Document:

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                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

                        THIRD AMENDMENT TO SECOND AMENDED
                          AND RESTATED CREDIT AGREEMENT

      This Third Amendment to Second Amended and Restated Credit Agreement (this
"Third Amendment") dated as of October 13, 2005, is by and among PARALLEL
PETROLEUM CORPORATION, a Delaware corporation, and PARALLEL, L.P., a Texas
limited partnership (collectively, the "Borrowers"), and PARALLEL, L.L.C., a
Delaware limited liability company ("Guarantor"), and CITIBANK TEXAS, N.A.
(formerly known as First American Bank, SSB), BNP PARIBAS, and WESTERN NATIONAL
BANK (collectively, "Lenders"), and CITIBANK TEXAS, N.A., as Joint Lead Arranger
and as Administrative Agent ("Agent") and BNP PARIBAS, as Joint Lead Arranger
and as Syndication Agent.

                                    RECITALS:

      WHERAS, Borrowers, Guarantor and Lenders in the capacities stated above,
entered into that Second Amended and Restated Credit Agreement dated as of
September 27, 2004, as amended by First Amendment to Second Amended and Restated
Credit Agreement dated as of December 27, 2004, and by Second Amendment to
Second Amended and Restated Credit Agreement dated as of April 1, 2005 (as
amended, the "Credit Agreement"); and

      WHEREAS, Borrowers, Guarantor and Lenders desire to amend the Credit
Agreement in certain respects.

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the parties hereto
agree as follows:

                                    Agreement

      Section 1. Definitions. Except as otherwise expressly provided herein, all
terms defined in the Credit Agreement shall have the same meanings herein.

      Section 2. Amendment to Definition of LIBOR Margin. The definition of
"LIBOR Margin" in Section 1 of the Credit Agreement is hereby amended in its
entirety to read as follows:

      LIBOR Margin means:

            (a) two and one-half percent (2.50%) per annum whenever the
      Borrowing Base Usage is equal to or greater than 75%; or

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            (b) two and one-quarter percent (2.25%) per annum whenever the
      Borrowing Base Usage is equal to or greater than 50%, but less than 75%;
      or

            (c) two percent (2.00%) per annum whenever the Borrowing Base Usage
      is less than 50%.

      Section 3. Amendment to Definition of Maturity Date. The definition of
"Maturity Date" in Section 1 of the Credit Agreement is hereby amended in its
entirety to read as follows:

            Maturity Date shall mean October 31, 2010.

      Section 4. Amendment to Hedging Covenant. Section 12(w) of the Credit
Agreement is hereby amended in its entirety to read as follows:

            (w) Crude Oil and Natural Gas Hedging. Borrowers shall maintain with
      counterparties acceptable to the Agent non-speculative crude oil and
      natural gas price hedges for rolling twenty-four (24) month periods, but
      not to extend beyond the Maturity Date unless Borrowers otherwise elect,
      and with prices and other terms as shall be approved in advance by Agent
      covering at least fifty percent (50%) of Borrowers' aggregate estimated
      monthly crude oil and natural gas production from Borrowers' proved
      producing Oil and Gas Properties, determined on a BOE Basis (defined
      below). The foregoing hedging requirement shall be based upon the then
      most current reserve evaluation delivered by Borrowers to Agent pursuant
      to Section 12(a)(iii) above, and Borrowers shall be in compliance with the
      required volumes to be hedged within ninety (90) days after the effective
      date of each such most current reserve evaluation. As used in this
      Agreement, the term "BOE Basis" shall mean in the case of crude oil,
      barrels of crude oil, and in the case of natural gas and natural gas
      liquids, quantities of natural gas and natural gas liquids translated into
      barrels of crude oil based on equal energy content.

      Section 5. Amendment to Rate Management Transaction Covenant. Section
13(l) of the Credit Agreement is hereby amended in its entirety to read as
follows:

            (l) Rate Management Transactions. Neither either Borrower nor
      Guarantor will, and will not permit any Subsidiary to, enter into any Rate
      Management Transactions, except the foregoing prohibitions shall not apply
      to (x) transactions required by this Agreement or consented to in writing
      by the Majority Lenders, in each case which are on terms acceptable to the
      Majority Lenders, or (y) transactions by Borrowers designed to hedge,
      provide a floor price for, or swap crude oil or natural gas, provided that
      (i) the same do not cover more than eighty-five percent (85%) of
      Borrowers' aggregate estimated monthly crude oil and natural gas
      production from Borrowers' proved producing crude oil and natural gas
      reserves existing as of the date of the execution thereof based upon the
      then most current reserve evaluation required pursuant to Section

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      12(a)(iii) above and determined on a BOE Basis, (ii) the same do not
      contain terms or provisions which would require margin calls, (iii) the
      counterparty to any such transaction has a minimum rating of "A-1" by
      Standard & Poors' Corporation or "A-3" by Moody's Investors Service, Inc.,
      (iv) the same are for a term not extending beyond October 31, 2010, and
      (v) the same include provisions for payment to Borrowers upon the
      occurrence of specified price indexes of a price per unit of measurement
      equal to or greater than that under the Agent's then current pricing
      policies; or, provided that (A) the same do not cover more than ninety
      percent (90%) of Borrowers' aggregate estimated monthly crude oil and
      natural gas production from Borrowers' proved producing crude oil and
      natural gas reserves existing as of the date of the execution thereof
      based upon the then most current reserve evaluation required pursuant to
      Section 12(a)(iii) above and determined on a BOE Basis, (B) the same do
      not cover more than seventy-five percent (75%) of Borrowers' aggregate
      estimated monthly crude oil and natural gas production from all categories
      of Borrowers' proved crude oil and natural gas reserves existing as of the
      date of the execution thereof based upon the then most current reserve
      evaluation required pursuant to Section 12(a)(iii) above and determined on
      a BOE Basis, (C) as of the date of the execution thereof, Borrowers'
      aggregate actual production from proved producing crude oil and natural
      gas reserves exceeds Borrowers' aggregate forecasted production from
      proved producing crude oil and natural gas reserves for such date based on
      the then most current reserve evaluation required pursuant to Section
      12(a)(iii) above, (D) the same are for a term of twelve (12) months or
      less, and (E) the same satisfy the requirements set forth in items (ii),
      (iii) and (v) above.

      Section 6. Redetermination of Borrowing Base. In accordance with Section
7(b) of the Credit Agreement, a semi-annual redetermination of the Borrowing
Base has been made by Lenders. Pursuant to Section 7(b) of the Credit Agreement,
Agent hereby notifies Borrowers that Lenders have redetermined the Borrowing
Base and, effective as of the date of this Third Amendment, the redetermined
Borrowing Base is $100,000,000.00. The amount of the new Borrowing Base shall be
subject to redetermination as provided in the Credit Agreement. The next
scheduled semi-annual determination of the Borrowing Base by Lenders pursuant to
the Credit Agreement shall be on or about April 1, 2006. Pursuant to Section
8(b) of the Credit Agreement, the fee payable to Agent for the ratable benefit
of Lenders in connection with the $10,000,000.00 increase in the Borrowing Base
is $37,500.00.

      Section 7. Representations and Warranties of Borrowers and Guarantor.
Borrowers and Guarantor hereby jointly and severally represent and warrant to
Lenders as follows:

            (a) The representations and warranties contained in Section 10 of
the Credit Agreement are true and correct on and as of the date hereof as though
made on and as of the date hereof, except for those representations and
warranties which address matters only as of a particular date (which remain true
and correct as of such date).

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            (b) No Event of Default or Default has occurred and is continuing
under the Credit Agreement.

            (c) The execution, delivery and performance by Borrowers and
Guarantor of this Third Amendment are within the Borrowers' and Guarantor's
partnership, corporate and limited liability company powers, have been duly
authorized by all necessary action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not violate or
constitute a default under any provisions of applicable law or any material
agreement binding upon Borrowers, Guarantor or their respective Subsidiaries or
result in the creation or imposition of any Lien upon any of the assets of
Borrowers, Guarantor or their respective Subsidiaries, except Permitted Liens.

            (d) This Third Amendment constitutes the valid and binding
obligation of Borrowers and Guarantor enforceable in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditor's rights generally, and (ii) the
availability of equitable remedies may be limited by equitable principles of
general application.

      Section 8. Conditions Precedent. This Third Amendment shall be effective
as of the date upon which all of the following conditions have been satisfied:

            (a) Agent shall have received counterparts of this Third Amendment
duly executed by Borrowers, Guarantor and Lenders;

            (b) Agent shall have received from Borrowers for the ratable benefit
of Lenders (i) the fees required by Section 8(b) of the Credit Agreement in
connection with the increase in the Borrowing Base provided for above, and (ii)
a loan extension fee of $200,000;

            (c) the Borrowers and Guarantor shall have provided to Agent (i) a
copy of resolutions, in form and substance satisfactory to Agent, of the Board
of Directors of PPC authorizing the execution, delivery and performance of this
Third Amendment and any other Loan Documents to be executed or delivered
pursuant hereby, certified by the secretary or an assistant secretary of PPC,
which certificate shall be in form and substance satisfactory to Agent and
Agent's counsel and shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded, (ii) a copy of the resolutions, in
form and substance satisfactory to Agent, duly adopted by the respective
partners of PLP authorizing the execution, delivery and performance of this
Third Amendment and any other Loan Documents to be executed or delivered by PLP
pursuant hereto, certified by PLP's general partner, which certificate shall be
in form and substance satisfactory to Agent and Agent's counsel and shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded, and (iii) resolutions, in form and substance satisfactory to
Agent, of the managers of Guarantor authorizing the execution, delivery and
performance of this Third Amendment and any other Loan Documents to be executed
or delivered pursuant hereto, certified by its secretary or assistant secretary,
which certificate shall be in form and substance satisfactory to Agent and
Agent's counsel and shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded; and

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            (d) Agent shall have received any other documents, certificates and
opinions in connection with this Third Amendment that may be requested by Agent,
in form and substance satisfactory to Agent.

      Section 9. Ratification of Credit Agreement and Other Loan Documents.
Except as expressly amended hereby, the Credit Agreement and all of the other
Loan Documents are and shall be unchanged and all of the terms, provisions,
covenants, conditions, schedules and exhibits thereof shall remain and continue
in full force and effect and are hereby ratified and confirmed by Borrowers,
Guarantor and Lenders as of the date of this Third Amendment as if the Credit
Agreement and the other Loan Documents were executed by Borrowers, Guarantor and
the other parties thereto as of the date of this Third Amendment. The amendments
contemplated hereby shall not limit or impair any Liens securing the Loans, each
of which are hereby ratified, affirmed and extended to secure the Loans as they
may be increased pursuant hereto.

      Section 10. No Waiver. Neither the execution by Lenders of this Third
Amendment nor anything contained herein shall in anywise be construed or operate
as a waiver by Lenders of any Default of Event of Default (whether now existing
or that may occur hereafter) or of any of Lenders' or Agent's rights under the
Credit Agreement as amended hereby or under any of the other Loan Documents.

      Section 11. Miscellaneous.

            11.1 Legal Expenses. The Borrowers hereby agree to pay on demand all
      reasonable fees and expenses of counsel to the Agent incurred by the Agent
      in connection with the preparation, negotiation and execution of this
      Third Amendment and all related documents.

            11.2 Multiple Counterparts. This Third Amendment may be executed in
      a number of identical separate counterparts (including by facsimile
      transmission), each of which for all purposes is to be deemed an original
      but all of which shall constitute, collectively, one agreement. No party
      to this Third Amendment shall be bound hereby until a counterpart of this
      Third Amendment has been executed by all parties hereto.

            11.3 Reference to Agreement. Each of the Loan Documents is hereby
      amended so that any reference in the Loan Documents to the Credit
      Agreement shall mean a reference to the Credit Agreement as amended
      hereby.

            11.4 Governing Law. This Third Amendment is being executed and
      delivered, and is intended to be performed, in Midland, Midland County,
      Texas, and the substantive laws of Texas shall govern the validity,
      construction, enforcement and interpretation of this Third Amendment and
      all other documents and instruments referred to herein, unless otherwise
      specified therein.

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            11.5 Plural and Singular Forms. The definitions given to terms
      defined hereby shall be equally applicable to both the singular and plural
      forms of such terms.

            11.6 Final Agreement. THIS THIRD AMENDMENT, THE CREDIT AGREEMENT AND
      THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
      AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
      SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
      AGREEMENTS BETWEEN THE PARTIES.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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      IN WITNESS THEREOF, Borrowers, Guarantor and Lenders have caused this
Third Amendment to be duly executed as of the day and year first above written.

                           BORROWERS:   PARALLEL PETROLEUM CORPORATION,
                                          a Delaware corporation

                                        By:   /s/ Steven D. Foster
                                           -------------------------------------
                                              Steven D. Foster
                                              Chief Financial Officer

                                        PARALLEL, L.P., a Texas limited
                                          Partnership
                                        By:   Parallel Petroleum Corporation,
                                              Its General Partner

                                        By:   /s/ Steven D. Foster
                                           -------------------------------------
                                              Steven D. Foster
                                              Chief Financial Officer

                           GUARANTOR:   PARALLEL, L.L.C., a Delaware limited
                                          liability company

                                        By:   /s/ Steven D. Foster
                                           -------------------------------------
                                              Steven D. Foster
                                              Chief Financial Officer

                  [SIGNATURE PAGE TO THIRD AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

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                             LENDERS:   CITIBANK TEXAS, N.A. a national banking
                                        association, as Joint Lead Arranger and
                                        Administrative Agent and as a Lender

                                        By:   /s/ Frank K. Stowers
                                           -------------------------------------
                                              Frank K. Stowers
                                              Senior Vice President

                  [SIGNATURE PAGE TO THIRD AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

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                                        BNP PARIBAS, as Joint Lead Arranger and
                                        Syndication Agent and as a Lender

                                        By:   /s/ Brian M. Malone
                                           -------------------------------------
                                        Name:     Brian M. Malone
                                        Title:    Managing Director

                                        By:   /s/ Polly Schott
                                           -------------------------------------
                                        Name:     Polly Schott
                                        Title:    Vice President

                  [SIGNATURE PAGE TO THIRD AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

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                                        WESTERN NATIONAL BANK,
                                        as a Lender

                                        By:   /s/ Wesley D. Bownds
                                           -------------------------------------
                                              Wesley D. Bownds
                                              Executive Vice President

                  [SIGNATURE PAGE TO THIRD AMENDMENT TO SECOND
                     AMENDED AND RESTATED CREDIT AGREEMENT]

                                       10<PAGE>

                                                                    Exhibit 10.2

                           PURCHASE AND SALE AGREEMENT

      This Purchase and Sale Agreement ("Agreement"), dated as of October 14,
2005, is by and among Lynx Production Company, Inc., whose address is 2100 Ross
Avenue, Suite 860, LB 52, Dallas, Texas 75201, Elton Resources, Inc., whose
address is 2813 Willow Ridge, Garland, Texas 75044, Cascade Energy Corporation,
whose address is 5919 Greenville Avenue, No. 409, Dallas, Texas 75206, Chelsea
Energy Inc., whose address is 2100 Ross Avenue, Suite 860, LB 52, Dallas, Texas
75201, William P. Sutter, Trustee, William P. Sutter Trust, whose address is 2
Par Club Circle, Village of Golf, Florida 33436, J. Leroy Bell, whose address is
P.O. Box 2521, Midland, Texas 79702, E.L. Brahaney, whose address is 223 W. Wall
Street, Suite 603, Midland, Texas 79701, Brent Beck, whose address is 4113
Fairwood, Midland, Texas 79707, Cavic Interests, LLC, whose address is P.O. Box
50213, Midland, Texas 79710, and Stanley Talbott, whose address is 201 W. Wall,
Suite 405, Midland, Texas 79701 (collectively, "Seller"), and Parallel LP, whose
address is 1004 N. Big Spring, Suite 400, Midland, Texas 79701 ("Buyer"). Seller
and Buyer are sometimes together referred to herein as "Parties".

                                   WITNESSETH:

      WHEREAS, Seller owns certain oil and gas leasehold interests and related
assets more fully described on the exhibits hereto; and

      WHEREAS, Seller desires to sell and Buyer desires to acquire these
interests and related assets on the terms and conditions hereinafter provided;

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Seller and Buyer hereby agree as follows:

                             ARTICLE 1. DEFINITIONS

      1.1. "Agreement" shall mean this Purchase and Sale Agreement between
Seller and Buyer.

      1.2. "Assets" shall mean the following described assets and properties
(except to the extent constituting Excluded Assets):

      (a) the Leases;

      (b) the Personal Property and Incidental Rights; and

      (c) the Inventory Hydrocarbons

      1.3. "Assumed Obligations" shall mean:

      (a) all Environmental Obligations or Liabilities;

      (b) all obligations with respect to gas production, sales or, subject to
Article 18, processing imbalances with third parties; and

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      (c) all liabilities, duties, and obligations that arise out of the
ownership, operation or use of the Assets after the Effective Time.

      1.4. "Closing" shall be as defined in Section 13.1.

      1.5. "Closing Date" shall be as defined in Section 13.1.

      1.6. "Effective Time" shall mean 7:00 a.m., local time, on November 1,
2005.

      1.7. "Environmental Defect" shall mean: (i) a condition or activity with
respect to an Asset that is in violation, or reasonably likely to violate, any
federal, state or local statute or regulation ("Environmental Law") relating to
natural resources, conservation, the environment, or the emission, release,
storage, treatment, disposal, transportation, handling or management of
industrial or solid waste, hazardous waste, hazardous or toxic substances,
chemicals or pollutants, petroleum, including crude oil, natural gas, natural
gas liquids, or liquefied natural gas, and any wastes associated with the
exploration and production of oil and gas ("Regulated Substances"); or (ii) the
presence of Regulated Substances in the soil, groundwater, or surface water in,
on, at or under an Asset in any manner or quantity which is required to be
remediated by Environmental Law or by any applicable action or guidance levels
or other standards published by any governmental agency with jurisdiction over
the Assets. Buyer and Seller agree that for a condition to be in violation of
any statute or regulation referred to in the preceding sentence, it shall not be
necessary that Seller shall be under notice of violation from a federal or state
regulatory agency.

      1.8. "Environmental Obligations or Liabilities" shall mean all
liabilities, obligations, expenses (including, without limitation, all
attorneys' fees), fines, penalties, costs, claims, suits or damages (including
natural resource damages) of any nature, associated with the Assets, whether
arising before or after the Effective Time, and attributable to or resulting
from: (i) pollution or contamination of soil, groundwater or air, on the Assets
and any other contamination of or adverse effect upon the environment, (ii)
underground injection activities and waste disposal, (iii) clean-up responses,
remedial, control or compliance costs, including the required cleanup or
remediation of spills, pits, ponds, or lagoons, including any subsurface or
surface pollution caused by such spills, pits, ponds, or lagoons, (iv)
noncompliance with applicable land use, permitting, surface disturbance,
licensing or notification requirements, (v) all obligations for plugging,
replugging and abandoning any wells, the restoration of any well sites, tank
battery sites and gas plant sites, the proper removal, disposal and abandonment
of any wastes or fixtures, and the proper capping and burying of all flow lines,
which are included in the Assets; and (vi) violation of any federal, state or
local environmental or land use law. Notwithstanding anything to the contrary
set forth in, or implied by, this Section 1.8, "Environmental Obligations or
Liabilities" does not include (i) personal injury or wrongful death occurring
prior to the Closing or (ii) offsite waste disposal occurring prior to the
Closing Date.

      1.9. "Excluded Assets" shall mean the following:

      (a) (i) all trade credits, accounts receivable, notes receivable and other
receivables attributable to Seller's interest in the Assets with respect to any
period of time prior to the Effective Time; (ii) all deposits, cash, checks in
process of collection, cash equivalents and funds attributable to Seller's
interest in the assets with respect to any period of time prior to the Effective
Time; and (iii) all proceeds, benefits, income

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or revenues accruing (and any security or other deposits made) with respect to
the Assets prior to the Effective Time, all of the preceding regardless of when
actually paid or received;

      (b) all corporate, financial, and tax records of Seller; however, Buyer
shall be entitled to receive copies of any tax records which directly relate to
any Assumed Obligations, or which are necessary for Buyer's ownership,
administration, or operation of the Assets;

      (c) all claims and causes of action of Seller arising from acts, omissions
or events, or damage to or destruction of the Assets, occurring prior to the
Effective Time except to the extent directly related to the Assumed Obligations;

      (d) except as otherwise provided in Article 15, all rights, titles, claims
and interests of Seller relating to the Assets prior to the Effective Time (i)
under any policy or agreement of insurance or indemnity; (ii) under any bond; or
(iii) to any insurance or condemnation proceeds or awards;

      (e) all Hydrocarbons produced from or attributable to the Assets with
respect to all periods prior to the Effective Time, together with all proceeds
from or of such Hydrocarbons, except the Inventory Hydrocarbons;

      (f) claims of Seller for refund of or loss carry forwards with respect to
production, windfall profit, severance, ad valorem or any other taxes
attributable to any period prior to the Effective Time, or income or franchise
taxes;

      (g) all amounts due or payable to Seller as adjustments or refunds under
any contracts or agreements (including take-or-pay claims) affecting the Assets,
respecting periods prior to the Effective Time;

      (h) all amounts due or payable to Seller as adjustments to insurance
premiums related to the assets with respect to any period prior to the Effective
Time;

      (i) all proceeds, benefits, income or revenues accruing (and any security
or other deposits made) with respect to the Assets, and all accounts receivable
attributable to the Assets, prior to the Effective Time;

      (j) all of Seller's intellectual property, including, but not limited to,
proprietary computer software, patents, trade secrets, copyrights, names, marks
and logos;

      (k) all of Seller's remote terminal units, radio control alarms, radio
towers, [and leased automobiles and trucks] located on the leases, areas, and
lands described in Exhibit A.

      1.10. "Hydrocarbons" shall mean crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids and other liquid or gaseous
hydrocarbons (including CO2), and shall also refer to all other minerals of
every kind and character which may be covered by or included in the Leases and
Assets.

      1.11. "Inventory Hydrocarbons" shall mean all merchantable oil and
condensate (for oil or liquids in storage tanks, being only that oil or liquids
physically

                                                                               3

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above the top of the pipeline connection from such tanks) produced from or
attributable to the Leases prior to the Effective Time which have not been sold
by Seller and are in storage at the Effective Time.

      1.12. "Leases" shall mean, except to the extent constituting Excluded
Assets, any and all interests owned by Seller in the lands described on Exhibit
A, including, but not limited to, the oil and gas leases described on Exhibit A,
and any interest which Seller is entitled to receive by reason of any
participation, joint venture, farm-in, farm-out, joint operating agreement or
other agreement, in and to the oil, gas and/or mineral leases, permits,
licenses, concessions, leasehold estates, royalty interests, overriding royalty
interests, net revenue interests, executory interests, net profit interests,
working interests, reversionary interests, fee and term mineral interests, and
any other interests of Seller in Hydrocarbons, it being the intent hereof if the
legal descriptions and depth limitations set forth on Exhibit A do not correctly
describe such leases or interests or all of the lands covered thereby, that the
"Leases" shall nevertheless include all of Seller's right, title and interest in
the Leases, lands and other interests described on Exhibit A and all land and
depths covered thereby, SAVE AND EXCEPT depths from the top of the Yates
Formation down to the base of the Queen Formation, even though such interests
may be incorrectly described.

      1.13. "Performance Deposit" shall be as defined in Section 3.2.

      1.14. "Personal Property and Incidental Rights" shall mean all right,
title and interest of Seller in and to or derived from the following insofar as
the, same do not constitute Excluded Assets and are attributable to, appurtenant
to, incidental to, or used for the operation of the Leases:

      (a) all easements, rights-of-way, permits, licenses, servitudes, surface
leases and fee parcels or other interests;

      (b) all wells, equipment and other personal property, inventory, spare
parts, tools, fixtures, pipelines, wellhead equipment, casing, tubing, pumps,
motors, machinery, gathering lines and facilities, telephone lines, boilers,
buildings, injection wells and facilities, saltwater disposal wells and
facilities, central processing facilities, metering facilities, compression
facilities, platforms, tank batteries, appurtenances, and improvements now or as
of the Effective Time situated upon the Leases or the land covered by the
instruments described in Section 1.14(a) or used or held for use in connection
with the development or operation of the Leases or the production, treatment,
storage, compression; processing or transportation of Hydrocarbons from or in
the Leases;

      (c) all contracts, agreements, and title instruments to the extent,
attributable to and affecting the Assets in existence at Closing, including all
Hydrocarbon sales, purchase, gathering, transportation, treating, marketing,
exchange, processing, and fractionating contracts, and joint operating
agreements, unitization, pooling and communitization agreements; and

      (d) originals of all lease files, land files, well files, production
records, division order files, abstracts, title opinions, and contract files,
insofar as the same are directly related to the Leases; including, without
limitation, all seismic, geological, geochemical, and geophysical information
and data, to the extent that such data is not

                                                                               4

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subject to any third party restrictions, but excluding Seller's proprietary
interpretations of same.

      1.15. "Purchase Price" shall be as defined in Section 3.1.

      1.16. "Retained Obligations" shall mean all liabilities, duties, and
obligations that arise out of the ownership, operation or use of the Assets
prior to the Effective Time (including, without limitation, (i) all indebtedness
of Seller for borrowed money which is secured by liens on or security interests
in the Assets; and (ii) the following to the extent the same are attributable to
periods prior to the Effective Time in accordance with generally accepted
accounting principles: liabilities for royalties, overriding royalties and other
burdens on production; production expenses, operating expenses and all
expenditures attributable to the operation of the Assets; personal injuries; and
Taxes (provided, that all Taxes based on or measured by production or the value
thereof shall be deemed for purposes of this Agreement to be attributable to the
period when such production was produced, notwithstanding that such Taxes may
not be assessed or paid in a subsequent period); but not including any such
items to the extent the Purchase Price is reduced therefor pursuant to Section
3.3(b)(2 or 5)), except those specifically included in the definition of
"Assumed Obligations."

                    ARTICLE 2. AGREEMENT TO PURCHASE AND SELL

      Subject to the terms and conditions of this Agreement, Seller agrees to
sell and convey to Buyer and Buyer agrees to purchase and pay for the Assets and
to assume the Assumed Obligations.

                      ARTICLE 3. PURCHASE PRICE AND PAYMENT

      3.1. Purchase Price.

      Subject to adjustment as set forth below, the Purchase Price for the
Assets shall be Forty Nine Million Five Hundred Thousand Dollars
($49,500,000.00), allocated among the Assets as provided in Exhibit B.

      3.2. Performance Deposit.

      Immediately upon the execution hereof, Buyer shall tender to Seller, by
bank wire transfer to the trust account of the law firm of Turner, Davis &
Gerald, a Performance Deposit equal to $4,455,000.00, which Performance Deposit
shall be non-interest-bearing and non-refundable except as provided herein.

      3.3. Final Settlement/Purchase Price Adjustments.

      Within 90 days after Closing, Seller shall provide to Buyer, for Buyer's
concurrence, an accounting (the "Final Settlement Statement") of the actual
amounts of Seller's and Buyer's Credits for the adjustment set out in this
Section 3.3. Buyer shall have the right for 30 days after receipt of the Final
Settlement Statement to audit and take exceptions to such adjustments. The
Parties shall attempt to resolve any disagreements on a best efforts basis.
Those credits agreed upon by Buyer and Seller shall be netted and the final
settlement shall be paid as directed in writing by the receiving party, on final
adjustment by the party owing it (the "Final Settlement").

                                                                               5

<PAGE>

      The Purchase Price shall be adjusted as follows:

      (a) The Purchase Price shall be adjusted upward by the following
("Seller's Credits"):

            (1) the value of (i) all Inventory Hydrocarbons, such value to be
based upon actual sales receipts if available or, in the absence thereof, upon
the prevailing market value for crude oil in effect as of the Effective Time
adjusted for grade and gravity, less taxes and transportation fees deducted by
the purchaser of such oil, such oil to be measured at the Effective Time by the
operators of the Assets; and (ii) the value of all of Seller's unsold inventory
of gas plant products, if any, attributable to the Leases at the Effective Time
valued in the same manner as if such products had been sold under the contract
then in existence between Seller and the purchaser of such products or, if there
is no such contract, valued in the same manner as if said products had been sold
at the posted price for said products;

            (2) the amount of all production expenses, operating expenses and
all expenditures attributable to the operation of the Assets after the Effective
Time and actually paid by Seller in accordance with generally accepted
accounting principles;

            (3) an amount equal to $317.00 per month (or prorated portion
thereof) from the Effective Time to the Closing Date, as a fee for operating the
Assets, such fee shall be in lieu of any COPAS fees that may be chargeable to
Seller's interest in any Assets operated by Seller (plus Seller shall be
entitled to all third party COPAS fees related to periods before the Closing
Date);

            (4) an amount equal to the sum of any upward adjustments provided
elsewhere in this Agreement; and

            (5) any other amount agreed upon by Seller and Buyer in writing
prior to Closing.

      (b) The Purchase Price shall be adjusted downward by the following
("Buyer's Credits"):

            (1) the total collected sales value of all Hydrocarbons sold by the
Seller after the Effective Time, all of which are attributable to the Assets,
and any other monies collected by the Seller with respect to the ownership or
operation of the Assets after the Effective Time, but excepting interest income.
To the extent collected as of Closing, such revenue shall be included in the
preliminary statement referenced in Section 3.3(c). To the extent collected
after Closing such revenue, less Seller's reasonable estimate of amounts then
owing to Seller, shall be delivered to Buyer within five (5) business days after
receipt of such revenue by Seller. Delivery or acceptance of such revenue shall
not be considered a waiver of any rights to further adjustments or calculations
a party may have pursuant to this Agreement;

            (2) the amount of all unpaid ad valorem, property, production, net
profits, excise, severance and similar taxes and assessments (but not including
income taxes) ("Taxes"), which taxes and assessments become due and payable or
accrue to the Assets prior to the Effective Time, which amount shall, where
possible, be computed based upon the tax rate and values applicable to the tax
period in question; otherwise, the amount of the adjustment under this paragraph
shall be

                                                                               6

<PAGE>

computed based upon such Taxes assessed against the applicable portion
of the Assets for the immediately preceding tax period just ended;

            (3) an amount equal to the sum of any downward adjustments provided
elsewhere in this Agreement;

            (4) an amount equal to the sum of amounts held in suspense by Seller
for the account of third parties as set forth in Schedule 3.3(b)(4) hereto
(subject to reasonable updatinq through the Closing Date)(obligations for
payment of which amounts to such third parties Buyer shall assume at Closing);

            (5) an amount equal to all unpaid royalties, overriding royalties
and other burdens on production, production expenses, operating expenses and all
expenditures attributable to the operation of the Assets prior to the Effective
Time in accordance with generally accepted accounting principles; and

            (6) any other amount agreed upon by Seller and Buyer in writing
prior to Closing.

      (c) Seller shall prepare and deliver to Buyer, at least five "Business
Days" prior to Closing, Seller's estimate of the adjusted Purchase Price to be
paid at Closing, together with a preliminary statement setting forth Seller's
estimate of the amount of each adjustment to the Purchase Price to be made
pursuant to this Section 3.3. The Parties shall negotiate in good faith and
attempt to agree on such estimated adjustments prior to Closing. In the event
any estimated adjustment amounts are not agreed upon prior to Closing, the
estimate of the adjusted Purchase Price for purposes of Closing shall be
calculated based on Seller's and Buyer's agreed upon estimated adjustments (and
any disputes shall be resolved by the parties in connection with the resolution
of the Final Settlement Statement).

               ARTICLE 4. SELLER'S REPRESENTATIONS AND WARRANTIES

      Seller jointly represents and warrants to Buyer as of the date hereof, and
the Closing Date that:

      (a) Among the parties Seller, Lynx Production Company, Inc., Elton
Resources, Inc. and Cascade Energy Corporation, Chelsea Energy, Inc. and Cavic
Interests, LLC (collectively the "Corporate Sellers") each is a corporation or
limited liability company duly organized, validly existing, and in good standing
under the laws of the state of Texas, and is duly qualified to carry on its
business in those states where it is required to do so.

      (b) Seller has all requisite power and authority to carry on its business
as presently conducted, to enter into this Agreement and the other documents and
agreements contemplated hereby, and to perform its obligations under this
Agreement and the other documents and agreements contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not violate, nor be in conflict
with, any provision of the governing documents of any of the Corporate Sellers
or any agreement or instrument to which Seller is a party or by which it is
bound (except any provision contained in agreements customary in the oil and gas
industry relating to (1) the Preferential Purchase Rights (defined below)
covering all or any portion of the Assets; (2) required consents to

                                                                               7

<PAGE>

transfer the Assets; (3) maintenance of uniform interest provisions; and (4) any
other third-party approvals or consents contemplated herein), or any judgment,
decree, order, statute, rule, or regulation applicable to Seller.

      (c) This Agreement, and all documents and instruments required hereunder
to be executed and delivered by Seller at Closing, constitute legal, valid and
binding obligations of Seller and is enforceable in accordance with its
respective terms, subject to applicable bankruptcy and other similar laws of
general application with respect to creditors.

      (d) There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by, or to the actual knowledge of Seller threatened
against Seller.

      (e) The execution, delivery and performance of this Agreement and the
transaction contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, partnership or otherwise, on the part
of Seller.

      (f) There are no claims, demands, actions, suits, or proceedings
(including condemnation, expropriation, or forfeiture proceedings) pending, or
to the knowledge of Seller threatened, against Seller or any of its affiliates,
or any Asset (a) seeking to prevent the consummation of the transactions
contemplated hereby, or (b) which, singly or in the aggregate, would adversely
affect the Assets.

      (g) Production Sales Contracts. Except for contracts or arrangements
terminable on 30 days' notice and except as specifically indicated in Schedule
4(g), no hydrocarbons produced from the Assets are subject to a sales contract
or other agreement relating to the production, gathering, transporting,
processing, treating or marketing of hydrocarbons, and no person has any call
upon or option to purchase the Assets or the production therefrom.

      (h) Prepayment Obligations. Seller is not obligated, by virtue of a
prepayment arrangement, a "take or pay" arrangement, a production payment or any
other arrangement, to deliver hydrocarbons produced from the Assets at some
future time without then or thereafter receiving full payment therefor.

                ARTICLE 5. BUYER'S REPRESENTATIONS AND WARRANTIES

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

      (a) Buyer is a limited partnership duly organized, validly existing, and
in good standing under the laws of the state of Texas, and as of the Closing
Date (but not on the date hereof) is duly qualified to carry on its business in
those states where it is required to do so.

      (b) Buyer has all requisite power and authority to carry on its business
as presently conducted, to enter into this Agreement and the other documents and
agreements contemplated hereby, and to perform it obligations under this
Agreement and the other documents and agreements contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with, any provision of Buyer's articles of
incorporation, partnership agreement(s),

                                                                               8

<PAGE>

by-laws or governing documents or any material agreement or instrument to which
it is a party or by which it is bound, or any judgment, decree, order, statute,
rule, or regulation applicable to Buyer.

      (c) The execution, delivery and performance of this Agreement and the
transactions contemplated hereunder have been duly and validly authorized by all
requisite authorizing action, corporate, company, partnership or otherwise, on
the part of Buyer.

      (d) This Agreement, and all documents and instruments required hereunder
to be executed and delivered by Buyer at Closing, constitute legal, valid and
binding obligations of Buyer in accordance with their respective terms, subject
to applicable bankruptcy and other similar laws of general application with
respect to creditors.

      (e) There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by, or to the actual knowledge of Buyer threatened
against Buyer.

      (f) Buyer has not incurred any obligation or liability, contingent or
otherwise, for brokers' or finders' fees in connection with this Agreement and
the transaction provided herein.

      (g) Buyer is an experienced and knowledgeable investor and operator in the
oil and gas business. Prior to entering into this Agreement, Buyer was advised
by and has relied solely on its own expertise and legal, tax, reservoir
engineering, and other professional counsel concerning this Agreement, the
Assets and the value thereof.

      (h) Buyer has the financial resources to close the transaction
contemplated by this Agreement, and if third party financing is a requirement
for Buyer's ability to close, Buyer has obtained such financing or will have
obtained such financing before the Closing Date.

                ARTICLE 6. ACCESS TO INFORMATION AND INSPECTIONS

      6.1. Title Files.

      Promptly after the execution of this Agreement and until the Closing Date,
Seller shall permit Buyer and its representatives at reasonable times during
normal business hours to examine and copy, in Seller's offices at their actual
location, all abstracts of title, title opinions; title files, ownership maps,
lease files, assignments, division orders, payout statements and agreements
pertaining to the Assets as requested by Buyer, insofar as the same may now be
in existence and in the possession of Seller. No warranty of any kind is made by
Seller as to the information so supplied, and Buyer agrees that any conclusions
drawn therefrom are the result of its own independent review and judgment.

      6.2. Other Files.

      Promptly after the execution of this Agreement and until the Closing Date,
Seller shall permit Buyer and its representatives at reasonable times during
normal business hours to examine, in Seller's offices at their actual location,
all production, well, regulatory, engineering, seismic, geological, geophysical
and geochemical

                                                                               9

<PAGE>

information, accounting information and other information, files, books,
records, and data pertaining to the Assets as requested by Buyer, insofar as the
same may now be in existence and in the possession of Seller, excepting economic
evaluations, reserve reports and any such information that is subject to the
attorney/client and work product privileges. Seller shall use its commercially
reasonable efforts to cause third party operators of the Assets to afford Buyer
similar access to their files and records relating to the Assets. No warranty of
any kind is made by Seller as to the information so supplied, and Buyer agrees
that any conclusions drawn therefrom are the result of its own independent
review and judgment.

      6.3. Confidentiality Agreement.

      All such information made available to Buyer shall be maintained
confidential by Buyer until Closing. The information protected by such
confidentiality obligation does not include any information that (i) at the time
of disclosure is generally available to and known by the public (other than as a
result of a disclosure by Buyer), or (ii) is or was available to Buyer on a
nonconfidential basis. Buyer may disclose the information or portions thereof to
those employees, agents or representatives of Buyer or its lenders who need to
know such information for the purpose of assisting Buyer in connection with its
performance of this Agreement. Further, in the event that Buyer is requested or
required (by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) to disclose any of the information,
Buyer shall provide Seller with prompt written notice of such request or
requirement, so that Seller may seek such protective order or other appropriate
remedy as it may desire. Buyer shall further take whatever reasonable steps
which may be necessary to ensure that Buyer's employees, consultants and agents
comply with the provisions of this Section 6.3.

      6.4. Inspections.

      Promptly after the execution of this Agreement and until Closing, Seller,
subject to any necessary third-party operator approval, shall permit Buyer and
its representatives at reasonable times and at their sole risk, cost and
expense, to conduct reasonable inspections of the Assets.

      6.5. No Warranty or Representation on Seller's Information.

      EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER MAKES NO WARRANTY
OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE ACCURACY,
COMPLETENESS, OR MATERIALITY OF THE INFORMATION, RECORDS, AND DATA NOW,
HERETOFORE, OR HEREAFTER MADE AVAILABLE TO BUYER IN CONNECTION WITH THE ASSETS
OR THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS,
QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF ANY, PRODUCTION RATES,
RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION, ALLOWABLES
OR OTHER REGULATORY MATTERS, POTENTIAL FOR PRODUCTION OF HYDROCARBONS FROM THE
ASSETS, OR ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY OTHER MATERIAL
FURNISHED TO BUYER BY SELLER. ANY AND ALL SUCH DATA, INFORMATION AND MATERIAL
FURNISHED BY SELLER IS PROVIDED AS A CONVENIENCE ONLY AND ANY RELIANCE ON OR USE
OF SAME IS AT BUYER'S SOLE RISK.

                                                                              10

<PAGE>

                ARTICLE 7. ENVIRONMENTAL MATTERS AND ADJUSTMENTS

      7.1. Upon execution of and pursuant to the terms of this Agreement, Buyer
shall have the right, at reasonable times during normal business hours, to
conduct its investigation into the status of the physical and environmental
condition of the Assets. If, in the course of conducting such investigation,
Buyer discovers that any Asset is subject to a material Environmental Defect,
Buyer may raise such Environmental Defect in the manner set forth hereafter. For
purposes hereof, the term "material" shall mean that the cost of remediating any
single defect exceeds $100,000.00, the parties agreeing that such amount will be
a per Asset deductible rather than a threshold; in this context each separately
designated asset described on Exhibit "B" hereto will constitute a separate
"Asset". No later than 5:00 p.m., C.D.T., on November 1, 2005 (the
"Environmental Defect Notice Date"), Buyer shall notify Seller in writing
specifying such Environmental Defects, if any, the Assets affected thereby, and
Buyer's good faith estimate of the net reduction in value of the Assets affected
by such defects (the "Environmental Defect Value"). Prior to Closing, Buyer and
Seller shall treat all information regarding any environmental conditions as
confidential, whether material or not, and shall not make any contact with any
governmental authority or third party regarding same without the written consent
of the other party unless required by law.

      7.2. If Buyer fails to notify Seller prior to or on the Environmental
Defect Notice Date, of any Environmental Defects, all Environmental Defects not
timely noticed to Seller pursuant to Section 7.1 will be deemed waived, Seller
shall be released from any liability therefor, the Parties shall proceed with
Closing, Seller shall be under no obligation to correct the defects, and Buyer
shall assume the risks, liability and obligations associated with such defects.
Seller may, but shall be under no obligation to, correct at its own cost and
expense such defects on or before the Closing Date.

      7.3. In the event that Buyer provides Seller with an Environmental Defect
Notice, Seller, at its sole option, shall, (i) agree to cure or remediate any
Environmental Defect within a reasonable time after Closing as provided in
Section 7.4; or, (ii) reduce the Purchase Price by the amount of the
Environmental Defect Value; provided, however, if an Environmental Defect poses
a material risk of any claims by third parties for damages, injunctive relief or
any other remedy other than the remediation contemplated in determining the
Environmental Defect Value, or if the estimated Environmental Defect Value
exceeds 20% of the Allocated Value of the affected Asset, then Buyer shall have
the right to delete the affected Asset from the Assets to be conveyed under this
Agreement, and receive a reduction of the Purchase Price in the amount of the
Allocated Value of such Asset, in which event 100% of the Allocated Value of
such Asset shall be included in the calculation of total defects for purposes of
Article 9. Regardless of Seller's intention to cure or remediate an
Environmental Defect after Closing, the value of all Environmental Defects not
cured or remediated by Closing shall be included in the calculation of total
defects for purposes of Article 9.

      7.4 If Seller elects to proceed under Section 7.3(i) with respect to an
Environmental Defect, Seller shall remediate such Environmental Defect as soon
as reasonably practicable after Closing in accordance with applicable law, in
which case the following provisions will govern the remediation:

                                                                              11

<PAGE>

      (a) An amount equal to the Environmental Defect Value of such
Environmental Defect shall be placed in escrow by Buyer, with an escrow agent
and pursuant to an escrow agreement mutually acceptable to the Parties, and the
Purchase Price shall be reduced by such amount.

      (b) Buyer will grant access to the Assets after Closing to Seller, and
third parties conducting assessments or remediation, to the extent and as long
as necessary to conduct and complete the assessment or remediation work, to
remove equipment and facilities, and to perform any other activities reasonably
necessary in connection with assessment or remediation. Buyer will use its
commercially reasonable efforts not to interfere with Seller's ingress and
egress or assessment or remediation activities. Seller will make reasonable
efforts to perform the work so as to minimize disruption to Buyer's business
activities and to the Assets.

      (c) Seller shall retain the liability for, and shall indemnify, defend and
hold harmless Buyer from any Claims with respect to the Environmental Defect,
until such time as the remediation has been completed and accepted by Buyer, and
upon such acceptance by Buyer (which acceptance shall not be unreasonably
withheld or delayed), the amount escrowed on account of such Environmental
Defect shall be released to Seller (together with all interest earned thereon
..in the escrow account), and Seller shall have no further liability or
indemnification obligation with respect to such Environmental Defect.

      (d) Until Seller completes remediation of an Environmental Defect, Seller
and Buyer will each notify the other of any pending or threatened claim, action,
or proceeding by any authority or private party that relates to or would affect
the Environmental Defect or the remediation of the Assets affected by the
Environmental Defect.

      (e) If Seller undertakes remediation as to any Asset in which Seller's
ownership is less than 100%, Buyer will bill the other working interest owners
for their share of the remediation expenses in advance of Seller beginning such
remediation to the extent permitted under the applicable operating agreement and
will pay over to Seller any amount so received provided that Buyer shall have no
obligation to initiate any legal proceeding to collect such amounts and shall be
entitled to deduct any reasonable costs of collection from the amount received
to be paid to Seller.

      7.5 Notwithstanding anything contained herein to the contrary, there shall
be no adjustments to the Non-Producing Leasehold (as described in Exhibit B
hereto) pursuant to Articles 7 and 9 hereof.

                    ARTICLE 8. TITLE DEFECTS AND ADJUSTMENTS

      8.1. Definitions.

      For purposes hereof, the terms set forth below shall have the meanings
assigned thereto.

      (a) "Allocated Value" shall mean the dollar amount allocated to each Asset
as set forth on Exhibit B.

                                                                              12

<PAGE>

      (b) "Defensible Title", subject to and except for the Permitted
Encumbrances (as hereinafter defined), means: As to the Leases, such title held
by Seller and reflected by appropriate documentation properly filed in the
official records of the jurisdiction in which the Lease or Leases are located
that (a) entitles Seller and will entitle Buyer, after Closing, to own and
receive and retain, without suspension, reduction or termination, payment of
revenues for not less than the net revenue interest shown on Exhibit B of all
oil and gas produced, saved and marketed from or attributable to the well or
unit indicated through the plugging, abandonment and salvage of such wells; (b)
obligates Seller, and will obligate Buyer after Closing, to bear the costs and
expenses relating to the maintenance, development and operation of such well or
unit through the plugging, abandonment and salvage of such wells in an amount
not greater than the expense interest of Seller set forth in Exhibit B (unless
Seller's net revenue interest therein is proportionately increased); and (c) the
Assets are free and clear of any liens, burdens or encumbrances of any kind or
character.

      (c) "Title Defect" shall mean any matter which (i) causes Seller to have
less than Defensible Title to any of the Assets as of the Closing Date, or (ii)
causes any of the following to be untrue:

            (A) Leases. The Leases are in full force and effect, are valid and
subsisting. Except for the matters described in Schedule 8.1(c)(A), within the
last two years Seller has not been notified by any lessor under any Lease or by
any other party of a default under any Lease that has not been resolved or of
any requirements or demands to drill additional wells on any of the Leases.
Further, all contracts affecting the Assets are of the type generally found in
the oil and gas industry in the geological area in which the Assets in question
are located, do not (individually or in the aggregate) contain unusual or unduly
burdensome provisions which may operate in a materially adverse manner with
respect to the Assets or to the Buyer, and are in form and substance considered
conventional within the oil and gas industry in the geographical area in which
the Assets are located.

            (B) Material Contracts; Required Capital Expenditures. Seller is not
in default, and within the last two years has not received any written notice
from any person alleging that Seller is in default, in any material respect
under any material contract or agreement pertaining to the Assets except for
those alleged defaults described in Schedule 8.1(c).

            (C) Proration. The production from the wells has not been prorated.

            (D) Tax Partnerships. Except as set forth on the attached Schedule
8.1(c) (D), , no portion of the Assets (1) has been contributed to and is
currently owned by a tax partnership; (2) is subject to any form of agreement
(whether formal or informal, written or oral) deemed by any federal tax statute,
rule or regulation to be or to have created a tax partnership; or (3) otherwise
constitutes "partnership property" (as that term is used throughout Subchapter K
of Chapter 1 of Subtitle A of the Code) of a tax partnership. For purposes of
this Section 8.1(c)(D) a "tax partnership" is any entity, organization or group
deemed to be a partnership within the meaning of section 761 of the Code or any
similar federal statute, rule or regulation, and that is not excluded from the
application of the partnership provisions of Subchapter K of Chapter 1 of
Subtitle A of the Code by reasons of elections made, pursuant to section 761 (a)
of the Code and all such similar federal statutes, rules and regulations, to be
excluded from the application of all such partnership provisions.

                                                                              13

<PAGE>

      (d) "Title Defect Property" shall mean any Lease or portion thereof
burdened by a Title Defect.

      (e) "Permitted Encumbrances" shall mean any of the following matters:

            (i) defects in the early chain of title consisting of failure to
recite marital status or the omission of succession or heirship proceedings;

            (ii) defects or irregularities arising out of prior oil and gas
leases which, on their face, expired more than ten (10) years prior to the
Effective Time, and which have not been released of record;

            (iii) tax liens and mechanic's liens for amounts not yet due and
payable, or those that are being contested in good faith by Seller in the
ordinary course of business (which contests and contested amounts are described
in Schedule 8.1 (e)(iii) hereto);

            (iv) to the extent any of the following do not materially diminish
the value of, or impair the conduct of operations on, any of the Assets and do
not impair Seller's right to receive the revenues attributable thereto: (x)
easements, rights-of-way, servitudes, permits, surface leases and other rights
in respect of surface operations, pipelines, grazing, hunting, fishing, logging,
canals, ditches, reservoirs or the like, and (y) easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other similar
rights-of-way, on, over or in respect of property owned or leased by Seller or
over which Seller owns rights of way, easements, permits or licenses;

            (v) all lessors' royalties, overriding royalties, net profits
interests, carried interest, production payments, reversionary interests and
other burdens on or deductions from the proceeds of production if the net
cumulative effect of such burdens or deductions does not reduce the net revenue
interest of Seller in any well affected thereby to a percentage less than that
percentage reflected in Exhibit B or impair the right to receive revenues
attributable thereto;

            (vi) preferential rights to purchase and required third party
consents to assignments and similar agreements with respect to which waivers or
consents are obtained from the appropriate parties prior to the Closing Date, or
the appropriate time period for asserting the rights has expired without an
exercise of the rights prior to the Closing Date;

            (vii) all rights to consent by, required notices to, filings with,
or other actions by governmental entities and tribal authorities in connection
with the sale or conveyance of oil and gas leases or interests if they are
customarily obtained subsequent to the sale or conveyance;

            (viii) defects or irregularities of title arising out of events or
transactions which have been barred by limitations;

            (ix) any encumbrance or other matter (other than liens securing
indebtedness originated by or expressly assumed by Seller or its affiliates,
which shall not be subject to any deductible) having an aggregate adverse effect
on the value of the

                                                                              14

<PAGE>

Assets of less than $100,000.00, the parties agreeing that such amount will be a
per Asset deductible rather than a threshold; and

            (x) any encumbrance or other matter (whether or not constituting a
"Title Defect") expressly waived in writing by Buyer.

      8.2. Notice of Title Defects.

      No later than 5:00 p.m., C.S.T., on November 1, 2005 (the "Title Defect
Notice Date"), Buyer may provide Seller written notice of any Title Defect along
with a description of those matters which, in Buyer's reasonable opinion,
constitute Title Defects and setting forth in detail Buyer's calculation of the
value for each Defect. Seller may elect, at its sole cost and expense, but
without obligation, to cure all or any portion of such Title Defects. Buyer's
failure to deliver to Seller such notice on or before the Defect Notice Date
shall be deemed a waiver by Buyer of all Title Defects that Seller does not have
notice of on such date. Any defect or deficiency concerning Seller's title to
the Assets not asserted by Buyer prior to the Title Defect Notice Date shall be
deemed waived by Buyer for all purposes.

      8.3. Title Defect Adjustment.

      (a) Seller shall have the opportunity to cure, until sixty (60) days after
Closing ("Cure Period"), any Title Defect, or, alternatively, Seller may elect
to cure such Title Defect by indemnifying Buyer against any damages, claims or
expenses that may arise out of such Title Defect, subject to the provisions of
Section 8.3(b) below. If Seller elects to attempt to cure a Title Defect after
Closing, Closing with respect to the portion of the Assets affected by such
Title Defect will be deferred (the "Closing Deferred Property"). Closing with
respect to all other Assets will proceed as provided in this Agreement (subject
to Article 9 and the other provisions of this Agreement), but the Base Purchase
Price delivered to Seller at such initial Closing will be reduced by the
Allocated Value of all Closing Deferred Properties. If Seller cures any Title
Defect within the Cure Period, then the Closing with respect to the Closing
Deferred Property for which such Title Defect has been cured will proceed and
will be finalized within seven (7) days following the end of the Cure Period. If
Seller fails or refuses to cure any Title Defect prior to the expiration of the
Cure Period, Buyer may separately elect with respect to each affected Closing
Deferred Property, by notice to Seller delivered within seven (7) days after
receipt by Buyer of Notice from Seller of such failure or refusal to cure any
such Title Defect, to waive all of the Title Defects applicable to such Closing
Deferred Property (which waived Title Defects shall be deemed Permitted
Encumbrances) and proceed to Closing on such Closing Deferred Property. If Buyer
does not elect to waive an existing Title Defect, Seller shall retain the
affected Closing Deferred Property and the Parties shall have no further
obligation with respect thereto. In the event that any such property is retained
by Seller and such property has been receiving revenue, without complaint, for a
period in excess of two years, then Buyer agrees (i) not to take any action to
interfere with such revenue stream, and (ii) to the extent that Buyer becomes
payor of such revenue, to pay Seller such revenue upon receipt of an indemnity
agreement from Seller.

      (b) The following provisions shall apply to an election by Seller under
the first sentence of Section 8.3(a) to cure a Title Defect by indemnifying
Buyer with regard to such Title Defect, notwithstanding any other provisions of
this Agreement:

                                                                              15

<PAGE>

            (i) Seller's indemnity shall be of unlimited duration;

            (ii) Seller's indemnity shall be freely transferable by Buyer to its
successors and assigns to the Assets affected by such Title Defect, including
without limitation, any lender to Buyer and any purchaser of such Assets,
whether directly from Buyer or through any foreclosure proceeding; and

            (iii) If the Title Defect Value, individually or in the aggregate,
for one or more Title Defects to be covered by the Seller's indemnity exceeds
$500,000.00, Seller shall not have the right under the first sentence of Section
8.3(a) to indemnify Buyer with regard to such Title Defects without Buyer's
consent, and if such consent is not obtained, then either Seller or Buyer shall
have the option to terminate this Agreement as provided in Article 9 below.

      8.4. Title Defect Values.

      In determining the value of a Title Defect, it is the intent of the
Parties to include, to the extent possible, only that portion of the lands,
leases and wells, whether an undivided interest, separate interest or otherwise,
materially and adversely affected by the defect. The Title Defect value shall in
no event exceed the Allocated Value of the affected Asset. Subject to such
limitation; the "Title Defect Value" shall be determined by the parties in good
faith taking into account all relevant factors, including, but not limited to,
the following:

            (i) the Allocated Value of the leases, lands and well affected by
the Title Defect;

            (ii) the reduction in the warranted NRI of the Title Defect
Property, or the amount by which the cost sharing percentage for such property
is greater than the warranted WI;

            (iii) the productive status of the Title Defect Property (i.e.,
proved developed producing, etc.) and the present value of the future income
expected to be produced therefrom;

            (iv) if the Title Defect represents only a possibility of title
failure, the probability that such failure will occur;

            (v) the legal effect of the Title Defect; and

            (vi) if the Title Defect is a lien or encumbrance on the leases,
lands or wells, the cost of removing such lien or encumbrance.

      Notwithstanding anything to the contrary that may be contained in this
Article VIII, (i) Buyer understands and agrees that the Allocated Values set
forth in Exhibit B are for currently producing zones and that any loss of depth
rights or acreage will not have a Title Defect Value unless such loss causes a
decrease in expense or net revenue interest in the currently producing zone; and
(ii) notwithstanding anything contained herein to the contrary, there shall be
no adjustments to the Non-Producing Leasehold (as described in Exhibit B hereto)
pursuant to Articles 7 and 9 hereof.

                                                                              16

<PAGE>

      8.5. Title Warranty.

      SELLER SHALL CONVEY SELLER'S INTERESTS IN AND TO THE ASSETS TO BUYER
SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS, AND ENCUMBRANCES,
WITHOUT WARRANTY OF TITLE, AS PROVIDED IN THE FORM OF ASSIGNMENT, BILL OF SALE
AND CONVEYANCE ATTACHED AS EXHIBIT C HERETO EXCEPT THAT SELLER SHALL WARRANT
TITLE TO THE ASSETS AGAINST ALL CLAIMS, LIENS, BURDENS AND ENCUMBRANCES ARISING
BY, THROUGH OR UNDER SELLER, BUT NOT OTHERWISE. IMBALANCES WITH RESPECT TO OIL
OR NATURAL GAS ARE GOVERNED BY ARTICLE 18 HEREOF. THE PARTIES AGREE THAT THE
EXISTENCE OF ANY SUCH IMBALANCES SHALL NOT BE DEEMED A TITLE DEFECT.

                         ARTICLE 9. OPTION TO TERMINATE

      If the aggregate of the values attributable to all Title Defects
determined pursuant to Article 8 plus the value of all Environmental Defects
determined pursuant to Article 7 plus the aggregate value of a reduction to the
Purchase Price pursuant to Article 10 exceeds Four Million Eight Hundred Fifty
Thousand and no/100 Dollars ($4,850,000.00), then either Buyer or Seller may, at
its sole option, terminate this Agreement without any further obligation by
giving written notice of termination. In the event of such termination, Seller
shall return the Performance Deposit to Buyer, without interest, within five (5)
days of receipt of the notice of termination and neither party shall have any
further obligation or liability hereunder.

              ARTICLE 10. PREFERENTIAL PURCHASE RIGHTS AND CONSENTS

      10.1. Actions and Consents.

      (a) Seller and Buyer agree that each shall use all reasonable efforts to
take or cause to be taken all such action as may be necessary to consummate and
make effective the transaction provided in this Agreement and to assure that it
will not be under any material corporate, legal, or contractual restriction that
could prohibit or delay the timely consummation of such transaction.

      (b) Seller shall notify all holders of (i) preferential rights to purchase
the Assets ("Preferential Purchase Rights"), (ii) rights of consent to the
assignment, or (iii) rights of approval to the assignment of the Assets, and of
such terms and conditions of this Agreement to which the holders of such rights
are entitled. Seller shall promptly notify Buyer if any Preferential Purchase
Rights are exercised, any consents or approvals denied, or if the requisite
period has elapsed without said rights having been exercised or consents or
approvals having been received. If prior to Closing, any such Preferential
Purchase Rights are timely and properly exercised, or Seller is unable to obtain
a necessary consent or approval prior to Closing, the interest or part thereof
so affected shall be eliminated from the Assets and the Purchase Price reduced
by the portion of the Purchase Price allocated to such interest or part thereof
as provided in Exhibit B. If any additional Preferential Purchase Rights are
discovered after Closing, or if a third party Preferential Purchase Rights
holder alleges improper notice, then Buyer agrees to cooperate with Seller in
giving effect to any such valid third party Preferential Purchase Rights. In the
event any such valid third party preferential purchase rights are validly
exercised after Closing, Buyer's sole remedy against Seller shall be return by
Seller to Buyer of that portion of the Purchase Price

                                                                              17

<PAGE>

allocated under Exhibit B to the portion of the assets on which such rights are
exercised and lost by Buyer to such third party. The parties agree that the
Allocated Values for properties subject to Preferential Purchase Rights shall be
the sole responsibility of Buyer, and Buyer agrees to indemnify and hold Seller
harmless from all liability and claims related to the reasonableness of such
values.

      (c) With respect to any portion of the Assets for which a Preferential
Purchase Right has not been asserted prior to Closing or a consent or other
approval to assign has not been granted and for which the time for election to
exercise such Preferential Purchase Right or to grant such consent has not
expired, Closing with respect to the portion of the Assets subject to such
outstanding obligations will be deferred (the "Third Party Interests"). Closing
with respect to all other Assets will proceed as provided in this Agreement, but
the Base Purchase Price delivered to Seller at Closing will be reduced by the
allocated value of the Third Party Interests. In the event that within ninety
(90) days after Closing any such Preferential Purchase Right is waived or
consent or approval is obtained or the time for election to purchase or to
deliver a consent or approval passes (such that under the applicable documents,
Seller may sell the affected Third Party Interest to Buyer), then the Closing
with respect to the applicable portion of the Third Party Interests will proceed
promptly. If such waivers, consents or approvals as are necessary are not
received by Seller within the applicable ninety (90) day period, Seller shall
retain such Third Party Interests and the parties shall have no further
obligation to each other with respect thereto.

                         ARTICLE 11. COVENANTS OF SELLER

      11.1. Covenants of Seller Pending Closing.

      (a) From and after the date of execution of this Agreement and until the
Closing, and subject to Section 11.2 and the constraints of applicable operating
and other agreements, Seller shall operate, manage, and administer the Assets in
a good and workmanlike manner consistent with its past practices, and shall
carry on its business with respect to the Assets in substantially the same
manner as before execution of this Agreement. Seller shall use all reasonable
efforts to preserve in full force and effect all Leases, operating agreements,
easements, rights-of-way, permits, licenses, and agreements which relate to the
Assets in which Seller owns an interest, and shall perform all obligations of
Seller in or under all such agreements relating to the Assets; provided,
however, Buyer's sole remedy for Seller's breach of its obligations under this
Section 10.1(a) shall be limited to the amount of that portion of the Purchase
Price allocated in Exhibit B to that portion of the Assets affected by such
breach. Seller shall, except for emergency action taken in the face of serious
risk to life, property, or the environment (1) submit to Buyer, for prior
written approval, all requests for operating or capital expenditures and all
proposed contracts and agreements relating to the Assets which involve
individual commitments of more than $25,000.00; (2) consult with, inform, and
advise Buyer regarding all material matters concerning the operation,
management, and administration of the Assets; (3) obtain Buyer's written
approval prior to voting under any operating, unit, joint venture, partnership
or similar agreement; and (4) not approve or elect to go nonconsent as to any
proposed well or plug and abandon or agree to plug and abandon any well without
Buyer's prior written approval. On any matter requiring Buyer's approval under
this Section 10.1(a), Buyer shall respond within five (5) days to Seller's
request for approval and failure of Buyer to respond to Seller's request for
approval within such time shall

                                                                              18
<PAGE>

release Seller from the obligation to obtain Buyer's approval before proceeding
on such matter.

      (b) Seller shall promptly notify Buyer of any suit, lessor demand action,
or other proceeding before any court, arbitrator, or governmental agency and any
cause of action which relates to the Assets or which might result in impairment
or loss of Seller's interest in any portion of the Assets or which might hinder
or impede the operation of the Assets.

      11.2. Limitations on Seller's Covenants Pending Closing.

      To the extent Seller is not the operator of any of the Assets, the
obligations of Seller in Section 11.1 concerning operations or activities which
normally or pursuant to existing contracts are carried out or performed by the
operator, shall be construed to require only that Seller use all reasonable
efforts (without being obligated to incur any expense or institute any cause of
action) to cause the operator of such Assets to take such actions or render such
performance within the constraints of the applicable operating agreements and
other applicable agreements.

                         ARTICLE 12. CLOSING CONDITIONS

      12.1. Seller's Closing Conditions.

      The obligations of Seller under this Agreement are subject, at the option
of Seller, to the satisfaction, at or prior to the Closing, of the following
conditions:

      (a) all representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Buyer shall have performed and satisfied, or has caused to be performed and
satisfied, all agreements required by this Agreement to be performed and
satisfied by Buyer at or prior to the Closing;

      (b) the execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by all
necessary action, corporate, partnership or otherwise, on the part of Buyer;

      (c) all necessary consents of and filings with any state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, except to the extent that such consents and filings are
normally obtained, accomplished or waived after Closing; and

      (d) as of the Closing Date, no suit, action or other proceeding (excluding
any such matter initiated by Seller) shall be pending or threatened before any
court or governmental agency seeking to restrain Seller or prohibit the Closing
or seeking damages against Seller as a result of the consummation of this
Agreement.

      12.2. Buyer's Closing Conditions.

      The obligations of Buyer under this Agreement are subject, at the option
of Buyer, to the satisfaction, at or prior to the Closing, of the following
conditions:

                                                                              19

<PAGE>

      (a) all representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Seller shall have performed and satisfied, or has caused to be performed and
satisfied, all agreements required by this Agreement to be performed and
satisfied by Seller at or prior to the Closing;

      (b) the execution, delivery, and performance of this Agreement and the
transactions contemplated thereby have been duly and validly authorized by all
necessary action, corporate, partnership or otherwise, on the part of Seller;

      (c) all necessary consents of and filings with any state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, except to the extent that such consents and filings are
normally obtained, accomplished or waived after Closing;

      (d) as of the Closing Date, no suit, action or other proceeding (excluding
any such matter initiated by Buyer) shall be pending or threatened before any
court or governmental agency seeking to restrain Buyer or prohibit the Closing
or seeking damages against Buyer as a result of the consummation of this
Agreement.

                               ARTICLE 13. CLOSING

      13.1. Closing.

      Each of the parties Seller at their option may schedule the closing of the
transaction contemplated in this Agreement as to their respective interests at a
location mutually acceptable to such Seller and Buyer at any time between
November 15, 2005 and January 15, 2006; so long as at the first of such closings
(the "Initial Closing") (a) Lynx Production Company, Inc. and any other parties
Seller joining in the Initial Closing convey a minimum of an undivided 40%
interest in and to each of the Assets and (b) operatorship of all of the Assets
operated by Lynx Operating Co., Inc. is transferred from Lynx Operating Co.,
Inc. to Parallel LP on or before November 15, 2005. The Initial Closing of this
transaction (the "Closing") shall be held at the offices of Lynx Production
Company, Inc. at 11:00 a.m., local time, on November 15, 2005 or at such earlier
date or place as the Parties may agree in writing (herein called "Closing
Date"). Time is of the essence and the Closing Date shall not be extended unless
by written agreement of the Parties. On or before five (5) business days prior
to Closing, Buyer and Seller shall use their best efforts to provide each other
copies of all closing documents.

      13.2. Seller's Closing Obligations.

      At Closing, except to the extent comprising the Excluded Assets, Seller
shall deliver to Buyer the following:

      (a) the Assignment and Conveyance substantially in the form attached
hereto as Exhibit C and such other documents as may be reasonably necessary to
convey all of Seller's interest in the Assets to Buyer in accordance with the
provisions hereof;

                                                                              20

<PAGE>

      (b) a nonforeign affidavit executed by Seller in the form attached as
Exhibit D;

      (c) appropriate regulatory forms appointing Buyer as the operator for
those Assets which Lynx Operating Company operates;

      (d) copies of all third-party waivers, consents, approvals, permits and
actions obtained;

      (e) exclusive possession of the Assets;

      (f) letters-in-lieu of transfer orders in form acceptable to Seller and
Buyer;

      (g) a Reporting and Accounting Memorandum executed by Seller in the form
attached as Exhibit E; and

      (h) releases of all liens and encumbrances burdening the Assets in form
and substance reasonably satisfactory to Buyer.

      13.3. Buyer's Closing Obligations.

      At Closing, Buyer shall deliver to each Seller (I) by wire transfer in
immediately available funds to an Account designated by each Seller, the
Purchase Price (less the Performance Deposit) attributable to each Seller's
interest as adjusted by Section 3.3, and (ii) a Reporting and Accounting
Memorandum executed by Buyer in the form attached as Exhibit E.

      13.4. Joint Closing Obligations.

      Both Parties at Closing shall execute a Settlement Statement evidencing
the amount actually wire transferred and all adjustments to the Purchase Price
taken into account at Closing. All events of Closing shall each be deemed to
have occurred simultaneously with the other, regardless of when actually
occurring, and each shall be a condition precedent to the other.

               ARTICLE 14. LIMITATIONS ON WARRANTIES AND REMEDIES

      THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF
THE RESERVES, IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE LEASES,
OR THE ENVIRONMENTAL CONDITION OF THE ASSETS. THE ITEMS OF PERSONAL PROPERTY,
EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE
ASSETS ARE SOLD HEREUNDER "AS IS, WHERE IS, AND WITH ALL FAULTS" AND NO
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR CONDITION, ARE GIVEN BY OR ON BEHALF OF SELLER. IT IS UNDERSTOOD AND
AGREED THAT PRIOR TO CLOSING BUYER SHALL HAVE INSPECTED THE ASSETS FOR ALL
PURPOSES AND HAS SATISFIED ITSELF AS TO

                                                                              21

<PAGE>

THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, AND
THAT BUYER ACCEPTS SAME IN ITS "AS IS, WHERE IS AND WITH ALL FAULTS" CONDITION.
THE WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU
OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND BUYER HEREBY WAIVES ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONDITION, OR
CONFORMITY TO SAMPLES.

                   ARTICLE 15. CASUALTY LOSS AND CONDEMNATION

      If, prior to the Closing, all or any portion of the Assets is destroyed by
fire or other casualty or if any portion of the Assets shall be taken by
condemnation or under the right of eminent domain (all of which are herein
called "Casualty Loss" and limited to property damage or taking only), Buyer and
Seller must agree prior to Closing either (i) to delete that portion of the
Assets which is subject to the Casualty Loss from the Assets, and the Purchase
Price shall be reduced by the value allocated to the deleted interest as set out
in Exhibit B, or (ii) for Buyer to proceed with the purchase of such Assets,
notwithstanding any such destruction or taking (without reduction of the
Purchase Price) in which case Seller shall pay, at the Closing, to Buyer all
sums paid to Seller by third parties by reason of the destruction or taking of
such Assets and shall assign, transfer and set over unto Buyer all insurance
proceeds received by Seller as well as all of the right, title and interest of
Seller in and to any claims, causes of action, unpaid proceeds or other payments
from third parties arising out of such destruction or taking; provided, however,
if the value of that portion of the Assets affected by the Casualty Loss, not to
exceed that allocated in Exhibit B, exceeds10%, Buyer and Seller shall each have
the right to terminate this Agreement upon written notification to the other,
Seller shall return the Performance Deposit to Buyer, the transaction shall not
close and thereafter neither Buyer nor Seller shall have any liability or
further obligations to the other hereunder. Prior to Closing, Seller shall not
voluntarily compromise, settle or adjust any amounts payable by reason of any
Casualty Loss without first obtaining the written consent of Buyer.

                        ARTICLE 16. DEFAULT AND REMEDIES

      16.1. Seller's Remedies.

      Upon failure of Buyer to consummate the transactions contemplated hereby
by the Closing Date, as it may be extended in accordance herewith, Seller's
exclusive remedy for such breach and any other breach of this Agreement by Buyer
other than Section 6.3 shall be to retain the Performance Deposit as a
liquidated damage and not as a penalty, and terminate this Agreement, all other
remedies being expressly waived by Seller. Notwithstanding any provision hereof
to the contrary Seller may retain the Deposit as a liquidated damage only in the
event the transaction contemplated by this Agreement is terminated due solely to
the breach hereof by Buyer in the absence of any material breach hereof by
Seller. If the transaction contemplated by this Agreement fails to close or is
terminated for any other reason, the Performance Deposit shall be returned to
Buyer.

                                                                              22

<PAGE>

      16.2. Buyer's Remedies.

      Upon failure of Seller to comply herewith by the Closing Date, as it may
be extended in accordance herewith, Buyer, at its sole option and in addition to
any other remedies it may have at law or equity, may (i) enforce specific
performance, or (ii) terminate this Agreement. In the event Buyer elects to
terminate this Agreement as set forth above, Seller shall immediately return the
Performance Deposit to Buyer.

      16.3. Other Remedies.

      Notwithstanding the foregoing, termination of this Agreement shall not
prejudice or impair Buyer's obligations under Section 6.3 (and the
confidentiality agreements referenced therein). The prevailing party in any
legal proceeding brought under or to enforce this Agreement shall be
additionally entitled to recover court costs and reasonable attorneys' fees from
the non-prevailing party.

      16.4. Effect of Termination.

In the event of termination of this Agreement under this Article 16, the
transaction shall not close and neither Buyer nor Seller shall have any further
obligations, remedies, liabilities, rights or duties to the other hereunder,
except as expressly provided herein.

                      ARTICLE 17. ASSUMPTION AND INDEMNITY

      17.1. Assumed Obligations; Pre-Closing Liabilities.

      Upon and after Closing Buyer shall own the Assets, together with all the
rights, duties, obligations, and liabilities accruing after Closing, including
the Assumed Obligations and Buyer's indemnity obligations hereunder. Buyer
agrees to assume and pay, perform, fulfill and discharge all Assumed
Obligations. Seller agrees to retain and pay, perform, fulfill and discharge all
Retained Obligations.

      17.2. Buyer's Indemnity.

      Buyer agrees to indemnify, defend and hold Seller harmless from and
against any and all claims, demands, losses, damages, punitive damages, costs,
expenses, causes of action or judgments of any kind or character including,
without limitation, any interest, penalty, reasonable attorneys' fees and other
costs and expenses incurred in connection therewith or the defense thereof
(collectively the "Claims"), with respect to all liabilities and obligations or
alleged or threatened liabilities and obligations caused by, related to,
attributable to, or arising out of the Assumed Obligations.

      17.3. Seller's Indemnity.

      Seller agrees to indemnify, defend and hold Buyer harmless from and
against any and all Claims for or with respect to all liabilities and
obligations or alleged or threatened liabilities and obligations caused by,
related to, attributable to, or arising out of the Retained Obligations.

                                                                              23

<PAGE>

      17.4. Negligence.

      THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN
THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES
AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE,
COMPARATIVE, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE
PARTIES HERETO.

      17.5. Broker or Finder's Fee.

      Each party hereby agrees to indemnify and hold the other harmless from and
against any claim for a brokerage or finder's fee or commission in connection
with this Agreement or the transactions contemplated by this Agreement to the
extent such claim arises from or is attributable to the actions of such
indemnifying party, including, without limitation, any and all losses, damages,
punitive damages, attorneys' fees, costs and expenses of any kind or character
arising out of or incurred in connection with any such claim or defending
against the same.

                           ARTICLE 18. GAS IMBALANCES

      Seller and Buyer will use their best efforts to update (to the Effective
Time) the gas imbalance volume amounts listed on Exhibit F. If, prior to the
Final Settlement Date, either party hereto notifies the other party hereto that
the volumes set forth in Exhibit F are incorrect, then Buyer or Seller will pay
the other at the Final Settlement, as appropriate, an amount equal to $10.00 per
net mmbtu variance from the net imbalance shown on Exhibit F. Subject to such
adjustment on the Final Settlement Date, as of the Closing Buyer agrees to
assume any liability and obligation for gas production imbalances (whether over
or under) attributable to the Assets. Except as set forth in this Article 18, in
assuming this liability at Closing, Buyer shall not be obligated to make any
additional payment over the Purchase Price to Seller, and Seller shall not be
obligated to refund any of said price to reimburse Buyer for any over-balances
existing at the time of sale.

                            ARTICLE 19. MISCELLANEOUS

      19.1. Public Announcements.

      The parties hereto agree that prior to Closing, prior to making any public
announcement or statement with respect to the transaction contemplated by this
Agreement, the party desiring to make such public announcement or statement
shall consult with the other party hereto and exercise its best efforts to (i)
agree upon the text of a joint public announcement or statement to be made by
both of such parties; or (ii) obtain written approval of the other party hereto
to the text of a public announcement or statement to be made solely by Seller or
Buyer, as the case may be. Nothing contained in this paragraph shall be
construed to require either party to obtain approval of the other party hereto
to disclose information with respect to the transaction contemplated by this
Agreement to any state or federal governmental authority or agency to the extent
(i) required by applicable law or by any applicable rules, regulations or orders
of any governmental authority or agency having jurisdiction; or (ii) necessary
to comply with disclosure requirements of the New York Stock Exchange or other
recognized exchange or over the counter, and applicable securities laws.
Attached hereto as Exhibit "H" ("Press Release Form") is a draft of the

                                                                              24

<PAGE>

type of public announcement contemplated by Buyer to be utilized in connection
with the transaction being the subject of this Agreement. The parties agree to
cause any public announcement issued in connection with the closing of the
transaction contemplated in this Agreement to conform substantially to the form
attached hereto.

      19.2. Filing and Recording of Assignments, etc.

      Buyer shall be solely responsible for all filings and recording of
assignments and other documents related to the Assets and for all fees connected
therewith, and Buyer shall furnish copies of all such filed and/or recorded
documents to Seller. Seller shall not be responsible for any loss to Buyer
because of Buyer's failure to file or record documents correctly or promptly.
Buyer shall promptly file all appropriate forms, declarations or bonds with
federal and state agencies relative to its assumption of operations and Seller
shall cooperate with Buyer in connection with such filings.

      19.3. Further Assurances and Records.

      (a) After the Closing each of the parties will execute, acknowledge and
deliver to the other such further instruments, and take such other action, as
may be reasonably requested in order to more effectively assure to said party
all of the respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered or inuring to the benefit of such
party in consummation of the transactions contemplated hereby.

      (b) Buyer agrees to maintain the files and records of Seller that are
acquired pursuant to this Agreement for seven (7) years after Closing. Buyer
shall provide Seller and its representatives reasonable access to and the right
to copy such files and records for the purposes of (i) preparing and delivering
any accounting provided for under this Agreement and adjusting, prorating and
settling the charges and credits provided for in this Agreement; (ii) complying
with any law, rule or regulation affecting Seller's interest in the Assets prior
to the Closing Date; (iii) preparing any audit of the books and records of any
third party relating to Seller's interest in the Assets prior to the Closing
Date, or responding to any audit prepared by such third parties; (iv) preparing
tax returns; (v) responding to or disputing any tax audit; or (vi) asserting,
defending or otherwise dealing with any claim or dispute under this Agreement.

      (c) Buyer agrees that within thirty (30) days after Closing or within
thirty (30) days after operations are actually transferred, whichever is later,
it will remove or cause to be removed the names and marks used by Seller and all
variations and derivatives thereof and logos relating thereto from the Assets
and will not thereafter make any use whatsoever of such names, marks and logos;
provided, however, that the name of the "Pontius-Barksdale" Lease shall not be
changed.

      (d) To the extent not obtained or satisfied as of Closing, Seller agrees
to continue to use all reasonable efforts, but without any obligation to incur
any cost or expense in connection therewith, and to cooperate with Buyer's
efforts to obtain for Buyer (i) access to files, records and data relating to
the Assets in the possession of third parties; and (ii) access to wells
constituting a part of the Assets operated by third parties for purposes of
inspecting same.

      (e) Buyer shall comply with all current and subsequently amended
applicable laws, ordinances, rules, and regulations applicable to the Assets and
shall

                                                                              25

<PAGE>

promptly obtain and maintain all permits required by governmental authorities in
connection with the Assets.

      19.4. Notices.

      Except as otherwise expressly provided herein, all communications required
or permitted under this Agreement shall be in writing and any communication or
delivery hereunder shall be deemed to have been duly given and received when
actually delivered to the address of the parties to be notified as set forth
below and addressed as follows:

      If to Seller, as follows:

      Lynx Production Company, Inc.
      2100 Ross Avenue, Suite 860, LB 52
      Dallas, Texas 75201
      Attention: Vance Payne
      FAX: (214) 954-0713

      With copy to:

      Steven C. Haworth
      Law Offices of Steven C. Haworth
      5919 Greenville Avenue, No. 409
      Dallas, Texas 75206
      FAX: (214) 692-0909

      If to Buyer:

      Parallel LP
      1004 N. Big Spring, Suite 400
      Midland, Texas 79701
      Attention: Don E Tiffin
      FAX: (432) 684-3905

      With copy to:

      J. Randy Turner
      Turner, Davis & Gerald, P.C.
      400 W. Illinois Avenue
      Midland, Texas 79701

      Fax: (432) 686-5133

      Provided, however, that any notice required or permitted under this
Agreement will be effective if given verbally within the time provided, so long
as such verbal notice is followed by written notice thereof in the manner
provided herein within twenty-four (24) hours following the end of such time
period. Any party may, by written notice so delivered to the other, change the
address to which delivery shall thereafter be made.

                                                                              26

<PAGE>

      19.5. Incidental Expenses.

      Buyer shall bear and pay (i) all state or local government sales,
transfer, gross proceeds, or similar taxes incident to or caused by the transfer
of the Assets to Buyer, (ii) all documentary, transfer and other state and local
government taxes incident to the transfer of the Assets to Buyer; and (iii) all
filing, recording or registration fees for any assignment or conveyance
delivered hereunder. Each party shall bear its own respective expenses incurred
in connection with the negotiation and Closing of this transaction, including it
own consultants' fees, attorneys' fees, accountants' fees, and other similar
costs and expenses.

      19.6. Waiver.

      Any of the terms, provisions, covenants, representations, warranties or
conditions hereof may be waived only by a written instrument executed by the
party waiving compliance. Except as otherwise expressly provided in this
Agreement, the failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect such party's right to enforce
the same. No waiver by any party of any condition, or of the breach of any term,
provision, covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty.

      19.7. Binding Effect; Assignment.

      All the terms, provisions, covenants, obligations, indemnities,
representations, warranties and conditions of this Agreement shall be
enforceable by the parties hereto and their respective successors and assigns.
The rights of each party under this Agreement are personal to that party and may
not be assigned or transferred to any other party, firm, corporation or other
entity, without the prior, express and written consent of the other party, and
such consent may be withheld for any reason, including convenience. Any attempt
to assign this Agreement over the objection or without the express written
consent of the other party shall be absolutely void. Seller may condition its
consent to assign this Agreement on Buyer providing Seller with an appropriate
guarantee of its assignee's performance. In the event Buyer sells or assigns all
or a portion of the Assets, this Agreement shall remain in effect between Buyer
and Seller as to all the Assets regardless of such assignment.

      19.8. Taxes.

      (a) Seller and Buyer agree that this transaction is not subject to the
reporting requirement of Section 1060 of the Internal Revenue Code of 1986, as
amended, and that, therefore, IRS Form 8594, Asset Acquisition Statement, is not
required to be and will not be filed for this transaction. In the event the
parties mutually agree that a filing of Form 8594 is required, the parties will
confer and cooperate in the preparation and filing of their respective forms to
reflect a consistent reporting of the agreed upon allocation.

      (b) Seller shall be responsible for and shall pay all taxes attributable
to or arising from the ownership or operation of the Assets prior to the
Effective Time.

                                                                              27

<PAGE>

Buyer shall be responsible for and shall pay all taxes attributable to or
arising from the ownership or operation of the Assets after the Effective Time.
Any party which pays such taxes for the other party shall be entitled to prompt
reimbursement upon evidence of such payment.

      Each party shall be responsible for its own federal income taxes, if any,
as may result from this transaction.

      (c) If this transaction is determined to result in state sales or transfer
taxes, Buyer shall be solely responsible for any and all such taxes due on the
Assets acquired by Buyer by virtue of this transaction. If Buyer is assessed
such taxes, Buyer shall promptly remit same to the taxing authority. If Seller
is assessed such taxes, Buyer shall reimburse Seller for any such taxes paid by
Seller to the taxing authority.

      19.9. Confidentiality of Agreement.

      This Agreement and the terms and provisions thereof, including the
Purchase Price, shall be maintained confidential by Buyer and Seller until
Closing; provided, however, that this Agreement and the terms and provisions
thereof may be disclosed to Buyer's lenders, if any, and their consultants, who
shall be required to keep such information confidential.

      19.10. Audits.

      It is expressly understood and agreed that Seller retains its right to
receive its proportionate share of the proceeds from any audits relating to
activities prior to the Effective Time, except to the extent such proceeds are
directly related to the Assumed Obligations. However, Buyer shall have the right
to audit the books and records of Seller in order to fulfill any and all SEC and
other governmental requirements to which Buyer is subject.

      19.11. Like-Kind Exchanges.

      Each party consents to the other party's assignment of its rights and
obligations under this Agreement to its Qualified Intermediary (as that term is
defined in Section 1. 1031 (k)-I(g)(4)(v) of the Treasury Regulations) in
connection with effectuation of a like-kind exchange. However, Seller and Buyer
acknowledge and agree that any assignment of this Agreement to a Qualified
Intermediary does not release either party from any of their respective
liabilities and obligations to each other under this Agreement. Each party
agrees to cooperate with the other to attempt to structure the transaction as a
like-kind exchange.

      19.12. Governing Law.

      THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.

                                                                              28

<PAGE>

      19.13. Entire Agreement.

      This Agreement embodies the entire agreement between the Parties and
replaces and supersedes all prior agreements, arrangements and understandings
related to the subject matter hereof, whether written or oral. No other
agreement, statement, or promise made by any party, or to any employee, officer
or agent of any party, which is not contained in this Agreement shall be binding
or valid. This Agreement may be supplemented, altered, amended, modified or
revoked by writing only, signed by the Parties hereto. The headings herein are
for convenience only and shall have no significance in the interpretation
hereof. The Parties stipulate and agree that this Agreement shall be deemed and
considered for all purposes, as prepared through the joint efforts of the
Parties, and shall not be construed against one party or the other as a result
of the preparation, submittal or other event of negotiation, drafting or
execution thereof. It is understood and agreed that there shall be no
third-party beneficiary of this Agreement, and that the provisions hereof do not
impart enforceable rights in anyone who is not a party or a successor or
assignee of a party hereto.

      19.14. Exhibits.

      All Exhibits attached to this Agreement, and the terms of those Exhibits
which are referred to in this Agreement, are made a part hereof and incorporated
herein by reference.

      19.15. Delivery of Files After Closing.

      The Assets set out in Section 1.14(d) shall be provided by Seller to Buyer
as soon as reasonably possible after the Closing Date at a location to be
specified by Seller. Any transportation, postage, or delivery costs from
Seller's offices shall be at Buyer's sole cost, risk and expense.

      19.16. Survival.

      All of the representations, warranties, indemnities, covenants and
agreements of or by the parties hereto shall survive the execution and delivery
of the Assignment and Conveyance indefinitely.

      19.17. Subsequent Adjustments.

      Regardless of the date set for the Final Settlement, Buyer and Seller
agree that their intent is to allow for the earliest practical forwarding of
revenue and reimbursement of expenses between them, and Seller and Buyer
recognize that either may receive funds or pay expenses after the Final
Settlement Date which are properly the property or obligation of the other.
Therefore, upon receipt of net proceeds or payment of net expenses due to or
payable by the other party hereto, whichever occurs first, Seller or Buyer, as
the case may be, shall submit a statement to the other party hereto showing the
relevant items of income and expense. Payment of any net amount due by Seller or
Buyer, as the case may be, on the basis thereof shall be made within ten days of
receipt of the statement.

                                                                              29

<PAGE>

      19.18. Counterparts.

      This Agreement may be executed in any number of counterparts, and each and
every counterpart shall be deemed for all purposes one (1) agreement.

      IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.

                                     SELLER:

                                     LYNX PRODUCTION COMPANY, INC.

                                     By: /s/ Robert S. Craine
                                        ----------------------------------
                                         Robert S. Craine
                                         President

                                     ELTON RESOURCES, INC.

                                     By: /s/ Vance Payne
                                        ----------------------------------
                                         Vance Payne
                                         President

                                     CASCADE ENERGY CORPORATION

                                     By: /s/ Steven C. Haworth
                                        ----------------------------------
                                         Steven C. Haworth
                                         President

                                     CHELSEA ENERGY, INC.

                                     By: /s/ Lee Higgins
                                        ----------------------------------
                                         Lee Higgins
                                         President

                                     WILLIAM P. SUTTER TRUST

                                     By: /s/ William P. Sutter
                                        ----------------------------------
                                         William P. Sutter
                                         Trustee

                                         /s/ J. Leroy Bell
                                     -------------------------------------
                                         J. LEROY BELL

                                                                              30

<PAGE>

                                         /s/ E.L. Brahaney
                                     -------------------------------------
                                         E.L. BRAHANEY

                                         /s/ Brent Beck
                                     -------------------------------------
                                         BRENT BECK

                                     CAVIC INTERESTS, LLC

                                     By: /s/ Patrick S. Gerald
                                        ----------------------------------
                                         Patrick S. Gerald
                                         President

                                         /s/ Stanley Talbott
                                     -------------------------------------
                                         STANLEY TALBOTT

                                     BUYER:

                                     PARALLEL LP
                                     By: Parallel Petroleum Corporation,
                                         its general partner

                                     By: /s/ Donald E. Tiffin
                                     -------------------------------------
                                         Donald E. Tiffin
                                         Chief Operating Officer

                                                                              31

<PAGE>

                                    EXHIBIT A

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                           Introduction to Exhibit "A"

      The Purchase and Sale Agreement to which this Exhibit "A" is attached
covers all of the interests owned by Seller in the following described lands in
Andrews and Gaines Counties, Texas, SAVE AND EXCEPT depths from the top of the
Yates Formation down to the base of the Queen Formation, including, but not
limited to, such interests in the oil and gas leases described in this Exhibit
"A", insofar as they cover such lands and depths.

     [The remainder of Exhibit A consists of 49 pages of legal descriptions
      of the lands and oil and gas leases constituting part of the Assets]

                                                                              32
<PAGE>

                                    EXHIBIT B

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

<TABLE>
<CAPTION>
                                                                 Working        Net Revenue       Allocated
      Asset                      Description                     Interest        Interest           Value
-----------------    ---------------------------------------    -----------    --------------    -----------
<S>                  <C>                                        <C>            <C>               <C>
Debbie Baggett       W/2, W/2 E/2 of Section 15, Block           1.0000000          .75000000    $16,783,425
                     A-22, PSL, Gaines County, Texas

W. B. Elam           S/2 N/2 of Section 14, Block A-22,          1.0000000          .75000000    $ 7,040,745
                     PSL, Gaines County, Texas

Pontius-Barksdale    N/2 and SE/4 of Section 16, Block           1.0000000          .75000000    $19,825,830
                     A-22, PSL, Gaines County, Texas

Cothes B-1           NW/4 NW/4 (B-1) and SE/4 NW/4 (B-2) of      1.0000000          .75000000    $ 1,309,500
   And               Section 25, Block A-22, PSL, Andrews
Cothes B-2           and Gaines Counties, Texas

Shortes              NW/4 NE/4 of Section 25, Block A-22,        1.0000000          .75000000    $ 1,000,000
                     PSL, Andrews and Gaines Counties, Texas

Segal                SE/4 SW/4 of Section 20, Block A-23,        1.0000000          .75000000    $    194,000
                     PSL, Andrews and Gaines Counties, Texas

C. R. Cothes         NE/4 NE/4 of Section 21, Block A-23,        .68905100          .51678825    $ 1,503,500
  (Cothes #1)        PSL, Andrews and Gaines Counties, Texas

Non-Producing        All  of the lands covered by the            1.0000000     As provided in    $ 1,843,000
Leasehold            Leases described in Exhibit "A" hereto                    the respective
                     SAVE AND EXCEPT the lands described                               Leases
                     above in this Exhibit "B"
                                                                                                 -----------
                     Seller excepts from the                                                     $49,500,000
                     above-described lands depths from the
                     top of the Yates Formation down to the
                     base of the Queen Formation.
</TABLE>

                                                                              33
<PAGE>

                                    EXHIBIT C

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

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

                     CONVEYANCE, ASSIGNMENT AND BILL OF SALE

STATE OF TEXAS                      Section
                                    Section
COUNTIES OF GAINES AND ANDREWS      Section

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE

KNOW ALL MEN BY THESE PRESENTS:

      THAT, Lynx Production Company, Inc., whose address is 2100 Ross Avenue,
Suite 860, LB 52, Dallas, Texas 75201, Elton Resources, Inc., whose address is
2813 Willow Ridge, Garland, Texas 75044, Cascade Energy Corporation, whose
address is 5919 Greenville Avenue, No. 409, Dallas, Texas 75206, Chelsea Energy
Inc., whose address is 2100 Ross Avenue, Suite 860, LB 52, Dallas, Texas 75201,
William P. Sutter, Trustee, William P. Sutter Trust, whose address is 2 Par Club
Circle, Village of Golf, Florida 33436, J. Leroy Bell, whose address is P.O. Box
2521, Midland, Texas 79702, E.L. Brahaney, whose address is 223 W. Wall Street,
Suite 603, Midland, Texas 79701, Brent Beck, whose address is 4113 Fairwood,
Midland, Texas 79707, Cavic Interests, LLC, whose address is P.O. Box 50213,
Midland, Texas 79710, and Stanley Talbott, whose address is 201 W. Wall, Suite
405, Midland, Texas 79701 (collectively, "Assignor") in consideration of Ten
Dollars ($10.00) and other good and valuable consideration to it in hand paid,
the receipt and sufficiency of which are hereby acknowledged, does hereby grant,
bargain, convey, sell, assign, and transfer unto PARALLEL LP, whose address is
1004 N. Big Spring, Suite 400, Midland, TX 79701 ("Assignee"), the following
interests (the "Assets"):

      1.    all of Assignor's right, title, and interest, if any, in and to,
            except to the extent constituting Excluded Assets, the following
            (the "Leases"): any and all interests owned by Assignor in the lands
            described on "Exhibit A", including, but not limited to the oil and
            gas leases described on Exhibit A, and any interest which Assignor
            is entitled to receive by reason of any participation, joint
            venture, farm-in, farm-out, joint operating agreement or other
            agreement, in and to the oil, gas and/or mineral leases, permits,
            licenses, concessions, leasehold estates; royalty interests,
            overriding royalty interests, net revenue interests, executory
            interests, net profit

                                                                              34
<PAGE>

            interests, working interests, reversionary interests, fee and term
            mineral interests, and any other interests of Assignor in crude oil,
            natural gas, casinghead gas, condensate, sulphur, natural gas
            liquids and other liquid or gaseous hydrocarbons (including CO2),
            and shall also refer to all other minerals of every kind and
            character which may be covered by or included in the Leases and
            Assets (collectively, "Hydrocarbons"), it being the intent hereof if
            the legal descriptions and depth limitation set forth on "Exhibit A"
            do not correctly describe such leases or interests or all of the
            lands covered thereby, that the "Leases" shall nevertheless include
            all of Assignor's right, title and interest in the Leases, lands and
            other interests described on Exhibit A and all land and depths
            covered thereby, SAVE AND EXCEPT depths from the top of the Yates
            Formation down to the base of the Queen Formation, even though such
            interests may be incorrectly described;

      2.    all of Assignor's right, title and interest in and to or derived
            from the following insofar as the same do not constitute Excluded
            Assets and are attributable to, appurtenant to, incidental to, or
            used for the operation of the Leases: (a) all easements,
            rights-of-way, permits, licenses, servitudes, surface leases and fee
            parcels or other interests; (b) all wells located upon the Leases or
            on lands pooled or unitized with any portion thereof, or on lands
            located within any governmental drilling and spacing units which
            includes any portion thereof, and all equipment and other personal
            property, inventory, spare parts, tools, fixtures, pipelines,
            wellhead equipment, casing, tubing, pumps, motors, machinery,
            gathering lines and facilities, telephone lines, boilers, buildings,
            injection wells and facilities, saltwater disposal wells and
            facilities, central processing facilities, metering facilities,
            compression facilities, platforms, tank batteries, appurtenances,
            and improvements now or as of 7:00 a.m., local time, on November 1,
            2005 (the "Effective Time") situated upon the Leases or the land
            covered by the easements, rights-of-way, permits, licenses,
            servitudes, surface leases and fee parcels or other interests
            described below or used or held for use in connection with the
            development or operation of the Leases or the production, treatment,
            storage, compression, processing or transportation of Hydrocarbons
            from or in the Leases; (d) all contracts, agreements, and title
            instruments to the extent attributable to and affecting the Assets
            in existence at on the date hereof, including all Hydrocarbon sales,
            purchase, gathering, transportation, treating, marketing, exchange,
            processing, and fractionating contracts, and joint operating
            agreements, unitization, pooling and communitization agreements; and
            (e) originals of all lease files, land files, well files, production
            records, division order files, abstracts, title opinions, and
            contract files, insofar as the same are directly related to the
            Leases; including, without limitation, all seismic, geological,
            geochemical, and geophysical information and data, to the extent
            that such data is not subject to any third party restrictions, but
            excluding Assignor's proprietary interpretations of same;

      3.    all of Assignor's right, title and interest in all merchantable oil
            and condensate (for oil or liquids in storage tanks, being only that
            oil or liquids physically above the top of the pipeline connection
            from such tanks) produced from or attributable to the Leases prior
            to the Effective

                                                                              35
<PAGE>

            Time which have not been sold by Assignor and are in storage at the
            Effective Time;

SAVE AND EXCEPT, the following (the "Excluded Assets"):

      1.    (i) all trade credits, accounts receivable, notes receivable and
            other receivables attributable to Assignor's interest in the Assets
            with respect to any period of time prior to the Effective Time; (ii)
            all deposits, cash, checks in process of collection, cash
            equivalents and funds attributable to Assignor's interest in the
            assets with respect to any period of time prior to the Effective
            Time; and (iii) all proceeds, benefits, income or revenues accruing
            (and any security or other deposits made) with respect to the Assets
            prior to the Effective Time;

      2.    all corporate, financial, and tax records of Assignor; however,
            Assignor shall be entitled to receive copies of any tax records
            which directly relate to any Assumed Obligations, or which are
            necessary for Assignee's ownership, administration, or operation of
            the Assets;

      3.    all claims and causes of action of Assignor arising from acts,
            omissions or events, or damage to or destruction of the Assets,
            occurring prior to the Effective Time except to the extent directly
            related to the Assumed Obligations;

      4.    except as otherwise provided in Article 15 of the P&S Agreement, all
            rights, titles, claims and interests of Seller relating to the
            Assets prior to the Effective Time (i) under any policy or agreement
            of insurance or indemnity; (ii) under any bond; or (iii) to any
            insurance or condemnation proceeds or awards; (f) all Hydrocarbons
            produced from or attributable to the Assets with respect to all
            periods prior to the Effective Time, together with all proceeds from
            or of such Hydrocarbons, except the Inventory Hydrocarbons;

      5.    claims of Assignor for refund of or loss carry forwards with respect
            to production, windfall profit, severance, ad valorem or any other
            taxes attributable to any period prior to the Effective Time, or
            income or franchise taxes;

      6.    all amounts due or payable to Assignor as adjustments or refunds
            under any contracts or agreements (including take-or-pay claims)
            affecting the Assets, respecting periods prior to the Effective
            Time;

      7.    all amounts due or payable to Assignor as adjustments to insurance
            premiums related to the assets with respect to any period prior to
            the Effective Time;

      8.    all proceeds, benefits, income or revenues accruing (and any
            security or other deposits made) with respect to the Assets, and all
            accounts receivable attributable to the Assets, prior to the
            Effective Time;

                                                                              36
<PAGE>

      9.    all of Assignor's intellectual property, including, but not limited
            to, proprietary computer software, patents, trade secrets,
            copyrights, names, marks and logos;

      10.   all of Assignor's remote terminal units, radio control alarms, radio
            towers, [and leased automobiles and trucks] located on the leases,
            areas, and lands described in "Exhibit A" hereto.

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

      1.    This Assignment is made subject to that certain Purchase and Sale
            Agreement (the "P&S Agreement") dated October 14, 2005 between
            Assignor and Assignee, and all terms and conditions, of said P&S
            Agreement are incorporated herein by reference to the same extent
            and with the same effect as if copied in full herein. In the event
            of a conflict between the terms and conditions of this Assignment
            and the P&S Agreement, the P&S Agreement shall govern and control.
            Capitalized terms used herein but not defined herein shall have the
            respective meanings set forth in the P&S Agreement.

      2.    Assignee assumes all rights or obligations associated with gas
            imbalances attributable to the Assets, regardless of when such
            imbalances occurred or accrued.

      3.    Assignee hereby assumes all duties, liabilities and obligations,
            express or implied, imposed upon Assignor under the provisions of
            the Leases and any and all assignments, subleases, farmout
            agreements, assignments of overriding royalty, joint operating
            agreements, easements, rights-of-way, and all other contracts,
            agreements and instruments affecting the Property, whether recorded
            or unrecorded, and under all applicable laws, rules, regulations,
            orders and ordinances; including, but not limited to, the plugging
            and abandonment of the wells included in this assignment as well as
            any other wells drilled hereafter on the Leases, and the clean-up
            and restoration of the premises on which the wells are located.

      4.    SELLER SHALL CONVEY SELLER'S INTERESTS IN AND TO THE ASSETS TO BUYER
            SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS, AND
            ENCUMBRANCES, WITHOUT WARRANTY OF TITLE, AS PROVIDED IN THE FORM OF
            ASSIGNMENT, BILL OF SALE AND CONVEYANCE ATTACHED AS EXHIBIT C HERETO
            EXCEPT THAT SELLER SHALL WARRANT TITLE TO THE ASSETS AGAINST ALL
            CLAIMS, LIENS, BURDENS AND ENCUMBRANCES ARISING BY, THROUGH OR UNDER
            SELLER, BUT NOT OTHERWISE.IMBALANCES WITH RESPECT TO OIL OR NATURAL
            GAS ARE GOVERNED BY ARTICLE 18 HEREOF. THE PARTIES AGREE THAT THE
            EXISTENCE OF ANY SUCH IMBALANCES SHALL NOT BE DEEMED A TITLE DEFECT.

      5.    Assignor and Assignee will execute, acknowledge and deliver to the
            other such further instruments, and take such other action, as may
            be reasonably requested in order to more effectively assure to said
            party all

                                                                              37
<PAGE>

            of the respective properties, rights, titles, interest, estates and
            privileges intended to be assigned, delivered or inuring to the
            benefit of such party in consummation of the transaction
            contemplated hereby.

      6.    This Agreement may be executed in any number of counterparts, and
            each and every counterpart shall be deemed for all purposes one (1)
            agreement.

      TO HAVE AND TO HOLD the same unto the said Assignee forever. The
provisions hereof shall be covenants running with the land and shall inure to
the benefit of and be binding upon Assignor and Assignee, their respective
personal representatives, successors and assigns.

      IN WITNESS HEREOF, the undersigned have executed this instrument on the
date of the acknowledgments annexed hereto, but to be effective for all purposes
from and after 7:00 a.m., local time, the 1st day of November, 2005.

                                        SELLER:

                                        LYNX PRODUCTION COMPANY, INC.

                                        By:____________________________________
                                                Robert S. Craine
                                                President

                                        ELTON RESOURCES, INC.

                                        By:____________________________________
                                                Vance Payne
                                                President

                                        CASCADE ENERGY CORPORATION

                                        By:____________________________________
                                                Steven C. Haworth
                                                President

                                        CHELSEA ENERGY, INC.

                                        By:____________________________________
                                                Lee Higgins
                                                President

                                                                              38
<PAGE>

                                        WILLIAM P. SUTTER TRUST

                                        By:____________________________________
                                                 William P. Sutter
                                                 Trustee

                                        _______________________________________
                                                 J. LEROY BELL

                                        _______________________________________
                                                 E.L. BRAHANEY

                                        _______________________________________
                                                 BRENT BECK

                                        CAVIC INTERESTS, LLC

                                        By:____________________________________
                                                 Patrick S. Gerald
                                                 President

                                        _______________________________________
                                                 STANLEY TALBOTT

                                        BUYER:

                                        PARALLEL LP
                                        By: Parallel Petroleum Corporation,
                                            its general partner

                                        By:____________________________________
                                                 Donald E. Tiffin
                                                 Chief Operating Officer

                                                                              39
<PAGE>

                                    EXHIBIT D

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                              NON-FOREIGN AFFIDAVIT
                      Exemption from Withholding of Tax For
                  Dispositions of U.S. Real Property Interests

      Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform _________________ that withholding of tax is not required upon
the disposition of U.S. real property interests by _____________ and
_______________ the undersigned hereby certifies the following:

      1.    The undersigned are not foreign corporations, foreign partnerships,
            foreign trusts, or foreign estates for purposes of U.S. income
            taxation;

      2.    The undersigned's taxpayer identification number is:

             (name)                    (TIN)
             (name)                    (TIN)

      3.    The home or office address of the undersigned is _________________.

      The undersigned understand that this certification may be disclosed to the
Internal Revenue Service by ________________________ and that any false
statement contained herein could be punished by fine, imprisonment, or both.

      Under penalties of perjury, I declare that I have examined this
certificate and, to the best of my knowledge and belief, it is true, correct,
and complete, and I further declare that I have authority to sign this document.

      DATED this ____ day of __________, 200__.

                                        __________________________
                                        By: ________, General Partner (if appl.)

                                        By: ___________________________________
                                                 (name and title)

                                                                              40
<PAGE>

                                    EXHIBIT E

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                       Reporting and Accounting Memorandum

      In connection with the Purchase and Sale Agreement (the "P&S Agreement")
between ______________ ("Buyer") and ____________________ and
___________________ (collectively, "Seller"), and contingent upon a __________,
200__ closing, the following is hereby agreed between the parties:

      1.    Seller will prepare and submit state production reports for the
            field for the production month of ___________, 200__. All subsequent
            monthly production reports will be the responsibility of Buyer.
            Seller will send a copy of the _________, 200__ reports as filed to
            Buyer.

      2.    Change of operator forms will be prepared by Seller showing
            __________ as the new operator of the Assets effective
            ______________, 200__. ________'s State of ___________ operator
            number is

      3.    Letters-in-lieu, effective with ___________, 200__ production will
            be sent to the purchasers by Buyer. Seller shall prepare the letters
            and provide them at closing.

      4.    Seller will make royalty distributions for the production month of
            ________, 200__. Royalty distributions for the production month of
            __________, 200__ will be the responsibility of Buyer.

      5.    Seller will pay severance taxes for the production month of
            _________, 200__. Severance tax payments for the production month of
            __________, 200__ will be the responsibility of Buyer.

      6.    Seller will make rental, minimum royalty and any other lease
            (including surface) obligation payments due on or before __________,
            200__. Buyer will make subsequent monthly payments. Buyer agrees to
            indemnify and hold Seller harmless for any missed lease rental
            and/or minimum royalty payments from closing through ____________,
            200__.

      7.    Buyer will take any royalty monies in suspense accounts.

      8.    Seller will make gas nominations for the production month of
            __________, 200__. Buyer will make gas nominations beginning for the
            production month of ________, 200__.

      9.    Seller will have their measurement service agent process the volumes
            for the wellhead meter points to be used in reporting and allocating
            for __________, 200__ production which will be closed out in
            __________, 200__ accounting. Buyer will take over this measurement
            function

                                                                              41
<PAGE>

            effective __________, 200__. Seller will provide Buyer with volume
            and integration statements for___________, 200__ production.

      10.   Joint interest billings (JIBs) for the month of __________covering
            expenses incurred through ___________, 200__, will be prepared by
            Seller. Buyer will prepare JIBs for___________, 200__ activity
            forward. Such JIB's will be mailed out to working interest owners in
            early ________, 200__.

      11.   Buyer will assume actual field operations at 7:00 am the day after
            the Closing Date.

      12.   If either party receives revenue or other payments for the benefit
            of the other party, the party receiving revenue shall promptly
            forward such revenue to the other party. If either party pays
            invoices or otherwise incurs expenses for the benefit of the other
            party and provides supporting documentation related thereto, the
            party for whose benefit the payment in question was made shall
            promptly reimburse the party making such payment. For purposes of
            this paragraph, "promptly" shall be understood to mean within five
            (5) business days, in the absence of extenuating circumstances.

      13.   This agreement is intended to set forth the division of reporting
            and other responsibilities between the parties, but is not intended
            to alter any provisions of the P&S Agreement related to which party
            will be ultimately financially responsible for payments made before
            or after the Effective Time of the P&S Agreement. In the event of
            any conflict between the provisions of this memorandum and the P&S
            Agreement, the P&S Agreement shall control. All capitalized terms
            not defined herein shall have the meanings given in the P&S
            Agreement.

      Signed the ______day of ____________, 200__.

                                                                              42
<PAGE>

                                    EXHIBIT F

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                                 GAS IMBALANCES

None.

                                                                              43
<PAGE>

                                    EXHIBIT G

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                                   LITIGATION

None.

                                                                              44
<PAGE>

                                   EXHIBIT "H"

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                                                PRESS RELEASE

Parallel Petroleum Corporation
1004 N. Big Spring Street, Suite 400      Contact: Cindy Thomason
Midland, TX 79701 (432) 684-3727                   Manager of Investor Relations
http://www.plll.com                                cindyt@plll.com

                    PARALLEL PETROLEUM ENTERS INTO AGREEMENT
                   TO ACQUIRE ________________ BOE OF RESERVES

MIDLAND, Texas, (BUSINESS WIRE), ______________(Date) - Parallel Petroleum
Corporation (NASDAQ: PLLL) today announced that its wholly owned subsidiary,
Parallel, L. P., has entered into a Purchase and Sale Agreement to acquire
producing and undeveloped oil and gas properties having a combined estimated
______ million equivalent barrels of proved oil reserves, of which _____% is
proved developed producing reserves, with production of approximately ____
equivalent barrels of oil per day. The combined net purchase price is estimated
to be approximately $_____ million (including customary purchase price
adjustments), or approximately $_____ per proved equivalent barrel of oil.
Parallel will finance the acquisitions using a portion of its revolving credit
facility provided by Citibank and _________________.

This transaction is scheduled to close on November 15, 2005.

Hedging information

The Company has hedged barrels of oil associated with this Purchase and Sale
Agreements and additional barrels of oil associated with its existing
production. None of the Company's existing production had previously been hedged
in ____ and ____. These hedges are shown in the table below.

      Calendar          Barrels of Oil            Total             NYMEX
      Year              per day                   Barrels           Swap Price

Management Comments

Larry C. Oldham, Parallel's President and CEO, commented, "___________________"

The Company

Parallel Petroleum is an independent energy company headquartered in Midland,
Texas, primarily engaged in the acquisition, development, exploration and
production of oil and gas using enhanced oil recovery techniques and 3-D seismic
technology. Additional information on Parallel Petroleum Corporation is
available at www.plll.com.

                                                                              45
<PAGE>

This release contains forward-looking statements subject to various risks and
uncertainties that could cause the company's future plans, objectives and
performance to differ materially from those in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "intend," "subject to,"
"anticipate," "estimate," "continue, " "present value," "future," "reserves",
"appears," "prospective," or other variations thereof or comparable terminology.
Factors that could cause or contribute to such differences could include, but
are not limited to, those relating to the results of exploratory drilling
activity, the company's growth strategy, changes in oil and natural gas prices,
operating risks, availability of drilling equipment, outstanding indebtedness,
changes in interest rates, dependence on weather conditions, seasonality,
expansion and other activities of competitors, changes in federal or state
environmental laws and the administration of such laws, and the general
condition of the economy and its effect on the securities market. While we
believe our forward-looking statements are based upon reasonable assumptions,
these are factors that are difficult to predict and that are influenced by
economic and other conditions beyond our control. Investors are directed to
consider such risks and other uncertainties discussed in documents filed by the
company with the Securities and Exchange Commission.

                                                                              46
<PAGE>

                               Schedule 3.3(b)(4)

            Attached to and made a part of that certain Purchase and Sale
            Agreement dated October 14, 2005, by and between Lynx Production
            Company, Inc., et al, as Seller, and Parallel LP, as Buyer

                                 Suspense Funds

                            Lynx Operating Co., Inc.
                       Suspense Master Listing by Property

<TABLE>
<CAPTION>

Lease Name                                         Amount
---------------------                         --------------
<S>                                           <C>
C. R. Cothes #1                               $     7,645.60
Cothes B-1                                    $    11,149.50
Cothes B-2                                    $     6,572.53
Debbie Baggett #1-A                           $       260.35
Debbie Baggett #2-A                           $       236.77
Debbie Baggett #3-A                           $       415.35
Debbie Baggett #4-A                           $       271.12
Debbie Baggett #5A                            $       183.39
Debbie Baggett #6A                            $       347.91
Debbie Baggett #7-A                           $       374.17
Debbie Baggett #1-B                           $       268.30
Debbie Baggett #2-B                           $       451.37
Debbie Baggett #3-B                           $       347.78
Debbie Baggett #4-B                           $       425.56
Pontius-Barksdale #1                          $    26,269.39
Pontius-Barksdale #2                          $    21,041.01
Pontius-Barksdale #3                          $    18,981.55
Pontius-Barksdale #4                          $    11,984.89
Pontius-Barksdale #5                          $    10,396.03
Pontius-Barksdale #6                          $     8,867.24
Pontius-Barksdale #7                          $    11,720.92
Pontius-Barksdale #8                          $    10,538.03
Pontius-Barksdale #9                          $     8,722.29
Pontius-Barksdale #10                         $    12,911.87
Shortes (Seaboard)                            $     3,552.83
                                              --------------

Total                                         $   173,935.75
</TABLE>

                                                                              47
<PAGE>

                                  Schedule 4(g)

          Hydrocarbon sales contracts not terminable on 30 days' notice

      Gas purchase contract dated October 17, 2002, between Lynx Operating Co.,
Inc. ("Seller") and Duke Energy Field Services, LP ("Buyer") covering sections
14, 15 & 16, Blk A22, PSL, Andrews and Gaines Counties, Texas (Casinghead Gas).

                                                                              48
<PAGE>

                               Schedule 8.1(c) (d)

                                Tax Partnerships

Exhibit G attached to Operating Agreement dated July 9, 2002 between Lynx
Operating Co., Inc., as operator, and Lynx Production Company, Inc., et al., as
non-operators, covering the Debbie Baggett #2-A, the Debbie Baggett #2-B and the
Pontius Barksdale #3 wells only.

                                                                              49
<PAGE>

                           Schedule 8.1c and 8.1 (c) a

                  Lease defaults and material contract defaults

                                     [NONE]

                                                                              50
<PAGE>

                              Schedule 8.1(e) (iii)

                  Tax Liens and Mechanics Liens being contested

                                     [NONE]

                                                                              51

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