Document:

Final Execution Copy

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                          SECURITIES PURCHASE AGREEMENT

                                 by and between

                            CARPATSKY PETROLEUM INC.
                             an Alberta corporation
                                 (the "Company")

                                       and

                         BELLWETHER EXPLORATION COMPANY
                             a Delaware corporation
                                  ("Purchaser")

                                 Concerning the
                  purchase of convertible preferred shares and
                       warrants to purchase common shares

                                December 30, 1999

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                                TABLE OF CONTENTS

                                                                           Page

ARTICLE I.        DEFINITIONS.................................................1
         Section 1.1       Definitions........................................1

ARTICLE II.  PURCHASE AND SALE OF SECURITIES..................................4
         Section 2.1       Sale and Issuance Purchase Shares..................4
         Section 2.2       Sale and Issuance of Warrants......................5
         Section 2.3       Legend.............................................5
         Section 2.4       Purchase; Purchase Price...........................5

ARTICLE III.  CLOSING DATE; DELIVERY..........................................5
         Section 3.1       Closing Date.......................................5
         Section 3.2       Payment; Delivery..................................5

ARTICLE IV.  REPRESENTATIONS AND WARRANTIES...................................6
         Section 4.1       Representations and Warranties of the Company......6
                  (a)      Organization and Standing; Articles and By-Laws....6
                  (b)      Corporate Power; Authority.........................6
                  (c)      Purchase Shares and Warrants.......................6
                  (d)      Capitalization.....................................7
                  (e)      Subsidiaries.......................................7
                  (f)      No Conflicts or Consents...........................7
                  (g)      Corporate Documents.  .............................8
                  (h)      ASC Documents; Financial Statements; Liabilities...8
                  (i)      Oil and Gas Properties.............................9
                  (j)      Investment Company................................10
                  (k)      Public Utility Company............................10
                  (l)      Environmental Matters.............................11
                  (m)      Tax Matters.......................................13
                  (n)      Litigation........................................15
                  (o)      Broker's and Finder's Fee.........................15
                  (p)      Absence of Sensitive Payments.....................15
                  (q)      Compliance with Law...............................15
                  (r)      Contracts.........................................16
                  (s)      Employment Plans/Employment Agreements............17
                  (t)      Absence of Certain Changes or Events..............17
                  (u)      The Company's Assets..............................18
                  (v)      Registration Rights...............................18
         Section 4.2       Representations and Warranties of Purchaser.......18
                  (a)      Investment Intent.................................18

                                       (i)

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                  (b)      Accredited Investor...............................21
                  (c)      Corporate Power; Authority........................21
         Section 4.3       Acknowledgments of the Purchaser..................21

ARTICLE V.  CONDITIONS TO CLOSING............................................22
         Section 5.1       Purchaser's Conditions............................22
                  (a)      Representations and Warranties Correct............22
                  (b)      Covenants.........................................22
                  (c)      Compliance Certificate............................22
                  (d)      No Material Adverse Change........................23
                  (e)      Consents..........................................23
                  (f)      Registration Rights Agreement.....................23
                  (g)      Opinion of Company's Counsel......................23
                  (h)      Pease Merger Agreement............................23
                  (i)      Due Diligence.....................................23
         Section 5.2       Company's Conditions..............................23
                  (a)      Representations...................................23
                  (b)      Consents..........................................23
                  (c)      Pease Merger Agreement............................23

ARTICLE VI.  AFFIRMATIVE COVENANTS OF THE COMPANY............................24
         Section 6.1       Financial Information.............................24
                  (a)      ASC Reports.......................................24
                  (b)      Other Reports.....................................24
         Section 6.2       Access............................................24
         Section 6.3       Rule 144 Reporting................................24
         Section 6.4       Shareholder Approval..............................25
         Section 6.5       Conduct of Business by the Company Pending the
                           Closing ..........................................25
         Section 6.6       Stock Exchange Listing............................26
         Section 6.7       Additional Agreements.............................26
         Section 6.8       No Shop...........................................27
         Section 6.9       Advice of Changes.................................27
         Section 6.10      Pease Merger......................................27
         Section 6.11      Board Nominees....................................28
         Section 6.12      Use of Proceeds...................................28

ARTICLE VII.  MISCELLANEOUS..................................................29
         Section 7.1       Governing Law.....................................29
         Section 7.2       Survival..........................................29
         Section 7.3       Successors and Assigns............................29
         Section 7.4       Entire Agreement, Amendment.......................29
         Section 7.5       Notices, etc......................................29
         Section 7.6       Delays or Omissions...............................29

                                      (ii)

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         Section 7.7       Counterparts.....................................30
         Section 7.8       Severability.....................................30
         Section 7.9       Titles and Subtitles.............................30
         Section 7.10      Specific Performance.............................30

Articles of Amendment                                      Exhibit A
Warrant                                                    Exhibit B
First Amendment to Registration Rights Agreement           Exhibit C
Form of Legal Opinion                                      Exhibit D
Amendment to the Pease Merger Agreement                    Exhibit E
Company's Articles of Incorporation and By-Laws            Schedule 4.1(a)
Company's Capitalization                                   Schedule 4.1(d)
Company's Subsidiaries                                     Schedule 4.1(e)
Required Consents                                          Schedule 4.1(f)
Material Adverse Changes                                   Schedule 4.1(h)
Changes to Reserves                                        Schedule 4.1(i)(ii)
Environmental and Safety Matters                           Schedule 4.1(l)
Taxes                                                      Schedule 4.1(m)
Litigation                                                 Schedule 4.1(n)
Contracts                                                  Schedule 4.1(r)
Registration Rights                                        Schedule 4.1(v)

                                      (iii)

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                          SECURITIES PURCHASE AGREEMENT

         This  Securities  Purchase  Agreement  (the  "Agreement")  is made  and
entered into as of December 30, 1999 by and between Carpatsky Petroleum Inc., an
Alberta  corporation  (the "Company"),  and Bellwether  Exploration  Company,  a
Delaware corporation ("Purchaser").

                              W I T N E S S E T H:

         WHEREAS,  Purchaser  desires to purchase  95,450,000  million Preferred
Shares,  and  Warrants to purchase  12,500,000  Common  Shares,  and the Company
desires to issue and sell to Purchaser  the  Preferred  Shares and the Warrants,
for  an  aggregate  consideration  of  U.S.$4,000,000,  all  on  the  terms  and
conditions described herein.

         NOW,  THEREFORE,  for and in  consideration of the mutual covenants and
promises herein contained, as well as for other good and valuable consideration,
the receipt  and  sufficiency  of which are hereby  acknowledged,  the  parties,
intending to be legally bound, contract and agree as follows:

                             ARTICLE I. DEFINITIONS

     Section 1.1  Definitions.  As used in this  Agreement,  the following terms
when capitalized have the meanings indicated.

          "Affiliate"   shall  have  the  meaning   ascribed  by  the   Business
Corporations Act (Alberta).

         "Agreement"  shall mean this  Agreement,  including  the  Schedules and
Exhibits hereto, all as amended or otherwise modified from time to time.

         "Alternative Proposal" has the meaning set forth in Section 6.8.

         "Amendment  to the Pease Merger  Agreement"  means the amendment to the
Pease Merger Agreement described in Exhibit F.

         "Ancillary  Agreements"  means,  collectively,  the First  Amendment to
Registration Rights Agreement and the Amendment to the Pease Merger Agreement.

         "Articles" has the meaning set forth in Section 2.1.

         "Articles of Amendment" means the articles of amendment with respect to
the Preferred Shares in the form attached as Exhibit A.

         "ASC" means the Alberta Securities Commission.

         "ASC Documents" has the meaning set forth in Section 4.1(h)(i).

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         "Audited  Financial  Statements" shall mean the audited balance sheets,
and the related statements of earnings, shareholders' equity and cash flows, and
the related notes thereto of Company as of and for the years ended  December 31,
1998.

         "CDNX" means the Canadian Venture Exchange.

         "Closing" shall have the meaning ascribed to it in Section 3.1.

         "Closing Date" has the meaning provided for in Section3.1.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Common Shares"  has the meaning set forth in Section 2.1.

         "Company" has the meaning set forth in the introductory paragraph.

         "Environmental Laws" has the meaning set forth in Section 4.1(l)(xi).

         "Environmental Liability" has the meaning set forth in Section 4.1(l)
(xiii).

         "ERISA"  has the meaning provided for in Section 4.1(s).

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "Financial  Statements" shall mean the Audited Financial Statements and
the Interim Financial Statements.

         "First Amendment to Registration  Rights Agreement" means the agreement
set forth in Exhibit C.

         "Governmental  Authority" means the government of any nation,  state or
other  political   subdivision   thereof,   any  entity  exercising   executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled,  through
stock or capital  ownership or otherwise,  by any of the  foregoing  (including,
without limitation, a government controlled oil company).

         "Hazardous Materials" has the meaning set forth in Section 4.1(l)(xii).

         "Holder"  means the  Purchaser  and any  subsequent  direct or indirect
transferee of the Purchase  Shares,  Warrants,  Shares or Warrant Shares,  other
than a transferee, (i) who has acquired the Purchase Shares, Warrants, Shares or
Warrant Shares that have been the subject of a distribution registered under the
Securities Act or (ii) in the case of Shares or Warrant Shares, who has acquired
such  Common Shares  after such  shares have  been the subject of a distribution

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to the  public  pursuant  to Rule 144  under  the  Securities  Act or  otherwise
distributed  under  circumstances not requiring a legend as described in Section
2.3.

         "Interim Financial  Statements" shall mean the unaudited balance sheet,
and the related  unaudited  statements of earnings and cash flows of the Company
as of and for the nine months ended September 30, 1999.

         "Latest  Balance  Sheet" shall mean the balance  sheet  included in the
Interim Financial Statements.

         "Liens" shall mean pledges, liens, defects, leases, licenses, equities,
conditional sales contracts, charges, claims, encumbrances,  security interests,
easements,  restrictions, chattel mortgages, mortgages or deeds of trust, of any
kind or nature whatsoever.

         "Material Adverse Change" is a change which had or is reasonably likely
to have a Material Adverse Effect.

         "Material  Adverse  Effect"  shall mean with  respect to any Person,  a
material  adverse  effect on the  financial  condition,  results of  operations,
business  or  prospects  of such Person  and,  in the case of the  Company,  its
consolidated subsidiaries taken as a whole.

         "Other  Securities"  has the meaning  provided  for in the Articles of
Amendment or the Warrant.

         "Payment" has the meaning set forth in Section 4.1(p).

         "Pease" means Pease Oil and Gas Company, a Nevada corporation.

         "Pease Merger Agreement" means the Agreement and Plan of Merger between
the Company and Pease, dated September 1, 1999.

         "Person"  shall  mean an  individual,  firm,  corporation,  general  or
limited partnership,  limited liability company,  limited liability partnership,
joint   venture,   trust,   Governmental   Authority   or   body,   association,
unincorporated organization or other entity.

         "Preferred Shares" has the meaning set forth in Section 2.1.

         "Purchase Price" has the meaning set forth in Section 2.4.

         "Purchase Shares" has the meaning set forth in Section 2.1.

         "Purchaser" has the meaning set forth in the introductory paragraph.

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         "Reserve Engineer"  has the meaning set forth in Section 4.1(i)(ii).

         "Reserve Report" has the meaning set forth in Section 4.1(i)(ii).

         "Returns" shall mean all returns, reports, estimates,  declarations and
statements of any nature regarding Taxes for periods required to be filed by the
taxpayer relating to its income, properties or operations.

         "SEC" means the U.S.  Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.

         "Securities Act" means the U.S. Securities Act of 1933, as amended, and
the  rules  and  regulations  of the  SEC  thereunder,  and  shall  include  any
replacement statute and rules and regulations thereunder.

         "Securities  Act (Alberta)"  means the  Securities  Act  (Alberta),  as
amended,  and the  rules,  regulations,  policy  statements,  notices  and other
requirements promulgated thereunder.

          "Shareholder  Consent"  means the  consent  to the  private  placement
contemplated by this Agreement.

         "Shares" has the meaning set forth in Section 2.1.

         "Securities Laws" has the meaning set forth in Section 4.1(c).

         "Taxes"  shall  mean any  taxes  imposed  by any  government  or entity
empowered with taxing authority by a government,  including, without limitation,
national, federal, provincial, state, regional, local or other taxes (including,
without  limitation,   income,  value-added,   alternative  minimum,  franchise,
property,  sales, use, lease,  excise,  premium,  payroll,  wage,  employment or
withholding  taxes),  fees,  duties,  assessments,  withholdings or governmental
charges of any kind whatsoever  (including interest,  penalties and additions to
tax).

         "Warrants" means the warrants in the form of Exhibit B.

         "Warrant Shares" has the meaning set forth in Section 2.2.

                   ARTICLE II. PURCHASE AND SALE OF SECURITIES

         Section 2.1 Sale and Issuance Purchase Shares.  The Company shall issue
and sell to Purchaser at the Closing (as hereinafter  defined) 94,450,000 shares
(the  "Purchase  Shares")  of  its  convertible   preferred  shares  ("Preferred
Shares"),  initially convertible into 50,000,000 common shares ("Common Shares")
of the Company, representing, as of the date hereof, 31.66% of the Common Shares
on a fully diluted basis. The Purchase Shares have the characteristics set forth

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in the Articles of Amendment. The Purchase Shares and the Shares (as hereinafter
defined)  issuable upon  conversion of the Purchase  Shares shall be entitled to
all of the  rights,  privileges  and  preferences  provided  therein  and in the
Company's  Articles of  Incorporation,  as amended by the Articles of Amendment,
included in Schedule 4.1(a) ("Articles").  The Common Shares or Other Securities
to be received upon  conversion of the Purchase Shares are referred to herein as
the "Shares."

         Section 2.2 Sale and Issuance of Warrants.  The Company shall issue and
sell to Purchaser at the Closing (as hereinafter  defined)  Warrants to purchase
12,500,000  Common  Shares,  representing,  as of the date hereof,  7.91% of the
Common  Shares on a fully  diluted  basis.  All Warrant  Shares (as  hereinafter
defined)  to be  purchased  pursuant  to the  Warrants  shall  have the  rights,
privileges and  preferences  as set forth in the Articles.  The Common Shares or
Other Securities for which the Warrants shall be exercisable upon payment of the
exercise  price set forth in the Warrant are  referred to herein as the "Warrant
Shares."

         Section 2.3 Legend.  The Purchase Shares,  Warrants,  any Shares issued
upon  conversion  of the Purchase  Shares,  and any Warrant  Shares  issued upon
exercise of the Warrants will not be registered  under the  Securities  Act, and
will bear a restrictive legend as set forth in Section 4.2(a)(vii).

         Section  2.4  Purchase;  Purchase  Price.  Subject  to  the  terms  and
conditions set forth herein,  for and in  consideration of the sale and issuance
of the  Purchase  Shares and  Warrants,  Purchaser  hereby  agrees to pay to the
Company at the Closing U.S.$4,000,000 in cash ("Purchase Price").

                       ARTICLE III. CLOSING DATE; DELIVERY

         Section 3.1 Closing Date.  The closing  ("Closing") of the purchase and
sale of the Purchase  Shares and Warrants  hereunder shall be held at 10:00 A.M.
Houston,  Texas time, on December 30, 1999 ("Closing  Date"),  at the offices of
Haynes & Boone L.L.P., 1000 Louisiana, Suite 4300, Houston, Texas 77002.

         Section 3.2 Payment; Delivery. At the Closing, the Company will deliver
to  Purchaser  duly  executed  certificates  representing  the  Purchase  Shares
registered  in the name of  Purchaser,  against  payment of the  Purchase  Price
therefor,  by wire  transfer of  immediately  available  funds per the Company's
instructions,  together  with  delivery by the Company of such other  documents,
certificates  and  opinions of counsel as may be required to be delivered by the
Company  to  Purchaser  as a  condition  to  Purchaser's  consummation  of  this
Agreement, including, without limitation, the Ancillary Agreements.

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                   ARTICLE IV. REPRESENTATIONS AND WARRANTIES

         Section 4.1  Representations and Warranties of the Company. In order to
induce Purchaser to enter into this Agreement, the Company hereby represents and
warrants to Purchaser, as follows:

                  (a)  Organization  and  Standing;  Articles and  By-Laws.  The
         Company is a corporation legally incorporated,  duly organized, validly
         existing  and in  good  standing  under  the  laws of the  province  of
         Alberta,  Canada,  has  full  corporate  power  and  authority  and all
         necessary  licenses and permits to own, lease,  produce and operate the
         properties  used in its  business  and to carry on its  business as now
         being conducted. The Company is duly qualified to do business and is in
         good standing as a foreign  corporation in each jurisdiction  where the
         character  of the  properties  owned,  leased or  produced by it or the
         nature  of  the  businesses  transacted  by  it  requires  it  to be so
         qualified.  Schedule 4.1(a) is a true, correct and complete copy of the
         Company's  Articles and By-Laws,  containing all amendments through the
         date hereof.

                  (b) Corporate Power; Authority. The Company has full corporate
         power  and  authority  to enter  into  this  Agreement  and each of the
         Ancillary  Agreements  and to perform  its  obligations  hereunder  and
         thereunder. The execution,  delivery and performance of this Agreement,
         and the Ancillary  Agreements,  the issuance of the Purchase Shares and
         Warrants,  the issuance upon  conversion of the Purchase  Shares of the
         Shares,  the  issuance  upon  exercise  of the  Warrants of the Warrant
         Shares,  and the consummation of the transactions  contemplated  hereby
         and  thereby  have been duly  authorized  and  approved by the Board of
         Directors of the Company and, subject to the receipt of approval of the
         Company's  shareholders  as  contemplated  by  Section  6.4,  no  other
         corporate  proceeding  on the  part  of the  Company  is  necessary  to
         authorize and approve this  Agreement and the Ancillary  Agreements and
         the transactions  contemplated  hereby and thereby.  This Agreement has
         been,  and at the  Closing  each  Ancillary  Agreement  will  be,  duly
         executed and delivered by, and  constitutes or will  constitute a valid
         and binding obligation of, the Company, enforceable against the Company
         in accordance with its terms (except as  enforceability  may be limited
         by applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
         similar laws affecting creditors' rights generally or by the principles
         governing the availability of equitable remedies).

                  (c) Purchase  Shares and  Warrants.  The  Purchase  Shares and
         Warrants,  when  issued  in  accordance  with this  Agreement,  will be
         validly issued, fully paid and non-assessable and will have the rights,
         preferences  and  privileges  set forth in the Articles of Amendment or
         Warrant (as the case may be).  The Shares and Warrant  Shares have been
         duly and  validly  reserved  and,  when issued in  compliance  with the
         provisions  of this  Agreement and the Articles of Amendment or Warrant
         (as  the  case  may  be),  will  be  validly  issued,  fully  paid  and
         non-assessable and will have the rights, preferences and privileges set
         forth in the Articles.  Upon  issuance upon  conversion of the Purchase
         Shares or upon exercise of the Warrants,  the Shares or Warrant  Shares

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         (as the case may be) will be free of any Liens  created by the Company;
         provided,  however,  that the Shares and Warrant Shares will be subject
         to  restrictions on transfer under the Securities Act or any applicable
         United  States or Canadian  state and  provincial  securities  laws and
         rules of the ASC  (collectively,  "Securities  Laws").  The  Shares and
         Warrant  Shares are not subject to any  preemptive  rights or rights of
         first refusal.

                  (d)  Capitalization.  The  authorized  capital  stock  of  the
         Company  consists  of  unlimited  number  of  Common  Shares,  of which
         77,778,263  shares  are issued  and  outstanding  as of the date of the
         hereof.  The  outstanding  shares have been duly authorized and validly
         issued,  and  are  fully  paid  and   nonassessable.   All  outstanding
         securities  of the Company were issued in  compliance  with  applicable
         Securities  Laws.  The Company has reserved  50,000,000  and 12,500,000
         Common Shares for issuance upon conversion of the Preferred  Shares and
         exercise of the  Warrants,  respectively.  Other than the Common Shares
         and except as specifically  described on Schedule  4.1(d),  the Company
         does not have any outstanding  capital stock or securities  convertible
         into or  exchangeable  for any  shares  of its  capital  stock,  or any
         outstanding  rights (either preemptive or other) to subscribe for or to
         purchase,  or any outstanding rights or options for the purchase of, or
         any agreements providing for the issuance (contingent or otherwise) of,
         or any  outstanding  calls,  commitments  or  claims  of any  character
         relating to, any capital stock or any stock or  securities  convertible
         into or exchangeable for any capital stock of the Company.  The Company
         is  not  subject  to  any  obligation   (contingent  or  otherwise)  to
         repurchase  or  otherwise  acquire or retire any shares of its  capital
         stock or any  convertible  securities,  rights or  options  of the type
         described in the preceding sentence.  The Company is not a party to any
         agreement  (except as contemplated  by this Agreement)  restricting the
         transfer of any shares of the Company's capital stock.

                  (e)  Subsidiaries.  Except as listed on Schedule  4.1(e),  the
         Company  has no  subsidiaries  and does not  otherwise  own or control,
         directly  or  indirectly,  any  equity  interest  in  any  corporation,
         association, business entity or other Person. Each such subsidiary is a
         corporation legally incorporated,  duly organized, validly existing and
         in  good  standing   under  the  laws  of  the   jurisdiction   of  its
         incorporation, has full corporate power and authority and all necessary
         licenses and permits to own, lease,  produce and operate the properties
         used  in  its  business  and to  carry  on its  business  as now  being
         conducted.  Each  subsidiary is duly qualified to do business and is in
         good standing as a foreign  corporation in each jurisdiction  where the
         character of the properties  owned or leased by it or the nature of the
         businesses transacted by it requires it to be so qualified except where
         the  failure  to be so  qualified  would  not have a  Material  Adverse
         Effect.

                  (f)      No Conflicts or Consents.

                           (i) Neither the  execution,  delivery or  performance
                  of this Agreement nor the Ancillary  Agreements by the Company
                  nor  the  consummation of the transactions contemplated hereby

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                  or  thereby will  (1) violate,  conflict with,  or result in a
                  breach of any provision of, constitute a material  default (or
                  an event that, with notice  or lapse  of time or  both,  would
                  constitute   a  material   default)   under,   result  in  the
                  termination of, or accelerate the performance  required by, or
                  result in the creation of any material  adverse  claim against
                  any of the material properties or assets of the Company or its
                  subsidiaries  under,  (A) the  Articles,  by-laws or any other
                  organizational  documents of the Company or its  subsidiaries,
                  or (B) any material note, bond, mortgage,  indenture,  deed of
                  trust, lease, license, agreement, production sharing contract,
                  concession  or other  instrument  or  obligation  to which the
                  Company or any of its subsidiaries is a party, or by which the
                  Company or any of its  subsidiaries or any of their respective
                  assets are bound, or (2) violate any order, writ,  injunction,
                  decree,   judgment,   statute,   rule  or  regulation  of  any
                  Governmental  Authority to which the Company or any subsidiary
                  is subject or by which the Company or any of its  subsidiaries
                  or any of their  respective  assets are bound in any  material
                  respect.

                           (ii)  Except  as set  forth on  Schedule  4.1(f),  no
                  consent,  approval,  order,  permit  or  authorization  of, or
                  registration, declaration or filing with, any Person or of any
                  Governmental Authority is required for the execution, delivery
                  and  performance  by the  Company  of this  Agreement  and the
                  Ancillary   Agreements  and  the  covenants  and  transactions
                  contemplated hereby or thereby.

                  (g) Corporate  Documents.  The minute books of the Company and
         its  subsidiaries  contain  reasonably  complete and accurate  required
         records of all  corporate  actions of the equity  owners of the various
         entities  and of the boards of  directors  or other  governing  bodies,
         including  committees  of such boards or  governing  bodies.  The share
         transfer  records of the Company are  maintained by its transfer  agent
         and registrar  and, to the knowledge of the Company,  contain  complete
         and accurate  records of all issuances and redemptions of shares by the
         Company.

                  (h)      ASC Documents; Financial Statements; Liabilities.

                           (i) Since January 1, 1997,  the Company has filed all
                  reports,  forms, statements and other documents required under
                  the  Securities  Act  (Alberta)  to be filed with the ASC (the
                  "ASC   Documents")   other  than  annual   audited   financial
                  statements  for the year  ended  June 30,  1999 and  unaudited
                  interim  financial  statements  for  the  three  months  ended
                  September 30, 1999. The ASC  Documents,  and any such reports,
                  forms and  documents  filed by the Company  with the ASC after
                  the date hereof, as amended,  complied,  or will comply, as to

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                  form in all  material  respects with the  requirements  of the
                  Securities Act (Alberta),  as the  case may be,  applicable to
                  such ASC Documents,  and none of  the ASC Documents contained,
                  any untrue statement of a  material fact or omitted to state a
                  material fact  required  to be stated  therein or necessary in
                  order  to  make  the  statements  therein,  in  light  of  the
                  circumstances under which they were made, not misleading.

                           (ii) The  Financial  Statements  included  in the ASC
                  Documents  have  been  audited  by  Garrett  Power,  Chartered
                  Accountants (in the case of the Audited Financial  Statements)
                  in  accordance  with  Canadian   generally  accepted  auditing
                  standards,  have been  prepared in  accordance  with  Canadian
                  generally  accepted  accounting  principles applied on a basis
                  consistent   with  prior  periods,   and  present  fairly  the
                  consolidated  financial  position of the Company at such dates
                  and the results of  operations  and cash flows for the periods
                  then  ended,  except,  in the  case of the  Interim  Financial
                  Statements,  as permitted by the Securities Act (Alberta). The
                  Interim   Financial   Statements   reflect   all   adjustments
                  (consisting only of normal,  recurring  adjustments)  that are
                  necessary for a fair  statement of the results for the interim
                  periods  presented  therein.  Except as set forth on  Schedule
                  4.1(h),  or in the Latest Balance Sheet and the notes thereto,
                  there  has  not  been  any  Material  Adverse  Change  in  the
                  consolidated financial condition of the Company since December
                  31, 1998.

                           (iii) The Latest Balance Sheet  includes  appropriate
                  reserves  for all Taxes and other  liabilities  incurred as of
                  such date but not yet payable.

                           (iv)  Since  the date of the  Latest  Balance  Sheet,
                  there has been no  change  that has had or is likely to have a
                  Material Adverse Effect on the Company.

                  (i)      Oil and Gas Properties.

                           (i) Except for Liens  arising in the ordinary  course
                  of  business  after the date of the Latest  Balance  Sheet and
                  assets  disposed of in the ordinary  course of business  after
                  the date of the Latest Balance Sheet,  each of the Company and
                  its subsidiaries has good and marketable title, free and clear
                  of all Liens which would have a Material Adverse Effect on the
                  Company and its  subsidiaries on a consolidated  basis, to the
                  all their material properties and assets,  whether tangible or
                  intangible,  real, personal or mixed,  reflected in the Latest
                  Balance   Sheet  as  being   owned  by  the  Company  and  its
                  subsidiaries  as of the date  thereof or purported to be owned
                  on the date thereof, including without limitation, the oil and
                  gas  interests  reported  upon  in  the  Reserve  Report.  All
                  buildings, and all fixtures,  equipment and other property and
                  assets which are  material to its  business on a  consolidated

                                        9

<PAGE>

                  basis,  held under leases  by the Company and its subsidiaries
                  are held under valid  instruments  enforceable by each of them
                  in accordance with  their respective terms.  Substantially all
                  of the Company's and  its  subsidiaries'  equipment in regular
                  use has been  reasonably  well maintained and is  generally in
                  good  and  serviceable  condition,  reasonable  wear  and tear
                  excepted.

                           (ii) The Company  has  delivered  to the  Purchaser a
                  copy of the  reserve  report  ("Reserve  Report")  dated as of
                  December 31, 1998,  prepared by Ryder Scott Company  Petroleum
                  Engineers, independent reserve engineers ("Reserve Engineers")
                  relating  to the oil  and gas  reserves  of the  Company.  The
                  factual  information  underlying the estimates of the reserves
                  of the  Company,  which was  supplied  by the  Company  to the
                  Reserve  Engineers  for the purpose of  preparing  the Reserve
                  Report, including,  without limitation,  production,  volumes,
                  sales prices for production,  contractual  pricing  provisions
                  under oil or gas sales or marketing  contracts  under  hedging
                  arrangements, costs of operations and development, and working
                  interest and net revenue information relating to the Company's
                  ownership interests in properties, was true and correct in all
                  material  respects  on the date of such  Reserve  Report;  the
                  estimates  of future  capital  expenditures  and other  future
                  exploration  and  development  costs  supplied  to the Reserve
                  Engineers  were  prepared in good faith and with a  reasonable
                  basis; the information  provided to the Reserve  Engineers for
                  purposes of preparing  the Reserve  Reports  were  prepared in
                  accordance  with  customary  industry  practices;  each of the
                  Reserve  Engineers  were, as of the date of any Reserve Report
                  prepared  by it, and are, as of the date  hereof,  independent
                  petroleum  engineers  with respect to the Company;  other than
                  normal  production of the reserves and intervening oil and gas
                  price  fluctuations  set  forth in  Schedule  4.1(i)(ii),  the
                  Company is not, as of the date  hereof,  aware of any facts or
                  circumstances that would result in a materially adverse change
                  in the reserves in the  aggregate,  or the  aggregate  present
                  value of future net cash flows therefrom,  as described in the
                  Reserve  Reports;  estimates of such  reserves and the present
                  value of the future net cash flows  therefrom  in the  Reserve
                  Report  comply  in all  material  respects  to the  applicable
                  requirements of Regulation S-X under the Securities Act;

               (j)  Investment  Company.  Neither  the  Company  nor  any of its
          subsidiaries  is an  "investment  company"  within the  meaning of the
          Investment Company Act of 1940, as amended.

                  (k) Public Utility Company. Neither the Company nor any of its
         subsidiaries is a "public utility," a "holding company" or a subsidiary
         or  "affiliate"  of a public  utility  within the meaning of the Public
         Utility Holding Company Act of 1935, as amended.

                                       10

<PAGE>

                  (l)  Environmental  Matters.  Except as set forth on  Schedule
         4.1(l),  and except for matters that would not result  individually  in
         liability  to the Company or any of its  subsidiaries  in excess of (a)
         $10,000  in the  case  of  matters  known  to the  Company  or,  in the
         aggregate  with all other such matters,  in liability to the Company or
         any of its  subsidiaries  in excess of  $25,000,  or (b) $25,000 in the
         case of matters not known to the Company or, in the aggregate  with all
         other  such  matters,  in  liability  to  the  Company  or  any  of its
         subsidiaries  in  excess  of  $50,000,  to the  best  knowledge  of the
         Company:

                           (i) the properties,  operations and activities of the
                  Company or any of its  subsidiaries  are in  compliance in all
                  material respects with all applicable  Environmental  Laws and
                  there are no circumstances  which could reasonably be expected
                  to prevent or interfere with their  continued  compliance with
                  applicable Environmental Laws;

                           (ii) each of the Company and its subsidiaries and the
                  properties and operations of the Company and its  subsidiaries
                  (including,  without  limitation,  properties  located  in the
                  Ukraine) are not subject to any existing,  pending, or, to the
                  Company's   knowledge,    threatened   civil,    criminal   or
                  administrative  action,  suit,  claim,  notice  of  violation,
                  investigation,  notice of  potential  liability,  request  for
                  information,  inquiry,  demand or proceeding  under applicable
                  Environmental Laws;

                           (iii) neither the Company nor any of its subsidiaries
                  has agreed,  whether by contract or by consent  agreement with
                  Governmental  Authorities or private persons, to undertake any
                  environmental investigation, clean up, or remedial activities;

                           (iv)  all  notices,  permits,  licenses,  or  similar
                  authorizations required to be obtained or filed by the Company
                  or its subsidiaries  under any Environmental Law in connection
                  with  any  aspect  of  the  business  of  the  Company  or its
                  subsidiaries,  including without  limitation those relating to
                  the  treatment,  storage,  disposal or  discharge of Hazardous
                  Materials,  have been duly obtained or filed,  and the Company
                  and its  subsidiaries  are in  compliance  with the  terms and
                  conditions of all such notices,  permits, licenses and similar
                  authorizations.

                           (v) the  Company  and  each of its  subsidiaries  has
                  satisfied  and is currently in  compliance  with all financial
                  responsibility requirements applicable to their operations and
                  imposed  by any  Governmental  Authority  under  Environmental
                  Laws,   and  the  Company  has  not  received  any  notice  of
                  noncompliance    with   respect   to   any   such    financial
                  responsibility requirements;

                           (vi)   there  are  no   physical   or   environmental
                  conditions  existing on any  property of the Company or any of
                  its subsidiaries or resulting from the Company's or any of its
                  subsidiaries'  operations or activities,  past or present,  at

                                       11

<PAGE>

                  any  location,  including,  without  limitation,  releases and
                  disposal of  Hazardous Materials,  that would give rise to any
                  on-site or  off-site  investigation,  reporting,  or  remedial
                  obligations or other Environmental Liability;

                           (vii)   to  the   extent   required   by   applicable
                  Environmental  Laws, all Hazardous  Materials generated by the
                  Company and its  subsidiaries  have been  transported  only by
                  persons  authorized  under  applicable  Environmental  Laws to
                  transport such  materials,  and disposed of only at treatment,
                  storage and disposal  facilities  authorized  under applicable
                  Environmental   Laws  to  treat,  store  or  dispose  of  such
                  Hazardous materials;

                           (viii)  there has been no  exposure  of any person or
                  property to  Hazardous  Materials  or any release of Hazardous
                  Materials  into  the   environment  by  the  Company  and  its
                  subsidiaries  or in  connection  with  their  present or prior
                  properties or operations that could  reasonably by expected to
                  give rise to any Environmental Liability;

                           (ix) no  release or clean up of  Hazardous  Materials
                  has occurred at the Company's and its subsidiaries' properties
                  which could  reasonably be expected to result in the assertion
                  or creation of any Lien on the properties by any  Governmental
                  Authority  with  respect  thereto,  nor has any such lien been
                  asserted or made by any  Governmental  Authority  with respect
                  thereto; and

                           (x) the  operations  of each third party  operator of
                  any of the Company's and its  subsidiaries'  properties are in
                  compliance with the terms of this Section.

         The Company has made  available to the Purchaser all material  internal
         and   external   environmental   audits,    studies,    documents   and
         correspondence  on  environmental  matters  in  the  possession  of the
         Company  relating  to  any  of  the  present  or  prior  properties  or
         operations of the Company and its subsidiaries.

         In this Section,

                           (xi)  "Environmental  Laws"  shall  mean  any and all
                  laws, statutes,  ordinances,  rules,  regulations or orders of
                  any Governmental  Authority  pertaining to pollution,  health,
                  safety, or the environment, including, without limitation, the
                  laws of the Ukraine on  Environmental  Protection (VVR (Visnyk
                  Verkhovnoi  Rady [Herald of the Supreme  Rada]) 1991,  #41. p.
                  5546),  the Clean Air Act,  the  Comprehensive  Environmental,
                  Response,  Compensation,  and  Liability  Act, the Clean Water
                  Act,  the  Occupational  Safety and Health Act,  the  Resource
                  Conservation  and Recovery Act, the Solid Waste  Disposal Act,
                  the Emergency  Planning and Community  Right-To-Know  Act, the
                  Safe Drinking Water Act, the Toxic Substances Control Act, the

                                       12

<PAGE>

                  Hazardous  Materials  Transportation  Act, the  Oil  Pollution
                  Act,  all   as  amended,   any  state  laws  implementing  the
                  foregoing federal laws, any  state laws pertaining to, health,
                  safety and  waste management  including,  without  limitation,
                  the  handling  of  asbestos,   medical  waste   or  disposable
                  products,  hydrocarbon  products,  PCBs  or   other  Hazardous
                  Materials  or  processing  or disposing of wastes  or the use,
                  maintenance  and closure of pits and  impoundments,  all other
                  federal,    provincial,    state   or   local    environmental
                  conservation  or  protection   and  health  and  safety  laws,
                  domestic and foreign,  and  any common law creating  liability
                  for  environmental   conditions.    Environmental  Laws  shall
                  include,  without limitation,  all  restrictions,  conditions,
                  standards,    limitations,     prohibitions,     requirements,
                  guidelines,  obligations,  schedules  and timetables contained
                  in Environmental  Laws or contained in  any regulation,  plan,
                  code, order,  decree, judgment,  injunction,  notice or demand
                  letter issued, entered, promulgated or approved thereunder.

                           (xii) "Hazardous  Materials" shall mean any materials
                  that are  regulated  by or form the basis or  liability  under
                  Environmental Laws, and include, without limitation, asbestos,
                  wastes,  including,  without  limitation,  medical  wastes  or
                  disposable  products,  hazardous  substances,   pollutants  or
                  contaminants,    hazardous   or   solid   wastes,    hazardous
                  constituents,    hazardous   materials,    toxic   substances,
                  petroleum,  including  crude  oil  or  any  fraction  thereof,
                  natural  gas,  natural gas liquids,  liquefied  natural gas or
                  synthetic  gas usable for fuel (or mixtures of natural gas and
                  such synthetic gas).

                           (xiii)    "Environmental    Liability"   shall   mean
                  liabilities,  fines,  penalties,  obligations,   consequential
                  damages,  responsibilities,  response costs,  natural resource
                  damages, corrective action costs, reclamation costs, and costs
                  and expenses, known or unknown, absolute or contingent,  past,
                  present or future,  resulting from any  requirement,  claim or
                  demand under Environmental Laws or contract.

                  (m)      Tax Matters.

                           (i) Each of the  following  is true with  respect  to
                  each  of the  Company  and  its  subsidiaries  to  the  extent
                  applicable to such member:

                                    (1) all Returns that are or were required to
                           be filed by or with  respect to the  Company  and its
                           subsidiaries  have  been or will be  timely  filed by
                           each of the Company and its subsidiaries  when due in
                           accordance with all applicable  laws; all Taxes shown
                           on the Returns  have been or will be timely paid when
                           due;  the Returns  have been  properly  completed  in
                           compliance  with all applicable  laws and regulations
                           and  completely  and  accurately  reflect  the  facts
                           regarding the income, expenses, properties,  business

                                       13

<PAGE>

                           and operations  required  to be  shown  thereon;  the
                           Returns are not subject to  penalties  under  Section
                           6662 of the Code (or any corresponding  provision  of
                           state, local or foreign tax law);

                                    (2) except as set forth on Schedule  4.1(m),
                           each member of the Company and its  subsidiaries  has
                           paid all Taxes  required to be paid by it (whether or
                           not  shown  on a  Return)  or for  which  it could be
                           liable  (provided  that it shall not be  considered a
                           breach  of this  representation  if it is  ultimately
                           determined  that  additional tax payments are due but
                           such assessment is based on an adjustment to a Return
                           or position,  if such member has a  reasonable  basis
                           for the  position  taken with respect to such Taxes),
                           whether  to taxing  authorities  or to other  Persons
                           under tax allocation agreements or otherwise, and the
                           charges,  accruals,  and  reserves  for Taxes due, or
                           accrued  but not yet  due,  relating  to its  income,
                           properties, transactions or operations for any period
                           as  reflected  on  its  books   (including,   without
                           limitation, the Latest Balance Sheet) are adequate to
                           cover such Taxes;

                                    (3)  there  are  no  ongoing  or   scheduled
                           audits,  agreements  or consents  currently in effect
                           for the  extension  or waiver of the time (A) to file
                           any Return or (B) for assessment or collection of any
                           Taxes   relating   to  the  income,   properties   or
                           operations of any of the Company and its subsidiaries
                           for any  period,  and  neither  the  Company  nor any
                           subsidiary  has been requested to enter into any such
                           agreement or consent;

                                    (4) there are no Liens for Taxes (other than
                          for  current  Taxes not yet due and  payable and Taxes
                          set forth on Schedule  4.1(m) ) upon the assets of any
                          of the Company nor its subsidiaries;

                                    (5) the  Company and its  subsidiaries  have
                           not   received   notice   of   any   Tax   deficiency
                           outstanding,   proposed   or   assessed   against  or
                           allocable to the Company or its subsidiaries or their
                           assets  (other  than for Taxes set forth on  Schedule
                           4.1(m);

                                    (6) to the knowledge of the Company, each of
                           the Company and its  subsidiaries has complied in all
                           material respects with all applicable tax laws (other
                           than for Taxes set forth on Schedule 4.1(m); and

                                       14

<PAGE>

                                    (7)  all  Taxes  that  the  Company  and its
                           subsidiaries  are or were required by applicable  law
                           to  withhold  or  collect  have been  duly  withheld,
                           collected and paid.

                  (n) Litigation.  Except as disclosed on Schedule 4.1(n), there
         are no actions,  suits,  proceedings,  arbitrations  or  investigations
         pending or, to the  knowledge  of the  Company,  threatened  before any
         court, any Governmental Authority,  governmental instrumentality or any
         arbitration  panel,  against  or  affecting  any of the  Company or its
         subsidiaries.   To  the   knowledge  of  the   Company,   no  facts  or
         circumstances  exist that would be  reasonably  likely to result in the
         filing of any such action that would have a Material  Adverse Effect on
         the  Company.  Except as  disclosed  on  Schedule  4.1(n),  neither the
         Company  nor its  subsidiaries  is  subject  to any  currently  pending
         judgment, order or decree entered in any lawsuit or proceeding.

                  (o)  Broker's and Finder's  Fee. No agent,  broker,  Person or
         firm  acting on behalf of the  Company  is or will be  entitled  to any
         commission  or  broker's  or  finder's  fee  from  the  Company  or its
         subsidiaries  in connection with any of the  transactions  contemplated
         herein.

                  (p) Absence of  Sensitive  Payments.  Except as  disclosed  to
         Purchaser,  neither  the  Company,  any  subsidiary  nor any  Affiliate
         thereof nor any  officer or  director  of any of them  acting  alone or
         together,  has performed any of the following  acts:  (i) the making of
         any contribution, payment, remuneration, gift or other form of economic
         benefit (a  "Payment")  to or for the private  use of any  governmental
         official,  employee  or agent  where the  Payment or the purpose of the
         Payment was illegal under the laws of the United States,  Canada or the
         Ukraine or the  jurisdiction  in which such payment was made,  (ii) the
         establishment or maintenance of any unrecorded fund, asset or liability
         for any purpose or the making of any false or artificial entries on its
         books,  (iii) the making of any  Payment or the  receipt of any Payment
         with the intention or understanding that any part of the Payment was to
         be used for any  purpose  other than that  described  in the  documents
         supporting  the  Payment,  or (iv) the giving of any Payment to, or the
         receipt of any Payment from, any person who was or could have been in a
         position  to  help  or  hinder  the  business  of the  Company  and its
         subsidiaries  (or assist  any of the  Company  or its  subsidiaries  in
         connection  with any actual or  proposed  transaction)  which (A) would
         reasonably  have been  expected  to subject  any of the  Company or its
         subsidiaries  to any  damage  or  penalty  in any  civil,  criminal  or
         governmental  litigation or  proceeding,  (B) if not given in the past,
         would have had a Material  Adverse  Effect on the Company or (C) if not
         continued in the future,  would have a Material  Adverse  Effect on the
         Company.

                  (q)  Compliance   with  Law.   Neither  the  Company  nor  any
         subsidiary is in violation of any statute, law, ordinance,  regulation,
         rule or order of any  foreign,  United  States,  Canadian  or  Ukranian
         federal,  state,  provincial  or local  Governmental  Authority  or any
         judgment, decree or order of any court, except where any such violation

                                       15

<PAGE>

         would not,  individually or  in the aggregate,  have a Material Adverse
         Effect on the Company.   Each of the Company and its  subsidiaries  has
         all  permits,  approvals,  licenses and  franchises  from  Governmental
         Authorities  required  to conduct its business as now being  conducted,
         except  for  such  permits,  approvals,  licenses  and  franchises  the
         absence of  which would not,  individually or in the aggregate,  have a
         Material Adverse Effect on the Company.

                  (r)      Contracts.

                           (i)  Schedule  4.1(r)  sets  forth,  as of  the  date
                  hereof, a list of all of the following  material contracts and
                  other agreements to which the Company or its subsidiaries is a
                  party or by which any of them or any material portion of their
                  properties  or assets are bound or subject  (other  than those
                  set forth on any other  Schedule):  (1)  contracts,  severance
                  agreements  and other  agreements  with any  current or former
                  officer,  director,  employee,   consultant,  agent  or  other
                  representative;  (2) contracts and other  agreements  with any
                  labor union or  association  representing  any employee of the
                  Company and its  subsidiaries;  (3)  contracts,  agreements or
                  other agreements  relating to the Company and its subsidiaries
                  between the Company and its subsidiaries, on the one hand, and
                  any  shareholder  or any of his, her or its  Affiliates on the
                  other  hand;  (4)  joint  venture   agreements,   concessions,
                  licenses or production  sharing  contracts;  (5) contracts and
                  other  agreements  under  which  the  Company  or  any  of its
                  subsidiaries  agrees to indemnify any party; (6) contracts and
                  other  agreements  relating to the borrowing of money;  or (7)
                  any other material  contract or other agreement whether or not
                  made in the  ordinary  course  of  business.  There  have been
                  delivered or made available to the Purchaser true and complete
                  copies of all such contracts and other agreements set forth on
                  Schedule 4.1(r).

                           (ii) All contracts, agreements and understandings set
                  forth on Schedule 4.1(r) are valid and binding and are in full
                  force and  effect and  enforceable  in  accordance  with their
                  respective   terms  other  than   contracts,   agreements   or
                  understandings  which are by their terms no longer in force or
                  effect.  Except as set forth on Schedule 4.1(r) (or on another
                  Schedule),  (1) no  approval  or consent of, or notice to, any
                  Person is needed in order  that such  contract,  agreement  or
                  understanding  shall  continue  in full  force  and  effect in
                  accordance  with its terms without  penalty,  acceleration  or
                  rights of early termination  following the consummation of the
                  transactions  contemplated by this Agreement,  and (2) neither
                  the Company nor any of its  subsidiaries  is in  violation  or
                  breach of or default  under any such  contract,  agreement  or
                  understanding nor to the knowledge of the Company is any other
                  party to any such contract, agreement or understanding.

                                       16

<PAGE>

                  (s)      Employment Plans/Employment Agreements

                           (i)  Neither the  Company  nor its  subsidiaries  has
                  sponsored,  maintained or contributed to or for the benefit of
                  the current or former employees,  officers or directors of the
                  Company  or  its   subsidiaries  or  has  been  so  sponsored,
                  maintained  or  contributed  to within six years  prior to the
                  Closing Date:

                                    (1) any  "employee  benefit  plan,"  as such
                           term is  defined  in  Section  3(3)  of the  Employee
                           Retirement  Income  Security Act of 1974,  as amended
                           ("ERISA")  (including,  but not limited to,  employee
                           benefit plans,  such as foreign plans,  which are not
                           subject to the provisions of ERISA); and

                                    (2)  any  personnel  policy,   option  plan,
                           collective  bargaining   agreement,   bonus  plan  or
                           arrangement,  incentive  award  plan or  arrangement,
                           vacation  policy,   severance  pay  plan,  policy  or
                           agreement,   deferred   compensation   agreement   or
                           arrangement,  executive  compensation or supplemental
                           income arrangement,  consulting agreement, employment
                           agreement  and  each  other  employee  benefit  plan,
                           agreement,    arrangement,   program,   practice   or
                           understanding.

                           (ii)   Neither  the  Company  nor  its   subsidiaries
                  contributes  to or has an obligation to contribute to, and has
                  not at any time  within six years  prior to the  Closing  Date
                  contributed  to or had an  obligation  to contribute to or any
                  liability with respect to (a) a multiemployer  plan within the
                  meaning  of  Section  3(37) of ERISA or (b) a plan  subject to
                  Title IV of ERISA,  Section 302 of ERISA or Section 412 of the
                  Code. No Plan is funded through a trust that is intended to be
                  exempt  from  federal  income  taxation  pursuant  to  Section
                  501(c)(9) of the Code.

                           (iii) the Company  does not have a 401(k) Plan or any
                  health benefit plans.

                  (t)  Absence of Certain  Changes or Events.  Since the date of
         the Latest Balance Sheet,  each of the Company and its subsidiaries has
         conducted its business only in the ordinary course, and has not:

                           (i)      amended its articles of incorporation,
                  bylaws or similar organizational documents;

                           (ii)  merged  or  consolidated  with  another  entity
                  (other than a subsidiary) or acquired or agreed to acquire any
                  business or any  corporation,  partnership  or other  business

                                       17

<PAGE>

                  organization,  or  sold,  leased,  transferred   or  otherwise
                  disposed  of any  material  portion  of its assets  except for
                  fair value in the ordinary course of business;

                           (iii)  suffered  any  damage,   destruction  or  loss
                  (whether or not covered by  insurance)  which has had or could
                  have a Material Adverse Effect on the Company;

                           (iv)   suffered  the   termination,   suspension   or
                  revocation  of  any  license  or  permit   necessary  for  the
                  operation of its business;

                           (v)  entered  into any  transaction  other than on an
                  arm's-length basis;

                           (vi)  declared  or paid  any  dividend  or  made  any
                  distribution with respect to any of its equity  interests,  or
                  redeemed,  purchased or  otherwise  acquired any of its equity
                  interests,  or issued, sold or granted any option,  warrant or
                  other right to purchase or acquire any equity interest; or

                           (vii) agreed, whether or not in writing, to do any of
                  the foregoing  (other than as contemplated by the Pease Merger
                  Agreement).

                  (u) The Company's Assets. The assets of the Company and of its
         subsidiaries  consist solely of (i) reserves of oil, rights to reserves
         of oil and associated  exploration  and  production  assets with a fair
         market  value not  exceeding  $500 million and (ii) other assets with a
         fair market  value not  exceeding  $15  million.  For  purposes of this
         Section 4.1(u), the term "associated exploration and production assets"
         shall have the meaning  ascribed  thereto in Section 802.3 of the Rules
         promulgated pursuant to the  Hart-Scott-Rodino  Antitrust  Improvements
         Act of 1976 ("HSR Act").

                  (v)  Registration   Rights.  The  Company  is  not  under  any
         obligation   to  register  (as  defined  in  the  First   Amendment  to
         Registration  Rights  Agreement)  any  of  its  presently   outstanding
         securities  or any of its  securities  which may  hereafter  be issued,
         except as described on Schedule 4.1(v).

         Section 4.2       Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to the Company as follows:

         (a)      Investment Intent.  Purchaser:

                         (i) is acquiring the Purchase Shares, the Warrants, the
                    Shares and the  Warrant  Shares for  investment  for its own
                    account,  not as a nominee  or agent,  and not with the view
                    to,  or for  resale in  connection  with,  any  distribution
                    thereof   except   pursuant  to  the  First   Amendment   to
                    Registration Rights Agreement;

                                       18

<PAGE>

                         (ii)  understands  and  acknowledges  that the Purchase
                    Shares, the Warrants, the Shares and the Warrant Shares have
                    not been and will not be  registered  under  any  applicable
                    Securities Laws, and that the issuance  contemplated  hereby
                    is being made in reliance on a private  placement  exemption
                    to  "accredited  investors" as defined in Regulation D under
                    the  Securities Act and similar  exemptions  under state law
                    and   applicable   exemptions   under  the   Securities  Act
                    (Alberta);

                         (iii) has had access to such information concerning the
                    Company as it has  considered  necessary in connection  with
                    its  investment  decision to invest in the Purchase  Shares,
                    the Warrants,  the Shares and the Warrant Shares,  including
                    an  opportunity  to meet with members of  management  of the
                    Company  and  to  ask  and  receive   answers  to  questions
                    regarding the Company,  its business,  financial  condition,
                    prospects and the terms of this offering;

                         (iv) has such knowledge and experience in financial and
                    business  matters as to be capable of evaluating  the merits
                    and  risks  of  its  investment  in  the  Purchase   Shares,
                    Warrants,  Shares and Warrant Shares and is able to bear the
                    economic risks of such investment;

                         (v) acknowledges that it has not purchased the Purchase
                    Shares, the Warrants, the Shares and the Warrant Shares as a
                    result of any general  solicitation or general  advertising,
                    including   advertisements,   articles,   notices  or  other
                    communications  published  in  any  newspaper,  magazine  or
                    similar  media  or  broadcast  over the  internet,  radio or
                    television,  or any seminar or meeting whose  attendees have
                    been invited by general solicitation or general advertising;

                         (vi)  agrees  that  if it  decides  to  offer,  sell or
                    otherwise transfer any of the Purchase Shares, the Warrants,
                    the Shares or the Warrant Shares, it will not offer, sell or
                    otherwise  transfer any of such Purchase  Shares,  Warrants,
                    Shares or Warrant Shares, directly or indirectly, unless:

                         A.  the  sale is to the  Company  or  registered  under
                    applicable Securities Laws; or

                         B. the sale is made  outside  the  United  States  in a
                    transaction   meeting  the   requirements  of  Rule  904  of
                    Regulation S (or such  successor  rule or regulation as then
                    in effect);

                         C. the sale is made pursuant to the exemption  from the
                    registration  requirements under the Securities Act provided
                    by Rule 144 thereunder, if available, and in accordance with
                    any applicable state securities laws; or

                                       19

<PAGE>

                         D. the  sale is made in a  transaction  that  otherwise
                    does not require  registration  under applicable  Securities
                    Laws  governing  the offer and sale of the Purchase  Shares,
                    Warrants, Shares and Warrant Shares;

                         (vii)  understands and acknowledges  that upon issuance
                    thereof and until such time as is no longer  required  under
                    requirements   of  the  applicable   Securities   Laws,  all
                    certificates representing the Purchase Shares, the Warrants,
                    the  Shares and the  Warrant  Shares  (and all  certificates
                    issued in  exchange  therefor or in  substitution  thereof),
                    shall  bear,  in  addition  to  any  legend(s)  required  by
                    applicable  Securities  Laws  and  policies,  the  following
                    legend:

                  THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN AND WILL NOT
                  BE REGISTERED UNDER THE UNITED STATES  SECURITIES ACT OF 1933,
                  AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,  BY PURCHASING
                  SUCH  SECURITIES,  AGREES FOR THE BENEFIT OF THE COMPANY  THAT
                  SUCH  SECURITIES  MAY BE OFFERED,  SOLD,  PLEDGED OR OTHERWISE
                  TRANSFERRED  ONLY (A) TO THE  COMPANY,  (B) OUTSIDE THE UNITED
                  STATES IN ACCORDANCE  WITH REGULATION S UNDER THE 1933 ACT, IF
                  APPLICABLE  (OR SUCH  SUCCESSOR  RULE OR REGULATION AS THEN IN
                  EFFECT),   (C)  INSIDE  THE  UNITED  STATES  (1)  PURSUANT  TO
                  REGISTRATION  UNDER THE 1933 ACT AND APPLICABLE STATE LAWS, OR
                  (2) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933
                  ACT  PROVIDED BY RULE 144  THEREUNDER,  IF  AVAILABLE,  AND IN
                  ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS, OR (3) IN A
                  TRANSACTION THAT DOES NOT REQUIRE  REGISTRATION UNDER THE 1933
                  ACT OR ANY APPLICABLE  STATE  SECURITIES  LAWS, AND THE HOLDER
                  HAS PRIOR TO SUCH SALE  FURNISHED TO THE COMPANY AN OPINION OF
                  COUNSEL OF RECOGNIZED STANDING, REASONABLY SATISFACTORY TO THE
                  COMPANY,  TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED.
                  DELIVERY  OF  THIS   CERTIFICATE  MAY  NOT  CONSTITUTE   "GOOD
                  DELIVERY" IN SETTLEMENT OF  TRANSACTIONS ON STOCK EXCHANGES IN
                  CANADA.

                  and understands that the certificate representing the Purchase
                  Shares,  Warrants,  Shares and  Warrant  Shares  will bear the
                  following additional legend:

                  THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD
                  UNLESS (A) A PERIOD OF AT LEAST 12 MONTHS HAS ELAPSED FROM THE
                  DATE OF  ORIGINAL  ISSUE,  (B) NO  UNUSUAL  EFFORT  IS MADE TO
                  PREPARE  THE MARKET OR TO CREATE A DEMAND  FOR THE  SECURITIES
                  MAKING UP THE DISTRIBUTION, (C) NO EXTRAORDINARY COMMISSION OR

                                       20

<PAGE>

                  CONSIDERATION  IS  PAID  TO A PERSON OR COMPANY OTHER THAN THE
                  VENDOR  OF THE  SECURITIES  IN RESPECT OF THE TRADE,  AND  (D)
                  THE  FIRST  TRADE  IS NOT  FROM  THE  HOLDINGS  OF  A  CONTROL
                  PERSON.   ("UNUSUAL EFFORT,"  "EXTRAORDINARY  COMMISSION"  AND
                  "CONTROL PERSON"  HAVE THE MEANINGS  SET OUT IN THE SECURITIES
                  ACT (ALBERTA) AND THE RULES THEREUNDER.)

                         (viii) consents to the Company making a notation on its
                    records or giving  instructions to any transfer agent of the
                    Purchase  Shares,  the Warrants,  the Shares and the Warrant
                    Shares in order to implement  the  restrictions  on transfer
                    set forth and described herein; and

                         (ix) will not sell all or any of the  Purchase  Shares,
                    the  Warrants,  the Shares and the Warrant  Shares except in
                    compliance with applicable Securities Laws.

                           (b)   Accredited   Investor.   The  Purchaser  is  an
         "accredited investor" as such term is defined in Regulation D under the
         Securities Act.

                           (c)  Corporate  Power;  Authority.  The Purchaser has
         full corporate power and authority to enter into this Agreement and the
         Ancillary  Agreements  and to perform  its  obligations  hereunder  and
         thereunder. The execution,  delivery and performance of this Agreement,
         and the Ancillary  Agreements and the  consummation of the transactions
         contemplated  hereby and thereby have been duly authorized and approved
         by the  Board of  Directors  of the  Purchaser  and no other  corporate
         proceeding  on the part of the  Purchaser is necessary to authorize and
         approve  this   Agreement   and  the  Ancillary   Agreements   and  the
         transactions  contemplated hereby and thereby. This Agreement has been,
         and at the Closing, each Ancillary Agreement will be, duly executed and
         delivered by, and  constitutes  or will  constitute a valid and binding
         obligation  of the  Purchaser  enforceable  against  the  Purchaser  in
         accordance with its terms (except as  enforceability  may be limited by
         applicable  bankruptcy,  insolvency,   reorganization,   moratorium  or
         similar laws affecting creditors' rights generally or by the principles
         governing the availability of equitable remedies).

         Section 4.3  Acknowledgments  of the Purchaser.  In connection with the
issuance of the Purchase Shares and the Warrants, Purchaser certifies that it is
not a resident of Alberta and hereby acknowledges to the Company as follows:

                  (a) Purchaser  understands  that no  securities  commission or
         similar  regulatory  authority  has reviewed or passed on the merits of
         the Purchase Shares or the Warrants,

                  (b)      there is no government or other insurance covering
         the Purchase Shares or the Warrants,

                                       21

<PAGE>

                  (c)      there are risks associated with the purchase of the
         Purchase Shares and the Warrants,

                  (d) there  are  restrictions  on the  Purchaser's  ability  to
         resell the Purchase Shares and the Warrants (and the Shares and Warrant
         Shares) and it is the  responsibility of the Purchaser to find out what
         those  restrictions  are and to comply  with them  before  selling  the
         Purchase Shares Warrants (and the Shares and Warrant Shares), and

                  (e) the Company has advised the Purchaser  that the Company is
         relying on an exemption from the  requirements to provide the Purchaser
         with a prospectus and to sell the Purchase Shares and Warrants  through
         a person or company  registered to sell securities under the Securities
         Act (Alberta)  and, as a consequence  of acquiring the Purchase  Shares
         and the  Warrants  pursuant  to this  exemption,  certain  protections,
         rights and remedies provided by the Securities Act (Alberta), including
         statutory rights of rescission or damages, will not be available to the
         Purchaser.

                        ARTICLE V. CONDITIONS TO CLOSING

         Section 5.1 Purchaser's Conditions. Purchaser's obligations to purchase
the  Purchase  Shares  and  the  Warrants  at the  Closing  are  subject  to the
fulfillment  of the  following  conditions,  the  waiver  of which  shall not be
effective against Purchaser unless specifically consented to in writing:

                  (a)    Representations    and    Warranties    Correct.    The
         representations  and  warranties  made by the  Company in  Section  4.1
         hereof  shall be true and  correct  when  made,  and  shall be true and
         correct on the Closing  Date except to the extent such  representations
         and  warranties  specifically  relate to an earlier date, in which case
         such  representations  and  warranties  shall be true and correct as of
         such earlier date.

                  (b)  Covenants.  All  covenants,   agreements  and  conditions
         contained in this  Agreement to be performed by the Company on or prior
         to the Closing Date shall have been  performed or complied  with in all
         respects.

                  (c) Compliance  Certificate.  The Company shall have delivered
         to Purchaser a  certificate  of the Company,  executed by the President
         and Secretary of the Company,  dated the Closing Date, and  certifying,
         that all representations and warranties of the Company contained in the
         Agreement  are true and correct on the Closing  Date as if made on such
         date,  that all conditions to the obligations of Purchaser to close the
         transactions  contemplated  by this  Agreement  have been  satisfied or
         waived in writing by Purchaser  and that the Company has complied  with
         all covenants or obligations set forth in this Agreement.

                                       22

<PAGE>

                  (d) No  Material  Adverse  Change.  There  shall  have been no
         Material  Adverse  Change with respect to the Company since the date of
         the Interim Financial Statements.

                  (e)  Consents.  The  shareholders  of the  Company  shall have
         approved  the   issuance  of  the  Purchase   Shares  and  Warrants  as
         contemplated by Section 6.4. Any consent,  approval,  authorization  or
         order of any  court,  Governmental  Authority  or  administrative  body
         required for the consummation of the transactions  contemplated by this
         Agreement,  shall  have  been  obtained  and  shall be in effect on the
         Closing Date.

                  (f)      Registration Rights Agreement.  The Company shall
         have executed the First Amendment to Registration Rights Agreement.

                  (g)  Opinion  of  Company's  Counsel.   Purchaser  shall  have
         received  from McManus  Thompson a favorable  opinion dated the Closing
         Date, in form and substance  satisfactory to Purchaser,  in the form of
         Exhibit D.

                  (h) Pease Merger  Agreement.  The Pease Merger Agreement shall
         have been  amended as  contemplated  by  Section  6.10 and the form and
         substance of such  amendment  shall be  satisfactory  to the Purchaser,
         acting reasonably.

                  (i) Due Diligence.  The Purchaser shall have completed its due
         diligence  investigation  of the Company,  its  subsidiaries  and their
         respective assets,  operations and prospects,  and the Company shall be
         satisfied in its sole and absolute  discretion with the results of that
         investigation.  Such due diligence shall include,  without  limitation,
         receipt of such opinions and  certificates  regarding  the  operations,
         properties  and  prospects  of the  Company  from  Ukranian  counsel to
         Purchaser as purchaser shall request.

         Section 5.2 Company's Conditions.  The Company's obligation to sell and
issue the  Purchase  Shares and Warrants at the Closing is, at the option of the
Company,  subject to the  fulfillment  as of the Closing  Date of the  following
conditions:

                  (a) Representations.  The representations made by Purchaser in
         Sections 4.2 and 4.3 hereof  shall be true and correct  when made,  and
         shall be true and correct on the Closing Date.

                  (b)  Consents.  The  shareholders  of the  Company  shall have
         approved  the   issuance  of  the  Purchase   Shares  and  Warrants  as
         contemplated by Section 6.4. Any other consent, approval, authorization
         or order of any court,  Governmental  Authority or administrative  body
         required for the consummation of the transactions  contemplated by this
         Agreement,  shall  have  been  obtained  and  shall be in effect on the
         Closing Date.

                  (c) Pease Merger  Agreement.  The Pease Merger Agreement shall
         have been amended as contemplated by Section 6.10.

                                       23

<PAGE>

                ARTICLE VI. AFFIRMATIVE COVENANTS OF THE COMPANY

         Section 6.1       Financial Information. The Company will mail to each
Holder of any of the Purchase Shares, Warrants, Shares or Warrant Shares the
following:

                  (a) ASC Reports. The Company shall promptly mail copies of all
         quarterly  and annual  reports and of the  information,  documents  and
         other reports which the Company is required to file with the ASC or the
         SEC,  exclusive  of any  exhibits  to such  reports  and  exclusive  of
         registration statements on Form S-8.

                  (b) Other  Reports.  If the  Company is not  required  to file
         reports  with the ASC or the SEC,  the  Company  shall mail within five
         days after it would have been required to file with the SEC,  financial
         statements,  including  notes  thereto  (and  with  respect  to  annual
         financial  statements,  an  auditor's  report by a firm of  established
         national  reputation),  and a "Management's  Discussion and Analysis of
         Financial  Condition and Results of Operations" both comparable to that
         which the Company would have been required to include in such annual or
         quarterly  reports,  information,  documents  or other  reports  if the
         Company were subject to the  requirements of Section 13 or 15(d) of the
         Exchange Act.

         Section  6.2  Access.  The  Company  will  allow,  and will  cause  its
subsidiaries  to allow,  any  Holder of  Purchase  Shares,  Warrants,  Shares or
Warrant  Shares or proposed  assignee of Purchase  Shares,  Warrants,  Shares or
Warrant Shares designated by such Holder, and their respective  representatives,
upon two Business Days prior telephonic  notice, to visit and inspect any of its
property,  to  examine  its books of record  and  account,  and to  discuss  its
affairs,  finances and accounts with its officers,  provided,  (i) the Holder of
Purchase  Shares,  Warrants,  Shares or Warrant  Shares,  proposed  assignee  or
representative signs a customary  confidentiality  agreement if requested by the
Company and (ii) the examination will not unreasonably  disrupt, in any material
manner, the operations of the Company.

         Section 6.3 Rule 144 Reporting.  The Company agrees that from and after
the date it registers any class of its  securities  under Section 12(b) or 12(g)
of the Exchange Act, it shall:

                  (a) Make and keep "adequate public information"  available, as
         those terms are understood and defined in Rule 144 under the Securities
         Act, at all times from and after the date hereof;

                  (b) File with the SEC in a timely manner all reports and other
         documents  required of the  Company  under the  Securities  Act and the
         Exchange Act; and

                  (c) So long as Purchaser  owns any  Purchase  Shares or Common
         Shares,  furnish to Purchaser promptly upon request a written statement

                                       24

<PAGE>

         by the Company as to its compliance with the reporting requirements (i)
         necessary to cause "adequate public  information" to be available under
         Rule 144, and (ii) of the Securities Act and Exchange Act.

         Section 6.4  Shareholder  Approval.  The  Company  will take all action
necessary  to  obtain  the  approval  of  the  shareholders  of the  Company  in
accordance with the requirements of the CDNX by obtaining  Shareholder  Consents
from holders of a majority of its Common  Shares,  excluding  the  Purchaser and
Torch  Energy   Advisors   Incorporated,   with  respect  to  the   transactions
contemplated  hereby. The Board of Directors of the Company shall recommend such
approval  and  shall  each take all  lawful  action to  solicit  such  approval;
provided, however, that such recommendation is subject to any action required by
the fiduciary  duties of the Board of Directors of the Company under  applicable
law.

         Section 6.5 Conduct of  Business  by the Company  Pending the  Closing.
Prior to the  Closing,  unless  Purchaser  shall  otherwise  agree in writing or
except as otherwise required by this Agreement:

                  (i) the Company shall,  and shall cause its  subsidiaries  to,
         carry on their respective businesses in the usual, regular and ordinary
         course in substantially  the same manner as heretofore  conducted,  and
         shall,  and  shall  cause its  subsidiaries  to,  use their  reasonable
         efforts to preserve  intact their present  business  organizations  and
         preserve  their  relationships  with  customers,  suppliers  and others
         having  business  dealings with them to the end that their goodwill and
         on-going  businesses  shall be unimpaired  at the Closing.  The Company
         shall,  and shall cause its  subsidiaries  to, (a)  maintain  insurance
         coverages  and its books,  accounts  and  records  in the usual  manner
         consistent with past practice; (b) comply in all material respects with
         all  laws,  ordinances  and  regulations  of  Governmental  Authorities
         applicable to the Company and its  subsidiaries;  (c) maintain and keep
         its material properties and equipment in good repair, working order and
         condition,  ordinary wear and tear excepted;  (d) maintain its material
         concessions in full force and effect and not take any action or fail to
         take any action  which would  constitute  a material  breach or default
         thereunder;  and (e) perform in all material  respects its  obligations
         under all material  contracts and commitments to which it is a party or
         by which it is bound;

                  (ii) the Company shall not, and shall not propose or agree to,
         nor shall it permit any of its subsidiaries to, or propose or agree to,
         (a) sell or pledge or agree to sell or pledge any  capital  stock owned
         by  it in  any  of  their  respective  subsidiaries,  (b)  amend  their
         respective articles or by-laws,  (c) split, combine or reclassify their
         outstanding  stock or issue or authorize or propose the issuance of any
         other  securities in respect of, in lieu of or in substitution for such
         shares of stock, or declare,  set aside,  authorize or pay any dividend
         or other  distribution  payable  in cash,  stock  or  property,  or (d)
         directly or indirectly  redeem,  purchase or otherwise acquire or agree
         to redeem, purchase or otherwise acquire any shares of stock;

                                       25

<PAGE>

                  (iii) the  Company  shall not,  nor shall it permit any of its
         subsidiaries to, (A) issue,  deliver or sell or agree to issue, deliver
         or sell any additional  shares of, or rights of any kind to acquire any
         shares of, its respective stock of any class,  any indebtedness  having
         the right to vote on any matter on which the Company's shareholders may
         vote or any  option,  rights or  warrants  to  acquire,  or  securities
         convertible into,  exercisable for or exchangeable for, shares of stock
         other than  issuances,  deliveries or sales of  securities  pursuant to
         obligations outstanding as of the date of this Agreement;  (B) acquire,
         lease or dispose or agree to  acquire,  lease or dispose of any capital
         assets  or any  other  assets  other  than in the  ordinary  course  of
         business;  (C) incur  additional  indebtedness  or  encumber or grant a
         security  interest  in any  asset or  enter  into  any  other  material
         transaction other than in each case in the ordinary course of business;
         (D) acquire or agree to acquire by merging or consolidating with, or by
         purchasing a  substantial  equity  interest in, or by any other manner,
         any  business or any  corporation,  partnership,  association  or other
         business  organization  or  division  thereof;  or (E)  enter  into any
         contract,  agreement,  commitment or arrangement with respect to any of
         the foregoing;

                  (iv) the  Company  shall  not,  nor shall it permit any of its
         subsidiaries  to,  except as required to comply  with  applicable  law,
         enter into any new (or amend any  existing)  employment,  severance  or
         consulting agreement, grant any general increase in the compensation of
         current or former directors,  officers or employees (including any such
         increase pursuant to any bonus,  pension,  profit-sharing or other plan
         or commitment) or grant any increase in the compensation  payable or to
         become payable to any director,  officer or employee,  except in any of
         the  foregoing  cases  in  accordance  with  pre-existing   contractual
         provisions or in the ordinary  course of business  consistent with past
         practice; and

                  (v) the  Company  shall  not,  nor shall it permit  any of its
         subsidiaries to, amend, modify, terminate, waive or permit to lapse any
         material right of first  refusal,  preferential  right,  right of first
         offer,  or  any  other  material  right  of the  Company  or any of its
         subsidiaries.

         Section 6.6 Stock  Exchange  Listing.  The  Company  shall use its best
efforts  to list on the  CDNX,  the  Shares  and  Warrant  Shares,  to be issued
pursuant to the Purchase Shares and Warrants.

         Section 6.7 Additional Agreements.  Subject to the terms and conditions
herein  provided,  each of the  parties  hereto  agrees to use all  commercially
reasonable  efforts to take,  or cause to be taken,  all  actions  and to do, or
cause to be done, all things  necessary,  proper or advisable  under  applicable
laws  and  regulations  to  consummate  and  make  effective  the   transactions
contemplated by this  Agreement,  including  using all  commercially  reasonable
efforts to obtain all necessary waivers,  consents and approvals,  to effect all
necessary   registrations  and  filings  and  to  lift  any  injunction  to  the
transactions  contemplated  hereby  (and,  in such case,  to  proceed  with such
transactions as expeditiously as possible).

                                       26

<PAGE>

         Section 6.8 No Shop.  The Company agrees (a) that neither it nor any of
its  subsidiaries  shall,  and it shall direct and use its best efforts to cause
its  officers,  directors,  employees,  agents and  representatives  (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its subsidiaries) not to, initiate, solicit or encourage,  directly or
indirectly,  any  inquiries or the making or  implementation  of any proposal or
offer (including, without limitation, any proposal or offer to its shareholders)
with respect to a merger,  stock or asset acquisition,  consolidation or similar
transaction, involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company or its subsidiaries,  taken as a
whole  (any  such  proposal  or  offer  being  hereinafter  referred  to  as  an
"Alternative Proposal"),  or engage in any negotiations  concerning,  or provide
any  confidential  information  or data to, or have any  discussions  with,  any
Person relating to an Alternative  Proposal, or release any third party from any
obligations  under any existing  standstill  agreement or arrangement,  or enter
into any  agreement  with  respect  to an  Alternative  Proposal,  or  otherwise
facilitate any effort or attempt to make or implement an  Alternative  Proposal;
(b) that it will  immediately  cease and  cause to be  terminated  any  existing
activities,  discussions or negotiations with any parties  conducted  heretofore
with respect to any of the  foregoing,  and it will take the necessary  steps to
inform  the  individuals  or  entities  referred  to  above  of the  obligations
undertaken  in this  Section  6.8;  and (c) that it will  notify  the  Purchaser
immediately  if any such  inquiries  or  proposals  are  received  by,  any such
information  is requested  from, or any such  negotiations  or  discussions  are
sought to be initiated or continued with, it. Notwithstanding the foregoing, the
Company may, directly or indirectly,  furnish information and access to, and may
participate in discussions  and negotiate  with, any Person,  if such Person has
submitted  a  written  proposal  to  its  Board  of  Directors  relating  to  an
Alternative  Proposal  which the Board of Directors  believes is superior from a
financial  point  of  view  to  the  transactions  contemplated  hereby  and  is
reasonably likely to be consummated and the Company's Board of Directors, having
received a written opinion of legal counsel relating thereto,  determines in its
good faith  judgment that failing to take such action would  constitute a breach
of the Board of Directors'  fiduciary duty to its  shareholders  imposed by law.
The Board of Directors shall provide a copy of any such written  proposal to the
Purchaser  immediately after receipt thereof and thereafter keep the other party
promptly advised of any development with respect thereto and any revision of the
terms of such Alternative Proposal.

         Section 6.9 Advice of Changes.  The Company  shall  confer on a regular
basis with Purchaser on operational  matters.  The Company shall promptly advise
the  Purchaser  orally and in  writing  of any change or event that has had,  or
could  reasonably be expected to have, a Material  Adverse  Effect.  The Company
shall promptly provide the Purchaser (or their respective counsel) copies of all
filings made by such party with the CDNX or any other Governmental  Authority in
connection with this Agreement and the transactions contemplated hereby.

          Section 6.10 Pease Merger. The Company is currently party to the Pease
Merger Agreement.  Contemporaneously with the execution of this Agreement, Pease
and the Company  have  amended the Pease Merger  Agreement  as  contemplated  by
Exhibit E. Purchaser  agrees to vote all Common Shares which it owns or controls
and all of the  Preferred  Shares in favor of the  Pease  Merger  Agreement  (as
amended as  contemplated  by Exhibit E),  including the approval and adoption of

                                       27

<PAGE>

the  Redomestication  (as defined in the Pease Merger  Agreement) and the Merger
(as defined in the Pease Merger  Agreement);  provided however,  Purchaser shall
not be required to vote or cause the voting of Common Shares or Preferred Shares
unless:

         (i) The  conditions to  consummation  of the  Redomesticatioin  and the
Merger set forth in Section 7.01(a) and (c) of the Pease Merger  Agreement shall
have  been  satisfied  as of the date of the vote of  shareholders  or waived by
Purchaser.

         (ii) The  conditions to the  consummation  of the  Redomestication  and
Merger  set  forth in  Section  7.02(a)  through  7.02(j)  of the  Pease  Merger
Agreement  shall have been satisfied as of the date of the vote of  shareholders
or waived by Purchaser, except that

                  (A) the  certificates  of the  President  and Chief  Financial
         Officer of Pease described in Section  7.02(a),  7.02(b) and 7.02(c) of
         the  Pease  Merger  Agreement  shall  be  delivered  and  addressed  to
         Purchaser and shall be dated the date of the shareholder vote;

                  (B) the "reasonable business judgement of Carpatsky" set forth
         in  Section  7.02(d)  of  the  Pease  Merger  Agreement  shall  be  the
         "reasonable business judgement of Bellwether Exploration Company";

                  (C)  Purchaser   shall  have  been  advised  orally  that  the
         requirements   of  the  second  sentence  of  clause  (iii)  below  are
         anticipated to be satisfied at the closing.

         (iii) Purchaser shall have received drafts of the opinions set forth in
Section 7.02(e) and (f) of the Pease Merger Agreement, and such opinion shall be
in form and substance  acceptable to Purchaser,  acting reasonably.  Each of the
opinions  described  in Section  7.02(e) and (f) of the Pease  Merger  Agreement
shall be addressed and delivered to Purchaser at the Closing.

         (iv) The Company will not waive the  conditions  in Section  7.02(i) or
(j) of  the  Pease  Merger  Agreement  without  the  prior  written  consent  of
Purchaser.

     Section 6.11 Board Nominees.  At or prior to the Closing, the Company shall
cause J.P. Bryan to be appointed as Chief Executive Officer of the Company,  and
shall cause the board to be increased by two members,  Mr. Burges, Mr. Braun and
Mr. Richards to resign as directors,  and Mr. Bryan, Dr. Jack Birks, Mr. Timothy
Robson,  Mr. Don Boykiw and Mr. John Kousinioris to be appointed as directors of
the Company.

         Section 6.12 Use of Proceeds. The Company shall pay $1.0 million of the
net proceeds of the issuance of the  Preferred  Shares and Warrants to the joint
activity  account  created  pursuant  to the  Joint  Activity  Agreement,  dated
September 14, 1995, between Poltavanaftogaz and the Company, as amended.

                                       28

<PAGE>

                           ARTICLE VII. MISCELLANEOUS

     Section 7.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS
BY THE INTERNAL LAWS OF THE STATE OF TEXAS.

         Section 7.2 Survival.  The representations,  warranties,  covenants and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby.

         Section  7.3  Successors  and  Assigns.  Except as  otherwise  provided
herein,  the  provisions  hereof  shall  inure to the benefit of, and be binding
upon,  the  successors,  assigns,  heirs,  executors and  administrators  of the
parties hereto.

         Section 7.4 Entire Agreement,  Amendment.  This Agreement and the other
documents  delivered  pursuant  hereto at the  Closing  constitute  the full and
entire  understanding  and  agreement  between  the  parties  with regard to the
subjects hereof and thereof,  and no party shall be liable or bound to any other
party in any manner by any warranties,  representations  or covenants  except as
specifically set forth herein or therein.  Except as expressly  provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written  instrument  signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.

         Section 7.5 Notices, etc. All notices and other communications required
or permitted  hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to Purchaser,  at: Bellwether  Exploration Company, 1331 Lamar,
Suite 1450,  Houston,  Texas 77010, Attn: Roland E. Sledge,  Esq. with a copy to
Haynes and Boone,  LLP,  1000  Louisiana,  Suite  4300,  Houston,  Texas  77002,
Attention: Guy Young, or at such other address as Purchaser shall have furnished
to the Company in writing, or (b) if to any other Holder of any Purchase Shares,
Warrants,  Shares or Warrant  Shares,  at such address as such Holder shall have
furnished  the Company in writing,  or,  until any such Holder so  furnishes  an
address to the  Company,  then to and at the  address of the last Holder of such
Purchase  Shares,  Warrants,  Shares or Warrant  Shares who has so  furnished an
address to the Company,  or (c) if to the  Company,  to its address set forth on
the  signature  page of this  Agreement  and  addressed to the  attention of the
Corporate  Secretary,  or at  such  other  address  as the  Company  shall  have
furnished to Purchaser,  with a copy to McManus  Thomson,  1210,  606-4th Street
S.W., Calgary, Alberta T2P 1T1, Attention: James D. Thomson.

          Section 7.6 Delays or Omissions.  Except as expressly provided herein,
no delay or  omission  to exercise  any right,  power or remedy  accruing to any
Holder of any Purchase  Shares,  Warrants,  Warrant  Shares or Shares , upon any
breach or default of the Company  under this  Agreement,  shall  impair any such
right,  power or remedy of such Holder nor shall it be  construed to be a waiver
of any such  breach or  default,  or an  acquiescence  therein,  or of or in any
similar  breach or  default  thereafter  occurring;  nor shall any waiver of any
single  breach or  default  be deemed a waiver  of any other  breach or  default

                                       29

<PAGE>

theretofore or thereafter occurring.  Any waiver, permit, consent or approval of
any kind or character  on the part of any Holder of any breach or default  under
this  Agreement,  or any waiver on the part of any Holder of any  provisions  or
conditions of this agreement,  must be in writing and shall be effective only to
the extent  specifically set forth in such writing.  All remedies,  either under
this  Agreement  or by  law  or  otherwise  afforded  to any  Holder,  shall  be
cumulative and not alternative.

     Section 7.7  Counterparts.  This Agreement may be executed in any number of
counterparts,  each of which  shall be an  original,  and all of which  together
shall constitute one agreement.

         Section  7.8  Severability.  In the event  that any  provision  of this
Agreement  becomes or is declared  by a court of  competent  jurisdiction  to be
illegal,  unenforceable or void, this Agreement shall continue in full force and
effect  without said  provision;  provided  that no such  severability  shall be
effective if it materially changes the economic benefit of this Agreement to any
party.

         Section 7.9 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience  only and are not considered in construing or
interpreting this Agreement.

         Section 7.10 Specific  Performance.  The Company  acknowledges that any
breaches of the  agreements and covenants  contained in of this Agreement  would
cause irreparable injury to Purchaser for which Purchaser would have no adequate
remedy at law. In addition to any other  remedy that  Purchaser  may be entitled
to, the parties agree that Purchaser shall be entitled to the remedy of specific
performance.

                       [Signatures on the following page]

                                       30

<PAGE>

         The foregoing  Agreement is hereby  executed as of the date first above
written.

                                            "COMPANY"

Address: 6671 Southwest Freeway, Suite 303  CARPATSKY PETROLEUM INC.
         Houston, Texas 77074
         Fax: (713) 981-8670
                                            By
                                               ---------------------------------
                                               David A. Melman,
                                               Chief Corporate Officer

                                            "PURCHASER"

                                            BELLWETHER EXPLORATION COMPANY

                                            By
                                               ---------------------------------
                                               J.P. Bryan,
                                               Chief Executive Officer

                                       31

<PAGE>

                         Exhibit A Final Execution Copy
                                      to
                          Securities Purchase Agreement
                             dated December 30, 1999

                        FORM 4 BUSINESS CORPORATIONS ACT
                              (SECTIONS 27 OR 171)

                         Alberta ARTICLES OF AMENDMENT
------------------------------------- -----------------------------------------
1.       NAME OF CORPORATION           2.        CORPORATE ACCESS NUMBER

         Carpatsky Petroleum Inc.                J06545923
------------------------------------  -----------------------------------------

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

3.       ITEM NO. __ OF THE ARTICLES OF THE ABOVE NAMED CORPORATION ARE AMENDED
IN ACCORDANCE WITH SECTION ______ OF THE BUSINESS CORPORATIONS ACT.

         Pursuant to Section 27(5) of the Business  Corporations  Act (Alberta),
         the share  capital  of the  Corporation  is hereby  amended to create a
         series of  Preferred  Shares to be  designated  "Convertible  Preferred
         Shares, Series A" (the "Convertible  Preferred Shares"),  consisting of
         500,000,000   Convertible   Preferred  Shares.  Each  such  Convertible
         Preferred  Share shall have  attached  thereto the rights,  privileges,
         restrictions and conditions described in the electronic attachment.

4.       DATE                        SIGNATURE                  TITLE

         December 30, 1999
-----------------------------  -----------------------      -------------------

<PAGE>

                            CARPATSKY PETROLEUM INC.

                 ELECTRONIC ATTACHMENT TO ARTICLES OF AMENDMENT
                     SETTING FORTH THE POWERS, PREFERENCES,
                     RIGHTS, QUALIFICATIONS, LIMITATIONS AND
                        RESTRICTIONS OF THE CORPORATION'S
                     CONVERTIBLE PREFERRED SHARES, SERIES A

         Section 1.        Designation and Number.

         (a) The series of Preferred  Shares shall be designated as "Convertible
Preferred Shares, Series A" ("Preferred Shares"). The number of shares initially
constituting the Preferred  Shares shall be 500,000,000.  Such number may not be
decreased  below  the  number  of then  outstanding  shares  of such  series  of
Preferred Shares.

         (b) The Preferred Shares shall,  with respect to rights on liquidation,
dissolution  or winding up, rank prior to all other classes and series of Junior
Shares  of  the  Corporation  now or  hereafter  authorized  including,  without
limitation, the Common Shares.

         (c) Capitalized  terms used herein and not otherwise defined shall have
the meanings set forth in Section 10 below.

         Section 2.        Dividends and Distributions.

         In the event that the  Corporation  shall  declare a cash  dividend  to
holders of Common Shares,  then the Board of Directors  shall  declare,  and the
holder of each  Preferred  Share shall be entitled to receive,  a dividend in an
amount equal to the amount of such  dividend  received by a holder of the number
of Common Shares for which such Preferred  Shares are  convertible on the record
date for  such  dividend.  Any  such  amount  shall  be paid to the  holders  of
Preferred  Shares at the same time such  dividend  is made to  holders of Common
Shares.

         The  holders  Preferred  Shares  shall not be  entitled  to receive any
dividends or other distributions except as provided herein.

         Section 3.        Voting Rights.

         In addition to any voting rights  provided by law and except where only
a specified class or series of shares is entitled to vote, the holders Preferred
Shares shall have the following voting rights:

                                        1

<PAGE>

         (a) Except as otherwise  required by applicable  law and so long as the
Preferred Shares are outstanding,  each Preferred Share shall entitle the holder
thereof  to vote,  in person or by proxy or  written  consent,  at a special  or
annual meeting of  shareholders  or in connection  with any  shareholder  action
taken in lieu of a meeting of  shareholders,  on all matters voted on by holders
of Common  Shares,  including  the election of directors,  voting  together as a
single class with all other shares entitled to vote thereon. With respect to any
such vote,  each  Preferred  Share shall entitle the holder  thereof to cast one
vote for each Preferred  Share standing in his or her name on the transfer books
of the Corporation as of the record date for determining the shareholders of the
Corporation eligible to vote on any such matters.

         (b) Unless the consent or approval of a greater  number of shares shall
then be required by law, the affirmative vote of the holders of at least 66-2/3%
of the outstanding  Preferred  Shares,  voting  separately as a single class, in
person or by proxy,  at a special or annual meeting of  shareholders  called for
the purpose, shall be necessary to (i) authorize,  adopt or approve an amendment
to the Articles  that would alter or change the powers,  preferences  or special
rights of the Preferred Shares,  (ii) amend, alter or repeal the Shares so as to
affect  the  Preferred  Shares  adversely,  including,  without  limitation,  by
granting any voting  right to any holder of notes,  bonds,  debentures  or other
debt obligations of the Corporation, or (iii) authorize, increase the authorized
number of shares  of, or issue  (including  on  conversion  or  exchange  of any
convertible or exchangeable  securities or by  reclassification)  any additional
Preferred Shares except under Section 9.

         (c)  For  so  long  as  the  Preferred  Shares  are  outstanding,   the
Corporation  shall not issue any capital stock  entitling the holder  thereof to
vote generally under ordinary circumstances in the election of directors,  other
than (i) Common Shares and (ii) Preferred Shares issued pursuant to Section 9.

         Section 4.        Redemption.

         The  Corporation  shall  not have any  right to  redeem  any  Preferred
Shares.

         Section 5.        Reacquired Shares.

         Any  Preferred  Shares  converted,  exchanged,  purchased  or otherwise
acquired  by the  Corporation  in any manner  whatsoever  shall be  retired  and
cancelled  promptly after the  acquisition  thereof.  All such Preferred  Shares
shall upon their cancellation become authorized but unissued preferred shares.

         Section 6.        Liquidation, Dissolution or Winding Up.

          (a) In the event of the liquidation,  dissolution or winding-up of the
Corporation or other  distribution  of the assets of the  Corporation  among its
shareholders  for the  purpose of  winding-up  its  affairs,  the holders of the
Preferred  Shares shall be entitled to receive the  Liquidation  Amount prior to
any payment being made or any property of the Corporation  being  distributed to

                                        2

<PAGE>

the  holders of the Common  Shares or the  holders of any Junior  Shares.  After
payment to the holders of the Preferred  Shares of the Liquidation  Amount,  the
holders of the Preferred Shares shall be entitled to receive  (rateably with the
holders of the Common  Shares) for each  Preferred  Share held, the amount which
would have been received by the Holder of such Preferred Shares if on the record
date for such  distribution,  the holder of such Preferred  Shares had converted
such Preferred Shares into the number of Common Shares into which such Preferred
Shares were convertible on the record date for such distribution.

         (b) Neither the consolidation or merger of the Corporation with or into
any other Person nor the sale or other  distribution to another Person of all or
substantially  all the assets,  property or business of the Corporation shall be
deemed to be a  liquidation,  dissolution or winding up of the  Corporation  for
purposes of this Section 6.

         Section 7.        Conversion.

         (a)  Subject  to the  terms  and  conditions  set  forth  herein,  each
Preferred  Share  shall  be  convertible   into  a  number  of  fully  paid  and
non-assessable  Common  Shares  as is  equal,  subject  to  Section  7(g),  to a
fraction, the numerator of which shall be the Common Share Conversion Number and
the  denominator  of which shall be the number of  Preferred  Shares  issued and
outstanding on the date of conversion.  The Common Share Conversion Number shall
initially be 50,000,000, and shall be subject to adjustment as set forth in this
Section.  Such  conversion  right  may only be  exercised  by the  holders  of a
majority  of  the  outstanding   Preferred  Shares   surrendering   certificates
("Surrendered   Certificates")   representing  a  majority  of  the  outstanding
Preferred  Shares to the  Corporation at any time during usual business hours at
its principal  place of business to be maintained by it,  accompanied by written
notice that the holders of a majority of the outstanding  Preferred Shares elect
to convert such shares and  specifying the name or names (with address) in which
a  certificate  or  certificates  for Common  Shares are to be issued and (if so
required by the Corporation) by a written  instrument or instruments of transfer
in form reasonably  satisfactory to the Corporation  duly executed by the holder
or its duly  authorized  legal  representative  and transfer tax stamps or funds
therefor,  if  required  pursuant  to Section  7(j).  Upon such  surrender,  all
Preferred Shares shall automatically be converted into Common Shares as provided
in this Section.  Notwithstanding the foregoing provisions or anything set forth
herein or in the Articles of the  Corporation,  any Preferred  Shares  remaining
outstanding  on December 28, 2004 shall be and be deemed to have been  converted
into Common Shares at the Conversion Number then in effect.

          (b)  As  promptly  as  practicable  after  the  surrender,  as  herein
provided,  of Preferred  Shares for  conversion  pursuant to Section  7(a),  the
Corporation  shall deliver to all holders of Preferred  Shares a written  notice
informing  such  holders (i) that the  holders of a majority of the  outstanding
Preferred  Shares  have  delivered  their  certificates  for such  shares to the
Corporation in  satisfactory  form for conversion into Common Shares pursuant to
the  requirements of this Section 7, (ii) that, as result of such delivery,  all
outstanding  Preferred  Shares  have been  converted  into the right to  receive

                                        3

<PAGE>

Common Shares and (iii) of the Common Share  Conversion  Number and  instructing
such holders to surrender the certificates  representing  their Preferred Shares
to the  Corporation  in the manner  specified  in Section 7(a) above in order to
receive  certificates  representing  the  Common  Shares  deliverable  upon  the
conversion  of their  Preferred  Shares.  As promptly as  practicable  after the
surrender of any certificates  representing  Preferred Shares in accordance with
the requirements of this Section 7, the Corporation shall deliver to or upon the
written  order of the holder of such  shares so  surrendered  a  certificate  or
certificates  representing  the number of fully paid and  non-assessable  Common
Shares  into  which  such  Preferred  Shares  may be or have been  converted  in
accordance  with the  provisions  of this  Section 7.  Subject to the  following
provisions  of this  paragraph  and of Section 7(d),  such  conversion  shall be
deemed to have been made immediately  prior to the close of business on the date
that such Preferred Shares shall have been surrendered in satisfactory  form for
conversion,  and the Person or Persons  entitled  to receive  the Common  Shares
deliverable  upon  conversion of such Preferred  Shares shall be treated for all
purposes as having  become the record holder or holders of such Common Shares at
such  appropriate  time, and such conversion  shall be based on the Common Share
Conversion Number in effect at such time; provided,  however,  that no surrender
shall be effective to constitute  the Person or Persons  entitled to receive the
Common Shares  deliverable  upon such conversion as the record holder or holders
of such Common Shares while the share transfer books of the Corporation shall be
closed (but not for any period in excess of five days), but such surrender shall
be effective to constitute the Person or Persons entitled to receive such Common
Shares as the record  holder or holders  thereof  for all  purposes  immediately
prior to the close of  business on the next  succeeding  day on which such share
transfer books are open, and such  conversion  shall be deemed to have been made
at, and shall be based on the Common Share Conversion  Number in effect at, such
time on such next succeeding day.

         (c)  To  the  extent  permitted  by  law,  when  Preferred  Shares  are
converted,  all  dividends  declared  and  unpaid  on the  Preferred  Shares  so
converted to the date of  conversion  shall be  immediately  due and payable and
must accompany the Common Shares issued upon such conversion.

         (d) The Common Share  Conversion  Number shall be subject to adjustment
as follows:

               (i) In case the  Corporation  shall  at any time or from  time to
         time (A)  pay a  dividend  or make a  distribution  on the  outstanding
         Common Shares  in capital  stock  (which,  for purposes of this Section
         7(d) shall include,  without limitation, any dividends or distributions
         in the form of options,  warrants  or other  rights to acquire  capital
         stock) of the Corporation, (B) subdivide  the outstanding Common Shares
         into a larger  number of shares,  (C) combine  the  outstanding  Common
         Shares into a smaller number  of shares, or (D) issue any shares of its
         capital stock  in a reclassification  of the Common Shares then, and in
         each  such  case,  the  Common  Share  Conversion   Number  in   effect
         immediately  prior to such event  shall be adjusted to equal the Common
         Share  Conversion  Number  in effect  immediately  prior to such action

                                        4

<PAGE>

         multiplied  by  a  fraction,  the  numerator  of which is the number of
         Common Shares  outstanding  after the  action  described in clauses (A)
         through (D) and the  denominator  of which is  the number Common Shares
         outstanding  immediately  prior to such  action.   An  adjustment  made
         pursuant to this Section 7(d)(i) shall  become effective  retroactively
         (A) in the  case  of  any  such  dividend  or  distribution,  to a date
         immediately following  the close of business on the record date for the
         determination  of  holders of Common  Shares  entitled to receive  such
         dividend or distribution  or  (B) in the case of any such  subdivision,
         combination or  reclassification,  to the  close of business on the day
         upon which such corporate action becomes effective.

                  (ii) In case the Corporation shall at any time or from time to
         time  issue  Common   Shares  (or   securities   convertible   into  or
         exchangeable  for Common  Shares,  or any  options,  warrants  or other
         rights to acquire  Common  Shares) for a  consideration  per share less
         than the Current  Market  Price per Common  Share then in effect at the
         record date or issuance date, as the case may be (the "Date"), referred
         to in the following  sentence  (treating the consideration per share of
         any security  convertible or  exchangeable  or exercisable  into Common
         Shares  as  equal  to (A)  the  sum  of the  price  for  such  security
         convertible,  exchangeable  or exercisable  into Common Shares plus any
         additional  consideration  payable (without regard to any anti-dilution
         adjustments) upon the conversion, exchange or exercise of such security
         into Common Shares divided by (B) the number of Common Shares initially
         underlying such  convertible,  exchangeable  or exercisable  security),
         then,  and in each such case,  the Common  Share  Conversion  Number in
         effect shall be adjusted by  multiplying  the Common  Share  Conversion
         Number in effect on the day immediately prior to the Date by a fraction
         (x) the  numerator  of which  shall be the sum of the  number of Common
         Shares  outstanding  on the Date plus the number of  additional  Common
         Shares  issued or to be issued (or the  maximum  number into which such
         convertible  or  exchangeable   securities  initially  may  convert  or
         exchange or for which such options,  warrants or other rights initially
         may be exercised) and (y) the  denominator of which shall be the sum of
         the number of Common Shares  outstanding on the Date plus the number of
         Common Shares which the aggregate consideration for the total number of
         such  additional  Common  Shares  (or  securities  convertible  into or
         exchangeable  for Common  Shares,  or any  options,  warrants  or other
         rights to  acquire  Common  Shares)  plus the  aggregate  amount of any
         additional  consideration  initially  payable  (without  regard  to any
         anti-dilution  adjustments) upon such conversion,  exchange or exercise
         of such  security  into  Common  Shares  would  purchase at the Current
         Market Price per Common  Share on the Date.  Such  adjustment  shall be
         made  whenever  such  shares,  securities,  options,  warrants or other
         rights are issued,  and shall become effective  retroactively to a date
         immediately following the close of business (i) in the case of issuance
         to shareholders of the Corporation, as such, on the record date for the
         determination   of  shareholders   entitled  to  receive  such  shares,
         securities,  options,  warrants  or other  rights and (ii) in all other

                                        5

<PAGE>

         cases, on  the date ("issuance date") of such issuance;  provided that:
         (A) the  determination  as  to whether an  adjustment is required to be
         made pursuant to  this Section 7(d)(ii) shall be made upon the issuance
         of  such  shares  or  such   convertible  or  exchangeable  securities,
         options,   warrants  or  other  rights;  (B)  if  any  convertible   or
         exchangeable  securities,  options,  warrants  or other  rights (or any
         portions  thereof)  which  shall  have  given  rise  to  an  adjustment
         pursuant to  this Section  7(d)(ii)  shall have  expired or  terminated
         without the  exercise  thereof and/or if by reason of the terms of such
         convertible  or  exchangeable  securities,  options,  warrants or other
         rights  there shall  have been an increase or  increases or decrease or
         decreases, with  the passage of time or otherwise, in the price payable
         upon  the  exercise  or  conversion  thereof,  then  the  Common  Share
         Conversion  Number  hereunder  shall  be readjusted  (but to no greater
         extent than originally  adjusted) on  the basis of (x) eliminating from
         the computation  any additional  Common  Shares  corresponding  to such
         convertible or  exchangeable  securities,  options,  warrants or  other
         rights  as   shall  have  expired  or  terminated,   (y)  treating  the
         additional Common  Shares, if any, actually issued or issuable pursuant
         to  the   previous   exercise  of  such   convertible  or  exchangeable
         securities,  options,  warrants or  other  rights as having been issued
         for the  consideration  actually  received and receivable  therefor and
         (z)  treating  any  of such  convertible  or  exchangeable  securities,
         options,  warrants or  other rights which remain  outstanding  as being
         subject to  exercise  or  conversion  on the basis of such  exercise or
         conversion price  as shall be in effect at the time of adjustment;  and
         (C) no adjustment in  the Common Share Conversion  Number shall be made
         pursuant  to  this  Section  7(d)(ii)  as a result of any  issuance  of
         securities by  the Corporation in respect of which an adjustment to the
         Common Share Conversion Number is made pursuant to Section 7(d)(i).

                  (iii) In the case the Corporation, at any time or from time to
         time,  shall take any action  affecting its Common Shares similar to or
         having an effect  similar  to any of the  actions  described  in any of
         Section  7(d)(i)  and  Section  7(d)(ii),  or  Section  7(h)  (but  not
         including  any action  described in any such  Section) and the Board of
         Directors of the Corporation in good faith  determines that it would be
         equitable in the  circumstances  to adjust the Common Share  Conversion
         Number as a result of such  action,  then,  and in each such case,  the
         Common Share Conversion  Number shall be adjusted in such manner and at
         such time as the Board of  Directors of the  Corporation  in good faith
         determines would be equitable in the circumstances  (such determination
         to be evidenced  in a  resolution,  a certified  copy of which shall be
         mailed to the holders of the Preferred Shares).

               (iv)  Notwithstanding   anything  herein  to  the  contrary,   no
         adjustment  under  this  Section  7(d) shall  be made upon the grant of
         options to  employees  or  directors  of  the  Corporation  pursuant to
         benefit plans approved by the  Board of Directors of the Corporation or

                                        6

<PAGE>

         upon the  issuance  of Common  Shares upon  exercise of such options if
         the exercise  price  thereof was  not less than the Market Price of the
         Common Shares on the date such options were granted.

         (e) If the Corporation shall take a record of the holders of its Common
Shares  for the  purpose  of  entitling  them to  receive  a  dividend  or other
distribution,  and shall  thereafter and before the distribution to shareholders
thereof   legally   abandon  its  plan  to  pay  or  deliver  such  dividend  or
distribution,  then  thereafter  no  adjustment  in the Common Share  Conversion
Number then in effect shall be required by reason of the taking of such record.

         (f) Upon any  increase  or  decrease  in the  Common  Share  Conversion
Number,  then, and in each such case, the Corporation  promptly shall deliver to
each  registered  holder of Preferred  Shares at least 10 Business Days prior to
effecting  any  of the  foregoing  transactions  a  certificate,  signed  by the
President or a Vice-President and by the Treasurer or an Assistant  Treasurer or
the  Secretary or an Assistant  Secretary of the  Corporation,  setting forth in
reasonable  detail the event  requiring the  adjustment  and the method by which
such adjustment was calculated and specifying the increased or decreased  Common
Share Conversion Number then in effect following such adjustment.

         (g) No fractional shares or scrip representing  fractional shares shall
be  issued  upon  the  conversion  of any  Preferred  Shares.  If more  than one
Preferred  Share shall be  surrendered  for  conversion  at one time by the same
holder,  the number of full Common Shares issuable upon conversion thereof shall
be  computed  on the  basis of the  aggregate  number  of  Preferred  Shares  so
surrendered.  If the  conversion  of any  Preferred  Share of  Preferred  Shares
results  in a  fraction,  an amount  equal to such  fraction  multiplied  by the
Current  Market Price of the Common Shares on the Business Day preceding the day
of conversion shall be paid to such holder in cash by the Corporation.

         (h) In case of any capital  reorganization or reclassification or other
change of outstanding  Common Shares,  or in case of any consolidation or merger
of the  Corporation  with or into another Person (other than (i) a consolidation
or merger in which the  resulting  entity is obligated and bound by this Article
of Amendment,  the Articles of the resulting  entity contain  identical terms in
such Articles regarding the Common Shares of the resulting entity and which does
not result in any  reclassification  or change of  outstanding  Common Shares or
(ii) a  transaction  described  in Section  7(d)(i)),  or in case of any sale or
other disposition to another Person of all or substantially all of the assets of
the Corporation (any of the foregoing,  a  "Transaction"),  the Corporation,  or
such  successor or  purchasing  Person,  as the case may be,  shall  execute and
deliver to each holder of  Preferred  Shares at least 10 Business  Days prior to
effecting any of the  foregoing  Transactions  a certificate  that the holder of
each Preferred Share then outstanding shall have the right thereafter to convert
such Preferred Share into the kind and amount of shares or other  securities (of
the Corporation or another issuer, the "Other  Securities")) or property or cash
receivable upon such Transaction by a holder of the number of Common Shares into
which such Preferred Shares could have been converted  immediately prior to such
Transaction.  Such certificate  shall provide for adjustments  which shall be as

                                        7

<PAGE>

nearly equivalent as may be practicable to the adjustments  provided for in this
Section 7. If, in the case of any such Transaction,  the Other Securities,  cash
or property receivable thereupon by a holder of Common Shares includes shares or
other  securities  of a Person  other than the  resulting  entity or  purchasing
Person and other than the  Corporation,  which  controls or is controlled by the
resulting  entity  or  purchasing  Person  or  which,  in  connection  with such
Transaction,  issues  Other  Securities,  other  property  or cash to holders of
Common Shares,  then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically acknowledge the obligations
of such successor or purchasing  Person and acknowledge its obligations to issue
such Other Securities, other property or cash to the holders of Preferred Shares
upon  conversion of the Preferred  Shares as provided  above.  The provisions of
this Section 7(h) and any equivalent  thereof in any such certificate  similarly
shall apply to successive Transactions.

         (i) The  Corporation  shall at all times reserve and keep available for
issuance  upon the  conversion  of the  Preferred  Shares,  such  number  of its
authorized but unissued Common Shares as will from time to time be sufficient to
permit the conversion of all outstanding  Preferred  Shares,  and shall take all
action  required to increase the  authorized  number of Common  Shares if at any
time there shall be insufficient authorized but unissued Common Shares to permit
such  reservation  or to permit  the  conversion  of all  outstanding  Preferred
Shares.

         (j) The issuance or delivery of certificates for Common Shares upon the
conversion of Preferred  Shares shall be made without  charge to the  converting
holder of Preferred  Shares for such  certificates  or for any tax in respect of
the  issuance or delivery of such  certificates  or the  securities  represented
thereby,  and such  certificates  shall be issued or delivered in the respective
names of, or (subject to compliance  with the  applicable  provisions of federal
and state  securities  laws) in such names as may be directed by, the holders of
the Preferred Shares converted;  provided,  however,  that the Corporation shall
not be required  to pay any tax which may be payable in respect of any  transfer
involved in the issuance and  delivery of any such  certificate  in a name other
than that of the holder of the Preferred Shares  converted,  and the Corporation
shall not be required to issue or deliver such  certificate  unless or until the
Person or Persons requesting the issuance or delivery thereof shall have paid to
the  Corporation  the  amount  of such  tax or  shall  have  established  to the
reasonable satisfaction of the Corporation that such tax has been paid.

         (k) If an offer is made to purchase  Common  Shares and the offer must,
by reason of applicable  securities  legislation or the  requirements of a stock
exchange on which the Common Shares are listed,  be made to all or substantially
all  holders  of Common  Shares  located  in a  province  of Canada in which the
requirement  applies,  the  holders  of  Preferred  Shares  shall be  given  the
opportunity  to  participate  in the offer  through  conversion of the Preferred
Shares into Common Shares; unless;

                  (i) an  identical  offer (in terms of price per  security  and
         percentage of  outstanding  securities  to be taken upon,  exclusive of
         securities  owned  immediately  prior  to the  bid by the  offeror,  or
         associates  or  affiliates  of the offeror,  and in all other  material
         respects) is made  concurrently  to purchase  Preferred  Shares,  which

                                        8

<PAGE>

         offer  has no  condition  attached  other than the right not to take up
         and  pay  for  securities  tendered  if  no  securities  are  purchased
         pursuant to the offer for Common Shares; or

                  (ii)  less  than  50%  of  the   Common   Shares   outstanding
         immediately  prior to the offer,  other than Common Shares owned by the
         offeror,  or associates  or  affiliates  of the offeror,  are deposited
         pursuant to the offer.

         Section 8.        Certain Remedies.

         Any  registered  holder of  Preferred  Shares  shall be  entitled to an
injunction or injunctions to prevent  breaches of the provisions of this Article
of  Amendment  and to  enforce  specifically  the terms and  provisions  of this
Article  of  Amendment  in any court of the United  States or any state  thereof
having  jurisdiction,  this being in addition to any other  remedy to which such
holder may be entitled at law or in equity.

         Section 9.        Additional Preferred Shares.

         While any Preferred Shares are outstanding,  the Corporation  shall not
issue any additional Common Shares or convertible securities,  rights, warrants,
options  or other  commitments  to issue  Common  Shares  unless,  prior to such
issuance,  the Corporation  declares and pays a dividend on the Preferred Shares
of a number of  Preferred  Shares  equal to the  number of Common  Shares  being
issued or the maximum  number of Common  Shares which may be issued  pursuant to
such convertible securities, rights, warrants, options or commitments; provided,
however,  the Corporation  shall not be required to issue  additional  Preferred
Shares in connection  with the issuance of Common Shares  pursuant to agreements
described in a Schedule to the Purchase Agreement.

         Section 10.       Definitions.

         For the  purposes of this Article of  Amendment,  the  following  terms
shall have the meanings indicated:

         "Business  Day"  shall mean any day other  than a  Saturday,  Sunday or
other day on which  commercial  banks in the City of New York are  authorized or
required by law or executive order to close.

         "Common  Shares"  shall  mean and  include  the  Common  Shares  of the
Corporation and each other class of capital stock of the  Corporation  that does
not have a preference  over any other class of capital stock of the  Corporation
as  to  dividends  or  upon  liquidation,  dissolution  or  winding  up  of  the
Corporation and, in each case, shall include any other class of capital stock of
the Corporation into which such shares are reclassified or reconstituted.

                                        9

<PAGE>

         "Current  Market  Price" per share  shall mean,  on any date  specified
herein for the determination  thereof, (a) the average daily Market Price of the
Common Shares for those days during the period of 20 days,  ending on such date,
which are  Trading  Days,  and (b) if the Common  Shares are not then  listed or
admitted  to  trading  on any  national  securities  exchange  or  quoted in the
over-the-counter market, the Market Price on such date.

         "Junior Shares" shall mean any capital stock of the Corporation ranking
junior (either as to dividends or upon  liquidation,  dissolution or winding up)
to the Preferred Shares including, without limitation, the Common Shares.

         "Liquidation  Amount" with respect to a Preferred  Share shall mean the
sum of (a) all declared and unpaid  dividends on such Preferred  Share,  and (b)
the sum of $10.00 divided by the number of Preferred  Shares  outstanding on the
applicable date.

         "Market  Price"  shall  mean,  per Common  Share on any date  specified
herein:  (a) the closing price per Common Share on the Canadian Venture Exchange
or other  principal  Canadian  stock  exchange  on which the  Common  Shares are
traded, stated in U.S. dollars at the then current noon buying rate for Canadian
dollars as certified by the New York Federal  Reserve Bank or (b) if there shall
have been no trading on such date or if the Common Shares are not so designated,
the average of the reported closing bid and asked prices of the Common Shares on
such date as shown by any  reputable  dealer in Common Shares as selected by the
Board of  Directors  of the  Corporation.  If none of (a) or (b) is  applicable,
Market Price shall mean a market price per share determined at the Corporation's
expense by an  appraiser  chosen by the holders of a majority  of the  Preferred
Shares or, if no such  appraiser  is so chosen  more than twenty  business  days
after notice of the necessity of such  calculation  shall have been delivered by
the Corporation to the holders of Preferred Shares,  then by an appraiser chosen
by the Corporation.

         "Person" shall mean any  individual,  firm,  corporation,  partnership,
trust,  incorporated or unincorporated  association,  limited liability company,
joint  venture,  joint  stock  company,  government  (or an agency or  political
subdivision  thereof)  or other  entity  of any  kind,  and  shall  include  any
successor (by merger) of such entity.

         "Purchase  Agreement"  shall mean the  Securities  Purchase  Agreement,
dated December 29, 1999,  between the  Corporation  and  Bellwether  Exploration
Company.

         "Trading  Day"  shall  mean  a day on  which  the  national  securities
exchanges are open for trading.

                                       10
<PAGE>

                                   Exhibit B               Final Execution Copy
                                       to
                          Securities Purchase Agreement
                             dated December 30, 1999

                                     WARRANT

                            CARPATSKY PETROLEUM INC.
                             an Alberta Corporation
                                 (the "Company")

                          To Purchase up to 12,500,000
                         of the Company's Common Shares

                                    issued to

                         Bellwether Exploration Company
                             a Delaware corporation
                                ("Warrantholder")

                                December 30, 1999

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED  STATES  SECURITIES  ACT OF 1933,  AS AMENDED (THE "1933  ACT").  THE
HOLDER  HEREOF,  BY PURCHASING  SUCH  SECURITIES,  AGREES FOR THE BENEFIT OF THE
COMPANY  THAT  SUCH  SECURITIES  MAY BE  OFFERED,  SOLD,  PLEDGED  OR  OTHERWISE
TRANSFERRED  ONLY (A) TO THE COMPANY (B) OUTSIDE THE UNITED STATES IN ACCORDANCE
WITH  REGULATION S UNDER THE 1933 ACT, IF APPLICABLE  (OR SUCH SUCCESSOR RULE OR
REGULATION AS THEN IN EFFECT),  (C) INSIDE THE UNITED STATES (1) PURSUANT TO THE
EXEMPTION FROM REGISTRATION  UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER,
IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (2) IN
A  TRANSACTION  THAT  DOES NOT  REQUIRE  REGISTRATION  UNDER THE 1933 ACT OR ANY
APPLICABLE  STATE SECURITIES LAWS, AND IN THE CASE OF A TRANSFER UNDER CLAUSE C,
THE HOLDER HAS PRIOR TO SUCH SALE FURNISHED TO THE COMPANY AN OPINION OF COUNSEL
OR OTHER  EVIDENCE  REASONABLY  SATISFACTORY  TO THE  COMPANY.  DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE  "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON
STOCK  EXCHANGES IN CANADA.  UPON RECEIPT OF A CERTIFICATE OF THE HOLDER IN FORM
SATISFACTORY  TO THE  COMPANY,  INDICATING  THE  HOLDER  WILL  COMPLY  WITH  THE
REQUIREMENTS  OF REGULATION S IN CONNECTION  WITH THE SALE OF THE SECURITIES THE
COMPANY  WILL  DIRECT THE  TRANSFER  AGENT TO REMOVE  THIS LEGEND TO PERMIT GOOD
DELIVERY OF THE SECURITIES.  IN ADDITION,  THE SECURITIES REPRESENTED HEREBY MAY
NOT BE TRANSFERRED UNTIL DECEMBER 29, 2000, EXCEPT PURSUANT TO AN EXEMPTION FROM
THE PROSPECTUS REQUIREMENTS OF THE SECURITIES ACT (ALBERTA).

===============================================================================

<PAGE>

                                TABLE OF CONTENTS
                                                                           Page

ARTICLE I.  EXERCISE OF WARRANT...............................................1
         Section 1.1.      Manner of Exercise.................................1
         Section 1.2.      When Exercise Effective............................1
         Section 1.3.      Delivery of Share Certificates, etc................2
                  (a)      Certificates.......................................2
                  (b)      Partial Exercise...................................2

ARTICLE II. ADJUSTMENT OF COMMON SHARES ISSUABLE UPON EXERCISE................2
         Section 2.1.      General; Warrant Price.............................2
         Section 2.2.      Share Dividends....................................2
         Section 2.3.      Rights, Options and Warrants.......................3
         Section 2.4.      Subdivisions.......................................3
         Section 2.5.      Certain Non-Cash Distributions.....................4
         Section 2.6.      Certain Cash Distributions.........................4
         Section 2.7.      Certain Tender Offers..............................5
         Section 2.8.      Reclassification...................................6
         Section 2.9.      Certain Calculations...............................6
         Section 2.10.     Size of Adjustments................................6
         Section 2.11.     Permitted Increases................................7
         Section 2.12.     Notice of Adjustments of Warrant Price.............7
         Section 2.13.     Notice of Certain Corporate Action.................7
         Section 2.14.     Company to Reserve Common Shares...................8
         Section 2.15.     Taxes on Conversions...............................8
         Section 2.16.     Covenant as to Common Shares.......................8

ARTICLE III.  CONSOLIDATION, MERGER, ETC......................................8
         Section 3.1.      Consolidation, Merger, Sale of Assets,
                           Reorganization, etc................................9
         Section 3.2.      Assumption of Obligations..........................9

ARTICLE IV.  OTHER PROVISIONS CONCERNING DILUTION.............................9
         Section 4.1.      No Dilution or Impairment..........................9
         Section 4.2.      Registration of Common Shares.....................10
         Section 4.3.      Availability of Information.......................10
         Section 4.4.      Reservation of Shares, etc........................10

ARTICLE V.  RESTRICTIONS ON TRANSFER.........................................11
         Section 5.1.      Restrictive Legends...............................11
         Section 5.2.      Notice of Proposed Transfer; Opinions of Counsel..12
         Section 5.3.      Termination of Restrictions.......................12

                                       (i)

<PAGE>

ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.................13
         Section 6.1.      Ownership of Warrants.............................13
         Section 6.2.      Office, Transfer and Exchange of Warrants.........13
                  (a)      Office............................................13
                  (b)      New Warrant.......................................13
         Section 6.3.      Replacement of Warrants...........................13

ARTICLE VII.  DEFINITIONS....................................................14

ARTICLE VIII. MISCELLANEOUS..................................................15
         Section 8.1.      Remedies..........................................15
         Section 8.2.      No Rights or Liabilities as Shareholder...........15
         Section 8.3.      Notices...........................................16
         Section 8.5.      Miscellaneous.....................................16

                                      (ii)

<PAGE>

                            CARPATSKY PETROLEUM INC.

                                     Warrant

No. W-2                                                       December 30, 1999

         Carpatsky Petroleum Inc., an Alberta  corporation (the "Company"),  for
value  received,  hereby  certifies  that,  subject to Section  8.6,  Bellwether
Exploration  Company,  a  Delaware  corporation  ("Bellwether"),  or  registered
assigns,  is  entitled  to  purchase  from the  Company  up to  12,500,000  duly
authorized,  validly issued,  fully paid and  non-assessable  common shares (the
"Common  Shares") at any time or from time to time prior to 5:00 p.m.,  Houston,
Texas  time,  on the  Expiration  Date,  all  subject to terms,  conditions  and
adjustments set forth in this Warrant.

         Certain  capitalized  terms used in this Warrant are defined in Article
VII;  unless  otherwise  specified,  references to an "Exhibit"  mean one of the
exhibits  attached to this Warrant,  references to an "Article"  mean one of the
articles in this Warrant and  references to a "Section" mean one of the sections
of this Warrant.

                         ARTICLE I. EXERCISE OF WARRANT

         Section 1.1.  Manner of Exercise.  This Warrant may be exercised by the
holder hereof,  in whole or in part,  from time to time,  during normal business
hours on any  Business  Day, by  surrender of this Warrant to the Company at its
office  maintained  pursuant to subsection (a) of Section 6.2,  accompanied by a
subscription in substantially the form attached to this Warrant (or a reasonable
facsimile  thereof) duly executed by such holder and accompanied by payment,  in
cash or by certified or official  bank check payable to the order of the Company
in the amount  obtained by multiplying  (a) the number of Common Shares (without
giving effect to any adjustment  thereof) designated in such subscription by (b)
U.S. $0.20, and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and non-assessable Common Shares (or
Other Securities) determined as provided in Articles II through IV.

         Section 1.2.  When  Exercise  Effective.  Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the  Business Day on which this Warrant  shall have been  surrendered  to the
Company as  provided in Section  1.1,  and at such time the Person or Persons in
whose name or names any certificate or certificates  for Common Shares (or Other
Securities)  shall be  issuable  upon such  exercise  as provided in Section 1.3
shall be deemed to have become the holder or holders of record thereof.

         Section  1.3.  Delivery  of  Share   Certificates,   etc.  As  soon  as
practicable after each exercise of this Warrant, in whole or in part, and in any
event  within  five  Business  Days  thereafter,  the  Company,  at its  expense
(including  the payment by it of any applicable  issue taxes),  will cause to be
issued in the name of and delivered to the holder hereof,  subject to Article V,
as such holder (upon payment by such holder of any  applicable  transfer  taxes)
may direct, the following:

                                        1

<PAGE>

                  (a) Certificates. A certificate or certificates for the number
         of duly  authorized,  validly  issued,  fully  paid and  non-assessable
         Common  Shares  (or Other  Securities)  to which such  holder  shall be
         entitled upon such exercise  plus, in lieu of any  fractional  share to
         which such holder would otherwise be entitled,  cash in an amount equal
         to the same  fraction of the market price per share on the Business Day
         next preceding the date of such exercise.

                  (b) Partial Exercise. In case such exercise is in part only, a
         new Warrant or Warrants of like tenor dated the date hereof, calling in
         the  aggregate  on the face or faces  thereof  for the number of Common
         Shares equal (without  giving effect to any adjustment  thereof) to the
         number of such shares  called for on the face of this Warrant minus the
         number of such shares  designated  by the holder upon such  exercise as
         provided in Section 1.1.

         ARTICLE II. ADJUSTMENT OF COMMON SHARES ISSUABLE UPON EXERCISE

         Section 2.1. General;  Warrant Price. The number of Common Shares which
the holder of this  Warrant  shall be  entitled  to receive  upon each  exercise
hereof shall be  determined  by  multiplying  the number of Common  Shares which
would be  issuable  upon such  exercise,  as  designated  by the  holder  hereof
pursuant to Section 1.1, by a fraction (a) the numerator of which is U.S.  $0.20
and (b) the denominator of which is the Warrant Price in effect at the effective
time of such  exercise (as provided in Section 1.2).  The "Warrant  Price" shall
initially be U.S.  $0.20,  shall be adjusted and readjusted from time to time as
provided in this Article II and, as so adjusted or  readjusted,  shall remain in
effect until a further  adjustment or  readjustment  thereof is required by this
Article II.

         Section 2.2. Share  Dividends.  In case the Company shall pay or make a
dividend  or other  distribution  on any class of capital  stock of the  Company
payable in Common Shares, the Warrant Price in effect at the opening of business
on the day  following  the date  fixed  for the  determination  of  shareholders
entitled  to receive  such  dividend or other  distribution  shall be reduced by
multiplying such Warrant Price by a fraction of which the numerator shall be the
number of Common Shares  outstanding  at the close of business on the date fixed
for such  determination  and the denominator  shall be the sum of such number of
shares  and the total  number  of shares  constituting  such  dividend  or other
distribution, such increase to become effective immediately after the opening of
business on the day  following  the date fixed for such  determination.  For the
purposes  of  this  Section  2.2,  the  number  of  Common  Shares  at any  time
outstanding  shall not include  shares  held in the  treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions  of Common  Shares.  The Company will not pay any dividend or make any
distribution on Common Shares held in the treasury of the Company.

         Section 2.3.  Rights,  Options and Warrants.  In case the Company shall
issue rights,  options or warrants to all holders of its Common Shares entitling
them to subscribe  for or purchase  Common Shares at a price per share less than
the current  market  price per Common Share  (determined  as provided in Section
2.9) on the date fixed for the determination of shareholders entitled to receive
such rights, options or  warrants, the Warrant Price in effect at the opening of

                                        2

<PAGE>

business on the day  following  the date fixed for such  determination  shall be
reduced by  multiplying  such Warrant Price by a fraction of which the numerator
shall be the number of Common Shares outstanding at the close of business on the
date fixed for such  determination  plus the number of Common  Shares  which the
aggregate of the offering  price of the total number of Common Shares so offered
for subscription or purchase would purchase at such current market price and the
denominator  shall be the number of Common  Shares  outstanding  at the close of
business  on the date  fixed for such  determination  plus the  number of Common
Shares so  offered  for  subscription  or  purchase,  such  reduction  to become
effective  immediately  after the opening of business on the day  following  the
date fixed for such  determination.  For the  purposes of this  Section 2.3, the
number of Common Shares at any time outstanding shall not include shares held in
the  treasury  of the Company but shall  include  shares  issuable in respect of
scrip  certificates  issued in lieu of fractions of Common  Shares.  The Company
will not issue any rights,  options or warrants in respect of Common Shares held
in the  treasury  of the  Company.  To the extent  that any  rights,  options or
warrants  are not so issued or any such  rights,  options  or  warrants  are not
exercised  prior to the  expiration  thereof,  the  Warrant  Price shall then be
readjusted  to the Warrant  Price  which would then be in effect  based upon the
number of Common Shares actually issued upon the exercise of such rights, option
or warrants.

         Section 2.4.  Subdivisions.  In case outstanding Common Shares shall be
subdivided  into a greater number of Common Shares,  the Warrant Price in effect
at the  opening  of  business  on the day  following  the day  upon  which  such
subdivision becomes effective shall be proportionately reduced, and, conversely,
in case  outstanding  Common Shares shall each be combined into a smaller number
of Common Shares,  the Warrant Price in effect at the opening of business on the
day following the day upon which such  combination  becomes  effective  shall be
proportionately  increased,  such increase or reduction,  as the case may be, to
become effective  immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.

         Section 2.5. Certain Non-Cash Distributions. In case the Company shall,
by  dividend  or  otherwise,  distribute  to all  holders of its  Common  Shares
evidences of its  indebtedness,  shares of any class of capital stock,  or other
property (including cash and securities,  but excluding (i) any rights,  options
or warrants  referred to in Section 2.3,  and (ii) any dividend or  distribution
referred to in Section 2.2), the Warrant Price shall be reduced so that the same
shall equal the rate  determined  by  multiplying  the  Warrant  Price in effect
immediately  prior  to  the  close  of  business  on  the  date  fixed  for  the
determination  of  shareholders  entitled  to  receive  such  distribution  by a
fraction of which the  numerator  shall be the current  market  price per Common
Share  (determined  as  provided  in  Section  2.9) on the date  fixed  for such
determination  (the  "Reference  Date")  less the then  fair  market  value  (as
determined by the Board of Directors,  whose  determination  shall be conclusive
and described in an certificate  delivered to the holders) on the Reference Date
of the portion of the assets, shares or evidences of indebtedness so distributed
applicable to one Common Share and the  denominator  shall be the current market
price  per  Common  Share on the  Reference  Date,  such  adjustment  to  become
effective  immediately prior to the opening of business on the day following the
Reference Date.

                                        3

<PAGE>

         Section 2.6. Certain Cash Distributions.  In case the Company shall, by
dividend  or  otherwise,  distribute  to all  holders of its Common  Shares cash
(excluding any cash that is distributed as part of a distribution referred to in
Section  2.5) in an  aggregate  amount  that,  combined  together  with  (i) the
aggregate  amount of any other cash  distributions  to all holders of its Common
Shares  made  exclusively  in cash  within the 12 months  preceding  the date of
payment of such  distribution and in respect of which no adjustment  pursuant to
this Section 2.6 has been made and (ii) the  aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose determination shall
be  conclusive  and  described  in a resolution  of the Board) of  consideration
payable in respect of any tender offer by the Company or any of its subsidiaries
for all or any  portion  of the  Common  Shares  concluded  within the 12 months
preceding  the date of payment of such  distribution  and in respect of which no
adjustment  pursuant to Section 2.7 has been made (the "combined cash and tender
amount"),  exceeds  15% of the  product of the  current  market  price per share
(determined as provided in Section 2.9) of the Common Shares on the date for the
determination of holders of Common Shares entitled to receive such  distribution
times the  number  of Common  Shares  outstanding  on such date (the  "aggregate
current market price"), then, and in each such case, immediately after the close
of business on such date for  determination,  the Warrant Price shall be reduced
so that the same shall  equal the rate  determined  by  multiplying  the Warrant
Price in effect immediately prior to the close of business on the date fixed for
determination  of the  shareholders  entitled to receive such  distribution by a
fraction (i) the  numerator of which shall be equal to the current  market price
per Common Share  (determined  as provided in Section 2.9) on the date fixed for
such  determination  less an amount  equal to the  quotient of (x) the excess of
such combined cash and tender amount over 15% of such  aggregate  current market
price  divided by (y) the number of Common Shares  outstanding  on such date for
determination  and (ii) the  denominator  of which shall be equal to the current
market  price per Common Share  (determined  as provided in Section 2.9) on such
date for determination.

         Section 2.7. Certain Tender Offers.  In case a tender offer made by the
Company or any  Subsidiary  for all or any  portion of the Common  Shares  shall
expire  and such  tender  offer or  exchange  (as  amended  upon the  expiration
thereof) shall require the payment to shareholders  (based on the acceptance (up
to any maximum  specified in the terms of the tender offer) of Purchased  Shares
(as defined below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors,  whose  determination  shall be conclusive
and described in a resolution of the Board of Directors) that combined  together
with (i) the aggregate of the cash plus the fair market value (as  determined by
the Board of Directors, whose determination shall be conclusive and described in
a Board  Resolution),  as of the expiration of such tender or exchange offer, of
consideration  payable in respect of any other  tender or exchange  offer by the
Company or any Subsidiary  for all or any portion of the Common Shares  expiring
within the 12 months  preceding the  expiration of such tender or exchange offer
and in respect of which no adjustment pursuant to this Section 2.7 has been made
and (ii) the aggregate  amount of any cash  distributions  to all holders of the
Company's Common Shares within 12 months preceding the expiration of such tender
or exchange offer and in respect of which no adjustment  pursuant to Section 2.6
has been made (the "combined tender and cash amount") exceeds 15% of the product
of the current market price per Common Share  (determined as provided in Section
2.9) as of the last time (the "Expiration Time") tenders or exchanges could have
been made

                                        4

<PAGE>

pursuant  to such  tender or  exchange  offer (as it may be  amended)  times the
number of Common Shares outstanding (including any tendered or exchanged shares)
as of the Expiration Time, then, and in each such case, immediately prior to the
opening  of  business  on the day after  the date of the  Expiration  Time,  the
Warrant Price shall be reduced so that the same shall equal the rate  determined
by multiplying the Warrant Price  immediately  prior to close of business on the
date of the  Expiration  Time by a fraction (i) the  numerator of which shall be
equal to (A) the  product  of (i) the  current  market  price per  Common  Share
(determined as provided in this Section 2.9 on the date of the  Expiration  Time
multiplied  by (ii) the  number  of Common  Shares  outstanding  (including  any
tendered or exchanged  shares) on the date of the  Expiration  Time less (B) the
combined  tender and cash  amount,  and (ii) the  denominator  of which shall be
equal  to the  product  of  (A)  the  current  market  price  per  Common  Share
(determined as provided in Section 2.9) as of the Expiration  Time multiplied by
(B) the number of Common Shares outstanding (including any tendered or exchanged
shares) as of the Expiration Time less the number of all shares validly tendered
or exchanged and not withdrawn as of the  Expiration  Time (the shares deemed so
accepted up to any such maximum, being referred to as the "Purchased Shares").

         Section 2.8.  Reclassification.  The  reclassification of Common Shares
into  securities  other than  Common  Shares  shall be deemed to  involve  (a) a
distribution  of such  securities  other than  Common  Shares to all  holders of
Common Shares (and the effective date of such  reclassification  shall be deemed
to be "the date fixed for the determination of shareholders  entitled to receive
such  distribution"  and "the date  fixed  for such  determination"  within  the
meaning of Section 2.5), and (b) a subdivision or  combination,  as the case may
be,  of  the  number  Common  Shares  outstanding   immediately  prior  to  such
reclassification   into  the  number  Common  Shares   outstanding   immediately
thereafter (and the effective date of such  reclassification  shall be deemed to
be "the day upon  which such  subdivision  becomes  effective"  or "the day upon
which such combination becomes effective", as the case may be, and "the day upon
which such subdivision or combination  becomes  effective" within the meaning of
Section 2.4).

         Section 2.9. Certain  Calculations.  For the purpose of any computation
under  Sections 2.3, 2.5, 2.6 or 2.7, the current  market price per Common Share
on any date shall be  calculated  by the Company and be deemed to be the average
of the daily  closing  prices per share for the five  consecutive  Trading  Days
selected by the Company  commencing  not more than 10 Trading Days  before,  and
ending not later than, the earlier of the day in question and the day before the
"ex"  date  with  respect  to  the  issuance  or  distribution   requiring  such
computation.  For purposes of this  paragraph,  the term "'ex' date",  when used
with respect to any issuance or distribution,  means the first date on which the
Common Shares trade regular way in the  applicable  securities  market or on the
applicable  securities  exchange  without the right to receive such  issuance or
distribution.

         Section 2.10. Size of  Adjustments.  No adjustment in the Warrant Price
shall be required  unless such  adjustment  (plus any adjustments not previously
made by reason of this Section 2.10) would require an increase or decrease of at
least one percent in such rate; provided, however, that any adjustments which by
reason  of  this  Section  2.10 are  not required  to be  made shall  be carried

                                        5

<PAGE>

forward and taken into account in any subsequent  adjustment.  All  calculations
under  this  Section  shall  be  made  to the  nearest  cent  or to the  nearest
one-hundredth of a share, as the case may be.

         Section 2.11. Permitted Increases.  The Company may make such increases
in the Warrant  Price,  for the remaining  term of the Securities or any shorter
term, in addition to those required  herein,  as it considers to be advisable in
order to avoid or  diminish  any  income  tax to any  holders  of Common  Shares
resulting from any dividend or  distribution  of shares or issuance of rights or
warrants to purchase or subscribe  for shares or from any event  treated as such
for income tax purposes.

         Section 2.12.  Notice of  Adjustments  of Warrant  Price.  Whenever the
Warrant  Price is adjusted as herein  provided  the  Company  shall  compute the
adjusted  Warrant  Price in  accordance  with this  Article and shall  prepare a
certificate  signed by the  principal  accounting  or  financial  officer of the
Company  setting  forth the  adjusted  Warrant  Price and showing in  reasonable
detail the facts upon which such adjustment is based, and such certificate shall
promptly be sent to the Lender.

         Section 2.13.     Notice of Certain Corporate Action.  In case:

                  (a) the  Company  shall  declare  a  dividend  (or  any  other
         distribution)   on  its  Common  Shares   payable  (i)  otherwise  than
         exclusively in cash or (ii) exclusively in cash in an amount that would
         require any adjustment pursuant to Section 2.3 through 2.8; or

                  (b) the Company shall authorize the granting to the holders of
         its Common Shares generally of rights, options or warrants to subscribe
         for or  purchase  any  shares of  capital  stock of any class or of any
         other rights; or

                  (c)  of  any  reclassification  of the  Common  Shares  of the
         Company, or of any consolidation, merger or share exchange to which the
         Company is a party and for which  approval of any  shareholders  of the
         Company is required,  or of the conveyance,  sale, transfer or lease of
         all or substantially all of the assets of the Company; or

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

                  (e) the  Company  or any  Subsidiary  shall  commence a tender
         offer for all or a portion of the Company's  outstanding  Common Shares
         (or shall amend any such tender offer);

then the Company  shall  deliver to the holder of this  Warrant at least 20 days
(or 10 days in any case  specified  in  clause  (a) or (b)  above)  prior to the
applicable record,  expiration or effective date hereinafter specified, a notice
stating  (x) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution,  rights, options or warrants, or, if a record is not to
be taken,  the date as of which  the  holders  of Common  Shares of record to be
entitled to such dividend,  distribution,  rights, options or warrants are to be
determined,  (y) the date on which the right to make  tenders  under such tender

                                        6

<PAGE>

offer  expires  or (z) the date on which such  reclassification,  consolidation,
merger, conveyance,  transfer, sale, lease, dissolution,  liquidation or winding
up is expected to become effective, and the date as of which it is expected that
holders of Common  Shares of record  shall be entitled to exchange  their Common
Shares  for   securities,   cash  or  other  property   deliverable   upon  such
reclassification,  consolidation,  merger,  conveyance,  transfer,  sale, lease,
dissolution,  liquidation or winding up. Neither the failure to give such notice
or the notice  referred to in the  following  paragraph  nor any defect  therein
shall  affect the legality or validity of the  proceedings  described in clauses
(a) through (e) of this Section 2.13.

         Section 2.14.  Company to Reserve Common  Shares.  The Company shall at
all times reserve and keep available,  free from preemptive  rights,  out of its
authorized  but  unissued  Common  Shares,  for the  purpose  of  effecting  the
conversion  of  Securities,  the full number of Common Shares then issuable upon
the exercise of this Warrant.

         Section  2.15.  Taxes on  Conversions.  Except as  provided in the next
sentence,  the Company will pay any and all taxes and duties that may be payable
in  respect  of the issue or  delivery  of Common  Shares  on  exercise  of this
Warrant.  The  Company  shall not,  however,  be required to pay any tax or duty
which may be payable in respect of (i) income of the holder or (ii) any transfer
involved in the issue and delivery of Common Shares in a name other than that of
the  holder,  and no such issue or  delivery  shall be made unless and until the
Person  requesting such issue has paid to the Company the amount of any such tax
or duty, or has established to the  satisfaction of the Company that such tax or
duty has been paid.

         Section 2.16. Covenant as to Common Shares. The Company agrees that all
Common Shares which may be delivered upon exercise of this Warrant will be newly
issued  shares  and,  upon such  delivery,  will have been duly  authorized  and
validly issued and will be fully paid and nonassessable  and, except as provided
in Section 2.15, the Company will pay all taxes,  liens and charges with respect
to the issue thereof.

                    ARTICLE III. CONSOLIDATION, MERGER, ETC.

         Section 3.1.  Consolidation,  Merger,  Sale of Assets,  Reorganization,
etc. From and after the date hereof,  the Company shall not (a) consolidate with
or merge  into any  other  Person  if the  resulting  entity is not bound by and
obligated  to comply  with the terms of this  Warrant,  or (b)  permit any other
Person to consolidate with or merge into the Company if, in connection with such
consolidation or merger,  the Common Shares or Other Securities shall be changed
into or exchanged for shares or other securities of any other Person (unless the
Common Shares or Other Securities are converted into the shares of the resulting
entity and the terms of the articles of  incorporation  pertaining to the Common
Shares or Other Securities of the resulting entity are identical to the articles
of incorporation of the Company) or cash or any other property,  or (c) transfer
all or substantially all of its properties or assets to any other Person, or (d)
effect a capital  reorganization  or  reclassification  of the Common  Shares or
Other  Securities  (other  than a  capital  reorganization  or  reclassification
resulting in  adjustment  in the Warrant Price is provided in Article II) unless

                                        7

<PAGE>

the Company  provides the holder of this Warrant  written notice of the proposed
transaction 10 days prior to any record date for notice to shareholders entitled
to vote on such  transaction  or, if no such vote is taken, 20 days prior to the
effective date or closing of the transaction.

         Section 3.2.  Assumption  of  Obligations.  If any of the  transactions
described in Section 3.1 are  consummated,  the holder of this Warrant  shall be
entitled to receive,  following  such  transaction,  the Common  Shares or Other
Securities  that such holder would have been entitled to receive had such holder
exercised  such  Warrant  immediately  prior  to  the  effective  time  of  such
transaction.  If the transaction described in Section 3.1 provides that a holder
of Common  Shares may elect to receive  different  forms of  consideration,  the
holder  shall,  by  notice  to the  Company,  be  entitled  to elect the type of
consideration to be received and, if the holder fails to make such election, the
Company may make such election  acting in good faith.  Notwithstanding  anything
contained  in this Warrant to the  contrary,  the Company will not effect any of
the  transactions  described  in clauses  (a) through (d) of Section 3.1 unless,
prior to the  consummation  thereof,  each Person (other than the Company) which
may be required to deliver any  shares,  securities,  cash or property  upon the
exercise of this Warrant as provided herein shall assume, by written  instrument
delivered to, and reasonably  satisfactory  to, the holder of this Warrant,  (a)
the  obligations  of the Company  under this Warrant  (and if the Company  shall
survive  the  consummation  of such  transaction,  such  assumption  shall be in
addition to, and shall not release the Company from, any continuing  obligations
of the Company  under this  Warrant) and (b) the  obligation  to deliver to such
holder such  shares,  securities,  cash or property as, in  accordance  with the
foregoing  provisions  of this  Article  III,  such  holder may be  entitled  to
receive.

                ARTICLE IV. OTHER PROVISIONS CONCERNING DILUTION

         Section  4.1.  No  Dilution or  Impairment.  The  Company  will not, by
amendment of its articles of incorporation or through any consolidation, merger,
reorganization,  transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this  Warrant,  but will at all times in the carrying out
of all such terms and in the taking of all such  action as may be  necessary  or
appropriate in order to protect the rights of the holder of this Warrant against
dilution or other impairment.  Without limiting the generality of the foregoing,
the Company  will take all such action as may be  necessary  or  appropriate  in
order  that  the  Company   may  validly  and  legally   issue  fully  paid  and
nonassessable  Common  Shares on the  exercise of the Warrant  from time to time
outstanding, and will not take any action which results in any adjustment of the
Warrant  Price if the  total  number  of Common  Shares  (or  Other  Securities)
issuable  after the action upon the  exercise of the  Warrant  would  exceed the
total  number of Common  Shares (or Other  Securities)  then  authorized  by the
Company's  articles of  incorporation  and available for the purpose of issuance
upon such exercise.

     Section 4.2.  Registration of Common Shares.  If any Common Shares required
to be reserved  for purposes of exercise of this  Warrant  require  registration
with or  approval  of any  governmental  authority  under any U.S.  or  Canadian

                                        8

<PAGE>

federal,  state or provincial  law (other than the  Securities  Act) before such
shares may be issued  upon  exercise,  the Company  will,  at its expense and as
expeditiously as possible,  use its best efforts to cause such shares to be duly
registered  or approved,  as the case may be. At any such time as Common  Shares
are listed on any securities  exchange,  the Company will, at its expense,  list
the Common Shares issuable upon exercise of the Warrant and maintain the listing
of such shares  after  their  issuance;  and the Company  will also list on such
securities  exchange,  [will  register under the Exchange Act] and will maintain
such  listing  of,  any  Other  Securities  that at any time are  issuable  upon
exercise of the  Warrants,  if and at the time that any  securities  of the same
class shall be listed on such securities exchange by the Company.

         Section 4.3.  Availability of  Information.  The Company will cooperate
with  each  holder of any  Warrant,  in  supplying  such  information  as may be
reasonably  requested  by such  holder  to  complete  and file  any  information
reporting forms presently or hereafter  required by the Commission or the ASC to
report such holders beneficial ownership of Common Shares or Other Securities or
as a condition to the  availability  of an exemption  from the provisions of the
Securities  Act (Alberta) or the  Securities  Act for the sale of any Restricted
Securities.

         Section 4.4.  Reservation of Shares, etc. The Company will at all times
reserve and keep  available,  solely for issuance and delivery  upon exercise of
the  Warrants,  the number of Common Shares (or Other  Securities)  from time to
time  issuable  upon  exercise  of the  Warrant.  All  Common  Shares  (or Other
Securities)  issuable upon exercise of the Warrant shall be duly authorized and,
when  issued  upon such  exercise,  shall be validly  issued and, in the case of
shares,  fully  paid and  non-assessable  with no  liability  on the part of the
holders thereof.

                       ARTICLE V. RESTRICTIONS ON TRANSFER

         Section 5.1. Restrictive Legends. Except as otherwise permitted by this
Article  V, this  Warrant  and any shares  acquired  upon the  exercise  of this
Warrant have not been  registered  under the Securities Act of 1933, as amended,
and may not be transferred, sold or otherwise disposed of in the absence of such
registration or an exemption therefrom under such Act. In addition, this Warrant
and any shares acquired upon the exercise of this Warrant may not be transferred
until  one year from the date of  issuance  of  Warrant  except  pursuant  to an
exemption from the prospectus requirements of the Securities Act (Alberta). This
Warrant  and  such  Shares  may be  transferred  only  in  compliance  with  the
conditions specified in this Warrant.

         Each Warrant  issued upon the transfer of any Warrant  shall be stamped
or otherwise imprinted with a legend containing the foregoing restrictions.

         Except as otherwise  permitted by this Article V, each  certificate for
Common Shares (or Other Securities) issued upon the exercise of any Warrant, and
each  certificate  issued upon the transfer of any such Common  Shares (or Other
Securities),   shall  be  stamped  or  otherwise  imprinted  with  a  legend  in
substantially the following form:

                                        9

<PAGE>

         THE  SECURITIES  REPRESENTED  HEREBY  HAVE  NOT  BEEN  AND  WILL NOT BE
         REGISTERED  UNDER THE UNITED STATES  SECURITIES ACT OF 1933, AS AMENDED
         (THE "1933 ACT").  THE HOLDER HEREOF,  BY PURCHASING  SUCH  SECURITIES,
         AGREES  FOR THE  BENEFIT OF THE  COMPANY  THAT SUCH  SECURITIES  MAY BE
         OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY
         (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE
         1933 ACT, IF APPLICABLE  (OR SUCH  SUCCESSOR RULE OR REGULATION AS THEN
         IN EFFECT),  (C) INSIDE THE UNITED STATES (1) PURSUANT TO THE EXEMPTION
         FROM  REGISTRATION  UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER,
         IF AVAILABLE,  AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS,
         OR (2) IN A TRANSACTION  THAT DOES NOT REQUIRE  REGISTRATION  UNDER THE
         1933 ACT OR ANY APPLICABLE  STATE SECURITIES LAWS, AND IN THE CASE OF A
         TRANSFER UNDER CLAUSE C, THE HOLDER HAS PRIOR TO SUCH SALE FURNISHED TO
         THE  COMPANY  AN  OPINION  OF  COUNSEL  OR  OTHER  EVIDENCE  REASONABLY
         SATISFACTORY  TO THE  COMPANY.  DELIVERY  OF THIS  CERTIFICATE  MAY NOT
         CONSTITUTE  "GOOD  DELIVERY" IN  SETTLEMENT  OF  TRANSACTIONS  ON STOCK
         EXCHANGES  IN CANADA.  UPON RECEIPT OF A  CERTIFICATE  OF THE HOLDER IN
         FORM  SATISFACTORY  TO THE COMPANY,  INDICATING  THE HOLDER WILL COMPLY
         WITH THE  REQUIREMENTS  OF REGULATION S IN CONNECTION  WITH THE SALE OF
         THE  SECURITIES  THE COMPANY WILL DIRECT THE  TRANSFER  AGENT TO REMOVE
         THIS LEGEND TO PERMIT GOOD DELIVERY OF THE SECURITIES. IN ADDITION, THE
         SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNTIL DECEMBER 29,
         2000, EXCEPT PURSUANT TO AN EXEMPTION FROM THE PROSPECTUS  REQUIREMENTS
         OF THE SECURITIES ACT (ALBERTA).

         Section 5.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any  Restricted  Securities  which are not  registered  under an
effective  registration  statement under the Securities Act, the holder thereof,
will give  written  notice to the Company of such  holder's  intention to effect
such  transfer and to comply in all other  respects  with this Section 5.2. Each
such notice (a) shall  describe  the manner and  circumstances  of the  proposed
transfer and (b) if requested by the Company,  shall include an opinion of legal
counsel addressed to the Company, in form and substance reasonably  satisfactory
to the Company,  to the effect that such  transfer  does not violate the Act and
applicable state or provincial securities laws.

         Section 5.3.  Termination of Restrictions.  The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease and
terminate as to any particular  Restricted Securities when such securities shall
have been sold pursuant to an effective registration statement under the Act and
a prospectus  under the  Securities  Act  (Alberta) or otherwise  become  freely

                                       10

<PAGE>

transferable by the holder thereof.  Whenever such restrictions  shall cease and
terminate as to any Restricted Securities,  the holder thereof shall be entitled
to receive from the Company,  without  expense (other than  applicable  transfer
taxes,  if any), new  certificates  representing  the securities not bearing the
applicable legends required by Section 5.1.

               ARTICLE VI. OWNERSHIP, TRANSFER AND SUBSTITUTION OF
                                    WARRANTS

         Section 6.1. Ownership of Warrants. The Company may treat the person in
whose name any Warrant is  registered  on the register kept at the office of the
Company  maintained  pursuant to subdivision (a) of Section 6.2 as the owner and
holder  thereof for all  purposes,  notwithstanding  any notice to the contrary,
except that, if and when any Warrant is properly  assigned in blank, the Company
may (but shall not be  obligated  to) treat the  bearer  thereof as the owner of
such  Warrant  for all  purposes,  notwithstanding  any notice to the  contrary.
Subject to Article V, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.

         Section 6.2.      Office, Transfer and Exchange of Warrants.

                  (a) Office. The Company will maintain an office where notices,
presentations  and demands in respect of this  Warrant may be made upon it. Such
office shall be maintained at 6671 Southwest Freeway,  Suite 303, Houston, Texas
77074 until such time as the Company  shall notify each holder of the Warrant of
any change of location of such office.

                  (b) New Warrant.  Upon the surrender of any Warrant,  properly
endorsed,  for  registration  of transfer  or for  exchange at the office of the
Company maintained  pursuant to subdivision (a) of this Section 6.2, the Company
at its  expense  will  (subject to  compliance  with  Article V, if  applicable)
execute and deliver to or upon the order of the holder  thereof a new Warrant or
Warrants  of like  tenor,  in the name of such  holder or as such  holder  (upon
payment by such holder of any applicable transfer taxes) may direct,  calling in
the  aggregate  on the face or faces  thereof  for the  number of Common  Shares
called for on the face or faces of the Warrant or Warrants so surrendered.

         Section  6.3.  Replacement  of  Warrants.   Upon  receipt  of  evidence
reasonably  satisfactory  to the  Company  of the loss,  theft,  destruction  or
mutilation  of any  Warrant  and,  in  the  case  of any  such  loss,  theft  or
destruction,  upon delivery of indemnity reasonably  satisfactory to the Company
in form and amount or, in the case of any such  mutilation,  upon  surrender  of
such Warrant for cancellation at the office of the Company  maintained  pursuant
to  subdivision  (a) of Section 6.2, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

                                       11

<PAGE>

                            ARTICLE VII. DEFINITIONS

         As used herein,  unless the context otherwise  requires,  the following
terms have the following respective meanings:

         ASC: The Alberta Securities Commission.

         Business  Day:  Any day other than a  Saturday  or a Sunday or a day on
which commercial banking  institutions in the States of Texas or the province of
Alberta are  authorized  by law to be closed.  Any  reference to "days"  (unless
Business Days are specified) shall mean calendar days.

         Commission:  The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

         Common Shares:  As defined in the  introduction  to this Warrant,  such
term to include  (i) any shares into which such  Common  Shares  shall have been
changed or any shares resulting from any reclassification of such Common Shares,
(ii) all other  shares  of any  class or  classes  (however  designated)  of the
Company the holders of which have the right,  without  limitation  as to amount,
either to all or to a share of the balance of current  dividends and liquidating
dividends  after the  payment  of  dividends  and  distributions  on any  shares
entitled to preference.

         Company:  As defined in the introduction to this Warrant,  such term to
include any corporation  which shall succeed to or assume the obligations of the
Company hereunder in compliance with Article III.

         Exchange Act: The Securities  Exchange Act of 1934, as amended,  or any
similar  federal  statute,  and the  rules  and  regulations  of the  Commission
thereunder, all as the same shall be in effect at the time.

         Expiration Date: December 31, 2000.

         NASD:  The National Association of Securities Dealers, Inc.

         Other  Securities:  Any shares  (other  than  Common  Shares) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be  entitled  to receive,  or shall have
received  upon the exercise of the Warrant,  in lieu of or in addition to Common
Shares,  or which at any time shall be  issuable  or shall  have been  issued in
exchange for or in replacement of Common Shares or Other Securities  pursuant to
Article III or otherwise.

                                       12

<PAGE>

         Person:  Any  corporation,  association,  partnership,  joint  venture,
trust,  estate,  organization,  business,  individual,  government  or political
subdivision thereof or governmental agency.

         Restricted Securities:  All of the following:  (a) any Warrants bearing
the  applicable  legend or legends  referred to in Section  5.1,  (b) any Common
Shares  (or Other  Securities)  which  have been  issued  upon the  exercise  of
Warrants and which are evidenced by a certificate  or  certificates  bearing the
applicable  legend or legends  referred  to in such  section  and (c) unless the
context otherwise requires, any Common Shares (or Other Securities) which are at
the time issuable upon the exercise of Warrants and which, when so issued,  will
be evidenced by a certificate or certificates  bearing the applicable  legend or
legends referred to in such section.

         Securities Act: The Securities Act of 1933, as amended,  or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.

     Securities Act (Alberta): The Securities Act (Alberta), as amended, and the
rules,   regulations,   policy   statements,   notices  and  other  requirements
promulgated thereunder.

         Warrant Price:  As defined in Section 2.1 of this Warrant.

                           ARTICLE VIII. MISCELLANEOUS

         Section 8.1. Remedies.  The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened  default
by the Company in the performance of or compliance with any of the terms of this
Warrant  are not and  will not be  adequate  and  that,  to the  fullest  extent
permitted by law,  such terms may be  specifically  enforced by a decree for the
specific  performance  of any  agreement  contained  herein or by an  injunction
against a violation of any of the terms hereof or otherwise.

         Section 8.2. No Rights or  Liabilities  as  Shareholder.  The holder of
this Warrant and all subsequent holders thereof hereby agree that, except to the
extent set forth in Section  8.4 and  elsewhere  herein,  no  provision  of this
Warrant shall be construed as conferring  upon the holder hereof any rights as a
shareholder  of the  Company or as  imposing  any  obligation  on such holder to
purchase  any  securities  or as imposing  any  liabilities  on such holder as a
shareholder of the Company,  whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.

         Section 8.3. Notices.  All notices and other  communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested,  addressed (a) if to any holder of any Warrant, to the
registered  address  of such  holder  as set forth in the  register  kept at the
principal office of the Company,  or (b) if the Company, to the attention of its

                                       13

<PAGE>

President at its office  maintained  pursuant to subdivision (a) of Section 6.2,
provided  that the  exercise of any  Warrant  shall be  effective  in the manner
provided in Article I.

         Section 8.5.      Miscellaneous.

         (a) This Warrant may be amended,  waived,  discharged or terminated and
the Company may take any action  herein  required to be performed by it, only if
the Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of Warrants  entitling such holders to
purchase  51% or more by number of shares of the total  number of Common  Shares
issuable under all Warrants at the time outstanding.

         (b)      THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
TEXAS.

         (c)  The  section   headings  in  this  Warrant  are  for  purposes  of
convenience only and shall not constitute a part hereof.

         (d) This  Agreement  shall be binding  upon and inure to the benefit of
and be  enforceable by the parties  hereto and their  respective  successors and
assigns. In addition,  and whether or not any express assignment shall have been
made, the provisions of this agreement  which are for the benefit of the parties
hereto other than the Company  shall also be for the benefit of and  enforceable
by any subsequent holder of any Registrable Securities.

                              CARPATSKY PETROLEUM INC.

                              By:
                              Name: David A. Melman
                              Title:  Chief Corporate Officer

                                       14

<PAGE>

       [THIS IS A SIGNATURE PAGE TO THE CARPATSKY PETROLEUM INC. WARRANT]

                              FORM OF SUBSCRIPTION

To Carpatsky Petroleum Inc.:

         The  undersigned   registered  holder  of  the  within  Warrant  hereby
irrevocably  exercises such Warrant for, and purchases  _________* Common Shares
of  Carpatsky  Petroleum  Inc.,  and  herewith  makes  payment  of  $___________
therefor,  and requests that the  certificates  for such shares be issued in the
name of, and delivered to ____________________, whose address is
-----------------------------------.

Dated:                        (Signature must conform in all respects to name of
                               holder as specified on the face or Warrant)

                               (Street Address)

                               (City)              (State)           (Zip Code)

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

          *Insert  the number of shares  called for on the face of this  Warrant
(or, in the case of a partial  exercise,  the  portion  thereof as to which this
Warrant is being  exercised),  in either case without  making any adjustment for
additional  Common Shares or any other shares or other securities or property or
cash which,  pursuant  to the  adjustment  provisions  of this  Warrant,  may be
delivered upon  exercise.  In the case of a partial  exercise,  a new Warrant or
Warrants will be issued and delivered,  representing the unexercised  portion of
the Warrant, to the holder surrendering the Warrant.

                                        1

<PAGE>

                               FORM OF ASSIGNMENT

                 [To be executed only upon transfer of Warrant]

         For value  received,  the undersigned  registered  holder of the within
Warrant  hereby sells,  assigns and transfers unto  _________________  the right
represented  by such Warrant to purchase  Common Shares of to which such Warrant
relates, and appoints  ______________ his Attorney in fact to make such transfer
on the books of maintained for such purpose,  with full power of substitution in
the premises.

Dated:                        (Signature must conform in all respects to name of
         holder as specified on the face or Warrant)

                                                     (Street Address)

                              (City)              (State)           (Zip Code)

Signed in the presence of:

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

Instructions:

1.       If the Transfer Form is signed by a trustee,  executor,  administrator,
         curator,  guardian,  attorney,  officer of a corporation  or any person
         acting in a judiciary or representative  capacity, the certificate must
         be  accompanied  by evidence of authority to sign  satisfactory  to the
         Trustee and the Company.

2.       The  signature on  the Transfer  Form must be  guaranteed by a Schedule
         "A" major  chartered  bank/trust  company, or a member of an acceptable
         Medallion  Guarantee program.  The Guarantor must affix a stamp bearing
         the  actual words: "Signature guaranteed". Signature guarantees are not
         accepted  from  treasury  branches  or credit  unions  unless they  are

                                        1

<PAGE>

         members of the Stamp  Medallion  Program.  Furthermore,  in  the United
         States, signature guarantees must  be done by members of the "Medallion
         Signature Guarantee program" only.

3.       Warrants shall only be transferable in accordance with applicable laws.
         Holders of Special  Warrants  are  directed to consult with their legal
         advisors in this regard.

4.       Transferees  must duly complete the  Acknowledgment  and Declaration of
         Transferee Form Attached.

                                        2

<PAGE>

                  ACKNOWLEDGMENT AND DECLARATION OF TRANSFEREE

TO:      Carpatsky Petroleum Inc.

         The undersigned transferee of ________________ Warrants of Carpatsky
Petroleum Inc. hereby:

         (i)      acknowledges that any transfer of the Warrants or the
securities issued on exercise of the Warrants may be subject to resale
restrictions; and

         (ii) represents and warrants that [check only one]:

                    [ ] A. (i)      the transferee is not a U.S. Person as
                                    defined in Rule 902 of Regulation S under
                                    the United States  Securities Act  of  1933,
                                    as  amended  (the  "1933  Act"),  and is not
                                    acquiring  the  Warrants  for the  account
                                    or benefit of or resale to a U.S. Person;

                           (ii)     no offers to sell the Warrants  were made by
                                    any   person  to  the   transferee   or  any
                                    beneficial  transferee for whom it is acting
                                    while  such   persons  were  in  the  United
                                    States; and

                           (iii)    the   transferee    and   each    beneficial
                                    transferee for whom the transferee is acting
                                    were not in the United States at the time of
                                    the  execution  and delivery of the document
                                    or  instrument  or other  buy order by which
                                    the   transferee    and   each    beneficial
                                    transferee  for whom it is acting  agreed to
                                    acquire the Warrants; or

               [ ] B. the transfer of Warrants is exempt from registration under
               the  1933  Act and  applicable  state  securities  laws,  and the
               transferee  has  provided  evidence of the  exemption  (which the
               transferee   acknowledges   must  be  satisfactory  to  Carpatsky
               Petroleum Inc.) and may at the option of Carpatsky Petroleum Inc.
               be required to include an opinion of counsel; and

                           (i)      expressly  waives  and  releases   Carpatsky
                                    Petroleum   Inc.  to  the   fullest   extent
                                    permitted   by  law,   from  all  rights  of
                                    withdrawal  to which it might  otherwise  be
                                    entitled   pursuant  to  the  provisions  of
                                    applicable securities legislation.

                    [SIGNATURES BEGIN ON THE FOLLOWING PAGE]

                                        1

<PAGE>

DATED the _____ day of __________________, _____.

                                        Name of Transferee

                                        By
                                          -------------------------------------
                                          Name:
                                          Title:
                                          Address:

       [THIS IS A SIGNATURE PAGE TO THE ACKNOWLEDGMENT AND DECLARATION OF
                                   TRANSFEREE]

                                        2

<PAGE>

                                   Exhibit C                Final Execution Copy
                                       to
                          Securities Purchase Agreement
                             dated December 30, 1999

                               AMENDMENT NO. 1 TO
                          REGISTRATION RIGHTS AGREEMENT

         This  Amendment is made and entered into as of December 30, 1999 by and
between  Carpatsky  Petroleum  Inc.,  an Alberta  corporation  ("Company"),  and
Bellwether Exploration Company, a Delaware corporation  ("Bellwether"),  for the
purpose of amending the  Registration  Rights  Agreement,  dated October 7, 1999
between the Company and Bellwether ("Agreement").

         Section 1.  Amendments to the Agreement.

                  1.1 The Agreement is hereby amended by amending the definition
         of "Company Securities" in Section 1.1 to read as follows:

                  "Company  Securities"  means any securities of the Company and
                  includes  the  Common  Stock,  the  Additional  Warrants,  the
                  Warrants (as defined in the Securities Purchase Agreement, the
                  Shares (as defined in the Securities  Purchase  Agreement) and
                  the  Warrant  Shares (as  defined in the  Securities  Purchase
                  Agreement).

                  1.2 The  agreement is further  amended by adding the following
         definition to Section 1.1:

                  "Securities  Purchase Agreement" means the Securities Purchase
                  Agreement,  dated  December  30,  1999,  entered  into  by and
                  between the Company and Bellwether.

         Section 2.  No Other Changes.  Except as explicitly amended by this
Amendment, the terms, conditions, rights and obligations under the Agreement
shall remain in full force and effect.

         Section 3.  Consents.  The  Company  represents  and  warrants  that no
consent,  approval,  order,  or  authorization  of, or declaration,  filing,  or
registration  with,  any party is required to be obtained or made in  connection
with the execution, delivery, or performance by the Company of the Agreement, as
amended  by  this  Amendment,  or the  consummation  by it of  the  transactions
contemplated  hereby  or  thereby,  other  than  those  consents  that have been
received  by the  Company  as of the  date  hereof  and  requisite  filings  and
registrations  with,  and orders of, the Alberta  Securities  Commission  or the
United States Securities and Exchange Commission.

         Section 4.  Counterparts.  This Amendment may be executed by the
parties hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement.

                                      - 1 -

<PAGE>

         The parties have  executed  this  agreement  on the date first  written
above.

                            CARPATSKY PETROLEUM INC.

                            By:
                               ----------------------------------------
                              Name: David A. Melman
                              Title:  Chief Corporate Officer

                            BELLWETHER EXPLORATION COMPANY

                            By:
                               ----------------------------------------
                              Name: J. P. Bryan
                              Title:  Chief Executive Officer

                                      - 2 -

<PAGE>

Schedule 1.05

Directors of Pease (Radiant Energy)

J.P. Bryan

Dr. Jack Burks

David Melman

Leslie Texas

Steve Antry

2 other nominees to be identified by Bellwether in writing prior to the Closing

Directors of Surviving Corporation

J.P. Bryan

David Melman

1 other nominee to be identified by Bellwether in writing prior to the Closing

Officers of Pease (Radiant Energy) and the Surviving Corporation

J.P. Bryan                 Chief Executive Officer

Leslie Texas               President

Robert Bensh               Vice President

Additional Officers

David Melman

Patrick Duncan

<PAGE>

Schedule 4.01

         C.  Carpatsky,  through the Joint  Activity  Agreement No. 410/95 dated
September 15, 1995, revised on October 15, 1996 and amended on December 25, 1997
and again on August 26, 1998,  owns an interest  for the purpose of  investment,
exploration and operation of the Rudovsko-  Chervonozavodsky  field,  located in
the Poltava district of eastern Ukraine (this contract,  as amended, is referred
to collectively  herein as the "Joint Activity  Agreement").  The Joint Activity
Agreement  is  sometimes  referred  to as  the  Carpatsky-Poltavaneftagaz  Joint
Activity,  which  essentially  acts as, and is referred to as, a Ukrainian Joint
Venture.  Pursuant to the terms of the Joint Activity  Agreement,  Carpatsky has
the  right,  not  the  obligation,  to  own  up to a 45%  net  revenue  interest
(representing  a 50% working  interest) in the Joint  Activity.  The net revenue
interest is determined by: a.) dividing Carpatsky's total capital contributions,
as defined in the Joint Activity Agreement,  by the total capital  contributions
of the Joint  Activity;  and b.)  multiplying  this percentage by 90%. The Joint
Activity  Agreement  is unclear  whether or not the working  interest  decreases
proportionately should Carpatsky's total contributions, as compared to the total
contributions of the Joint Activity,  fall below 50%. However, it is Carpatsky's
representation to Pease that the working interest, and corresponding obligations
to the Joint Account, would be proportionately reduced under such circumstances.
As of September 30, 1999, Carpatsky's net revenue interest in the Joint Activity
was 41.68%  (representing a presumed working interest of 46.31%).  On October 1,
1999,  Carpatsky's net revenue  interest was effectively  reduced to 31.98% when
its Ukrainian  partner  increased  their equity  position  through an additional
capital  contribution  to the Joint Account.  The Ukrainian  partner has advised
Carpatsky  that it has until  December  31, 1999 to make an  additional  capital
contribution  of  approximately  $2.9  million.  A failure  to do so may  dilute
Carpatsky's  interest in the RC field even further and will  preclude  Carpatsky
from  participating  in at least  the  next  two  wells  that  will be  drilled.
Carpatsky's  rights and  obligations  are subject to all terms and conditions of
the Joint Activity Agreement, as amended.

<PAGE>

Schedule 4.03(b)(iii)

         As discussed in Schedule 4.01 C, Carpatsky's net revenue interest as of
October  1, 1999 in the  Carpatsky-Poltavaneftagaz  Joint  Activity  is  31.98%.
Pursuant  to the  terms of the  Joint  Activity  Agreement,  as  amended,  as of
September 30, 1999, Carpatsky has the right to increase its net revenue interest
percentage to 45% by contributing,  or repaying,  approximately  $2.9 million to
the Joint Account,  or its partners.  The terms of the Joint Activity  Agreement
contemplate that Carpatsky will be a 50/50 partner on all  expenditures  subject
to the Joint Activity.  The Joint Activity Agreement also contemplates that from
time-to-time  the  respective  partners may not  contribute at the  contemplated
50/50  levels  and has  certain  provisions  that  deal with  these  imbalances.
However,  it is unclear as to whether or not  Carpatsky's  right to increase its
net revenue  interest  percentage  to 45% will or can be honored by its partners
indefinitely.

<PAGE>

Schedule 4.03(c)

         B.       Carpatsky Stock Awards

                  1. As previously  disclosed in Schedule  4.03(b)(i)C,  item 5,
Torch Energy Advisors  Incorporated will receive  1,200,000  Carpatsky shares in
settlement of a payable due Torch for services performed for $150,000,

                  2. As previously  disclosed in Schedule  4.03(b)(i)C,  item 4,
Proteus  International has been offered 720,000 Carpatsky shares and warrants to
purchase  435,000  Carpatsky  common shares in settlement of a $90,000 claim for
services. As previously disclosed,  the warrants will be exercisable at US $0.20
per share and will expire on December 31, 2000.

                  3. As previously  disclosed in Schedule  4.03(b)(i)C,  item 6,
David A. Melman will receive  953,333 common shares of Carpatsky and warrants to
purchase 357,000  Carpatsky common shares in connection with financial  services
rendered in a US $1,000,000  private  placement.  As previously  disclosed,  the
warrants will be  exercisable  at US $0.20 per share and will expire on December
31, 2000.

                  4. In  connection  with the  contemplated  merger  with Pease,
David A. Melman will receive 2.0 million shares of Carpatsky (to be issued prior
to the Effective Time of the merger) as compensation for services rendered.

<PAGE>

Schedule 4.08

         As of September 30, 1999, the Carpatsky-Poltavaneftagaz  Joint Activity
had incurred a Corporate Profits Liability in UAH of 2,899,558 (US equivalent is
$648,714 using  September 30, 1999 exchange  rates).  This liability is past due
and incurring  interest at a annual rate of 45% (the discount rate in UAH of the
National Bank of Ukraine). Using Carpatsky's presumed working interest of 46.31%
at September 30, 1999, our  proportionate  share is  approximately  US $300,419,
excluding interest.  However, as discussed in Schedule 4.01C, the wording of the
Carpatsky-Poltavaneftagaz  Joint  Activity  Agreement  leaves  the  issue of the
adjustable  working interest  unclear.  Accordingly,  if the working interest is
50%, Carpatsky's  proportionate share could be as high as US$324,357,  excluding
interest.

<PAGE>

Schedule 4.11

         B. As  disclosed  in  Schedule  4.08,  as of  September  30,  1999  the
Carpatsky-  Poltavaneftagaz  Joint  Activity  had  incurred a Corporate  Profits
Liability in UAH of $2,899,558 (US  equivalent is $648,714  using  September 30,
1999 exchange  rates).  This liability is past due and incurring  interest at an
annual rate of 45% (the  discount  rate in UAH of the National Bank of Ukraine).
Using Carpatsky's presumed working interest of 46.31% at September 30, 1999, our
proportionate share is approximately US $300,419,  excluding interest.  However,
because it is  unclear  whether  the  working  interest  could  arguably  be 50%
Carpatsky  proportionate  share  could  be  as  high  as  US$324,357,  excluding
interest.

<PAGE>

Schedule 4.19

         The  following are  Carpatsky's  contractual  commitments  in excess of
$10,000 over 12 months as of June 30, 1999:

         A  As  discussed  in  Schedule   4.01  C  and   disclosed  in  Schedule
4.03(b)(iii),  Carpatsky's  working  interest  as of  October  1,  1999  in  the
Carpatsky-Poltavaneftagaz Joint Activity is 31.98%. Pursuant to the terms of the
Joint Activity Agreement,  as amended,  as of September 30, 1999,  Carpatsky has
the right to increase its working interest percentage to 50% by contributing, or
repaying,  approximately  $2.9 million to the Joint Account,  or its partners by
December 31, 1999. A failure to do so may dilute Carpatsky's  interest in the RC
field even further and will preclude  Carpatsky from  participating  in at least
the next two  wells  that  will be  drilled.  The  terms of the  Joint  Activity
Agreement contemplate that Carpatsky will be a 50/50 partner on all expenditures
subject to the Joint Activity.  The Joint Activity  Agreement also  contemplates
that  from  time-to-time  the  respective  partners  may not  contribute  at the
contemplated  50/50  levels  and has  certain  provisions  that deal with  these
imbalances.  However,  it is unclear as to whether or not  Carpatsky's  right to
increase its working  interest  percentage  to 50% will or can be honored by its
partners indefinitely.

<PAGE>

                Schedule 4.1(d) to Securities Purchase Agreement
                             dated December 30, 1999

Common Stock Outstanding                                77,728,2631
Stock Options Outstanding                                  200,000
Stock Purchase Warrants                                 17,665,4042
Offers Outstanding to Convert:
         Calaway Debt -  approximately  $275,000 @ 12.5(cent) per share RLF Debt
         approximately $365,000 @ 12.5(cent) per share

No other securities with equity component.

--------

       1  Inclusive  of  stock  option  repurchases.  2 All at $.20 US  expiring
       December 31, 2000.

<PAGE>

                Schedule 4.1(e) to Securities Purchase Agreement
                             dated December 30, 1999

         Carpatsky Petroleum Corp., a Delaware corporation

<PAGE>

                Schedule 4.1(f) to Securities Purchase Agreement
                             dated December 30, 1999

         Consent of the CDNX.

<PAGE>

                Schedule 4.1(h) to Securities Purchase Agreement
                             dated December 30, 1999

         None

<PAGE>

              Schedule 4.1(i)(ii) to Securities Purchase Agreement
                             dated December 30, 1999

         Common to the oil and gas industry in foreign countries, Carpatsky does
not own an interest in real property; its rights and obligations are governed by
joint  agreements  with its Ukrainian  partners.  Carpatsky's oil and gas assets
consist of interests in the following two fields in the Republic of Ukraine: (1)
Rudovsko-Chervonozavodskoye  natural  gas and gas  condensate  field  (the  "RC"
field)  located  in the  Poltava  District  of  Eastern  Ukraine;  and  (2)  the
Bitkov-Babchensky  oil field (the "Bitkov field") located in the Ivano-Frankovsk
District of southwest  Ukraine.  The RC field is governed by the Joint  Activity
Agreement No. 410/95 dated  September 15, 1995,  revised on October 15, 1996 and
amended on December 25, 1997 and again on August 26, 1998.  This Joint  Activity
Agreement  was  established  for the  purpose  of  investment,  exploration  and
operation of the RC field. All of Carpatsky's rights and obligations are subject
to all terms and conditions of the Joint Activity Agreement as amended.

         The Bitkov field is governed by a Joint Venture  Agreement  dated April
18, 1995, which establishes  Carpatsky's rights and obligations in UkrCarpatoil,
Ltd., a Ukrainian  joint  venture.  UkrCarpatoil  was created for the purpose of
production, exploitation and exploration of the Bitkov field. As outlined in the
License  Agreement  dated July 25, 1995,  Carpatsky's  rights are limited to the
incremental hydrocarbon production above the "baseline" production as defined in
the License  Agreement.  The  "organizational  period" as defined in the license
agreement  dated April 18,  1995 has been  extended  through  August 13, 2000 by
amendments  executed on August 13, 1999.  Carpatsky's rights and obligations are
subject to all of the terms and  conditions of the Joint  Venture  Agreement and
License Agreement as amended.

<PAGE>

              Schedule 4.1(i)(ii) to Securities Purchase Agreement
                             dated December 30, 1999

          a) The Reserve  Report  dated June 30,  1999,  prepared by Ryder Scott
Company Petroleum Engineers and entitled,  "Carpatsky Petroleum Estimated Future
Reserves and Income Attributable to Certain Leasehold Interests in Ukraine,  SEC
Perimeters Full  Contractual  Interest Case", is subject to all the limitations,
contingencies,  uncertainties and estimates that are described in the Discussion
Letter dated June 23, 1999 included in the aforementioned  Reserve Report.  This
Discussion Letter is incorporated in this document by reference in its entirety.

          b) The Development  Schedule (or Drilling Plan) that was  contemplated
in the aforementioned Reserve Report has not been adhered to principally because
the capital necessary to fund the drilling activity has not been available.

          c) The  aforementioned  Reserve  Report  contemplated  that all of the
natural gas in the RC field would be sold to Unocal beginning October 1, 1999 on
an  exported  basis.  That event did not occur and the  natural  gas from the RC
field is currently being sold domestically in Ukraine.  Historically,  Carpatsky
has not  received  payment for the  majority of its natural gas sales in Ukraine
and there can be assurance payment will be received in the future.

          d) The sales price used in the Reserve Report for natural gas is $1.50
per Mcf and is held constant  throughout  the life of the  reserves.  The actual
selling price for 1999 (through September 30th) has averaged $0.87 per Mcf.

<PAGE>

                Schedule 4.1(l) to Securities Purchase Agreement
                             dated December 30, 1999

         None

<PAGE>

                Schedule 4.1(m) to Securities Purchase Agreement
                             dated December 30, 1999

          As  of  September  30,  1999,  the  Carpatsky  Poltavanaftagas,  Joint
Activity in the RC field has  incurred a corporate  profits  liability in UAH of
2,899,558 (U.S.  equivalent is $648,714 using September 30, 1999 exchange rate).
This  liability is past due and  incurring  interest and  penalties at an annual
rate  of 45%  (the  discount  rate  in UAH of the  National  Bank  of  Ukraine).
Carpatsky's properties are subject to a lien to the extent of unpaid taxes.

<PAGE>

                Schedule 4.1(n) to Securities Purchase Agreement
                             dated December 30, 1999

         RLG International has threatened litigation.

<PAGE>

                Schedule 4.1(r) to Securities Purchase Agreement
                             dated December 30, 1999

          The terms of the Stock  Subscription  Agreement  for the 1999  Private
Placement  stated  David A.  Melman  will be  appointed  as a member  of  Senior
Management and a member of the Company's Board of Directors.

          The following debts are past due as of September 30, 1999:

          1)  Series 1  Debenture  dated  August  15,  1998 in favor of James C.
Calaway, principal amount $220,000 plus accrued interest of $55,973.

          2)  Promissory  Note in favor of RLG  International,  Inc.;  principal
amount of $328,914 plus accrued interest of $30,277.

<PAGE>

                Schedule 4.1(v) to Securities Purchase Agreement
                             dated December 30, 1999

         The only registration  rights agreements that the Company is a party to
are with Bellwether Exploration Company and Torch Energy Advisors Incorporated.EMPLOYMENT AGREEMENT

     This Employment Agreement (this "Agreement") entered into effective as of
June 1, 2000, by and between Leslie C. Texas (the "Employee"), and Carpatsky
Petroleum, Inc., a Delaware corporation having its principal place of business
at 1331 Lamar, Suite 1455, Houston, Texas 77010-3039 (the "Company");

                              W I T N E S S E T H:

     WHEREAS, the Company wishes to employ the Employee to perform services for
the Company, and the Employee wishes to be so employed by the Company, all upon
the terms and conditions hereinafter set forth:

     NOW THEREFORE, in consideration of the premises and mutual covenants and
obligations herein set forth and for other good and valuable consideration, the
receipt, sufficiency and adequacy of which is hereby acknowledged, accepted and
agreed to, the parties hereto, intending to be legally bound, hereby agree as
follows:

     1. Employment and Term. The term of this Agreement (the "Term of this
Agreement") shall be effective as of the 1st day of June, 2000 and shall
terminate twelve (12) months from the date hereof (the "Termination Date"),
unless earlier terminated by either party hereto in accordance with the
provisions of Section 5 hereof. During the term of this Agreement, the terms of
employment shall be as set forth herein unless modified by the Employee and the
Company in accordance with the provisions of Section 11 hereof. The Employee
hereby agrees to accept such employment and to perform the services specified
herein, all upon the terms and conditions hereinafter set forth.

     2. Position and Responsibilities. The Employee shall report to, and be
subject to the general direction and control of the Chairman of the Board of the
Company. The Employee's duties shall include, but not be limited to, the
securing of oil and gas industry investment opportunities in the former Soviet
Union ("Investment Opportunities") for Company and its affiliates. The Employee
shall maintain an office at the Company's principal offices located in the
greater Houston, Texas metropolitan area and at the offices currently occupied
by the Employee located in Kiev, Ukraine.

     3. Extent of Service. The Employee shall devote substantially all of his
time and attention during normal business hours to the business of the Company.

     4. Compensation.

                  (a) In consideration of the services to be rendered by the
         Employee to the Company, the Company will pay the Employee a salary
         ("Salary") of $10,000 per month during the Term of this Agreement. Such
         Salary will be payable in conformity with the Company's prevailing
         practice for Employees' compensation as such practice shall be
         established or modified from time to time. Salary payments shall be
         subject to all applicable federal and state withholding, payroll and
         other taxes.

<PAGE>

                  (b) In the event Company elects, in writing within ten (10)
         business days after Employee has submitted an Investment Opportunity to
         the Company in writing, to pursue in good faith such Investment
         Opportunity ("CPI Submission"), Company shall pay Employee at closing
         of the Investment Opportunity, an incentive fee equal to a minimum of
         two percent (2%) and a maximum of five percent (5%) net profits
         interest in the Investment Opportunity based on the net purchase price
         and/or the fair market value of such Investment Opportunity at closing
         ("CPI Incentive Fee"). In the event the Investment Opportunity does not
         close for any reason, no fee shall be due by Company to Employee.
         Employee may elect, by giving Company written notice within ten (10)
         business days prior to the closing of an Investment Opportunity, to
         receive its CPI Incentive Fee as follows: (i) fifty percent (50%) as a
         net profits interest in the Investment Opportunity and (ii) fifty
         percent (50%) in cash. The amount of any CPI Incentive Fee shall be
         agreed to in writing between the Chairman of the Board of the Company
         and the Employee within five (5) business days subsequent to the CPI
         Submission. Such CPI Incentive Fee shall be based on the estimated
         value of the Investment Opportunity, the estimated development costs
         and capital expenditures, and the risk associated therewith as well as
         the value added by Employee. In the event Company elects in writing not
         to pursue the Investment Opportunity or does not respond within ten
         (10) business days of the CPI Submission, Employee shall then present
         the Investment Opportunity to Torch Energy Advisors Incorporated and
         its clients ("Torch"). In the event Torch elects, in writing within
         five (5) business days after Employee has submitted an Investment
         Opportunity to Torch in writing, to pursue in good faith such
         Investment Opportunity ("Torch Submission"), Torch shall pay Employee
         at closing of the Investment Opportunity, an incentive fee equal to a
         minimum of two percent (2%) and a maximum of five percent (5%) net
         profits interest in the Investment Opportunity based on the net
         purchase price and/or the fair market value of such Investment
         Opportunity at closing ("Torch Incentive Fee"). In the event the
         Investment Opportunity does not close for any reason, no fee shall be
         due by Torch to Employee. Employee may elect, by giving Torch written
         notice within ten (10) business days prior to the closing of an
         Investment Opportunity, to receive its Torch Incentive Fee as follows:
         (i) fifty percent (50%) as a net profits interest in the Investment
         Opportunity and (ii) fifty percent (50%) in cash. The amount of any
         Incentive Fee shall be agreed to in writing between the Chairman of the
         Board of Torch and the Employee within five (5) business days
         subsequent to the Torch Submission. Such Torch Incentive Fee shall be
         based on the estimated value of the Investment Opportunity, the
         estimated development costs and capital expenditures, and the risk
         associated therewith as well as the value added by Employee. The Torch
         Incentive Fee, if any, shall be divided equally between Company and
         Employee. If Torch does not respond in writing within such time period,
         Employee shall be free to broker the Investment Opportunity to a third
         party. In the event neither Company nor Torch elects to pursue the
         Investment Opportunity, then Employee will have the right to broker the
         Investment Opportunity to a third party and, if successful, the
         Incentive Fee will be divided seventy-five percent (75%) to Employee
         and twenty-five percent (25%) to Company.

                                       2
<PAGE>

                  (c) During the term of this Agreement, the Company shall pay
         or reimburse the Employee for all reasonable out-of-pocket expenses for
         travel, meals, hotel accommodations, entertainment and the like
         incurred by him in connection with the business of the Company upon
         submission by him of an appropriate statement documenting such expenses
         as required by the Internal Revenue Code of 1986, as amended (the
         "Code").

                  (d) The Employee shall be entitled to three (3) weeks of paid
         vacation during each calendar year during the term of this Agreement.
         Vacation shall accrue on the first day of each calendar year. The
         Company shall pay the Employee for any accrued but unused portion of
         vacation and any such unused portion of vacation shall not be carried
         forward to the next year.

                  (e) During the term of this Agreement, the Employee shall pay
         and the Company shall reimburse Employee for the reasonable costs
         associated with premium payments for his medical and dental plan.

         5.       Termination.

                  (a) Termination by Company; Discharge for Cause. The Company
         shall be entitled to terminate this Agreement and the Employee's
         employment with the Company at any time and for whatever reason; or at
         any time for "Cause" (as defined below) by written notice to the
         Employee. Termination of the Employee's employment by the Company shall
         constitute a termination for "Cause" if such termination is for one or
         more of the following reasons: (i) the willful failure or refusal of
         the Employee to render services to the Company in accordance with his
         obligations under this Agreement, including, without limitation, the
         failure or refusal of the Employee to comply with the work rules,
         policies, procedures, and directives as established by the Board of
         Directors and consistent with this Agreement; such failure or refusal
         to be uncured and continuing for a period of not less than fifteen (15)
         days after notice outlining the situation is given by the Company to
         the Employee; (ii) the commission by the Employee of an act of fraud or
         embezzlement; (iii) the commission by the Employee of any other action
         with the intent to injure the Company; (iv) the Employee having been
         convicted of a felony or a crime involving moral turpitude; (v) the
         Employee having misappropriate the property of the Company; (vi) the
         Employee having engaged in personal misconduct which materially injures
         the Company; or (vii) the Employee having willfully violated any law or
         regulation relating to the business of the company which results in
         material injury to the Company. In the event of the Employee's
         termination by the Company for Cause hereunder, the Employee shall be
         entitled to no severance or other termination benefits except for any
         unpaid Salary accrued through the date of termination. A termination of
         this Agreement by the Company without Cause pursuant to this Section
         5(a) shall entitle the Employee to the Severance Payment and other
         benefits specified in Section 5(e) hereof.

                                       3

<PAGE>

                  (b) Death. If the Employee dies during the term of this
         Agreement and while in the employ of the Company, this Agreement shall
         automatically terminate and the Company shall have no further
         obligation to the Employee or his estate except that the Company shall
         pay to the Employee's estate that portion of his Salary and benefits
         accrued through the date of death. All such payments to the Employee's
         estate shall be made in the same manner and at the same time as the
         Employee's Salary.

                  (c) Disability. If during the term of this Agreement, the
         Employee shall be prevented from performing his duties hereunder for a
         period of 60 days by reason of disability, then the Company, on 30
         days' prior notice to the Employee, may terminate this Agreement. For
         purposes of this Agreement, the Employee shall be deemed to have become
         disabled when the Board of Directors of the Company, upon verification
         by a physician designated by the Company, shall have determined that
         the Employee has become physically or mentally unable (excluding
         infrequent and temporary absences due to ordinary illness) to perform
         the essential functions of his duties under this Agreement with
         reasonable accommodation. In the event of a termination pursuant to
         this paragraph (c), the Company shall be relieved of all its
         obligations under this Agreement, except that the Company shall pay to
         the Employee or his estate in the event of his subsequent death, that
         portion of the Employee's Salary and benefits accrued through the date
         of such termination. All such payments to the Employee or his estate
         shall be made in the same manner and at the same time as his Salary and
         would have been paid to him had he not become disabled.

                  (d) Voluntary Termination. Notwithstanding anything to the
         contrary herein, the Employee shall be entitled to voluntarily
         terminate this Agreement and his employment with the Company at his
         pleasure upon thirty (30) days written notice to such effect. In such
         event, the Employee shall not be entitled to any further compensation
         other than any unpaid Salary and benefits accrued through the date of
         termination. At the Company's option, the Company may pay to the
         Employee the salary and benefits that the Employee would have received
         during such thirty (30) day period in lieu of requiring the Employee to
         remain in the employment of the Company for such thirty (30) day
         period.

                  (e) Termination Benefits Upon Involuntary Termination. In the
         event that the Company terminates this Agreement and the Employee's
         employment with the Company for any reason other than for Cause (as
         defined in Section 5(a) hereof) or the death or disability (as defined
         in Section 5(b) and 5(c) hereof) of the Employee, then the Company
         shall pay the Employee, within thirty (30) days after the date of
         termination, an amount (the "Severance Payment") equal to the balance
         of Employee's Salary for the Term of this Agreement, minus applicable
         withholding and authorized salary reductions (the "Severance Payment").
         In addition, following other such termination, the Employee shall be
         entitled to the following benefits (collectively, the "Additional
         Benefits"):

                           (i) continued coverage, at the Employee's cost, under
                  the Company's group health plan for the applicable coverage
                  period under the Consolidated Omnibus Budget Reconciliation
                  Act of 1985, as amended ("COBRA") but only if Employee elects
                  such COBRA continuation in accordance with the time limits and
                  in the applicable COBRA regulations; and

                                       4
<PAGE>

                           (ii) an amount, in cash, equal to the sum of (A) any
                  unreimbursed expenses incurred by the Employee in the
                  performance of his duties hereunder through the date of
                  termination, plus (B) any accrued and unused vacation time or
                  other unpaid benefits as of the date of termination.

         The parties agree that, because there can be no exact measure of the
         damages which would occur to the Employee as a result of termination of
         employment, such payments contemplated in this Section 5(e) shall be
         deemed to constitute liquidated damages and not a penalty and the
         Company agrees that the Employee shall not be required to mitigate his
         damages. The termination compensation in this Section 5(e) shall be
         paid only if the Employee executes a termination agreement releasing
         all legally waivable claims arising from the Employee's employment.

                  (f) Survival. Notwithstanding the termination of this
         Agreement under this Section 5, the provisions of Sections 7 and 8 of
         this Agreement, and all other provisions hereof which by their terms
         are to be performed following the termination hereof shall survive such
         termination and be continuing obligations.

         6. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he has obtained all necessary waivers and/or consents from
third parties as to enable him to accept employment with the Company on the
terms and conditions set forth herein and to execute and perform this Agreement
without being in conflict with any other agreement, obligations or understanding
with any such third party.

         7. Confidential Information. The Employee acknowledges that in the
course of his employment with the Company, he has received and will receive
access to confidential information of a special and unique value concerning the
Company and its business, including, without limitation, trade secrets,
know-how, lists of customers, employee records, books and records relating to
operations, costs or providing service and equipment, operating an maintenance
costs, pricing criteria and other confidential information and knowledge
concerning the business of the Company and its affiliates (hereinafter
collectively referred to as "information") which the Company desires to protect.
The Employee acknowledges that such information is confidential and the
protection of such confidential information against unauthorized use or
disclosure is of critical importance to the Company. The Employee agrees that he
will not reveal such information to any one outside the Company. The Employee
further agrees that during the term of this Agreement and thereafter he will not
use or disclose such information. Upon termination of his employment hereunder,
the Employee shall surrender to the Company all papers, documents, writings and
other property produced by him or coming into his possession by or through his
employment hereunder and relating to the information referred to in this Section
7, and the Employee agrees that all such materials will at all times remain the
property of the Company. The obligation of confidentiality, non-use and
non-disclosure of know-how set forth in this Section 7 shall not extend to

                                       5
<PAGE>

know-how (i) which was in the public domain prior to disclosure by the
disclosing party, (ii) which comes into the public domain other than through a
breach of this Agreement, (iii) which is disclosed to the Employee after the
termination of this Agreement by a third party having legitimate possession
thereof and the unrestricted right to make such disclosure, or (iv) which is
necessarily disclosed in the course of the Employee's performance of his duties
to the Company as contemplated in this Agreement. The agreements in this Section
7 shall survive the termination of this Agreement.

         8. No Solicitation. To support the agreements contained in Section 7
hereof, from the date hereof and for a period twelve (12) months after the
Employee's employment with the Company is terminated for any reason, the
Employee shall not, either directly or indirectly, through any person, firm,
association or corporation with which the Employee is now or may hereafter
become associated, (i) use in any competition, solicitation or marketing effort
any information as to which the Employee has a duty of confidential treatment
under paragraph 7 above, or (ii) hire, employ, solicit or engage any then
current employee of the Company or its affiliates.

         9. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or on the date mailed, postage
prepaid, by certified mail, return receipt requested, or telegraphed and
confirmed if addressed to the respective parties as follows:

                  If to the Employee:           Leslie C. Texas
                                                1331 Lamar, Suite 1455
                                                Houston, Texas 77010

                  If to the Company:            Carpatsky Petroleum, Inc.
                                                1331 Lamar, Suite 1455
                                                Houston, Texas 77010-3039
                                                Attn: Douglas G. Manner

Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.

         10. Specific Performance. The Employee acknowledges that a remedy at
law for any breach or attempted breach of Section 7 or 8 of this Agreement will
be inadequate, agrees that the Company shall be entitled to specific performance
and injunctive and other equitable relief in case of any such a breach or
attempted breach, and further agrees to waive any requirement of the securing or
posting of any bond in connection with the obtaining of any such injunctive or
any other equitable relief.

         12. Waivers and Modifications. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 12. No modification or waiver by the Company shall be
effective without the consent of at least a majority of the Compensation
Committee of the Board of Directors then in office at the time of such
modification or waiver. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach

                                       6

<PAGE>

thereof or as a waiver of any other provision of this Agreement. This Agreement
sets forth all the terms of the understandings between the parties with
reference to the subject matter set forth herein and may not be waived, changed,
discharged or terminated orally or by any course of dealing between the parties,
but only by an instrument in writing signed by the party against whom any
waiver, change, discharge or termination is sought.

        13. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Texas.

         14. Severability. In case of one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
contained herein.

         15. Arbitration. In the event that a dispute or controversy should
arise between the Employee and the Company as to the meaning or application of
any provision, term or condition of this Agreement, such dispute or controversy
shall be settled only by binding arbitration in Houston, Texas and for said
purpose each of the parties hereto hereby expressly consents to such arbitration
in such place. Such arbitration shall be conducted in accordance with the
existing rules and regulations of the American Arbitration Association governing
commercial transactions. The expense of the arbitrator shall be shared equally
by the Company and Employee.

         IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date and year first above written.

                                    COMPANY:

                                    CARPATSKY PETROLEUM, INC.

                                    By: /s/
                                       -------------------------------------
                                    Name:
                                         -----------------------------------
                                    Title:
                                          ----------------------------------

                                    EMPLOYEE:

                                    /s/
                                    ----------------------------------------
                                    Leslie C. Texas

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