Document:

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                                 VirtGame Corp.
                             6969 Corte Santa Fe, #A
                           San Diego, California 92121
                             Telephone: 858-373-5001
                             Facsimile: 858-373-5007

                                                                  March 31, 2003

Lighthouse Financial Group, LLC
420 Lexington Avenue, Suite 360
New York, New York 10170

Keane Securities Co., Inc.
50 Broadway
New York, New York 10004

Gentlemen:

         The undersigned, VirtGame Corp., a Delaware corporation (together with
any of its subsidiaries, affiliates, successors or assigns, the "Company"),
proposes to offer for sale to certain "accredited investors," through Lighthouse
Financial Group, LLC ("Lighthouse" or the "Managing Agent") and Keane Securities
Co., Inc. ("Keane"), as co-placement agents (collectively, the "Placement
Agents") in an "all-or-none" private placement, a minimum of $2,000,000 (the
"Minimum Amount") and a maximum of $3,000,000 (the "Maximum Amount") of units
(the "Units"), each consisting of twenty-five (25) shares of the Company's
$1,000 face amount zero dividend Series A convertible redeemable preferred
shares (the "Preferred Shares") and 35,000 five-year redeemable warrants as more
fully described on Schedule 1 hereto. The Securities (as hereinafter defined) to
be offered pursuant to the Offering Documents (as hereinafter defined) are
referred to as the "Financing" or the "Offering."

         The closing (the "Closing") of the Financing shall not occur until the
Company has, in any combination, received and accepted subscriptions for the
purchase of Securities in amounts equal to the Minimum Amount.

         The Securities will be offered pursuant to those terms and conditions
acceptable to you and your counsel as reflected in the final form of
Confidential Private Placement Memorandum of the Company (together with the
exhibits and any supplements thereto, the "Memorandum"). The Securities will be
offered pursuant to the Memorandum in accordance with Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act").

         Each prospective investor subscribing to purchase Securities (the
"Subscriber") will be required to deliver, among other things, a subscription
agreement ("Subscription Agreement") and an accredited investor certification
("Certification") in the forms to be provided, representing and warranting,
among other things, that such Subscriber is an "accredited investor" as such
term is defined in Regulation D.

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         The Memorandum and the form of proposed Subscription Agreement between
the Company and each Subscriber and the exhibits which are part of the
Memorandum (including, without limitation, the Registration Rights Agreement
between the Company and each of the Subscribers with respect to certain
registration rights under the Securities Act (the "Registration Rights
Agreement")) and/or the Subscription Agreement are referred to herein
collectively as the "Offering Documents."

         The Securities will be offered for minimum subscription amounts of
$25,000; on a "best efforts, all-or-none" basis, exclusively by the Placement
Agents; provided, however, that the Company and the Placement Agents may, in
their discretion, accept subscriptions for a lesser amount from a Subscriber.

         The Company will prepare and deliver to the Placement Agents a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to the Placement Agents and their respective counsel, which
Offering Documents shall include reviewed financial statements for such periods
as may be required.

         Capitalized terms used herein, unless otherwise defined or unless the
context otherwise indicates, shall have the same meanings provided in the
Memorandum.

         1. APPOINTMENT OF CO-PLACEMENT AGENTS. You are hereby appointed
exclusive Co-Placement Agents of the Company during the offering period herein
specified (the "Offering Period") for the purposes of assisting the Company on a
"best efforts" basis in finding qualified Subscribers for the purchase of
Securities. The Offering Period shall commence on the date of delivery and
acceptance by the Placement Agents of the Memorandum ("Commencement Date") and
shall continue until the earlier to occur of (i) the sale of the Minimum amount;
or (ii) May 15, 2003 (as the same may be extended by mutual consent of the
Placement Agents and the Company) to a date no later than June 30, 2003. If the
Minimum Amount is not sold prior to the end of the Offering Period, the Offering
will be terminated and all funds received from Subscribers and held in a special
non-interest bearing escrow account (the "Account") by Lighthouse, as escrow
agent of the Company, in the Account at JP Morgan Chase, New York, New York (the
"Bank") will be returned, without deduction or accrued interest thereon. You
hereby accept such agency and agree to assist the Company in finding qualified
Subscribers for the purchase of Securities. Your agency hereunder is not
terminable by the Company except upon termination of the Offering.

         As part of the Placement Agents' exclusive representation of the
Company with respect to the Offering, the Placement Agents shall assist the
Company in identifying potential investors as the Company may designate. In
addition, the Placement Agents shall assist the Company in structuring,
negotiating and effecting the Offering. The Company agrees that, during the
course of the engagement hereunder, neither it, nor any of its management, nor
any of its affiliates, shall initiate any discussions with third parties with
respect to the Offering and to the extent any of such persons receives an
inquiry from any third parties concerning the Offering or any other financing
related to the Company, they will promptly identify to the Placement Agents the
name of such person and the date of such initial contact. Placement Agents may
enter into selling agreements with other broker-dealers. Placement Agents will
be solely responsible for compensating any selling group members and the Company
shall have no liability for any additional compensation to any selling group
member who participates in the Offering; provided, however, the exclusive
appointment of the Co-Placement Agents shall not apply to McMahan Securities
("McMahan") if McMahan does not become a party to this Agreement or enter into a
selling agreement with the Placement Agents. In addition, the exclusive
appointment shall not apply to those firms identified on Schedule 1A.

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         Notwithstanding anything to the contrary contained in this Agreement,
the Managing Agent shall have the exclusive authority to represent the Placement
Agents and act on their behalf with respect to the exercise of all rights of the
Placement Agents under this Agreement, including, but not limited to, (i) the
waiver of any breach of the terms of this Agreement by the Company, (ii) the
giving or receiving of any and all notices, (iii) the receipt of any and all
payments of cash or stock compensation and the reimbursement of expenses, which
in all cases shall be paid or issued in the name of the Managing Agent, and (iv)
the exercise of any and all other rights of the Placement Agents hereunder,
including, but not limited to, the rights of first refusal in Section 5(d)(ii),
the transactional fee in Section 5(d)(iii) and the appointment of the board
representative in Section 5(f). Nothing in the foregoing sentence shall modify
or affect the liability of any Placement Agents for the representations,
warranties or agreements made by the Placement Agent in this Agreement.

         2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants as follows:

                  (a) The Company has reviewed the Offering Documents and will
review the documents to be used in connection with the Series A convertible
redeemable preferred shares (the "Preferred Shares") and the five year
redeemable warrants (the "Warrants") (collectively, the "Units" or the
"Securities"). The Offering Documents conform, and the Units, the Preferred
Shares, and the Warrants will conform, with applicable requirements of the
Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, including Rule 506 of Regulation D. The Placement
Agents may sell the Units to an unlimited number of "Accredited" investors as
such term is defined in Regulation D. The Offering Documents are either in
compliance, or will be supplemented to be in compliance, with any applicable
securities laws. The Company will give the Placement Agents immediate notice of
any supplement or amendment of the Offering Documents.

                  (b) The Offering Documents do not as of the date of such
documents and will not as of each Closing Date (as later defined herein),
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

                  (c) Neither the Commission nor any state securities agency has
issued any order preventing, or suspending, the use of the Offering Documents or
the sale of the Units.

                  (d) Subsequent to the date as of which information is given in
the Offering Documents with respect to each Closing Date, there has not been:

                           (i) except as provided in this Agreement, any
material change in the capital stock (other than securities issued pursuant to
the Offering) or long-term debt (including any capitalized lease obligation), or
material increase in the short-term debt of the Company;

                           (ii) except as provided in this Agreement, any
issuance of options, warrants, convertible securities or other rights to
purchase the capital stock of the Company;

                           (iii) any material adverse change, or any development
involving a material adverse change, in or affecting the business, business
prospects, properties, management, financial position, stockholders' equity,
results of operations or general condition of the Company;

                           (iv) any material transaction entered into by the
Company;

                           (v) any material obligation, direct or contingent,
incurred by the Company, except obligations incurred in the ordinary course of
business that, in the aggregate, are not material; or

                           (vi) any dividend or distribution of any kind
declared, paid or made on the Company's capital stock.

                                      -3-
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                  (e) The Company has no subsidiaries, and is not affiliated
with any other company or business entity, except as explicitly stated in the
Offering Documents.

                  (f) The Company is not in violation of its organizational
documents, as currently in effect. The Company is not in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which the Company
or its properties are bound, which, individually or in the aggregate, could have
a material adverse effect on the Company. The Company is not in violation of any
law, order, rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign.

                  (g) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Offering Documents. The
Company is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction in which the ownership or lease of its properties,
or the conduct of its business, requires such qualification and in which the
failure to be qualified or in good standing would have a material adverse effect
on the business of the Company. The Company has all necessary and material
authorizations, approvals and orders of and from all governmental regulatory
officials and bodies to own its properties and to conduct its business as
described in the Offering Documents, and is conducting its business in
substantial compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business. Except as described in the
Offering Documents, the Company holds all material licenses, certificates and
permits from state, federal and other regulatory authorities, including, but not
limited to, its gaming license from the Nevada Gaming Commission, necessary for
the conduct of its business as described in the Offering Documents, or has
obtained waivers from any such applicable requirements from the appropriate
state, federal or other regulatory authority.

                  (h) The Company has full requisite power and authority to
enter into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by the application of bankruptcy, insolvency, moratorium or similar
laws affecting the rights of creditors generally and by judicial limitations on
the right of specific performance, and except as the enforceability of the
indemnification or contribution provisions hereof may be affected by applicable
federal or state securities laws. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a material default under:

                           (i) Any bond, debenture, note, contract, lease,
license, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company is a party, or by which it,or
any of its property, is bound;

                                      -4-

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                           (ii) The Company's Certificate of Incorporation, as
amended, Bylaws and other governing documents; or

                           (iii) Any law, order, rule, regulation, writ,
injunction or decree of any government, governmental agency or court having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization or order of any court or governmental agency or body is
required for the consummation by the Company of the transactions contemplated by
this Agreement, except, as may be required under the Act or state securities or
Blue Sky laws in connection with the sale of the Securities by the Company.

                  (i) There are no actions, suits, or proceedings pending before
any court or before any governmental agency, authority, or body to which the
Company is a party or of which the business or property of the Company is the
subject which might result in any material adverse change in the condition
(financial or otherwise), business or prospects of the Company, materially and
adversely affect its properties or assets or prevent consummation of the
transactions contemplated by this Agreement and, to the best of the Company's
knowledge, no such actions, suits, or proceedings are threatened.

                  (j) The Units conform in substance to all statements relating
thereto contained in the Offering Documents. The Company will, as of each
Closing Date as it relates to the Offering Documents, have the duly authorized
and outstanding capitalization as set forth in the Offering Documents. At each
Closing, the Securities to be sold by the Company hereunder will have been duly
authorized and, when issued and delivered pursuant to this Agreement and the
subscription agreements to be entered into between the Company and purchasers of
the Securities (the "Subscription Agreements"), will constitute valid and
binding obligations of the Company in accordance with their terms, except as
enforceability may be limited by the application of bankruptcy, insolvency,
moratorium or similar laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance. The Warrant Shares
and the shares underlying the Preferred Shares have been duly authorized and
reserved for issuance, and when issued upon such exercise will be validly
issued, fully paid and nonassessable. No preemptive rights or similar rights of
any security holders of the Company exist with respect to the issuance and sale
of the Securities by the Company. Except as disclosed in the Offering Documents
or disclosed in writing to the Placement Agents, the Company has no agreement
with any security holder which gives such security holder the right to require
the Company to register under the Act any securities of any nature owned or held
by such person. Upon payment for and delivery of the Securities to be sold by
the Company pursuant to this Agreement and the Subscription Agreements, the
investors will acquire good and marketable title to such Securities, free and
clear of all liens, encumbrances or claims, except for restrictions under
applicable federal and state securities laws.

                  (k) The Placement Agents' Warrants, as defined in Section 4,
when issued and delivered, will constitute a valid and binding obligation of the
Company enforceable in accordance with its terms. Upon payment for and delivery
of the Placement Agents' Warrant Shares, as defined in Section 4, pursuant to
the Placement Agents' Warrant, the Placement Agents will acquire good and
marketable title to the Placement Agents' Warrant Shares, free and clear of all
liens, encumbrances or claims, except for restrictions under applicable federal
and state securities laws. The certificates evidencing the Shares will comply as
to form with all applicable provisions of applicable law. A sufficient number of
shares of Common Stock have been reserved for issuance by the Company upon
exercise of the Placement Agents' Warrants.

                                      -5-
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                  (l) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by the Company
of the transactions contemplated by this Agreement, except as may be required
under the Act or Blue Sky Laws in connection with the sale of the Securities by
the Company.

                  (m) The financial statements of the Company, together with the
related notes, forming part of the Offering Documents, will fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply. All
financial statements included in the Offering Documents will be prepared in
accordance with generally accepted accounting principles ("GAAP"), consistently
applied throughout the periods involved, except as may be otherwise stated
therein and except as the financial statements for the interim periods are
subject to year-end adjustments.

                  (n) Except as is otherwise disclosed in the Offering
Documents, the Company has good and marketable title to all of the property,
real and personal, described in the Offering Documents as being owned by the
Company, free and clear of all liens, encumbrances, equities, charges or claims,
except as do not materially interfere with the uses made and to be made by the
Company of such property. Except as is otherwise disclosed in the Offering
Documents, the Company has valid and binding leases to the real and/or personal
property described in the Offering Documents as being under lease to the
Company.

                  (o) The Company has filed all necessary federal and state
income and franchise tax returns and paid all taxes shown as due thereon. The
Company has no knowledge of any tax deficiency which might be asserted against
it which would materially and adversely affect the Company's business or
properties.

                  (p) Except as disclosed in the Offering Documents:

                           (i) the Company owns or possesses the rights to use
all patents, copyrights, trademarks, trade secrets and proprietary rights or
information described in the Offering Documents as being reasonably necessary
for the conduct of its present or intended business and has not received any
notice of conflict with asserted rights of others;

                           (ii) there are no pending legal, governmental or
administrative proceedings relating to patents, copyrights, trademarks or
proprietary rights or information, to which the Company is a party or of which
any property of the Company is subject and no such proceedings are, to the
Company's knowledge, threatened or contemplated against the Company by any
governmental agency or authority or others;\

                           (iii) to the Company's knowledge the Company is not
using any confidential information or trade secrets of any third party without
the consent of such third party;

                           (iv) to the Company's knowledge the Company does not
infringe upon the right or claimed right of any person under, or with respect
to, any of the intangible rights listed above; and

                           (v) the Company is not obligated or under any
liability whatsoever to make any material payments by way of royalties, fees or
otherwise to any owner of, licensor of or other claimant to, any patent,
trademark, trade name, copyright or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise.

                                      -6-
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                  (q) Except as disclosed in the Offering Documents, no person
is entitled, directly or indirectly, to compensation from the Company or the
Placement Agents for services as a finder in connection with the transactions
contemplated by this Agreement.

                  (r) Subject to the Placement Agents' compliance with their
representations and warranties in Section 3, the Company will conduct the
Offering in compliance with the requirements of Regulation D promulgated under
the Act. The Company is not disqualified from claiming exemption under
Regulation D by Rule 505(b)(2)(iii) of Regulation D and meets the other
requirements to claim exemption under Regulation D.

                  (s) No labor disturbance by the employees of the Company
exists or, to the Company's knowledge, is imminent which could reasonably be
expected to have a material adverse effect on the conduct of the business,
operations, financial condition or income of the Company.

                  (t) The Company has no defined benefit pension plan or other
plan promulgated pursuant to, or which is intended to comply with the provisions
of, the Employee Retirement Income Security Act of 1974, except as disclosed in
the Offering Documents.

                  (u) The Company has not sold any securities in violation of
the Act or any state securities laws.

                  (v) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts adequate for its business and in
line with the insurance maintained by similar companies and businesses.

                  (w) The Company intends to apply the proceeds from the sale of
the Securities for the purposes and substantially in the manner set forth in the
Offering Documents.

         3. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENTS.

Each of the Placement Agents represents that:

                  (a) It is duly organized, validly existing and in good
standing under the laws of its respective jurisdiction with all requisite
corporate power to carry on its business as currently being conducted.

                  (b) It is, and any subagents will be, licensed as
broker-dealers, authorized to conduct offerings of the sort contemplated hereby
by the Commission and the blue sky authorities of each other state in which the
Company and Placement Agents have agreed to offer the Securities. It and
subagents are members in good standing of the National Association of Securities
Dealers, Inc. To the Placement Agents' knowledge, no proceedings are pending or
threatened to revoke or limit any such status of either Placement Agent.

                  (c) This Agreement has been duly authorized and executed by
the Placement Agents and is a legal, valid and binding agreement of the
Placement Agents.

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                  (d) The Placement Agents will:

                           (i) not offer, offer for sale or sell the Securities
by means of any form of general solicitation or general advertising as described
under Rule 502(c) of Regulation D;

                           (ii) provide each of its offerees of Securities a
copy of the Offering Documents at all times prior to the termination of the
Offering;

                           (iii) comply with the provisions of the Act and the
Rules and Regulations and the 1934 Act and the rules promulgated thereunder,
including but not limited Rules 10b-9 and 15c2-4 under the 1934 Act and Rule 506
of the Rules and Regulations, in the offer and sale of the Securities;

                           (iv) not utilize any sales materials other than the
Offering Documents or make any statements concerning the Company other than
information contained in the Offering Documents unless prior written approval is
obtained from, and a copy of the materials to be used is provided to, the
Company and its legal counsel; and

                           (v) use its best efforts to provide that any
subagents will comply with the provisions of (i) - (iv) above.

         4. CLOSING: PLACEMENT AND FEES.

                  (a) CLOSING. The Closing of the Financing shall take place at
the offices of either of the Placement Agents at a time and date agreed upon
between the Placement Agents and the Company upon the receipt of Subscription
Agreements and related documents in form and substance satisfactory to the
Company and the Placement Agents which are equal to or are in excess of the
Minimum Amount. At the Closing, payment for the Securities shall be made against
delivery of certificates representing the Securities sold.

                  (b) PROCEDURES AT CLOSING. At the Closing:

                           (i) The Placement Agents on behalf of themselves and
the Subscribers shall receive the opinion of Preston Gates & Ellis LLP ("Company
Counsel"), dated the Closing date, to the effect that:

                                    (A) the Company and each of its Subsidiaries
is duly organized and validly existing and in good standing under the laws of
its incorporation, has all requisite power and authority necessary to own or
hold its properties and conduct its business as described in the Ancillary
Documents and is duly qualified as a corporation for the transaction of business
and is in good standing in each jurisdiction where the failure to be so
qualified might have a material and adverse impact upon the Company or upon any
of its Subsidiaries;

                                    (B) the Company has full right, power and
authority to enter into this Agreement and to perform all of its obligations
hereunder or contemplated hereby or by any of the Ancillary Documents; the
Company has full right, power and authority to issue, sell and deliver the
Securities; this Agreement and the Ancillary Documents have been duly
authorized, executed and delivered by the Company and are valid and legally
binding obligations of the Company, each enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors rights generally;

                                      -8-
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                                    (C) the authorized capital stock of the
Company as of the Closing (not giving effect to the transactions contemplated by
this Agreement) consists of the capital stock described in the Offering
Documents and that to the best of Company Counsel's knowledge, there are no
outstanding warrants, options, agreements, convertible securities, preemptive
rights or other commitments pursuant to which the Company is, or may become,
obligated to issue any shares of its Common Stock or any other capital stock or
other securities of the Company; all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued, are fully paid an
nonassessable;

                                    (D) to Company Counsel's knowledge, the
Offering Documents (except as to the financial statements and other financial
information set forth in the Offering Documents or incorporated by reference
therein, as to which no opinion is expressed) and any amendment or supplement
thereto prior to the termination of the Offering, do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;

                                    (E) to the best of Company Counsel's
knowledge, the Company has complied with the requirements of the Securities Act
and Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Commission currently in effect relating
to "private offerings" and/or "accredited investors" of the type made by the
Company and the issuance and sale of the Securities is exempt from registration
under the Securities Act;

                                    (F) neither the execution and delivery of
this Agreement, nor compliance with the terms hereof, nor the consummation of
the transactions herein contemplated, has, nor will, conflict with, result in a
breach of, or constitute a default under the Charter or By-laws of the Company
or of any of its Subsidiaries, or, to Company Counsel's knowledge, any material
contract, instrument or document to which the Company or any of its Subsidiaries
is a party, or by which any of its properties is bound;

                                    (G) no approval or consent of any court,
board or governmental agency, instrumentality or authority of the United States
or of any state having jurisdiction or authority over the Company or its
Subsidiaries not duly obtained is required for the valid authorization,m
issuance, sale and delivery of the Securities (or the Reserve Shares) and the
components thereof, other than that required under the United States state "blue
sky" laws;

                                    (H) to the best of Company Counsel's
knowledge, there are no claims, actions, suits, investigations or proceedings
before or by any arbitrator, court, governmental authority or instrumentality
pending or, to Company Counsel's knowledge, threatened against or affecting the
Company or of any of its Subsidiaries or involving the Company's or any of its
Subsidiaries' properties which might adversely affect the business, properties
or financial condition of the Company or any of its Subsidiaries, or which might
adversely affect the transactions or other acts contemplated by this Agreement
of the validity or enforceability of this Agreement, except as set forth in or
contemplated by the Offering Documents; and

                                    (I) the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, and to the best of Company
Counsel's knowledge, has timely filed all reports required to be filed with the
Securities and Exchange Commission, and will be in compliance with such filing
requirements as of the Closing Date.

                                      -9-
<PAGE>

                                    For purposes of the opinion of Company
Counsel, the phrase "to Company Counsel's knowledge" shall mean actual knowledge
with duty of inquiry limited to interviewing the Company's chief executive
officer and director, Bruce Merati, and the phrase "to the best of Company
Counsel's knowledge" shall mean actual knowledge after having conducted an
inquiry customary for purposes of providing opinions of such nature.

                           (ii) At the Closing, the Placement Agents will have
received a signed letter from the Company's auditors, confirming that such firm
is an independent public accountant within the meaning of the Securities Act and
stating that: (i) insofar as reported on by such firm, in their opinion, the
financial statements of the Company included in the Offering Documents
(including, without limitation, the Financial Statements) comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act; (ii) on the basis of procedures and inquiries (not constituting
an examination in accordance with generally accepted auditing standards)
consisting of a reading of the last available financial statements of the
Company, inquiries of officers of the Company responsible for financial and
accounting matters as to the transactions and events subsequent to the Balance
Sheet Date, and a reading of the minutes of meetings of the shareholders, the
board of Directors of the Company and any committees of the Board of Directors,
as set forth in the minute books of the Company, nothing has come to their
attention which, in their judgment, would indicate that (A) during the period
from the Balance Sheet Date to a specified date not more than five (5) business
days prior to the date of such letter, there have been any material decreases in
net current assets or net assets or any change in the capitalization or
long-term debt of the Company or of any of its Subsidiaries, except in all cases
as set forth in or contemplated by the Offering Documents; and (B) the unaudited
interim financial statements of the Company, if any, appearing in the Offering
Documents, are not presented in conformity with Generally Accepted Accounting
Principles and Practices on a basis substantially consistent with the audited
financial statements included in the Offering Documents; and (iii) they have
compared specific dollar amounts, numbers of shares, numerical data, percentages
of revenues and earnings, and other financial information pertaining to the
Company set forth in the Offering Documents (with respect to all dollar amounts,
numbers of shares, percentages and other financial information contained in the
Offering Documents, to the extent that such amounts, numbers, percentages and
information may be derived from the general accounting records of the Company,
and excluding any questions requiring an interpretation by legal counsel) with
the results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter, and found them to be in agreement.

                           (iii) Counsel for the Placement Agents and Company
Counsel shall receive certificates from the Company, signed by the President or
Vice President thereof, certifying (A) that the representations and warranties
contained in Section 2 hereof are true and accurate at the Initial Closing with
the same effect as though expressly made at the Initial Closing; and (B) that
attached hereto is (1) a true and correct copy of resolutions adopted by the
Company's Board of Directors authorizing (i) the execution, delivery and
performance of this Agreement and the Ancillary Documents, and (ii) the issuance
of the Securities and the VirtGame Warrants and certifying that such resolutions
have not been modified, rescinded or amended and are in full force and effect;
and (2) a true and correct copy of a resolution adopted by the Company's Board
of Directors and by each of the Company's Subsidiaries, authorizing the
execution, delivery and performance of each document to which it is party, and
that such resolutions have not been modified, rescinded or amended and are in
full force and effect.

                           (iv) There shall be delivered on behalf of each
Subscriber one copy of the Subscription Agreement signed by each Subscriber and
one copy of the Certification signed by each Subscriber.

                                      -10-
<PAGE>

                           (v) The Placement Agents shall have received
certificates of good standing of the Company, dated as of a recent date, from
the Secretary of State of the jurisdiction of its incorporation and certificates
of good standing of each of the Company's Subsidiaries, dated as of a recent
date, by the Secretary of State of the jurisdictions of incorporation of the
Subsidiaries.

                           (vi) At the Closing, the Placement Agents shall
instruct the Bank to pay to the Company out of the funds on deposit in the
Account, as such funds are received from Subscribers whose Subscriptions have
been accepted.

                  (c) BLUE SKY. Where appropriate, counsel for the Placement
Agents shall prepare a summary blue sky survey stating the extent to which and
the conditions upon which offers and sales of the Securities may be made in
certain jurisdictions. Blue Sky applications shall be made in such states and
jurisdictions as shall be requested by the Placement Agents. It is understood
that such survey may be based on or rely upon (i) the representations of each
Subscriber set forth in the Subscription Agreement delivered by such Subscriber;
(ii) the representations, warranties and agreements of the Company and of its
Subsidiaries set forth herein; (iii) the representations and warranties of the
Placement Agents set forth herein; and (iv) the representations of the Company
and its Subsidiaries set forth in the certificate to be delivered at the Closing
pursuant to paragraph 4(b)(iii) hereof.

                  (d) PLACEMENT FEE AND EXPENSES.

                           (i) At the Closing, the Company shall pay to the
Placement Agents a commission equal to eight percent (8%) of the aggregate
proceeds derived from the Financing. In addition, the Company shall pay the
Placement Agents a non-accountable and non-refundable expense allowance, equal
to Sixty-Five Thousand Dollars ($65,000) of the aggregate proceeds to be derived
from the Financing, Fifty Thousand Dollars ($50,000) of which is payable to
Lighthouse, with Thirty Thousand Dollars ($30,000) payable to Lighthouse upon
the execution hereof and the balance of Fifteen Thousand Dollars ($15,000) to
Keane, and Twenty Thousand Dollars ($20,000) to Lighthouse upon the first
Closing.

                           (ii) The Company has granted to Lighthouse (and to
Keane if the Minimum Offering is raised) a right of first refusal to underwrite
or place any future public sales or private sales of debt or equity securities
whatsoever of the Company or of any Subsidiary or successor thereof, (excluding
sales to employees of the Company or of its Subsidiaries or successors), or any
such sale by any of the principal shareholders of the Company, or of its
Subsidiaries and successors, for a period commencing on March 1, 2003 and
expiring on March 1, 2006. If any such proposed financing is offered to the
Placement Agents as aforesaid, the Placement Agents shall have 30 days in which
to determine whether or not to accept such offer and, if the Placement Agents
decline the offer, the right of first refusal shall be forfeited by the
Placement Agents, but only if such a financing is consummated with another
underwriter or placement agent upon the same terms and conditions as those
offered to the Placement Agents, and such financing is consummated within six
(6) months after the end of the 30 day period referred to above. If after a
declination by the Placement Agents the aforesaid conditions are not satisfied,
then the right of first refusal to the Placement Agents shall be reinstated.

                                      -11-
<PAGE>

                           (iii) The Company shall pay the Placement Agents a
transaction fee consisting of (i) three percent (3%) of all consideration paid
or payable and (ii) if mutually agreed upon by the parties, an equity
participation in the surviving entity, in the event that the Company or any of
its Subsidiaries is party to any merger, acquisition, joint venture or other
transaction or series of transactions during the eighteen (18) months from the
Closing of the Offering; provided, however, such fee shall be five percent (5%)
if the gross proceeds raised in this Offering are at least two million seven
hundred and fifty thousand seven hundred and fifty thousand dollars
($2,750,000).

                  (e) ISSUANCE OF VIRTGAME WARRANTS. Simultaneously with the
Closing as provided in paragraph 4(a) above, the Company shall issue to the
Placement Agents or their designee(s), non-redeemable warrants exercisable for
five (5) years to purchase ten percent (10%) of the number of Units sold at 120%
of the per Unit price paid by Subscribers.

                  (f) PLACEMENT AGENTS' DECISION NOT TO PROCEED, ETC. If the
Placement Agents decide not to proceed with the Offering because of a breach by
the Company or by its Subsidiaries of its/their representations, warranties, or
covenants in this Agreement, or as a result of adverse changes in the affairs of
the Company or of its Subsidiaries, the Company shall be obligated to pay the
Placement Agents Sixty-Five Thousand Dollars ($65,000) reimbursement for
expenses, including attorneys' fees.

         5. COVENANTS OF THE COMPANY.

                  (a) AMENDMENTS AND SUPPLEMENTS. The Company covenants and
agrees that, until the Offering contemplated by the Offering Documents has been
completed or terminated, if there shall occur any event relating to or
affecting, among other things, the Company, any of its Subsidiaries, or the
proposed operations of the Company or any of its Subsidiaries as described in
the Offering Documents, as a result of which it is necessary, in the opinion of
the Placement Agents and their counsel or Company Counsel, to amend or
supplement the Offering Documents in order that the Offering Documents will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Company shall
immediately prepare and furnish to the Placement Agents a reasonable number of
copies of an appropriate amendment of or supplement to the Offering Documents,
in form and substance satisfactory to the Placement Agents and their counsel.

                  (b) USE OF PROCEEDS. The net proceeds of the Offering of the
Securities will be used by the Company, as more fully described in the Offering
Documents, for the purposes to be set forth in the Offering Documents.

                  (c) EXPENSES OF OFFERING. The Company shall be responsible
for, and shall bear all expenses directly and necessarily incurred in connection
with the proposed financing, including, but not limited to, the Offering
Documents, this Agreement, the Share certificates, blue sky fees, filing fees
and the fees and disbursements of the Company's Counsel and the other fees and
expenses set forth above; provided, however, the Company shall not be
responsible for the fees of the Placement Agents, including the Placement
Agents' legal fees (other than reasonable blue sky legal and filing fees) or
travel expenses.

                  (d) RESERVATION OF COMMON STOCK. The Company will reserve and
keep available the maximum number of its authorized but unissued Reserved Shares
which are issuable upon exercise of the Warrants, the Placement Agents'
warrants, and the conversion of the Preferred Shares.

                  (e) EARLY TERMINATION BY THE COMPANY. Anything contained
herein to the contrary notwithstanding, in the event that, following the date of
this Agreement until the termination of the Offering Period, the Company desires
to terminate this Agreement for any reason (which for purposes of this Agreement
shall include, but not be limited to, the Placement Agents being ready, willing
and able to go forward with the transactions contemplated hereunder, but the
Company being unwilling to proceed for any reason), the Placement Agents have
the right, but not the obligation, to agree to such early termination upon the
payment by the Company to the Placement Agents of a sum equal to three percent
(3%) of the total gross proceeds of the Minimum Offering had such Offering been
completed.

                                      -12-
<PAGE>

                  (f) PLACEMENT AGENTS' BOARD REPRESENTATIVE. Subject to the
occurrence of the Minimum Offering, the Placement Agents and their successors
shall have the right to designate one nominee for election, at their option but
subject to the approval of the Company's Board of Directors, which shall not be
unreasonably withheld, either as a member of or non-voting advisor to the Board
of Directors of the Company, and the Company will use its best efforts to cause
such nominee to be elected and continued in office as a director of the Company
or as such advisor so long as at least twenty-five percent (25%) of the
Preferred Shares sold in the Offering are outstanding; provided, however, the
right of Placement Agents to appoint a member to the Company's Board of
Directors shall be subject to the Company having approved or caused to be
elected a second member to the Company's Board of Directors and such person
shall be required to have been approved by the Nevada Gaming Commission and the
designee's execution of and compliance with, a reasonable nondisclosure
agreement. Following the election of such nominee as a director or advisor, such
person shall attend meetings of the Board and receive no more or less
compensation than is paid to other non-officer directors of the Company for
attendance at meetings of the Board of Directors of the Company and shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings including, but not limited to, food, lodging and transportation.
The Company agrees to provide Placement Agents' designee with a written
indemnity agreement on terms and conditions at least as favorable as those
provided to any other director of the Company.

                  (g) PLACEMENT AGENTS SOURCES. For a period of two (2) years
from the date of this Agreement, the Placement Agents shall keep a list of the
names of all their sources of potential financing ("Placement Agents Sources")
for the Company, which list may be furnished to the Company and amended from
time to time by the Placement Agents at their discretion. The Company agrees, in
the event it directly or indirectly receives financing in any form or nature
whatsoever from any Source, that it will fully compensate the Placement Agents
under the terms and conditions of this Agreement to the same extent as if the
Placement Agents themselves had obtained such financing from such Placement
Agents Source.

                  (h) FINDER'S FEE. The Company agrees that it will pay at
Closing a finder's fee to Lighthouse equal to three percent (3%) of the
aggregate gross proceeds of the Financing. The Company represents and warrants
to the Placement Agents that, other than the finder's fee payable to Lighthouse,
it is not obligated to pay a finder's fee to anyone other than Lighthouse in
connection with the introduction of the Company to the Placement Agents.

                  (i) The Company agrees to use its "best efforts" to cause its
shares of Common Stock to be listed on the BBX at the earliest date such
securities may be listed.

                  (j) ESCROW ARRANGEMENTS. The Placement Agents will promptly
deposit funds received from Subscribers in the Account with the Bank and hold
the funds in accordance with the terms of this Agreement and hold the Offering
Documents for the benefit of the Subscribers and the Company. The Bank shall
release funds from such Account only upon receipt of instruction executed by
each of the Placement Agents and the Company. The fees incurred in opening and
maintaining the Account will be borne by the Company. If the Closing does not
take place before the termination of the Offering Period, the Placement Agents
will instruct the Bank to return the funds to the Subscribers without any
deduction or interest thereon.

                                      -13-
<PAGE>

         6. INDEMNIFICATION.

                  (a) The Company hereby agrees to indemnify and hold harmless
the Placement Agents and each person, if any, who controls the Placement Agents
within the meaning of Section 15 of the Act against any losses, claims, damages,
or liabilities, joint or several, to which the Placement Agents or each such
controlling person may become subject, under the Act, the Securities and
Exchange Act of 1934, as amended (the "1934 Act"), the common law, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of, or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Documents or any
amendment or supplement thereof, or the omission or alleged omission to state in
the Offering Documents or any amendment or supplement thereof, a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; or (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any application or other statement executed by the Company or based upon written
information furnished by the Company filed in any jurisdiction in order to
obtain an exemption from registration for the Securities or the sale thereof
from the securities laws of such jurisdiction, or the omission or alleged
omission to state in such application or statement a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company will
reimburse the Placement Agents and each such controlling person for any legal or
other expenses reasonably incurred by the Placement Agents or controlling person
(subject to the limitation set forth in Section 6(c) hereof) in connection with
investigating or defending against any such loss, claim, damage, liability, or
action. The Company will not be liable in any such case to the extent that any
such loss, claim, damage, or liability arise out of, or is based upon, an untrue
statement, or alleged untrue statement, or omission, or alleged omission, made
in reliance upon and in conformity with written information furnished to the
Company by, or on behalf of, the Placement Agents specifically for use in the
preparation of the Offering Documents or in any application or other statement
executed by the Company or the Placement Agents filed in any jurisdiction in
order to exempt the Securities or the sale thereof from registration under the
securities laws of such jurisdiction. This indemnity agreement is in addition to
any liability which the Company may otherwise have. For purposes of this Section
8, information furnished to the Company by or on behalf of, the Placement Agents
shall be as agreed upon in writing by the parties at each Closing.

                  (b) The Placement Agents agree to indemnify and hold harmless
the Company, each of its directors and each person who controls the Company
within the meaning of Section 15 of the Act against any losses, claims, damages,
or liabilities to which the Company or any such director, or controlling person
may become subject, under the Act, the 1934 Act, the common law, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of, or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Documents or the
omission or alleged omission to state in the Offering Documents or any amendment
or supplement thereof, a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
application or other statement executed by the Company or by the Placement
Agents and filed in any jurisdiction in order to obtain an exemption from
registration for the Securities or the sale thereof from the securities laws of
such jurisdiction, or the omission or alleged omission to state in such
application or statement a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; in each case in (i) or (ii) above to the
extent, but only the extent, that such untrue statement, or alleged untrue
statement, or omission, or alleged omission, was made in reliance upon and in
conformity with written information furnished to the Company by, or on behalf
of, the Placement Agents specifically for use in the preparation of the Offering
Documents or in any application or other statement executed by the Company or by
the Placement Agents and filed in any jurisdiction. The Placement Agents will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director or controlling person in connection with investigating or
defending against any such loss, claim, damage, liability, or action. This
indemnity agreement is in addition to any liability which the Placement Agents
may otherwise have.

                                      -14-
<PAGE>

                  (c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 6, notify in writing the indemnifying party of the
commencement thereof. The omission so to notify the indemnifying party will not
relieve it from any liability under this Section 6 as to the particular item for
which indemnification is then being sought. The party claiming indemnification
shall promptly notify the other party of such complaint, notice, claim, or
action, and such indemnifying party shall have the right to investigate and
defend any such loss, claim, damage, liability, or action. The party claiming
indemnification shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the fees and expenses of
such separate counsel shall be borne by the party against whom indemnification
is sought. Any such indemnifying party shall not be liable to any indemnified
party on account of any settlement of any claim or action effected without the
consent of such indemnifying party.

                  (d) In order to provide for just and equitable contribution in
any case in which the Placement Agents or the Company (or any person who
controls the Placement Agents or the Company within the meaning of Section 15 of
the Act) makes claim for indemnification pursuant to this Section 6 but it is
judicially determined (by entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such
case, notwithstanding the fact that the provisions of this Section 6 hereof
provide for indemnification in such case, then, and in each such case, (i) the
Company, and any persons controlling the Company and who may be liable for
contribution, in the aggregate, and (ii) the Placement Agents and any person
controlling the Placement Agents, shall contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from all others) in such proportion so that the Placement Agents and its
controlling persons is responsible for the portion represented by the percentage
that the Placement Agents' Commission bears to the offering price, and the
Company and its controlling persons, in the aggregate is responsible for the
remaining portion; provided, however, that no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation and if such allocation is not permitted by applicable law then
the relative fault of the Company and the Placement Agents in connection with
the statements or omissions which resulted in such damages and other relative
equitable considerations shall also be considered. The Company and the Placement
Agents agree that it would not be just and equitable if the respective
obligations of the Company and the Placement Agents to contribute pursuant to
this Section 6 were to be determined by pro rata or per capita allocation of the
aggregate damages or by any other method of allocation that does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 6, the Placement Agents and its controlling persons
shall not be required to contribute any amount in excess of the amount by which
the total price of the Securities purchased by investors from the Company
pursuant to this Agreement and the Subscription Agreements exceeds the amount of
any damages that the Placement Agents and its controlling persons has otherwise
been required to pay by reason of such untrue statement. The foregoing
contribution agreement shall in no way affect the liabilities for contribution
of any persons having liability under Section 11 of the Act other than the
Company, the Placement Agents and persons controlling the Company and the
Placement Agents.

                                      -15-
<PAGE>

                  (e) Promptly after receipt by a party to this Agreement of
notice of the commencement of any action, suit or proceeding, such person will,
if a claim for contribution in respect thereof is to be made against another
party (the "Contributing Party"), notify the Contributing Party of the
commencement thereof, but the omission so to notify the Contributing Party will
not relieve the Contributing Party from any liability which it may have to any
party other than under this Section 6. In case any such action, suit or
proceeding is brought against any party and such person notifies a Contributing
Party of the commencement thereof, the Contributing Party will be entitled to
participate therein with the notifying party and any other Contributing Party
similarly notified.

         7. MISCELLANEOUS.

                  (a) GENERAL. The Company shall supply the Placement Agents
with such financial statements, contracts and other corporate records and
documents as may be requested of it. In addition, the Placement Agents shall be
fully informed by the Company of any events which might have a material affect
on the financial condition of the Company or any of its Subsidiaries. If, in the
opinion of the Placement Agents, the condition of the Company or the condition
of any of its Subsidiaries, financial or otherwise, and its/their prospects are
affected in a material and/or adverse manner and do no fulfill the expectation
of the Placement Agents, it shall have the sole discretion to review and
determine its continued interest in the Offering.

                  (b) SURVIVAL. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party except
that the provisions of Sections 4(d)(ii), (iii), 4(f), and 5(c) hereof and the
indemnification provisions provided in Section 6 hereof shall survive any
termination and shall survive each Closing. Notwithstanding anything provided
herein to the contrary, the provisions of Section 5(g) hereof shall survive the
termination of the Offering Period and shall remain in full force and effect
with respect to all Placement Agents Sources who invest, or commit to invest, in
the Company at any time during the 24-month period commencing the day that the
Offering Period terminates. Additionally, the Placement Agents shall be entitled
to also retain their non-accountable and non-refundable expense allowance to the
extent it has been paid prior to the date of termination.

                  (c) REPRESENTATIONS, WARRANTIES AND COVENANTS TO SURVIVE
DELIVERY. The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company and its Subsidiaries, and where
appropriate, its/their respective principal stockholders, shall survive
execution of this Agreement and delivery of the Securities and the termination
of this Agreement.

                  (d) NO OTHER BENEFICIARIES. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.

                  (e) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York. The parties
hereby agree: (i) in any legal proceeding brought in connection with this
Agreement or the transactions contemplated hereby, to irrevocably submit to the
nonexclusive IN PERSONAM jurisdiction of (A) any state or federal court of
competent jurisdiction sitting in the State of New York, County of New York; or
(B) in the event that any party is a defendant in any legal proceeding in which
it seeks to join the other as a third party defendant, then, any state or
federal court in which such proceeding has properly been brought, and consents
to suit therein; and (ii) to waive any objection they may now or hereafter have
to the venue of such proceeding in any such court or that such proceeding was
brought in an inconvenient court.

                                      -16-
<PAGE>

                  (f) NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered
personally, receipt acknowledged, or five (5) days after being sent by
registered or certified mail, return receipt requested, postage prepaid. All
notices shall be made to the parties at the addresses designated above, or at
such other or different addresses which a party may subsequently provide with
notice thereof, and to their respective legal counsel, as follows:

(i) If to the Placement Agents, to:

                          Lighthouse Financial Group, LLC
                          420 Lexington Avenue, Suite 360
                          New York, New York 10170
                          Attn:  Mr. Robert J. Bradley

                          - and -

                          Keane Securities Co., Inc.
                          50 Broadway
                          New York, New York 10004
                          Attn:

                          - with a copy to -

                          Stursberg & Veith
                          405 Lexington Avenue
                          Suite 4949
                          New York, New York  10174-4902
                          Attn:  C. Walter Stursberg, Jr., Esq.

                          - and -

                          Walter D. O'Hearn, Jr., Esq.
                          Keane Securities Co., Inc.
                          50 Broadway
                          New York, New York 10004

or to such other person or address as the Placement Agents shall furnish the
Company in writing.

(ii) If to the Company, to:

                          VirtGame Corp.
                          6969 Corte Santa Fe
                          Suite A
                          San Diego, California 92121
                          Attn:  Mr. Bruce Merati, President and Chief Financial
                                    Officer

                          - with a copy to -

                          Preston Gates & Ellis LLP
                          4 Park Plaza, Suite 1900
                          Irvine, California 92614-8559
                          Attn:  Daniel K. Donahue, Esq.

                                      -17-

<PAGE>

or to such other person or address as the Company shall furnish the Placement
Agents in writing.

                  (g) COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.

                  (h) REIMBURSEMENT. Notwithstanding the non-occurrence of a
Closing, or any other condition, in no event shall the Placement Agents be
responsible for any of the Company's fees, costs or expenses; however, the
Company shall reimburse the Placement Agents for any out-of-pocket expenses
(including, but not limited to, reasonable counsel fees and expense) which the
Placement Agents may incur in connection with the enforcement of its rights
hereunder.

                  (i) FORM OF SIGNATURE. The parties hereto agree to accept a
facsimile transmission copy of their respective signatures as evidence of their
respective actual signatures to this Agreement; ; provided, however, that each
party who produces a facsimile signature agrees, by the express terms hereof, to
place, immediately after transmission of his or her signature by fax, a true and
correct original copy of his or her signature in overnight mail to the address
of the other party.

                  (j) MODIFICATION. This Agreement (i) may only be modified by a
written instrument which is executed by both parties thereto, (ii) constitutes
the entire agreement between the parties, and (iii) shall be binding upon and
inure to the benefit of both parties hereto and their respective successor and
assignees.

                  (k) NON-CIRCUMVENTION. Each of the Company and the Placement
Agents agree that no effort shall be made to circumvent the terms and conditions
of this Agreement or gain a fee, commission, remuneration, consideration or
benefit whatsoever. With respect to any attempt at circumvention of this
Agreement, the injured party is entitled to seek any and all legal remedies,
fees or compensation equal to those received or committed or agreed to be paid
pursuant to the terms of this Agreement as the same are due and payable to the
circumvented party under the terms of this Agreement.

                  (l) GOOD FAITH. Each of the Company and the Placement Agents
understand that this Agreement is a reciprocal and mutual one and both warrant,
covenant, and promise that it will act in good faith toward each other in the
performance of this Agreement and in other matters.

                  (m) FURTHER SERVICES. The Placement Agents shall, if requested
by the Company, testify in, and shall prepare and assist in the preparation of
testimony for, any judicial or administrative proceeding in respect of the
services performed by the Placement Agents hereunder. With respect thereto, the
Company shall pay, in addition to the fees and expenses payable to the Placement
Agents hereunder, for the time required to expend by the Placement Agents at its
standard hourly rates as then in effect, together with reasonable out-of-pocket
expenses, but not limited to, fees and expenses of its legal counsel.

                                      -18-
<PAGE>

                  (n) WAIVER OF BREACH. The waiver by either the Placement
Agents or the Company of any provision of this Agreement shall not be construed
as a waiver of any subsequent breach hereof.

         If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.

                                           Very truly yours,

                                           VIRTGAME CORP.

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

Placement Agents

LIGHTHOUSE FINANCIAL GROUP, LLC

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

KEANE SECURITIES CO., INC.

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

                                      -19-
<PAGE>

                                   SCHEDULE 1

                              TERMS AND CONDITIONS

CONVERSION:       a) "Common Stock Price Per Share" shall mean the average of
the closing bid price of the Company's common stock ("Common Stock") for the ten
successive trading days ending three days prior to the closing of the Offering.

                  b) Each share of the Series A convertible redeemable preferred
shares (the "Preferred Shares") shall be convertible into Common Stock and each
Warrant shall be exercisable at a price equal to 115% of the Common Stock Price
Per Share.

                  c) The Preferred Shares shall be entitled to a liquidation
preference of $1,000 per share and shall rank senior to all capital stock
hereafter issued by the Company.

                  d) The Preferred Shares shall be non-redeemable for a period
of two (2) years from the closing of the Financing. Thereafter, the Preferred
Shares shall be redeemable, in whole and not in part, upon sixty (60) days prior
written notice from and after that time when the closing bid of the Common Stock
equals or exceeds 300% of the Common Stock Price Per Share (adjusted for splits,
stock dividends, reorganizations, and the like) for any five (5) consecutive
trading days.

                  e) RESET: If, during the period of twenty-four (24) months
after the closing of the Financing, the Company raises additional capital by
selling Common Stock (or securities convertible into Common Stock) to an
investor or investors for a price less than the Common Stock Price Per Share
(adjusted for splits, stock dividends, reorganizations, and the like) (the "New
Price"), the investors in the Financing and the Placement Agents shall be
entitled to a reset adjustment calculated as follows:

                           (i)      The conversion price of the Preferred Shares
                                    and the exercise price of the Warrants shall
                                    be adjusted to 115% of the New Price.

                           (ii)     Placement Agents' Warrants " this security
                                    shall be amended in form and content in a
                                    manner equitably consistent with the
                                    adjustment set forth above.

                  f) Prior to the closing of the Financing, there shall be not
more than forty (40) million shares of Common Stock outstanding, including
Common Stock underlying all existing options and Warrants.

                  g) From and after the closing of the Financing, until 75.1% of
the Placement Agents has ceased to exist, the Company shall not issue or grant
more than 750,000 Warrants and options in the aggregate during each successive
twelve month period. Any such issued or granted Warrants and options shall have
exercise prices per share not less than the higher of (i) 85% of fair market
value of the Common Stock on the date of issue or grant or (ii) the Common Stock
Price Per Share.

                                      -20-
<PAGE>

                  h) The Company is to extend a covenant to the investors in the
Offering to prepare and file a Registration Statement with the Securities and
Exchange Commission within four (4) months after the closing of the Offering to
register the Common Stock underlying the Preferred Shares, the Warrants, and the
Placement Agents' Warrants and, thereafter, to use its best efforts to have said
Registration Statement declared effective. A delay in filing said Form beyond
the aforesaid four month period shall obligate the Company to pay to each
investor in the Offering a Registration Delay Rebate of five percent (5%) of the
investor's investment in the Offering for each thirty (30) day period (or part
thereof) of delay.

                  i) The Warrants included in the Units shall be redeemable at
any time after the Closing, in whole or in part, at $.05 each upon 30 days'
prior written notice when the closing bid of the Common Stock equals or exceeds
350% of the Common Stock Price Per Share (adjusted for splits, stock dividends,
reorganizations, and the like) for any ten (10) consecutive trading days
provided such notice is given within twenty (20) days of such ten (10)
consecutive trading days.

                                      -21-<PAGE>
EXHIBIT 10.12

                                 PROMISSORY NOTE

U. S. $ 2,200,000.00                                    Grand Junction, Colorado
                                                                February 6, 2001

          FOR VALUE RECEIVED, MOUNTAIN COMPRESSED AIR, INC., ("Maker") promises
to pay to the order of MOUNTAIN AIR DRILLING SERVICE CO., INC., at 578 Rio Hondo
Road, Grand Junction, CO 81503, or such other place as any holder may from time
to time designate in writing to Maker, the principal sum of Two Million Two
Hundred thousand United States Dollars ($2,200,000.00), together with interest
from the date of this Note on the unpaid principal balance at the rate of five
and three-quarter percent (5.75%) per annum, simple interest. Principal and
interest shall be payable in one lump sum of $2,832,500 on February 6, 2006.

          All payments on this Note shall be applied first to interest accrued
to the date of payment, and the balance shall be applied to principal reduction.
Prepayment may be made at any time by Maker, or from time to time, in whole or
in part, without penalty or premium. Any prepayment shall be applied first to
unpaid late payment penalties, second to interest accrued to the date of the
prepayment, and the balance shall be applied to principal.

          Any holder of this Note shall have the right, at the holder's sole
option, following 10 days written notice of the default to Maker and any
guarantors, unless Maker ahs cured the default specified within such 10 day
period, to declare all remaining balances of principal and interest immediately
due and payable or to add unpaid interest to principal upon: (1) insolvency of
the Maker or any guarantor, or the commencement of any bankruptcy or insolvency
proceedings by or against Maker or any guarantor: (2) failure to provide the
holder with a copy of Maker's unaudited financial statements (including balance
sheet, profit and loss statement, and statement of cash flows) within 30 days
after the close of each calendar quarter, and a copy of any audited financial
statements of Maker within 15 days after preparation: or, (3) removal of any of
the equipment purchased from a holder from the contiguous 48 States of the
United States. If a holder declares the unpaid balances of this Note due and
payable, as provided above, the entire unpaid principal balance and interest
accrued to the date of the declaration shall bear interest at the rate of
fifteen percent (15%) per annum, compounded annually, until paid. Forbearance or
delay, however long such delay may be, by a holder to exercise holder's option
with respect to any events giving rise to that option shall not constitute a
waiver of holder's rights as to any subsequent event. Exercise of this option
after notice of default may be without further notice to Maker or guarantors,
notice of exercise being expressly waived. Upon exercise of the option to
accelerate Maker's obligations to pay, a holder may accept any payments on this
Note without waiving acceleration.

          This Note shall be governed by and construed in accordance with the
laws of the State of Colorado. Maker and any guarantor expressly agree that
venue and jurisdiction for any action or proceeding concerning this Note shall
be proper in the courts of Mesa County, Colorado, as well as in the county and
State where Maker maintains its principal office.

          All persons and entities now or at any time liable for the payment of
this Note, including any guarantor, for themselves, their heirs, legal
representatives, successors, and assigns, (1) expressly waive presentment,
demand, notice, protest, notice of dishonor, the right of subrogation, and
diligence in the collection of the sums due under this Note; (2) consent that
the time for all payments, or any part of any payment, may be extended,
rearranged, renewed, or postponed by any holder, in holder's sole discretion
(any number of times and for any duration) without modifying, altering,
releasing, affecting, or limiting the liability of any party: (3) agree that a
holder shall not be required first to institute any suit, or to exhaust any
remedies against Maker or any other person or entity liable under this Note or
against any collateral securing this Note in order to enforce payment of this
Note; and (4) consent to any holder's impairment of recourse against other
parties to this Note or any collateral securing this Note.

          The right to receive any payments hereon, including prepayments, is
subject to the terms of that certain Subordination Agreement dated as of
February 6, 2001, by and among the Maker, the Payee of this Note, Wells Fargo
Bank Texas, National Association, Wells Fargo Energy Capital, and Wells Fargo.

<PAGE>

          Equipment Finance, Inc., reference to which instrument is here made
and which instrument is here incorporated by reference for all purposes. This is
not a negotiable note. Any holders' rights in the Note are subject to the
provisions of the Subordination Agreement.

          The provisions of this Note are severable and if any provision of this
Note is determined to be illegal or unenforceable, the remaining terms of this
Note shall remain enforceable to the maximum extent allowed by law in accordance
with the intent of the parties as stated in this Note.

                                          MOUNTAIN COMPRESSED AIR, INC.

                                          By: /s/ Munawar H. Hidayatallah
                                              ----------------------------------
                                              Munawar H. Hidayatallah, President

Payment of this Note is unconditionally guaranteed.

/s/ Munawar H. Hidayatallah                  /s/  Jayne Munawar
---------------------------                  ------------------
MUNAWAR H. HIDAYATALLAH, PERSONALLY          (Spouse of Munawar H. Hidayatallah)

<PAGE>

                            ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement ("Agreement") is entered into as of
February 6, 2001, by and among MOUNTAIN COMPRESSED AIR, INC., a Texas
corporation ("BUYER"); MOUNTAIN AIR DRILLING SERVICE CO., INC., a Colorado
corporation ("SELLER") and ROD HUSKEY AND LINDA HUSKEY, residents of Grand
Junction, Colorado (collectively referred to as the "HUSKEYS").

                                    RECITALS

         The Huskeys, as shareholders, own 100% of the issued and outstanding
shares of capital stock of Seller. Seller desires to sell, and Buyer desires to
purchase, the Assets of Seller for the consideration and on the terms set forth
in this Agreement.

                                    AGREEMENT

         The parties, intending to be legally bound, agree as follows:

1. DEFINITIONS

         For purposes of this Agreement, the capitalized terms and variations
thereof have the meanings specified or referred to in Schedule 1.

2. SALE AND TRANSFER OF ASSETS; CLOSING

2.1 ASSETS TO BE SOLD

         Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing Seller shall sell, convey, assign, transfer and
deliver to Buyer, free and clear of any Encumbrances other than Permitted
Encumbrances, and Buyer shall purchase and acquire from Seller, all of Seller's
right, title and interest in and to the following property and assets (but
excluding the Excluded Assets):

         (a)      all Tangible Personal Property, including those items
                  described in Schedule 2.1(a);

         (b)      Cash in the amount of $350,000.00 from Seller;

         (c)      all Seller's rights in, to and under all Seller Contracts,
                  including those listed in Schedule 2.1(c), and all outstanding
                  offers or solicitations made by or to Seller to enter into any
                  Contract;

                                        1

<PAGE>

         (d)      all Governmental Authorizations and all pending applications
                  therefor or renewals thereof, in each case to the extent
                  transferable to Buyer, including those listed in Schedule
                  2.1(d);

         (e)      all data and Records related to the operations of Seller,
                  including client and customer lists and Records, referral
                  sources, research and development reports and Records,
                  production reports and Records, service and warranty Records,
                  equipment logs, operating guides and manuals, financial and
                  accounting Records, creative materials, advertising materials,
                  promotional materials, studies, reports, correspondence and
                  other similar documents and Records; and

         (f)      all of the intangible rights and property of Seller, including
                  Seller's name, assumed fictional business names, trading
                  names, going concern value, good-will, telephone, telecopy and
                  e-mail addresses, websites and listings listed in Schedule 2.1
                  (f).

         Notwithstanding the foregoing, the transfer of the Assets pursuant to
this Agreement shall not include the assumption of any Liability in respect
thereof unless the Buyer expressly assumes such Liability pursuant to Section
2.4(a).

2.2 EXCLUDED ASSETS

         Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the following items (collectively, the "Excluded
Assets") are not part of the sale and purchase contemplated hereunder, are
excluded from the Assets, and shall remain the property of Seller after the
Closing:

         (a)      the minute books, stock Records and corporate seal of Seller;

         (b)      the shares of capital stock of Seller held in treasury;

         (c)      all records concerning the case styled Mountain Air Drilling
                  Service Company vs. Muscle Products Corporation, pending in
                  the Mesa County, Colorado, District Court, Case No. 99-CV-323
                  (the "Muscle Products Litigation"), and other Records that
                  Seller is required by law to retain in its possession,
                  provided that Seller will provide Buyer with all personnel
                  records for those employees which Buyer employs following
                  Closing; Buyer may, at its expense, make and retain copies of
                  any other Records retained by Seller under this Section
                  2.2(c);

         (d)      all rights in connection with and assets of employee plans and
                  health insurance, if any;

         (e)      all rights of Seller under this Agreement, the Bill of Sale,
                  and the Assignment and Assumption Agreement;

         (f)      property and assets expressly designated in Schedule 2.2(f);

         (g)      any proceeds and/or rights to the Muscle Products Litigation
                  or other Proceedings; and

                                        2

<PAGE>

         (h)      all cash, Accounts Receivable and investment assets (including
                  prepaid expenses, deposits and retainers) except the
                  $350,000.00 paid to Buyer pursuant to Section 2.1(b).

2.3 PURCHASE PRICE

         The purchase price for the Assets (the "Purchase Price") will be (i)
$9,800,000.00 in cash (the "Cash"), (ii) a promissory note in the aggregate
principal amount of $2,200,000.00 with interest at five and three-quarters
percent (5-3/4%) per annum payable to Seller ("Note") in the form attached
hereto as Exhibit 2.3 hereof, (iii) the assumption of the Assumed Liabilities,
and (iv) $200,000.00 paid in advance to Seller by Buyer as a nonrefundable
deposit ("Deposit") toward the purchase of the Assets pursuant to a prior Asset
Purchase Agreement between the parties that is released to Seller prior to the
execution of this Agreement and is nonrefundable.

2.4 LIABILITIES

         (a)      Assumed Liabilities. On the Closing Date, Buyer shall assume
                  and agree to discharge only the following specifically
                  enumerated obligations and Liabilities of Seller (the "Assumed
                  Liabilities"):

                  (i)      any Liability to Seller's customers incurred by
                           Seller in the Ordinary Course of Business for
                           non-delinquent orders outstanding as of the Closing
                           Date reflected on Seller's books; and

                  (ii)     any Liability to Seller's customers under written
                           warranty agreements given by Seller to its customers
                           in the Ordinary Course of Business prior to the
                           Closing Date.

All account payables shall remain the responsibility of Seller.

         (b)      Retained Liabilities. "Retained Liabilities" shall mean every
                  Liability of Seller other than the Assumed Liabilities. All of
                  the Retained Liabilities shall remain the sole responsibility
                  of and shall be retained, paid, performed and discharged
                  solely by Seller. Retained Liabilities shall include:

                  (i)      any Liability arising out of or relating to services
                           provided by Seller to the extent services were
                           provided prior to the Closing Date, other than to the
                           extent assumed under Section 2.4(a);

                  (ii)     any Liability under any Contract assumed by Buyer
                           pursuant to Section 2.4(a) which arises after the
                           Closing Date but which arises out of or relates to
                           any Breach that occurred prior to the Closing Date;

                  (iii)    any Liability for Taxes including (A) any Taxes
                           arising as a result of Seller's operation of its
                           business or ownership of the Assets prior to the
                           Closing Date, and (b) any deferred Taxes of any
                           nature;

                                        3

<PAGE>

                  (iv)     any Liability arising out of or relating to Seller's
                           credit facilities, or any security interest related
                           thereto;

                  (v)      any Environmental, Health and Safety Liabilities
                           arising out of or relating to the operation of
                           Seller's business or Seller's leasing, ownership or
                           operation of any real property;

                  (vi)     any Liability under employee plans, if any, or
                           relating to payroll, vacation, sick leave, pension
                           benefits, employee stock option or profit-sharing
                           plans, health care plans or benefits, or any other
                           employee plans or benefits of any kind for Seller's
                           employees or former employees, or both;

                  (vii)    any Liability under any employment, severance,
                           retention or termination agreement with any employee
                           of Seller or any of its Related Persons;

                  (viii)   any Liability arising out of or relating to any
                           employee grievance whether or not the affected
                           employees are hired by Buyer;

                  (ix)     any Liability of Seller to the Huskeys, any other
                           shareholder or Related Person;

                  (x)      any Liability to indemnify, reimburse or advance
                           amounts to any officer, director, employee or agent
                           of Seller to which Buyer has not agreed;

                  (xi)     any Liability to distribute to any of Seller's, the
                           Huskeys or otherwise apply all or any part of the
                           consideration received hereunder;

                  (xii)    any Liability arising out of any Proceeding pending
                           as of the Closing Date, whether or not set forth in
                           any Schedule, or any Proceeding commenced after the
                           Closing Date and arising out of, or relating to, any
                           occurrence or event happening prior to the Closing
                           Date;

                  (xiii)   any Liability arising out of or resulting from
                           Seller's non-compliance with any Legal Requirement or
                           Order of any Governmental Body prior to the Closing
                           Date;

                  (xiv)    any Liability of Seller under this Agreement or any
                           other document executed in connection with the
                           Contemplated Transactions;

                  (xv)     any Liability of Seller based upon Seller's acts or
                           omissions occurring after the Closing Date; and

                  (xvii)   any Liability of Seller for accounts payable of
                           Seller.

                                       4
<PAGE>

2.5 ALLOCATION

         The Purchase Price shall be allocated in accordance with Schedule 2.5.
After the Closing, the parties shall make consistent use of the allocation, fair
market value and useful lives specified in Schedule 2.5 for all Tax purposes and
in any and all filings, declarations and reports with the IRS in respect
thereof, including the reports required to be filed under Section 1060 of the
Code, if applicable, it being understood that Buyer shall prepare and deliver
IRS Form 8594 to Seller within forty-five (45) days after the Closing Date if
such form is required to be filed with the IRS. In any Proceeding related to the
determination of any Tax, neither Buyer nor Seller or the Huskeys shall contend
or represent that such allocation is not a correct allocation.

2.6 CLOSING

         The consummation of the purchase and sale provided for in this
Agreement (the "Closing") will take place at the offices of Wilson, Cribbs,
Goren & Flaum, P.C., 440 Louisiana, Suite 2200, Houston, TX 77002, at 10:00 a.m.
(local time) on or before February 6, 2001. Subject to the provisions of Article
9, failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.6 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.

2.7 CLOSING OBLIGATIONS

         In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing:

         (a)      Seller and the Huskeys, as the case may be, shall deliver to
                  Buyer:

                  (i)      a bill of sale for all of the Assets which are
                           Tangible Personal Property in the form of Exhibit
                           2.7(a)(i) (the "General Conveyance, Transfer and
                           Assignment"), executed by Seller;

                  (ii)     an assignment of all of the Assets which are
                           intangible personal property in the form of Exhibit
                           2.7(a)(ii) which assignment shall also contain
                           Buyer's undertaking and assumption of the Assumed
                           Liabilities (the "Assignment and Assumption
                           Agreement"), executed by Seller;

                  (iii)    such other deeds, bills of sale, assignments,
                           certificates of title, documents and other
                           instruments of transfer and conveyance as may
                           reasonably be requested by Buyer, each in form and
                           substance satisfactory to Seller, Buyer and their
                           respective legal counsel and executed by Seller;

                  (iv)     an employment agreement in the form of Exhibit
                           2.7(a)(iv) executed by each of Rod Huskey and Linda
                           Huskey (the "Employment Agreements");

                  (v)      a lease agreement in the form of Exhibit 2.7(a)(v)
                           executed by Seller and the Huskeys (the "Lease
                           Agreement") covering the Leased Property;

                                       5
<PAGE>

                  (vi)     a certificate in the form of Exhibit 2.7(a)(vi)
                           executed by Seller and the Huskeys as to the accuracy
                           of their representations and warranties as of the
                           date of this Agreement and as of the Closing Date in
                           accordance with Section 7.1 and as to their
                           compliance with and performance of their covenants
                           and obligations to be performed or complied with at
                           or before the Closing in accordance with Section 7.2;

                  (vii)    a certificate of the Secretary of Seller in the form
                           of Exhibit 2.7(a)(vii) certifying, certifying all
                           requisite resolutions or actions of Seller's board of
                           directors and the Huskeys approving the execution and
                           delivery of this Agreement and the consummation of
                           the Contemplated Transactions and the change of name
                           contemplated by Section 5.9;

                  (viii)   cash in the amount of $350,000.00; and

                  (ix)     that certain Subordination Agreement between Seller,
                           Huskeys, Buyer and Wells Fargo Bank Texas, N.A.

         (b)      Buyer shall deliver to Seller and the Huskeys, as the case may
                  be:

                  (i)      the Assignment and Assumption Agreement executed by
                           Buyer;

                  (ii)     the Employment Agreements for the Huskeys executed by
                           Buyer;

                  (iii)    a certificate in the form of Exhibit 2.7(b)(iii)
                           executed by Buyer as to the accuracy of its
                           representations and warranties as of the date of this
                           Agreement and as of the Closing Date in accordance
                           with Section 8.1 and as to its compliance with and
                           performance of its covenants and obligations to be
                           performed or complied with at or before the Closing
                           in accordance with Section 8.2; and

                  (iv)     a certificate of the Secretary of Buyer in the form
                           of Exhibit 2.7(b)(iv) certifying all requisite
                           resolutions or actions of Buyer's Board of Directors
                           approving the execution and delivery of this
                           Agreement and the consummation of the transactions
                           contemplated herein and the authority of the Buyer
                           executing this Agreement and any other document
                           relating to the Contemplated Transactions.

                  (v)      the Lease Agreement executed by the Buyer;

                  (vi)     the Cash (by wire transfer as directed by Seller) and
                           the Note required by Section 2.3.

                                       6
<PAGE>

3. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE HUSKEYS

         Seller and the Huskeys represent and warrant, jointly and severally, to
Buyer as follows:

3.1 ORGANIZATION AND GOOD STANDING

         (a)      Schedule 3.1(a) contains a complete and accurate list of
                  Seller's jurisdiction of incorporation and any other
                  jurisdictions in which it is qualified to do business as a
                  foreign corporation. Seller is a corporation duly organized,
                  validly existing, and in good standing under the laws of its
                  jurisdiction of incorporation, with full corporate power and
                  authority to conduct its business as it is now being
                  conducted, to own or use the properties and assets that it
                  purports to own or use, and to perform all its obligations
                  under Seller Contracts. Seller is duly qualified to do
                  business as a foreign corporation and is in good standing
                  under the laws of each state or other jurisdiction in which
                  either the ownership or use of the properties owned or used by
                  it, or the nature of the activities conducted by it, requires
                  such qualification.

         (b)      Seller has no Subsidiary and does not own any shares of
                  capital stock or other securities of any other Person.

3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT

         (a)      This Agreement constitutes the legal, valid, and binding
                  obligation of Seller and the Huskeys, enforceable against each
                  of them in accordance with its terms. Upon the execution and
                  delivery by Seller and the Huskeys of the Employment
                  Agreements, Lease Agreement, and other agreements to be
                  executed or delivered by any or all of the Seller and the
                  Huskeys at Closing (collectively, the "Seller's Closing
                  Documents"), each of Seller's Closing Documents will
                  constitute the legal, valid, and binding obligation of each of
                  Seller and the Huskeys a party thereto, enforceable against
                  each of them in accordance with its terms. Seller has the
                  absolute and unrestricted right, power and authority to
                  execute and deliver this Agreement and the Seller's Closing
                  Documents to which it is a party and to perform its
                  obligations under this Agreement and the Seller's Closing
                  Documents, and such action has been duly authorized by all
                  necessary action by Seller's, the Huskeys and board of
                  directors. The Huskeys have all necessary legal capacity to
                  enter into this Agreement and the Seller's Closing Documents
                  to which such Huskeys are a party and to perform his or her
                  obligations hereunder and thereunder.

         (b)      Neither the execution and delivery of this Agreement nor the
                  consummation or performance of any of the Contemplated
                  Transactions will, directly or indirectly (with or without
                  notice or lapse of time):

                  (i)      Breach any provision of any of the Governing
                           Documents of Seller or any resolution adopted by the
                           board of directors of Seller or the Huskeys;

                  (ii)     Breach or give any Governmental Body or other Person
                           the right to challenge any of the Contemplated
                           Transactions or to exercise any remedy or obtain any
                           relief under, any Legal Requirement or any Order to
                           which Seller or the Huskeys, or any of the Assets,
                           may be subject;

                  (iii)    contravene, conflict with, or result in a violation
                           or Breach of any of the terms or requirements of, or
                           give any Governmental Body the right to revoke,
                           withdraw, suspend, cancel, terminate, or modify, any
                           Governmental Authorization that is held by Seller or
                           that otherwise relates to the Assets or to the
                           business of Seller;

                                        7

<PAGE>

                  (iv)     cause Buyer to become subject to, or to become liable
                           for the payment of, any Tax, except sales and use
                           taxes which may become due as a result of the sale of
                           the assets;

                  (v)      Breach any provision of, or give any Person the right
                           to declare a default or exercise any remedy under, or
                           to accelerate the maturity or performance of, or
                           payment under, or to cancel, terminate, or modify,
                           any Seller Contract;

                  (vi)     result in the imposition or creation of any
                           Encumbrance upon or with respect to any of the
                           Assets; or

                  (vii)    result in any shareholder of the Seller having the
                           right to exercise dissenters' appraisal rights.

         Neither Seller nor the Huskeys are required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.

3.3 CAPITALIZATION

         The Huskeys own 100% of the issued and outstanding shares of capital
stock of Seller. The Huskeys are and will be on the Closing Date the record and
beneficial owners and holders of all the shares owned by each of them, free and
clear of all Encumbrances. There are no Contracts for the issuance, sale, or
transfer of any equity securities or other securities of Seller. None of the
outstanding equity securities of Seller were issued in violation of the
Securities Act of 1933, as amended (the "Securities Act") or any other Legal
Requirement.

3.4 FINANCIAL STATEMENTS

         Seller has delivered to Buyer:

         (a)      unaudited balance sheets of Seller as of December in each of
                  the years 1996 through 1999, and the related unaudited
                  statements of income, changes in shareholders' equity, and
                  cash flows for each of the fiscal years then ended, including
                  in each case the notes thereto;

                                       8
<PAGE>

         (b)      an unaudited balance sheet of Seller as of December 31, 2000,
                  (the "Interim Balance Sheet") and the related unaudited
                  statements of income, changes in shareholder's equity and cash
                  flows for the fiscal year then ended, including in each case
                  the notes thereto certified by Seller. Such financial
                  statements fairly present (and the financial statements
                  delivered pursuant to Section 5.8 will fairly present) the
                  financial condition and the results of operations, changes in
                  shareholders' equity, and cash flows of Seller as of the
                  respective dates of and for the periods referred to in such
                  financial statements, all in accordance with GAAP, subject, in
                  the case of interim financial statements, to normal recurring
                  year-end adjustments (the effect of which will not,
                  individually or in the aggregate, be materially adverse) and
                  the absence of notes (that, if presented, would not differ
                  materially from those included in the Balance Sheet). The
                  financial statements referred to in this Section 3.4,
                  delivered pursuant to Section 5.8 and the Audited Financial
                  Statements when delivered pursuant to Section 2.9 of this
                  Agreement reflect and will reflect the consistent application
                  of such accounting principles throughout the periods involved,
                  except as disclosed in the notes to such financial statements.
                  The financial statements have been and will be prepared from
                  and are in accordance with the books and Records of Seller,
                  which have been prepared in accordance with Section 3.5; and

         (c)      the audited financial statements of Seller for fiscal years
                  ended December 31, 1997 through 1999 as prepared by Gordon,
                  Hughes & Banks, LLP.

3.5 BOOKS AND RECORDS

         The books of account and other financial Records of Seller, all of
which have been made available to Buyer, are complete and correct and represent
actual, bona fide transactions.

3.6 TITLE TO ASSETS

         Seller owns good and transferable title to all of the other Assets free
and clear of any Encumbrances other than those described in Schedule 3.6
("Permitted Encumbrances").

3.7 CONDITION OF TANGIBLE PERSONAL PROPERTY

         No warranties, express or implied, are made as to the condition,
merchantability, or fitness for any purpose of any item of Tangible Personal
Property. The sale of the Tangible Personal Property is made AS IS and WHERE IS.
Prior to Closing, Seller shall maintain all of the Tangible Personal Property
through routine maintenance in the Ordinary Course of Business. All Tangible
Personal Property used in Seller's business is in the possession of Seller. At
least 90% of the fair market value of the Tangible Personal Property, as
described and detailed in that certain appraisal dated May 10, 2000, by Superior
Auctions Appraisals & Brokerage, is currently and has been for at least the last
year located in the State of New Mexico and will be located in New Mexico at the
Closing.

3.8 [INTENTIONALLY LEFT BLANK]

3.9 NO UNDISCLOSED LIABILITIES

         Seller has no Liability except for Liabilities reflected or reserved
against in the Balance Sheet or the Interim Balance Sheet and current
Liabilities incurred in the Ordinary Course of Business of Seller since the date
of the Interim Balance Sheet.

                                       9
<PAGE>

3.10 TAXES

         (a)      Tax Returns Filed and Taxes Paid. Except as described in
                  Schedule 3.10(a) Seller and its Subsidiaries have filed or
                  caused to be filed on a timely basis all Tax Returns
                  (including where appropriate consolidated Tax Returns) and all
                  reports with respect to Taxes that are or were required to be
                  filed pursuant to applicable Legal Requirement. All such Tax
                  Returns and reports filed by Seller and its Subsidiaries are
                  true, correct and complete in all respects. Seller has paid,
                  or made provision for the payment of, all Taxes that have or
                  may have become due for all periods covered by the Tax Returns
                  or otherwise, or pursuant to any assessment received by
                  Seller, except said Taxes, if any, as are listed in Schedule
                  3.10(a) and are being contested in good faith and as to which
                  adequate reserves (determined in accordance with GAAP) have
                  been provided in the Balance Sheet and Interim Balance Sheet.
                  Seller currently is not the beneficiary of any extension of
                  time within which to file any Tax Return except an extension
                  to file all state and federal income tax returns for the year
                  1999. No claim has ever been made or is expected to be made be
                  made by an authority in a jurisdiction where the Seller does
                  not file Tax Returns that it is or may be subject to taxation
                  by that jurisdiction. There are no Encumbrances on any of the
                  assets of Seller that arose in connection with any failure (or
                  alleged failure) to pay any Tax, and Seller has no Knowledge
                  of any basis for assertion of any claims attributable to Taxes
                  which, if adversely determined would result in any such
                  Encumbrance;

         (b)      Delivery of Tax Returns and Information Regarding Audits and
                  Potential Tax Liabilities. Seller has delivered to Buyer
                  copies of, and Schedule 3.10(b) contains a complete and
                  accurate list of all Tax Returns specified in Section 3.10(a)
                  that were filed since December 31, 1997. Schedule 3.10(b)
                  indicates such Tax Returns that have been audited or are
                  currently under audit and accurately describes any
                  deficiencies, or other amounts that were paid or are currently
                  being contested. To the Knowledge of the Huskeys, any
                  director, or officer (or employee responsible for Tax matters)
                  of Seller (a "Responsible Tax Person"), no undisclosed
                  deficiencies are expected to be asserted with respect so any
                  such audit. All deficiencies proposed as a result of such
                  audits have been paid, reserved against, settled, or, as
                  described in Schedule 3.10(b), are being contested in good
                  faith by appropriate Proceedings. Seller has delivered copies
                  of any examination reports, statements of deficiencies, or
                  similar items with respect to such audits;

         (c)      Proper Accrual. The charges, accruals, and reserves with
                  respect to Taxes on the books of Seller are adequate
                  (determined in accordance with GAAP) and are at least equal to
                  Seller's Liability for Taxes. There exists no proposed tax
                  assessment or deficiency against Seller, except as disclosed
                  in the Interim Balance Sheet or in Schedule 3.10(c); and

         (d)      Specific Potential Tax Liabilities and Tax Situations.

                  (i)      Withholding. All Taxes that Seller is or were
                           required by Legal Requirements to withhold, deduct or
                           collect have been duly withheld, deducted and
                           collected and, to the extent required, have been paid
                           to the proper Governmental Body or other Person.

                  (ii)     S Corporation. Seller is an S corporation as defined
                           in Code Section 1361.

                                       10
<PAGE>

3.11 NO MATERIAL ADVERSE CHANGE

         Since the date of the Interim Balance Sheet, there has not been any
material adverse change in the business, operations, prospects, assets, results
of operations or condition (financial or other) of Seller, and no event has
occurred or circumstance exists that may result in such a material adverse
change.

3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS

         (a)      Seller is, and at all times since January 1, 1999 has been, in
                  full compliance with each material Legal Requirement that is
                  or was applicable to it or to the conduct or operation of its
                  business or the ownership or use of any of its assets;

         (b)      No event has occurred or circumstance exists that (with or
                  without notice or lapse of time) (i) may constitute or result
                  in a violation by Seller of, or a failure on the part of
                  Seller to comply with, any material Legal Requirement, or (ii)
                  may give rise to any obligation on the part of Seller to
                  undertake, or to bear all or any portion of the cost of, any
                  Remedial Action of any nature;

         (c)      Seller has not received, at any time since January 1, 1999 any
                  notice or other communication (whether oral or written) from
                  any Governmental Body or any other Person regarding (i) any
                  actual, alleged, possible, or potential violation of, or
                  failure to comply with, any material Legal Requirement, or
                  (ii) any actual, alleged, possible, or potential obligation on
                  the part of Seller to undertake, or to bear all or any portion
                  of the cost of, any Remedial Action of any nature; and

         (d)      The Governmental Authorizations listed in Schedule 3.12(d)
                  collectively constitute all of the Governmental Authorizations
                  necessary to permit Seller to lawfully conduct and operate its
                  business in the manner it currently conducts and operates such
                  business and to permit Seller to own and use its assets in the
                  manner in which it currently owns and uses such assets.

3.13 LEGAL PROCEEDINGS; ORDERS

         Except as set forth in Schedule 3.13 attached hereto and made a part
hereof for all purposes, there is no pending or, to Seller's Knowledge,
threatened Proceeding:

         (a)      by or against Seller or that otherwise relates to or may
                  affect the business of, or any of the assets owned or used by,
                  Seller; or

         (b)      that challenges, or that may have the effect of preventing,
                  delaying, making illegal, or otherwise interfering with, any
                  of the Contemplated Transactions.

         To the Knowledge of Seller, no event has occurred or circumstance
exists that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. There are no Proceedings listed or required
to be listed in Schedule 3.13 that may have a material adverse effect on the
business, operations, assets, condition, or prospects of Seller, or upon the
Assets.

                                       11
<PAGE>

3.14 ENVIRONMENTAL MATTERS

Except as disclosed in Schedule 3.14:

         (a)      Seller is, and at all times has been, in full compliance with,
                  and has not been and is not in violation of or liable under,
                  any Environmental Law. Neither Seller nor any the Huskeys has
                  any basis to expect, nor has any of them or any other Person
                  for whose conduct they are or may be held to be responsible
                  received, any actual or threatened Order, notice, or other
                  communication from any Governmental Body or private citizen
                  acting in the public interest, or of any actual or potential
                  violation or failure to comply with any Environmental Law, or
                  of any actual or threatened obligation to undertake or bear
                  the cost of any Environmental, Health, and Safety Liabilities
                  with respect to the Leased Property or any other properties or
                  assets (whether real, personal, or mixed) in which Seller has
                  had an interest, or with respect to any property to which
                  Hazardous Materials were generated, manufactured, refined,
                  transferred, imported, used, or processed by Seller or any
                  other Person for whose conduct it is or may be held
                  responsible, or from which Hazardous Materials have been
                  transported, treated, stored, handled, transferred, disposed,
                  recycled, or received;

         (b)      There are no pending or, to the Knowledge of Seller,
                  threatened claims, Encumbrances, or other restrictions of any
                  nature, resulting from any Environmental, Health, and Safety
                  Liabilities or arising under or pursuant to any Environmental
                  Law, with respect to or affecting the Leased Property or any
                  of the Assets being purchased by Buyer;

         (c)      Neither Seller, nor any other Person for whose conduct it is
                  or may be held responsible, has any Environmental, Health, and
                  Safety Liabilities with respect to the Leased Property or, to
                  the Knowledge of Seller , with respect to any other properties
                  and assets (whether real, personal, or mixed) in which Seller
                  (or any predecessor) has or had an interest, or at any
                  property geologically or hydrologically adjoining the Leased
                  Property or any such other property or assets;

         (d)      There are no Hazardous Materials present on or in the
                  Environment at the Leased Property or at any geologically or
                  hydrologically adjoining property, including any Hazardous
                  Materials contained in barrels, above or underground storage
                  tanks, landfills, land deposits, dumps, equipment (whether
                  movable or fixed) or other containers, either temporary or
                  permanent, and deposited or located in land, water, sumps, or
                  any other part of the Leased Property or such adjoining
                  property, or incorporated into any structure therein or
                  thereon. Neither Seller nor any Person for whose conduct it is
                  or may be held responsible, or to the Knowledge of Seller, any
                  other Person, has permitted or conducted, or is aware of, any
                  Hazardous Activity conducted with respect to the Leased
                  Property or any other properties or assets (whether real,
                  personal, or mixed) in which Seller has or had an interest;

                                       12
<PAGE>

         (e)      There has been no Release or, to the Knowledge of Seller,
                  Threat of Release, of any Hazardous Materials at or from the
                  Leased Property or at any other locations where any Hazardous
                  Materials were generated, manufactured, refined, transferred,
                  produced, imported, used, or processed from or by the Leased
                  Property, or from any other properties and assets (whether
                  real, personal, or mixed) in which Seller has or had an
                  interest, or to the Knowledge of Seller any geologically or
                  hydrologically adjoining property, whether by Sellers or any
                  other Person; and

         (f)      Seller has delivered to Buyer true and complete copies and
                  results of any reports, studies, analyses, tests, or
                  monitoring possessed or initiated by Seller pertaining to
                  Hazardous Materials or Hazardous Activities in, on, or under
                  the Leased Property, or concerning compliance by Seller or any
                  other Person for whose conduct it is or may be held
                  responsible, with Environmental Laws.

3.15 BROKERS OR FINDERS

         Neither Seller nor any of its officers, directors, employees or agents
have incurred any obligation or Liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with the sale of Seller's business or the Assets or the Contemplated
Transactions other than commissions to The Dillard Anderson Group which are
being paid by Seller.

3.16 EMPLOYMENT MATTERS

         (a)      Schedule 3.16 (a) contains a complete and accurate list of the
                  following information for each employee as of May 1, 2000, of
                  Seller, including each employee on leave of absence or layoff
                  status: employee name; job title; date of hiring; dates of
                  commencement of employment; compensation paid or payable, and
                  sick and vacation leave that is accrued but unused;

         (b)      To the Knowledge of Buyer, no officer, director, agent,
                  employee, consultant, or contractor of Seller is bound by any
                  Contract that purports to limit the ability of such officer,
                  director, agent, employee, consultant, or contractor (i) to
                  engage in or continue or perform any conduct, activity, duties
                  or practice relating to the business of Seller or (ii) assign
                  to Seller or to any other Person any rights to any invention,
                  improvement, or discovery. No former or current employee of
                  Seller is a party to, or is otherwise bound by, any Contract
                  that in any way adversely affected, affects, or will affect
                  the ability of Seller or Buyer to conduct the business as
                  heretofore carried on by Seller;

                                       13
<PAGE>

         (c)      Seller (i) has not been, and is not now, a party to any
                  collective bargaining agreement or other labor contract; (ii)
                  since January 1, 1999, there has not been, there is not
                  presently pending or existing, and to Seller's Knowledge there
                  is not threatened, any strike, slowdown, picketing, work
                  stoppage or employee grievance process involving Seller; (iii)
                  no event has occurred or circumstance exists that could
                  provide the basis for any work stoppage or other labor
                  dispute; (iv) there is not pending or, threatened against or
                  affecting Seller any Proceeding relating to the alleged
                  violation of any Legal Requirement pertaining to labor
                  relations or employment matters, including any charge or
                  complaint filed with the National Labor Relations Board or any
                  comparable Governmental Body, and there is no organizational
                  activity or other labor dispute against or affecting Seller or
                  the Facilities; (v) no application or petition for an election
                  of or for certification of a collective bargaining agent is
                  pending; (vi) no grievance or arbitration Proceeding exists
                  which might have an adverse effect upon Seller or the conduct
                  of its business; (vii) there is no lockout of any employees by
                  Seller, and no such action is contemplated by Seller; (viii)
                  there has been no charge of discrimination filed against or
                  threatened against Seller with the Equal Employment
                  Opportunity Commission or any Governmental Body; and

         (d)      Seller has maintained workers' compensation coverage as
                  required by applicable state law through purchase of insurance
                  and not by self-insurance or otherwise.

3.17 DISCLOSURE

         To the best of Seller's and the Huskeys' knowledge, no representation
or warranty or other statement made by Seller or the Huskeys in this Agreement
or in connection with the Contemplated Transactions omits to state a material
fact necessary to make any of them, in light of the circumstances in which it
was made, not misleading.

4. REPRESENTATIONS AND WARRANTIES OF BUYER

4.1 ORGANIZATION AND GOOD STANDING

         Buyer is a Texas corporation duly organized, validly existing, and in
good standing under the laws of the State of Texas, with full power and
authority to conduct its business as it is now being conducted.

                                       14
<PAGE>

4.2 AUTHORITY; NO CONFLICT

         (a)      This Agreement constitutes the legal, valid, and binding
                  obligation of Buyer, enforceable against Buyer in accordance
                  with its terms. Upon the execution and delivery by Buyer of
                  the Assignment and Assumption Agreement, the Employment
                  Agreements, Lease Agreement, Note, and other agreements to be
                  executed or delivered by Buyer at Closing (collectively, the
                  "Buyer's Closing Documents"), each of the Buyer's Closing
                  Documents will constitute the legal, valid, and binding
                  obligation of Buyer, enforceable against Buyer in accordance
                  with its respective terms. Buyer has the absolute and
                  unrestricted right, power, and authority to execute and
                  deliver this Agreement and the Buyer's Closing Documents and
                  to perform its obligations under this Agreement and the
                  Buyer's Closing Documents, and such action has been duly
                  authorized by all necessary corporate action;

         (b)      Neither the execution and delivery of this Agreement by Buyer
                  nor the consummation or performance of any of the Contemplated
                  Transactions by Buyer will give any Person the right to
                  prevent, delay, or otherwise interfere with any of the
                  Contemplated Transactions pursuant to:

                  (i)      any provision of Buyer's Governing Documents;

                  (ii)     any resolution adopted by the board of directors or
                           the stockholders of Buyer;

                  (iii)    any Legal Requirement or Order to which Buyer may be
                           subject; or

                  (iv)     any Contract to which Buyer is a party or by which
                           Buyer may be bound. Buyer is not and will not be
                           required to obtain any Consent from any Person in
                           connection with the execution and delivery of this
                           Agreement or the consummation or performance of any
                           of the Contemplated Transactions.

4.3 BROKERS OR FINDERS

         Neither Buyer nor any of its officers, directors, employees or agents
have incurred any obligation or Liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with the Contemplated Transactions.

4.4 CAPITALIZATION

         The authorized equity securities of Buyer consist of 15,000,000 shares
of common stock, par value $.01 per share. All of the equity securities of Buyer
have been duly authorized and validly issued and are fully paid and
non-assessable. None of the outstanding equity securities of Buyer were issued
in violation of the Securities Act or other legal requirement.

                                       15
<PAGE>

5. COVENANTS OF SELLER PRIOR TO CLOSING

5.1 ACCESS, INVESTIGATION AND AUDIT

         Seller and the Huskeys shall cause Seller to:

         (a)      afford Buyer and its Representatives and prospective lenders
                  and their Representatives (collectively, "Buyer's Advisors")
                  full and free access to Seller's personnel, properties
                  (including subsurface testing), Contracts, Governmental
                  Authorizations, books and Records, and other documents and
                  data;

         (b)      furnish Buyer and Buyer's Advisors with copies of all such
                  Contracts, Governmental Authorizations, books and Records, and
                  other existing documents and data as Buyer may reasonably
                  request;

         (c)      furnish Buyer and Buyer's Advisors with such additional
                  financial, operating, and other relevant data and information
                  as Buyer may reasonably request;

         (d)      otherwise cooperate and assist, to the extent reasonably
                  requested by Buyer, with Buyer's investigation of the
                  properties, assets and financial condition related to Seller.
                  In addition, Buyer shall have the right to have the Leased
                  Real Property and Tangible Personal Property inspected by
                  Buyer's representatives, at Buyer's sole cost and expense, for
                  purposes of determining the physical condition and legal
                  characteristics of the Leased Real Property and Tangible
                  Personal Property.

5.2 OPERATION OF THE BUSINESS OF SELLER

         (a)      During the period from the date of this Agreement to the
                  earlier of Closing or a termination event as classified in
                  Article 9 hereof, Seller shall (and the Huskeys shall cause
                  Seller to):

                  (i)      conduct its business only in the Ordinary Course of
                           Business;

                  (ii)     except as otherwise directed by Buyer in writing, and
                           without making any commitment on Buyer's behalf, use
                           its Best Efforts to preserve intact its current
                           business organization, keep available the services of
                           its officers, employees, and agents, and maintain its
                           relations and good will with suppliers, customers,
                           landlords, Creditors, employees, agents, and others
                           having business relationships with it;

                  (iii)    confer with Buyer prior to implementing operational
                           decisions of a material nature;

                  (iv)     otherwise report periodically to Buyer concerning the
                           status of its business, operations and finances;

                                       16
<PAGE>

                  (v)      make no material changes in management personnel or
                           enter into any employment agreements without prior
                           consultation with Buyer;

                  (vi)     maintain the Assets in a state of repair and
                           condition which complies with Legal Requirements and
                           is consistent with the requirements and normal
                           conduct of Seller's business;

                  (vii)    keep in full force and effect, without amendment, all
                           material rights relating to Seller's business;

                  (viii)   comply with all Legal Requirements and contractual
                           obligations applicable to the operations of Seller's
                           business;

                  (ix)     continue in full force and effect the insurance
                           coverage under the policies set forth in the
                           Schedules or substantially equivalent policies;

                  (xi)     use its Best Efforts to cooperate with Buyer and
                           assist Buyer in identifying the Governmental
                           Authorizations required by Buyer to operate the
                           business from and after the Closing Date and either
                           transferring existing Governmental Authorizations of
                           Seller to Buyer, where permissible, or obtaining new
                           Governmental Authorizations for Buyer;

                  (xii)    upon request from time to time, execute and deliver
                           all documents, make all truthful oaths, testify in
                           any Proceedings and do all other acts that may be
                           reasonably necessary or desirable, in the opinion of
                           Buyer, to consummate the Contemplated Transactions,
                           all without further consideration; and

                  (xiii)   maintain all books and Records of Seller relating to
                           Seller's business in the Ordinary Course of Business.

5.3 NEGATIVE COVENANT

         Except as otherwise expressly permitted herein, Seller shall not, and
the Huskeys shall not permit Seller to, without the prior written Consent of
Buyer:

         (a)      take any affirmative action, or fail to take any reasonable
                  action within its control, the a result of which would
                  negatively impact the business of Seller or the relationship
                  with its customers;

         (b)      make any modification to any material Contract or Governmental
                  Authorization;

         (c)      allow the levels of supplies or other materials included in
                  the inventories, if any, to vary materially from the levels
                  customarily maintained;

         (d)      enter into any compromise or settlement of any litigation,
                  Proceeding or governmental investigation relating to the
                  Assets, the business of Seller or the Assumed Liabilities,
                  except Seller may settle the Muscle Products litigation
                  without Buyer's written consent; or

         (e)      allow the Tangible Personal Property to materially deteriorate
                  from its operating condition.

         It is specifically agreed and understood that Seller may settle any
litigation involving the Seller without Buyer approval.

                                       17
<PAGE>

5.4 REQUIRED APPROVALS

         As promptly as practicable after the date of this Agreement, Seller
shall make all filings required by Legal Requirements (other than Federal Legal
Requirements) to be made by it in order to consummate the Contemplated
Transactions. Seller and the Huskeys also shall use their Best Efforts to
cooperate with Buyer and its Representatives with respect to all filings that
Buyer elects to make, or pursuant to Legal Requirements shall be required to
make, in connection with the Contemplated Transactions. Seller and the Huskeys
also shall use their Best Efforts to cooperate with Buyer and its
Representatives in obtaining all Material Consents.

5.5 NOTIFICATION

         Between the date of this Agreement and the Closing Date, Seller and the
Huskeys shall promptly notify Buyer in writing if any of them becomes aware of:

         (a)      any fact or condition that causes or constitutes a Breach of
                  any of Seller's representations and warranties made as of the
                  date of this Agreement; or

         (b)      the occurrence after the date of this Agreement of any fact or
                  condition that would or be reasonably likely to (except as
                  expressly contemplated by this Agreement) cause or constitute
                  a Breach of any such representation or warranty had that
                  representation or warranty been made as of the time of the
                  occurrence of, or Seller's or the Huskeys' discovery of, such
                  fact or condition.

         Should any such fact or condition require any change to the Schedules,
Seller shall promptly deliver to Buyer a supplement to the Schedules specifying
such change. Such delivery shall not affect any rights of Buyer under Section
9.2 and Article 11. During the same period, Seller and the Huskeys also shall
promptly notify Buyer of the occurrence of any Breach of any covenant of Seller
in this Article 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Article 7 impossible or unlikely.

                                       18
<PAGE>

5.6 NO NEGOTIATION

         Until such time as this Agreement shall be terminated pursuant to
Section 9.1, neither Seller nor the Huskeys shall directly or indirectly
solicit, initiate, encourage or entertain any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any inquiries or proposals from, any Person (other than Buyer)
relating to any business combination transaction involving Seller, including the
sale by the Huskeys of Seller's stock, the merger or consolidation of Seller, or
the sale of Seller's business or any of the Assets (other than in the Ordinary
Course of Business). Seller and the Huskeys shall notify Buyer of any such
inquiry or proposal within twenty four hours of receipt or awareness of the same
by Seller or any the Huskeys.

5.7 BEST EFFORTS

         Seller and the Huskeys shall use their Best Efforts to cause the
conditions in Article 7 to be satisfied.

5.8 INTERIM FINANCIAL STATEMENTS

         Until the Closing Date, Seller shall deliver to Buyer within ten (10)
days after the end of each calendar month a copy of the interim financial
statements for such month prepared in a manner and containing information
reasonably required by Buyer and certified by Seller as to compliance with
Section 3.4.

6. COVENANTS OF BUYER PRIOR TO CLOSING

6.1 REQUIRED APPROVALS

         As promptly as practicable after the date of this Agreement, Buyer
shall make, or cause to be made, all filings required by Legal Requirements
(including any federal Legal Requirements imposed upon Buyer) to be made by it
to consummate the Contemplated Transactions. Buyer also shall fully cooperate,
and cause any Related Person to cooperate, with Seller (i) with respect to all
filings Seller shall be required by Legal Requirements to make, and (ii) in
obtaining all Consents identified in Schedule 7.3, provided, however, that Buyer
shall not be required to dispose of or make any change to its business, expend
any material funds or Incur any other burden in order to comply with this
Section 6.1.

6.2 BEST EFFORTS

         Buyer shall use its Best Efforts to cause the conditions in Article 8
and Section 7.3 to be satisfied

                                       19

<PAGE>

7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE

         Buyer's obligation to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):

7.1 ACCURACY OF REPRESENTATIONS

         (a)      All of Seller's and the Huskeys' representations and
                  warranties in this Agreement (considered collectively), and
                  each of these representations and warranties (considered
                  individually), must have been accurate in all material
                  respects as of the date of this Agreement, and must be
                  accurate in all material respects as of the time of the
                  Closing as if then made, without giving effect to any
                  supplement to the Schedules.

         (b)      All Seller's and the Huskey's conditions and covenants in this
                  Agreement are satisfied in all material respects.

7.2 SELLER'S PERFORMANCE

         (a)      All of the covenants and obligations that Seller and the
                  Huskeys are required to perform or to comply with pursuant to
                  this Agreement at or prior to the Closing (considered
                  collectively), and each of these covenants and obligations
                  (considered individually), must have been duly performed and
                  complied with in all material respects.

         (b)      Seller and the Huskeys must have delivered each of the
                  documents required to be delivered by them pursuant to Section
                  2.7(a), and each of the other covenants and obligations in
                  Sections 5.4, 5.7, 10.2 and 10.3, must have been performed.

7.3 CONSENTS

         Each of the Consents identified in Schedule 7.3 (the "Material
Consents") must have been obtained and must be in full force and effect.

7.4 ADDITIONAL DOCUMENTS

         Seller and the Huskeys shall have caused the documents and instruments
required by Section 2.7(a) and the following documents to be delivered (or
tendered subject only to Closing) to Buyer:

         (a)      an opinion of Dufford, Waldeck, Milburn & Krohn, L.L.P., dated
                  the Closing Date, in the form satisfactory to counsel for the
                  Buyer;

         (b)      If requested by Buyer, any Consents or other instruments that
                  may be required to permit Buyer's qualification in each
                  jurisdiction in which Seller is licensed or qualified to do
                  business as a foreign corporation under the name, "Mountain
                  Air", or any derivative thereof;

         (c)      To the extent required by Buyer, releases of all Encumbrances
                  on the Assets, other than Permitted Encumbrances; and

                                       20
<PAGE>

         (d)      Certificates of good standing of Seller certifying payment of
                  all applicable state taxes by Seller and existence, executed
                  by the appropriate officials fo the State of Colorado and each
                  jurisdiction in which Seller is qualified to do business as a
                  foreign corporation, dated within ten (10) days of Closing.

7.5 NO PROCEEDINGS

         Since the date of this Agreement, there shall not have been commenced
or threatened against Buyer, or against any Related Person of Buyer, any
Proceeding (i) involving any challenge to, or seeking Damages or other relief in
connection with, any of the Contemplated Transactions, or (ii) that may have the
effect of preventing, delaying, making illegal, imposing limitations or
conditions on, or otherwise interfering with any of the Contemplated
Transactions.

7.6 NO CONFLICT

         Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene, or conflict with, or result in a violation of, or cause Buyer
or any Related Person of Buyer to suffer any adverse consequence under, (i) any
applicable Legal Requirement or Order, or (ii) any Legal Requirement or Order
that has been published, introduced, or otherwise proposed by or before any
Governmental Body, excluding Bulk Sales Laws.

7.7 LICENSES AND PERMITS

         Buyer shall have received such Governmental Authorizations as are
necessary or desirable to allow Buyer to operate the Assets from and after the
Closing.

7.8 GOVERNMENTAL APPROVALS

         Buyer shall have obtained assurances from all of the necessary
Governmental Bodies, in form and substance reasonably satisfactory to Buyer,
that Buyer will be granted all Governmental Authorizations necessary or
appropriate for the operation of the Assets as previously operated following the
Closing Date.

7.9 TERMINATION OF EMPLOYEES

         Seller shall have effectuated the termination of every employee prior
to the close of business on the Closing Date.

                                       21

<PAGE>

8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE

         Seller's obligation to sell the Assets and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part).

8.1 ACCURACY OF REPRESENTATIONS

         All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.

8.2 BUYER'S PERFORMANCE

         (a)      All of the covenants and obligations that Buyer is required to
                  perform or to comply with pursuant to this Agreement at or
                  prior to the Closing (considered collectively), and each of
                  these covenants and obligations (considered individually),
                  must have been performed and complied with in all material
                  respects.

         (b)      Buyer must have delivered each of the documents required to be
                  delivered, and made each of the payments required to be made
                  by Buyer pursuant to Section 2.7(b).

8.3 ADDITIONAL DOCUMENTS

         Buyer shall have caused the documents and instruments required by
Section 2.7(b) and the following documents to be delivered (or tendered subject
only to Closing) to Seller and the Huskeys and such other documents as Seller
may reasonably request for the purpose of (i) evidencing the accuracy of any
representation or warranty of Buyer, (ii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, or (iii) evidencing the satisfaction of any
condition referred to in this Article 8.

8.4 NO INJUNCTION

         There shall not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the consummation of the Contemplated
Transactions, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.

8.5 EMPLOYEES

         Buyer shall have interviewed all of Seller's employees, and shall have
hired at least 90% of such employees effective following the Closing Date.

                                       22

<PAGE>

8.6 OPINION LETTER

         Buyer shall have delivered to Seller and Huskeys an opinion of Wilson,
Cribbs, Goren & Flaum, P.C., dated the Closing Date, in the form satisfactory to
counsel for the Seller.

9. TERMINATION

9.1 TERMINATION EVENTS

         The obligation of the parties to effect the Contemplated Transactions
pursuant to this Agreement may, by notice given prior to or at the Closing, be
terminated:

         (a)      by either Buyer or Seller if a material Breach of any
                  provision of this Agreement has been committed by the other
                  party and such Breach has not been waived;

         (b)      (i)      by Buyer if any of the conditions in Article 7 has
                           not been satisfied as of the date specified for
                           Closing in the first sentence of Section 2.6 or if
                           satisfaction of such a condition by such date is or
                           becomes impossible (other than through the failure of
                           Buyer to comply with its obligations under this
                           Agreement) and Buyer has not waived such condition on
                           or before such date; or

                  (ii)     by Seller, if any of the conditions in Article 8 has
                           not been satisfied as of the date specified for
                           Closing in the first sentence of Section 2.6 or if
                           satisfaction of such a condition by such date is or
                           becomes impossible (other than through the failure of
                           Seller and the Huskeys to comply with their
                           obligations under this Agreement) and Seller and the
                           Huskeys have not waived such condition on or before
                           such date;

         (c)      by mutual Consent of Buyer and Seller; or

         (d)      by Buyer or Seller if the Closing has not occurred (other than
                  through the failure of Buyer or Seller to comply fully with
                  their obligations under this Agreement) on or before the date
                  specified in the first sentence of Section 2.6 of this
                  Agreement.

9.2 EFFECT OF TERMINATION

         Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of such right of termination will not be an election of remedies. If the
obligations of the parties to effect the Contemplated Transactions pursuant to
this Agreement are terminated pursuant to Section 9.1, all further obligations
of the parties under this Agreement will terminate; provided, however, that if
obligations under this Agreement are terminated by a party because of the Breach
of the Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired. If this Agreement is terminated for any
reason, the Deposit shall be retained in full satisfaction of all claims under
this Agreement. Seller's retention of the Deposit shall constitute a waiver of
the right to pursue all other legal remedies for such termination and an
agreement to accept such Deposit in full satisfaction of all claims under this
Agreement.

                                       23
<PAGE>

10. POST CLOSING OBLIGATIONS OF THE PARTIES

10.1 PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS

         Seller shall pay in a timely manner all Taxes resulting from or payable
in connection with the sale of the Assets pursuant to this Agreement, regardless
of the Person on whom imposed by Legal Requirements except that Buyer shall
agree to pay any sales, use, transfer, registration or title transfer taxes and
fees imposed by the States of Colorado, New Mexico and Utah upon the transfer of
the Assets.

10.2 PAYMENT OF OTHER RETAINED LIABILITIES

         In addition to payment of Taxes pursuant to Section 10.1, Seller shall
pay, or make adequate provision for the payment, in full of all of the Retained
Liabilities and other Liabilities of Seller under this Agreement to the extent
the failure to pay such liabilities could result in a claim against Buyer or
lien upon the Assets. If any such Liabilities are not so paid or provided for,
and if Buyer reasonably determines that failure to make any payments will impair
Buyer's use or enjoyment of the Assets, Buyer may at any time after Closing Date
elect to make all such payments directly (but shall have no obligation to do so)
and set off and deduct the full amount of all such payments from the payments
under the Note to Seller.

10.3 REPORTS AND RETURNS

         After Closing, Seller shall prepare and file all reports and returns
required by applicable law relating to the business of Seller as conducted using
the Assets, to and including the Closing, on or before the due date of such
reports and returns, taking into account all allowable extensions.

10.4 ASSISTANCE IN PROCEEDINGS

         Seller will cooperate with Buyer and its counsel in the contest or
defense of, and make available its personnel and provide any testimony and
access to its books and Records in connection with, any Proceeding involving or
relating to (a) any Contemplated Transaction, or (b) any action, activity,
circumstance, condition, conduct, event, fact, failure to act, incident,
occurrence, plan, practice, situation, status, or transaction on or before the
Closing Date involving Seller or its business or the Huskeys.

                                       24
<PAGE>

10.5 COVENANT NOT TO COMPETE

         For a period of five years after the Closing Date, neither Seller nor
the Huskeys shall directly or indirectly, do any of the following:

         (a)      own, manage, operate, control, be or remain employed or
                  retained at, act as consultant or advisor to, render any
                  services for, have any financial interest in, or otherwise be
                  connected in any manner with the ownership, management,
                  operation, or control of any Person, firm, partnership,
                  corporation, or other entity that is engaged in any business
                  similar to the business of Seller as carried on prior to the
                  Closing Date.

         (b)      Solicit the business of any Person who to Seller's or the
                  Huskeys' Knowledge is a customer of Buyer or any Person who
                  was a customer or account of Seller at the time of the Closing
                  or within the preceding year.

         All of the foregoing provisions are reasonable and are necessary to
protect and preserve the value of the Assets and to prevent any unfair advantage
being conferred on Seller or the Huskeys.

10.6 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS

         For one year after Closing, Seller will use its Best Efforts to
cooperate with Buyer in its efforts to continue and maintain for the benefit of
Buyer those business relationships of Seller existing prior to the Closing and
relating to the business to be operated by Buyer after the Closing, including
relationships with lessors, employees, regulatory authorities, licensors,
customers, suppliers, and others, and Seller will satisfy the Retained
Liabilities in a manner which is not detrimental to any of such relationships.
Seller will refer to Buyer all inquiries relating to said business. Neither
Seller nor any of its officers, employees, agents, or the Huskeys, shall take
any action which would tend to diminish the value of the Assets after the
Closing or which would interfere with the business of Buyer to be engaged in
after the Closing, including, without limitation, disparaging the name or
business of Buyer.

10.7 RETENTION OF AND ACCESS TO RECORDS

         After the Closing Date, Buyer shall retain for a period consistent with
Buyer's record retention policies and practices (but in no event for less than
three years after Closing) those Records of Seller delivered to Buyer. Prior to
the end of three years after Closing, Buyer will provide Seller with copies of
all records that Seller may request. Buyer also shall provide Seller and the
Huskeys and their Representatives reasonable access thereto, during normal
business hours and on at least three days' prior written notice, to enable them
to prepare financial statements or Tax Returns or deal with tax audits. After
the Closing Date, Seller shall provide Buyer and its Representatives reasonable
access to Records that are Excluded Assets, during normal business hours and on
at least three days' prior written notice, for any reasonable business purpose
specified by Buyer in such notice.

10.8 CONSENTS

         If there are any Material Consents which have not yet been obtained (or
otherwise are not in full force and effect) as of the time of the Closing and
Buyer elects to waive the closing conditions as to such Material Consents, then,
if the Closing occurs, and notwithstanding Sections 2.1 and 2.4 hereof, neither
this Agreement nor the Assignment and Assumption Agreement nor any other
document related to the consummation of the Contemplated Transactions shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery, or
an attempted sale, assignment, assumption, transfer, conveyance or delivery, of
the Contracts as to which such Material Consents were not obtained (or otherwise
are not in full force and effect) (the "Restricted Material Contracts").
Following the Closing, the parties shall use reasonable efforts, and cooperate
with each other, to obtain the Material Consents relating to each Restricted
Material Contract as quickly as practicable. Pending the obtaining of such
Material Consents relating to any Restricted Material Contract, the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to Buyer the benefits of use of the Restricted Material
Contract for its term (or any right or benefit arising thereunder, including the
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereunder). Once a Material Consent for the sale, assignment,
assumption, transfer, conveyance and delivery of a Restricted Material Contract
is obtained, Seller shall promptly assign, transfer, convey and deliver such
Restricted Material Contract to Buyer, and Buyer shall assume the obligations
under such Restricted Material Contract assigned to Buyer from and after the
date of assignment to Buyer pursuant to a special-purpose assignment and
assumption agreement substantially similar in terms to those of the Assignment
and Assumption Agreement (which special-purpose agreement the parties shall
prepare, execute and deliver in good faith at the time of such transfer).

                                       25
<PAGE>

10.9 FURTHER ASSURANCES

         Subject to the provision in Section 6. 1, the parties shall cooperate
reasonably with each other with their respective Representatives in connection
with any steps required to be taken as part of their respective obligations
under this Agreement, and the parties agree (i) to furnish upon request to each
other such further information, (ii) to execute and deliver to each other such
other documents, (iii) to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the Contemplated Transactions.

10.10 REIMBURSEMENT OF NET INCOME.

         Within thirty (30) days after the date of Closing, Gordon, Hughes &
Bank, LLP shall determine the net profits of the Seller for the period ("Stub
Period") running from January 1, 2001 through the date of Closing. The net
profits of Seller shall be determined by accruing all unpaid billings (for
equipment rentals, operators, chemicals, lubricants, etc.) and invoices (for
sales of inventory and supplies in the ordinary course of business) for goods
and services provided during the Stub Period, adding all cash received during
the Stub Period for billings and invoices for goods and services provided during
the Stub Period, subtracting all expenses incurred during the Stub Period in the
ordinary course of business (including a prorata share of any expenses prepaid
prior to the Stub Period) and subtracting the estimated income tax which will be
due by the shareholders of Seller (at the shareholders' highest marginal rates)
as a result of such profits. The net profits shall be calculated without
including any payments received for goods and services provided by Seller prior
to January 1, 2001, any amounts received from the sale, settlement or
disposition of assets which are Excluded Assets, any interest income, or any
income tax which might be due as a result of the receipt of payments as
described in this sentence or the deduction of any commissions paid by Seller
pursuant to this transaction. The profits shall not be reduced by any expenses
(including insurance premiums) which are prepaid during the Stub Period to the
extent such expenses are refundable to Seller after Closing. The determination
of net profits under this paragraph by Gordon Hughes & Banks, LLP, shall be
final, conclusive and binding upon the parties. The amount of net profits as
determined by Gordon Hughes & Banks, LLP shall be paid to Buyer by Seller, in
cash, within five (5) days of the determination of net profits by Gordon, Hughes
& Banks, LLP. If the amount determined is a loss, no payment shall be made to
Buyer and Buyer shall not owe any amount to Seller as a result of such loss.

                                       26
<PAGE>

10.11 CHANGE OF NAME

         Within thirty (30) days after the Closing Date, Seller shall:

         (a)      amend its Governing Documents and take all other actions
                  necessary to change its name to one sufficiently dissimilar to
                  Seller's present name, in Buyer's judgment, to avoid
                  confusion; and

         (b)      take all actions reasonably requested by Buyer to enable Buyer
                  to change its name or file Assumed Name Declarations to a name
                  similar to Seller's present name.

11. INDEMNIFICATION; REMEDIES

11.1 SURVIVAL

         All representations, warranties, covenants, and obligations in this
Agreement, the Schedules, the supplements to the Schedules, the certificates
delivered pursuant to Section 2.7, and any other certificate or document
delivered pursuant to this Agreement shall survive the Closing for a period of
two years except the representations and warranties regarding Taxes and title to
the Assets shall survive indefinitely. The right to indemnification,
reimbursement, or other remedy based on such representations, warranties,
covenants and obligations shall not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) about
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation, except that if Buyer or its executive officers
acquires actual knowledge of a Breach of a representation or warranty prior to
Closing, Buyer will disclose such Breach to Seller and grant Seller five (5)
days to cure such Breach prior to exercising Buyer's remedies under this
Agreement. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement, or other remedy based on such representations, warranties,
covenants, and obligations.

11.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLER AND THE HUSKEYS

         Seller and the Huskeys, jointly and severally, will indemnify and hold
harmless Buyer, and its Representatives, employees, Subsidiaries, and Related
Persons (collectively, the "Indemnified Persons"), and will reimburse the
Indemnified Persons, for any loss, Liability, claim, damage, expense (including
costs of investigation and defense and reasonable attorneys' fees and expenses)
or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising from or in connection with:

                                       27
<PAGE>

         (a)      any Breach of any representation or warranty made by Seller or
                  the Huskeys in this Agreement (without giving effect to any
                  supplement to the Schedules), the Schedules, the supplements
                  to the Schedules, the certificates delivered pursuant to
                  Section 2.7 (for this purpose, each such certificate will be
                  deemed to have stated that Seller's and the Huskeys'
                  representations and warranties in this Agreement fulfill the
                  requirements of Section 7.1 as of the Closing Date as if made
                  on the Closing Date without giving effect to any supplement to
                  the Schedules, unless the certificate expressly states that
                  the matters disclosed in a supplement have caused a condition
                  specified in Section 7.1 not to be satisfied), any transfer
                  instrument or any other certificate or document delivered by
                  Seller or the Huskeys pursuant to this Agreement;

         (b)      any Breach of any covenant or obligation of Seller or the
                  Huskeys in this Agreement or in any other document, writing or
                  instrument delivered by Seller or any the Huskeys pursuant to
                  this Agreement;

         (c)      any claim by any Person for brokerage or finder's fees or
                  commissions or similar payments based upon any agreement or
                  understanding alleged to have been made by any such Person
                  with Seller or the Huskeys (or any Person acting on their
                  behalf) in connection with any of the Contemplated
                  Transactions;

         (d)      any product or component thereof manufactured by or shipped,
                  or any services provided by, Seller, in whole or in part,
                  prior to the Closing Date;

         (e)      any matter disclosed in the Schedules;

         (f)      any Retained Liabilities;

         (g)      any state or local law Liability that may result from an
                  Employment Loss, as defined by 29 U.S.C. ss. 2101(a)(6),
                  caused by any action of Seller prior to the Closing or by
                  Buyer's decision not to hire previous employees of Seller;

         (h)      any employee benefit plans, practices, programs or
                  arrangements (including the establishment, operation or
                  terminations thereof) established or maintained by Seller; or

         (i)      any other debts, Liabilities or obligations of Seller, whether
                  accrued, absolute, contingent, known, unknown, or otherwise,
                  but excluding any Assumed Liabilities.

11.3 INDEMNIFICATION AND REIMBURSEMENT BY SELLER -- ENVIRONMENTAL MATTERS

         In addition to the indemnification under Section 11.2, Seller and
Huskeys, jointly severally, will indemnify and hold harmless Buyer and the other
Indemnified Persons, and will reimburse Buyer and the other Indemnified Persons,
for any Damages (including costs of cleanup, containment, or other remediation)
arising from or in connection with:

                                       28
<PAGE>

         (a)      any Environmental, Health and Safety Liabilities arising out
                  of or relating to: (i) the ownership or operation by any
                  Person at any time on or prior to the Closing Date of any of
                  the Assets or the business of the Seller, or (ii) any
                  Hazardous Materials or other contaminants that were present on
                  the Leased Property at any time on or prior to the Closing
                  Date; or

         (b)      any bodily injury (including illness, disability and death,
                  and regardless of when any such bodily injury occurred, was
                  incurred, or manifested itself), personal injury, property
                  damage (including trespass, nuisance, wrongful eviction, and
                  deprivation of the use of the Leased Property), or other
                  damage of or to any Person or any Assets in any way arising
                  from or allegedly arising from any Hazardous Activity
                  conducted by any Person with respect to the business of Seller
                  or the Assets prior to the Closing Date, or from any Hazardous
                  Material that was (i) present or suspected to be present on or
                  before the Closing Date on or at the Leased Property (or
                  present or suspected to be present on any other property, if
                  such Hazardous Material emanated or allegedly emanated from
                  any of the Leased Property and was present or suspected to be
                  present on any of the Leased Property on or prior to the
                  Closing Date) or Released or allegedly Released by any Person
                  on or at any Assets at any time on or prior to the Closing
                  Date.

         Buyer will be entitled to control any Remedial Action, any Proceeding
relating to an Environmental Claim, and, except as provided in the following
sentence, any other Proceeding with respect to which indemnity may be sought
under this Section 11.3. The procedure described in Section 11.9 will apply to
any claim solely for monetary damages relating to a matter covered by this
Section 11.3.

11.4 INDEMNIFICATION AND REIMBURSEMENT BY BUYER

         Buyer will indemnify and hold harmless Seller, and will reimburse
Seller, for any Damages arising from or in connection with:

         (a)      any Breach of any representation or warranty made by Buyer in
                  this Agreement or in any transfer instrument, certificate or
                  document delivered by Buyer pursuant to this Agreement;

         (b)      any Breach of any covenant or obligation of Buyer in this
                  Agreement or in any other document, writing or instrument
                  delivered by Buyer pursuant to this Agreement;

         (c)      any claim by any Person for brokerage or finder's fees or
                  commissions or similar payments based upon any agreement or
                  understanding alleged to have been made by such Person with
                  Buyer (or any Person acting on Buyer's behalf) in connection
                  with any of the Contemplated Transactions;

         (d)      any Assumed Liabilities;

         (e)      any Environmental, Health and Safety Liabilities arising out
                  of or relating to: (i) the ownership or operation by Buyer at
                  any time after the Closing Date of any of the Assets or the
                  business of the Buyer, or (ii) any Hazardous Materials or
                  other contaminants that were present on the real property
                  subject to the Lease Agreement at any time after the Closing
                  Date; or,

                                       29
<PAGE>

         (f)      any bodily injury (including illness, disability and death,
                  and regardless of when any such bodily injury occurred, was
                  incurred, or manifested itself), personal injury, property
                  damage (including trespass, nuisance, wrongful eviction, and
                  deprivation of the use of real property), or other damage of
                  or to any Person or any Assets in any way arising from or
                  allegedly arising from any Hazardous Activity conducted by any
                  Person with respect to the business of Buyer or the Assets
                  after the Closing Date, or from any Hazardous Material that
                  was (i) present or suspected to be present after the Closing
                  Date on or at the Leased Property (or present or suspected to
                  be present on any other property, if such Hazardous Material
                  emanated or allegedly emanated from any of the Leased Property
                  and was present or suspected to be present on any of the
                  Leased Property after the Closing Date) or Released or
                  allegedly Released by any Person on or at any Assets at any
                  time after the Closing Date.

11.5 LIMITATIONS ON AMOUNT

         (a)      Sellers and the Huskeys will have no liability (for
                  indemnification or otherwise) with respect to the matters
                  described in Section 11.2 and Section 11.3 until the total of
                  all Damages with respect to such matters exceeds $25,000.00,
                  but then for the total amount of such Damages.

         (b)      Buyer will have no liability (for indemnification or
                  otherwise) with respect to the matters described in Section
                  11.4 until the total of all Damages with respect to such
                  matters exceeds $25,000.00, but then for the total amount of
                  such Damages. This limitation shall not include claims related
                  to failure to pay any of the Assumed Liabilities or any
                  default under the Note.

         (c)      In no event shall the aggregate indemnification to be provided
                  by any party pursuant to this Article 11 exceed $5,000,000.00.
                  Any Damages for failure to pay the Assumed Liabilities or for
                  any default under the Note shall not be subject to or included
                  in the limitations provided by this section.

11.6 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS

         (a)      Promptly after receipt by an indemnified party ("Indemnitee")
                  under Section 11.2, 11.4, or 11.3 (to the extent provided in
                  the last sentence of Section 11.3) of notice of the
                  commencement of any Proceeding against it, such Indemnitee
                  will, if a claim is to be made against an indemnifying party
                  ("Indemnitor") under such Section, give notice to the
                  Indemnitor of the commencement of such Proceeding, but the
                  failure to notify the Indemnitor will not relieve the
                  Indemnitor of any Liability that it may have to any
                  Indemnitee, except to the extent that the Indemnitor
                  demonstrates that the defense of such action is prejudiced by
                  the Indemnitor's failure to give such notice.

                                       30
<PAGE>

         (b)      If any Proceeding referred to in Section 11.6(a) is brought
                  against an Indemnitee and it gives notice to the Indemnitor of
                  the commencement of such Proceeding, the Indemnitor will be
                  entitled to participate in such Proceeding and, to the extent
                  that it wishes (unless (i) the Indemnitor is also a party to
                  such Proceeding and the Indemnitee determines in good faith
                  that joint representation would be inappropriate, or (ii) the
                  Indemnitor fails to provide reasonable assurance to the
                  Indemnitee of its financial capacity to defend such Proceeding
                  and provide indemnification with respect to such Proceeding),
                  to assume the defense of such Proceeding with counsel
                  satisfactory to the Indemnitee and, after notice from the
                  Indemnitor to the Indemnitee of its election to assume the
                  defense of such Proceeding, the Indemnitor will not, as long
                  as it diligently conducts such defense, be liable to the
                  Indemnitee under this Section 11.6 for any fees of other
                  counsel or any other expenses with respect to the defense of
                  such Proceeding, in each case subsequently incurred by the
                  Indemnitee in connection with the defense of such Proceeding,
                  other than reasonable costs of investigation. If the
                  Indemnitor assumes the defense of a Proceeding, (i) it will be
                  conclusively established for purposes of this Agreement that
                  the claims made in that Proceeding are within the scope of and
                  subject to indemnification; (ii) no compromise or settlement
                  of such claims may be effected by the Indemnitor without the
                  Indemnitee's Consent unless (A) there is no finding or
                  admission of any violation of Legal Requirements or any
                  violation of the rights of any Person and no effect on any
                  other claims that may be made against the Indemnitee, and (B)
                  the sole relief provided is monetary damages that are paid in
                  full by the Indemnitor; and (iii) the Indemnitor will have no
                  Liability with respect to any compromise or settlement of such
                  claims effected without its Consent. If notice is given to an
                  Indemnitor of the commencement of any Proceeding and the
                  Indemnitor does not, within ten days after the Indemnitee's
                  notice is given, give notice to the Indemnitee of its election
                  to assume the defense of such Proceeding, the Indemnitor will
                  be bound by any determination made in such Proceeding or any
                  compromise or settlement effected by the Indemnitee.

         (c)      Notwithstanding the foregoing, if an Indemnitee determines in
                  good faith that there is a reasonable probability that a
                  Proceeding may adversely affect it or its Related Persons
                  other than as a result of monetary damages for which it would
                  be entitled to indemnification under this Agreement, the
                  Indemnitee may, by notice to the Indemnitor, assume the
                  exclusive right to defend, compromise, or settle such
                  Proceeding, but the Indemnitor will not be bound by any
                  determination of a Proceeding so defended for the purposes of
                  this Agreement or any compromise or settlement effected
                  without its Consent (which may not be unreasonably withheld).

         (d)      Seller and the Huskeys hereby consent to the non-exclusive
                  jurisdiction of any court in which a Proceeding is brought
                  against any Indemnified Person for purposes of any claim that
                  an Indemnified Person may have under this Agreement with
                  respect to such Proceeding or the matters alleged therein, and
                  agree that process may be served on Buyer, Seller and the
                  Huskeys with respect to such a claim anywhere in the world.

         (e)      With respect to any Proceeding subject to indemnification
                  under this Section 11.6: (i) both the Indemnitee and the
                  Indemnitor, as the case may be, shall keep the other party
                  fully informed of the Proceeding at all stages thereof where
                  such party is not represented by its own counsel, and (ii) the
                  parties agree (each at its own expense) to render to each
                  other such assistance as they may reasonably require of each
                  other and to cooperate in good faith with each other in order
                  to ensure the proper and adequate defense of any Proceeding
                  brought by any third party.

                                       31
<PAGE>

         (f)      With respect to any Proceeding subject to indemnification
                  under this Section 11.6, the parties agree to cooperate in
                  such a manner as to preserve in full (to the extent possible)
                  the confidentiality of all confidential business Records and
                  the attorney-client and work-product privileges. In connection
                  therewith, each party agrees that: (i) it will use its Best
                  Efforts, in any Proceeding in which it has assumed or
                  participated in the defense, to avoid production of
                  confidential business Records (consistent with applicable law
                  and rules of procedure), and (ii) all communications between
                  any party hereto and counsel responsible for or participating
                  in the defense of any Proceeding shall, to the extent
                  possible, be made so as to preserve any applicable
                  attorney-client or work-product privilege.

11.7 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS

         A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.

11.8 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE

         THE INDEMNIFICATION PROVIDED IN THIS SECTION 11 SHALL BE APPLICABLE
WHETHER OR NOT THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE
INDEMNITEE, OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE
INDEMNITEE, OR THE SOLE OR CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE
INDEMNITEE, IS ALLEGED OR PROVEN.

11.9 SETOFF

         Buyer shall have no right to set off any claims for indemnification
under Sections 11.2 and 11.3 hereof against payments due to Seller under the
Note.

12. GENERAL PROVISIONS

12.1 EXPENSES

         Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance f this Agreement and the Contemplated
Transactions, including all fees and expenses of its Representatives. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a Breach
of this Agreement by another party.

                                       32
<PAGE>

12.2 PUBLIC ANNOUNCEMENTS

         Any public announcement, press release or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer and Seller jointly determine.
Except with the prior written Consent of Buyer or as expressly permitted by this
Agreement, neither Seller, the Huskeys nor their Representatives will disclose
to any Person:

         (a)      the fact that Seller Confidential Information has been
                  disclosed to Buyer or Buyer's Representatives, that Buyer or
                  Buyer's Representatives have inspected any portion of the
                  Seller Confidential information, that the Buyer Confidential
                  Information has been disclosed to Seller or Seller's
                  Representatives, or that Seller or Seller's Representatives
                  have inspected any portion of the Buyer Confidential
                  Information; or

         (b)      any information about the Contemplated Transactions, including
                  the status of such discussions or negotiations, the execution
                  of any documents (including this agreement), or any of the
                  terms of the Contemplated Transactions or the related
                  documents including this Agreement). Seller and Buyer will
                  consult with each other concerning the means by which Seller's
                  employees, customers, suppliers and others having dealings
                  with Seller will be informed of the Contemplated Transactions,
                  and Buyer will have the right to be present for any such
                  communication.

                                       32

<PAGE>

12.3 NOTICES

         All notices, Consents, waivers, and other communications required or
permitted by this Agreement shall be in writing and shall be deemed given to a
party when (i) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid), or (ii) received by the
addressee, if sent by certified mail, return receipt requested, in each case to
the following addresses and marked to the attention of the person (by name or
title) designated below (or to such other address, or person as a party may
designate by notice to the other parties):

                          SELLER (BEFORE THE CLOSING):

                          Mountain Air Drilling Service Co., Inc.
                          P.O. Box 55367
                          Grand Junction, Colorado 81505

                                       33

<PAGE>

                         with a copy to:

                         William H. T. Frey
                         Dufford, Waldeck, Milburn & Krohn, L.L.P.
                         744 Horizon Court, Suite 300
                         Grand Junction, Colorado 81506

                         SELLER (AFTER THE CLOSING):

                         Mountain Air Drilling Service Co., Inc.
                         578 Rio Hondo Road
                         Grand Junction, CO 81503

                         with a copy to:

                         William H. T. Frey
                         Dufford, Waldeck, Milburn & Krohn, L.L.P.
                         744 Horizon Court, Suite 300
                         Grand Junction, Colorado 81506

                         THE HUSKEYS:

                         Rod Huskey and Linda Huskey
                         578 Rio Hondo Road
                         Grand Junction, CO 81503

                         with a copy to:

                         William H. T. Frey
                         Dufford, Waldeck, Milburn & Krohn, L.L.P.
                         744 Horizon Court, Suite 300
                         Grand Junction, Colorado 81506

                         BUYER:

                         Mountain Compressed Air, Inc.
                         1875 Century Park East
                         Suite 600, Century City
                         Los Angeles, California 90067
                         Attn: Munawar H. Hidayatallah

                         with a copy to:

                         Wilson, Cribbs, Goren & Flaum, P.C.
                         440 Louisiana, Suite 2200
                         Houston, TX 77002
                         Attn: Theodore F. Pound III

                                       34
<PAGE>

12.4 ENFORCEMENT OF AGREEMENT

         Seller and the Huskeys acknowledge and agree that Buyer would be
damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms and that any Breach of this
Agreement by Seller or the Huskeys could not be adequately compensated by
monetary damages. Accordingly, Seller and the Huskeys agree that, in addition to
any other right or remedy to which Buyer may be entitled, at law or in equity,
it shall be entitled to enforce any provision of this Agreement by a decree of
specific performance and to temporary, preliminary and permanent injunctive
relief to prevent Breaches or threatened Breaches of the provisions of this
Agreement, without posting any bond or other undertaking.

12.5 ENTIRE AGREEMENT AND MODIFICATION

         This Agreement supersedes all prior agreements, whether written or
oral, between the parties with respect to its subject matter and constitutes
(along with the Schedules, Exhibits and documents delivered pursuant to this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.

12.6 SCHEDULES

         (a)      The statements in the Schedules, and those in any supplement
                  thereto, relate only to the representations and warranties in
                  the Section of the Agreement to which they expressly relate
                  and not to any other representation or warranty in this
                  Agreement.

         (b)      In the event of any inconsistency between the statements in
                  this Agreement and the Exhibits hereto and those in the
                  Schedules (other than an exception expressly set forth as such
                  in the Schedules with respect to a specifically identified
                  representation or warranty), the statements in this Agreement
                  and the Exhibits hereto will control.

12.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS

         No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written Consent of the other
parties, except that Buyer may collaterally assign its rights hereunder to any
financial institution providing financing in connection with the Contemplated
Transactions. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement, except such rights as
shall inure to a successor or permitted assignee pursuant to this Section 12.7.

                                       35
<PAGE>

12.8 SEVERABILITY

         If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

12.9 SECTION HEADINGS, CONSTRUCTION

         The headings of Articles and Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All
references to "Articles", "Sections" and "Schedules" refer to the corresponding
Articles, Sections and Schedules of this Agreement and the schedules,
respectively. All words used in this Agreement will be construed to be of such
gender or number as the context requires. Unless otherwise expressly provided,
the word "including" or "includes" does not limit the preceding words or terms
and the word "or" is used in the inclusive sense. All references to documents,
instruments or agreements shall be deemed to refer as well to I addenda,
exhibits, schedules or amendments thereto.

12.10 TIME OF ESSENCE

         With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.

12.11 GOVERNING LAW AND JURISDICTION

         This Agreement will be governed by and construed under the laws of the
State of Colorado without regard to conflicts of laws principles that would
require the application of any other law. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of
Colorado, or, if it has or can acquire jurisdiction, in the United States
District Courts of the State of Colorado, and each of the parties consents to
the jurisdiction of such courts (and of its appropriate appellate courts), in
any such action or proceeding and waiver any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.

12.12 EXECUTION OF AGREEMENT

         This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
The exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement
to the parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the parties transmitted by facsimile shall be deemed to
be their original signatures for any purpose whatsoever.

                                       36
<PAGE>

12.13 THE HUSKEYS GUARANTEE

         The Huskeys have joined in this Agreement for the purpose of
guaranteeing, and by their respective signatures below, do hereby
unconditionally guarantee each and every, all and singular, the obligations of
Seller hereunder and under the deeds, bills of sale, assignments, and other
documents, writings, and instruments executed and delivered by Seller or on its
behalf pursuant to Section 2.7(a) and other provisions of this Agreement. The
Liability of the Huskeys hereunder shall be joint and several with Seller.
Wherein this Agreement provision is made for any action to be taken or performed
by Seller, the Huskeys jointly and severally undertake to use their Best Efforts
to cause Seller to take such action or to perform such action. Without limiting
the generality of the foregoing, the Huskeys shall be jointly and severally
liable with Seller for the indemnities set forth in Article 11 hereof.

                                       37

<PAGE>

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

                                 Buyer: MOUNTAIN COMPRESSED AIR, INC.

                                        By: /S/ MUNAWAR H. HIDAYATALLAH
                                            ------------------------------------
                                            Munawar H. Hidayatallah,
                                            Chairman and Chief Executive Officer

                                 Seller: MOUNTAIN AIR DRILLING SERVICE CO.,
                                         INC., a Colorado corporation

                                         By /S/ ROD HUSKEY
                                            ------------------------------------
                                            Rod Huskey, President

                                            /S/ ROD HUSKEY
                                            ------------------------------------
                                            ROD HUSKEY

                                            /S/ LINDA HUSKEY
                                            ------------------------------------
                                            LINDA HUSKEY

                                       38

<PAGE>

                                   SCHEDULE 1

"ACCOUNTS RECEIVABLE" is defined as (i) all Accounts Receivable and other rights
to payment from customers of Seller and the full benefit of all security for
such accounts or debts, including all Accounts Receivable representing amounts
receivable in respect of goods shipped or products sold or services rendered to
customers, and (ii) all other accounts or notes receivable and the full benefit
of all security for such accounts or notes, and (iii) any claims, remedies and
other rights related to any of the foregoing.

"AGREEMENT" is defined as this Asset Purchase Agreement.

"ASSETS" is defined in Section 2.1, excluding the Excluded Assets which are
defined in Section 2.2.

"ASSIGNMENT AND ASSUMPTION AGREEMENT" is defined in Section 2.7(a)(ii).

"ASSUMED LIABILITIES" is defined in Section 2.4(a).

"BALANCE SHEET" is defined in Section 3.4.

"BEST EFFORTS" is defined as the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible, provided, however, that a Person
required to use his Best Efforts under this Agreement will not be thereby
required to take actions that would result in a materially adverse change in the
benefits to such Person of this Agreement and the Contemplated Transactions, or
to dispose of or make any change to its business, expend any material funds or
incur any other material burden.

"BREACH" is defined as any violation or breach of, any misrepresentation or
inaccuracy in, default under, or any failure to perform or comply with any
representation, warranty, covenant, obligation, or other provision of any
Contract, or any event which with the passing of time or the giving of notice,
or both, would constitute such a violation, breach, misrepresentation,
inaccuracy, default or failure. When used with respect to this Agreement or any
Contract delivered pursuant to this Agreement, a "Breach" will also be deemed to
include any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with any representation, warranty, covenant, promise,
obligation, duty under, or other provision of, this Agreement or any Contract
delivered pursuant to this Agreement.

"BUYER" is defined in the first paragraph of this Agreement.

"BUYER'S ADVISORS" is defined in Section 5. 1.

"BUYER'S CLOSING DOCUMENTS" is defined in Section 4.2.

"CLOSING" is defined in Section 2.7.

"CLOSING DATE" is defined as the date as of which the Closing actually takes
place.

                                       39

<PAGE>

"CODE" is defined as the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Code or any
successor law. "Competing Business" is defined in Section 3.25.

"CONSENT" is defined as any approval, consent, ratification, waiver, or other
authorization. "Contemplated Transactions' is defined as all of the transactions
contemplated by this Agreement.

"CONTRACT" is defined as any agreement, contract, Lease, consensual obligation,
promise, or Undertaking (whether written or oral and whether express or implied)
that is legally binding.

"DAMAGES" is defined in Section 11.2.

"DEPOSIT" is defined in Section 2.3

"EMPLOYMENT AGREEMENT" is defined in Section 2.7(a)(iv).

"ENCUMBRANCE" is defined as any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
mortgage, right of way, easement, Encroachment, servitude, right of first
option, right of first refusal or restriction of any kind, any restriction on
use, voting (in the case of any security), transfer, receipt of income, or
exercise of any other attribute of ownership.

"ENVIRONMENT" is defined as soil, land surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwaters, drinking
water supply, stream sediments, ambient air (including indoor air), plant and
animal life, and any other environmental medium or natural resource.

"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" is defined as any cost, damages,
expense, Liability, obligation, or other responsibility arising from or under
any Environmental Law or Occupational Safety and Health Law, including those
consisting of or relating to:

         (a) any environmental, health, or safety matter or condition (including
         on-site or off-site contamination, occupational safety and health, and
         regulation of chemical substances or products);

         (b) fines, penalties, judgments, awards, settlements, legal or
         administrative proceedings, damages, losses, claims, demands and
         response, remedial, or inspection costs and expenses arising under any
         Environmental Law or Occupational Safety and Health Law;

         (c) financial responsibility under any Environmental Law or
         Occupational Safety and Health Law for cleanup costs or corrective
         action, including any cleanup, removal, containment, or other
         remediation or response actions ("Cleanup") required by any
         Environmental Law or Occupational Safety and Health Law (whether or not
         such Cleanup has been required or requested by any Governmental Body or
         any other Person) and for any natural resource damages; or

                                       40

<PAGE>

         (d) any other compliance, corrective, or remedial measures required
         under any Environmental Law or Occupational Safety and Health Law.

The terms "removal," "remedial," and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 ET SEQ., as amended
("CERCLA").

"ENVIRONMENTAL LAW" is defined as any Legal Requirement that requires or relates
to:

         (a) advising appropriate authorities, employees, and the public of
         intended or actual releases of pollutants or hazardous substances or
         materials, violations of discharge limits, or other prohibitions and
         the commencements of activities, such as resource extraction or
         construction, that could have significant impact on the Environment;

         (b) preventing or reducing to acceptable levels the release of
         pollutants or hazardous substances or materials into the Environment;

         (c) reducing the quantities, preventing the release, or minimizing the
         hazardous characteristics of wastes that are generated;

         (d) assuring that products are designed, formulated, packaged, and used
         so that they do not present unreasonable risks to human health or the
         Environment when used or disposed of;

         (e) protecting resources, species, or ecological amenities;

         (f) reducing to acceptable levels the risks inherent in the
         transportation of hazardous substances, pollutants, oil, or other
         potentially harmful substances;

         (g) cleaning up pollutants that have been released, preventing the
         Threat of Release, or paying the costs of such clean up or prevention;
         or

         (h) making responsible parties pay private parties, or groups of them,
         for damages done to their health or the Environment, or permitting
         self-appointed representatives of the public interest to recover for
         injuries done to public assets.

"EXCLUDED ASSETS" is defined in Section 2.2.

"EXHIBIT" is defined as an exhibit to this Agreement.

"GAAP" is defined as generally accepted accounting principles for financial
reporting in the United States, applied on a basis consistent with the basis on
which the Balance Sheet and the other financial statements referred to in
Section 3.4 were prepared.

"GENERAL CONVEYANCE, TRANSFER AND ASSIGNMENT" is defined in Section 2.7(a)(i).

                                       41
<PAGE>

"GOVERNING DOCUMENTS" is defined, with respect to any particular entity, as (a)
if a corporation, the articles or certificate of incorporation and the bylaws;
(b) if a general partnership, the limited
partnership agreement and any statement of partnership; (c) if a limited
partnership, the limited partnership agreement and the certificate of limited
partnership; (d) if a limited liability company, the articles of organization
and operating agreement; (e) any other charter or similar document adopted or
filed in connection with the creation, formation or organization of a Person;
(f) all equityholders' agreements, voting agreements, voting trust agreements,
joint venture agreements, registration rights agreements or other agreements or
documents relating to the organization, management or operation of any Person,
or relating to the rights, duties and obligations of the equityholders of any
Person; and (g) any amendment or supplement to any of the foregoing.

"GOVERNMENTAL AUTHORIZATION" is defined as any Consent, license, or permit
issued, granted, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.

"GOVERNMENTAL BODY" is defined as any:

         (a) nation, state, county, city, town, village, district, or other
         jurisdiction;

         (b) federal, state, local, municipal, foreign, or other government;

         (c) governmental or quasi-governmental authority of any nature
         (including any agency, branch, department, board, commission, court,
         tribunal or other entity exercising governmental or quasi-governmental
         powers);

         (d) multi-national organization or body;

         (e) body exercising, or entitled or purporting to exercise, any
         administrative, executive, judicial, legislative, police, regulatory,
         or taxing authority or power; or

         (f) official of any of the foregoing.

"HAZARDOUS ACTIVITY" is defined as the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities.

"HAZARDOUS MATERIAL" is defined as any substance, material or waste which is or
will foreseeably be regulated by any Governmental Body, including any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance" "extremely hazardous waste," "restricted
hazardous waste," "containment," "toxic waste" or "toxic substance" under any
provision of Environmental Law, and including petroleum, petroleum products,
asbestos, presumed asbestos-containing material or asbestos-containing material,
urea formaldehyde and polychlorinated biphenyls.

                                       42
<PAGE>

"INDEMNIFIED PERSONS" is defined in Section 11.2.

"INDEMNITEE" is defined in Section 11.6(a).

"INDEMNITOR" is defined in Section 11.6(a).

"INTERIM BALANCE SHEET" is defined in Section 3.4.

"IRS" is defined as the United States Internal Revenue Service or any successor
agency, and, the extent relevant, the United States Department of the Treasury.

"KNOWLEDGE" of a particular fact or matter by an individual exists if

         (a) such individual is actually aware of such fact or other matter; or

         (b) a prudent individual could be expected to discover or otherwise
         become aware of such fact or other matter in the course of conducting a
         reasonably comprehensive investigation regarding the accuracy of any
         representations or warranties contained in this Agreement.

A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of any
representations and warranties made herein by such Person or individual.

"LEASE AGREEMENT" is defined in Section 2.7(a)(v).

"LEASED PROPERTY" is defined as the real property and buildings leased by Seller
to Buyer and located in Grand Junction, Colorado and utilized by Seller in the
business of Seller.

"LEGAL REQUIREMENT" is defined as any federal, state, local, municipal, foreign,
international, multinational, or other constitution, law, ordinance, principle
of common law, regulation, statute, or treaty.

"LIABILITY" is defined, with respect to any Person, as any Liability or
obligation of such person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or the same is required to be accrued on the financial statements of such
Person.

"MATERIAL CONSENTS" is defined in Section 7.3.

"NOTE" is defined in Section 2.3

                                       43
<PAGE>

"OCCUPATIONAL SAFETY AND HEALTH LAW" is defined as any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, including the Occupational Safety and
Health Act, 29 U.S.C.ss.651 ET. SEQ., and any program, whether governmental or
private (such as those promulgated or sponsored by industry associations
insurance companies), designed to provide safe and healthful working conditions.

"ORDER" is defined as any order, injunction, judgment, decree, ruling,
assessment or arbitration award of any Governmental Body or arbitrator.

"ORDINARY COURSE OF BUSINESS" is defined, with respect to an action taken by a
Person, as:

         (a) an action which is consistent in nature, scope and magnitude with
         the past practices of such Person and is taken in the ordinary course
         of the normal day-to-day operations of such Person;

         (b) an action which does not require authorization by the board of
         directors or shareholders of such Person (or by any Person or group of
         Persons exercising similar authority) and does not require any other
         separate or special authorization of any nature; and

         (c) an action which is similar in nature, scope and magnitude to
         actions customarily taken, without any separate or special
         authorization, in the ordinary course of the normal day- to-day
         operations of other Persons that are in the same line of business as
         such Person.

"PERMITTED ENCUMBRANCES" is defined in Section 3.6.

"PERSON" is defined as an individual, partnership, corporation, business trust,
limited liability, limited liability partnership, joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Body.

"PROCEEDING" is defined as any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
judicial or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.

"PURCHASE PRICE" is defined in Section 2.3.

"RECORD" is defined as information that is inscribed on a tangible medium or
that is stored in an electronic or other medium and is retrievable in
perceivable form.

"RELATED PERSON" is defined, with respect to a particular individual, as:

         (a) each other member of such individual's Family;

         (b) any Person that is directly or indirectly controlled by any one or
         more members of such individual's Family;

         (c) any Person in which members of such individual's Family hold
         (individually or in the aggregate) a Material Interest; and

                                       44

<PAGE>

         (d) any Person with respect to which one or more members of such
         individual's Family serves as a director, officer, partner, executor,
         or trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

         (a) any Person that directly or indirectly controls, is directly or
         indirectly controlled by, or is directly or indirectly under common
         control with such specified Person;

         (b) any Person that holds a Material Interest in such specified Person;

         (c) each Person that serves as a director, officer, partner, executor,
         or trustee of such specified Person (or in a similar capacity);

         (d) any Person in which such specified Person holds a Material
         Interest; and

         (e) any Person with respect to which such specified Person serves as a
         general partner or a trustee (or in a similar capacity).

For purposes of this definition, (a) "control" (including "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and shall be construed as such term is used in the rules
promulgated under the Securities Act, (b) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(c) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 5% of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least 5% of the outstanding equity securities or equity
interests in a Person.

"RELEASE" is defined as any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching,
or migration on or into the or into or out of any property.

"REMEDIAL ACTION" is defined as all actions, including any capital expenditures,
required or voluntarily undertaken to (i) clean up, remove, treat, or in any
other way address any Hazardous al or other substance; (ii) prevent the Release
or Threat of Release, or minimize the further Release of any Hazardous Material
or other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the Environment; (iii) perform pre-remedial studies
and investigations or post-remedial monitoring and care; or (iv) bring any
Leased Real Property and the Facilities located and operations conducted thereon
into compliance with all Environmental Laws and Environmental Permits.

                                       45

<PAGE>

"REPRESENTATIVE" is defined, with respect to a particular Person, as any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.

"RESPONSIBLE TAX PERSON" is defined in Section 3.14(b).

"RETAINED LIABILITIES" is defined in Section 2.4(b).

"SCHEDULE" or "SCHEDULES" is defined as a schedule or schedules to this
Agreement.

"SECURITIES ACT" is defined in Section 3.3.

"SELLER" is defined in the first paragraph of this Agreement.

"SELLER CONTRACT" is defined as any Contract (a) under which Seller has or may
acquire any lights or benefits, (b) under which Seller has or may become subject
to any obligation or Liability, or (c) by which Seller or any of the assets
owned or used by Seller is or may become bound.

"SELLER'S CLOSING DOCUMENTS" is defined in Section 3.2(a).

"TANGIBLE PERSONAL PROPERTY" is defined as all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property (other than Inventories) of every
kind owned or leased by Seller (wherever located and whether or not carried on
Seller's books), together with any express or implied warranty by the
manufacturers or sellers or lessors of any item or component part thereof, and
all maintenance Records and other documents relating thereto.

"TAX" is defined as any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, lane, boat, vessel or other title or registration,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum, and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever,
and any interest, penalties, additional or additional amounts thereon, imposed,
assessed, collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract.

"TAX RETURN" is defined as any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.

"THREAT OF RELEASE" is defined as a reasonable likelihood of a Release that may
require in order to prevent or mitigate damage to the Environment that may
result from such Release.

"WARN ACT" is defined in Section 3.23 (d).

"WORKING CAPITAL" is the cash and Accounts Receivable less trade payables of
Seller.

                                       46

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