Document:

SECURITIES PURCHASE AGREEMENT

      SECURITIES  PURCHASE AGREEMENT (the "Agreement"),  dated as of January __,
2006,  by and  among  NATURAL  GAS  SYSTEMS,  INC.,  a Nevada  corporation  (the
"Company"),  and Rubicon Master Fund, a company  organized under the laws of the
Cayman Islands (the "Buyer").

      WHEREAS:

      A. The Company and the Buyer are executing and  delivering  this Agreement
in reliance upon the exemption from securities  registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.

      B. The Company and the Buyer entered into that certain Securities Purchase
Agreement (the "Original  Securities  Purchase  Agreement"),  dated as of May 6,
2005 (the "Original Date"), whereby the Company issued and sold to the Buyer 1.2
million shares of common stock,  $0.001 par value (the "Common  Stock"),  of the
Company (collectively, the "Original Securities").

      C.  Contemporaneously  with the  execution  and  delivery of the  Original
Agreement,  the parties  hereto  executed and  delivered a  registration  rights
agreement (the "Original  Registration Rights Agreement")  pursuant to which the
Company has agreed to provide  certain  registration  rights with respect to the
Original Securities under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

      D. As a condition to the  consummation  of the  transactions  contemplated
hereby  the  Company  and the Buyer  have  agreed to amend  and  restate  in its
entirety the Original Registration Rights Agreement, , substantially in the form
attached  hereto as Exhibit A (as  amended or  modified  from time to time,  the
"Registration  Rights  Agreement"),  pursuant to which the Company has agreed to
provide  certain  registration  rights with  respect to the  Securities  and the
Original Securities under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

      E. As consideration  for the Buyer's  agreement to execute and deliver the
Registration  Rights  Agreement and Buyer's payment of an aggregate amount equal
to  US$10.00,  the Company  has agreed to sell to the Buyer,  upon the terms and
conditions  stated in this Agreement,  One Hundred and Sixty Thousand  (160,000)
shares of common stock,  $0.001 par value (the "Common  Stock"),  of the Company
(collectively, the "Securities").

      NOW, THEREFORE, the Company and the Buyer hereby agree as follows:

<PAGE>

      1. PURCHASE AND SALE OF SECURITIES.

            (a) Purchase of Securities.

                  (i) Subject to the  satisfaction (or waiver) of the conditions
set forth in  Sections 6 and 7 below,  the  Company  shall issue and sell to the
Buyer,  and the Buyer agrees to purchase the Securities  from the Company on the
Closing Date (the "Closing").

                  (ii)  Closing.  The date and time of the Closing (the "Closing
Date")  shall be 10:00  a.m.,  New York City time,  on the date  hereof (or such
later  date  as is  mutually  agreed  to by the  Company  and the  Buyer)  after
notification  of  satisfaction  (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below at the offices of Schulte  Roth & Zabel LLP, 919
Third Avenue, New York, New York 10022.

                  (iii)  Purchase  Price.  The aggregate  purchase price for the
Securities  to be purchased by the Buyer at the Closing (the  "Purchase  Price")
shall be US$10.00.

            (b) Form of Payment.  On the Closing  Date,  (i) the Buyer shall pay
its Purchase  Price to the Company for the  Securities  to be issued and sold to
the Buyer at the Closing,  by wire transfer of  immediately  available  funds in
accordance with the Company's  written wire  instructions,  and (ii) the Company
shall deliver to the Buyer certificates with respect to the Securities which the
Buyer is then purchasing issued in the name of the Buyer or its lawful designee.

      2. BUYER'S REPRESENTATIONS AND WARRANTIES.

      The Buyer represents and warrants that:

            (a) No Public Sale or  Distribution.  The Buyer is (i) acquiring the
Securities  for its own  account and not with a view  towards,  or for resale in
connection  with, the public sale or  distribution  thereof,  except pursuant to
sales  registered or exempted  under the 1933 Act;  provided,  however,  that by
making the  representations  herein, the Buyer does not agree to hold any of the
Securities  for any minimum or other  specific  term and  reserves  the right to
dispose  of the  Securities  at any time in  accordance  with or  pursuant  to a
registration  statement  or an  exemption  under  the  1933  Act.  The  Buyer is
acquiring the Securities  hereunder in the ordinary course of its business.  The
Buyer does not  presently  have any  agreement  or  understanding,  directly  or
indirectly, with any Person to distribute any of the Securities.

            (b)  Accredited   Investor  Status.  The  Buyer  is  an  "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.

            (c)  Reliance  on  Exemptions.   The  Buyer   understands  that  the
Securities  are being offered and sold to it in reliance on specific  exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the  Buyer's  compliance  with,  the  representations,  warranties,  agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Securities.

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<PAGE>

            (d)  Information.  The Buyer  and its  advisors,  if any,  have been
furnished with all materials  relating to the business,  finances and operations
of the Company and  materials  relating to the offer and sale of the  Securities
that have been requested by the Buyer. The Buyer and its advisors,  if any, have
been  afforded the  opportunity  to ask  questions of the Company.  Neither such
inquiries nor any other due diligence  investigations  conducted by the Buyer or
its advisors,  if any, or its representatives  shall modify, amend or affect the
Buyer's right to rely on the Company's  representations and warranties contained
herein.  The Buyer understands that its investment in the Securities  involves a
high degree of risk. The Buyer has sought such accounting,  legal and tax advice
as it has  considered  necessary to make an informed  investment  decision  with
respect to its  acquisition  of the  Securities.  Buyer has made the decision to
invest in the Securities solely on the basis of publicly  available  information
about the Company in the  Company's  filings  with the  Securities  and Exchange
Commission  (the  "Public  Information").  Buyer  acknowledges  that no officer,
director, broker-dealer, placement agent, finder or other person affiliated with
the Company has given Buyer any information or made any representations, oral or
written,  other than as provided in the Public  Information,  on which Buyer has
exclusively  relied  upon in  deciding  to invest in the  Securities,  including
without  limitation,  any information  with respect to future  operations of the
Company or the economic  returns which may accrue as a result of the purchase of
the Securities.

            (e) No Governmental  Review.  The Buyer  understands  that no United
States,   federal,   state  or  province  agency  or  any  other  government  or
governmental  agency has passed on or made any  recommendation or endorsement of
the  Securities  or  the  fairness  or  suitability  of  the  investment  in the
Securities nor have such  authorities  passed upon or endorsed the merits of the
offering of the Securities.

            (f)  Transfer  or  Resale.  The  Buyer  understands  that  except as
provided in the Registration Rights Agreement:  (i) the Securities have not been
and are not being  registered  under the 1933 Act or any state  securities laws,
and may not be  offered  for sale,  sold,  assigned  or  transferred  unless (A)
subsequently  registered  thereunder,  (B) the Buyer shall have delivered to the
Company an opinion of counsel  selected by the Buyer, in a generally  acceptable
form, to the effect that such Securities to be sold, assigned or transferred may
be  sold,   assigned  or   transferred   pursuant  to  an  exemption  from  such
registration,  or (C) the Buyer provides the Company with  reasonable  assurance
(including if reasonably  requested by the Company,  a legal  opinion) that such
Securities  can be sold,  assigned or  transferred  pursuant to Rule 144 or Rule
144A promulgated  under the 1933 Act, as amended,  (or a successor rule thereto)
(collectively,  "Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance  with the terms of Rule 144 and further,
if Rule 144 is not applicable,  any resale of the Securities under circumstances
in which the seller (or the Person (as defined in Section 3(s)) through whom the
sale is made) may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC  thereunder;  and (iii) neither the Company
nor any other Person is under any  obligation to register the  Securities  under
the 1933 Act or any  state  securities  laws or to  comply  with the  terms  and
conditions of any exemption thereunder.

            (g)  Legends.  The Buyer  understands  that  until  such time as the
resale of the Securities have been registered under the 1933 Act as contemplated
by the Registration  Rights Agreement,  the stock certificates  representing the

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<PAGE>

Securities,  except as set forth below, shall bear any legend as required by the
"blue  sky" laws of any  state and a  restrictive  legend in  substantially  the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):

      THE  SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN
      REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR
      APPLICABLE  STATE  SECURITIES  LAWS.  THE  SECURITIES MAY NOT BE
      OFFERED  FOR SALE,  SOLD,  TRANSFERRED  OR  ASSIGNED  (I) IN THE
      ABSENCE  OF (A) AN  EFFECTIVE  REGISTRATION  STATEMENT  FOR  THE
      SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR (B)
      AN OPINION OF COUNSEL  SELECTED  BY THE  HOLDER,  IN A GENERALLY
      ACCEPTABLE  FORM,  THAT  REGISTRATION IS NOT REQUIRED UNDER SAID
      ACT OR THAT THE  SECURITIES  MAY BE SOLD PURSUANT TO RULE 144 OR
      RULE 144A UNDER  SAID ACT.  SUBJECT TO  APPLICABLE  FEDERAL  AND
      STATE   SECURITIES  LAWS,  THE  SECURITIES  MAY  BE  PLEDGED  IN
      CONNECTION  WITH A BONA FIDE  MARGIN  ACCOUNT  OR OTHER  LOAN OR
      FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend  set forth  above  shall be removed  and the  Company  shall  issue a
certificate without such legend to the holder of the Securities upon which it is
stamped,  if,  unless  otherwise  required by state  securities  laws,  (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale,  assignment or other transfer,  such holder provides the Company with an
opinion of counsel,  in a  generally  acceptable  form,  to the effect that such
sale,  assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable  assurance (including if reasonably requested by the
Company,  a  legal  opinion)  that  the  Securities  can be  sold,  assigned  or
transferred pursuant to Rule 144 or Rule 144A.

            (h)  Authorization;  Validity;  Enforcement.  This Agreement and the
Registration  Rights  Agreement to which the Buyer is a party have been duly and
validly  authorized,  executed  and  delivered  on behalf of the Buyer and shall
constitute the legal,  valid and binding  obligations  of the Buyer  enforceable
against the Buyer in  accordance  with their  respective  terms,  except as such
enforceability  may be limited by general  principles of equity or to applicable
bankruptcy,  insolvency,  reorganization,   moratorium,  liquidation  and  other
similar laws relating to, or affecting generally,  the enforcement of applicable
creditors' rights and remedies.

            (i) Residency. The Buyer is a resident of the Cayman Islands.

            (j) No Conflicts.  The  execution,  delivery and  performance of the
Transaction  Documents  by the  Buyer and the  consummation  by the Buyer of the
transactions contemplated hereby and thereby (including, without limitation, the
purchase of the  Securities)  will not result in a violation of any  constituent
document of the Buyer or any of its subsidiaries,

                                      -4-
<PAGE>

            (k)  Prohibited  Transactions.  Prior to the earlier of (i) the time
that the press  release  referred to in Section  4(i) hereof has been issued and
(ii) the fifth  Business Day following  the Closing Date,  neither Buyer nor its
affiliates  will engage,  directly or indirectly,  effect or agree to effect any
short  sale,  whether or not  against  the box,  establish  any "put  equivalent
position" (as defined in Rule  16a-1(h)  under the 1934 Act) with respect to the
Common Stock, grant any other right (including,  without limitation,  any put or
call  option)  with  respect to the Common Stock or with respect to any security
that includes,  relates to or derived any significant part of its value from the
Common Stock or otherwise seek to hedge its position in the Securities.

      3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

      The Company represents and warrants to the Buyer that:

            (a)   Organization   and   Qualification.   The   Company   and  its
"Subsidiaries"  (which for purposes of this Agreement  means any entity in which
the Company,  directly or  indirectly,  owns a  controlling  interest of capital
stock or holds an equity or similar  interest) are entities  duly  organized and
validly  existing in good standing under the laws of the  jurisdiction  in which
they are formed,  and have the requisite  power and  authorization  to own their
properties  and to carry on their business as now being  conducted.  Each of the
Company  and its  Subsidiaries  is duly  qualified  as a  foreign  entity  to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business  conducted by it makes such qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good  standing  would  not  have a  Material  Adverse  Effect.  As  used in this
Agreement,  "Material  Adverse Effect" means any material  adverse effect on the
business,  properties,  assets, operations,  results of operations, or condition
(financial or otherwise) of the Company and its Subsidiaries,  taken as a whole,
or on the transactions  contemplated hereby and the other Transaction  Documents
(as defined below) or by the  agreements  and  instruments to be entered into in
connection herewith or therewith,  or on the authority or ability of the Company
to perform its obligations under the Transaction  Documents.  The Company has no
Subsidiaries except as set forth on Schedule 3(a).

            (b)  Authorization;  Enforcement;  Validity.  The  Company  has  the
requisite  power and authority to enter into and perform its  obligations  under
this  Agreement,  the  Registration  Rights  Agreement,  and  each of the  other
agreements   entered  into  by  the  parties  hereto  in  connection   with  the
transactions  contemplated  by this Agreement  (collectively,  the  "Transaction
Documents")  and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction  Documents by the Company
and the consummation by the Company of the transactions  contemplated hereby and
thereby,  including,  without limitation,  the issuance of the Securities,  have
been duly  authorized  by the  Company's  Board of  Directors  and  (other  than
securities  filings,   including  the  filing  with  the  SEC  of  one  or  more
Registration  Statements in accordance with the requirements of the Registration
Rights  Agreement) no further filing,  consent,  or authorization is required by
the Company, its Board of Directors or its stockholders.  This Agreement and the
other  Transaction  Documents  have  been duly  executed  and  delivered  by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable  against  the Company in  accordance  with their  respective  terms,
except as such  enforceability may be limited by general principles of equity or

                                      -5-
<PAGE>

applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation or
similar laws relating to, or affecting generally,  the enforcement of applicable
creditors' rights and remedies.

            (c) Issuance of  Securities.  The issuance of the Securities is duly
authorized  and are free from all taxes,  liens and charges  with respect to the
issue thereof. The offer and issuance by the Company of the Securities is exempt
from registration under the 1933 Act.

            (d) No Conflicts.  The  execution,  delivery and  performance of the
Transaction  Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance  of  the  Securities)  will  not  (i)  result  in a  violation  of  any
certificate  of  incorporation,  certificate  of formation,  any  certificate of
designations  or  other  constituent  documents  of  the  Company  or any of its
Subsidiaries,  any capital  stock of the Company or any of its  Subsidiaries  or
bylaws of the  Company or any of its  Subsidiaries  or (ii)  conflict  with,  or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment,   acceleration  or  cancellation  of,  any  agreement,  indenture  or
instrument to which the Company or any of its  Subsidiaries is a party, or (iii)
result in a violation of any law, rule,  regulation,  order,  judgment or decree
(including  federal and state  securities laws and regulations and the rules and
regulations of the OTC Bulletin Board or "pink sheets" (the "Principal Market"))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its  Subsidiaries  is bound or affected,  in each
case as would not have a Material Adverse Effect.

            (e)  Consents.  The Company is not  required to obtain any  consent,
authorization  or order of, or make any filing (other than  securities  filings,
including  filing  with  the  SEC of  one or  more  Registration  Statements  in
accordance  with the  requirements  of the  Registration  Rights  Agreement)  or
registration  with,  any  court,   governmental  agency  or  any  regulatory  or
self-regulatory  agency or any other Person in order for it to execute,  deliver
or perform  any of its  obligations  under or  contemplated  by the  Transaction
Documents,  in each case in  accordance  with the terms  hereof or thereof.  All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain  pursuant to the  preceding  sentence  have been  obtained or
effected on or prior to the Closing Date,  and the Company and its  Subsidiaries
are unaware of any facts or  circumstances  which might prevent the Company from
obtaining or effecting any of the registration,  application or filings pursuant
to the  preceding  sentence.  The  Company is not in  violation  of the  listing
requirements  of the  Principal  Market and has no  knowledge  of any facts that
would  reasonably  lead to  delisting or  suspension  of the Common Stock in the
foreseeable future.

            (f)  Acknowledgment  Regarding  Buyer's Purchase of Securities.  The
Company  acknowledges and agrees that the Buyer is acting solely in the capacity
of arm's length  purchaser  with respect to the  Transaction  Documents  and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company,  (ii) an  "affiliate"  of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of more
than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the Securities  Exchange Act of 1934, as amended (the "1934 Act")).  The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company  (or in any similar  capacity)  with  respect to the  Transaction

                                      -6-
<PAGE>

Documents and the transactions  contemplated hereby and thereby,  and any advice
given by a Buyer or any of its  representatives or agents in connection with the
Transaction  Documents and the transactions  contemplated  hereby and thereby is
merely incidental to the Buyer's purchase of the Securities. The Company further
represents  to the  Buyer  that  the  decision  of the  Company  and each of the
Subsidiaries to enter into the Transaction  Documents,  as applicable,  has been
based solely on the independent  evaluation by the Company, its Subsidiaries and
their representatives.

            (g) No General  Solicitation;  Placement  Agent's Fees.  Neither the
Company,  nor any of its  affiliates,  nor any  Person  acting  on its or  their
behalf, has engaged in any form of general  solicitation or general  advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities.  The Company shall be  responsible  for the payment of any placement
agent's fees,  financial advisory fees, or brokers'  commissions (other than for
persons engaged by the Buyer or its investment  advisor)  relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold the
Buyer harmless  against,  any  liability,  loss or expense  (including,  without
limitation,  reasonable  attorney's fees and out-of-pocket  expenses) arising in
connection with any such claim.

            (h) No Integrated Offering. Other than as disclosed on Schedule 2(h)
hereto, none of the Company, its Subsidiaries,  any of their affiliates, and any
Person acting on their behalf has,  directly or  indirectly,  made any offers or
sales of any  security  or  solicited  any  offers  to buy any  security,  under
circumstances that would require registration of any of the Securities under the
1933 Act  (other  than as  disclosed  in  Schedule  3(r)  hereto)  or cause this
offering of the Securities to be integrated  with prior offerings by the Company
for purposes of the 1933 Act or any applicable  stockholder approval provisions,
including,  without limitation,  under the rules and regulations of any exchange
or automated  quotation system on which any of the securities of the Company are
listed or designated.

            (i)  Application  of Takeover  Protections;  Rights  Agreement.  The
Company and its board of directors have taken all necessary  action,  if any, in
order  to  render   inapplicable   any  control  share   acquisition,   business
combination,  poison pill (including any distribution  under a rights agreement)
or other similar anti-takeover  provision under the Certificate of Incorporation
or the laws of the  jurisdiction of its formation or otherwise which is or could
become  applicable to the Buyer as a result of the transactions  contemplated by
this Agreement,  including,  without  limitation,  the Company's issuance of the
Securities  and the Buyer's  ownership  of the  Securities.  The Company has not
adopted  a  stockholder   rights  plan  or  similar   arrangement   relating  to
accumulations of beneficial  ownership of Common Stock or a change in control of
the Company.

            (j) [Intentionally omitted]

            (k) SEC Documents;  Financial Statements. Other than as disclosed on
Schedule 3(k) hereto,  since May 26, 2004,  and subject to applicable  extension
periods for any late  filings,  the Company  has filed all  reports,  schedules,
forms,  statements and other  documents  required to be filed by it with the SEC
pursuant to the reporting  requirements  of the 1934 Act and no such  disclosure
has been made on a confidential  basis that remains  subject to  confidentiality
(all of the foregoing  filed prior to the date hereof and all exhibits  included
therein and  financial  statements,  notes and  schedules  thereto and documents
incorporated  by reference  therein  being  hereinafter  referred to as the "SEC
Documents").   The  Company  has  delivered  to  the  Buyer  or  its  respective
representatives  true,  correct and  complete  copies of the SEC  Documents  not
available on the EDGAR systems.  As of their respective dates, the SEC Documents
complied in all material  respects with the requirements of the 1934 Act and the
rules and  regulations of the SEC promulgated  thereunder  applicable to the SEC
Documents,  and none of the SEC Documents,  at the time they were filed with the

                                      -7-
<PAGE>

SEC  contained  any untrue  statement  of a material  fact or omitted to state a
material  fact  required to be stated  therein or necessary in order to make the
statements  therein,  in the light of the  circumstances  under  which they were
made, not misleading.  As of their respective dates, the financial statements of
the Company  included in the SEC  Documents  complied as to form in all material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of  unaudited  interim  statements,  to the extent  they may exclude
footnotes or may be condensed or summary  statements)  and fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided in writing by or on behalf of the
Company to the Buyer  which is not  included  in the SEC  Documents,  including,
without limitation,  information  referred to in Section 2(d) of this Agreement,
contains any untrue  statement of a material fact or omits to state any material
fact  necessary  in order to make the  statements  therein,  in the light of the
circumstance under which they are or were made, not misleading.

            (l)  Absence of Certain  Changes.  Except as  disclosed  in Schedule
3(l),  since  September 30, 2005 (as disclosed in Form 10-QSB filed November 14,
2005)  there  has  been no  material  adverse  change  and no  material  adverse
development in the business,  properties,  operations,  condition  (financial or
otherwise) or results of operations of the Company or its Subsidiaries, taken as
whole,  other than  continuing  losses.  Since  September  30,  2005,  except as
disclosed  on  Exhibit  3(l),  the  Company  has not (i)  declared  or paid  any
dividends, (ii) sold any assets,  individually or in the aggregate, in excess of
$100,000  outside  of  the  ordinary  course  of  business,  (iii)  had  capital
expenditures,  individually,  in excess of $500,000 or (iv) waived any  material
rights with  respect to any  Indebtedness  or other rights in excess of $100,000
owed to it. The Company has not taken any steps to seek  protection  pursuant to
any  bankruptcy  law nor does the Company have any knowledge  that its creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge of
any fact that would  reasonably  lead a creditor to do so. The Company is not as
of the date hereof,  and after  giving  effect to the  transaction  contemplated
hereby,  will not be,  Insolvent.  "Insolvent"  is defined  to be the  condition
wherein (A) the sum of (1) current  assets,  (2)  tangible net assets other than
oil and gas reserves,  (3) other tangible or financial assets, (4) book value of
nonproved oil and gas properties, and (5) the net present value at a ten percent
discount  rate of the future  pretax cash flows from the proved  reserves of the
Company  as  determined  under SEC  rules;  is less than the sum of (6)  current
liabilities,  (7) long term  debt,  (8)  future  obligations  under  capitalized
leases,  and (9) other  obligations  such as  indebtedness  for borrowed  money,
deferred purchase prices,  letters of credit and the like net of set aside funds
and direct contingent obligations (without  duplication);  or (B) the Company is
unable to pay its uncontested  debts and  liabilities  within thirty days of the
time that they come absolute and matured in a material amount.

                                      -8-
<PAGE>

            (m)   No   Undisclosed   Events,   Liabilities,    Developments   or
Circumstances. As of the date hereof, no material event, liability,  development
or circumstance has occurred or exists, or is reasonably  expected to occur with
respect  to the  Company  or its  Subsidiaries  or  their  respective  business,
properties, prospects, operations or financial condition, that would be required
to be  disclosed  by the Company  under  applicable  securities  laws in the SEC
Documents and that has not been disclosed.

            (n) Conduct of Business; Regulatory Permits. Neither the Company nor
its  Subsidiaries  is in  violation  of any  term  of or in  default  under  its
Certificate  of  Incorporation  or Bylaws  or their  organizational  charter  or
certificate of  incorporation or bylaws,  respectively.  Neither the Company nor
any of its Subsidiaries is in violation of any judgment,  decree or order or any
statute,  ordinance,  rule  or  regulation  applicable  to  the  Company  or its
Subsidiaries,  and neither the Company nor any of its Subsidiaries  will conduct
its  business  in  violation  of any  of  the  foregoing,  except  for  possible
violations  which would not,  individually or in the aggregate,  have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in  violation  of  any of the  rules,  regulations  or  requirements  of the
Principal Market and has no knowledge of any facts or  circumstances  that would
reasonably  lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Since September 30, 2005, (i) the Common Stock
has been designated for quotation on the Principal  Market,  (ii) trading in the
Common Stock has not been  suspended by the SEC, the Principal  Market and (iii)
the Company has received no  communication,  written or oral,  from the SEC, the
Principal  Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations  and permits  issued by the  appropriate  regulatory  authorities
necessary to conduct their  respective  businesses,  except where the failure to
possess  such   certificates,   authorizations   or  permits   would  not  have,
individually or in the aggregate,  a Material  Adverse  Effect,  and neither the
Company nor any such Subsidiary has received any notice of proceedings  relating
to the revocation or  modification  of any such  certificate,  authorization  or
permit.

            (o) Foreign Corrupt Practices.  Neither the Company,  nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other Person acting
on behalf of the  Company or any of its  Subsidiaries  has, in the course of its
actions for, or on behalf of, the Company (i) used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to political activity;  (ii) made any direct or indirect unlawful payment to any
foreign or domestic  government official or employee from corporate funds; (iii)
violated  or is in  violation  of any  provision  of the  U.S.  Foreign  Corrupt
Practices  Act of 1977,  as amended;  or (iv) made any unlawful  bribe,  rebate,
payoff, influence payment,  kickback or other unlawful payment to any foreign or
domestic government official or employee.

            (p) Sarbanes-Oxley Act.

                  (i) The Company is in compliance  with any and all  applicable
requirements  of the  Sarbanes-Oxley  Act of 2002  that  are  effective  for the
Company as of the date hereof,  and any and all applicable rules and regulations
promulgated by the SEC  thereunder  that are effective for the Company as of the
date hereof, except where such noncompliance would not have,  individually or in
the aggregate, a Material Adverse Effect.

                                      -9-
<PAGE>

                  (ii)  Neither  the  chief  executive  officer  nor  the  chief
financial  officer of the Company shall have failed to provide,  with respect to
any SEC  Document  filed (or  required to be filed) with the SEC on or after the
date of this Agreement,  any necessary  certification in the form required under
(i) Rule  13a-14(a) or Rule  15d-14(a)  promulgated  under the Exchange  Act, as
applicable,  and (ii) Rule 13a-14(b)  promulgated  under the Exchange Act and 18
U.S.C. ss. 1350.

                  (iii) The Company expects to implement such programs and shall
take such steps reasonably  necessary to provide for its future  compliance (not
later than the relevant  statutory and regulatory  deadline  therefore) with all
provisions of Section 404 of the Sarbanes-Oxley Act that shall become applicable
to the Company and has not received, orally or in writing, any notification that
its  auditors  believe that  management  will not likely be able to complete its
assessment before the applicable  reporting deadline,  or if completed,  that it
will not likely be completed in sufficient  time for the auditor to complete its
assessment.

            (q)  Transactions  With  Affiliates.  Other  than  as  disclosed  on
Schedule 3(r) or Schedule 3(q), none of the officers,  directors or employees of
the Company is presently a party to any  transaction  with the Company or any of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors),  including any contract, agreement or other arrangement providing
for the  furnishing  of  services  to or by,  providing  for  rental  of real or
personal  property to or from,  or otherwise  requiring  payments to or from any
such  officer,  director or employee or, to the  knowledge  of the Company,  any
corporation,  partnership,  trust or other  entity  in which  any such  officer,
director,  or employee has a  substantial  interest or is an officer,  director,
trustee or partner.

            (r) Equity  Capitalization.  As of the date hereof,  the  authorized
capital stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of which as of the date hereof, 24,788,364 are issued and outstanding, 4,000,000
shares are  reserved  for issuance  pursuant to the  Company's  stock option and
purchase  plans and  2,421,467  shares are  reserved  for  issuance  pursuant to
securities  (other  than  the  Securities  and  stock  options)  exercisable  or
exchangeable for, or convertible into, shares of Common Stock and (ii) 5,000,000
shares of preferred stock, $0.001 par value, of which as of the date hereof none
of which is  issued  and  outstanding  or  reserved  for  issuance.  All of such
outstanding  shares have been, or upon issuance will be,  validly issued and are
fully paid and nonassessable.  Except as disclosed in Schedule 3(r): (i) none of
the Company's share capital is subject to preemptive rights or any other similar
rights or any liens or encumbrances  suffered or permitted by the Company;  (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character  whatsoever relating to, or securities or rights
convertible  into, or exercisable or exchangeable  for, any share capital of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements  by which the Company or any of its  Subsidiaries  is or may become
bound  to  issue  additional  share  capital  of  the  Company  or  any  of  its
Subsidiaries  or options,  warrants,  scrip,  rights to  subscribe  to, calls or
commitments  of any  character  whatsoever  relating to, or securities or rights
convertible  into, or exercisable or exchangeable  for, any share capital of the
Company  or  any of its  Subsidiaries;  (iii)  there  are  no  outstanding  debt
securities,  notes,  credit  agreements,  credit facilities or other agreements,
documents or instruments evidencing Indebtedness (as defined in Section 3(s)) of
the  Company or any of its  Subsidiaries  or by which the  Company or any of its
Subsidiaries  is or may become  bound;  (iv) there are no  financing  statements

                                      -10-
<PAGE>

securing obligations in any material amounts, either singly or in the aggregate,
filed  in  connection  with  the  Company;   (v)  there  are  no  agreements  or
arrangements  under which the Company or any of its Subsidiaries is obligated to
register  the sale of any of their  securities  under the 1933 Act  (except  the
Registration  Rights  Agreement);  (vi) there are no  outstanding  securities or
instruments  of  the  Company  or  any of its  Subsidiaries  which  contain  any
redemption  or  similar  provisions,  and there are no  contracts,  commitments,
understandings  or arrangements by which the Company or any of its  Subsidiaries
is or may  become  bound  to  redeem a  security  of the  Company  or any of its
Subsidiaries;   (vii)  there  are  no  securities  or   instruments   containing
anti-dilution  or similar  provisions  that will be triggered by the issuance of
the Securities;  (viii) the Company does not have any stock appreciation  rights
or "phantom  stock" plans or agreements  or any similar plan or  agreement;  and
(ix)  the  Company  and its  Subsidiaries  have no  liabilities  or  obligations
required to be  disclosed in the SEC  Documents  but not so disclosed in the SEC
Documents,  other than those incurred in the ordinary course of the Company's or
its  Subsidiaries'  respective  businesses  and  which,  individually  or in the
aggregate,  do not or would not have a Material Adverse Effect.  The Company has
furnished  to the Buyer  true,  correct  and  complete  copies of the  Company's
Certificate  of  Incorporation,  as amended  and as in effect on the date hereof
(the "Certificate of  Incorporation"),  and the Company's Bylaws, as amended and
as in effect on the date hereof (the "Bylaws"),  and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and
the material rights of the holders thereof in respect thereto.

            (s)  Indebtedness  and Other  Contracts.  Except as disclosed in the
financial  statements and footnotes thereto on Form 10-QSB filed on November 14,
2005,  and except for trade debt  incurred in the  ordinary  course of business,
neither  the  Company  nor  any of its  Subsidiaries  (i)  has  any  outstanding
Indebtedness (as defined below),  (ii) is a party to any contract,  agreement or
instrument,  the  violation  of which,  or  default  under  which,  by the other
party(ies) to such contract,  agreement or instrument would result in a Material
Adverse  Effect,  (iii) is in violation  of any term of or in default  under any
contract,  agreement or instrument  relating to any  Indebtedness,  except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect,  or (iv) is a party to any contract,  agreement or
instrument  relating  to any  Indebtedness,  the  performance  of which,  in the
judgment  of the  Company's  officers,  has or is  expected  to have a  Material
Adverse  Effect.  Schedule 3(s) provides a description  of the material terms of
any  such  outstanding  Indebtedness.   For  purposes  of  this  Agreement:  (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed  money,  (B) all  obligations  issued,  undertaken  or  assumed  as the
deferred purchase price of property or services  including,  without limitation,
"capital  leases"  in  accordance  with  U.S.  generally   accepted   accounting
principals  (other than trade  payables  entered into in the ordinary  course of
business),  (C) all reimbursement or payment obligations with respect to letters
of credit,  surety  bonds and other  similar  instruments,  (D) all  obligations
evidenced  by  notes,  bonds,  debentures  or  similar  instruments,   including
obligations  so  evidenced  incurred  in  connection  with  the  acquisition  of
property,  assets or businesses,  (E) all indebtedness  created or arising under
any  conditional  sale or  other  title  retention  agreement,  or  incurred  as
financing,  in either case with respect to any property or assets  acquired with
the  proceeds of such  indebtedness  (even though the rights and remedies of the
seller or bank  under such  agreement  in the event of  default  are  limited to
repossession or sale of such property),  (F) all monetary  obligations under any
leasing or similar  arrangement  which,  in connection  with generally  accepted
accounting principles,  consistently applied for the periods covered thereby, is

                                      -11-
<PAGE>

classified as a capital lease, (G) all  indebtedness  referred to in clauses (A)
through (F) above secured by (or for which the holder of such  Indebtedness  has
an existing  right,  contingent  or  otherwise,  to be secured by) any mortgage,
lien,  pledge,  charge,  security  interest or other  encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person  which owns such  assets or  property  has not assumed or
become  liable for the  payment  of such  indebtedness,  and (H) all  Contingent
Obligations  in respect of  indebtedness  or  obligations of others of the kinds
referred to in clauses (A) through (G) above,  provided that such amounts in (A)
through (G) collectively  exceed $100,000 (y) "Contingent  Obligation" means, as
to any Person,  any direct or indirect  liability,  contingent or otherwise,  of
that  Person  with  respect  to  any  indebtedness,  lease,  dividend  or  other
obligation  of  another  Person if the  primary  purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any  agreements  relating  thereto  will be complied  with,  or that the
holders of such  liability  will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person" means an individual,  a limited liability
company,  a  partnership,   a  joint  venture,   a  corporation,   a  trust,  an
unincorporated  organization  and a  government  or  any  department  or  agency
thereof.

            (t) Absence of  Litigation.  There is no action,  suit,  proceeding,
inquiry or investigation  before or by the Principal Market,  any court,  public
board,  government agency,  self-regulatory  organization or body pending or, to
the knowledge of the Company,  threatened against or affecting the Company,  the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's  Subsidiaries'  officers  or  directors,  except  as would  not have a
Material Adverse Effect.

            (u) Insurance.  The Company and each of its Subsidiaries 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 its  Subsidiaries  are
engaged.  Neither  the  Company  nor any such  Subsidiary  has been  refused any
insurance  coverage  sought or applied  for and neither the Company nor any such
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
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not have a Material Adverse Effect.

            (v)  Employee  Relations.  (i)  Neither  the  Company nor any of its
Subsidiaries  is a party to any collective  bargaining  agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their  employees are good. No executive  officer of the Company (as defined
in Rule  501(f) of the 1933 Act) has  notified  the  Company  that such  officer
intends to leave the Company or otherwise  terminate such  officer's  employment
with the Company.  No executive officer of the Company,  to the knowledge of the
Company,  is in  violation  of any  material  term of any  employment  contract,
confidentiality,    disclosure    or    proprietary    information    agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant to which the Company is a party,  and the continued  employment of each
such executive  officer does not subject the Company or any of its  Subsidiaries
to any liability with respect to any of the foregoing matters.

                                      -12-
<PAGE>

                  (ii) The Company and its  Subsidiaries  are in compliance with
all federal,  state,  local and foreign laws and regulations  respecting  labor,
employment  and  employment  practices  and  benefits,  terms and  conditions of
employment and wages and hours,  except where failure to be in compliance  would
not, either  individually or in the aggregate,  reasonably be expected to result
in a Material Adverse Effect.

            (w) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real  property and good and  marketable  title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not  materially  affect the value of such property and
do not  materially  interfere  with the use made and proposed to be made of such
property by the Company and any of its Subsidiaries, or as disclosed on Schedule
3(w) or Schedule 3(s). Any real property and facilities  held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable  leases  with  such  exceptions  as  are  not  material  and  do not
materially  interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.

            (x) Intellectual  Property Rights.  The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, service marks,
and all applications and registrations  therefor,  trade names, patents,  patent
rights,  copyrights,  original  works  of  authorship,   inventions,   licenses,
approvals,  governmental  authorizations,  trade secrets and other  intellectual
property  rights  ("Intellectual  Property  Rights")  necessary to conduct their
respective  businesses  as now  conducted.  None of the  Company's  Intellectual
Property  Rights  have  expired  or  terminated,  or are  expected  to expire or
terminate,  within three years from the date of this Agreement. The Company does
not have any  knowledge  of any  material  infringement  by the  Company  or its
Subsidiaries  of  Intellectual  Property  Rights of  others.  There is no claim,
action or proceeding being made or brought,  or to the knowledge of the Company,
being  threatened,  against  the  Company  or  its  Subsidiaries  regarding  its
Intellectual  Property  Rights,  except as would have a Material Adverse Effect.
The Company is unaware of any facts or  circumstances  that would  reasonably be
expected to give rise to any of the foregoing  infringements or claims,  actions
or proceedings.  The Company and its Subsidiaries have taken reasonable security
measures  to  protect  the  secrecy,  confidentiality  and value of all of their
Intellectual Property Rights.

            (y) Environmental  Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental  Laws (as hereinafter  defined),  (ii)
have received all permits,  licenses or other  approvals  required of them under
applicable  Environmental Laws to conduct their respective  businesses and (iii)
are in compliance  with all terms and conditions of any such permit,  license or
approval  where,  in each of the  foregoing  clauses  (i),  (ii) and (iii),  the
failure to so comply could be reasonably  expected to have,  individually  or in
the aggregate,  a Material Adverse Effect. The term  "Environmental  Laws" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment  (including,  without  limitation,  ambient air,
surface  water,  groundwater,  land surface or  subsurface  strata),  including,
without  limitation,  laws  relating  to  emissions,   discharges,  releases  or
threatened  releases  of  chemicals,  pollutants,   contaminants,  or  toxic  or
hazardous substances or wastes  (collectively,  "Hazardous  Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,

                                      -13-
<PAGE>

use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all  authorizations,  codes,  decrees,  demands  or  demand  letters,
injunctions,  judgments,  licenses,  notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

            (z)  Subsidiary  Rights.  Except as set forth in Schedule  3(w), the
Company  or one of its  Subsidiaries  has the  unrestricted  right to vote,  and
(subject to  limitations  imposed by  applicable  law) to receive  dividends and
distributions  on, all capital  securities of its  Subsidiaries  as owned by the
Company or such Subsidiary.

            (aa) Tax Status.  The Company and each of its  Subsidiaries  (i) has
made or filed all  foreign,  federal and state income and all other tax returns,
reports and  declarations  required by any  jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental  assessments and charges that are
material in amount,  shown or determined to be due on such returns,  reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books  provision  reasonably  adequate  for the  payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.  No liens have been filed and no  material  claims are
being asserted by or against the Company or any of its Subsidiaries with respect
to any taxes (other than liens for taxes not yet due and  payable).  Neither the
Company nor its  Subsidiaries  has  received  notice of  assessment  or proposed
assessment of any material amount of taxes claimed to be owed by it or any other
Person on its behalf. Neither the Company nor its Subsidiaries is a party to any
tax  sharing or tax  indemnity  agreement  or any other  agreement  of a similar
nature that  remains in effect.  Each of the Company  and its  Subsidiaries  has
complied  in all  material  respects  with  all  applicable  legal  requirements
relating to the payment and withholding of taxes and, within the time and in the
manner  prescribed by law, has withheld from wages,  fees and other payments and
paid over to the proper  governmental  or  regulatory  authorities  all  amounts
required.

            (bb)  Internal  Accounting  Controls.  The  Company  and each of its
Subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance 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
conformity with generally accepted  accounting  principles and to maintain asset
and  liability   accountability,   (iii)  access  to  assets  or  incurrence  of
liabilities  is  permitted  only in  accordance  with  management's  general  or
specific  authorization  and (iv) the  recorded  accountability  for  assets and
liabilities is compared with the existing  assets and  liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.

            (cc) Form SB-2 Eligibility.  The Company is eligible to register the
Securities  for resale by the Buyer using Form SB-2  promulgated  under the 1933
Act.

            (dd)  Manipulation  of  Price.  The  Company  has  not,  and  to its
knowledge  no one acting on its behalf has, (i) taken,  directly or  indirectly,
any action designed to cause or to result in the  stabilization  or manipulation
of the price of any security of the Company to facilitate  the sale or resale of
any  of  the  Securities,  or  (ii)  sold,  bid  for,  purchased,  or  paid  any
compensation for soliciting purchases of, any of the Securities.

                                      -14-
<PAGE>

            (ee) Acknowledgement Regarding Buyer's Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding,  but subject
to  compliance  by  the  Buyer  with   applicable  law,  it  is  understood  and
acknowledged by the Company (i) that the Buyer has not been asked to agree,  nor
has the Buyer agreed,  to desist from purchasing or selling,  long and/or short,
securities of the Company, or "derivative" securities based on securities issued
by the Company or to hold the Securities for any specified  term; (ii) that past
or future open market or other  transactions  by the Buyer,  including,  without
limitation,  short  sales or  "derivative"  transactions,  before  or after  the
closing of this or future private placement transactions,  may negatively impact
the market price of the  Company's  publicly-traded  securities;  (iii) that the
Buyer, and counter parties in "derivative"  transactions to which the Buyer is a
party,  directly or  indirectly,  presently  may have a "short"  position in the
Common  Stock,  and  (iv)  that  the  Buyer  shall  not be  deemed  to have  any
affiliation  with  or  control  over  any  arm's  length  counter-party  in  any
"derivative" transaction.  The Company further understands and acknowledges that
(a) the Buyer may engage in legally  permissible  hedging  activities at various
times during the period that the Securities are outstanding and (b) such hedging
activities (if any) could reduce the value of the existing  stockholders' equity
interests in the Company at and after the time that the hedging  activities  are
being conducted.

            (ff) Disclosure.  The Company confirms that neither it nor any other
Person acting on its behalf has provided the Buyer or its agents or counsel with
any information that constitutes material,  nonpublic  information.  The Company
understands   and   confirms   that  the  Buyer  will  rely  on  the   foregoing
representations  in effecting  transactions  in securities  of the Company.  All
disclosure provided to the Buyer in writing regarding the Company,  its business
and the  transactions  contemplated  hereby,  including  the  Schedules  to this
Agreement, furnished by or on behalf of the Company is true and correct and does
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact  necessary in order to make the  statements  made therein,  in the
light of the  circumstances  under which they were made,  not  misleading.  Each
press  release  issued by the Company  since May 27, 2004 did not at the time of
release  contain  any untrue  statement  of a  material  fact or omit to state a
material  fact  required to be stated  therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. No event or circumstance has occurred or information exists with
respect to the  Company  or any of its  Subsidiaries  or its or their  business,
properties,   prospects,   operations  or  financial  conditions,  which,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

      4. COVENANTS.

            (a) Best  Efforts.  Each party shall use its best efforts  timely to
satisfy each of the  conditions  to be satisfied by it as provided in Sections 6
and 7 of this Agreement.

            (b) Form D and Blue Sky.  The  Company  agrees to file a Form D with
respect to the Securities as required  under  Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Company shall, on or before
the Closing Date, take such action as the Company shall reasonably  determine is
necessary in order to obtain an exemption for or to qualify the  Securities  for
sale to the Buyer at the Closing  pursuant to this  Agreement  under  applicable
securities  or "Blue Sky" laws of the states of the United  States (or to obtain

                                      -15-
<PAGE>

an exemption from such  qualification),  and shall provide  evidence of any such
action so taken to the Buyer on or prior to the Closing Date.  The Company shall
make all filings and  reports  relating to the offer and sale of the  Securities
required  under  applicable  securities  or "Blue Sky" laws of the states of the
United States following the Closing Date.

            (c)  Reporting  Status.  Until the date on which the  Investors  (as
defined in the Registration Rights Agreement) shall have sold all the Securities
(the "Reporting Period"),  the Company shall timely file all reports required to
be filed  with the SEC  pursuant  to the 1934  Act,  and the  Company  shall not
terminate  its status as an issuer  required to file reports  under the 1934 Act
even if the 1934 Act or the rules and  regulations  thereunder  would  otherwise
permit such termination.

            (d) Use of Proceeds.  The Company will not use the proceeds from the
sale of the Securities  primarily for the redemption or repurchase of any equity
securities or for the repayment of any  outstanding  indebtedness of the Company
or its Subsidiaries, other than ordinary course trade payables.

            (e) Financial Information.  The Company agrees to send the following
to each Investor during the Reporting  Period (i) unless the following are filed
with the SEC through  EDGAR and are  available  to the public  through the EDGAR
system,  within one (1)  Business  Day after the filing  thereof with the SEC, a
copy of its Annual  Reports on Form 10-K or 10-KSB,  any interim  reports or any
consolidated balance sheets, income statements,  stockholders' equity statements
and/or  cash flow  statements  for any period  other than  annual,  any  Current
Reports on Form 8-K and any registration  statements (other than on Form S-8) or
amendments  filed  pursuant to the 1933 Act,  and (ii) copies of any notices and
other  information  made available or given to the  stockholders  of the Company
generally,  contemporaneously with the making available or giving thereof to the
stockholders.

            (f) Listing.  The Company shall use  reasonable  efforts to promptly
secure  the  listing of all of the  Registrable  Securities  (as  defined in the
Registration  Rights  Agreement)  upon each  national  securities  exchange  and
automated  quotation  system, if any, upon which the Common Stock is then listed
(subject to official  notice of issuance) and shall maintain such listing of all
Registrable  Securities  from  time to time  issuable  under  the  terms  of the
Transaction   Documents.   The  Company  shall   maintain  the  Common   Stocks'
authorization for quotation on the Principal Market. Neither the Company nor any
of its Subsidiaries  shall take any action that would be reasonably  expected to
result in the  delisting  or  suspension  of the Common  Stock on the  Principal
Market.  The  Company  shall  pay all  fees  and  expenses  in  connection  with
satisfying its obligations under this Section 4(f).

            (g) Fees.  Each party to this Agreement  shall bear its own expenses
and fees  (including but not limited to legal fees) in connection  with the sale
of the Securities to the Buyer.

            (h) Pledge of Securities.  The Company acknowledges and agrees that,
subject to all applicable  securities  laws, the Securities may be pledged by an
Investor (as defined in the Registration  Rights Agreement) in connection with a
bona fide  margin  agreement  or other  loan or  financing  arrangement  that is
secured by the Securities. Subject to all applicable securities laws, the pledge
of  Securities  shall not be deemed to be a transfer,  sale or assignment of the
Securities hereunder,  and no Investor effecting a pledge of Securities shall be

                                      -16-
<PAGE>

required to provide the Company with any notice  thereof or  otherwise  make any
delivery to the  Company  pursuant to this  Agreement  or any other  Transaction
Document,  including, without limitation,  Section 2(f) hereof; provided that an
Investor  and its pledgee  shall be required  to comply with the  provisions  of
Section  2(f)  hereof  in order to  effect a sale,  transfer  or  assignment  of
Securities to such pledgee.  Subject to applicable  securities laws, the Company
hereby  agrees to execute and  deliver  such  documentation  as a pledgee of the
Securities may reasonably  request in connection with a pledge of the Securities
to such pledgee by an Investor.

            (i) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the end of the fourth Business Day following
the Closing,  the Company shall file a Form 8-K in the form required by the 1934
Act  and  attaching  the  material  Transaction  Documents  (including,  without
limitation, this Agreement and the Registration Rights Agreement) as exhibits to
such filing (including all attachments, the "8-K Filing"). As of the date of the
filing of the Form 8-K, the Buyer shall not be in  possession  of any  material,
nonpublic  information received from the Company, any of its Subsidiaries or any
of  its  respective  officers,  directors,  employees  or  agents,  that  is not
disclosed in the 8-K Filing.  The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide the Buyer with any material,  nonpublic  information
regarding  the Company or any of its  Subsidiaries  from and after the filing of
the 8-K Filing with the SEC without the express written consent of the Buyer. In
the event of a breach  of the  foregoing  covenant  by the  Company,  any of its
Subsidiaries, or any of its or their respective officers,  directors,  employees
and  agents,  in  addition  to  any  other  remedy  provided  herein  or in  the
Transaction  Documents,  the Company agrees to file a current report on Form 8-K
that contains the material details of such non-public disclosure (and to provide
Buyer with a reasonable opportunity to review and comment upon such filing prior
to its  filing  with the SEC and to  incorporate  such  comments  therein as the
Company  deems  reasonably  necessary).  Subject to the  foregoing,  neither the
Company  nor the  Buyer  shall  issue  any press  releases  or any other  public
statements  with  respect to the  transactions  contemplated  hereby;  provided,
however,  that the Company shall be entitled,  without the prior approval of the
Buyer, to make any press release or other public disclosure with respect to such
transactions   (i)  in   substantial   conformity   with  the  8-K   Filing  and
contemporaneously  therewith  and  (ii) as is  required  by  applicable  law and
regulations  (provided  that  in the  case of  clause  (i) the  Buyer  shall  be
consulted by the Company in connection  with and given an  opportunity to review
and comment on any such press  release or other public  disclosure  prior to its
release). Notwithstanding the foregoing, the Company shall not publicly disclose
the name of the Buyer,  or include  the name of the Buyer in any filing with the
SEC or any regulatory agency or the Principal Market,  without the prior written
consent of the Buyer,  except  (i) for  disclosure  thereof in the 8-K Filing or
Registration   Statement  or  (ii)  as  required  by  law  or  Principal  Market
regulations  or any order of any court or other  governmental  agency,  in which
case the Company shall provide the Buyer with prior notice of such disclosure.

            (j) [Intentionally omitted].

            (k)  Conduct  of  Business.  The  business  of the  Company  and its
Subsidiaries  shall not be  conducted  in  violation  of any law,  ordinance  or

                                      -17-
<PAGE>

regulation of any  governmental  entity,  except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.

            (l)  Integration.  None  of the  Company,  its  Subsidiaries,  their
affiliates  and any Person  acting on their behalf will take any action or steps
referred  to in  Section  3(h) that  would  require  registration  of any of the
Securities  under the 1933 Act or cause the  offering  of the  Securities  to be
integrated with other offerings, as disclosed on Schedule 2(h) hereto

      5. [Intentionally omitted]

      6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

            (a) Closing Date. The  obligation of the Company  hereunder to issue
and  sell  the  Securities  to  the  Buyer  at the  Closing  is  subject  to the
satisfaction,  at  or  before  the  Closing  Date,  of  each  of  the  following
conditions,  provided that these  conditions  are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Buyer with prior written notice thereof:

                  (i) The Buyer  shall  have  executed  each of the  Transaction
Documents to which it is a party and delivered the same to the Company.

                  (ii)  The  Buyer  shall  have  delivered  to the  Company  the
Purchase  Price,  less the amounts  withheld  pursuant to Section 4(g),  for the
Securities  and being  purchased by the Buyer at the Closing by wire transfer of
immediately  available funds pursuant to the wire  instructions  provided by the
Company.

                  (iii) The representations and warranties of the Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing  Date as  though  made at that  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date),  and  the  Buyer  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Buyer at or prior to the Closing Date.

      7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

            (a) Closing Date. The obligation of the Buyer  hereunder to purchase
the Securities at the Closing is subject to the  satisfaction,  at or before the
Closing  Date,  of  each  of  the  following  conditions,  provided  that  these
conditions  are for the Buyer's  sole  benefit and may be waived by the Buyer at
any time in its sole  discretion  by providing  the Company  with prior  written
notice thereof:

                  (i) The Company and, to the extent it is a party thereto, each
of it  Subsidiaries,  shall have executed and delivered to the Buyer (i) each of
the Transaction  Documents and (ii) the Securities (in such denominations as the
Buyer shall  request)  being  purchased by the Buyer at the Closing  pursuant to
this Agreement.

                  (ii)  The  Company  shall  have   delivered  to  the  Buyer  a
certificate,  executed  by the  Secretary  of the  Company  and  dated as of the
Closing Date, as to (i) the resolutions  consistent with Section 3(b) as adopted

                                      -18-
<PAGE>

by the  Company's  Board of Directors  in a form  reasonably  acceptable  to the
Buyer,  (ii) the Certificate of Incorporation  and (iii) the Bylaws,  each as in
effect at the Closing, in the form attached hereto as Exhibit C.

                  (iii) The  representations and warranties of the Company shall
be true and correct in all material respects (except for the representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) as of the date when made and as of the Closing Date as though made
at that time  (except  for  representations  and  warranties  that speak as of a
specific date) and the Company shall have  performed,  satisfied and complied in
all material respects with the covenants,  agreements and conditions required by
the  Transaction  Documents to be  performed,  satisfied or complied with by the
Company  at or prior to the  Closing  Date.  The Buyer  shall  have  received  a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, in the form attached hereto as Exhibit D.

                  (iv) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended, as of the
Closing  Date,  by the SEC, the  Principal  Market from trading on the Principal
Market  nor  shall  suspension  by the  SEC,  the  Principal  Market  have  been
threatened,  as of the  Closing  Date,  either (A) in  writing  by the SEC,  the
Principal  Market  or (B) by  falling  below  the  minimum  listing  maintenance
requirements of the Principal Market.

                  (v)  The  Company  shall  have   obtained  all   governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.

                  (vi) The Company shall have  delivered to the Buyer such other
documents  relating to the  transactions  contemplated  by this Agreement as the
Buyer or its counsel may reasonably request.

      8.  TERMINATION.  In the event that the Closing shall not have occurred on
or before five (5)  Business  Days from the date hereof due to the  Company's or
the  Buyer's  failure to satisfy  the  conditions  set forth in Sections 6 and 7
above  (and  the  non-breaching   party's  failure  to  waive  such  unsatisfied
condition(s)),  the non-breaching  party shall have the option to terminate this
Agreement with respect to such breaching  party at the close of business on such
date without liability of any party to any other party.

      9. MISCELLANEOUS.

            (a)  Governing  Law;   Jurisdiction;   Jury  Trial.   All  questions
concerning the construction,  validity,  enforcement and  interpretation of this
Agreement  shall be governed by the  internal  laws of the State of  California,
without  giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdictions) that would cause
the  application  of the  laws of any  jurisdictions  other  than  the  State of
California, except for the mandatorily applicable provisions of Nevada law. Each
party hereby irrevocably submits to the exclusive  jurisdiction of the state and
federal courts sitting in Los Angeles,  California,  for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein,  and hereby  irrevocably  waives,  and agrees not to

                                      -19-
<PAGE>

assert in any suit,  action or  proceeding,  any claim that it is not personally
subject  to the  jurisdiction  of any such  court,  that  such  suit,  action or
proceeding is brought in an  inconvenient  forum or that the venue of such suit,
action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding  by mailing a copy  thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient  service of process and notice  thereof.  Nothing  contained
herein  shall be deemed to limit in any way any  right to serve  process  in any
manner permitted by law. EACH PARTY HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY
HAVE,  AND  AGREES NOT TO  REQUEST,  A JURY  TRIAL FOR THE  ADJUDICATION  OF ANY
DISPUTE  HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

            (b)  Counterparts.  This  Agreement  may be  executed in two or more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered to the other  party;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

            (c) Headings.  The headings of this Agreement are for convenience of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

            (d)  Severability.  If any  provision  of this  Agreement  shall  be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability of any provision of this Agreement in any other jurisdiction.

            (e) Entire  Agreement;  Amendments.  This  Agreement  supersedes all
other prior oral or written  agreements  between the Buyer,  the Company,  their
affiliates  and  Persons  acting on their  behalf  with  respect to the  matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither the Company nor the Buyer makes any representation,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be amended  other than by an  instrument in writing  signed by the
Company  and the  holders  of at least a  majority  of the  aggregate  number of
Registrable Securities issued and issuable hereunder,  and any amendment to this
Agreement  made in conformity  with the provisions of this Section 9(e) shall be
binding on the Buyer and holders of  Securities,  as  applicable.  No  provision
hereof may be waived other than by an instrument in writing  signed by the party
against whom enforcement is sought.  No such amendment shall be effective to the
extent  that it  applies  to less  than  all of the  holders  of the  applicable
Securities then  outstanding.  No consideration  shall be offered or paid to any
Person to amend or consent to a waiver or  modification  of any provision of any
of the Transaction  Documents unless the same  consideration  also is offered to
all of the parties to the Transaction  Documents and holders of Securities.  The
Company has not,  directly or  indirectly,  made any  agreements  with the Buyer
relating to the terms or  conditions  of the  transactions  contemplated  by the
Transaction Documents except as set forth in the Transaction Documents.

                                      -20-
<PAGE>

            (f) Notices. Any notices,  consents, waivers or other communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending  party);  or (iii) five  Business Days after deposit
with an overnight courier service,  in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:

                           If to the Company:

                                    Natural Gas Systems, Inc.
                                    820 Gessner, Suite 1340
                                    Houston, Texas 77024
                                    Tel: 713-935-0122
                                    Fax: 713-935-0199
                                    Attention:       Robert S. Herlin, President

                                    Copy to:

                                    Troy & Gould Professional Corporation
                                    1801 Century Park East, 16th Floor
                                    Los Angeles, California 90067-2367
                                    Telephone:       (310) 789-1255
                                    Facsimile:       (310) 201-4746
                                    Attention:       Lawrence Schnapp, Esq.

If to a Buyer, to:

                                    Rubicon Master Fund
                                    c/o Rubicon Fund Management LLP
                                    103 Mount St.London W1K2TJ
                                    United Kingdom
                                    Facsimile No.:   +44 207-074 4280
                                    Telephone No.:   +44 207 074 4299
                                    Attn: William Callanan

         with a copy (for informational purposes only) to:

                  Schulte Roth & Zabel LLP
                  919 Third Avenue
                  New York, New York  10022
                  Telephone:        (212) 756-2000
                  Facsimile:        (212) 593-5955
                  Attention:        Peter Halasz, Esq.

                                      -21-
<PAGE>

or to such other address and/or facsimile number and/or to the attention of such
other Person as the  recipient  party has  specified by written  notice given to
each  other  party  five (5) days  prior to the  effectiveness  of such  change.
Written  confirmation  of receipt  (A) given by the  recipient  of such  notice,
consent,  waiver or other  communication,  (B)  mechanically  or  electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile  number  and an  image  of the  first  page of such  transmission  (C)
provided  by an  overnight  courier  service  shall be  rebuttable  evidence  of
personal  service,  receipt by facsimile  or receipt  from an overnight  courier
service in  accordance  with  clause  (i),  (ii) or (iii)  above,  respectively;
provided  however  that the  foregoing  clause  (B) shall  only be valid if such
communication  contained in the  facsimile is delivered by an overnight  courier
service within 24 hours of the transmission of facsimile.

            (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any  purchasers of the  Securities.  The Company shall not assign this
Agreement  or any rights or  obligations  hereunder  without  the prior  written
consent of the Buyer.  The Buyer may assign some or all of its rights  hereunder
without the consent of the Company, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.

            (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

            (i) Survival.  Unless this Agreement is terminated  under Section 8,
the  representations  and  warranties of the Company and the Buyer  contained in
Sections 2 and 3 shall  survive for 18 months  following  the  Closing,  and the
agreements  and  covenants  set  forth in  Sections  4 and 9 shall  survive  the
Closing.  The  Buyer  shall be  responsible  only  for its own  representations,
warranties, agreements and covenants hereunder.

            (j) Further Assurances. Each party shall do and perform, or cause to
be done and performed,  all such further acts and things,  and shall execute and
deliver all such other agreements,  certificates,  instruments and documents, as
any other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

            (k)  Indemnification.  In consideration of the Buyer's execution and
delivery of the  Transaction  Documents and acquiring the Securities  thereunder
and in addition to all of the Company's other  obligations under the Transaction
Documents,  the Company shall defend,  protect,  indemnify and hold harmless the
Buyer and each other  holder of the  Securities  and all of their  stockholders,
partners,  members,  officers,  directors,  employees  and  direct  or  indirect
investors  and any of the  foregoing  Persons'  agents or other  representatives
(including,   without   limitation,   those  retained  in  connection  with  the
transactions contemplated by this Agreement)  (collectively,  the "Indemnitees")
from and against any and all actions,  causes of action, suits, claims,  losses,
costs,  penalties,  fees,  liabilities  and damages,  and expenses in connection
therewith  (irrespective of whether any such Indemnitee is a party to the action
for  which  indemnification  hereunder  is  sought),  and  including  reasonable
attorneys' fees and disbursements (the "Indemnified  Liabilities"),  incurred by

                                      -22-
<PAGE>

any  Indemnitee  as a result  of,  or  arising  out of, or  relating  to (a) any
misrepresentation  or  breach  of any  representation  or  warranty  made by the
Company in any Transaction Documents, (b) any breach of any covenant,  agreement
or obligation of the Company  contained in any Transaction  Documents or (c) any
cause of action,  suit or claim  brought or made  against such  Indemnitee  by a
third party (including for these purposes a derivative  action brought on behalf
of the  Company)  and  arising  out of or  resulting  from  (i)  the  execution,
delivery,  performance  or enforcement of any  Transaction  Documents,  (ii) any
transaction  financed  or to be  financed  in  whole  or in  part,  directly  or
indirectly,  with the  proceeds  of the  issuance of the  Securities,  (iii) any
disclosure  made by the Buyer  pursuant to Section (i) or (iv) the status of the
Buyer or holder of the Securities as an investor in the Company  pursuant to the
transactions   contemplated   by  the  Transaction   Documents;   provided  that
indemnification  pursuant to clauses (iii), or (iv) above shall not be available
to the extent arising from such Buyer's bad faith, fraud or willful  misconduct.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason,  the Company shall make the maximum  contribution to the payment
and  satisfaction  of each of the  Indemnified  Liabilities  that is permissible
under  applicable law.  Except as otherwise set forth herein,  the mechanics and
procedures  with respect to the rights and  obligations  under this Section 9(k)
shall be the same as those set forth in  Section  6 of the  Registration  Rights
Agreement.

            (l) No Strict Construction. The language used in this Agreement will
be deemed to be the  language  chosen by the  parties  to express  their  mutual
intent, and no rules of strict construction will be applied against any party.

            (m) Remedies. The Buyer and each holder of the Securities shall have
all  rights  and  remedies  set forth in the this  Agreement  and all rights and
remedies  which  such  holders  have been  granted  at any time  under any other
agreement  or contract  and all of the rights  which such holders have under any
law;  provided,  however,  and any other agreement or covenant  notwithstanding,
Section 2 of the  Registration  Rights Agreement  contains certain  limitations,
waivers and release of rights and damages applicable thereto.  Any Person having
any rights under any  provision of this  Agreement  shall be entitled to enforce
such rights specifically (without posting a bond or other security),  to recover
damages  by  reason of any  breach of any  provision  of this  Agreement  and to
exercise all other rights granted by law.  Furthermore,  the Company  recognizes
that in the event that it fails to perform,  observe, or discharge any or all of
its  obligations  under  this  Agreement,  any  remedy  at law may  prove  to be
inadequate  relief to the Buyer.  The  Company  therefore  agrees that the Buyer
shall be entitled to seek temporary and permanent  injunctive relief in any such
case without the necessity of proving actual damages and without  posting a bond
or other security.

            (n)  Payment  Set Aside.  To the  extent  that the  Company  makes a
payment or  payments  to the Buyer  hereunder  or  pursuant  to any of the other
Transaction  Documents or the Buyer enforce or exercises its rights hereunder or
thereunder,  and such payment or payments or the proceeds of such enforcement or
exercise  or any part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent  or  preferential,  set aside,  recovered  from,  disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including,  without limitation,  any
bankruptcy law, foreign,  state or federal law, common law or equitable cause of
action),  then to the  extent of any such  restoration  the  obligation  or part
thereof  originally  intended to be satisfied  shall be revived and continued in

                                      -23-
<PAGE>

full force and effect as if such  payment had not been made or such  enforcement
or setoff had not occurred.

                            [Signature Page Follows]

                                      -24-
<PAGE>

      IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Securities  Purchase  Agreement to be duly executed as of
the date first written above.

                                       COMPANY:

                                       NATURAL GAS SYSTEMS, INC.

                                       By:
                                          --------------------------
                                          Name: Robert S. Herlin
                                          Title:   CEO and President

                [Signature Page to Securities Purchase Agreement]

<PAGE>

      IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Securities  Purchase  Agreement to be duly executed as of
the date first written above.

                                       BUYER:

                                       RUBICON MASTER FUND
                                       By: Rubicon Fund Management, LLP,
                                           its Investment Manager

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

                [Signature Page to Securities Purchase Agreement]

<PAGE>

                                    EXHIBITS

Exhibit A Amended and Restated Registration Rights AgreementAMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

      AMENDED AND RESTATED  REGISTRATION  RIGHTS  AGREEMENT (this  "Agreement"),
dated as of January __, 2006, by and among  NATURAL GAS SYSTEMS,  INC., a Nevada
corporation (the "Company"),  and Rubicon Master Fund, a company organized under
the laws of the Cayman Islands (the "Buyer").

      WHEREAS:

      A. Pursuant to a Securities Purchase  Agreement,  by and among the parties
hereto  (the  "Original  Securities  Purchase  Agreement"),  on May 6,  2005 the
Company issued and sold to the Buyer 1.2 million shares of common stock,  $0.001
par value (the "Common  Stock"),  of the Company  (collectively,  the  "Original
Securities").

      B. Concurrently with the Buyer's purchase of the Original Securities,  the
Buyer and the Company entered into a Registration Rights Agreement,  dated as of
May 6, 2005 (the "Original Registration Rights Agreement"),  whereby the Company
agreed to provide certain  registration rights under the Securities Act of 1933,
as amended, and the rules and regulations  thereunder,  or any similar successor
statute (collectively, the "1933 Act"), and applicable state securities laws.

      C. In connection with the Securities Purchase  Agreement,  dated as of the
date hereof,  by and among the parties hereto (the "Second  Securities  Purchase
Agreement",  and together with the Original Securities  Purchase Agreement,  the
"Securities  Purchase  Agreements"),  the Company has agreed, upon the terms and
subject to the conditions set forth in the Second Securities Purchase Agreement,
to issue and sell to the Buyer One Hundred and Sixty Thousand  (160,000)  shares
of Common  Stock of the  Company  (collectively,  the "Second  Securities",  and
together with the Original Securities, the "Securities").

      D. As a condition to the consummation of the transactions  contemplated by
the Second Securities Purchase Agreement,  the Company and the Buyer have agreed
to amend and restate in its entirety the Original  Registration Rights Agreement
as set forth herein.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby  acknowledged,  the Company and the Buyer hereby
agree as follows:

      1. Definitions.

      Capitalized  terms used herein and not otherwise defined herein shall have
the respective  meanings set forth in the Second Securities  Purchase Agreement.
As used in  this  Agreement,  the  following  terms  shall  have  the  following
meanings:

            a. "Business  Day" means any day other than Saturday,  Sunday or any
other day on which  commercial  banks in The City of New York are  authorized or
required by law to remain closed.

<PAGE>

            b.  "Closing  Date"  shall have the  meaning set forth in the Second
Securities Purchase Agreement.

            c. "Effective  Date" means the date the  Registration  Statement has
been declared effective by the SEC.

            d. "Effectiveness Deadline" means the date which is (i) in the event
that the  Registration  Statement  is not  subject  to a review by the SEC,  120
calendar days after the Closing Date or (ii) in the event that the  Registration
Statement is subject to a review by the SEC, 210 calendar days after the Closing
Date.

            e. "Filing Deadline" means 60 calendar days after the Closing Date.

            f. "Investor"  means the Buyer or any transferee or assignee thereof
to whom the Buyer  assigns  its rights  under this  Agreement  and who agrees to
become bound by the  provisions of this  Agreement in accordance  with Section 9
and any transferee or assignee  thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.

            g. "Person"  means an individual,  a limited  liability  company,  a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization and a government or any department or agency thereof.

            h.  "register,"   "registered,"  and   "registration"   refer  to  a
registration   effected  by  preparing  and  filing  one  or  more  Registration
Statements  (as defined  below) in compliance  with the 1933 Act and pursuant to
Rule 415 and the declaration or ordering of effectiveness  of such  Registration
Statement(s) by the SEC.

            i. "Registrable  Securities" means the Securities and, to the extent
allowable  under the 1933 Act and the rules  promulgated  thereunder  (including
Rule 416),  any share capital of the Company  issued or issuable with respect to
the Securities as a result of any split, dividend, recapitalization, exchange or
similar event or otherwise.

            j.  "Registration  Statement"  means  a  registration  statement  or
registration  statements  of the Company  filed under the 1933 Act  covering the
Registrable Securities.

            k.  "Required  Holders"  means the holders of at least a majority of
the Registrable Securities.

            l.  "Required   Registration   Amount"  means  100%  of  the  number
Registrable Securities.

            m. "Rule  415"  means  Rule 415 under the 1933 Act or any  successor
rule providing for offering securities on a continuous or delayed basis.

            n. "SEC" means the United States Securities and Exchange Commission.

                                       2
<PAGE>

      2. Registration.

            a. Mandatory  Registration.  The Company has previously prepared and
filed with the SEC a Registration Statement on Form SB-2 covering the resale of,
among other  shares,  all of the  Registrable  Securities  acquired by the Buyer
pursuant  to the  Original  Securities  Purchase  Agreement.  Such  Registration
Statement is being reviewed by the SEC and has not yet been declared  effective.
The Company agrees to prepare and, as soon as practicable  but in no event later
than the Filing  Deadline  file with the SEC, an amendment  to the  Registration
Statement such that the  Registration  Statement also cover the resale of all of
the Registrable  Securities.  The Registration  Statement ,as so amended,  shall
register  for resale at least the number of shares of Common  Stock equal to the
Required  Registration  Amount as of date such amendment is initially filed with
the SEC. The  Registration  Statement,  as so amended,  shall contain (except if
otherwise   reasonably   directed  by  the   Required   Holders)   the  "Selling
Stockholders"  and "Plan of  Distribution"  sections in  substantially  the form
attached  hereto as Exhibit B. The  Company  shall use  commercially  reasonable
efforts to have the Registration  Statement, as so amended declared effective by
the SEC as soon as  practicable,  but in no event  later than the  Effectiveness
Deadline.

            b.  Allocation  of  Registrable  Securities.  The initial  number of
Registrable  Securities included in any Registration  Statement and any increase
in the number of Registrable  Securities included therein shall be allocated pro
rata among the Investors  based on the number of Registrable  Securities held by
each  Investor at the time the  Registration  Statement  covering  such  initial
number of Registrable  Securities or increase  thereof is declared  effective by
the SEC. In the event that an Investor sells or otherwise  transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable  Securities included in such
Registration Statement for such transferor.  Any Shares of Common Stock included
in a  Registration  Statement  and which  remain  allocated  to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining  Investors,  pro rata based on the number of
Registrable  Securities  then held by such  Investors  which are covered by such
Registration  Statement.  The Company shall have the right to include securities
other than Registrable  Securities on the Registration Statement in its sole and
absolute discretion, including shares held by other investors and primary shares
being offered by the Company.

            c. Legal Counsel.  Subject to Section 5 hereof, the Required Holders
shall  have the right to select one legal  counsel  to review  any  registration
pursuant to this  Section 2 ("Legal  Counsel"),  which  shall be Schulte  Roth &
Zabel  LLP or such  other  counsel  as  thereafter  designated  by the  Required
Holders.  The Company and Legal Counsel  shall  reasonably  cooperate  with each
other in performing the Company's obligations under this Agreement.

            d.  Ineligibility  for Form S-3. The Company  undertakes to register
the  Registrable  Securities  on Form  S-3 as soon  as such  form is  available,
provided  that,  subject to the last sentence of Section 3(a), the Company shall
maintain the  effectiveness of the  Registration  Statement then in effect until
such time as a  Registration  Statement  on Form S-3  covering  the  Registrable
Securities  has been declared  effective by the SEC. The  Investors  acknowledge
that Form S-3 is not currently available to the Company and that accordingly the
Registration Statement will be filed on a Form SB-2.

                                       3
<PAGE>

            e. Sufficient Number of Shares  Registered.  In the event the number
of shares  available  under a Registration  Statement  filed pursuant to Section
2(a) is insufficient to cover all of the Registrable  Securities  required to be
covered by such Registration Statement or an Investor's allocated portion of the
Registrable  Securities  pursuant to Section  2(b),  the Company shall amend the
applicable  Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable),  or both, so as to cover at least
the Required Registration Amount as of the trading day immediately preceding the
date of the filing of such  amendment  or new  Registration  Statement,  in each
case, as soon as practicable,  but in any event not later than fifteen (15) days
after  the  necessity  therefor  arises.  The  Company  shall  use  commercially
reasonable efforts to cause such amendment and/or new Registration  Statement to
become  effective  as soon as  practicable  following  the filing  thereof.  For
purposes of the  foregoing  provision,  the number of shares  available  under a
Registration  Statement  shall  be  deemed  "insufficient  to  cover  all of the
Registrable  Securities"  if at any time the  number of  shares of Common  Stock
available for resale under the  Registration  Statement is less than the product
determined by multiplying (i) the Required  Registration  Amount as of such time
by (ii) 0.90.

            f. Effect of Failure to File or Obtain and Maintain Effectiveness of
the Registration Statement or Other Breach. If the Company shall breach any term
or condition of this Agreement, including but not limited to (i) an amendment to
the Registration  Statement covering all of the Registrable  Securities required
to be covered  thereby and required to be filed by the Company  pursuant to this
Agreement  (A) not being filed with the SEC on or before the Filing  Deadline (a
"Filing  Failure") or (B) not being  declared  effective by the SEC on or before
the Effectiveness Deadline (an "Effectiveness Failure") or (ii) on any day after
the Effective  Date sales of all of the  Registrable  Securities  required to be
included  on such  Registration  Statement  cannot be made (other than during an
Allowable   Grace  Period  (as  defined  in  Section  3(r))   pursuant  to  such
Registration Statement (including,  without limitation,  because of a failure to
keep such Registration  Statement effective,  to disclose such information as is
necessary  for sales to be made  pursuant  to such  Registration  Statement,  to
register  a  sufficient  number of shares of  Common  Stock or to  maintain  the
listing of the Common Stock) (a "Maintenance  Failure"),  then Buyer agrees that
its sole and exclusive remedy for such breach shall be to seek equitable relief,
and that in no event will Buyer be entitled to monetary  damages  (regardless of
whether it is able to obtain such specific performance); provided, however, that
with respect to any such future breach referenced above, the foregoing  sentence
limiting the Buyer's  sole and  exclusive  remedy to equitable  relief shall not
apply in the event of the Company's  willful,  intentional and deliberate breach
of Sections 2(a), 2(d) or 2(e) hereof.

            g.  General  Release.  Except as  provided  in this  Agreement  with
reference to the Registrable Securities, it is the intention of the parties that
by  entering  into this  Agreement,  Buyer is forever  relinquishing  any claims
whatsoever that it may now or in the future have against the Company as a result
of the failure of the Company to have a Registration  Statement  covering all of
the Registrable  Securities listed in the Registration Rights Agreement required
to be covered thereby be declared  effective by the SEC or, if and when declared
effective,  remain  effective for any  particular  length of time.  Accordingly,
Buyer  hereby  releases  and forever  discharges  Company and its  predecessors,

                                       4
<PAGE>

successors,  partners,  assigns,  employees,   shareholders,  owners,  officers,
directors, agents, attorneys, subsidiaries,  divisions, and affiliates, (jointly
referred to as "Released Parties") from any and all claims,  demands,  causes of
action,  obligations,  damages,  attorneys'  fees,  costs and liabilities of any
nature  whatsoever,  including but not limited to  Registration  Delay Payments,
whether or not now known,  suspected or asserted,  which Buyer may have or claim
to have against the Released  Parties relating in any manner to claims under the
Sections 2 or 3 hereof,  and hereby covenants not to assert such claims,  now or
in the future, through a lawsuit, an administrative proceeding or otherwise (the
"General  Release");  provided,  however,  that with  respect to any such future
breach of the Registration Rights Agreement under Sections 2(a), 2(d), 2(e), and
Section 3 of the Registration Rights Agreement,  in the event said breach occurs
after May 1, 2007,  the  parties  to this  Agreement  agree that Buyer  shall be
entitled to seek to equitable  relief,  as its sole and exclusive remedy, of the
obligations  of the Company in accordance  with the terms and conditions of this
Agreement,  as hereby  amended  in any court  specified  in  Section  11 hereof;
provided  further,  however,  that  with  respect  to  any  such  future  breach
referenced above, the foregoing sentence limiting the Buyer's sole and exclusive
remedy  to  equitable  relief  shall  not  apply in the  event of the  Company's
willful,  intentional  and  deliberate  breach of  Sections  2(a),  2(d) or 2(e)
hereof.

            h. Waiver.  With regards  specifically to the General Release above,
Buyer waives all rights under Section 1542 of the Civil Code of California. That
section reads as follows:

      "A general  release does not extend to claims which the creditor  does not
      know or  suspect  to exist  in his  favor  at the  time of  executing  the
      release,  which  if  known  by  him  must  have  materially  affected  his
      settlement with the debtor."

            Notwithstanding the provisions of Section 1542 or any similar law of
any other state, and to provide a full and complete release of Released Parties,
Buyer expressly  acknowledges that this Agreement and the General Release above,
in each case relating  solely to claims under Sections 2 and 3 of this Agreement
is intended to include, without limitation, all claims which Buyer does not know
or suspect to exist in his favor at the time of execution of this Agreement, and
that the issuance of the Second Securities, under the Second Securities Purchase
Agreement,  completely  extinguishes  all legal  claims  under  Sections 2 and 3
hereof.

      3. Related Obligations.

      At such time as the Company is obligated to file a Registration  Statement
with the SEC  pursuant  to Section  2(a),  2(d) or 2(e),  the  Company  will use
commercially  reasonable  efforts to effect the  registration of the Registrable
Securities in accordance  with the intended  method of disposition  thereof and,
pursuant thereto, the Company shall have the following obligations:

            a. The Company shall submit to the SEC, within two (2) Business Days
after the Company learns that no review of a particular  Registration  Statement
will be made by the staff of the SEC or that the staff has no  further  comments
on a  particular  Registration  Statement,  as the case may be,  a  request  for
acceleration of effectiveness of such Registration  Statement to a time and date
not later than 48 hours after the submission of such request.  The Company shall
keep each  Registration  Statement  effective  pursuant to Rule 415 at all times
until the earlier of (i) the date as of which the  Investors  may  commence  the
sale of Registrable  Securities covered by such Registration  Statement pursuant
to Rule 144 (or any successor  thereto)  promulgated  under the 1933 Act or (ii)
the  date  on  which  the  Investors  shall  have  sold  all of the  Registrable
Securities covered by such Registration  Statement (the "Registration  Period").
The  Company  shall  ensure  that each  Registration  Statement  (including  any
amendments or supplements thereto and prospectuses  contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein,  or necessary to make the statements  therein (in
the case of prospectuses,  in the light of the  circumstances in which they were
made) not misleading.

                                       5
<PAGE>

            b. The Company shall  prepare and file with the SEC such  amendments
(including   post-effective   amendments)  and  supplements  to  a  Registration
Statement  and  the  prospectus  used  in  connection  with  such   Registration
Statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under the 1933 Act,  as may be  necessary  to keep such  Registration  Statement
effective at all times during the Registration  Period, and, during such period,
comply with the  provisions of the 1933 Act with respect to the  disposition  of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such  Registrable  Securities shall have been disposed
of in  accordance  with the  intended  methods of  disposition  by the seller or
sellers  thereof  as set forth in such  Registration  Statement.  In the case of
amendments and supplements to a Registration  Statement which are required to be
filed  pursuant to this Agreement  (including  pursuant to this Section 3(b)) by
reason of the Company  filing a report on Form 10-Q,  Form 10-K or any analogous
report under the  Securities  Exchange Act of 1934, as amended (the "1934 Act"),
the  Company  shall  have  incorporated  such  report  by  reference  into  such
Registration  Statement,  if  applicable,  or  shall  file  such  amendments  or
supplements  with the SEC on the same day on which the 1934 Act  report is filed
which  created  the  requirement  for the  Company to amend or  supplement  such
Registration  Statement.  The  determination  as  to  whether  the  filing  of a
post-effective  amendment is required (as opposed to a supplement) shall be made
by the Company in consultation with its legal counsel.

            c. The Company  shall (A) permit Legal Counsel to review and comment
upon (i) a  Registration  Statement at least five (5) Business Days prior to its
filing with the SEC and (ii) all amendments and supplements to all  Registration
Statements  (except  for  Annual  Reports  on Form  10-K,  Reports on Form 10-Q,
Current  Reports on Form 8K,  and any  similar or  successor  reports)  within a
reasonable  number of days prior to their  filing with the SEC, and (B) not file
any Registration Statement or amendment or supplement thereto in a form to which
Legal  Counsel  reasonably  objects.  The Company shall not submit a request for
acceleration of the  effectiveness of a Registration  Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably  withheld. The Company shall furnish to Legal Counsel,
without charge,  (i) copies of any  correspondence  from the SEC or the staff of
the SEC to the  Company  or its  representatives  relating  to any  Registration
Statement,  (ii) promptly after the same is prepared and filed with the SEC, one
copy of any  Registration  Statement  and any  amendment(s)  thereto,  including
financial  statements  and  schedules,  all  documents  incorporated  therein by
reference,  if  requested  by an  Investor,  and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration  Statement and all amendments and supplements  thereto. The
Company  shall  reasonably  cooperate  with  Legal  Counsel  in  performing  the
Company's obligations pursuant to this Section 3.

                                       6
<PAGE>

            d. The Company  shall  furnish to each  Investor  whose  Registrable
Securities  are included in any  Registration  Statement,  without  charge,  (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration  Statement and any amendment(s)  thereto,  including financial
statements and schedules,  all documents  incorporated therein by reference,  if
requested by an Investor,  all exhibits and each  preliminary  prospectus,  (ii)
upon the  effectiveness  of any Registration  Statement,  ten (10) copies of the
prospectus  included  in such  Registration  Statement  and all  amendments  and
supplements  thereto  (or such  other  number  of copies  as such  Investor  may
reasonably  request)  and (iii) such other  documents,  including  copies of any
preliminary or final  prospectus,  as such Investor may reasonably  request from
time  to  time  in  order  to  facilitate  the  disposition  of the  Registrable
Securities owned by such Investor.

            e. The  Company  shall use  commercially  reasonable  efforts to (i)
register and qualify,  unless an exemption from  registration and  qualification
applies,  the resale by Investors  of the  Registrable  Securities  covered by a
Registration  Statement  under such other  securities  or "blue sky" laws of all
applicable  jurisdictions  in the United States,  (ii) prepare and file in those
jurisdictions,   such  amendments  (including  post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (x)  qualify to do business  in any  jurisdiction  where it would not
otherwise be required to qualify but for this Section 3(e),  (y) subject  itself
to general taxation in any such  jurisdiction,  or (z) file a general consent to
service of process in any such  jurisdiction.  The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable  Securities of the receipt
by the  Company  of any  notification  with  respect  to the  suspension  of the
registration  or  qualification  of any of the  Registrable  Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of notice of the  initiation or threatening of any proceeding for
such purpose.

            f. The Company  shall  notify  Legal  Counsel  and each  Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware  of such  event,  as a  result  of  which  the  prospectus  included  in a
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements  therein,  in the light of the circumstances
under which they were made, not misleading (provided that in no event shall such
notice contain any material,  nonpublic  information),  and,  subject to Section
3(q), promptly prepare a supplement or amendment to such Registration  Statement
to correct such untrue  statement  or  omission,  and deliver ten (10) copies of
such  supplement  or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request).  The
Company  shall also  promptly  notify Legal Counsel and each Investor in writing
(i) when a prospectus or any prospectus  supplement or post-effective  amendment
has  been  filed,  and  when a  Registration  Statement  or  any  post-effective
amendment has become  effective  (notification  of such  effectiveness  shall be
delivered  to Legal  Counsel and each  Investor by  facsimile on the same day of
such  effectiveness  and by overnight mail),  (ii) of any request by the SEC for
amendments or supplements to a Registration  Statement or related  prospectus or
related information,  and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

                                       7
<PAGE>

            g. The Company shall use commercially  reasonable efforts to prevent
the  issuance  of any stop  order  or other  suspension  of  effectiveness  of a
Registration  Statement,  or the suspension of the  qualification  of any of the
Registrable  Securities  for sale in any  jurisdiction  and, if such an order or
suspension  is issued,  to obtain the  withdrawal of such order or suspension at
the earliest  possible  moment and to notify Legal Counsel and each Investor who
holds  Registrable  Securities  being sold of the issuance of such order and the
resolution  thereof or its receipt of notice of the  initiation or threat of any
proceeding for such purpose.

            h. At the reasonable request of any Investor,  in the event that the
Registrable  Securities are being sold pursuant to an underwritten offering, the
Company shall furnish to such Investor,  on the date of the effectiveness of the
Registration  Statement  and  thereafter  from time to time on such  dates as an
Investor  may  reasonably  request  (i) a  letter,  dated  such  date,  from the
Company's  independent  certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an  underwritten  public  offering,  addressed  to the  Investors,  and  (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration  Statement,  in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.

            i. The  Company  shall  make  available  for  inspection  by (i) any
Investor,  (ii) Legal Counsel and (iii) one firm of  accountants or other agents
retained  by the  Investors  (collectively,  the  "Inspectors"),  all  pertinent
financial and other records, and pertinent corporate documents and properties of
the  Company  (collectively,  the  "Records"),  as  shall be  reasonably  deemed
necessary by each  Inspector,  and cause the Company's  officers,  directors and
employees to supply all information which any Inspector may reasonably  request;
provided,  however, that each Inspector shall agree to hold in strict confidence
and shall not make any  disclosure  (except to an Investor) or use of any Record
or  other  information  which  the  Company  determines  in  good  faith  to  be
confidential,  and of which determination the Inspectors are so notified, unless
(a) the  disclosure of such Records is  determined  by the Company  necessary to
avoid or correct a misstatement or omission in any Registration  Statement or is
otherwise  required  under the 1933 Act,  (b) the  release  of such  Records  is
ordered  pursuant to a final,  non-appealable  subpoena or order from a court or
government  body  of  competent  jurisdiction,  or (c) the  information  in such
Records has been made generally available to the public other than by disclosure
in  violation  of this  Agreement.  Each  Investor  agrees  that it shall,  upon
learning  that  disclosure  of  such  Records  is  sought  in or by a  court  or
governmental body of competent  jurisdiction or through other means, give prompt
notice to the  Company  and allow the  Company,  at its  expense,  to  undertake
appropriate  action to prevent  disclosure  of, or to obtain a protective  order
for,  the  Records  deemed  confidential.   Nothing  herein  (or  in  any  other
confidentiality  agreement between the Company and any Investor) shall be deemed
to limit the Investors' ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

                                       8
<PAGE>

            j. The Company shall hold in confidence  and not make any disclosure
of  information  concerning  an  Investor  provided  to the  Company  unless (i)
disclosure  of such  information  is  necessary  to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such  information  is ordered  pursuant to a subpoena or other final,
non-appealable   order  from  a  court  or   governmental   body  of   competent
jurisdiction,  or (iv) such information has been made generally available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
agreement.  The Company agrees that it shall,  upon learning that  disclosure of
such  information  concerning  an  Investor  is  sought  in  or  by a  court  or
governmental body of competent  jurisdiction or through other means, give prompt
written  notice to such  Investor  and allow such  Investor,  at the  Investor's
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

            k. The Company shall use commercially  reasonable  efforts either to
secure the inclusion for quotation of all of the  Registrable  Securities on the
NASD's OTC  Bulletin  Board.  The  Company  shall pay all fees and  expenses  in
connection with satisfying its obligation under this Section 3(k).

            l.  The  Company  shall   cooperate  with  the  Investors  who  hold
Registrable  Securities being offered and, to the extent applicable,  facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend)  representing  the  Registrable  Securities to be offered  pursuant to a
Registration  Statement and enable such certificates to be in such denominations
or amounts,  as the case may be, as the  Investors  may  reasonably  request and
registered in such names as the Investors may request.

            m. If  requested by an  Investor,  the Company  shall (i) as soon as
reasonably practicable  incorporate in a prospectus supplement or post-effective
amendment  such  information as an Investor  reasonably  requests to be included
therein  relating  to the  sale  and  distribution  of  Registrable  Securities,
including,  without  limitation,  information  with  respect  to the  number  of
Registrable  Securities  being  offered or sold,  the purchase  price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering;  (ii) as soon as reasonably practicable make all required
filings of such prospectus  supplement or  post-effective  amendment after being
notified of the matters to be  incorporated  in such  prospectus  supplement  or
post-effective   amendment;   and  (iii)  as  soon  as  reasonably  practicable,
supplement  or make  amendments  to any  Registration  Statement  if  reasonably
requested by an Investor holding any Registrable Securities.

            n. The  Company  shall  make  generally  available  to its  security
holders  as soon as  practical,  but not later than  ninety  (90) days after the
close of the period covered  thereby,  an earnings  statement (in form complying
with,  and in the manner  provided by, the provisions of Rule 158 under the 1933
Act) covering a  twelve-month  period  beginning not later than the first day of
the Company's fiscal quarter next following the effective date of a Registration
Statement.

            o. The Company shall otherwise use commercially  reasonable  efforts
to comply with all  applicable  rules and  regulations  of the SEC in connection
with any registration hereunder.

                                       9
<PAGE>

            p. As soon as  practicable  after  a  Registration  Statement  which
covers Registrable Securities is ordered effective by the SEC, the Company shall
deliver,  and shall  cause legal  counsel  for the  Company to  deliver,  to the
transfer  agent for such  Registrable  Securities  (with copies to the Investors
whose  Registrable  Securities  are  included  in such  Registration  Statement)
confirmation that such Registration Statement has been declared effective by the
SEC substantially in the form attached hereto as Exhibit A.

            q.  Notwithstanding  anything to the  contrary  herein,  at any time
after the  Effective  Date,  the Company may delay the  disclosure  of material,
non-public  information  concerning  the Company the  disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company,
in the best interest of the Company and otherwise  required (a "Grace  Period");
provided, that the Company shall promptly (i) notify the Investors in writing of
the existence of material,  non-public information giving rise to a Grace Period
(provided  that in each notice the Company will not disclose the content of such
material,  non-public  information  to the  Investors) and the date on which the
Grace Period will begin, and (ii) notify the Investors in writing of the date on
which the Grace Period ends; and, provided  further,  that no Grace Period shall
exceed 15  consecutive  days and during any three  hundred  sixty five (365) day
period such Grace Periods shall not exceed an aggregate of 45 days and the first
day of any Grace Period must be at least two (2) trading days after the last day
of any prior Grace Period (each, an "Allowable  Grace Period").  Notwithstanding
the  foregoing,  the  Allowable  Grace  Period  shall be  extended  by up to one
additional 30 day period during any three hundred sixty five (365) day period in
the event that a  post-effective  amendment  to the  Registration  Statement  is
required to be filed and such  amendment is reviewed by the SEC. For purposes of
determining the length of a Grace Period above,  the Grace Period shall begin on
and include the date the Investors  receive the notice referred to in clause (i)
and shall end on and  include  the later of the date the  Investors  receive the
notice  referred to in clause (ii) and the date referred to in such notice.  The
provisions of Section 3(g) hereof shall not be  applicable  during the period of
any Allowable  Grace Period.  Upon  expiration of the Grace Period,  the Company
shall again be bound by the first  sentence of Section  3(f) with respect to the
information giving rise thereto unless such material,  non-public information is
no longer  applicable.  Notwithstanding  anything to the  contrary,  the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee  of an  Investor  in  accordance  with the  terms  of the  Securities
Purchase  Agreements in connection with any sale of Registrable  Securities with
respect to which an Investor  has entered  into a contract for sale prior to the
Investor's  receipt of the notice of a Grace  Period and for which the  Investor
has not yet settled.

            r. The Company shall use commercially  reasonable  efforts to become
eligible to use a registration statement on Form S-3 for the registration of the
resale of Registrable Securities.

      4. Obligations of the Investors.

            a. At least five Business Days prior to the first anticipated filing
date of a  Registration  Statement,  the Company  shall notify each  Investor in
writing of the information the Company  requires from each such Investor if such
Investor elects to have any of such Investor's  Registrable  Securities included
in such  Registration  Statement.  It  shall  be a  condition  precedent  to the
obligations  of the  Company  to  complete  the  registration  pursuant  to this
Agreement with respect to the  Registrable  Securities of a particular  Investor
that such  Investor  shall  furnish to the Company  such  information  regarding
itself,  the  Registrable  Securities  held by it and  the  intended  method  of
disposition  of the  Registrable  Securities  held by it as shall be  reasonably
required to effect the  effectiveness  of the  registration of such  Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request.

                                       10
<PAGE>

            b. Each Investor,  by such Investor's  acceptance of the Registrable
Securities,  agrees to cooperate with the Company as reasonably requested by the
Company  in  connection  with the  preparation  and  filing of any  Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such  Investor's  election  to  exclude  all  of  such  Investor's   Registrable
Securities from such Registration Statement.

            c. Each  Investor  agrees that,  upon receipt of any notice from the
Company of the  happening of any event of the kind  described in Section 3(g) or
the  first  sentence  of  3(f),  such  Investor  will  immediately   discontinue
disposition of Registrable Securities pursuant to any Registration  Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the  supplemented or amended  prospectus  contemplated by Section 3(g) or the
first  sentence of 3(f) or receipt of notice that no  supplement or amendment is
required.  Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver  unlegended  shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities  Purchase  Agreements
in connection  with any sale of Registrable  Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section  3(g) or the first  sentence of 3(f) and for which the  Investor has not
yet settled.

            d. Each  Investor  covenants and agrees that it will comply with the
prospectus  delivery  requirements  of  the  1933  Act  as  applicable  to it in
connection  with sales of Registrable  Securities  pursuant to the  Registration
Statement.

      5. Expenses of Registration.

      All   reasonable   expenses,   other  than   underwriting   discounts  and
commissions,   incurred   in   connection   with   registrations,   filings   or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.

      6. Indemnification.

      In the event any  Registrable  Securities  are included in a  Registration
Statement under this Agreement:

            a. To the fullest  extent  permitted by law, the Company  will,  and
hereby does, indemnify,  hold harmless and defend each Investor,  the directors,
officers,  members, partners,  employees,  agents,  representatives of, and each
Person,  if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each,  an  "Indemnified  Person"),  against  any  losses,  claims,
damages,  liabilities,  judgments, fines, penalties,  charges, costs, reasonable

                                       11
<PAGE>

attorneys'  fees,  amounts paid in  settlement  or  expenses,  joint or several,
(collectively,  "Claims") incurred in investigating,  preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing  by or  before  any  court or  governmental,  administrative  or other
regulatory  agency,  body or the SEC, whether pending or threatened,  whether or
not an indemnified party is or may be a party thereto  ("Indemnified  Damages"),
to which any of them may become  subject  insofar as such  Claims (or actions or
proceedings,  whether commenced or threatened,  in respect thereof) arise out of
or are based upon:  (i) any untrue  statement or alleged  untrue  statement of a
material  fact  in a  Registration  Statement  or any  post-effective  amendment
thereto  or in any  filing  made in  connection  with the  qualification  of the
offering  under the securities or other "blue sky" laws of any  jurisdiction  in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged  omission  to state a material  fact  required  to be stated  therein or
necessary  to make the  statements  therein  not  misleading,  (ii)  any  untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
preliminary  prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,  if
the Company files any amendment  thereof or supplement  thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein,  in the light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or alleged
violation  by the  Company  of the  1933  Act,  the 1934  Act,  any  other  law,
including,  without  limitation,  any  state  securities  law,  or any  rule  or
regulation  thereunder  relating  to  the  offer  or  sale  of  the  Registrable
Securities  pursuant to a  Registration  Statement or (iv) any violation of this
Agreement  (the  matters  in the  foregoing  clauses  (i)  through  (iv)  being,
collectively,   "Violations").  Subject  to  Section  6(c),  the  Company  shall
reimburse the  Indemnified  Persons,  promptly as such expenses are incurred and
are due and payable,  for any reasonable legal fees or other reasonable expenses
incurred by them in connection with  investigating  or defending any such Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained in this Section 6(a):  (i) shall not apply to a Claim by an
Indemnified  Person  arising  out of or based upon a Violation  which  occurs in
reliance upon and in  conformity  with  information  furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection  with the  preparation of the  Registration  Statement or any such
amendment  thereof or supplement  thereto,  if such  prospectus  was timely made
available  by the Company  pursuant to Section  3(d);  (ii) with  respect to any
preliminary  prospectus,  shall not inure to the benefit of any such Person from
whom the Person  asserting any such Claim purchased the  Registrable  Securities
that are the subject thereof (or to the benefit of any Person  controlling  such
Person) if the untrue  statement or omission of material  fact  contained in the
preliminary  prospectus  was  corrected  in the  prospectus,  as then amended or
supplemented,  if such  prospectus  was timely  made  available  by the  Company
pursuant to Section 3(d),  and the  Indemnified  Person was promptly  advised in
writing not to use the  incorrect  prospectus  prior to the use giving rise to a
violation and such Indemnified Person,  notwithstanding  such advice, used it or
failed to deliver  the correct  prospectus  as required by the 1933 Act and such
correct  prospectus  was timely made available  pursuant to Section 3(d);  (iii)
shall not be  available  to the  extent  such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company,  including a corrected prospectus,  if such prospectus or corrected
prospectus  was timely made  available by the Company  pursuant to Section 3(d);
and (iv)  shall not apply to  amounts  paid in  settlement  of any Claim if such
settlement is effected  without the prior written consent of the Company,  which
consent shall not be  unreasonably  withheld or delayed.  Such  indemnity  shall
remain in full force and effect  regardless of any  investigation  made by or on
behalf  of  the  Indemnified  Person  and  shall  survive  the  transfer  of the
Registrable Securities by the Investors pursuant to Section 9.

                                       12
<PAGE>

            b. In  connection  with  any  Registration  Statement  in  which  an
Investor  is  participating,  each such  Investor  agrees to  severally  and not
jointly indemnify,  hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the  Registration  Statement and each Person,  if any,
who  controls  the  Company  within the  meaning of the 1933 Act or the 1934 Act
(each,  an  "Indemnified  Party"),  against any Claim or Indemnified  Damages to
which  any of them may  become  subject,  under  the 1933  Act,  the 1934 Act or
otherwise,  insofar as such  Claim or  Indemnified  Damages  arise out of or are
based upon any  Violation,  in each case to the extent,  and only to the extent,
that such  Violation  occurs in reliance  upon and in  conformity  with  written
information  furnished  to the  Company by such  Investor  expressly  for use in
connection with such Registration Statement;  and, subject to Section 6(c), such
Investor will  reimburse any legal or other expenses  reasonably  incurred by an
Indemnified Party in connection with  investigating or defending any such Claim;
provided,  however,  that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution  contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such  settlement is effected
without the prior written  consent of such Investor,  which consent shall not be
unreasonably withheld or delayed; provided,  further, however, that the Investor
shall be liable  under  this  Section  6(b) for only  that  amount of a Claim or
Indemnified  Damages as does not exceed the net  proceeds to such  Investor as a
result  of the sale of  Registrable  Securities  pursuant  to such  Registration
Statement.  Such indemnity  shall remain in full force and effect  regardless of
any  investigation  made by or on  behalf  of such  Indemnified  Party and shall
survive the transfer of the Registrable  Securities by the Investors pursuant to
Section 9.  Notwithstanding  anything  to the  contrary  contained  herein,  the
indemnification  agreement  contained  in this  Section 6(b) with respect to any
preliminary  prospectus shall not inure to the benefit of any Indemnified  Party
if  the  untrue  statement  or  omission  of  material  fact  contained  in  the
preliminary  prospectus  was corrected on a timely basis in the  prospectus,  as
then amended or supplemented.

            c. Promptly  after receipt by an  Indemnified  Person or Indemnified
Party  under  this  Section  6 of notice of the  commencement  of any  action or
proceeding  (including any governmental action or proceeding) involving a Claim,
such  Indemnified  Person or  Indemnified  Party  shall,  if a Claim in  respect
thereof is to be made  against  any  indemnifying  party  under this  Section 6,
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel  with the fees  and  expenses  of not  more  than one  counsel  for such
Indemnified  Person or Indemnified  Party to be paid by the indemnifying  party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation  by such counsel of the Indemnified  Person or Indemnified  Party

                                       13
<PAGE>

and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented by such counsel in such  proceeding.  In the case of an
Indemnified  Person,  legal  counsel  referred to in the  immediately  preceding
sentence  shall be  selected  by the  Investors  holding at least a majority  in
interest of the Registrable Securities included in the Registration Statement to
which the Claim  relates.  The  Indemnified  Party or  Indemnified  Person shall
cooperate fully with the  indemnifying  party in connection with any negotiation
or  defense  of any such  action  or Claim by the  indemnifying  party and shall
furnish to the indemnifying  party all information  reasonably  available to the
Indemnified  Party or Indemnified  Person which relates to such action or Claim.
The indemnifying  party shall keep the Indemnified  Party or Indemnified  Person
reasonably  apprised  at all  times  as to the  status  of  the  defense  or any
settlement  negotiations  with respect thereto.  No indemnifying  party shall be
liable for any settlement of any action,  claim or proceeding  effected  without
its prior written consent, provided,  however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person,  consent to entry of any judgment or enter into any  settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified  Party or Indemnified  Person of a
release  from all  liability  in respect to such Claim or  litigation,  and such
settlement  shall  not  include  any  admission  as to  fault on the part of the
Indemnified  Party.  Following  indemnification  as provided for hereunder,  the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified  Person with  respect to all third  parties,  firms or  corporations
relating to the matter for which  indemnification  has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified  Person or Indemnified  Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.

            d. The  indemnification  required by this Section 6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

            e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

      7. Contribution.

      To the extent any  indemnification  by an indemnifying party is prohibited
or  limited  by  law,  the  indemnifying   party  agrees  to  make  the  maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person  involved in the sale of  Registrable  Securities  which Person is
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the 1933 Act) in  connection  with such sale shall be entitled  to  contribution
from any Person  involved  in such sale of  Registrable  Securities  who was not
guilty of fraudulent  misrepresentation;  and (ii) contribution by any seller of
Registrable  Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.

                                       14
<PAGE>

      8. Reports Under the 1934 Act.

      With a view to making  available to the Investors the benefits of Rule 144
promulgated  under the 1933 Act or any other  similar rule or  regulation of the
SEC that may at any time permit the Investors to sell  securities of the Company
to the public  without  registration  ("Rule  144"),  the Company  agrees to use
commercially reasonable efforts to:

            a. make and keep public  information  available,  as those terms are
understood and defined in Rule 144;

            b. file with the SEC in a timely  manner  (taking  into  account any
permitted  extensions to file) all reports and other  documents  required of the
Company  under  the 1933 Act and the  1934  Act so long as the  Company  remains
subject to such  requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and

            c.  furnish  to  each   Investor  so  long  as  such  Investor  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company,  if true, that it has complied with the reporting  requirements of Rule
144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual report
of the Company and such other reports and documents so filed by the Company, and
(iii)  such  other  information  as may be  reasonably  requested  to permit the
Investors to sell such securities pursuant to Rule 144 without registration.

      9. Assignment of Registration Rights.

      The rights under this Agreement shall be  automatically  assignable by the
Investors to any transferee of all or any portion of such Investor's Registrable
Securities  if:  (i) the  Investor  agrees in  writing  with the  transferee  or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company  within a reasonable  time after such  assignment;  (ii) the Company is,
within a  reasonable  time after such  transfer or  assignment,  furnished  with
written notice of (a) the name and address of such  transferee or assignee,  and
(b) the  securities  with  respect to which such  registration  rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further  disposition  of such  securities  by the  transferee or assignee is
restricted  under the 1933 Act or applicable  state  securities laws; (iv) at or
before the time the Company  receives the written notice  contemplated by clause
(ii) of this  sentence  the  transferee  or assignee  agrees in writing with the
Company  to be bound by all of the  provisions  contained  herein;  and (v) such
transfer shall have been made in accordance with the applicable  requirements of
the Securities Purchase Agreements.

      10. Amendment of Registration Rights.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the Required
Holders.  Any amendment or waiver  effected in  accordance  with this Section 10
shall be binding upon each Investor and the Company.  No such amendment shall be
effective  to the extent  that it applies to less than all of the holders of the
Registrable Securities.  No consideration shall be offered or paid to any Person
to amend or consent to a waiver or  modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

                                       15
<PAGE>

      11. Miscellaneous.

            a. A Person  is  deemed  to be a holder  of  Registrable  Securities
whenever  such  Person  owns or is  deemed  to own of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or  more  Persons  with  respect  to the  same  Registrable
Securities,  the  Company  shall act upon the basis of  instructions,  notice or
election received from the such record owner of such Registrable Securities.

            b. Any notices,  consents,  waivers or other communications required
or  permitted to be given under the terms of this  Agreement  must be in writing
and will be deemed to have been  delivered:  (i) upon  receipt,  when  delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending  party);  or (iii) five  Business  Day after  deposit  with a nationally
recognized  overnight  delivery service,  in each case properly addressed to the
party to  receive  the  same.  The  addresses  and  facsimile  numbers  for such
communications shall be:

                  If to the Company:

                                    Natural Gas Systems, Inc.
                                    820 Gessner, Suite 1340
                                    Houston, Texas 77024
                                    Tel: 713-935-0122

Fax: 713-935-0199

Attention:        Robert S. Herlin, President
                  With a copy to:
                                    Troy & Gould Professional Corporation
                                    1801 Century Park East, 16th Floor
                                    Los Angeles, California 90067-2367
                                    Telephone:       (310) 789-1255
                                    Facsimile:       (310) 201-4746
                                    Attention:       Lawrence Schnapp, Esq.

                                       16
<PAGE>

                  If to Legal Counsel:

                  Schulte Roth & Zabel LLP
                  919 Third Avenue
                  New York, New York  10022
                  Telephone:        (212) 756-2000
                  Facsimile:        (212) 593-5955
                  Attention:        Peter Halasz, Esq.

If to the Buyer,  to its address and facsimile  number set forth on the Schedule
of Buyers attached  hereto,  with copies to the Buyer's  representatives  as set
forth on the  Schedule  of Buyers,  or to such other  address  and/or  facsimile
number and/or to the  attention of such other Person as the recipient  party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written  confirmation of receipt (A) given by the
recipient  of  such  notice,  consent,   waiver  or  other  communication,   (B)
mechanically  or  electronically  generated  by the sender's  facsimile  machine
containing the time, date,  recipient facsimile number and an image of the first
page of such  transmission  or (C)  provided by a courier or  overnight  courier
service shall be rebuttable  evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

            c.  Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            d. All questions concerning the construction,  validity, enforcement
and  interpretation  of this Agreement shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or conflict of
law  provision  or  rule  (whether  of the  State  of  New  York  or  any  other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby  irrevocably  submits to the
exclusive  jurisdiction  of the state and federal  courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction  contemplated hereby or discussed
herein,  and hereby  irrevocably  waives,  and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court,  that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby  irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve  process in any manner  permitted by law.
If any  provision of this  Agreement  shall be invalid or  unenforceable  in any
jurisdiction,  such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or  enforceability  of any  provision  of this  Agreement  in any other
jurisdiction.  EACH PARTY HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES  NOT TO  REQUEST,  A JURY  TRIAL  FOR  THE  ADJUDICATION  OF ANY  DISPUTE
HEREUNDER  OR IN  CONNECTION  HEREWITH OR ARISING OUT OF THIS  AGREEMENT  OR ANY
TRANSACTION CONTEMPLATED HEREBY.

                                       17
<PAGE>

            e. This Agreement,  the other  Transaction  Documents (as defined in
the Second Securities Purchase Agreement) and the instruments  referenced herein
and  therein  constitute  the entire  agreement  among the  parties  hereto with
respect to the subject  matter  hereof and thereof.  There are no  restrictions,
promises, warranties or undertakings,  other than those set forth or referred to
herein and therein.  This  Agreement,  the other  Transaction  Documents and the
instruments  referenced  herein and therein  supersede all prior  agreements and
understandings  among the  parties  hereto with  respect to the  subject  matter
hereof and  thereof,  including  but not  limited to the  Original  Registration
Rights Agreement.

            f. Subject to the  requirements  of Section 9, this Agreement  shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

            g. The headings in this  Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement.  This Agreement,  once executed by a party,  may be delivered to
the other party hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the party so delivering this Agreement.

            i.  Each  party  shall  do and  perform,  or  cause  to be done  and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j. All consents and other determinations  required to be made by the
Investors  pursuant to this Agreement shall be made, unless otherwise  specified
in this Agreement, by the Required Holders.

            k. The  language  used in this  Agreement  will be  deemed to be the
language  chosen by the parties to express  their mutual  intent and no rules of
strict construction will be applied against any party.

            l. This  Agreement is intended for the benefit of the parties hereto
and  their  respective  permitted  successors  and  assigns,  and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

            m. The  obligations  of each Investor  hereunder are several and not
joint with the  obligations  of any other  Investor,  and no  provision  of this
Agreement is intended to confer any  obligations  on any Investor  vis-a-vis any
other Investor.  Nothing contained  herein,  and no action taken by any Investor
pursuant  hereto,  shall be deemed to constitute the Investors as a partnership,
an  association,  a joint  venture  or any  other  kind of  entity,  or create a
presumption  that the  Investors  are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.

             [The remainder of the page is intentionally left blank]

                                       18
<PAGE>

      IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Amended and Restated  Registration Rights Agreement to be
duly executed as of the date first written above.

                                          NAME OF COMPANY

                                          NATURAL GAS SYSTEMS, INC.

                                          By: _________________________
                                              Name:
                                              Title:

<PAGE>

      IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Amended and Restated  Registration Rights Agreement to be
duly executed as of the date first written above.

                                         BUYER:

                                         RUBICON MASTER FUND
                                         By: Rubicon Fund Management, LLP,
                                             its Investment Manager

                                         By: _________________________
                                             Name:
                                             Title:

<PAGE>

                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>
                                 Buyer's Address and          Buyer's Representative's Address
Buyer                              Facsimile Number                 and Facsimile Number
-------------------   ----------------------------------    -------------------------------------
<S>                   <C>                                   <C>
Rubicon Master Fund   c/o Rubicon Fund Management LLP       Schulte Roth & Zabel LLP
                      103 Mount St.                         919 Third Avenue
                      London W1K2TJ                         New York, New York  10022
                      United Kingdom                        Telephone: (212) 756-2000
                      Facsimile No.:    +44 207 074 4280    Facsimile: (212) 593-5955
                      Telephone No.:    +44 207 074 4299    Attention: Peter Halasz, Esq.
                      Attn:   William Callanan
</TABLE>

<PAGE>

                                    EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[Transfer Agent]
[Address]
Attention:

      Re: NATURAL GAS SYSTEMS, INC.

Ladies and Gentlemen:

      We are counsel to NATURAL GAS  SYSTEMS,  INC., a Nevada  corporation  (the
"Company"),  and have  represented  the Company in connection  with that certain
Securities  Purchase Agreement (the "Original  Securities  Purchase  Agreement")
entered  into by and  among the  Company  and  Rubicon  Master  Fund,  a company
organized  under the laws of the Cayman  Islands (, the  "Holder")  pursuant  to
which the  Company  issued 1.2 million  shares of the  Company's  common  stock,
$0.001  par  value  per  share  (the  "Original  Securities")  and that  certain
Securities Purchase Agreement (the "Second Securities Purchase  Agreement",  and
together  with  the  Original  Securities  Purchase  Agreement,  the  Securities
Purchase  Agreements)  entered  into by and among  the  Company  and the  Holder
pursuant to which the Company  issued  _______  shares of the  Company's  common
stock,  $0.001 par value per share (the "Second  Securities",  and together with
the Original Securities, the "Securities").

      Pursuant to the  Securities  Purchase  Agreements,  the  Company  also has
entered  into an Amended and Restated  Registration  Rights  Agreement  with the
Holder  (the  "Registration  Rights  Agreement")  pursuant  to which the Company
agreed,  among other things, to register the Registrable  Securities (as defined
in the  Registration  Rights  Agreement),  including the  Securities,  under the
Securities  Act of 1933,  as amended (the "1933 Act").  In  connection  with the
Company's  obligations under the Registration Rights Agreement,  on ____________
___,  2005,  the Company filed a  Registration  Statement on Form SB-2 (File No.
333-_____________)  (the  "Registration  Statement")  with  the  Securities  and
Exchange  Commission (the "SEC") relating to the  Registrable  Securities  which
names the Holder as a selling stockholder thereunder.

      In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by  telephone  that the SEC has entered an order  declaring
the  Registration  Statement  effective  under  the 1933 Act at  [ENTER  TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,  after
telephonic  inquiry  of a  member  of the  SEC's  staff,  that  any  stop  order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose  are  pending  before,  or  threatened  by, the SEC and the  Registrable
Securities  are  available  for  resale  under  the  1933  Act  pursuant  to the
Registration Statement.

                                 EXHIBIT A - 1
<PAGE>

      Notwithstanding  anything to the contrary  contained  in this  letter,  we
neither  express nor imply any opinion as to  compliance by the Company with the
antifraud  provisions of the California Corporate Securities Law, the Securities
Act of 1933 or the Securities  Exchange Act of 1934, or the rules or regulations
under such law or any of such Acts

                                              Very truly yours,

                                              [ISSUER'S COUNSEL]

                                              By: ___________________________

cc:         Rubicon Master Fund

                                 EXHIBIT A - 2
<PAGE>

                                    EXHIBIT B

                              SELLING STOCKHOLDERS

      We are  registering  the  shares  of Common  Stock in order to permit  the
selling  stockholders  to offer the shares for resale from time to time.  Except
for the ownership of the Common Stock issued pursuant to the Securities Purchase
Agreements or as otherwise set forth below,  the selling  stockholders  have not
had any material relationship with us within the past three years.

      The table  below  lists the  selling  stockholders  and other  information
regarding the beneficial  ownership of the shares of Common Stock by each of the
selling  stockholders.  The second  column  lists the number of shares of Common
Stock beneficially owned by each selling stockholder as of ________, 2005.

      In  accordance  with the  terms of  registration  rights  agreements  with
certain of the selling stockholders, this prospectus generally covers the resale
of at least 100% of the Securities as of the trading day  immediately  preceding
the date the registration statement is initially filed with the SEC. The selling
stockholders  may sell all, some or none of their shares in this  offering.  See
"Plan of Distribution."

<TABLE>
<CAPTION>
                                                                      Maximum Number of
                                                                      Shares to be Sold
                                      Number of Shares Owned           Pursuant to this           Number of Shares
Name of Selling Stockholder              Prior to Offering                Prospectus            Owned After Offering
----------------------------------   --------------------------    -------------------------    ----------------------
<S>                                  <C>                           <C>                          <C>
Rubicon Master Fund (1)
</TABLE>

      (1) Pursuant to  investment  agreements,  each of Rubicon Fund  Management
Ltd., a company  organized under the laws of the Cayman Islands,  which we refer
to in  this  prospectus  as  Rubicon  Fund  Management  Ltd,  and  Rubicon  Fund
Management LLP, a limited liability  partnership organized under the laws of the
United Kingdom,  which we refer to in this prospectus as Rubicon Fund Management
LLP, Mr. Paul Anthony Brewer, Mr. Jeffrey Eugene Brummette,  Mr. William Francis
Callanan,  Mr. Vilas  Gadkari,  Mr. Robert Michael  Greenshields  and Mr. Horace
Joseph  Leitch III share all  investment  and voting  power with  respect to the
securities held by Rubicon Master Fund. Mr. Brewer, Mr. Brummette, Mr. Callanan,
Mr.  Gadkari,  Mr.  Greenshields  and  Mr.  Leitch  control  both  Rubicon  Fund
Management Ltd and Rubicon Fund  Management LLP. Each of Rubicon Fund Management
Ltd, Rubicon Fund Management LLP, Mr. Brewer, Mr. Brummette,  Mr. Callanan,  Mr.
Gadkari,  Mr. Greenshields and Mr. Leitch disclaim beneficial ownership of these
securities.

                                 EXHIBIT B - 1
<PAGE>

                              PLAN OF DISTRIBUTION

      We are  registering  shares of Common  Stock to permit the resale of these
shares of Common  Stock by the holders of such shares of Common  Stock from time
to time  after  the  date of this  prospectus.  We will not  receive  any of the
proceeds  from the sale by the  selling  stockholders  of the  shares  of Common
Stock. We will bear all fees and expenses incident to our obligation to register
the shares of Common Stock.

      The selling stockholders may sell all or a portion of the shares of Common
Stock owned by them and offered hereby from time to time directly or through one
or more  underwriters,  broker-dealers  or agents. If the shares of Common Stock
are sold through  underwriters or broker-dealers,  the selling stockholders will
be responsible for underwriting discounts or commissions or agent's commissions.
The  shares of Common  Stock  may be sold in one or more  transactions  at fixed
prices,  at prevailing  market prices at the time of the sale, at varying prices
determined  at the time of sale,  or at  negotiated  prices.  These sales may be
effected in transactions, which may involve crosses or block transactions,

      o     on any national  securities  exchange or quotation  service on which
            the securities may be listed or quoted at the time of sale;

      o     in the over-the-counter market;

      o     in  transactions  otherwise than on these exchanges or systems or in
            the over-the-counter market;

      o     through the writing of options,  whether  such options are listed on
            an options exchange or otherwise;

      o     ordinary  brokerage  transactions  and  transactions  in  which  the
            broker-dealer solicits purchasers;

      o     block  trades in which the  broker-dealer  will  attempt to sell the
            shares as agent but may  position  and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases  by  a  broker-dealer  as  principal  and  resale  by  the
            broker-dealer for its account;

      o     an  exchange  distribution  in  accordance  with  the  rules  of the
            applicable exchange;

      o     privately negotiated transactions;

      o     short sales;

      o     sales pursuant to Rule 144;

<PAGE>

      o     broker-dealers may agree with the selling  securityholders to sell a
            specified number of such shares at a stipulated price per share;

      o     a combination of any such methods of sale; and

      o     any other method permitted pursuant to applicable law.

      If the selling  stockholders effect such transactions by selling shares of
Common  Stock  to  or  through  underwriters,  broker-dealers  or  agents,  such
underwriters,  broker-dealers  or agents may receive  commissions in the form of
discounts,   concessions  or  commissions  from  the  selling   stockholders  or
commissions  from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts,  concessions or
commissions as to particular  underwriters,  broker-dealers  or agents may be in
excess of those customary in the types of transactions  involved). In connection
with sales of the shares of Common Stock or otherwise,  the selling stockholders
may enter into hedging  transactions with broker-dealers or others, which may in
turn  engage  in short  sales of the  shares of  Common  Stock in the  course of
hedging in positions they assume. The selling  stockholders may also sell shares
of Common  Stock  short and  deliver  shares of  Common  Stock  covered  by this
prospectus  to close  out  short  positions  and to  return  borrowed  shares in
connection  with such short  sales.  The selling  stockholders  may also loan or
pledge shares of Common Stock to  broker-dealers or others that in turn may sell
such shares.

      The selling  stockholders may pledge or grant a security  interest in some
or all of the shares of Common  Stock owned by them and, if they  default in the
performance of their secured  obligations,  the pledgees or secured  parties may
offer and sell the  shares of Common  Stock from time to time  pursuant  to this
prospectus or any  amendment to this  prospectus  under Rule  424(b)(3) or other
applicable  provision of the  Securities Act of 1933, as amended,  amending,  if
necessary,  the list of selling stockholders to include the pledgee,  transferee
or other successors in interest as selling  stockholders  under this prospectus.
The selling stockholders also may transfer and donate the shares of Common Stock
in other circumstances in which case the transferees,  donees, pledgees or other
successors  in interest  will be the selling  beneficial  owners for purposes of
this prospectus,  including, without limitation, in accordance with Section 2(f)
of the Securities Purchase Agreements.

      The  selling  stockholders  and  any  broker-dealer  participating  in the
distribution  of the shares of Common  Stock may be deemed to be  "underwriters"
within the  meaning of the  Securities  Act,  and any  commission  paid,  or any
discounts or concessions  allowed to, any such broker-dealer may be deemed to be
underwriting  commissions or discounts  under the Securities  Act. At the time a
particular  offering  of the  shares  of  Common  Stock  is made,  a  prospectus
supplement,  if required, will be distributed which will set forth the aggregate
amount of shares of Common  Stock being  offered and the terms of the  offering,
including  the name or names of any  broker-dealers  or agents,  any  discounts,
commissions  and  other  terms   constituting   compensation  from  the  selling
stockholders and any discounts,  commissions or concessions allowed or reallowed
or paid to broker-dealers.

<PAGE>

      Under the securities  laws of some states,  the shares of Common Stock may
be sold in such states only through  registered or licensed  brokers or dealers.
In  addition,  in some states the shares of Common  Stock may not be sold unless
such  shares  have been  registered  or  qualified  for sale in such state or an
exemption from registration or qualification is available and is complied with.

      There can be no assurance  that any selling  stockholder  will sell any or
all of the shares of Common Stock registered  pursuant to the shelf registration
statement, of which this prospectus forms a part.

      The  selling  stockholders  and any  other  person  participating  in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended,  and the rules and regulations  thereunder,  including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of  purchases  and sales of any of the  shares of  Common  Stock by the  selling
stockholders and any other participating person.  Regulation M may also restrict
the ability of any person  engaged in the  distribution  of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the  ability  of any  person  or  entity  to  engage in  market-making
activities with respect to the shares of Common Stock.

      We will pay all expenses of the registration of the shares of Common Stock
pursuant to the registration  rights  agreement,  estimated to be $[ ] in total,
including,  without  limitation,  Securities and Exchange Commission filing fees
and expenses of compliance with state  securities or "blue sky" laws;  provided,
however,  that a selling  stockholder  will pay all  underwriting  discounts and
selling commissions,  if any. We will indemnify the selling stockholders against
liabilities,  including some liabilities under the Securities Act, in accordance
with the registration  rights  agreements,  or the selling  stockholders will be
entitled to  contribution.  We may be  indemnified  by the selling  stockholders
against civil liabilities,  including liabilities under the Securities Act, that
may  arise  from  any  written  information  furnished  to  us  by  the  selling
stockholder  specifically  for use in this  prospectus,  in accordance  with the
related registration rights agreements, or we may be entitled to contribution.

      Once sold under the shelf registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in the hands of
persons other than our affiliates.

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