COLORADO WYOMING RESERVE COMPANY

                                       and

            JAMES E. MOORE REVOCABLE TRUST U/D/T DATED JULY 28, 1994



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

                                WARRANT AGREEMENT

                           Dated as of August 25, 1998



<PAGE>

            WARRANT AGREEMENT dated as of August 25, 1998 between COLORADO
WYOMING RESERVE COMPANY, a Wyoming corporation (the "Company"), and JAMES E.
MOORE REVOCABLE TRUST U/D/T DATED JULY 28, 1994 (the "Holder").

            WHEREAS, the Company proposes to sell Common Stock Purchase
Warrants, as hereinafter described (the "Warrants"), for a purchase price of
$0.001 per Warrant, to purchase up to an aggregate of 180,000 shares of Common
Stock, par value $0.01 per share (the "Common Stock"), of the Company (the
Common Stock issuable on exercise of the Warrants being referred to herein as
the "Warrant Shares"), each Warrant entitling the holder thereof to purchase one
Warrant Share.

            NOW, THEREFORE, in consideration of the premises and the payment by
Holder of $180.00, receipt of which is hereby acknowledged by the Company, and
the mutual agreements herein set forth, the parties hereto agree as follows:

            SECTION 1. WARRANT CERTIFICATES. The certificates evidencing the
Warrants (the "Warrant Certificates") to be delivered pursuant to this Agreement
shall be in registered form only and shall be substantially in the form set
forth in Exhibit A attached hereto.

            SECTION 2. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future Chairman of
the Board, President, Vice President, Secretary or Assistant Secretary and may
be imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be countersigned and delivered or disposed of he shall have
ceased to hold such office. The seal of the Company may be in the form of a
facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates.

            Any Warrant Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Warrant Certificate,
shall be a proper officer of the Company to sign such Warrant Certificate,
although at the date of the execution of this Warrant Agreement any such person
was not such officer.

            SECTION 3. REGISTRATION. The Company shall number and register the
Warrant Certificates in a corporate registry as they are issued by the Company.
The Company may deem and treat the registered holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for all purposes, and the
Company shall not be affected by any notice to the contrary.

            SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES. Subject to the
provisions of Section 20 hereof, the Company shall from time to time register
the transfer of any outstanding Warrant Certificates upon the records to be
maintained by it for that purpose, upon surrender thereof accompanied (if so
required by it) by a written instrument or instruments of transfer duly executed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the


<PAGE>

transferee(s) and the surrendered Warrant Certificate shall be canceled by the
Company. Canceled Warrant Certificates shall thereafter be disposed of in a
manner satisfactory to the Company.

            The Holder agrees that each certificate representing Warrant Shares
will bear the following legend:

            "The securities evidenced or constituted hereby have been
            acquired for investment and have not been registered under
            the Securities Act of 1933, as amended. Such securities may
            not be sold, transferred, pledged or hypothecated unless the
            registration provisions of said Act have been complied with
            or unless the Company has received an opinion of counsel
            reasonably satisfactory to the Company that such
            registration is not required."

            Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Company at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled by the Company.

      SECTION 5. TERMS OF WARRANTS, EXERCISE OF WARRANTS. Subject to the terms
of this Agreement, the Warrant holder shall have the right, which may be
exercised commencing at the opening of business on August 25, 1998 and until 
5:00 p.m., Pacific time on August 24, 2008 to receive from the Company the 
number of fully paid and nonassessable Warrant Shares which the Warrant holder
may at the time be entitled to receive on exercise of such Warrants and payment
of the Exercise Price then in effect for such Warrant Shares. In the
alternative, the Warrant holder may exercise its right, during the Exercise
Period, to receive Warrant Shares on a net basis, such that, without the
exchange of any funds, the Warrant holder receives that number of Warrant Shares
otherwise issuable (or payable) upon exercise of its Warrants less that number
of Warrant Shares having an aggregate fair market value (as defined below) at
the time of exercise equal to the aggregate Exercise Price that would otherwise
have been paid by the Warrant holder. For purposes of the foregoing sentence,
"fair market value" of the Warrant Shares shall mean (i) if the Common Stock is
in the over-the-counter market and not in The Nasdaq National Market nor on any
national securities exchange, the average of the per share closing bid price on
the 30 consecutive trading days immediately preceding the date in question, as
reported by The Nasdaq Small Cap Market (or an equivalent generally accepted
reporting service if quotations are not reported on The Nasdaq Small Cap
Market), or (ii) if the Common Stock is traded in The Nasdaq National Market or
on a national securities exchange, the average for the 30 consecutive trading
days immediately preceding the date in question of the daily per share closing
prices in The Nasdaq National Market or on the principal stock exchange on which
it is listed, as the case may be. For purposes of clause (i) above, if trading
in the Common Stock is not reported by The Nasdaq Small Cap Market, the
applicable bid price referred to in said clause shall be the lowest bid price as
reported on the OTC Electronic Bulletin Board of the National Association of
Securities Dealers, Inc. or, if not reported thereon, as reported in the "pink
sheets" published by National Quotation Bureau, Incorporated, and, if such
securities are not so reported, shall be the price of a share of Common Stock
determined by the Company's Board of Directors in good faith. The closing price
referred to in clause (ii) above shall be the last reported sale price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case in The Nasdaq National Market or on
the national securities exchange on which the Common Stock is then listed.. Each
Warrant not exercised prior to 5:00 p.m., Pacific time, on August 24, 2008 shall
become void and all rights


                                        2

<PAGE>

thereunder and all rights in respect thereof under this agreement shall cease as
of such time. No adjustments as to dividends will be made upon exercise of the
Warrants.

            A Warrant may be exercised upon surrender to the Company at its
principal office of the certificate or certificates evidencing the Warrants to
be exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, and upon payment to the Company of the exercise price (the
'Exercise Price") which is set forth in the form of Warrant Certificate attached
hereto as Exhibit A as adjusted as herein provided, for the number of Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price shall be made (i) in cash or by certified or official
bank check payable to the order of the Company, or (ii) in the manner provided
in the first paragraph of this Section 5.

            Upon such surrender of Warrants and payment of the Exercise Price
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Warrant holder and in the name of the
Warrant holder, or, upon satisfaction of the transfer requirements in Section 4,
such other names as the holder may designate, a certificate or certificates for
the number of full Warrant Shares issuable upon the exercise of such Warrants
together with cash as provided in Section 11; PROVIDED, HOWEVER, that if any
consolidation, merger or lease or sale of assets is proposed to be effected by
the Company as described in subsection (m) of Section 10 hereof, or a tender
offer or an exchange offer for shares of Common Stock of the Company shall be
made, upon such surrender of Warrants and payment of the Exercise Price as
aforesaid, the Company shall, as soon as possible, but in any event not later
than five business days thereafter, issue and cause to be delivered the full
number of Warrant Shares issuable upon the exercise of such Warrants in the
manner described in this sentence together with cash as provided in Section 11.
Such certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price.

            The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued pursuant to the provisions of this Section.

            All Warrant Certificates surrendered upon exercise of Warrants shall
be canceled by the Company. Such canceled Warrant Certificates shall then be
disposed of by the Company.

            SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.

            SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue in


                                        3

<PAGE>

exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also

satisfactory to them. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.

            SECTION 8. RESERVATION OF WARRANT SHARES. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.

            The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 11. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto, transmitted to each holder pursuant to Section 12
hereof.

            Before taking any action which would cause an adjustment pursuant to
Section 10 hereof to reduce the Exercise Price below the then par value (if any)
of the Warrant Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.

            The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof other than liens, charges or
security interests created or suffered by the holder thereof.

            SECTION 9. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed.

            SECTION 10. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES ISSUABLE. The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 10. For purposes of
this Section 10, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.


                                        4

<PAGE>

            (a)   ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.

            If the Company:

                  (1) pays a dividend or makes a distribution on its Common
      Stock in shares of its Common Stock;

                  (2) subdivides its outstanding shares of Common Stock into a
      greater number of shares;

                  (3) combines its outstanding shares of Common Stock into a
      smaller number of shares;

                  (4) makes a distribution on its Common Stock in shares of its
      capital stock other than Common Stock; or

                  (5) issues by reclassification of its Common Stock any shares
      of its capital stock;

then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.

            The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.

            If after an adjustment a holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.

            Such adjustment shall be made successively whenever any event listed
above shall occur.

            (b)   ADJUSTMENT FOR RIGHTS ISSUE.

            If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 60 days
after the record date mentioned below to purchase shares of Common Stock at a
price per share less than the current market price per share on that record
date, the Exercise Price shall be adjusted in accordance with the formula:

                                  O  +  N X P
                                        -----
                        E'  =  E  x   M
                                   -------------
                                     O + N


                                        5

<PAGE>

where:

      E' =  the adjusted Exercise Price.

      E =   the current Exercise Price.

      O =   the number of shares of Common Stock outstanding on the record date.

      N =   the number of additional shares of Common Stock offered.

      P =   the offering price per share of the additional shares.

      M =   the current market price per share of Common Stock on the record
            date.

            The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.

            (c)   ADJUSTMENT FOR OTHER DISTRIBUTIONS.

            If the Company distributes to all holders of its Common Stock any of
its assets or debt securities or any rights or warrants to purchase debt
securities, assets or other securities of the Company, the Exercise Price shall
be adjusted in accordance with the formula:

                        E'  =  E  x  M  -  F
                                    ---------
                                        M

where:

      E' =  the adjusted Exercise Price.

      E =   the current Exercise Price.

      M =   the current market price per share of Common Stock on the record
            date mentioned below.

      F =   the fair market value on the record date of the assets,
            securities, rights or warrants applicable to one share of Common
            Stock. The Board of Directors shall determine the fair market value.

            The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.


                                        6

<PAGE>

            This subsection (c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this subsection does not apply to rights, options
or warrants referred to in subsection (b) of this Section 10.

            (d)   ADJUSTMENT FOR COMMON STOCK ISSUE.

            If the Company issues shares of Common Stock for a consideration per
share less than the current market price per share on the date the Company fixes
the offering price of such additional shares, the Exercise Price shall be
adjusted in accordance with the formula:

                                            P
                                            -
                        E'  =  E  x  O  +  M
                                     --------    
                                          A

where:

      E' =  the adjusted Exercise Price.

      E =   the then current Exercise Price.

      O =   the number of shares outstanding immediately prior to the issuance
            of such additional shares.

      P =   the aggregate consideration received for the issuance of such
            additional shares.

      M =   the current market price per share on the date of issuance of such
            additional shares.

      A =   the number of shares outstanding immediately after the issuance of
            such additional shares.

            The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.

            This subsection (d) does not apply to:

                  (1)   any of the transactions described in subsections (b) and
      (c) of this Section 10,

                  (2) the exercise of Warrants, or the conversion or exchange of
      other securities convertible or exchangeable for Common Stock,

                  (3) Common Stock issued to the Company's employees under bona
      fide employee benefit plans adopted by the Board of Directors and approved
      by the holders of Common Stock when required by law, if such Common Stock
      would otherwise be covered by this subsection (d) (but only to the extent
      that the aggregate number of shares excluded hereby and issued after the
      date of this Warrant Agreement shall not exceed 5% of the Common Stock


                                       7

<PAGE>

      outstanding at the time of the adoption of each such plan, exclusive of
      antidilution adjustments thereunder),

                  (4) Common Stock upon the exercise of rights or warrants
      issued to the holders of Common Stock,

                  (5) Common Stock issued to (A) shareholders of any person
      which merges into the Company in proportion to their stock holdings of
      such person immediately prior to such merger, upon such merger or (B)
      the seller of all or substantially all the assets of another business
      upon the closing of such acquisition,

                  (6) Common Stock issued in a bona fide public offering
      pursuant to a firm commitment or best efforts underwriting (provided,
      however, in the case of a best efforts underwriting, it is conducted
      through a broker-dealer which is a member firm of the National Association
      of Securities Dealers, Inc.), or

                  (7) Common Stock issued in a bona fide private placement
      through a placement agent which is a member firm of the National
      Association of Securities Dealers, Inc. (except to the extent that any
      discount from the current market price attributable to restrictions on
      transferability of the Common Stock, as determined in good faith by the
      Board of Directors and described in a Board resolution which shall be
      filed with the Holder, shall exceed 20%).

            (e)   ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE.

            If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 10) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the current market price per share on the date of issuance
of such convertible securities, the Exercise Price shall be adjusted in
accordance with this formula:

                                            P
                                            -     
                        E'  =  E  x  O  +  M
                                    ---------
                                      O  +  D

where:

      E' =  the adjusted Exercise Price.

      E =   the then current Exercise Price.

      O =   the number of shares outstanding immediately prior to the issuance
            of such convertible securities.

      P =   the aggregate consideration received for the issuance of such
            convertible securities.

      M =   the current market price per share on the date of issuance of such
            convertible securities.


                                        8

<PAGE>

      D =   the maximum number of shares deliverable upon conversion or in
            exchange for such convertible securities at the initial conversion
            or exchange rate.

            The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.

            If all of the Common Stock deliverable upon conversion or exchange
of such convertible securities have not been issued when such convertible
securities are no longer outstanding, then the Exercise Price shall promptly be
readjusted to the Exercise Price which would then be in effect had the
adjustment upon the issuance of such convertible securities been made on the
basis of the actual number of shares of Common Stock issued upon conversion or
exchange of such convertible securities.

            This subsection (e) does not apply to:

                  (1) convertible securities issued to (A) shareholders of any
      person which merges into the Company, or with a subsidiary of the Company,
      in proportion to their stock holdings of such person immediately prior to
      such merger, upon such merger or (B) the seller of all or substantially
      all the assets of another business upon the closing of such acquisition,

                  (2) convertible securities issued in a bona fide public
      offering pursuant to a or best efforts underwriting (provided, however, in
      the case of a best efforts underwriting, it is conducted through a
      broker-dealer which is a member firm of the National Association of
      Securities Dealers, Inc.), or

                  (3) convertible securities issued in a bona fide private
      placement through a placement agent which is a member firm of the National
      Association of Securities Dealers, Inc. (except to the extent that any
      discount from the current market price attributable to restrictions on
      transferability of Common Stock issuable upon conversion, as determined in
      good faith by the Board of Directors and described in a Board resolution
      which shall be filed with the Holder, shall exceed 20% of the then current
      market price).

            (f)   CURRENT MARKET PRICE.

            In subsections (b), (c), (d) and (e) of this Section 10 the current
market price per share of Common Stock on any date shall be the fair market
value per Warrant Share as determined in accordance with the first paragraph of
Section 5 of this Agreement.

            (g)   CONSIDERATION RECEIVED.

            For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 10, the following shall
apply:

                  (1) in the case of the issuance of shares of Common Stock for
      cash, the consideration shall be the amount of such cash, provided that in
      no case shall any deduction be made for any commissions, discounts,
      placement fees or other expenses incurred by the Company for any
      underwriting or placement of the securities or otherwise in connection
      therewith;


                                        9

<PAGE>

                  (2) in the case of the issuance of shares of Common Stock for
      a consideration in whole or in part other than cash, the consideration
      other than cash shall be deemed to be the fair market value thereof as
      determined in good faith by the Board of Directors (irrespective of the
      accounting treatment thereof), whose determination shall be conclusive,
      and described in a Board resolution, a copy of which shall be mailed to
      each holder; and

                  (3) in the case of the issuance of securities convertible into
      or exchangeable for shares, the aggregate consideration received therefor
      shall be deemed to be the consideration received by the Company for the
      issuance of such securities plus the additional minimum consideration, if
      any, to be received by the Company upon the conversion or exchange thereof
      (the consideration in each case to be determined in the same manner as
      provided in clauses (1) and (2) of this subsection).

            (h)   WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.

            No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.

            All calculations under this Section shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.

            (i)   WHEN NO ADJUSTMENT REQUIRED.

            No adjustment need be made for a transaction referred to in
subsections (a), (b), (c), (d) or (e) of this Section 10 if Warrant holders are
to participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.

            No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.

            No adjustment need be made for a change in the par value or no par
value of the Common Stock.

            To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.

            (j) NOTICE OF ADJUSTMENT.

            Whenever the Exercise Price is adjusted, the Company shall provide
the notices required by Section 12 hereof.

            (k)   VOLUNTARY REDUCTION.

            The Company from time to time may reduce the Exercise Price by any
amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period;


                                       10

<PAGE>

PROVIDED, HOWEVER, that in no event may the Exercise Price be less than the par
value of a share of Common Stock.

            Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.

            A reduction of the Exercise Price does not change or adjust the
Exercise Price otherwise in effect for purposes of subsections (a) through (l)
of this Section 10.

            (l)   NOTICE OF CERTAIN TRANSACTIONS.

            If:

                  (1) the Company takes any action that would require an
      adjustment in the Exercise Price pursuant to subsections (a), (b), (c),
      (d) or (e) of this Section 10 and if the Company does not arrange for
      Warrant holders to participate pursuant to subsection (i) of this Section
      10;

                  (2) the Company takes any action that would require a
      supplemental Warrant Agreement pursuant to subsection (m) of this Section
      10; or

                  (3) there is a liquidation or dissolution of the Company, the
      Company shall mail to Warrant holders a notice stating the proposed record
      date for a dividend or distribution or the proposed effective date of a
      subdivision, combination, reclassification, consolidation, merger,
      transfer, lease, liquidation or dissolution. The Company shall mail the
      notice at least 15 days before such date. Failure to mail the notice or
      any defect in it shall not affect the validity of the transaction.

            (m) REORGANIZATION OF COMPANY.

            If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Warrants shall automatically become exercisable for the
kind and amount of securities, cash or other assets which the holder of a
Warrant would have owned immediately after the consolidation, merger, transfer
or lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than the Company, or the person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section.
The successor Company shall mail to Warrant holders a notice describing the
supplemental Warrant Agreement.

            If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.


                                       11

<PAGE>

            If this subsection (m) applies, subsections (a), (b), (c), (d) and
(e) of this Section 10 do not apply.

            (n)   WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.

            In any case in which this Section 10 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 11; PROVIDED, HOWEVER, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.

            (o) ADJUSTMENT IN NUMBER OF SHARES.

            Upon each adjustment of the Exercise Price pursuant to this Section
10, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:

                        N'  =  N   x   E
                                    ------
                                        E'

where:

      N' =  the adjusted number of Warrant Shares issuable upon exercise of a
            Warrant by payment of the adjusted Exercise Price.

      N =   the number or Warrant Shares previously issuable upon exercise of
            a Warrant by payment of the Exercise Price prior to adjustment.

      E' =  the adjusted Exercise Price.

      E =   the Exercise Price prior to adjustment.

            (p) FORM OF WARRANTS.

            Irrespective of any adjustments in the Exercise Price or the number
or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.

            SECTION 11. FRACTIONAL INTERESTS. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon


                                       12

<PAGE>

the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the Exercise Price on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.

            SECTION 12. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
Exercise Price pursuant to Section 10, the Company shall promptly thereafter (i)
cause to be given to each of the registered holders of the Warrant Certificates
at his address appearing on the Warrant register a certificate of the Principal
Financial Officer and Principal Accounting Officer of the Company setting forth
the Exercise Price after such adjustment and setting forth in reasonable detail
the method of calculation and the facts upon which such calculations are based
and setting forth the number of Warrant Shares (or portion thereof) issuable
after such adjustment in the Exercise Price, upon exercise of a Warrant and
payment of the adjusted Exercise Price, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, by first-class
mail, postage prepaid. Where appropriate, such notice may be given in advance
and included as a part of the notice required to be mailed under the other
provisions of this Section 12.

            In case:

            (a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or

            (b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or distributions
referred to in subsection (a) of Section 10 hereof); or

            (c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or

            (d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or

            (e) the Company proposes to take any action (other than actions of
the character described in Section 10(a)) which would require an adjustment of
the Exercise Price pursuant to Section 10; then the Company shall cause to be
given to each of the registered holders of the Warrant Certificates at his
address appearing on the Warrant register, at least 20 days (or 10 days in any
case specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in


                                       13

<PAGE>

any tender offer or exchange offer for shares of Common Stock, or (iii) the date
on which any such consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of shares of Common
Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure to
give the notice required by this Section 12 or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up, or the vote upon any action.

            Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.

            SECTION 13. NOTICES TO COMPANY. Any notice or demand authorized by
this Agreement to be given or made by the Company or by the registered holder of
any Warrant Certificate to or on the Company shall be sufficiently given or made
when and if deposited in the mail, first class or registered, postage prepaid,
addressed (until another address is filed in writing by the Company), as
follows:

                  COLORADO WYOMING RESERVE COMPANY
                  751 Horizon Court, Suite 205
                  Grand Junction, Colorado 81506

            In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Transfer Agent.

            SECTION 14. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
holders may from time to time supplement or amend this Agreement with the
approval of all holders of Warrant Certificates.

            SECTION 15.  SUCCESSORS.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Holder shall bind and
inure to the benefit of their respective successors and assigns hereunder.

            SECTION 16. TERMINATION. This Agreement shall terminate at 5:00
p.m., Pacific time on August 24, 2008. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised.

            SECTION 17. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Colorado and for all purposes shall be
construed in accordance with the internal laws of said State, provided, however,
that if, as a result of the Company's incorporation in the State of Wyoming, the
laws of that State should govern a particular issue, the internal laws of the
State of Wyoming shall govern that issue.


                                       14

<PAGE>

            All judicial proceedings arising out of or relating to this
Agreement and each Warrant Certificate issued hereunder may be brought in any
state or federal court of competent jurisdiction in the State of California, and
by execution and delivery of this Agreement, the Company accepts for itself
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and waives any defense of forum non convenience and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Agreement or
any Warrant Certificate issued hereunder.

            SECTION 18. TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT. The
Warrants may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee. Subject to compliance with such laws and the
provisions of Section 20, title to the Warrants may be transferred by
endorsement (by the Holder executing the Assignment Form annexed to the Warrant
Certificate) and delivery in the same manner as a negotiable instrument
transferable by endorsement and delivery.

            SECTION 19. EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of the
Warrant Certificate for exchange, properly endorsed on the Assignment Form and
subject to the provisions of this Agreement with respect to compliance with
applicable securities laws and with the limitations on assignments and transfers
and contained in Section 18, the Company at its expense shall issue to or on the
order of the Holder a new Warrant Certificate of like tenor, in the name of the
Holder or as the Holder may direct, for the number of shares issuable upon
exercise hereof.

            SECTION 20. COMPLIANCE WITH SECURITIES LAWS. The Holder agrees that
the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the federal or any state
securities laws. Prior to any proposed transfer of this Warrant (other than a
proposed transfer pursuant to an effective registration statement under the
Securities Act of 1933), the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel satisfactory to the Company (it
being agreed that Freshman, Marantz, Orlanski, Cooper & Klein, a law
corporation, shall be satisfactory) to the effect that the proposed transfer may
be effected without registration under the Securities Act, whereupon the holder
shall be entitled to transfer this Warrant in accordance with the terms of its
notice; provided, however, that no such opinion of counsel shall be required for
a transfer to one or more partners of the transferor (in the case of a
transferor that is a partnership) or to an affiliated corporation (in the case
of a transferor that is a corporation). Each Warrant transferred as above
provided shall bear the legend set forth at the beginning of the form Warrant
Certificate annexed hereto as Exhibit A.

            SECTION 21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Holder and the registered holders of the Warrant Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Holder and the
registered holders of the Warrant Certificates.

            SECTION 22. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.


                                       15

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.

                                   COLORADO WYOMING RESERVE COMPANY


                                   By:   /s/  Kim M. Fuerst
                                      -----------------------------------------
                                   Kim M. Fuerst
                                   Title: President

[Seal]


Attest:
       ------------------
       Secretary

                                   JAMES E. MOORE REVOCABLE TRUST U/D/T DATED
                                   JULY 28, 1994,


                                   BY:  /s/  James E. Moore
                                   --------------------------------
                                      JAMES E. MOORE, Trustee


                                      16

<PAGE>

                                                                     EXHIBIT A

                         [Form of Warrant Certificate]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.

                    EXERCISABLE ON OR BEFORE August 24, 2008

No. 1                                                         180,000 Warrants

                               Warrant Certificate

                        COLORADO WYOMING RESERVE COMPANY

            This Warrant Certificate certifies that JAMES E. MOORE REVOCABLE
TRUST U/D/T DATED JULY 28, 1994, or registered assigns, is the registered holder
of Warrants expiring August 24, 2008 (the "Warrants") to purchase Common Stock,
par value $0.01 per share (the "Common Stock"), of COLORADO WYOMING RESERVE
COMPANY, a Wyoming corporation (the "Company"). Each Warrant entitles the holder
upon exercise to receive from the Company on or before 5:00 p.m. Pacific Time on
August 24, 2008, one fully paid and nonassessable share of Common Stock (a
"Warrant Share") at the initial exercise price (the "Exercise Price") of $1.00
payable in lawful money of the United States of America upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office of the
Company, but only subject to the conditions set forth herein and in the Warrant
Agreement referred to herein. Notwithstanding the foregoing, Warrants may be
exercised without the exchange of funds pursuant to the net exercise provisions
of Section 5 of the Warrant Agreement. The Exercise Price and number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.

            No Warrant may be exercised after 5:00 p.m., Pacific Time on August
24, 2008, and to the extent not exercised by such time such Warrants shall
become void.

            This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of Colorado, provided, however,
that if, as a result of the Company's incorporation in the State of Wyoming, the
laws of that State should govern a particular issue, the internal laws of the
State of Wyoming shall govern that issue.

            All judicial proceedings arising out of or relating to this Warrant
Certificate may be brought in any state or federal court of competent
jurisdiction in the State of California, and by execution and delivery of this
Agreement, the Company accepts for itself generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non convenience and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Warrant Certificate.


                                       A-1

<PAGE>

            The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring August 24, 2008 entitling the holder
on exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of August 25,1998 (the "Warrant
Agreement"), duly executed and delivered by the Company to James E. Moore
Revocable Trust U/D/T dated July 28, 1994 (the "Holder"), which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company, the
Holder and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder and any transferee of the registered Holder) of the
Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof
upon written request to the Company.

            Warrants may be exercised at any time on or before August 24, 2008.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Company. In the event that upon any
exercise of Warrants evidenced hereby the number of Warrants exercised shall be
less than the total number of Warrants evidenced hereby, there shall be issued
to the holder hereof or his assignee a new Warrant Certificate evidencing the
number of Warrants not exercised. No adjustment shall be made for any dividends
on any Common Stock issuable upon exercise of this Warrant.

            The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.

            Warrant Certificates, when surrendered at the office of the Company
by the registered holder thereof may be exchanged, in the manner and subject to
the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

            Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.

            The Company may deem and treat the registered holder(s) thereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.


                                       A-2

<PAGE>

            IN WITNESS WHEREOF, COLORADO WYOMING RESERVE COMPANY has
caused this Warrant Certificate to be signed by its President and by its
Secretary, and has caused its corporate seal to be affixed hereunto or imprinted
hereon.

Dated: August 25, 1998

                                   COLORADO WYOMING RESERVE COMPANY


                                   By
                                     ------------------------------------------
                                              President


                                   By
                                     ------------------------------------------
                                              Secretary




                                       A-3

<PAGE>

                         [Form of Election to Purchase]

                    (To Be Executed Upon Exercise Of Warrant)

            The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive          shares of Common
                                                    --------
Stock and herewith tenders payment for such shares to the order of COLORADO
WYOMING RESERVE COMPANY in the amount of $        in accordance with the terms
                                          -------
hereof, unless the holder is exercising Warrants pursuant to the net exercise
provisions of Section 5 of the Warrant Agreement. The undersigned requests that
a certificate for such shares be registered in the name of                ,
                                                           ---------------
whose address is                                                    and that
                ---------------------------------------------------
such shares be delivered to                      whose address is . If said
                            --------------------
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of              ,
                                                                 --------------
whose address is                                         and that such Warrant
                 ---------------------------------------
Certificate be delivered to                       , whose address is            
                            ----------------------                  ------------
-----------------.



                                   Signature:

Date:



                                       A-4