Unassociated Document


    Exhibit
      10.18

    


    


    


    


    PURCHASE
      AND SALE AGREEMENT

    


    BETWEEN

    


    TAG
      OPERATING COMPANY, INC.

    AND

    INLAND
      GAS CORPORATION

    As
      Sellers

    


    AND

    


    PACKARD
      GAS COMPANY

    As
      Buyer

    


    


    
 

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    This
      Purchase and Sale Agreement (“Agreement”) is between Tag Operating Company,
      Inc., a Texas corporation with an address of 7447 Harwin Drive, Suite 145,
      Houston, Texas 77036 and Inland Gas Corporation, a Texas corporation with an
      address of 7447 Harwin Drive, Suite 145, Houston, Texas 77036 (collectively,
      “Seller”), as sellers, and Packard Gas Company, a Texas corporation with an
      address of 2815 East Skelly Drive, Suite 823, Tulsa, Oklahoma 74105 (“Buyer”),
      as buyer, effective on October 1, 2005.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    WHEREAS,
      Seller owns properties located within the Orange Field (“Properties”) of Orange
      County, Texas (as the same is hereinafter defined);

    


    WHEREAS,
      Buyer desires to purchase from Seller, and Seller desires to sell to Buyer,
      all
      of Sellers interest in and to the Properties;

    


    NOW,
      THEREFORE, in consideration of their mutual promises under this Agreement,
      the
      benefits to be derived by each party, and other good and valuable consideration,
      Buyer and Seller agree as follows:

    


    ARTICLE
      1. DEFINITIONS

    


    The
      following terms, when used in this Agreement, will have the following
      definitions:

    


    
      	1.01        	
              Additional
                Instruments.
                The instruments executed by Buyer before and at Closing and delivered
                to
                Seller in connection with this
                transaction.

            


    

    


    
      	1.02     
                 	
              Ad
                Valorem Taxes.
                Defined in Section 9.01.

            


    

    


    
      	1.03        	
              Associated
                Parties.
                Successors, assigns, directors, officers, employees, agents, contractors,
                subcontractors, and affiliates.

            


    

    


    
      	1.04      
               	
              Base
                Purchase Price.
                The respective amount set forth in Section
                3.01.

            


    

    


    
      	1.05      
               	
              Properties.
                Sellers interest in the oil and gas leasehold estates or other interests
                set forth on Exhibit A-1, together with Sellers interest in the
                following:

            


    

    


    
      	(a)  	
              each
                Well located on the leases and land described in Exhibit
                A-1.

            


    

    


    
      	(b)  	
              the
                easements, permits, licenses, surface and subsurface leases, right-of-way,
                servitudes, and other surface and subsurface rights affecting the
                land and
                leases described in Exhibit A-1.

            


    

    


    
      	(c)  	
              Material,
                equipment, and facilities in and on the land and used solely in connection
                with the use or operation of the leasehold estates and other interests
                described in Exhibit A-1 for oil or gas
                purposes.

            


    

    


    
      	(d)  	
              The
                facilities and pipelines located pursuant to the rights described
                in (b)
                above and necessary to market the production from the
                Properties.

            


    

    


    
      	(e)  	
              Contracts
                affecting the Properties, including agreements for sale or purchase
                of
                oil, gas and other hydrocarbons; processing agreements; division
                orders;
                unit agreements; operating agreements; and other contracts and agreements
                arising out of, connected with, or attributable to production from
                the
                Properties.

            


    

    


    
      	1.06        	
              Claim
                or Claims.
                Collectively, claims, demands, causes of action, and lawsuits asserted
                or
                filed by any person, including an artificial or natural person; a
                local,
                state, or federal governmental entity; a person holding rights under
                any
                Related Agreement; an Associated Party of Buyer or Seller; or a third
                party.

            


    

    


    
      	1.07     
                	
              Closing.
                The delivery of the conveyancing instruments and funds by the parties
                to
                close the purchase and sale of
                Properties.

            


    

    


    
      	1.08     
                	
              Closing
                Date.
                The date on which Closing is scheduled to and does
                occur.

            


    

    


    
      	1.09      
               	
              Effective
                Time.
                7
                a.m. local time where the interests are
                located.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	1.10  
                     	
              Environmental
                laws.
                Applicable federal, state and local laws, including statutes, regulations,
                orders and ordinances, previously or currently enacted or enacted
                in the
                future, and common law, relating to protection of public health,
                welfare,
                and the environment, including those laws relating to storage, handling,
                and use of chemicals and other hazardous materials; those relating
                to the
                generation, processing, treatment, storage, transport, disposal,
                cleanup,
                remediation, or management of waste materials or hazardous substances
                of
                any kind; and those relating to the protection of environmentally
                sensitive or protected areas. “Environmental Laws” includes the
                Comprehensive Environmental response, Compensation and Liability
                Act of
                1980, the Resource Conservation and Recovery Act of 1976, the Clean
                Water
                Act, the Safe Drinking Water Act, the Hazardous Materials Transportation
                Act, the Toxic Substance Control Act, and the Clean Air Act, as each
                is
                amended from time to time.

            


    

    


    
      	1.11     
                	
              Execution
                Date.
                The date on which the last of the parties executes this
                Agreement.

            


    

    


    
      	1.12      
               	
              Liability
                or
                Liabilities..
                Collectively, all damages (including consequential and punitive damages),
                including those for personal injury, death, or damage to personal
                or real
                property (both surface and subsurface) and costs for remediation,
                restoration, or clean up of contamination, whether the injury, death,
                or
                damage occurred or occurs on or off the Property by migration, disposal,
                or otherwise; losses; fines; penalties, expenses; costs to remove
                or
                modify facilities on or under the Property; plugging liabilities
                for all
                Wells; attorneys’ fees; court and other costs incurred in defending a
                Claim; liens; and judgments; in each instance, whether these damages
                and
                other costs are foreseeable or unforeseeable.


            


    

    


    
      	1.13        	
              NORM.
                Naturally
                occurring radioactive material.

            


    

    


    
      	1.14     
                	
              Oil.
                Crude oil, distillate, drip gasoline, condensate, and other liquid
                hydrocarbons.

            


    

    


    
      	1.15     
                	
              Permitted
                Encumbrances.
                (i) royalties, overriding royalties, reversionary interests, production
                payments and similar burdens which are in existence on the date here;
                (ii)
                sales contracts or other arrangements for the sale of production
                hydrocarbons which would not (when considered cumulatively with the
                matters discussed in clause (i) above) deprive the Buyer of any material
                right in respect of the Interests and Property (except for rights
                customarily granted with respect to such contracts and arrangements);
                (iii) statutory liens for taxes or other assessments that are not
                yet
                delinquent (or that, if delinquent, are being contested in good faith
                by
                appropriate proceedings, levy and execution thereon having been stayed
                and
                continue to be stayed; (iv) easements, rights of way, servitudes,
                permits,
                surface leases and other rights in respect to surface operations,
                pipelines, grazing, logging, canals, ditches, reservoirs or the like,
                conditions, covenants and other restrictions, and easements and rights
                of
                way on, over or in respect of the Interests and property and that
                do not
                individually or in the aggregate, cause a material adverse effect
                upon the
                operations or value of Interests and Property; and (v) rights reserved
                to
                or vested in any municipality, governmental, statutory or other public
                authority to control or regulate the Interests and Property in any
                manner,
                and all applicable laws, rules and orders from any governmental authority.
                

            


    

    


    
      	1.16     
                	
              Strict
                Liability.
                Includes strict statutory liability and strict products
                liability.

            


    

    


    
      	1.17     
                	
              Well
                or
                Wells.
                All
                wellbores, both abandoned and unabandoned, including oil wells, gas
                wells,
                injection wells, disposal wells, and water
                wells.

            


    

    


    ARTICLE
      2. PURCHASE AND SALE

    


    
      	
              2.01

            	
              Sale
                of the Properties.
                Pursuant to Seller’s offer, Seller agrees to sell the Properties to Buyer,
                and Buyer agrees to purchase them from Seller, for the consideration
                recited in and subject to the terms of this Agreement, as
                follows:

            


    

    


    
      	(a)  	
              All
                of Seller’s right, title and interest in and to the
                Properties.

            


    

    


    ARTICLE
      3. PURCHASE PRICE

    


    
      	3.01  
               	
               Base
                Purchase Prices.
                The Base Purchase Price for the Properties is as
                follows:

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	(a)  	
              $2,500,000

            


    

    and
      is
      subject to adjustment only as provided in this Agreement.

     

    
      	
              3.02

            	
              Adjustments
                to Base Purchase Price.
                The Base Purchase Price for the Properties shall be adjusted in the
                following manner:

            


    

    


    
      	(a)  	
              Increased
                by the following amounts:

            


    

    


    
      	
            	(i) 
              	
              The
                aggregate amount of all non-reimbursed amounts directly attributable
                to
                the operations and
                ownership of the properties incurred and paid in the ordinary course
                of
                business, exclusive of indirect amounts and overhead allocations,
                during
                the period from the respective Effective Time to the Closing
                Date;

            


    

    


    
      	(ii) 
              	
              An
                amount equal to the agreed value of all Oil and gas in storage above
                the
                pipeline connection or delivery point, as the case may
                be;

            


    

    


    
      	(iii) 
              	
              Any
                other upward adjustment mutually agreed upon by the
                parities;

            


    

    


    
      	(b)  	
              Decreased
                by the following amounts:

            


    

    


    
      	(i)  	
              The
                aggregate amount of proceeds received by Seller from the sale of
                Oil and
                gas produced from and attributable to the Interests between the Effective
                Time and the Closing Date;

            


    

    


    
      	(ii)  	
              The
                amount of any downward adjustment relating to Title Defects pursuant
                to
                Article 5;

            


    

    


    
      	(iii)  	
              Seller’s
                share of estimated ad valorem taxes through the Effective Time;
                

            


    

    


    
      	(iv)  	
              The
                amount of any downward adjustment mutually agreed upon by the parties;
                and

            


    

    


    
      	(v)  	
              The
                Base Purchase Price shall be adjusted downward by the amount of $20,000
                per barrel of produced oil if the gross production volumes for a
                consecutive 30 day period (prior to the Closing Date), to be selected
                by
                the Seller, are less than 125 barrels of oil per day (3,750 barrels
                of oil
                in 30 days). An exception to this adjustment would be an occurrence
                or
                situation wherein production from the Properties is interrupted by
                circumstances beyond the control of Seller. In that event, the days
                and
                the respective volumes of the Interruption Period shall be excluded
                from
                the calculation of the production volumes. Seller shall give Buyer
                two (2)
                days notice prior to starting the 30 day period so that Buyer may
                monitor
                the production. 

            


    

    


    
      	
              3.03

            	
              Closing
                Settlement Statement.
                Seller shall provide to Buyer a closing settlement statement prior
                to
                Closing presenting adjustments to the Base Purchase Price for the
                respective Interests that are subject to this Section 3.03, which
                Closing
                Settlement Statement shall set out separately the adjustments applicable
                to the respective Interests. Prior to Closing, Buyer and Seller shall
                agree upon the Closing Settlement Statement which shall include
                adjustments, known as of the Closing Date, pursuant to Section 3.02
                hereof. The Closing Statement shall also set forth the allocation
                of the
                Purchase Price to the Seller.

            


    

    


    ARTICLE
      4. SELLER’S REPRESENTATIONS AND WARRANTIES

    


    
      	
              4.01

            	
              Representations
                and Warranties Not Exclusive.
                Seller’s representations under this Article are in addition to its other
                representations and warranties under this Agreement and the Additional
                Instruments.

            


    

    


    
      	
              4.02

            	
              Organization;
                Name; Organizational Identification Number.
                Seller represents and warrants that it is duly organized validity
                existing
                and in good standing under the laws of its jurisdiction of organization.
                Seller is qualified or licensed to conduct business and is in good
                standing in each jurisdiction where the nature of its activities
                or the
                character of the properties utilized in its business make such
                qualification or licensing necessary. Seller’s correct legal name is set
                forth above Seller’s signature hereto. The location of Seller’s chief
                executive office is the address listed in the introductory paragraph
                of
                this Agreement.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	
              4.03

            	
              Power
                and Authority: Authorizations; Enforceability; No
                Conflicts.
                Seller represents and warrants
                that:

            


    

    


    
      	 	
              (a)

            	
              Seller
                has full corporate power and authority to own its assets and to carry
                on
                its business as it is now being conducted and to execute and deliver
                this
                Agreement and each of the Additional Instruments and to perform its
                obligations hereunder and thereunder and to consummate the transactions
                contemplated hereby and thereby.

            


    

    


    
      	(b)          
              	
              The
                execution, delivery and performance by Seller of this Agreement and
                the
                Additional Instruments to which Seller is a party and the consummation
                by
                Seller of the transactions contemplated hereby and thereby have been
                duly
                authorized by all requisite actions of
                Seller.

            


    

    


    
      	(c)        
                	
              This
                Agreement and the Additional Instruments to which Seller is a party
                have
                been duly and validly executed and delivered by Seller and constitute
                the
                legal, valid and binding obligations of Seller, enforceable against
                it in
                accordance with their respective
                terms.

            


    

    


    
      	(d)         
               	
              The
                execution and delivery by Seller of this Agreement and each of the
                Additional Instruments to which it is a party, the performance by
                Seller
                of its obligations hereunder and thereunder and the consummation
                by Seller
                of the transactions contemplated hereby and thereby do
                not:

            


    

    


    
      	(i)  	
              violate
                any provision of the certificate of incorporation or bylaws (or comparable
                organizational documents) of
                Seller;

            


    

    


    
      	(ii)  	
              result
                in a violation or breach of, or constitute (with or without due notice
                or
                lapse of time or both) a default (or give rise to any right of
                termination, amendment, cancellation or acceleration) under any of
                the
                terms, conditions or provisions of any oral or written agreement,
                instrument, contract, undertaking, mortgage, indenture, lease, license
                or
                other understanding to which Seller is a party or by which any of
                the
                properties or assets of Seller may be bound or otherwise subject;
                or

            


    

    


    
      	(iii)  	
              contravene
                or violate any law, rule, regulation, or order applicable to Seller,
                Seller’s Associated Parties, or any of their respective properties or
                assets.

            


    

    


    
      	(e)        
                	
              No
                consent of any governmental body or other person is required to be
                made or
                obtained by Seller in connection with the execution, delivery and
                performance by Seller of this Agreement or any other Additional
                Instruments to which Seller is a party or the consummation by Seller
                of
                the transactions contemplated hereby and thereby.
                

            


    

    


    
      	
              4.04

            	
              Title
                to the Interests.
                Seller represents and warrants that it owns Defensible Title to the
                Interests as of the date this Agreement is executed and will convey
                to
                Buyer Defensible Title to the Interests on the Closing
                Date.

            


    

    


    ARTICLE
      5. TITLE AND TITLE DEFECTS

    


    
      	
              5.01

            	
              Title.
                Seller shall transfer title of the Interests to Buyer at Closing
                pursuant
                to an assignment substantially in the form of the Assignment attached
                hereto as Exhibit
                B,
                and said Assignment shall be adapted to the particular interest to
                be
                assigned and to conform to the provisions of Article 2 hereof. Seller
                will
                convey to Buyer Defensible Title to the Interests on the Closing
                Date.
                Seller shall execute as many Assignments as are necessary to file
                for
                record Assignments in each jurisdiction and with each governmental
                authority where necessary to effect conveyance of the Interests and/or
                notice of such conveyance. Buyer shall be entitled to satisfy itself
                prior
                to Closing that it will be receiving conveyance of Defensible Title
                to the
                Interests. Seller shall provide to Buyer full and complete access
                to its
                records and documents relating to the Interests. As used herein,
                the term
                “Defensible Title” shall mean, as to each of the Interests to be conveyed
                to Buyer, a net revenue interest which is not less, and a working
                interest
                which is not greater, than those set out in Exhibits
                A-1 and A-2
                hereto with respect to such Interests, and a title which is free
                and clear
                of liens, encumbrances, defects or environment Conditions, other
                than
                Permitted Encumbrances, which materially and adversely affect the
                value of
                such Interests. Any matter which causes an Interest not to have Defensible
                Title, and any environmental Condition, shall be considered to be
                a “Title
                Defect”. If Buyer determines that any Interest is subject to any Title
                Defects prior to Closing, Buyer shall notify Seller in writing describing
                the Title Defects, after which time, the parties shall meet and exercise
                their best efforts to determine the validity of the claimed Title
                Defect.
                Seller shall have until the Closing to cure the Title Defects to
                the
                satisfaction of the Buyer. If Seller is not able to cure the Title
                Defect
                to Buyer’s reasonable satisfaction prior to Closing, then Buyer in its
                sole discretion may either (a) reduce the Purchase Price by the Allocation
                for the Property(s) with a Title Defect, (b) allow Seller 90 days
                after
                Closing to cure the Title Defects, (c) waive the Title Defects, or
                (d)
                terminate this Agreement. Should a Title Defect be discovered after
                the
                Closing Date, Seller shall undertake to cure such Title Defect to
                Buyer’s
                reasonable satisfaction; failing cure thereof, Buyer shall have the
                right,
                but not the obligation, to re-assign the affected Interest to Seller
                following the provisions of Section 8.04 hereof as to the Property
                so
                affected.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	
              5.02

            	
              Related
                Agreements.
                Except as otherwise provided in this Agreement, the sale of the Properties
                will be subject to all oil, gas, and mineral leases, assignments,
                subleases, farmout agreements, unit agreements, joint operating
                agreements, pooling agreements, letter agreements, easements,
                rights-of-way, gathering and transportation agreements, sales agreements,
                and other agreements concerning or pertaining to the Properties (“Related
                Agreements”), to the extent that they are binding on Seller or its
                successors or assigns. Buyer will assume all of Seller’s obligations and
                liabilities under the Related Agreements as of the respective Effective
                Times, insofar as the obligations or liabilities concern or pertain
                to the
                respective Interests, and the parties will execute all documents
                necessary
                for Buyer to assume the Related Agreements. Buyer’s obligation applies to
                all Related Agreements, whether recorded or not.
                

            


    

    


    ARTICLE
      6. PRE-CLOSING OBLIGATIONS

    


    
      	6.01        	
              Preferential
                Rights.

            


    

    


    
      	 	
              (a)

            	
              Notice.
                Seller will notify the owners, if any, of preferential rights to
                purchase
                the Properties.

            


    

    


    
      	(b)         
               	
              Adjustment
                to Base Purchase Price.
                If a third party gives notice of its intent to exercise a preferential
                right to purchase any of the Properties, Seller shall give immediate
                notice thereof to Buyer; in such event, Buyer may, at its option,
                elect to
                either (a) delay Closing as to all of the Properties pending closing
                of
                the preferential purchase, with no charge to either party for the
                delay,
                (b) terminate this Agreement, or (c) exclude the affected Property
                and
                close as to all other Properties as
                scheduled.

            


    

    


    
      	(c)        
                	
              Third-Party
                Failure to Purchase.
                If a third party gives notice of its intent to exercise a preferential
                right to purchase a preferential right property, but does not close
                the
                purchase for any reason either before or within a reasonable time
                after
                the scheduled Closing of this Agreement, Buyer may elect in its sole
                discretion, to acquire the preferential right property under the
                terms of
                this Agreement. In such event, Closing as to such property will be
                scheduled to occur within forty-five days after Buyer receives Seller’s
                notice that the third party has not closed. The effective time for
                the
                preferential right property will be the applicable Effective Time
                under
                this Agreement for the Interest of which the preferential right property
                is a part.

            


    

    


    
      	6.02      
               	
              Third-Party
                Notifications and Approvals.
                The sale of the Interests may require the approval or consent of
                lessors,
                joint interest owners, farmors, sublessors, Sellers, grantors, parties
                to
                agreements, governmental bodies having jurisdiction, or other third
                parties. Seller is responsible for obtaining approvals from all applicable
                third parties and will furnish Buyer with proof of each consent,
                maintenance-of-uniform interest provisions, if any, from joint-interest
                owners. If Seller does not furnish Buyer with all third-party approvals
                applicable to any Interest, then Seller may, at its option, elect
                to (a)
                delay Closing as to any or all of the Interests, with no charge to
                either
                party for the delay, or (b) terminate this Agreement. To the extent
                any
                consent or approval is typically obtained after transfer of a given
                Interest, Seller agrees that it will exercise its best efforts to
                obtain
                such consent(s) or approval(s) within 30 days following the Closing,
                and
                in any event will obtain such consent(s) or approval(s) within the
                shortest time practicable after Closing. Buyer shall provide assistance
                to
                Seller’s efforts to obtain such consent(s) or
                approval(s).

            


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      7. CLOSING

    


    
      	
              7.01

            	
              Closing
                Date.
                The Closing Date will be on or before October 30, 2005. Closing under
                this
                Agreement shall occur at the offices of Capco Offshore, Inc, 5555
                San
                Felipe, Suite 725, Houston, TX 77056. If the parties agree, Closing
                may be
                handled by exchange of documents (by mail or by courier). No price
                adjustment will be made if Closing is
                delayed.

            


    

    


    
      	
              7.02

            	
              Buyer’s
                Right to Delay Closing.
                Buyer may, at its sole option and for any reason, delay Closing for
                up to
                thirty days after the originally-scheduled Closing Date, upon written
                notice to Seller.

            


    

    


    
      	
              7.03

            	
              Seller’s
                Right to Delay Closing.
                In the event that production volumes have not averaged 125 BOPD for
                a
                consecutive 30 (thirty) day period by October 30, 2005 as defined
                in
                3.02(b)(v) hereinabove, Seller shall have the option to extend the
                Closing
                Date to November 30, 2005, with an Effective Date of November 1,
                2005, in
                order to qualify said production. Irrespective of this provision,
                Buyer
                may elect to close this transaction at any time by tendering the
                amount of
                the Base Purchase Price due, without adjustment for production
                volume.

            


    

    


    7.04       
       Closing
      Obligations.

    


    
      	 	
              (a)

            	
              Certificates
                of Authority.
                Seller shall deliver to Buyer, at least five days before the Closing
                Date,
                certificates in form and substance satisfactory to Buyer, effective
                as of
                the Closing Date and executed by Seller’s duly authorized officer,
                partner, or owner, as appropriate, to the effect that (1) Seller
                has all
                requisite corporate, partnership, or other power and authority to
                purchase
                the Interests on the terms of this Agreement and to perform its other
                obligations under this Agreement and the Additional Instruments and
                has
                fulfilled all corporate, partnership, or other prerequisites to closing
                this transaction, and (2) each individual executing the closing documents
                has the authority to act on behalf of Seller.


            


    

    


    
      	 	
              (b)

            	
              Change
                of Operatorship.
                For Interests that will be operated by Seller in its capacity as
                Operator
                under the Operating Agreements, and except to the extent waived by
                Buyer,
                Seller will deliver to Buyer on or before the closing Date evidence
                of the
                following: (1) that Seller has complied with the requirements of
                all laws
                and regulations relating to the transfer of operatorship, including
                those
                regarding the assumption of responsibility for the plugging and abandoning
                of each Well that is included in the applicable Interests or located
                on
                the Property; (2) that the appropriate bond, surety letter, letter
                of
                credit, or other financial security has been accepted by the relevant
                regulatory agency; and (3) that Seller has, to the extent possible
                under
                applicable regulations, obtained all necessary permits or transfers
                of
                permits to operate the applicable Interests and Property.
                

            


      	 	 	 


    

    
      	(c)        
                	
              Closing
                Settlement Statements.
                Seller shall provide to Buyer Closing Settlement Statement, as same
                may
                have been revised pursuant to Section 3.02, including items such
                as Base
                Purchase Price and adjustments to the Base Purchase Price (if any),
                to the
                extent this information is available at Closing. Seller will use
                estimates
                in the respective closing settlement statements, to the extent that
                estimates are necessary, and may correct the estimates in the final
                settlement statement. 

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	(d)           	
              Closing
                Documents.
                The parties, as indicated, will execute the following instruments
                to close
                this transaction:

            


    

    


    
      	(i)  	
              An
                instrument substantially in the form of the Assignment and Bill of
                Sale
                attached as Exhibit
                B,
                modified to the extent necessary to conform to the terms of this
                Agreement. The Assignment and Bill of Sale will be effective as of
                the
                Effective Time, be with special warranty of title, and restate the
                indemnities, releases, and waivers contained in this Agreement. Buyer
                may
                require the parties to execute separate instruments for each state,
                county, or other jurisdiction in which the Properties are located,
                or with
                respect to state or federal governmental jurisdiction to which the
                Interests are subject, to facilitate timely
                recording.

            


    

    


    
      	(ii)  	
              Other
                documents reasonably required to close this transaction and implement
                the
                terms of this Agreement, including deeds, bills of sale, and the
                like and
                instruments necessary under operating agreements, plans of unitization,
                laws, and regulations affecting the Interests to transfer the Interests
                and related obligations from Seller to
                Buyer;

            


    

    


    
      	(iii)  	
              Designation-of-Operator
                forms, or such other form as is required by governmental agencies
                with
                jurisdiction over the Properties.

            


    

    


    
      	(iv)  	
              Seller
                shall furnish Buyer with:

            


    

    


    
      	i.  	
              List
                of all pumping equipment and tankage for each
                lease

            


    

    


    
      	ii.  	
              List
                of all related equipment used on the lease premises such as all trucks,
                trailers, tractors, etc.

            


    

    


    
      	(v)  	
              The
                closing settlement statements.

            


    

    


    
      	(e)          
               	
              Third-Party
                Consents.
                Seller will deliver proof of required third-party consents and approvals,
                except to the extent waived by buyer in
                writing.

            


    

    


    
      	(f)             	
              Payment
                to Seller.
                At Closing, (i) buyer will pay to Seller $2,000,000.00 and (ii) as
                to the
                net amount shown on Closing Settlement Statement, in Buyer’s sole and
                unfettered discretion Buyer will either (A) offset amounts due hereunder,
                (B) pay Seller, or (C) any combination of the above. Cash payments
                hereunder shall be made by certified check, cashier’s check, or funds
                transfer as that term is defined in Chapter 4 of the Texas Business
                and
                Commerce Code. The respective closing settlement statement amounts
                are
                subject to further adjustment after Closing as provided in this Agreement.
                

            


    

    


    
      	(g)            	
              Delivery
                of Possession.
                Subject to the terms of applicable joint operating agreements, if
                any, the
                Related Agreements, and this Agreement, Seller will deliver possession
                of
                the Properties to Buyer as soon as practicable after the Effective
                Time or
                the Closing Date, whichever is later.


            


    

    


    
      	
              7.05

            	
              Condition
                Precedent.
                Seller’s performance of its obligations under this article is a condition
                precedent to Buyer’s obligation to close this
                transaction.

            


    

    


    
      	
              7.06

            	
              Seller’s
                Representation by Closing.
                By closing this transaction, Seller will be deemed to represent to
                Buyer
                that all Seller’s representations and warranties under this Agreement, the
                Additional Instruments, are true as of the Closing Date.
                

            


    

    


    ARTICLE
      8. POST-CLOSING OBLIGATIONS

    


    
      	
              8.01

            	
              Filing
                and Recording.
                Buyer will file or record the conveyance documents by which the Interests
                will be conveyed from Seller to Buyer in the appropriate governmental
                records and will provide photocopies of the filed or recorded document,
                including the recording data, to Seller.


            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	
              8.02

            	
              Further
                Assurances.
                Seller and Buyer each will, from time to time after Closing and upon
                reasonable request, execute, acknowledge, and deliver in proper form
                any
                conveyance, assignment, transfer, or other instrument reasonably
                necessary
                to accomplish the purposes of this
                Agreement.

            


    

    


    
      	
              8.03

            	
              Compliance.
                Buyer will comply with all rules, regulations, statutes and laws
                applicable to buyer’s ownership of the Interests or Property and with all
                Related Agreements, insofar as they concern or pertain to the Interests.
                Seller will comply with all rules, regulations, statutes, and laws
                applicable to Seller’s management and operation of the Interests or
                Property and with all Related Agreements, insofar as they concern
                or
                pertain to the Interests.

            


    

    


    
      	
              8.04

            	
              Reassignment.
                Should Buyer elect to reassign any property(s) due to title defect
                or due
                to other causes as set forth herein, Buyer shall execute and deliver
                to
                Seller a reassignment, without warranty of any kind (title, fitness,
                condition). Seller shall release and discharge Buyer and its Associated
                Parties, covenant not to sue Buyer or its Associated Parties, and
                indemnify, defend, and hold Buyer and its Associated Parties harmless
                as
                to any Property(s) that are reassigned, and the reassignment instrument
                will reinstate Seller’s obligation.

            


    

    


    ARTICLE
      9. TAXES

    


    
      	
              9.01

            	
              Taxes.
                Any ad valorem, property, production, severance and similar taxes
                and
                assessments on said Interests shall be borne by Seller for all times
                prior
                to the Effective Time and by Buyer for all times after the Effective
                Time.

            


    

    


    ARTICLE
      10. OIL IN STORAGE, PROCEEDS, COSTS, EXPENSES, AND
      DISBURSEMENTS

    


    
      	
              10.01

            	
              Oil
                in Storage.
                All Oil in storage at the Effective Time, including working inventory,
                belongs to Seller. All storage tanks shall be gauged as of 7:00am,
                local
                time, or as close thereto as possible. Any oil so shown to be in
                storage
                shall be valued at the price last paid by purchases during the last
                month
                of sales, less any applicable taxes, royalties and/or other required
                payments. Seller shall have the right to have a representative present
                at
                the gauging of all tanks.

            


    

    


    
      	
              10.02

            	
              Proceeds,
                Costs, and Expenses.
                All proceeds, receipts, credits, income, and charges attributable
                to the
                Properties and accruing after the Effective Time will be Buyer’s property
                and responsibility. 

            


    

    


    
      	
              10.03

            	
              Notice
                to Remitters of Proceeds.
                Seller will make reasonable efforts to cause all remitters to remit
                proceeds to Buyer. Notice to the remitters that this transaction
                has
                closed shall occur by letter-in-lieu-of-transfer order or other documents
                required by each remitter. 

            


    

    


    ARTICLE
      11. ENVIRONMENTAL MATTERS

    


    
      	
              11.01

            	
              Acknowledgement
                Concerning Possible Contamination of the Interests and
                Property.
                Buyer and Seller are aware that the Interests and property have been
                used
                for exploration, development, and production of oil and gas and that
                there
                may be petroleum, produced water, wastes, or other materials located
                on or
                under the Properties. Equipment and sites included in the properties
                may
                contain asbestos, hazardous substances, or NORM. NORM may affix or
                attach
                itself to the inside of Wells, materials, and equipment as scale,
                or in
                other forms; the Wells, materials, and equipment located on the Properties
                may contain NORM and other wastes or hazardous substances; and
                NORM-containing material and other wastes or hazardous substances
                may have
                been buried, come in contact with the soil, or otherwise been disposed
                of
                on the Property. Special procedures may be required for the remediation,
                removal, transportation, or disposal of wastes, asbestos, hazardous
                substances, and NORM from the Interests and the Property. Buyer shall
                undertake, at its sole cost and expense an evaluation of the environmental
                status of the Properties and shall inform Seller should this evaluation
                reveal any deficiencies as to the environmental status of the Properties.
                Any deficiencies so noted by Buyer shall be treated in the same manner
                as
                a Title Defect and Seller and Buyer shall have the same obligations
                and
                remedies as set forth in Article 5
                hereinabove.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    ARTICLE
      12. BUYER’S REPRESENTATIONS AND COVENANTS

    


    Buyer
      represents and warrants to Seller that as of the date hereof:

    


    
      	
              12.01

            	
              Organization.
                Buyer is duly organized, validly existing and in good standing under
                the
                laws of its own jurisdiction of organization.


            


    

    


    12.02    
       Power
      and Authority; Authorization; Enforceability; No Conflicts; Etc.
      

    


    
      	 	
              (a)

            	
              Buyer
                has all requisite power and authority to execute and deliver this
                Agreement and the Additional Instruments to which it is a party and
                to
                perform its obligations hereunder and thereunder and to consummate
                the
                transactions contemplated hereby and
                thereby.

            


    

    


    (b)        
       The
      execution, delivery and performance by Buyer of this Agreement and the
      Additional Instruments to which it is a party and the consummation by Buyer
      of
      the transactions contemplated hereby and thereby have been duly authorized
      by
      all requisite action of Buyer. 

    


    
      	 	
              (c)

            	
              The
                Agreement has been, and the other Additional Instruments to which
                Buyer is
                a party have been duly and validly executed and delivered by Buyer
                and
                constitutes the legal, valid and binding obligations of Buyer, enforceable
                against it in accordance with their respective
                terms.

            


    

    


    
      	(d)        
                	
              The
                execution and delivery by Buyer of this Agreement and of each of
                the
                Additional Instruments to which it is a party, the performance by
                it of
                the transactions contemplated hereby and thereby do
                not:

            


    

    


    
      	(i)  	
              result
                in a violation or breach of, or constitute (with or without due notice
                or
                lapse of time or both) a default (or give rise to any right of
                termination, amendment, cancellation or acceleration) under any of
                the
                terms, conditions or provisions of any agreement to which Buyer is
                a party
                or by which the properties or assets of Buyer may be bound or otherwise
                subject; or

            


    

    


    
      	(ii)  	
              contravene
                or violate any laws applicable to
                Buyer.

            


    

    


    
      	(e)         
               	
              No
                prior or subsequent filing or registration with, notification to,
                or
                authorization, consent or approval of, any governmental or regulatory
                agency is required to be made or obtained by Buyer in connection
                with the
                execution, delivery and performance of this Agreement by Buyer or
                any of
                the other Additional Instruments to which Buyer is a party or the
                consummation by Buyer of the transactions contemplated hereby and
                thereby.

            


    

    


    
      	12.03   
                	
              Securities
                Laws.
                

            


    

     

    
      	(a)           	
              Buyer
                acknowledges that the solicitation of an offer for and the sale of
                Interests by Seller has not been registered under any securities
                laws.

            


    

    


    
      	(b)        
                	
              Buyer
                intends to acquire the Properties for its own benefit and account
                and is
                not acquiring the Properties with the intent of distributing fractional
                undivided interests in them or otherwise selling them in a manner
                that
                would be subject to regulation by federal or state securities laws.
                If
                Buyer sells, transfers, or otherwise disposes of the Properties or
                fractional undivided interests in them in the future, it will do
                so in
                compliance with applicable federal and state
                laws.

            


    

    


    
      	(c)        
                	
              Buyer
                represents that at no time has it been presented with or solicited
                by or
                through any public promotion or other form of advertising in connection
                with this transaction.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    ARTICLE
      13. GAS IMBALANCES

    


    
      	
              13.01

            	
              Seller’s
                and Buyer’s Respective Obligations.
                For those Interests with cumulative gas-production-imbalance accounts
                among working interest owners, Buyer acknowledges that the amounts
                are
                derived from either Seller’s or Operator’s statements based upon current
                production, prior sales history, and contract information; were provided
                to Buyer before the Execution Date; and were taken into consideration
                in
                Buyer’s calculation of the Base Purchase Price and the Allocations. After
                the Effective Time, all benefits, obligations, and liabilities associated
                with these gas-production-imbalance accounts and related agreements
                will
                accrue to and become Buyer’s responsibility. Buyer will assume Seller’s
                overproduced or underproduced position as of the Effective Time and
                subject to the other provisions of this Agreement, unless the operating
                agreement, plan of unitization, or gas balancing agreement for an
                Interest
                provides for the cash settlement of gas-production-imbalance accounts
                when
                the Interest is assigned, in which event Seller reserves the
                gas-production-imbalance account and the right to the cash settlement.
                Any
                gas imbalances attributable to the Interests are disclosed on Exhibit
                D
                attached hereto. 

            


    

    


    ARTICLE
      14. FINAL SETTLEMENT STATEMENT

    


    
      	14.01      	
              Preparation.
                Seller will prepare a final settlement statement relating to the
                Interests
                and submit it to Buyer within 90 days after the Closing Date. The
                final
                settlement statement will deduct royalties, operating expenses, taxes,
                overhead, and other amounts due to Seller from amounts due to Buyer
                as
                provided in this Agreement, with adjustments as necessary for items
                identified after Closing.

            


    

    


    
      	14.02      	
              Final
                Settlement.
                Buyer must respond in writing with objections and proposed corrections
                within thirty days of receiving the final settlement statement relating
                to
                the interests. If the parties cannot resolve their differences within
                ninety days of Seller’s receipt of Buyer’s objections, then the
                alternate-dispute-resolution and arbitration procedures of this Agreement
                will be triggered. If Buyer does not respond to the final settlement
                statement by signing or objecting in writing within the thirty-day
                period,
                the statement will be deemed approved by Buyer. After approval of
                said
                final settlement statement, Seller will send a check or invoice to
                Buyer
                for the net amount.

            


    

    


    ARTICLE
      15. BROKER’S AND FINDER’S FEES

    


    Seller
      and Buyer each represents and warrants to the other that it has incurred no
      liability, contingent or otherwise, for broker’s or finder’s fees in conjunction
      with this Agreement or the transaction contemplated by it for which the other
      party will have any responsibility.

    


    ARTICLE
      16. COMMUNICATIONS

    


    Unless
      otherwise provided in this Agreement, communications (including notices) under
      this Agreement that must be in writing and delivered by a specific date will
      b
      deemed to have been made when received at the following addresses by registered
      or certified mail, postage prepaid or by messenger:

    


    
      	
              Seller:

            	
              Buyer:

            
	 	 
	
              Tag
                Operating Company 

            	
              Packard
                Gas Company

            
	
              7447
                Harwin Drive, Suite 145

            	
              2815
                E. Skelly Drive, Suite 823

            
	
              Houston,
                Texas 77036

            	
              Tulsa,
                Oklahoma 74105

            
	 	 
	
              Inland
                Gas Corporation

            	 
	
              7447
                Harwin Drive, Suite 145

            	 
	
              Houston,
                TX 77036

            	 


    

    


    ARTICLE
      17. SELLER’S DEFAULT

    


    If
      Seller
      defaults under this Agreement in a material way, including Seller’s failure to
      perform its obligations to close this transaction, Buyer may, at its sole
      option, terminate this Agreement in addition to all of its other rights at
      law
      or in equity.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    ARTICLE
      18. HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS

    ACT
      OF 1976

    


    The
      parties have determined that the Hart-Scott-Rodino Antitrust Improvements Act
      of
      1976 does not apply to this transaction.

    


    ARTICLE
      19. DEPOSIT

    


    Upon
      execution of this Agreement by all the Parties hereto, Buyer shall deliver
      a non
      refundable deposit in the amount of $500,000.00 to Seller. Said deposit shall
      be
      deducted from the Base Purchase Price as set forth in 3.01 above, at
      closing.

    


    


    ARTICLE
      20. MISCELLANEOUS

    


    
      	
              20.01

            	
              Entire
                Agreement.
                This Agreement and the Additional Instruments constitute the entire
                agreement between the parties as to the transaction described in
                this
                Agreement. All previous negotiations and communications between the
                parties as to these matters are merged into this Agreement and the
                Additional Instruments.

            
	 	 
	
              20.02

            	
              Successors
                and Assigns; Amendment; Survival.
                This Agreement is binding on and inures to the benefit of the parties
                and
                their respective successors, heirs, representatives, and assigns
                and may
                be supplemented, altered, amended, modified, or revoked only in writing
                signed by both parties. Neither the assignment of this Agreement
                nor of
                the Properties or any part of them will relieve Seller of its obligations
                under this Agreement unless and to the extent Buyer consents in writing
                to
                release Seller, which consent may be withheld for any
                reason.

            
	 	 
	 	
              All
                provisions of this Agreement and the Additional Instruments that
                cannot be
                performed before Closing or the earlier termination of this Agreement
                and
                all representations, promises, releases, and indemnities under this
                Agreement and the Additional Instruments will survive Closing or
                the
                earlier termination of this Agreement.

            
	 	 
	
              20.03

            	
              Choice
                of Law.
                This Agreement and its performance will be construed in accordance
                with,
                and enforced under, the internal laws of the State of Texas, without
                regard to choice of law rules of any jurisdiction, including
                Texas.

            
	 	 
	
              20.04

            	
              Assignment.
                Neither this Agreement nor the rights and obligations under it may
                be
                assigned or delegated by either party without the other party’s prior
                written consent, which consent may be withheld for any reason, and
                an
                attempted assignment or delegation in the absence of such consent
                is
                void.

            
	 	 
	
              20.05

            	
              No
                Admissions.
                Neither this Agreement, nor any part of it, nor any performance under
                this
                Agreement, nor any payment of any amount under this Agreement will
                constitute or may be construed as a finding, evidence of, or an admission
                or acknowledgement of any liability, fault, past or present wrongdoing,
                or
                violation of law, rule, regulation, or policy, be either Seller or
                Buyer
                or their respective Associated Parties.

            
	 	 
	
              20.06

            	
              Third-Party
                Beneficiaries.
                There are no third-party beneficiaries of this
                Agreement.

            
	 	 
	
              20.07

            	
              Public
                Communications.
                Unless provided otherwise in this Agreement, neither party will make
                any
                press release or public communication concerning this transaction
                without
                the other party’s prior written consent, which consent may be withheld for
                any reason. 

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	
              20.08

            	
              Headings
                and Titles.
                The headings and titles in this Agreement are for the guidance and
                convenience of reference only and do not limit or otherwise affect
                or
                interpret the terms or provisions of this Agreement.

            
	 	 
	
              20.09

            	
              Exhibits.
                All exhibits referenced in and attached to this Agreement are incorporated
                into it.

            
	 	 
	
              20.10

            	
              Includes.
                The word “includes” and its syntactical variants mean “includes, but is
                not limited to” and corresponding syntactical variants. The rule
                ejusdem
                generis may
                not be invoked to restrict or limit the scope of the general term
                or
                phrase followed or preceded by an enumeration of particular examples.
                

            
	 	 
	
              20.11

            	
              Severability.
                If any provision of this Agreement is found to be illegal or
                unenforceable, the other terms of this Agreement shall remain in
                effect,
                and this Agreement shall be construed as if the illegal or unenforceable
                provision had not been included.

            
	 	 
	
              20.12

            	
              Counterparts.
                This Agreement may be executed in multiple counterparts, all of which
                together will be considered one instrument.

            
	 	 
	
              20.13

            	
              Conflicts.
                If the text of this Agreement conflicts with the terms of any exhibit
                to
                this Agreement, then the text of this Agreement will
                control.

            
	 	 
	
              20.14

            	
              Not
                to Be Construed against the Drafter.
                Seller acknowledges that it has read this Agreement, has had opportunity
                to review it with an attorney of its choice, and has agreed to all
                of its
                terms. Under these circumstances, the parties agree that the rule
                of
                construction that a contract be construed against the drafter may
                not be
                applied in interpreting this Agreement.

            
	 	 
	
              20.15

            	
              No
                Waiver.
                No waiver by either party of any part of this Agreement will be deemed
                to
                be a waiver of any other part of this Agreement or a waiver of strict
                performance of the waived part in the future.

            
	 	 
	
              20.16

            	
              CONSPICUOSNESS.
                THE PARTIES ACKNOWLEDGE THAT THE PROVISIONS OF THIS AGREEMENT THAT
                ARE
                PRINTED IN THE SAME MANNER AS THIS SECTION ARE
                CONSPICUOUS.
                

            
	 	 
	
              20.17

            	
              Execution
                By the Parties. Neither
                the submission of this instrument for Seller’s examination, nor
                discussions or negotiations between the parties constitutes an offer
                to
                purchase the Properties and this instrument and the underlying transaction
                will become enforceable and binding between the parties only upon
                execution and delivery of this instrument by both Seller and
                Buyer.

            
	 	 
	 	
              The
                parties have executed this Agreement on the date below their signatures,
                to be enforceable and binding as of the Execution
                Date.

            


    

    


     

    
      	
              Tag
                Operating Company, Inc.

              a
                Texas Corporation

            	 	
              Packard
                Gas Company

              a
                Texas Corporation

            
	 	 
	 
 	 
 	 
 
	By:
              	 	By: 
	
              
                

              

              Name:


              
                

              

            	
              
                

              

              James
                L. Alexander

              Land
&
Contracts

            
	
              Title:                                                   
                60; 

              
                

              

              
              

            	Date: 
              _______________
	
              Date: 

              
                

              

            	 


    

     

    Inland
      Gas Corporation

    a
      Texas
      Corporation

     

    By:
      __________________________

    Name:
      ________________________

    Title:
      _________________________

    Date:
      _________________________



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
      “B” 

    


    To
      that
      certain Purchase and Sale Agreement effective October 1, 2005 by and between
      Tag
      Operating Company, Inc. and Inland Gas Corporation, as Sellers, and Packard
      Gas
      Company, As Buyer

    


    ASSIGNMENT
      AND BILL OF SALE

    


    OF
      OIL, GAS AND MJNERAL LEASES

     

    NOTICE
      OF CONFIDENTIALITY RIGHTS: IF YOU ARE ANA TURAL PERSON, YOU MAY REMOVE OR STRIKE
      ANY OF THE FOLLOWING INFORMA TION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR
      RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S
      LICENSE NUMBER. 

     

    STATE
      OF TEXAS 

     

    KNOW
      ALL MEN BY THESE PRESENTS, THAT: 

     

    COUNTY
      OF HARRIS

     

    This
      Assignment and Bill of Sale of Oil, Gas and Mineral Leases (this "Assignment")
      is
      made
      effective as of 7:00 a.m. the 31st day of October, 2005 (hereinafter referred
      to
      as the "Effective
      Date"), by
      and
      between Tag Operating Company, Inc. whose mailing address is 7447 Harwin Drive,
      Suite 145, Houston, Texas 77036, and Inland Gas Corporation whose mailing
      address is 7447 Harwin Drive, Suite 145, Houston, Texas 77036 (hereinafter
      referred to as collectively as the" Assignor") and Packard Gas Company whose
      mailing address is 2815 East Skelly Drive, Suite 823, Tulsa, Oklahoma 74105,
      (hereinafter referred to as the" Assignee"). 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    I.

     

    NOW,
      THEREFORE,
      for and
      in consideration of the sum of Ten and No/100 Dollars ($10.00), cash in hand
      paid, and other good and valuable consideration, the receipt an sufficiency
      of
      which is hereby acknowledged Assignor does hereby BARGAIN, SELL, ASSIGN and
      TRANSFER unto Assignee, subject to all royalty and overriding royalty interests,
      any other outstanding interests, depth limitations or reassignment obligations,
      if any, that may now burden Assignor's interest covered by this Assignment,
      and
      the Production Payment hereinafter reserved, the following interests, all of
      which are hereinafter sometimes referred to as the "
      Assigned Interests", to-wit:
      

     

    
      	
              a.
                

            	
              All
                of Assignor's right, title and interest in and to the Oil, Gas and
                Mineral
                Leases described in Exhibit" A " attached hereto and incorporated
                herein
                by reference for a]l purposes (the "Leases"),
                including,
                but not limited to, all of Assignor's leasehold estate and working
                interests, reversionary interests, recoupment rights and any other
                interests whatsoever in, to and under the Leases, such Leases entitling
                Assignee to the Working Interests and Net Revenue Interests in Wells
                located thereon described on Exhibit " A " and as provided in that
                certain
                Asset Purchase Agreement dated March 11, 2005, with Assignor and
                Assignee
                as parties (the "Purchase Agreement") SAVE AND EXCEPT any overriding
                royalty interest, mineral interest pr royalty interest in and to
                lands
                covered by the Leases in favor of Assignor, which are expressly reserved
                and excepted herefrom; 

            


    

     

    
      	
              b.
                

            	
              All
                of Assignor's right, title and interest in and to (i) all of the
                personal
                property, fixtures and improvements now situated thereon or appurtenant
                thereto, and all other equipment, including, but not limited to,
                the
                tanks, gun barrels, pumping units, dehydrators, tubing, wellhead
                equipment, flowlines and compressors, if any and (ii) all wellbores
                on the
                lands covered by the Leases; 

            


    

     

    
      	
              c.
                

            	
              All
                of Assignor's right, title and interest in and to all valid and existing
                rights-of- way, easements, surface leases, permits, or licenses now
                or
                hereafter affecting the Assigned Interests;


            


    

     

    
      	
              d.
                

            	
              All
                of Assignor's right, title and interest in and to any amendments,
                ratifications, renewals or extensions of the Leases; and
                

            


    

     

    
      	
              e.
                

            	
              All
                of Assignor's right, title and interest in and to all oil, gas and
                other
                minerals that may be produced from all oil and/or gas wells located
                on the
                Assigned Interests subsequent to the Effective Date hereof.
                

            


    

     

    
      	
              f.
                

            	
              All
                of Assignor’s right. title and interest in and to all valid and subsisting
                contracts insofar and only insofar as they are related to or affecting
                the
                foregoing specifically enumerated interests assigned hereunder and
                the
                oil, gas and all other hydrocarbons reduced therefrom including without
                limitation all operating agreements, exploration agreements, unit
                agreements, facilities use agreements, gas sales contracts, oil or
                other
                hydrocarbon sales contracts, processing agreements, transportation
                agreements, division orders, and all other valid contracts of whatever
                nature, including any and all amendments thereto.
                

            


    

     

    II.

     

    Assignee,
      in consideration of the mutual benefits to be derived hereunder, and by its
      acceptance hereof, understands and agrees to the following terms and conditions:
      


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              a.
                

            	
              Assignee
                assumes proportionate responsibility for and agrees to plug and abandon
                each and every well located on the Assigned Interests and to restore
                the
                surface of the Assigned Interests in accordance with applicable
                governmental rules, regulations, laws and orders, and as may be required
                under the Leases or other agreements affecting the Assigned Interests
                and
                if there is any financial assurance required by any law, rule, or
                regulation, then Assignee shall secure anew financial assurance in
                the
                required amount, and supply it to the regulatory body requiring such
                financial assurance, to the end that Assignor's financial assurance
                shall
                be released and discharged. In the event Assignee fails to do any
                of the
                foregoing, Assignee agrees to release, indemnify, defend and hold
                harmless
                Assignor for all liability for such failure.


            


    

     

    
      	
              b.
                

            	
              Assignee
                hereby expressly assumes and agrees to be bound by and to perform
                all of
                the duties and obligations accruing after the Effective Date of this
                Assignment under the Leases or any agreement affecting the Assigned
                Interests proportionately attributable to the percentage interest
                herein
                assigned. ASSIGNEE, ITS SUCCESSORS AND ASSIGNS, HEREBY AGREES TO
                INDEMNIFY
                AND DEFEND ASSIGNOR, ITS OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
                SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL CLAIMS, DEMANDS AND
                CAUSES OF
                ACTION, INCLUDING COSTS OF CLEAN-UP OR PLUGGING LIABILITIES FOR ANY
                AND
                ALL WELLS, BROUGHT BY ANY AND ALL PERSONS, INCLUDING (WITHOUT LIMIT
                A
                TION), ASSIGNEE'S AND ASSIGNOR'S EMPLOYEES, AGENTS, OR REPRESENTATIVES
                AND
                ALSO INCLUDING (WITHOUT LIMITATION) ANY PRIVATE CITIZENS, PERSONS,
                ORGANIZA TIONS, AND ANY AGENCY, BRANCH OR REPRESENT A TIVE OF FEDERAL,
                ST
                ATE OR LOCAL GOVERNMENT, ON ACCOUNT OF ANY PERSONAL INJURY OR DEA
                TH OR
                DAMAGE, DESTRUCTION, OR LOSS OF PROPERTY, CONTAMINATION OF NATURAL
                RESOURCE (INCLUDING SOIL, SURFACE WATER OR GROUND WATER) OR THE
                ENVIRONMENT, INCLUDING, WITHOUT LIMIT A TION, CLAIMS ARISING UNDER
                ENVIRONMENT AL LA WS RESULTING FROM OR ARISING OUT OF ANY LIABILITY
                CAUSED
                BY OR CONNECTED WITH THE PRESENCE, DISPOSAL OR RELEASE OF ANY MA
                TERIAL OF
                ANY KIND IN, ON OR UNDER THE ASSIGNED INTERESTS AT OR AFTER THE EFFECTIVE
                DA TE, WITHOUT REGARD TO ASSIGNOR'S (1) NEGLIGENCE, WHETHER SUCH
                NEGLIGENCE IS ACTIVE OR PASSIVE, JOINT, SOLE OR CONCURRENT, OR (2)
                STRICT
                LIABILITY. THIS INDEMNIFICA TION SHALL BE IN ADDITION TO ANY OTHER
                INDEMNITY PROVISIONS CONT AINED IN THIS ASSIGNMENT , AND IT IS EXPRESSL
                Y
                UNDERSTOOD AND AGREED THA T ANY TERMS OF THIS PARAGRAPH SHALL CONTROL
                OVER
                ANY CONFLICTING OR CONTRADICTING TERMS OR PROVISIONS CONT AINED ELSEWHERE
                IN THIS ASSIGNMENT . 

            


    

     

    
      	
              d.
                

            	
              The
                Assigned Interests have been utilized by Assignor for the purpose
                of
                exploration, development, and production of oil and gas. Assignee
                acknowledges that there may have been spills of crude oil and produced
                water or other material in the past on the Assigned Interests. In
                addition, some production equipment may contain asbestos and/or Naturally
                Occurring Radioactive Material (hereinafter referred to as "NORM").
                In
                this regard, Assignee expressly understands that NORM may affix or
                attach
                itself to the inside of the wells, materials and equipment as scale,
                or in
                other forms, and that said wells, materials and equipment located
                on the
                Assigned Interests may contain NORM and that NORM-containing material
                may
                be buried or otherwise disposed of on the Assigned Interests. Assignee
                also expressly understands that special procedures may be required
                for the
                removal and disposal of asbestos and NORM from the equipment and
                Assigned
                Interests where it may be found and that Assignee assumes all liability
                for assessment, removal and disposal of any such materials and associated
                activities. 

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              e.
                

            	
              ASSIGNEE
                UNDERSTANDS AND AGREES THAT THIS TRANSFER IS MADE ON AN "AS IS, WHERE
                IS",
                AND "WITH ALL FAULTS" BASIS AND ASSIGNEE RELEASES ASSIGNOR FROM ANY
                LIABILITY WITH RESPECT THERETO WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE
                TO
                ASSIGNOR'S NEGLIGENCE EXCEPT AS OTHERWISE EXPRESSLY AGREED UPON IN
                WRITING
                BY ASSIGNOR OR AS PROVIDED IN THIS PARAGRAPH. WITHOUT LIMITING THE
                ABOVE,
                AND EXCEPT AS EXPRESSL Y PROVIDED IN THISASSIGNMENT, ASSIGNEE WAIVES
                ITS
                RIGHT TO RECOVER FROM ASSIGNOR AND FOREVER RELEASES AND DISCHARGES
                ASSIGNOR FROM ANY AND ALL DAMAGES, CLAIMS, LOSSES, LIABILITIES, PENAL
                TIES, FINES, LIENS, JUDGMENTS, COSTS, OR EXPENSES, WHATSOEVER, (INCLUDING,
                WITHOUT LIMITATION, ATTORNEY'S FEES AND COSTS), WHETHER DIRECT OR
                INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THA T MA Y ARISE
                ON
                ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE PHYSICAL CONDITION
                OF THE
                ASSIGNED INTERESTS OR ANY ENVIRONMENT AL LA W OR REGULA TION APPLICABLE
                THERETO. 

            


    

     

    III..

     

    This
      Assignment is made and executed by Assignor and accepted by Assignee subject
      to
      a proportionate part of the terms, conditions, reservations and exceptions
      set
      forth in the following: 

     

    
      	
              a.
                

            	
              the
                terms, provisions, covenants and royalties set forth in the Leases
                and any
                pooling, communitization and unitization agreements or orders affecting
                the Assigned Interests; 

            


    

     

    
      	
              b.
                

            	
              all
                overriding royalty interests, restrictions, exceptions, reservations,
                burdens, encumbrances, conditions, limitations, interests, assignments,
                instruments, agreements and other matters, if any, that may burden
                or
                affect Assignor's interest in the Assigned Interests;
                

            


    

     

    
      	
              c.
                

            	
              the
                terms and conditions contained in any Joint Operating Agreement covering
                the Assigned Interests; and 

            


    

     

    d.
      all
      Federal, State, and local laws and to all orders, rules, regulations and
      standards issued thereunder by all duly constituted political subdivisions
      and
      agencies having jurisdiction, and Assignee hereby warrants that it will comp]y
      with same. Further, Assignee specifically warrants that it will comply with
      any
      and al] laws, orders, rules, regulations and standards of all Federal, State
      and
      local political subdivisions and agencies applicable to ( I) a]] exploration,
      drilling, production, plugging, and abandonment procedures, and (2) the control,
      regulation and prevention of pollution, including, but not limited to, salt
      water discharge and contamination. 

     

    IV.

     

    ASSIGNEE
      ACKNOWLEDGES THAT ASSIGNOR HAS NOT MADE, AND ASSIGNOR HEREBY EXPRESSLY DISCLAIMS
      AND NEGATES: (a) ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, RELATING
      TO
      THE CONDITION OF ANY IMMOV ABLE PROPERTY, MOV ABLE PROPERTY, EQUIPMENT,
      INVENTORY, MACHINERY, FIXTURES AND PERSONAL PROPERTY CONSTITUTING ANY PART
      OF
      THE ASSIGNED INTERESTS: (b) ANY AND ALL REPRESENTATIONS AND WARRANTIES AS TO
      ALL
      EQUIPMENT, PERSONAL PROPERTY, AND FIXTURES WHICH ARE SOLD AND CONVEYED ON AN
      "
      AS IS", "WHERE IS", AND "WITH ALL FAULTS" BASIS: (c) ANY WARRANTY OR
      REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING
      TO
      THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY
      TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT;
      (d)
      ANY WARRANTY OF FITNESS FOR ANY PURPOSE: (e) ANY IMPLIED OR EXPRESS WARRANTY
      OF
      FREEDOM FROM REDHIBITORY VICES OR DEFECTS OR OTHER VICES OR DEFECTS, WHETHER
      KNOWN OR UNKNOWN: (I) ANY AND ALL IMPLIED WARRANTIES EX.ISTING UNDER APPLICABLE
      LA W NOW OR HEREAFTER IN EFFECT. ASSIGNEE SHALL HAVE INSPECTED, OR WAIVED (AND
      UPON CLOSING SHALL BE DEEMED TO HA VE WAIVED) ITS RIGHT TO INSPECT, THE ASSIGNED
      INTERESTS FOR ALL PURPOSES AND SA TISFIED ITSELF AS TO THEIR PHYSICAL CONDITION,
      BOTH SURFACE AND SUBSURFACE. ASSIGNEE IS RELYING SOLELY UPON ITS OWN INSPECTION
      OF THE ASSIGNED INTERESTS, AND ASSIGNEE SHALL ACCEPT ALL OF THE SAME IN THEIR
      "
      AS IS, WHERE IS", AND "WITH ALL FAULTS" CONDITION. ALSO WITHOUT LIMITATION
      OF
      THE FOREGOING, ASSIGNOR MAKES NO WARRANTY OR REPRESENT A TION, EXPRESS, IMPLIED,
      ST A TUTORY OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA,
      REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR
      HEREAFTER FURNISHED OR MADE AVAILABLE TO ASSIGNEE IN CONNECTION WITH THIS
      ASSIGNMENT INCLUDING, WITHOUT L.IMITATION, RELATIVE TO PRICING ASSUMPTIONS
      OR
      QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) A TTRIBUT ABLE TO THE
      ASSIGNED INTERESTS OR THE ABILITY OR POTENTIAL OF THE ASSIGNED INTERESTS TO
      PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE ASSIGNED INTERESTS
      OR
      ANY OTHER MATTERS CONTAINED IN THE MATERIALS FURNISHED OR MADE AVAILABLE TO
      ASSIGNEE BY ASSIGNOR OR BY ASSIGNOR'S AGENTS OR REPRESENTATIVES. ANY AND ALL
      SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS
      (WRITTEN OR ORAL) FURNISHED BY ASSIGNOR OR OTHERWISE MADE AVA.ILABLE OR
      DISCLOSED TO ASSIGNEE SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR
      AGAINST ASSIGNOR AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT ASSIGNEE'S
      SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW. 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ASSIGNEE
      REPRESENTS AND WARRANTS THAT SUCH ASSIGNEE IS AN EXPERIENCED AND KNOWLEDGEABLE
      INVESTOR IN OIL AND GAS PROPERTIES, HAS THE FINANCIAL AND BUSINESS EXPERTISE
      TO
      EV ALUA TE THE MERITS AND RISKS OF THE TRANSACTIONS COVERED BY THIS ASSIGNMENT,
      AND HAS RELIED SOLEL YON THE BASIS OF ITS OWN INDEPENDENT INVESTIGATION OF
      THE
      ASSIGNED INTERESTS FOR ALL PURPOSES. ASSIGNEE ACKNOWLEDGES THAT IT HAS HAD
      THE
      OPPORTUNITY TO SEEK THE ADVICE OF PERSONS IT DEEMED APPROPRIATE CONCERNING
      THE
      CONSEQUENCES OF THE PROVISIONS OF THIS ASSIGNMENT AND HEREBY WAIVES ANY AND
      ALL
      RIGHTS TO CLAIM THAT IT IS AN UNSOPHISTICATED INVESTOR IN OIL AND GAS
      PROPERTIES. 

     

    V.

     

    It
      is the
      intention and agreement of Assignor and Assignee hereunder that the provisions
      of this Assignment be severable. Should the whole or any portion of a section
      or
      paragraph be judicially held to be void or invalid, such holding shall not
      affect other portions which can be given effect without the invalid or void
      portion. 

     

    Assignor
      and Assignee hereby agree that all of the covenants and agreements contained
      herein shall extend to and be obligatory upon the heirs, executors,
      representatives, administrators, successors, and assigns of Assignor and
      Assignee, and shall be covenants running with tJ:1e land. 

     

    TO
      HAVE
      AND TO HOLD the same unto the Assignees, their successors and assigns, according
      to the terms, covenants and conditions of the Leases and this Assignment.



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Assignee
      joins in the execution hereof for the purpose of being bound by all of the
      terms, provisions, obligations and covenants herein specified. 

     

    Assignee
      acknowledges that all bolded provisions herein relating to indemnity
      obligations, releases and waivers are conspicuous, satisfy the express
      negligence rule under Texas law and represent a material bargained for
      allocation of risk between Assignor and Assignee. 

     

    IN
      WITNESS WHEREOF,
      this
      instrument is executed as of the acknowledgement date of each of the parties
      hereto, but shall be effective as of the Effective Date hereof. 

     

    
      	
            	 	
            
	Witnesses	
              ASSIGNOR:

               

              TAG
                OPERATING COMPANY, INC.

            
	
              
 
	 
 	 
 
	 	By:   	 
	
              
 	
              

            
	
               Name:

            	 

              

            
	
               Title:

            	 
	 	
              

            


    

    
       

      
        	 	 	
              
	Witnesses	
                ASSIGNOR:

                 

                INLAND GAS
                  CORPORATION

              
	
                
 
	 
 	 
 
	 	By:    
                 	
              
	
                

              	
                

              
	
                 Name:

              	 

                

              
	
                 Title:

              	 
	 	
                

              


         

        
          	 	 	 
	Witnesses	
                  ASSIGNEE:

                   

                  PACKARD GAS COMPANY

                
	
                  
 
	 
 	 
 
	 	By:    
                   	
                
	
                  

                	
                  

                
	
                   Name:

                	 

                  

                
	
                   Title: