Document:

PURCHASE AND SALE AGREEMENT

                             between

                WILLIAMS PRODUCTION RMT COMPANY,

                           as Seller,

                               and

                     BERRY PETROLEUM COMPANY

                            as Buyer

                      Duchesne County, Utah

                      Dated April 23, 2003

                     Effective April 1, 2003

ARTICLE 1 PURCHASE AND SALE                                    1
     1.1  Purchase and Sale                                    1
     1.2  Assets                                               1
     1.3  Effective Time                                       2

ARTICLE 2 PURCHASE PRICE                                       2
     2.1  Purchase Price                                       2
     2.2  Deposit                                              2
     2.3  Adjustments to Purchase Price                        2
     2.4  Allocated Values                                     5

ARTICLE 3 DUE DILIGENCE INSPECTION                             5
     3.1  Access to Records                                    5
     3.2  No Representation or Warranty                        5
     3.3  Access to the Assets and Indemnity                   5

ARTICLE 4 TITLE MATTERS                                        5
     4.1  Defensible Title                                     5
     4.2  Permitted Encumbrances                               5
     4.3  Title Defect                                         6
     4.4  Notice of Title Defects                              7
     4.5  Seller's Right to Cure                               7
     4.6  Remedies for Title Defects                           7
     4.7  Title Thresholds                                     7
     4.8  Title Dispute Resolution                             8
     4.9  Depletion and Depreciation of Personal Property      8
     4.10 Consents                                             8
     4.11 Preferential Purchase Rights                         9
     4.12 Casualty Loss                                        9

ARTICLE 5 ENVIRONMENTAL MATTERS                                9
     5.1  Definitions                                          9
     5.2  Spills and NORM                                     10
     5.3  Environmental Assessment                            10
     5.4  Notice of Environmental Defects                     11
     5.5  Remedies for Environmental Defects                  11
     5.6  Environmental Thresholds                            11
     5.7  Environmental Dispute Resolution                    12
     5.8  "As Is, Where Is" Purchase                          12
     5.9  Disposal of Materials, Substances and Wastes        12
     5.10 Buyer's Indemnity                                   13

ARTICLE 6 SELLER'S REPRESENTATIONS AND WARRANTIES             13
     6.1  Existence                                           13
     6.2  Power                                               13
     6.3  Authorization                                       14
     6.4  Execution and Delivery                              14
     6.5  Liabilities for Brokers' Fees                       14
     6.6  Liens                                               14
     6.7  Taxes                                               14
     6.8  Litigation                                          14

ARTICLE 7 BUYER'S REPRESENTATIONS AND WARRANTIES              14
     7.1  Existence                                           14
     7.2  Power and Authority                                 14
     7.3  Authorization                                       15
     7.4  Execution and Delivery                              15
     7.5  Liabilities for Brokers' Fees                       15
     7.6  Litigation                                          15
     7.7  Independent Evaluation                              15
     7.8  Qualification                                       15
     7.9  Funds                                               15

ARTICLE 8 COVENANTS AND AGREEMENTS                            15
     8.1  Covenants and Agreements                            15

ARTICLE 9 CONDITIONS TO CLOSING                               17
     9.1  Seller's Conditions                                 17
     9.2  Buyer's Conditions                                  17

ARTICLE 10 RIGHT OF TERMINATION AND ABANDONMENT 18
     10.1 Termination                                         18
     10.2 Liabilities Upon Termination                        18

ARTICLE 11 CLOSING                                            19
     11.1 Date of Closing                                     19
     11.2 Closing Obligations                                 19

ARTICLE 12 POST-CLOSING OBLIGATIONS                           20
     12.1 Post-Closing Adjustments                            20
     12.2 Suspense Accounts                                   20
     12.3 Dispute Resolution                                  20
     12.4 Records                                             20
     12.5 Seller's Employees                                  20
     12.6 Further Assurances                                  20
     12.7 Disclaimers of Representations and Warranties       20

ARTICLE 13 TAXES                                              21
     13.1 Apportionment of Ad Valorem and Property Taxes      21
     13.2 Transfer Taxes and Recording Fees                   21
     13.3 Other Taxes                                         22
     13.4 Tax Reports and Returns                             22

ARTICLE 14
 ASSUMPTION AND RETENTION OF OBLIGATIONS; INDEMNIFICATION     22
     14.1 Buyer's Assumption of Liabilities and Obligations   22
     14.2 Seller's Retention of Liabilities and Obligations   22
     14.3 Buyer's Plugging and Abandonment Obligations        22
     14.4 Indemnification                                     23
     14.5 Procedure                                           24
     14.6 No Insurance; Subrogation                           25
     14.7 Reservation as to Non-Parties                       25

ARTICLE 15 MISCELLANEOUS                                      25
     15.1 Exhibits                                            25
     15.2 Expenses                                            25
     15.3 Notices                                             25
     15.4 Amendments                                          26
     15.5 Assignment                                          26
     15.6 Confidentiality                                     26
     15.7 Press Releases                                      26
     15.8 Headings                                            26
     15.9 Counterparts                                        26
     15.10 References                                         26
     15.11 Governing Law                                      27
     15.12 Removal of Signs                                   27
     15.13 Binding Effect                                     27
     15.14 Survival                                           27
     15.15 No Third-Party Beneficiaries                       27
     15.16 Limitation on Damages                              27
     15.17 Severability                                       27
     15.18 Knowledge                                          27

                            EXHIBITS

                                                   Section
  Exhibit                Description                Where
                                                   Defined

    A-1      Leases and Lands                       1.2.a

    A-2      Wells                                  1.2.b

    A-3      Rights-of-Way and Surface Leases       1.2.d

    A-4      Equipment and Facilities               1.2.e

     B       Material Agreements                    1.2.d

     C       Well Imbalances                        2.3.c

     D       Allocated Values                       2.4

     E       Form of Assignment and Bill of Sale    11.2.a

     F       Form of Assumption Agreement           11.2.a

     G       Seller's Officer's Certificate         11.2.g

     H       Buyer's Officer's Certificate          11.2.h

     I       Non-Foreign Affidavit                  11.2i

     J       Suspense Accounts                       12.2

     K       Seller's Employee Severance Policy      12.5

     L       Retained Litigation                     14.2

                   PURCHASE AND SALE AGREEMENT

     This  PURCHASE AND SALE AGREEMENT ("Agreement"), dated April
23,  2003,  is by and between Williams Production RMT Company,  a
Delaware  corporation,  whose address is  1515  Arapahoe  Street,
Tower  Three,  Suite 1000, Denver, Colorado 80202 ("Seller")  and
Berry Petroleum Company, a Delaware corporation, whose address is
5201  Truxtun Avenue, Suite 300, Bakersfield, California   93309-
0640 ("Buyer").

                            RECITALS

     A.    Seller  owns  and  desires to sell  certain  real  and
personal property interests located in Duchesne County, Utah,  as
more fully described in Section 1.2 below (the "Assets").

     B.   Buyer desires to purchase the Assets upon the terms and
conditions set forth in this Agreement.

                            AGREEMENT

     In consideration of the mutual promises contained herein and
other   good   and  valuable  consideration,  the   receipt   and
sufficiency  of which are hereby acknowledged, Seller  and  Buyer
agree as follows:

                            ARTICLE 1
                        PURCHASE AND SALE

     1.1  Purchase and Sale.  Seller agrees to sell and convey to
Buyer, and Buyer agrees to purchase and receive from Seller,  all
of  Seller's right, title and interest in the Assets, pursuant to
the terms and conditions of this Agreement.

	1.2  Assets.  The "Assets" are all of Seller's right, title,
and interest in and to the following real and personal property
interests located in Duchesne County, Utah:

      a.   The oil and gas leases and exploration and development
agreements  described on Exhibit A-1 (the "Leases"), insofar  and
only insofar as the Leases cover the lands described on Exhibit A-
1  (the  "Lands");  the  oil,  gas  and  all  other  hydrocarbons
("Hydrocarbons"), in, on or under or that may  be  produced  from
the Lands.

      b.   The oil and gas wells located on the Leases and Lands,
or lands pooled or unitized therewith, including without limitation
the oil and gas wells described on Exhibit A-2 (the "Wells"), all
injection and disposal wells on the Leases and Lands, and all
personal property and equipment associated with the Wells as of
the Closing Date.

      c.   The rights, to the extent transferable, in and to all
existing and effective unitization, pooling and communitization
agreements, declarations and orders, to the extent that they
relate to or affect any of the interests described in
Sections 1.2.a. and 1.2.b. or the post-Effective Time production
of Hydrocarbons from the Leases and Lands.

      d.   The rights, to the extent transferable, in and to
Hydrocarbon sales, purchase, gathering and processing contracts,
operating agreements, balancing agreements, joint venture
agreements, partnership agreements, farmout agreements and other
contracts, agreements and instruments relating to the interests
described in Sections 1.2.a., 1.2.b. and 1.2.c, including without
limitation the agreements described on Exhibit B (the "Material
Agreements").

      e.   All of the personal property, fixtures, improvements,
permits, licenses, approvals, servitudes, rights-of-way,
easements, surface leases (including without limitation the
rights-of-way easements and surface leases described on
Exhibit A-3) and other surface rights, tanks, boilers, buildings,
improvements, office equipment, injection facilities, saltwater
disposal facilities, the NJNR-Ute Tribe Joint Venture Pipeline
and Brundage Canyon Field compression facilities and gathering
systems, other appurtenances and facilities (including without
limitation the equipment, facilities and Roosevelt Office and
Yard Lease described on Exhibit A-4) located on and used in
connection with or otherwise related to the exploration for or
production, gathering, treatment, processing, storing, sale or
disposal of Hydrocarbons or water produced from the Assets
described in Sections 1.2.a. through 1.2.d.

      f.   Seller's files, records, data and information relating
to the Assets described in Sections 1.2.a. through 1.2.e., provided,
however, the foregoing shall not include any files, records, data
or information which is attorney work product or subject to
attorney client privilege or any files, data or information which
by agreement Seller is required to keep confidential except and
to the extent a waiver in writing is obtained of any such
confidential requirements (the "Records").

     1.3  Effective Time.  The purchase and sale of the Assets shall
be  effective as of April 1, 2003 at 7:00 a.m., local time  where
the Assets are located (the "Effective Time").

                            ARTICLE 2
                         PURCHASE PRICE

     2.1  Purchase Price.  The purchase price for the Assets shall
be Forty-eight Million Six Hundred Thousand Dollars ($48,600,000.00)
(the  "Purchase Price").  At Closing, Buyer shall pay Seller  the
Purchase Price as adjusted pursuant to Sections 2.2 and 2.3 below
by  wire  transfer of immediately available funds  to  Bank  One,
Chicago,  Illinois,  ABA  # 071000013,  Williams  Production  RMT
Company, Account 1098250, referencing "Brundage Canyon Sale."

     2.2  Deposit.  Buyer will deliver by wire transfer of immediately
available funds, on or before three (3) business days following
execution of this Agreement by Seller and Buyer, ten percent
(10%) of the Purchase Price with Seller as a deposit (the
"Deposit"), to be held by Seller and, subject to the terms of
Article 10 of this Agreement, either (i) applied against the
Purchase Price (without interest) in the event the Closing is
consummated, (ii) returned to Buyer with interest at the rate of
the average of the daily commercial paper overnight repurchase
rate as published in The Wall Street Journal for the period from
the time the Deposit is paid to Seller until it is returned to
Buyer ("Interest") if Seller refuses to close after all
conditions specified in Section 9.1 have been satisfied (or
waived by Seller) and Buyer certifies to Seller in writing that
it is ready, willing and able  to  perform under  Article 11 or
if the conditions specified in Section 9.2 have not been
satisfied (or waived by Buyer), or (iii) retained by Seller if
all conditions specified in Section 9.2 have been satisfied and
Seller certifies to Buyer in writing that Seller is ready,
willing and able to perform under Article 11.

	2.3  Adjustments to Purchase Price.  The Purchase Price shall be
adjusted according to this Section without duplication.  For all
adjustments known as of Closing, the Purchase Price shall be
adjusted at Closing pursuant to a "Preliminary Settlement
Statement" approved by Seller and Buyer on or before Closing.  A
draft of the Preliminary Settlement Statement will be prepared by
Seller and provided to Buyer two (2) business days prior to
Closing.  The Preliminary Settlement Statement shall set forth
the Purchase Price as adjusted as provided in this Section using
the best information available at the Closing Date which amount
shall be paid at Closing and is referred to as the "Closing
Amount."  The Closing Amount shall be paid at Closing by wire
transfer of immediately available funds in accordance with the
wiring instructions set forth in Section 2.1.  After Closing,
final adjustments to the Purchase Price shall be made pursuant to
the Final Settlement Statement to be delivered pursuant to
Section 12.1.  For the purposes of this Agreement, the term
"Property Expenses" shall mean all capital expenses, joint
interest billings, lease operating expenses, lease rental and
maintenance costs, royalties, overriding royalties, Taxes (as
defined and apportioned as of the Effective Time pursuant to
Article 13), drilling expenses, workover expenses, geological,
geophysical and any other exploration or development expenditures
chargeable under applicable operating agreements or other
agreements consistent with the standards established by the
Council of Petroleum Accountant Societies of North America that
are attributable to the maintenance and operation of the Assets
during the period in question.  Seller and Buyer agree that the
Purchase Price reflects the gas imbalance volumes attributable to
the Wells that are set forth on Exhibit C.  If the actual
imbalance volumes as of the Effective Time are different than
those set forth on Exhibit C, the Purchase Price  will be
adjusted in accordance with Sections 2.3.a.(vi) and 2.3.b.(v), as
applicable and will be subject to adjustment and confirmation in
connection with preparation of the Final Settlement Statement.

          a.   Upward Adjustments.  The Purchase Price shall be adjusted
upward by the following:

	       (i)  An amount equal to all Property Expenses, including
prepaid expenses, attributable to the Assets after the Effective Time
that  were paid by Seller (all to be apportioned as  of  the
Effective Time except as otherwise provided), including without
limitation,  prepaid  utility charges, prepaid  rentals  and
royalties, including lease rentals, and prepaid drilling and
completion costs (to be apportioned as of the Effective Time
based on drilling days).

	       (ii) The proceeds of production attributable to the Assets
occurring before the Effective Time and received by Buyer, net of
royalties and taxes measured by production.

             (iii) An amount equal to production from the Assets that
occurred before the Effective Time but, because such production
is in pipelines or in processing, had not been sold as of the
Effective Time times the price for which production from the
Assets was sold immediately prior to the Effective Time;

	       (iv) To the extent that there are any pipelines imbalances, if
the net of such imbalances is an overdelivery imbalance (that is, at the
Effective Time, Seller has delivered more gas to the
pipeline than the pipeline has redelivered for Seller), the
Purchase Price shall be adjusted upward by the product of the
price received by Seller times the net overdelivery imbalance in
MMbtus.

	       (v)  An amount equal to the value actually received
by Buyer for Seller's share of any oil or condensate in tanks or
storage facilities produced from or credited to the Leases and Lands
prior to the Effective Time based upon the quantities in oil or
condensate tanks or storage facilities as measured by and
reflected in Seller's records; and (vi) To the extent that the gas
imbalance volumes attributable to the Wells set forth on Exhibit C,
in the aggregate, reflect less than the actual volume of gas in MMbtus
which Seller is entitled to take in excess of its fractional interest
in the Wells asa result of underproduction by Seller from the Wells
as of the EffectiveTime (such additional volume of underproduced
gas being the "AdditionalUnderproduced Gas"), the Purchase Price
shall be adjusted upward by an amount equal to the product of Two
Dollars ($2.00)  times the Additional Underproduced Gas.

     	        (vii) Any other amount provided in this Agreement or agreed
upon
by Seller and Buyer.

          b.   Downward Adjustments.  The Purchase Price shall be adjusted
downward by the following:

               (i) An amount equal to the sum of all Title Purchase Price
Adjustments as defined in Section 4.7;

		   (ii) An amount equal to Environmental Purchase Price
Adjustment,
as defined in Section 5.6;

		   (iii)The proceeds of production attributable to the Assets
occurring on or after the Effective Time and received by Seller,
net of royalties and taxes measured by production;

		   (iv) To the extent that there are any pipelines imbalances, if
the net of such imbalances is an underdelivery imbalance (that is, at the
Effective Time, Seller has delivered less gas to the
pipeline than the pipeline has redelivered for Seller), the
Purchase Price shall be adjusted downward by the product of the
price received by Seller times the net underdelivery balance in
MMbtus.

		   (v)  To the extent that the gas imbalance volumes attributable
to the Wells set forth on Exhibit C, in the aggregate, reflect less than the
actual volume of gas in MMbtus which Seller is obligated to deliver in excess
of its fractional interest in the wells as a result of overproduction by Seller
from the Wells as of the Effective Time (such additional volume of overproduced
gas being the "Additional Overproduced Gas"), the Purchase Price shall be
adjusted downward by an amount equal to the product of Two
Dollars ($2.00) times the Additional Overproduced Gas;

		   (vi) An amount equal to the Seller Property Tax, as defined in
Section 13.1;

		   (vii) An amount equal to the Suspense Accounts, as defined in
Section 12.2; and

		   (viii) Any other amount provided in this Agreement or agreed
upon by Seller and Buyer.

     2.4  Allocated Values.  Seller and Buyer agree to allocate the
Purchase Price among the Assets as set forth in Exhibit D.

                            ARTICLE 3
                    DUE DILIGENCE INSPECTION

     3.1   Access to Records.  Subject to the provisions  of  the
Confidentiality Agreement dated February 11, 2003 between  Seller
and  Buyer, Seller will disclose and make available to Buyer  and
its  representatives at Seller's or Seller's agent's  office  and
during  Seller's normal business hours, all Records  in  Seller's
possession  or control relating to the Assets for the purpose  of
permitting  Buyer to perform its due diligence review  including,
but not limited to, all well, leasehold, unit and title files and
title opinions.  Seller agrees to cooperate with Buyer in Buyer's
efforts  to  obtain,  at  Buyer's sole expense,  such  additional
information  relating  to  the Assets  as  Buyer  may  reasonably
desire.  Buyer may inspect the Records only to the extent it  may
so do without violating any obligation, confidence or contractual
commitment  of  Seller  to  a  third  party.   Seller  shall  use
reasonable  efforts  to obtain the necessary  consents  to  allow
Buyer's  examination  of  any confidential  information  that  is
material to this transaction.

     3.2  No Representation or Warranty.  Seller makes no
representation or warranty as to the accuracy or completeness of
the Records maintained by Seller and made available to Buyer.
Buyer agrees that any conclusions drawn from such Records shall
be the result of its own independent review and judgment.

	3.3  Access to the Assets and Indemnity.  Prior to Closing,
Seller shall permit Buyer, and the officers, employees, agents
and advisors of Buyer, to have reasonable access to the Assets
pursuant to the terms of a Temporary Access Agreement dated March
17, 2003 between Seller and Buyer (the "Temporary Access
Agreement").

				   ARTICLE 4
                          TITLE MATTERS

     4.1  Defensible Title.  The term "Defensible Title" means such
title  of Seller in and to the Assets that, subject to and except
for  the  Permitted Encumbrances:  (i) entitles Seller to receive
not  less than the net revenue interest described on Exhibit  A-2
("NRI");  (ii)  obligates  Seller  to  bear  costs  and  expenses
relating to the Assets in an amount not greater than the  working
interest  described on Exhibit A-2 ("WI"); and (iii) is free  and
clear  of material liens, taxes, encumbrances, mortgages,  claims
and  production  payments and any defects  that  would  create  a
material  impairment of use and enjoyment of or loss of  interest
in the affected Asset.

     4.2  Permitted Encumbrances.  The term "Permitted Encumbrances"
shall mean:

          a.   Lessors' royalties, overriding royalties net profits
interests,   production  payments,  reversionary  interests   and
similar burdens if the net cumulative effect of such burdens does
not operate to reduce the NRIs below those set forth on Exhibit A-
2;
	    b.   Any required governmental or third-party consents to
assignment of the Assets and preferential purchase rights which
are handled exclusively under Sections 4.10, 4.11 and 9.2d below;

            c.   Liens for taxes or assessments not yet due or not yet
delinquent or, if delinquent, that are being contested in good
faith in the normal course of business, provided, however, that
Seller shall be responsible for the prompt payment of all taxes
attributable to the Assets for all pre-Effective Time periods.
This Section 4.2c does not change the apportionment of taxes
under Article 13 of this Agreement;

	    d.   Rights of reassignment, to the extent any exist as of the date
of this Agreement, upon the surrender or expiration of any
lease;
	    e.   Easements, rights-of-way, servitudes, permits, surface
leases and other rights with respect to surface operations, on,
over or in respect of any of the properties or any restriction on
access thereto and that do not materially interfere with the
operation of the affected property;

	    f.   Materialmen's, mechanics', repairmen's, employees',
contractors', operators' or other similar liens or charges
arising in the ordinary course of business incidental to
construction, maintenance or operation of the Assets (i) if they
have not been filed pursuant to law and the time for filing them
has expired, (ii) if filed, they have not yet become due and
payable or payment is being withheld as provided by law, or
(iii) if their validity is being contested in good faith by
appropriate action. Provided, however, that it shall be Seller's
responsibility to promptly discharge and remove all such liens or
charges at Seller's sole expense;

	    g.   Rights reserved to or vested in any municipality or
governmental, statutory, public or tribal authority to control or
regulate any of the Assets in any manner; and all applicable
laws, rules, regulations and orders of general applicability in
the area;

	    h.   Liens for post-Effective Time operations arising under
operating agreements, unitization and pooling agreements and
production sales contracts securing amounts not yet accrued or
due or;

	    i.   The terms of the Material Agreements and any and all other
agreements that are ordinary and customary in the oil, gas,
sulfur and other mineral exploration, development or extraction
business, or in the business of processing of gas and gas
condensate for the extraction of products therefrom; and
Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement from Williams Production
RMT Company to Lehman Commercial Paper, Inc., as
Administrative Agent, dated July 30, 2002, as supplemented
and amended, which will, as to the Assets, be released as a
condition to Closing under Section 9.2c.

     4.3   Title  Defect.   The  term "Title  Defect"  means  any
encumbrance,  encroachment, irregularity, defect in or  objection
to  real  property title, excluding Permitted Encumbrances,  that
alone or in combination with other defects:

          a.   Renders title to an Asset less than Defensible Title;

	    b.   Reduces, impairs or prevents Buyer from receiving payment from
the purchasers of production from an Asset; and/or

	    c.   Restricts or extinguishes Buyer's right to use an Asset as
owner, lessee, licensee or permittee, as applicable.

     4.4  Notice of Title Defects.  Buyer shall deliver to Seller a
written  "Notice  of Title Defects" on or before  May  21,  2003,
5:00  p.m.,  Mountain  Time.  The Notice of Title  Defects  shall
(i)  describe  the Title Defect, (ii) describe the basis  of  the
Title  Defect and (iii) describe Buyer's good faith  estimate  of
the  reduction in the Asset's Allocated Value caused by the Title
Defect   ("Title   Defect  Value")  and  all   calculations   and
documentation  substantiating the existence of the Title  Defect.
Buyer will be deemed to have conclusively waived any Title Defect
about which it fails to so notify Seller in writing prior to  May
21,  2003  at  5:00 p.m. Mountain Time.  Seller may  contest  the
Title  Defect  or  the Title Defect Value by so notifying  Buyer.
The  agreement of Seller and Buyer as to the Title  Defect  Value
shall result in the "Actual Title Defect Value".

     4.5  Seller's Right to Cure.  Seller shall have the option, but
not the obligation, to attempt to cure any Title Defects.  Seller
shall notify Buyer prior to Closing of its election to cure any
Title Defect, and shall thereafter provide to Buyer as soon as
practicable prior to Closing evidence that any such Title Defect
is cured.

     4.6  Remedies for Title Defects.  In the event that any Title
Defect is not cured on or before Closing, Seller shall, at its
sole election, elect one of the following by so notifying Buyer
not later than two (2) business days prior to Closing:

          a.    Subject to the specific limitations set forth  in
Section  4.7, indemnify Buyer against all liability,  loss,  cost
and  expense resulting from such Title Defect, but in  an  amount
not to exceed the Allocated Value of the Asset that is subject to
such  Title  Defect, in which event the parties shall proceed  to
Closing and the Asset that is subject to such Title Defect  shall
be conveyed by Seller to Buyer subject to such Title Defect, with
no  payment  or settlement at Closing as a result of  such  Title
Defect and no reduction or adjustment to the Purchase Price;

	    b.   Subject to the specific limitations set forth in Section
4.7, credit Buyer with the amount of the Actual Title Defect
Value for an Asset (the "Title Defect Adjustment"), in which
event the parties shall proceed to Closing and the Asset that is
subject to such Title Defect shall be conveyed by Seller to Buyer
subject to such Title Defect and Buyer shall pay to Seller the
Purchase Price as so adjusted;

	    c.   Retain the Asset subject to such Title Defect and reduce the
Purchase Price by an amount equal to the Allocated Value of such
Asset, in which event the parties shall proceed to Closing and
the Asset that is subject to such Title Defect shall be retained
by Seller and Buyer shall pay to Seller the Purchase Price as so
adjusted.

     4.7  Title Thresholds.  Seller shall have no obligation under
Section  4.6 and there shall be no indemnification by  Seller  of
Buyer  under  Section 4.6.a or reduction to  the  Purchase  Price
under Sections 4.6.b or 4.6.c unless Seller's share of a proposed
indemnity  amount or reduction to the Purchase Price  as  to  any
single  incident exceeds One Hundred Thousand Dollars  ($100,000)
(the "Single Title Incident Threshold Amount").  For the purposes
of  application  of  the foregoing threshold,  "single  incident"
shall be applicable as follows: (i) on a lease-by-lease basis for
all  oil  and  gas leasehold interests, provided that  Waterflood
Unit, Bureau of Indian Affairs Contract No. 14-20-H62-4919, shall
be  treated  as  a  single  lease, (ii)  on  an  exploration  and
development  agreement-by-exploration and  development  agreement
basis  for  Lands for which an oil and  gas lease  has  not  been
earned  (as identified on Exhibit D),  and  (iii) on a field-wide
system  basis  for  the  NJNR-Ute Tribe Joint  Venture  Pipeline,
Brundage   Canyon  Field  compression  and  gas  gathering.    In
addition,  if  Seller's  share of the proposed  indemnity  amount
under  Section  4.6.a  or reduction to the Purchase  Price  under
Sections  4.6.b  or 4.6.c as to any single incident  exceeds  One
Hundred   Thousand  Dollars  ($100,000),  there   shall   be   no
indemnification  by  Seller of Buyer  under  Sections  4.6.a,  or
reduction  to the Purchase Price under Sections 4.6.b  and  4.6.c
until  such  time  as  the total of these  excess  amounts  (over
$100,000)  exceeds five percent (5%) of the Purchase Price   (the
"Title  Threshold  Amount").  If the Title  Threshold  Amount  is
exceeded,  the Purchase Price reduction shall include the  Single
Title  Incident  Threshold Amount for those  title  Defects  that
exceed  such  threshold and are conveyed to Buyer  under  Section
4.6.b and shall include the Allocated Value of those Assets  with
an  Allocated  Value in excess of $100,000 that are  retained  by
Seller  under  Section 4.6.c.  The total of  the  Purchase  Price
reductions under Sections 4.6.b and 4.6.c is the "Title  Purchase
Price Adjustment."

     4.8  Title Dispute Resolution.  Seller and Buyer agree to resolve
disputes  concerning  the  following  matters  pursuant  to  this
Section: (i) the existence and scope of a Title Defect, (ii)  the
Defect  Value   of   that portion  of the  Asset  affected  by  a
Title  Defect,  (iii)  ,  the adequacy of Seller's  Title  Defect
curative  materials (the "Disputed Title Matters").  The  parties
agree  to attempt to initially resolve all Disputed Title Matters
through  good faith negotiations.  If the parties cannot  resolve
such  disputes  within fourteen (14) days prior to  Closing,  the
Disputed  Title Matters shall be finally determined by a mutually
agreeable  accounting,  petroleum engineering,  or  law  firm  or
consultant (the "Title Arbiter"), taking into account the factors
set forth in this Agreement.  On or before ten (10) days prior to
Closing,   Buyer  and  Seller  shall  present  their   respective
positions  in  writing to the Title Arbiter, together  with  such
evidence  as each party deems appropriate.  The Arbiter shall  be
instructed to resolve the dispute through a final decision within
five  (5)  days  after  submission  of  the  parties'  respective
positions  to the Title Arbiter.  The costs incurred in employing
the  Arbiter  shall be borne equally by Seller  and  Buyer.   The
Title  Arbiter's  final decision may be filed  with  a  court  of
competent jurisdiction and entered as a judgment which  shall  be
binding on the parties.

    4.9  Depletion and Depreciation of Personal Property.  Buyer
shall assume all risk of loss with respect to, and any change in
the condition of, the Assets from the Effective Time until
Closing for production of oil, gas and/or other hydrocarbons
through depletion (including the watering-out of any well,
collapsed casing or sand infiltration of any well) and the
depreciation of personal property due to ordinary wear and tear.

    4.10 Consents.  Seller shall use reasonable efforts to obtain all
required consents to assignment of leases and contracts.  If
Buyer discovers properties for which consents to assign are
applicable during the course of Buyer's due diligence activities,
Buyer shall notify Seller immediately and Seller shall use
reasonable efforts to obtain such consents prior to Closing.
Except for consents and approvals which are customarily obtained
post-Closing (including without limitation federal, state, or
other non-tribal governmental approvals) and those consents which
would not invalidate the conveyance of the Assets, if a necessary
consent (with the exception of consents required from the Ute
Tribe of the Uintah and Ouray Reservation and the Ute
Distribution Corporation (together, the "Tribe") which are
handled as a condition to Closing under Section 9.2.d) to assign
any Asset has not been obtained as of the Closing, then (i) the
portion of the Assets for which such consent has not been
obtained shall be included with the Assets at the Closing, and
the Purchase Price for that Asset shall be included in the
Preliminary Settlement Statement, (ii) Seller shall employ
reasonable efforts to obtain such consent as promptly as possible
following Closing, and (iii) if such consent has not been
obtained as of the Final Settlement Date (unless Seller and Buyer
otherwise mutually agree in writing), the Allocated Value of the
Asset shall be a downward adjustment to the Purchase Price on the
Final Settlement Statement and Buyer shall reassign such Asset to
Seller, effective as of the Effective Time.  Buyer shall
reasonably cooperate with Seller in obtaining any required
consent including providing assurances of reasonable financial
conditions, plans of development or any other information
reasonably requested by the party whose consent is required.

    4.11 Preferential Purchase Rights.  Seller shall send notice of
this Agreement to all persons holding preferential purchase
rights in any portion of the Assets (i) offering to sell to each
such person that portion of the Assets for which such a
preferential right is held for an amount equal to the Allocated
Values of such Assets and subject to all other applicable terms
and conditions of this Agreement.  If, prior to Closing, any
person asserting a preferential purchase right notifies Seller
that it intends to consummate the purchase of that portion of the
Assets to which it holds a preferential purchase right pursuant
to the terms and conditions of such notice and this Agreement,
then such Assets shall be excluded from the Assets identified in
this Agreement and the Purchase Price shall be reduced by the
Allocated Values of such Assets; provided, however, that, at
Seller's option, if the holder of such preferential right fails
to purchase such Assets prior to the Closing Date, then Seller
shall promptly so notify Buyer, and Seller shall sell to Buyer,
and Buyer shall purchase from Seller, the Assets to which the
preferential purchase right was asserted for the Allocated Values
of such Assets.  All Assets for which a preferential purchase
right has not been asserted prior to Closing shall also be sold
to Buyer at Closing pursuant to the provisions of this Agreement.
If one or more of the holders of any preferential purchase right
notifies Seller subsequent to Closing that it intends to assert
its preferential purchase right, Seller shall give notice thereof
to Buyer, whereupon Buyer shall perform all valid preferential
purchase right obligations of Seller to such holders and Buyer
shall be entitled to receive (and Seller hereby assigns to Buyer
all of Seller's rights to) all proceeds received from such
holders in connection with such preferential purchase rights.
Buyer assumes all risk, liability and obligations, and shall
defend, indemnify, and hold harmless Buyer from and against all
Losses (as defined in Section 14.4), which arise from or in
connection with any preferential purchase right obligations
transferred to Buyer at Closing pursuant to this Section.

    4.12 Casualty Loss.  Prior to Closing, if any of the Assets is
destroyed by fire or other casualty or any of the Assets is taken
or threatened to be taken in condemnation or under the right of
eminent domain ("Casualty Loss"), Seller shall promptly provide
notice of the Casualty Loss to Buyer.  Buyer shall not be
obligated to purchase an Asset that is the subject of a Casualty
Loss if Buyer provides written notice to Seller prior to Closing
of Buyer's election not to purchase such Asset.  If Buyer so
elects not to purchase such Asset, the Purchase Price shall be
adjusted as agreed to by Buyer and Seller.  If Buyer elects to
purchase such Asset, the Purchase Price shall be reduced by the
estimated cost to repair such Asset (with equipment of similar
utility) as agreed to by Buyer and Seller (the reduction being
the "Net Casualty Loss").  The Net Casualty Loss shall not,
however, exceed the Allocated Value of such Asset.  Seller, at
its sole option, may elect to cure such Casualty Loss.  If Seller
elects to cure such Casualty Loss, Seller may replace any
personal property that is the subject of a Casualty Loss with
equipment of similar grade and utility, or replace any real
property with real property of similar nature and kind if such
property is acceptable to Buyer.  If Seller elects to cure the
Casualty Loss to the satisfaction of Buyer, the Asset subject to
such Casualty Loss shall be purchased by Buyer and there shall be
no adjustment to the Purchase Price.

                            ARTICLE 5
                      ENVIRONMENTAL MATTERS

     5.1   Definitions.  For the purposes of the  Agreement,  the
following terms shall have the following meanings:

     "Environmental Defect" means a condition in, on or under the
Assets  (including, without limitation, air, land, soil,  surface
and subsurface strata, surface water, ground water, or sediments)
that  causes  an  Asset  to  be  in  material  violation  of   an
Environmental Law or a condition that can reasonably be  expected
to give rise to costs or liability under applicable Environmental
Laws.  NORM  (defined in Section 5.2) contaminated pipe,  meters,
tubing and wellheads shall not be an Environmental Defect.

     "Environmental Defect Value" means the cost to Remediate  an
Environmental  Defect.  The Environmental Defect Value  shall  be
limited  to  the net present value before federal  income  taxes,
calculated using a ten percent discount rate (PV10), of the  most
cost  effective  means  to  achieve the Remediation  required  by
applicable  federal, state or local law or other governmental  or
judicial directive and not for any other cost.

     "Environmental  Law"  means any statute,  rule,  regulation,
code   or   order,  issued  by  any  federal,  state,  or   local
governmental  entity in effect on or before  the  Effective  Time
(collectively,  "Laws")  relating  to  the  protection   of   the
environment or the release or disposal of waste materials.

     "Remediation" or "Remediate" means actions taken to  correct
an Environmental Defect and "Remediation Costs" means the actual,
or good faith estimates of the costs to conduct such Remediation.

     5.2  Spills and NORM.  Buyer acknowledges that in the past there
may  have  been spills of wastes, crude oil, condensate, produced
water,  or  other  materials (including, without limitation,  any
toxic,  hazardous  or  extremely hazardous substances)  onto  the
Lands.   In  addition,  some  production  equipment  may  contain
asbestos   and/or   Naturally  Occurring   Radioactive   Material
("NORM").  In this regard Buyer expressly understands that   NORM
may  affix or attach itself to the inside of wells, materials and
equipment  as scale or in other forms, that said wells, materials
and  equipment  located on the Lands or included  in  the  Assets
described  herein  may  contain  NORM  and  that  NORM-containing
material  may have been buried or otherwise disposed  of  on  the
Lands.   Buyer also expressly understands that special procedures
may  be required for the Remediation, removal, transportation and
disposal of asbestos or NORM from the Assets and Lands where such
material may be found and that Buyer assumes all liability for or
in   connection   with  the  assessment,  containment,   removal,
Remediation,  transportation and disposal of any such  materials,
in  accordance with all past, present or future applicable  laws,
rules, regulations and other requirements of any governmental  or
judicial entities having jurisdiction and also with the terms and
conditions of all applicable leases and other contracts.

    5.3  Environmental Assessment.  Prior to Closing, Buyer may
conduct an on-site inspection, environmental assessment and
compliance audit of the Assets (an "Environmental Assessment") at
Buyer's cost and expense.  Such Environmental Assessment shall be
conducted in accordance with the Temporary Access Agreement.
Seller shall provide Buyer with access to the Assets and to all
information in Seller's possession or control pertaining to the
environmental condition of the Assets, including, but not limited
to, status or any environmental reports, permits, records and
assessments in Seller's possession or control, and shall make
available to Buyer all present personnel who would reasonably be
expected to have knowledge or information regarding the
environmental status or condition of the Assets.  Seller makes no
representation or warranty as to the accuracy or completeness of
the records maintained by Seller and made available to Buyer.
Buyer shall provide Seller five (5) days prior written notice of
any environmental inspections and tests, including the scope of
same, and Buyer shall give Seller the opportunity to participate
in all such inspections and tests.  Buyer shall promptly provide
Seller, at no cost to Seller, all reports of environmental
inspections and tests, provided that all such reports shall be
deemed to be confidential between the parties and subject to the
Confidentiality Agreement dated February 11, 2003 between Seller
and Buyer and the Temporary Access Agreement.  Buyer agrees to
release, indemnify, defend, and hold harmless Seller against all
Losses (as defined in Section 14.4) arising from or related to
the activities of Buyer, its employees, agents, contractors and
other representatives in connection with Buyer's Environmental
Assessment regardless of the negligence or strict liability of
Seller.

    5.4  Notice of Environmental Defects.  Buyer shall deliver to
Seller a written "Notice of Environmental Defects" on or before
May  21, 2003, 5:00 p.m., Mountain Time.  The Notice of
Environmental Defects shall (i) describe the Environmental
Defect, (ii) provide evidence of the Environmental Defect and the
documentation in Buyer's possession pertaining to such
Environmental Defect, and, (iii) describe Buyer's good faith
estimate of the Remediation Costs associated with the
Environmental Defect.  Buyer will be deemed to have conclusively
waived any Environmental Defect for which it fails to provide
Seller a Notice of Environmental Defect prior to May 21, 2003 at
5:00 p.m., Mountain Time.  Seller may contest the existence and
scope of the Environmental Defect or Environmental Defect Value
by so notifying Buyer.  The agreement of Seller and Buyer as to
the Environmental Defect Value shall result in the "Actual
Environmental Defect Value".

    5.5  Remedies for Environmental Defects.  Upon the receipt by
Seller of notice from Buyer pursuant to Section 5.4 of any
Environmental Defect, Seller shall have the option, but not the
obligation, to attempt to Remediate any Environmental Defect.  In
the event that any such Environmental Defect has not been
Remediated by Seller such that the applicable Asset(s) will not
be brought into compliance with the applicable Environmental Laws
on or before Closing, Seller shall, at its sole election, elect
one of the following by so notifying Buyer not later than two (2)
business days prior to Closing.

          a.   Subject to the specific limitations set forth in Section
5.6,  indemnify  Buyer  against all  liability,  loss,  cost  and
expense  resulting from such Environmental Defect in which  event
the  parties  shall  proceed to Closing and  the  Asset  that  is
subject to such Environmental Defect shall be conveyed by  Seller
to Buyer subject to such Environmental Defect, with no payment by
Seller  or  other  settlement at Closing  as  a  result  of  such
Environmental  Defect  and  no reduction  or  adjustment  to  the
Purchase Price;

	    b.   Subject to the specific limitations set forth in Section
5.6, credit Buyer with the amount of the Actual Environmental
Defect Value (the "Environmental Defect Adjustment"), in which
event the parties shall proceed to Closing and the Asset that is
subject to such Environmental Defect shall be conveyed by Seller
to Buyer subject to such Environmental Defect and Buyer shall pay
to Seller the Purchase Price as so adjusted; or

	    c.   Retain the Asset subject to such Environmental Defect and
reduce
the Purchase Price by an amount equal to the Allocated
Value of such Asset, in which event the parties shall proceed to
Closing and the Asset that is subject to such Environmental
Defect shall be retained by Seller and Buyer shall pay to Seller
the Purchase Price as so adjusted.

     5.6  Environmental Thresholds.  Seller shall have no obligation
under Section 5.5 and there shall be no indemnification by Seller
of  Buyer under Section 5.5.a or reduction to the Purchase  Price
under Sections 5.5.b or 5.5.c unless Seller's share of a proposed
indemnity  amount or reduction to the Purchase Price  as  to  any
single  incident exceeds Twenty Thousand Dollars  ($20,000)  (the
"Single  Environmental  Incident  Threshold  Amount").   For  the
purposes  of  application  of  the foregoing  threshold,  "single
incident"  shall be applicable on a well by well or  property  by
property  basis.  In addition, if Seller's share of the  proposed
indemnity amount under Section 5.5.a or reduction to the Purchase
Price  under  Sections 5.5.b or 5.5.c as to any  single  incident
exceeds  Twenty  Thousand Dollars ($20,000), there  shall  be  no
indemnification  by  Seller  of  Buyer  under  Section  5.5.a  or
reduction  to  the Purchase Price under Sections 5.5.b  or  5.5.c
until  such  time  as  the total of these  excess  amounts  (over
$20,000)  exceeds  five percent (5%) of the Purchase  Price  (the
"Environmental   Threshold  Amount").    If   the   Environmental
Threshold Amount is exceeded, the Purchase Price reduction  shall
include  the Single Environmental Incident Threshold  Amount  for
those  Environmental Defects that exceed such threshold  and  are
conveyed  to  Buyer  under Section 5.5.b and  shall  include  the
Allocated Value of those Assets with an Allocated Value in excess
of  Twenty Thousand Dollars ($20,000) that are retained by Seller
under  Section 5.5.c.  The total of the Purchase Price reductions
under  Sections  5.5.b  and 5.5.c is the "Environmental  Purchase
Price Adjustment").

	5.7  Environmental Dispute Resolution.  The parties agree to
resolve disputes concerning the following matters pursuant to
this Section:  (i) the existence and scope of an Environmental
Defect, (ii) Buyer's estimate of Remediation Costs of an
Environmental Defect and (iii) the effectiveness of Seller's
Remediation (the "Disputed Environmental Matters").  The parties
agree to attempt to initially resolve all Disputed Environmental
Matters through good faith negotiations.  If the parties cannot
resolve such disputes within fourteen (14) days prior to Closing,
the Disputed Environmental Matters shall be finally determined by
a mutually agreeable environmental consulting firm (the
"Environmental Arbiter"), taking into account the factors set
forth in this Agreement.  On or before ten (10) days prior to
Closing, Buyer and Seller shall present their respective
positions in writing to the Environmental Arbiter, together with
such evidence as each party deems appropriate.  The Environmental
Arbiter, shall be instructed to resolve the dispute through a
final decision within five (5) days after submission of the
parties' respective positions to the Environmental Arbiter.  The
costs incurred in employing the Environmental Arbiter shall be
borne equally by Seller and Buyer.  The Environmental Arbiter's
final decision may be filed with a court of competent
jurisdiction and entered as a judgment which shall be binding
upon the parties.

	5.8  "As Is, Where Is" Purchase.  Buyer shall acquire the Assets
(including Assets for which a notice was given under Section 5.4
above) in an "AS IS, WHERE IS" condition and shall assume all
risks that the Assets may contain waste materials (whether toxic,
hazardous, extremely hazardous or otherwise) or other adverse
physical conditions, including, but not limited to, the presence
of unknown abandoned oil and gas wells, water wells, sumps, pits,
pipelines or other waste or spill sites which may not have been
revealed by Buyer's investigation.  With the exception of matters
for which Seller indemnifies Buyer under Section 5.5.a, on and
after the Effective Time, all responsibility and liability
related to all such conditions, whether known or unknown, fixed
or contingent, will be transferred from Seller to Buyer.

	5.9  Disposal of Materials, Substances and Wastes.  Buyer shall
properly handle, remove, transport and dispose of any material,
substance or waste (whether toxic, hazardous, extremely hazardous
or otherwise) from the Assets or Lands (including, but not
limited to, produced water, drilling fluids and other associated
wastes), whether present before or after the Effective Time, in
accordance with applicable local, state and federal laws and
regulations.  Buyer shall keep records of the types, amounts and
location of materials, substances and wastes which are
transported, handled, discharged, released or disposed onsite and
offsite.  When and if any Lease is terminated, Buyer shall take
whatever additional testing, assessment, closure, reporting or
remedial action with respect to the Assets or Lands as is
necessary to meet any local, state, federal or tribal
requirements directed at protecting human health or the
environment in effect at that time.

     5.10 Buyer's Indemnity.

          a.   With the exception of matters for which Seller indemnifies
Buyer under Section 5.5.a, Buyer shall indemnify, hold harmless,
release  and defend Seller from and against all damages,  losses,
claims,  demands,  causes of action, judgments  and  other  costs
(including  but not limited to any civil fines, penalties,  costs
of  assessment, clean-up, removal and Remediation of pollution or
contamination,  and  expenses  for the  modification,  repair  or
replacement  of facilities on the Lands) brought by any  and  all
persons and any agency or other body of federal, state, local, or
tribal government, on account of any personal injury, illness  or
death,  any damage to, destruction or loss of property,  and  any
contamination or pollution of natural resources (including  soil,
air,  surface  water or groundwater) to the  extent  any  of  the
foregoing  directly  or  indirectly is  caused  by  or  otherwise
involves  any  environmental condition of the  Assets  or  Lands,
whether  created  or  existing before, on or after  the  Closing,
including, but not limited to, the presence, disposal or  release
of any material (whether hazardous, extremely hazardous, toxic or
otherwise) of any kind in, on or under the Assets or the Lands.

	    b.   With the exception of matters for which Seller indemnifies
Buyer under Section 5.5.a, Buyer's indemnification obligations
shall extend to and include, but not be limited to (i) the
negligence or other fault of Seller, Buyer and third parties,
whether such negligence is active or passive, gross, joint, sole
or concurrent, (ii) Seller's or Buyer's strict liability, and
(iii) Seller's or Buyer's liabilities or obligations under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C.  9601 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C.  6901 et
seq.), the Clean Water Act (33 U.S.C.  466 et seq.), the Safe
Drinking Water Act (14 U.S.C.  1401-1450), the Hazardous
Materials Transportation Act (49 U.S.C.  1801 et seq.), the
Toxic Substances Control Act (15 U.S.C.  2601-2629), the Clean
Air Act (42 U.S.C.  7401 et seq.) as amended, the Clean Air Act
Amendments of 1990 and all state and local laws and any
replacement or successor legislation or regulation thereto.  This
indemnification shall be in addition to any other indemnity
provisions contained in this Agreement, and it is expressly
understood and agreed that any terms of this Section shall
control over any conflicting or contradicting terms or provisions
contained in this Agreement.

                            ARTICLE 6
             SELLER'S REPRESENTATIONS AND WARRANTIES

     Seller makes the following representations and warranties as
of the date of this Agreement:

     6.1   Existence.  Seller is a corporation duly organized and
validly existing under the laws of the State of Delaware.

     6.2  Power.  Seller has all requisite power and authority to
carry on its business as presently conducted, to enter into this
Agreement and each of the documents contemplated to be executed
by Seller at Closing, and to perform its obligations under this
Agreement and under such documents.  To Seller's knowledge,
(except for any consents which are the subject of Section 4.10 or
which are customarily obtained after Closing) the consummation of
the transaction contemplated by this Agreement and each of the
documents contemplated to be executed by Seller at Closing will
not violate, nor be in conflict with, (i) any provision of
Seller's organizational or governing documents, (ii) any
agreement or instrument to which Seller is a party or is bound,
or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Seller.

     6.3  Authorization.  The execution, delivery and performance of
this Agreement and each of the documents contemplated to be
executed by Seller at Closing and the contemplated transaction
has been duly and validly authorized by all requisite corporate
and shareholder action on the part of Seller.

     6.4  Execution and Delivery.  This Agreement has been duly
executed and delivered on behalf of Seller, and at the Closing
all documents and instruments required hereunder to be executed
and delivered by Seller will be duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms, subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application with respect to
creditors, (ii) general principles of equity and (iii) the power
of a court to deny enforcement of remedies generally based upon
public policy.

     6.5  Liabilities for Brokers' Fees.  Seller has incurred no
liability, contingent or otherwise, for brokers' or finders' fees
relating to the transaction contemplated by this Agreement for
which Buyer shall have any responsibility whatsoever.

     6.6  Liens.  To Seller's knowledge, except for the liens created
by or arising under joint operating agreements covering the
Assets or applicable state statutes, the Assets are free and
clear of all liens.

     6.7  Taxes.  To Seller's knowledge, all taxes and assessments
pertaining to the Assets based on or measured by the ownership of
property for all taxable periods prior to the taxable period in
which this Agreement is executed have been properly paid.  All
income taxes and obligations relating thereto that could result
in a lien or other claim against any of the Assets have been
properly paid, unless contested in good-faith by appropriate
proceeding.

      6.8   Litigation.  To Seller's knowledge, there is no action,
suit, proceeding, claim or investigation by any person, entity,
administrative agency or governmental body with the exception of
the Tribe, pending or, to Seller's knowledge, threatened, against
Seller before any governmental authority that impedes or is
likely to impede Seller's ability to consummate the transaction
contemplated by this Agreement and to assume the abilities to be
assumed by Seller under this Agreement."

                            ARTICLE 7
             BUYER'S REPRESENTATIONS AND WARRANTIES

     Buyer makes the following representations and warranties  as
of the date of this Agreement:

     7.1  Existence.  Buyer is a corporation, duly organized, validly
existing and formed under the laws of the State of Delaware,  and
Buyer  by Closing will be duly qualified and in good standing  in
the State of Utah.

     7.2  Power and Authority.  Buyer has all requisite power and
authority to carry on its business as presently conducted, to
enter into this Agreement and each of the documents contemplated
to be executed by Buyer at Closing, and to perform its
obligations under this Agreement and under such documents.  The
consummation of the transaction contemplated by this Agreement
and each of the documents contemplated to be executed by Buyer at
Closing will not violate, nor be in conflict with, (i) any
provision of Buyer's organizational or governing documents,
(ii) any agreement or instrument to which Buyer is a party or is
bound, or (iii) any judgment, decree, order, statute, rule or
regulation applicable to Buyer.

     7.3  Authorization.  The execution, delivery and performance of
this Agreement and each of the documents contemplated to be
executed by Buyer at Closing and the contemplated transaction has
been duly and validly authorized by all requisite action on the
part of Buyer.

     7.4  Execution and Delivery.  This Agreement has been duly
executed and delivered on behalf of Buyer, and at the Closing all
documents and instruments required hereunder to be executed and
delivered by Buyer will be duly executed and delivered.  This
Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms, subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application with respect to
creditors, (ii) general principles of equity and (iii) the power
of a court to deny enforcement of remedies generally based upon
public policy.

     7.5  Liabilities for Brokers' Fees.  Buyer has incurred no
liability, contingent or otherwise, for brokers' or finders' fees
relating to the transaction contemplated by this Agreement for
which Seller shall have any responsibility whatsoever.

     7.6  Litigation.  There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
governmental body pending or, to Buyer's knowledge, threatened in
writing, against Buyer before any governmental authority that
impedes or is likely to impede Buyer's ability to consummate the
transactions contemplated by this Agreement and to assume the
liabilities to be assumed by Buyer under this Agreement.

     7.7  Independent Evaluation.  Buyer is an experienced and
knowledgeable investor in the oil and gas business.  Buyer has
been advised by and has relied solely upon its own expertise in
legal, tax, reservoir engineering and other professional counsel
concerning this transaction, the Assets and the value thereof.

     7.8  Qualification.  Buyer is now or at closing will be and
thereafter will continue to be qualified to own and operate any
federal, state or Indian oil and gas lease that constitutes part
of the Assets, including meeting all bonding requirements.
Completing the transactions set out in this Agreement will not
cause Buyer to be disqualified or to exceed any acreage
limitation imposed by law, statute or regulation.

     7.9  Funds.  Buyer has arranged to have available by the Closing
Date sufficient funds to enable Buyer to pay in full the Purchase
Price and otherwise perform its obligations under this Agreement.

                            ARTICLE 8
                    COVENANTS AND AGREEMENTS

     8.1  Covenants and Agreements.  As to the period of time from the
execution hereof until Closing, Seller and Buyer as follows:

          a.   Operation Prior to Closing.  Except as otherwise consented to
in
writing by Buyer or provided in this Agreement, from  the date  of  execution
hereof  to the  Closing,  Seller  shall  use
Seller's  commercially  reasonable efforts  to  ensure  that  the
Assets  are  maintained and operated in a  good  and  workmanlike
manner.   Subject to the provisions of Section 2.3, Seller  shall
pay  or cause to be paid its proportionate share of all costs and
expenses  incurred  in connection with such operations.   To  the
extent  Seller  receives written AFEs or actual notice  of  such,
Seller shall notify Buyer of ongoing activities and major capital
expenditures   in   excess   of  Twenty-five   Thousand   Dollars
($25,000.00)  per activity net to Seller's interest conducted  on
the  Assets  and  shall  consult with Buyer  regarding  all  such
matters and operations.

	    b.   Restriction on Operations.  Subject to Section 8.1.a.,
unless Seller obtains the prior written consent of Buyer to act
otherwise, Seller will use good-faith efforts within the
constraints of the applicable operating agreements and other
applicable agreements not to (i) abandon any part of the Assets
(except in the ordinary course of business or the abandonment of
leases upon the expiration of their respective primary terms or
if not capable of production in paying quantities), (ii) except
for capital projects which are deemed to be approved, approve any
operations on the Assets anticipated in any instance to cost the
owner of the Assets more than Twenty-five Thousand Dollars
($25,000.00) per activity net to Seller's interest (excepting
emergency operations, operations required under presently
existing contractual obligations, ongoing commitments under
existing AFEs and operations undertaken to avoid a monetary
penalty or forfeiture provision of any applicable agreement or
order), (iii) convey or dispose of any material part of the
Assets (other than replacement of equipment or sale of oil, gas,
and other liquid products produced from the Assets in the regular
course of business) or enter into any farmout, farmin or other
similar contract affecting the Assets (iv) let lapse any
insurance now in force with respect to the Assets, or
(v) materially modify or terminate any contract material to the
operation of the Assets.

	    c.   Marketing.  Unless Seller obtains the prior written consent of
Buyer to act otherwise, Seller will not alter any existing
marketing contracts related to the Assets currently in existence,
or enter into any new marketing contracts or agreements related
to the Assets providing for the sale of Hydrocarbons for a term
in excess of one (1) month.

	    d.   Legal Status.  Seller and Buyer shall use all reasonable
efforts to maintain their respective legal statuses from the date
hereof until the Final Settlement Date and to assure that as of
the Closing Date they will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the
timely consummation of the transaction contemplated hereby.

	    e.   Notices of Claims.  Seller shall promptly notify Buyer and
Buyer shall promptly notify Seller, if, between the date hereof
and the Closing Date, Seller or Buyer, as the case may be,
receives notice of any claim, suit, action or other proceeding of
the type referred to in Sections 6.8 and 7.6.

	    f.   Compliance with Laws.  During the period from the date of this
Agreement to the Closing Date, Seller shall attempt in good
faith to comply in all material respects with all applicable
statutes, ordinances, rules, regulations and orders relating to
the ownership and operation of the Assets.

	    g.   Government Reviews and Filings.  Before and after the
Closing, Buyer and Seller shall cooperate to provide requested
information, make required filings with, prepare applications to
and conduct negotiations with each governmental agency as
required to consummate the transaction contemplated hereby.  Each
party shall make any governmental filings occasioned by its
ownership or structure.  Buyer shall make all filings after the
Closing at its expense with governmental agencies necessary to
transfer title to the Assets or to comply with laws and shall
indemnify and hold harmless Seller from and against all claims,
costs, expenses, liabilities and actions arising out of Buyer's
holding of such title after the Closing and prior to the securing
of any necessary governmental approvals of the transfer.

	    h.   Confidentiality.  Confidentiality is governed by the terms of
the Confidentiality Agreement dated February 11, 2003 between
Seller and Buyer and Section 15.6 of this Agreement.  The terms
of the Confidentiality Agreement dated February 11, 2003 between
Seller and Buyer shall survive termination of this Agreement for
the term set forth in the Confidentiality Agreement.

                            ARTICLE 9
                      CONDITIONS TO CLOSING

     9.1   Seller's Conditions.  The obligations of Seller at the
Closing are subject, at the option of Seller, to the satisfaction
at or prior to Closing of the following conditions precedent:

          a.    Representations, Warranties and  Covenants.   All
representations and warranties of Buyer contained in Article 7 of
this Agreement shall be true and correct in all material respects
on  and  as  of  the Closing, and Buyer shall have performed  and
satisfied all covenants and agreements required by this Agreement
to be performed and satisfied by Buyer at or prior to the Closing
in all material respects;

	    b.   Closing Documents.  Buyer shall have executed and delivered
the documents which are contemplated to be executed and delivered by
it pursuant to Article 11 of this Agreement prior to or on the Closing Date;

	    c.   No Action.  No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the subject
matter of this Agreement that restrains or prohibits the
purchase and sale contemplated by this Agreement and which
remains in effect at the time of Closing or seeks to recover
damages from Seller resulting therefrom.

     9.2  Buyer's Conditions.  The obligations of Buyer at the Closing
are  subject, at the option of Buyer, to the satisfaction  on  or
prior to the Closing of the following conditions precedent:

          a.    Representations, Warranties and  Covenants.   The
representations and warranties of Seller contained in  Article  6
of  this  Agreement  shall be true and correct  in  all  material
respects  on  and as of the Closing Date, and Seller  shall  have
performed and satisfied all covenants and agreements required  by
this Agreement to be performed and satisfied by Buyer at or prior
to the Closing in all material respects;

          b.   Closing Documents.  Seller shall have executed and delivered
the documents which are contemplated to be executed and delivered by
it pursuant to Article 11 of this Agreement prior to or on the Closing
Date;

	    c.   Release of Mortgage.  Lehman Commercial Paper, Inc., as
Administrative Agent, shall have executed, as to the Assets, a
recordable release of Mortgage, Deed of Trust, Security
Agreement, Assignment of Production and Financing Statement from
Williams Production RMT Company to Lehman Commercial Paper, Inc.,
as Administrative Agent, dated July 30, 2002, as supplemented and
amended.

          d.   Tribal Consents.  The Tribe shall have given all consents
necessary to transfer the Assets to Buyer.

	    e.   Assignment of Transportation Contracts.  Seller shall
deliver to Buyer assignments by Williams Energy marketing &
Trading Company of (i) Gas Transportation Agreement dated April
1, 1996 between Barrett Resources Corporation, as shipper, and
Questar Pipeline Company, as transporter, and, (ii) Gas
Transportation Agreement dated February 1, 1997 between Barrett
Resources Corporation, as shipper, and Questar Pipeline Company
as transporter.

          f.   No Action.  No order shall have been entered by any court or
governmental agency having jurisdiction over the parties  or  the subject
matter of this Agreement that restrains or prohibits  the
purchase  and  sale  contemplated by  this  Agreement  and  which
remains  in  effect at the time of Closing or  seeks  to  recover
damages from Buyer resulting therefrom.

                           ARTICLE 10
              RIGHT OF TERMINATION AND ABANDONMENT

     10.1 Termination.  This Agreement may be terminated in accordance
with the following provisions:

          a.   by Seller if the conditions set forth in Section 9.1 are not
satisfied,  through no fault of Seller, or waived  by  Seller  in
writing, as of the Closing Date; or

	    b.   by Buyer if the conditions set forth in Section 9.2 are not
satisfied, through no fault of Buyer, or waived by Buyer in
writing, as of the Closing Date.

	    c.   by Seller or Buyer if the aggregate of Title Defect
Adjustments and Environmental Defect Adjustments exceeds ten 10%
of the Purchase Price.

          d.   by Buyer if Closing does not occur on or before August 1,
2003.

	    e.   by Seller or Buyer if Closing does not occur on or before
October
23, 2003.

     10.2 Liabilities Upon Termination.

          a.   Buyer's Default.  If the transactions contemplated by this
Agreement are not consummated on or before the date specified  in
Section  11.1  by  reason of Buyer's wrongful failure  to  tender
performance at Closing, and if Seller is not in material  default
under the terms of this Agreement and is ready, willing and  able
to  Close, and Seller terminates this Agreement, Seller shall  be
entitled,  at  Seller's election, to (i) specific performance  or
(ii)  retention  of  the Deposit, and any  accrued  interest,  as
liquidated   damages.   If  Seller  does   not   elect   specific
performance  of  this  Agreement, Seller  and  Buyer  agree  that
Seller's  damages in the event Buyer fails to close are difficult
to measure and both Seller and Buyer agree that the amount of the
Deposit  bears a reasonable relationship to and is  a  reasonable
estimation of such damages.

	    b.   Seller's Default.  If the transactions contemplated by this
Agreement are not consummated on or before the date specified in
Section 11.1 by reason of Seller's wrongful failure to tender
performance at Closing and if Buyer is not in material default
under this Agreement and is ready, willing and able to Close, and
Buyer terminates this Agreement, Buyer shall be entitled to a
prompt refund of the Deposit with Interest as Buyer's sole and
exclusive remedy.

	    c.   Other Termination.  If Seller and Buyer agree to terminate
this Agreement, or  if either party terminates the Agreement
under Sections 10.1.c pr 10.1e, or if Buyer terminates under
Section 10.1.d, then each party shall release the other party
from any and all liability for termination of this Agreement, and
Seller shall promptly refund the Deposit with Interest.

                           ARTICLE 11
                             CLOSING

     11.1  Date of Closing.      Subject to  Seller's and Buyer's
rights   to   terminate  in  Article  10,  the  closing  of   the
transaction contemplated by this Agreement ("Closing" or "Closing
Date")  shall be held on or before the later of June 12, 2003  or
five  (5)  business days after Buyer's condition to  Closing  set
forth  in  Section  9.2.d is satisfied or  waived  by  Buyer,  at
Seller's  office  in Denver, Colorado, at 8:30 a.m.  or  at  such
other time and place as the parties may agree in writing.

     11.2 Closing Obligations.  At Closing, the following events shall
occur, each being a condition precedent to the others and each
being deemed to have occurred simultaneously with the others:

          a.   Assignment of Assets.  Seller and Buyer shall execute,
acknowledge and deliver to Buyer an Assignment and Bill  of  Sale
of  the  Assets effective as of the Effective Time (in sufficient
counterparts     to    facilitate    filing    and     recording)
(i)  substantially  in  the  form of Exhibit  E  with  a  special
warranty of title by, through and under Seller but not otherwise;
with  no  warranties,  express or implied,  as  to  the  personal
property, fixtures or condition of the Assets which are  conveyed
"as is, where is;" (ii) such other assignments, bills of sale, or
deeds  necessary  to  transfer the  Assets  to  Buyer,  including
without  limitation any conveyances on official forms and related
documentation  necessary  to transfer  the  Assets  to  Buyer  in
accordance  with  requirements of state and federal  governmental
regulations; and (iii) an Assignment and Assumption Agreement  in
the  form  of  Exhibit  F  under  which  Seller  assigns  various
contractual  interests  included in the Assets  and  under  which
Buyer  assumes the obligations thereunder in accordance with  the
terms of this Agreement.

          b.   Assignment of Transportation Contracts.  Seller shall
deliver  to  Buyer  assignments of Williams  Energy  Marketing  &
Trading  Company of (i) Gas Transportation Agreement dated  April
1,  1996  between Barrett Resources Corporation, as shipper,  and
Questar   Pipeline  Company,  as  transporter,  and,   (ii)   Gas
Transportation  Agreement dated February 1, 1997 between  Barrett
Resources Corporation, as shipper, and Questar Pipeline  Company,
as transporter.

          c.   Release of Lehman Mortgage.  Seller shall deliver to Buyer a
recordable release, as to the Assets, by Lehman Commercial Paper, Inc.,  as
Administrative  Agent, of  Mortgage,  Deed  of  Trust, Security   Agreement,
Assignment  of  Production  and  Financing Statement   from  Williams
Production  RMT  Company  to   Lehman Commercial Paper, Inc., as
Administrative
Agent, dated  July  30, 2002, as supplemented and amended.

	    d.   Preliminary Settlement Statement.  Seller shall deliver to
Buyer and Seller and Buyer shall execute and deliver the
Preliminary Settlement Statement.

	    e.   Purchase Price.  Buyer shall deliver to Seller the Closing
Amount by wire transfer of immediately available funds.

	    f.   Letters in Lieu.  Seller and Buyer shall execute and deliver
all necessary letters in lieu of transfer orders directing all
purchasers of production to pay Buyer the proceeds attributable
to production from the Assets from and after the Effective Time.

	    g.   Seller's Officer's Certificate.  Seller shall execute and
deliver to Buyer an officer's certificate in form and substance
similar to Exhibit G, stating that all conditions precedent to
Closing have been satisfied.

	    h.   Buyer's Officer's Certificate.  Buyer shall execute and
deliver to Seller an officer's certificate in form and substance
similar to Exhibit H, stating that all conditions precedent to
Closing have been satisfied.

          i.   Non-Foreign Affidavit.  In compliance with Section 1445 of the
United States Internal Revenue Code, Seller shall execute and
deliver  to Buyer a Non-Foreign Affidavit in the form of  Exhibit
I.

                           ARTICLE 12
                    POST-CLOSING OBLIGATIONS

     12.1 Post-Closing Adjustments.  As soon as practicable after the
Closing,  but  on or before one hundred twenty (120)  days  after
Closing,  Seller, with the assistance of Buyer's staff  and  with
access to such records as necessary, shall prepare and deliver to
Buyer   a  final  settlement  statement  (the  "Final  Settlement
Statement") setting forth each adjustment or payment that was not
finally  determined as of the Closing and showing the calculation
of  such  adjustment and the resulting final purchase price  (the
"Final Purchase Price").  As soon as practicable after receipt of
Seller's  proposed Final Settlement Statement, but on  or  before
fifteen  (15)  days  after  receipt of  Seller's  proposed  Final
Settlement  Statement, Buyer shall deliver to  Seller  a  written
report containing any changes that Buyer proposes to make to  the
Final Settlement Statement.  Buyer's failure to deliver to Seller
a   written  report  detailing  changes  to  the  proposed  Final
Settlement  Statement by that date shall be deemed an  acceptance
by  Buyer  of  the  Final Settlement Statement  as  submitted  by
Seller.  The parties shall endeavor to agree with respect to  the
changes  proposed  by Buyer, if any, no later than  fifteen  (15)
days  after receipt by Seller of Buyer's comments to the proposed
Final  Settlement Statement.  The date upon which such  agreement
is  reached or upon which the Final Purchase Price is established
for  the transaction shall be called the "Final Settlement Date."
If  the  Final  Purchase Price is more than the  Closing  Amount,
Buyer  shall  pay Seller the amount of such difference.   If  the
Final  Purchase  Price  is less than the Closing  Amount,  Seller
shall pay to Buyer the amount of such difference.  Any payment by
Buyer  or  Seller  shall  be  by  wire  transfer  in  immediately
available funds.  Any such payment shall be within five (5)  days
of the Final Settlement Date.

     12.2 Suspense Accounts.  Seller currently maintains suspense
accounts pertaining to oil and gas heretofore produced comprising
monies  payable  to  royalty owners,  mineral  owners  and  other
persons  with  an  interest in production that  Seller  has  been
unable to pay because of title defects (the "Suspense Accounts").
A  preliminary listing of the Suspense Accounts is set  forth  in
Exhibit  J.   At Closing, a downward adjustment to  the  Purchase
Price  will be made to convey the Suspense Accounts to Buyer  and
the  Suspense  Accounts  will  be  included  in  the  Preliminary
Settlement  Statement,  with  an adjustment  made  in  the  Final
Settlement Statement, if necessary.  Buyer will assume  full  and
complete responsibility and liability for proper payment  of  the
funds comprising the Suspense Accounts as set forth on the "Final
Suspense Account Statement," which shall be provided by Seller to
Buyer  with  the Final Settlement Statement required  in  Section
12.1 (including any liability under any unclaimed property law or
escheat  statute).  Buyer agrees to indemnify,  defend  and  hold
Seller,  its parent, subsidiary and affiliated entities, together
with their respective officers, directors, employees, agents  and
their  respective  successors  and  assigns,  harmless  from  and
against  any  and all liability, claims, demands,  penalties  and
expenses (including attorneys' fees) arising out of or pertaining
to   the  proper  payment  and  administration  of  the  Suspense
Accounts,  limited, however to the total amount of  the  Suspense
Accounts.

     12.3 Dispute Resolution.  If the parties are unable to resolve
disputes  concerning  the  Final Settlement  Statement  or  Final
Purchase  Price  on or before thirty (30) days  after  the  Final
Settlement Statement is received by Buyer, such disputes shall be
resolved in accordance with Section 14.5.d.

     12.4 Records.  Seller shall make the Records available for pick
up by Buyer at a mutually agreeable time.  Seller may retain
copies of the Records.  Buyer shall make the Records available to
Seller for review and copying during normal business hours.
Buyer agrees not to destroy or otherwise dispose of the Records
for a period of six years after the Closing without giving Seller
reasonable notice and an opportunity to copy the Records.

     12.5 Seller's Employees.  For all of Seller's employees hired by
Buyer  in  connection  with  Buyer's acquisition,  ownership  and
operation of the Assets, if Buyer terminates any such employee(s)
within  two  (2) years of Closing under circumstances that  would
have  entitled  such  employee(s) to a  severance  benefit  under
Seller's employee severance policy in effect for such employee(s)
on  the Effective Date, a copy of which is attached as Exhibit  K
to  this Agreement ("Seller's Employee Severance Policy"),  Buyer
shall  pay  such  employee(s) severance based  on  such  Seller's
employee  severance  policy based upon  years  of  employment  by
Seller  (and its affiliates) and Buyer.  Nothing in this  Section
12.5  is  intended to nor does bind Buyer to offer employment  to
any of Seller's employees which shall be a decision solely within
Buyer's discretion.  With the exception of Buyer's assumption  of
Seller's obligations under Seller's Employee Severance Policy  in
the  event Buyer hires Seller's employees, Buyer does not  hereby
assume any liability of Seller as to Seller's employees.

     12.6 Further Assurances.  From time to time after Closing, Seller
and  Buyer  shall each execute, acknowledge and  deliver  to  the
other such further instruments and take such other action as  may
be  reasonably requested in order more effectively to  assure  to
the other the full beneficial use and enjoyment of the Assets  in
accordance with the provisions of this Agreement and otherwise to
accomplish the purposes of the transaction contemplated  by  this
Agreement.

     12.7 Disclaimers of Representations and Warranties.  The express
representations and warranties of Seller contained in this
Agreement are exclusive and are in lieu of all other
representations and warranties, express, implied or statutory.
BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY
WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT
COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (A) PRODUCTION
RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING
INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF
HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (B) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR
OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER
FURNISHED TO BUYER BY OR ON BEHALF OF SELLER, (C) THE
ENVIRONMENTAL CONDITION OF THE ASSETS, THEIR COMPLIANCE WITH
ENVIRONMENTAL LAWS, AND THE PRESENCE OR ABSENCE OF HAZARDOUS
SUBSTANCES OR NATURALLY OCCURRING RADIOACTIVE MATERIALS, (D) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (E) ANY IMPLIED
OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (F) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (G) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, (H) ANY CLAIMS BY
BUYER FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN AS
OF THE EFFECTIVE TIME OR THE CLOSING DATE, AND (I) ANY AND ALL
IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, IT BEING THE
EXPRESS INTENTION OF BOTH BUYER AND SELLER THAT THE ASSETS WILL
BE CONVEYED TO BUYER IN THEIR PRESENT CONDITION AND STATE OF
REPAIR, "AS IS" AND "WHERE IS" WITH ALL FAULTS AND THAT BUYER HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS
APPROPRIATE.  THE PARTIES AGREE THAT THIS SECTION 12.5
CONSTITUTES A CONSPICUOUS LEGEND.

                           ARTICLE 13
                              TAXES

     13.1 Apportionment of Ad Valorem and Property Taxes.  All ad
valorem  taxes, real property taxes, personal property taxes  and
similar  obligations (the "Property Taxes") attributable  to  the
Assets with respect to the tax period in which the Effective Time
occurs  shall  be  apportioned as of the Effective  Time  between
Seller  and  Buyer.  Prior to Closing, Seller shall determine  an
estimate  of  the  portion of the Property Taxes  (based  on  the
latest  information then available), for the period in which  the
Effective  Time occurs attributable to the period  prior  to  the
Effective Time (the "Seller Property Tax").  Seller shall  credit
to  Buyer,  through a downward adjustment to the Purchase  Price,
the amount of the Seller Property Tax.  Buyer shall file or cause
to  be  filed  all required reports and returns incident  to  the
Property  Taxes and shall pay or cause to be paid to  the  taxing
authorities  all  Property Taxes relating to the  tax  period  in
which  the Effective Time occurs.  If the Property Taxes used  in
determining  the Seller Property Tax are not the actual  Property
Taxes for the tax period in which the Effective Time occurs, then
upon  the  determination of the actual Property  Taxes  for  such
period, the Seller Property Tax shall be recalculated based  upon
such  actual  Property Taxes (the "Revised Seller Property  Tax")
and  (i)  if the Revised Seller Property Tax is greater than  the
Seller  Property  Tax, Seller shall promptly pay  the  difference
between  such amounts or (ii) if the Revised Seller Property  Tax
is  less  than the Seller Property Tax, Buyer shall promptly  pay
Seller the difference between such amounts.

     13.2 Transfer Taxes and Recording Fees.  The Purchase Price
excludes, and Buyer shall be liable for, any Transfer Taxes (as
defined below) required to be paid in connection with the sale or
transfer of the Assets pursuant to this Agreement.  "Transfer
Taxes" mean any sales, use, stock, stamp, documentary, transfer,
filing, licensing, processing, recording authorization and
similar taxes, fees and charges.

     13.3 Other Taxes.  All severance, production, excise,
conservation and similar taxes attributable to the Assets that
are based upon or measured by the production of Hydrocarbons
(excluding Property Taxes which are addressed in Section 13.1)
shall be apportioned between the Seller and Buyer as of the
Effective Time.  All such taxes that have accrued with respect to
the period prior to the Effective Time have been or will be
properly paid or withheld by Seller, and all statements, returns,
and documents pertinent thereto have been or will be properly
filed.  Buyer shall be responsible for paying or withholding or
causing to be paid or withheld all such taxes that have accrued
after the Effective Time and for filing all statements, returns,
and documents incident thereto.

     13.4 Tax Reports and Returns.  For tax periods in which the
Effective Time occurs, Seller agrees to immediately forward to
Buyer copies of any tax reports and returns received by Seller
after Closing and provide Buyer with any information Seller has
that is necessary for Buyer to file any required tax reports and
returns related to the Assets.  Buyer agrees to file all tax
returns and reports applicable to the Assets that Buyer is
required to file after the Closing.

                           ARTICLE 14
                   ASSUMPTION AND RETENTION OF
                  OBLIGATIONS; INDEMNIFICATION

     14.1 Buyer's Assumption of Liabilities and Obligations.  Upon
Closing,  Buyer  shall  assume  and  pay,  perform,  fulfill  and
discharge   all   claims,   costs,  expenses,   liabilities   and
obligations  ("Obligations") accruing  or  relating  to  (i)  the
owning,  developing, exploring, operating or maintaining  of  the
Assets   or   the  producing,  transporting  and   marketing   of
Hydrocarbons  from the Assets from and after the Effective  Time,
including, without limitation, the payment of Property  Expenses,
the obligation to plug and abandon all wells located on the Lands
and  reclaim  all well sites located on the Lands  regardless  of
when the plugging, abandonment and reclamation obligations arose,
the  make-up and balancing obligations for overproduction of  gas
from  the Wells, all liability for royalty and overriding royalty
payments made and Taxes paid with respect to the Assets, (ii) the
environmental  condition of the Assets except for  any  condition
for which Buyer is indemnified by Seller under Section 5.5.a, and
(iii)  all  Obligations accruing or relating to the ownership  or
operation  of  the  Assets before the Effective  Time  for  which
Seller  is not liable pursuant to the provisions of Section  14.2
(collectively, the "Assumed Liabilities").

     14.2 Seller's Retention of Liabilities and Obligations.  Upon
Closing, Seller shall retain and pay (i) all Property Expenses of
Seller relating to the ownership and operation of the Assets and
the producing, transporting and marketing of Hydrocarbons from
the Assets prior to the Effective Time, but only as to Claims
asserted before one year after the Closing Date, (ii) all
liability for royalty and overriding royalty payments made and
Taxes paid prior to the Effective Time with respect to the
Assets, and (iii) the Retained Litigation described in Exhibit L
(collectively, the "Retained Liabilities").

     14.3 Buyer's Plugging and Abandonment Obligations.  In addition
to the Assumed Liabilities, upon Closing Buyer assumes full
responsibility and liability for the following plugging and
abandonment obligations related to the Assets ("Buyer's Plugging
and Abandonment Obligations"), regardless of whether they are
attributable to the ownership or operation of the Assets before
or after the Effective Time.  All operations by Buyer under this
Section shall be conducted in a good and workmanlike manner and
in compliance with all applicable laws and regulations.

          a.    The necessary and proper plugging, replugging and
abandonment of all wells on the Assets;

	    b.   The necessary and proper removal, abandonment and disposal of
all structures, pipelines, equipment, abandoned property,
trash, refuse and junk located on or comprising part of the
Assets;

	    c.   The necessary and proper capping and burying of all
associated flow lines located on or comprising part of the
Assets;

	    d.   The necessary and proper restoration of the surface used for
operation of the Assets and subsurface to the condition required
by applicable laws, regulations or contract;

	    e.   All obligations relating to the items described in Section
14.3.a. through Section 14.3.d. arising from contractual
requirements and demands made by courts, authorized regulatory
bodies or parties claiming a vested interest in the Assets; and

	    f.   Obtaining and maintaining all bonds, or supplemental or
additional bonds, that may be required contractually or by
governmental authorities.

     14.4 Indemnification.  "Losses" shall mean any actual losses,
costs,  expenses  (including  court costs,  reasonable  fees  and
expenses of attorneys, technical experts and expert witnesses and
the  costs  of  investigation),  liabilities,  damages,  demands,
suits,   claims,  and  sanctions  of  every  kind  and  character
(including  civil fines) arising from, related to  or  reasonably
incident  to  matters indemnified against; excluding however  any
special, consequential, punitive or exemplary damages, diminution
of  value of an Asset, loss of profits incurred by a party hereto
or   Loss   incurred  as  a  result  of  the  indemnified   party
indemnifying a third party.

     After  the  Closing, Buyer and Seller shall  indemnify  each
other as follows:

          a.   Seller's Indemnification of Buyer.  Seller assumes all risk,
liability,  obligation and Losses in connection with,  and  shall
defend,  indemnify,  and  save  and  hold  harmless  Buyer,   its
officers,  directors, employees and agents, from and against  all
Losses  which  arise from or in connection with (i) the  Retained
Liabilities,  (ii)  any material breach of any representation  or
warranty  made by Seller, (iii) any matter for which  Seller  has
agreed  to  indemnify Buyer under this Agreement,  and  (iv)  any
material breach by Seller of this Agreement.

	    b.   Buyer's Indemnification of Seller.  Buyer assumes all risk,
liability, obligation and Losses in connection with, and shall
defend, indemnify, and save and hold harmless Seller, Seller's
officers, directors, employees and agents, from and against all
Losses which arise from or in connection with (i) the Assumed
Liabilities, (ii) any material breach of any representation or
warranty made by Buyer, (iii) any matter for which Buyer has
agreed to indemnify Seller under this Agreement, and (iv) any
material breach by Buyer of this Agreement.

     14.5 Procedure.  The indemnifications contained in Section 14.4
shall be implemented as follows:

          a.   Coverage.  Such indemnity shall extend to all Losses
suffered or incurred by the Indemnified Party, as defined below.

	    b.   Claim Notice.  The party seeking indemnification under the
terms of this Agreement ("Indemnified Party") shall submit a
written "Claim Notice" to the other party ("Indemnifying Party")
which, to be effective, must state:  (i) the amount of each
payment claimed by an Indemnified Party to be owing, (ii) the
basis for such claim, with supporting documentation, and (iii) a
list identifying to the extent reasonably possible each separate
item of Loss for which payment is so claimed.  The amount claimed
shall be paid by the Indemnifying Party to the extent required
herein within ten (10) days after receipt of the Claim Notice, or
after the amount of such payment has been finally established,
whichever last occurs.

	    c.   Information.  Within twenty (20) days after the Indemnified
Party receives notice of a claim or legal action that may result in a Loss for
which indemnification may be sought under this
Article 14 ("Claim"), the Indemnified Party shall give a Claim
Notice to the Indemnifying Party.  If the Indemnifying Party or
its counsel so requests, the Indemnified Party shall furnish the
Indemnifying Party with copies of all pleadings and other
information with respect to such Claim.  At the election of the
Indemnifying Party made within sixty (60) days after receipt of
the Claim Notice, the Indemnified Party shall permit the
Indemnifying Party to assume control of such Claim (to the extent
only that such Claim, legal action or other matter relates to a
Loss for which the Indemnifying Party is liable), including the
determination of all appropriate actions, the negotiation of
settlements on behalf of the Indemnified Party, and the conduct
of litigation through attorneys of the Indemnifying Party's
choice; provided, however, that no such settlement can result in
any liability or cost to the Indemnified Party for which it is
entitled to be indemnified hereunder without its consent.  If the
Indemnifying Party elects to assume control, (i) any expense
incurred by the Indemnified Party thereafter for investigation or
defense of the matter shall be borne by the Indemnified Party,
and (ii) the Indemnified Party shall give all reasonable
information and assistance, other than pecuniary, that the
Indemnifying Party shall deem necessary to the proper defense of
such Claim, legal action, or other matter.  In the absence of
such an election, the Indemnified Party will use its best efforts
to defend, at the Indemnifying Party's expense, any claim, legal
action or other matter to which such other party's
indemnification under this Article 14 applies until the
Indemnifying Party assumes such defense, and, if the Indemnifying
Party fails to assume such defense within the time period
provided above, settle the same in the Indemnified Party's
reasonable discretion at the Indemnifying Party's expense.  If
such a Claim requires immediate action, both the Indemnified
Party and the Indemnifying Party will cooperate in good faith to
take appropriate action so as not to jeopardize defense of such
Claim or either party's position with respect to such Claim.

	    d.   Dispute Resolution.  If the existence of a valid Claim or
amount to be paid by an Indemnifying Party is in dispute, the
parties agree to submit determination of the existence of a valid
Claim or the amount to be paid pursuant to the Claim Notice to
binding arbitration.  The arbitration shall be before a three
person panel of neutral arbitrators, consisting of one person
each to be selected by Seller and Buyer, and the third to be
selected by the arbitrators selected by Seller and Buyer.  The
arbitrators shall conduct a hearing no later than sixty (60) days
after submission of the matter to arbitration, and a written
decision shall be rendered by the arbitrators within thirty
(30) days of the hearing.  Any payment due pursuant to the
arbitration shall be made within fifteen (15) days of the
arbitrators' decision.  This Section excludes those matters
addressed in Sections 4.8 and 5.7 of this Agreement.

     14.6 No Insurance; Subrogation.  The indemnifications provided in
this  Article  14 shall not be construed as a form of  insurance.
Seller  and  Buyer  waive  for themselves,  their  successors  or
assigns,  including without limitation, any insurers, any  rights
to  subrogation for Losses for which each of them is respectively
liable  or against which each respectively indemnifies the other,
and,  if required by applicable policies, Seller and Buyer  shall
obtain waiver of such subrogation from their respective insurers.

     14.7 Reservation as to Non-Parties.  Nothing in this Agreement is
intended to limit or otherwise waive any recourse Seller or Buyer
may have against any non-party for any obligations or liabilities
that may be incurred with respect to the Assets.

                           ARTICLE 15
                          MISCELLANEOUS

     15.1 Exhibits.  The Exhibits referred to in this Agreement are
hereby incorporated in this Agreement by reference and constitute
a part of this Agreement.

     15.2 Expenses.  Except as otherwise specifically provided, all
fees, costs and expenses incurred by Seller or Buyer in
negotiating this Agreement or in consummating the transaction
contemplated by this Agreement shall be paid by the party
incurring same, including, without limitation, legal and
accounting fees, costs and expenses.

     15.3 Notices.  All notices and communications required or
permitted under this Agreement shall be in writing and addressed
as follows:

          If to Seller:  Williams Production RMT Company
                    One Williams Center, 26th Floor
                    Tulsa, Oklahoma  74172
                    Attention:     Ron Greenwell
                    Telephone:     (918) 573-2104
                    Facsimile:     (918) 573-0582

                               and

			Williams Production RMT Company
			One Williams Center, MD41-3
                    Tulsa, Oklahoma  74172
                    Attention:     Exploration and Production
                              Legal Counsel
                    Telephone:     (918) 573-4850
                    Facsimile:     (918) 573-4190

          If to Buyer:   Berry Petroleum Company
                    5201 Truxtun Avenue, Suite 300
                    Bakersfield, California  93309
                    Attention:     Manager Land Department
                    Telephone:     (661) 616-3900
                    Facsimile:     (661) 616-3886

                                   and

                    Laura K. McAvoy, Esq.
                    Jackson, DeMarco & Peckenpaugh
                    2815 Townsgate Road, Suite 300
                    Westlake Village, California  91361
                    Telephone:     (805) 495-7489
                    Facsimile:     (805) 230-0087

Any  communication or delivery hereunder shall be deemed to  have
been duly made and the receiving party charged with notice (i) if
personally delivered, when received, (ii) if faxed, when received
if  receipt  is  confirmed by telephone by the sender,  (iii)  if
mailed, certified mail, return receipt requested, on the date set
forth on the return receipt or (iv) if sent by overnight courier,
one  day  after  sending.  Any party may, by  written  notice  so
delivered to the other party, change the address or individual to
which delivery shall thereafter be made.

     15.4 Amendments.  Except for waivers specifically provided for in
this  Agreement, this Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the
party  to  be charged with such amendment or waiver and delivered
by such party to the party claiming the benefit of such amendment
or waiver.

     15.5 Assignment.  Prior to Closing, neither party shall assign
all or any portion of its respective rights or delegate all or
any portion of its respective duties hereunder without the prior
written consent of the other party.

	15.6 Confidentiality.  Seller and Buyer agree the provisions of
this Agreement shall be kept confidential except as disclosure
may be required by applicable law, rules and regulations of
governmental agencies or stock exchanges.  Buyer shall inform
Seller of all such disclosures by Buyer.

     15.7 Press Releases.  Seller and Buyer agree that prior to making
any press releases or other public announcements concerning this
Agreement and the transactions contemplated hereby, the party
desiring to make such public announcement shall obtain the
consent of the other party with such consent not to be
unreasonably withheld.  Seller retains the right to edit and/or
reject any press release submitted by Buyer.  Nothing herein
shall preclude Buyer from making such disclosures deemed
necessary by Buyer's counsel under any federal securities laws or
New York Stock Exchange rule.

     15.8 Headings.  The headings of the articles and sections of this
Agreement are for guidance and convenience of reference only and
shall not limit or otherwise affect any of the terms or
provisions of this Agreement.

     15.9 Counterparts.  This Agreement may be executed by Seller and
Buyer in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute one and the same instrument.  Execution can be
evidenced by fax signatures with original signature pages to
follow in due course.

     15.10     References.  References made in this Agreement,
including use of a pronoun, shall be deemed to include, where
applicable, masculine, feminine, singular or plural, individuals,
partnerships or corporations.  As used in this Agreement,
"person" shall mean any natural person, corporation, partnership,
court, agency, government, board, commission, trust, estate or
other entity or authority.

     15.11     Governing Law.  This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of Colorado without regard to
principles of conflicts of law.  The validity of the various
conveyances affecting the title to real property Assets shall be
governed by and construed in accordance with the laws of the
State of Utah.

     15.12     Removal of Signs.  Buyer shall remove all of Seller's
well and lease signs within thirty (30) days of the Closing Date.

     15.13     Binding Effect.  This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto, and their
respective successors and assigns.

     15.14     Survival.  The following shall survive Closing:
(i) all post-closing obligations and indemnities of Seller and
Buyer subject to the limitations set forth herein, (ii) Seller's
representations and warranties in Article 6 and, (iii) Buyer's
representations and warranties in Article 7.

     15.15     No Third-Party Beneficiaries.  This Agreement is
intended only to benefit the parties hereto and their respective
permitted successors and assigns.

     15.16     Limitation on Damages.  Consistent with Article 14, the
parties hereto expressly waive any and all rights to
consequential, special, incidental, punitive or exemplary
damages, or loss of profits resulting from breach of this
Agreement.

     15.17     Severability.  It is the intent of the parties that the
provisions contained in this Agreement shall be severable.
Should any provisions, in whole or in part, be held invalid as a
matter of law, such holding shall not affect the other portions
of this Agreement, and such portions that are not invalid shall
be given effect without the invalid portion.

     15.18     Knowledge.  As used throughout this Agreement, the term
"knowledge" or "best knowledge" or "best of Seller's knowledge,"
whether or not such term is written in lower or upper case, means
the actual knowledge by the officers, employees, or agents of
Seller involved at a supervisory or higher level of any fact,
circumstance, or condition.

     Executed  on  the  dates  set forth in  the  acknowledgments
below.

                                Seller:

                                WILLIAMS PRODUCTION RMT COMPANY

                                /s/Ralph A. Hill
                                Ralph A. Hill
                                Senior Vice President

                                Buyer:

                                BERRY PETROLEUM COMPANY, a
                                Delaware corporation

                                By:
					   /s/ Jerry V. Hoffman
                                Jerry V. Hoffman
                                Chairman, President and
                                Chief Executive Officer

STATE OF OKLAHOMA   )
     CITY AND       ) ss.
COUNTY OF TULSA     )

     The  foregoing  instrument was acknowledged before  me  this
23rd  day  of  April,  2003  by Ralph A.  Hill,  as  Senior  Vice
President  for  Williams  Production  RMT  Company,  a   Delaware
corporation.

     Witness my hand and official seal.

     My commission expires:

                                Notary Public

STATE OF COLORADO             )
                         CITY AND            )
COUNTY OF DENVER              )

     The  foregoing  instrument was acknowledged before  me  this
23rd  day  of  April,  2003  by Jerry V.  Hoffman,  as  Chairman,
President and Chief Executive Officer of Berry Petroleum Company,
a Delaware corporation.

     Witness my hand and official seal.

     My commission expires:

                                Notary Public<PAGE>

EXHIBIT 10.1

         SECURITIES PURCHASE AGREEMENT, dated as of March 9, 2004 (this
"AGREEMENT"), between MICROISLET, INC., a Nevada corporation with principal
executive offices at 6370 Nancy Ridge Drive, Suite 112, San Diego, California
92121 (the "COMPANY") and ____________________ (the "PURCHASER").

                                  INTRODUCTION

         Subject to the terms and conditions of this Agreement, the Company may
issue and sell to the Purchaser and the Purchaser shall purchase from the
Company the following: (i) a minimum of the total number of shares (the
"SHARES") of common stock of the Company (the "COMMON STOCK") shown in Schedule
1.01(a); (ii) warrants (the "$1.00 WARRANTS") exercisable for an aggregate of
the number of shares of Common Stock shown on Schedule 1.01(a) at the exercise
price of $1.00 per share, in the form attached hereto as Exhibit A; and (iii)
warrants (the "$1.30 WARRANTS", and, together with the $1.00 Warrants, the
"WARRANTS") exercisable for an aggregate of the number of shares of Common Stock
shown on Schedule 1.01(a) at the exercise price of $1.30 per share, in the form
attached hereto as Exhibit A(1). The Warrants, together with this Agreement, are
hereinafter referred to as the "TRANSACTION AGREEMENTS." The $1.00 Warrants
shall be exercisable until the fifth anniversary of the execution and delivery
of this Agreement, and the $1.30 Warrants shall be exercisable until the fifth
anniversary of the Second Closing. The term "SECURITIES" as used herein shall
refer to (x) the Shares, the Warrants and the shares issuable upon exercise of
the Warrants (the "WARRANT SHARES").

         NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Purchaser hereby agree as follows:

                                    ARTICLE I

                            ACQUISITION OF SECURITIES

         SECTION 1.01      THE AGREEMENT.

         (a) Subject to the terms and conditions of this Agreement, the Company
shall issue and sell to the Purchaser and the Purchaser shall purchase from the
Company the Shares in two installments as follows: (i) following the execution
and delivery hereof by the parties hereto, the Purchaser shall purchase the
number of Shares included in the First Tranche as set forth in Schedule 1.01(a),
in the manner provided in Section 1.02(a) (the "FIRST TRANCHE"); and (ii)
following the effectiveness of the Registration Statement (as defined in SECTION
3.01 below), the Purchaser shall purchase the number of Shares included in the
Second Tranche as set forth in Schedule 1.01(a) (the "SECOND TRANCHE"), subject
to receipt of an Election Notice (as defined below) from the Company(2). The

-------------
(1) If the $1.30 warrants are stated to be for zero shares, no $1.30 warrants
will be issued, and all references in this Agreement to the $1.30 warrants
should be disregarded.
(2) If the number of Shares to be purchased in the Second Tranche is stated to
be zero, then there shall be no Second Closing (as defined in Section 1.02(a)),
and neither party shall have any obligations with respect to the Second Tranche
or the Second Closing.

                                       1

<PAGE>

purchase price per share (in either case, the "TRANCHE PURCHASE PRICE") for the
Shares sold in the First Tranche and the Second Tranche shall be as set forth in
SCHEDULE 1.01(A).

         (b) To effect its election to sell Shares in the Second Tranche, the
Company shall deliver to Purchaser written notice within five Business Days
after the effectiveness of the Registration Statement (an "ELECTION NOTICE")
specifying that the Company wishes to sell such Shares to the Purchaser. The
Election Notice shall specify that the election is being made and the date on
which the closing of the Second Tranche shall occur; provided, such date shall
be a Business Day (as hereinafter defined) and shall not be earlier than five
Business Days or later than ten Business Days after the date such Election
Notice is given to the Purchaser. In no event will the closing date of the
Second Tranche be set for a date after December 31, 2004. An Election Notice
shall be irrevocable. For purposes hereof, the term "BUSINESS DAY" shall mean
any day which is not (i) a Saturday or a Sunday or (ii) a day on which banking
institutions are generally authorized or obligated to close in the City of Los
Angeles, California. Subject to the foregoing and to the applicable conditions
in Sections 4.01, 4.02 and 4.03 hereof, the Purchaser shall be obligated to
purchase the Shares in the Second Tranche.

         (c) The Company shall not effect the sale of shares in the Second
Tranche, and the Purchaser shall not have the right to purchase Shares in the
Second Tranche, to the extent that after giving effect to such purchase the
Purchaser together with its affiliates would beneficially own in excess of 9.8%
of the outstanding shares of the Common Stock following such purchase. For
purposes hereof, the number of shares of Common Stock beneficially owned by the
Purchaser and its affiliates or acquired by the Purchaser and its affiliates, as
the case may be, shall include the number of Shares issuable in connection with
the Second Tranche. If the 9.8% limitation is reached, this shall not affect or
limit the Purchaser's obligation to purchase the Shares in the Second Tranche as
otherwise provided in this Agreement. Specifically, even though the Purchaser
may not receive additional shares of Common Stock in the event that the 9.8%
limitation is ever reached, the Purchaser is still obligated to pay to the
Company the Purchase Price as otherwise obligated under this Agreement. Under
such circumstances, the Purchaser would have the right to have issued the
additional shares of Common Stock in the future only at such time as its
ownership decreased so as to permit issuance of Shares without violation of this
Section 1.01(c). The number of outstanding shares of Common Stock shall be
determined after giving effect to any purchases under this Agreement by the
Purchaser since the date as of which such number of outstanding shares of Common
Stock was reported. Except as otherwise set forth herein, for purposes of this
Section 1.01(c), beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT").

         (d)      (i) Upon the First Closing (as defined below), the Purchaser
shall be granted the $1.00 Warrants.

                  (ii) In addition, upon the Second Closing (as defined below)
the Purchaser shall be granted the $1.30 Warrants.

                  (iii) If at any time or from time to time prior to the
Effective Date, the Company sells any Common Stock or any indebtedness, bonds,
debentures, notes, preferred stock or similar equity securities which are

                                       2

<PAGE>

convertible into or exercisable for Common Stock at a price (the "SUBSEQUENT
PRICE") less than $1.30, the Company shall issue to the Purchaser within five
(5) Trading Days following the such sale the number of additional shares of
Common Stock determined according to the following formula:

                  (($1.30 - Subsequent Price) x the number of Shares purchased
in the First Tranche) / Subsequent
Price

Notwithstanding anything to the contrary herein, the provisions of this Section
1.01(d) shall not apply to any such securities issued or to be issued pursuant
to (i) securities issued to employees, consultants, officers or directors of the
Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board of Directors; (ii) securities
issued pursuant to the acquisition of another business entity or business
segment of any such entity by the Company by merger, purchase of substantially
all of the assets or other reorganization whereby the Company will own more than
fifty (50%) of the voting power of such business segment of any such entity;
(iii) securities issued to vendors or customers or to other persons in similar
commercial situations with the Company if such issuance is approved by the Board
of Directors; (iv) securities issued in corporate partnering transactions on
terms approved by the Board of Directors; (v) securities issued in accordance
with the terms of any of the Company's warrants outstanding on the date hereof;
or (vi) borrowings, direct or indirect, from financial institutions regularly
engaged in the business of lending money, whether or not presently authorized
with an equity component which is not a major component of such borrowing.

         SECTION 1.02      CLOSING PROCEDURES; THE CLOSINGS.

         (a) Subject to the satisfaction or waiver of the conditions precedent
set forth in SECTIONS 4.01 and 4.02 hereof, the closing of the sale and purchase
of the Securities to be delivered in the First Tranche shall take place
immediately following the execution and delivery of this Agreement, or as soon
thereafter as practicable (the "FIRST CLOSING"); and subject to the satisfaction
or waiver of the conditions precedent set forth in SECTIONS 4.01, 4.02 and 4.03
hereof and the procedures set forth herein, the closing of the sale and purchase
of the Securities to be delivered in the Second Tranche shall take place on the
date specified in the Election Notice (the "SECOND CLOSING") (the "FIRST
CLOSING" and the "SECOND CLOSING," each a "CLOSING"). Unless otherwise agreed by
the Company and the Purchaser, each Closing shall occur at the offices of
Procopio, Cory, Hargreaves & Savitch LLP, counsel to the Company.

         (b) At each Closing, (i) each of the Company and the Purchaser shall
deliver to the other, as applicable, any documents required to be delivered by
Article IV hereof which have not been delivered prior to such Closing, (ii) the
Purchaser shall pay the applicable Tranche Purchase Price for the Shares being
purchased at the Closing by wire transfer of immediately available funds to an
account designated in writing by the Company at or prior to the Closing, and
(iii) the Company shall deliver to the Purchaser one or more stock certificates,
determined in accordance with the instructions of the Purchaser, representing
the Shares being purchased or shall cause the Shares being purchased to be
electronically transferred to the Purchaser.

                                       3

<PAGE>

         SECTION 1.03      ILLIQUIDITY OF INVESTMENT; SECURITIES LAWS.

         (a) The offering and proposed sale of Shares and the Warrants herein
have not been registered or qualified under the Securities Act nor under the
securities laws of California or any other state. This offering has not been
reviewed by the United States Securities and Exchange Commission (the
"COMMISSION") nor has the Commission or any state securities commission or
regulatory authority approved, passed upon or endorsed the merits of this
offering. The offering and proposed sale of the Shares and the Warrants herein
is being made in reliance upon certain securities exemptions, including (i) Rule
506 of Regulation D promulgated under the Securities Act, and (ii) the exemption
set forth in Section 25102(f) of the California Corporate Securities Law of
1968, as amended, and the regulations promulgated thereunder.

         (b) It is believed that the offering and proposed sale of the Shares
and the Warrants currently qualifies and will continue to qualify under each
such claimed exemption. Because the availability of these exemptions is based
upon subjective factors, however, and because the criteria for exemption are
subject to interpretation by state or federal regulatory agencies and courts,
there is no assurance that such exemptions will be available. If and to the
extent that suits for rescission are brought for failure to register this
offering or for acts or omissions constituting offenses under the Securities Act
or the securities laws of any state, the capital and financial condition of the
Company could be materially adversely affected. In addition, the Company could
be adversely affected by the need to defend any such private or governmental
action even where the Company ultimately is exonerated.

                                   ARTICLE II

                          REPRESENATIONS AND WARRANTIES

                  SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser, subject to such
exceptions as are listed in the disclosure letter to be delivered to Purchaser
on or prior to the First Closing, or as otherwise disclosed in the Company's SEC
Documents (as defined below), as follows:

         (a) The Common Stock has been registered under Section 12(g) of the
Exchange Act and the Company is subject to the periodic reporting requirements
of Section 13 of the Exchange Act. The Company has heretofore provided to the
Purchaser true, complete, and correct copies of all forms, reports, schedules,
statements, and other documents required to be filed by it under the Exchange
Act since at least April 24, 2002 as such documents have been amended since the
time of the filing thereof (collectively, the "SEC DOCUMENTS"). The SEC
Documents, including, without limitation, any financial statements and schedules
included therein, at the time filed or, if subsequently amended, as so amended,
(i) did not contain any untrue statement of a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading and (ii) complied in all respects with the applicable requirements of
the Exchange Act and the applicable rules and regulations thereunder.

                                       4

<PAGE>

         (b) At the date hereof and at each Closing:

                  (i) the Common Stock is and shall be traded and quoted in the
over-the-counter Bulletin Board market (the "OTCBB");

                  (ii) the Company has and shall have performed or satisfied all
of its undertakings to, and its obligations and requirements with, the
Commission; and

                  (iii) the Company has not, and shall not have taken any action
that would preclude, or otherwise jeopardize, the inclusion of the Common Stock
for quotation on the OTCBB.

         (c) MicroIslet of Delaware, Inc., a Delaware corporation
("SUBSIDIARY"), is the sole subsidiary of the Company. Other than Subsidiary,
the Company has no subsidiaries or affiliated corporations and does not own any
interest in any other enterprise (whether or not such enterprise is a
corporation). Each of the Company and Subsidiary has been duly organized and is
validly existing as a corporation in good standing under the laws of the
respective jurisdiction of its incorporation with full power and authority
(corporate and other) to own, lease and operate its respective properties and
conduct its respective business as described in the SEC Documents; each of the
Company and Subsidiary is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the ownership or leasing
of its respective properties or the conduct of its respective business requires
such qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the business, prospects,
condition (financial or otherwise), and results of operations of the Company and
Subsidiary taken as a whole; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and
Subsidiary is in possession of, and operating in compliance with, all
authorizations, licenses, certificates, consents, orders and permits from state,
federal, foreign and other regulatory authorities that are material to the
conduct of its business, all of which are valid and in full force and effect;
neither the Company nor Subsidiary is in violation of its charter or bylaws or
in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any material bond, debenture, note or other
evidence of indebtedness, or in any material lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which it is a party or by which it or its respective properties or
assets may be bound, which violation or default would have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company and Subsidiary taken as a whole; and neither the Company nor
Subsidiary is in violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or Subsidiary
or over its respective properties or assets, which violation would have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole. The SEC
Documents accurately describe any corporation, association or other entity owned
or controlled, directly or indirectly, by the Company or Subsidiary.

                                       5

<PAGE>

         (d) The Company has full legal right, power and authority to enter into
each of the Transaction Agreements and to perform the transactions contemplated
hereby and thereby. Each of the Transaction Agreements has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement on
the part of the Company, enforceable in accordance with its respective terms
(except as such enforceability may be subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies);
the performance of each of the Transaction Agreements and the consummation of
the transactions herein or therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or Subsidiary is a
party or by which its respective properties or assets may be bound, (ii) the
charter or bylaws of the Company or Subsidiary, or (iii) any law, order, rule or
regulation, or to the best of the Company's knowledge, any writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or Subsidiary or over
its respective properties or assets, which violation or default would have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole. No
consent, approval, authorization or order of, or qualification with, any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or Subsidiary or over its respective properties or
assets is required for the execution and delivery of any Transaction Agreement
and the consummation by the Company of the transactions herein and therein
contemplated, except such as may be required under the Securities Act or under
state or other securities or blue sky laws, all of which requirements have been,
or in accordance therewith will be, satisfied in all material respects.

         (e) There is not any pending or, to the best of the Company's
knowledge, threatened, action, suit, claim or proceeding against the Company or
Subsidiary, or any of its officers or any of its properties, assets or rights,
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or Subsidiary or over its officers
or properties or otherwise that (i) is reasonably likely to result in any
material adverse change in the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole or might
materially and adversely affect their properties, assets or rights taken as a
whole, (ii) might prevent consummation of the transactions contemplated by the
Transaction Agreements, or (iii) will be required to be disclosed in the
Registration Statement, except to the extent heretofore disclosed in the SEC
Documents.

         (f) As of the date of this Agreement, the authorized capital stock of
the Company consists of 50,000,000 shares of Common Stock, of which 28,143,179
shares of Common Stock are outstanding, and 10,000,000 shares of preferred
stock, none of which is outstanding. All outstanding capital stock of Subsidiary
is owned beneficially and of record by the Company. Each of such outstanding
shares of Common Stock and each outstanding share of capital stock of
Subsidiary, is validly authorized, validly issued, fully paid, and
nonassessable, has not been issued and is not owned or held in violation of any
preemptive or similar right of stockholders. As of the date of this Agreement,
there is no commitment, plan, or arrangement to issue, and no outstanding
option, warrant, or other right calling for the issuance of, any share of

                                       6

<PAGE>

capital stock of or any security or other instrument convertible into or
exchangeable for capital stock of the Company or Subsidiary. As of the date of
this Agreement, there is outstanding no security or other instrument convertible
into or exchangeable for capital stock of the Company or Subsidiary. The Shares
and the Warrant Shares have been duly authorized for issuance and sale to the
Purchaser pursuant hereto and the Warrants, respectively, and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement and the relevant Warrant or Warrants, respectively, will be
duly and validly issued and fully paid and nonassessable, and will be sold free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest of any kind; and no preemptive or similar right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or Warrant Shares or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon the execution
hereof. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale or
transfer of the Shares, the Warrants, or the Warrant Shares, except as may be
required under the Securities Act, the rules and regulations promulgated
thereunder or under state or other securities or blue sky laws. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the SEC Documents accurately and fairly presents in all material
respects the information required to be shown with respect to such plans,
arrangements, options and rights under the Securities Act, the Exchange Act, and
the rules and regulations promulgated thereunder. The Company has authorized and
has reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized, but unissued, shares of its Common Stock to cover the Warrant
Shares.

                  (g) Deloitte & Touche LLP (the "AUDITORS"), which has examined
the consolidated financial statements of the Company, together with the related
schedules and notes, for the year ended December 31, 2002, filed with the
Commission as a part of the SEC Documents, and which, pursuant to the rules and
regulations of the Commission are to be included in the Registration Statement,
are independent accountants within the meaning of the Securities Act, the
Exchange Act, and the rules and regulations promulgated thereunder; the audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited financial information, forming part of
the SEC Documents, fairly present the financial position and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply; and all audited consolidated financial statements of the
Company, together with the related schedules and notes, and the unaudited
consolidated financial information, filed with the Commission as part of the SEC
Documents, as the same might have been amended, complied as to form in all
material respects with applicable accounting requirements and with the rules and
regulations of the Commission with respect hereto, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein
(except as may be indicated in the notes thereto or as permitted by the rules
and regulations of the Commission) and fairly present, subject in the case of
the unaudited consolidated financial statements, to customary year end audit
adjustments, the financial position of the Company as at the dates thereof and
the results of its operations and cash flows. The selected and summary
consolidated financial and statistical data included in the SEC Documents

                                       7

<PAGE>

present fairly the information shown therein and have been compiled on a basis
consistent with the audited consolidated financial statements presented therein.
No other financial statements or schedules are required to be included in the
SEC Documents.

         (h) Subsequent to the respective dates as of which information is given
in the SEC Documents, there has not been (i) any material adverse change in the
business, prospects, financial condition or results of operations of the Company
and Subsidiary taken as a whole, (ii) any transaction committed to or
consummated that is material to the Company and Subsidiary taken as a whole,
(iii) any obligation, direct or contingent, that is material to the Company and
Subsidiary taken as a whole incurred by the Company or Subsidiary, except such
obligations as have been incurred in the ordinary course of business, (iv) any
change in the capital stock or outstanding indebtedness of the Company or
Subsidiary that is material to the Company and Subsidiary taken as whole, (v)
any dividend or distribution of any kind declared, paid, or made on the capital
stock of the Company, or (vi) any loss or damage (whether or not insured) to the
property of the Company or Subsidiary which has a material adverse effect on the
business, prospects, condition (financial or otherwise), or results of
operations of the Company and Subsidiary taken as a whole.

         (i) Each of the Company and Subsidiary has good and marketable title to
all properties and assets described in the SEC Documents as owned by it, free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, other than such as would not have a material adverse effect
on the business, prospects, financial condition or results of operations of the
Company and Subsidiary taken as a whole. The agreements to which the Company or
Subsidiary is a party described in the SEC Documents are legal, valid and
binding agreements, enforceable by the Company or Subsidiary, as applicable, in
accordance with their terms (except as such enforceability may be subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies), and, to the best of the Company's knowledge, the
other contracting party or parties thereto are not in breach or default under
any of such agreements. Each of the Company and Subsidiary has valid and
enforceable leases for all properties described in the SEC Documents as leased
by it. Except as set forth in the SEC Documents, each of the Company and
Subsidiary owns or leases all such properties as are necessary to its respective
operations as now conducted and as described in the SEC Documents.

         (j) Each of the Company and Subsidiary has timely filed all respective
federal, state, local and foreign tax returns required to be filed by it and has
paid all taxes shown thereon as due, and there is no tax deficiency that has
been or, to the best of the Company's knowledge, is likely to be asserted
against the Company or Subsidiary if audited, which might have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and Subsidiary taken as a whole, and all tax
liabilities are adequately provided for on the books of the Company and
Subsidiary.

         (k) The Company and Subsidiary are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and Subsidiary are engaged. Neither the Company nor
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain

                                       8

<PAGE>

similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiary, taken as a whole.

         (l) No labor disturbance by the employees of the Company or Subsidiary
exists or, to the best of the Company's knowledge, is imminent. The Company is
not aware of any existing or imminent labor disturbance by the employees of any
principal suppliers or customers of the Company or Subsidiary that might be
expected to result in any material adverse change in the business, prospects,
condition (financial or otherwise), or results of operations of the Company and
Subsidiary taken as a whole. No collective bargaining agreement exists with any
of the Company's or Subsidiary's employees and, to the best of the Company's
knowledge, no such agreement is imminent.

         (m) Each of the Company and Subsidiary owns or possesses adequate
rights to use all patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names, logos, and copyrights described or
referred to in the SEC Documents as owned by or used by it or that are necessary
to conduct its respective businesses as described in the SEC Documents; neither
the Company nor Subsidiary has received any notice of, or has knowledge of, any
infringement of or conflict with asserted rights of the Company or Subsidiary by
others with respect to any patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, logos, or copyrights described
or referred to in the SEC Documents as owned by or used by it; and neither the
Company nor Subsidiary has received any notice of, or has knowledge of, any
infringement of, or conflict with, asserted rights of others with respect to any
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names, logos, or copyrights described or referred to in the SEC
Documents as owned by or used by it or which, individually or in the aggregate,
in the event of an unfavorable decision, ruling or finding, would have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole.

         (n) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "INVESTMENT COMPANY ACT"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future, to conduct its affairs in such a manner as to ensure that it is not and
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations.

         (o) Neither the Company nor Subsidiary has, and no person or entity
acting on behalf or at the request of the Company or Subsidiary has, at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any other applicable jurisdiction.

         (p) Neither the Company nor Subsidiary has taken or will take, directly
or indirectly, any action designed to, or that might reasonably be expected to
cause or result in, stabilization in violation of law, or illegal manipulation

                                       9

<PAGE>

of the price of the Common Stock, to facilitate the sale or resale of the Shares
or the Warrant Shares.

         (q) Each of the Company and Subsidiary is in compliance in all material
respects with all rules, laws and regulations relating to the use, treatment,
storage and disposal of toxic substances and protection of health or the
environment ("ENVIRONMENTAL LAWS") that are applicable to its business. Neither
the Company nor Subsidiary has received notice from any governmental authority
or third party of an asserted claim under Environmental Laws, which claim is
required to be disclosed in the SEC Documents. To the best knowledge of the
Company, neither the Company nor Subsidiary is likely to be required to make
future material capital expenditures to comply with Environmental Laws. No
property which is owned, leased or occupied by the Company or Subsidiary has
been designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss. 9601, ET
SEQ.), or otherwise designated as a contaminated site under applicable state or
local law. Neither the Company nor Subsidiary is in material violation of any
federal or state law or regulation relating to occupational safety or health.

         (r) The books, records and accounts of each of the Company and
Subsidiary accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the results of operations of, the
Company and Subsidiary, as applicable, all to the extent required by generally
accepted accounting principles. Each of the Company and Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

         (s) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or Subsidiary to, or for the benefit of, any of the
officers, directors, or director-nominees of the Company or Subsidiary or any of
the members of the families of any of them.

         (t) The Company represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
the Company is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. The Company further agrees to indemnify the Purchaser for
any claims, losses or expenses incurred by the Purchaser as a result of the
representation in this paragraph being untrue.

         (u) No stockholder of the Company has any right (which has not been
waived or has not expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement) to request or require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act on the Registration Statement.

                                       10

<PAGE>

         SECTION 2.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser represents and warrants to the Company as follows:

         (a) If Purchaser is a business entity, the Purchaser is a company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation.

         (b) The Purchaser has full legal right, power and authority to enter
into this Agreement and to perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Purchaser. The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser (if the Purchaser is
a business entity), and will not result in the creation of any lien, charge,
security interest or encumbrance upon any assets or property of the Purchaser
pursuant to the terms or provisions of, or will not conflict with, result in the
breach or violation of, or constitute, either by itself or upon notice or the
passage of time or both, a default under any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which the
Purchaser is a party or by which the Purchaser or any of its assets or
properties may be bound or affected or any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Purchaser or
any of its properties. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body is
required for the execution, delivery and performance of this Agreement or the
consummation by the Purchaser of the transactions contemplated hereby. Assuming
the valid execution hereof by the Company, this Agreement will constitute the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and except as the
indemnification agreements of the Purchaser in SECTION 3.03 hereof may be
legally unenforceable.

         (c) There are no legal or governmental actions, suits or proceedings
pending or, to the Purchaser's knowledge, threatened to which the Purchaser is
or may be a party which seeks to prevent or restrain the transactions
contemplated by this Agreement or to recover damages as a result of the
consummation of such transactions. To the knowledge of the Purchaser, the
Purchaser has not been and is not currently the subject of an investigation or
inquiry by the Commission, National Association of Securities Dealers, Inc.,
NASD Regulation, Inc., or any state securities commission.

         (d) The Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Shares, the Warrants, and the Warrant Shares, including investments in
securities issued by the Company. The Purchaser is not a "dealer" within the
meaning of the Securities Act or a "broker" or "dealer" within the meaning of

                                       11

<PAGE>

the Exchange Act. The Purchaser is able to bear the economic risk of loss of the
Purchaser's entire investment in the Shares, the Warrants, and the Warrant
Shares.

         (e) The Purchaser has requested, received, reviewed and considered all
information it deems relevant in making an informed decision to purchase the
Shares and the Warrants. The Purchaser understands that the Company is still in
the development stage and does not have operating revenues.

         (f) The Purchaser is acquiring the Shares and the Warrants in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares in violation of the
Securities Act or entering into any arrangement or understanding with any other
person regarding the distribution of such Shares in violation of the Securities
Act (it being understood that the foregoing does not limit the Purchaser's right
to sell Shares pursuant to the Registration Statement).

         (g) Purchaser understands that the Company is raising additional
capital from investors on terms similar to this Agreement but with different
allocations of shares between the First Tranche and the Second Tranche, and with
proportional adjustments to the number of shares underlying the $1.00 Warrants
and the $1.30 Warrants (such number being fifty percent (50%) of the number of
Shares purchased in the respective tranches). Purchaser understands that the
Company will require substantially more capital than the amount raised in this
offering (and the amounts raised from other investors concurrently herewith) in
order to complete the steps necessary to bring any products to market and
generate revenues. Purchaser acknowledges that these matters are discussed in
more detail in the SEC Reports under the heading "Management's Discussion and
Analysis." Purchaser understands that any additional capital raised by the
Company in the future may be on terms similar to or different from the terms of
this Agreement, and such terms may be more or less favorable to investors than
the terms of this Agreement.

         (h) The Purchaser is an "accredited investor" as defined in Rule 501 of
Regulation D under the Securities Act, and has provided true and correct
information on the Accredited Investor Questionnaire attached hereto as EXHIBIT
B.

         (i) Purchaser represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of Purchaser
is or will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Purchaser further agrees to indemnify the Company for any claims, losses or
expenses incurred by the Company as a result of the representation in this
paragraph being untrue.

         (j) Except for the representations and warranties contained in this
Section 2.02, the Purchaser makes no representation or warranty to the Company,
express or implied, in connection with the transactions contemplated by this
Agreement.

         SECTION 2.03 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates delivered pursuant hereto shall

                                       12

<PAGE>

survive the execution of this Agreement, the delivery to the Purchaser of the
Shares and the Warrants being purchased and the payment therefor, for a period
of two years following the Second Closing, or if there is no Second Closing, two
years following the First Closing.

                                   ARTICLE III

                                    COVENANTS

         SECTION 3.01      COVENANTS OF THE COMPANY.

         (a) (i) As soon as practicable, but in any event no later than May 28,
2004, the Company shall prepare and file with the Commission a registration
statement on Form SB-2 or other applicable form as determined by the Company
(the "REGISTRATION STATEMENT") for the purpose of registering the sale of the
Shares and the Warrant Shares by the Purchaser from time to time on the
facilities of any securities exchange or trading system on which the Common
Stock is then traded or in privately-negotiated transactions, which Registration
Statement shall contain all material information required to be set forth
therein and all material information disclosed to the Purchaser. For purposes of
this Section 3.01(a), the terms "SHARES" and "WARRANT SHARES" shall include any
other securities of the Company issued in exchange for the Shares or Warrant
Shares, as a dividend on the Shares or the Warrant Shares, or in connection with
a stock split or other reorganization transaction affecting the Shares or the
Warrant Shares. The Company shall use its commercially reasonable efforts to
cause the Registration Statement to become effective under the Securities Act as
soon as practicable, and in any event on or prior to August 30, 2004. In the
event that the Registration Statement should not be filed on or prior to May 28,
2004 or be declared effective under the Securities Act on or prior to August 30,
2004 (in either case, an "EVENT DATE"), (A) then on each monthly anniversary
following an Event Date until filing or effectiveness of the Registration
Statement, as applicable, the Company shall issue to the Purchaser (subject to
the limitations stated in Section 1.01(c)), as liquidated damages and not as a
penalty, the number of shares of Common Stock equal to 2% of the Shares
purchased by the Purchaser in the First Tranche.

                  (ii) The Company shall prepare and file with the Commission
such amendments and supplements to the Registration Statement and the prospectus
forming a part thereof as may be necessary to keep the Registration Statement
effective until the earliest date, after the date on which all of the Shares
have been purchased pursuant to this Agreement or the obligation of the
Purchaser to purchase the Shares pursuant to this Agreement has been terminated,
on which (i) all the Shares have been disposed of pursuant to the Registration
Statement, (ii) all of the Shares then held by the Purchaser may be sold within
a three month period under the provisions of Rule 144 without limitation as to
volume, whether pursuant to Rule 144(k) or otherwise, or (iii) the Company has
determined that all Shares then held by the Purchaser may be sold without
restriction under the Securities Act and has removed any stop transfer
instructions relating to such Shares and offered to cause to be removed any
restrictive legends on the certificates, if any representing such Shares (the
period between the Effective Date and the earliest of such dates is referred to
herein as the "REGISTRATION PERIOD"). At any time after the end of the

                                       13

<PAGE>

Registration Period, the Company may withdraw the Registration Statement and its
obligations under this Section 3.01(a) shall automatically terminate.

                  (iii) The Company shall not be obligated to prepare and file a
post-effective amendment or supplement to the Registration Statement or the
prospectus constituting a part thereof during the continuance of a Blackout
Event. A "BLACKOUT EVENT" means any of the following: (a) the possession by the
Company of material information that is not ripe for disclosure in a
registration statement or prospectus, as determined in good faith by the Chief
Executive Officer or the Board of Directors of the Company or that disclosure of
such information in the Registration Statement or the prospectus constituting a
part thereof would be materially detrimental to the business and affairs of the
Company; or (b) any material engagement or activity by the Company which would,
in the good faith determination of the Chief Executive Officer or the Board of
Directors of the Company, be materially adversely affected by disclosure in a
registration statement or prospectus at such time. In each event that there
should be in excess of two Blackout Events during any year commencing on the
date of this Agreement or any anniversary hereof, or in each event that any
Blackout Event should continue in excess of 30 days, for each such Blackout
Event and for each 30-day period or portion thereof following the aforementioned
initial 30 days, the exercise price of the Warrants shall be decreased by 2%
from the exercise price thereof in effect immediately prior to such adjustment.

                  (iv) At least two (2) Business Days prior to the filing with
the Commission of the Registration Statement (or any amendment thereto) or the
prospectus forming a part thereof (or any supplement thereto), the Company shall
provide draft copies thereof to the Purchaser and shall consider incorporating
into such documents such comments as the Purchaser (and its counsel) may propose
to be incorporated therein. Notwithstanding the foregoing, no prospectus
supplement, the form of which has previously been provided to the Purchaser,
need be delivered in draft form to the Purchaser.

                  (v) The Company shall promptly notify the Purchaser upon the
occurrence of any of the following events in respect of the Registration
Statement or the prospectus forming a part thereof: (i) receipt of any request
for additional information from the Commission or any other federal or state
governmental authority during the Registration Period, the response to which
would require any amendments to the Registration Statement; (ii) the issuance by
the Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; or (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.

                  (vi) The Company shall furnish to the Purchaser with respect
to the Shares and Warrant Shares registered under the Registration Statement
(and to each underwriter, if any, of such Shares and Warrant Shares) such number
of copies of prospectuses and such other documents as the Purchaser may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Shares and Warrant Shares by the Purchaser pursuant to the
Registration Statement.

                                       14

<PAGE>

                  (vii) The Company shall file or cause to be filed such
documents as are required to be filed by the Company for normal state securities
law or "blue sky" clearance in states specified in writing by the Purchaser;
PROVIDED, HOWEVER, that the Company shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented.

                  (viii) With a view to making available to the Purchaser the
benefits of Rule 144, the Company agrees, throughout the Registration Period and
so long as the Purchaser owns Shares or Warrants purchased pursuant to this
Agreement, to:

                           (A) comply with the provisions of paragraph (c) of
Rule 144; and

                           (B) file with the Commission in a timely manner all
reports and other documents
required to be filed by the Company pursuant to Section 13, 14 or 15(d) under
the Exchange Act; and, if at any time it is not required to file such reports
but in the past had been required to or did file such reports, it will, upon the
request of the Purchaser, make available other information as required by, and
so long as necessary to permit sales of its Shares pursuant to, Rule 144.

                  (ix) The Company shall bear all expenses incurred by it in
connection with the procedures in paragraphs (i) through (ix) of this Section
3.01(a) and the registration of the Shares and Warrant Shares pursuant to the
Registration Statement. The Company shall not be responsible for any expenses
incurred by the Purchaser in connection with its sale of the Shares or Warrant
Shares or its participation in the procedures in paragraphs (i) through (ix) of
this Section 3.01(a), including, without limitation, any fees and expenses of
counsel or other advisers to the Purchaser and any underwriting discounts,
brokerage fees and commissions incurred by the Purchaser.

         (b) (i) The Company may refuse to register (or refuse to permit its
transfer agent to register) any transfer of any Shares not made in accordance
with this Section 3.01(b) and for such purpose may place stop order instructions
with its transfer agent with respect to the Shares.

         (c) So long as the Registration Statement is effective covering the
resale of Shares then still owned by the Purchaser, the Company shall furnish to
the Purchaser:

                  (i) as soon as practicable after available, one copy of (A)
its Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a firm of certified public accountants), (B) upon written request, its Annual
Report on Form 10-KSB, (C) upon written request, its Quarterly Reports on Form
10-QSB, (D) upon written request, its Current Reports on Form 8-K, and (E) a
full copy of the Registration Statement (the foregoing, in each case, excluding
exhibits); and

                  (ii) upon the written request of the Purchaser, all exhibits
excluded by the parenthetical to subparagraph (i)(E) of this Section 3.01(d).

                                       15

<PAGE>

         (d) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock, which transfer agent
and registration shall be reasonably satisfactory to the Purchaser.

         (e) The Company shall promptly comply with the Sarbanes-Oxley Act of
2002 and the regulations promulgated pursuant thereto if it is not in compliance
at the date hereof.

         (f) Until the earlier of the termination of this Agreement and the
Second Closing (the earlier of such events, the "RELEASE TIME"), no dividend or
liquidating or other distribution or stock split shall be authorized, declared,
paid, or effected by the Company in respect of the outstanding shares of capital
stock of the Company. Until the Release Time, no direct or indirect redemption,
purchase, or other acquisition shall be made by the Company or any affiliate
thereof of shares of capital stock of the Company. This covenant shall not apply
if there is no Second Closing, either because no Second Closing is provided for
in this Agreement, or the last date for the Second Closing has expired.

         (g) Until the Release Time, and subject to the Company's obligations
under Regulation FD promulgated by the Commission and/or execution by the
Purchaser of an appropriate confidentiality agreement, the Company will afford
the officers, directors, employees, counsel, agents, investment bankers,
accountants, and other representatives of the Purchaser free and full access to
the plants, properties, books, and records of the Company, will permit them to
make extracts from and copies of such books and records, and will from time to
time furnish the Purchaser with such additional financial and operating data and
other information as to the business, prospects, financial condition, and
results of operations of the Company as the Purchaser from time to time may
request. This covenant shall not apply if there is no Second Closing, either
because no Second Closing is provided for in this Agreement, or the last date
for the Second Closing has expired.

         (h) Before the Company releases any information concerning this
Agreement or any of the transactions contemplated by this Agreement which is
intended for, or may result in, public dissemination thereof, the Company shall
cooperate with the Purchaser, shall furnish drafts of all documents or proposed
oral statements to the Purchaser for comment, and shall not release any such
information without the written consent of Purchaser, which consent shall not be
unreasonably withheld. Nothing contained herein shall prevent the Company from
releasing any information if required to do so by law.

         (i) The Company shall timely prepare and file any declaration or filing
necessary to comply with any transfer tax statutes that require any such filing
before the relevant Closing.

         (j) The Company shall obtain make such state securities law or "blue
sky" filings and obtain such state securities law or "blue sky" filings as shall
be reasonably requested by the Purchaser, provided, however, that the Company
shall not be required to qualify to do business or to become subject to general
service of process in any such jurisdiction.

                                       16

<PAGE>

         SECTION 3.02      COVENANTS OF THE PURCHASER.

         (a) The Purchaser agrees to comply in all material respects with all
federal and state securities laws and the rules and regulations promulgated
thereunder in connection with any sale by it of the Shares, the Warrants and the
Warrant Shares, whether or not such sale is pursuant to the Registration
Statement. In connection with the sale of any Shares pursuant to the
Registration Statement, but without limiting the generality of the foregoing
sentence, the Purchaser shall (i) comply with the provisions of Regulation M
promulgated under the Exchange Act, and (ii) deliver to the purchaser of Shares
the prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date.

         (b) The Purchaser will cooperate with the Company in all respects in
connection with the performance by the Company of its obligations under Section
3.01(a), including timely supplying all information reasonably requested by the
Company (which shall include all information regarding the Purchaser, and any
person who beneficially owns Shares held by the Purchaser within the meaning of
Rule 13d-3 promulgated under the Exchange Act, and the proposed manner of sale
of the Shares required to be disclosed in the Registration Statement) and
executing and returning all documents reasonably requested in connection with
the registration and sale of the Shares. During any periods that the Company is
unable to meet its obligations hereunder with respect to the registration of the
Shares solely because the Purchaser fails to furnish such information within
three Business Days of the Company's request, any liquidated damages that are
accruing at such time shall be tolled and any Event Date that may otherwise
occur solely because of such delay shall be suspended, until such information is
delivered to the Company.

          (c) Neither the Purchaser nor any entity controlling it, under its
control or under common control with it has, prior to the execution of this
Agreement, and will not, for a period of 18 months following the execution of
this Agreement, carry a net short position (as defined below) in the Common
Stock of the Company. A "net short position" means that the aggregate short
position of the Purchaser with respect to the Common Stock exceeds the number of
shares of Common Stock owned by the Purchaser, which for such purpose shall be
deemed to include all of the Shares plus the Warrant Shares. For purposes
hereof, a short position will include any derivative instruments such as a put
option, collar, swap or any other instrument which would result in a short
position.

         (d) In connection with the sale of any Shares pursuant to the
Registration Statement, the Purchaser shall deliver to the purchaser thereof the
prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date, all in accordance with the
requirements of the Securities Act and the rules and regulations promulgated
thereunder and any applicable blue sky laws.

         (e) If at any time or from time to time after the Effective Date, the
Company notifies the Purchaser in writing that the Registration Statement or the
prospectus forming a part thereof (taking into account any prior amendments or

                                       17

<PAGE>

supplements thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, the Purchaser shall
not offer or sell any Shares or engage in any other transaction involving or
relating to the Shares (other than purchases of Shares pursuant to this
Agreement), from the time of the giving of notice with respect to such untrue
statement or omission until the Purchaser receives written notice from the
Company that such untrue statement or omission no longer exists or has been
corrected or disclosed in an effective post-effective amendment to the
Registration Statement or a valid prospectus supplement to the prospectus
forming a part thereof.

         (f) The Purchaser acknowledges and understands that the Shares, the
Warrants, and the Warrant Shares are (or upon the issuance thereof will be)
"restricted securities" as defined in Rule 144. The Purchaser hereby agrees not
to offer or sell (as such terms are defined in the Securities Act and the rules
and regulations promulgated thereunder) any Shares, Warrants, or Warrant Shares
unless such offer or sale is made (a) pursuant to an effective registration of
such securities under the Securities Act, or (b) pursuant to an available
exemption from the registration requirements of the Securities Act. The
Purchaser agrees that it will not engage in hedging transactions with regard to
the Shares, the Warrants, and the Warrant Shares other than in compliance with
Section 3.02(c) and the Securities Act. A proposed transfer shall be deemed to
comply with this Section 3.02(f) if the Purchaser delivers to the Company a
legal opinion in form and substance reasonably satisfactory to the Company from
counsel reasonably satisfactory to the Company to the effect that such transfer
complies with this Section 3.02(f).

         SECTION 3.03      INDEMNIFICATION.

         (a) For the purpose of this paragraph (a) of this Section 3.03: (i) the
term "PURCHASER AFFILIATE" shall mean any person who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act; and (ii) the term "REGISTRATION STATEMENT" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 3.01(a).

                  (i) The Company agrees to indemnify and hold harmless the
Purchaser and each Purchaser Affiliate, against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchaser or such
Purchaser Affiliate may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon (A) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, as amended as of the
Effective Date, including any information deemed to be a part thereof as of the
time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to
Rule 434 promulgated under the Securities Act, or the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required (the "PROSPECTUS"), or any amendment or
supplement thereto, (B) the omission or alleged omission to state in the
Registration Statement as of the Effective Date a material fact required to be

                                       18

<PAGE>

stated therein or necessary to make the statements in the Registration Statement
or any post-effective amendment or supplement thereto, or in the Prospectus or
any amendment or supplement thereto, not misleading, in each case in the light
of the circumstances under which the statements contained therein were made, or
(C) any inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder, and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred by the Purchaser or such Purchaser Affiliate in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; PROVIDED, HOWEVER, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (A) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the prospectus included therein, or any amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Purchaser expressly for use therein, or (B) the
failure of the Purchaser to comply with the covenants and agreements contained
in Section 3.02 hereof, or (C) the inaccuracy of any representations made by the
Purchaser herein or (D) any statement or omission in any Prospectus that is
corrected or disclosed in any subsequent Prospectus that was delivered to the
Purchaser prior to the pertinent sale or sales by the Purchaser.

                  (ii) The Purchaser will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act and the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (A) any failure to comply with the covenants and agreements
contained in Section 3.02 hereof, (B) the inaccuracy of any representation made
by the Purchaser herein, or (C) any (I) untrue or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, or (II) omission or alleged omission to
state in the Registration Statement, the Prospectus or any amendment or
supplement thereto a material fact required to be stated therein or necessary to
make the statements in the Registration Statement or any amendment or supplement
thereto, in the prospectus included therein, or any amendment or supplement
thereto, not misleading, in each case in the light of the circumstances under
which they were made; provided, that the Purchaser's indemnification obligation
under this clause (C) shall apply to the extent, and only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, such prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use therein,
and will reimburse the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person for any legal and other
expense reasonably incurred by the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person in

                                       19

<PAGE>

connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.

                  (iii) Promptly after receipt by an indemnified party under
this Section 3.03 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 3.03, promptly notify the indemnifying
party in writing thereof; provided, the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party for contribution (except as provided in paragraph (iv)) or
otherwise than under the indemnity agreement contained in this Section 3.03 or
to the extent it is not prejudiced as a result of such failure. In case any such
action is brought against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 3.03 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof unless
the indemnified party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of action, in which case the reasonable fees
and expenses of counsel shall be at the expense of the indemnifying party, or
unless the indemnified party and the indemnifying party, in the reasonable
opinion of counsel to the indemnified party, have defenses distinct from, or
contradictory to, the defenses available to the other.

                  (iv) If the indemnification provided for in this Section 3.03
is required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(i) or (ii) of this Section 3.03 in respect to any losses, claims, damages,
liabilities or expenses referred to herein (subject to the limitation of
paragraph (iii) of this Section 3.03), then each applicable indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of any losses, claims, damages, liabilities or expenses referred to
herein (I) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the sale of the Common Stock
contemplated by this Agreement or (II) if the allocation provided by clause (I)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (I) above but
the relative fault of the Company and the Purchaser in connection with the
statements or omissions or inaccuracies in the representations and warranties in
this Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by the Purchaser
to the Company pursuant to this Agreement for the Shares purchased by the
Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the "DIFFERENCE") between the amount such Purchaser paid for the
Shares that were sold pursuant to the Registration Statement and the amount
received by such Purchaser from such sale. The relative fault of the Company on
the one hand and the Purchaser on the other shall be determined by reference to,

                                       20

<PAGE>

among other things, whether the untrue or alleged statement of a material fact
or the omission or alleged omission to state a material fact or the inaccurate
or the alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by the Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, omission or inaccuracy. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (iii) of this Section 3.03, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (iii) of this Section
3.03 with respect to the notice of the threat or commencement of any threat or
action shall apply if a claim for contribution is to be made under this
paragraph (iv); PROVIDED, HOWEVER, that no additional notice shall be required
with respect to any threat or action for which notice has been given under
paragraph (iii) for purposes of indemnification. The Company and each Purchaser
agree that it would not be just and equitable if contribution pursuant to this
Section 3.03 were determined solely by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this Section
3.03, the Purchaser shall not be required to contribute any amount in excess of
the amount by which the Difference exceeds the amount of any damages that such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

                                   ARTICLE IV

                              CONDITIONS TO CLOSING

         SECTION 4.01 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to purchase Shares at a Closing shall be subject to
the satisfaction of the following conditions, or the waiver of such conditions
by the Purchaser, at or prior to the applicable Closing:

                  (a) the representations and warranties of the Company set
forth in Section 2.01 of this Agreement shall be true and correct with the same
force and effect as though expressly made on and as of such Closing, except for
representations or warranties made as of a particular date which representations
and warranties shall be true and correct as of such date;

                  (b) the Company shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to such Closing;

                  (c) the Company shall have delivered to the Purchaser a
certificate executed by the Chairman of the Board or Chief Executive Officer and
the chief financial or accounting officer of the Company, dated the applicable
Closing, to the effect that the conditions in clauses (i) and (ii) have been
satisfied;

                                       21

<PAGE>

                  (d) Procopio, Cory, Hargreaves & Savitch LLP, counsel to the
Company, shall have delivered to the Purchaser its legal opinion in form and
substance satisfactory to the Purchaser; and

                  (f) there shall not have been (i) any domestic or
international event of war or terrorism, that shall have materially and
adversely disrupted the U.S. securities markets; or (ii) a general suspension
of, or a general limitation on prices for, trading in securities on the New York
Stock Exchange or the American Stock Exchange or in the over-the-counter market;
or (iii) a banking moratorium declared by any state or federal authority; or
(iv) a moratorium in foreign exchange trading by major international banks or
persons declared; or (v) a material interruption in the mail service or other
means of communication within the United States; or (vi) a material or
substantial loss suffered by the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage, or other calamity or malicious act, whether or not
such loss shall have been insured, or from any labor dispute or court or
government action, order, or decree, which will, in the reasonable discretion of
the Purchaser, make it inadvisable to proceed with any portion of the
transactions contemplated hereby; or (viii) any material adverse change in the
business, prospects, financial condition, or results of operations of the
Company; or (ix) any material governmental restrictions shall have been imposed
on trading in securities in general, which restrictions are not in effect on the
date hereof; or (x) passed by the Congress of the United States or by any state
legislature any act or measure, or adopted by any governmental body or
authoritative accounting institute or board, or any governmental executive, any
orders, rules, or regulations, which the Purchaser reasonably believes likely to
have a material adverse effect on the business, financial condition, or
financial statements of the Company or any of the Subsidiary or the market for
the Common Stock.

         SECTION 4.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to sell Shares at any Closing shall be subject to the
satisfaction of the following conditions, or the waiver of such conditions by
the Company, at or prior to the applicable Closing:

                  (a) the representations and warranties of the Purchaser set
forth in Section 2.02 of this Agreement shall be true and correct with the same
force and effect as though expressly made on and as of such Closing, except for
representations or warranties made as of a particular date which representations
and warranties shall be true and correct as of such date;

                  (b) the Purchaser shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to such Closing; and

                  (c) the Purchaser shall have delivered to the Company a
certificate executed by the Purchaser (or, if the Purchaser is a business
entity, by a duly authorized officer of the Purchaser), dated the applicable
Closing, to the effect that the conditions in clauses (a) and (b) have been
satisfied.

         SECTION 4.03 CONDITIONS TO THE OBLIGATIONS OF BOTH PARTIES WITH RESPECT
TO THE SECOND CLOSING. The obligation of the Company to sell, and the Purchaser
to purchase, Shares at the Second Closing shall be subject to the satisfaction
of the following additional condition:

                                       22

<PAGE>

                  (a) the Registration Statement shall have been declared by the
Commission, and shall not have been withdrawn, no stop order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceedings for the suspension of the effectiveness of the Registration
Statement shall have been instituted or threatened by the Commission.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.01 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:

                  (a) if to the Company, to:

                                    MicroIslet, Inc.
                                    6370 Nancy Ridge Drive
                                    Suite 112
                                    San Diego, California  92121
                                    Attention: Chief Executive Officer and
                                               Chief Financial Officer

                                    with a copy to:

                                    Procopio, Cory, Hargreaves & Savitch LLP
                                    530 B Street, Suite 2100
                                    San Diego, California  92101
                                    Attention:  John D. Tishler
                                    Phone:  (619) 515-3258
                                    Facsimile:  (619) 235-0398

                           or to such other person at such other place as the
                           Company shall designate to the Purchaser in writing;
                           and

                  (b)      if to the Purchaser, at the address set forth below
                           the Purchaser's signature to this Agreement.

         SECTION 5.02 ASSIGNMENT. Neither party hereto may assign or delegate
any of such party's rights or obligations under or in connection with this
Agreement, and any attempted assignment or delegation of such rights or
obligations shall be void. Except as expressly provided in Section 3.03 with
respect to Purchaser Affiliates, directors and controlling persons of the
Company and officers of the Company who signed the Registration Statement, no
person, including without limitation any person who purchases or otherwise
acquires or receives any Shares from the Purchaser, is an intended third party
beneficiary of this Agreement, and no party to this Agreement shall have any

                                       23

<PAGE>

obligation arising under this Agreement to any person other than the other party
hereto and, to the extent expressly provided in Section 3.03, Purchaser
Affiliates, directors and controlling persons of the Company and officers of the
Company who signed the Registration Statement.

         SECTION 5.03 CHANGES. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.

         SECTION 5.04 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

         SECTION 5.05 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

         SECTION 5.06 GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
regard to its conflicts of law principles, and the federal law of the United
States of America. The Company irrevocably consents to the jurisdiction of the
courts of the State of California and of any federal court, in each case located
in San Diego, California in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, the Company waives personal service of any summons, complaint, or
other process and agrees that service thereof may be made in accordance with
Section 5.01. Within 30 days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to such action
or proceeding, the Company shall appear or answer such summons, complaint, or
other process. Should the Company fail to appear or answer within such 30-day
period or such extended period, as the case may be, the Company shall be deemed
in default and judgment may be entered against the Company for the amount as
demanded in any summons, complaint, or other process so served.

         SECTION 5.07 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.

                                       24

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.

                                   "COMPANY":

                                   MICROISLET, INC.

                                   BY:  _______________________________________
                                        NAME: JOHN F. STEEL IV
                                        TITLE:  CHIEF EXECUTIVE OFFICER

                                   "PURCHASER":

                                   ____________________________________________
                                   PRINT NAME:_________________________________

                                            ADDRESS:
                                            ___________________________________
                                            ___________________________________
                                            Phone:_____________________________
                                            Fax:_______________________________

                                       25

<PAGE>

<TABLE>
<CAPTION>
                                                   SCHEDULE 1.01(a)

                                                       TRANCHES
                                                       --------

                                   NUMBER OF SHARES          TRANCHE PURCHASE PRICE PER       NUMBER OF       EXERCISE
          TRANCHE                INCLUDED IN TRANCHE         TRANCHE SHARE (U.S. DOLLARS)      WARRANTS         PRICE
          -------                -------------------         ----------------------------      --------         -----
<S>                                   <C>                               <C>                   <C>               <C>
       First Tranche                                                    $1.30                                   $1.00
       Second Tranche                                                   $1.50                                   $1.30
       --------------                 ---------                                               ---------
           Total
</TABLE>

                                                          26

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