behalf of Seller and constitutes the legal, valid and binding obligation of

Seller enforce-able in accordance with its terms, except as enforceability may

be limited by applicable bankrupt-cy, reorganization or moratorium statutes, or

other similar laws affecting the rights of creditors generally or equitable

principles (collectively, "Equitable Limitations"). At the Closing all documents

and instruments required hereunder to be executed and delivered by Seller shall

be duly executed and delivered and shall constitute legal, valid and binding

obligations of Seller enforceable in accordance with their terms, except as

en-force-ability may be limited by Equitable Limitations.

3.4. CONFLICTS. The execution and delivery of this Agreement by Seller does

---------

not, and the consummation of the trans-actions contemplated by this Agreement

shall not, (a) violate or be in conflict with, or require the consent of any

person or entity under, any provision of Seller's governing documents, (b)

violate any provision of or require any consent, authorization or approval under

any judgment, decree, judicial or administrative order, award, writ, injunction,

statute, rule or regulation applicable to Seller, or (c) result in the creation

of any lien, charge or encumbrance on any of the Properties.

3.5. CONTRACTS. The Exhibit sets forth a list of the following contracts,

---------

agreements, and commitments to which any of the Gas Properties are bound: (a)

any agreement with any affiliate of Seller; (b) any agreement or contract of

Seller for the sale, exchange or other disposition of Substances produced from

the Gas Properties that is not cancellable without penalty on not more than 120

days prior written notice; (c) any agreement of Seller to sell, lease, farmout

or otherwise dispose of any of its interests in any of the Gas Properties other

than conventional rights of reassignment; (d) any operating agreement to which

Seller's interest in any of the Gas Properties is subject; and (e) any contract

that commits Seller to expend more than $10,000 in any year in connection with

the Gas Properties, unless made upon consultation and approval of the Buyer.

3.6. LITIGATION AND CLAIMS. Except as is set forth on the Exhibit, (a) no

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

claim, demand, filing, investigation, administrative proceeding, action, suit or

other legal proceeding is pending or, to the best of Seller's knowledge,

threatened, with respect to the Gas Properties or the ownership or operation of

any thereof, other than proceedings relating to the oil and gas industry

generally and as to which Seller is not a named party; and (b) no written notice

from any govern-mental authority or any other person (including employees) has

been received by Seller claiming any violation or repudiation of the Gas

Properties or any violation of any law, rule, regulation, ordinance, order,

decision or decree of any governmental authority (including, without limitation,

any such law, rule, regulation, ordinance, order, decision or decree

concerning the conservation of natural resources).

3.7. APPROVALS AND PREFERENTIAL RIGHTS. The Exhibit contains a complete and

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

accurate list of (a) all approvals and consents required to be obtained by

Seller for the assignment or transfer of the Gas Properties to Buyer, other than

approvals and consents of governmental authorities that are customarily obtained

in similar transactions after the consummation of the transaction, and (b) all

preferential purchase rights that affect the transactions contemplated by this

Agreement.

3.8. COMPLIANCE WITH LAW AND PERMITS. The Gas Properties have been and

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

currently are operated, and Seller and the Gas Proper-ties are, in compliance

with the provisions and requirements of existing laws, rules, regulations,

ordinances, orders, decisions and decrees of all governmental authorities having

jurisdiction with respect to the Gas Properties or the ownership or operation of

any thereof. All necessary governmental permits, licenses and other

authorizations with regard to the ownership or operation of the Gas Properties

have been obtained and maintained in effect. No violations exist in respect of

such permits, licenses or other authorizations, except for violations that would

not have a material adverse effect on the ownership or operation of the Gas

Properties.

3.9. ENVIRONMENTAL COMPLIANCE. Except as set forth on the Exhibit, no

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

pollutant, waste, contaminant, or hazardous, extremely hazardous, or toxic

material, substance, chemical or waste identified, defined or regulated as such

under any law relating to health and safety or environmental matters is present,

or has been handled, managed, stored, transported, processed, treated, disposed

of, released, migrated or has escaped on, in, from, under or in connection with

the Gas Properties or the ownership or operation thereof such as to cause a

condition or circumstance that would result in a violation of any existing law

relating to health and safety or environmental matters or in a remediation,

removal, response, restoration, abatement, investigative or monitoring

obligation.

3.10. STATUS OF CONTRACTS. All of the Contracts are in full force and

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

effect, and Seller is not in breach of, or with the lapse of time or the giving

of notice, or both, would be in breach of, any of its obligations there-under

except to the extent that such breaches would not have a material adverse effect

on the ownership or operation of the Properties.

3.11. PRODUCTION BURDENS, TAXES, EXPENSES AND REVENUES. All payments due

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

under or with respect to the Gas Proper-ties have been properly and timely paid

or funds set aside in escrow for such purpose. All ad valorem, property,

production, severance and other taxes based on or measured by the owner-ship of

the Gas Properties or the production of Substances there-from have been properly

and timely paid. All expenses pay-able under the terms of the Con-tracts have

been properly and timely paid except for such expenses as are being currently

paid prior to delinquency in the ordinary course of business. All of the

proceeds from the sale of Substances are being properly and timely paid to

Seller by the purchasers of production without suspension or indemnity other

than standard division order indemnities. Seller has not nor will Seller be

obligated by virtue of any prepayment made under any production sales contract

or any other contract containing a "take or pay" clause, or under any

arrangement, to deliver oil, gas or other minerals produced from or allocated to

any of the Gas Properties at some future time without receiving full payment

therefor at the time of delivery. Seller has conducted all sales of gas which is

subject to the balancing rights of third parties in accordance with the

operating agreement and gas balancing agreement covering the specific Gas

Property. Seller will clear all imbalances as of the Effective Date.

3.12. CURRENT COMMITMENTS. The Exhibits contain a true and complete list as

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

of the date of this Agreement of all authorities for expenditures to drill or

rework Wells or for capital expenditures pursuant to any of the Contracts for

which all of the activities anticipated in such authorities for expenditures or

commitments have not been completed by the date of this Agreement.

3.13 LIENS AND ENCUMBRANCES. During Seller's ownership of the Properties

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

and to the best of Seller's knowledge, except as shown on the Exhibit, there are

no liens or encumbrances burdening the Properties that will not be released at

Closing. At Closing Seller will pay and discharge all liens and encumbrances on

the Properties.

4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants

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

to Seller that:

4.1. ORGANIZATION. Buyer is a corporation duly organized, validly existing

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

and in good standing under the laws of the State of Wyoming, and qualified to do

business in the State of Wyoming.

4.2. AUTHORIZATION AND AUTHORITY. The execution and delivery of this

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

Agreement have been and the performance of this Agreement and the transactions

contemplated hereby shall be at the time required to be performed hereunder,

duly and validly authorized by all requisite corporate action on the part of

Buyer. Buyer has full corporate power and authority to carry on its business as

presently con-ducted, to enter into this Agreement, to purchase the Properties

on the terms de-scribed in this Agreement and to perform its other obligations

under this Agreement.

4.3. ENFORCEABILITY. This Agreement has been duly executed and delivered on

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

behalf of Buyer, and constitutes a legal, valid and binding obligation of Buyer

enforceable in accordance with its terms, except as enforce-ability may be

limited by Equitable Limitations. At the Closing all documents required

hereunder to be executed and de-livered by Buyer shall be duly executed and

delivered and shall constitute legal, valid and binding obligations of Buyer

enforceable in accordance with their terms, except as enforceability may be

limited by Equitable Limitations.

4.4. CONFLICTS. The execution and delivery of this Agreement by Buyer does

---------

not, and the consummation of the transactions contemplated by this Agreement

shall not, (a) violate or be in conflict with, or require the consent of any

person or entity under, any provision of Buyer's Certificate of Organization,

bylaws or other governing documents, (b) conflict with, result in a breach of,

constitute a default (or an event that with the lapse of time or notice, or

both, would constitute a default) under any agreement or instrument to which

Buyer is a party or is bound, or (c) violate any provision of or require any

consent, authorization or approval under any judgment, decree, judicial or

administrative order, award, writ, injunction, statute, rule or regulation

applicable to Buyer.

4.5. RELIANCE. Prior to executing this Agreement, Buyer has been afforded

--------

an opportunity to (a) examine the Gas Properties and such materials as it has

requested to be provided to it by Seller, (b) discuss with representatives of

Seller such materials and the nature and operation of the Gas Properties and (c)

investigate the condition, including subsurface condition, of the Gas Properties

and Surface Rights and the condition of the Equipment. In entering into this

Agreement, Buyer has relied solely on the express representations and covenants

of Seller in this Agreement, its independent investigation of, and judgment with

respect to, the Equipment and the Gas Properties and the advice of its own

legal, tax, economic, environmental, engineering, geological and geophysical

advisors and not on any comments or statements of any representatives of, or

consultants or advisors engaged by, Seller or the persons representing the

Seller.

4.6. QUALIFIED LEASEHOLDER. Buyer meets the area-wide bonding and any other

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

bonding requirements of the Bureau of Land Management and other governmental

authorities, and, after the Closing, Buyer anticipates that it will continue to

be able to meet such bonding requirements. Buyer is, and, after the Closing, is

expected to continue to be, otherwise qualified to own the Gas Properties.

4.7. QUALIFIED PURCHASER. Buyer is an experienced and knowledgeable

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

investor and operator in the oil and gas business. Buyer is acquiring the Gas

Properties for its own account and not with a view to, or for offer of resale in

connection with, a distribution thereof, within the meaning of the Securities

Act of 1933, 15 U.S.C. ' 77a et seq., and any other rules, regulations, and laws

pertaining to the distribution of securities.

4.8. AVAILABLE FUNDS. The Buyer has, or reasonably believes it can obtain a

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

commitment to acquire, the funds by which to pay the Purchase Price at Closing.

5. COVENANTS OF SELLER PENDING CLOSING.

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

5.1. CONDUCT OF BUSINESS PENDING CLOSING. Seller covenants that from the

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

date hereof to the Closing Date, except (a) as provided herein, (b) as required

by any obligation, agreement, lease, contract, or instrument referred to on the

Exhibit, or (c) as otherwise consented to in writing by Buyer, Selle

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