<PAGE>
 
                                                                     EXHIBIT 2.1

                               PURCHASE AND SALE

                                   AGREEMENT

                                    BETWEEN

                              MARATHON OIL COMPANY

                                      and

                            CRETE OIL COMPANY, INC.

                                     dated

                                October 31, 1995
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ARTICLE I  EXHIBITS..................................      1
  1.1 Exhibits.......................................      1
 
ARTICLE II  SALE AND PURCHASE........................      2
  2.1 Assets Involved................................      2
 
ARTICLE III  PURCHASE PRICE..........................      4
  3.1 Performance....................................      4
  3.2 Purchase Price.................................      4
  3.3 Crude Oil in Storage...........................      4
  3.4 Property Exchange..............................      5
 
ARTICLE IV  REPRESENTATIONS OF MOC...................      5
  4.1 Existence......................................      5
  4.2 Power..........................................      5
  4.3 Authorization..................................      6
 
ARTICLE V  REPRESENTATIONS OF PURCHASER..............      6
  5.1 Existence......................................      6
  5.2 Power..........................................      7
  5.3 Authorization..................................      7
  5.4 Further Distribution...........................      7
 
ARTICLE VI  PRE-CLOSING OBLIGATIONS OF MOC...........      8
  6.1 Hart-Scott-Rodino Act..........................      8
  6.2 Operations.....................................      8
  6.3 Permissions....................................      9
  6.4 Notices to Holders of Preferential Purchase
       Rights and Rights to Consent..................      9
  6.5 Access.........................................      9
 
ARTICLE VII  PRE-CLOSING OBLIGATIONS OF PURCHASER....      9
  7.1 Hart-Scott-Rodino Act..........................      9
  7.2 Indemnity Regarding Access.....................     10
  7.3 Permissions....................................     10
  7.4 Confidentiality................................     11
 
ARTICLE VIII  MOC'S CONDITIONS OF CLOSING............     12
  8.1 Representations................................     12
  8.2 Performance....................................     12
  8.3 Officer's Certificate..........................     12
  8.4 Pending Matters................................     12
  8.5 Opinion of Purchaser's Counsel.................     13
  8.6 Governmental Bond..............................     13

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  8.7   Corporate Documentation.........................   14
 
ARTICLE IX  PURCHASER'S CONDITIONS OF CLOSING...........   14
  9.1   Representations.................................   14
  9.2   Performance.....................................   14
  9.3   Officer's Certificate...........................   14
  9.4   Pending Matters.................................   15
  9.5   Opinion of MOC's Counsel........................   15
  9.6   Litigation......................................   16
  9.7   Default.........................................   16
  9.8   Environment.....................................   17
 
ARTICLE X  OPERATORSHIP.................................   18
  10.1  Resignation of Operator and Selection of 
         Successor Operator.............................   18
 
ARTICLE XI  CASUALTY LOSS...............................   18
  11.1  Casualty Loss of Assets.........................   18
 
ARTICLE XII  EMPLOYEES..................................   18
  12.1  Union Location..................................   18
  12.2  No Third Party Beneficiaries....................   19
 
ARTICLE XIII  CLOSING...................................   19
  13.1  Time and Place..................................   19
  13.2  Closing Obligations.............................   19
 
ARTICLE XIV  WARRANTY OF TITLE..........................   20
  14.1  Warranty of Title...............................   20
  14.2  Definition of Title Defect......................   20
  14.3  Definition of Permitted Encumbrances............   21
 
ARTICLE XV  POST CLOSING OBLIGATIONS....................   22
  15.1  Receipts and Credits............................   23
  15.2  Assumption of Obligations and Indemnities.......   23
  15.3  Call on Oil.....................................   26
  15.4  Records.........................................   26
  15.5  Employment......................................   26
  15.6  Further Assurances..............................   27
 
ARTICLE XVI  TERMINATION................................   27
  16.1  Right of Termination............................   27
  16.2  Effect of Termination...........................   27
  16.3  MOC Rights Upon Termination.....................   29
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  16.4  Return of Financial Data........................   29
  17.1  Apportionment of Real Property Taxes............   29
  17.2  Sales Taxes.....................................   30
  17.3  Other Taxes.....................................   31
  17.4  Taxes Paid For Others...........................   31
  17.5  Cooperation.....................................   31
 
ARTICLE XVIII  PREFERENTIAL PURCHASE RIGHTS AND RIGHTS
 TO CONSENT.............................................   32
  18.1  Exercise of Preferential Purchase Rights........   32
  18.2  Non-Consents to Assignments.....................   33
  18.3  Excluded Leasehold Interest.....................   33
  18.4  Support for Excluded Leasehold Interests........   34
 
ARTICLE XIX  INDEPENDENT INVESTIGATION AND DISCLAIMER...   34
 
ARTICLE XX  MISCELLANEOUS...............................   35
  20.1  Governing Law...................................   35
  20.2  Entire Agreement................................   36
  20.3  Waiver..........................................   36
  20.4  Captions........................................   36
  20.5  Assignment......................................   36
  20.6  Notices.........................................   36
  20.7  Expenses........................................   37
  20.8  Severability....................................   37
  20.9  Publicity.......................................   38
  20.10 Use of MOC's Name...............................   38
  20.11 Consequential Damages...........................   38
  20.12 Brokers' and Finders' Fees......................   38
  20.13 Survival........................................   39
 
</TABLE>
<PAGE>
 
     This Purchase and Sale Agreement (this "Agreement") is made as of October
31, 1995, by and between Marathon Oil Company, an Ohio corporation ("MOC"), and
Crete Oil Company, Inc., an Illinois corporation ("Purchaser").

                                    RECITALS

     Whereas, MOC desires to sell and Purchaser desires to purchase certain oil
and gas properties and related rights on the terms and conditions provided in
this Agreement;

     Now, therefore, MOC and Purchaser agree as follows:

                             ARTICLE I    EXHIBITS

     1.1  Exhibits.   The following Exhibits (with their respective schedules)
are attached and are made a part hereof:
     (a)  (i)   Exhibit A1 - "Oil and Gas Leasehold Interests."
          (ii)  Exhibit A2 - "Overriding Royalty Interests."
          (iii) Exhibit A3 - "Mineral Interests Owned in Fee."
          (iv)  Exhibit A4 - "Surface Owned in Fee."
          (v)   Exhibit A5 - "Surface Leases."
          (vi)  Exhibit A6 - "Easements."
          (vii) Exhibit A7 - "Miscellaneous Agreements."

                                       1
<PAGE>
 
     (b) Exhibit B - "Excluded Items and Reserved Interests."
     (c) Exhibit C - "Preferential Purchase Rights and Rights to Consent."
     (d) Exhibit D - "Pending Litigation, Contractual Defaults and
                      Conditions Affecting the Environment."
     (e) Exhibit E - "Instrument of Conveyance."

                         ARTICLE II  SALE AND PURCHASE
     
          2.1  Assets Involved.  Subject to the terms and conditions of this
Agreement, MOC shall sell and Purchaser shall purchase, effective as of November
1, 1995 at 7:00 a.m. Central Standard Time (the "Effective Date"), as
hereinafter provided, all of MOC's  right, title and interest in the following
assets (the "Assets"):
          (a) The oil and gas leases described at Exhibit A1 (the "Leasehold
Interests") and the overriding royalty and fee mineral interests described at
Exhibits A2 and A3, together with all of MOC's right, title and interest in
respect of any pooled or unitized acreage of which any such leases and interests
are a part, and, subject to the conditions set forth in Exhibit B, all of MOC's
right, title and interest in the surface interests described at Exhibits A4 and
A5 and the easements described at Exhibit A6 (all of which are collectively
referred to as the "Subject Interests");
          (b) To the extent attributable or allocable to the Subject Interests,
all of MOC's right, title and interest in and to (i) all wells, equipment and
facilities, except as set forth at Exhibit B, which are located on (or in the
case of line injection wells,

                                       2
<PAGE>
 
on or adjacent to) or used exclusively and directly in connection with the
production, treatment or transportation of oil and gas from the Subject
Interests, (ii) to the extent they are assignable, all orders, contracts,
agreements and other instruments which affect the Subject Interests, including,
but not limited to, those described at Exhibits A1 through A7 [but not including
the following: insurance contracts held by MOC; orders, contracts, agreements
and other instruments which include or affect oil and gas properties of MOC
other than the Subject Interests; and production sales agreements with any
affiliates or subsidiaries of MOC, the collective bargaining agreement between
MOC and Local No. 7-482 of the Oil, Chemical and Atomic Workers International
Union], (iii) to the extent they are assignable and subject to the conditions
set forth in Exhibit B, all easements, licenses, authorizations, permits and
similar rights and interests which affect, but only to the extent they affect,
the Subject Interests and (iv) to the extent they are assignable, all other
rights, privileges, benefits and powers conferred upon the owner and holder of
the Subject Interests, but not including any and all assets, facilities,
contract, real and personal property (whether tangible or intangible) owned or
operated by MOC's refining, pipeline, supply and transportation or marketing
organizations;
          (c) Subject to Section 15.4, copies of general operating records, well
files, lease files, contract files (including unit and operating agreement
files), land files, regulatory reports and certificates, abstracts and title
opinions pertaining to the Subject Interests; but not including all of the
following: any legal files, attorney-client communications or attorney work
product;  MOC's geophysical and geological data

                                       3
<PAGE>
 
base (the "Data Base") for which there is a contractual prohibition upon
transfer or licensing to Purchaser; auditors' reports; and reserve reports.

                          ARTICLE III  PURCHASE PRICE

          3.1  Performance  Deposit. Contemporaneously with the execution of
this agreement, Purchaser has paid MOC a partial Performance Deposit in the
amount of $250,000.00.  On or before December 1, 1995, Purchaser shall remit
$1,750,000.00 to MOC as balance of the Performance Deposit.  In the event that
the transactions contemplated by this Agreement are consummated, the Performance
Deposit, together with simple interest thereon at the rate of six and on-half
percent (6.5%) per annum (the "Interest Amount"), shall be applied to the
Purchase Price at Closing.  In the event that this Agreement is terminated, the
remitted Performance Deposit and the Interest Amount, thereon, shall be applied
in accordance with the provisions of Section 16.2.

          3.2  Purchase Price.  The aggregate Purchase Price for the Assets
shall be cash in the amount of Forty-six Million Two Hundred Thousand Dollars US
($46,200,000.00 US) (the "Purchase Price").  Unless otherwise agreed to by MOC
and Purchaser prior to the Closing Date, or as modified by Section 3.4; payment
of the Purchase Price, minus the Performance Deposit and the Interest Amount,
shall be by wire transfer of federal (same day) funds by Purchaser to MOC's
designated United States bank account at Closing (as defined in Section 13.1).

          3.3   Crude Oil in Storage.  All oil in storage, above one foot (1')
from the bottom of the tanks, as of 7:00 a.m. Central Standard Time on the
Effective Date

                                       4
<PAGE>
 
which is credited to the Subject Interests shall remain the property of MOC.

          3.4  Property Exchange.  MOC may desire to structure the conveyance
of a portion of the real property subject to this Agreement as an exchange under
Section 1031 of the Internal Revenue Code of 1986.  MOC will have up to forty-
five (45) days after Closing to designate exchange properties.  The conveyance
of such real property and the manner of payment of the Purchase Price under
Section 3.2 with respect to such real property shall be modified as necessary to
satisfy the requirements of Section 1031.

                       ARTICLE IV  REPRESENTATIONS OF MOC

MOC represents and warrants to Purchaser that:

          4.1  Existence.  MOC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and is duly
qualified to carry on its business in the States of Illinois, Indiana and
Kentucky.

          4.2  Power.   MOC has the corporate power to enter into and perform
this Agreement and the transactions contemplated hereby.  Subject to any
applicable requirements under Title II of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act") , to any preferential purchase
rights, rights to consent and restrictions on assignment of the type generally
found in the oil and gas industry, and to rights to consent by governmental
entities and required notices to and filings with governmental entities where
the same are customarily obtained or made

                                       5
<PAGE>
 
subsequent to the assignment of oil and gas interests and leases, the execution,
delivery and performance of this Agreement by MOC, and the transactions
contemplated hereby, will not violate (i) any provision of the articles of
incorporation or by laws of MOC, (ii) any material agreement or instrument to
which MOC is a party or by which MOC is bound, (iii) any judgement, order,
ruling, or decree applicable to MOC as a party in interest, or (iv) to the best
of MOC's knowledge, any law, rule or regulation applicable to MOC.

          4.3  Authorization.  The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate actions on the part of MOC.  This
Agreement has been duly executed and delivered on behalf of MOC and at the
Closing all documents and instruments required hereunder to be executed and
delivered by MOC shall have been duly executed and delivered.  This Agreement
does, and all such documents and instruments shall, constitute legal, valid and
binding obligations of MOC enforceable in accordance with their terms.

                    ARTICLE V  REPRESENTATIONS OF PURCHASER

Purchaser represents and warrants to MOC that:

          5.1  Existence.  Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Illinois and is
duly qualified to carry on its business in the State of Illinois, Indiana and
Kentucky as of the Closing

                                       6
<PAGE>
 
Date.

          5.2  Power.  Purchaser has the corporate power to enter into and
perform this Agreement and the transactions contemplated hereby.  Subject to any
applicable requirements under the HSR Act, and to any rights to consent by
governmental entities and required notices to and filings with governmental
entities where the same are customarily obtained or made subsequent to the
assignment of oil and gas interests and leases, the execution, delivery and
performance of this Agreement by Purchaser, and the transactions contemplated
hereby, will not violate (i) any provision of the articles of incorporation or
bylaws of Purchaser, (ii) any material agreement or instrument to which
Purchaser is a party or by which Purchaser is bound, (iii) any judgement, order,
ruling, or decree applicable to Purchaser as a party in interest, or (iv) to the
best of Purchaser's knowledge, any law, rule or regulation applicable to
Purchaser.

          5.3  Authorization.  The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate actions on the part of Purchaser.  This
Agreement has been duly executed and delivered on behalf of Purchaser, and at
the Closing all documents and instruments required hereunder to be executed and
delivered by Purchaser shall have been duly executed and delivered.  This
Agreement does, and such documents and instruments shall, constitute legal,
valid and binding obligations of Purchaser enforceable in accordance with their
terms.

          5.4  Further Distribution.  Purchaser is acquiring the Assets for its
own

                                       7
<PAGE>
 
account and not with a view to, or for offer or resale in connection with, a
distribution or transfer thereof within the meaning of the Securities Act of
1933 and the rules and regulations pertaining to it or in violation of any
applicable federal and state securities laws.

                   ARTICLE VI  PRE-CLOSING OBLIGATIONS OF MOC

          6.1  Hart-Scott-Rodino Act.  MOC shall prepare and submit, in a
timely manner, any necessary filings for MOC in connection with the transactions
contemplated by this Agreement under the HSR Act and the rules and regulations
thereunder.  MOC shall request expedited treatment of such filings by the
Federal Trade Commission, shall promptly make any appropriate or necessary
subsequent or supplemental filings, and shall furnish to Purchaser copies of all
such filings made under the HSR Act at the same time as they are filed with the
government.

          6.2  Operations.   From the date of this Agreement until Closing (the
"Interim Period"), except as otherwise approved by Purchaser, MOC (i) shall
operate and maintain those Assets operated by MOC in a reasonably prudent and
workmanlike manner, (ii) shall not transfer, sell, hypothecate, encumber or
otherwise dispose of any of the Assets (other than as required in connection
with the exercise by third parties of preferential rights to purchase any of the
Assets), and (iii) shall not commence or consent to any individual operation on
the Assets that it has not previously committed to and that may be expected to
cost in excess of $20,000.00

                                       8
<PAGE>
 
(except for emergency operations).

          6.3  Permissions.  During the Interim Period, MOC will cooperate with
Purchaser in Purchaser's efforts pursuant to Section 7.3 to obtain all
permissions, approvals, and consents by federal, state and local governmental
authorities and others as may be required to consummate the sale contemplated
hereunder.

          6.4  Notices to Holders of Preferential Purchase Rights and Rights to
Consent.  MOC shall, except as noted on Exhibit C, send to each holder of a
preferential purchase right set forth at Exhibit C a notice offering to sell to
such holder, in accordance with the contractual provisions applicable to such
right, those Subject Interests covered by such right on substantially the terms
hereof, and for a portion of the Purchase Price determined in accordance with
Section 18.3 if the Subject Interest is a Leasehold Interest, or for the amount
specified in Exhibit C if the Subject Interest is not a Leasehold Interest.  In
addition, MOC shall, except as noted on Exhibit C, send to each holder of a
right to consent to an assignment set forth in Exhibit C a request that the
holder consent to the assignment of the Subject Interest to which its right
applies.

          6.5  Access.  During the Interim Period and subject to Section 7.2,
MOC shall allow Purchaser to have, upon reasonable prior notice and only during
normal work hours, access to the Assets.

               ARTICLE VII  PRE-CLOSING OBLIGATIONS OF PURCHASER

          7.1  Hart-Scott-Rodino Act.   Purchaser shall prepare and submit, in a
timely

                                       9
<PAGE>
 
manner, any necessary filings for Purchaser in connection with the transactions
contemplated by this Agreement under the HSR Act and the rules and regulations
thereunder. Purchaser shall request expedited treatment of such filings by the
Federal Trade Commission, shall promptly make any appropriate or necessary
subsequent or supplemental filings, and shall furnish to MOC copies of all
filings made under the HSR Act at the same time as they are filed with the
government.

          7.2  Indemnity Regarding Access.   Purchaser shall and do hereby
covenant and agree to indemnify, defend and hold harmless MOC, its officers,
directors, employees, agents, co-lessees a co-venturers (if any), from and
against any and all claims, liabilities, damages, losses, costs and expenses
(including without limitation, court costs and reasonable attorney's fees)
whether or not based on a theory of negligence, negligence per se, strict
liability, willful misconduct, products liability, condition of premises or
other theory of liability, in connection with personal injuries, including
death, or property damage or loss arising out of or relating to the access of
Purchaser, it officers, employees, and representatives to the Assets during the
Interim Period, as permitted under this Agreement; provided however, this
indemnity shall not include any claims, liabilities, damages, losses, costs or
expenses caused by MOC's gross negligence or willful misconduct.

          7.3  Permissions.  During the Interim Period, Purchaser will use
reasonable efforts to obtain all permissions, approvals, and consents by
federal, state and local governmental authorities and others as may be required
to consummate the sale contemplated hereunder (excluding governmental
permissions, approvals and

                                      10
<PAGE>
 
consents which are customarily obtained after the assignment of an oil and gas
lease or interest).

          7.4  Confidentiality.  Until after Closing (and without limitation as
to time if Closing should not occur for any reason) , except as required by law,
Purchaser and its officers, employees, agents and representatives', will hold in
strict confidence all information, data and documents obtained from MOC in
connection with the transactions contemplated by this Agreement, except any such
information, datum or document which (i) at the time of disclosure to Purchaser
by MOC is in the public domain, (ii) after disclosure to Purchaser by MOC
becomes part of the public domain by publication or otherwise, except by breach
of this commitment by Purchaser, or by breach by Purchaser of that certain
Confidentiality Agreement dated June 19, 1995, between MOC and Purchaser, (iii)
Purchaser can establish by competent proof was rightfully in its possession at
the time of disclosure to Purchaser by MOC, (iv) Purchaser rightfully received
from third parties free of any obligation of confidence, or (v) is developed
independently by Purchaser, provided the information, datum or document
developed shall not be derived from data, information, or documents obtained
from MOC in connection with the transactions contemplated by this Agreement.
The obligations of Purchaser under this Section 7.4 shall be in addition to, and
not in lieu of, Purchaser's obligations under that certain Confidentiality
Agreement dated June 19, 1995, between MOC and Purchaser.  In addition,
Purchaser agrees that if this Agreement is terminated for any reason whatsoever,

                                      11
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Purchaser, at MOC's request, shall promptly return to MOC all documents
furnished to Purchaser, its officers, employees, agents and representatives in
connection with this Agreement, or Purchaser's investigation of the Assets, and
shall destroy documents derived or created by Purchaser from any information,
data or documents furnished by MOC.

                   ARTICLE VIII  MOC'S CONDITIONS OF CLOSING

MOC's obligation to consummate the transaction provided for herein is subject to
the satisfaction or waiver by MOC of the following conditions:

          8.1  Representations.  The representations and warranties of
Purchaser contained in Article V shall be true and correct in all material
respects on the date of this Agreement and Closing Date as though made on and as
of those dates.

          8.2  Performance.  Purchaser shall have performed in all material
respects the obligations, covenants and agreements contained in Article VII to
be performed by it at or prior to the Closing.

          8.3  Officer's Certificate.  Purchaser shall have delivered to MOC a
certificate of a corporate officer, dated the date of Closing, certifying on
behalf of Purchaser that, to the best of its knowledge, the conditions set forth
in Sections 8.1 and 8.2 have been fulfilled.

          8.4  Pending Matters.  No suit, action or other proceeding by a
governmental authority shall be pending or threatened which seeks substantial
damages from MOC

                                      12
<PAGE>
 
in connection with, or seeks to restrain, enjoin or otherwise prohibit, the
consummation of the transactions contemplated by this Agreement.

          8.5  Opinion of Purchaser's Counsel.  Purchaser shall have
delivered to MOC an opinion of Purchaser's counsel, Scott Helmholz, Esq.,  dated
as of Closing, in form and substance satisfactory to MOC, to the effect that:
          (a) Purchaser is a corporation duly organized, validly existing and in
good standing existing and in good standing under the laws of the State of
Illinois and is duly qualified to carry on its business in the States of
Illinois, Indiana and Kentucky;
          (b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on part of Purchaser; and
          (c) This Agreement and all documents and instruments executed by
Purchaser at Closing have been duly executed and delivered on behalf of
Purchaser, and constitute legal, valid and binding obligations of Purchaser
enforceable in accordance with their terms.

          In giving this opinion, Purchaser's counsel may rely upon certificates
of governmental officials and of Purchaser's officers as to matters of fact, and
may qualify the opinion with such other assumptions and exceptions as are
reasonably acceptable to MOC.

          8.6  Governmental Bond.  Purchaser shall have delivered to MOC either
copies of any bonds, satisfactory to MOC, covering any MOC operated Subject
Interests required under any laws, rules or regulations of any federal, state or
local
                                      13
<PAGE>
 
governmental agencies having jurisdiction over the Assets, or a commitment by a
surety company, satisfactory to MOC, to issue such bonds upon Closing.

          8.7  Corporate Documentation.  Purchaser, on or before the Closing
Date, shall have provided MOC copies of Purchaser's Articles of Incorporation,
and all amendments thereto, certified by the Secretary of State of its state of
incorporation, together with true and correct copies of the by-laws (or
comparable document) for Purchaser, certified by Purchaser's secretary.
Purchaser shall also have provided certificates of good standing from the
Secretary of State of its state of incorporation and the States of Illinois,
Indiana and Kentucky.

                 ARTICLE IX  PURCHASER'S CONDITIONS OF CLOSING

          Purchaser's obligation to consummate the transactions provided for
herein is subject to the satisfaction or waiver by Purchaser of the following
conditions:

          9.1  Representations.  The representations and warranties of MOC
contained in Article IV shall be true and correct in all material respects on
the date of this Agreement and on the Closing Date as though made on and as of
those dates.

          9.2  Performance.  MOC shall have performed in all material respects
the obligations, covenants and agreements contained in Article VI to be
performed by it at or prior to the Closing.

          9.3  Officer's Certificate.  MOC shall have delivered to Purchaser a
certificate of a corporate officer, dated the date of Closing, certifying on
behalf of MOC, that to

                                      14
<PAGE>
 
the best of its knowledge, the conditions set forth in Sections 9.1 and 9.2 have
been fulfilled.

          9.4  Pending Matters.  No suit, action or other proceeding by a
governmental authority shall be pending or threatened which seeks substantial
damages from Purchaser in connection with, or seeks to restrain, enjoin or
otherwise prohibit, the consummation of the transactions contemplated by this
Agreement.

          9.5  Opinion of MOC's Counsel.  MOC shall have delivered to Purchaser
an opinion of MOC's counsel, Jeffrey L.  Benson, Senior Attorney, dated the date
of Closing, in form and substance satisfactory to Purchaser, to the effect that:
          (a) MOC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, and is duly qualified to carry on
business in the State of Illinois, Indiana and Kentucky;
          (b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of MOC; and
          (c) This Agreement and all documents and instruments executed by MOC
at Closing have been duly executed and delivered on behalf of MOC, and
constitute legal, valid and binding obligations of  MOC enforceable in
accordance with their terms.

          In giving this opinion, MOC's counsel may rely upon certificates of
governmental officials and of MOC's officers as to matters of fact, and may
qualify

                                      15
<PAGE>
 
the opinion with such other assumptions and exceptions as are reasonably
acceptable to Purchaser.

          9.6  Litigation.  Except as described in Exhibit D, or as revealed to
Purchaser in a separate writing or in the data room prior to execution of this
Agreement, as of the execution of this Agreement, MOC has not received official
notice of and is not aware of any legal, administrative or arbitration
proceeding or any claim (including, but not limited to, any audit claim under
any operating agreement where MOC is the operator), pending or threatened
against MOC or directly involving the Assets, that reasonably is expected to
materially and adversely affect the value of the Assets taken as a whole after
the Closing Date.  If prior to Closing, Purchaser discovers any such proceeding
or claim which existed as of the execution of this Agreement but was not
disclosed by MOC as provided above, Purchaser shall, no later than fifteen (15)
days prior to the Closing Date, notify MOC in writing of such proceeding or.
claim.  The parties will then negotiate in good faith to arrive at a mutually
acceptable written agreement concerning such proceeding or claim.  If the
parties do not reach agreement by the closing Date, the sale shall nevertheless
close if MOC agrees to retain the liability for such proceeding or claim.

          9.7  Default.  Except as set forth at Exhibit D, or as revealed to
Purchaser in a separate writing or in the data room prior to the execution of
this Agreement, MOC, as of the execution of this Agreement, is not aware of any
default under or violation of any agreement or obligation to which the Assets
may be subject that reasonably is expected to materially and adversely affect
the value of the Assets taken as a

                                      16
<PAGE>
 
whole after the Closing Date. If prior to Closing, Purchaser discovers any such
default which existed as of the execution of this Agreement but was not
disclosed by MOC as provided above, Purchaser shall, no later than fifteen (15)
days prior to the Closing Date, notify MOC in writing of such default. The
parties will then negotiate in good faith to arrive at a mutually acceptable
written agreement concerning such default. If the parties do not reach agreement
by the Closing Date, the sale shall nevertheless close if MOC agrees to retain
the liability for such default.

          9.8  Environment.  Except as described at Exhibit D, or as revealed
to Purchaser in a separate writing or in the data room prior to the execution of
this Agreement, as of the execution of this Agreement, MOC, through its
operations, has not created a condition of or upon the Subject Interests of
which it is aware which (i) adversely affects the environment and (ii) is
reasonably expected to materially and adversely affect the value of the Assets
taken as a whole after the Closing Date.  If, prior to Closing, Purchaser
discovers such a condition which existed as of the execution of this Agreement
but was not disclosed by MOC as provided above, Purchaser shall, no later than
fifteen (15) days prior to the Closing Date, notify MOC in writing of such
condition.  The parties will then negotiate in good faith to arrive at a
mutually acceptable written agreement concerning such condition.  If the parties
do not reach agreement by the Closing Date, the sale shall nevertheless close if
MOC agrees to retain the liability for such condition.

                                       17
<PAGE>
 
                            ARTICLE X  OPERATORSHIP

          10.1  Resignation of Operator and Selection of Successor Operator.
MOC is operator of certain oil and gas leases owned by MOC and others including,
but not limited to, unitized and pooled areas, which are part of the Assets, and
shall resign as operator of these properties as soon as reasonably possible
after the Closing of this transaction.  Although Purchaser hereby represents
that it desires to succeed MOC as operator of these properties, MOC makes no
warranty or representation concerning Purchaser's ability to become successor
operator to MOC.  The resignation of operator and selection of a successor
operator in such circumstances is controlled by applicable agreements, such as
unit agreements, pooling agreements and joint operating agreements.  MOC agrees
to cooperate with Purchaser's efforts to be selected as operator of these
properties.  Purchaser represents that it will act expeditiously to take all
reasonable measures., including, but not limited to, taking action prior to
Closing if the parties agree that it is appropriate, to be appointed successor
operator or have a successor operator to MOC appointed as soon as possible after
MOC resigns, in accordance with the applicable agreements.

                           ARTICLE XI  CASUALTY LOSS

          11.1  Casualty Loss of Assets.  If prior to Closing any of the Assets
are damaged or destroyed by fire or other casualty, the Purchase Price shall not
be reduced, unless such damage or destruction is caused by the gross negligence
or willful misconduct of MOC.

                             ARTICLE XII  EMPLOYEES

          12.1  Union Location.  Purchaser acknowledges that some employees
presently

                                      18
<PAGE>
 
employed by MOC and working at or about the Subject Interests are represented by
Local No. 7-482 of the Oil, Chemical and Atomic Workers International Union.

          12.2  No Third Party Beneficiaries.  Nothing express or implied in
this Agreement is intended to confer upon or deny, any employee of MOC any
rights or remedies including, but not limited to, any rights of employment with
MOC or Purchaser for any specified period of time.

                             ARTICLE XIII  CLOSING

   13.1 Time and Place. If the conditions to Closing have been satisfied or
waived, the consummation of the transactions contemplated hereby (the "Closing")
shall be held at MOC's offices in Oklahoma City, Oklahoma, or at a mutually
agreeable location at 9:00 O'clock a.m. Central Standard Time on or before
December 28, 1995, unless delayed by mutual consent of the parties (the actual
date of Closing being herein referred to as the "Closing Date"), provided,
however, that if the necessary waiting period with respect to filings under the
HSR Act has not expired by that date, the Closing shall occur five (5) business
days after the expiration of such waiting period.

   13.2  Closing Obligations.  At the Closing:
    (a) MOC shall execute, acknowledge and deliver to Purchaser, and Purchaser
will execute and acknowledge such sufficient copies of the Instrument of
Conveyance, in substantially the form set forth at Exhibits E, (the "Deed and
Assignments") as may be necessary for recording in the applicable county records
and for each party to retain duplicate originals for their records;
    (b) MOC shall execute such other instruments, including any instrument
required under the Illinois Responsible Property Transfer Act, the Indiana
Voluntary Remediation of Hazardous Substances and Petroleum Act, and take such
other action as may be necessary to carry out its obligations under this
Agreement;

                                      19
<PAGE>
 
    (c) MOC and Purchaser shall execute and exchange duplicate originals of a
Closing statement (the "Closing Statement"). The Closing Statement shall account
for the Purchase Price, the Performance Deposit, the Interest Amount, and all
revenue, fees, expenses, costs, taxes and other items attributable or allocable
to either of the parties under this Agreement through midnight Central Standard
Time on December 31, 1995. Where the actual amounts of such items are not known
as of the Closing, they shall be estimated in good faith and shall be reconciled
within ninety (90) days after the Closing;
    (d) Purchaser shall make payment of the Purchase Price in the manner
described in Section 3.2 and Section 3.4 (if applicable);
    (e) Purchaser shall execute such other instruments, including any
instruments required under the Illinois Responsible Property Transfer Act, the
Indiana Voluntary Remediation of Hazardous Substances and Petroleum Act, and
take such other action as may be necessary to carry out its obligations under
this Agreement;
    (f) MOC and Purchaser shall execute, acknowledge and deliver transfer orders
or letters in lieu thereof directing all purchasers of production to make
payment to Purchaser of proceeds attributable to production from the Assets; and
    (g) MOC and Purchaser shall execute effective as of midnight Central
Standard Time on December 31, 1995, all required state change of operatorship
and ownership forms, and they shall be thereafter forwarded by MOC or Purchaser,
as may be appropriate, to the applicable state agencies.

                         ARTICLE XIV  WARRANTY OF TITLE

          14.1  Warranty of Title.   The Leasehold Interest described at
Exhibit A1 and the overriding and fee mineral interests described at Exhibits A2
and A3 shall be sold with a warranty against Title Defects as defined in Section
14.2

          14.2   Definition of Title Defect.  The term "Title Defect" as used
herein shall mean any material encumbrance, encroachment, irregularity, defect
in or objection

                                      20
<PAGE>
 
to MOC's title (expressly excluding "Permitted Encumbrances", as defined in
Section 14.3) that, alone or in combination with other defects, renders MOC's
title less than that which is customarily regarded as acceptable in the industry
for producing oil and gas properties. In evaluating whether an encumbrance,
encroachment, irregularity defect in or objection to title is material, due
consideration shall be given to the length of time that the property involved
has been or is in "pay status" and whether such defect is of the type expected
to be encountered in the area involved and customarily acceptable to prudent
operators and interest owners. Such usual and customary defects include, but are
not limited to defects that have been cured by possession under applicable
statues of limitation; defects which are more than forty (40) years old; defects
in the early chain of title such as failure recite marital status in documents
and omission of heirship succession proceedings; lack of survey; and failure to
record releases of liens, production payments or mortgages that have expired of
their own terms.

          14.3  Definition of Permitted Encumbrances.  As used herein, the term
"Permitted Encumbrances" shall mean:
          (a) Lessors' royalties, overriding royalties, reversionary interests
and similar burdens if the net cumulative effect of the burdens does not operate
to reduce the interest of MOC with respect to all oil and gas produced from (or,
where subject to a unit or pooling agreement, allocated to) any leasehold or
interest below the "Net Revenue Interest" or "NRI" for such Leasehold Interest
as set forth at Exhibit A1, A2, or A3;
          (b) Division orders and sales contracts terminable without penalty
upon no more than ninety (90) days' notice to the Purchaser;
          (c) Preferential rights to purchase, rights to consent and
restrictions on assignment of the type generally found in the oil and gas
industry;
          (d) Materialmen's, mechanics', repairmen's, employees', contractors',
operators', tax and other similar liens or charges arising in the ordinary
course of business (i) if they have not been filed pursuant to law, (ii) if
filed, they have not yet

                                      21
<PAGE>
 
become due and payable or payment is being withheld as provided by law, or
(iii)if their validity is being contested in good faith by appropriate action;
          (e) All rights to consent by, required notices to, filing with or
other actions by governmental entities in connection with the sale or conveyance
of oil and gas leases or interests if they are customarily obtained subsequent
to the sale or conveyance;
          (f) Rights of reassignment;
          (g) Easements, rights-of-way, servitude, permits, surface leases and
other rights in respect of surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like; covenants or other restrictions; and
easements for streets, alleys, highways, pipelines, telephone lines, power
lines, railways and other easements and rights-of-way, on, over or in respect of
any of the leases or interests;
          (h) All other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting the leaseholds
and interests which individually or in the aggregate do not reduce the interest
of MOC with respect to all oil and gas produced from (or, where subject to a
unit or pooling agreement, allocated to) any leasehold or interest below the
"Net Revenue Interest" or "NRI" set forth at Exhibit A1, A2, or A3;
          (i) All rights reserved to or vested in any governmental, statutory or
public authority to control or regulate any of the leaseholds or interests in
any manner, and all applicable laws, rules and orders of governmental authority;
          (j) Any Title Defects as Purchaser may have expressly waived in
writing;
          (k) The terms and conditions of all leases, agreements, orders,
instruments and documents and all defects described in or referred to in the
Exhibits hereto;
          (l) Failure to produce oil, gas or other hydrocarbons paying
quantities from a lease or interest, or lands pooled therewith; and
          (m) Taxes not yet due or not yet delinquent.

                      ARTICLE XV  POST CLOSING OBLIGATIONS


                                      22
<PAGE>
 
          15.1  Receipts and Credits.   All monies, proceeds, receipts, credits
and income attributable to the Assets for all periods of time subsequent to the
Effective Date, shall be the sole property and entitlement of the Purchaser,
and, to the extent received by MOC, MOC shall fully disclose, account for and
transmit same to Purchaser.  All monies, proceeds, receipts, credits and income
attributable to the Assets for all periods of time prior to the Effective Date,
shall be the sole property and entitlement of MOC and, to the extent received by
Purchaser, Purchaser shall fully disclose, account for and transmit same to MOC.
Except for those matters for which MOC is indemnified in Section 15.2, all
costs, expenses, taxes and disbursements, including without limitation, employee
salaries, taxes, assessments, benefit costs and related items, attributable to
periods of time prior to the Effective Date, regardless of when due or payable,
shall be the sole obligation of MOC and MOC shall promptly pay, or if paid by
Purchaser, reimburse Purchaser for same.  All costs, expenses, taxes and
disbursements, including without limitation, employee salaries, taxes,
assessments, benefit costs and related items, attributable to the Assets for all
periods of time subsequent to the Effective Date, regardless of when due or
payable, shall be the sole obligation of the Purchaser and Purchaser shall
promptly pay, or, if paid by MOC, reimburse MOC for same.

          15.2  Assumption of Obligations and Indemnities.  If Closing occurs:
          (a) Purchaser hereby agrees and shall agree, in writing, in the
instrument conveying the Assets, as of the Effective Date, to assume, perform
and comply with all of the provisions and obligations (express or implied) that
are attributable to the Assets, whether existing as of the Effective Date or
later arising, including, but not limited to: all of the terms and conditions of
all applicable and valid agreements, contracts and instruments, including, but
not limited to, those described at Exhibits A1 through A7, all lease agreements,
unit agreements, joint operating agreements, pooling agreements, communitization
agreements and easements and rights-of-way; all existing lease burdens
(including, but not limited to, royalties, overriding royalties, production
payments, net profits interests, carried working interests or similar

                                      23
<PAGE>
 
burdens); all duties imposed by governmental law, rule or regulation; and the
obligations to properly and timely plug and abandon all wells (from the surface
down to the total depth drilled) now located on the Subject Interests (or in the
case of line injection wells, on or adjacent to the Subject Interests)
regardless of by whom they were drilled and all wells hereafter drilled on the
Subject Interests by Purchaser, its successors or assigns, to properly and
timely remove all buildings, equipment and materials from the Subject Interests
upon cessation of use thereof, and to properly and timely restore the surface of
the Subject Interests. Anything to the contrary in this Agreement
notwithstanding, Purchaser does not agree to assume or perform the provisions of
the collective bargaining agreement between MOC and Local No. 7-482 of the Oil,
Chemical and Atomic Workers International Union.
          (b) Except only as provided at Section 15.2(c), below, Purchaser
agrees, effective as of the Effective Date, to indemnify, defend and hold
harmless MOC, its officers, directors, employees, parent, affiliate and
subsidiary corporations, from and against any and all claims, demands,
liabilities, costs, judgments, expenses (including, without limitation, court
costs and reasonable attorney's fees), damages and losses of whatsoever kind or
nature, that are attributable to the Assets or their operation; including, but
not limited to, with respect to all of the following: (i) the obligations
assumed by Purchaser in Section 15.2(a), above, and the operations and
activities contemplated at Subsection 15.2 (a) , above; (ii) damage to or loss
of property or natural resources, or injury to or death of any persons, no
matter when it occurs or what the cause, including, without limitation, whether
or not attributable, in whole or part, to a condition(s) of or upon the Assets
that existed before the Effective Date, (including, but not limited to, a
condition which may be considered to be a nuisance and/or which affects or
threatens to affect the environment); and (iii) any condition(s) of or upon the
Assets (including, without limitation, any condition which may be considered to
be a nuisance and/or which affects or threatens to affect the environment),
whether or not it existed prior to the Effective Date.

                                      24
<PAGE>
 
          (c) MOC agrees, effective as of the Effective Date, to indemnify,
defend and hold harmless Purchaser, its officers, directors, employees, parent,
affiliate and subsidiary corporations, from and against any and all claims,
demands, liabilities, costs, judgments, expenses (including, but not limited to,
court costs and reasonable attorney's fees), damages and losses relating
directly to the following only: (i) injury to (including death of) any person
occurring prior to the Effective Date and caused by MOC's operation of the.
Assets; (ii) any crop damage occurring prior to the year 1996 (but not including
crop damage which occurs in 1996 or thereafter but results from a condition(s)
of or upon the Assets that existed before 1996); and (iii) MOC's failure, during
the period it owned the Assets, to timely and properly account to a third party
for production proceeds MOC was obligated to pay pursuant to any applicable
lease agreement, unit agreement or pooling agreement conveyed to Purchaser under
this Agreement.
          (d) The parties agree that the indemnity provisions of Sections
15.2(b) and (c), above, shall apply regardless of whether the applicable
indemnitee was wholly partially, actively or passively, negligent or otherwise
at fault, and whether or not the claim, damage, loss or liability is based on a
theory of negligence, negligence per se, strict liability, willful  misconduct,
products liability, premises liability or other theory of liability.
          (e) Purchaser agrees, and shall agree in the instrument conveying the
Assets, that any subsequent assignment or transfer of the Assets, or any portion
thereof, made by Purchaser, shall contain covenants respecting plugging and
abandonment and surface restoration similar to the terms in this Section
15.2(a), and Purchaser agrees that any such assignment or transfer will not
relieve the Purchaser herein of the obligations assumed in this Section 15.2.
          (f) The parties agree that, to the extent the provisions of any
instrument conveying the Assets conflicts with the provisions of this Section
15.2, the provisions of this Section 15.2 shall control.

                                      25
<PAGE>
 
          15.3  Call on Oil.  MOC, or its designee, will have, for a period of
twenty (20) years beginning with the Effective Date, the continuing right and
option, at any time, and from time to time, to purchase the crude oil (including
condensate, distillate and other liquids recovered from the well stream by
normal lease-separation methods) produced and saved from the Subject Interests.
The price to be paid therefor shall be the "posted" price of MOC, gravity
adjusted, applicable thereto for the particular crude type.  In the event MOC
does not "post" for a particular crude type, the price will be based on a
mutually agreed upon major company's posting.  MOC intends to exercise this
option initially and to purchase the crude oil on a continuing basis. MOC may
terminate or initiate the purchase of crude oil an three (3) months' notice.
Purchaser shall notify MOC in advance of significant changes in quantity or
quality of the stream resulting from development or other work in the Subject
Interests.  For the purposes of this paragraph, notice can be given to:

          Marathon Oil Company
          Refinery Office Building
          Robinson, Illinois 62454
          Attn:  Crude Oil Acquisition

unless MOC provides Purchaser prior written notice of a change of address.

          15.4  Records.  Within a reasonable amount of time after Closing, MOC
will deliver to Purchaser true and accurate copies of relevant records as
described at Section 2.1(d) pertaining to the Assets.  Purchaser shall provide
MOC with access to, and MOC shall have the right to copy at its own expense, any
documents, data or material delivered to Purchaser under this Agreement.

          15.5  Employment.  Purchaser agrees to promptly provide MOC with the
name and address of every former employee of MOC, if any, who is employed by
Purchaser within thirty (30) days following the Closing.

                                      26
<PAGE>
 
          15.6  Further Assurances.    After Closing, MOC and Purchaser agree
to take such further actions and to execute, acknowledge and deliver all such
further documents that are necessary useful in carrying out the purposes of this
Agreement or of document delivered pursuant hereto.

                            ARTICLE XVI  TERMINATION


          16.1   Right of Termination.  This Agreement and the transactions
contemplated hereby may be terminated at any time at or prior to the Closing:
          (a) By mutual consent of the parties;
          (b) By MOC, if the Closing shall not have occurred as hereinabove
provided because Purchaser shall have failed to obtain financing or to
materially perform its obligations hereunder; or
          (c) By Purchaser, if the Closing shall not have occurred as
hereinabove provided because MOC shall have failed to materially perform its
obligations hereunder.
          16.2  Effect of Termination.  The following provisions shall apply in
the event of termination of this Agreement:
          (a) If this Agreement is terminated for a reason not stated in either
Section 16.2(b) or Section 16.2(c), then such termination shall be without
liability of either party to this Agreement, and MOC shall promptly return the
Performance Deposit, together with the Interest Amount, to Purchaser or its
designee(s) at ______________________________

                                      27
<PAGE>
 
_______________Bank, Acct.#______________________, located at _______________
________________________________________________.

          (b) If this Agreement is terminated by MOC as a result of Purchaser's
failure to remit the balance of the Performance Deposit as specified in Section
3.1 or to obtain financing or as a result of the negligent or willful failure of
Purchaser to perform its obligations hereunder, (i) Purchaser shall be fully
liable for any and all actual, incidental and consequential damages (including,
but not limited to, lost profits), costs and expenses (including, but not
limited to reasonable attorneys' fees) hereby sustained or incurred by MOC, and
(ii) MOC shall be entitled to retain all of the remitted Performance Deposit and
the Interest Amount thereon as payment toward the damages, costs and expenses
described in (i) above.  If the Performance Deposit and the Interest Amount
together exceed the total damages, costs and expenses owed by Purchaser to MOC
under (i) above, MOC shall still be entitled to retain the entire remitted
Performance Deposit and Interest Amount.

          (c) If this Agreement shall be terminated by Purchaser as a result of
the negligent or willful failure of MOC to perform its obligations hereunder,
MOC shall be fully liable for any and all actual, incidental and consequential
damages (including, but not limited to, lost profits), costs and expenses
(including, but not limited to, reasonable attorneys' fees) thereby sustained or
incurred by Purchaser, up to a maximum of $200,000.00, and MOC shall promptly
return the Performance Deposit, together with the Interest Amount to Purchaser
or its designee(s) at __________________


                                      28
<PAGE>
 
_________________________Bank, Acct.#________________located at ____________
____________________________________________________.

          16.3  MOC Rights Upon Termination.  Notwithstanding anything to the
contrary contained in this Agreement, upon any termination of this Agreement
pursuant to Section 16.1, MOC shall be free immediately to enjoy all rights of
ownership of the Assets and to sell, transfer, encumber or otherwise dispose of
the Assets to any party without any restriction under this Agreement; and
Purchaser shall be liable for all actual, incidental and consequential damages
(including, but not limited to, lost profits) sustained or incurred by MOC if it
attempts to interfere in any way with any such enjoyment or action by MOC.

          16.4  Return of Financial Data.  Upon termination, MOC will promptly
return to Purchaser all financial data concerning Purchaser, except such data as
MOC may have obtained prior to any disclosure by Purchaser or rightfully
received from a third party under an obligation of confidence.

                             ARTICLE XVII    TAXES

          17.1  Apportionment of Real Property Taxes. All real property taxes
assessed as of the 1996 assessment dates, based on the volume of hydrocarbons
produced from the Assets in 1995 shall be the responsibility of and paid by
Purchaser.  All real property taxes assessed as of the 1995 assessment dates,
based on the volume of

                                      29
<PAGE>
 
hydrocarbons produced from the Assets in 1994 shall be prorated between
Purchaser and MOC as follows:
     (a) MOC shall be responsible and liable for 83.29% of the 1995 assessed tax
     payable in 1996; and
     (b) Purchaser shall be responsible and liable for 16.71% of the 1995
     assessed tax payable in 1996.

          Purchase shall be responsible and liable for the entire portion of the
1995 assessed tax, payable in 1996, which is attributable to various lease
burdens, such as royalties and overriding royalties, and for other working
interest owners in jointly operated properties' provided, however, MOC shall
assign to Purchaser all monies withheld by MOC (if any) for such taxes.
Purchaser shall invoice MOC for its portion of said real property taxes assessed
for 1995 when due and payable to the taxing authority under state law.  Provided
that, if MOC pays the properly invoiced amount to Purchaser at least one (1)
month before payment of the taxes is delinquent under state law, Purchaser shall
then be solely liable and responsible for payment to, and shall report and make
payment to, the appropriate taxing authority.  Purchaser shall be responsible
for all such taxes assessed in any year thereafter.

          Beginning with the Effective Date, Purchaser will be responsible for
filing all ad valorem tax returns with the appropriate authorities.

          17.2  Sales Taxes. The Purchase Price provided for hereunder is net
of any sales taxes or other transfer taxes in connection with the sale of the
Assets.  Purchaser shall be liable for any sales tax or other transfer tax, as
well as any

                                      30
<PAGE>
 
applicable conveyance, transfer and recording fee, and real estate transfer
stamps or taxes imposed on the transfer of the Assets pursuant to this
Agreement. Purchaser shall indemnify and hold MOC harmless with respect to the
payment of any of those taxes including any interest or penalties assessed
thereon.

          17.3  Other Taxes.  All excise, windfall profit and other taxes
relating to production of oil, gas and condensate attributable to the Assets
prior to the Effective Date shall be paid by MOC, and all such taxes relating to
such production on or after the Effective Date shall be paid by Purchaser.  Real
property taxes not related to production shall be prorated between MOC and
Purchaser as of the Effective Date.

          17.4  Taxes Paid For Others.  Purchaser agrees to withhold from
future income distributions to royalty owners, working interest owners,
overriding royalty interest owners and other production burden holders as to the
Assets, amounts sufficient to reimburse MOC for various taxes (e.g., ad valorem,
real property, severance, etc.) paid by MOC on behalf of such interest holders
while MOC operated the Assets.  MOC will provide Purchaser with sufficient
documentation to allow Purchaser to confirm amounts to be withheld and will
indemnify and hold Purchaser harmless from liability for deducting such sums as
directed by MOC.  Purchaser agrees to promptly forward to MOC such sums which
are deducted pursuant to this Section 17.4.

          17.5  Cooperation.   Each party to this Agreement shall provide the
other party with reasonable access to all relevant documents, data and other
information which may be required by the other party for the purpose of
preparing tax returns and responding to any audit by any taxing jurisdiction.
Each party to this Agreement shall

                                      31
<PAGE>
 
cooperate with all reasonable requests of the other party made in connection
with contesting the imposition of taxes. Notwithstanding anything to the
contrary in this Agreement, neither party to this Agreement shall be required at
any time to disclose to the other party any tax returns or other confidential
tax information.

       ARTICLE XVIII  PREFERENTIAL PURCHASE RIGHTS AND RIGHTS TO CONSENT

          18.1  Exercise of Preferential Purchase Rights.  If, prior to
Closing, any holder of a preferential purchase right notifies MOC that it
intends to consummate the purchase of the Subject Interests to which its
preferential purchase right applies, then those Subject Interests shall be
excluded from the Assets to be conveyed to Purchaser under this Agreement.  The
Purchase Price shall be reduced for any Leasehold Interest so excluded by the
portion of the Purchase Price determined in accordance with Section 18.3 and for
any non-Leasehold Interest so excluded by the amount specified in Exhibit C;
provided, however, that if the holder of such preferential purchase right fails
to consummate the purchase of the Subject Interest covered by such right, then
MOC shall so notify Purchaser, and within fifteen(15) days after Purchaser's
receipt of such notice from MOC, MOC shall sell to Purchaser, and Purchaser
shall purchase from MOC, for a price equal to the portion of the Purchase Price
specified above for the Subject Interest, and upon the other terms of this
Agreement, the Subject Interest to which the preferential purchase right
applied.  All Subject Interests for which a preferential purchase right has not
been asserted

                                      32
<PAGE>
 
prior to Closing by the holder of such right shall be sold to Purchaser at
Closing pursuant to the provisions of this Agreement. If one or more of the
holders of any such preferential purchase rights notifies MOC subsequent to the
Closing that it intends to assert its preferential purchase right, MOC shall
give notice thereof to Purchaser, whereupon Purchaser shall satisfy all such
preferential purchase rights obligations of MOC to such holders and shall
indemnify and hold harmless MOC from and against any and all claims,
liabilities, losses, costs and expenses (including, but not limited to, court
costs and reasonable attorney's fees) in connection therewith, and Purchaser
shall be entitled to receive (and MOC hereby assigns to Purchaser all of MOC's
rights to) all proceeds received from such holders in connection with such
preferential purchase rights.

          18.2  Non-Consents to Assignments.  If, prior to Closing, any holder
of a right to consent to assignment does not consent to the assignment of the
Subject Interests to which its right applies, then those Subject Interests shall
be excluded from the Assets to be assigned to Purchaser under this Agreement.
The Purchase Price shall be reduced for any Leasehold Interest excluded by the
portion of the Purchase Price determined in accordance with Section 18.3 and for
any non-Leasehold  interests so excluded by the amount specified in Exhibit C.

          18.3  Excluded Leasehold Interest.  The value of an excluded
Leasehold Interest (V) is to the total Purchase Price (PP) , as the net revenue
attributable to the applicable Leasehold Interest for the nine (9) consecutive
months preceding October

                                      33
<PAGE>
 
1, 1995 and ending on September 30, 1995 (IR) is to the net revenue attributable
to all of the Subject Interests for the same nine (9) month period (AR)

[or   V   : IR ].
      --    --   
      PP    AR

          18.4  Support for Excluded Leasehold Interests.  If any Leasehold
Interests are excluded from the Assets pursuant to Section 18.2, Purchaser
shall supply services to MOC or its assignee at cost as necessary to support a
waterflood operation by MOC or its assignee on such Leasehold Interests.  These
services shall include, but not necessarily be limited to, the supply of water
and electricity; the receiving, processing and storage of produced fluids; the
disposal of produced water;  and ingress and egress.

             ARTICLE XIX  INDEPENDENT INVESTIGATION AND DISCLAIMER

          19.1  Independent Investigation and Disclaimer.  Purchaser
acknowledges that in making the decision to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser has relied only on
its own independent investigation of the Assets, and upon the representations,
warranties and covenants in this Agreement.  Accordingly, Purchaser acknowledges
that MOC has not made, AND MOC HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE, OR
OTHERWISE RELATING TO (i) TITLE (EXCEPT AS STATED IN SECTION 14.1), (ii) THE

                                      34
<PAGE>
 
CONDITION OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED OR EXPRESSED
WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS),  (iii) ANY INFORMATION, DATA OR
OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED OR SHOWN, OR TO BE FURNISHED OR
SHOWN TO PURCHASER BY OR ON BEHALF OF MOC (INCLUDING, BUT NOT LIMITED TO,
INFORMATION, DATA, GEOLOGICAL OR GEOPHYSICAL DATA, OR ANY INTERPRETATION,
RENDERING, CHARTING OR DRAWING THEREOF, OR OTHER MATERIALS REGARDING THE
EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF
OR THE COST OF RECOVERING ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY
PRODUCT PRICING ASSUMPTION, PRESENT OR PAST PRODUCTION RATES, AND THE ABILITY TO
SELL OIL OR GAS PRODUCTION AFTER CLOSING), AND (iv) THE AMOUNT OF RESERVES OR
THE ABILITY TO PRODUCE; provided, however, that the foregoing disclaimer and
negation of representations and warranties shall not affect or impair the
representations and warranties of MOC set forth in Article IV hereof.

                           ARTICLE XX  MISCELLANEOUS


          20.1  Governing Law.  This Agreement and all assignments and other
instruments executed in accordance with it shall be governed by and interpreted
in accordance with the laws of the State of Illinois.

                                      35
<PAGE>
 
          20.2  Entire Agreement.  This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, except for the Confidentiality Agreement dated June 19, 1995.  No
supplement, amendment, alteration, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the parties hereto.

          20.3  Waiver.  No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.

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

          20.5  Assignment.  Neither party hereto shall assign this Agreement
or any of its rights or obligations hereunder without the prior written consent
of the other party and any assignment made without such consent shall be void.
Except as otherwise provided herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

          20.6.  Notices.  Any notice provided or permitted to be given under
this Agreement shall be in writing, and may be served by personal delivery,
telefax or by depositing same in the mail, addressed to the party to be
notified, postage prepaid, and registered or certified with a return receipt
requested.  Notice shall be deemed

                                      36
<PAGE>
 
to have been given and received only if and when actually received by the
addressee. For purposes of notice, the addresses of the parties shall be as
follows:

          MOC's Mailing Address:
            Marathon Oil Company
            P. 0. Box 689
            Oklahoma City, OK 73132
            Attention: Region Manager

          Purchaser's Mailing Address:
            Crete Oil Company, Inc.
            722 W.  Exchange St.
            Crete, Illinois 60417
            Attention: President

Each party shall have the right, upon giving ten (10) days' prior written notice
to the other, in the manner hereinabove provided, to change its address for
purposes of notice.

          20.7  Expenses.  Except as otherwise provided herein, each party
shall be solely responsible for all expenses incurred by it in connection with
this transaction.  MOC shall reimburse Purchaser for the filing fee required
under HSR.

          20.8  Severability.   If any term or other provision of this Agreement
is determined by a court to be invalid, illegal or incapable of being enforced
under any rule of law, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in a
materially adverse manner with respect to either party.

                                      37
<PAGE>
 
          20.9  Publicity.   MOC and Purchaser shall consult with each other
with regard to all publicity and other releases issued at or prior to the
Closing concerning this Agreement and the transactions contemplated hereby and,
except as required by applicable law or the applicable rules or regulations of
any governmental body or stock exchange, neither party shall issue any publicity
or other release without the prior written consent of the other party.  Without
limiting the above, the parties agree that the Purchase Price shall be kept
confidential.

          20.10  Use of MOC's Name.  As soon as practicable, but in any event
no later than thirty (30) days after the Closing, Purchaser shall remove or
cause to be removed the names and marks used by MOC and all variations and
derivatives thereof and logos relating thereto from the Assets and shall not
thereafter make any use whatsoever of those names, marks and logos.  MOC, upon
reasonable notice, may enter the property any time after thirty (30) days, to
determine if  Purchaser has taken the actions required by this Section and, if
such actions have not been taken, to remove such names and marks, and bill
Purchaser for the cost of such removal.

          20.11  Consequential Damages.  Except as expressly provided herein,
the parties waive any rights to incidental or consequential damages resulting
from a breach of this Agreement.

          20.12  Brokers' and Finders' Fees.  Neither party shall have any
liability, contingent or otherwise, for brokers' or finders' fees relating to
the sale of the Assets incurred by the other party, and each party agrees to
indemnify and hold the other harmless for any such liability arising as a result
of the other party's actions.

                                      38
<PAGE>
 
          20.13  Survival.  Only the representations, warranties, covenants and
obligations of Articles IV, V, X, XIV, XV, XVI, XVII, XVIII, XIX, and XX, and
Sections 3.4, 7.2, 8.3, 8.5, 9.3 and 9.5, and those contained in the Deeds and
Assignments, shall survive the Closing.

          20.14  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          In witness whereof, the parties have executed this Agreement as of the
day and year first set forth above.



ATTEST:                                     MARATHON OIL COMPANY

                                                /s/ D.C. GERARD  
______________________________              By:_________________________________
Assistant Secretary                             Its Vice President, Domestic
                                                Production

ATTEST:                                     CRETE OIL COMPANY, INC.

                                                /s/ ROBERT J. McCULLOUGH
______________________________              By:_________________________________
Assistant Secretary                             Its President

                                      39
<PAGE>
 
                                   AMENDMENT

                                     to the

                      PURCHASE AND SALE AGREEMENT between

                MARATHON OIL COMPANY and CRETE OIL COMPANY, INC.

                             dated October 31, 1995

     This Amendment (the "Amendment") is made to the Purchase and Sale Agreement
(the "Agreement") dated October 31, 1995, between Marathon Oil Company, an Ohio
corporation ("MOC"), and Crete Oil Company, Inc., an Illinois corporation
("Purchaser").

                                    RECITALS

     Whereas, MOC desires to sell and Purchaser desires to purchase certain oil
and gas properties and related rights on the terms and conditions provided in
the Agreement;

     And whereas, Plains Illinois Inc., a wholly owned subsidiary of Plains
Resources Inc., is the assignee of Crete Oil Company, Inc. pursuant to an
assignment of the Agreement and a consent thereto from MOC;

     And whereas, MOC, Plains Resources Inc. and Plains Illinois Inc., as the
Purchaser, desire to amend certain terms and conditions of the Agreement;

     Now, therefore, MOC, Purchaser and Plains Resources Inc., for good and
valuable consideration, the receipt of which is acknowledged, agree as follows:

A.  The following Sections of the Agreement shall be amended to read as set
forth herein.

     1.  Section 2.1 (b)

     To the extent attributable or allocable to the Subject Interests, all of
MOC's right, title and interest in and to (i) all wells, equipment and
facilities, except as set forth at Exhibit B, which are located on (or in the
case of line injection wells, on or adjacent to) or used exclusively and
directly in connection with the production, treatment or transportation of oil
and gas from the Subject Interests, (ii) all trucks, equipment, electrical poles
and lines, personal property and inventory owned by MOC and located on or used
exclusively and directly in connection with the Subject Interests, (iii) to the
extent they are assignable, all orders, contracts, agreements and other
instruments which affect the Subject Interests, including, but not limited to,
those described at Exhibits A1 through A7  [but not including the following:
insurance contracts held by MOC; orders, contracts, agreements and other
instruments which include or affect oil and gas properties of MOC other than the
Subject Interests; and production sales agreements with any affiliates or
subsidiaries of MOC, the collective bargaining agreement between MOC and Local
No. 7-482 of the Oil, Chemical and Atomic Workers International Union], (iv) to
the extent they are assignable and subject to the conditions set forth in
Exhibit B, all easements, licenses, authorizations, permits and similar rights
and interests which affect, but only to the extent they affect, the Subject
Interests and (v) to the extent they are assignable, all other rights,
privileges, benefits and powers conferred upon the owner and holder of the
Subject Interests; but not including any and all assets, facilities, contract,
real and personal property (whether tangible or intangible) owned or operated by
MOC's refining, pipeline, supply and transportation or marketing organizations;

     2.  Section 2.1 (c)
<PAGE>
 
     Subject to Section 15.4, originals of general operating records, well
files, lease files, contract files (including unit and operating agreement
files), land files, regulatory reports and certificates, abstracts and title
opinions, logs, cores, geological, petrophysical, geophysical and engineering
data, and geologic and engineering studies pertaining to the Illinois Basin; but
not including all of the following: any legal files, attorney-client
communications or attorney work product; those items for which MOC is required
by law or regulation to retain the originals (and in such instance MOC shall
provide copies to Purchaser); MOC's geophysical and geological data base for
which there is a contractual prohibition upon transfer or licensing to
Purchaser; auditors' reports; and reserve reports.  MOC shall also provide
Purchaser with copies of and/or access to actual revenue data for the last three
(3) years pertaining to the Assets.

     3.  Section 15.2 (c)

     MOC agrees, effective as of the Effective Date, to indemnify, defend and
hold harmless Purchaser, its officers, directors, employees, parent, affiliate
and subsidiary corporations, from and against any and all claims, demands,
liabilities, costs, judgments, expenses (including, but not limited to, court
costs and reasonable attorney's fees), damages and losses relating directly to
the following only: (i) injury to (including death of) any person occurring
prior to the Closing Date and caused by MOC's operation of the Assets; (ii) any
crop damage occurring prior to the year 1996 (but not including crop damage
which occurs in 1996 or thereafter but results from a condition(s) of or upon
the Assets that existed before 1996); (iii) MOC's failure, during the period it
owned the Assets, to timely and properly account to a third party for production
proceeds MOC was obligated to pay pursuant to any applicable lease agreement,
unit agreement or pooling agreement conveyed to Purchaser under this Agreement;
(iv) the pending litigation, contractual defaults, claims and other items set
forth in sections I, III, IV, V and VI of Exhibit D; and (v) claims for
contractual defaults attributable to the Assets or their operation which
occurred prior to the Closing Date

     4.  Section 15.3

       Call on Oil.  MOC, or its designee, will have, for a period of twenty
(20) years beginning on January 1, 1996, the right to purchase the crude oil
(including condensate, distillate and other liquids recovered from the well
stream by normal lease-separation methods) produced and saved from the Subject
Interests.  The price to be paid shall be the market price as mutually agreed
upon from time to time by the parties hereto. Each party agrees to negotiate
with the other party to establish the market price in a timely manner and in
good faith. In the event the parties cannot agree upon a market price to be
paid, the price proposed to be paid by MOC (the "MOC Price"), shall be
considered the market price, provided that, for a period of sixty (60) days
after the effective date of the MOC Price, Purchaser may cancel its contract or
obligation to deliver crude oil to MOC by providing MOC with five (5) business
days prior notice of cancellation. Purchaser may only exercise its right to
cancel if such crude oil is sold or to be sold to a third party for a price in
excess of the MOC Price. In such event, MOC's right to purchase such crude oil
shall be suspended for a period that does not exceed the lesser of (i) two
years, or (ii) the term of Purchaser's contract with such third party.

     In the event that Purchaser desires to sell crude oil production subject to
this Agreement to a third party for a price that is in excess of the price
currently being paid by MOC, Purchaser shall provide MOC with the pertinent
terms of such third party offer.  MOC shall have ten (10) business days to agree
to purchase the crude oil on the same terms and conditions, effective upon the
termination of the then existing agreement under which MOC is purchasing such
crude oil.  If MOC does not exercise its right to match such third party offer,
Purchaser  shall  be entitled to sell such crude oil to said third party on the
terms provided to MOC, upon the expiration of the then existing agreement with
MOC.  The term of any such sales to a third party shall not exceed two years.

     Purchaser shall notify MOC in advance of significant changes in quantity or
quality of the stream resulting from development or other work in the Subject
Interests.  For the purposes of this paragraph, notice can be given to:

     Marathon Oil Company
     Refinery Office Building
<PAGE>
 
     Robinson, Illinois 62454
     Attn:  Crude Oil Acquisition

unless MOC provides Purchaser prior written notice of a change of address.

     5.  Exhibit "B", Section 5

     Marathon Pipe Line Company has pipelines, pump stations, meters, corrosion
prevention equipment  (and associated ground beds) and other equipment located
on or in easements and surface leases which are the  subject of this Agreement.
All such pipelines, pump stations, meters, corrosion prevention equipment  (and
associated ground beds) and other equipment and any other equipment or
facilities owned by a subsidiary or affiliate of MOC, are hereby excluded from
this sale.  MOC shall, however grant a concurrent interest in the excluded
easements and rights of way for permitted uses thereunder for the purpose of
operating and maintaining the Assets.  Marathon Pipe Line Company shall have  a
concurrent interest in any easements and surface leases conveyed hereunder on in
which Marathon Pipe Line Company has located pipelines, pump stations, meters,
corrosion prevention equipment (and associated ground beds) and other equipment
for permitted uses thereunder for the purpose of operating and maintaining the
same and to lay, construct, operate and maintain future pipelines as necessary
and convenient.  Marathon Pipe Line Company shall have the right to transport
electricity over power lines assigned under this Agreement for the purpose of
operating its pump stations.

     6.  Exhibit "E" shall be amended to incorporate the above and shall have
added the following Sections:

1.  (d)  A concurrent interest in the easements and rights of way described in
Exhibit "D" for permitted uses thereunder for the purpose of operating and
maintaining the Assets.

and,

5.  MOC excepts and reserves unto itself, it successors and assigns, and unto
its wholly owned subsidiary, Marathon Pipe Line Company, a concurrent interest
in any easements, rights of way  and surface leases conveyed hereunder on in
which Marathon Pipe Line Company has located pipelines, pump stations, meters,
corrosion prevention equipment (and associated ground beds) and other equipment
for permitted uses thereunder for the purpose of operating and maintaining the
same and to lay, construct, operate and maintain future pipelines as necessary
and convenient.  MOC also excepts and reserves unto itself, it successors and
assigns, and unto its wholly owned subsidiary, Marathon Pipe Line Company, the
right to transport electricity over power lines assigned hereunder for the
purpose of operating Marathon Pipe Line Company pump stations.

The remaining sections of Exhibit"E" shall be renumbered accordingly.

     7.  Section 3.2

     Purchase Price .  The aggregate Purchase Price for the Assets shall be the
amount of Forty-six Million, Two Hundred Thousand Dollars US ($46,200,000.00 US)
(the "Purchase Price") payable as follows:

     a)  $41.5 million cash (less the Performance Deposit and Interest Account)
and

     b) $4.7 million payable in Plains Resources Inc. Common Stock, $.10 par
value. The number of shares of Common Stock to be issued at Closing (the "Common
Stock") shall be equal to $4.7 million divided by the closing market price for
Plains Resources Inc.'s common stock on the day immediately preceding the
Closing ("Closing Price").

Purchaser shall as expeditiously as possible, but within 90 days of the Closing
Date prepare and file with the Securities Exchange Commission a Shelf
Registration Statement under Rule 415 of the Securities Act with 

<PAGE>
 
respect to the Common Stock ("Registration Statement") and use its best efforts
to cause the Registration Statement to become and remain effective until all the
Common Stock can be sold.

          For a one year period following the date the Registration Statement
becomes effective, Purchaser shall be obligated to make an adjustment to the
Purchase Price of up to $470,000 cash in the following circumstances (the "Price
Adjustment").  The Price Adjustment shall occur if MOC sells part or all of the
Common Stock at a price less than the Closing Price.  Notwithstanding the
foregoing, if MOC sells a portion of the Common Stock at a price above the
Closing Price such that in the aggregate the average price received by MOC
equals or exceeds the Closing Price, there shall be no Price Adjustment.  In the
event a Price Adjustment is applicable, MOC shall provide Purchaser written
request for such Price Adjustment, setting forth in detail the number of shares
sold, the price received by MOC for such shares and the date such shares were
sold.  Payment shall be made by Purchaser in cash to MOC within thirty days from
receipt of such notice.

          In the event MOC has received Price Adjustment in the manner described
above and subsequently sells additional Common Stock within two years following
the date the registration statement becomes effective above the Closing Price,
then MOC shall reimburse Purchaser for any Price Adjustment previously paid to
MOC which is in excess of the Price Adjustment which would be due to MOC if the
aggregate sales of Common Stock were used to calculate the Price Adjustment.

          MOC hereby represents as follows:

          a)  it is acquiring Plains Resources Inc.'s Common Stock for its own
     account with the present intention of holding such stock for purposes of
     investment.

          b)  it has no intention of selling Plains Resources Inc.'s Common
     Stock in a  public distribution in violation of the Federal Securities Law
     or any applicable state securities law, and

          c)  it is an accredited investor (as such term is defined in Rule 501
     of Regulation D promulgated under the Securities Act).

          Unless otherwise agreed to by MOC and Purchaser prior to the Closing
Date, or as modified by Section 3.4, payment of the cash portion of the Purchase
Price shall be by wire transfer of federal (same day) funds by Purchaser to
MOC's designated United States bank account at Closing (as defined in Section
13.1).


B.  In all other respects the Agreement shall remain unchanged and in full force
and effect.


          IN WITNESS WHEREOF, the parties have executed this Amendment as of
December 4, 1995.


MARATHON OIL COMPANY

By:    /s/ D. C. Gerard
   ---------------------------------- 
    D. C. Gerard   its Vice President


PLAINS RESOURCES INC.                  PLAINS ILLINOIS INC.

By:  /s/ Greg L. Armstrong             By:  /s/ Greg L. Armstrong 
   ----------------------------------       -----------------------------------
   Greg L. Armstrong    its President       Greg L. Armstrong     its President