EXHIBIT 2.1


                            SHARE EXCHANGE AGREEMENT



                                     AMONG:

                       THE SHAREHOLDERS OF PETROGEN, INC.

                                      AND:

                                 PETROGEN, INC.

                                      AND:

                              HADRO RESOURCES, INC.




                                 PETROGEN, INC.
                       3200 Southwest Freeway, Suite 3300
                          Houston, Texas, U.S.A., 77027

<PAGE>

                            SHARE EXCHANGE AGREEMENT




         THIS SHARE EXCHANGE AGREEMENT is made and dated for reference effective
as at October 11, 2002 (the  "EFFECTIVE  Date") as fully  executed on this _____
day of January, 2003.


AMONG:


         THE UNDERSIGNED  SHAREHOLDERS OF PETROGEN, INC., each having an address
         for notice and delivery located at 3200 Southwest Freeway,  Suite 3300,
         Houston,  Texas, U.S.A., 77027 (each such shareholder being hereinafter
         singularly  referred to as a "VENDOR" and  collectively  referred to as
         the "VENDORS" as the context so requires");

                                                               OF THE FIRST PART


AND:


         PETROGEN,  INC., a company  incorporated under the laws of the State of
         Colorado, U.S.A., and having an address for notice and delivery located
         at 3200 Southwest Freeway, Suite 3300, Houston, Texas, U.S.A., 77027

         (the "COMPANY");

                                                              OF THE SECOND PART

AND:


         HADRO  RESOURCES,  INC., a company  incorporated  under the laws of the
         State of Nevada,  U.S.A., and having an address for notice and delivery
         located at 435 Martin Street, Suite 2000, Blaine,  Washington,  U.S.A.,
         98230

         (the "PURCHASER");

                                                               OF THE THIRD PART

<PAGE>

                                      -2-

         (the  Vendors,   the  Company  and  the  Purchaser  being   hereinafter
         singularly also referred to as a "PARTY" and  collectively  referred to
         as the "PARTIES" as the context so requires).


         WHEREAS:


A.       The  Company  is  a  body  corporate  subsisting  under and  registered
pursuant to the laws of the State of Colorado, U.S.A.;


B.       The   Company  is  presently  engaged  in  the  business of oil and gas
development and production (collectively, the "COMPANY'S BUSINESS");


C.       The  Vendors  are  the  legal  and  beneficial  owners of  all  of  the
11,807,000  presently issued and outstanding common shares in the capital of the
Company  (each a "PURCHASED  SHARE");  the  particulars  of the  registered  and
beneficial  ownership of such  Purchased  Shares being set forth in Schedule "B"
which is attached hereto and which forms a material part hereof;


D.       In  accordance   with  the   terms  and  conditions  of  that   certain
"Agreement In Principle" dated for reference October 11, 2002 (the "AGREEMENT IN
PRINCIPLE"),  as entered into between the Company and the Purchaser, the Company
and the Purchaser therein agreed to use their best efforts to initiate, complete
and enter into a formal  agreement  whereby  the  Vendors  would sell all of the
Purchased  Shares to the Purchaser  upon the general terms and conditions as set
forth therein;  a copy of which  Agreement In Principle being attached hereto as
Schedule  "A" and  which  forms a  material  part  hereof,  and  the  terms  and
conditions  of the  Agreement In  Principle  setting  forth the Parties  general
intentions herein; and


E.       The  Parties  hereto  have  agreed  to  enter into this  agreement (the
"AGREEMENT")  which formalizes and replaces,  in its entirety,  the Agreement In
Principle,  as  contemplated  and  required  by the  terms of the  Agreement  In
Principle,  and which  clarifies  their  respective  duties and  obligations  in
connection  with the  purchase by the  Purchaser  from the Vendors of all of the
Purchased Shares together with the further development of the Company's Business
as a consequence thereof;


         NOW THEREFORE THIS AGREEMENT  WITNESSETH that in  consideration  of the
mutual promises,  covenants and agreements herein contained,  THE PARTIES HERETO
COVENANT AND AGREE WITH EACH OTHER as follows:

<PAGE>

                                      -3-


                                    ARTICLE 1
                                   DEFINITIONS


1.1      DEFINITIONS.  For the purposes of this Agreement, except  as  otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:


         (a)      "AFFILIATE" and "ASSOCIATE" have the meanings ascribed to them
                  under the  COMPANY ACT of the  Province  of British  Columbia,
                  R.S.B.C. 1996, as amended from time to time;


         (b)      "AGREEMENT"  means this "Share Exchange  Agreement" as entered
                  into among the Vendors,  the Company and the Purchaser herein,
                  together  with any  amendments  thereto and any  Schedules  as
                  attached thereto;


         (c)      "AGREEMENT  IN  PRINCIPLE"  has the meaning  ascribed to it in
                  recital  "D."  hereinabove;  a  copy  of  which  Agreement  In
                  Principle  being attached hereto as Schedule "A" and forming a
                  material part hereof;


         (d)      "ARBITRATION ACT" means the COMMERCIAL  ARBITRATION ACT of the
                  Province of British Columbia,  R.S.B.C.  1996, as amended from
                  time to time, as set forth in Article "14" hereinbelow;


         (e)      "ATTORNEY"  has the meaning  ascribed to it in section  "12.3"
                  hereinbelow;


         (f)      "BOARD OF DIRECTORS"  means,  as  applicable,  the  respective
                  Board  of  Directors  of each of the  Parties  hereto  as duly
                  constituted from time to time;


         (g)      "BUSINESS DAY" means any day during which  Canadian  Chartered
                  Banks are open for business in the City of Vancouver, Province
                  of British Columbia;


         (h)      "BUSINESS  DOCUMENTATION"  means any and all records and other
                  factual  data  and  information   relating  to  the  Company's
                  Business   interests   and  assets  and   including,   without
                  limitation, all plans, agreements and records which are in the
                  possession  or control of any of the Vendors or the Company in
                  that respect;


         (i)      "CLOSING"  has the  meaning  ascribed  to it in section  "7.1"
                  hereinbelow;

<PAGE>
                                      -4-


         (j)      "CLOSING DATE" has the meaning ascribed to it in section "7.1"
                  hereinbelow;


         (k)      "COMMISSION"  means the United States  Securities and Exchange
                  Commission;


         (l)      "COMPANY" means Petrogen,  Inc., a company  incorporated under
                  the laws of the State of Colorado,  U.S.A.,  or any  successor
                  company,  however  formed,  whether  as a  result  of  merger,
                  amalgamation or other action;


         (m)      "COMPANY'S  ASSETS"  means all assets,  contracts,  equipment,
                  goodwill,   inventory,   Company's   Property   interests  and
                  Intellectual  Property of the Company and  including,  without
                  limitation, all of the property interests,  assets, contracts,
                  equipment,   goodwill  and  inventory  which  are  listed  and
                  described  in  Schedules  "E" through  "J" which are  attached
                  hereto and which form a material part hereof;


         (n)      "COMPANY'S BUSINESS" has the meaning ascribed to it in recital
                  "B." hereinabove;


         (o)      "COMPANY'S  FINANCIAL  STATEMENTS" has the meaning ascribed to
                  it in section  "3.3"  hereinbelow;  a copy of which  Company's
                  Financial  Statements being set forth in Schedule "D" which is
                  attached hereto and which forms a material part hereof;


         (p)      "COMPANY'S  OPTIONS" has the meaning ascribed to it in section
                  "3.3" hereinbelow;


         (q)      "COMPANY'S  PROPERTY" means the mineral interests described in
                  Schedule "E" which is attached hereto and the interests of the
                  Company,  the registered owner and Petrogen Ltd. therein,  and
                  any other claim or property interests of the registered owner,
                  the Company and Petrogen Ltd.  incorporated into the Company's
                  Property by the terms of this Agreement;


         (r)      "COMPANY'S WARRANTS" has the meaning ascribed to it in section
                  "3.3" hereinbelow;


         (s)      "CONFIDENTIAL  INFORMATION"  has the meaning ascribed to it in
                  section "11.1" hereinbelow;

<PAGE>
                                      -5-


         (t)      "CONSOLIDATION"  has the  meaning  ascribed  to it in  section
                  "2.2" hereinbelow;


         (u)      "CONSULTING SERVICES AGREEMENT" has the meaning ascribed to it
                  in section "4.1" hereinbelow; the proposed form of which being
                  attached  hereto as Schedule  "O" and forming a material  part
                  hereof;


         (v)      "DAX" means the Frankfurt  Stock  Exchange,  together with its
                  respective  successors and permitted assigns as the context so
                  requires;


         (w)      "DEFAULTING  PARTY"  and   "NON-DEFAULTING   PARTY"  have  the
                  meanings ascribed to them in section "15.1" hereinbelow;


         (x)      "DISCHARGES"  has the meaning  ascribed to it in section "5.4"
                  hereinbelow;


         (y)      "DRILLING AND OPERATING AGREEMENT" has the meaning ascribed to
                  it in  section  "3.3"  hereinbelow;  a copy  of  said  form of
                  proposed  Drilling  and  Operating  Agreement  being  attached
                  hereto as Schedule "P" and forming a material part hereof;


         (z)      "EFFECTIVE  DATE" has the meaning  ascribed to it on the front
                  page of this Agreement;


         (aa)     "ELECTION  FORM" has the  meaning  ascribed  to it in  section
                  "5.5" hereinbelow;


         (ab)     "EQUITY  INTEREST"  has the meaning  ascribed to it in section
                  "5.5" hereinbelow;


         (ac)     "EQUITY INTEREST DOCUMENTATION" has the meaning ascribed to it
                  in section "5.5" hereinbelow;


         (ad)     "EXECUTION  DATE"  means  the  actual  date  of  the  complete
                  execution of this  Agreement and any amendment  thereto by all
                  Parties hereto as set forth on the front page hereof;


         (ae)     "EXPLORATION  AND  DEVELOPMENT EXPENDITURES"  means all costs,
                  expenses,  charges,  obligations  and  liabilities of whatever
                  kind or  nature  expended,  funded  or  incurred  directly  or
                  indirectly by the Operator and including, without limiting the
                  generality of the foregoing,  by any joint venture  partner of

<PAGE>
                                      -6-


                  the Company, on or in respect of the Company's  Properties and
                  in connection  with the  exploration  and  development  of the
                  Company's  Properties  for  the  purpose  of  determining  the
                  existence of resources on the  Company's  Property  during the
                  term of the Drilling and Operating  Agreement  and  including,
                  without  limiting the generality of the foregoing,  all monies
                  expended  in  maintaining  the  Company's   Property  in  good
                  standing  by the doing and  filing of  assessment  work and by
                  making the tenure  payments  within the time  periods in which
                  such  tenure   payments  are  required  to  be  made,  and  by
                  expending, funding or incurring all on-site Company's Property
                  costs and  including,  without  limiting the generality of the
                  foregoing, the costs of prospecting,  claim staking, Company's
                  Property  payments,  taxes,  mapping,  surveying,  permitting,
                  geophysical,  geochemical  and geological  surveys,  sampling,
                  assaying,  trenching,  drilling,  geochemical  analyses,  road
                  building,  drill site preparation,  drafting,  report writing,
                  consultants,  metallurgical testing, mining, metallurgical and
                  economic  studios,  feasibility  studies,  reclamation and all
                  other project expenditures,  together with the supervision and
                  management  of all work done for the benefit of the  Company's
                  Property;    provided,    however,    that   the    Operator's
                  administrative  expenses shall not exceed ten percent (10%) of
                  the exploration and development  expenses incurred directly or
                  indirectly on the Company's Property; the exact particulars of
                  which  being  detailed in the form of  proposed  Drilling  and
                  Operating  Agreement  being set forth in Schedule "P" which is
                  attached hereto;


         (af)     "FINANCING"  has the meaning  ascribed to it in section  "5.6"
                  hereinbelow;


         (ag)     "ICI" means  Investor  Communications  International,  Inc., a
                  company   incorporated   under   the  laws  of  the  State  of
                  Washington,  U.S.A., or any successor company, however formed,
                  whether as a result of merger, amalgamation or other action;


         (ah)     "INCOME  TAX ACT" means the  INCOME TAX ACT of Canada,  R.S.C.
                  1985, as amended,  together with the RULES and  Regulations to
                  the Income Tax Act;


         (ai)     "INDEMNIFIED   PARTY"  and  "INDEMNIFIED   PARTIES"  have  the
                  meanings ascribed to them in section "16.1" hereinbelow;


         (aj)     "INITIAL  DUE  DILIGENCE"  has the  meaning  ascribed to it in
                  section "6.1" hereinbelow;


         (ak)     "INTELLECTUAL  PROPERTY"  means, with  respect to the Company,
                  all  right  and  interest  to all  patents,  patents  pending,
                  inventions,  know-how,  any operating or  identifying  name or
                  registered or  unregistered  trademarks  and  tradenames,  all
                  computer programs,  licensed end-user software,  source codes,
                  products  and  applications  (and  related  documentation  and

<PAGE>
                                      -7-


                  materials)  and other works of  authorship  (including  notes,
                  reports, other documents and materials,  magnetic, electronic,
                  sound  or  video  recordings  and  any  other  work  in  which
                  copyright or similar  right may  subsist)  and all  copyrights
                  (registered  or  unregistered)  therein,   industrial  designs
                  (registered   or    unregistered),    franchises,    licenses,
                  authorities,  restrictive  covenants  or other  industrial  or
                  intellectual property used in or pertaining to the Company and
                  including, without limitation, the items described in Schedule
                  "F" which is attached  hereto and which forms a material  part
                  hereof,  and  all  lists  of  customers,  documents,  records,
                  correspondence   and  other  information   pertaining  to  the
                  Company;


         (al)     "LOAN"  has  the  meaning  ascribed  to  it in  section  "5.1"
                  hereinbelow;


         (am)     "LOAN  AGREEMENT"  has the  meaning  ascribed to it in section
                  "5.1"  hereinbelow;  a copy of  said  form  of  proposed  Loan
                  Agreement  being attached hereto as Schedule "N" and forming a
                  material part hereof;


         (an)     "OPERATOR"  has the meaning  ascribed  to it in section  "3.3"
                  hereinbelow and means, initially, Petrogen Ltd., together with
                  that person,  company or companies  acting as such pursuant to
                  the terms and  conditions  of this  Agreement and any Drilling
                  and Operating Agreement;


         (ao)     "OPTIONS"  has the  meaning  ascribed  to it in section  "4.1"
                  hereinbelow;


         (ap)     "OTCBB"  means  the  NASD  Over-the-Counter   Bulletin  Board,
                  together with its respective  successors and permitted assigns
                  as the context so requires;


         (aq)     "OUTSTANDING  INDEBTEDNESS"  has the meaning ascribed to it in
                  section "5.5" hereinbelow;


         (ar)     "PARTIES" or "PARTY"  means,  respectively,  the Vendors,  the
                  Company and the Purchaser hereto, as the case may be, together
                  with their respective  successors and permitted assigns as the
                  context so requires;


         (as)     "PERSON"  or  "PERSONS"  means  an  individual,   corporation,
                  partnership,  party,  trust,  fund,  association and any other
                  organized  group of persons  and the  personal  or other legal
                  representative  of a person  to whom  the  context  can  apply
                  according to law;


         (at)     "PETROGEN LTD." means Petrogen  International  Ltd., a company
                  incorporated under the laws of the State of Colorado,  U.S.A.,

<PAGE>
                                      -8-


                  and a  company  being  an  affiliate  of the  Company,  or any
                  successor  company,  however  formed,  whether  as a result of
                  merger, amalgamation or other action;


         (au)     "POOLING  AGREEMENT" has the meaning ascribed to it in section
                  "2.5"  hereinbelow;  a copy of said form of  proposed  Pooling
                  Agreement  being attached hereto as Schedule "C" and forming a
                  material part hereof;


         (av)     "POWER OF ATTORNEY" has the meaning  ascribed to it in section
                  "12.3" hereinbelow;


         (aw)     "PRINCIPAL  SUM" has the  meaning  ascribed  to it in  section
                  "5.1" hereinbelow;


         (ax)     "PRIVATE  PLACEMENT" has the meaning ascribed to it in section
                  "4.1" hereinbelow;


         (ay)     "PURCHASED  SHARE" has the  meaning  ascribed to it in recital
                  "C."  hereinabove;  the  particulars  of  the  registered  and
                  beneficial  ownership of such Purchased Shares being set forth
                  in Schedule "B" which is attached hereto;


         (az)     "PURCHASE  PRICE" has the  meaning  ascribed  to it in section
                  "2.2" hereinbelow;


         (ba)     "PURCHASER"   means   Hadro   Resources,   Inc.,   a   company
                  incorporated  pursuant  to the laws of the  State  of  Nevada,
                  U.S.A., or any successor company, however formed, whether as a
                  result of merger, amalgamation or other action;


         (bb)     "PURCHASER'S FINANCIAL STATEMENTS" has the meaning ascribed to
                  it in section "4.1"  hereinbelow;  a copy of which Purchaser's
                  Financial  Statements being set forth in Schedule "K" which is
                  attached hereto and which forms a material part hereof;


         (bc)     "PURCHASER'S  OPTIONS"  has  the  meaning  ascribed  to  it in
                  section "3.3" hereinbelow;


         (bd)     "PURCHASER'S  WARRANTS"  has  the  meaning  ascribed  to it in
                  section "3.3" hereinbelow;

<PAGE>
                                      -9-


         (be)     "RATIFICATION" has the meaning ascribed to it in section "6.1"
                  hereinbelow;


         (bf)     "REDEMPTION  AMOUNT" has the meaning ascribed to it in section
                  "5.4" hereinbelow;


         (bg)     "REDEMPTION  DATE" has the  meaning  ascribed to it in section
                  "5.4" hereinbelow;


         (bh)     "REDEMPTION  NOTICE" has the meaning ascribed to it in section
                  "5.4" hereinbelow;


         (bi)     "REGISTRATION  STATEMENT",  "REGULATION  D",  "REGULATION  S",
                  "RULE 144", "RULE 501",  "RULE 506",  "U.S.  PERSON" and "FORM
                  S-8" have the meanings ascribed to them in the Securities Act;


         (bj)     "REGULATION   S   CERTIFICATE"   and   "ACCREDITED    INVESTOR
                  CERTIFICATE"  have the  meanings  ascribed  to them in section
                  "4.1" hereinbelow;  the proposed forms of which being attached
                  hereto as Schedule "Q" and forming a material part hereof;


         (bk)     "REGULATORY  APPROVAL"  means the  acceptance  for filing,  if
                  required,  of the transactions  contemplated by this Agreement
                  by the Regulatory Authorities;


         (bl)     "REGULATORY  AUTHORITY" and  "REGULATORY  AUTHORITIES"  means,
                  either  singularly or collectively as the context so requires,
                  the OTCBB, the DAX and/or such other  regulatory  agencies who
                  have or who may  have  jurisdiction  over the  affairs  of the
                  Company,   the  Purchaser   and/or  the  Vendors   herein  and
                  including,  without  limitation,  and  where  applicable,  all
                  applicable securities commissions and again including, without
                  limitation,   the   Commission,   and  all  other   regulatory
                  authorities  from  whom any such  authorization,  approval  or
                  other  action  is  required  to be  obtained  or to be made in
                  connection   with  the   transactions   contemplated  by  this
                  Agreement;


         (bm)     "RESIDUAL  INTEREST" has the meaning ascribed to it in section
                  "3.3"  hereinbelow;  the  exact  particulars  of  which  being
                  detailed in the form of proposed  Operator's  Agreement  being
                  set forth in Schedule "P" which is attached hereto;

<PAGE>

                                      -10-


         (bn)     "REVERSE   TAKEOVER"  means  that  transaction  or  series  of
                  transactions  pursuant to which the Purchaser will acquire all
                  of the  Purchased  Shares of the  Company  from the Vendors in
                  exchange for the issuance  from  treasury by the  Purchaser of
                  the Shares and all matters necessarily ancillary thereto;


         (bo)     "RIGHT OF ELECTION" has the meaning  ascribed to it in section
                  "5.5" hereinbelow;


         (bp)     "SECURITIES"  has the meaning  ascribed to it in section "3.3"
                  hereinbelow;  the particulars of which outstanding  Securities
                  being set forth in Schedule "B" which is attached hereto;


         (bq)     "SECURITIES  ACT" means the United  States  SECURITIES  ACT OF
                  1933,   as  amended,   and  all  the  RULES  and   REGULATIONS
                  promulgated  under the United States  SECURITIES  ACT OF 1933;
                  and "1934 ACT" means the United States SECURITIES EXCHANGE ACT
                  OF  1934,  as  amended,  and all  the  RULES  and  REGULATIONS
                  promulgated under the United States SECURITIES EXCHANGE ACT OF
                  1934;


         (br)     "SECURITY"  has the meaning  ascribed  to it in section  "5.1"
                  hereinbelow;


         (bs)     "SHARE"  has  the  meaning  ascribed  to it in  section  "2.2"
                  hereinbelow;


         (bt)     "SUBJECT  REMOVAL  DATE"  has the  meaning  ascribed  to it in
                  section "6.1" hereinbelow;


         (bu)     "SUBSIDIARY" means any company or companies of which more than
                  fifty percent (50%) of the  outstanding  shares carrying votes
                  at all  times  (provided  that the  ownership  of such  shares
                  confers the right at all times to elect at least a majority of
                  the board of directors of such company or  companies)  are for
                  the time being owned by or held for a company and/or any other
                  company in like  relation to the  company,  and  includes  any
                  company in like relation to the subsidiary;


         (bv)     "TRANSFER AGENT" means the Purchaser's  existing registrar and
                  transfer  agent  for  its  common  shares,  Global  Securities
                  Transfer Inc., of Suite 141, 191 University Boulevard, Denver,
                  Colorado,  U.S.A.,  80206, a company incorporated  pursuant to
                  the laws of the State of Colorado,  U.S.A.,  or any  successor
                  company,  however  formed,  whether  as a  result  of  merger,
                  amalgamation or other action;

<PAGE>
                                      -11-


         (bw)     "TRANSFER DOCUMENTS" has the meaning ascribed to it in section
                  "8.2" hereinbelow; and


         (bx)     "VENDOR" and "VENDORS" means individually and collectively, as
                  the context so  requires,  each and every  shareholder  of the
                  Company who has executed this Agreement as a Party hereto.


1.2      SCHEDULES.  For  the  purposes  of this  Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following shall
represent  the Schedules  which are attached to this  Agreement and which form a
material part hereof:


              SCHEDULE                                 DESCRIPTION


          Schedule "A"                          Agreement In Principle;
          Schedule "B":              Purchased Shares, Vendors and Securities;
          Schedule "C":                            Pooling Agreement;
          Schedule "D":                     Company's Financial Statements;
          Schedule "E":                           Company's Property;
          Schedule "F":                     Company's Intellectual Property;
          Schedule "G":                             Company's Lease;
          Schedule "H":                 Company's Contracts of Employment;
          Schedule "I":                       Company's Material Contracts;
          Schedule "J":                 Company's List of Bank Accounts etc.;
          Schedule "K":                    Purchaser's Financial Statements;
          Schedule "L":                       Purchaser's Material Contracts;
          Schedule "M":                 Purchaser's List of Bank Accounts etc.;
          Schedule "N":                              Loan Agreement;
          Schedule "O":                     Consulting Services Agreement;
          Schedule "P":                Drilling and Operating Agreement; and
          Schedule "Q":                            Vendor Certificates.


1.3      INTERPRETATION. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires,:


         (a)      the words  "herein",  "hereof" and "hereunder" and other words
                  of similar  import refer to this  Agreement as a whole and not
                  to any  particular  Article,  section or other  subdivision of
                  this Agreement;


         (b)      any  reference to an entity shall  include and shall be deemed
                  to be a reference to any entity that is a permitted  successor
                  to such entity; and

<PAGE>
                                      -12-


         (c)      words in the  singular  include  the  plural  and words in the
                  masculine gender include the feminine and neuter genders,  and
                  VICE VERSA.


                                    ARTICLE 2
                    PURCHASE AND SALE OF THE PURCHASED SHARES


2.1      PURCHASE AND SALE. Subject to the terms and conditions hereof and based
upon the  representations,  warranties and covenants  contained in Articles "3",
"4" and "5" hereinbelow and the prior  satisfaction of the conditions  precedent
which are set forth in Article  "7"  hereinbelow,  the Vendors  hereby  agree to
assign, sell and transfer at the Closing Date (as hereinafter determined) all of
their respective rights, entitlement and interest in and to all of the Purchased
Shares to the Purchaser  and the Purchaser  hereby agrees to purchase all of the
Purchased  Shares from the  Vendors on the terms and  subject to the  conditions
contained in this Agreement.


2.2      PURCHASE PRICE.  The total purchase price (collectively,  the "PURCHASE
PRICE") for all of the Purchased Shares will be satisfied by way of the issuance
and delivery by the Purchaser to the Vendors,  in accordance  with section "2.3"
hereinbelow,  of an aggregate of 7,000,000 restricted and consolidated (assuming
the  prior  completion  by the  Purchaser  of one new for 20 old  share  capital
consolidation  (the  "CONSOLIDATION"))  common  shares  in  the  capital  of the
Purchaser  (each  a  "SHARE")  within  five  business  days of the  Closing  (as
hereinafter determined) of this Agreement.


2.3      PRO-RATA  ENTITLEMENT.  The  Purchaser  will  issue  the  Shares to the
Vendors pro rata in accordance with the each Vendor's respective Purchased Share
shareholding in and to the Company and outstanding as at the Closing Date and as
set forth in Schedule "B" which is attached hereto;  with all fractions  greater
than or equal to one-half  being rounded up and all fractions less than one-half
being rounded down.


2.4      RESALE RESTRICTIONS AND LEGENDING  OF SHARE CERTIFICATES.   The Vendors
hereby   initially   acknowledge   and  agree  that  the   Purchaser   makes  no
representations  as to any resale or other restriction  affecting the Shares and
that  it is  presently  contemplated  that  the  Shares  will be  issued  by the
Purchaser  to  each  of the  Vendors  in  reliance  upon  the  registration  and
prospectus  exemptions  contained  in  certain  sections  of the  United  States
SECURITIES  ACT of 1933 (the  "SECURITIES  ACT") or  "REGULATION  S" promulgated
under the Securities  Act which will impose a trading  restriction in the United
States on the Shares for a period of at least 12 months  from the  Closing  Date
(as hereinafter  determined).  In addition,  the Vendors hereby also acknowledge
and agree  that the  within  obligation  of the  Purchaser  to issue the  Shares
pursuant  to  sections  "2.2"  and  "2.3"  hereinabove  will be  subject  to the
Purchaser  being satisfied that an exemption from  applicable  registration  and
prospectus requirements is available under the Securities Act and all applicable
securities  laws,  in respect of each  particular  Vendor and related  Purchased
Share  and  Share,  and  the  Purchaser  shall  be  relieved  of any  obligation
whatsoever to purchase any Purchased  Share of any Vendor and to issue Shares in
respect of any such Vendor  where the  Purchaser  reasonably  determines  that a
suitable exemption is not available to it.

<PAGE>
                                      -13-


         The Vendors hereby also  acknowledge  and  understand  that neither the
sale of the  Shares  which  the  Vendors  are  acquiring  nor any of the  Shares
themselves have been registered under the Securities Act or any state securities
laws,  and,  furthermore,  that  the  Shares  must be held  indefinitely  unless
subsequently  registered  under the  Securities  Act or an  exemption  from such
registration is available.  The Vendors also acknowledge and understand that the
certificates  representing  the Shares will be stamped with the following legend
(or substantially  equivalent  language)  restricting  transfer in the following
manner:


         "The transfer of the  securities  represented  by this  certificate  is
         prohibited  except in  accordance  with the  provisions of Regulation S
         promulgated  under the United States Securities Act of 1933, as amended
         (the  "Securities  Act"),  pursuant  to  registration  under the Act or
         pursuant to an  available  exemption  from  registration.  In addition,
         hedging  transactions  involving  such  securities may not be conducted
         unless in compliance with the Securities Act.".


                                       or


         "The  securities   represented  by  this   certificate  have  not  been
         registered under the United States  Securities Act of 1933, as amended,
         or the laws of any state, and have been issued pursuant to an exemption
         from  registration  pertaining  to such  securities  and  pursuant to a
         representation by the security holder named hereon that said securities
         have been acquired for purposes of  investment  and not for purposes of
         distribution.  These securities may not be offered, sold,  transferred,
         pledged  or  hypothecated  in  the  absence  of  registration,  or  the
         availability of an exemption from such  registration.  Furthermore,  no
         offer, sale, transfer, pledge or hypothecation is to take place without
         the prior  written  approval of counsel to the company being affixed to
         this  certificate.  The  stock  transfer  agent  has  been  ordered  to
         effectuate transfers only in accordance with the above instructions.";


and the Vendors  hereby  consent to the Company making a notation on its records
or giving instructions to any Transfer Agent (as hereinafter  determined) of the
Shares  in order to  implement  the  restrictions  on  transfer  set  forth  and
described hereinabove.


                  The Vendors also acknowledge and understand that:


         (a)      the Shares are  restricted  securities  within the  meaning of
                  "RULE 144" promulgated under the Securities Act;


         (b)      the  exemption  from  registration  under Rule 144 will not be
                  available  in any event for at least one year from the date of
                  issuance of the Shares to the Vendors,  and even then will not
                  be available  unless (i) a public  trading  market then exists
                  for the common stock of the Company, (ii) adequate information

<PAGE>
                                      -14-


                  concerning  the  Company is then  available  to the public and
                  (iii)  other  terms and  conditions  of Rule 144 are  complied
                  with; and


         (c)      any  sale of the  Shares  may be made by the  Vendors  only in
                  limited amounts in accordance with such terms and conditions.


         The Vendors finally  acknowledge and understand that, without in anyway
limiting the acknowledgements  and understandings as set forth hereinabove,  the
Vendors agrees that the Vendors shall in no event make any disposition of all or
any portion of the Shares which the Vendors are acquiring  hereunder  unless and
until:


         (a)      there is then in effect a "REGISTRATION  STATEMENT"  under the
                  Securities  Act covering  such proposed  disposition  and such
                  disposition  is  made in  accordance  with  said  Registration
                  Statement; or


         (b)      (i)  the  Vendors  shall  have  notified  the  Company  of the
                  proposed disposition and shall have furnished the Company with
                  a detailed  statement  of the  circumstances  surrounding  the
                  proposed  disposition,  (ii) the Vendors shall have  furnished
                  the Company with an opinion of the Vendors' own counsel to the
                  effect that such disposition will not require  registration of
                  any such  Shares  under  the  Securities  Act and  (iii)  such
                  opinion of the Vendors'  counsel shall have been  concurred in
                  by counsel for the Company and the Company  shall have advised
                  the Vendors of such concurrence.


2.5      POOLING REQUIREMENTS.  The  Vendors  hereby also  acknowledge and agree
that all Shares,  when issued,  will have a statutory hold period of at least 12
months from the Closing Date (as hereinafter  determined) in accordance with the
Securities Act and all applicable securities laws. In addition, the Vendors also
acknowledge  and agree that all of the Shares  will be subject to release to the
Vendors  in  accordance  with the terms  and  conditions  of a certain  "POOLING
AGREEMENT" which will be entered into at or subsequent to the Closing Date among
each of Vendors,  the Purchaser and the Transfer Agent,  acting as trustee under
the Pooling Agreement;  a copy of form of which proposed Pooling Agreement being
attached  hereto as Schedule  "C" and forming a material  part  hereof.  In this
regard the Vendors  acknowledge  and understand that the purpose of such Pooling
Agreement  is to keep an orderly  market and aid the  Purchaser  in  providing a
stable market and price for the Purchaser's trading shares.


2.6      OTHER SECURITIES.  If  and  to  the  extent that  any  Vendor  has  any
absolute,  contingent,  optional,  pre-emptive  or other  right to  acquire  any
securities in the capital of the Company,  it is hereby  acknowledged and agreed
by any such Vendor that such Vendor shall be  conclusively  deemed,  as and from
the Closing, to have transferred the same to the Purchaser to the fullest extent
permitted  by law,  and to  otherwise  hold  the  same in  trust  for and at the
discretion of the Purchaser.

<PAGE>
                                      -16-


2.7      STANDSTILL  PROVISIONS.   In  consideration   of  the  Parties'  within
agreement to purchase and sell the Purchased  Shares and to enter into the terms
and  conditions  of this  Agreement,  each of the Parties  hereby  undertake for
themselves, and for each of their respective agents and advisors, that they will
not until the earlier of the Closing  Date (as  hereinafter  determined)  or the
termination  of  this  Agreement   approach  or  consider  any  other  potential
purchasers,  or make, invite,  entertain or accept any offer or proposal for the
proposed  sale of any  interest  in and to any of the  Purchased  Shares  or the
assets or the respective business interests of the Company or the Purchaser,  as
the case may, or, for that matter,  disclose any of the terms of this Agreement,
without the Parties' prior written  consent.  In this regard each of the Parties
hereby  acknowledges  that  the  foregoing  restrictions  are  important  to the
respective  businesses of the Parties and that a breach by either of the Parties
of any of the covenants  herein  contained would result in irreparable  harm and
significant  damage  to  each  affected  Party  that  would  not  be  adequately
compensated for by monetary award.  Accordingly,  the Parties hereby agree that,
in the event of any such  breach,  in addition to being  entitled as a matter of
right to apply to a Court of competent equitable  jurisdiction for relief by way
of restraining order,  injunction,  decree or otherwise as may be appropriate to
ensure compliance with the provisions hereof, any such Party will also be liable
to the other Parties, as liquidated  damages,  for an amount equal to the amount
received  and earned by such  Party as a result of and with  respect to any such
breach.  The  Parties  hereby  also  acknowledge  and  agree  that if any of the
aforesaid restrictions,  activities,  obligations or periods are considered by a
Court of  competent  jurisdiction  as being  unreasonable,  they agree that said
Court shall have authority to limit such restrictions,  activities or periods as
the Court deems proper in the circumstances.


                                    ARTICLE 3
                    REPRESENTATIONS, WARRANTIES AND COVENANTS
                     BY EACH OF THE VENDORS AND THE COMPANY


3.1      GENERAL  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  BY  EACH  OF THE
VENDORS  AND THE  COMPANY.  In order to induce the  Purchaser  to enter into and
consummate this Agreement, each of the Vendors and the Company hereby represents
to,  warrants  to and  covenants  with the  Purchaser,  with the intent that the
Purchaser  will rely thereon in entering  into this  Agreement and in concluding
the  transactions  contemplated  herein,  that,  to the  best of the  knowledge,
information and belief of each of the Vendors and the Company, after having made
due inquiry:


         (a)      if a corporation,  it is duly  incorporated  under the laws of
                  its respective  jurisdiction of  incorporation  and is validly
                  existing and in good  standing  with respect to all  statutory
                  filings required by the applicable corporate laws;


         (b)      it is qualified to do business in those jurisdictions where it
                  is necessary to fulfill its  obligations  under this Agreement
                  and it has the full  power and  authority  to enter  into this
                  Agreement  and any  agreement  or  instrument  referred  to or
                  contemplated by this Agreement;

<PAGE>
                                      -16-


         (c)      it has the requisite power,  authority and capacity to own and
                  use all of its respective  business assets and to carry on its
                  respective  business  as  presently  conducted  by it  and  to
                  fulfill its respective obligations under this Agreement;


         (d)      the  execution   and  delivery  of  this   Agreement  and  the
                  agreements  contemplated  hereby have been duly  authorized by
                  all  necessary   action,   corporate  or  otherwise,   on  its
                  respective part;


         (e)      there are no other consents, approvals or conditions precedent
                  to the  performance  of this  Agreement  which  have  not been
                  obtained;


         (f)      this  Agreement   constitutes  a  legal,   valid  and  binding
                  obligation of it enforceable against it in accordance with its
                  terms, except as enforcement may be limited by laws of general
                  application affecting the rights of creditors;


         (g)      no  proceedings  are  pending  for,  and it is unaware of, any
                  basis for the  institution of any  proceedings  leading to its
                  respective  dissolution or winding up, or the placing of it in
                  bankruptcy or subject to any other laws  governing the affairs
                  of insolvent companies or persons;


         (h)      the  making  of  this  Agreement  and  the  completion  of the
                  transactions  contemplated  hereby and the  performance of and
                  compliance with the terms hereof does not and will not:


                  (i)      if a corporation, conflict with or result in a breach
                           of  or  violate  any  of  the  terms,  conditions  or
                           provisions of its respective constating documents;


                  (ii)     conflict with or result in a breach of or violate any
                           of the terms,  conditions  or  provisions of any law,
                           judgment,  order, injunction,  decree,  regulation or
                           ruling  of  any  Court  or  governmental   authority,
                           domestic  or  foreign,  to  which it is  subject,  or
                           constitute   or  result   in  a  default   under  any
                           agreement,  contract or  commitment  to which it is a
                           party;


                  (iii)    give  to  any  party   the   right  of   termination,
                           cancellation  or  acceleration  in or with respect to
                           any agreement,  contract or commitment to which it is
                           a party;
<PAGE>
                                      -17-


                  (iv)     give to any government or governmental  authority, or
                           any   municipality   or  any   subdivision   thereof,
                           including any  governmental  department,  commission,
                           bureau, board or administration  agency, any right of
                           termination,   cancellation   or  suspension  of,  or
                           constitute a breach of or result in a default  under,
                           any permit,  license,  control or authority issued to
                           it which is necessary or desirable in connection with
                           the conduct and operations of its respective business
                           and  the  ownership  or  leasing  of  its  respective
                           business assets; or


                  (v)      constitute a default by it, or any event which,  with
                           the giving of notice or lapse of time or both,  might
                           constitute an event of default,  under any agreement,
                           contract,  indenture or other instrument  relating to
                           any  indebtedness of it which would give any party to
                           that   agreement,   contract,   indenture   or  other
                           instrument  the right to accelerate  the maturity for
                           the  payment  of  any  amount   payable   under  that
                           agreement,  contract,  indenture or other instrument;
                           and


         (i)      neither this Agreement nor any other document,  certificate or
                  statement furnished to the Purchaser by or on behalf of any of
                  the Vendors or the Company in connection with the transactions
                  contemplated  hereby  knowingly  or  negligently  contains any
                  untrue or  incomplete  statement of material  fact or omits to
                  state  a  material  fact   necessary  in  order  to  make  the
                  statements  therein not  misleading  which would likely affect
                  the decision of the Purchaser to enter into this Agreement.


3.2      REPRESENTATIONS,  WARRANTIES  AND  COVENANTS BY THE VENDORS  RESPECTING
THE PURCHASED  SHARES AND THE SHARES.  In order to induce the Purchaser to enter
into and consummate this  Agreement,  each of the Vendors hereby also represents
to,  warrants  to and  covenants  with the  Purchaser,  with the intent that the
Purchaser  will  also rely  thereon  in  entering  into  this  Agreement  and in
concluding  the  transactions  contemplated  herein,  that,  to the  best of the
knowledge,  information and belief of each of the Vendors, after having made due
inquiry:


         (a)      save and except as set forth in Schedule "B" which is attached
                  hereto,  the Vendors have good and marketable title to and are
                  the legal and beneficial owner of all of the Purchased Shares,
                  and the Purchased Shares are fully paid and non-assessable and
                  are free and clear of liens, charges,  encumbrances,  pledges,
                  mortgages,  hypothecations  and adverse  claims of any and all
                  nature whatsoever and including, without limitation,  options,
                  pre-emptive  rights and other rights of  acquisition in favour
                  of any person, whether conditional or absolute;


         (b)      the Vendors  have the power and capacity to own and dispose of
                  the Purchased Shares, and the Purchased Shares are not subject
                  to any voting or similar arrangement;
<PAGE>
                                      -18-


         (c)      there are no actions,  suits,  proceedings  or  investigations
                  (whether or not purportedly against or on behalf of any of the
                  Vendors  or the  Company),  pending or  threatened,  which may
                  affect,  without  limitation,  the  rights  of any  Vendor  to
                  transfer any of the  Purchased  Shares to the Purchaser at law
                  or in equity, or before or by any federal, state,  provincial,
                  municipal or other governmental department, commission, board,
                  bureau,  agency or instrumentality,  domestic or foreign, and,
                  without limiting the generality of the foregoing, there are no
                  claims or potential claims under any relevant family relations
                  legislation  or other  equivalent  legislation  affecting  the
                  Purchased Shares.  In addition,  the Vendors are not now aware
                  of any  existing  ground  on which  any such  action,  suit or
                  proceeding  might be commenced with any reasonable  likelihood
                  of success;


         (d)      save and except as set forth in Schedule "B" which is attached
                  hereto,   no  other  person,   firm  or  corporation  has  any
                  agreement,  option or right  capable of becoming an  agreement
                  for the purchase of any of the Purchased Shares;


         (e)      the Vendors  acknowledge  that the Shares will be issued,  and
                  reserved  for  issuance   where   applicable,   under  certain
                  exemptions  from  the  registration   and  prospectus   filing
                  requirements otherwise applicable under the Securities Act and
                  all applicable  securities  laws,  and that, as a result,  the
                  Vendors may be restricted from using most of the remedies that
                  would otherwise be available to the Vendors,  the Vendors will
                  not receive information that would otherwise be required to be
                  provided  to the Vendors and the  Purchaser  is relieved  from
                  certain   obligations   that  would  otherwise  apply  to  the
                  Purchaser,   in  either  case,  under  applicable   securities
                  legislation;


         (f)      the Vendors  realize that the sale of the Purchased  Shares in
                  exchange   for  the  Shares  will  be  a  highly   speculative
                  investment and that the each Vendor is able, without impairing
                  that Vendor's financial  condition,  to hold the Shares for an
                  indefinite period of time and to suffer a complete loss on the
                  Vendor's  investment.  The  Vendors  have such  knowledge  and
                  experience in financial and business  matters that the Vendors
                  are  capable  of  evaluating  the  merits  and  risks  of  the
                  prospective investment;


         (g)      the  Vendors  have not  received,  nor have any of the Vendors
                  requested  or do any of the Vendors  require to  receive,  any
                  offering  memorandum  or a  similar  document  describing  the
                  business  and affairs of the  Purchaser in order to assist the
                  Vendors in entering into this  Agreement  and in  consummating
                  the transactions contemplated herein;
<PAGE>
                                      -19-


         (h)      if the Vendor is a "U.S.  PERSON",  as that term is defined in
                  Regulation S, then the Vendor certifies that:


                  (i)      the Vendor qualifies as an  "accredited  investor" as
                           that term is defined  under Rule 501 of  Regulation D
                           promulgated under the Securities Act, as amended;


                  (ii)     the Vendor is  receiving  the  Shares  solely for the
                           Vendor's  own account for  investment  and not with a
                           view to or for sale or  distribution of the Shares or
                           any   portion   thereof  and  not  with  any  present
                           intention  of selling,  offering to sell or otherwise
                           disposing  of  or  distributing  the  Shares  or  any
                           portion  thereof  in  any  transaction  other  than a
                           transaction   exempt  from  registration   under  the
                           Securities Act;


                  (iii)    the  entire  legal  and  beneficial  interest  in the
                           Shares the Vendor is receiving is being acquired for,
                           and will be held for the  account of, the Vendor only
                           and  neither  in  whole  nor in part  for  any  other
                           person;


                  (iv)     the Vendor  understands that: (A) neither the sale of
                           the  Shares  which the  Vendor is  receiving  nor the
                           Shares  themselves  have  been  registered  under the
                           Securities Act or any state  securities laws, and the
                           Shares must be held indefinitely  unless subsequently
                           registered  under the  Securities Act or an exemption
                           from  such  registration  is  available;  and (B) the
                           share  certificate  representing  the Shares  will be
                           stamped with the following  legend (or  substantially
                           equivalent language) restricting transfer:


                           "The securities  represented by this certificate have
                           not  been   registered   under  the   United   States
                           Securities  Act of 1933,  as amended,  or the laws of
                           any  state,  and  have  been  issued  pursuant  to an
                           exemption  from   registration   pertaining  to  such
                           securities  and pursuant to a  representation  by the
                           security  holder  named  hereon that said  securities
                           have been acquired for purposes of investment and not
                           for purposes of  distribution.  These  securities may
                           not  be  offered,  sold,   transferred,   pledged  or
                           hypothecated in the absence of  registration,  or the
                           availability of an exemption from such  registration.
                           Furthermore,  no  offer,  sale,  transfer,  pledge or
                           hypothecation  is to take  place  without  the  prior
                           written  approval  of  counsel to the  company  being
                           affixed to this certificate. The stock transfer agent
                           has been  ordered  to  effectuate  transfers  only in
                           accordance with the above instructions."; and
<PAGE>
                                      -20-


                  and each such U.S. Person Vendor will complete and provide the
                  Purchaser  and  the  Company  with  an  executed  copy  of the
                  attached form of "Accredited Investor  Certificate";  which is
                  attached  hereto with  Schedule "Q" and which forms a material
                  hereof; contemporaneously with such Vendor's execution of this
                  Agreement;


         (i)      if the Vendor is not a U.S. Person,as defined in Regulation S,
                  then the Vendor certifies that:


                  (i)      the Vendor is not a U.S.  Person (as  defined in Rule
                           902 of Regulation S under the  Securities  Act, which
                           definition  includes,  but is  not  limited  to,  any
                           natural  person  resident in the United  States,  any
                           corporation or partnership  incorporated or organized
                           under the laws of the United  States or any estate or
                           trust of which any executor, administrator or trustee
                           is a U.S. Person);


                  (ii)     the Vendor is not acquiring any of the Shares for the
                           account  or  benefit  of  any  U.S.   Person  or  for
                           offering,  resale  or  delivery  for the  account  or
                           benefit of any U.S.  Person or for the account of any
                           person   in   any   jurisdiction   other   than   the
                           jurisdiction  set out in the name and  address of the
                           Vendor as stated in  Schedule  "B" which is  attached
                           hereto;


                  (iii)    the Vendor was not  offered  any Shares in the United
                           States and was outside the United  States at the time
                           of execution  and  delivery of this  Agreement by the
                           Vendor;


                  (iv)     the Vendor  understands that the Shares have not been
                           registered   under   the   Securities   Act  and  any
                           applicable securities laws;


                  (v)      the  Vendor  agrees  to  resell  the  Shares  only in
                           accordance  with  the  provisions  of  Regulation  S,
                           pursuant to a registration  under the Securities Act,
                           or  pursuant  to an  available  exemption  from  such
                           registration, and that hedging transactions involving
                           the Shares may not be conducted  unless in compliance
                           with the Securities Act; and


                  (vi)     the   Vendor   understands   that   any   certificate
                           representing  the Shares  will bear a legend  setting
                           forth the foregoing restrictions; and


                  and each such non-U.S. Person Vendor will complete and provide
                  the  Purchaser  and the Company  with an executed  copy of the
                  attached  form of  "Regulation S  Certificate";  which is also
                  attached  hereto with  Schedule "Q" and which forms a material

<PAGE>
                                      -21-


                  hereof; contemporaneously with such Vendor's execution of this
                  Agreement; and


         (j)      the  Vendors are not aware of any fact or  circumstance  which
                  has not  been  disclosed  to the  Purchaser  which  should  be
                  disclosed  in  order  to  prevent  the   representations   and
                  warranties  contained in this section from being misleading or
                  which would  likely  affect the  decision of the  Purchaser to
                  enter into this Agreement.


3.3      REPRESENTATIONS,  WARRANTIES  AND  COVENANTS BY EACH OF THE VENDORS AND
THE  COMPANY  RESPECTING  THE COMPANY AND THE  COMPANY'S  PROPERTY.  In order to
induce the Purchaser to enter into and consummate  this  Agreement,  each of the
Vendors and the Company  hereby also  represents  to,  warrants to and covenants
with the Purchaser, with the intent that the Purchaser will also rely thereon in
entering into this  Agreement and in concluding  the  transactions  contemplated
herein,  that, to the best of the knowledge,  information  and belief of each of
the Vendors and the Company, after having made due inquiry:


         (a)      the Company  owns and  possesses  and has good and  marketable
                  title  to and  possession  of all  of the  Company's  Business
                  interests  and the  Company's  Assets  free  and  clear of all
                  actual or threatened liens,  charges,  options,  encumbrances,
                  voting  agreements,  voting trusts,  demands,  limitations and
                  restrictions  of any  nature  whatsoever;  save and except for
                  those  actual  or  threatened  liens,  charges,  encumbrances,
                  demands,  limitations  and  restrictions  which are  listed in
                  Schedule  "D"  which is  attached  hereto  and  which  forms a
                  material part hereof;


         (b)      the  Company's  Business  interests  at the  Closing  Date (as
                  hereinafter  determined)  will be  comprised  of a one hundred
                  percent (100%)  registered and beneficial  working interest in
                  and to all of the Company's Assets and the Company's  Property
                  at that time which,  subject to the  following,  shall be free
                  and clear of all actual or threatened liens, charges, options,
                  encumbrances,   voting  agreements,  voting  trusts,  demands,
                  limitations and  restrictions of any nature  whatsoever,  with
                  the Company's affiliated company,  Petrogen International Ltd.
                  ("PETROGEN  LTD."),  retaining,  at all times,  a ten  percent
                  (10%)  carried  interest  in and to  such  Company's  Property
                  comprising the Company's Business at the Closing Date together
                  with the right,  as operator  (the  "OPERATOR")  in respect of
                  each  of  the  Company's  Property  interests,  to  charge  an
                  administrative  fee of ten percent  (10%) for all  Exploration
                  and Development  Expenditures incurred in connection therewith
                  (collectively,  the "RESIDUAL INTEREST"); the exact details of
                  which Residual Interest and the Operator's responsibilities in
                  maintaining the Company's  Property  interests being set forth
                  in  the  terms  and  conditions  of a  certain  "DRILLING  AND
                  OPERATING AGREEMENT" which will be entered at or subsequent to
                  the Closing Date between the  Purchaser  and Petrogen  Ltd.; a
                  copy  of  form  of  which  proposed   Drilling  and  Operating
                  Agreement  being attached hereto as Schedule "P" and forming a
                  material part hereof;

<PAGE>

                                      -22-


         (c)      as at the Closing Date (as hereinafter determined) the Company
                  will be the registered and/or beneficial owner of an undivided
                  one hundred  percent  (100%)  interest in and to the Company's
                  Property  interests  free and clear of all liens,  charges and
                  claims of others,  and the Company and the  Operator  have and
                  will have free and unimpeded  right of access to the Company's
                  Property  and  have  and  will  have  use  of  the   Company's
                  Property's surface for the herein purposes;


         (d)      as at the Closing Date (as hereinafter determined) the Company
                  will hold the  right to  explore  and  develop  the  Company's
                  Property interests;


         (e)      the mineral interests  comprising the Company's  Property have
                  been  duly and  validly  located  and  recorded  in a good and
                  minerlike  manner pursuant to the laws of the  jurisdiction(s)
                  in which the Company's Property interests exist;


         (f)      there is no  adverse  claim  or  challenge  against  or to the
                  ownership  of  or  title  to  any  of  the  mineral  interests
                  comprising  the  Company's  Property  interests  or which  may
                  impede their  development,  nor to the best of the  knowledge,
                  information  and belief of the Company,  after having made due
                  inquiry,  is  there  any  basis  for any  potential  claim  or
                  challenge,  save and except for any and all potential national
                  land  claims  which may exist from time to time in  connection
                  with  the  Company's  Property  interests,  and  there  are no
                  outstanding  agreements  or options to acquire or purchase the
                  Company's  Property  interests or any portion  thereof and, to
                  the  best of the  knowledge,  information  and  belief  of the
                  Company,  after having made due  inquiry,  no persons have any
                  royalty,   net  profits  or  other  interests   whatsoever  in
                  production from any of the Company's  Property  interests save
                  and except for the  Residual  Interest  to  Petrogen  Ltd.  as
                  contemplated herein;


         (g)      the Company  holds all licenses  and permits  required for the
                  conduct  in  the  ordinary  course  of the  operations  of the
                  Company's  Business  and for the uses to which  the  Company's
                  Assets  have  been  put  and are in good  standing,  and  such
                  conduct and uses are in compliance  with all laws,  zoning and
                  other  by-laws,   building  and  other  restrictions,   rules,
                  regulations  and  ordinances  applicable to the Company and to
                  the Company's  Business and the Company's Assets,  and neither
                  the  execution   and  delivery  of  this   Agreement  nor  the
                  completion of the transactions  contemplated  hereby will give
                  any person the right to  terminate  or cancel any said license
                  or permit or affect such compliance;
<PAGE>
                                      -23-


         (h)      the  presently  authorized  and  issued  share  capital of the
                  Company is as  described  in  Schedule  "B" which is  attached
                  hereto and which forms a material part hereof,  and there are,
                  other than the present  incentive  stock options,  convertible
                  equity  instruments  and share  purchase  warrants  to acquire
                  certain common shares in and to the Company (collectively, the
                  "SECURITIES")  which are listed in Schedule "B", at present no
                  other shares in the capital of the Company  issued or allotted
                  or agreed to be issued or allotted to any person. In addition,
                  at Closing the issued share  capital of the Company,  together
                  with the names and the number, class and kind of shares of the
                  Company  held by the  Vendors,  will be as set out in Schedule
                  "B";


         (i)      the Purchased  Shares are validly issued and  outstanding  and
                  fully paid and  non-assessable  in the  capital of the Company
                  and,  save and  except as set forth in  Schedule  "B" which is
                  attached  hereto,  the Purchased  Shares are free and clear of
                  all   actual   or   threatened   liens,   charges,    options,
                  encumbrances,   voting  agreements,  voting  trusts,  demands,
                  limitations and restrictions of any nature whatsoever;


         (j)      save and except as set forth in Schedule "B" which is attached
                  hereto,   no  other  person,   firm  or  corporation  has  any
                  agreement,  option or right  capable of becoming an  agreement
                  for  the  purchase  of  any  of the  Purchased  Shares  or any
                  unissued shares in the capital of the Company,  and at Closing
                  (as hereinafter  determined) it is presently contemplated that
                  each of the presently  issued and outstanding  incentive stock
                  option Securities (collectively,  the "COMPANY'S OPTIONS") and
                  share   purchase   warrant   Securities   (collectively,   the
                  "COMPANY'S  WARRANTS")  outstanding in and to the Company will
                  be exchanged,  on the same exercise terms and conditions,  for
                  an equal number of incentive stock options (collectively,  the
                  "PURCHASER'S    OPTIONS")   and   share   purchase    warrants
                  (collectively,  the  "PURCHASER'S  WARRANTS")  in  and  to the
                  resulting   Purchaser   on  a   post-Consolidation   basis  in
                  consideration,  in part,  of the  ongoing  involvement  of the
                  existing Company's  Optionholders and Warrantholders in and to
                  the resulting Purchaser company and in exchange for the agreed
                  upon   cancellation  by  said  Company's   Optionholders   and
                  Warrantholders  of all  of the  then  issued  and  outstanding
                  Company's  Options and  Company's  Warrants  as a  consequence
                  thereof;


         (k)      there are no actions,  suits,  proceedings  or  investigations
                  (whether or not purportedly against or on behalf of any of the
                  Vendors  or the  Company),  pending or  threatened,  which may
                  affect,  without limitation,  the rights of any of the Vendors
                  to transfer the Purchased Shares to the Purchaser at law or in
                  equity,  or  before  or by  any  federal,  state,  provincial,
                  municipal or other governmental department, commission, board,
                  bureau,  agency or instrumentality,  domestic or foreign, and,
                  without limiting the generality of the foregoing, there are no
                  claims or potential claims under any relevant family relations
                  legislation or other equivalent  legislation  affecting any of
                  the Purchased Shares. In addition, the Vendors and the Company
                  are not now  aware of any  existing  ground  on which any such

<PAGE>
                                      -24-


                  action,  suit  or  proceeding  might  be  commenced  with  any
                  reasonable likelihood of success;


         (l)      from  October 11, 2002 (that being the  reference  date of the
                  Agreement In Principle) to and up to and including the Closing
                  Date (as hereinafter determined) the Company has not committed
                  to making and until the  Closing  Date will not make or commit
                  itself, without the written consent of the Purchaser, to:


                  (i)      redeem or acquire any shares in its share capital;


                  (ii)     declare or pay any dividend;


                  (iii)    make any  reduction in or otherwise  make any payment
                           on account of its paid-up capital; or

                  (iv)     effect    any    subdivision ,    consolidation    or
                           reclassification of its share capital;


         (m)      save and except for the proposed Residual Interest to Petrogen
                  Ltd. as contemplated  herein,  from October 11, 2002 to and up
                  to and including the Closing Date (as hereinafter  determined)
                  the Company has not  committed to making and until the Closing
                  Date  will not make or  commit  itself,  without  the  written
                  consent of the Purchaser, to:


                  (i)      acquire  or  have  the  use  of any  property  from a
                           person,  corporation  or entity  with whom it was not
                           dealing with at arm's length; or


                  (ii)     dispose  of  anything  to a  person,  corporation  or
                           entity  with  whom it was not  dealing  with at arm's
                           length for  proceeds  less than the fair market value
                           thereof;


         (n)      from October 11, 2002 to and up to and  including  the Closing
                  Date (as hereinafter determined) the Company has not committed
                  to making and until the  Closing  Date will not make or commit
                  itself,  without  the  written  consent of the  Purchaser,  to
                  provide any person,  firm or  corporation  with any agreement,
                  option or right,  consensual  or  arising  by law,  present or
                  future,  contingent  or  absolute,  or capable of  becoming an
                  agreement, option or right:

<PAGE>
                                      -25-


                  (i)      other  than as set  forth in  Schedule  "B"  which is
                           attached  hereto,  to require it to issue any further
                           or other  shares in its share  capital,  or any other
                           security  convertible or exchangeable  into shares in
                           its share  capital,  or to  convert or  exchange  any
                           securities into or for shares in its share capital;


                  (ii)     for the issue and allotment of any of the  authorized
                           but unissued shares in its share capital;


                  (iii)    to  require  it  to  purchase,  redeem  or  otherwise
                           acquire any of the issued and  outstanding  shares in
                           its share capital; or


                  (iv)     to  purchase or  otherwise  acquire any shares in its
                           share capital;


         (o)      save and except for those matters which are listed in Schedule
                  "D"  which is  attached  hereto  and in  particular,  however,
                  without   limitation,   except  for   liabilities   which  are
                  disclosed,   reflected  or  adequately  provided  for  in  the
                  Company's financial statements  (collectively,  the "COMPANY'S
                  FINANCIAL  STATEMENTS")  under generally  accepted  accounting
                  principles;  a copy of which  Company's  Financial  Statements
                  being  attached  hereto as Schedule "D" and forming a material
                  part  hereof;   there  are  no  other  material   liabilities,
                  contingent or otherwise, existing on the Execution Date hereof
                  in respect of which the  Company may be liable on or after the
                  completion of the transactions  contemplated by this Agreement
                  other than:


                  (i)      liabilities   disclosed   or   referred  to  in  this
                           Agreement; and


                  (ii)     liabilities   incurred  in  the  ordinary  course  of
                           business, none of which are materially adverse to the
                           Company's Business,  operations, affairs or financial
                           conditions of the Company;


         (p)      no  dividend  or other  distribution  by the  Company has been
                  made, declared or authorized since its incorporation, and from
                  October 11, 2002 to and up to and  including  the Closing Date
                  (as  hereinafter  determined) the Company has not committed to
                  making  and  until  the  Closing  Date will not make or commit
                  itself,  without  the  written  consent of the  Purchaser,  to
                  confer upon,  or pay to or to the benefit of, any entity,  any
                  benefit  having  monetary  value,  any  bonus  or  any  salary
                  increases except in the normal course of its business;


         (q)      save and except as set forth in Schedule "D" which is attached
                  hereto, there is no basis for and there are no actions, suits,
                  judgments,   investigations  or  proceedings   outstanding  or
                  pending  or,  to the best of the  knowledge,  information  and

<PAGE>
                                      -26-


                  belief  of  the  Company,   after  having  made  due  inquiry,
                  threatened  against  or  affecting  the  Company  at law or in
                  equity or before or by any federal,  state, municipal or other
                  governmental department, commission, board, bureau or agency;


         (r)      the  Company  is  not  in  breach  of  any  laws,  ordinances,
                  statutes, regulations,  by-laws, orders or decrees to which it
                  is subject or which apply to it;


         (s)      the Company is not a party to any  collective  agreement  with
                  any labour union or other association of employees,  and there
                  is no  pending  application  for  certification  of any of the
                  Company's  employees  as  a  collective  bargaining  unit.  In
                  addition,  and to the best of the knowledge,  information  and
                  belief of the  Company,  after  having made due  inquiry,  the
                  Company is not presently a party to any complaint,  grievance,
                  arbitration  or other labour  matter  referred to any board or
                  labour authority;


         (t)      there are no  pension,  profit  sharing,  group  insurance  or
                  similar plans or other deferred  compensation  plans affecting
                  the Company or any of its directors, officers or employees;


         (u)      the Company has not  experienced,  nor are the Vendors and the
                  Company  aware of, any  occurrence  or event which has had, or
                  might  reasonably  be expected to have, a  materially  adverse
                  affect on the Company's  Business,  the Company's Assets or on
                  the results of the Company's operations;


         (v)      the Company  holds or have applied for all permits,  licenses,
                  consents  and  authorities  issuable  by any  federal,  state,
                  regional or municipal  government or agency  thereof which are
                  necessary or desirable in connection with its operations;


         (w)      from October 11, 2002 to and up to and  including  the Closing
                  Date (as hereinafter  determined)  there has been prepared and
                  will be prepared  and filed on a timely  basis all federal and
                  state income tax returns, elections and designations,  and all
                  other governmental  returns,  notices and reports of which the
                  Company  has,  or  ought  reasonably  to have  had,  knowledge
                  required to be or reasonably  capable of being filed up to and
                  including the Closing Date,  with respect to the operations of
                  the Company,  and no such  returns,  elections,  designations,
                  notices  or  reports  contain  or will  contain  any  material
                  misstatement  or omit any material  statement that should have
                  been included,  and each such return,  election,  designation,
                  notice  or  report,   including   accompanying  schedules  and
                  statements,  is and will be true,  correct and complete in all
                  material respects;

<PAGE>
                                      -27-


         (x)      the  Company  has been  assessed  for all  federal,  state and
                  municipal  income tax for all years to and  including its most
                  recent  taxation  year, and from October 11, 2002 to and up to
                  and including the Closing Date (as hereinafter determined) the
                  Company  will have paid in full or  accrued  in  accounts  all
                  amounts  (including,  but  not  limited  to,  sales,  use  and
                  consumption  taxes  and  taxes  measured  on  income  and  all
                  installments  of taxes) due and payable to all federal,  state
                  and  municipal  taxation  authorities  up to and including the
                  Closing Date;


         (y)      save and except as set forth in Schedule "D" which is attached
                  hereto, there is not now, and there will not be by the Closing
                  Date (as hereinafter determined), any proceeding, claim or, to
                  the  best of the  knowledge,  information  and  belief  of the
                  Vendors and the Company,  after  having made due inquiry,  any
                  investigation  by any  federal,  state or  municipal  taxation
                  authority,  or any matters  under  discussion  or dispute with
                  such taxation authorities,  in respect of taxes,  governmental
                  charges,  assessments or  reassessments in connection with the
                  Company,  and the Vendors and the Company are not aware of any
                  contingent tax liabilities or any grounds that could result in
                  an assessment,  reassessment,  charge or  potentially  adverse
                  determination  by any  federal,  state or  municipal  taxation
                  authority as against the Company;


         (z)      the  Company  is not,  nor  until or at the  Closing  Date (as
                  hereinafter determined) will it be, in breach of any provision
                  or  condition  of, nor has it done or  omitted to do  anything
                  that,  with or without  the giving of notice or lapse or both,
                  would constitute a breach of any provision or condition of, or
                  give rise to any right to  terminate  or cancel or  accelerate
                  the  maturity  of  any  payment  under,  any  deed  of  trust,
                  contract,  certificate,  consent,  permit,  license  or  other
                  instrument  to which  it is a  party,  by which it is bound or
                  from which it derives benefit,  any judgment,  decree,  order,
                  rule or regulation of any Court or  governmental  authority to
                  which it is subject,  or any statute or regulation  applicable
                  to it, to an extent  that,  in the  aggregate,  has a material
                  adverse affect on it;


         (aa)     adequate  provision  has been  made and will be made for taxes
                  payable by the Company for the current  period for which a tax
                  return is not yet required to be filed and, to the best of the
                  knowledge,  information  and  belief  of the  Vendors  and the
                  Company,   after  having  made  due  inquiry,   there  are  no
                  contingent tax liabilities of the Company or any grounds which
                  would  prompt a  re-assessment  of the Company and  including,
                  without  limitation,  the  aggressive  treatment of income and
                  expenses in the filing of earlier tax returns by the Company;


         (ab)     all amounts  required to be withheld  for taxes by the Company
                  from  payments  made to any  present  or  former  shareholder,
                  officer, director,  non-resident creditor, employee, associate
                  or consultant  has been withheld and paid on a timely basis to

<PAGE>
                                      -28-


                  the  property   governmental   body   pursuant  to  applicable
                  legislation;


         (ac)     the  Company  has not  filed  with the  Minister  of  National
                  Revenue any agreement or form pursuant to subsection  "125(3)"
                  of the Income Tax Act for its  current  taxation  year and the
                  Company  has  never  carried  on  business  as a  member  of a
                  partnership;


         (ad)     Schedule  "E"  which is  attached  hereto  and  which  forms a
                  material  part  hereof   contains  an  accurate  and  complete
                  description of all of the Company's Property interests;


         (ae)     Schedule  "F"  which is  attached  hereto  and  which  forms a
                  material  part  hereof   contains  an  accurate  and  complete
                  description of all of the Company's Intellectual Property, and
                  the Intellectual  Property does not infringe the rights of any
                  other person;


         (af)     the Company  does not have and does not use any service  mark,
                  tradename  or  trademark  except as  disclosed  as part of the
                  Company's Intellectual Property;


         (ag)     the  Company  has  good  and  marketable  title  to all of its
                  Company's Property interests, Intellectual Property, Company's
                  Business,   Company's   Assets,   properties,   interests   in
                  properties,  real and personal,  including  those reflected in
                  the Company's Financial Statements or which have been acquired
                  since the date of the latest  Company's  Financial  Statements
                  (except  for  those  which  have  been  transferred,  sold  or
                  otherwise  disposed  of in the  ordinary  or normal  course of
                  business), free and clear of all encumbrances, and none of the
                  Company's  properties  or  the  Company's  Assets  is  in  the
                  possession of or under the control of any other person;


         (ah)     the Company has no equipment, other than the personal property
                  or fixtures in the possession or custody of the Company which,
                  as of the date hereof,  is leased or is held under  license or
                  similar arrangement;


         (ai)     except  for the real  property  leases  and the  contracts  of
                  employment  which  are set  forth  in  Schedules  "G" and "H",
                  respectively,  which are  attached  hereto  and  which  form a
                  material part hereof,  the Company is not party to or bound by
                  any other material  contract,  whether oral or written,  other
                  than the contracts and agreements as set forth in Schedule "I"
                  which is  attached  hereto  and which  forms a  material  part
                  hereof;


         (aj)     as to the  contracts  listed in Schedule "I" which is attached
                  hereto:

<PAGE>
                                      -29-


                  (i)      each such contract is in full  force and  effect  and
                           unamended;


                  (ii)     no material  default exists in respect thereof on the
                           part  of  either  the  Company  or  any  other  party
                           thereto;


                  (iii)    each such  contract  does not involve a Vendor or any
                           non-arm's length party except where described; and


                  (iv)     none of the Vendors is aware of any  intention on the
                           part of any  other  party  thereto  to  terminate  or
                           materially alter any such contract;


         (ak)     the  Company  has  no  consulting  or  employment  agreements,
                  whether  written or otherwise,  except for those which are set
                  forth in Schedule "I" which is attached hereto;


         (al)     Schedule  "J"  which is  attached  hereto  and  which  forms a
                  material  part hereof is a true and complete  list showing the
                  name of each bank,  trust  company or similar  institution  in
                  which the Company has accounts or safety  deposit  boxes,  the
                  identification  numbers of each such  account or safe  deposit
                  box, the names of all persons  authorized to draw therefrom or
                  to have access thereto and the number of signatories  required
                  on each  account.  In addition,  Schedule "J" also  includes a
                  list of all  non-bank  account  numbers,  codes  and  business
                  numbers used by the Company for the purposes of remitting tax,
                  dues, assessments and other fees;


         (am)     the Company maintains, and has maintained,  insurance in force
                  against loss on the Company's  Assets,  against such risks, in
                  such  amounts and to such  limits,  as is in  accordance  with
                  prudent business practices  prevailing in its line of business
                  and having  regard to the  location,  age and character of its
                  properties  and the Company's  Assets,  and has complied fully
                  with all requirements of such insurance,  including the prompt
                  giving  of  any  notice  of  any  claim  or   possible   claim
                  thereunder,  and  all  such  insurance  has  been  and is with
                  insurers which the Company believes to be responsible;


         (an)     the Company  utilizes  no product  warranties,  guarantees  or
                  product return policies;


         (ao)     the    most    recently     completed     and     consolidated
                  management-prepared   Company's  Financial  Statements  as  at
                  September  30, 2002 are true and correct in every  respect and
                  present fairly the financial position of the Company as at its

<PAGE>
                                      -30-


                  most recently  completed  financial  period and the results of
                  its  operations  for the period then ended in accordance  with
                  generally   accepted   accounting   principles   on  a   basis
                  consistently  applied;  a copy  of  said  Company's  Financial
                  Statements being attached hereto as Schedule "D";


         (ap)     the Company's  Financial  Statements and the books and records
                  of the Company are true and correct in every material respect,
                  were prepared in accordance with generally accepted accounting
                  principles   and  fairly   reflect  the  Company's   Business,
                  property,  the Company's Assets and the financial  position of
                  the  Company  as  at  the  date  of  the  Company's  Financial
                  Statements  and any such books and  records and the results of
                  the operations for the period then ended,  and there have been
                  no adverse changes in the Company's Business or affairs of the
                  Company since the date of the Company's  Financial  Statements
                  and any such books and records;


         (aq)     since September 30, 2002:


                  (i)      there has not been any material adverse change in the
                           financial position or condition of the Company or any
                           damage,   loss  or  other  change  in   circumstances
                           materially   affecting  the  Company's   Business  or
                           properties  or the  Company's  right or  capacity  to
                           carry on business;


                  (ii)     the Company has not waived or  surrendered  any right
                           of material value;


                  (iii)    the Company has not  discharged  or satisfied or paid
                           any lien or  encumbrance  or  obligation or liability
                           other than current liabilities in the ordinary course
                           of business; and


                  (iv)     the  Company's  Business  has been  carried on in the
                           ordinary course;


         (ar)     save and except for those matters which are listed in Schedule
                  "D"  which  is  attached  hereto,  there  are no  liabilities,
                  contingent  or  otherwise,  of the  Company not  disclosed  or
                  reflected in the Company's Financial Statements,  except those
                  incurred  in the  ordinary  course of  business of the Company
                  since September 30, 2002;


         (as)     save and except for any outstanding advances,  salaries, wages
                  and/or employment-related  expenses which are set forth in the
                  Company's Financial Statements, the Company is not indebted to
                  any Vendor or to any  affiliate or associate of the Company or
                  of any Vendor;

<PAGE>

                                      -31-


         (at)     save  and  except  as set  forth  in the  Company's  Financial
                  Statements,  no  payments  of  any  kind  have  been  made  or
                  authorized  by or on behalf of the  Company to or on behalf of
                  any of  the  Vendors  or to or on  behalf  of  any  directors,
                  officers,  shareholders  or  employees of the Company or under
                  any management  agreements  with the Company other than in the
                  ordinary course of business;


         (au)     except as otherwise  provided for herein,  the Vendors and the
                  Company have not retained,  employed or introduced any broker,
                  finder or other  person who would be  entitled  to a brokerage
                  commission  or finder's  fee  arising out of the  transactions
                  contemplated hereby;


         (av)     save and except for those matters which are listed in Schedule
                  "H" which is attached  hereto,  the Company  does not have any
                  contracts, agreements,  undertakings or arrangements,  whether
                  oral, written or implied, with employees,  lessees, licensees,
                  managers,   accountants,   suppliers,   agents,  distributors,
                  directors,   officers,  lawyers  or  others  which  cannot  be
                  terminated,  without  penalty,  on no  more  than  12  month's
                  notice;


         (aw)     save  and  except  as set  forth  in the  Company's  Financial
                  Statements,  neither the Vendors, nor any directors,  officers
                  or  employees  of the  Company,  are  now  indebted  or  under
                  obligation to the Company on any account whatsoever other than
                  in the ordinary course of business;


         (ax)     all  material  transactions  of  the  Company  and  including,
                  without   limitation,   all   directors'   and   shareholders'
                  resolutions, have been promptly and properly recorded or filed
                  in or with its books and records;


         (ay)     the  Vendors  and the  Company  have  the full  authority  and
                  capacity  required to enter into this Agreement and to perform
                  their respective obligations hereunder;


         (az)     the  present  directors  and  officers  of the  Company are as
                  follows:


               NAME                   POSITION


        Sacha H. Spindler  President, Chief Executive Officer and a director;and
        Leo W. Kerrigan    Secretary, Chief Financial Officer and a director;

<PAGE>
                                      -32-


         (ba)     prior to the Subject Removal Date (as hereinafter  determined)
                  the  Company  will  have  obtained  all   authorizations   and
                  approvals  or waivers  that may be  necessary  or desirable in
                  connection   with  the   transactions   contemplated  in  this
                  Agreement,  and other  actions  by, and have made all  filings
                  with, any and all Regulatory Authorities,  if applicable, from
                  whom any such  authorization,  approval  or  other  action  is
                  required to be obtained or to be made in  connection  with the
                  transactions contemplated herein, and all such authorizations,
                  approvals  and other actions will be in full force and effect,
                  and all such  filings  will have been  accepted by the Company
                  which will be in compliance  with,  and have not committed any
                  breach of, any securities laws, regulations or policies of any
                  Regulatory Authority to which the Company may be subject;


         (bb)     the Company has not  committed to making and until the Closing
                  Date (as  hereinafter  determined)  will  not  make or  commit
                  itself, without the written consent of the Purchaser, to:


                  (i)      guarantee, or agree to guarantee, any indebtedness or
                           other obligation of any person or corporation;


                  (ii)     other   than   the   payment   of   ordinary   course
                           obligations,  make any  single  operating  or capital
                           expenditures in excess of U.S. $50,000.00; or


                  (iii)    waive or surrender any right of material value;


         (bc)     until the Closing Date (as hereinafter determined) the Company
                  will:


                  (i)      maintain  its  Company's  Business  and  assets  in a
                           manner   consistent   with  and  in  compliance  with
                           applicable law; and


                  (ii)     not enter into any material  transaction or assume or
                           incur  any  material  liability  outside  the  normal
                           course of its business;


         (bd)     save and except for the proposed Residual Interest to Petrogen
                  Ltd. as contemplated  herein, the Company has not committed to
                  making and until the Closing Date (as hereinafter  determined)
                  will not make or commit itself, without the written consent of
                  the Purchaser, to:

<PAGE>
                                      -33-


                  (i)      declare or pay any dividend, or make any distribution
                           of its properties or assets to its  shareholders,  or
                           purchase or retire any of its shares;


                  (ii)     sell all or any  part of its  Company's  Business  or
                           assets  or  agree to do or  perform  any act or enter
                           into  any  transaction  or  negotiation  which  could
                           reasonably   be  expected  to  interfere   with  this
                           Agreement or which would render inaccurate any of the
                           representations,  warranties  and covenants set forth
                           in this Agreement; or


                  (iii)    merge,  amalgamate  or  consolidate  into or with any
                           entity,   or   enter   into   any   other   corporate
                           reorganization;


                  provided,  however,  that  the  provisions  hereof  shall  not
                  preclude  the  Company,  pending the  Closing (as  hereinafter
                  determined) or the  termination of this  Agreement,  whichever
                  shall first occur, from carrying on its business in the normal
                  course thereof;


         (be)     the Company will,  for a period of at least five business days
                  prior to the Closing Date (as hereinafter determined),  during
                  normal business hours:


                  (i)      make  available  for  inspection  by the  solicitors,
                           auditors and  representatives  of the  Purchaser,  at
                           such location as is appropriate, all of the Company's
                           books, records, contracts, documents,  correspondence
                           and other written materials,  and afford such persons
                           every  reasonable  opportunity to make copies thereof
                           and take  extracts  therefrom at the sole cost of the
                           Purchaser;   provided  such  persons  do  not  unduly
                           interfere in the operations of the Company;


                  (ii)     authorize and permit such persons at the risk and the
                           sole cost of the Purchaser,  and only if such persons
                           do not  unduly  interfere  in the  operations  of the
                           Company, to attend at all of its respective places of
                           business and operations to observe the conduct of its
                           business and  operations,  inspect its properties and
                           assets and make physical  counts of its  inventories,
                           shipments and deliveries; and


                  (iii)    require the Company's management personnel to respond
                           to all reasonable  inquiries concerning the Company's
                           Business  and assets or the  conduct of its  business
                           relating to its liabilities and obligations;

<PAGE>
                                      -34-


         (bf)     the Vendors and the Company will give to the Purchaser, within
                  at least  five  business  days prior to the  Closing  Date (as
                  hereinafter determined), by written notice, particulars of:


                  (i)      each occurrence within the Vendors' and the Company's
                           knowledge  after the Execution Date of this Agreement
                           that, if it had occurred  before the Execution  Date,
                           would have been  contrary  to any of the  Vendors' or
                           the   Company's    respective    representations   or
                           warranties contained herein; and


                  (ii)     each  occurrence or omission  within the Vendors' and
                           the Company's knowledge after the Execution Date that
                           constitutes  a breach of any of the  Vendors'  or the
                           Company's  respective  covenants  contained  in  this
                           Agreement;


         (bg)     each  of  the   attached   Schedules   contains  all  material
                  information  for each  particular  Schedule listed therein and
                  there are no omissions of material information by the Company;


         (bh)     neither this Agreement nor any other document,  certificate or
                  statement furnished to the Purchaser by or on behalf of any of
                  the Vendors or the Company in connection with the transactions
                  contemplated  hereby  knowingly  or  negligently  contains any
                  untrue or  incomplete  statement of material  fact or omits to
                  state  a  material  fact   necessary  in  order  to  make  the
                  statements therein not misleading; and


         (bi)     it is not aware of any fact or circumstance which has not been
                  disclosed to the Purchaser  which should be disclosed in order
                  to  prevent  the  representations,  warranties  and  covenants
                  contained in this section from being misleading or which would
                  likely affect the decision of the Purchaser to enter into this
                  Agreement.


3.4      CONTINUITY OF THE REPRESENTATIONS,  WARRANTIES AND COVENANTS BY EACH OF
THE VENDORS AND THE COMPANY.  The  representations,  warranties and covenants by
each of the  Vendors  and the  Company  contained  in  this  Article,  or in any
certificates or documents delivered pursuant to the provisions of this Agreement
or in connection with the transactions  contemplated hereby, will be true at and
as  of  the   Closing   Date  (as   hereinafter   determined)   as  though  such
representations,  warranties  and  covenants  were made at and as of such  time.
Notwithstanding  any investigations or inquiries made by the Purchaser or by the
Purchaser's  professional  advisors  prior to the Closing Date, or the waiver of
any condition by the Purchaser, the representations, warranties and covenants of
each of the Vendors and the Company  contained in this Article shall survive the
Closing  Date and shall  continue in full force and effect for a period of three
calendar years from the Closing Date;  provided,  however,  that the Vendors and
the  Company  shall not be  responsible  for the  breach of any  representation,
warranty or covenant  of either of the Vendors or the Company  contained  herein

<PAGE>
                                      -35-


caused by any act or  omission  of the  Purchaser  prior to the  Execution  Date
hereof of which the Vendors and the Company  were  unaware or as a result of any
action taken by the Purchaser after the Execution Date. In the event that any of
the  said  representations,  warranties  or  covenants  are  found by a Court of
competent  jurisdiction  to be incorrect and such  incorrectness  results in any
loss or damage  sustained  directly or  indirectly  by the  Purchaser,  then the
Vendors  and/or the Company,  as the case may be, will, in  accordance  with the
provisions of Article "17" hereinbelow, pay the amount of such loss or damage to
the Purchaser within 30 calendar days of receiving notice of judgment therefore;
provided  that the  Purchaser  will not be entitled to make any claim unless the
loss or damage suffered may exceed the amount of U.S. $1,000.00.


                                    ARTICLE 4
           WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE PURCHASER


4.1      WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE PURCHASER. In order to
induce the Vendors and the Company to enter into and consummate  this Agreement,
the Purchaser  hereby warrants to,  represents to and covenants with each of the
Vendors  and the  Company,  with the  intent  that each of the  Vendors  and the
Company will rely thereon in entering into this  Agreement and in concluding the
transactions   contemplated   herein,  that,  to  the  best  of  the  knowledge,
information and belief of the Purchaser, after having made due inquiry:


         (a)      the Purchaser is a  corporation  duly  incorporated  under the
                  laws of the State of Nevada,  U.S.A.,  is validly existing and
                  is in good  standing  with  respect to all  statutory  filings
                  required by the applicable corporate laws;


         (b)      the Purchaser's  subsidiaries,  if any, are corporations  duly
                  incorporated under the laws of their respective  jurisdictions
                  of  incorporation,  are  validly  existing  and  are  in  good
                  standing with respect to all statutory filings required by the
                  applicable corporate laws;


         (c)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, have the requisite  power,  authority and capacity to own
                  and use all of their  respective  business assets and to carry
                  on their respective businesses as presently conducted by them;


         (d)      the   Purchaser   is   qualified   to  do  business  in  those
                  jurisdictions where it is necessary to fulfill its obligations
                  under this Agreement,  and it has the full power and authority
                  to enter into this  Agreement  and any agreement or instrument
                  referred to or contemplated by this Agreement;
<PAGE>
                                      -36-


         (e)      the  execution   and  delivery  of  this   Agreement  and  the
                  agreements contemplated hereby has been duly authorized by all
                  necessary corporate action on its part;


         (f)      there are no other consents, approvals or conditions precedent
                  to the  performance  of this  Agreement  which  have  not been
                  obtained;


         (g)      this  Agreement   constitutes  a  legal,   valid  and  binding
                  obligation of the Purchaser  enforceable against the Purchaser
                  in accordance  with its terms,  except as  enforcement  may be
                  limited by laws of general application affecting the rights of
                  creditors;


         (h)      no  proceedings  are pending for, and the Purchaser is unaware
                  of, any basis for the institution of any  proceedings  leading
                  to the  dissolution or winding up of the Purchaser,  or of any
                  of the Purchaser's subsidiaries, if any, or the placing of the
                  Purchaser or any of the Purchaser's  subsidiaries,  if any, in
                  bankruptcy or subject to any other laws  governing the affairs
                  of insolvent companies;


         (i)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, own and possess and have good and marketable title to and
                  possession of all of their respective business assets free and
                  clear of all actual or  threatened  liens,  charges,  options,
                  encumbrances,   voting  agreements,  voting  trusts,  demands,
                  limitations and  restrictions of any nature  whatsoever,  save
                  and  except for those  actual or  threatened  liens,  charges,
                  encumbrances,  demands, limitations and restrictions which are
                  listed in  Schedule  "K" which is  attached  hereto  and which
                  forms a material part hereof;


         (j)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, hold all licenses and permits required for the conduct in
                  the ordinary course of the operations of their  businesses and
                  for the uses to which their  respective  business  assets have
                  been put and are in good  standing,  and such conduct and uses
                  are in  compliance  with all laws,  zoning and other  by-laws,
                  building  and  other  restrictions,   rules,  regulations  and
                  ordinances  applicable  to  the  Purchaser,   to  any  of  the
                  Purchaser's   subsidiaries,   if  any,  and  their  respective
                  businesses and assets,  and neither the execution and delivery
                  of this  Agreement  nor  the  completion  of the  transactions
                  contemplated   hereby  will  give  any  person  the  right  to
                  terminate  or cancel any said license or permit or affect such
                  compliance;


         (k)      the   authorized   capital  of  the   Purchaser   consists  of
                  100,000,000   common  shares   without  par  value  of  which,
                  according  to the  records  of the  Purchaser,  and  after the
                  completion  of its  proposed  Consolidation,  an  aggregate of
                  2,078,251  consolidated common shares of the Purchaser will be
                  issued and outstanding as fully paid and  non-assessable as at

<PAGE>
                                      -37-

                  the Closing Date (as hereinafter determined), and there are at
                  present no other shares in the capital of the Purchaser issued
                  or  allotted or agreed to be issued or allotted to any person,
                  save and except for certain shares of the Purchaser which have
                  been  allotted  and  reserved  for  issuance by the  Purchaser
                  pursuant  to the terms of certain  outstanding  stock  options
                  which have been  approved by the  directors of the  Purchaser;
                  the  details  of which  allotted  and  reserved  shares of the
                  Purchaser  being set forth in  Schedule  "K" which is attached
                  hereto;


         (l)      all of the issued and outstanding  shares of the Purchaser are
                  listed   and   posted   for   trading  on  each  of  the  NASD
                  Over-the-Counter   Bulletin   Board  (the   "OTCBB")  and  the
                  Frankfurt Stock Exchange ("DAX"),  and the Purchaser is not in
                  material  default of any of its  listing  requirements  of the
                  OTCBB,  the DAX or any rules or policies of the United  States
                  Securities and Exchange Commission (the "COMMISSION");


         (m)      all  registration  statements,  reports  and proxy  statements
                  filed  by  the  Purchaser   with  the   Commission,   and  all
                  registration statements, reports and proxy statements required
                  to be filed by the Purchaser  with the  Commission,  have been
                  filed by the Purchaser under the United States  SECURITIES ACT
                  of 1934 (the "1934 ACT"),  were filed in all material respects
                  in accordance  with the  requirements  of the 1934 Act and the
                  rules  and  regulations  thereunder  and no such  registration
                  statements,  reports or proxy statements  contained any untrue
                  statement of a material  fact or omitted to state any material
                  fact  required to be stated  therein or  necessary in order to
                  make the  statements  therein,  in light of the  circumstances
                  under which they were made, not misleading;


         (n)      the  Purchaser  will allot and issue the Shares on the Closing
                  Date in accordance  with sections "2.2" and "2.3"  hereinbelow
                  as  fully  paid  and  non-assessable  in  the  capital  of the
                  Purchaser,  free and clear of all actual or threatened  liens,
                  charges,  options,  encumbrances,  voting  agreements,  voting
                  trusts,  demands,  limitations and  restrictions of any nature
                  whatsoever,  other  than hold  periods  or other  restrictions
                  imposed  under  applicable  securities   legislation  and  the
                  restrictions imposed under the Pooling Agreement;


         (o)      save and  except  for the  prior  completion  of its  proposed
                  Consolidation, from October 11, 2002 (that being the reference
                  date of the Agreement In Principle) to and up to and including
                  the Closing Date (as hereinafter determined) the Purchaser and
                  each  of  the  Purchaser's  subsidiaries,  if  any,  have  not
                  committed  to making and until the Closing  Date will not make
                  or commit  themselves,  without  the  written  consent  of the
                  Company, to:


                  (i)      redeem  or  acquire  any  shares  in their respective
                           share capitals;

<PAGE>
                                      -38-


                  (ii)     declare or pay any dividend;


                  (iii)    make any reduction in or otherwise  make any  payment
                           on account of their respective paid-up capitals; or


                  (iv)     effect   any    subdivision  ,    consolidation    or
                           reclassification of any of their respective share
                           capitals;


         (p)      from October 11, 2002 to and up to and  including  the Closing
                  Date (as hereinafter determined) the Purchaser and each of the
                  Purchaser's subsidiaries, if any, have not committed to making
                  and until the Closing Date will not make or commit themselves,
                  without the written consent of the Company, to:


                  (i)      acquire  or  have  the  use  of any  property  from a
                           person, corporation or entity with whom they were not
                           dealing with at arm's length; or


                  (ii)     dispose  of  anything  to a  person,  corporation  or
                           entity with whom they were not dealing  with at arm's
                           length for  proceeds  less than the fair market value
                           thereof;


         (q)      save and except as set forth in Schedule "K" which is attached
                  hereto,  from October 11, 2002 to and up to and  including the
                  Closing Date (as  hereinafter  determined)  the  Purchaser and
                  each  of  the  Purchaser's  subsidiaries,  if  any,  have  not
                  committed  to making and until the Closing  Date will not make
                  or commit  themselves,  without  the  written  consent  of the
                  Company,  to provide any person,  firm or corporation with any
                  agreement,  option or right,  consensual  or  arising  by law,
                  present  or  future,  contingent  or  absolute,  or capable of
                  becoming an agreement, option or right:


                  (i)      to require  them to issue any further or other shares
                           in their  respective  share  capitals,  or any  other
                           security  convertible or exchangeable  into shares in
                           their  respective  share  capitals,  or to convert or
                           exchange any  securities  into or for shares in their
                           respective share capitals;


                  (ii)     for the issue and allotment of any of the  authorized
                           but  unissued  shares  in  their   respective   share
                           capitals;

<PAGE>
                                      -39-

                  (iii)    to  require  them to  purchase,  redeem or  otherwise
                           acquire any of the issued and  outstanding  shares in
                           their respective share capitals; or


                  (iv)     to purchase or otherwise  acquire any shares in their
                           respective share capitals;


         (r)      the Purchaser is not aware of any court order which  restricts
                  or prevents the  issuance by the  Purchaser of any shares from
                  treasury;


         (s)      save and except for those matters which are listed in Schedule
                  "K"  which  is   attached   hereto,   there  are  no  material
                  liabilities,   contingent  or   otherwise,   existing  on  the
                  Execution Date hereof in respect of which the Purchaser or any
                  of the Purchaser's  subsidiaries,  if any, may be liable on or
                  after the completion of the transactions  contemplated by this
                  Agreement other than:


                  (i)      liabilities   disclosed   or  referred   to  in  this
                           Agreement; and


                  (ii)     liabilities   incurred  in  the  ordinary  course  of
                           business, none of which are materially adverse to the
                           respective   businesses,   operations,   affairs   or
                           financial  conditions  of the  Purchaser or of any of
                           the Purchaser's subsidiaries, if any;


         (t)      no dividend or other  distribution  by the Purchaser or any of
                  the Purchaser's subsidiaries,  if any, has been made, declared
                  or authorized since their respective incorporations,  and from
                  October 11, 2002 to and up to and  including  the Closing Date
                  (as  hereinafter  determined)  the  Purchaser  and each of the
                  Purchaser's subsidiaries, if any, have not committed to making
                  and until the Closing Date will not make or commit themselves,
                  without the written consent of the Company, to confer upon, or
                  pay to or to the benefit of, any  entity,  any benefit  having
                  monetary value,  any bonus or any salary  increases  except in
                  the normal course of their respective businesses;


         (u)      there  is no  basis  for  and  there  are no  actions,  suits,
                  judgments,   investigations  or  proceedings   outstanding  or
                  pending  or,  to the best of the  knowledge,  information  and
                  belief of the Purchaser, after making due inquiry,  threatened
                  against or affecting the  Purchaser or any of the  Purchaser's
                  subsidiaries,  if any, at law or in equity or before or by any
                  federal,  state,  municipal or other governmental  department,
                  commission, board, bureau or agency;
<PAGE>
                                      -40-


         (v)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any,  are not in  breach of any  laws,  ordinances,  statutes,
                  regulations,  by-laws,  orders or  decrees  to which  they are
                  subject or which apply to them;


         (w)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any,  are not a party  to any  collective  agreement  with any
                  labour union or other  association of employees,  and there is
                  no  pending  application  for  certification  of  any  of  the
                  Purchaser's or any of the Purchaser's  subsidiaries' employees
                  as a collective bargaining unit. In addition,  and to the best
                  of the  knowledge,  information  and belief of the  Purchaser,
                  after having made due inquiry,  the  Purchaser and each of the
                  Purchaser's subsidiaries,  if any, is not presently a party to
                  any complaint,  grievance,  arbitration or other labour matter
                  referred to any board or labour authority;


         (x)      there are no  pension,  profit  sharing,  group  insurance  or
                  similar plans or other deferred  compensation  plans affecting
                  the Purchaser, any of the Purchaser's subsidiaries, if any, or
                  any of their respective directors, officers or employees;


         (y)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, have not experienced,  nor is the Purchaser aware of, any
                  occurrence  or event  which has had,  or might  reasonably  be
                  expected  to  have,  a  materially   adverse   affect  on  the
                  Purchaser's or any of the Purchaser's  subsidiaries',  if any,
                  respective  businesses  or on the results of their  respective
                  operations;


         (z)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, hold or have applied for all permits, licenses,  consents
                  and authorities  issuable by any federal,  state,  regional or
                  municipal  government or agency thereof which are necessary or
                  desirable in connection with their respective operations;


         (aa)     from October 11, 2002 to and up to and  including  the Closing
                  Date (as hereinafter determined) there has been and there will
                  be prepared  and filed on a timely basis all federal and state
                  income tax returns, elections and designations,  and all other
                  governmental  returns,   notices  and  reports  of  which  the
                  Purchaser  had,  or ought  reasonably  to have had,  knowledge
                  required to be or reasonably  capable of being filed up to the
                  Closing Date,  with respect to the operations of the Purchaser
                  and each of the Purchaser's subsidiaries,  if any, and no such
                  returns, elections,  designations,  notices or reports contain
                  or will contain any material misstatement or omit any material
                  statement  that  should  have  been  included,  and each  such
                  return,  election,  designation,  notice or report,  including
                  accompanying  schedules and  statements,  is and will be true,
                  correct and complete in all material respects;

<PAGE>
                                      -41-


         (ab)     the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, have been  assessed for all federal,  state and municipal
                  income tax for all years to and  including  their most  recent
                  respective  taxation  years,  and  at  the  Closing  Date  (as
                  hereinafter   determined)   the  Purchaser  and  each  of  the
                  Purchaser's  subsidiaries,  if any,  will have paid in full or
                  accrued in accounts all amounts  (including but not limited to
                  sales, use and consumption  taxes and taxes measured on income
                  and all installments of taxes) due and payable to all federal,
                  state and  municipal  taxation  authorities  up to the Closing
                  Date;


         (ac)     there is not now,  and there will not be by the  Closing  Date
                  (as hereinafter determined),  any proceeding, claim or, to the
                  best  of  the  knowledge,   information   and  belief  of  the
                  Purchaser,  after making due inquiry, any investigation by any
                  federal, state or municipal taxation authority, or any matters
                  under discussion or dispute with such taxation authorities, in
                  respect  of  taxes,   governmental  charges,   assessments  or
                  reassessments  in connection  with the Purchaser or any of the
                  Purchaser's  subsidiaries,  if any,  and the  Purchaser is not
                  aware of any  contingent  tax  liabilities or any grounds that
                  could  result  in  an  assessment,   reassessment,  charge  or
                  potentially  adverse  determination  by any federal,  state or
                  municipal  taxation  authority as against the Purchaser or any
                  of the Purchaser's subsidiaries, if any;


         (ad)     the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, are not in breach of any  provision or condition  of, nor
                  have they done or omitted  anything that,  with or without the
                  giving of notice or lapse or both,  would  constitute a breach
                  of any provision or condition of, or give rise to any right to
                  terminate or cancel or accelerate  the maturity of any payment
                  under,  any deed of  trust,  contract,  certificate,  consent,
                  permit, license or other instrument to which either of them is
                  a party, by which either of them is bound or from which either
                  of them derives benefit, any judgment,  decree, order, rule or
                  regulation  of any court or  governmental  authority  to which
                  either  of them  is  subject,  or any  statute  or  regulation
                  applicable  to  either  of them,  to an  extent  that,  in the
                  aggregate, has a material adverse affect on either of them;


         (ae)     adequate  provision  has been  made and will be made for taxes
                  payable  by  the  Purchaser   and  each  of  the   Purchaser's
                  subsidiaries,  if any, for the current  period for which a tax
                  return is not yet required to be filed and, to the best of the
                  knowledge,  information  and  belief of the  Purchaser,  after
                  having  made  due  inquiry,   there  are  no  contingent   tax
                  liabilities  of the  Purchaser  or of  any of the  Purchaser's
                  subsidiaries,  if any,  or any grounds  which  would  prompt a
                  re-assessment  of the  Purchaser  or  any  of the  Purchaser's
                  subsidiaries,  if any,  and  including,  without  limiting the
                  generality  of the  foregoing,  the  aggressive  treatment  of
                  income and  expenses  in the filing of earlier  tax returns by
                  the Purchaser or by any of the  Purchaser's  subsidiaries,  if
                  any;

<PAGE>
                                      -42-


         (af)     the most recently completed audited and unaudited consolidated
                  financial  statements of the Purchaser as at June 30, 2002 and
                  September   30,   2002,   respectively   (collectively,    the
                  "PURCHASER'S FINANCIAL  STATEMENTS"),  are true and correct in
                  every respect and presently  fairly the financial  position of
                  the  Purchaser  as at its most  recently  completed  financial
                  period and the results of its  operations  for the period then
                  ended  in  accordance  with  generally   accepted   accounting
                  principles  on a basis  consistently  applied;  a copy of said
                  Purchaser's  Financial  Statements  being  attached  hereto as
                  Schedule "K" and forming a material part hereof;


         (ag)     the Purchaser's Financial Statements and the books and records
                  of the Purchaser and each of the Purchaser's subsidiaries,  if
                  any,  are true and  correct in every  material  respect,  were
                  prepared in  accordance  with  generally  accepted  accounting
                  principles  and  fairly  reflect  the  respective  businesses,
                  property,  assets and financial positions of the Purchaser and
                  each of the Purchaser's  subsidiaries,  if any, as at the date
                  of the Purchaser's Financial Statements and any such books and
                  records and the results of their respective operations for the
                  periods then ended,  and there have been no adverse changes in
                  the respective businesses or affairs of the Purchaser and each
                  of  the  Purchaser's   subsidiaries  since  the  date  of  the
                  Purchaser's  Financial  Statements  and  any  such  books  and
                  records;


         (ah)     the  Purchaser  has  good and  marketable  title to all of its
                  assets,  properties  and  interests  in  properties,  real and
                  personal,   including   those  reflected  in  the  Purchaser's
                  Financial  Statements  or which have been  acquired  since the
                  date of the latest  Purchaser's  Financial  Statements (except
                  for those  which  have  been  transferred,  sold or  otherwise
                  disposed  of in the  ordinary or normal  course of  business),
                  free  and  clear  of  all   encumbrances,   and  none  of  the
                  Purchaser's  assets or properties  is in the  possession of or
                  under the control of any other person;


         (ai)     the  Purchaser  has no  equipment,  other  than  the  personal
                  property  or  fixtures  in the  possession  or  custody of the
                  Purchaser  which, as of the date hereof,  is leased or is held
                  under license or similar arrangement;


         (aj)     except  for the real  property  leases  and the  contracts  of
                  employment  which  are set  forth  in  Schedule  "L"  which is
                  attached  hereto and which forms a material  part hereof,  the
                  Purchaser  is not  party  to or bound  by any  other  material
                  contract,  whether oral or written,  other than the  contracts
                  and agreements as set forth in Schedule "L";


         (ak)     as to the  contracts  listed in Schedule "L" which is attached
                  hereto:


                  (i)      each such contract is in full force  and  effect  and
                           unamended;

<PAGE>
                                      -43-


                  (ii)     no material  default exists in respect thereof on the
                           part of  either  the  Purchaser  or any  other  party
                           thereto;


                  (iii)    each such  contract  does not involve  any  non-arm's
                           length party except where described; and


                  (iv)     the  Purchaser  is not aware of any  intention on the
                           part of any  other  party  thereto  to  terminate  or
                           materially alter any such contract;


         (al)     the Purchaser  has no  consulting  or  employment  agreements,
                  whether  written or otherwise,  except for those which are set
                  forth in Schedule "L" which is attached hereto;


         (am)     Schedule  "M"  which is  attached  hereto  and  which  forms a
                  material  part hereof is a true and complete  list showing the
                  name of each bank,  trust  company or similar  institution  in
                  which the Purchaser has accounts or safety deposit boxes,  the
                  identification  numbers of each such  account or safe  deposit
                  box, the names of all persons  authorized to draw therefrom or
                  to have access thereto and the number of signatories  required
                  on each  account.  In addition,  Schedule "M" also  includes a
                  list of all  non-bank  account  numbers,  codes  and  business
                  numbers  used by the  Purchaser  for the purposes of remitting
                  tax, dues, assessments and other fees;


         (an)     the  Purchaser  maintains,  and has  maintained,  insurance in
                  force against loss on the  Purchaser's  assets and properties,
                  against such risks, in such amounts and to such limits,  as is
                  in accordance with prudent  business  practices  prevailing in
                  its line of business and having  regard to the  location,  age
                  and character of its assets and  properties,  and has complied
                  fully with all  requirements of such insurance,  including the
                  prompt  giving of any  notice of any claim or  possible  claim
                  thereunder,  and  all  such  insurance  has  been  and is with
                  insurers which the Purchaser believes to be responsible;


         (ao)     the Purchaser  utilizes no product  warranties,  guarantees or
                  product return policies;


         (ap)     since September 30, 2002:


                  (i)      there has not been any material adverse change in the
                           financial position or condition of the Purchaser,  or
                           of any of the  Purchaser's  subsidiaries,  if any, or
                           any  damage,  loss or other  change in  circumstances

<PAGE>
                                      -44-


                           materially  affecting  the  respective  businesses or
                           properties   of  the   Purchaser   and  each  of  the
                           Purchaser's  subsidiaries,  if any, or their right or
                           capacity to carry on business;


                  (ii)     the   Purchaser   and   each   of   the   Purchaser's
                           subsidiaries,  if any, have not waived or surrendered
                           any right of material value;


                  (iii)    the   Purchaser   and   each   of   the   Purchaser's
                           subsidiaries,   if  any,   have  not   discharged  or
                           satisfied  or  paid  any  lien  or   encumbrance   or
                           obligation   or   liability    other   than   current
                           liabilities in the ordinary course of business; and


                  (iv)     the  respective  businesses of the Purchaser and each
                           of the  Purchaser's  subsidiaries,  if any, have been
                           carried on in the ordinary course;


         (aq)     save and except for those matters which are listed in Schedule
                  "K"  which  is  attached  hereto,  there  are no  liabilities,
                  contingent  or  otherwise,  of the  Purchaser or of any of the
                  Purchaser's  subsidiaries,  if any, not disclosed or reflected
                  in the Purchaser's Financial Statements, except those incurred
                  in the ordinary  course of business of the  Purchaser and each
                  of the Purchaser's  subsidiaries,  if any, since September 30,
                  2002;


         (ar)     no payments of any kind have been made or  authorized by or on
                  behalf   of  the   Purchaser   or   any  of  the   Purchaser's
                  subsidiaries, if any, to or on behalf of directors,  officers,
                  shareholders  or  employees  of  the  Purchaser  or any of the
                  Purchaser's  subsidiaries,  if any,  or under  any  management
                  agreements  with  the  Purchaser  or any  of  the  Purchaser's
                  subsidiaries,  if any,  other than in the  ordinary  course of
                  business;


         (as)     save and except for the proposed  issuance of common shares of
                  the  Company  as  a  finder's  fee  in  conjunction  with  the
                  successful  completion  of the within  Reverse  Takeover,  and
                  except  for any  finder's  fees or  commissions  which  may be
                  payable or issuable by the Purchaser in  conjunction  with the
                  completion of its proposed  Private  Placement (as hereinafter
                  determined) as set forth  hereinbelow,  the Purchaser and each
                  of the  Purchaser's  subsidiaries,  if any, have not retained,
                  employed  or  introduced  any  other  broker,  finder or other
                  person who would be  entitled  to a  brokerage  commission  or
                  finder's  fee  arising  out of the  transactions  contemplated
                  hereby;


         (at)     the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, do not have any contracts,  agreements,  undertakings  or
                  arrangements,   whether   oral,   written  or  implied,   with
                  employees,   lessees,   licensees,   managers,    accountants,

<PAGE>
                                      -45-


                  suppliers, agents, distributors,  directors, officers, lawyers
                  or others which cannot be terminated,  without penalty,  on no
                  more than three month's notice;


         (au)     none of  directors,  officers or employees of the Purchaser or
                  any of the Purchaser's subsidiaries,  if any, are now indebted
                  or  under  obligation  to  the  Purchaser  or to  any  of  the
                  Purchaser's  subsidiaries,  if any, on any account whatsoever,
                  other than in the ordinary course of business;


         (av)     all material  transactions  of the  Purchaser  and each of the
                  Purchaser's  subsidiaries,  if  any,  and  including,  without
                  limitation, all directors' and shareholders' resolutions, have
                  been promptly and properly  recorded or filed in or with their
                  respective books and records;


         (aw)     the present (and presently proposed at Closing (as hereinafter
                  determined))  directors  and officers of the Purchaser are and
                  will be as follows:


                           NAME                            POSITION


                  Grant Atkins                      President and sole director;


         (ax)     the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any, have good and marketable title to all of their respective
                  properties,  if any, and assets, and such properties,  if any,
                  and assets are not subject to any  mortgage,  pledge,  deed of
                  trust,  lien,  conditional  sale  agreement,   encumbrance  or
                  charge;


         (ay)     prior to the Subject Removal Date (as hereinafter  determined)
                  the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any,  will have  obtained all  authorizations,  approvals,  or
                  waivers that may be necessary or desirable in connection  with
                  the  transactions  contemplated in this  Agreement,  and other
                  actions  by,  and have  made  all  filings  with,  any and all
                  Regulatory  Authorities required to be made in connection with
                  the   transactions   contemplated   herein,   and   all   such
                  authorizations,  approvals  and other  actions will be in full
                  force and effect, and all such filings will have been accepted
                  by the Purchaser  and the  Purchaser's  subsidiaries,  if any,
                  which will be in compliance  with,  and have not committed any
                  breach of, any securities laws, regulations or policies of any
                  Regulatory  Authority  to which  the  Purchaser  or any of the
                  Purchaser's subsidiaries, if any, may be subject;


         (az)     the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any,  have not  committed to making and until the Closing Date
                  (as   hereinafter   determined)   will  not  make  or   commit
                  themselves, without the written consent of the Company, to:

<PAGE>
                                      -46-


                  (i)      guarantee, or agree to guarantee, any indebtedness or
                           other obligation of any person or corporation;


                  (ii)     other   than   the   payment   of   ordinary   course
                           obligations,    make   any   operating   or   capital
                           expenditures in excess of U.S. $10,000.00; or


                  (iii)    waive or surrender any right of material value;


         (ba)     until  the  Closing  Date  (as  hereinafter   determined)  the
                  Purchaser and each of the  Purchaser's  subsidiaries,  if any,
                  will:


                  (i)      maintain   their   respective   assets  in  a  manner
                           consistent  with and in  compliance  with  applicable
                           law; and


                  (ii)     not enter into any material  transaction or assume or
                           incur  any  material  liability  outside  the  normal
                           course of their respective businesses;


         (bb)     the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any,  have not  committed to making and until the Closing Date
                  (as   hereinafter   determined)   will  not  make  or   commit
                  themselves, without the written consent of the Company, to:


                  (i)      declare or pay any dividend, or make any distribution
                           of their  respective  properties  or  assets to their
                           respective shareholders, or purchase or retire any of
                           their respective shares;


                  (ii)     sell all or any part of their  respective  assets  or
                           agree  to do or  perform  any act or  enter  into any
                           transaction or negotiation  which could reasonably be
                           expected to  interfere  with this  Agreement or which
                           would render  inaccurate any of the  representations,
                           warranties and covenants set forth in this Agreement;
                           or


                  (iii)    merge,  amalgamate  or  consolidate  into or with any
                           entity,   or   enter   into   any   other   corporate
                           reorganization;

<PAGE>
                                      -47-


                  provided,  however,  that  the  provisions  hereof  shall  not
                  preclude   the   Purchaser   and   each  of  the   Purchaser's
                  subsidiaries,  if any,  pending the  Closing  (as  hereinafter
                  determined) or the  termination of this  Agreement,  whichever
                  shall  first  occur,   from   carrying  on  their   respective
                  businesses in the normal course thereof;


         (bc)     the  Purchaser  will,  for a period of at least five  business
                  days prior to the Closing  Date (as  hereinafter  determined),
                  during normal business hours:


                  (i)      make  available  for  inspection  by  the  respective
                           solicitors,   auditors  and  representatives  of  the
                           Company,  at such location as is appropriate,  all of
                           the   Purchaser's   and   each  of  the   Purchaser's
                           subsidiaries',  if any,  books,  records,  contracts,
                           documents,    correspondence    and   other   written
                           materials,  and afford such persons every  reasonable
                           opportunity  to make copies thereof and take extracts
                           therefrom at the sole cost of the  Company;  provided
                           such   persons  do  not  unduly   interfere   in  the
                           respective  operations of the Purchaser or any of the
                           Purchaser's subsidiaries, if any;


                  (ii)     authorize and permit such persons at the risk and the
                           sole cost of the Company, and only if such persons do
                           not unduly interfere in the respective  operations of
                           the   Purchaser   and   each   of   the   Purchaser's
                           subsidiaries,  if  any,  to  attend  at all of  their
                           respective  places  of  business  and  operations  to
                           observe  the conduct of their  respective  businesses
                           and operations,  inspect their respective  properties
                           and  assets  and  make   physical   counts  of  their
                           respective inventories, shipments and deliveries; and


                  (iii)    require the  Purchaser's  and each of the Purchaser's
                           subsidiaries',    if   any,   respective   management
                           personnel  to  respond  to all  reasonable  inquiries
                           concerning   the   Purchaser's   and   each   of  the
                           Purchaser's   subsidiaries',   if   any,   respective
                           business  assets or the  conduct of their  respective
                           businesses  relating to their respective  liabilities
                           and obligations;


         (bd)     the Purchaser  will give to the Company,  within at least five
                  business  days  prior  to the  Closing  Date  (as  hereinafter
                  determined), by written notice, particulars of:


                  (i)      each  occurrence  within  the  Purchaser's  knowledge
                           after the Execution Date of this  Agreement  that, if
                           it had occurred before the Execution Date, would have
                           been    contrary   to   any   of   the    Purchaser's
                           representations or warranties contained herein; and

<PAGE>
                                      -48-


                  (ii)     each  occurrence or omission  within the  Purchaser's
                           knowledge after the Execution Date that constitutes a
                           breach of any of the Purchaser's  covenants contained
                           in this Agreement;


         (be)     the shares in the capital of the  Purchaser are not subject to
                  or  affected  by  any  actual  or,  to  the  knowledge  of the
                  Purchaser,  pending or threatened cease trading, compliance or
                  denial  of  use  of   exemptions   orders   of,   or   action,
                  investigation  or  proceeding  by or  before,  any  securities
                  regulatory  authority,  Court,  administrative agency or other
                  tribunal;


         (bf)     the  making  of  this  Agreement  and  the  completion  of the
                  transactions  contemplated  hereby and the  performance of and
                  compliance with the terms hereof does not and will not:


                  (i)      conflict with or result in a breach of or violate any
                           of  the  terms,   conditions  or  provisions  of  the
                           constating  documents  of the  Purchaser or of any of
                           the Purchaser's subsidiaries, if any;


                  (ii)     conflict with or result in a breach of or violate any
                           of the terms,  conditions  or  provisions of any law,
                           judgment,  order, injunction,  decree,  regulation or
                           ruling  of  any  Court  or  governmental   authority,
                           domestic or foreign, to which the Purchaser or any of
                           the Purchaser's subsidiaries,  if any, is subject, or
                           constitute   or  result   in  a  default   under  any
                           agreement, contract or commitment to which either the
                           Purchaser or any of the Purchaser's subsidiaries,  if
                           any, is a party;


                  (iii)    give  to  any  party   the   right  of   termination,
                           cancellation  or  acceleration  in or with respect to
                           any agreement, contract or commitment to which either
                           the Purchaser or any of the Purchaser's subsidiaries,
                           if any, is a party;


                  (iv)     give to any government or governmental  authority, or
                           any   municipality   or  any   subdivision   thereof,
                           including any  governmental  department,  commission,
                           bureau, board or administration  agency, any right of
                           termination,   cancellation   or  suspension  of,  or
                           constitute a breach of or result in a default  under,
                           any permit,  license,  control or authority issued to
                           the   Purchaser   or  to  any   of  the   Purchaser's
                           subsidiaries, if any, which is necessary or desirable
                           in  connection  with the  conduct and  operations  of
                           their  respective  businesses  and the  ownership  or
                           leasing of their respective business assets; or

<PAGE>
                                      -49-


                  (v)      constitute  a default by the  Purchaser or any of the
                           Purchaser's subsidiaries, if any, or any event which,
                           with the  giving  of notice or lapse of time or both,
                           might  constitute  an event  of  default,  under  any
                           agreement,  contract,  indenture or other  instrument
                           relating to any  indebtedness  of the Purchaser or of
                           any of the  Purchaser's  subsidiaries,  if any, which
                           would  give any  party to that  agreement,  contract,
                           indenture or other instrument the right to accelerate
                           the  maturity  for the payment of any amount  payable
                           under that  agreement,  contract,  indenture or other
                           instrument;


         (bg)     the  Purchaser  will  appoint the  directors of the Company as
                  directors of the Purchaser and the incumbent  directors  shall
                  resign  as  directors  of the  Purchaser,  together  with  the
                  appointment  of not less than three nominees of the Company as
                  Executive   Officers   of  the   Purchaser,   at  Closing  (as
                  hereinafter  determined);  such  appointees  or nominees to be
                  determined  prior to Closing,  and in the  Company's  sole and
                  absolute discretion;


         (bh)     the Purchaser's present accounts payable,  which are estimated
                  at  approximately  U.S. $50,000 as at September 30, 2002, will
                  not,  except  for  the  costs  incurred  by the  Purchaser  in
                  completing the within Reverse Takeover,  increase by more than
                  ten  percent  (10%)  by  the  Closing  Date  (as   hereinafter
                  determined),  and the  Purchaser may make payments to decrease
                  the accounts payable before the Closing Date;


         (bi)     the  Purchaser  has been  provided  with  certain  advances by
                  parties  associated  with the  Purchaser,  approximating  U.S.
                  $800,000 as at September  30, 2002, to which the Purchaser has
                  agreed to repay those advances and accrued  interest by way of
                  the issuance of certain  common shares of the Purchaser  prior
                  to the Closing Date (as  hereinafter  determined);  and except
                  for certain  further  advances by parties  associated with the
                  Purchaser  for costs  incurred by the  Purchaser in the normal
                  course  of  business  and in  completing  the  within  Reverse
                  Takeover,  there will not be any further advances  outstanding
                  at the Closing Date;


         (bj)     the  Purchaser  will raise on or before  December  31, 2002 an
                  initial  common  share  private   placement  funding  for  the
                  Purchaser,  under  "RULE  506" or  "REGULATION  S"  under  the
                  Securities Act, of a minimum of U.S. $500,000.00 and a maximum
                  of up to U.S.  $1,000,000.00,  and at a subscription  price of
                  not  less  than  U.S.  $1.00  per   restricted   common  share
                  (collectively, the "PRIVATE PLACEMENT"), with an understanding
                  to utilize its reasonably commercial efforts to raise not less
                  than  U.S.  $250,000.00  of the  Private  Placement  within 60
                  calendar  days from the  acceptance  date of the  Agreement In
                  Principle by the Company and the  Purchaser and with a further
                  understanding to utilize its reasonably  commercial efforts to
                  raise not less than an initial U.S. $100,000.00 of the Private
                  Placement  within 15 calendar days from the acceptance date of
                  the Agreement In Principle by the Company and the Purchaser;

<PAGE>
                                      -50-


         (bk)     the Purchaser will sell prior to and/or  commensurate with the
                  Closing  (as  hereinafter  determined)  hereunder  its  entire
                  right,  entitlement  and  interest in and to its  wholly-owned
                  subsidiary,  Oakhills  Energy,  Inc.,  to  Tristar,  a present
                  creditor  of  the  Purchaser,  for  in  consideration  of  the
                  foregiveness by Tristar of its present  indebtedness  from the
                  Purchaser in the approximate  amount of U.S. $100,000 together
                  with the  delivery  by Tristar to the  Purchaser  of a general
                  release  in  conjunction  with  the  completion  of  the  same
                  (collectively, the "SUBSIDIARY SALE");


         (bl)     the Purchaser will file, with the prior written consent of the
                  Company,  a  "FORM  S-8"  registration  statement  for a stock
                  option plan in the estimated amount of not less than 2,000,000
                  post-Consolidation  common  shares  of  the  Purchaser,  at an
                  exercise   price   of   not   less   than   U.S.   $0.50   per
                  post-Consolidation common share (collectively, the "OPTIONS");
                  and  in  such  amounts  and  with  such  optionees  as  may be
                  determined  by  management  for the Purchaser and the Company,
                  acting  reasonably,  prior to the Closing Date (as hereinafter
                  determined),  and as may be  acceptable  with the  appropriate
                  Regulatory Authorities;  it being acknowledged and agreed that
                  an aggregate of 2,000,000 of such Options will be exchanged as
                  Purchaser's  Options for the  Company's  Options,  on the same
                  exercise  terms  and  conditions,   for  an  equal  number  of
                  incentive stock options in and to the resulting Purchaser on a
                  post-Consolidation  basis,  in  consideration  of the  ongoing
                  involvement of the existing Company's  Optionholders in and to
                  the resulting Purchaser company and in exchange for the agreed
                  upon  cancellation by said Company's  Optionholders  of all of
                  the  then  issued  and  outstanding  Company's  Options  as  a
                  consequence  thereof;  and it being further  acknowledged  and
                  agreed that, subject to applicable securities laws, any common
                  shares   which  may  arise  from  the  exercise  of  any  such
                  Purchaser's  Options  subsequent  to the Closing  Date will be
                  held in pool and either (i) sold jointly and pro rata with any
                  other  Option   common  shares   deposited   therein  or  (ii)
                  restricted  as to sale in such maximum daily amounts as may be
                  determined in accordance with the sole and absolute discretion
                  and  direction  of such nominee or nominees as may be mutually
                  agreed  upon in  writing,  from  time to time,  by each of the
                  Purchaser  and the  Company at or  subsequent  to the  Closing
                  Date;


         (bm)     the Purchaser will exchange all existing  Company's  Warrants,
                  on the same exercise terms and conditions, for an equal number
                  of Purchaser's Warrants in and to the resulting Purchaser on a
                  post-Consolidation  basis in  consideration,  in part,  of the
                  ongoing  involvement of the existing Company's  Warrantholders
                  in and to the resulting  Purchaser company and in exchange for
                  the agreed upon cancellation by said Company's  Warrantholders
                  of all of the then issued and outstanding  Company's  Warrants
                  as a consequence thereof;

<PAGE>
                                      -51-


         (bn)     the Purchaser  will use its  commercially  reasonable  efforts
                  prior to and/or  commensurate with the Closing (as hereinafter
                  determined)  hereunder  to enter into a  proposed  "CONSULTING
                  SERVICES AGREEMENT" with ICI; a copy of form of which proposed
                  Consulting   Services   Agreement  being  attached  hereto  as
                  Schedule "O" and forming a material  part hereof;  whereby ICI
                  shall conduct certain consulting services for the Purchaser as
                  contemplated therein;


         (bo)     the Purchaser will have acquired the necessary approval of its
                  shareholders, if required, to change the name of the Purchaser
                  to "Petrogen  Corp.",  or to such other name as the  Company's
                  Board of Directors  may  determine at Closing (as  hereinafter
                  determined),  together  with the  appointment  of the existing
                  directors of the Company to the  resulting  Board of Directors
                  of the Purchaser and the  appointment  of up to three nominees
                  of the  Company as  Executive  Officers  of the  Purchaser  at
                  Closing; such appointees or nominees to be determined prior to
                  Closing,  and in the Company's  sole and absolute  discretion;
                  and at  Closing  the  Purchaser  shall  be in the  process  of
                  preparing  or  filing  the  necessary  documentation  with all
                  Regulatory  Authorities  to effect  the same and  which  shall
                  include,  without  limitation,  obtaining a new trading symbol
                  and CUSIP number for the resulting Purchaser;


         (bp)     neither this Agreement nor any other document,  certificate or
                  statement furnished to any of the Vendors or the Company by or
                  on behalf of the Purchaser in connection with the transactions
                  contemplated  hereby  knowingly  or  negligently  contains any
                  untrue or  incomplete  statement of material  fact or omits to
                  state  a  material  fact   necessary  in  order  to  make  the
                  statements therein not misleading; and


         (bq)     it is not aware of any fact or circumstance which has not been
                  disclosed  to the  Vendors  and the  Company  which  should be
                  disclosed in order to prevent the representations,  warranties
                  and covenants  contained in this section from being misleading
                  or which would  likely  affect the decision of the Vendors and
                  the Company to enter into this Agreement.


4.2      CONTINUITY OF THE REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  BY  THE
PURCHASER.  The  representations,  warranties  and  covenants  of the  Purchaser
contained  in  this  Article,  or in any  certificates  or  documents  delivered
pursuant  to  the  provisions  of  this  Agreement  or in  connection  with  the
transactions contemplated hereby, will be true at and as of the Closing Date (as
hereinafter determined) as though such representations, warranties and covenants
were  made  at  and as of  such  time.  Notwithstanding  any  investigations  or
inquiries  made by either of the Vendors or the  Company,  or by the Vendors' or
the Company's respective professional advisors prior to the Closing Date, or the
waiver  of  any  condition  by  either  of  the  Vendors  or  the  Company,  the
representations,  warranties  and covenants of the  Purchaser  contained in this
Article  shall  survive  the Closing  Date and shall  continue in full force and
effect for a period of three  calendar  years from the Closing  Date;  provided,
however,  that the  Purchaser  shall not be  responsible  for the  breach of any

<PAGE>
                                      -52-


representation, warranty or covenant of the Purchaser contained herein caused by
any act or  omission  of  either  of the  Vendors  or the  Company  prior to the
Execution  Date hereof of which the  Purchaser was unaware or as a result of any
action taken by either of the Vendors or the Company after the  Execution  Date.
In the event that any of the said  representations,  warranties or covenants are
found  by  a  Court  of  competent   jurisdiction   to  be  incorrect  and  such
incorrectness  results in any loss or damage sustained directly or indirectly by
either of the Vendors and/or the Company, then the Purchaser will, in accordance
with the provisions of Article "16" hereinbelow,  pay the amount of such loss or
damage to either of the Vendors  and/or the Company,  as the case may be, within
30 calendar days of receiving  notice of judgment  therefore;  provided that the
Vendors and the Company  will not be entitled to make any claim  unless the loss
or damage suffered may exceed the amount of U.S. $1,000.00.


                                    ARTICLE 5
                   INTERIM SECURED LOAN AND SECURITY THEREFORE


5.1      INTERIM SECURED LOAN FROM THE PURCHASER  TO THE  COMPANY.  It is hereby
acknowledged and agreed by the Parties hereto that, in conjunction with and as a
condition to the entering into of the Agreement In Principle and this  Agreement
by the Parties hereto,  the Purchaser has heretofore  agreed, in accordance with
the specific terms and conditions of that certain form of proposed  "Secured and
Convertible Loan Agreement" (the "LOAN AGREEMENT") in this matter, to be entered
into between the  Purchaser and the Company  concurrently  with the execution of
this  Agreement;  a copy of the  form  of said  proposed  Loan  Agreement  being
attached  hereto as Schedule "N" and forming a material part hereof;  to advance
by way  of a loan  or  loans  to the  Company  (collectively,  the  "LOAN")  the
aggregate  principal sum of up to U.S.  $250,000.00 (the "PRINCIPAL SUM") within
five  business  days  of the due  and  complete  closing  of a  minimum  of U.S.
$250,000.00 of the proposed Private Placement  financing as set forth in section
"4.1" hereinabove.


         In this regard,  and in accordance with the terms and conditions of the
proposed Loan  Agreement,  any such Principal Sum Loan amount will bear interest
accruing  thereon  at the  rate  of ten  percent  (10%)  per  annum,  compounded
semi-annually  and not in advance (the  "INTEREST")  prior to maturity,  and any
such  Principal  Sum and Interest  will be secured,  contemporaneously  with the
advancement  of any funds  under  any such  Loan,  by way of a senior  fixed and
floating  charge  on  all of  the  assets  of  the  Company  (collectively,  the
"SECURITY").  In this  regard it is hereby also  acknowledged  and agreed by the
Parties hereto that, upon the completion of the within Reverse  Takeover,  it is
intended, subject to the Purchaser's prior receipt of appropriate accounting and
legal advice, that the Loan will simply be forgiven,  or become an inter-company
account as the situation may require.


5.2      COVENANTS  OF  THE  COMPANY  IN  CONNECTION  WITH ANY LOAN. In order to
induce the  Purchaser  to  provide  any such Loan  under the Loan  Agreement  as
contemplated by section "5.1" hereinabove, the Company hereby covenants with the
Purchaser, with the intent that the Purchaser will rely thereon in providing any
such Loan and in concluding the transactions contemplated thereby, that:

<PAGE>
                                      -53-

         (a)      the Company will use any such  Principal  Sum monies which may
                  be  advanced  by the  Purchaser  by way of Loan  for the  sole
                  purpose of advancing  the ongoing  development,  marketing and
                  maintenance  of  the  Company's  Business  interests  and  the
                  Company's Assets; and


         (b)      any such  Principal  Sum will be advanced by the  Purchaser to
                  the Company subject to the  fulfillment  and/or the continuing
                  fulfillment of at least the following  Security  conditions to
                  the sole  and  absolute  satisfaction  and  discretion  of the
                  Purchaser:


                  (i)      the   execution   by  the   Company  of  formal  Loan
                           documentation  in form and substance  satisfactory to
                           the Purchaser and its counsel, acting reasonably; and


                  (ii)     the  granting  and  delivery  by the  Company  to the
                           Purchaser  of  such   Security   documentation   (and
                           including,  without limitation,  promissory notes and
                           security  instruments)  as  may  be  required  by the
                           Purchaser  and its  counsel,  acting  reasonably,  in
                           order to  evidence  the Loan,  together  with and all
                           other  supporting  documents  required under any such
                           Security documentation.


5.3      REPAYMENT OF THE PRINCIPAL SUM PORTION OF THE LOAN.Subject to the prior
application of the provisions provided for in section "3.5" of the proposed Loan
Agreement and as set forth hereinbelow,  it is hereby acknowledged and agreed by
the Parties  hereto that, in  accordance  with the section "3.4" of the proposed
Loan Agreement, the Company will covenant to repay to the Purchaser, as required
under the terms of the proposed Loan  Agreement,  all Principal Sum monies which
are advanced by the Purchaser to the Company under the proposed Loan  Agreement,
together with all outstanding  Interest accrued thereon,  at or before 5:00 p.m.
(Vancouver  time) on the day which is 90  calendar  days from the earlier of one
year from the execution  date of the Loan  Agreement and the date upon which the
Purchaser's proposed purchase of all of the issued and outstanding shares of the
Company under the terms and  conditions  of this  Agreement  terminates  for any
reason  whatsoever  (herein and therein the "FINAL PRINCIPAL SUM PAYMENT DATE");
failing  which the Purchaser  may  immediately  realize upon any of the Security
which has been provided by the Company to the  Purchaser in accordance  with the
terms of the proposed Loan Agreement.


5.4      PREPAYMENT AND REDEMPTION OF THE LOAN.  It  is hereby  acknowledged and
agreed by the Parties  hereto that,  in  accordance  with  section  "3.5" of the
proposed  Loan  Agreement,  the Company may prepay and redeem any portion of the
Principal  Sum  portion of the Loan in whole or in part at any time prior to the
Final  Principal Sum Payment Date (herein and therein the "RIGHT OF REDEMPTION")
and  in the  manner  as set  forth  immediately  hereinbelow  by  providing  the
Purchaser  with not less than 30 calendar days' prior written notice (herein and
therein the "REDEMPTION  NOTICE") of its Right of Redemption intention to redeem

<PAGE>
                                      -54-


and repay all or any  portion  of the  Principal  Sum and any  Interest  accrued
thereon  which would be due and owing by the Company to the Purchaser at the end
of such  30-day  period  (herein  and  therein,  collectively,  the  "REDEMPTION
AMOUNT") (such day at the end of such 30-day period being the "REDEMPTION  DATE"
and, for clarity, such Redemption Date would be the date to which such Principal
Sum and Interest would be calculated and due and payable to the Purchaser at the
close of business, in Vancouver,  British Columbia, on such Redemption Date). In
order to provide  such  Redemption  Notice it is hereby  also  acknowledged  and
agreed that the Company  will be  required,  at the date of its  delivery to the
Purchaser of the Redemption Notice, to provide to the Purchaser's solicitors, or
to such  other  mutually  agreeable  holder  (herein  and  therein  the  "ESCROW
HOLDER"),  a certified cheque or bank draft  representing the entire  Redemption
Amount  and made  payable  to the  Purchaser  in funds of the  United  States of
America, or funds by way of wire transfer to such designation as may be directed
by the Purchaser in its sole and absolute discretion,  in the amount of any such
Redemption Amount.  Thereupon, and should the proposed Redemption Amount in fact
represent all of the Principal Sum and any Interest  accrued thereon which would
be due and  owing by the  Company  to the  Purchaser  under  the  proposed  Loan
Agreement at the Redemption Date, then the Purchaser will be required to provide
to the Escrow  Holder,  and as soon as reasonably  possible after its receipt of
the Redemption Notice,  all such registerable  discharges as may be necessary to
relieve  the  Company  of any  obligation  to the  Purchaser  under  each of the
proposed Loan  Agreement and each and every other  Security  instrument  already
provided by the Company to the Purchaser  under the terms and  conditions of the
proposed Loan Agreement (herein and therein, collectively, the "DISCHARGES"). In
this regard,  and on the second business day subsequent to the Redemption  Date,
the Escrow Holder, if applicable,  shall deliver to the Purchaser the Redemption
Amount and, only if also applicable, to the Company the Discharges,  and, unless
otherwise  directed in writing by each of the Purchaser and the Company,  to the
Purchaser's  and the Company's  respective  addresses for notice and delivery as
set forth on the front page of the proposed Loan Agreement.  Notwithstanding the
Company's prior exercise of its Right of Redemption and/or the Purchaser's prior
exercise of its Right of Election as provided for in the proposed Loan Agreement
and  as set  forth  herein,  and  notwithstanding  the  prior  repayment  to the
Purchaser by the Company of all or any portion of the entire  Redemption  Amount
and/or the prior conversion by the Purchaser of all or any portion of the entire
Outstanding Indebtedness (as hereinafter determined) for any Equity Interest (as
hereinafter  determined) as also provided for in the proposed Loan Agreement and
as set forth herein,  no such action or actions will, in any manner,  and unless
this Agreement is otherwise  terminated for any reason  whatsoever  prior to the
Closing  thereof,  affect  the within  obligation  of each of the  Vendors,  the
Company and the  Purchaser  to complete  the  proposed  purchase and sale of the
Purchased Shares as contemplated by the terms and conditions of this Agreement.


5.5      RIGHT TO CONVERT ANY OUTSTANDING INDEBTEDNESS TO EQUITY OF THE COMPANY.
Subject to the  Company's  prior Right of Redemption as set forth in Article "3"
of the  proposed  Loan  Agreement,  at any time  after the Final  Principal  Sum
Payment Date as set forth  hereinabove,  should either this Agreement  terminate
for any reason  whatsoever  prior to the  Closing  (as  hereinafter  determined)
thereof or should the Final  Principal Sum Payment Date be otherwise  determined
at any time  subsequent  to the  advance  of any Loan  under the  proposed  Loan
Agreement,  then the  Purchaser  will have, in addition to all of the rights and
Security specifically provided for in the proposed Loan Agreement,  the sole and
exclusive right and option, in its sole and absolute  discretion,  to elect (the

<PAGE>
                                      -55-


"RIGHT OF ELECTION") to convert the entire Principal Sum,  Interest or any other
sum outstanding under any Loan from the Purchaser to the Company as contemplated
by  the  proposed  Loan  Agreement  (herein  and  therein,   collectively,   the
"OUTSTANDING INDEBTEDNESS") to a participating and voting interest in and to the
Company which is then equivalent to that percentage  which is equivalent to five
percent  (5%)  multiplied  by the  fraction  which has,  as its  numerator,  the
Outstanding Indebtedness,  and which has, as its denominator,  U.S. $250,000.00,
of the resulting issued and outstanding  participating  and voting common shares
of the Company at that time (the "EQUITY INTEREST").  In this regard, and should
the Purchaser  exercise its Right of Election to convert the entire  Outstanding
Indebtedness  outstanding  into the Equity Interest in and to the Company as set
forth  immediately  hereinabove  then it is also hereby  acknowledged and agreed
that the Company will, at all times,  maintain such Equity  Interest  percentage
ownership  position  of the  Purchaser  in and to the  Company  with no dilution
whatsoever  unless otherwise  consented to in writing by the Purchaser.  In this
regard it is hereby  acknowledged  and  agreed by the  Parties  hereto  that the
Purchaser's Right of Election may only be exercised by the Purchaser's surrender
of the proposed  Loan  Agreement and the delivery to the Escrow Holder of a duly
executed   "Election  Form"  (herein  and  therein  the  "ELECTION   FORM");  in
substantially  the form which is attached as Schedule "D" to the  proposed  Loan
Agreement;  together  with such  registerable  Discharges as may be necessary to
relieve the Company of any  obligation to the Purchaser  under the proposed Loan
Agreement and each and every other Security  instrument  already provided by the
Company to the  Purchaser  under the terms and  conditions  of the proposed Loan
Agreement.  In conjunction with the Escrow Holder's receipt of the Election Form
and Discharges from the Purchaser it is hereby also acknowledged and agreed that
the Company will then be required to provide to the Escrow  Holder,  and as soon
as reasonably possible  thereafter,  a certificate or certificates  representing
the Equity  Interest  duly  registered  to the prior order and  direction of the
Purchaser  together  with  such  other  documentation  or  assurances  as may be
necessary,  in  the  sole  and  absolute  discretion  of the  Purchaser,  acting
reasonably,  in order to evidence the  Company's  compliance  with the terms and
conditions of the proposed Loan Agreement and including, without limitation, the
issuance of such Equity Interest as provided for hereunder  (herein and therein,
collectively,  the "EQUITY INTEREST DOCUMENTATION").  In this regard, and on the
second  business day  subsequent  to the Escrow  Holder's  receipt of the Equity
Interest  Documentation from the Company, the Escrow Holder shall deliver to the
Purchaser  the Equity  Interest  Documentation  and to the Borrower the Election
Form and the Discharges,  and, unless  otherwise  directed in writing by each of
the Purchaser and the Company,  to the Purchaser's and the Company's  respective
addresses for notice and delivery as set forth on the front page of the proposed
Loan  Agreement.  Notwithstanding  the Company's  prior exercise of its Right of
Redemption  and/or the  Purchaser's  prior  exercise of its Right of Election as
provided  for in the  proposed  Loan  Agreement  and as set  forth  herein,  and
notwithstanding  the prior  repayment to the  Purchaser by the Company of all or
any portion of the entire  Redemption  Amount and/or the prior conversion by the
Purchaser of all or any portion of the entire  Outstanding  Indebtedness for any
Equity  Interest as also provided for in the proposed Loan  Agreement and as set
forth herein,  no such action or actions  will,  in any manner,  and unless this
Agreement is otherwise terminated for any reason whatsoever prior to the Closing
thereof,  affect the within  obligation of each of the Vendors,  the Company and
the Purchaser to complete the proposed purchase and sale of the Purchased Shares
as contemplated by the terms and conditions of this Agreement.

<PAGE>
                                      -56-


5.6      FINANCING  BY  THE  COMPANY  PRIOR  TO  CLOSING.  It  is hereby further
acknowledged  and  agreed  by  the  Parties  hereto  that,  notwithstanding  the
Purchaser's  good faith ability to complete the proposed  Private  Placement (as
hereinafter  determined)  and any Loan  consequent  thereon prior to the Closing
Date (as hereinafter determined), the Company has ongoing operating requirements
which cannot be ignored or underfunded prior thereto. Correspondingly,  and with
the Purchaser's  prior written consent;  which consent shall not be unreasonably
withheld; it is hereby acknowledged and agreed that the Company may organize and
complete up to U.S.  $500,000.00 in equity  financing  prior to the Closing Date
hereof  (collectively,  the  "FINANCING")  which  may  take  the  form,  without
limitation,  of a proposed revenue trust providing the subscriber thereof with a
revenue  interest return of up to two hundred percent (200%),  from the then net
cash flow of the Company,  with up to a full share  purchase  warrant also being
provided to the  subscriber  to acquire up to one common share of any  reporting
company  which  may  result  from any  business  combination  with  the  Company
exercisable at not less than U.S. $1.00 per common share.


5.7      COSTS.   It is hereby further  acknowledged  and  agreed by the Parties
hereto that while any portion of any Outstanding Indebtedness is outstanding the
Company will be, and up to and including either the Closing Date (as hereinafter
determined)  or the  termination  of either  this  Agreement  will be,  directly
responsible for and pay all fees and expenses and including, without limitation,
all legal, accounting, sponsorship, regulatory and filing fees and expenses, and
otherwise,  in connection  with the preparation and execution of this Agreement,
all filings with any regulatory  authority as may have  jurisdiction over either
any of the  Vendors,  the  Company  or the  Purchaser  in  conjunction  with the
completion  of this  Agreement  and  all  documentation  necessarily  incidental
thereto;  and  which  fees and  expenses  shall be added to and form part of the
Outstanding Indebtedness hereunder.


                                    ARTICLE 6
                         CONDITIONS PRECEDENT TO CLOSING


6.1 PARTIES' CONDITIONS  PRECEDENT PRIOR TO THE CLOSING DATE. All of the rights,
duties and  obligations  of each of the Parties  hereto under this Agreement are
subject to the following  conditions precedent for the exclusive benefit of each
of the Parties to be fulfilled in all material aspects in the reasonable opinion
of each of the  Parties  or to be waived by each or any of the  Parties,  as the
case may be, as soon as  possible  after the  Execution  Date;  however,  unless
specifically  indicated as  otherwise,  not later than 10 calendar days prior to
the  Closing  Date (as  hereinafter  determined;  such date  being the  "SUBJECT
REMOVAL DATE"):


         (a)      the specific  ratification of the terms and conditions of this
                  Agreement by the Board of  Directors of each of the  Purchaser
                  and  the  Company  within  five  business  days of the due and
                  completion  execution of this Agreement by each of the Parties
                  hereto (collectively, the "RATIFICATION");
<PAGE>
                                      -57-


         (b)      the  completion by each of the Purchaser and the Company of an
                  initial  due  diligence  and  operations  review  of the other
                  Party's   respective   businesses  and  operations  within  10
                  calendar days of the prior  satisfaction  of the  Ratification
                  (collectively, the "INITIAL DUE DILIGENCE");


         (c)      the  completion by the Purchaser of not less than a minimum of
                  U.S.  $500,000 of the Private  Placement on or before December
                  31, 2002,  together with the corresponding  Principal Sum Loan
                  of not less  than U.S.  $250,000  from  such  minimum  Private
                  Placement,  all in accordance  with the  provisions of section
                  "4.1" and Article "5" hereinabove;


         (d)      the  receipt  of all  necessary  approvals  to the  terms  and
                  conditions  of  and  the  transactions  contemplated  by  this
                  Agreement;


         (e)      shareholders of the Purchaser  passing an ordinary  resolution
                  or, where required, a special resolution,  approving the terms
                  and conditions of this  Agreement and all of the  transactions
                  contemplated  hereby,  and the Purchaser  sending all required
                  notice  to  the   Purchaser's   shareholders   in   connection
                  therewith,   or,  in  the  alternative  and  if  allowable  in
                  accordance  with  applicable  corporate and  securities  laws,
                  shareholders of the Purchaser holding over fifty percent (50%)
                  of the  issued  shares  of  the  Purchaser  providing  written
                  consent resolutions evidencing their approval to the terms and
                  conditions  of  this  Agreement  and  all of the  transactions
                  contemplated   hereby  together  with   certification  of  any
                  required  notice to all  shareholders of the Purchaser of such
                  written consent resolutions; and


         (f)      the directors of the Purchaser  and/or the shareholders of the
                  Purchaser,  if required,  approving of the within  issuance by
                  the Purchaser to the order and direction of the Vendors of all
                  of the referenced Shares in accordance with sections "2.2" and
                  "2.3"  hereinabove  and, in  addition,  the  directors  and/or
                  shareholders  of  the  Purchaser,  if  required,  having  also
                  approved and received any required notice of:


                  (i)      the  change  of name of the  Purchaser  to  "Petrogen
                           Corp.", or to such other name as may be determined by
                           management for the Company,  in its sole and absolute
                           discretion, prior to the Closing Date (as hereinafter
                           determined),  and  as  may  be  acceptable  with  the
                           appropriate Regulatory Authorities;


                  (ii)     the  Consolidation  of the  Purchaser's share capital
                           on a one new for 20 old share  capital  consolidation
                           basis;


                  (iii)    an initial common share Private Placement funding for
                           the  Purchaser,  under Rule 506 or Regulation S under
                           the Securities Act, of a minimum of U.S.  $500,000.00

<PAGE>
                                      -58-


                           and a maximum of up to U.S.  $1,000,000.00,  and at a
                           subscription  price of not less than  U.S.  $1.00 per
                           restricted  common share,  with an  understanding  to
                           utilize its  reasonably  commercial  efforts to raise
                           not  less  than  U.S.   $250,000.00  of  the  Private
                           Placement within 60 calendar days from the acceptance
                           date of the Agreement In Principle by the Company and
                           the  Purchaser  and with a further  understanding  to
                           utilize its  reasonably  commercial  efforts to raise
                           not less  than an  initial  U.S.  $100,000.00  of the
                           Private  Placement  within 15 calendar  days from the
                           acceptance  date of the Agreement In Principle by the
                           Company  and  the  Purchaser.  In this  regard  it is
                           hereby  also  acknowledged  and agreed  that at least
                           U.S.   $250,000.00   raised   in  any  such   Private
                           Placement(s)  will take the form of the secured  Loan
                           from the Purchaser to the Company as  contemplated in
                           Article "5" hereinabove;


                  (iv)     the Subsidiary Sale by the Purchaser;


                  (v)      the filing by the  Purchaser,  with the prior written
                           consent of the  Company,  of a Form S-8  registration
                           statement  for a stock  option plan in the  estimated
                           amount of not less than 2,000,000  post-Consolidation
                           common shares of the Purchaser,  at an exercise price
                           of not less  than U.S.  $0.50 per  post-Consolidation
                           common  share;  and in such  amounts  and  with  such
                           optionees as may be determined by management  for the
                           Purchaser and the Company,  acting reasonably,  prior
                           to the Closing Date (as hereinafter determined),  and
                           as may be acceptable with the appropriate  Regulatory
                           Authorities; it being acknowledged and agreed that an
                           aggregate  of  2,000,000  of  such  Options  will  be
                           exchanged as  Purchaser's  Options for the  Company's
                           Options,  on the same exercise terms and  conditions,
                           for an equal number of incentive stock options in and
                           to the  resulting  Purchaser on a  post-Consolidation
                           basis, in consideration of the ongoing involvement of
                           the existing  Company's  Optionholders  in and to the
                           resulting  Purchaser  company and in exchange for the
                           agreed   upon    cancellation   by   said   Company's
                           Optionholders   of  all  of  the  then   issued   and
                           outstanding   Company's   Options  as  a  consequence
                           thereof; and it being further acknowledged and agreed
                           that,  subject to  applicable  securities  laws,  any
                           common  shares  which may arise from the  exercise of
                           any  such  Purchaser's   Options  subsequent  to  the
                           Closing Date will be held in pool and either (i) sold
                           jointly  and pro rata  with any other  Option  common
                           shares  deposited  therein or (ii)  restricted  as to
                           sale  in  such  maximum   daily  amounts  as  may  be
                           determined in  accordance  with the sole and absolute
                           discretion  and direction of such nominee or nominees
                           as may be mutually agreed upon in writing,  from time
                           to time,  by each of the Purchaser and the Company at
                           or subsequent to the Closing Date;

<PAGE>
                                      -59-


                  (vi)     the  Purchaser's  exchange of all existing  Company's
                           Warrants,  on the same exercise terms and conditions,
                           for an equal number of Purchaser's Warrants in and to
                           the resulting Purchaser on a post-Consolidation basis
                           in consideration, in part, of the ongoing involvement
                           of the existing  Company's  Warrantholders  in and to
                           the resulting  Purchaser  company and in exchange for
                           the  agreed  upon   cancellation  by  said  Company's
                           Warrantholders   of  all  of  the  then   issued  and
                           outstanding   Company's  Warrants  as  a  consequence
                           thereof;


                  (vii)    the  appointment  of the  existing  directors  of the
                           Company to the  resulting  Board of  Directors of the
                           Purchaser,  together  with the  appointment  of up to
                           three  nominees of the Company as Executive  Officers
                           of  the   Purchaser,   at  Closing  (as   hereinafter
                           determined);   such  appointees  or  nominees  to  be
                           determined  prior to  Closing,  and in the  Company's
                           sole and absolute discretion;


                  (viii)   the entering  into by the  Purchaser  prior to and/or
                           commensurate   with  the  Closing   (as   hereinafter
                           determined)  hereunder  of  the  proposed  Consulting
                           Services  Agreement with ICI; a copy of form of which
                           proposed Consulting Services Agreement being attached
                           hereto as Schedule  "O" and  forming a material  part
                           hereof;  whereby ICI shall conduct certain consulting
                           services for the Purchaser as contemplated therein;


                  (ix)     the entering into by the Purchaser  commensurate with
                           the Closing (as hereinafter  determined) hereunder of
                           the proposed  Drilling and Operating  Agreement  with
                           Petrogen  Ltd.;  a copy  of form  of  which  proposed
                           Drilling  and  Operating   Agreement  being  attached
                           hereto as Schedule  "P" and  forming a material  part
                           hereof;  whereby the exact details of which  Residual
                           Interest  and  the  Operator's   responsibilities  in
                           maintaining the Company's  Property interests will be
                           set forth as contemplated therein; and


                  (x)      such other matters as may be agreed to as between the
                           Parties   hereto   prior   the   completion   of  the
                           transactions contemplated by this Agreement.


6.2      PARTIES' WAIVER OF CONDITIONS PRECEDENT.   The conditions precedent set
forth in section "6.1"  hereinabove are for the exclusive benefit of each of the
Parties hereto and may be waived by each or any of the Parties in writing and in
whole or in part at any time;  however,  not later than five calendar days prior
to the Subject Removal Date.


6.3      THE VENDORS' AND THE COMPANY'S CONDITIONS PRECEDENT.  The rights,duties
and  obligations of each of the Vendors and the Company under this Agreement are

<PAGE>
                                      -60-


also subject to the following  conditions precedent for the exclusive benefit of
each of the Vendors and the Company to be fulfilled  in all material  aspects in
the reasonable opinion of the Vendors and the Company or to be waived by each or
any of the Vendors and the Company as soon as possible after the Execution Date,
however;  unless  specifically  indicated  as  otherwise,  not  later  than five
calendar days prior to the Subject Removal Date:


         (a)      the  Purchaser   shall  have  complied  with  all  warranties,
                  representations,  covenants and agreements herein agreed to be
                  performed  or caused to be  performed  by the  Purchaser on or
                  before the Closing Date (as hereinafter determined);


         (b)      the  Purchaser   shall  have  complied  with  all   applicable
                  securities  laws in connection with the issuance of the Shares
                  to the Vendors on or before the Closing  Date (as  hereinafter
                  determined);


         (c)      the Purchaser  and each of the  Purchaser's  subsidiaries,  if
                  any,  will have  obtained all  authorizations,  approvals,  or
                  waivers that may be necessary or desirable in connection  with
                  the  transactions  contemplated in this  Agreement,  and other
                  actions  by,  and have  made  all  filings  with,  any and all
                  Regulatory  Authorities required to be made in connection with
                  the   transactions   contemplated   herein,   and   all   such
                  authorizations,  approvals  and other  actions will be in full
                  force and effect, and all such filings will have been accepted
                  by the Purchaser and the Purchaser's subsidiaries, if any, who
                  will be in compliance  with, and have not committed any breach
                  of,  any  securities  laws,  regulations  or  policies  of any
                  Regulatory  Authority  to which  the  Purchaser  or any of the
                  Purchaser's subsidiaries, if any, may be subject;


         (d)      all matters  which,  in the opinion of counsel for the Vendors
                  and  the  Company,   are  material  in  connection   with  the
                  transactions  contemplated  by this Agreement shall be subject
                  to the  favourable  opinion of such counsel,  and all relevant
                  records and information  shall be supplied to such counsel for
                  that purpose;


         (e)      no  material  loss or  destruction  of or damage to either the
                  Purchaser or to any of the Purchaser's  subsidiaries,  if any,
                  shall have occurred since the Execution Date;


         (f)      no action or  proceeding  at law or in equity shall be pending
                  or  threatened  by any  person,  company,  firm,  governmental
                  authority, regulatory body or agency to enjoin or prohibit:

<PAGE>
                                      -61-


                  (i)      the  purchase  or  transfer  of any of the  Purchased
                           Shares contemplated by this Agreement or the right of
                           any of the Vendors to dispose of any of the Purchased
                           Shares; or


                  (ii)     the  right  of  the  Purchaser  and  the  Purchaser's
                           subsidiaries,  if any,  to conduct  their  respective
                           operations and carry on, in the normal course,  their
                           respective  businesses  and  operations  as they have
                           carried on in the past;


         (g)      the   delivery  to  the  Company  by  the   Purchaser,   on  a
                  confidential   basis,  of  the  following   documentation  and
                  information:


                  (i)      a copy of all material contracts, agreements, reports
                           and title  information  of any nature  respecting the
                           Purchaser; and


                  (ii)     details of any lawsuits,  claims or potential  claims
                           relating to the  Purchaser of which the  Purchaser is
                           aware and the Vendors and the Company are unaware;


         (h)      the  Purchaser  will,  for a period of at least five  business
                  days prior to the Closing  Date (as  hereinafter  determined),
                  during normal business hours:


                  (i)      make  available  for  inspection  by  the  respective
                           solicitors,   auditors  and  representatives  of  the
                           Company,  at such location as is appropriate,  all of
                           the   Purchaser's   and   each  of  the   Purchaser's
                           subsidiaries',  if any,  books,  records,  contracts,
                           documents,    correspondence    and   other   written
                           materials,  and afford such persons every  reasonable
                           opportunity  to make copies thereof and take extracts
                           therefrom at the sole cost of the  Company;  provided
                           such   persons  do  not  unduly   interfere   in  the
                           respective  operations of the Purchaser or any of the
                           Purchaser's subsidiaries, if any;


                  (ii)     authorize and permit such persons at the risk and the
                           sole cost of the Company, and only if such persons do
                           not unduly interfere in the respective  operations of
                           the   Purchaser   and   each   of   the   Purchaser's
                           subsidiaries,  if  any,  to  attend  at all of  their
                           respective  places  of  business  and  operations  to
                           observe  the conduct of their  respective  businesses
                           and operations,  inspect their respective  properties
                           and  assets  and  make   physical   counts  of  their
                           respective inventories, shipments and deliveries; and


                  (iii)    require the  Purchaser's  and each of the Purchaser's
                           subsidiaries',    if   any,   respective   management
                           personnel  to  respond  to all  reasonable  inquiries

<PAGE>
                                      -62-


                           concerning   the   Purchaser's   and   each   of  the
                           Purchaser's   subsidiaries',   if   any,   respective
                           business  assets or the  conduct of their  respective
                           businesses  relating to their respective  liabilities
                           and obligations; and


         (i)      the  completion  by the  Vendors and the  Company,  and by the
                  Vendors' and the Company's respective  professional  advisors,
                  of a  thorough  due  diligence  and  operations  review of the
                  respective businesses and operations of the Purchaser and each
                  of the  Purchaser's  subsidiaries,  if any,  to the  sole  and
                  absolute satisfaction of each of the Vendors and the Company.


6.4      THE  VENDORS'  AND  THE  COMPANY'S  WAIVER  OF  CONDITIONS  PRECEDENT.
The  conditions  precedent  set forth in section "6.3"  hereinabove  are for the
exclusive  benefit of each of the  Vendors  and the Company and may be waived by
each or any of the Vendors and the Company in writing and in whole or in part at
any time after the Execution Date;  however,  unless  specifically  indicated as
otherwise, not later than five calendar days prior to the Subject Removal Date.


6.5      PURCHASER'S CONDITIONS PRECEDENT PRIOR TO THE CLOSING DATE. The rights,
duties and obligations of the Purchaser under this Agreement are also subject to
the following conditions precedent for the exclusive benefit of the Purchaser to
be fulfilled in all material aspects in the reasonable  opinion of the Purchaser
or to be waived by the Purchaser as soon as possible  after the Execution  Date;
however,  unless  specifically  indicated  as  otherwise,  not  later  than five
calendar days prior to the Subject Removal Date:


         (a)      the  Vendors  and the  Company  shall have  complied  with all
                  warranties,  representations,  covenants and agreements herein
                  agreed  to be  performed  or  caused  to be  performed  by the
                  Vendors  and the  Company  on or before the  Closing  Date (as
                  hereinafter determined);


         (b)      the Company will have obtained all  authorizations,  approvals
                  or waivers that may be  necessary  or desirable in  connection
                  with the  transactions  contemplated  in this  Agreement,  and
                  other actions by, and have made all filings with,  any and all
                  Regulatory  Authorities  from  whom  any  such  authorization,
                  approval  or other  action is required to be obtained or to be
                  made in connection with the transactions  contemplated herein,
                  and all such authorizations,  approvals and other actions will
                  be in full force and effect,  and all such  filings  will have
                  been accepted by the Company who will be in  compliance  with,
                  and has not  committed  any breach of,  any  securities  laws,
                  regulations or policies of any  Regulatory  Authority to which
                  the Company may be subject;

<PAGE>
                                      -63-


         (c)      all  matters  which,   in  the  opinion  of  counsel  for  the
                  Purchaser,  are material in connection  with the  transactions
                  contemplated  by  this  Agreement  shall  be  subject  to  the
                  favourable  opinion of such counsel,  and all relevant records
                  and  information  shall be supplied  to such  counsel for that
                  purpose;


         (d)      no material loss or  destruction  of or damage to the Company,
                  any of the Company's Assets,  any of the Company's Business or
                  the Purchased Shares shall have occurred;


         (e)      no action or  proceeding  at law or in equity shall be pending
                  or  threatened  by any  person,  company,  firm,  governmental
                  authority, regulatory body or agency to enjoin or prohibit:


                  (i)      the  purchase  or  transfer  of any of the  Purchased
                           Shares contemplated by this Agreement or the right of
                           any of the Vendors to dispose of any of the Purchased
                           Shares; or


                  (ii)     the right of the  Company to conduct  its  operations
                           and carry on, in the  normal  course,  its  Company's
                           Business and  operations  as it has carried on in the
                           past;


         (f)      the  delivery  to  the   Purchaser   by  the  Company,   on  a
                  confidential   basis,  of  all  Business   Documentation   and
                  including, without limitation, the following documentation and
                  information:


                  (i)      a copy of all material contracts, agreements, reports
                           and information of any nature respecting the Company,
                           its assets and the Company's Business; and


                  (ii)     details of any lawsuits,  claims or potential  claims
                           relating  to either  the  Company,  its  assets,  the
                           Company's  Business or the Purchased  Shares of which
                           either of the Vendors or the Company is aware and the
                           Purchaser is unaware;


         (g)      the  delivery  to  the   Purchaser  by  the  Company  and  the
                  Guarantors of such Security and supporting  documentation  and
                  instruments  respecting  the granting by the  Purchaser to the
                  Company  of  the  within  interim  Loan  as  the   Purchaser's
                  solicitors may reasonably require;


         (h)      the Company will,  for a period of at least five business days
                  prior to the Closing Date (as hereinafter determined),  during
                  normal business hours:

<PAGE>
                                      -64-


                  (i)      make  available  for  inspection  by the  solicitors,
                           auditors and  representatives  of the  Purchaser,  at
                           such location as is appropriate, all of the Company's
                           books, records, contracts, documents,  correspondence
                           and other written materials,  and afford such persons
                           every  reasonable  opportunity to make copies thereof
                           and take  extracts  therefrom at the sole cost of the
                           Purchaser;   provided  such  persons  do  not  unduly
                           interfere in the operations of the Company;


                  (ii)     authorize and permit such persons at the risk and the
                           sole cost of the Purchaser,  and only if such persons
                           do not  unduly  interfere  in the  operations  of the
                           Company, to attend at all of its respective places of
                           business and operations to observe the conduct of its
                           business and  operations,  inspect its properties and
                           assets and make physical  counts of its  inventories,
                           shipments and deliveries; and


                  (iii)    require the Company's management personnel to respond
                           to all reasonable  inquiries concerning the Company's
                           Business  and assets or the  conduct of its  business
                           relating to its liabilities and obligations; and


         (i)      the  completion  by  the  Purchaser  and  by  the  Purchaser's
                  professional   advisors  of  a  thorough  due   diligence  and
                  operations  review of both the business and  operations of the
                  Company  together  with the  transferability  of the Purchased
                  Shares  as  contemplated  by this  Agreement,  to the sole and
                  absolute satisfaction of the Purchaser.


6.6      PURCHASER'S  WAIVER OF CONDITIONS PRECEDENT.  The conditions  precedent
set forth in section  "6.5"  hereinabove  are for the  exclusive  benefit of the
Purchaser  and may be waived by the Purchaser in writing and in whole or in part
at any after the  Execution  Date;  however,  unless  specifically  indicated as
otherwise, not later than five calendar days prior to the Subject Removal Date.


6.7      THE  VENDORS'  ADDITIONAL  INCOME  TAX  COVENANTS.   The  Vendors  also
acknowledge and agree that:


         (a)      the Purchaser  does not assume and shall not be liable for any
                  taxes under the Income Tax Act or any other  taxes  whatsoever
                  which may be or become  payable by the Vendors and  including,
                  without  limitation,  any taxes resulting from or arising as a
                  consequence  of the transfer by the Vendors to the  Purchaser,
                  of the Purchased Shares herein  contemplated,  and the Vendors
                  shall  indemnify  and save  harmless  the  Purchaser  from and
                  against all or any such taxes;

<PAGE>
                                      -65-


         (b)      as to all income tax matters:


                  (i)      an election under subsection  "85.1(5)" of the Income
                           Tax Act may be made and filed by each of the  Vendors
                           and by the Purchaser in the prescribed  form,  manner
                           and within the time prescribed by the Income Tax Act,
                           and  each  such  election  shall  specify  that  each
                           Vendor's   deemed  proceeds  of  disposition  of  the
                           Purchased Shares  transferred by such Vendor shall be
                           such  amount as that  Vendor  shall  specify  in such
                           election; provided that the amount so specified is an
                           amount   within   the   parameters   established   in
                           subsection 85.1(5) of the Income Tax Act;


                  (ii)     the   Purchaser's    obligations    under   paragraph
                           "7.7(b)(i)"  hereinabove shall be discharged upon its
                           execution  of the  prescribed  form for  making  such
                           election,  and  returning  said  form  to each of the
                           Vendors  within  seven  calendar  days of the date of
                           receipt  thereof.  Provided  that the  Purchaser  has
                           discharged such obligation,  the Purchaser shall have
                           no liability for any tax, interest, penalty, claim or
                           cost  whatsoever  which may arise  from the making or
                           failure to make such  election by any of the Vendors,
                           or the amounts selected in any such election; and


                  (iii)    it  is  intended  by  the  Parties  hereto  that  the
                           consideration  for the Purchased  Shares shall be the
                           fair market  value  thereof as of the  Closing  Date.
                           Therefore, if Revenue Canada, Taxation,  disputes the
                           fair market value of any of the Purchased Shares, and
                           any of the  Parties  have  made and  filed  the joint
                           election as  contemplated  by  paragraph  "7.7(b)(i)"
                           hereinabove,  the  Parties  agree to  amend  the said
                           joint  election  so as to conform to the fair  market
                           value thereof,  whether determined by agreement among
                           Revenue  Canada,   Taxation,   the  Vendors  and  the
                           Purchaser  or by  judicial  determination  beyond any
                           further right of appeal or by the expiry or waiver of
                           right to appeal any  determination by Revenue Canada,
                           Taxation,  of the fair market value thereof.  Nothing
                           herein shall require any Party to make any adjustment
                           which  would  cause  such  Party  to  thereby  become
                           insolvent  within the meaning of the  corporate  laws
                           governing such Party, if applicable.


                                    ARTICLE 7
                          CLOSING AND EVENTS OF CLOSING


7.1      CLOSING  AND  CLOSING  DATE. The closing  (the "CLOSING") of the within
purchase and delivery of the Purchased  Shares, as contemplated in the manner as
set forth in Article  "2"  hereinabove,  together  with all of the  transactions
contemplated by this Agreement,  shall occur on such date or dates following the
due and complete  satisfaction of all of the conditions  precedent which are set

<PAGE>
                                      -66-


out in Article "6" hereinabove (the "CLOSING DATE"), or on such earlier or later
Closing  Dates as may be  agreed to in  advance  and in  writing  by each of the
Parties  hereto,  and will be closed,  in each such instance,  at the offices of
Devlin  Jensen,  at Suite 2550,  555 West Hastings  Street,  Vancouver,  British
Columbia, V6B 4N5, at 2:00 p.m. (Vancouver time) on each such Closing Date.


7.2      LATEST  CLOSING  DATE.  If  the  final Closing Date has not occurred by
January 31, 2003 this Agreement will be terminated and unenforceable  unless the
Parties hereto agree in writing to grant an extension of the final Closing Date.


7.3      DOCUMENTS  TO BE  DELIVERED  BY THE VENDORS  AND THE  COMPANY  PRIOR TO
THE CLOSING DATE.  Not later than five calendar days prior to each Closing Date,
and in addition to the  documentation  which is required by the  agreements  and
conditions  precedent  which  are set forth  hereinabove,  the  Vendors  and the
Company  shall  also  execute  and  deliver,  or cause to be  delivered,  to the
Purchaser,  the Transfer Agent and/or the Escrow Agent, as applicable,  all such
other documents, resolutions and instruments as may be necessary, in the opinion
of  counsel  for  the  Purchaser,  acting  reasonably,  to  complete  all of the
transactions  contemplated by this Agreement and including,  without limitation,
the  necessary  transfer all of the Purchased  Shares to the Purchaser  free and
clear of all liens, charges and encumbrances,  and in particular including,  but
not being limited to, the following materials:


         (a)      all  documentation  as may be necessary and as may be required
                  by the  solicitors for the Purchaser,  acting  reasonably,  to
                  ensure that all of the Purchased Shares have been transferred,
                  assigned  and  are  registerable  in the  name  of and for the
                  benefit of the Purchaser  under all  applicable  corporate and
                  securities laws;


         (b)      the certificates  representing the Purchased Shares registered
                  in the  respective  names of the Vendors and duly endorsed for
                  transfer to the  Purchaser  and/or  irrevocable  stock  powers
                  transferring the Purchased Shares to the Purchaser;


         (c)      a certificate  representing the Purchased Shares registered in
                  the name of the Purchaser;


         (d)      a certified  copy of the  resolutions  of the directors of the
                  Company (and of any of the Vendors, if necessary)  authorizing
                  the transfer by the Vendors to the  Purchaser of the Purchased
                  Shares;


         (e)      a copy of all  corporate  records  and books of account of the
                  Company and including,  without limiting the generality of the
                  foregoing,  a copy of all minute books,  share register books,
                  share certificate books and annual reports of the Company;

<PAGE>
                                      -67-


         (f)      a  certificate  of an officer of the Company,  dated as of the
                  Closing  Date,  acceptable in form to the  solicitors  for the
                  Purchaser, acting reasonably,  certifying that the warranties,
                  representations,  covenants  and  agreements  of  the  Company
                  contained  in this  Agreement  are  true  and  correct  in all
                  respects  and will be true and correct as of the Closing  Date
                  as if made by the Company on the Closing Date;


         (g)      consents  to act or  other  documents  as may be  required  in
                  connection with the  appointment of the existing  directors of
                  the  Company  to  the  resulting  Board  of  Directors  of the
                  Purchaser,  together  with  the  appointment  of up  to  three
                  nominees  of  the  Company  as   Executive   Officers  of  the
                  Purchaser,  all as the  Company may so  determine  in writing,
                  from time to time,  and in its sole and  absolute  discretion,
                  prior to the Closing Date;


         (h)      all remaining Business Documentation; and


         (i)      all such other  documents and  instruments as the  Purchaser's
                  solicitors may reasonably require.


7.4      DOCUMENTS TO BE DELIVERED BY  THE PURCHASER  PRIOR TO THE CLOSING DATE.
Not later than five calendar days prior to each Closing Date, and in addition to
the documentation  which is required by the agreements and conditions  precedent
which are set forth  hereinabove,  the Purchaser shall also execute and deliver,
or cause to be delivered,  to the Company,  the Transfer Agent and/or the Escrow
Agent, as applicable,  all such other documents,  resolutions and instruments as
may be  necessary,  in the opinion of counsel  for the Vendors and the  Company,
acting  reasonably,  to complete all of the  transactions  contemplated  by this
Agreement and including,  without  limitation,  the necessary  acceptance of the
transfer of all of the Purchased  Shares to the Purchaser  free and clear of all
liens,  charges and  encumbrances,  and in particular  including,  but not being
limited to, the following materials:


         (a)      a Closing agenda;


         (b)      a certified copy of an ordinary resolution of the shareholders
                  of the Purchaser  or, where  required,  a special  resolution,
                  approving the terms and  conditions of this  Agreement and all
                  of the  transactions  contemplated  hereby,  and the Purchaser
                  sending all required notice to the Purchaser's shareholders in
                  connection therewith, or, in the alternative and if acceptable
                  in accordance with applicable  corporate law,  shareholders of
                  the  Purchaser  holding over fifty percent (50%) of the issued
                  shares of the Purchaser  providing written consent resolutions
                  evidencing  their approval to the terms and conditions of this
                  Agreement and all of the  transactions  contemplated  together

<PAGE>
                                      -68-


                  with  certification of any required notice to all shareholders
                  of the Purchaser of such written consent resolutions;


         (c)      a certified  copy of the  resolutions  of the directors of the
                  Purchaser   providing   for  the   approval   of  all  of  the
                  transactions   contemplated  hereby  and  including,   without
                  limitation,  each of the  matters  provided  for in  paragraph
                  "6.1(f)" hereinabove;


         (d)      an  executed  treasury  order  (or  treasury  orders)  of  the
                  Purchaser  providing  for  the  due  issuance  of  all  of the
                  Purchase  Price  Shares  to the  order  and  direction  of the
                  Vendors  in   accordance   with   sections   "2.2"  and  "2.3"
                  hereinabove;


         (e)      all  necessary  consents  and  approvals  in  writing  to  the
                  completion of the transactions contemplated herein;


         (f)      a certificate of an officer of the Purchaser,  dated as of the
                  Closing  Date,  acceptable in form to the  solicitors  for the
                  Vendors and the Company,  acting  reasonably,  certifying that
                  the warranties,  representations,  covenants and agreements of
                  the Purchaser contained in this Agreement are true and correct
                  and will be true and correct as of the Closing Date as if made
                  by the Purchaser on the Closing Date;


         (g)      the  resignation  in writing  of all  existing  directors  and
                  officers of the Purchaser;


         (h)      a certified  copy of the  resolutions  of the directors of the
                  Purchaser  accepting the  resignations  of all of the existing
                  directors  and  officers of the  Purchaser  and, in  addition,
                  appointing the directors of the Company to the resulting Board
                  of Directors of the Purchaser,  together with the  appointment
                  of not less than three  nominees of the  Company as  Executive
                  Officers of the Purchaser, all as the Company may so determine
                  in writing,  from time to time,  and in its sole and  absolute
                  discretion, prior to the Closing Date;


         (i)      an  opinion  of  counsel  to the  Purchaser,  dated  as at the
                  Closing Date,  and  addressed to the Vendors,  the Company and
                  their respective counsel,  in form and substance  satisfactory
                  to the Vendors' and the Company's  respective counsel,  acting
                  reasonably, and including the following:


                  (i)      the  due incorporation, existence and standing of the
                           Purchaser and its qualification to carry on business;

<PAGE>
                                      -69-


                  (ii)     the  authorized  and issued  capital of the Purchaser
                           (relying  on  a  certificate  of  the  registrar  and
                           Transfer  Agent of the  Purchaser as to the number of
                           securities issued);


                  (iii)    all necessary  steps and  proceedings  and including,
                           without  limitation,  compliance  with all applicable
                           securities  laws,  have been taken in connection with
                           the  execution,  delivery  and  performance  of  this
                           Agreement and the transactions  contemplated  herein;
                           and


                  (iv)     the due  issuance  of the  Shares  as fully  paid and
                           non-assessable  and having been issued in  accordance
                           with  an  applicable   registration   and  prospectus
                           exemption available under the Securities Act; and


         (j)      all such other  documents and  instruments as the Vendors' and
                  the Company's respective solicitors may reasonably require.


                                    ARTICLE 8
               APPOINTMENT OF ESCROW AGENT AND TRANSFER DOCUMENTS


8.1      APPOINTMENT  OF ESCROW AGENT. The Parties hereto hereby acknowledge and
initially appoint Devlin Jensen,  Barristers and Solicitors,  of Suite 2550, 555
West Hastings  Street,  Vancouver,  British  Columbia,  V6B 4N5, counsel for the
Company  herein,  as escrow agent (the  "ESCROW  AGENT")  herein,  or such other
Escrow Agent as may be mutually  determined  by the Parties  hereto prior to the
Subject Removal Date.


8.2      ESCROW OF TRANSFER  DOCUMENTS.  Subject to and in accordance  with  the
terms and conditions  hereof and the  requirements of Articles "2", "5", "6" and
"7"  hereinabove,  and without in any manner limiting the obligations of each of
the  Parties  hereto  as  contained  therein  and  hereinabove,   it  is  hereby
acknowledged  and confirmed by the Parties  hereto that each of the Parties will
execute,  deliver,  or cause to be delivered,  all such  documentation as may be
required by the  requirements  of Articles  "2",  "5",  "6" and "7"  hereinabove
(herein,  collectively,  the "TRANSFER DOCUMENTS") and deposit the same with the
Escrow Agent, or with such other mutually agreeable escrow agent,  together with
a copy of this  Agreement,  there to be held in escrow for release by the Escrow
Agent to the  Parties in  accordance  with the strict  terms and  provisions  of
Articles "2", "5", "6" and "7" hereinabove.


8.3      RESIGNATION OF ESCROW AGENT.The Escrow Agent may resign from its duties
and responsibilities if it gives each of the Parties hereto three calendar days'
written  notice  in  advance.  Upon  receipt  of notice  of the  Escrow  Agent's
intention to resign,  the Parties shall,  within three  calendar days,  select a
replacement  escrow  agent and  jointly  advise the  Escrow  Agent in writing to
deliver the Transfer  Documents to the replacement  escrow agent. If the Parties

<PAGE>
                                      -70-


fail to agree on a replacement  escrow agent within three  calendar days of such
notice, the replacement escrow agent shall be selected by a Judge of the Supreme
Court of the Province of British  Columbia upon application by any Party hereto.
The  Escrow  Agent  shall  continue  to be bound  by this  Agreement  until  the
replacement  escrow agent has been  selected  and the Escrow Agent  receives and
complies  with the joint  instructions  of the Parties to deliver  the  Transfer
Documents to the  replacement  escrow agent.  The Parties agree to enter into an
escrow  agreement  substantially  in the same  form of this  Agreement  with the
replacement escrow agent.


8.4      INSTRUCTIONS TO ESCROW AGENT. Instructions  given to the  Escrow  Agent
pursuant to this Agreement shall be given by duly authorized  signatories of the
respective Parties hereto.


8.5      NO OTHER DUTIES OR OBLIGATIONS.  The Escrow  Agent shall have no duties
or obligations other than those specifically set forth in this Article.


8.6      NO OBLIGATION TO TAKE LEGAL ACTION.   The  Escrow  Agent  shall  not be
obligated  to take any legal action  hereunder  which  might,  in its  judgment,
involve  any expense or  liability  unless it shall have been  furnished  with a
reasonable indemnity by all of the Parties hereto together with such other third
parties as the Escrow Agent may require in its sole and absolute discretion.


8.7      NOT BOUND TO ANY OTHER AGREEMENTS. The Escrow Agent is not bound in any
way by any other contract or agreement between the Parties hereto whether or not
it has  knowledge  thereof  or of its terms and  conditions  and its only  duty,
liability  and  responsibility  shall  be to hold and  deal  with  the  Transfer
Documents as herein directed.


8.8      NOTICE.  The Escrow  Agent  shall be entitled to assume that any notice
and evidence received by it pursuant to these  instructions from anyone has been
duly  executed by the Party by whom it purports to have been signed and that the
text of any notice and  evidence is  accurate  and the truth.  The Escrow  Agent
shall not be obliged to inquire into the sufficiency or authority of the text or
any signatures appearing on such notice or evidence.


8.9      INDEMNITY. The Parties hereto, jointly and severally,covenant and agree
to  indemnify  the  Escrow  Agent  and to hold it  harmless  against  any  loss,
liability  or expense  incurred,  without  negligence  or bad faith on its part,
arising out of or in connection with the  administration of its duties hereunder
including,  without  limitation,  the costs and  expenses  of  defending  itself
against any claim or liability arising therefrom.


8.10     NOT REQUIRED TO TAKE ANY ACTION.  In  the  event  of  any  disagreement
between  any of the  Parties  hereto to these  instructions  or between  them or
either or any of them and any  other  person,  resulting  in  adverse  claims or
demands being made in connection  with the Transfer  Documents,  or in the event
that the Escrow  Agent  should  take  action  hereunder,  it may, at its option,

<PAGE>
                                      -71-


refuse to comply  with any  claims or demands on it, or refuse to take any other
action hereunder,  so long as such disagreement  continues or such doubt exists,
and in any such  event,  it shall not be or  become  liable in any way or to any
person for its  failure or refusal to act,  and it shall be entitled to continue
so to refrain from acting until:


         (a)      the rights of all  Parties  shall have been fully and  finally
                  adjudicated by a court of competent jurisdiction; or


         (b)      all  differences  shall  have  been  adjusted  and  all  doubt
                  resolved by agreement among all of the interested persons, and
                  it shall have been notified  thereof in writing  signed by all
                  such persons.


                                    ARTICLE 9
                           DUE DILIGENCE INVESTIGATION


9.1      DUE  DILIGENCE.  Each of the Parties  hereto  shall  forthwith  conduct
such further due diligence  examination  of the other Parties hereto as it deems
appropriate.


9.2      CONFIDENTIALITY.  Each  Party  may in a  reasonable  manner  carry  out
such  investigations  and due diligence as to the other Parties  hereto,  at all
times  subject  to the  confidentiality  provisions  of  Articles  "10" and "11"
hereinbelow,  as each Party deems  necessary.  In that regard the Parties  agree
that each  shall  have full and  complete  access to the other  Parties'  books,
records,  financial  statements and other documents,  articles of incorporation,
by-laws, minutes of Board of Directors' meetings and its committees,  investment
agreements, material contracts and as well such other documents and materials as
the Parties  hereto,  or their  respective  solicitors,  may deem reasonable and
necessary to conduct an adequate due diligence  investigation of each Party, its
respective operations and financial condition prior to the Closing.


                                   ARTICLE 10
                                 NON-DISCLOSURE


10.1     NON-DISCLOSURE.    Subject   to   the  provisions  of  section   "10.3"
hereinbelow,  the Parties  hereto,  for themselves,  their officers,  directors,
shareholders,  consultants,  employees and agents, agree that they each will not
disseminate  or  disclose,  or  knowingly  allow,  permit  or  cause  others  to
disseminate  or  disclose  to third  parties  who are not  subject to express or
implied covenants of confidentiality, without the other Parties' express written
consent,  either:  (i) the fact or  existence of this  Agreement or  discussions
and/or  negotiations  between  them  involving,  INTER ALIA,  possible  business
transactions; (ii) the possible substance or content of those discussions; (iii)
the  possible  terms  and  conditions  of any  proposed  transaction;  (iv)  any
statements or  representations  (whether verbal or written) made by either Party
in the course of or in  connection  with those  discussions;  or (v) any written
material  generated by or on behalf of any Party and such  contacts,  other than

<PAGE>
                                      -72-


such disclosure as may be required under  applicable  securities  legislation or
regulations,  pursuant  to any order of a Court or on a "need to know"  basis to
each of the Parties' respective professional advisors.


10.2     DOCUMENTATION.   Any  document or written material generated  by either
Party  hereto  in the  course  of,  or in  connection  with,  the due  diligence
investigations  conducted  pursuant to this Agreement  shall be marked or deemed
"Confidential" and shall be treated by each Party as a trade secret of the other
Parties.  Upon  termination of this Agreement prior to Closing all copies of any
and all documents obtained by any Party from any other Party herein,  whether or
not marked "Confidential", shall be returned to the other Parties forthwith.


10.3     PUBLIC  ANNOUNCEMENTS.  Notwithstanding the provisions of this Article,
the Parties  hereto agree to make such public  announcements  of this  Agreement
promptly upon its execution in accordance  with the  requirements  of applicable
securities legislation and regulations.


                                   ARTICLE 11
                           PROPRIETARY INFORMATION AND
                  ADDITIONAL OBLIGATIONS OF THE PARTIES HERETO


11.1     CONFIDENTIAL  INFORMATION.  Each Party hereto acknowledges that any and
all  information  which a Party may obtain from, or have  disclosed to it, about
the  other  Parties   constitutes   valuable   trade  secrets  and   proprietary
confidential  information of the other Parties (collectively,  the "CONFIDENTIAL
INFORMATION").  No such Confidential Information shall be published by any Party
without the prior written  consent of the other Parties  hereto,  however,  such
consent in respect of the  reporting of factual  data shall not be  unreasonably
withheld,  and shall not be  withheld in respect of  information  required to be
publicly  disclosed  pursuant to  applicable  securities  or  corporation  laws.
Furthermore,  each Party  hereto  undertakes  not to disclose  the  Confidential
Information  to any third party without the prior written  approval of the other
Parties and to ensure that any third party to which the Confidential Information
is disclosed  shall  execute an agreement and  undertaking  on the same terms as
contained herein.


11.2     IMPACT OF BREACH OF  CONFIDENTIALITY.  The Parties  hereto  acknowledge
that the Confidential  Information is important to the respective  businesses of
each of the Parties and that,  in the event of  disclosure  of the  Confidential
Information,  except as authorized hereunder,  the damage to each of the Parties
hereto,  or to either  of them,  may be  irreparable.  For the  purposes  of the
foregoing  sections the Parties  recognize and hereby agree that a breach by any
of the  Parties  of any of the  covenants  therein  contained  would  result  in
irreparable harm and significant  damage to each of the other Parties that would
not be adequately  compensated for by monetary award.  Accordingly,  the Parties
agree that in the event of any such breach,  in addition to being  entitled as a
matter  of right to apply to a Court of  competent  equitable  jurisdiction  for
relief by way of restraining  order,  injunction,  decree or otherwise as may be
appropriate to ensure compliance with the provisions hereof, any such Party will
also be liable to the other Parties, as liquidated damages,  for an amount equal

<PAGE>
                                      -73-


to the amount  received and earned by such Party as a result of and with respect
to any such breach.  The Parties also  acknowledge  and agree that if any of the
aforesaid restrictions,  activities,  obligations or periods are considered by a
Court of competent  jurisdiction as being  unreasonable,  the Parties agree that
said  Court  shall have  authority  to limit such  restrictions,  activities  or
periods as the Court deems proper in the circumstances. In addition, the Parties
further  acknowledge  and agree that all  restrictions  or  obligations  in this
Agreement are  necessary and  fundamental  to the  protection of the  respective
businesses of each of the Parties and are reasonable and valid, and all defenses
to the strict enforcement  thereof by either of the Parties are hereby waived by
the other Parties.


11.3     COMPLIANCE  WITH  APPLICABLE  LAWS.  The  Parties  will comply with all
Canadian,  U.S.  and  foreign  laws,  whether  federal,   provincial  or  state,
applicable  to their  respective  duties  hereunder  and,  in  addition,  hereby
represent and warrant that any information  which they may provide to any person
or  company  hereunder  will,  to  the  best  of  their  respective   knowledge,
information  and belief,  be accurate and complete in all material  respects and
not misleading,  and will not omit to state any fact or information  which would
be material to such person or company.


11.4     OPINIONS, REPORTS AND ADVICE OF THE VENDORS.   The Vendors  acknowledge
and agree that all  written and oral  opinions,  reports,  advice and  materials
provided  by the Vendors to the  Purchaser  or the  Company in  connection  with
purchase and sale  contemplated  herein are intended  solely for the Purchaser's
benefit and for the  Purchaser's  use only,  and that any such  written and oral
opinions,  reports,  advice and  information  are the exclusive  property of the
Purchaser.  In this regard the Vendors covenant and agree that the Purchaser may
utilize any such  opinion,  report,  advice and  materials for any other purpose
whatsoever and, furthermore,  may reproduce,  disseminate,  quote from and refer
to,  in whole or in part,  at any  time  and in any  manner,  any such  opinion,
report,  advice and materials in the Purchaser's  sole and absolute  discretion.
The  Vendors  further  covenant  and  agree  that no  public  references  to the
Purchaser,  the Company or the Vendors,  or  disclosure  of the Vendors' role in
respect of the  Purchaser  or the  Company,  be made by the Vendors  without the
prior  written  consent  of  the  Purchaser  in  each  specific   instance  and,
furthermore, that any such written opinions, reports, advice or materials shall,
unless  otherwise  required by the Purchaser,  be provided by the Vendors to the
Purchaser in a form and with such  substance as would be  acceptable  for filing
with and  approval by any  Regulatory  Authority  having  jurisdiction  over the
affairs of the Purchaser and the Company from time to time.


                                   ARTICLE 12
                   AMENDMENT, POWER OF ATTORNEY AND VARIATIONS


12.1     ASSIGNMENT.  Save and except as provided herein,   no  Party hereto may
sell,  assign,  pledge or mortgage or otherwise  encumber all or any part of its
respective  interest  herein without the prior written  consent all of the other
Parties hereto.

<PAGE>
                                      -74-


12.2     AMENDMENT. This Agreement and any provision thereof may only be amended
in writing and only by duly  authorized  signatories  of each of the  respective
Parties hereto.


12.3     POWER OF ATTORNEY ON BEHALF OF THE VENDORS.  In order to better provide
for the  administration  and  completion of each of the  transactions  which are
contemplated  by the terms and  conditions of this  Agreement,  each Vendor does
hereby make,  constitute and appoint Sacha H. Spindler, a Vendor and the current
President and director of the Company,  or such other present or future director
or officer of the Company as Mr.  Spindler  may  appoint in writing,  and in his
sole and absolute  discretion,  in his time(s) of absence (the  "ATTORNEY"),  as
such  Vendor's  true and lawful  Attorney  for such Vendor and in such  Vendor's
name,  place and stead and for the sole purpose and power of specifically  doing
all acts and executing all deeds, resolutions, documents, matters and things and
including,  without limitation, any agreement supplemental thereto, which may be
necessary to be done in such  Vendor's  place and stead and in order to complete
all of  transactions  on such  Vendor's  behalf which may be required  under the
terms and conditions of this Agreement (the "POWER OF ATTORNEY"). In this regard
the within Power of Attorney for each particular  Vendor shall be effective from
the Execution Date of this Agreement and shall continue in full force and effect
until the earlier of either the final Closing or the  termination  of the within
purchase and sale.


12.4     CORRECTIONS  AND AMENDMENTS TO BE MADE  BY ATTORNEY.   Without  in  any
manner whatsoever limiting the Power of Attorney granted to the Attorney by each
Vendor  as  set  forth   immediately   hereinabove,   the  Vendors  hereby  also
specifically  authorize  the  Attorney to correct any errors in, to complete any
information missing from and to make any amendments to this Agreement,  together
with  any  and  all  other  documents,  resolutions  and  instruments  as may be
necessary, in the opinion of Attorney, acting reasonably, to complete all of the
transactions contemplated by terms and conditions of this Agreement.


12.5     VARIATION  IN THE  TERMS  OF  THIS  AGREEMENT  UPON  REVIEW.     It  is
hereby  acknowledged  and agreed by each of the  Parties  hereto  that where any
variation  in the  terms  and/or  conditions  of this  Agreement  is  reasonably
required by any of the Regulatory Authorities as a condition of their respective
Regulatory  Approval to any of the terms and conditions of this  Agreement,  any
such reasonable  variation or variation will be deemed to be accepted by each of
the Parties hereto and form part of the terms and conditions of this Agreement.


                                   ARTICLE 13
                                  FORCE MAJEURE


13.1     EVENTS.  If any  Party  hereto is at any time  prevented or delayed  in
complying with any provisions of this Agreement by reason of strikes, walk-outs,
labour  shortages,  power  shortages,  fires,  wars,  acts of God,  earthquakes,
storms,   floods,   explosions,   accidents,   protests  or   demonstrations  by
environmental  lobbyists  or native  rights  groups,  delays in  transportation,
breakdown  of  machinery,  inability to obtain  necessary  materials in the open

<PAGE>
                                      -75-


market, unavailability of equipment, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons beyond the control of
that  Party,  then the time  limited  for the  performance  by that Party of its
respective  obligations hereunder shall be extended by a period of time equal in
length to the period of each such prevention or delay.


13.2     NOTICE. A Party shall, within seven calendar days, give notice  to  the
other Parties of each event of FORCE MAJEURE under section  "13.1"  hereinabove,
and upon  cessation of such event shall furnish the other Parties with notice of
that  event  together  with  particulars  of the  number  of days by  which  the
obligations  of that Party  hereunder have been extended by virtue of such event
of FORCE MAJEURE and all preceding events of FORCE MAJEURE.


                                   ARTICLE 14
                                   ARBITRATION


14.1     MATTERS FOR  ARBITRATION.  The Parties  hereto agree that all questions
or matters in dispute  with  respect to this  Agreement  shall be  submitted  to
arbitration pursuant to the terms hereof.


14.2     NOTICE.  It shall be a  condition  precedent  to the right of any Party
to submit any matter to arbitration  pursuant to the provisions  hereof that any
Party  intending  to refer any matter to  arbitration  shall have given not less
than 10 calendar  days' prior  written  notice of its  intention to do so to the
other  Parties  together  with  particulars  of the  matter in  dispute.  On the
expiration  of such 10 calendar  days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided in section "14.3" hereinbelow.


14.3     APPOINTMENTS.    The  Party  desiring  arbitration  shall  appoint  one
arbitrator,  and shall  notify the other  Parties of such  appointment,  and the
other  Parties  shall,  within 10 calendar  days after  receiving  such  notice,
appoint an arbitrator,  and the two arbitrators so named,  before  proceeding to
act,  shall,  within 10 calendar days of the  appointment  of the last appointed
arbitrator,  unanimously agree on the appointment of a third arbitrator,  to act
with them and be chairman of the  arbitration  herein provided for. If the other
Parties  shall fail to  appoint  an  arbitrator  within 10  calendar  days after
receiving  notice  of the  appointment  of the first  arbitrator,  or if the two
arbitrators appointed by the Parties shall be unable to agree on the appointment
of the chairman,  the chairman  shall be appointed  under the  provisions of the
Arbitration Act. Except as specifically  otherwise provided in this section, the
arbitration  herein  provided  for shall be conducted  in  accordance  with such
Arbitration  Act.  The  chairman,  or in the case where only one  arbitrator  is
appointed,  the  single  arbitrator,  shall fix a time and  place in  Vancouver,
British Columbia, for the purpose of hearing the evidence and representations of
the  Parties,  and he shall  preside  over the  arbitration  and  determine  all
questions of  procedure  not  provided  for under such  Arbitration  Act or this
section.  After  hearing any evidence and  representations  that the Parties may
submit,  the single  arbitrator,  or the arbitrators,  as the case may be, shall
make an award and reduce the same to writing,  and  deliver one copy  thereof to

<PAGE>

                                      -76-


each of the Parties.  The expense of the arbitration  shall be paid as specified
in the award.


14.4     AWARD.  The  Parties  hereto agree that the award of a  majority of the
arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be
final and binding upon each of them.


                                   ARTICLE 15
                             DEFAULT AND TERMINATION


15.1     DEFAULT.  The Parties  hereto agree that  if  any  Party  hereto  is in
default with respect to any of the provisions of this  Agreement  (herein called
the   "DEFAULTING   PARTY"),   the   non-defaulting   Parties   (herein  called,
collectively,  the  "NON-DEFAULTING  PARTY") shall give notice to the Defaulting
Party designating such default, and within 10 calendar days after its receipt of
such notice, the Defaulting Party shall either:


         (a)      cure  such  default,  or  commence  proceedings  to cure  such
                  default and  prosecute  the same to  completion  without undue
                  delay; or


         (b)      give the Non-Defaulting  Party notice that it denies that such
                  default has occurred and that it is submitting the question to
                  arbitration as herein provided.


15.2     ARBITRATION.  If  arbitration  is sought,  a Party  shall not be deemed
in default until the matter shall have been  determined  finally by  appropriate
arbitration under the provisions of Article "14" hereinabove.


15.3     CURING THE DEFAULT.   If:


         (a)      the default is not so cured or the  Defaulting  Party does not
                  commence or diligently proceed to cure the default; or


         (b)      arbitration is not so sought; or


         (c)      the Defaulting Party is found in arbitration proceedings to be
                  in  default,  and fails to cure it within five  calendar  days
                  after the rendering of the arbitration award,

<PAGE>

                                      -77-


the Non-Defaulting Party may, by written notice given to the Defaulting Party at
any time while the default  continues,  terminate the interest of the Defaulting
Party in and to this Agreement.


15.4     TERMINATION.   In  addition to the foregoing it is hereby  acknowledged
and  agreed by the  Parties  hereto  that  this  Agreement  will be  immediately
terminated,   unless  otherwise   extended  in  accordance  with  section  "7.2"
hereinabove, in the event that:


         (a)      the  Ratification  has  not  been  satisfied  by  each  of the
                  Purchaser  and the Company  within five  business  days of the
                  Execution Date;


         (b)      each of the  Purchaser  and the  Company  fails to  complete a
                  successful  and  Initial  Due  Diligence  review  of the other
                  Party's   respective   businesses  and  operations  within  30
                  calendar days of the prior satisfaction of the Ratification;


         (c)      the  Purchaser  has  failed  to  complete  a  minimum  of U.S.
                  $500,000 of the Private  Placement  on or before  December 31,
                  2002,  together with the  corresponding  Principal Sum Loan of
                  not  less  than  U.S.   $250,000  from  such  minimum  Private
                  Placement,  all in accordance  with the  provisions of section
                  "4.1" and Article "5" hereinabove;


         (d)      either of the  Parties  hereto  has not  either  satisfied  or
                  waived each of their respective  conditions precedent prior to
                  the Subject  Removal Date in accordance with the provisions of
                  Article "6" hereinabove;


         (e)      each of the conditions  specified in section "6.1" hereinabove
                  have not been  satisfied  in the  manner  and  within the time
                  periods as specified therein;


         (f)      either of the  Parties  hereto has failed to deliver or caused
                  to be delivered any of their respective  documents required to
                  be delivered  by Articles  "5",  "6", "7" and "8"  hereinabove
                  prior to each of the Subject Removal Date and the Closing Date
                  in  accordance  with the  provisions of Articles "5", "6", "7"
                  and "8";


         (g)      the final  Closing  has  not occurred on or before January 31,
                  2003 in accordance with section "7.2" hereinabove; or


         (h)      by agreement in writing by each of the Parties hereto;

<PAGE>
                                      -78-


and in such event this  Agreement  will be terminated and be of no further force
and effect other than the obligations under Articles "10" and "11" hereinabove.


                                   ARTICLE 16
                      INDEMNIFICATION AND LEGAL PROCEEDINGS


16.1     INDEMNIFICATION.  The  Parties  hereto  agree  to  indemnify  and  save
harmless  the other  Parties  hereto  and  including,  where  applicable,  their
respective  affiliates,  directors,  officers,  employees  and agents (each such
party  being an  "INDEMNIFIED  Party")  harmless  from and  against  any and all
losses, claims, actions, suits, proceedings, damages, liabilities or expenses of
whatever nature or kind,  including any  investigation  expenses incurred by any
Indemnified Party, to which an Indemnified Party may become subject by reason of
the terms and conditions of this Agreement.


16.2     NO INDEMNIFICATION.  This  indemnity  will  not  apply  in  respect  of
an  Indemnified  Party in the event and to the extent that a court of  competent
jurisdiction in a final judgment shall determine that the Indemnified  Party was
grossly negligent or guilty of willful misconduct.


16.3     CLAIM OF INDEMNIFICATION.  The Parties hereto agree to waive any  right
they might have of first requiring the  Indemnified  Party to proceed against or
enforce any other right, power, remedy, security or claim payment from any other
person before claiming this indemnity.


16.4     NOTICE OF CLAIM. In case any action is brought  against an  Indemnified
Party in respect of which  indemnity  may be sought  against  any of the Parties
hereto, the Indemnified Party will give the relevant Party hereto prompt written
notice of any such action of which the Indemnified  Party has knowledge and such
Party will  undertake  the  investigation  and defense  thereof on behalf of the
Indemnified Party,  including the prompt Consulting of counsel acceptable to the
Indemnified  Party  affected  and the  payment of all  expenses.  Failure by the
Indemnified  Party to so notify  shall  not  relieve  any  Party  hereto of such
Party's obligation of  indemnification  hereunder unless (and only to the extent
that) such failure  results in a forfeiture  by any Party hereto of  substantive
rights or defenses.


16.5     SETTLEMENT.  No  admission of liability and no settlement of any action
shall be made without the consent of each of the Parties  hereto and the consent
of the Indemnified Party affected, such consent not to be unreasonable withheld.


16.6     LEGAL  PROCEEDINGS.  Notwithstanding  that the  relevant   Party hereto
will undertake the investigation and defense of any action, an Indemnified Party
will  have  the  right  to  employ  separate  counsel  in any  such  action  and
participate  in the defense  thereof,  but the fees and expenses of such counsel
will be at the expense of the Indemnified Party unless:


<PAGE>

                                      -79-


         (a)      such counsel has been authorized by the relevant Party hereto;


         (b)      the  relevant  Party hereto has not assumed the defense of the
                  action  within a  reasonable  period of time  after  receiving
                  notice of the action;


         (c)      the named parties to any such action  include any Party hereto
                  and the  Indemnified  Party shall have been advised by counsel
                  that there may be a conflict  of  interest  between  any Party
                  hereto and the Indemnified Party; or


         (d)      there  are  one  or  more  legal  defenses  available  to  the
                  Indemnified  Party which are different  from or in addition to
                  those available to any Party hereto.


16.7     CONTRIBUTION.  If for any reason other than the gross negligence or bad
faith of the  Indemnified  Party  being  the  primary  cause of the loss  claim,
damage, liability, cost or expense, the foregoing indemnification is unavailable
to the Indemnified  Party or  insufficient  to hold them harmless,  the relevant
Party hereto shall  contribute to the amount paid or payable by the  Indemnified
Party as a result of any and all such losses,  claim,  damages or liabilities in
such  proportion  as is  appropriate  to reflect not only the relative  benefits
received by any Party  hereto on the one hand and the  Indemnified  Party on the
other,  but  also  the  relative  fault  of  the  Parties  and  other  equitable
considerations  which  may  be  relevant.  Notwithstanding  the  foregoing,  the
relevant  Party  hereto  shall in any event  contribute  to the  amount  paid or
payable  by the  Indemnified  Party,  as a result  of the loss,  claim,  damage,
liability, cost or expense (other than a loss, claim, damage, liability, cost or
expenses, the primary cause of which is the gross negligence or bad faith of the
Indemnified  Party),  any  excess  of such  amount  over the  amount of the fees
actually received by the Indemnified Party hereunder.


                                   ARTICLE 17
                                     NOTICE


17.1     NOTICE.   Each  notice,  demand  or  other  communication  required  or
permitted to be given under this Agreement shall be in writing and shall be sent
by prepaid  registered  mail  deposited in a Post Office  addressed to the Party
entitled to receive the same,  or  delivered  to such Party,  at the address for
such Party specified above. The date of receipt of such notice,  demand or other
communication  shall be the date of delivery thereof if delivered,  or, if given
by registered  mail as aforesaid,  shall be deemed  conclusively to be the third
calendar  day after the same shall  have been so  mailed,  except in the case of
interruption  of postal  services for any reason  whatsoever,  in which case the
date of  receipt  shall  be the  date on  which  the  notice,  demand  or  other
communication is actually received by the addressee.

<PAGE>
                                      -80-


17.2     CHANGE OF ADDRESS.  Either Party  may at any time and from time to time
notify the other  Parties in writing of a change of address  and the new address
to which notice shall be given to it thereafter until further change.


                                   ARTICLE 18
                               GENERAL PROVISIONS


18.1     ENTIRE AGREEMENT.  This Agreement  constitutes  the entire agreement to
date  between  the  Parties  hereto and  supersedes  every  previous  agreement,
communication,   expectation,  negotiation,   representation  or  understanding,
whether oral or written, express or implied, statutory or otherwise, between the
Parties  hereto  with  respect  to the  subject  matter  of this  Agreement  and
including,  without  limitation,  the  Agreement  In  Principle  as between  the
Purchaser and the Company.


18.2     ENUREMENT.  This  Agreement will enure to the benefit of  and  will  be
binding  upon  the  Parties   hereto,   their   respective   heirs,   executors,
administrators and assigns.


18.3     SCHEDULES.  The Schedules to this Agreement are hereby  incorporated by
reference into this Agreement in its entirety.


18.4     TIME OF THE ESSENCE.   Time will be of the essence of this Agreement.


18.5     REPRESENTATION AND COSTS.  It  is  hereby  acknowledged  by each of the
Parties hereto that Devlin Jensen, Barristers and Solicitors, and the law office
of Reed & Reed, PC, act solely for the Company, and, correspondingly,  that each
of the Vendors and the Purchaser  have been  required by each of Devlin  Jensen,
the law office of Reed & Reed,  PC and the Company to obtain  independent  legal
advice with respect to their respective reviews and execution of this Agreement.
In addition,  it is hereby further acknowledged and agreed by the Parties hereto
that  Devlin  Jensen,  Barristers  and  Solicitors,  and  certain  or all of its
principal owners or associates,  from time to time, may have both an economic or
shareholding  interest in and to the Company and/or a fiduciary duty to the same
arising from either a directorship,  officership or similar relationship arising
out of the  request  of the  Company  for  certain  of such  persons to act in a
similar capacity while acting for the Company as counsel.  Correspondingly,  and
even where, as a result of this  Agreement,  the consent of each Party hereto to
the role and  capacity of Devlin  Jensen,  Barristers  and  Solicitors,  and its
principal  owners  and  associates,  as the case may be,  is deemed to have been
received,  where any  conflict or perceived  conflict  may arise,  or be seen to
arise,  as a result of any such  capacity or  representation,  each Party hereto
acknowledges  and  agrees to,  once more,  obtain  independent  legal  advice in
respect of any such  conflict or perceived  conflict  and,  consequent  thereon,
Devlin  Jensen,  Barristers  and  Solicitors,  together with any such  principal
owners or  associates,  as the case may be,  shall be at  liberty at any time to
resign any such  position  if it or any Party  hereto is in any way  affected or
uncomfortable  with any such  capacity  or  representation.  Each  Party to this
Agreement  will  also  bear  and pay its own  costs,  legal  and  otherwise,  in

<PAGE>
                                      -81-


connection  with  its  respective  preparation,  review  and  execution  of this
Agreement and, in particular, that the costs involved in the preparation of this
Agreement,  and all  documentation  necessarily  incidental  thereto,  by Devlin
Jensen,  Barristers and Solicitors,  and the law office of Reed & Reed, PC shall
be at the cost of the Company.


18.6     APPLICABLE LAW.  The  situs  of this  Agreement  is  Vancouver, British
Columbia,  and for all purposes this Agreement  will be governed  exclusively by
and construed and enforced in accordance with the laws and Courts  prevailing in
the Province of British Columbia.


18.7     FURTHER  ASSURANCES.  The Parties hereto hereby, jointly and severally,
covenant and agree to forthwith,  upon request, execute and deliver, or cause to
be executed and delivered,  such further and other deeds, documents,  assurances
and  instructions  as may be required by the Parties hereto or their  respective
counsel in order to carry out the true nature and intent of this Agreement.


18.8     INVALID  PROVISIONS.  If any provision of this Agreement is at any time
unenforceable  or invalid for any reason it will be severable from the remainder
of this Agreement and, in its  application at that time,  this Agreement will be
construed as though such  provision was not  contained  herein and the remainder
will continue in full force and effect and be construed as if this Agreement had
been executed without the invalid or unenforceable provision.


18.9     CURRENCY. Unless otherwise stipulated, all payments required to be made
pursuant to the  provisions of this  Agreement  and all money amount  references
contained herein are in lawful currency of the United States.


18.10    SEVERABILITY AND CONSTRUCTION.  Each Article, section, paragraph,  term
and provision of this Agreement,  and any portion  thereof,  shall be considered
severable,  and if, for any reason,  any portion of this Agreement is determined
to be invalid,  contrary to or in conflict with any applicable present or future
law,  rule or  regulation  in a final  unappealable  ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to any of the Parties
hereto is a party,  that ruling shall not impair the  operation  of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible  (all of which shall remain  binding on the Parties and continue to
be given full force and  agreement as of the date upon which the ruling  becomes
final).


18.11    CAPTIONS.  The captions, section  numbers, Article numbers and Schedule
numbers  appearing in this  Agreement are inserted for  convenience of reference
only and shall in no way define, limit, construe or describe the scope or intent
of this Agreement nor in any way affect this Agreement.


18.12    COUNTERPARTS.  This Agreement may be signed by the Parties hereto in as
many  counterparts as may be necessary and, if required,  by facsimile,  each of
which so signed being deemed to be an original,  and such counterparts  together

<PAGE>
                                      -82-


shall  constitute one and the same instrument and,  notwithstanding  the date of
execution,  will be deemed to bear the Execution  Date as set forth on the front
page of this Agreement.


18.13    NO PARTNERSHIP  OR AGENCY.  The  Parties  hereto  have  not  created  a
partnership  and  nothing  contained  in  this  Agreement  shall  in any  manner
whatsoever  constitute any Party the partner,  agent or legal  representative of
any other  Party,  nor create any  fiduciary  relationship  between them for any
purpose  whatsoever.  No Party shall have any authority to act for, or to assume
any  obligations or  responsibility  on behalf of, any other party except as may
be,  from  time to time,  agreed  upon in  writing  between  the  Parties  or as
otherwise expressly provided.


18.14    CONSENTS AND WAIVERS.   No consent  or  waiver  expressed or implied by
either  Party  hereto in respect of any breach or default by any other  Party in
the performance by such other of its obligations hereunder shall:


         (a)      be valid unless it is in writing and stated to be a consent or
                  waiver pursuant to this section;


         (b)      be relied  upon as a consent to or waiver of any other  breach
                  or default of the same or any other obligation;


         (c)      constitute a general waiver under this Agreement; or


         (d)      eliminate or modify the need for a specific  consent or waiver
                  pursuant to this section in any other or subsequent instance.


         IN WITNESS WHEREOF each of the Parties hereto has hereunto set its seal
by the hand of its duly  authorized  signatory as of the  Execution  Date as set
forth on the front page of this Agreement.


The COMMON SEAL of                       )    NO. OF PURCHASED SHARES: 2,951,750
PETROGEN INTERNATIONAL LTD.,             )
a Vendor herein, was hereunto affixed    )
in the presence of:                      )                 (C/S)
                                         )
_________________________________________)
Authorized Signatory                     )



<PAGE>


The COMMON SEAL of                       )    NO. OF PURCHASED SHARES: 4,012,500
UNIT HOLDINGS LTD.,                      )
a Vendor herein, was hereunto affixed    )
in the presence of:                      )                  (C/S)
                                         )
_________________________________________)
Authorized Signatory                     )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES: 3,375,000
LEO WILLIAM KERRIGAN,                    )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ____________________
                                         )            LEO WILLIAM KERRIGAN
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:   285,000
PETER K. JENSEN,                         )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            _______________
                                         )            PETER K. JENSEN
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:   191,250
PEGGY TRENDALL-JENSEN,                   )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            _____________________
                                         )            PEGGY TRENDALL-JENSEN
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )

<PAGE>
                                      -84-


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:   150,000
PETER JENSEN FAMILY TRUST,               )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            _________________________
                                         )            PETER JENSEN FAMILY TRUST
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:   110,000
PETER JENSEN (IN TRUST                   )
FOR FAMILY MEMBERS),                     )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ______________________
                                         )            PETER JENSEN (IN TRUST
_________________________________________)             FOR FAMILY MEMBERS)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:   100,000
THOMAS J. DEUTSCH,                       )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            _________________
                                         )            THOMAS J. DEUTSCH
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )

<PAGE>
                                      -85-


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    37,500
TIMOTHY G. RUSSELL,                      )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            __________________
                                         )            TIMOTHY G. RUSSELL
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    90,000
JOHN M. HEFNER,                          )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ______________
                                         )            JOHN M. HEFNER
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    90,000
KEVIN M. SMITH,                          )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ______________
                                         )            KEVIN M. SMITH
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )

<PAGE>

                                      -86-


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    75,000
ALISON MUIR,                             )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ___________
                                         )            ALISON MUIR
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


The COMMON SEAL of                       )    NO. OF PURCHASED SHARES:    75,000
GLOBAL FINANCIAL GROUP, INC.,            )
a Vendor herein, was hereunto affixed    )
in the presence of:                      )                (C/S)
                                         )
_________________________________________)
Authorized Signatory                     )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    37,500
MINOR BUCKINGHAM,                        )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ________________
                                         )            MINOR BUCKINGHAM
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    56,250
JAMES T. ROCHE,                          )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ______________
                                         )            JAMES T. ROCHE
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )

<PAGE>
                                      -87-


The COMMON SEAL of                       )    NO. OF PURCHASED SHARES:    56,250
CELESTINE ASSET MANAGEMENT,              )
a Vendor herein, was hereunto affixed    )
in the presence of:                      )                  (C/S)
                                         )
_________________________________________)
Authorized Signatory                     )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:     3,750
WARREN D. MUIR,                          )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ______________
                                         )            WARREN D. MUIR
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:     3,750
ATTILA ODRY,                             )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ___________
                                         )            ATTILA ODRY
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


SIGNED, SEALED and DELIVERED by          )    NO. OF PURCHASED SHARES:    67,500
ROY E. GOULD,                            )
a Vendor herein, in the presence of:     )
                                         )
_________________________________________)
Witness Signature                        )            ____________
                                         )            ROY E. GOULD
_________________________________________)
Witness Address                          )
                                         )
_________________________________________)
Witness Name and Occupation              )


<PAGE>
                                      -88-


The COMMON SEAL of                       )    NO. OF PURCHASED SHARES:    39,000
590498 B.C. LTD.,                        )
a Vendor herein, was hereunto affixed    )
in the presence of:                      )                 (C/S)
                                         )
_________________________________________)
Authorized Signatory                     )


The COMMON SEAL of                       )
PETROGEN, INC.,                          )
the Company herein, was hereunto affixed )
in the presence of:                      )                  (C/S)
                                         )
_________________________________________)
Authorized Signatory                     )


The CORPORATE SEAL of                    )
HADRO RESOURCES, INC.,                   )
the Purchaser herein, was hereunto       )
affixed                                  )                   (C/S)
in the presence of:                      )
                                         )
_________________________________________)
Authorized Signatory                     )
                                   __________



<PAGE>

                                   SCHEDULE A



         This is Schedule "A" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                             AGREEMENT IN PRINCIPLE


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>



                                   SCHEDULE B



         This is Schedule "B" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                    PURCHASED SHARES, VENDORS AND SECURITIES


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>


                                   SCHEDULE C



         This is Schedule "C" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                                POOLING AGREEMENT


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>



                                   SCHEDULE D



         This is Schedule "D" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                         COMPANY'S FINANCIAL STATEMENTS


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________



<PAGE>


                                   SCHEDULE E



         This is Schedule "E" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                               COMPANY'S PROPERTY


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________



<PAGE>



                                   SCHEDULE F



         This is Schedule "F" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                        COMPANY'S INTELLECTUAL PROPERTY


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>


                                   SCHEDULE G



         This is Schedule "G" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc. {changing its name to "Petrogen Corp."}.


                                 COMPANY'S LEASE


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>

                                   SCHEDULE H



         This is Schedule "H" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                        COMPANY'S CONTRACTS OF EMPLOYMENT


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________



<PAGE>


                                   SCHEDULE I



         This is Schedule "I" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                          COMPANY'S MATERIAL CONTRACTS


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>



                                   SCHEDULE J



         This is Schedule "J" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                      COMPANY'S LIST OF BANK ACCOUNTS ETC.


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>



                                   SCHEDULE K



         This is Schedule "K" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.

                        PURCHASER'S FINANCIAL STATEMENTS


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>


                                   SCHEDULE L



         This is Schedule "L" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                         PURCHASER'S MATERIAL CONTRACTS


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________



<PAGE>



                                   SCHEDULE M



         This is Schedule "M" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                     PURCHASER'S LIST OF BANK ACCOUNTS ETC.


          REGULATION S CERTIFICATE AND ACCREDITED INVESTOR CERTIFICATE


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________



<PAGE>



                                   SCHEDULE N



         This is Schedule "N" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                                 LOAN AGREEMENT


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________


<PAGE>



                                   SCHEDULE O



         This is Schedule "O" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                          CONSULTING SERVICES AGREEMENT


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________



<PAGE>



                                   SCHEDULE P



         This is Schedule "P" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                              OPERATOR'S AGREEMENT


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________

<PAGE>



                                   SCHEDULE Q



         This is Schedule "Q" to that certain  Share  Exchange  Agreement  among
each of the Vendor  shareholders  of Petrogen,  Inc.,  Petrogen,  Inc. and Hadro
Resources, Inc.


                               VENDOR CERTIFICATES


          REGULATION S CERTIFICATE AND ACCREDITED INVESTOR CERTIFICATE


                     REFER TO THE MATERIALS ATTACHED HERETO.
                                   __________