A G R E E M E N T


         THIS  AGREEMENT,  made and entered  into as of the 3rd day of December,
1991,  by and  between  COASTAL  CARIBBEAN  OILS &  MINERALS,  LTD.,  a  Bermuda
corporation  with its  principal  office at  Hamilton,  Bermuda  (the "CCO") and
COASTAL PETROLEUM  COMPANY,  a Florida  corporation with its principal office at
Tallahassee, Florida ("CPC")

                                   WITNESSETH:

         WHEREAS CCO has entered into an agreement (the "Purchase Agreement") of
even date herewith with John J. D'Alessandro,  M.D., F.A.C.S.  (the "Purchaser")
for the sale to Purchaser of shares of CPC presently owned by CCO; and

         WHEREAS the Purchase  Agreement provides for the exchange by Purchaser,
at his  option,  of some or all of the  shares  of CPC  purchased  by  Purchaser
pursuant to the Purchase  Agreement for a royalty as more fully set forth in the
Purchase Agreement; and

         WHEREAS CCO desires to acquire from CPC a royalty suitable for transfer
to Purchaser  pursuant to the Purchase Agreement in exchange for one-half of the
gross  proceeds  received from Purchaser  pursuant to the Purchase  Agreement or
such other consideration as the parties hereto may agree; and

         WHEREAS CPC desires to grant such royalty to CCO in order to obtain the
funds necessary to pursue a suitable oil and gas exploration program and to fund
CPC's other business activities;

         NOW,  THEREFORE,  in  consideration  of the  covenants and premises set
forth herein the parties hereby agree as follows:


<PAGE>


         1. CPC shall upon demand and upon  delivery of the amounts set forth in
Section 2 hereof deliver to CCO a fully executed royalty agreement substantially
in the form  attached  hereto as Exhibit A on each and every  occasion  that CCO
shall  make  such  demand  in  connection  with the sale by CCO of shares of CPC
common stock to Dr. John J.  D'Alessandro  pursuant to the  Purchase  Agreement.
Each royalty so delivered shall grant to CCO a royalty interest in the leases of
CPC no greater and no less than  required to satisfy the  obligations  of CCO to
Purchaser in the event that he shall  request the transfer to him of the royalty
in exchange for shares of the common stock of CPC.

         2. CCO  shall pay to CPC on each such  occasion  one-half  of the gross
proceeds  received from Purchaser  pursuant to the Purchase  Agreement,  or such
other  consideration  as the parties  hereto  shall  agree,  in exchange for the
issuance to CCO of the royalty from CPC.

         3. CCO may not grant,  bargain,  sell,  convey,  assign,  or  otherwise
transfer the royalty  interest or any part thereof  granted hereby to any person
without the prior written  consent of CPC,  except that CCO may grant,  bargain,
sell,  convey,  assign or otherwise transfer said royalty interests to Purchaser
freely and  without  the  consent of CPC  provided  that such  transfers  are in
accordance with the provisions of the Purchase Agreement.

         4. Upon  acquisition of any such royalty,  CCO shall promptly file such
royalty on the appropriate land records of the State of Florida.


<PAGE>


         IN WITNESS  WHEREOF,  CCO and CPC have caused these presents to be duly
executed by their proper officers as of the day and year first written above.

                                                 COASTAL PETROLEUM COMPANY



                                                 By:      /s/Arthur B. O'Donnell
                                                          Arthur B. O'Donnell
                                                          Its Vice President

ATTEST:


/s/ James J. Gaughran
Its Secretary

                                                 COASTAL CARIBBEAN OILS
                                                   & MINERALS, LTD.


                                                 By:      /s/ Phillip W. Ware
                                                          Phillip W. Ware
                                                          Its Vice President

ATTEST:


/s/ James J. Gaughran
Its Assistant Secretary



<PAGE>


                                                                       EXHIBIT A


                                    INDENTURE


         THIS  INDENTURE  made and entered  into this the ___ day of  _________,
199__, by and between COASTAL PETROLEUM COMPANY, a Florida  corporation with its
principal office at Gainesville,  Florida (the "Grantor") and COASTAL  CARIBBEAN
OILS &  MINERALS,  LTD.,  a Bermuda  corporation  with its  principal  office at
Hamilton, Bermuda (the "Grantee").

                              W I T N E S S E T H:

         For and in  consideration  of the sum of Ten Dollars ($10.00) and other
good and valuable  consideration in hand paid by Grantee to Grantor, the receipt
whereof is hereby  acknowledged,  Grantor  has and does hereby  grant,  bargain,
sell, convey, assign,  transfer, set over and deliver unto Grantee in fee simple
forever a royalty (the  "Royalty")  as more fully set forth  below.  The Royalty
shall entitle  grantee to receive  _______  percent (____%) of the gross amounts
received by Grantor or its successors in interest from the sale of all oil, gas,
casinghead  gas or  other  gaseous  substances  and  sulphur,  and each of them,
produced and saved from any and all of the so-called "working interest" areas of
Grantor's  Drilling Leases 224-A,  224-B and 248 executed by and between Grantor
and the Trustees of the Internal  Improvement Trust Fund of the State of Florida
(the "Trustees"), all as modified and amended to the date hereof (the "Leases"),
and _______ percent (____%) of all amounts  received by Grantor or its successor
in  interest as a royalty  ("the  "Trustees'  Payments")  pursuant to Section 4,
Paragraph 2 of that certain  Memorandum of  Settlement  dated January 6, 1976 by
and between the Trustees and Grantor.  Copies of the Leases and said  Memorandum
of Settlement  are hereto  attached and by this  reference made a part hereof as
fully and  completely  as if  incorporated  herein,  it being the  intention  of

<PAGE>

Grantor hereby to convey to Grantee an absolute  interest in and to (i) all oil,
gas,  casinghead gas or other gaseous  substances and sulphur produced and saved
from  said  lands  and  premises  of the  Leases,  and any  and all  extensions,
modifications  or  renewals  of any or all of the Leases and (ii) the  Trustees'
Payments.  The Royalty, as it relates to such oil, gas, casinghead gas and other
gaseous  substances  and sulphur  produced and saved from said premises shall be
made free of all burdens and costs,  except the Grantee's  proportionate part of
the severance or production taxes which may be assessed against said production,
and to be  deposited  to the credit of Grantee  into the  storage  tanks or pipe
lines to which the wells on said premises may be connected,  said tanks and pipe
line to be  provided  by  Grantor  without  cost to  Grantee.  At the  option of
Grantor,  the  Royalty  may be paid at  current  market  prices  therefor  as an
overriding  royalty  over and  above  the  rents  and  royalties  to be paid the
Trustees.  Said overriding royalty shall be accounted for, paid and delivered to
Grantee, together with that portion, if any, of the Royalty that is payable with
respect to the Trustees' Payments, on or before the 15th day of January,  April,
July and October for the  production  during the calendar  quarter  ended on the
last day of the  immediately  preceding  month,  it being  understood  that said
overriding  royalty of oil, gas,  casinghead gas or other gaseous substances and
sulphur,  and each of them,  shall be  computed as to the net  quantity  thereof
produced and saved after  deducting  any that may be used as fuel for  Grantor's
operations on said premises.

         TO HAVE AND TO HOLD the  Royalty  forever,  or so long as the Leases or
any extensions, modifications or renewals thereof, or any future leases covering
said lands between the Trustees and Grantor, its successors, assigns, successive
assigns,  or  distributees  are in effect and owned by Grantor,  its successors,
assigns, successive assigns or distributees,  and until all products, materials,
equipment, supplies and properties shall have been salvaged and disposed of.


<PAGE>

         In the  event  the  Leases  or any of them are  modified  to  provide a
unitizing clause,  then any portion of the lands covered by Leases may be pooled
or combined  with a lease or portion  thereof  covering  other lands in the same
general  area and state of  development,  such  other  lands  having an area not
greater than the total area of lands covered by the Leases which are included in
the unit included within a pooling  agreement or agreements which may be entered
into by Coastal Petroleum Company, its successors or assigns with other persons,
firms or  corporations.  Grantee  shall then receive on  production of oil, gas,
casinghead  gas, and other gaseous  substances  and sulphur only such portion of
the overriding  royalty stipulated herein as the acreage in which Grantee has an
overriding  royalty  interest  and which is  included  in such unit bears to the
total  acreage  so  pooled in the  particular  unit or units so  pooled.  When a
pooling  agreement is entered  into,  then within thirty days from the execution
thereof,  Grantor  shall  provide  to  Grantee  herein or to the  representative
designated to receive quarterly statements, a copy of such pooling agreement and
within a  reasonable  time  shall  cause the same to be  recorded  in the County
wherein the land is situated.

         Grantor is wholly  responsible  for the  payment of all  rentals to the
Trustees  to be paid  under  the  terms  and  provisions  of the  Leases  or any
extensions,  modifications or renewals  thereof,  and Grantor agrees to pay said
rentals so as not to permit any  default  or any  forfeiture  to occur as to any
drilling blocks in the Leases described on account of non-payment of rentals.

         Grantee  shall not be  responsible  for the  payment of any  rentals or
other performances under the Leases or any extensions, modifications or renewals
thereof.


<PAGE>


         Said  overriding  royalty  shall be  payable  to  Grantee  on the dates
aforesaid free and clear of all cost of drilling, development, operations, taxes
or  otherwise,  except  that  Grantee  shall pay its  proportionate  part of the
severance or production taxes which may be assessed against said production.

         Grantor, its successors and assigns retain the right to use the oil and
gas  produced  from said  premises as fuel for  operating  the  premises and for
treating and handling production therefrom, and such quantities so used shall be
deducted before said overriding royalty is computed.

         Grantor agrees to provide on the 15th day of January,  April,  July and
October for the calendar quarter ended the last day of the immediately preceding
month to Grantee,  or to its representative  designated in writing,  an itemized
statement or statements  showing (i) the total amount of production of oil, gas,
casinghead gas or other gaseous substances and sulphur produced and saved during
the preceding calendar quarter, (ii) the gross sales price of all such oil, gas,
casinghead  gas and other  gaseous  substances  and  sulphur  for said  calendar
quarter  and the  moneys  due to  Grantee  under  the  terms of this  instrument
computed on the basis of said quarterly  statements,  and (iii) amounts received
pursuant to the Trustees' Royalty during said calendar quarter.

         Grantee  hereunder shall have the right,  but shall not be obligated to
pay any liens acquired  against the interest of the Grantor,  its successors and
assigns  covered by the Leases and to be subrogated to the rights of the holders
of such liens.


<PAGE>


         Grantor for itself,  its successors,  assigns and distributees,  hereby
agrees to execute and deliver to Grantee at any time  hereafter and from time to
time  when  requested  by  Grantee  such  instrument  or  instruments  as may be
desirable  in order to  effectively  convey  and  assure  unto the  Grantee  the
absolute and full overriding royalty hereby to it conveyed and assured.

         Grantee may not grant, bargain,  sell, convey,  assign,  transfer,  set
over and deliver its  interest  herein or any part thereof to any party prior to
December 31, 1995, except that Grantee may grant, bargain, sell, convey, assign,
transfer,  set over and deliver its  interest  herein or any part thereof to one
John J.  D'Alessandro,  his heirs and assigns without the consent of the Grantor
at any time prior to December 31, 1995.

         In the event title to part of the lands covered by the Leases shall, by
judicial,  legislative process, or otherwise,  be vested in the United States of
America,  and the rights of the lessee  under the  Leases,  or any of them,  are
recognized by the United  States of America  through the granting of a new lease
or otherwise  covering said lands,  then the overriding  royalty herein conveyed
and granted shall continue to apply to such lands.

         This indenture  extends to and is binding upon the Grantor and Grantee,
their successors, assigns, personal representatives, and heirs, respectively.


<PAGE>


         IN WITNESS WHEREOF, Coastal Petroleum Company has caused these presents
to be duly executed by its proper officers and its corporate seal to be hereunto
affixed the day and year first above written.


WITNESSES:                               COASTAL PETROLEUM COMPANY



______________________________           By       ______________________________
                                                  Its President

______________________________




ATTEST:  ______________________________
         Its Secretary



STATE OF FLORIDA           :
                           :
COUNTY OF ________________ :


         I HEREBY CERTIFY that on this ____ day of __________ 199__,  before me,
the undersigned authority,  personally appeared  ________________,  President of
Coastal Petroleum Company, a corporation, to me well known and known to me to be
such officer of said  corporation  and the individual who executed the foregoing
instrument  as  such  officer  for  and  on  behalf  of  said  corporation,  who
acknowledged  that he executed the same freely and  voluntarily  in his official
capacity  as such  officer  for and on behalf of said  corporation  pursuant  to
authority in him vested by the Board of Directors  of said  corporation  for the
uses and purposes therein mentioned.

         WITNESS my hand and official seal the date aforesaid.



                                            ------------------------------------
                                            Notary Public
                                            My Commission Expires:



<PAGE>



STATE OF CONNECTICUT       :
                           :
COUNTY OF NEW HAVEN        :


         I HEREBY CERTIFY that on this ____ day of __________ 199__,  before me,
the undersigned authority,  personally appeared  ________________,  Secretary of
Coastal Petroleum Company, a corporation, to me well known and known to me to be
such officer of said  corporation  and the individual who executed the foregoing
instrument  as  such  officer  for  and  on  behalf  of  said  corporation,  who
acknowledged  that he executed the same freely and  voluntarily  in his official
capacity  as such  officer  for and on behalf of said  corporation  pursuant  to
authority in him vested by the Board of Directors  of said  corporation  for the
uses and purposes therein mentioned.

         And the said  _________________,  Secretary,  further acknowledged that
the seal affixed to said instrument  purporting to be the corporate seal of said
corporation  is in truth and in fact the common  corporate  seal thereof and was
affixed to said  instrument  by him  pursuant to  authority in him vested by the
Board of Directors of said corporation.

         WITNESS my hand and official seal the date aforesaid.



                                            ------------------------------------
                                            Notary Public
                                            My Commission Expires: