Document:

Exhibit 4.1

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                          SECURITIES PURCHASE AGREEMENT

                                     BETWEEN

                            CBARNEY INVESTMENTS, LTD.

                                       AND

                        NATURAL GAS SERVICES GROUP, INC.

                                  JULY 20, 2004

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                                Table of Contents
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ARTICLE I
TERMS OF THE TRANSACTION.......................................................1
1.1      Authorization of Shares...............................................1
1.2      Sale and Purchase.....................................................1

ARTICLE II
CLOSING........................................................................1
2.1      Closing...............................................................1
2.2      Closing Deliveries....................................................1

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................2
3.1      Corporate Organization................................................2
3.2      Capitalization of the Company.........................................2
3.3      Authority Relative to This Agreement..................................3
3.4      Noncontravention......................................................3
3.5      Consents and Approvals................................................4
3.6      Authorization of Issuance; Reservation of Shares......................4
3.7      Financial Condition...................................................4
3.8      SEC Filings...........................................................5
3.9      Internal Accounting Controls..........................................5
3.10     Form S-3 Eligibility..................................................5
3.11     Anti-Takeover Provisions..............................................6
3.12     No General Solicitation or Integrated Offering........................6
3.13     Subsidiaries..........................................................6
3.14     Transactions With Affiliates..........................................6
3.15     Employee Relations....................................................7
3.16     Titles and Assets.....................................................7
3.17     Intellectual Property.................................................7
3.18     Material Agreements...................................................8
3.19     Hedging Agreements....................................................8
3.20     Defaults..............................................................8
3.21     Insurance.............................................................8
3.22     Litigation............................................................9
3.23     Compliance with the Law...............................................9
3.24     Environmental Matters.................................................9
3.25     ERISA................................................................10
3.26     Taxes................................................................11
3.27     Investment Company Act...............................................11
3.28     Public Utility Holding Company Act...................................11

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3.29     Brokerage Fees.......................................................12
3.30     No Material Misstatements............................................12

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR................................12
4.1      Organization.........................................................12
4.2      Authority Relative to This Agreement.................................12
4.3      Noncontravention.....................................................13
4.4      Consents and Approvals...............................................13
4.5      Purchase for Investment..............................................13
4.6      Financial Resources..................................................15
4.7      Brokerage Fees.......................................................15

ARTICLE V
ADDITIONAL AGREEMENTS.........................................................15
5.1      Reasonable Best Efforts..............................................15
5.2      Press Releases.......................................................15
5.3      Fees and Expenses....................................................16
5.4      Alternative Transactions.............................................17
5.5      Expense Reimbursement................................................17
5.6      No Integrated Offerings..............................................17

ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY......................................17
6.1      Representations and Warranties.......................................17
6.2      Covenants and Agreements.............................................17
6.3      Legal Proceedings....................................................17
6.4      Consents.............................................................17

ARTICLE VII
CONDITIONS TO OBLIGATIONS OF INVESTOR.........................................17
7.1      Representations and Warranties.......................................17
7.2      Covenants and Agreements.............................................18
7.3      Legal Proceedings....................................................18
7.4      Legal Opinion........................................................18
7.5      Consents.............................................................18
7.6      Amex Listing.........................................................18
7.7      Due Diligence........................................................18
7.8      Closing Deliveries...................................................18
7.9      Material Adverse Effect..............................................18

ARTICLE VIII
BOARD VISITATION..............................................................18
8.1      Board Visitation.....................................................18

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ARTICLE IX
COVENANTS.....................................................................19
9.1      Survival.............................................................19
9.2      Transfer Restrictions................................................19
9.3      Lock-up..............................................................20
9.4      Registration of Shares...............................................20
9.5      Use of Proceeds......................................................22
9.6      Participation Right..................................................22
9.7      Capitalization Certification.........................................23
9.8      Inspection of Properties and Books...................................23
9.9      Additional Covenants.................................................24
9.10     Confidentiality......................................................25

ARTICLE X
TERMINATION...................................................................26
10.1     Termination; Liabilities Consequent Thereon..........................26

ARTICLE XI
MISCELLANEOUS.................................................................27
11.1     Notices..............................................................27
11.2     Entire Agreement.....................................................28
11.3     Binding Effect; Assignment; No Third Party Beneficiaries.............28
11.4     Severability.........................................................29
11.5     Injunctive Relief....................................................29
11.6     Governing Law........................................................29
11.7     Jurisdiction.........................................................29
11.8     Counterparts.........................................................29
11.9     Amendment............................................................29
11.10    Waiver...............................................................29
11.11    Indemnification......................................................30
11.12    Payment Set Aside....................................................30
11.13    Joint Participation in Drafting......................................30

ARTICLE XII
DEFINITIONS...................................................................31
12.1     Certain Defined Terms................................................31

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                          SECURITIES PURCHASE AGREEMENT

         This SECURITIES  PURCHASE  AGREEMENT (this "Agreement") is entered into
as of July 20,  2004,  between  NATURAL GAS  SERVICES  GROUP,  INC.,  a Colorado
corporation  (the  "Company"),  and CBARNEY  INVESTMENTS,  LTD., a Texas limited
partnership (the "Investor").

         WHEREAS,  the  Company  has  authorized  the  sale and  issuance  of an
aggregate of up to Six Hundred Forty-Nine Thousand Five Hundred and Seventy-Four
(649,574) shares of its Common Stock, $0.01 par value (the "Shares");

         Whereas,  the Investor  desires to purchase the Shares on the terms and
conditions set forth herein; and

         Whereas,  the  Company  desires  to issue  and sell the  Shares  to the
Investor on the terms and conditions set forth herein;

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants and  agreements  herein  contained,  and intending to be legally bound
hereby, the Company and the Investor hereby agrees as follows:

                                    ARTICLE I
                            TERMS OF THE TRANSACTION

         1.1  Authorization of Shares. On or prior to the Closing (as defined in
Section 2.1), the Company shall  authorize the sale and issuance to the Investor
of the Shares.

         1.2 Sale and Purchase.  Subject to the terms and conditions  hereof, at
the Closing the Company hereby agrees to issue and sell to the Investor, and the
Investor agrees to purchase from the Company,  Six Hundred  Forty-Nine  Thousand
Five Hundred and Seventy-Four (649,574) Shares at an aggregate purchase price of
Five Million Dollars ($5,000,000).

                                   ARTICLE II
                                     CLOSING

         2.1  Closing.  The closing of the sale and purchase of the Shares under
this Agreement (the "Closing")  shall take place at the offices of Gardere Wynne
Sewell LLP, 1000 Louisiana,  Houston, Texas 77002, at 10:00 a.m., local time, on
a date to be specified by the parties that is as soon as practicable  after, but
in no event later than the third  Business Day  following  the  satisfaction  or
waiver of each of the  conditions  set forth in  Articles VI and VII, or at such
other time or place as the  Company and the  Investor  may  mutually  agree (the
"Closing Date"). All closing transactions at the Closing shall be deemed to have
occurred simultaneously.

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         2.2  Closing  Deliveries.  At the  Closing,  subject  to the  terms and
conditions hereof, the Company will deliver to the Investor,  against payment of
the purchase price therefor by wire transfer made payable to the Company:

         (a) a certificate or certificates representing the Shares;

         (b) an Officer's  Certificate,  dated the date of the Closing,  stating
that the conditions  specified in Article VII have been fully  satisfied  (other
than with  respect to the approval by the Investor of any of the items set forth
herein);

         (c) certified  copies of the resolutions  duly adopted by the Company's
Board authorizing the execution,  delivery and performance of this Agreement and
the Ancillary Documents and the issuance and sale of the Shares;

         (d) certified copies of the Articles of Incorporation and Bylaws of the
Company, each as in effect at the Closing;

         (e) copies of all third party and governmental consents,  approvals and
filings  required  in  connection  with  the  consummation  of the  transactions
hereunder;

         (f) the Capitalization Schedule (as defined in Section 9.7 below); and

         (g) any other  documents  related to the  transactions  contemplated by
this Agreement as the Investor or its counsel may reasonably request.

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investor that:

         3.1  Corporate   Organization.   The  Company  is  a  corporation  duly
organized, validly existing, and in good standing under the laws of the State of
Colorado and has all requisite  corporate power and authority to own, lease, and
operate its properties and to carry on its business as now being  conducted.  No
actions or  proceedings  to  dissolve  the  Company  are pending or, to the best
knowledge  of the  Company,  threatened.  The  Company is duly  qualified  to do
business as a foreign  corporation and is in good standing in each  jurisdiction
where such qualification is necessary, except where the failure to so qualify or
to be in good standing would not have a Material Adverse Effect.

         3.2      Capitalization of the Company.

         (a) On the Closing Date,  the  authorized  capital stock of the Company

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will  consist  of  30,000,000  shares of Common  Stock and  5,000,000  shares of
preferred  stock,  $0.01  par  value,  381,654  of which are  designated  as 10%
Convertible  Series A Preferred  Stock.  As of the date  hereof,  (i)  5,412,135
shares of Common  Stock are  outstanding  and no shares of  preferred  stock are
outstanding,  and (ii) 66,500  shares of Common  Stock are reserved for issuance
upon exercise of  outstanding  employee,  officer and director stock options and
2,549,336  shares of Common Stock are reserved  for  issuance  upon  exercise of
outstanding  options (excluding  employee,  officer and director stock options),
warrants or conversion  rights.  All outstanding  shares of capital stock of the
Company have been validly  issued and are fully paid and  nonassessable,  and no
shares of capital  stock of the Company are subject to, nor have any been issued
in violation of, preemptive or similar rights.

         (b) Except as set forth above in subparagraph  (a) of this Section 3.2,
there are outstanding on the date hereof (i) no shares of capital stock or other
voting securities of the Company;  (ii) no securities of the Company convertible
into or exchangeable  for shares of capital stock or other voting  securities of
the Company;  (iii) no options or other rights to acquire from the Company,  and
no  obligation  of the Company to issue or sell,  any shares of capital stock or
other  voting  securities  of the  Company  or  any  securities  of the  Company
convertible  into or exchangeable  for such capital stock or voting  securities;
and (iv) no equity equivalents, interests in the ownership or earnings, or other
similar rights of or with respect to the Company.

         (c)  Except  as  previously  disclosed  to the  Investor,  neither  the
execution of or Closing under this Agreement nor the  consummation  of any other
transaction  currently  contemplated by the Company or any of its  Subsidiaries,
will trigger or cause any adjustment under any  anti-dilution  provisions or any
other similar provisions  contained in any agreement as currently in effect that
have the effect of (i) causing a decrease in any  exercise  price or  conversion
price in any security exercisable for or convertible into shares of Common Stock
(a "Common  Stock  Equivalent"),  or (ii)  causing an  increase in the number of
shares of Common  Stock that may be acquired  upon  conversion  or exercise of a
Common Stock Equivalent.

         3.3  Authority  Relative  to  This  Agreement.  The  Company  has  full
corporate  power and authority to execute,  deliver,  and perform this Agreement
and to execute,  deliver, and where applicable,  perform the Ancillary Documents
to which it is a party and to consummate the  transactions  contemplated  hereby
and thereby.  The  execution,  delivery and  performance  by the Company of this
Agreement and the execution,  delivery, and where applicable,  performance by it
of the Ancillary Documents to which it is a party, and the consummation by it of
the  transactions  contemplated  hereby and thereby,  have been (or prior to the
Closing will have been) duly authorized by all necessary corporate action of the
Company.  This Agreement has been duly executed and delivered by the Company and
constitutes,  and each  Ancillary  Document  executed  or to be  executed by the
Company has been,  or when  executed will be, duly executed and delivered by the
Company and constitutes, or when executed and delivered will constitute, a valid

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and legally binding obligation of the Company,  enforceable  against the Company
in accordance with its terms,  except that such enforceability may be limited by
(i) applicable bankruptcy, insolvency,  reorganization,  moratorium, and similar
laws or judicial  decisions  now or hereafter in effect  relating to  creditors'
rights generally,  and (ii) general equitable principles  (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

         3.4 Noncontravention.  The execution,  delivery, and performance by the
Company of this Agreement and the execution, delivery, and where applicable, the
performance  by it of  Ancillary  Documents  to  which  it is a  party  and  the
consummation by it of the  transactions  contemplated  hereby and thereby do not
and will not (i) conflict  with or result in a violation of any provision of the
Company's Articles of Incorporation,  as amended through the date hereof, or the
Company's Bylaws,  as amended through the date hereof,  or the charter,  bylaws,
partnership  agreement or other governing  instruments of any  Subsidiary,  (ii)
conflict with or result in a violation of any provision of, or constitute  (with
or without the giving of notice or the passage of time or both) a default under,
or give rise  (with or without  the  giving of notice or the  passage of time or
both)  to any  loss  of  material  benefit,  or of  any  right  of  termination,
cancellation, or acceleration under, any Material Agreement, (iii) result in the
creation or imposition of any Encumbrance  upon the properties of the Company or
any  Subsidiary or (iv) violate any  Applicable  Law binding upon the Company or
any  Subsidiary,  other than, in the case of clauses (ii),  (iii) and (iv),  any
such conflicts,  violations,  defaults, rights or Encumbrances that individually
or in the aggregate would not have a Material Adverse Effect.

         3.5  Consents  and  Approvals.   No  consent,   approval,   order,   or
authorization of, or declaration, filing, or registration with, any Governmental
Entity is required to be  obtained or made by the Company or any  Subsidiary  in
connection with the execution,  delivery,  or performance by the Company of this
Agreement and the  execution,  delivery,  and where  applicable,  performance of
Ancillary  Documents  to  which  it  is a  party  or  the  consummation  of  the
transactions contemplated hereby and thereby, other than (i) compliance with any
applicable  requirements  of  the  Securities  Act,  (ii)  compliance  with  any
applicable   requirements  of  the  Exchange  Act,  (iii)  compliance  with  any
applicable state securities laws; and (iv) such consents,  approvals, orders, or
authorizations  which,  if not  obtained,  and such  declarations,  filings,  or
registrations  which, if not made, would not,  individually or in the aggregate,
have a Material Adverse Effect.  Except for such consents as are obtained before
or contemporaneously with consummation of the Closing, no consent or approval of
any other  Person is  required  to be  obtained  or made by the  Company  or any
Subsidiary in connection  with the  execution,  delivery,  or performance by the
Company  of this  Agreement  and  execution,  delivery  and,  where  applicable,
performance  of  the  Ancillary  Documents  to  which  it  is  a  party  or  the
consummation of the transactions contemplated hereby and thereby.

         3.6 Authorization of Issuance;  Reservation of Shares.  When issued and
delivered  pursuant to this Agreement against payment therefor,  the Shares will
be validly issued,  fully paid and nonassessable.  The issuance of the Shares is
not subject to any preemptive or similar rights.

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         3.7 Financial Condition.  The audited consolidated balance sheet of the
Company  and  its  Subsidiaries  as  at  December  31,  2003,  and  the  related
consolidated  statements  of income,  stockholders'  equity and cash flow of the
Company and its  Subsidiaries  for the fiscal year ended on said date,  with the
opinion  thereon of Hein & Associates LLP heretofore  furnished to the Investor,
and the unaudited consolidated balance sheet of the Company and its Subsidiaries
as at March  31,  2004,  and the  related  consolidated  statements  of  income,
stockholders'  equity and cash flow of the Company and its  Subsidiaries for the
three-month period ending on such date heretofore furnished to the Investor, are
complete and correct and fairly present the consolidated  financial condition of
the  Company  and its  Subsidiaries  as at said  dates  and the  results  of its
operations for the fiscal year and the three-month  period ending on said dates,
all in accordance with generally accepted  accounting  principles  ("GAAP"),  as
applied on a consistent  basis  (subject,  in the case of the interim  financial
statements,  to  normal  year-end  adjustments).  Neither  the  Company  nor any
Subsidiary  has  on  the  date  hereof  any  debt,  trade  payables,  contingent
liabilities,  liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated  losses from any  unfavorable  commitments,  except as
referred to or  reflected  or provided  for in the  Financial  Statements  or in
Schedule 3.7 or except to the extent that the  existence of any of the foregoing
would not have a Material  Adverse  Effect.  Since December 31, 2003,  there has
been no change or event having or reasonably  likely to have a Material  Adverse
Effect,  except as disclosed  to the Investor in writing.  Since the date of the
Financial  Statements,  neither the business nor the properties of the Company's
Subsidiaries, taken as a whole, have been materially and adversely affected as a
result of any fire, explosion,  earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts,  permits or concessions by any  Governmental  Entity,
riot, activities of armed forces or acts of God or of any public enemy.

         3.8 SEC Filings.  The Company has complied with its obligations to file
with the SEC all  forms,  reports,  schedules,  statements  and other  documents
required to be filed by it under the  Securities  Act and the Exchange Act since
January 1, 2000. All forms, reports, schedules,  statements, and other documents
(including all amendments  thereto) filed by the Company with the Securities and
Exchange Commission since such date are herein  collectively  referred to as the
"SEC  Filings".  The SEC  Filings,  at the time filed,  complied in all material
respects with all applicable  requirements of federal  securities  laws. None of
the SEC Filings,  including,  without  limitation,  any financial  statements or
schedules included therein,  at the time filed or as same may have been amended,
contained  any  untrue  statement  of a  material  fact or  omitted to state any
material  fact  required to be stated  therein or necessary in order to make the
statements  contained  therein,  in light of the circumstances  under which they
were made, not misleading.

         3.9 Internal Accounting  Controls.  The Company maintains in accordance
with Section  13(b)(2)(B)  of the  Exchange Act 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,

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(ii)  transactions are recorded as necessary to permit  preparation of financial
statements in conformity with GAAP and to maintain asset  accountability,  (iii)
access to assets is permitted only in accordance  with  management's  general or
specific  authorization,  and (iv) the  recorded  accountability  for  assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for
the Company and designed such disclosure  controls and procedures to ensure that
material  information  relating to the Company,  including its Subsidiaries,  is
made  known  to  the  certifying  officers  by  others  within  those  entities,
particularly  during the  period in which the  Company's  Annual  Report on Form
10-KSB  or  Quarterly  Report  on Form  10-QSB,  as the  case  may be,  is being
prepared.  The Company's certifying officers have evaluated the effectiveness of
the Company's  controls and  procedures as of a date within 90 days prior to the
filing date of the 2003 Annual Report on Form 10-KSB (the "2003 Annual  Report")
and the Company's most recently filed Quarterly Report on Form 10-QSB (each such
date, an "Evaluation Date"). The Company presented in the 2003 Annual Report and
its most recently filed  Quarterly  Report on Form 10-QSB the conclusions of the
certifying  officers  about the  effectiveness  of the  disclosure  controls and
procedures  based on their  evaluations  as of the respective  Evaluation  Date.
Since  the  Evaluation  Date for the 2003  Annual  Report,  there  have  been no
significant  changes in the Company's internal  accounting  controls (within the
meaning  of  Section  13(b)(2)(B)  of the  Exchange  Act) or,  to the  Company's
knowledge,  in other  factors  that could  significantly  affect  the  Company's
internal accounting controls.

         3.10 Form S-3  Eligibility.  The Company is  eligible  to register  the
resale of its Common  Stock on a  registration  statement  on Form S-3 under the
Securities  Act. The Company is not aware of any current facts or  circumstances
that  would  prohibit  or delay the  preparation  and  filing of a  registration
statement  on Form S-3 with  respect to the Shares.  The Company has no basis to
believe that its past or present independent public auditors will withhold their
consent to the inclusion,  or incorporation by reference, of their audit opinion
concerning the Company's financial statements to be included in the Registration
Statement required to be filed pursuant to Section 9.4 of this Agreement.

         3.11 Anti-Takeover  Provisions.  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  its  Articles  of   Incorporation  or  the  laws  of  the  state  of  its
incorporation or other  jurisdiction  which is or could become applicable to the
Investor  as a  result  of the  transactions  contemplated  by  this  Agreement,
including,  without  limitation,  the  Company's  issuance of the Shares and the
Investor's ownership of the Shares.

         3.12 No  General  Solicitation  or  Integrated  Offering.  Neither  the
Company  nor  any  distributor  participating  on the  Company's  behalf  in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor,  has conducted any "general solicitation" (as such term
is defined in  Regulation  D) with  respect to any of the Shares  being  offered

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hereby. Neither the Company nor any of its Affiliates,  nor any person acting on
its or 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 the  Shares  being  offered  hereby  under  the
Securities  Act or cause this offering of  Securities to be integrated  with any
prior offering of securities of the Company for purposes of the Securities  Act,
which result of such integration would require registration under the Securities
Act, or would trigger any applicable stockholder approval provisions.

         3.13  Subsidiaries.  Except as set forth on Schedule  3.13, the Company
has no  Subsidiaries.  Each Subsidiary is a corporation or limited  partnership,
duly incorporated or organized,  validly existing and in good standing under the
laws of its jurisdiction of incorporation  or organization,  as applicable,  and
has all requisite  corporate or partnership  power and authority in all material
respects to own, lease,  and operate its properties and to carry on its business
as now being  conducted.  Each  Subsidiary is duly qualified to do business as a
foreign  corporation  or  limited  partnership,  as  applicable,  and is in good
standing in each  jurisdiction  where such  qualification  is necessary,  except
where the  failure  to so  qualify  or to be in good  standing  would not have a
Material  Adverse  Effect.  There  are  outstanding  (i)  no  securities  of any
Subsidiary convertible into or exchangeable for shares of capital stock or other
voting  securities  of any  Subsidiary  or of the Company and (ii) no options or
other rights to acquire from any  Subsidiary and no obligation of any Subsidiary
to issue or sell, any shares of capital stock or other voting  securities of any
Subsidiary  or of the  Company or any  securities  of any  Subsidiary  or of the
Company  convertible  into or  exchangeable  for such  capital  stock or  voting
securities.

         3.14  Transactions  With  Affiliates.  Except as  disclosed  in the SEC
Filings, none of the officers,  directors, or employees of the Company or any of
its Subsidiaries is presently a party to any transaction with the Company or any
of its  Subsidiaries  (other than for ordinary  course  services solely in their
capacity as officers, directors or employees), 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 any
corporation,  partnership,  trust or other  entity  in which  any such  officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.

         3.15   Employee   Relations.   Neither  the  Company  nor  any  of  its
Subsidiaries  is  involved  in any  material  union  labor  dispute  nor, to the
knowledge  of  the  Company  or any of its  Subsidiaries,  is any  such  dispute
threatened.  The Company and its Subsidiaries  believe that their relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
Securities Act) presently  employed by the Company has notified the Company that
such officer intends to leave the Company or otherwise  terminate such officer's
employment with the Company.  The Company and its Subsidiaries are in compliance
with all  federal,  state,  local and foreign  laws and  regulations  respecting
employment  and  employment  practices,  terms and  conditions of employment and
wages and hours,  except where  failure to be in  compliance  would not,  either
individually or in the aggregate, result in a Material Adverse Effect.

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         3.16 Titles and Assets.

         (a) Each of the Company and its  Subsidiaries  has good and  defensible
title to, or valid  leasehold  interests  in,  all of its  material  assets  and
Properties,  except for such  assets  and  Properties  as are no longer  used or
useful in the  conduct  of its  businesses  or as have been  disposed  of in the
ordinary  course of  business  and except for (A)  defects in title set forth on
Schedule 3.16 and (B) such imperfections of title, easements,  rights of way and
similar liens or other matters and failures of title as would not,  individually
or in the  aggregate,  have a  Material  Adverse  Effect.  All such  assets  and
Properties,  other than assets and Properties in which the Company has leasehold
interests,  are free and clear of all  Liens,  other than those (w) set forth in
the SEC Filings (x) Liens set forth in Schedule 3.16, and (y) Excepted Liens.

         (b)  All  leases,  licenses,  permits,  authorizations  and  agreements
necessary  for the conduct of the  business of the Company and the  Subsidiaries
are valid and  subsisting,  in full force and effect and there exists no default
or event or circumstance  which with the giving of notice or the passage of time
or both would give rise to a default under any such leases,  licenses,  permits,
authorizations and agreements, which would have a Material Adverse Effect.

         (c) The Properties  presently owned,  leased or licensed by the Company
and the Subsidiaries,  including,  without limitation, all easements,  licenses,
permits,  authorizations and rights of way, include all Properties  necessary to
permit the  Company  and the  Subsidiaries  to  conduct  their  business  in all
material respects in the same manner as its business has been conducted prior to
the Closing Date.

         (d) All of the Properties of the Company and the Subsidiaries which are
reasonably  necessary  for the  operation of their  business are in good working
condition in all material respects and are maintained in accordance with prudent
business standards.

         3.17  Intellectual  Property.  Each of the Company and its Subsidiaries
owns or is duly licensed (and, in such event,  has the unfettered right to grant
sublicenses) or otherwise has the right to use all patents, patent applications,
trademarks,  trademark  applications,  trade names,  service marks,  copyrights,
copyright applications,  licenses, permits, inventions,  discoveries, processes,
scientific,  technical, engineering and marketing data, object and source codes,
know-how  (including  trade  secrets and other  unpatented  and/or  unpatentable
proprietary  or  confidential  information,  systems  or  procedures)  and other
similar rights and proprietary knowledge (collectively, "Intangibles") which are
material to the conduct of its business as now being  conducted and as presently
contemplated  to be conducted in the future.  Schedule 3.17 sets forth a list of
all material patents, patent applications,  trademarks,  trademark applications,
copyrights,  licenses, sublicenses, and copyright applications owned and/or used
by the Company in its  business.  To the  knowledge of the Company,  neither the
Company nor any  Subsidiary of the Company  infringes or is in conflict with any

                                       8
<PAGE>

right of any other person with respect to any third party  Intangibles.  Neither
the Company  nor any of its  Subsidiaries  has  received  written  notice of any
pending conflict with or infringement upon such third party Intangibles. Neither
the Company nor any of its Subsidiaries has entered into any consent  agreement,
indemnification  agreement,  forbearance  to sue or  settlement  agreement  with
respect to the validity of the  Company's or its  Subsidiaries'  ownership of or
right  to  use  its  Intangibles.   The  Intangibles  of  the  Company  and  its
Subsidiaries are valid and enforceable and no registration  relating thereto has
lapsed,  expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings,  and all applications therefor are pending and
in good standing, except where such abandonment or cancellation would not result
in a Material Adverse Effect. The Company and its Subsidiaries have complied, in
all material respects, with their respective contractual obligations relating to
the protection of their respective Intangibles used pursuant to licenses. To the
Company's  knowledge,  no person is infringing  on or violating the  Intangibles
owned or used by the Company or its Subsidiaries.

         3.18  Material  Agreements.  Set  forth on  Schedule  3.18  hereto is a
complete  and  correct  list of all  Material  Agreements,  leases,  indentures,
purchase  agreements,  obligations in respect of letters of credit,  guarantees,
joint venture agreements,  and other instruments in effect as of the date hereof
(other than Hedging Agreements) providing for, evidencing, securing or otherwise
relating  to any  material  Debt  of the  Company  or any  Subsidiary,  and  all
obligations  of the  Company  or any  Subsidiary  to issuers of surety or appeal
bonds issued for account of the Company or any such Subsidiary.

         3.19 Hedging  Agreements.  Schedule 3.19 sets forth,  as of the Closing
Date, a true and complete list of all Hedging  Agreements  (including  commodity
price swap agreements, forward agreements or contracts of sale which provide for
prepayment for deferred  shipment or delivery of oil, gas or other  commodities)
of the Company and each Subsidiary.

         3.20 Defaults. Neither the Company nor any Subsidiary is in default nor
has any event or  circumstance  occurred  which,  but for the  expiration of any
applicable  grace period or the giving of notice,  or both,  would  constitute a
default  under any material  agreement or  instrument  to which the Company is a
party or by which  the  Company  is  bound,  except  for  defaults  which in the
aggregate would not have a Material Adverse Effect.

         3.21 Insurance.  Schedule 3.21 attached hereto contains an accurate and
complete  description  of all material  policies of fire,  liability,  workmen's
compensation  and other forms of insurance owned or held by the Company and each
Subsidiary  as of the date  hereof.  All such  policies  are in full  force  and
effect,  all  premiums  with  respect  thereto  covering  all  periods up to and
including  the Closing  Date have been paid,  and no notice of  cancellation  or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance with all  requirements of law and of all agreements to
which the  Company or any  Subsidiary  is a party;  are valid,  outstanding  and
enforceable  policies;  provide  adequate  insurance  coverage  in at least such

                                       9
<PAGE>

amounts  and  against at least such risks  (but  including  in any event  public
liability) as are usually  insured against in the same general area by companies
engaged in the same or a similar  business for the assets and  operations of the
Company and each  Subsidiary  (taking into account the cost and  availability of
such  insurance);  will remain in full force and effect  through the  respective
dates set forth in Schedule  3.21 with the payment of additional  premiums;  and
will not in any way be  affected  by, or  terminate  or lapse by reason  of, the
transactions  contemplated  by this  Agreement.  Schedule  3.21  identifies  all
material risks, if any, which the Company, the Subsidiaries and their respective
Board of Directors or officers have designated as being self insured.

         3.22 Litigation.  Except as disclosed in Schedule 3.22 hereto, there is
no litigation,  legal,  administrative or arbitral proceeding,  investigation or
other  action  of any  nature  pending  or,  to the  knowledge  of the  Company,
threatened against or affecting the Company or any Subsidiary.

         3.23  Compliance  with the Law.  Neither the Company nor any Subsidiary
has  violated  any  Governmental  Requirement  or failed to obtain any  license,
permit,  franchise  or  other  governmental   authorization  necessary  for  the
ownership  of any of  its  Properties  or the  conduct  of its  business,  which
violation  or failure  would have (in the event such  violation  or failure were
asserted by any Person through  appropriate  action) a Material  Adverse Effect.
Except for such acts or  failures  to act as would not have a  Material  Adverse
Effect,  the Properties have been  maintained,  operated and developed in a good
and workmanlike manner and in conformity with all applicable laws and all rules,
regulations and orders of all duly constituted  authorities having  jurisdiction
and in  conformity  with the  provisions  of  agreements  and other  instruments
comprising a part of the Properties,  including, without limitation, all leases,
subleases or other contracts comprising a part of the Properties.

         3.24 Environmental Matters. Except to the extent that the inaccuracy of
any  of the  following,  individually  or in the  aggregate,  would  not  have a
Material Adverse Effect:

         (a) No Property owned,  leased or operated by the Company or any of its
Subsidiaries,   and  no  operations  conducted  thereon  violate  any  order  or
requirement of any court or Governmental Entity or any Environmental Laws;

         (b) Without  limitation of clause (a) above, no Property owned,  leased
or  operated  by the  Company  or any of its  Subsidiaries,  nor the  operations
currently  conducted  thereon or, to the best  knowledge of the Company,  by any
prior owner or operator of such  Property or  operation,  are in violation of or
subject to any existing,  pending or  threatened  action,  suit,  investigation,
inquiry or proceeding by or before any court or  Governmental  Entity or subject
to any remedial obligations under Environmental Laws;

         (c) All notices, permits,  licenses or similar authorizations,  if any,
required to be obtained  or filed by the Company or any of its  Subsidiaries  in
connection  with the operation or use of any and all Property of the Company and

                                       10
<PAGE>

each of its Subsidiaries,  including without limitation  present, or to the best
of  Company's  knowledge,  past  treatment,  storage,  disposal  or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed,  and the Company and each  Subsidiary are in compliance with the terms
and   conditions   of  all  such   notices,   permits,   licenses   and  similar
authorizations;

         (d) All hazardous substances,  solid waste, and oil and gas exploration
and  production  wastes,  if any,  generated at any and all  Properties,  owned,
leased or operated by of the  Company and each of its  Subsidiaries  have in the
past, during the tenure of ownership of the Company and its Subsidiaries and, to
the best of the Company's knowledge,  prior thereto,  been transported,  treated
and disposed of in accordance with  Environmental  Laws and so as not to pose an
imminent  and  substantial  endangerment  to  public  health or  welfare  or the
environment,  and, to the best  knowledge  of the  Company,  all such  transport
carriers and  treatment and disposal  facilities  have been and are operating in
compliance  with  Environmental  Laws  and so as not to  pose  an  imminent  and
substantial endangerment to public health or welfare or the environment, and are
not the subject of any existing, pending or threatened action,  investigation or
inquiry by any Governmental Entity in connection with any Environmental Laws;

         (e) The Company has taken all steps  reasonably  necessary to determine
and has determined  that no hazardous  substances,  solid waste,  or oil and gas
exploration and production wastes,  have been disposed of or otherwise released,
and there has been no threatened release of any hazardous  substances,  on or to
any  Properties,  owned,  leased  or  operated  by  the  Company  or  any of its
Subsidiaries, except in compliance with Environmental Laws and so as not to pose
an imminent  and  substantial  endangerment  to public  health or welfare or the
environment; and

         (f)  Neither  the  Company  nor any of its  Subsidiaries  has any known
contingent liability in connection with any release or threatened release of any
oil, hazardous substance or solid waste into the environment.

         3.25 ERISA.

         (a) The Company and each ERISA  Affiliate have complied in all material
respects with ERISA and, where  applicable,  the Code regarding each Plan.  Each
Plan is, and has been,  maintained  in  substantial  compliance  with ERISA and,
where applicable, the Code.

         (b) No act,  omission or transaction has occurred which could result in
imposition  on  the  Company  or  any  ERISA  Affiliate   (whether  directly  or
indirectly)  of an  amount  of  $10,000  or more as (i)  either a civil  penalty
assessed  pursuant  to  section  502(c),  (i) or (1) of ERISA  or a tax  imposed
pursuant  to Chapter 43 of  Subtitle D of the Code or (ii)  breach of  fiduciary
duty liability damages under section 409 of ERISA.

                                       11
<PAGE>

         (c) No Plan  (other  than a  defined  contribution  plan) or any  trust
created  under any such Plan has been  terminated  since  September 2, 1974.  No
liability  to the  Pension  Benefit  Guaranty  Corporation  in excess of $10,000
(other than for the payment of current  premiums  which are not past due) by the
Company or any ERISA  Affiliate  has been or is  expected  by the Company or any
ERISA  Affiliate to be incurred  with  respect to any Plan.  No ERISA Event with
respect to any Plan has occurred which could reasonably be expected to result in
liabilities of $10,000 or more.

         (d) Full  payment  when  due has been  made of all  amounts  which  the
Company  or any  ERISA  Affiliate  is  required  under the terms of each Plan or
applicable  law to have paid as  contributions  to such Plan, and no accumulated
funding deficiency in an amount of $10,000 or more (as defined in section 302 of
ERISA and section 412 of the Code),  whether or not waived,  exists with respect
to any Plan.

         (e) The actuarial  present value of the benefit  liabilities under each
Plan  which is  subject  to Title IV of  ERISA  does  not,  as of the end of the
Company's  most  recently  ended  fiscal year,  exceed the current  value of the
assets  (computed on a plan  termination  basis in  accordance  with Title IV of
ERISA) of such Plan  allocable to such benefit  liabilities  by $10,000 or more.
The term  "actuarial  present value of the benefit  liabilities"  shall have the
meaning specified in section 4041 of ERISA.

         (f) None of the Company or any ERISA Affiliate sponsors,  maintains, or
contributes to an employee  welfare  benefit plan, as defined in section 3(1) of
ERISA,  including,  without  limitation,  any such plan  maintained  to  provide
benefits to former employees of such entities, that may not be terminated by the
Company or any ERISA  Affiliate in its sole  discretion  at any time without any
material liability.

         (g) None of the Company or any ERISA Affiliate  sponsors,  maintains or
contributes  to,  or has at  any  time  in the  preceding  six  calendar  years,
sponsored, maintained or contributed to, any Multiemployer Plan.

         (h) None of the Company or any ERISA  Affiliate  is required to provide
security  under  section  401(a)(29)  of the Code due to a Plan  amendment  that
results in an increase in current liability for the Plan.

         3.26 Taxes.  The Company has filed (taking into account any extensions)
all United States Federal income tax returns and all other tax returns which are
required  to be filed by it on or before the  Closing and has paid all taxes due
pursuant to such returns or pursuant to any assessment  received by the Company,
except  for any  taxes  which are being  contested  in good  faith and by proper
proceedings  and against  which  adequate  reserves  are being  maintained.  The
charges,  accruals  and reserves on the books of the Company in respect of taxes
and other governmental charges are adequate.  No tax lien has been filed and, to

                                       12
<PAGE>

the  knowledge of the Company,  no claim is being  asserted  with respect to any
such tax, fee or other charge, except for any taxes, fees or other charges which
are being  contested in good faith and by proper  proceedings  and against which
adequate reserves are being maintained.

         3.27 Investment  Company Act. Neither the Company nor any Subsidiary is
an "investment  company" or a company  "controlled" by an "investment  company,"
within the meaning of the Investment Company Act of 1940, as amended.

         3.28 Public Utility Holding Company Act. The Company and its affiliates
and  Subsidiaries  are not, and after giving  effect to the  performance  of the
terms of this  Agreement  will not be,  subject to regulation  (i) as a "holding
company," a "subsidiary  company" of a "holding  company," an  "affiliate"  of a
"holding  company,"  an  "affiliate"  of a  "subsidiary  company"  of a "holding
company," or an "associate company" of a "holding company," in each case as such
terms are  defined  in PUHCA or (ii)  under any  state  law or  regulation  with
respect  to  rates  or  the   financial  or   organizational   regulation  of  a
"public-utility  company,"  as defined in PUHCA.  Neither the  Company,  nor any
"subsidiary  company"  (as  defined  in  PUHCA)  of  the  Company,  directly  or
indirectly owns, controls or holds with power to vote, five percent (5%) or more
of the outstanding  voting securities of (A) any "holding company," (B) any "gas
utility  company,"  or (C) any  "electric  utility  company"  (as such terms are
defined in PUHCA).

         3.29  Brokerage  Fees.  The  Company  has not  retained  any  financial
advisor,  broker,  agent,  or  finder  or paid or  agreed  to pay any  financial
advisor,  broker, agent, or finder on account of the sale by the Company and the
purchase by the Investor of the Shares.

         3.30  No  Material  Misstatements.   Taken  as  a  whole,  the  written
information, statements, exhibits, certificates, documents and reports furnished
to the  Investor  by the  Company  or any  Subsidiary  in  connection  with  the
negotiation of this Agreement do not contain any material  misstatement  of fact
or omit to state a material  fact or any fact  necessary to make the  statements
contained therein not materially misleading in the light of the circumstances in
which made and with respect to the Company or any Subsidiary.  As of the Closing
Date,  there is no fact  peculiar  to the  Company  or  Subsidiary  which  has a
Material  Adverse Effect relative to the Company or in the future may reasonably
be expected to have a Material  Adverse  Effect and which has not been disclosed
in this Agreement or the other documents,  certificates and statements furnished
to the  Investor by or on behalf of the Company or any  Subsidiary  prior to, or
on, the Closing Date in connection with the transactions contemplated hereby.

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

The Investor represents and warrants to the Company that:

                                       13
<PAGE>

         4.1 Organization. The Investor is a limited partnership duly organized,
validly  existing and in good standing under the laws of the state of Texas. The
Investor  has all  requisite  partnership  power and  authority  in all material
respects to own, lease,  and operate its properties and to carry on its business
as now being  conducted.  No actions or proceedings to dissolve the Investor are
pending or, to the best knowledge of the Investor, threatened.

         4.2  Authority  Relative  to This  Agreement.  The  Investor  has  full
partnership power and authority to execute,  deliver, and perform this Agreement
and execute,  deliver and, where applicable,  perform the Ancillary Documents to
which it is a party and to consummate the transactions  contemplated  hereby and
thereby.  The  execution,  delivery,  and  performance  by the  Investor of this
Agreement and execution,  delivery,  and, where  applicable,  performance of the
Ancillary  Documents to which it is a party,  and the  consummation by it of the
transactions  contemplated hereby and thereby,  have been duly authorized by all
necessary  corporate or partnership  action of the Investor.  This Agreement has
been duly  executed and  delivered by the  Investor  and  constitutes,  and each
Ancillary  Document executed or to be executed by the Investor has been, or when
executed will be, duly  executed and delivered by the Investor and  constitutes,
or when  executed and delivered  will  constitute,  a valid and legally  binding
obligation of the Investor,  enforceable against the Investor in accordance with
its terms,  except  that such  enforceability  may be limited by (i)  applicable
bankruptcy, insolvency,  reorganization,  moratorium, and similar laws affecting
creditors' rights generally,  and (ii) general equitable principles  (regardless
of whether such  enforceability  is  considered  in a proceeding in equity or at
law).

         4.3 Noncontravention.  The execution,  delivery, and performance by the
Investor of this  Agreement and the execution,  delivery and, where  applicable,
performance of Ancillary  Documents to which it is a party and the  consummation
by it of the  transactions  contemplated  hereby and thereby do not and will not
(i) conflict with or result in a violation of any  provision of its  Certificate
of Limited Partnership or partnership agreement, (ii) conflict with or result in
a violation of any provision  of, or  constitute  (with or without the giving of
notice or the  passage of time or both) a default  under,  or give rise (with or
without  the  giving of notice or the  passage  of time or both) to any right of
termination,  cancellation,  or acceleration under, any bond,  debenture,  note,
mortgage, indenture, lease, agreement or other instrument or obligation to which
the Investor is a party or by which the Investor or any of its properties may be
bound, or (iii) violate any Applicable Law binding upon the Investor, except, in
the case of clauses (ii) and (iii) above,  for any such  conflicts,  violations,
defaults,  terminations,  cancellations,  accelerations,  or Encumbrances  which
would not,  individually or in the aggregate,  have a material adverse effect on
the business, assets, or results of operations of the Investor or on the ability
of the Investor to consummate the transactions contemplated hereby.

         4.4  Consents  and  Approvals.   No  consent,   approval,   order,   or
authorization of, or declaration, filing, or registration with, any Governmental
Entity is required to be obtained or made by the Investor in connection with the
execution,  delivery,  or  performance  by the  Investor of this  Agreement.  No
consent or approval of any Person who is not a  Governmental  Entity is required

                                       14
<PAGE>

to be  obtained  or made by the  Investor  in  connection  with  the  execution,
delivery or  performance  by the Investor of this  Agreement and the  execution,
delivery and, where applicable,  performance of the Ancillary Documents to which
it is a party.

         4.5 Purchase for Investment.  The Investor understands that none of the
Shares  have been  registered  under  the  Securities  Act.  The  Investor  also
understands  that the Shares are being offered and sold pursuant to an exemption
from  registration  contained  in the  Securities  Act  based  in part  upon the
Investor's  representations  contained in this  Agreement.  The Investor  hereby
represents and warrants as follows:

         (a)  Investor  Bears  Economic  Risk.  The  Investor  has   substantial
experience in evaluating and investing in securities in companies similar to the
Company  so that it is  capable  of  evaluating  the  merits  and  risks  of its
investment  in the  Company and has the  capacity to protect its own  interests.
Without  limiting  the  generality  of  the  foregoing,   the  Investor  further
represents  that it has such knowledge  regarding the oil and gas industries and
the  business  of the Company and the  current  circumstances  surrounding  such
industries and business that it is capable of evaluating the merits and risks of
the acquisition of the Shares.  The Investor must bear the economic risk of this
investment  indefinitely  unless  the  Shares  are  registered  pursuant  to the
Securities  Act, or an exemption from  registration  is available.  The Investor
understands  that, except as provided in Section 9.4, the Company has no present
intention of registering the Shares. The Investor also understands that there is
no assurance that any exemption from registration  under the Securities Act will
be available  and that,  even if  available,  such  exemption  may not allow the
Investor to transfer all or any portion of the Shares  under the  circumstances,
in the amounts or at the times the Investor might propose.

         (b) Acquisition  for Own Account.  The Investor is acquiring the Shares
for the Investor's own account for investment  only, and not with a view towards
their distribution.

         (c) Investor Can Protect Its Interest.  The Investor represents that by
reason of its, or of its  management's,  business or financial  experience,  the
Investor has the capacity to protect its own  interests in  connection  with the
transactions  contemplated  in  this  Agreement  and  the  Ancillary  Documents.
Further,  the Investor is not aware of any publication of any  advertisement  in
connection with the transactions contemplated in the Agreement.

         (d)  Accredited  Investor.  The  Investor  represents  that  it  is  an
accredited investor within the meaning of Regulation D under the Securities Act.

         (e) Company  Information.  The Investor has had access to the Company's
SEC  Filings  and has had an  opportunity  to discuss  the  Company's  business,
management and financial affairs with directors,  officers and management of the
Company  and has had the  opportunity  to review the  Company's  operations  and
facilities.  The Investor has also had the  opportunity to ask questions of, and
receive  answers from,  the Company and its  management  regarding the terms and
conditions of this investment. The Investor hereby acknowledges and affirms that
it has completed its own independent investigation,  analysis, and evaluation of

                                       15
<PAGE>

the  Company  and its  Subsidiaries,  that it has  made  all  such  reviews  and
inspections of the business, assets, results of operations, condition (financial
or  otherwise),  and  prospects  of the Company and its  Subsidiaries  as it has
deemed  necessary or appropriate,  and that in making its decision to enter into
this Agreement and to consummate  the  transactions  contemplated  hereby it has
relied  solely  on the  SEC  Filings  and  its  own  independent  investigation,
analysis, and evaluation of the Company and its Subsidiaries, or that of its own
independent advisers in evaluating its investment in the Shares.

         (f) Transfer  Restrictions.  The Investor  acknowledges and agrees that
the Shares are subject to  restrictions on transfer as set forth in Sections 9.2
and 9.3, and further  understands  that the Shares will not have been registered
pursuant to the Securities Act or any applicable state securities laws, that the
Shares will be characterized as "restricted securities" under federal securities
laws, and that under such laws and applicable  regulations  the Shares cannot be
sold or otherwise  disposed of without  registration under the Securities Act or
an exemption therefrom.  In this connection,  the Investor represents that it is
familiar  with Rule 144, as  currently  in effect,  and  understands  the resale
limitations imposed thereby and by the Securities Act. Appropriate stop transfer
instructions  may be issued to the transfer  agent for securities of the Company
(or a  notation  may be made  in the  appropriate  records  of the  Company)  in
connection with the Shares.

         (g) Confirmation.  The acquisition of the Shares by the Investor at the
Closing  shall   constitute  the  Investor's   confirmation   of  the  foregoing
representations.

         4.6  Financial  Resources.  The  Investor has the  financial  resources
available  to it as are  necessary  to perform  its  obligations  to acquire the
Shares pursuant to the terms of this Agreement.

         4.7  Brokerage  Fees.  The  Investor  has not  retained  any  financial
advisor,  broker,  agent,  or  finder  or paid or  agreed  to pay any  financial
advisor,  broker, agent, or finder on account of the sale by the Company and the
purchase by the Investor of the Shares pursuant to this Agreement.

                                    ARTICLE V
                              ADDITIONAL AGREEMENTS

         5.1 Reasonable Best Efforts.  Each party hereto agrees that it will use
its reasonable best efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things reasonably necessary, proper, or advisable under
Applicable Laws to consummate the  transactions  contemplated by this Agreement,
including,  without  limitation,  (i)  cooperation  in  determining  whether any
consents, approvals, orders, authorizations,  waivers, declarations, filings, or
registrations of or with any Governmental  Entity or third party are required in
connection with the consummation of the transactions  contemplated  hereby; (ii)
reasonable  best  efforts  to  obtain  any  such  consents,  approvals,  orders,
authorizations,  and waivers and to effect any such declarations,  filings,  and
registrations;  (iii) reasonable best efforts to cause to be lifted or rescinded

                                       16
<PAGE>

any  injunction  or  restraining  order or other order  adversely  affecting the
ability of the parties to consummate the transactions  contemplated hereby; (iv)
reasonable best efforts to defend, and cooperation in defending, all lawsuits or
other legal  proceedings  challenging  this Agreement or the consummation of the
transactions  contemplated  hereby;  and (v)  the  execution  of any  additional
instruments necessary to consummate the transactions contemplated hereby.

         5.2 Press  Releases.  Except as may be required by Applicable Law or by
the  rules  of  any  national  securities  exchange  or  registered   securities
association,  prior to the Closing,  neither the Investor nor the Company  shall
issue any press  release  with  respect to this  Agreement  or the  transactions
contemplated  hereby without the prior consent of the other party (which consent
shall not be  unreasonably  withheld  under the  circumstances).  Any such press
release  required by Applicable  Law or by the rules of any national  securities
exchange  or  registered  securities   association  shall  only  be  made  after
reasonable notice to the other party.

         5.3 Fees and Expenses.  Except as otherwise  expressly provided in this
Agreement,  all fees and  expenses,  including  fees and  expenses  of  counsel,
financial  advisors and accountants,  incurred in connection with this Agreement
and the  transactions  contemplated  hereby shall be paid by the party incurring
such fee or  expense.  Notwithstanding  the  foregoing,  an amount  equal to all
reasonable out- of-pocket  expenses  incurred by the Investor in connection with
this Agreement and the transactions  contemplated  hereby,  including  attorneys
fees, up to a maximum amount of all such fees and expenses of $50,000,  shall be
paid by the Company to the  Investor  on the  Closing  Date if, and only if, the
Closing occurs.

         5.4 Alternative Transactions.

         (a) Provided that Investor is not in default  hereunder,  from the date
of this Agreement until the earlier of the date of Closing or the termination of
this Agreement  pursuant to Section 10.1 (the "Exclusive  Period"),  the Company
shall  not,  directly  or  indirectly  through  any of its  Subsidiaries  or the
respective   directors,   officers,   agents,    representatives,    affiliates,
stockholders or any other Persons acting on any of their behalf,  (i) enter into
any transaction with any Person or Persons other than the Investor relative to a
sale  of  the  equity   securities  (or  instruments   convertible  into  equity
securities)  of the  Company  for cash  (other  than  equity  securities  issued
pursuant to options,  warrants  and other  instruments  convertible  into equity
securities  outstanding on the date of this  Agreement in accordance  with their
terms) or that would prevent or materially impede the transactions  contemplated
by this Agreement (any of the foregoing,  an  "Alternative  Transaction"),  (ii)
solicit or encourage submission of inquiries, proposals or offers from any other
Person or Persons  relative to an Alternative  Transaction,  (iii) except in the
ordinary  course of business or as required by Applicable  Law,  regulation,  or
court order or by  agreements  existing at the date of this  Agreement,  provide
information to any other Person regarding the Company or any of its Subsidiaries
in  connection  with  a  proposed  Alternative  Transaction,  (iv)  conduct  any

                                       17
<PAGE>

discussions or negotiations regarding, or enter into any agreement,  arrangement
or understanding regarding, or approve, recommend or propose publicly to approve
or  recommend,  an  Alternative  Transaction,  or  (v)  agree  to do  any of the
foregoing.  The Company  shall  promptly  notify the  Investor in writing if the
Company  receives any offer,  inquiry or proposal or enters into any discussions
and such notice  shall  include all  relevant  information,  including,  without
limitation,  the terms and conditions of such  Alternative  Transaction  and the
identity  of  the  potential   acquirer  and  other  parties  relating  to  such
Alternative  Transaction  and the details  thereof.  The Company  shall keep the
Investor  fully  informed on an ongoing  basis with  respect to each such offer,
inquiry,  proposal or  discussions.  The Company shall provide the Investor with
copies of all such offers,  inquiries  or proposals  that are in writing and all
written  materials and  correspondence  relating  thereto as soon as practicable
after  receipt by the Company.  During the  Exclusive  Period,  and provided the
Investor is not in default  hereunder,  the  Company and its Board of  Directors
shall not enter into any  agreement  with  respect to, or  otherwise  approve or
recommend, any Alternative Transaction.

         (b) The Company shall  immediately cease and cause to be terminated any
existing  discussions or negotiations  with any Person (other than the Investor)
conducted  heretofore  with respect to any of the foregoing.  The Company agrees
not  to  release  any  third  party  from  the  confidentiality  and  standstill
provisions  of any  agreement  to  which  the  Company  is a party,  other  than
agreements  with the  Company's  customers  and  suppliers  entered  into in the
ordinary  course of  business  and other  than those  which  expire by their own
terms.

         (c) The Company  shall ensure that the  officers  and  directors of the
Company  and its  Subsidiaries,  and any  investment  banker,  attorney or other
advisor or  representatives  retained by the Company or any of its Subsidiaries,
or providing  services to the Company or any of its Subsidiaries,  in connection
with  the  transactions  contemplated  hereby  are  aware  of  the  restrictions
described in this Section 5.4 and shall direct such Persons to comply therewith.

         5.5  Expense  Reimbursement.  In the event  that the  Company  does not
complete the  transactions  with the  Investor  contemplated  by this  Agreement
(other than  pursuant to Section  10.1(a),  (b) or (d)),  the Company  agrees to
reimburse  the Investor for up to One Hundred  Thousand  Dollars  ($100,000)  in
documented,  reasonable,  third party expenses,  including,  without limitation,
attorney's  fees, of the Investor  incurred in connection with the  transactions
contemplated by this Agreement.

         5.6 No Integrated  Offerings.  The Company shall not make any offers or
sales of any security under circumstances that would require registration of the
Shares being offered or sold  hereunder  under the  Securities Act or cause this
placement of the Shares to be integrated  with any other  offering of securities
by the Company for purposes of any stockholder  approval provision applicable to
the Company or its securities.

                                       18
<PAGE>

                                   ARTICLE VI
                    CONDITIONS TO OBLIGATIONS OF THE COMPANY

         The   obligations  of  the  Company  to  consummate  the   transactions
contemplated  by this Agreement  shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:

         6.1  Representations  and  Warranties.   All  the  representations  and
warranties of the Investor contained in this Agreement shall be true and correct
in all material  respects,  both as of the date of this  Agreement and as of the
Closing Date,  except as affected by  transactions  contemplated or permitted by
this Agreement (or the announcement thereof).

         6.2 Covenants and  Agreements.  The Investor  shall have  performed and
complied with in all material respects all covenants and agreements  required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.

         6.3 Legal  Proceedings.  No Proceeding  shall,  on the Closing Date, be
pending or threatened  seeking to restrain,  prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.

         6.4  Consents.  All consents,  approvals,  orders,  authorizations  and
waivers of, and all declarations,  filings and registrations with, third parties
(including  Governmental  Entities) required to be obtained or made by or on the
part  of  the  parties  hereto,  or  otherwise   reasonably  necessary  for  the
consummation of the transactions  contemplated  hereby, shall have been obtained
or made,  and all  thereof  shall be in full  force  and  effect  at the time of
Closing.

                                   ARTICLE VII
                      CONDITIONS TO OBLIGATIONS OF INVESTOR

         The  obligations  of  the  Investor  to  consummate  the   transactions
contemplated  by this Agreement  shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:

         7.1  Representations  and  Warranties.   All  the  representations  and
warranties of the Company  contained in this Agreement shall be true and correct
in all material  respects,  both as of the date of this  Agreement and as of the
Closing Date,  except as affected by  transactions  contemplated or permitted by
this Agreement (or the announcement thereof).

         7.2 Covenants  and  Agreements.  The Company  shall have  performed and
complied with in all material respects all covenants and agreements  required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.

                                       19
<PAGE>

         7.3 Legal  Proceedings.  No Proceeding  shall,  on the Closing Date, be
pending or threatened  seeking to restrain,  prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.

         7.4 Legal  Opinion.  Lynch,  Chappell  & Alsup,  P.C.,  counsel  to the
Company,  shall have delivered to the Investor a legal opinion  satisfactory  in
form and substance to the Investor.

         7.5  Consents.  All consents,  approvals,  orders,  authorizations  and
waivers of, and all declarations,  filings and registrations with, third parties
(including  Governmental  Entities) required to be obtained or made by or on the
part  of  the  parties  hereto,  or  otherwise   reasonably  necessary  for  the
consummation of the transactions  contemplated  hereby, shall have been obtained
or made,  and all  thereof  shall be in full  force  and  effect  at the time of
Closing.

         7.6 Amex  Listing.  The Shares  shall have been  approved  for listing,
subject only to official notice of issue, on the American Stock Exchange.

         7.7 Due  Diligence.  The  Investor  shall  be  satisfied,  in its  sole
discretion,  with  the  results  of its due  diligence  investigation  into  the
Company.

         7.8  Closing   Deliveries.   The  Investor   shall  have  received  the
certificates,  instruments and documents required to be delivered by the Company
by Section 2.2.

         7.9 Material  Adverse  Effect.  The Company  shall not have  suffered a
Material Adverse Effect.

                                  ARTICLE VIII
                                BOARD VISITATION

         8.1  Board  Visitation.  So long as at such  time  the  Board  does not
include any director who is an employee,  officer or director of the Investor or
its  Affiliates,  the Company shall give the Investor (if the Investor is then a
Qualified  Investor) notice of each meeting of the Board not later than the time
(and in the same  manner as) notice is given to the  directors  and the  Company
shall  permit a  representative  of the  Investor to attend as an  observer  all
meetings of the Board;  provided that  Investor's  rights under this Section 8.1
may be  suspended  to the  extent,  and only to the extent,  (x) the  Investor's
presence at a meeting of the Board (or part of such  meeting) is, in the opinion
of counsel to the  Company or the Board,  likely to result in either a breach of
fiduciary  duties  of the  Board of  Directors,  in the loss of  attorney/client
privilege,  or in the violation of Applicable Law or rules of any stock exchange
on which  the  Company's  common  stock is then  listed,  or (y) if the Board is
considering a proposed  transaction  between the Company and the Investor or its
Affiliates or an  alternative  thereto.  If there is a  disagreement  concerning
whether the Investor's representative is entitled to attend a meeting (or a part
of such  meeting),  the parties  agree to consult in good faith in an attempt to

                                       20
<PAGE>

resolve such disagreement.  The Investor's  representative  shall be entitled to
receive  all  written  materials  and  other  information  (including,   without
limitation,  copies of meeting  minutes)  given to directors in connection  with
such meetings at the same time such materials and  information  are given to the
directors. If the Company proposes to take any action by written consent in lieu
of a meeting of the Board at any time when the Board does not include a director
who is an employee,  officer or director of the Investor or its Affiliates,  the
Company shall give a copy of such written  consent to the Investor  prior to the
effective date of such consent.  If the Investor designates a third party as its
representative  hereunder,  the  Company  shall have the right to consent to the
identity of such representative, which consent shall not be unreasonably held.

                                   ARTICLE IX
                                    COVENANTS

         9.1 Survival.  The  representations  and  warranties  made herein shall
survive the Closing, regardless of any investigation made by or on behalf of any
party, until the second anniversary of the Closing Date; provided,  however, the
representations  and warranties  contained in Sections 3.25, 3.26 and 3.27 shall
survive until the expiration of the applicable  statute of limitations  relating
to the subject  matters of such  representations  and warranties  (the "Survival
Date".) All  statements as to factual  matters  contained in any  certificate or
other  instrument  delivered by or on behalf of the Company  pursuant  hereto in
connection  with the  transactions  contemplated  hereby  shall be  deemed to be
representations  and  warranties  by the  Company  herein for  purposes  of this
Section  9.1.  No  action  may  be  brought  with  respect  to a  breach  of any
representation  or warranty after the Survival Date unless,  prior to such time,
the party seeking to bring such an action has notified the other parties of such
claim, specifying in reasonable detail the nature of the loss suffered.

         9.2 Transfer Restrictions.

         (a) The Investor agrees that it will not, directly or indirectly, sell,
assign,  transfer,  pledge,  encumber, or otherwise dispose of any of the Shares
except:

                  (i) In compliance with Rule 144; provided,  however,  that the
         Investor shall provide the Company with copies of all filings made with
         the SEC with  respect  to sales of  securities  under Rule 144 and with
         such other  information  and documents as the Company shall  reasonably
         require in order to assure compliance with Rule 144; or

                  (ii)  Pursuant  to a  no-action  letter or other  interpretive
         statement or release of the SEC to the effect that the proposed sale or
         other  disposition  may be  effected  without  registration  under  the
         Securities Act; or

                  (iii)  Pursuant to an  applicable  exemption  (other than Rule
         144) under the Securities  Act;  provided,  however,  that the Investor
         shall have furnished the Company with an opinion of counsel  reasonably
         acceptable to the Company, to the effect that such disposition does not

                                       21
<PAGE>

         require  registration  of  the  Shares  to be  disposed  of  under  the
         Securities Act, provided further,  however,  that no opinion of counsel
         shall be required in the case of a transfer to an affiliate (as defined
         in Rule 405 of the  Securities  Act) of the Investor if such  affiliate
         shall have furnished the Company with the representations  contained in
         Section 4.5 of this Agreement and shall have agreed with the Company to
         be subject to the terms of this  Agreement  to the same extent as if an
         original holder of the Shares pursuant hereto; or

                  (iv)   Pursuant  to  an  effective   Registration   Statement,
         including,  but not limited  to, the  Registration  Statement  required
         pursuant to Section 9.4 of this Agreement.

         (b) It is agreed and  understood by the Investor that the  certificates
or  instruments  representing  the Shares  shall  each be  stamped or  otherwise
imprinted with a legend in substantially the following form:

         "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES  LAWS,  AND MAY NOT BE SOLD OR  TRANSFERRED  IN THE  ABSENCE  OF SUCH
REGISTRATION  OR AN  EXEMPTION  THEREFROM.  SUCH  SECURITIES  ARE SUBJECT TO THE
RESTRICTIONS AND PRIVILEGES SPECIFIED IN A SECURITIES PURCHASE AGREEMENT,  DATED
AS OF JULY 20, 2004,  BETWEEN THE COMPANY AND THE INITIAL  HOLDERS OF SECURITIES
NAMED THEREIN,  A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY AND
WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST,  AND
THE HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND THEREBY."

         9.3  Lock-up.  The  Investor  agrees  that,  during the ninety (90) day
period  following the Closing  Date,  the Investor  shall not sell,  transfer or
assign any of the Shares  except to an  Affiliate  who agrees to be bound by the
provisions of this Section 9.3 and Section 9.2.

         9.4 Registration of Shares.

         (a) The Company shall file a Registration  Statement on a Form S-3 with
respect to the Shares with the SEC within  sixty (60) days of the  Closing  Date
and use its reasonable best efforts to have such Registration Statement declared
effective  within one hundred  twenty  (120) days of the Closing  Date.  As used
herein,  "register,"  "registered"  and  "registration"  refer to a registration
effected by preparing and filing a registration statement or similar document (a
"Registration  Statement")  in  compliance  with  the  Securities  Act,  and the
declaration or order of effectiveness of such Registration Statement.

         (b) In connection with the Company's registration  obligations pursuant
to  this  Section  9.4,  the  Company  shall  keep  the  Registration  Statement

                                       22
<PAGE>

continuously  effective to permit the sale of the Shares in accordance  with the
intended method or methods of distribution thereof specified in the Registration
Statement or in the related prospectus(es), and shall:

                  (i)  prepare  and file with the SEC a  Registration  Statement
         with respect to the Shares as set forth in Section 9.4(a) above and use
         its  reasonable  best efforts to cause such  Registration  Statement to
         become and remain  effective for the period described in paragraph (ii)
         below;

                  (ii)  prepare  and  file  with  the SEC  such  amendments  and
         supplements to the  Registration  Statement and the prospectus  used in
         connection  therewith  as may be  necessary  to keep  the  Registration
         Statement effective and to comply with the provisions of the Securities
         Act with  respect to the sale or other  disposition  of all  securities
         covered by the  Registration  Statement  until the earliest of (w) when
         the  Shares  have  been  sold  pursuant  to Rule 144 (or any  successor
         provision) or the Registration Statement, (x) when the Shares have been
         otherwise  transferred and a new certificate for the Shares not bearing
         a legend restricting  further transfer shall have been delivered by the
         Company,  (y) when all of the Investor's and his Affiliates'  remaining
         Shares can be sold in a single transaction in compliance with Rule 144,
         or (z) when the Shares have ceased to be outstanding; and

                  (iii)  furnish  to the  Investor  such  number  of copies of a
         summary  prospectus  or  other  prospectus,   including  a  preliminary
         prospectus,  in conformity with the requirements of the Securities Act,
         and such other  documents,  as the Investor may  reasonably  request to
         facilitate  the  disposition  of  all  the  Shares  as  covered  by the
         Registration Statement;

                  (iv) use its  reasonable  best  efforts to register or qualify
         the  Shares  under  such  other  securities  or blue  sky  laws of such
         jurisdictions   within  the  United  States  as  each  holder  of  such
         securities shall reasonably  request  (provided,  however,  the Company
         shall  not be  obligated  to  qualify  as a foreign  corporation  to do
         business  under  the laws of any  jurisdiction  in which it is not then
         qualified to file any general  consent to service of  process),  and do
         such  other  reasonable  acts and  things as may be  required  of it to
         enable the Investor to consummate the disposition in such  jurisdiction
         of the Shares;

                  (v) notify the Investor  during the time when a prospectus  is
         required to be delivered  under the  Securities Act of the happening of
         any event that makes any statement made in the Registration  Statement,
         prospectus  or any other  document  incorporated  therein by  reference
         untrue or that  requires the making of any changes in the  Registration
         Statement, prospectus or any document incorporated therein by reference
         in order that such  documents  not  contain any untrue  statement  of a
         material  fact or omit to state any material fact required to be stated
         therein or necessary to make the statements therein not misleading;

                                       23
<PAGE>

                  (vi)  cause  all  the  Shares  covered  by  the   Registration
         Statement to be listed on the  American  Stock  Exchange,  any national
         securities  exchange,  an  over-the-counter  market,  or, if the Common
         Stock securities of the Company are not listed thereon,  on the primary
         exchanges,  markets,  or  inter-dealer  quotations  systems  (including
         NASDAQ) if any, on which similar  securities  issued by the Company are
         then listed; and

                  (vii) otherwise use its reasonable best efforts to comply with
         all applicable  rules and regulations of the SEC, and make available to
         its security holders, as soon as reasonably practicable,  but not later
         than 18 months after the effective date of the Registration  Statement,
         an  earnings  statement  covering  the  period  of at least  12  months
         beginning  within  three  months  after  the  effective  date  of  such
         Registration  Statement,  which  earnings  statement  shall satisfy the
         provisions of Section 11(a) of the Securities Act.

         (c) All expenses incurred in complying with Section 9.4(b),  including,
without  limitation,  all  registration,  listing and filing fees (including all
expenses  incident  to  filing  with  the  AMEX),  printing  expenses,  fees and
disbursements  of  counsel  for the  Company,  expenses  of any  special  audits
incident to or required by any such  registration and expenses of complying with
the  securities  or blue  sky  laws of any  jurisdictions  pursuant  to  Section
9.4(b)(iv), shall be paid by the Company.

         9.5 Use of Proceeds.  The Company  shall use the proceeds from the sale
and issuance of the Shares for general  corporate  purposes and working capital.
Such proceeds shall not be used to (i) pay dividends;  (ii) pay for any increase
in  executive  compensation  or make any loan or other  advance to any  officer,
employee,  shareholder,  director or other affiliate of the Company, without the
express  approval of the Investor;  (iii) purchase debt or equity  securities of
any entity  (including  redeeming the Company's own securities),  except for (A)
evidences of  indebtedness  issued or fully  guaranteed  by the United States of
America  and  having  a  maturity  of not more  than  one year  from the date of
acquisition,  (B)  certificates  of deposit,  notes,  acceptances and repurchase
agreements  having  a  maturity  of not  more  than  one  year  from the date of
acquisition  issued by a bank  organized in the United  States  having  capital,
surplus and undivided profits of at least  $100,000,000,  (C) the highest- rated
commercial  paper  having a maturity  of not more than one year from the date of
acquisition,  (D) "Money  Market" fund shares,  or money market  accounts  fully
insured by the Federal Deposit Insurance  Corporation and sponsored by banks and
other financial  institutions,  or (E) in connection with strategic acquisitions
approved by the Company's  Board of Directors  upon  exercise of its  reasonable
business  judgment;  or (iv) make any  investment  not  directly  related to the
current business of the Company.

         9.6 Participation  Right. Subject to the terms and conditions specified
in this Section 9.6, for  twenty-four  months  following the Closing  Date,  the
Investor  shall have a right to  participate  with  respect to the  issuance  or
possible issuance of (i) future equity or equity-linked securities, or (ii) debt

                                       24
<PAGE>

which is  convertible  into  equity  or in which  there is an  equity  component
("Additional  Securities")  on the same terms and  conditions  as offered by the
Company to the other  purchasers of such  Additional  Securities.  Each time the
Company proposes to offer any Additional  Securities,  the Company shall make an
offering of such  Additional  Securities to the Investor in accordance  with the
following provisions:

         (a) the Company shall  deliver a notice (the  "Notice") to the Investor
stating (i) its bona fide intention to offer such  Additional  Securities,  (ii)
the number of such  Additional  Securities  to be  offered,  (iii) the price and
terms, if any, upon which it proposes to offer such Additional  Securities,  and
(iv) the anticipated closing date of the sale of such Additional Securities.

         (b) by written  notification  received by the Company,  within ten (10)
days after  giving of the Notice,  the Investor may elect to purchase or obtain,
at the price and on the terms  specified  in the Notice,  up to that  portion of
such Additional Securities which equals the proportion that the number of Shares
that the  Investor  and its  Affiliates  then hold bears to the total  number of
shares of Common Stock then  outstanding  (assuming full conversion and exercise
of all  convertible or exercisable  securities  then  outstanding)  (a "Pro Rata
Portion");  provided,  however,  that  if the  terms  set  forth  in the  Notice
contemplate consideration for such Pro Rata Portion of the Additional Securities
to be paid in a form other than cash,  the  Investor  may elect to  purchase  or
obtain such  Additional  Securities at a price equal to the fair market value of
the consideration set forth in the Notice, as reasonably determined by the Board
of Directors.

         (c) if the Pro  Rata  Portion  of the  Additional  Securities  that the
Investor is entitled to obtain  pursuant to Section 9.6(b) are not elected to be
obtained  as  provided  therein,  the  Company  may,  during the  90-day  period
following the expiration of the period provided in Section 9.6(b) hereof,  offer
the remaining  unsubscribed portion of such Additional  Securities to any person
or  persons at a price not less than,  and upon terms no more  favorable  to the
offeree than, those specified in the Notice.  If the Company does not consummate
the sale of such Additional  Securities  within such period,  the right provided
hereunder shall be deemed to be revived and such Additional Securities shall not
be  offered  or sold  unless  first  reoffered  to the  Investor  in  accordance
herewith.

         (d) the participation right in this Section 9.6 shall not be applicable
to (i) the issuance or sale of  securities  (or options  therefor) to employees,
officers,  directors,  or consultants of the Company for the primary  purpose of
soliciting or retaining their  employment or service  pursuant to a stock option
plan (or similar equity  incentive  plan) approved by the Board of Directors and
the Company's shareholders,  (ii) upon conversion or exercise of any convertible
or  exercisable  securities  outstanding  as of Closing and as  disclosed in the
initial  capitalization  schedule  delivered  at Closing,  (iii) the issuance of
shares of  Common  Stock in  connection  with a bona  fide  underwritten  public
offering,  or (iv) the  issuance  of  securities  in  connection  with  mergers,

                                       25
<PAGE>

acquisitions,  strategic  business  partnerships or joint ventures,  the primary
purpose of which, in the reasonable  judgment of the Board of Directors,  is not
to raise additional capital.

         9.7  Capitalization  Certification.  The Company shall provide,  at the
Closing, a schedule (a "Capitalization  Schedule") reflecting the capitalization
of the Company as of immediately  after the  transactions  contemplated  by this
Agreement,  including at least the information provided in the representation in
Section 3.2 and indicating the number of  fully-diluted  shares of Common Stock,
and certified by the Chief Financial  Officer of the Company.  From time to time
after the Closing, at the request of the Investor,  as long as the Investor is a
Qualified Investor, the Company shall provide an updated Capitalization Schedule
to the Investor showing capitalization information as of a date that is as close
to the date of delivery to the Investor as practicable.

         9.8 Inspection of Properties and Books.  So long as the Investor or any
of its Affiliates is a Qualified Investor,  the Investor and its representatives
and  agents  (collectively,  the  "Inspectors")  shall  have the  right,  at the
Investor's  expense and no more than twice in any year, to visit and inspect any
of the properties of the Company and of its  Subsidiaries,  to examine the books
of account and records of the  Company  and of its  Subsidiaries,  to make or be
provided with copies and extracts  therefrom,  to discuss the affairs,  finances
and accounts of the Company and of its  Subsidiaries  with, and to be advised as
to the same  by,  its and  their  officers,  employees  and  independent  public
accountants  (and by this provision the Company  authorizes such  accountants to
discuss such affairs, finances and accounts,  whether or not a representative of
the Company is present) all at such  reasonable  times and intervals and to such
reasonable  extent as the  Investor  may desire;  provided,  however,  that each
Inspector shall hold in confidence and shall not make any disclosure  (except to
the Investor) of any such information which the Company determines in good faith
to be confidential,  and of which  determination the Inspectors are so notified,
unless (i) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement filed pursuant to Section
9.4 of this Agreement,  (ii) the release of such information is ordered pursuant
to a  subpoena  or other  order  from a court or  government  body of  competent
jurisdiction, or (iii) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Investor agrees that it shall, upon learning that disclosure of such information
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 information deemed confidential.

         9.9  Additional  Covenants.  The Company  covenants and agrees that, so
long as the Investor is a Qualified Investor:

         (a) Financial  Statements and Other Reports. The Company shall deliver,
or shall cause to be delivered, to the Investor:

                                       26
<PAGE>

                  (i) Annual Financial  Statements.  As soon as available and in
         any event  within  90 days  after  the end of each  fiscal  year of the
         Company and its consolidated  Subsidiaries  consolidated  statements of
         income,  stockholders'  equity,  changes in financial position and cash
         flow of the Company and its  consolidated  Subsidiaries for such fiscal
         year, and the related consolidated and unaudited  consolidating balance
         sheets of the Company and its  consolidated  Subsidiaries as at the end
         of such fiscal year, and setting forth in each case in comparative form
         the   corresponding   figures  for  the  preceding   fiscal  year,  and
         accompanied by the related  opinion of independent  public  accountants
         which opinion shall state that said financial statements fairly present
         the consolidated  financial  condition and results of operations of the
         Company and its  consolidated  Subsidiaries  as at the end of, and for,
         such fiscal year and that such financial  statements have been prepared
         in accordance with GAAP except for such changes in such principles with
         which the independent public accountants shall have concurred.

                  (ii) Quarterly Financial Statements.  As soon as available and
         in any event  within 45 days  after the end of each of the first  three
         fiscal   quarterly   periods  of  each  fiscal  year  of  the  Company,
         consolidated  statements of income,  stockholders'  equity,  changes in
         financial  position  and cash flow of the Company and its  consolidated
         Subsidiaries  for such period and for the period from the  beginning of
         the respective  fiscal year to the end of such period,  and the related
         consolidated  and  consolidating  balance  sheets as at the end of such
         period.

                  (iii) Monthly Financial  Statements.  As soon as available and
         in any event within forty-five (45) days after the end of each calendar
         month  that is not also  the end of one of the  Company's  first  three
         fiscal quarterly periods or of the Company's fiscal year, a copy of the
         monthly financial statements of the Company generated by the Company in
         the ordinary  course of business and  distributed to the members of the
         Company's Board of Directors.

         (b) SEC  Filings,  Etc.  Promptly,  upon its becoming  available,  each
financial  statement,  report,  notice or proxy  statement filed with the SEC or
sent by the Company to  stockholders  generally.  So long as the Company  timely
files with the SEC and  delivers to the Investor  Annual  Reports on Form 10-KSB
and Quarterly  Reports on Form 10-QSB in  compliance  with the  requirements  of
those forms, the requirements of Section  9.10(a)(i) and (ii) shall be deemed to
have been met.

         (c)  Exchange  Act  Reports.  At all times (i) timely  file all reports
required to be filed by the  Company  under  Section  13(d) or Section 15 of the
Exchange Act and the rules and regulations  thereunder,  and (ii) if the Company
is no longer subject to the requirements of the Exchange Act, provide holders of
the Shares reports in substantially the same form and at the same times as would
be required if the Company were subject to the Exchange Act.

                                       27
<PAGE>

         (d) Listing of Common Stock.  Maintain at all times a valid listing for
the Company's  Common Stock on the New York Stock  Exchange,  the American Stock
Exchange or the Nasdaq-  National  Market  System and not  voluntarily  take any
action  to have the  Common  Stock  de-listed;  provided,  however,  that if the
Company is de-listed  without its consent then this Section  9.9(d) shall not be
violated as long as the Company  thereafter  uses its reasonable best efforts to
relist  the Common  Stock on the New York Stock  Exchange,  the  American  Stock
Exchange or the Nasdaq- National Market System.

         (e)  Further  Assurances.  The  Company at its  expense  will  promptly
execute  and deliver to the  Investor  upon  request  all such other  documents,
agreements  and  instruments  to comply with or  accomplish  the  covenants  and
agreements  of the  Company  in  this  Agreement  or any  other  agreements  and
documents executed by and between the Company and the Investor.

         9.10 Confidentiality.

         (a) Investor  acknowledges,  understands  and agrees that in connection
with  the  transactions  contemplated  by  this  Agreement,  including,  without
limitation,  the matters  provided for in Article VIII hereof,  the Company will
make available to Investor certain oral and written  information  concerning the
business,  financial  condition,  operations,  assets  and  liabilities  of  the
Company,  including assumptions used to prepare projected financial information,
capital  expenditures and budget  information.  Consequently,  Investor may have
access  to  and  receive  material,  non-public,  proprietary  and  confidential
information  (the  "Confidential  Information").  As  a  condition  to,  and  in
consideration  of,  such  Confidential   Information  being  furnished  or  made
available to Investor and Investor's partners,  directors,  officers, employees,
agents,  advisors  or  other  representatives  (including,  without  limitation,
lawyers,   accountants,   consultants,   bankers  and  financial   advisors)  or
prospective  financing  sources,  or  Subsidiaries  or  Affiliates of any of the
foregoing, as applicable (collectively, the "Representatives"),  Investor agrees
to treat all Confidential  Information  concerning the Company (whether prepared
by the Company, its representatives or otherwise and irrespective of the form of
communication)  furnished to Investor or its Representatives  herewith or in the
future by or on behalf of the Company in accordance  with the provisions of this
Section  9.10,  and to  take  or  abstain  from  taking  certain  other  actions
hereinafter set forth. The term "Confidential  Information" does not include any
information  released by the Company to the public,  including required periodic
reports or filings made available to the public.

         (b)  Investor  agrees that the  Confidential  Information  will be kept
confidential and, except as otherwise  expressly  permitted by the provisions of
this Agreement,  that Investor and Investor's  Representative  will not disclose
any of the  Confidential  Information  to any Person in any  manner  whatsoever,
provided,  however,  that (i) Investor may make any  disclosure of  Confidential
Information to which the Company gives its prior written  consent,  and (ii) any
Confidential  Information  may be disclosed to  Investor's  Representatives  who

                                       28
<PAGE>

agree to keep such  Confidential  Information  confidential and who are provided
with a copy  of this  Agreement  and  agree  to be  bound  by the  terms  hereof
respecting  the  confidentiality  of  such  Confidential   Information  and  any
discussions and  negotiations to the same extent as if they were parties hereto.
If Investor or Investor's  Representatives  receive a request to disclose all or
any part of the information contained in the Confidential  Information under the
terms of a valid and effective  subpoena or order issued by a court of competent
jurisdiction  or by a  governmental  body,  Investor  agrees to (i)  immediately
notify the Company of the existence,  terms and circumstances surrounding such a
request,  so that the Company may seek an  appropriate  protective  order and/or
waive  Investor's  compliance with the provisions of this Agreement (and, if the
Company seeks such an order,  to provide such  cooperation  as the Company shall
reasonably  request) and (ii) if disclosure of such  information  is required in
the opinion of Investor's counsel,  exercise Investor's  reasonable best efforts
to obtain reasonable  assurance that confidential  treatment will be accorded to
such of the disclosed information which the Company so designates.

         (c) The  provision of this  Section 9.10 shall  survive the Closing and
continue  for so  long  as  Investor  or  its  Representatives  has or  receives
Confidential Information.

                                    ARTICLE X
                                   TERMINATION

         10.1 Termination; Liabilities Consequent Thereon. This Agreement may be
terminated and the  transactions  contemplated  hereunder  abandoned at any time
prior to the Closing only as follows:

         (a) by either the Investor or the Company if the Closing shall not have
occurred by August 4, 2004; provided,  however, that the right to terminate this
Agreement  pursuant to this Section  10.1(a) shall not be available to any party
whose failure to fulfill any obligation  under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur before such date; or

         (b) at any time by mutual agreement of the Company and the Investor; or

         (c) by the Investor, if there has been any breach of any representation
or  warranty or any  material  breach of any  covenant of the Company  contained
herein and the same has not been cured within 15 days after  notice  thereof (it
being  understood  and  agreed  by  the  Investor  that,  in  the  case  of  any
representation  or  warranty  of  the  Company  contained  herein  which  is not
hereinabove  qualified by application  thereto of a materiality  standard,  such
representation  or warranty will be deemed to have been breached for purposes of
this Section  10.1(c) only if such  representation  or warranty was not true and
correct in all material respects at the time such representation or warranty was
made by the Company); or

         (d) by the Company, if there has been any breach of any representation,
warranty or any material breach of any covenant of the Investor contained herein
and the same has not been cured  within 15 days after  notice  thereof (it being

                                       29
<PAGE>

understood and agreed by the Company that, in the case of any representation and
warranty of the Investor contained herein which is not hereinabove  qualified by
application thereto of a materiality  standard,  such representation or warranty
will be deemed to have been  breached for purposes of this Section  10.1(d) only
if such  representation  or warranty  was not true and  correct in all  material
respects at the time such representation or warranty was made by the Investor).

Any termination  pursuant to this Section 10.1 shall be without liability on the
part of any party, unless such termination is the result of a material breach of
this Agreement by a party to this  Agreement in which case such breaching  party
shall remain  liable for such breach  notwithstanding  any  termination  of this
Agreement.

                                   ARTICLE XI
                                  MISCELLANEOUS

         11.1 Notices. All notices, requests,  demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if (i)  delivered
personally,  (ii) sent by prepaid  overnight  courier service,  or (iii) sent by
facsimile  transmission  to the parties at the  following  addresses (or at such
other addresses as shall be specified by the parties by like notice):

     (a)          If to the Company:

                  Natural Gas Services Group, Inc.
                  2911 SCR 1260
                  Midland, Texas  79706
                  Attention: Wallace C. Sparkman
                  Facsimile:  (432) 563-5567

                  with a copy to:

                  Thomas W. Ortloff
                  Lynch, Chappell & Alsup, P.C.
                  The Summit, Suite 700
                  300 North Marienfeld
                  Midland, Texas  79701
                  Facsimile:  (432) 683-8346

     (b)          If to the Investor:

                  CBarney Investments, Ltd.
                  952 Echo Lane, Suite 364
                  Houston, Texas 77024

                                       30
<PAGE>

                  Attention: Charles L. Barney
                  Facsimile: (713) 722-8886

                  with a copy to:

                  Gardere Wynne Sewell LLP
                  1000 Louisiana, Suite 3400
                  Houston, Texas 77002
                  Attention:  Michael Rooke
                  Facsimile:  (713) 276-6368

Such notices, requests, demands, and other communications shall be effective (i)
if delivered  personally or sent by courier service,  upon actual receipt by the
intended recipient, or (ii) if sent by facsimile transmission,  upon the receipt
of a confirmation of transmission.

         11.2 Entire  Agreement.  This  Agreement,  together with the Schedules,
Exhibits,  Annexes,  and other writings referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with respect
to  the  subject  matter  hereof  and   supersedes  all  prior   agreements  and
understandings,  both written and oral, between the parties and their Affiliates
with respect to the subject matter hereof.

         11.3 Binding Effect;  Assignment;  No Third Party  Beneficiaries.  This
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their  respective  successors  and  permitted  assigns.  Except as otherwise
expressly  provided in this  Agreement,  neither this  Agreement  nor any of the
rights,  interests  or  obligations  hereunder  shall be  assigned by any of the
parties hereto without the prior written  consent of the other party;  provided,
however, that the Investor may assign all or a part of its rights, interests and
obligations  hereunder  to one  or  more  of its  Affiliates.  Nothing  in  this
Agreement,  express or implied,  is intended to or shall  confer upon any person
other   than  the   parties   hereto,   and  their   respective   heirs,   legal
representatives,  successors,  and permitted  assigns,  any rights,  benefits or
remedies  of any nature  whatsoever  under or by reason of this  Agreement.  The
rights and  obligations of the Investor and its Affiliates  under this Agreement
are  personal to the  Investor  and its  Affiliates  and shall not attach to any
Shares sold by the Investor or its Affiliates to any third party.

         11.4  Severability.  If any  provision of this  Agreement is held to be
unenforceable,  then  this  Agreement  shall be  considered  divisible  and such
provision shall be deemed inoperative to the extent it is deemed  unenforceable,
and in all other respects this  Agreement  shall remain in full force and effect
to the maximum extent permitted by Applicable Law.

         11.5 Injunctive  Relief.  The parties hereto acknowledge and agree that
irreparable  damage  would  occur in the  event  any of the  provisions  of this
Agreement  were not performed in accordance  with their  specific  terms or were
otherwise  breached.  The parties  accordingly  agree that the parties  shall be

                                       31
<PAGE>

entitled to an injunction or injunctions  to prevent  breaches of the provisions
of this Agreement,  and shall be entitled to enforce specifically the provisions
of this Agreement, in any court of the United States or any state thereof having
jurisdiction,  in  addition  to any other  remedy to which  the  parties  may be
entitled under this Agreement or at law or in equity.

         11.6 Governing  Law. THIS AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE  WITH THE LAWS OF THE STATE OF TEXAS,  WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

         11.7  Jurisdiction.  Except as  otherwise  expressly  provided  in this
Agreement or as otherwise required by applicable law, venue for any suit, action
or  proceeding  seeking  to  enforce  any  provision  of, or based on any matter
arising  out of or in  connection  with,  this  Agreement  or  the  transactions
contemplated  hereby  shall be  exclusively  in the state or  federal  courts in
Harris County,  Texas,  and each of the parties hereby consents to the exclusive
jurisdiction of such courts (and of the appropriate  appellate courts therefrom)
in any such suit,  action or proceeding and irrevocably  waives,  to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit,  action or proceeding in any such court or
that any such suit,  action or proceeding which is brought in any such court has
been  brought in an  inconvenient  forum.  Process  in any such suit,  action or
proceeding may be served on any party  anywhere in the world,  whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party  agrees that  service of process on such party as provided in Section 11.1
shall be deemed effective service of process on such party.

         11.8 Counterparts. This Agreement may be executed by the parties hereto
in any number of  counterparts,  each of which shall be deemed an original,  but
all of which shall  constitute one and the same agreement.  Each counterpart may
consist of a number of copies  hereof each signed by less than all, but together
signed by all, the parties hereto.

         11.9  Amendment.  This  Agreement  may  not  be  amended  except  by an
instrument in writing signed by or on behalf of the parties hereto.

         11.10 Waiver.  No failure or delay by a party hereto in exercising  any
right, power, or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial  exercise  thereof  preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.  The provisions
of this Agreement may not be waived except by an instrument in writing signed by
or on behalf of the party against whom such waiver is sought to be enforced.

         11.11 Indemnification. In consideration of the Investor's execution and
delivery of this  Agreement  and the  Ancillary  Documents  and  purchase of the
Shares  hereunder,  and in addition to all of the  Company's  other  obligations
under  this  Agreement  and the other  Ancillary  Documents,  from and after the
Closing,  the Company  shall  defend,  protect,  indemnify and hold harmless the

                                       32
<PAGE>

Investor  and each other  holder of the  Shares  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
any  Indemnitee  as a result  of,  or  arising  out of, or  relating  to (i) any
misrepresentation  or  breach  of any  representation  or  warranty  made by the
Company  in  this  Agreement,   any  other  Ancillary   Document  or  any  other
certificate,  instrument or document  contemplated  hereby or thereby,  (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, any other Ancillary Document or any other certificate,  instrument or
document  contemplated  hereby or thereby or (iii) 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 (A) the execution, delivery, performance or enforcement
of this  Agreement,  any other  Ancillary  Document  or any  other  certificate,
instrument  or  document  contemplated  hereby or thereby,  (B) any  transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds  of the  issuance  and sale of the  Shares,  or (C) the  status  of the
Investor or holder of the Shares as an investor  in the  Company.  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  which is permissible under
applicable law.

         11.12 Payment Set Aside. To the extent that the Company makes a payment
or payments to the Investor  hereunder or pursuant to any of the other Ancillary
Documents  or the  Investor  enforces  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, 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 full force
and effect as if such  payment had not been made or such  enforcement  or setoff
had not occurred.

         11.13 Joint Participation in Drafting. Each party to this Agreement has
participated  in the  negotiation  and drafting of this  Agreement and the other
Ancillary  Documents.  As such,  the language  used herein and therein  shall be
deemed to be the language  chosen by the parties  hereto to express their mutual
intent, and no rule of strict  construction will be applied against any party to
this Agreement.

                                       33
<PAGE>

                                   ARTICLE XII
                                   DEFINITIONS

         12.1 Certain  Defined  Terms.  As used in this  Agreement,  each of the
following terms has the meaning given it in this Article:

         "Affiliate"  of any Person means (i) any Person  directly or indirectly
controlled by, controlling or under common control with such first Person,  (ii)
any  director  or officer of such first  Person or of any Person  referred to in
clause (i) above,  and (iii) if any Person in clause (i) above is an individual,
any member of the immediate family (including  parents,  spouse and children) of
such individual and any trust whose principal  beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by
any such member or trust. For purposes of this definition, any Person which owns
directly or indirectly  50% or more of the  securities  having  ordinary  voting
power for the election of directors or other  governing body of a corporation or
50% or more of the partnership or other ownership  interests of any other Person
(other  than as a  limited  partner  of such  other  Person)  will be  deemed to
"control" (including, with its correlative meanings,  "controlled by" and "under
common control with") such corporation or other Person.

         "Ancillary  Documents" means each agreement,  instrument,  and document
(other  than this  Agreement)  executed  or to be  executed  by the  Company  or
Investor in  connection  with the sale and  purchase of the Shares and the other
transactions contemplated by this Agreement.

         "Applicable  Law" means any statute,  law,  rule,  or regulation or any
judgment, order, writ, injunction, or decree of any Governmental Entity to which
a specified person or property is subject.

         "Business Day" means any day other than a Saturday,  a Sunday, or a day
on which banking  institutions in Houston,  Texas are authorized or obligated by
law or executive order to close.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time and any successor statute.

         "Common Stock" means the common stock, par value of $0.01 per share, of
the Company,  and such other class of securities  as shall  represent the common
equity of the Company.

                                       34
<PAGE>

         "Debt"  means,  for  any  Person  the  sum  of the  following  (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds,  debentures,  notes or other similar instruments (including principal,
interest,  fees and  charges);  (ii) all  obligations  of such  Person  (whether
contingent or otherwise) in respect of bankers  acceptances,  letters of credit,
surety or other bonds and similar  instruments;  (iii) all  obligations  of such
Person to pay the deferred  purchase  price of Property or services  (other than
for borrowed money) excluding trade payables;  (iv) all obligations under leases
which shall have been, or should have been, in accordance with GAAP, recorded as
capital leases in respect of which such Person is liable (whether  contingent or
otherwise);  (v) all obligations under leases (other than capital leases and oil
and gas leases)  which  require such Person or its  Affiliate  to make  payments
exceeding  $50,000  over  the  term  of  such  lease,   including   payments  at
termination,  which are substantially  equal to at least eighty percent (80%) of
the  purchase  price of the Property  subject to such lease plus  interest at an
imputed  market  rate of  interest;  (vi) all Debt (as  described  in the  other
clauses  of this  definition)  of others  secured by a Lien on any asset of such
Person,  whether or not such Debt is assumed by such Person;  (vii) all Debt (as
described in the other clauses of this definition) of others  guaranteed by such
Person or in which such Person otherwise  assures a creditor against loss of the
Debt of  others;  (viii)  all  obligations  or  undertakings  of such  Person to
maintain or cause to be maintained the financial position or covenants of others
including without  limitation  agreements  expressed as an agreement to purchase
the Debt or Property of others or otherwise; (x) obligations to pay for goods or
services whether or not such goods or services are actually received or utilized
by such Person; (xi) any capital stock of such Person in which such Person has a
mandatory  obligation to redeem such stock (xii) the undischarged balance of any
production  payment  created by such  Person or for the  creation  of which such
Person directly or indirectly  received  payment;  and (xiii) all obligations of
such Person under Hedging Agreements.

         "Encumbrances" means Liens, charges, pledges, options, mortgages, deeds
of trust,  security interests,  claims,  restrictions  (whether on voting, sale,
transfer, disposition, or otherwise), easements, and other encumbrances of every
type and  description,  whether  imposed by law,  agreement,  understanding,  or
otherwise.

         "Environmental  Laws"  means  any  and  all  Governmental  Requirements
pertaining to the  environment in effect in any and all  jurisdictions  in which
the  Company  or any  Subsidiary  is  conducting  or at any time  has  conducted
business,  or where any Property,  including,  without  limitation,  Oil and Gas
Property,  of the  Company  or any  Subsidiary  is  located,  including  without
limitation, OPA, the Clean Air Act, as amended, the Comprehensive Environmental,
Response,  Compensation,  and Liability Act of 1980, as amended ("CERCLA"),  the
Federal Water Pollution  Control Act, as amended,  the  Occupational  Safety and
Health Act of 1970, as amended,  the Resource  Conservation  and Recovery Act of
1976, as amended  ("RCRA"),  the Safe Drinking Water ACT, as amended,  the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and  other  environmental  conservation  or  protection  laws.  As  used  in the
provisions hereof relating to Environmental  Laws, the term "oil" shall have the
meaning  specified in OPA, the terms  "hazardous  substance"  and  "release" (or

                                       35
<PAGE>

"threatened  release")  have the  meanings  specified  in CERCLA,  and the terms
"solid waste" and  "disposal"  (or  "disposal")  have the meanings  specified in
RCRA; provided that to the extent the laws of the state in which any Oil and Gas
Property of the  Company or any  Subsidiary  is located  establish a meaning for
"oil,"  "hazardous  substance,"  "release," "solid waste" or "disposal" which is
broader than that specified in either OPA,  CERCLA or RCRA, such broader meaning
shall apply.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time and any successor statute.

         "ERISA  Affiliate"  means  each  trade  or  business  (whether  or  not
incorporated)  which  together with the Company or any Subsidiary of the Company
would be  deemed  to be a  "single  employer"  within  the  meaning  of  section
4001(b)(1)  of ERISA or  subsections  (b), (c), (m) or (o) of section 414 of the
Code.

         "Excepted  Liens"  means:  (i) Liens for  taxes,  assessments  or other
governmental  charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP;  (ii) Liens in connection with workmen's  compensation,
unemployment  insurance  or other  social  security,  old age  pension or public
liability  obligations not yet due or which are being contested in good faith by
appropriate  action and for which  adequate  reserves  have been  maintained  in
accordance with GAAP; (iii)  operators',  vendors',  carriers',  warehousemen's,
repairmen's,  mechanics', workmen's,  materialmen's,  construction or other like
Liens  arising  by  operation  of law in the  ordinary  course  of  business  or
customary landlord's liens, each of which is in respect of obligations that have
not been  outstanding  more than 60 days or which are  being  contested  in good
faith by  appropriate  proceedings  and for which  adequate  reserves  have been
maintained in accordance with GAAP; (iv) encumbrances  (other than to secure the
payment  of  borrowed  money  or the  deferred  purchase  price of  property  or
services), easements, restrictions,  servitudes, permits, conditions, covenants,
exceptions  or  reservations  in any  rights  of way or other  property  for the
purpose  of  roads,   pipelines,   transmission  lines,   transportation  lines,
distribution  lines for the  removal  of gas,  oil,  coal or other  minerals  or
timber, and other like purposes,  or for the joint or common use of real estate,
rights of way,  facilities and equipment,  and defects,  irregularities,  zoning
restrictions  and  deficiencies  in title of any rights of way or other property
which in the aggregate do not materially impair the use of such rights of way or
other  property for the purposes of which such rights of way and other  property
are held or materially  impair the value of such property subject  thereto;  and
(vi)  deposits of cash or securities to secure the  performance  of bids,  trade
contracts,  leases, statutory obligations and other obligations of a like nature
incurred in the ordinary course of business.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

                                       36
<PAGE>

         "Governmental  Entity" means any court or tribunal in any  jurisdiction
(domestic or foreign) or any public,  governmental,  or regulatory body, agency,
department,  commission,  board,  bureau, or other authority or  instrumentality
(domestic or foreign).

         "Governmental  Requirement"  means any law, statute,  code,  ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit,  certificate,  license,  authorization or other directive or requirement
(in the case of banking regulatory  authorities  whether or not having the force
of law), including,  without limitation,  Environmental Laws, energy regulations
and occupational,  safety and health standards or controls,  of any Governmental
Entity.

         "Hedging  Agreements"  means any  commodity,  interest rate or currency
swap,  cap,  floor,  collar,  forward  agreement or other exchange or protection
agreements or any option with respect to any such transaction.

         "Lien" means any interest in property  securing an obligation  owed to,
or a claim by, a Person  other  than the  owner of the  property,  whether  such
interest  is based on the common law,  statute or  contract,  and  whether  such
obligation or claim is fixed or contingent, and including but not limited to the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes.  The term "Lien" shall include reservations,  exceptions,
encroachments,  easements, rights of way, covenants,  conditions,  restrictions,
leases and other title exceptions and encumbrances  affecting property.  For the
purposes  of this  Agreement,  a Person  shall be  deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
or leases under a financing lease or other  arrangement  pursuant to which title
to the  property  has been  retained  by or  vested  in some  other  Person in a
transaction intended to create a financing.

         "Material  Adverse  Effect"  means any change,  development,  or effect
(individually  or in the  aggregate)  which is, or is  reasonably  likely to be,
materially adverse (i) to the business, assets, results of operations, condition
(financial  or  otherwise),  or  prospects  of the Company and the  Subsidiaries
considered  as a whole,  except  for such  changes,  developments  or effects in
general economic,  capital market, regulatory or political conditions or oil and
gas industry and do not  disproportionately  affect such Person,  or (ii) to the
ability of the Company to perform on a timely basis any material  obligation  of
the Company under this Agreement.

         "Material Agreement" means (a) any written agreement,  contract, lease,
commitment, understanding,  instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any  Subsidiary or any of their
respective  properties may be bound  involving total value or  consideration  or
liability in excess of $50,000 (except  contracts,  agreements and  arrangements
made with  customers or suppliers in the ordinary  course of business),  (b) any

                                       37
<PAGE>

loan or credit agreement,  bond, debenture, note, mortgage or indenture by which
the  Company or any  Subsidiary  or any of their  respective  properties  may be
bound, or (c) any agreement set forth as an exhibit to the Company's Form 10-KSB
for the fiscal year ended December 31, 2003.

         "Person" or "person" means any  individual,  corporation,  partnership,
joint   venture,   association,    joint-stock   company,   trust,   enterprise,
unincorporated organization, or Governmental Entity.

         "Plan" means any employee  pension  benefit plan, as defined in Section
3(2) of ERISA,  which (i) is  currently or hereafter  sponsored,  maintained  or
contributed to by the Company, any Subsidiary or an ERISA Affiliate, or (ii) was
at any time during the preceding  six calendar  years  sponsored,  maintained or
contributed to, by the Company, any Subsidiary or an ERISA Affiliate.

         "Proceeding"  means any  action,  suit or  proceeding,  whether  civil,
criminal,  administrative,  arbitrative or investigative,  any appeal in such an
action, suit or proceeding,  and any inquiry or investigation that could lead to
such an action, suit or proceeding.

         "Property"  means all assets,  including  all  personal  (tangible  and
intangible) and real property rights, titles and interests.

         "PUHCA"  means the  Public  Utility  Holding  Company  Act of 1935,  as
amended.

         "Qualified  Investor" means the Investor,  at any time during which the
Investor (i) beneficially  owns (together with its Affiliates) 5% or more of the
outstanding  Common  Shares,  and (ii) has not taken any action to (a)  acquire,
offer to acquire,  or agree to acquire,  directly or indirectly,  by purchase or
otherwise,  or direct  or  indirect  rights or  options  to  acquire  beneficial
ownership  of  thirty  percent  (30%) or more of the  voting  securities  of the
Company,  (b) make, or in any way  participate,  directly or indirectly,  in any
"solicitation"  of  "proxies" to vote (as such terms are used in the proxy rules
of the SEC) in opposition to the recommendation of the majority of the Company's
directors  with  respect to any matter,  (c) propose any merger,  consolidation,
sale of substantially all the assets, or business  combination with or involving
the Company  over the  objection of the Board of Directors of the Company or (d)
initiate  any legal  proceedings  against the  Company or any of its  Affiliates
(other than any arising out of this Agreement).

         "reasonable  best  efforts"  means a party's best efforts in accordance
with reasonable  commercial  practice and without the incurrence of unreasonable
expense.

         "Rule 144" means Rule 144 promulgated under the Securities Act.

         "SEC" means the Securities and Exchange Commission.

         "Securities Act" means the Securities Act of 1933, as amended.

                                       38
<PAGE>

         "Subsidiaries"  means all Persons controlled  directly or indirectly by
the Company,  or in which the Company  directly or indirectly  owns an equity or
voting   interest  of  fifty  percent  (50%)  or  more.  For  purposes   hereof,
"controlled"  means the power to direct the  management or policies of a person,
whether through voting securities, by contract or otherwise.

         IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement,  which may be executed in multiple counterparts,  to be executed
by their duly authorized representatives, all as of the day and year first above
written.

                                  THE COMPANY:

                                  NATURAL GAS SERVICES GROUP, INC.

                                  By:       /s/ Wallace C. Sparkman
                                     -------------------------------------------
                                        Wallace C. Sparkman, President

                                  INVESTOR:

                                  CBARNEY INVESTMENTS, LP

                                  By:  Celby & Company, LLC, its general partner

                                  By:       /s/ Charles L. Barney
                                     -------------------------------------------
                                         Charles L. Barney, Chairman

                                       39
<PAGE>
<TABLE>
<CAPTION>
                             SCHEDULE 3.7

                                   Liabilities

                                  Note Payable

                                    Schedule
                                  June 30, 2004

                                        Interest                Maturity         June 30, 2004
       Description                        Rate                    Date              Balance
<S>                                     <C>                     <C>             <C>
Western National Bank (826759)               5.25%              3/18/2006       $        14,077

Western National Bank (826913)        Prime + 1.0%               2/5/2006                14,156

Western National Bank (827110)        Prime + 1.0%              9/15/2006                13,212

Thomas H. Jackson (NGSG Building)               7%             10/15/2009                66,498

Western National Bank (816755)                  7%              9/15/2010               191,044

GMAC                                          0.0%              12/9/2004                 7,161

Ford Motor Co (7330)                            0%              7/21/2006                41,073

Ford Motor Co  (2607)                           0%              7/21/2006                41,894

Ford Motor Co (2373)                            0%              8/21/2006                42,594

Ford Motor Co (2448)                            0%              8/21/2006                42,594

Ford Motor Co (5297)                            0%             10/25/2003                24,077

Western National Bank (126910)               5.25%             12/13/2005                23,491

Western National Bank (841975)        Prime + 1.5%              8/28/2005                11,711

Western National Bank (841977)        Prime + 1.5%              4/28/2007                35,700

Western National Bank (816930)         Prime + 1.%               7/6/2004                 3,126

<PAGE>

Western National Bank (817095)         Prime + 1.%              4/23/2005                16,904

Western National Bank (826740)         Prime + 1.%              1/15/2006                15,115

Western National Bank - 826957         Prime + 1.%              8/15/2006                27,750

Western National Bank - 827006         Prime + 1.%              5/28/2006                25,294

Western National Bank (817299)        Prime + 1.0%              9/15/2007             6,325,502

Western National Bank (817300)        Prime + 1.0%             11/15/2009             4,365,000

Western National Bank  (827130)        Prime + 1.%             11/15/2006                29,784

Western National Bank                  Prime + 1.%             11/15/2006                16,372
                                                                                ---------------
                                                                                $    11,394,129

                                                                                ---------------
AMEX Business Finance (378481) -
Lease                                       10.50%             10/10/2005       $        21,347
                                                                                ===============

Line of credit Western National Bank
(816559)                              Prime + 1.0%     S/T line of credit       $       361,377
                                                                                ===============

                                                                                ===============
Subordinated notes - various holders        10.0%              12/31/2006       $     1,539,261
                                                                                ===============
</TABLE>

<PAGE>

                                  SCHEDULE 3.13

                                  Subsidiaries

Hy-Bon Rotary Compression, LLC, a Texas limited liability company

<PAGE>

                                  SCHEDULE 3.16

                                Titles and Assets

Natural Gas Services Group, Inc. has granted liens and security interests to and
in favor of Western National Bank covering the following types of property:

(i)      all Accounts;

(ii)     all Contracts;

(iii)    all Documents;

(iv)     all Equipment;

(v)      all Instruments;

(vi)     all Inventory; and

(vii)    all  Proceeds  and all  present  and  future  increases,  combinations,
         reclassifications,    improvements   and   products   of,   accessions,
         attachments,  and other additions to, and substitutes and  replacements
         for all or any part of the foregoing.

<PAGE>

                                  SCHEDULE 3.17

                                   Intangibles

Flaretip Patents (Net book value)                                    $   100,200

<PAGE>

                                  SCHEDULE 3.18

                               Material Agreements

Purchase and Sale Agreement by and between Hy-Bon Engineering Company,  Inc. and
NGE Leasing, Inc.

Articles of incorporation.

Amendment to articles of  incorporation  dated March 31, 1999,  and filed on May
25, 1999.

Amendment to articles of  incorporation  dated July 25, 2001,  and filed on July
30, 2001.

Amendment to articles of  incorporation  dated June 18, 2003,  and filed on June
19, 2003.

Articles of Merger filed on December  30, 2003 to be  effective  January 1, 2004
merging NGE Leasing, Inc into Natural Gas Services Group, Inc.

Articles of Merger filed on December  30, 2003 to be  effective  January 1, 2004
merging Rotary Gas Systems, Inc. into Natural Gas Services Group, Inc.

Articles of Merger filed on December  30, 2003 to be  effective  January 1, 2004
merging Great Lakes Compression, Inc. into Natural Gas Services Group, Inc.

Bylaws.

Warrant agent agreement.

Lock-up agreements.  (Now expired)

Representative's option for the purchase of common stock.

Representative's option for the purchase of warrants.

1998 Stock Option Plan.

Asset Purchase  Agreement between Natural Gas Acquisition  Corporation and Great
Lakes Compression, Inc. dated January 1, 2001.

Amendment to Guaranty  Agreement  between Natural Gas Services  Group,  Inc. and
Dominion Michigan Production Services, Inc.

Series A 10% Subordinated Notes due December 31, 2006.

<PAGE>

Five-Year Warrants to Purchase Common Stock. (continued)

Warrants issued to Berry-Shino Securities, Inc.

Warrants issued to Neidiger, Tucker, Bruner, Inc.

Warrant issued in March 2001 for guaranteeing debt.

Warrant issued in April 2002 for guaranteeing debt.

Exhibits 3(c)(1), 3(c)(2), 3(c)(3), 3(1)(4), 13(d)(1),  13(d)(2) and 13(d)(3) to
Asset Purchase  Agreement between Natural Gas Acquisition  Corporation and Great
Lakes Compression, Inc. dated January 1, 2001.

Articles of Organization of Hy-Bon Rotary  Compression,  L.L.C.  dated April 17,
2000 and filed on April 20, 2001.

Regulations of Hy-Bon Rotary Compression, L.L.C.

First Amended and Restated Loan Agreement  between  Natural Gas Services  Group,
Inc. and Western National Bank

Termination of Employment  Agreement Letter relating to the Employment Agreement
of Alan Kurus

Termination of Employment  Agreement Letter relating to the Employment Agreement
of Wayne Vinson

Termination of Employment  Agreement Letter relating to the Employment Agreement
of Earl R. Wait

Lease Agreement dated June 1, 2003 with Steven J. & Katherina L. Winer

Lease Agreement dated June 19, 2003 with Wise Commercial Properties

Lease Agreement dated April 1, 2004 with City of Midland, TX.

Various loan  agreements  related to loans  listed on Schedule 3.7  incorporated
herein.

<PAGE>

                                  SCHEDULE 3.19

                               Hedging Agreements

None.

<PAGE>

                                  SCHEDULE 3.21

                                    Insurance

Property Coverage
Carrier                                         St. Paul Fire & Marine Ins. Co
Policy Period                                   4/25/04 - 4/25/05
Policy No.                                      Vk04200283
Limits                                          Buildings - $1,330,000
                                                Contents - $860,000
Deductible                                      Buildings - $1,000
                                                Contents - $1,000

Commercial General
Carrier                                         St. Paul Fire & Marine Ins. Co
Policy Period                                   4/25/04 - 4/25/05
Policy No.                                      Vk0420028303
Limits                                          Each Occurrence - $1,000,000
                                                Aggregate - $2,000,000
Deductible                                      $25,000

Workers' Comp/Employee
Carrier                                         St. Paul Fire & Marine Ins. Co
Policy Period                                   4/25/04 - 4/25/05
Policy No.                                      Wva4203079
Limits                                          Each Accident - $1,000,000
Deductible                                      $0

Excess Primary Umbrella
Carrier                                         St. Paul Fire & Marine Ins. Co
Policy Period                                   4/25/04 - 4/25/05
Policy No.                                      Vk04200283
Limits                                          Each Occurrence - $5,000,000
                                                Aggregate - $5,000,000
Retention                                       $10,000

Directors and Officers                          N/A
Carrier
Policy Period
Policy No.

Automobile Liability
Carrier                                         St. Paul Fire & Marine Ins. Co
Policy Period                                   4/25/04 - 4/25/05
Policy No.                                      Vk0420028303
Limits                                          $1,000,000
Deductible                                      $1,000

<PAGE>

                                  SCHEDULE 3.22

                                   Litigation

None.EXHIBIT 4.1

                                 INDIGINET, INC.
             AMENDED EMPLOYEE STOCK INCENTIVE PLAN FOR THE YEAR 2004

     1.        General  Provisions.
               -------------------

     1.1       Purpose.  This  Stock  Incentive Plan (the "Plan") is intended to
               -------
allow  designated officers and employees (all of whom are sometimes collectively
referred  to  herein  as  the "Employees," or individually as the "Employee") of
Indiginet,  Inc., a Florida corporation (the "Company") and its Subsidiaries (as
that  term  is defined below) which they may have from time to time (the Company
and  such  Subsidiaries  are  referred  to  herein  as the "Company") to receive
certain  options  (the "Stock Options") to purchase common stock of the Company,
no par value per share (the "Common Stock"), and to receive grants of the Common
Stock subject to certain restrictions (the "Awards").  As used in this Plan, the
term  "Subsidiary"  shall  mean  each  corporation  which  is  a  "subsidiary
corporation" of the Company within the meaning of Section 424(f) of the Internal
Revenue  Code  of 1986, as amended (the "Code").  The purpose of this Plan is to
provide  the  Employees, who make significant and extraordinary contributions to
the  long-term  growth  and  performance  of  the  Company,  with  equity-based
compensation incentives, and to attract and retain the Employees.

     1.2       Administration.
               --------------

     1.2.1     The Plan shall be administered by the Compensation Committee (the
"Committee")  of,  or  appointed  by, the Board of Directors of the Company (the
"Board").  The  Committee  shall select one of its members as Chairman and shall
act  by  vote  of  a  majority  of a quorum, or by unanimous written consent.  A
majority  of  its  members  shall  constitute  a quorum.  The Committee shall be
governed by the provisions of the Company's Bylaws and of Florida law applicable
to the Board, except as otherwise provided herein or determined by the Board.

     1.2.2     The  Committee  shall  have  full  and complete authority, in its
discretion,  but  subject  to the express provisions of this Plan (a) to approve
the Employees nominated by the management of the Company to be granted Awards or
Stock  Options;  (b)  to  determine  the number of Awards or Stock Options to be
granted  to  an  Employee; (c) to determine the time or times at which Awards or
Stock Options shall be granted; to establish the terms and conditions upon which
Awards  or  Stock  Options  may  be  exercised;  (d)  to  remove  or  adjust any
restrictions and conditions upon Awards or Stock Options; (e) to specify, at the
time  of  grant,  provisions  relating to exercisability of Stock Options and to
accelerate  or otherwise modify the exercisability of any Stock Options; and (f)
to  adopt such rules and regulations and to make all other determinations deemed
necessary or desirable for the administration of this Plan.  All interpretations
and  constructions  of  this  Plan  by  the  Committee,  and  all of its actions
hereunder, shall be binding and conclusive on all persons for all purposes.

     1.2.3     The  Company  hereby  agrees  to indemnify and hold harmless each
Committee  member  and each Employee, and the estate and heirs of such Committee
member  or  Employee,  against  all  claims,  liabilities,  expenses, penalties,
damages  or  other  pecuniary losses, including legal fees, which such Committee
member  or  Employee,  his  estate  or  heirs  may  suffer  as  a  result of his
responsibilities,  obligations  or  duties  in connection with this Plan, to the
extent  that  insurance,  if  any, does not cover the payment of such items.  No
member  of  the  Committee  or  the  Board  shall  be  liable  for any action or
determination made in good faith with respect to this Plan or any Award or Stock
Option  granted  pursuant  to  this  Plan.

     1.3       Eligibility and Participation.  The Employees eligible under this
               -----------------------------
Plan shall be approved by the Committee from those Employees who, in the opinion
of  the  management  of  the Company, are in positions which enable them to make
significant  contributions  to  the  long-term  performance  and  growth  of the
Company.  In  selecting  the  Employees  to  whom  Award or Stock Options may be
granted,  consideration  shall  be given to factors such as employment position,
duties  and  responsibilities, ability, productivity, length of service, morale,
interest in the Company and recommendations of supervisors.

     1.4       Shares Subject to this Plan.  The maximum number of shares of the
               ---------------------------
Common  Stock  that  may  be  issued  pursuant  to this Plan shall be 50,000,000
subject  to adjustment pursuant to the provisions of Paragraph 4.1. If shares of
the Common Stock awarded or issued under this Plan are reacquired by the Company
due  to  a  forfeiture

                                        1
<PAGE>
or  for  any  other  reason, such shares shall be cancelled and thereafter shall
again  be  available  for  purposes  of  this  Plan.  If a Stock Option expires,
terminates or is cancelled for any reason without having been exercised in full,
the shares of the Common Stock not purchased thereunder shall again be available
for  purposes  of  this Plan.  In the event that any outstanding Stock Option or
Award  under  this  Plan  for any reason expires or is terminated, the shares of
Common  Stock  allocable to the unexercised portion of the Stock Option or Award
shall  be  available for issuance under the Indiginet, Inc. Amended Non-Employee
Directors  and  Consultants  Retainer  Stock  Plan  for  the  Year  2004.

     2.        Provisions  Relating  to  Stock  Options.
               ----------------------------------------

     2.1       Grants  of  Stock Options.  The Committee may grant Stock Options
               -------------------------
in such amounts, at such times, and to the Employees nominated by the management
of  the  Company  as  the  Committee,  in  its discretion, may determine.  Stock
Options  granted  under  this  Plan  shall  constitute "incentive stock options"
within the meaning of Section 422 of the Code, if so designated by the Committee
on  the  date  of  grant.  The Committee shall also have the discretion to grant
Stock  Options  which  do  not  constitute incentive stock options, and any such
Stock  Options  shall be designated non-statutory stock options by the Committee
on  the  date  of  grant.  The aggregate Fair Market Value (determined as of the
time  an  incentive stock option is granted) of the Common Stock with respect to
which incentive stock options are exercisable for the first time by any Employee
during  any  one calendar year (under all plans of the Company and any parent or
subsidiary  of  the  Company)  may not exceed the maximum amount permitted under
Section  422  of the Code (currently, $100,000.00).  Non-statutory stock options
shall  not  be  subject  to  the limitations relating to incentive stock options
contained  in the preceding sentence.  Each Stock Option shall be evidenced by a
written  agreement (the "Option Agreement") in a form approved by the Committee,
which shall be executed on behalf of the Company and by the Employee to whom the
Stock  Option is granted, and which shall be subject to the terms and conditions
of  this  Plan.  In  the  discretion of the Committee, Stock Options may include
provisions  (which  need  not  be  uniform),  authorized by the Committee in its
discretion,  that  accelerate  an  Employee's  rights  to exercise Stock Options
following  a  "Change in Control," upon termination of the Employee's employment
by  the  Company  without  "Cause" or by the Employee for "Good Reason," as such
terms  are  defined in Paragraph 3.1 hereof.  The holder of a Stock Option shall
not  be  entitled  to  the privileges of stock ownership as to any shares of the
Common  Stock  not  actually  issued  to  such  holder.

     2.2       Purchase  Price.  The  purchase  price  (the "Exercise Price") of
               ---------------
shares  of  the  Common Stock subject to each Stock Option (the "Option Shares")
shall  not  be less than 85 percent of the Fair Market Value of the Common Stock
on the date of the grant of the option.  For an Employee holding greater than 10
percent  of the total voting power of all stock of the Company, either Common or
Preferred, the Exercise Price of an incentive stock option shall be at least 110
percent of the Fair Market Value of the Common Stock on the date of the grant of
the  option.  As  used  herein,  "Fair  Market Value" means the mean between the
highest  and  lowest  reported  sales prices of the Common Stock on the New York
Stock  Exchange  Composite Tape or, if not listed on such exchange, on any other
national  securities  exchange  on  which  the  Common Stock is listed or on The
NASDAQ  Stock  Market,  or,  if  not  so listed on any other national securities
exchange  or  The  NASDAQ Stock Market, then the average of the bid price of the
Common  Stock  during  the  last  five  trading  days  on the OTC Bulletin Board
immediately  preceding  the  last  trading day prior to the date with respect to
which  the  Fair  Market  Value is to be determined.  If the Common Stock is not
then  publicly  traded,  then the Fair Market Value of the Common Stock shall be
the  book value of the Company per share as determined on the last day of March,
June,  September,  or  December  in  any  year  closest  to  the  date  when the
determination  is  to  be  made.  For  the  purpose  of  determining  book value
hereunder,  book  value  shall be determined by adding as of the applicable date
called  for  herein  the capital, surplus, and undivided profits of the Company,
and after having deducted any reserves theretofore established; the sum of these
items  shall  be divided by the number of shares of the Common Stock outstanding
as  of  said date, and the quotient thus obtained shall represent the book value
of  each  share  of  the  Common  Stock  of  the  Company.

     2.3       Option  Period.  The  Stock  Option  period  (the  "Term")  shall
               --------------
commence  on the date of grant of the Stock Option and shall be 10 years or such
shorter  period  as  is  determined  by  the Committee.  Each Stock Option shall
provide  that  it  is exercisable over its term in such periodic installments as
the  Committee  may  determine,  subject  to  the provisions of Paragraph 2.4.1.
Section  16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")  exempts persons normally subject to the reporting requirements of Section
16(a)  of  the  Exchange  Act (the "Section 16 Reporting Persons") pursuant to a
qualified  employee stock option plan from the normal requirement of not selling
until at least six months and one day from the date the Stock Option is granted.

                                        2
<PAGE>
     2.4       Exercise  of  Options.
               ---------------------

     2.4.1     Each  Stock  Option may be exercised in whole or in part (but not
as  to  fractional  shares) by delivering it for surrender or endorsement to the
Company,  attention  of  the Corporate Secretary, at the principal office of the
Company,  together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by Paragraph 2.4.2.  Payment may be
made  (a)  in  cash,  (b)  by  cashier's or certified check, (c) by surrender of
previously owned shares of the Common Stock valued pursuant to Paragraph 2.2 (if
the Committee authorizes payment in stock in its discretion), (d) by withholding
from  the  Option  Shares which would otherwise be issuable upon the exercise of
the Stock Option that number of Option Shares equal to the exercise price of the
Stock  Option,  if  such  withholding  is  authorized  by  the  Committee in its
discretion,  or  (e)  in the discretion of the Committee, by the delivery to the
Company  of the optionee's promissory note secured by the Option Shares, bearing
interest  at  a  rate  sufficient  to  prevent  the imputation of interest under
Sections  483 or 1274 of the Code, and having such other terms and conditions as
may  be  satisfactory  to  the  Committee.  Subject  to  the  provisions of this
Paragraph  2.4  and Paragraph 2.5, the Employee has the right to exercise his or
her  Stock  Options  at the rate of at least 20 percent per year over five years
from  the  date  the  Stock  Option  is  granted.

     2.4.2     Exercise  of  each Stock Option is conditioned upon the agreement
of  the  Employee  to  the  terms  and conditions of this Plan and of such Stock
Option  as  evidenced  by  the Employee's execution and delivery of a Notice and
Agreement  of  Exercise  in  a  form  to  be  determined by the Committee in its
discretion.  Such Notice and Agreement of Exercise shall set forth the agreement
of  the Employee that (a) no Option Shares will be sold or otherwise distributed
in violation of the Securities Act of 1933, as amended (the "Securities Act") or
any  other  applicable  federal  or state securities laws, (b) each Option Share
certificate  may be imprinted with legends reflecting any applicable federal and
state  securities  law  restrictions  and conditions, (c) the Company may comply
with  said securities law restrictions and issue "stop transfer" instructions to
its  Transfer  Agent  and  Registrar without liability, (d) if the Employee is a
Section  16 Reporting Person, the Employee will furnish to the Company a copy of
each  Form  4  or Form 5 filed by said Employee and will timely file all reports
required  under  federal  securities  laws, and (e) the Employee will report all
sales  of  Option  Shares  to the Company in writing on a form prescribed by the
Company.

     2.4.3     No  Stock  Option  shall  be  exercisable  unless  and  until any
applicable  registration  or  qualification  requirements  of  federal and state
securities  laws,  and  all  other  legal requirements, have been fully complied
with.  At no time shall the total number of securities issuable upon exercise of
all  outstanding  options  under  this  Plan, and the total number of securities
provided  for under any bonus or similar plan or agreement of the Company exceed
a  number  of  securities  which  is equal to 30 percent of the then outstanding
securities  of  the  Company,  unless  a  percentage  higher  than 30 percent is
approved  by at least two-thirds of the outstanding securities entitled to vote.
The  Company  will  use  reasonable  efforts  to maintain the effectiveness of a
Registration  Statement  under  the  Securities  Act  for  the issuance of Stock
Options  and  shares  acquired  thereunder,  but there may be times when no such
Registration  Statement  will  be  currently  effective.  The  exercise of Stock
Options  may  be  temporarily  suspended without liability to the Company during
times  when  no  such  Registration  Statement is currently effective, or during
times  when,  in  the  reasonable  opinion  of the Committee, such suspension is
necessary  to  preclude  violation  of  any  requirements  of  applicable law or
regulatory  bodies  having  jurisdiction  over the Company.  If any Stock Option
would expire for any reason except the end of its term during such a suspension,
then  if  exercise  of such Stock Option is duly tendered before its expiration,
such  Stock  Option  shall  be  exercisable  and exercised (unless the attempted
exercise  is  withdrawn)  as  of the first day after the end of such suspension.
The Company shall have no obligation to file any Registration Statement covering
resales  of  Option  Shares.

     2.5       Continuous  Employment.  Except  as  provided  in  Paragraph  2.7
               ----------------------
below, an Employee may not exercise a Stock Option unless from the date of grant
to  the  date of exercise the Employee remains continuously in the employ of the
Company.  For  purposes  of  this  Paragraph  2.5,  the  period  of  continuous
employment  of  an Employee with the Company shall be deemed to include (without
extending  the term of the Stock Option) any period during which the Employee is
on leave of absence with the consent of the Company, provided that such leave of
absence  shall  not  exceed  three  months  and that the Employee returns to the
employ  of  the  Company  at  the  expiration  of such leave of absence.  If the
Employee  fails to return to the employ of the Company at the expiration of such
leave  of  absence,  the  Employee's employment with the Company shall be deemed
terminated  as  of  the  date  such  leave of absence commenced.  The continuous
employment  of  an Employee with the Company shall also be deemed to include any
period  during  which the Employee is a member of the Armed Forces of the United
States,

                                        3
<PAGE>
provided  that  the Employee returns to the employ of the Company within 90 days
(or  such  longer period as may be prescribed by law) from the date the Employee
first  becomes  entitled  to  a discharge from military service.  If an Employee
does  not  return  to  the  employ of the Company within 90 days (or such longer
period  as  may  be  prescribed by law) from the date the Employee first becomes
entitled  to  a  discharge from military service, the Employee's employment with
the  Company  shall  be  deemed to have terminated as of the date the Employee's
military  service  ended.

     2.6       Restrictions  on  Transfer.  Each Stock Option granted under this
               --------------------------
Plan shall be transferable only by will or the laws of descent and distribution.
No  interest  of  any  Employee  under this Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or  equitable  process.  Each  Stock  Option  granted  under  this Plan shall be
exercisable  during  an  Employee's  lifetime  only  by  the  Employee or by the
Employee's  legal  representative.

     2.7       Termination  of  Employment.
               ---------------------------

     2.7.1     Upon  an  Employee's  Retirement,  Disability  (both  terms being
defined  below)  or  death,  (a)  all Stock Options to the extent then presently
exercisable  shall remain in full force and effect and may be exercised pursuant
to  the  provisions thereof, and (b) unless otherwise provided by the Committee,
all  Stock  Options to the extent not then presently exercisable by the Employee
shall  terminate  as of the date of such termination of employment and shall not
be  exercisable  thereafter.  Unless  employment  is  terminated  for  cause, as
defined  by applicable law, the right to exercise in the event of termination of
employment,  to the extent that the optionee is entitled to exercise on the date
the  employment  terminates  as  follows:

               (i)  At  least  six  months  from  the  date  of  termination  if
termination was caused by death or disability.

               (ii) At least 30 days from the date of termination if termination
was caused by other than death or disability.

     2.7.2     Upon  the  termination  of  the employment of an Employee for any
reason other than those specifically set forth in Paragraph 2.7.1, (a) all Stock
Options  to  the  extent then presently exercisable by the Employee shall remain
exercisable  only  for a period of 90 days after the date of such termination of
employment  (except that the 90 day period shall be extended to 12 months if the
Employee  shall die during such 90 day period), and may be exercised pursuant to
the  provisions  thereof,  including  expiration  at  the  end of the fixed term
thereof,  and  (b) unless otherwise provided by the Committee, all Stock Options
to  the extent not then presently exercisable by the Employee shall terminate as
of  the  date  of  such  termination  of employment and shall not be exercisable
thereafter.

     2.7.3     For  purposes  of  this  Plan:

               (a)  "Retirement"  shall  mean  an Employee's retirement from the
employ of the Company on or after the date on which the Employee attains the age
of  65  years;  and

               (b)  "Disability" shall mean total and permanent incapacity of an
Employee, due to physical impairment or legally established mental incompetence,
to perform the usual duties of the Employee's employment with the Company, which
disability  shall  be determined (i) on medical evidence by a licensed physician
designated  by  the  Committee, or (ii) on evidence that the Employee has become
entitled  to  receive  primary  benefits as a disabled employee under the Social
Security  Act  in  effect  on  the  date  of  such  disability.

     3.        Provisions  Relating  to  Awards.
               --------------------------------

     3.1       Grant  of  Awards.  Subject  to  the provisions of this Plan, the
               -----------------
Committee shall have full and complete authority, in its discretion, but subject
to  the  express  provisions  of this Plan, to (1) grant Awards pursuant to this
Plan,  (2)  determine  the  number of shares of the Common Stock subject to each
Award  (the  "Award Shares"), (3) determine the terms and conditions (which need
not  be  identical)  of  each  Award,  including  the  consideration  (if

                                        4
<PAGE>
any)  to  be  paid  by  the  Employee  for  such Common Stock, which may, in the
Committee's  discretion,  consist  of  the delivery of the Employee's promissory
note  meeting  the  requirements  of  Paragraph  2.4.1, (4) establish and modify
performance  criteria  for  Awards,  and  (5)  make  all  of  the determinations
necessary or advisable with respect to Awards under this Plan.  Each Award under
this  Plan  shall  consist of a grant of shares of the Common Stock subject to a
restriction  period (after which the restrictions shall lapse), which shall be a
period  commencing  on  the date the Award is granted and ending on such date as
the  Committee  shall  determine  (the "Restriction Period").  The Committee may
provide  for  the lapse of restrictions in installments, for acceleration of the
lapse  of  restrictions  upon  the  satisfaction  of  such  performance or other
criteria or upon the occurrence of such events as the Committee shall determine,
and for the early expiration of the Restriction Period upon an Employee's death,
Disability  or  Retirement as defined in Paragraph 2.7.3, or, following a Change
of  Control, upon termination of an Employee's employment by the Company without
"Cause" or by the Employee for "Good Reason," as those terms are defined herein.
For  purposes  of  this  Plan:

     "Change  of  Control"  shall be deemed to occur (a) on the date the Company
first  has  actual  knowledge  that any person (as such term is used in Sections
13(d)  and  14(d)(2)  of  the  Exchange Act) has become the beneficial owner (as
defined  in  Rule  13(d)-3  under  the Exchange Act), directly or indirectly, of
securities of the Company representing 40 percent or more of the combined voting
power  of  the  Company's  then  outstanding  securities, or (b) on the date the
stockholders of the Company approve (i) a merger of the Company with or into any
other  corporation  in  which the Company is not the surviving corporation or in
which  the  Company  survives  as  a  subsidiary  of another corporation, (ii) a
consolidation  of  the  Company with any other corporation, or (iii) the sale or
disposition  of  all  or  substantially all of the Company's assets or a plan of
complete  liquidation.

     "Cause,"  when  used  with reference to termination of the employment of an
Employee by the Company for "Cause," shall mean:

                    (a)  The  Employee's  continuing willful and material breach
of his duties to the Company after he receives a demand from the Chief Executive
of  the  Company  specifying the manner in which he has willfully and materially
breached  such  duties, other than any such failure resulting from Disability of
the Employee or his resignation for "Good Reason," as defined herein; or

                    (b)  The  conviction  of  the  Employee  of  a  felony;  or

                    (c)  The Employee's commission of fraud in the course of his
employment  with  the  Company,  such  as  embezzlement  or  other  material and
intentional  violation  of  law  against  the  Company;  or

                    (d)  The  Employee's  gross misconduct causing material harm
to  the  Company.

     "Good  Reason"  shall  mean  any  one  or  more of the following, occurring
following  or in connection with a Change of Control and within 90 days prior to
the  Employee's resignation, unless the Employee shall have consented thereto in
writing:

                    (a)  The  assignment  to the Employee of duties inconsistent
with his executive status prior to the Change of Control or a substantive change
in  the  officer  or officers to whom he reports from the officer or officers to
whom  he  reported  immediately  prior  to  the  Change  of  Control;  or

                    (b)  The  elimination  or  reassignment of a majority of the
duties and responsibilities that were assigned to the Employee immediately prior
to  the  Change  of  Control;  or

                    (c)  A  reduction  by  the  Company in the Employee's annual
base  salary  as  in  effect  immediately  prior  to  the  Change of Control; or

                    (d)  The Company requiring the Employee to be based anywhere
outside  a  35-mile radius from his place of employment immediately prior to the
Change  of  Control,  except for required travel on the Company's business to an
extent  substantially consistent with the Employee's business travel obligations
immediately  prior  to  the  Change  of  Control;  or

                                        5
<PAGE>
                    (e)  The  failure  of  the  Company  to grant the Employee a
performance  bonus  reasonably  equivalent  to the same percentage of salary the
Employee  normally  received  prior  to  the Change of Control, given comparable
performance  by  the  Company  and  the  Employee;  or

                    (f)  The  failure  of  the  Company to obtain a satisfactory
Assumption  Agreement  (as  defined  in  Paragraph  4.13  of  this  Plan) from a
successor,  or  the  failure  of  such  successor  to  perform  such  Assumption
Agreement.

     3.2       Incentive  Agreements.  Each  Award granted under this Plan shall
               ---------------------
be  evidenced  by  a  written  agreement  (an  "Incentive  Agreement") in a form
approved  by  the Committee and executed by the Company and the Employee to whom
the  Award  is  granted.  Each Incentive Agreement shall be subject to the terms
and conditions of this Plan and other such terms and conditions as the Committee
may  specify.

     3.3       Amendment,  Modification  and  Waiver  of  Restrictions.  The
               -------------------------------------------------------
Committee  may  modify  or  amend  any  Award  under  this  Plan  or  waive  any
restrictions  or conditions applicable to the Award; provided, however, that the
Committee may not undertake any such modifications, amendments or waivers if the
effect  thereof  materially increases the benefits to any Employee, or adversely
affects  the  rights  of  any  Employee  without  his  consent.

     3.4       Terms  and  Conditions  of  Awards.  Upon  receipt of an Award of
               ----------------------------------
shares  of the Common Stock under this Plan, even during the Restriction Period,
an  Employee  shall be the holder of record of the shares and shall have all the
rights  of  a  stockholder with respect to such shares, subject to the terms and
conditions  of  this  Plan  and  the  Award.

     3.4.1     Except  as otherwise provided in this Paragraph 3.4, no shares of
the  Common  Stock  received  pursuant  to  this  Plan shall be sold, exchanged,
transferred,  pledged,  hypothecated  or  otherwise  disposed  of  during  the
Restriction Period applicable to such shares.  Any purported disposition of such
Common Stock in violation of this Paragraph 3.4 shall be null and void.

     3.4.2     If  an Employee's employment with the Company terminates prior to
the expiration of the Restriction Period for an Award, subject to any provisions
of  the Award with respect to the Employee's death, Disability or Retirement, or
Change  of Control, all shares of the Common Stock subject to the Award shall be
immediately  forfeited  by  the  Employee and reacquired by the Company, and the
Employee  shall  have  no  further  rights  with  respect  to the Award.  In the
discretion  of  the Committee, an Incentive Agreement may provide that, upon the
forfeiture  by  an  Employee  of  Award  Shares,  the Company shall repay to the
Employee the consideration (if any) which the Employee paid for the Award Shares
on  the  grant  of  the Award.  In the discretion of the Committee, an Incentive
Agreement  may also provide that such repayment shall include an interest factor
on  such  consideration  from  the date of the grant of the Award to the date of
such  repayment.

     3.4.3     The  Committee  may require under such terms and conditions as it
deems  appropriate  or  desirable that (a) the certificates for the Common Stock
delivered  under  this Plan are to be held in custody by the Company or a person
or  institution  designated by the Company until the Restriction Period expires,
(b)  such  certificates shall bear a legend referring to the restrictions on the
Common Stock pursuant to this Plan, and (c) the Employee shall have delivered to
the Company a stock power endorsed in blank relating to the Common Stock.

     4.        Miscellaneous  Provisions.
               -------------------------

     4.1       Adjustments  Upon  Change  in  Capitalization.
               ---------------------------------------------

     4.1.1     The  number and class of shares subject to each outstanding Stock
Option, the Exercise Price thereof (but not the total price), the maximum number
of  Stock  Options  that  may  be granted under this Plan, the minimum number of
shares  as  to  which  a  Stock Option may be exercised at any one time, and the
number  and  class  of  shares  subject  to  each  outstanding  Award,  shall be
proportionately  adjusted in the event of any increase or decrease in the number
of  the  issued  shares  of  the  Common  Stock which results from a split-up or
consolidation  of  shares,  payment of a stock dividend or dividends exceeding a
total of five percent for which the record dates occur in any one fiscal year, a
recapitalization  (other than the conversion of convertible securities according
to  their

                                        6
<PAGE>
terms),  a  combination  of shares or other like capital adjustment, so that (a)
upon  exercise  of  the  Stock Option, the Employee shall receive the number and
class  of  shares  the  Employee  would  have received had the Employee been the
holder of the number of shares of the Common Stock for which the Stock Option is
being  exercised  upon  the  date  of such change or increase or decrease in the
number  of  issued shares of the Company, and (b) upon the lapse of restrictions
of  the  Award Shares, the Employee shall receive the number and class of shares
the  Employee  would  have  received if the restrictions on the Award Shares had
lapsed  on  the  date  of  such  change or increase or decrease in the number of
issued  shares  of  the  Company.

     4.1.2     Upon  a  reorganization,  merger  or consolidation of the Company
with  one  or  more  corporations  as  a  result of which the Company is not the
surviving  corporation  or  in  which  the  Company  survives  as a wholly-owned
subsidiary of another corporation, or upon a sale of all or substantially all of
the  property  of  the  Company  to  another  corporation,  or  any  dividend or
distribution  to  stockholders  of more than 10 percent of the Company's assets,
adequate  adjustment  or  other provisions shall be made by the Company or other
party  to  such transaction so that there shall remain and/or be substituted for
the  Option  Shares and Award Shares provided for herein, the shares, securities
or assets which would have been issuable or payable in respect of or in exchange
for  such  Option Shares and Award Shares then remaining, as if the Employee had
been  the  owner  of  such  shares as of the applicable date.  Any securities so
substituted  shall  be  subject  to  similar  successive  adjustments.

     4.2       Withholding  Taxes.  The Company shall have the right at the time
               ------------------
of  exercise  of  any  Stock  Option,  the  grant  of  an Award, or the lapse of
restrictions on Award Shares, to make adequate provision for any federal, state,
local  or  foreign  taxes  which it believes are or may be required by law to be
withheld  with  respect  to  such  exercise (the "Tax Liability"), to ensure the
payment  of  any such Tax Liability.  The Company may provide for the payment of
any  Tax Liability by any of the following means or a combination of such means,
as  determined  by  the  Committee  in  its  sole and absolute discretion in the
particular  case  (1)  by requiring the Employee to tender a cash payment to the
Company,  (2) by withholding from the Employee's salary, (3) by withholding from
the  Option  Shares which would otherwise be issuable upon exercise of the Stock
Option,  or  from  the  Award  Shares  on  their  grant  or  date  of  lapse  of
restrictions,  that  number of Option Shares or Award Shares having an aggregate
Fair  Market  Value (determined in the manner prescribed by Paragraph 2.2) as of
the  date  the  withholding tax obligation arises in an amount which is equal to
the  Employee's  Tax  Liability or (4) by any other method deemed appropriate by
the  Committee.  Satisfaction  of  the  Tax  Liability of a Section 16 Reporting
Person  may  be made by the method of payment specified in clause (3) above only
if  the  following  two  conditions  are  satisfied:

                    (a)  The  withholding  of  Option Shares or Award Shares and
the  exercise  of the related Stock Option occur at least six months and one day
following the date of grant of such Stock Option or Award; and

                    (b)  The  withholding  of  Option  Shares or Award Shares is
made either (i) pursuant to an irrevocable election (the "Withholding Election")
made  by  the  Employee  at  least  six  months in advance of the withholding of
Options Shares or Award Shares, or (ii) on a day within a 10-day "window period"
beginning  on  the  third  business  day  following  the  date of release of the
Company's quarterly or annual summary statement of sales and earnings.

     Anything herein to the contrary notwithstanding, a Withholding Election may
be  disapproved  by  the  Committee  at  any  time.

     4.3       Relationship  to Other Employee Benefit Plans.  Stock Options and
               ---------------------------------------------
Awards  granted hereunder shall not be deemed to be salary or other compensation
to  any  Employee  for  purposes  of  any pension, thrift, profit-sharing, stock
purchase  or any other employee benefit plan now maintained or hereafter adopted
by  the  Company.

     4.4       Amendments  and  Termination.  The  Board of Directors may at any
               ----------------------------
time suspend, amend or terminate this Plan.  No amendment, except as provided in
Paragraph  3.3,  or  modification of this Plan may be adopted, except subject to
stockholder  approval, which would (1) materially increase the benefits accruing
to  the  Employees  under  this  Plan,  (2)  materially  increase  the number of
securities  which may be issued under this Plan (except for adjustments pursuant
to  Paragraph  4.1  hereof),  or  (3)  materially  modify the requirements as to
eligibility  for  participation  in  this  Plan.

                                        7
<PAGE>
     4.5       Successors  in  Interest.  The  provisions  of  this Plan and the
               ------------------------
actions of the Committee shall be binding upon all heirs, successors and assigns
of  the  Company  and  of  the  Employees.

     4.6       Other  Documents.  All  documents prepared, executed or delivered
               ----------------
in  connection  with this Plan (including, without limitation, Option Agreements
and  Incentive  Agreements)  shall be, in substance and form, as established and
modified  by  the Committee; provided, however, that all such documents shall be
subject in every respect to the provisions of this Plan, and in the event of any
conflict between the terms of any such document and this Plan, the provisions of
this  Plan  shall  prevail.

     4.7       Fairness  of the Repurchase Price.  In the event that the Company
               ---------------------------------
repurchases  securities  upon  termination  of employment pursuant to this Plan,
either:  (a)  the  price  will  not  be  less  than the fair market value of the
securities  to  be repurchased on the date of termination of employment, and the
right to repurchase will be exercised for cash or cancellation of purchase money
indebtedness  for the securities within 90 days of termination of the employment
(or  in the case of securities issued upon exercise of options after the date of
termination,  within  90  days  after  the  date of the exercise), and the right
terminates  when the Company's securities become publicly traded, or (b) Company
will  repurchase  securities  at  the original purchase price, provided that the
right  to  repurchase  at  the  original purchase price lapses at the rate of at
least  20  percent  of the securities per year over five years from the date the
option  is  granted  (without  respect  to  the date the option was exercised or
became  exercisable)  and  the right to repurchase must be exercised for cash or
cancellation of purchase money indebtedness for the securities within 90 days of
termination  of  employment  (or  in  case of securities issued upon exercise of
options  after  the  date  of  termination, within 90 days after the date of the
exercise).

     4.8       No  Obligation  to Continue Employment.  This Plan and the grants
               --------------------------------------
which  might be made hereunder shall not impose any obligation on the Company to
continue  to  employ  any  Employee.  Moreover, no provision of this Plan or any
document executed or delivered pursuant to this Plan shall be deemed modified in
any  way  by any employment contract between an Employee (or other employee) and
the  Company.

     4.9       Misconduct  of  an Employee.  Notwithstanding any other provision
               ---------------------------
of  this  Plan, if an Employee commits fraud or dishonesty toward the Company or
wrongfully  uses  or  discloses  any  trade  secret,  confidential data or other
information  proprietary to the Company, or intentionally takes any other action
which  results  in material harm to the Company, as determined by the Committee,
in  its  sole and absolute discretion, the Employee shall forfeit all rights and
benefits  under  this  Plan.

     4.10      Term  of  Plan.  No  Stock  Option shall be exercisable, or Award
               --------------
granted,  unless  and until the Directors of the Company have approved this Plan
and  all  other  legal requirements have been met.  This Plan was adopted by the
Board  effective July 26, 2004.  No Stock Options or Awards may be granted under
this  Plan  after  July  26,  2014.

     4.11      Governing  Law.  This Plan and all actions taken thereunder shall
               --------------
be  governed  by,  and  construed  in  accordance with, the laws of the State of
Florida.

     4.12      Approval.  This  Plan  must  be  approved  by  a  majority of the
               --------
outstanding  securities  entitled  to vote within 12 months before or after this
Plan  is  adopted  or  the  date  the agreement is entered into.  Any securities
purchased  before  security  holder  approval  is  obtained must be rescinded if
security  holder  approval is not obtained within 12 months before or after this
Plan  is  adopted  or  the  date the agreement is entered into.  Such securities
shall not be counted in determining whether such approval is obtained.

     4.13      Assumption  Agreements.  The Company will require each successor,
               ----------------------
(direct  or  indirect, whether by purchase, merger, consolidation or otherwise),
to  all  or substantially all of the business or assets of the Company, prior to
the  consummation  of  each such transaction, to assume and agree to perform the
terms  and  provisions  remaining  to  be  performed  by  the Company under each
Incentive  Agreement  and  Stock  Option  and  to  preserve  the benefits to the
Employees  thereunder.  Such  assumption  and  agreement shall be set forth in a
written  agreement  in  form  and  substance  satisfactory  to the Committee (an
"Assumption  Agreement"),  and  shall  include  such adjustments, if any, in the
application  of the provisions of the Incentive Agreements and Stock Options and
such  additional provisions, if any, as the Committee shall require and approve,
in  order  to  preserve  such  benefits  to  the

                                        8
<PAGE>
Employees.  Without  limiting the generality of the foregoing, the Committee may
require  an  Assumption  Agreement  to  include  satisfactory  undertakings by a
successor:

                    (a)  To provide liquidity to the Employees at the end of the
Restriction  Period  applicable  to  the Common Stock awarded to them under this
Plan,  or  on  the  exercise  of  Stock  Options;

                    (b)  If  the  succession occurs before the expiration of any
period  specified  in  the  Incentive Agreements for satisfaction of performance
criteria  applicable  to  the  Common  Stock awarded thereunder, to refrain from
interfering  with  the Company's ability to satisfy such performance criteria or
to  agree  to  modify  such  performance criteria and/or waive any criteria that
cannot  be  satisfied  as  a  result  of  the  succession;

                    (c)  To  require  any  future  successor  to  enter  into an
Assumption  Agreement;  and

                    (d)  To  take  or  refrain from taking such other actions as
the  Committee  may  require  and  approve,  in  its  discretion.

     4.14      Compliance  with  Rule  16b-3.  Transactions  under this Plan are
               -----------------------------
intended  to  comply  with  all  applicable conditions of Rule 16b-3 promulgated
under the Exchange Act.  To the extent that any provision of this Plan or action
by  the  Committee  fails to so comply, it shall be deemed null and void, to the
extent  permitted  by  law  and  deemed  advisable  by  the  Committee.

     4.15      Information  to  Shareholders.  The Company shall furnish to each
               -----------------------------
of its stockholders financial statements of the Company at least annually.

     IN  WITNESS  WHEREOF,  this Plan has been executed effective as of July 26,
2004.

                                        INDIGINET, INC.

                                        By  /s/  Mark Ellis
                                          --------------------------------------
                                          Mark Ellis, President

                                        9
<PAGE>

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