Document:

Exhibit 10.3

Asset Purchase and Sale Agreement

                        ASSET PURCHASE AND SALE AGREEMENT

                                 BY AND BETWEEN

                       ONEOK Propane Distribution Company,
                      a division of ONEOK Propane Company,
                             a Delaware corporation
                                  (AS "SELLER")

                                       AND

                           SONTERRA ENERGY CORPORATION
                               a Texas Corporation
                                  (AS "BUYER")

                                 October    ,2004
                                        ----

<PAGE>
<TABLE>
<CAPTION>

                        ASSET PURCHASE AND SALE AGREEMENT

                                TABLE OF CONTENTS

<C>                                                                                   <C>
1.DEFINITIONS..........................................................................1

2.SALE OF ASSETS.......................................................................6
        2.1       Assets to be Sold and Purchased......................................6
        2.2       Consents to Assignment...............................................7

3.PURCHASE PRICE AND TERMS OF PAYMENT..................................................7
        3.1       Base Purchase Price..................................................7
        3.2       Upward Price Adjustment for Prepaid Expenses.........................7
        3.3       Downward Price Adjustment............................................7
        3.4       Adjusted Purchase Price..............................................8
        3.5       Statement of Adjustments.............................................8
        3.6       Recordation Fees and Sales Taxes.....................................8
        3.7       Liabilities & Obligations Related to Third Party Claims..............9
        3.8       Assumption of Liabilities............................................9

4.REPRESENTATIONS AND WARRANTIES OF SELLER.............................................9
        4.1       Organization, Good Standing, and Authority...........................9
        4.2       Valid and Binding Agreement; No Violation...........................10
        4.3       Compliance with Laws................................................10
        4.4       Absence of Claims...................................................10
        4.5       Title to Assets.....................................................10
        4.6       Taxes...............................................................11
        4.7       No Conflicting Orders...............................................11
        4.8       Contracts...........................................................11
        4.9       Condemnation........................................................11
        4.10      Liabilities.........................................................12
        4.11      Brokerage Arrangements..............................................12

5.REPRESENTATIONS AND WARRANTIES OF BUYER.............................................12
        5.1       Organization, Good Standing, and Authority..........................12
        5.2       Valid and Binding Agreement; No Violation...........................12
        5.3       Litigation..........................................................13
        5.4       No Conflicting Orders...............................................13
        5.5       Funds...............................................................13
        5.6       Bankruptcy..........................................................13
        5.7       Brokerage Arrangements..............................................13
        5.8       Insurance...........................................................13
        5.9       Net Worth...........................................................14

6.PRE-CLOSING CONDUCT AND COVENANTS...................................................14
        6.1       Conduct of Business.................................................14
        6.2       Operations..........................................................14
        6.3       Confidentiality.....................................................15
        6.4       Litigation..........................................................15
        6.5       Execution of Settlement Documents...................................17
</TABLE>

                                       i

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<TABLE>
<CAPTION>

<C>                                                                                  <C>
7.CLOSING AND CONDITIONS TO CLOSING...................................................17
        7.1       Conditions to Closing...............................................17
        7.2       Time and Place of Closing...........................................19
        7.3       Effective Date......................................................19
        7.4       Assumption of Risk of Loss, Liabilities and Operations..............19
        7.5       Termination At or Prior to Closing..................................19
        7.6       Effect of Termination...............................................20

8.DISCLAIMERS.........................................................................20
        8.1       Disclaimer Regarding Assets.........................................20

9.INDEMNIFICATIONS....................................................................21
        9.1       Indemnification by Buyer............................................21
        9.2       Indemnification by Seller...........................................21
        9.3       Limitations on Liability............................................22
        9.4       Survival of Representations and Warranties..........................23
        9.5       Notice of Asserted Liability; Opportunity to Defend and/or Cure.....24
        9.6       Exclusive Remedy....................................................26
        9.7       Survival of Covenants...............................................26

10.POST-CLOSING ACCOUNTING AND CONTINUING OBLIGATIONS.................................26
        10.1      Ad Valorem Taxes....................................................26
        10.2      Apportionment of Revenues and Expenses..............................27
        10.3      Obligations and Credits.............................................27
        10.4      Final Accounting Statement..........................................28
        10.5      Records/Audit.......................................................28
        10.6      Transfer of Records.................................................28
        10.7      Commissions.........................................................29
        10.8      Further Assurances..................................................29
        10.9      Other Taxes.........................................................29
        10.10     Costa Bella Meter and Yard Line Installation........................29

11.MISCELLANEOUS PROVISIONS...........................................................29
        11.1      Quit Claim of Interests.............................................29
        11.2      Removal of signage..................................................30
        11.3      Assignments.........................................................30
        11.4      Entire Agreement; Amendments........................................30
        11.5      Severability........................................................30
        11.6      Counterparts........................................................31
        11.7      Governing Law.......................................................31
        11.8      Waiver of Trade Practices Acts......................................31
        11.9      Notice and Addresses................................................32
        11.10     Public Announcements................................................32
        11.11     No Partnership......................................................33
        11.12     Headings, Articles and Sections.....................................33
        11.13     Exhibits............................................................33
        11.14     No Third-Party Beneficiaries........................................33
        11.15     Principles of Construction and Interpretation.......................33
        11.16     Not to be Construed Against Drafter.................................34
</TABLE>

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                             EXHIBITS AND SCHEDULES
                                       TO
                        ASSET PURCHASE AND SALE AGREEMENT
                        ---------------------------------

   EXHIBITS:
   ---------

         A        Description of Assets

         B        Contracts

         C        Real Property

         D        Disclosure Schedule

                  4.1      Consents

                  4.2      Violations

                  4.3      Governmental Notices of Violation

                  4.4      Asserted Claims

                  4.5      Title to Assets

                  4.6      Taxes

                  4.7      No Conflicting Orders

                  4.8      Contracts

                  4.9      Condemnation

                  4.10     Liabilities

   SCHEDULES:
   ----------

         Schedule 3.2 - Capital Expenditures

                                      iii

<PAGE>

                        ASSET PURCHASE AND SALE AGREEMENT

     This ASSET  PURCHASE  AND SALE  AGREEMENT  (this  "Agreement")  is made and
entered into as of this day of October,  2004,  by and between  Sonterra  Energy
Corporation,  a Texas  corporation  (referred to as "Buyer"),  and ONEOK Propane
Distribution   Company,   a  division  of  ONEOK  Propane  Company,  a  Delaware
corporation (referred to as "Seller").

     WHEREAS,  Seller is the owner and operator of propane  distribution systems
that serve certain residential subdivisions in the Austin, Texas area as well as
the related assets all as described herein; and:

     WHEREAS,  Seller  desires to sell and Buyer  desires to purchase the Assets
(as  hereinafter  defined) of Seller on terms and subject to the  conditions set
forth in this Agreement.

     FOR  AND IN  CONSIDERATION  of the  premises  and of the  mutual  covenants
contained herein, the parties executing below agree as follows:

1.   DEFINITIONS

     The  following  terms shall have the  following  meanings when used in this
Agreement:

     "Adjusted  Purchase Price" shall have the meaning  ascribed to such term as
set forth in Section 3.4 hereinafter.

     "Affiliate" of any Party  (hereinafter  defined) hereto means any person or
other legal entity who controls,  is controlled  by, or is under common  control
with, such Party. For purposes hereof,  "control" means the ownership,  directly
or  indirectly,  of the power (by ownership of an equity  interest,  contract or
otherwise)  to direct  the  management  of an entity by virtue of  ownership  or
voting control of 50% or more of the then outstanding voting ownership interests
in such entity.

     "Applicable Laws" means all laws, statutes,  ordinances,  permits, decrees,
orders,   rules  or  regulations   (excluding   Environmental  Laws)  which  are
promulgated,  issued or enacted by a Governmental  Authority or tribal authority
having appropriate jurisdiction.

     "Assets"  means all real and personal  property and  appurtenances  thereto
directly  related to the ownership and solely for the operation and  maintenance
of Seller's  propane  distribution  systems  located  wholly within the State of
Texas  (excluding all real and personal  property of Seller,  if any, located in
and related to the Arbolago  Subdivision,  the Hills of Lakeway  Subdivision and
the  Northshore on Lake Travis Phase II  Subdivision),  as same are described in
more detail in Exhibit "A", together with all of the following assets:

          (i)   The Contracts;

          (ii)  The Equipment;

          (iii) The Incidental Rights;

          (iv)  The Plans;

          (v)   The Real Property; and

          (vi)  The Propane.

                                       1
<PAGE>

Provided, however, that the following shall not be included in the definition of
Assets: any interests of Seller in and to rights or property relating to propane
distribution  systems located in the Subdivisions of Arbolago,  Hills of Lakeway
and Northshore on Lake Travis Phase II.

     "Assigned  Instruments" shall have the meaning ascribed to such term as set
forth in Section 2.2 hereinafter.

     "Base Purchase  Price" shall have the meaning  ascribed to such term as set
forth in Section 3.1 hereinafter.

     "BNC" shall have the meaning  ascribed to such term as set forth in Section
6.3 hereinafter.

     "Business Days" means the days of Monday through Friday,  excluding Federal
Bank holidays.

     "Claim" or "Claims"  means any and all  claims,  demands,  suits,  actions,
causes of action, losses,  damages,  liabilities,  judgments,  fines, penalties,
costs  (including  reasonable  attorneys'  fees  and  costs  of  investigations,
mediation,  arbitration  or  litigation),  investigations  or  orders  which are
brought,   undertaken,   issued  or  asserted  by  a  Third   Party,   excluding
Environmental Claims.

     "Claim Notice" shall have the meaning ascribed to such term as set forth in
Section 9.5 hereinafter.

     "Closing"  shall  have the  meaning  ascribed  to such term as set forth in
Section 7.2 hereinafter.

     "Closing Date" shall have the meaning ascribed to such term as set forth in
Section 7.2.

     "Code"  means  the  Internal  Revenue  Code of 1986,  as  amended,  and any
regulations thereunder.

     "Contracts"  means all  contracts  and  agreements,  as same are  listed in
Exhibit "B" attached hereto and made a part hereof for all purposes,  pertaining
to the servicing, handling and distribution of propane through the Assets.

     "Disclosure  Schedule" means Exhibit "D" of this Agreement  attached hereto
and incorporated herein by reference.

     "Effective  Date" shall have the meaning ascribed to such term as set forth
in Section 7.3 hereinafter.

                                       2
<PAGE>

     "Environmental Claim" means any and all written administrative,  regulatory
or  judicial  actions,   suits,   demands,   demand  letters,   claims,   liens,
investigations,  proceedings  or notices of  noncompliance  or  violation by any
Third Party (including any Governmental  Authority) alleging potential Liability
(including,   without   limitation,   potential   Liability   for   enforcement,
investigatory  costs,  damages,  Loss,   contribution,   indemnification,   cost
recovery, compensation,  injunctive relief, cleanup costs, governmental resource
costs,  removal costs,  remedial  costs,  natural  resources  damages,  property
damages,  personal injuries or penalties)  arising out of, based on or resulting
from (i) the presence, or Release or threatened Release into the environment, of
any Hazardous  Materials at any location operated,  leased or managed by Seller;
(ii) any  violation of any  Environmental  Law; or (iii) one or more Releases of
the same or  substantially  the  same  Hazardous  Material,  from or at the same
location  regardless  of whether such  Releases  resulted from the same event or
from multiple events over time.

     "Environmental  Defect" means any condition  present in or on the Assets or
arising in  connection  with the  operation of the Assets (i) that  violates any
Environmental  Law;  (ii)  that  results  in  any  Liability  to any  person  or
Governmental Authority (federal, state or local), contingent or otherwise, under
any  Environmental  Law;  or (iii) that  results  from a spill of any  Hazardous
Substance.

     "Environmental   Laws"  means  any  and  all  applicable  laws,   statutes,
ordinances,  rules,  regulations,  orders, or determinations of any Governmental
Authority  pertaining  to the  protection  of  human  health  or  safety  or the
environment,  in effect in any or all  jurisdictions  in which  the  Assets  are
operated,  including,  without  limitation,  the Clean Air Act, as amended,  the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
("CERCLA"),  the Federal Water Pollution  Control Act, as amended,  the Resource
Conservation and Recovery Act, as amended ("RCRA"), the Safe Drinking Water Act,
as amended,  the Toxic Substances Control Act, as amended,  and comparable state
and local environmental laws.

     "Equipment"  means all items of personal  property and equipment  which are
located at and  attached  to the Assets and used solely in  connection  with the
ownership,  operation, repair, use, or maintenance of the Assets, including, but
not limited to all vehicles,  pipe, connections,  fittings,  meters and metering
facilities,  measuring equipment and devices, cathodic protection,  compressors,
pumps,  gauges,  valves,  laterals,  tanks,  and dehydration  units described on
Exhibit "A".

     "Final  Accounting  Statement" shall have the meaning ascribed to such term
as set forth in Section 10.4 hereinafter.

     "Final Settlement Date" shall have the meaning ascribed to such term as set
forth in Section 10.4 hereinafter.

     "GAAP"  means  generally  accepted  United  States  accounting  principles,
consistently  applied.  As applied,  GAAP means those accounting  principles and
practices (i) which are recognized as such by the Financial Accounting Standards
Board,  (ii) which are applied for all periods in a manner  consistent  with the
manner in which such  principles  and practices  were applied to the most recent
audited financial statements of Seller, and (iii) which are consistently applied
for all periods so as to reflect properly the financial  condition,  and results
of operations and cash flows, of Seller.

                                       3
<PAGE>

     "Governmental  Authority"  means any foreign  governmental  authority,  the
United States of America,  any State of the United States,  any local  authority
and  any  political  subdivision  of any of the  foregoing,  any  multi-national
organization or body, any agency, department,  commission,  board, bureau, court
or  other  authority  thereof,  or  any   quasi-governmental   or  private  body
exercising,  or purporting to exercise,  any executive,  legislative,  judicial,
administrative, police, regulatory or taxing authority or power of any nature.

     "Hazardous  Material"  means  (i)  any  petroleum  or  petroleum  products,
radioactive materials,  friable asbestos, urea formaldehyde foam insulation, and
transformers  or other  equipment that  contained  dielectric  fluid  containing
polychlorinated biphenyls ("PCBs"); (ii) any chemicals,  materials or substances
which are now defined as or included in the definition of hazardous  substances,
hazardous wastes,  hazardous materials,  extremely hazardous wastes,  restricted
hazardous wastes, toxic substances, toxic pollutants, or words of similar import
under any Environmental Law; and (iii) any other chemical  material,  substances
or waste,  exposure  to which is now  prohibited,  limited  or  regulated  under
Environmental Law in the jurisdiction in which the Assets are located.

     "Hazardous  Substance" means a substance,  chemical,  pollutant,  waste, or
other material that  constitutes any "hazardous  substance"  under CERCLA or any
"hazardous  waste" or "regulated  substance"  under RCRA, or any other material,
waste, or substance that may serve as the basis of obligations to sample,  test,
investigate,  cleanup, remove, monitor, or otherwise respond under Environmental
Laws.

     "Incidental  Rights" means (i) all books and records primarily  relating to
the  Assets,  (ii) all  governmental  filings,  permits,  approvals  or licenses
relating primarily to the ownership,  use, occupancy or operation of the Assets,
and (iii) all contract files, right-of-way files, and engineering files relating
primarily to the Assets.

     "Indemnified  Party"  shall have the  meaning  ascribed to such term as set
forth in Section 9.5 hereinafter.

     "Indemnifying  Party"  shall have the meaning  ascribed to such term as set
forth in Section 9.5 hereinafter.

     "Liability" or "Liabilities" means any debt, obligation,  duty or liability
of any nature (including unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted,  contingent,  conditional,  inchoate, implied,
vicarious,  joint, several or secondary  liability),  regardless of whether such
debt,  obligation,  duty or  liability  would be required to be  disclosed  on a
balance sheet prepared in accordance with GAAP.

     "Loss"  or  "Losses"  shall  mean  with  respect  to a  specific  Claim  or
Environmental Claim the sum of all actual and reasonable out-of-pocket costs and
expenses incurred in connection with the investigation and defense thereof,  any
judgments,  fines or amounts paid in settlement thereof,  and additional losses,
costs or expenses reasonably incurred to comply with any settlement, judgment or
order imposed  thereby,  or otherwise  resulting  from such Third Party Claim or
Environmental Claim which has been finally adjudicated or settled.

                                       4
<PAGE>

     "Material  Adverse Effect" means a matter which imposes,  or which would be
reasonably  expected to impose in the future,  on the Assets a material  adverse
effect  in an  aggregate  amount  greater  than  One  Hundred  Thousand  Dollars
($100,000.00).

     "Notice  Period" shall have the meaning  ascribed to such term as set forth
in Section 9.5 hereinafter.

     "Party" means either Seller or Buyer.

     "Permitted Encumbrances" means:

          (i)  Consents to assignment  encumbering the Assets as provided for in
               Section 2.2;

          (ii) All rights to consent by,  required  notices to, filings with, or
               other actions by Governmental  Authorities or tribal  authorities
               in  connection  with the  transfer of the Assets to the Buyer and
               the  consummation of this Agreement,  if the same are customarily
               obtained subsequent to the transfer of title;

         (iii) Rights  reserved to or vested in any  Governmental  Authority  or
               tribal  authority having  appropriate  jurisdiction to control or
               regulate the Assets in any manner whatsoever,  and all Applicable
               Laws of any such Governmental Authority or tribal authority;

          (iv) Third Party easements, rights-of-way, servitudes, surface leases,
               sub-surface  leases,  grazing  rights and  logging  rights to the
               extent same are  evidenced  in a document  recorded in the public
               land records of the county,  as of the date  hereof,  wherein the
               encumbered  property is located or same is provided by Seller; as
               well as canals, ditches,  reservoirs,  pipelines,  utility lines,
               telephone lines, power lines, railways,  streets,  roads, alleys,
               highways and structures  on, over and through the Assets,  but in
               all cases only to the extent such rights, interests or structures
               do not materially  interfere with the Assets in their current use
               or to the extent such right,  interests or structures are evident
               from a surface inspection of the Assets;

          (v)  Liens for taxes or assessments  not yet due or not yet delinquent
               or, if  delinquent,  that are being  contested  by Seller in good
               faith in the normal course of business;

          (vi) Mechanics' and  materialmen's  liens relating to obligations  not
               yet due or not yet delinquent  or, if delinquent,  that are being
               contested  by  Seller  in good  faith  in the  normal  course  of
               business and otherwise disclosed in the Disclosure Schedule;

                                       5
<PAGE>

         (vii) Preferential  purchase rights and similar contractual  provisions
               encumbering  the Assets with respect to which,  prior to Closing,
               (A)  waivers  or  consents  are  obtained  from  the  appropriate
               parties,  or (B) the  applicable  time period for asserting  such
               rights has expired without an exercise of such rights; and

        (viii) Any  matters  disclosed  in  the  Disclosure  Schedule  as  being
               exceptions to Seller's representations in Article 4.

     "Plans" means all plans, drawings,  maps, plats, or similar reports or data
and any other technical descriptions primarily relating to the Assets.

     "Primarily  used," "used primarily,"  and/or "relating  primarily to" means
used at least 75% of the time in the ordinary course of business with respect to
the applicable Assets.

     "Propane" means any hydrocarbons,  minerals and materials of every kind and
description  that are present,  as of the Effective  Date,  in the  distribution
lines and bulk storage tanks that are a part of the Assets.

     "Real  Property" means all parcels of real property,  fixtures,  easements,
rights-of-way,  leases, permits, tenements, rights of egress and ingress and all
other rights in real property relating to, and used primarily in connection with
the operation of the Assets, including,  without limitation,  those items listed
in Exhibit "C" attached hereto and made a part hereof for all purposes.

     "Release" means any release, spill, emission, leaking, injection,  deposit,
disposal, discharge, dispersal, leaching or migration into the atmosphere, soil,
surface  water,  groundwater  or property or into any vessel or  container  from
which any of the foregoing may occur.

     "Taxes" means all taxes, charges,  imposts,  tariffs, fees, levies or other
similar  assessments or charges of any kind  whatsoever,  including,  employment
related taxes, ad valorem taxes,  excise taxes or other taxes of or with respect
to real  property,  personal  property,  sales,  use,  transfers,  licensing and
franchises  imposed  by or under  any law,  and such  terms  shall  include  any
interest,  fines,  penalties,  assessments  or additions to tax resulting  from,
attributable  to or incurred in  connection  with any such tax or any contest or
dispute thereof.

     "Third Party" or "Third Parties" mean any  Governmental  Authority,  tribal
authority or person other than Seller or Buyer or Affiliates of Seller or Buyer.

2.   SALE OF ASSETS

     2.1  Assets to be Sold and Purchased

     Subject to the terms and  conditions  of this  Agreement,  Seller agrees to
sell and Buyer agrees to purchase all of Seller's right,  title, and interest in
the Assets and those rights and properties described in Section 11.1.

                                       6
<PAGE>

     2.2  Consents to Assignment

     Notwithstanding  any other provision herein,  the Assets shall not include,
and this  Agreement  does not  constitute  an  agreement  by Seller to obtain an
assignment of any Contract,  fee title,  real property lease,  equipment  lease,
right of way, easement,  license, permit, approval or authorization constituting
any portion of the Assets ("Assigned  Instruments") or any claim or right or any
benefit  arising  thereunder or resulting  therefrom if an attempted  assignment
thereof at or prior to Closing would: (A) cause Seller either to be in violation
of any  licensing  or other law, or (B) be in violation  of any  prohibition  on
assignment  or  prohibition  on  change in  control  contained  in any  Assigned
Instrument.  In the event any Assigned Instrument cannot be assigned to Buyer at
the  Closing,  Seller  will,  effective as of the  Effective  Date,  and without
adjustment to the Base Purchase  Price,  appoint the Buyer as agent with respect
to any such Assigned  Instrument,  and the Parties shall  cooperate as otherwise
may be  necessary in any manner  reasonably  designed,  such that:  (A) from and
after the Effective Date, the Buyer will receive the revenues and other benefits
from and pay the costs  and  expenses  required  to be paid  under the  Assigned
Instrument (the "Beneficial  Ownership  Arrangement");  (B) Buyer will indemnify
and hold Seller harmless with respect to obligations arising under such Assigned
Instruments  from  and  after  the  Effective  Date;  and (C)  Seller  will  use
commercially  reasonable efforts for ninety (90) days from the Effective Date to
obtain any  consents  with  respect to any  Assigned  Instrument  that  requires
consent to assignment  (and which  consents have not been obtained  prior to the
Closing)  and Seller  shall pay all costs of seeking to obtain  such  consent or
approval.  Seller will be responsible for the reasonable costs of complying with
this Section 2.2.

3.   PURCHASE PRICE AND TERMS OF PAYMENT

     3.1  Base Purchase Price

     The purchase price for the Assets and those rights and properties described
in Section 11.1 shall be Two Million Dollars ($2,000,000.00) (the "Base Purchase
Price").

     3.2  Upward Price Adjustment for Prepaid Expenses

     The Base Purchase Price shall be adjusted  upward by an amount equal to the
prepaid  expenses  pertaining  to the  Assets and those  rights  and  properties
described in Section 11.1 that were actually paid by Seller, prior to Closing to
the extent such  expenses  are, in  accordance  with GAAP,  attributable  to the
period after the Effective  Date,  including,  without  limitation,  (i) prepaid
rent,  insurance,  utilities,  lease,  license  or right of way  payments,  (ii)
prepaid  renewal  fees,  (iii) prepaid ad valorem and property  taxes,  and (iv)
prepaid  emission fees. The Base Purchase Price shall also be adjusted upward by
an amount equal to the total amount of capital  expenditures  incurred by Seller
pertaining  to the Assets and those rights and  properties  described in Section
11.1  during the period from May 1, 2004 to the Closing  Date,  as said  capital
expenditures are listed on the attached Schedule 3.2.

                                       7
<PAGE>

     3.3  Downward Price Adjustment

     The Base  Purchase  Price shall be adjusted  downward by an amount equal to
the  expenses  paid in arrears  pertaining  to the  Assets and those  rights and
properties  described in Section 11.1 that were actually paid by Buyer after the
Closing to the extent such expenses are, in accordance  with GAAP,  attributable
to the period before the Effective  Date,  including,  without  limitation,  (i)
rent,  insurance,  utilities,  lease,  license or right of way payments  paid in
arrears,  and (ii) renewal  fees paid in arrears,  (iii) ad valorem and property
taxes paid in arrears.  The Base Purchase Price shall be adjusted downward by an
amount equal to all unpaid ad valorem and property taxes, based upon or measured
by the  ownership  of the Assets and those  rights and  properties  described in
Section 11.1 to the extent such taxes and  assessments  are, in accordance  with
GAAP,  attributable to the period prior to the Effective Date; provided,  if the
amount of any such  taxes  shall not have been  actually  assessed  on or before
Closing,  the amount of such taxes shall be  computed  based upon such taxes and
assessments  for the preceding  calendar  year (or the current  calendar year if
such  information is available) or, if such taxes or assessments are assessed on
other than a calendar year basis, for the tax related year last ended; provided,
however, that adjustment will be made in the Final Accounting Statement prepared
pursuant  to Section  10.4 based upon the amount of taxes  actually  assessed as
provided for in Section 10.1.

     3.4  Adjusted Purchase Price

     The Base Purchase Price,  adjusted as provided for in Sections 3.2 and 3.3,
shall be referred to herein as the  "Adjusted  Purchase  Price."  Subject to the
terms and  conditions  of this  Agreement,  in reliance on the  representations,
warranties and agreements of Seller contained  herein,  and completion by Seller
of the covenants contained herein,  Buyer shall pay Seller the Adjusted Purchase
Price (based on the interim  statement of  adjustments  described in Section 3.5
below) by wire transfer directly to Seller in immediately available funds at the
time of Closing,  to Seller's credit into the bank account  designated by Seller
at or prior to Closing.

     3.5  Statement of Adjustments

     At or prior to  Closing,  Seller  and Buyer  shall  agree  upon an  interim
statement of adjustments setting out, to the extent reasonably practicable,  the
adjustments to the Base Purchase Price pursuant to Sections 3.2 and 3.3 above. A
final  statement of  adjustments  to the Purchase  Price shall be  determined by
Buyer and Seller within ninety (90) days of the Closing Date.

     3.6  Recordation Fees and Sales Taxes

     Buyer shall pay the cost of recording or similar payments due on or arising
from the recording of any assignment  instrument(s),  bills of sale, deed(s), or
other  instruments  in connection  with the assignment of Assets from Seller and
the  quit-claim  of rights  described  in Section  11.1.  Buyer shall pay to the
proper taxing  authorities  the cost of any sales,  use,  documentary  stamps or
other  transfer  tax,  or similar  payment  due on or arising  from the sale and
assignment of Assets and the quit-claim of rights described in Section 11.1 from
Seller to Buyer.  Buyer shall  promptly  report and remit  payment to the proper
taxing authorities for any sales tax, use tax, transfer tax, documentary stamps,
or such similar taxes and any penalties  and interest  thereon,  and shall remit

                                       8
<PAGE>

payment  to  Seller  for the  cost of any such  taxes,  penalties  and  interest
required by any taxing  authority  to be paid by Seller for the account of Buyer
arising  in  connection  with  the  sale or  conveyance  of the  Assets  and the
quit-claim  of  rights  described  in  Section  11.1  as  contemplated  by  this
Agreement. Buyer shall pay, and shall defend, indemnify and hold Seller harmless
from,  the cost of recording all  assignment  instrument(s),  deed(s),  or other
instruments,  or similar  payments due on or arising  from the  recording of any
assignment instrument(s),  deed(s), or other instruments in connection with such
assignments,  transfers or sales and any other transactions contemplated in this
Agreement.

     3.7  Liabilities & Obligations Related to Third Party Claims

     Subject  to the  indemnification  provisions  set forth in Article 9, Buyer
shall  pay  and be  responsible  for all  Liabilities  and  perform  obligations
relating to Claims and  Environmental  Claims that arise or relate to ownership,
possession  or operation  of the Assets on or after the  Effective  Date.  In no
event  shall  Seller  have any  liability  for any  Liabilities  or  obligations
relating to Claims or  Environmental  Claims that arise or relate to  ownership,
possession or operation of the Assets on or after the Effective Date.

     3.8  Assumption of Liabilities

     On the Closing Date,  but effective as of the Effective  Date,  Buyer shall
assume and become  responsible  for, on the terms and subject to the  conditions
set forth in this Agreement,  all obligations and liabilities  arising after the
Effective Date under  applicable law and the  Contracts,  developer  agreements,
tank site leases and other  agreements  of Seller with respect to the Assets and
the interests described in Section 11.1.

     4.   REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller hereby  represents  and warrants to Buyer as of the Closing Date and
as of the date of this Agreement as follows:

     4.1  Organization, Good Standing, and Authority

     Seller  is a  corporation  duly  organized,  validly  existing  and in good
standing under the laws of the State of Delaware.  Seller has the full power and
authority  to enter  into  and  perform  this  Agreement  and to  carry  out the
transactions  contemplated  herein and to own and hold the properties and assets
it now owns  where such  properties  are now owned or held.  Seller is  properly
qualified,  as required by applicable  law, to conduct  business in the State of
Texas and has all the  requisite  power and  authority  to own the Assets and to
carry on its business as now  conducted in regard to the Assets.  Seller has the
power and authority to execute and deliver this  Agreement,  to  consummate  the
transactions  contemplated  hereby and to perform  all the terms and  conditions
hereof  to be  performed  by  Seller.  The  officers  of  Seller  executing  and
delivering  this Agreement are duly authorized and fully empowered to enter into
this Agreement on behalf of Seller. The execution and delivery of this Agreement
and the consummation by Seller of the transactions contemplated herein have been
duly and validly  authorized by all necessary  action by Seller,  and no further
approval  therefor  is  required  by law or  otherwise.  Except  as set forth in
Schedule  4.1 of the  Disclosure  Schedule,  no  consent  of any Third  Party is
required  for  Seller  to  enter  into  this  Agreement  and to  consummate  the
transactions  contemplated  herein,  except as to consents  customarily obtained
following Closing.

                                       9
<PAGE>

     4.2  Valid and Binding Agreement; No Violation

     This  Agreement  constitutes  a valid  and  binding  obligation  of  Seller
enforceable  in accordance  with its terms,  except as such  enforcement  may be
limited by bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  enforcement of creditors' rights generally and by general  principles
of equity (whether  applied in a proceeding at law or in equity).  Except as set
forth  in  Schedule  4.2 of the  Disclosure  Schedule,  this  Agreement  and the
execution,  delivery and  performance of this Agreement and the  consummation of
the  transactions  contemplated  by this  Agreement  will not (i)  constitute  a
violation  of, or  conflict  with,  or be a default  under any order,  judgment,
decree,  or any law or  regulation  of any  Governmental  Authority or under any
material commitment, agreement, understanding, arrangement or restriction of any
kind to which  Seller is a party or by which Seller is bound;  or (ii)  conflict
with any of or require  the  consent  of any  person or entity  under the terms,
conditions  or  provisions  of  the  charter  documents,  bylaws  or  equivalent
governing  instruments of Seller; or (iii) conflict with, result in a breach of,
constitute a default  under  (whether with notice or the lapse of time or both),
or  accelerate  or permit the  acceleration  of the  performance  required by or
require any consent,  authorization  or approval under any indenture,  mortgage,
lien or any  material  agreement,  permit,  lease or other  instrument  to which
Seller is a party or by which it is bound or to which any property of the Seller
is subject or any contracts,  permits or leases that are included in the Assets;
or (iv) result in the creation of any material  lien,  charge or  encumbrance on
the Assets under any indenture, mortgage, lien, lease or contract.

     4.3  Compliance with Laws

     Except as set forth in Schedule 4.3 of the Disclosure Schedule, to Seller's
knowledge,  the Seller is not in violation of or in default under any Applicable
Law related to the Assets or in  violation  of or in default  under any order of
any Governmental  Authority  applicable to it that would have a Material Adverse
Effect on the Assets.

     4.4  Absence of Claims

     Except as described in Schedule 4.4 of the Disclosure Schedule, to Seller's
knowledge,  there are no Claims or  Environmental  Claims being asserted,  or to
Seller's  knowledge,  threatened,  against the Assets that would,  if determined
adversely to Seller or Buyer,  prevent or interfere with the consummation of the
transactions contemplated by this Agreement.

     4.5  Title to Assets

     The Seller has or at Closing will have good and valid title to the vehicles
listed on Exhibit  "A" and good and valid  leasehold  interests  in all  propane
storage  tank sites  listed in Exhibit  "C",  in each case free and clear of all
liens,  encumbrances or security interests (collectively,  "Liens"),  except for
Permitted  Encumbrances and except for matters  disclosed on Schedule 4.5 of the
Disclosure Schedule (including,  without limitation, defects in title, rights to
purchase,  or liens described on Schedule 4.5). With respect to the distribution

                                       10
<PAGE>

system easements, rights-of-way,  licenses and land use permits included as part
of the Assets (collectively, the "Easements"), the Seller has or at Closing will
have (i) title to or  interest in the  Easements  listed on Exhibit "C" free and
clear of all liens and Claims of those  claiming by,  through,  or under Seller,
(ii) title to or interest  in the  Easements  sufficient  to use and operate the
Assets in the manner operated by Seller  immediately  prior to Closing,  without
interference  by Third Parties  arising from defects in title,  and (iii) use of
public  utility  easements  in the  various  subdivisions  related to the Assets
sufficient  to operate the Assets in the manner  operated by Seller  immediately
prior to Closing.

     4.6  Taxes

     Except as set forth in Schedule 4.6 of the Disclosure Schedule: (i) all tax
returns  related to or  affecting  the Assets have been filed by or on behalf of
the Seller  through  calendar year 2002 and such returns are true,  complete and
correct;  (ii) with  respect to items or periods  covered by such  returns,  all
Taxes shown payable on such returns have been paid in full on a timely basis and
no other Taxes are payable by the Seller; (iii) the Seller has withheld and paid
all  Taxes  required  to have been  withheld  and paid,  and  complied  with all
information  reporting and backup withholding  requirements,  in connection with
amounts paid or owing to any  employee,  creditor,  independent  contractor,  or
other  third  party;  (iv) there are no liens on any of the Assets of the Seller
with respect to Taxes, other than liens for Taxes not yet due and payable or for
Taxes  that  the  Seller  is  contesting  in  good  faith  through   appropriate
proceedings;  (v) there are no  outstanding  agreements  or  waivers  by or with
respect to the Seller  extending the period for  assessment or collection of any
Taxes;  and (vi) there is no pending  action,  proceeding or  investigation  for
assessment or collection of Taxes with respect to the Assets.

     4.7  No Conflicting Orders

     Except as described in Schedule 4.7 of the Disclosure Schedule, to Seller's
knowledge,  Seller is not a party  to,  subject  to,  or bound by any  judgment,
order, writ, injunction,  or decree of any court or Governmental Authority which
would prevent or interfere with the execution,  delivery, or performance of this
Agreement or the consummation of the transactions herein contemplated.

     4.8  Contracts

     Except as described in Schedule 4.8 of the Disclosure Schedule, to Seller's
knowledge,  Seller is not in default  under or in breach or  violation of and no
event  has  occurred  which,  with  notice  or the  lapse of time or both  would
constitute a default under, or a breach or a violation of any term, condition or
provision of any material Contract. To Seller's knowledge,  Exhibit B contains a
true  and  complete  list of all  material  Contracts.  Except  as set  forth in
Schedule 4.8: (i) the Seller has not received any prepayment,  advance  payment,
deposits or similar payments, and has no refund obligation,  with respect to any
propane  serviced,  handled or distributed by or on behalf of the Seller related
to the  Assets;  and (ii) the  Seller  has not  received  any  compensation  for
handling or distribution  services  related to the Assets which would be subject
to any refund or create any repayment  obligation  either by or to the Buyer and
to the knowledge of Seller, there is no basis for a claim that a refund is due.

                                       11
<PAGE>

     4.9  Condemnation

     Except as described in Schedule 4.9 of the Disclosure Schedule, to Seller's
knowledge,  there are no pending  or  threatened  or  proposed  condemnation  or
eminent domain proceedings,  decrees or orders by Governmental  Authorities,  or
contemplated sales in lieu thereof,  involving partial or total taking of any of
the Assets.

     4.10 Liabilities

     Except  as set  forth  on  Schedule  4.10 of the  Disclosure  Schedule,  to
Seller's knowledge, the Assets are not subject to any obligations or Liabilities
(whether accrued, absolute,  contingent,  unliquidated or otherwise, whether due
or to become due), other than contractual  obligations and liabilities  incurred
in the  ordinary  course  of  business,  and  other  than  normal  and  ordinary
Liabilities  which have arisen in the ordinary  course of business  that, in the
aggregate, would not have a Material Adverse Effect.

     4.11 Brokerage Arrangements

     The Seller has not entered (directly or indirectly) into any agreement with
any  person,  firm or  corporation  that would  obligate  the Buyer,  to pay any
commission,  broker's fee or finder's fee or other fee in  connection  with this
Agreement or the transactions contemplated herein.

     5.   REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby  represents  and warrants to Seller as of the Closing Date and
as of the date of this Agreement as follows:

     5.1  Organization, Good Standing, and Authority

     Buyer has the full  power and  authority  to enter  into and  perform  this
Agreement  and to carry out the  transactions  contemplated  herein.  Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas.  Buyer is  properly  qualified,  as  required  by law, to
conduct  business  in the State of Texas.  The  execution  and  delivery of this
Agreement  by  Buyer  and  the   consummation  by  Buyer  of  the   transactions
contemplated herein have been duly authorized,  and no further approval therefor
is required by law or otherwise.  The officers of Buyer executing and delivering
this  Agreement  are duly  authorized  and fully  empowered  to enter  into this
Agreement on behalf of Buyer.  Buyer is aware of no  authorizations or approvals
other than those  contemplated  herein which are required by law or otherwise to
enable Buyer to perform its obligations under this Agreement.  No consent of any
Third Party is required for Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, except as to consents customarily obtained
following Closing.  Buyer's ability to consummate the transactions  contemplated
in this  Agreement is not  contingent  on its ability to complete any  financing
prior to or upon the Closing.

                                       12
<PAGE>

     5.2  Valid and Binding Agreement; No Violation

     This  Agreement  constitutes a valid and binding  agreement of Buyer and is
enforceable  in accordance  with its terms,  except as such  enforcement  may be
limited by bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  enforcement of creditors' rights generally and by general  principals
of equity (whether applied in a proceeding at law or in equity).  This Agreement
and  the  execution,   delivery  and  performance  of  this  Agreement  and  the
consummation  of the  transactions  contemplated  by this Agreement will not (i)
constitute a violation  of, or conflict  with,  or be a default under any order,
judgment,  decree,  or any law or  regulation of any  Governmental  Authority or
under  any  material  commitment,  agreement,   understanding,   arrangement  or
restriction  of any kind to which  Buyer is a party or by which  Buyer is bound;
(ii)  conflict  with any of or require the consent of any person or entity under
the  terms,  conditions  or  provisions  of the  charter  documents,  bylaws  or
equivalent  governing  instruments of Buyer; or (iii) conflict with, result in a
breach of,  constitute a default under (whether with notice or the lapse of time
or both), or accelerate or permit the  acceleration of the performance  required
by or require  any  consent,  authorization  or  approval  under any  indenture,
mortgage,  lien or any material agreement,  permit, lease or other instrument to
which  Buyer is a party or by which it is bound or to which any  property of the
Buyer is subject.

     5.3  Litigation

     There is no injunction or restraining  order or legal,  administrative,  or
arbitration  proceeding  pending or threatened  against Buyer which restrains or
prohibits the consummation of the transactions contemplated by this Agreement.

     5.4  No Conflicting Orders

     Buyer is not a party to, subject to, or bound by any judgment, order, writ,
injunction, or decree of any court or Governmental Authority which would prevent
or interfere with the execution,  delivery,  or performance of this Agreement or
the consummation of the transactions herein contemplated.

     5.5  Funds

     Buyer has,  at the date of this  Agreement,  and will have,  at the Closing
Date,  sufficient  unencumbered  funds to pay the Adjusted Purchase Price at the
Closing.

     5.6  Bankruptcy

     There  are no  pending  or,  to the best  knowledge  of  Buyer,  threatened
proceedings in bankruptcy,  for protection or suspension of debts,  or involving
assignment of assets for the benefit and  protection of creditors  involving the
Buyer.

                                       13
<PAGE>

     5.7  Brokerage Arrangements

     The Buyer has not entered  (directly or indirectly) into any agreement with
any person,  firm or  corporation  that would  obligate  the Seller,  to pay any
commission,  broker's fee or finder's fee or other fee in  connection  with this
Agreement or the transactions contemplated herein.

     5.8  Insurance

     Buyer currently maintains comprehensive general liability insurance with an
amount of coverage  that is equal to or greater  than  contractual  liability of
$1,000,000 per occurrence and $2,000,000 annually.

     5.9  Net Worth

     Buyer  has  a  net  worth  that  is  greater  than  five  million   dollars
($5,000,000.00).

     6.   PRE-CLOSING CONDUCT AND COVENANTS

     6.1  Conduct of Business

     Without  first  obtaining the written  consent of the Buyer,  from the date
hereof  until the  Closing  Date,  the Seller  covenants  that it will not as to
Seller's operation of the Assets:

          (i)  operate the Assets other than in the usual,  regular and ordinary
               course in all material respects consistent with past practices or
               make any material  change in the conduct of such  businesses  and
               operations  or  financial   reporting  and   accounting   methods
               affecting the Assets;

          (ii) enter into any  renewal of a  Contract  on terms and  conditions,
               including economic terms, not substantially the same as currently
               exist in such Contract;

          (iii)sell, lease or otherwise  dispose of any of the Assets other than
               (A)  the  sale of  Assets  in the  ordinary  course  of  business
               pursuant  to  existing  Contracts,  or (B)  Assets  that are sold
               pursuant to any preferential right to purchase;

          (iv) other than in the  ordinary  course of business  consistent  with
               past  practices  (A)  terminate  or amend  any  Contract,  or any
               material  permit or other material right,  (B) waive,  release or
               assign any material rights or claims, (C) create any liens on the
               Assets; or

          (v)  implement or adopt any change in its tax methods,  principles  or
               elections relating to the Assets.

                                       14
<PAGE>

     6.2  Operations

     Except as otherwise  expressly  provided in this  Agreement,  from the date
hereof until Closing, Seller shall:

          (i)  maintain the Assets in as good working  order and condition as of
               the date hereof, ordinary wear and tear excepted;

          (ii) use its reasonable efforts to maintain and preserve the operation
               of the Assets;

          (iii)advise the Buyer  promptly in writing of any  material  change in
               any schedule delivered pursuant to this Agreement;

          (iv) file on a timely  basis all  notices,  reports  or other  filings
               necessary or required for the continuing  operation of the Assets
               to be  filed  with  or  reported  to any  Governmental  Authority
               wherever located; and

          (v)  file on a timely basis all complete and correct  applications  or
               other  documents  necessary  to  maintain,  renew or  extend  any
               permit,   variance  or  any  other   approval   required  by  any
               Governmental  Authority  necessary or required for the continuing
               operation  of the  Assets,  whether  or not such  approval  would
               expire before or after the Closing Date.

     6.3  Confidentiality

     The terms of that certain  Confidentiality  Agreement by and between Seller
and BNC  Engineering,  LLC ("BNC"),  dated  September 19, 2003 are  incorporated
herein by reference and the Parties hereto agree to be bound to same with regard
to the information  disclosed by Seller, and their representatives in connection
with the transactions contemplated by this Agreement.

     6.4  Litigation

          (i)  Austin  Colony and Senna Hills.  From and after  Closing,  Seller
               shall maintain the  responsibility  and liability for the matters
               described as "HBH  Development  Company,  LLC v.  Southern  Union
               Company  and  ONEOK  Propane  Company,  District  Court of Travis
               County,  Texas,  Cause  No.  GN  402427"  (the  "Austin's  Colony
               Matter") and "Senna  Hills,  Ltd. v.  Southern  Union Company and
               ONEOK Propane  Company,  District Court of Travis County,  Texas,
               Cause No. GN  402428"  (the  "Senna  Hills  Matter"),  as further
               described in Schedule 4.4 of the Disclosure Schedule (but only to
               the extent  that the claims  asserted in such  matters  relate to
               acts or omissions  occurring  prior to the  Effective  Date).  In
               connection  with the final  adjudication  or  settlement of these
               matters:

               (A) Seller shall be entitled to any  recoveries,  collections  of
               money, judgments or other benefits relating to these matters;

                                       15
<PAGE>

               (B) Seller and Buyer  agree that in order to settle the  Austin's
               Colony Matter or the Senna Hills Matter, Seller may negotiate for
               Buyer and Buyer will  execute a new tank site lease or enter into
               another similar  arrangement  involving royalty payments or other
               payments  for  each   subdivision   with   customary   terms  and
               conditions, including without limitation, a term of not more than
               fifteen  (15) years and a rental  payment (or royalty  payment or
               other  payment)  not to exceed  $10,000  annually.  Seller  shall
               indemnify and hold Buyer  harmless  from the rental  payments and
               any Losses  suffered by Buyer related to settling  these lawsuits
               to the  extent  that  both  (a)  such  Losses  relate  to acts or
               omissions  occurring  prior  to the  Effective  Date,  including,
               without  limitation,  use fees that may have  accrued  during the
               period  January 1, 2003 to the Effective  Date,  and (b) Buyer is
               not able to  recover  for the  rental  payments  and such  Losses
               through rate recovery mechanisms;

               (C) In the event final  adjudication  or  settlement of either or
               both of the  Austin's  Colony  Matter and the Senna Hills  Matter
               results  in the  easement  use fee  obligation  continuing  under
               either  or both of the  developer  agreements  at  issue in these
               matters,  Buyer  agrees  to  enter  into  any  amendment  to  the
               developer  agreements  or new  developer  agreements as necessary
               that  requires  Buyer to pay easement use fees  subsequent to the
               Effective  Date on the same terms and  conditions as the existing
               developer agreements;

               (D) In the event (a) no  settlement  is reached in either or both
               of the Austin's  Colony Matter and the Senna Hills Matter and (b)
               final  adjudication  results in a  repudiation  of the  developer
               agreement at issue in the respective matter and forfeiture of the
               distribution  system,  Seller shall refund to Buyer the amount of
               the Base Purchase Price allocated to the respective  distribution
               system,  which  for the  Austin's  Colony  Matter  shall be three
               hundred thousand dollars  ($300,000.00),  and for the Senna Hills
               Matter shall be two hundred fifty thousand dollars ($250,000.00),
               with  the  refund   payment   constituting   full  and   complete
               satisfaction  on the  part of  Seller  for any  damages  to Buyer
               resulting  from the  repudiation  of the developer  agreement and
               forfeiture of the distribution system.

          (ii) The Preserve at Barton  Creek and Lake  Pointe.  Seller and Buyer
               agree  that  in  connection   with  the  final   adjudication  or
               settlement  of The  Preserve  at  Cedar  Creek  Canyon,  Inc.  v.
               Southern Union Company and ONEOK,  Inc.,  d/b/a Texas Gas Service
               Company,  Cause No.  278305,  in the  County  Court at Law No. 2,
               Travis County,  Texas (the "Preserve Matter"),  and TEBO, L.P. v.
               ONEOK, Inc., Case No.  A04CA602LY,  in the United States District
               Court for the Western  District of Texas,  Austin  Division  (the
               "Lake Pointe  Matter"),  as further  described in Schedule 4.4 of
               the Disclosure  Schedule,  Seller shall  indemnify and hold Buyer
               harmless  from any  Losses  suffered  by Buyer  related  to these
               matters but only to the extent  that the claims  asserted in such

                                       16
<PAGE>

               matters  relate  to  acts or  omissions  occurring  prior  to the
               Effective  Date.  In the event (A) no  settlement  is  reached in
               either or both of the Preserve  Matter and the Lake Pointe Matter
               and  (B)  final  adjudication  results  in a  repudiation  of the
               developer  agreement  at  issue  in  the  respective  matter  and
               forfeiture  of the  distribution  system,  Seller shall refund to
               Buyer the  amount of the Base  Purchase  Price  allocated  to the
               respective  distribution  system,  which for the Preserve  Matter
               shall be eighty-four thousand dollars  ($84,000.00),  and for the
               Lake Pointe  Matter  shall be four hundred  ninety-five  thousand
               dollars ($495,000.00),  with the refund payment constituting full
               and complete  satisfaction  on the part of Seller for any damages
               to  Buyer   resulting  from  the  repudiation  of  the  developer
               agreement and forfeiture of the distribution system.

          (iii)Cooperation.  From and after the Closing,  Seller and Buyer shall
               cooperate  in   connection   with  the   foregoing   proceedings,
               including,  without limitation,  providing access to information,
               documents and personnel  reasonably  necessary in connection with
               these matters.

     6.5  Execution of Settlement Documents

     Buyer  agrees to  cooperate  in  executing  any new tank site lease and any
release (and related settlement documents) as may be necessary or appropriate to
document the  settlement  of any claims or disputes  arising under the developer
agreements  and other  Contracts  for the various  subdivisions  relating to the
Assets and the interests described in Section 11.1.

7.   CLOSING AND CONDITIONS TO CLOSING

     7.1  Conditions to Closing

          (i)  Conditions to Obligations of Seller. The obligations of Seller to
               consummate the  transactions  contemplated  by this Agreement are
               subject, at the option of Seller, to the following conditions:

               (A) Representations.  The representations and warranties of Buyer
               contained herein shall be true and correct on the date hereof and
               the Closing Date.

               (B)  Performance.  Buyer  shall  have  complied  in all  material
               respects  with  all   obligations,   covenants,   and  agreements
               contained in this  Agreement to be performed or complied  with by
               it at or prior to the Closing.

               (C) Pending  Matters.  No suit,  action or other  proceeding by a
               Third Party shall be pending or  threatened  which seeks  damages
               from  Buyer or Seller in  connection  with the  proposed  sale of
               Assets  and  interests  described  in Section  11.1,  or seeks to
               restrain,  enjoin or otherwise  prohibit the  consummation of the
               transactions  contemplated by this  Agreement.  The Closing shall
               not  violate  any order or  decree  of any court or  Governmental
               Authority having competent jurisdiction.

                                       17
<PAGE>

               (D) Delivery.  Buyer shall have  delivered to Seller the Adjusted
               Purchase Price as contemplated by Section 3.4.

               (E)  Filings.  All  necessary  filings  with and  consents of any
               Governmental  Authority required by Buyer for the consummation of
               the  transactions  contemplated by this Agreement shall have been
               made and  obtained,  and all  waiting  periods  with  respect  to
               filings made with Governmental Authorities in connection with the
               consummation  of the  transactions  described  herein  shall have
               expired or been terminated.

          (ii) Conditions to Obligations of Buyer.  The  obligations of Buyer to
               consummate the  transactions  contemplated  by this Agreement are
               subject, at the option of Buyer, to the following conditions:

               (A) Representations. The representations and warranties of Seller
               contained herein shall be true and correct on the date hereof and
               the Closing Date.

               (B)  Performance.  Seller  shall have  complied  in all  material
               respects  with  all   obligations,   covenants,   and  agreements
               contained in this  Agreement to be performed or complied  with by
               it at or prior to the Closing.

               (C) Pending  Matters.  No suit,  action or other  proceeding by a
               Third Party shall be pending or  threatened  which seeks  damages
               from Seller or Buyer in connection  with the proposed sale of the
               Assets  and  interests  described  in Section  11.1,  or seeks to
               restrain,  enjoin or otherwise  prohibit the  consummation of the
               transactions  contemplated by this  Agreement.  The Closing shall
               not  violate  any order or  decree  of any court or  Governmental
               Authority having competent jurisdiction.

               (D)  Preferential  Purchase  Rights.  All  preferential  purchase
               rights and similar contractual  provisions encumbering the Assets
               shall  have  (a)  been  waived  or  consents  obtained  from  the
               appropriate  parties,  (b) expired with respect to the applicable
               time period for asserting such rights without an exercise of such
               right, or (c) been exercised,  the purchase of Assets pursuant to
               such exercises has been completed.

               (E)  Delivery.  Seller  shall  have  delivered  to  Buyer  deeds,
               assignments,  bills of sale and all other  transfer  documents in
               the forms reasonably  acceptable to Buyer and Seller transferring
               the Assets and interests described in Section 11.1 from Seller to
               Buyer free and clear of all security  interests,  liens,  adverse
               claims or other encumbrances except as otherwise provided in this
               Agreement,  and  Exhibits  updated to the Closing  Date,  and any
               other agreements,  documents,  certificates, or other instruments
               reasonably necessary to consummate the transactions  contemplated
               by this Agreement.

                                       18
<PAGE>

               (F)  Filings.  All  necessary  filings  with and  consents of any
               Governmental Authority required by Seller for the consummation of
               the  transactions  contemplated by this Agreement shall have been
               made and  obtained,  and all  waiting  periods  with  respect  to
               filings made with Governmental Authorities in connection with the
               consummation  of the  transactions  described  herein  shall have
               expired or been terminated.  Buyer shall support Seller's filings
               as may be required.

               (G)  Due  Diligence  Review.  Completion  by  Buyer  of  its  due
               diligence  review of the Assets without the discovery by Buyer of
               any fact, circumstance,  Claim,  Environmental Claim or Liability
               not disclosed by Seller to Buyer in the Disclosure Schedule,  the
               effect of which such fact, circumstance, Claim or Liability has a
               Material  Adverse Effect on the Assets or Buyer's  ability to own
               and operate the Assets.

     7.2  Time and Place of Closing

     Closing  shall  occur on or  before  October  29,  2004 at 11:00  a.m.  CDT
(provided that all conditions to Closing contained within Section 7.1 above have
been met), unless a later date is mutually agreed to in writing by both Parties.
The Closing shall take place at Seller's offices in Tulsa,  Oklahoma  (provided,
however, that the Closing may be achieved by transmitting  documents between the
Parties  without the physical  presence of the officers and  representatives  of
Seller and Buyer).  The "Closing Date" under this Agreement shall be the date on
which the actual Closing occurs as may be documented in a closing  memorandum to
be mutually  agreed upon by the Parties and executed at Closing.  The  "Closing"
shall consist of Seller making the  deliveries  described in Section  7.1(ii)(E)
and Buyer making the deliveries described in Section 7.1(i)(D).

     7.3  Effective Date

     The "Effective  Date" of the transfer from Seller to Buyer  hereunder shall
be the first  calendar  day of the month in which the Closing  Date occurs under
this Agreement. The phrase "on or after the Effective Date" as used herein means
at or after 9:00  a.m.,  Central  Standard  Time,  on the  Effective  Date,  and
"before" or "prior to" the Effective Date means before that time.

     7.4  Assumption of Risk of Loss, Liabilities and Operations

     Buyer shall assume possession, risk of loss, ownership, responsibility for,
and operation of the Assets from and after 9:00 a.m.,  Central Standard Time, on
the Effective Date.

     7.5 Termination At or Prior to Closing

     This  Agreement  may be  terminated  at any time on or prior to the Closing
Date:

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<PAGE>

          (i)  by mutual written consent of the Parties;

          (ii) by Seller if the  conditions set forth in Section 7.1(i) have not
               been  satisfied  in all  material  respects by Buyer on or before
               Closing,  unless  Buyer's  failure to satisfy the  conditions set
               forth in Section 7.1(i) are the result of Seller's breach of this
               Agreement,  in which case Seller may not terminate this Agreement
               pursuant to this Section 7.5(ii);

          (iii)by Buyer if the conditions set forth in Section  7.1(ii) have not
               been  satisfied in all  material  respects by Seller on or before
               Closing,  unless  Seller's  failure to satisfy the conditions set
               forth in Section 7.1(ii) are the result of Buyer's breach of this
               Agreement,  in which case Buyer may not terminate  this Agreement
               pursuant to this Section 7.5(iii);

          (iv) by any Party on or before the  Closing  Date if any  Governmental
               Authority  shall have issued a final order,  judgment,  or decree
               permanently restraining,  enjoining,  prohibiting or invalidating
               the consummation of any of the transactions  contemplated herein;
               or

          (v)  by Buyer or  Seller  in  accordance  with  any  other  applicable
               termination provision in this Agreement.

          7.6  Effect of Termination

          In the  event  that  Closing  does not  occur as a result of any Party
     exercising its right to terminate this Agreement pursuant to Section 7.5 or
     any other  applicable  termination  provision in this Agreement,  then this
     Agreement  shall be null and void and no Party  shall  have any  rights  or
     obligations  under this  Agreement,  except that (i) nothing  herein  shall
     relieve  any Party from any  Liability  for any breach  hereof and (ii) the
     confidentiality  obligations  under  Section  6.3  shall  survive  any such
     termination.

8.   DISCLAIMERS

     8.1  Disclaimer Regarding Assets

          BUYER  ACKNOWLEDGES  THAT EXCEPT FOR THE  PROVISIONS  REGARDING  TITLE
     EXPRESSLY   SET  FORTH  IN  SECTION  4.5  HEREOF  AND  IN  THE   ASSIGNMENT
     INSTRUMENTS,  AND THE  REPRESENTATIONS  AND  WARRANTIES IN THIS  AGREEMENT,
     SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
     REPRESENTATION OR WARRANTY,  EXPRESS OR IMPLIED,  RELATING TO THE CONDITION
     OF ANY PART OF THE ASSETS (INCLUDING,  WITHOUT LIMITATION,  (i) ANY IMPLIED
     OR  EXPRESS  WARRANTY  OF  MERCHANTABILITY,  (ii) ANY  IMPLIED  OR  EXPRESS
     WARRANTY  OF FITNESS  FOR A  PARTICULAR  PURPOSE,  AND (iii) ANY IMPLIED OR
     EXPRESS  WARRANTY  REGARDING  THE  CONDITION OF THE  ASSETS),  IT BEING THE
     EXPRESS   INTENTION   OF  BUYER  AND   SELLER   THAT,   EXCEPT   FOR  THOSE
     REPRESENTATIONS  AND  WARRANTIES   EXPRESSLY  SET  OUT  HEREIN  OR  IN  THE

                                       20
<PAGE>

     ASSIGNMENT  INSTRUMENTS,  THE ASSETS  SHALL BE  ACCEPTED  BY BUYER "AS IS,"
     "WHERE IS," AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND WITH ALL
     DEFECTS AND WITH ALL FAULTS,  BOTH PATENT AND LATENT; AND BUYER AGREES THAT
     PRIOR TO  CLOSING,  BUYER  SHALL MAKE OR CAUSE TO BE MADE SUCH  INSPECTIONS
     WITH  RESPECT  TO THE  ASSETS  AS BUYER  DEEMS  APPROPRIATE.  BUYER  HEREBY
     RELEASES  SELLER FROM ANY AND ALL LIABILITY FOR FAULTS OR DEFECTS  (WHETHER
     PATENT OR  LATENT),  EXCEPT  INSOFAR  AS SUCH  LIABILITY  RELATES  TO THOSE
     REPRESENTATIONS  AND  WARRANTIES   EXPRESSLY  SET  OUT  HEREIN  OR  IN  THE
     ASSIGNMENT  INSTRUMENTS.  THE PARTIES  AGREE THAT THE TEXT OF THIS  SECTION
     CONSTITUTES A CONSPICUOUS LEGEND, WRITING, AND NOTICE.

9.   INDEMNIFICATIONS

     9.1  Indemnification by Buyer

          (i)  Buyer's   General   Indemnity.   Buyer  shall  defend,   release,
               indemnify, and hold harmless the Seller, its officers, directors,
               employees, agents,  representatives,  Affiliates,  successors and
               assigns  to whom  Seller's  rights  hereunder  are  allowed to be
               assigned  pursuant to the terms of Section  11.3 (with the Seller
               and such persons being collectively referred to in this Agreement
               as the "Seller  Indemnitees") from and against any and all Claims
               asserted  against  Seller  Indemnitees as a result of, caused by,
               arising   out   of,   or  in  any   way   relating   to  (A)  any
               misrepresentation  or breach of  warranty by Buyer  expressed  in
               this  Agreement,  (B)  any  nonfulfillment  of any  agreement  or
               covenant on the part of the Buyer under this  Agreement,  (C) any
               Liability  or  obligation  (other  than those for which the Buyer
               Indemnitees  are being  indemnified  by the  Seller)  that arises
               based on or relating to any action taken, omission by or inaction
               of any  employee  of Buyer  or its  Affiliates  on or  after  the
               Effective  Date, (D) any Liability or obligation that pertains to
               the ownership operation of the Assets or the properties or rights
               described  in  Section  11.1  arising  from any acts,  omissions,
               events,  conditions  or  circumstances  occurring on or after the
               Effective Date, and (E) any Liability or obligation  arising with
               respect  to  performance  on or after the  Effective  Date of the
               Contracts,  leases,  agreements or other  arrangements  of Buyer,
               including,  without limitation,  any developer agreements or tank
               site leases that are in effect on or after the Effective Date.

          (ii) Buyer's  Environmental  Indemnity.  Buyer shall defend,  release,
               indemnify,  and hold  harmless  the Seller  Indemnitees  from and
               against any and all  Environmental  Claims  asserted  against the
               Seller  Indemnitees  as a result of or arising out of any and all
               Environmental  Defects attributable to acts, events, or omissions
               occurring on or after the Effective Date.

                                       21
<PAGE>

     9.2  Indemnification by Seller

          (i)  Seller's  General  Indemnity.   Seller  shall  defend,   release,
               indemnify and hold harmless the Buyer,  its officers,  directors,
               employees, agents,  representatives,  Affiliates,  successors and
               assigns  to  whom  Buyer's  right  hereunder  are  allowed  to be
               assigned  pursuant  to the terms of Section  11.3 (with the Buyer
               and such  persons  being  collectively  referred to as the "Buyer
               Indemnitees")  from  and  against  any  and all  Claims  asserted
               against Buyer  Indemnitees as a result of, caused by, arising out
               of, or in any way relating to (A) any misrepresentation or breach
               of  warranty  by Seller  expressed  in this  Agreement  as of the
               Closing Date, (B) any nonfulfillment of any agreement or covenant
               on the part of the Seller under this Agreement, (C) any Liability
               or obligation (other than those for which the Seller  Indemnitees
               are being  indemnified by the Buyer  hereunder) that arises based
               on or  relating to any action  taken,  omission by or inaction of
               any  employee or agent  (other than Buyer or its  Affiliates  and
               employees) of Seller prior to the Effective  Date, (D) subject to
               Section 6.4, any  Liability or  obligation  that  pertains to the
               ownership of the Assets or  operation of the Assets  arising from
               any  acts,  omissions,   events,   conditions,  or  circumstances
               occurring prior to the Effective Date, and (E) subject to Section
               6.4,  any  Liability  or  obligation   arising  with  respect  to
               performance  before the Effective Date of the  Contracts,  leases
               and other agreements of Seller.

          (ii) Seller's Environmental  Indemnity.  Seller shall defend, release,
               indemnify  and  hold  harmless  the  Buyer  Indemnities  from and
               against any and all  Environmental  Claims  asserted  against the
               Buyer  Indemnitees  as a  result  or  arising  out of any and all
               Environmental  Defects attributable to acts, events, or omissions
               occurring prior to the Effective Date.

     9.3  Limitations on Liability

          (i)  Limitations on Seller's  Liability.  Notwithstanding  anything to
               the contrary in this Agreement, the liability of Seller under any
               provision of this Agreement  shall be limited as follows,  except
               that the  following  limitation  shall  not  apply to a breach by
               Seller of its covenant contained in Section 6.4:

               (A) Seller  shall have no liability  for Losses  unless a written
               Claim  Notice  meeting the  requirements  of Section 9.5 has been
               delivered to Seller within one year after the Closing Date.

               (B) Seller shall not be  obligated  to indemnify  the Buyer under
               Section 9.2 hereof unless and until the cumulative  amount of all
               Losses  incurred,  suffered  or paid by  Buyer  equal  or  exceed
               Fifteen  Thousand  Dollars  ($15,000.00)  in the  aggregate  (the
               "Indemnity Aggregate Threshold"), and then only for the Losses of
               Buyer under  Section 9.2 that exceed such amount,  subject to the
               requirements of Section 9.3(i)(C).

                                       22
<PAGE>

               (C) After the Indemnity  Aggregate Threshold has been met, Seller
               shall not be obligated  to  indemnify  the Buyer for a particular
               Claim  or  Environmental  Claim  under  Section  9.2  unless  the
               collective  Losses  incurred,  suffered or paid by the Buyer with
               respect to such individual  Claim or  Environmental  Claim exceed
               two thousand  five hundred  dollars  ($2,500.00),  in which event
               Seller  will be  liable  for all  such  Losses  relating  to such
               individual  Claim or  Environmental  Claim (subject to subsection
               (D) immediately below).

               (D) Seller shall not, in any case,  be required to make  payments
               to Buyer for Losses hereunder in an aggregate amount in excess of
               one hundred thousand dollars ($100,000.00).

          (ii) Indemnity  Under Master  Agreement.  Notwithstanding  anything in
               this  Article 9 to the  contrary,  Seller shall have no indemnity
               obligation  under this  Agreement for any Claim or  Environmental
               Claim arising under that certain Master Agreement for Services by
               and between  Seller  (successor in interest to SUPro Energy,  dba
               SUCO -  Propane)  and BNC dated  January  1,  2003  (the  "Master
               Agreement").  Any Claim or Environmental  Claim arising under the
               Master  Agreement  shall  be  governed  by  and  subject  to  the
               indemnity rights and obligations under the Master Agreement.

          (iii)Excluded  Damages.  Notwithstanding  anything to the  contrary in
               this  Agreement,  in no event shall either Party be liable to the
               other or to the other's  indemnitees under this Agreement for any
               consequential,   exemplary,   punitive,  remote,  or  speculative
               damages; provided, however, that if any indemnitee is held liable
               to a Third  Party  for any such  damages  and  Buyer or Seller is
               obligated to indemnify  such  indemnitee for the matter that gave
               rise to such  damages,  Buyer or Seller  shall be liable for, and
               obligated to reimburse such indemnitee for such damages.

     9.4  Survival of Representations and Warranties

          (i)  Survival of Buyer's  Representations  and  Warranties.  Except as
               otherwise   specifically  provided  in  this  Agreement,   Seller
               Indemnitees  shall be  entitled to rely upon the  warranties  and
               representations of Buyer set forth herein as of the Closing Date,
               and the obligations of Buyer to Seller with respect thereto shall
               survive the Closing and  continue in full force and effect  until
               one year after the Closing Date, at which time Buyer's warranties
               and  representations  to Seller and all  liabilities  of Buyer to
               Seller with respect thereto shall terminate  except for Claims or
               Environmental    Claims    relating   to   any    warranties   or
               representations  as to which  timely  Claim  Notices  meeting the
               requirements  of Section 9.5 have been  delivered to Buyer within
               the one year  period.  The  liabilities  of Buyer to Seller  with
               respect  to  the  matters   addressed  in  all   warranties   and
               representations  as to which  timely  Claim  Notices  meeting the

                                       23
<PAGE>

               requirements  of Section 9.5 have been  delivered  to Buyer shall
               continue  until such  Claims or  Environmental  Claims  have been
               finally decided, settled or adjudicated.

          (ii) Survival of Seller's  Representations  and Warranties.  Except as
               otherwise   specifically   provided  in  this  Agreement,   Buyer
               Indemnitees  shall only be entitled  to rely upon the  warranties
               and  representations of Seller set forth herein as of the Closing
               Date, and the obligations of Seller to Buyer with respect thereto
               shall  survive the Closing and  continue in full force and effect
               until one year after the  Closing  Date,  at which time  Seller's
               warranties  and  representations  to  Buyer  set  forth  in  this
               Agreement  and all  liabilities  of Seller to Buyer with  respect
               thereto shall terminate except for Claims or Environmental Claims
               relating to any warranties or  representations as to which timely
               Claim Notices  meeting the  requirements of Section 9.5 have been
               delivered to Seller within the one year period.  The  liabilities
               of Seller with respect to the matters addressed in all warranties
               and  representations as to which timely Claim Notices meeting the
               requirements  of Section 9.5 have been  delivered to Seller shall
               continue  until such  Claims or  Environmental  Claims  have been
               finally decided, settled or adjudicated.

     9.5  Notice of Asserted Liability; Opportunity to Defend and/or Cure

          (i)  Claims Procedures.

               (A) All claims for indemnification under any indemnities given in
               this  Agreement  (an  "Indemnity  Claim")  shall be asserted  and
               resolved  pursuant  to this  Section  9.5.  Any  person  claiming
               indemnification  hereunder  is  hereinafter  referred  to as  the
               "Indemnified  Party" and any person  against whom such Claims are
               asserted   hereunder   is   hereinafter   referred   to  as   the
               "Indemnifying Party."

               (B) In the event  that any  Claims or  Environmental  Claims  are
               asserted  against or sought to be collected  from an  Indemnified
               Party  by  a  Third  Party,  the  Indemnified  Party  shall  with
               reasonable promptness provide to the Indemnifying Party a written
               notice of an  Indemnity  Claim  hereunder  (the "Claim  Notice"),
               which  notice must  include  details  describing  the factual and
               legal  basis of the  Indemnity  Claim,  sufficient  to allow  the
               Indemnifying  Party to  investigate  and respond to same.  If the
               Indemnified Party fails to provide the Indemnifying  Party with a
               Claim Notice complying with the above requirements with regard to
               any Indemnity Claim, following the Indemnified Party's receipt of
               a notice  of same,  in  accordance  with the  provisions  of this
               Agreement in reasonably  sufficient time so that the Indemnifying
               Party's   ability  to  defend  against  the  Indemnity  Claim  is
               prejudiced,   the  Indemnifying  Party's  indemnity   obligations
               hereunder shall be reduced to the extent of such prejudice.

                                       24
<PAGE>

               (C) The  Indemnifying  Party shall have thirty (30) days from the
               personal  delivery or receipt of the Claim  Notice  (the  "Notice
               Period")  to notify the  Indemnified  Party (i) whether or not it
               disputes  the  Liability  of  the   Indemnifying   Party  to  the
               Indemnified  Party hereunder with respect to such Indemnity Claim
               and/or  (ii)  whether  or not it  desires,  at the sole  cost and
               expense of the Indemnifying Party (subject to the indemnification
               limits agreed to herein), to defend the Indemnified Party against
               such  Indemnity  Claim  and/or  cure any defect  included in such
               notice;  provided,  however, that any Indemnified Party is hereby
               authorized  prior to and during  the Notice  Period to request an
               extension of time to file responsive pleadings,  file any motion,
               answer  or  other  pleading  that  it  shall  deem  necessary  or
               appropriate to protect its interests or those of the Indemnifying
               Party (and of which it shall have given notice and opportunity to
               comment to the  Indemnifying  Party) and not  prejudicial  to the
               Indemnifying Party.

               (D) In  the  event  that  the  Indemnifying  Party  notifies  the
               Indemnified  Party  within the Notice  Period  that it desires to
               defend the Indemnified  Party against such Indemnity Claim and/or
               cure any defect included in such notice,  the Indemnifying  Party
               shall  have  the  right,  subject  to the last  sentence  of this
               Section  9.5(i)(D),  to defend all appropriate  proceedings,  and
               with  counsel of its own  choosing,  which  proceedings  shall be
               promptly  settled  or  prosecuted  by them to a final  conclusion
               and/or  shall have the right to cure any defect  included  in the
               Indemnified  Party's notice.  If the Indemnified Party desires to
               participate in, but not control, any such defense,  settlement or
               cure it must do so at its sole cost and expense.

               (E) If the Indemnifying Party fails to respond to the Indemnified
               Party within the Notice Period or after  electing to defend fails
               to  commence  or  diligently   pursue  such  defense,   then  the
               Indemnified  Party shall have the right,  but not the obligation,
               to  undertake  or continue  the defense of and to  compromise  or
               settle  (exercising  reasonable  business judgment) the Indemnity
               Claim,  all as the  agent  of,  and with  commensurate  fiduciary
               obligations  to, the  Indemnifying  Party subject to the right of
               the  Indemnifying  Party to assume the defense of such  Indemnity
               Claim at any time prior to the settlement,  compromise,  or prior
               determination  thereof.  Each  Party  will keep the  other  Party
               reasonably   informed  of  the  progress  of  any  such  defense,
               compromise,  or  settlement  of an Indemnity  Claim or activities
               being undertaken to cure a defect under this Section 9.5.

               (F) If requested by the Indemnifying Party, the Indemnified Party
               agrees to cooperate with the  Indemnifying  Party and its counsel
               in contesting any Indemnity  Claim which the  Indemnifying  Party
               wishes to defend or, if appropriate  and related to the Indemnity
               Claim in question,  in making any counterclaim  against the Third
               Party asserting the Indemnity  Claim, or any cross-claim  against
               any person.

                                       25
<PAGE>

               (G) In the  event the  Indemnifying  Party is not  disputing  its
               liability to the  Indemnified  Party with respect to an Indemnity
               Claim,  no such  Indemnity  Claim  may be  settled  or  otherwise
               compromised without the prior written consent of the Indemnifying
               Party. Anything in this Article to the contrary  notwithstanding,
               the Indemnifying Party shall not, without the Indemnified Party's
               prior written  consent,  settle or compromise  any  proceeding or
               consent  to  the  entry  of  any  judgment  with  respect  to any
               Indemnity Claim for anything other than money damages paid by the
               Indemnifying  Party.  The  Indemnifying  Party may,  without  the
               Indemnified  Party's prior written consent,  settle or compromise
               any such Indemnity Claim or consent to entry of any judgment with
               respect  to any such  Indemnity  Claim that  requires  solely the
               payment  of money  damages  by the  Indemnifying  Party  and that
               includes as an unconditional term thereof the release by claimant
               or the plaintiff of the  Indemnified  Party from all liability in
               respect of such Indemnity Claim.

          (ii) Access to Records,  Assets and  Employees.  Buyer and Seller each
               agree to give the other and its representatives reasonable access
               during  regular  business  hours and upon  five (5)  days'  prior
               written  notice to all of its books and  records  (to the  extent
               same  are  not   subject  to  the   attorney   work   product  or
               attorney-client  privilege), to the extent such reasonably relate
               to the  matters  to which the Claim  Notice  relates;  and in the
               event of an emergency a Party will use all reasonable  efforts to
               provide such access to the other Party without delay.

     9.6  Exclusive Remedy

     As between Buyer and Seller, the indemnifications  from Buyer to Seller and
from Seller to Buyer contained within this Article 9 are the exclusive  remedies
available  to  either  Buyer or  Seller  under  this  Agreement,  including  the
indemnification  obligations  contained within this Article 9, except that Buyer
or Seller may obtain specific performance of such indemnification obligations.

     9.7  Survival of Covenants

     Except as otherwise set forth in this Agreement,  the indemnities and other
covenants set forth in the Agreement  shall survive Closing and continue in full
force and effect.

     10.  POST-CLOSING ACCOUNTING AND CONTINUING OBLIGATIONS

     10.1 Ad Valorem Taxes

          (i)  Ad Valorem Taxes.  Buyer assumes all liability for, and agrees to
               pay, all ad valorem taxes for the 2004 tax year and beyond. Buyer
               assumes full  responsibility for filing all ad valorem renditions
               and tax returns in all applicable tax  jurisdictions for the 2004
               tax year and beyond;  provided,  however,  Seller shall reimburse
               Buyer for the  portion of the 2004 ad valorem  taxes  relating to

                                       26
<PAGE>

               the period  from  January  1, 2004 to the  Effective  Date,  said
               reimbursement  to be  reflected as a downward  adjustment  to the
               Base  Purchase  Price  pursuant to Section 3.3 based on estimated
               taxes for the 2004 tax  year.  Seller  will,  upon  request  from
               Buyer,  provide  historical  documentation  of prior year filings
               related  to ad  valorem  taxes  to help  facilitate  the  Buyer's
               correct  filing of ad valorem  renditions and tax returns for the
               2004 tax year. As soon as reasonably practicable, but in no event
               later than thirty (30) days after the Closing  Date,  Buyer shall
               provide proper  written  notice to the taxing  authorities in all
               applicable  jurisdictions  indicating  that Buyer is the owner of
               record of the Assets and the properties described in Section 11.1
               as of the Closing Date, and the party  responsible for filing all
               ad valorem  renditions  and tax returns for the 2004 tax year and
               beyond. Upon Seller's receipt of any tax statements after Closing
               for ad valorem taxes (or taxes imposed in lieu thereof)  assessed
               against the Assets for the 2004 tax year,  it shall  forward such
               statements to Buyer.

          (ii) Settlement  of 2004 Tax  Variance.  To the extent  the  estimated
               taxes  credited to Buyer at Closing  pursuant to Section 3.3 vary
               from the actual  taxes  assessed,  due and payable for the period
               relating  to January  1, 2004 to the  Effective  Date,  the Party
               owing the  difference  shall remit same to the other Party within
               thirty  (30) days of Buyer's  mailing of a  statement  reflecting
               such  difference  (the "Tax  Variance  Statement").  Buyer  shall
               calculate the variance and mail the Tax Variance Statement within
               thirty (30) days of receiving the tax statements  from the taxing
               authorities for the actual taxes for 2004.

     10.2 Apportionment of Revenues and Expenses

     Seller  shall be  entitled  to all  operating  revenues,  related  accounts
receivable  and  other  amounts  arising  in the  ordinary  course  of  business
attributable to Assets and shall be responsible  for all operating  expenses and
related accounts payable arising in the ordinary course of business attributable
to the Assets and the  interests  described in Section 11.1, in each case to the
extent they relate to the time on or prior to the Effective Date. Buyer shall be
entitled to all operating  revenues and related accounts  receivable  arising in
the ordinary  course of business  attributable  to the Assets and the  interests
described  in  Section  11.1 and shall be  responsible  for the  payment  of all
operating  expenses and related  accounts payable arising in the ordinary course
of business  attributable  to the Assets and the interests  described in Section
11.1,  in each case to the extent  they  relate to the time after the  Effective
Date. The actual amounts or values  associated with the above shall be accounted
for in the Final Accounting Statement.

     10.3 Obligations and Credits

     All pre-paid expenses  pertaining to the Assets and the interests described
in Section 11.1,  including,  without limitation,  (i) prepaid rent,  insurance,
utilities,  lease, license or right of way payments,  (ii) prepaid renewal fees,
(iii) prepaid ad valorem and property taxes, (iv) prepaid emission fees, and (v)
deposits  attributable  to the period after the Effective Date, if any, shall be

                                       27
<PAGE>

reimbursed  to Seller by Buyer;  and accrued  payables  applicable to periods of
time prior to the Effective Date, if any, and attributable to the Assets and the
interests  described in Section 11.1 shall be the  responsibility of Seller. All
amounts equal to the expenses  paid in arrears  pertaining to the Assets and the
interests  described in Section 11.1 that were  actually paid by Buyer after the
Closing  Date  to the  extent  such  expenses  are,  in  accordance  with  GAAP,
attributable  to the  period  before  the  Effective  Date,  including,  without
limitation,  (i) rent,  insurance,  utilities,  lease,  license  or right of way
payments  paid in arrears,  (ii) renewal fees paid in arrears,  (iii) ad valorem
and  property  taxes paid in arrears,  and (iv)  emission  fees paid in arrears,
shall be the  responsibility of Seller.  The actual amounts or values associated
with the above shall be accounted for in the Final Accounting Settlement.

     10.4 Final Accounting Statement

     As soon as reasonably  practicable,  but in no event later than ninety (90)
days after the  Closing  Date,  Seller  shall  deliver  to Buyer a  post-Closing
statement  setting  forth  a  detailed  final  calculation  of all  post-Closing
adjustments  attributable  to the Assets and the interests  described in Section
11.1  ("Final  Accounting  Statement").  To the extent  reasonably  required  by
Seller, Buyer shall assist in the preparation of the Final Accounting Statement.
As soon as reasonably  practicable,  but in no event later than thirty (30) days
after Buyer  receives the Final  Accounting  Statement,  Buyer shall  deliver to
Seller a written  exception report containing any and all changes Buyer proposes
to be made to the Final  Accounting  Statement.  Buyer's proposed changes to the
Final Accounting  Statement  contained in the written  exception report shall be
final and Buyer  shall not be allowed to make any  amendments  or  modifications
thereto.  If Buyer fails to deliver  such an exception  report to Seller  within
that period, the Final Accounting  Statement delivered by Seller shall be deemed
to be true and correct and binding on and non-appealable by all Parties. As soon
as  reasonably  practicable,  but in no event later than fifteen (15) days after
Seller receives Buyer's exception  report,  the Parties shall meet and undertake
to agree on the final post-Closing adjustments.  If the Parties fail to agree on
the final  post-Closing  adjustments  within such fifteen  (15) day period,  the
disputed items shall be resolved by submitting  the same to the accounting  firm
KPMG LLP (the "Accounting  Referee").  The Accounting  Referee shall resolve the
dispute(s)  regarding the Final  Accounting  Settlement  within thirty (30) days
after having the relevant  materials  submitted for review.  The decision of the
Accounting Referee shall be binding and non-appealable by the Parties.  The fees
and expenses  associated  with the Accounting  Referee shall be borne equally by
Buyer and  Seller.  The date upon which all  amounts  associated  with the Final
Accounting Statement are established,  whether by agreement of the Parties or by
decision of the Accounting Referee, shall be herein called the "Final Settlement
Date." Any amounts  owed by either  Party to the other as a result of such final
post-Closing  adjustments  shall be paid within five (5) Business Days after the
Final Settlement Date.

     10.5 Records/Audit

     The Parties shall maintain a true and correct set of records  pertaining to
their  performance of this Agreement and all  transactions  related  thereto and
shall  retain all such  records for a period of not less than two (2) years from
the Effective Date. Any representatives authorized by either Party may audit any
and all such records,  excluding any that are  attorney/client  or attorney work
product  privileged,  of the other Party during normal business hours for a time
period not to exceed two (2) years from the Effective  Date. For a period of two
(2) years from the  Effective  Date,  after  Closing and upon  fifteen (15) days
written   notice,   the  Seller  will   afford  to  Buyer  and  its   authorized
representatives  reasonable  access during Seller's normal business hours to all
accounting records and charts relating to the Assets.

                                       28
<PAGE>

     10.6 Transfer of Records

     Within a reasonable  time  following  Closing,  Seller will gather and make
available to Buyer all its original files  relating  primarily to the Assets and
copies of the  original  files  that  Seller  will  retain,  including,  without
limitation,  contract  files,  division order files and contract  administration
files, maps,  engineering  reports,  operating reports and data, and maintenance
records  dealing with the operation and  maintenance  of the Assets.  Buyer,  at
Buyer's  expense,  will remove the records gathered by Seller and transport same
from  Seller's  office  within ten (10) days after  notice  from Seller that the
records are ready to be removed.

     10.7 Commissions

     Seller and Buyer will respectively pay or discharge, and will indemnify the
other for,  brokerage  commissions  or finders'  fees  incurred by reason of any
action taken by such indemnifying Party.

     10.8 Further Assurances

     From time to time and without further consideration each Party will execute
and deliver,  or cause its  Affiliates to execute and deliver to the other Party
such documents and take such actions as the other Party may  reasonably  request
in order to consummate more effectively the transactions contemplated hereby.

     10.9 Other Taxes

     Except as  otherwise  provided  herein,  all Taxes  imposed with respect to
periods prior to the Effective  Date shall be the  responsibility  of Seller and
all such Taxes imposed with respect to periods on and after the  Effective  Date
shall be the responsibility of Buyer. If any Party pays any such Taxes which are
properly  due and are the  responsibility  of the other  Party,  then the paying
Party shall be entitled to prompt reimbursement upon evidence of such payment.

     10.10 Costa Bella Meter and Yard Line Installation.

     Buyer shall, subsequent to Closing, without further consideration,  install
or cause to be installed  individual  customer  meters and yard lines on no more
than fifteen (15) lots in the Costa Bella  subdivision when necessary to provide
propane  service  to  those  homes  constructed  or to  be  constructed  on  the
identified lots. The installation shall be in a good and workman like manner and
in accordance with all Applicable  Laws. Buyer shall indemnify and hold harmless
Seller  against  any  Liability  or  obligation  arising  with  respect  to  the
performance of the installations described in this Section 10.10.

                                       29
<PAGE>

11.  MISCELLANEOUS PROVISIONS

     11.1 Quit Claim of Interests

     Notwithstanding  anything in this  Agreement to the  contrary,  at Closing,
Seller shall quit claim all of its rights and interests,  if any, in any assets,
including without limitation any partial or complete propane distribution system
and  related  personal  and  real  property  rights,  related  to  the  Arbolago
subdivision, the Hills of Lakeway subdivision, and the Northshore on Lake Travis
Phase II subdivision,  without any representation or warranty as to any property
rights  Seller may have in such assets.  Any of the property  rights  Seller may
have in the foregoing  assets will not be deemed to be an Asset as defined under
this Agreement or covered by any of the  representations or warranties of Seller
in this Agreement.

     11.2 Removal of signage

     By no later than sixty (60) days after Closing, Buyer shall, to the best of
its abilities, have removed or caused to have been removed the names and markers
used by Seller and its Affiliates and all variations and derivations thereof and
logos relating  thereto from the Assets and the properties  described in Section
11.1.

     11.3 Assignments

     The terms,  provisions and conditions of this Agreement shall extend to, be
binding  upon,  and  inure  to the  benefit  of the  Parties,  their  respective
successors,  permitted  assigns and legal  representatives.  Except as otherwise
provided in this Section 11.3,  neither  Party will make any  assignment of this
Agreement  without the advance written  consent of the other.  Any assignment by
either Party hereunder,  whether to an Affiliate or otherwise, shall not relieve
the  original  assigning  Party  from  its  obligations  hereunder  and it shall
continue to be liable  therefor unless the other Party executes a release in the
assigning Party's favor. The terms,  covenants and conditions  contained in this
Agreement  shall be binding  upon and shall  inure to the  benefit of Seller and
Buyer and their respective successors and assigns, and such terms, covenants and
conditions  shall be covenants  running  with the land and with each  subsequent
transfer or assignment of the Assets.  Notwithstanding anything contained herein
to the contrary, the representations,  warranties,  and indemnities given herein
by Seller may not be assigned by Buyer to a Third  Party.  Seller and Buyer will
reasonably  cooperate with each other in connection with an assignment permitted
hereunder to effectuate the intention of this Agreement.

     11.4 Entire Agreement; Amendments

     This  Agreement,  including  the  Exhibits and  Schedules  attached to this
Agreement  contain the entire  understanding  of the Parties with respect to the
subject  matter  of  this  Agreement.  There  are no  restrictions,  agreements,
promises, warranties,  covenants, or undertakings other than those expressly set
forth in this  Agreement.  This Agreement  supersedes  all prior  agreements and
understandings  between the Parties with  respect to the subject  matter of this
Agreement except for the Confidentiality  Agreement between Seller and BNC dated
September 19, 2003,  which shall continue in full force and effect in accordance
with its terms. This Agreement may be amended only by a written  instrument duly

                                       30
<PAGE>

executed by the Parties. Any condition to a Party's obligations hereunder may be
waived  only in writing by that Party.  No waiver by either  Party of any one or
more  defaults  by the other in  performance  of any of the  provisions  of this
Agreement  shall  operate or be construed  as a waiver of any future  default or
defaults, whether of a like or different character.

     11.5 Severability

     Except as provided in the following sentence,  the invalidity of any one or
more covenants or provisions of this Agreement  shall not affect the validity of
any other  provisions  hereof or this  Agreement as a whole,  and in case of any
such  invalidity,  this  Agreement  shall be  construed  to the  maximum  extent
possible as if such invalid  provision had not been included herein. In no event
shall partial or incomplete  invalidity,  illegality or unenforceability  affect
the validity of this Agreement.  Upon the complete  invalidity or termination of
this Agreement  pursuant to this Section after the Closing under such terminated
or invalid  Agreement,  the  Parties  will  reasonably  cooperate  to return the
Parties to the same economic situation they were in prior to such Closing to the
maximum extent reasonably possible.

     11.6 Counterparts

     This   Agreement   may  be  executed   simultaneously   in  any  number  of
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same  instrument,  provided that identical
counterparts of same are executed by Seller and Buyer.

     11.7 Governing Law

     THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT OF THIS
AGREEMENT  SHALL BE  GOVERNED  BY AND  CONSTRUED,  ENFORCED,  AND  PERFORMED  IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF TEXAS, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME,  WITHOUT  GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION
OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY  JURISDICTION  OTHER
THAN THE STATE OF TEXAS VENUE FOR ANY ACTION RELATING TO THIS AGREEMENT SHALL BE
TRAVIS COUNTY, TEXAS.

     11.8 Waiver of Trade Practices Acts

          (i) It is the  intention  of  the  parties  that  Buyer's  rights  and
     remedies with respect to this  transaction  and with respect to all acts or
     practices  of Seller,  past,  present or future,  in  connection  with this
     transaction  shall be  governed  by legal  principles  other than the Texas
     Deceptive Trade Practices - Consumer  Protection Act, Tex. Bus. & Com. Code
     Ann.  ss.17.41 et seq.  (the  "DTPA").  AS SUCH,  BUYER  HEREBY  WAIVES THE
     APPLICABILITY  OF THE  DTPA TO  THIS  TRANSACTION  AND ANY AND ALL  DUTIES,
     RIGHTS OR REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA,  WHETHER SUCH DUTIES,
     RIGHTS AND REMEDIES ARE APPLIED  DIRECTLY BY THE DTPA ITSELF OR  INDIRECTLY
     IN CONNECTION WITH OTHER STATUTES.

                                       31
<PAGE>

          (ii) TO THE MAXIMUM  EXTENT  PERMITTED BY LAW, BUYER HEREBY WAIVES ALL
     PROVISIONS OF CONSUMER  PROTECTION ACTS,  DECEPTIVE TRADE PRACTICE ACTS AND
     OTHER  ACTS  SIMILAR TO THE DTPA IN ALL  JURISDICTIONS  IN WHICH ANY OF THE
     ASSETS ARE LOCATED  (SUCH ACTS,  TOGETHER  WITH THE DPTA,  ARE  HEREINAFTER
     COLLECTIVELY REFERRED TO AS THE "TRADE PRACTICES ACTS")

          (iii) BUYER  EXPRESSLY  RECOGNIZES THAT THE PRICE FOR WHICH SELLER HAS
     AGREED TO PERFORM ITS OBLIGATIONS  UNDER THIS AGREEMENT HAS BEEN PREDICATED
     UPON THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS AND THIS WAIVER OF THE
     TRADE PRACTICES ACTS. BUYER FURTHER  RECOGNIZES THAT SELLER, IN DETERMINING
     TO PROCEED WITH THE ENTERING INTO OF THIS AGREEMENT,  HAS EXPRESSLY  RELIED
     ON THIS WAIVER AND THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS.

     11.9 Notice and Addresses

     Any notice, request, instruction, waiver or other communication to be given
hereunder  by any  Party  shall  be in  writing  and  shall be  considered  duly
delivered if  personally  delivered,  mailed by certified  mail with the postage
prepaid or sent by facsimile to the addresses of the Parties as follows:

                 Seller:     ONEOK Propane Distribution Company
                             100 West Fifth Street
                             Tulsa, Oklahoma 74103
                             Fax:  (918) 588-7961
                             Attention:    D. Lamar Miller

                             ONEOK Propane Distribution Company
                             100 West Fifth Street
                             Tulsa, Oklahoma 74103
                             Fax:  (918) 588-7960
                             Attention:    General Counsel

                 Buyer:      Sonterra Energy Corporation
                             1862 West Bitters, Bldg. #1
                             San Antonio, Texas 78248
                             Fax:  (210) 764-2930
                             Attention:    Michael R. Ward

                 With copies to:

                             BNC Engineering, LLC
                             607 Riverbend Drive
                             Georgetown, Texas 78628
                             Fax:  (512) 930-7696
                             Attention:    James E. Blackwell

                                       32
<PAGE>

                 and         Hays & Owens L.L.P.
                             807 Brazos Street, Suite 500
                             Austin, Texas 78701
                             Fax:  (512) 472-3883
                             Attention:    Elizabeth J. (Liza) Ossenfort

or at such other address as either Party may designate by written notice.

     11.10 Public Announcements

     No press release,  public  announcement,  confirmation or other information
regarding this Agreement or the contents hereof shall be made by Buyer or Seller
without  prior  consultation  with the other,  except as may be necessary in the
opinion of legal counsel to any Party to meet the requirements of any Applicable
Law or regulations,  the  determination of any court, or the requirements of any
stock  exchange on which the  securities  of such Party or its  ultimate  parent
company  may  be  listed.  If  the  transactions  contemplated  herein  are  not
consummated,  neither  Buyer nor Seller  shall  disclose  to any Third  Party or
publicly  announce  the  proposed  transaction  contemplated  hereby,  except as
otherwise permitted  hereinabove and except as agreed in advance, in writing, by
the Parties or otherwise  required by Applicable Law, in which case the Party so
compelled will give reasonable written notice in advance to the other Party.

     11.11 No Partnership

     Nothing  in this  Agreement  shall be  deemed  to  create a joint  venture,
partnership, tax partnership, or agency relationship between the Parties.

     11.12 Headings, Articles and Sections

     All references to "Articles" and "Sections"  herein pertain to the Articles
and Sections of this  Agreement and all  references to "Exhibits" are references
to the Exhibits  attached to this Agreement,  unless expressly stated otherwise.
All  titles  and  headings  set forth in this  Agreement  are solely for ease of
reference and shall not be used to construe the meaning of this Agreement.

     11.13 Exhibits

     All Exhibits attached hereto are incorporated herein by reference as
fully as though contained in the body hereof.

     11.14 No Third-Party Beneficiaries

     Except as otherwise  provided in this Agreement,  nothing contained in this
Agreement  shall entitle  anyone other than Seller or Buyer or their  authorized
successors  and  assigns to any claim,  cause of action,  remedy or right of any
kind whatsoever.

                                       33
<PAGE>

     11.15 Principles of Construction and Interpretation

     In construing this Agreement, the following principles shall be followed:

          (i)  no  consideration  shall be given to the fact or presumption that
               one  Party  had  a  greater  or  lesser  hand  in  drafting  this
               Agreement;

          (ii) examples  shall  not  be  construed  to  limit,  expressly  or by
               implication, the matter they illustrate;

          (iii)the word "includes" and its syntactical  variants mean "includes,
               but is not  limited  to" and  corresponding  syntactical  variant
               expressions; and

          (iv) the  plural  shall be deemed to  include  the  singular  and vice
               versa, as applicable.

     11.16 Not to be Construed Against Drafter

     THE PARTIES ACKNOWLEDGE THAT THEY EACH HAVE HAD AN ADEQUATE  OPPORTUNITY TO
REVIEW EACH AND EVERY  PROVISION  CONTAINED IN THIS  AGREEMENT AND TO SUBMIT THE
SAME TO LEGAL  COUNSEL FOR REVIEW AND COMMENT,  INCLUDING  EXPRESSLY BUT WITHOUT
LIMITATION THE WAIVERS AND  INDEMNITIES  CONTAINED IN THIS  AGREEMENT.  BASED ON
SAID  REVIEW  AND  CONSULTATION,  THE  PARTIES  AGREE  WITH EACH AND EVERY  TERM
CONTAINED IN THIS AGREEMENT AND THAT EACH AND EVERY TERM IS  CONSPICUOUS.  BASED
ON THE  FOREGOING,  THE  PARTIES  AGREE  THAT  THE RULE OF  CONSTRUCTION  THAT A
CONTRACT BE CONSTRUED  AGAINST THE DRAFTER,  IF ANY, SHALL NOT BE APPLIED IN THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT.

     IN  WITNESS  WHEREOF,  the  Parties  have set  their  hands  by their  duly
authorized officials as of the date(s) set forth below.

                                            BUYER:

                                            Sonterra Energy Corporation, a Texas
                                            corporation

                                            By:     ____________________________
                                                     Michael R. Ward, President

                                            Date:   October   , 2004

                                            SELLER:

                                            ONEOK Propane Distribution Company,
                                            a division of ONEOK Propane Company,
                                            a Delaware corporation

                                            By:     ____________________________
                                                    D. Lamar Miller,
                                                    Senior Vice President -
                                                    Financial Services

                                            Date:    October   , 2004

                                       34
<PAGE>

                                   Exhibit "A"

                              Description of Assets

The propane  distribution  systems,  including the gas mains, yard lines, meters
and storage tanks, serving the following subdivisions in the Austin, Texas area:

              Austin's Colony Phase II
              Costa Bella
              Jacarandas
              Lake Pointe
              La Ventana
              Lakewinds Estates
              Northshore on Lake Travis Phase I
              Riverbend
              Rob Roy Rim
              Senna Hills
              Sterling Acres
              The Point The
              Preserve at Barton Creek

NOTE:  For  informational  purposes  only,  without  any  representation  as  to
accuracy, the propane distribution systems include approximately 25 miles of gas
mains  pipe,  75,000 feet of yard  lines,  850 meters and  storage  tanks with a
combined capacity of 156,500 gallons.

                                    Vehicles
                                    --------

Year         Make and Model                VIN #
----         --------------                -----
1991         Ford Econoline Van            1FTJE34G1MHB09136
1987         Ford 4700 Pickup              1FDNF70HXHVA20432
1992         GMC 2500 Combo                1GTGC24K5NE543531

                                      A-1

<PAGE>

                                   Exhibit "B"

                                    Contracts
                                    ---------

Lease Agreement  dated  October 2,  1998,  between  RTNT,  Inc.  (predecessor in
     interest to Hornsby Bend Utility  Company,  Inc.),  as Landlord,  and SuPro
     Energy Company  (predecessor  in interest to Seller),  as Tenant - Austin's
     Colony Phase II Subdivision

Propane Service  Agreement,  dated  September 10, 1998,  between  Southern Union
     Company  (predecessor in interest to Seller) and HBH Development - Austin's
     Colony Phase II Subdivision

Lease Agreement,  dated  September  30, 2004,  between Seller and Falcon of Lake
     Travis, Inc.- Costa Bella Subdivision

Propane System Agreement,  dated March 23, 1999,  between Southern Union Company
     (predecessor in interest to Seller) and Falcon of Lake Travis, Inc. - Costa
     Bella Subdivision

Lease Agreement, dated as of October 1, 2004,  between  Seller and Jacarandas at
     the Creek Owners' Association, Inc. - Jacarandas Subdivision

Master Installation  Agreement,  dated December 12, 2000, between Southern Union
     Company  (predecessor  in interest to Seller) and Jacarandas at the Creek -
     Chris Milan Property - Jacarandas Subdivision

Master Installation  Agreement,  dated December 31, 2001, between Southern Union
     Company  (predecessor  in interest to Seller) and TEBO,  L.P. - Lake Pointe
     Subdivision

Propane System  Installation  Agreement,  dated July 2, 1999,  between  Southern
     Union Company (predecessor in interest to Seller) and La Ventana Driftwood,
     L.P. - La Ventana Subdivision

Agreement for  Installation of Subdivision  Propane System,  dated September 27,
     1999,  between  Southern Union Company  (predecessor in interest to Seller)
     and Toll Bros., Inc. - Lakewinds Estates Sections 1, 2 and 3 Subdivision

Agreement for  Installation of Subdivision  Propane System,  dated July 9, 1999,
     between  Southern  Union  Company  (predecessor  in interest to Seller) and
     Silvercreek   Partners  I,  Ltd.  -  Northshore  on  Lake  Travis  Phase  I
     Subdivision

Tank Site Lease Agreement,  dated December 10, 2003, between Mini-Me Management,
     Ltd., as Landlord, and Seller, as Tenant - Riverbend Subdivision

Agreement for Installation of Subdivision Propane System, dated August 19, 1999,
     between Southern Union Company (predecessor in interest to Seller) and Lake
     Austin Land and Cattle, Ltd. - Riverbend Subdivision

                                      B-1

<PAGE>

Agreement for  Installation of Subdivision  Propane  System,  dated November 17,
     1998,  between  Southern Union Company  (predecessor in interest to Seller)
     and Parmer Ridge LTD - Rob Roy Rim Subdivision

Propane Service  Agreement,  dated  January 30,  1997,  between  Southern  Union
     Company (predecessor in interest to Seller) and Senna Hills Limited - Senna
     Hills Subdivision

Agreement for Installation of Subdivision Propane System, dated August 19, 1999,
     between Southern Union Company (predecessor in interest to Seller) and E.P.
     McCall, Jr. and Keith Schoenfelt - Sterling Acres Subdivision

Agreement for  Installation of Subdivision  Propane System,  dated September 27,
     1999,  between  Southern Union Company  (predecessor in interest to Seller)
     and The Volente Group of Texas LTD - The Point Subdivision

Agreement for Installation of Subdivision Propane System,  dated August 4, 1999,
     between Southern Union Company  (predecessor in interest to Seller) and The
     Preserve  at Cedar  Creek  Canyon,  Inc.  - The  Preserve  at Barton  Creek
     Subdivision

Master Agreement for Services,  dated January 1, 2003,  between SUPro Energy dba
     SUCOPropane (predecessor in interest to Seller) and BNC

Self-Service Storage Rental Agreement,  dated on or about March 1, 2004, between
     Seller and Byron Lee, dba Baronie's Botels

Note:For purposes of full disclosure only,  there exists that certain  Agreement
     for  Installation of Subdivision  Propane System,  dated February 21, 2000,
     between  Southern  Union  Company  (predecessor  in interest to Seller) and
     Lakeway 74, Ltd. - Arbolago  Subdivision,  and that certain  Agreement  for
     Installation  of  Subdivision  Propane  System,  dated July 9, 2001 between
     Southern Union Company  (predecessor in interest to Seller) and Silvercreek
     Partners I, Ltd. - Northshore on Lake Travis Phase II Subdivision; however,
     these two agreements are not executed, are not in full force and effect and
     do not constitute Contracts as defined under the Agreement.

                                      B-2

<PAGE>

                                  Exhibit "C"

                                  Real Property
                                  -------------
                                     Leases
                                     ------

Lease Agreement, dated  October 2, 1998,  between  RTNT,  Inc.  (predecessor  in
     interest to Hornsby Bend Utility  Company,  Inc.),  as Landlord,  and SuPro
     Energy Company  (predecessor  in interest to Seller),  as Tenant - Austin's
     Colony Phase II Subdivision

Leasehold interest under that certain Propane Service Agreement, dated September
     10,  1998,  between  Southern  Union  Company  (predecessor  in interest to
     Seller) and HBH Development - Austin's Colony Phase II Subdivision

Lease Agreement, dated  September  30, 2004,  between  Seller and Falcon of Lake
     Travis, Inc.- Costa Bella Subdivision

Leasehold interest under that certain Propane System Agreement,  dated March 23,
     1999,  between  Southern Union Company  (predecessor in interest to Seller)
     and Falcon of Lake Travis, Inc. - Costa Bella Subdivision

Lease Agreement, dated as of October 1, 2004,  between  Seller and Jacarandas at
     the Creek Owners' Association, Inc. - Jacarandas Subdivision

Leasehold  interest  under that certain  Master  Installation  Agreement,  dated
     December 12, 2000, between Southern Union Company  (predecessor in interest
     to Seller) and  Jacarandas at the Creek - Chris Milan Property - Jacarandas
     Subdivision

Leasehold  interest  under that certain  Master  Installation  Agreement,  dated
     December 31, 2001, between Southern Union Company  (predecessor in interest
     to Seller) and TEBO, L.P. - Lake Pointe Subdivision

Leasehold interest  under that certain  Propane System  Installation  Agreement,
     dated July 2, 1999, between Southern Union Company (predecessor in interest
     to Seller) and La Ventana Driftwood, L.P. - La Ventana Subdivision

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane System,  dated September 27, 1999,  between  Southern Union Company
     (predecessor  in  interest  to Seller)  and Toll  Bros.,  Inc. -  Lakewinds
     Estates Sections 1, 2 and 3 Subdivision

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane  System,  dated  July  9,  1999,  between  Southern  Union  Company
     (predecessor  in  interest to Seller)  and  Silvercreek  Partners I, Ltd. -
     Northshore on Lake Travis Phase I Subdivision

Tank Site Lease Agreement,  dated December 10, 2003, between Mini-Me Management,
     Ltd., as Landlord, and Seller, as Tenant - Riverbend Subdivision

                                      C-1

<PAGE>

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane  System,  dated August 19, 1999,  between  Southern  Union  Company
     (predecessor  in interest to Seller) and Lake Austin Land and Cattle Ltd. -
     Riverbend Subdivision

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane  System,  dated November 17, 1998,  between  Southern Union Company
     (predecessor  in  interest  to Seller)  and Parmer  Ridge LTD - Rob Roy Rim
     Subdivision

Leasehold interest under that certain Propane Service  Agreement,  dated January
     30,  1997,  between  Southern  Union  Company  (predecessor  in interest to
     Seller) and Senna Hills Limited - Senna Hills Subdivision

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane  System,  dated August 19, 1999,  between  Southern  Union  Company
     (predecessor  in  interest  to  Seller)  and E.P.  McCall,  Jr.  and  Keith
     Schoenfelt - Sterling Acres Subdivision

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane System,  dated September 27, 1999,  between  Southern Union Company
     (predecessor  in interest  to Seller) and The Volente  Group of Texas LTD -
     The Point Subdivision

Leasehold interest under that certain  Agreement for Installation of Subdivision
     Propane  System,  dated  August 4, 1999,  between  Southern  Union  Company
     (predecessor in interest to Seller) and The Preserve at Cedar Creek Canyon,
     Inc. - The Preserve at Barton Creek Subdivision

                                      C-2

<PAGE>
<TABLE>
<CAPTION>

                                    Easements
                                    ---------

     Grantor            Grantee               Date          Recording Data     Subdivision
     -------            -------               ----          --------------     -----------
 <C>                 <C>                   <C>              <C>                <C>
1. Falcon of Lake    SuPro Energy Company  January 4, 2000  Doc #2000010794    Costa Bella
   Travis, Inc.      (predecessor in
                     interest to Seller)
2. Toll Bros., Inc.  SuPro Energy Company  January 25, 2000       --           Lakewinds
                     (predecessor in                                            Estates
                      interest to Seller)
</TABLE>

                                      C-3

<PAGE>

                                   Exhibit "D"

                               Disclosure Schedule
                               -------------------

                      4.1 Consents

                      4.2 Violations

                      4.3 Governmental Notices of Violation

                      4.4 Asserted Claims

                      4.5 Title to Assets

                      4.6 Taxes

                      4.7 No Conflicting Orders

                      4.8 Contracts

                      4.9 Condemnation

                      4.10Liabilities

     Capitalized terms used but not defined in this Disclosure Schedule have the
meanings  assigned to such terms in the Agreement.  This Disclosure  Schedule is
qualified in its entirety by reference to specific  provisions  of the Agreement
and are not intended to constitute,  and shall not be construed as constituting,
representations  or warranties of Seller except as and to the extent provided in
the Agreement.

     The inclusion of any matter in this Disclosure  Schedule in connection with
any representation,  warranty, covenant or agreement that may be qualified as to
materiality, is not an admission by Seller that such matter is material or would
result in a Material Adverse Effect.  No disclosure in this Disclosure  Schedule
relating to any possible breach or violation of any agreement, law or regulation
shall be  construed  as an  admission  or  indication  that any such  breach  or
violation exists or has actually occurred.

     Section headings and numbers used in this Disclosure  Schedule refer to the
corresponding sections of the Agreement,  and these headings and numbers are for
convenience  only  and  are not to be used to  interpret  any  provision  of the
Agreement or this Disclosure Schedule. This Disclosure Schedule does not purport
to disclose any  agreements,  contracts or instruments  that may be entered into
pursuant to the terms of the Agreement.

     Any information  disclosed on any schedule hereto shall be deemed disclosed
for all  schedules  hereto to the extent that it is  reasonably  apparent on the
face of such schedule that such matter is applicable to such other schedule.

<PAGE>

                                  Schedule 4.1

                                    Consents
                                    --------

1.   Consent to Assign that  certain  Lease  Agreement,  dated  October 2, 1998,
     between  RTNT,  Inc.  (predecessor  in  interest  to Hornsby  Bend  Utility
     Company,  Inc.),  as Landlord,  and SuPro Energy  Company  (predecessor  in
     interest to Seller), as Tenant, Austin's Colony Phase II Subdivision

2.   Consent to Assign that certain  Agreement for  Installation  of Subdivision
     Propane System,  dated September 27, 1999,  between  Southern Union Company
     (predecessor  in  interest  to Seller)  and Toll  Bros.,  Inc. -  Lakewinds
     Estates Sections 1, 2 and 3 Subdivision

3.   Consent to Assign that certain Self-Service Storage Rental Agreement, dated
     on or about  March 1, 2004  between  Seller  and Byron Lee,  dba  Baronie's
     Botels

<PAGE>

                                  Schedule 4.2

                                   Violations
                                   ----------

     All information  disclosed on Schedules 4.1, 4.4 and 4.5 of this Disclosure
     Schedule is incorporated by reference into this Schedule 4.2.

<PAGE>

                                  Schedule 4.3

                        Governmental Notices of Violation
                        ---------------------------------

                                      None.

<PAGE>

                                  Schedule 4.4

                                 Asserted Claims
                                 ---------------

1.   Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane System,  dated February 21, 2000,  between Southern
     Union  Company  (predecessor  in interest to Seller) and Lakeway 74, Ltd. -
     Arbolago Subdivision

2.   HBH  Development  Company,  LLC v. Southern Union Company and ONEOK Propane
     Company;  Cause  GN402427,  in the District Court of Travis County,  Texas,
     126th Judicial  District,  involving,  among other things,  Propane Service
     Agreement,  dated  September  10,  1998,  between  Southern  Union  Company
     (predecessor  in interest to Seller) and HBH  Development - Austin's Colony
     Phase II Subdivision

3.   Falcon of Lake Travis, Inc. v. Southern Union Company, Cause No. GN-304809,
     in the District  Court of Travis  County,  Texas,  98th Judicial  District,
     involving,  among other things,  Propane System Agreement,  dated March 23,
     1999,  between  Southern Union Company  (predecessor in interest to Seller)
     and Falcon of Lake Travis, Inc. - Costa Bella Subdivision

4.   Pending  dispute  involving,   among  other  things,   Master  Installation
     Agreement  dated  December  12,  2000,   between   Southern  Union  Company
     (predecessor  in interest to Seller)  and  Jacarandas  at the Creek - Chris
     Milan Property - Jacarandas Subdivision,

5.   TEBO,  L.P. v. ONEOK,  Inc.,  Case No.  A04CA602  LY, in the United  States
     District  Court  for  the  Western  District  of  Texas,  Austin  Division,
     involving,   among  other  things,  Master  Installation  Agreement,  dated
     December 31, 2001, between Southern Union Company  (predecessor in interest
     to Seller) and TEBO, L.P. - Lake Pointe Subdivision

6.   Pending dispute involving,  among other things, Propane System Installation
     Agreement,  dated July 2, 1999, between Southern Union Company (predecessor
     in  interest  to  Seller)  and La  Ventana  Driftwood,  L.P.  - La  Ventana
     Subdivision

7.   Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane System,  dated September 27, 1999, between Southern
     Union Company  (predecessor  in interest to Seller) and Toll Bros.,  Inc. -
     Lakewinds Estates Sections 1, 2 and 3 Subdivision

8.   Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane System,  dated July 9, 1999, between Southern Union
     Company  (predecessor  in interest to Seller) and  Silvercreek  Partners I,
     Ltd. - Northshore on Lake Travis Phase I Subdivision

9.   Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane System,  dated July 9, 2001, between Southern Union
     Company  (predecessor  in interest to Seller) and  Silvercreek  Partners I,
     Ltd. - Northshore on Lake Travis Phase II Subdivision

10.  Pending dispute involving,  among other things,  Tank Site Lease Agreement,
     dated December 10, 2003, between Mini-Me Management, Ltd., as Landlord, and
     Seller, as Tenant - Riverbend Subdivision

<PAGE>

11.  Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane  System,  dated August 19, 1999,  between  Southern
     Union Company  (predecessor in interest to Seller) and Lake Austin Land and
     Cattle, Ltd. - Riverbend Subdivision

12.  Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane System,  dated November 17, 1998,  between Southern
     Union  Company  (predecessor  in interest to Seller) and Parmer Ridge LTD -
     Rob Roy Rim Subdivision

13.  Senna Hills,  Ltd. v. Southern  Union  Company and ONEOK  Propane  Company;
     Cause  GN402428,  In the  District  Court of Travis  County,  Texas,  200th
     Judicial  District,   involving,   among  other  things,   Propane  Service
     Agreement,   dated  January  30,  1997,   between  Southern  Union  Company
     (predecessor  in interest to Seller) and Senna Hills  Limited - Senna Hills
     Subdivision

14.  Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane  System,  dated August 19, 1999,  between  Southern
     Union Company  (predecessor in interest to Seller) and E.P. McCall, Jr. and
     Keith Schoenfelt - Sterling Acres Subdivision

15.  Pending dispute involving,  among other things,  Agreement for Installation
     of Subdivision  Propane System,  dated September 27, 1999, between Southern
     Union Company  (predecessor in interest to Seller) and The Volente Group of
     Texas LTD - The Point Subdivision

16.  The Preserve at Cedar Creek  Canyon,  Inc. v.  Southern  Union  Company and
     ONEOK,  Inc.,  d/b/a Texas Gas Service  Company,  Cause No. 278305,  In the
     County Court at Law No. 2, Travis  County,  Texas,  involving,  among other
     things,  Agreement for  Installation of Subdivision  Propane System,  dated
     August 4, 1999, between Southern Union Company  (predecessor in interest to
     Seller)  and The  Preserve at Cedar Creek  Canyon,  Inc. - The  Preserve at
     Barton Creek Subdivision

17.  All information  disclosed in Schedule 4.1 of this  Disclosure  Schedule is
     incorporated by reference into this Schedule 4.4.

<PAGE>

                                  Schedule 4.5

                                 Title to Assets
                                 ---------------

1.   Leasehold  interest under that certain  Propane  Service  Agreement,  dated
     September 10, 1998, between Southern Union Company (predecessor in interest
     to Seller) and HBH  Development  - Austin's  Colony  Phase II  Subdivision,
     encumbered  by lawsuit  HBH  Development  Company,  LLC v.  Southern  Union
     Company and ONEOK Propane Company; Cause GN402427, In the District Court of
     Travis County, Texas, 126th Judicial District

2.   Leasehold interest under that certain Propane System Agreement, dated March
     23,  1999,  between  Southern  Union  Company  (predecessor  in interest to
     Seller)  and  Falcon  of  Lake  Travis,  Inc.  - Costa  Bella  Subdivision,
     encumbered  by  lawsuit  Falcon of Lake  Travis,  Inc.  v.  Southern  Union
     Company,  Cause No.  GN-304809,  in the  District  Court of Travis  County,
     Texas, 98th Judicial District

3.   Leasehold interest under that certain Master Installation Agreement,  dated
     December 12, 2000, between Southern Union Company  (predecessor in interest
     to Seller) and  Jacarandas at the Creek - Chris Milan Property - Jacarandas
     Subdivision, encumbered by pending dispute

4.   Leasehold interest under that certain Master Installation Agreement,  dated
     December 31, 2001 between Southern Union Company  (predessor in interest to
     Seller) and TEBO,  L.P. - Lake Pointe  Subdivision,  encumbered  by lawsuit
     TEBO,  L.P. v. ONEOK,  Inc.,  Case No.  A04CA602  LY, in the United  States
     District Court for the Western District of Texas, Austin Division

5.   Leasehold   interest  under  that  certain   Propane  System   Installation
     Agreement,  dated July 2, 1999, between Southern Union Company (predecessor
     in  interest  to  Seller)  and La  Ventana  Driftwood,  L.P.  - La  Ventana
     Subdivision, encumbered by pending dispute

6.   Leasehold  interest  under  that  certain  Agreement  for  Installation  of
     Subdivision  Propane  System,  dated September 27, 1999,  between  Southern
     Union Company  (predecessor  in interest to Seller) and Toll Bros.,  Inc. -
     Lakewinds  Estates  Sections 1, 2 and 3 Subdivision,  encumbered by pending
     dispute

7.   Leasehold  interest  under  that  certain  Agreement  for  Installation  of
     Subdivision  Propane  System,  dated July 9, 1999,  between  Southern Union
     Company  (predecessor  in interest to Seller) and  Silvercreek  Partners I,
     Ltd. - Northshore on Lake Travis Phase I Subdivision, encumbered by pending
     dispute

8.   Leasehold  interest  under that  certain Tank Site Lease  Agreement,  dated
     December 10, 2003,  between  Mini-Me  Management,  Ltd.,  as Landlord,  and
     Seller, as Tenant - Riverbend Subdivision, encumbered by pending dispute

9.   Leasehold  interest  under  that  certain  Agreement  for  Installation  of
     Subdivision  Propane System,  dated August 19, 1999, between Southern Union
     Company (predecessor in interest to Seller) and Lake Austin Land and Cattle
     Ltd. - Riverbend Subdivision, encumbered by pending dispute

<PAGE>

10.  Leasehold  interest  under  that  certain  Agreement  for  Installation  of
     Subdivision Propane System, dated November 13, 1998, between Southern Union
     Company  (predecessor in interest to Seller) and Parmer Ridge LTD - Rob Roy
     Rim Subdivision, encumbered by pending dispute

11.  Leasehold  interest under that certain  Propane  Service  Agreement,  dated
     January 30, 1997,  between Southern Union Company  (predecessor in interest
     to Seller) and Senna Hills Limited - Senna Hills Subdivision, encumbered by
     lawsuit  Senna Hills,  Ltd. v.  Southern  Union  Company and ONEOK  Propane
     Company;  Cause  GN402428,  In the District Court of Travis County,  Texas,
     200th Judicial District

12.  Leasehold  interest  under  that  certain  Agreement  for  Installation  of
     Subdivision  Propane System,  dated August 19, 1999, between Southern Union
     Company  (predecessor in interest to Seller) and E.P. McCall, Jr. and Keith
     Schoenfelt - Sterling Acres Subdivision, encumbered by pending dispute

13.  Leasehold  interest  under  that  certain  Agreement  for  Installation  of
     Subdivision  Propane  System,  dated September 27, 1999,  between  Southern
     Union Company  (predecessor in interest to Seller) and The Volente Group of
     Texas LTD - The Point Subdivision, encumbered by pending dispute

14.      Leasehold interest under that certain Agreement for Installation of
         Subdivision Propane System, dated August 4, 1999, between Southern
         Union Company (predecessor in interest to Seller) and The Preserve at
         Cedar Creek Canyon, Inc. - The Preserve at Barton Creek Subdivision,
         encumbered by lawsuit The Preserve at Cedar Creek Canyon, Inc. v.
         Southern Union Company and ONEOK, Inc., d/b/a Texas Gas Service
         Company, Cause No. 278305, In the County Court at Law No. 2, Travis
         County, Texas

15.  All  information  disclosed  in  Schedules  4.1 and 4.4 of this  Disclosure
     Schedule is incorporated by reference into this Schedule 4.5.

<PAGE>

                                  Schedule 4.6

                                      Taxes
                                      -----

                                      None.

<PAGE>

                                  Schedule 4.7

                               Conflicting Orders
                               ------------------

                                      None.

<PAGE>

                                  Schedule 4.8

                                    Contracts
                                    ---------

1.   Prepaid  credit  balance of $3,830.97 for Arthur and Stephanie  Gault,  502
     Luna Vista, Austin, Texas 78738 - Hills of Lakeway Subdivision

2.   All information  disclosed in Schedules 4.1, 4.4 and 4.5 of this Disclosure
     Schedule is incorporated by reference into this Schedule 4.8.

<PAGE>

                                  Schedule 4.9

                                  Condemnation
                                  ------------

                                      None.

<PAGE>

                                  Schedule 4.10

                                   Liabilities
                                   -----------

     All information  disclosed in Schedules 4.1, 4.4 and 4.5 of this Disclosure
     Schedule is incorporated by reference into this Schedule 4.10.

<PAGE>
<TABLE>
<CAPTION>

      Account Number              Description                       Vendor                  Date in Service      Capitalized Balance
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>                         <C>                               <C>                     <C>                  <C>
Mains:

      054.4628.4628.1010000       La Ventana (Phases 6 & 7)          McCowen Equipment Co.   07/01/04             $   44,879.49
      054.4628.4628.1010000       La Ventana (Phases 6 & 7)          BNC Engineering         07/01/04             $    5,720.00
                                                                                                                  -------------

Mains Subtotal                                                                                                    $   50,599.49

Tank Sites:

      054.4630.4630.1010000       Lakewinds                          BNC Engineering         07/01/04             $   20,177.75

Design / Engineering:

      054.0000.0000.1070000       Northshore extended mains design   BNC Engineering         07/01/04             $    2,910.00
      054.0000.0000.1070000       Northshore extended mains design   BNC Engineering`        07/28/04             $    1,746.00
                                                                                                                  -------------

Design / Engineering Subtotal                                                                                     $    4,656.00

Total Capital Expenditures (To Increase Base Purchase Price)                                                       $   75,433.24
                                                                                                                   =============
</TABLE>Exhibit 10.1

                                    AGREEMENT

         AGREEMENT,  dated as of  November  4, 2004 (this  "Agreement"),  by and
between HQ Sustainable  Maritime Industries,  Inc., a corporation  organized and
existing under the laws of the State of Delaware, U.S.A. ("HQSM"), and Sino-Sult
Canada (S.S.C.) Limited, a limited liability  corporation organized and existing
under the laws of the country of Canada ("Sino-Sult").

                                    RECITALS

         A. Pursuant to that certain Purchase Agreement,  dated as of August 17,
2004 (the "Purchase Agreement"), by and among HQSM, Sino-Sult and Sealink Wealth
Limited, a limited liability  corporation  organized and existing under the laws
of the British  Virgin  Islands,  HQSM made in favor of Sino-Sult a  Convertible
Promissory Note, dated August 17, 2004 (the "Note"),  in the original  principal
amount of U.S.  $11,111,345.  In  accordance  with the terms  thereof,  the Note
matured in October of 2004.

         B. Pursuant to a letter dated  November 4, 2004 (the "Demand  Letter"),
Sino-Sult  has  demanded  of HQSM  payment in full of the  principal  amount and
accrued interest due and outstanding  under the Note or, in lieu of such payment
and in full and  complete  satisfaction  of the Note,  has offered to accept (1)
15,730,493  shares (the "Common  Shares") of common stock,  $0.001 par value per
share, of HQSM, (2) 100,000 shares (the "Preferred  Shares") of preferred stock,
$0.001 par value per share,  of HQSM,  issuable  pursuant  to a  certificate  of
designation, substantially in the form attached hereto as Annex 1; provided that
HQSM shall make a cash payment to  Sino-Sult of the accrued and unpaid  interest
on the Note (the "Cash Payment"), all upon the terms set forth herein.

         C. HQSM has agreed to accept such offer from Sino-Sult,  upon the terms
set forth herein.

         NOW  THEREFORE,  in  consideration  of the  foregoing  and  the  mutual
covenants  and  agreements  set forth  below,  and for other  good and  valuable
consideration,  the receipt and adequacy of which are hereby  acknowledged,  the
parties hereto hereby agree as follows:

                                    ARTICLE I
                          AGREEMENT REGARDING THE NOTE

         Section 1.01.  Issuance of HQSM Securities in Satisfaction of the Note.
In lieu of payment of the outstanding  principal  balance of the Note,  together
with accrued and unpaid interest thereon, and in full and complete  satisfaction
of the Note,  the parties  agree that HQSM shall issue to  Sino-Sult  the Common
Shares and the Preferred Shares, and shall make the Cash Payment with respect to
accrued interest on the Note.

                  (a) Common  Shares.  As  promptly as  feasible  following  the
execution and delivery of this Agreement by the parties hereto, but in any event
no later than ten (10) calendar days thereafter, HQSM shall issue and deliver to
Sino-Sult one or more certificates  representing the Common Shares, which Common
Shares will be free and clear of all liens, claims,  charges and encumbrances of
any kind whatsoever.  HQSM shall pay all expenses, and any and all United States

                                       1
<PAGE>

federal,  state  and  local  taxes  and other  charges  that may be  payable  in
connection  with the  preparation,  issuance and delivery of stock  certificates
under this  Section  1.01(a) in the name of  Sino-Sult,  or as may be  otherwise
directed by Sino-Sult.

                  (b)  Preferred  Shares.  As promptly as  feasible,  but in any
event no later than the earliest of (x) ten (10) calendar days following receipt
by HQSM of all requisite approvals  (including without  limitation,  shareholder
approvals) for such issuance,  and (y) the six (6) month anniversary of the date
of the Demand  Letter,  HQSM shall  issue and deliver to  Sino-Sult  one or more
certificates  representing the Preferred Shares,  which Preferred Shares will be
free and  clear of all  liens,  claims,  charges  and  encumbrances  of any kind
whatsoever.  HQSM shall pay all expenses, and any and all United States federal,
state and local taxes and other charges that may be payable in  connection  with
the preparation,  issuance and delivery of stock certificates under this Section
1.01(b) in the name of Sino-Sult, or as may be otherwise directed by Sino-Sult.

                  (c) As  promptly as  feasible,  but in any event no later than
ten (10) calendar days following the execution and delivery of this Agreement by
the parties hereto,  HQSM shall make the Cash Payment to Sino-Sult of all of the
accrued  and  unpaid  interest  on the Note  from the date of  issuance  thereof
through and including the date of payment thereof, which amount shall be payable
in immediately available Unites States dollars.

         Section 1.02   Default by HQSM.

                  (a) General  Default.  In the event that HQSM shall default in
the  performance of any of its obligations  hereunder,  Sino-Sult shall have all
rights and remedies as shall be available thereto under law or at equity, all of
which shall be cumulative.

                  (b) Preferred Shares Default.  In the event that HQSM defaults
in the  performance of its obligation  under the Note and hereunder to issue the
Preferred  Shares,  the  principal  amount of $100,000,  together  with interest
thereon at the rate set forth in the Note,  as  accrued  from  August  17,  2004
through such date of payment,  shall  immediately  become due and payable at the
option and upon demand of Sino-Sult.

                                   ARTICLE II
                                  MISCELLANEOUS

         Section  2.01  Governing  Law.  This  Agreement  shall be governed  by,
enforced,  and  construed  under and in  accordance  with the laws of the United
States of America and,  with respect to the matters of state law,  with the laws
of the State of New York, without regard to its conflicts of law principles.

         Section 2.02 Resolution of Disputes.

                  (a)  Any  dispute,  controversy  or  claim  arising  out of or
relating  to this  Agreement,  or the  interpretation,  breach,  termination  or
validity  hereof,  shall first be resolved  through  friendly  consultation,  if
possible.  Such consultation  shall begin immediately after one party hereto has
delivered  to the  other  party a written  request  for such  consultation  (the
"Consultation Date"). If the dispute cannot be resolved within 30 days following
the  Consultation  Date, the dispute shall be submitted to arbitration  upon the
request of either Party, with written notice to the other Party.

                                       2
<PAGE>

                  (b)  Arbitration.  The  arbitration  shall be conducted in New
York,  New York  under the  auspices  of the  American  Arbitration  Association
("AAA") in accordance with the commercial  arbitration  rules and  supplementary
procedures for international  commercial  arbitration of the AAA. There shall be
three  arbitrators:  one arbitrator shall be chosen by each party to the dispute
and those two  arbitrators  shall choose the third  arbitrator.  All arbitration
proceedings  shall be  conducted  in English.  Each party to the  dispute  shall
cooperate  with the other in making full  disclosure of and  providing  complete
access to all  information  and  documents  requested  by the other party to the
dispute in connection with the arbitration proceedings. Arbitration shall be the
sole, binding,  exclusive and final remedy for resolving any dispute between the
parties  thereto;  either  party  thereto  may apply to any  court of  competent
jurisdiction  in the State of New York for  enforcement  of any award granted by
the arbitrators.

                  (c) During the period when a dispute is being resolved, except
for the matter being disputed,  the Parties shall in all other respects continue
to abide by the terms of this Agreement.

         Section 2.03  Attorney's  Fees. In the event that any party  institutes
any  action or suit to  enforce  this  Agreement  or to secure  relief  from any
default  hereunder or breach  hereof,  the breaching  party shall  reimburse the
non-breaching  party  for  all  costs,  including  reasonable  attorney's  fees,
incurred in connection  therewith  and in enforcing or  collecting  any judgment
rendered therein.

         Section 2.04 Schedules;  Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules  delivered
pursuant to this Agreement.

         Section  2.05 Entire  Agreement.  This  Agreement  and any  agreements,
documents  and  instruments  to be executed and  delivered  pursuant  hereto are
intended to embody the final, complete and exclusive agreement among the parties
with  respect to the  subject  matter of this  Agreement,  and are  intended  to
supersede all prior agreements,  understandings and  representations  written or
oral, with respect thereto.

         Section 2.06 Agreement  Binding on Successors  and Assigns.  All rights
and obligations  under this entire  Agreement shall be binding upon and inure to
the benefit of the heirs, executors,  administrators,  successors and assigns of
the parties hereto.

         Section 2.07  Counterparts.  This Agreement may be executed in multiple
counterparts,  each of which shall be deemed an original  and all of which taken
together  shall be but a single  instrument.  For  purposes  of this  Agreement,
facsimile signatures may be deemed originals.

         Section  2.08  Amendment  or Waiver.  Every  right and remedy  provided
herein shall be cumulative with every other right and remedy,  whether conferred
herein, at law, or in equity, and may be enforced concurrently  herewith, and no
waiver by any party of the  performance  of any obligation by the other shall be
construed as a waiver of the same of any other  default  then,  theretofore,  or
thereafter  occurring  or  existing.  This  Agreement  may be amended  only by a
writing  signed  by  both  parties  hereto,  with  respect  to any of the  terms
contained  herein,  and any term or condition of this Agreement may be waived or
the time for  performance  may be extended by a writing  signed by the party for
whose benefit the provision is intended.

                                       3
<PAGE>

         Section 2.09 Third Party Consents and  Certificates.  The parties agree
to  cooperate  with  each  other in order to obtain  any  required  third  party
consents to this Agreement and the transactions herein contemplated.

         Section 2.10 Notice. Any notice or other  communication given hereunder
shall be deemed  sufficient  if in writing and sent by  registered  or certified
mail, return receipt requested, addressed to HQSM, at its principal office, Wall
Street Center, 14 Wall Street - 20th Floor, New York, New York 10005, Attention:
President, and to Sino-Sult at the following address: 7305 Marie-Victorin, Suite
100, Brossard,  Quebec, Canada J4W 1A6, Attention:  President.  Notices shall be
deemed to have been given on the date of  mailing,  except  notices of change of
address, which shall be deemed to have been given when received.

         Section 2.11 Severability.  In the event that any provision or any part
of any provision of this Agreement shall be void or unenforceable for any reason
whatsoever,  then such  provision  shall be stricken and of no force and effect.
However, unless such stricken provision goes to the essence of the consideration
bargained for by a party,  the  remaining  provisions  of this  Agreement  shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.

         Section 2.12 No Third Party Rights. Nothing in this Agreement,  whether
express or implied,  is  intended  to confer any rights or remedies  under or by
reason of this  Agreement  on any  persons  other than the parties to it and the
respective  successors  and  assigns of the  foregoing,  nor is anything in this
Agreement  intended to relieve or discharge  the  obligation or liability of any
third  persons  to any  party,  nor shall any  provision  hereof  give any third
persons any right of subrogation or action over or against any party.

         Section 2.13 Construction.  The language in all parts of this Agreement
shall in all cases be construed simply,  according to its fair meaning,  and not
strictly for or against any of the parties  hereto.  Without  limitation,  there
shall be no  presumption  against  any party on the  ground  that such party was
responsible for drafting this Agreement or any part thereof.

         Section 2.14 Section  Headings.  The section headings of this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       4
<PAGE>

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

HQ SUSTAINABLE MARITIME INDUSTRIES, INC.

By:  /s/ Norbert Sporns
   ----------------------
Name: Norbert Sporns
Title: CEO and President

SINO-SULT CANADA (S.S.C.) LIMITED

By:  /s/ Lillian Wang Li
   ----------------------
Name: Lillian Wang Li
Title: Director

                                       5
<PAGE>

                                     ANNEX 1

                           CERTIFICATE OF DESIGNATION

                    HQ SUSTAINABLE MARITIME INDUSTRIES, INC.

                           CERTIFICATE OF DESIGNATION
                           OF SERIES A PREFERRED STOCK

                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware

         HQ  Sustainable  Maritime  Industries,  Inc.  (the  "Corporation"),   a
corporation  organized  and existing  under the General  Corporation  Law of the
State of Delaware, does hereby certify:

         FIRST:  Pursuant to authority  conferred upon the Board of Directors by
its Certificate of Incorporation,  and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of Directors
is authorized to issue  Preferred Stock of the Company in one or more series and
has adopted the resolution set forth below on August 17, 2004:

         RESOLVED,  that  pursuant  to the  authority  expressly  granted to and
vested in the Board of Directors of the  Corporation  by the  provisions  of the
Certificate  of  Incorporation  of  the  Corporation,  as  amended,  out  of the
authorized but unissued shares of Preferred Stock of the Corporation  this Board
of Directors hereby creates a series of the Preferred Stock, par value $.001 per
share (the "Preferred Stock"),  of the Corporation,  and this Board of Directors
hereby fixes the powers, designations,  preferences and relative, participating,
optional  or  other  special  rights  of the  shares  of  such  series,  and the
qualifications,  limitations or restrictions thereof (in addition to the powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications,  limitations or restrictions  thereof, set forth
in the Certificate of Incorporation  of the Corporation  which are applicable to
Preferred Stock of all series) as follows:

<PAGE>

1.       Designation. The designation of the series shall be "Series A Preferred
         Stock" (the "Series A Preferred Stock").

2.       Number. The number of shares  constituting the Series A Preferred Stock
         shall be 100,000.

3.       Voting Rights.

         a.  General  Voting  Rights.  The  holder  of each  share  of  Series A
         Preferred  Stock shall have the right to the voting power equal to that
         of one thousand  shares of the  Corporation's  common stock,  par value
         $.001 per share (the  "Common  Stock")  and with  respect to such vote,
         each such holder shall have full voting  rights and powers equal to the
         voting rights and powers of the holders of Common  Stock,  and shall be
         entitled,  notwithstanding  any  provision  hereof,  to  notice  of any
         stockholders'   meeting  in   accordance   with  the   by-laws  of  the
         Corporation,  and shall be entitled to vote,  together  with holders of
         Common Stock, with respect to any question upon which holders of Common
         Stock have the right to vote.

         b. Consent Needed for Authorization. Without the vote or consent of the
         holders  of at least a  majority  of the  shares of Series A  Preferred
         Stock then outstanding,  the Corporation may not (i) authorize,  create
         or issue, or increase the authorized  number of shares of, any class or
         series of capital stock ranking prior to or on a parity with the Series
         A  Preferred  Stock  either  as  to  dividends  or  liquidation,   (ii)
         authorize,  create or issue any class or series of common  stock of the
         Corporation   other  than  the  Common  Stock,   (iii)   authorize  any
         reclassification  of the  Series A  Preferred  Stock,  (iv)  authorize,
         create or issue any  securities  convertible  into or  exercisable  for
         capital  stock  prohibited by Section  3(b)(i) or (ii),  (v) amend this
         Certificate or (vi) enter into any disposal,  merger or  reorganization
         involving 20% of the total capitalization of the Corporation.

4.       Liquidation.

         a. Preference. Subject to the rights of the holders of any other series
         of Preferred  Stock ranking  senior to or on a parity with the Series A
         Preferred  Stock with  respect to  liquidation  and any other  class or
         series of capital stock of the  Corporation  ranking  senior to or on a
         parity with the Series A Preferred  Stock with respect to  liquidation,
         in the  event of any  liquidation,  dissolution  or  winding  up of the
         affairs of the  Corporation,  whether  voluntary  or  involuntary,  the
         holders  of record of the  issued  and  outstanding  shares of Series A
         Preferred Stock shall be entitled to receive,  out of the assets of the
         Corporation  available  for  distribution  to the  holders of shares of
         Series A Preferred  Stock,  prior and in preference to any distribution
         of any of the assets of the  Corporation to the holders of Common Stock
         and any other series of Preferred  Stock ranking junior to the Series A
         Preferred  Stock with  respect to  liquidation  and any other  class or
         series of capital stock of the Corporation ranking junior to the Series
         A Preferred  Stock with respect to  liquidation,  an amount in cash per
         share equal to $1.00, plus an amount equal to all dividends accrued and

<PAGE>

         unpaid on each such  share  (whether  or not  declared)  up to the date
         fixed for  distribution.  If,  upon such  liquidation,  dissolution  or
         winding  up of  the  affairs  of the  Corporation,  the  assets  of the
         Corporation distributable among the holders of Series A Preferred Stock
         and any other series of Preferred  Stock ranking on a parity  therewith
         in  respect  thereto  or any class or series  of  capital  stock of the
         Corporation  ranking on a parity  therewith in respect thereto shall be
         insufficient  to permit  the  payment  in full to all such  holders  of
         shares of the  preferential  amounts  payable to them,  then the entire
         assets of the Corporation available for distribution to such holders of
         shares shall be distributed ratably among such holders in proportion to
         the  respective  amounts that would be payable per share if such assets
         were  sufficient to permit  payment in full.  After payment of the full
         amount to which they are  entitled  upon  liquidation  pursuant to this
         Section  4(a),  the holders of shares of Series A Preferred  Stock will
         not be entitled to any further  participation  in any  distribution  of
         assets by the  Corporation.  Neither a  consolidation  or merger of the
         Corporation  with  another  corporation  or  other  entity  nor a sale,
         transfer,  lease or exchange of all or part of the Corporation's assets
         will be  considered  a  liquidation,  dissolution  or winding up of the
         affairs of the Corporation for purposes of this Section 4(a).

         b.  Adjustments.  The liquidation  preference  provided for herein with
         respect to the Series A Preferred Stock shall be equitably  adjusted to
         reflect any stock dividend, stock distribution,  stock split or reverse
         stock  split,   combination   of  shares,   subdivision  of  shares  or
         reclassification  of shares  with  respect  to the  Series A  Preferred
         Stock.

5.       Optional  Conversion  Rights.  The Series A  Preferred  Stock  shall be
         convertible as follows:

         a.  Optional  Conversion.  Subject  to and  upon  compliance  with  the
         provisions  of this  Section  5, the  holder of any  shares of Series A
         Preferred  Stock  shall  have the  right at such  holder's  option  (an
         "Optional  Conversion"),  at any time or from time to time, and without
         the payment of any additional consideration therefor, to convert any of
         such  shares  of  Series  A   Preferred   Stock  into  fully  paid  and
         nonassessable  shares  of  Common  Stock at the  ratio of one  share of
         Series A  Preferred  Stock for two  shares of the  Common  Stock of the
         Corporation  ("Optional  Conversion  Price").  In case the  Corporation
         shall (i) declare a dividend or make a distribution  on its outstanding
         shares of Common Stock or (ii) subdivide or reclassify its  outstanding
         shares of Common  Stock into a smaller  number of shares,  the Optional
         Conversion  Price in  effect  at the time of the  record  date for such
         dividend or distribution or of the effective date of such  subdivision,
         combination  or  reclassification  shall be  adjusted  so that it shall
         equal the price  determined by multiplying  such conversion  price by a
         fraction,  the  denominator  of which  shall be the number of shares of
         Common Stock  outstanding  after  giving  effect to such action and the
         numerator  of which  shall be the  number of  shares  of  Common  Stock
         outstanding  immediately  prior to such action.  The number and kind of
         securities  shall also be  proportionately  adjusted.  Such  adjustment
         shall be made successively whenever any event listed above shall occur.

<PAGE>

         b. Costs. The Corporation shall pay all documentary, stamp, transfer or
         other  transactional  taxes attributable to the issuance or delivery of
         shares  of  Common  Stock  upon  conversion  of any  shares of Series A
         Preferred Stock; provided that the Corporation shall not be required to
         pay any taxes which may be payable in respect of any transfer  involved
         in the  issuance or delivery  of any  certificate  for such shares in a
         name other than that of the holder of the shares of Series A  Preferred
         Stock in respect of which such shares are being issued.

         c.  Dividends  Upon  Conversion.  In connection  with any conversion of
         shares of Series A Preferred Stock,  the Corporation  shall pay accrued
         and unpaid  dividends  thereon in  accordance  with the  provisions  of
         Section 6.

6.       Dividends.

         a. Dividends.

                  (i) Subject to the rights of the  holders of any other  series
                  of Preferred  Stock ranking  senior to or on a parity with the
                  Series A Preferred  Stock with  respect to  dividends  and any
                  other  class or series  of  capital  stock of the  Corporation
                  ranking  senior to or on a parity  with the Series A Preferred
                  Stock with respect to dividends,  other than the Common Stock,
                  the holders of the Series A Preferred  Stock shall be entitled
                  to receive,  when and as  declared by the Board of  Directors,
                  cumulative  dividends per share of Series A Preferred Stock at
                  a rate  per  annum as  determined  by the  Board of  Directors
                  during  the  period  commencing  after  the  date of  original
                  issuance  of any  shares of  Series A  Preferred  Stock  until
                  converted pursuant to Section 5 above;  provided,  however, in
                  the event of an Optional Conversion, all accumulated dividends
                  will automatically be eliminated and no such dividends will be
                  due or payable to holders of Series A Preferred Stock.

                  (ii) Dividends on the Series A Preferred  Stock will accrue on
                  each  December  15,  March  15,  June 15,  and  September  15,
                  occurring after the date of original  issuance,  provided that
                  the  Corporation  shall have the option to pay dividends  when
                  and as declared by the Board of Directors of the  Corporation.
                  The party  that  holds the  Preferred  Stock on an  applicable
                  record  date for any  dividend  payment  will be  entitled  to
                  receive such dividend payment and any other accrued and unpaid
                  dividends  which accrued prior to such dividend  payment date,
                  without  regard to any sale or  disposition  of such shares of
                  Series A Preferred Stock  subsequent to the applicable  record
                  date but prior to the applicable dividend payment date.

<PAGE>

                  (iii) The Corporation  shall pay the dividends on the Series A
                  Preferred   Stock  described  in  Section   6(a)(i),   at  the
                  Corporation's option and in its sole discretion,  out of funds
                  legally  available  therefor  (A) in cash,  (B) in  shares  of
                  Common  Stock,  such that the number of shares of Common Stock
                  to be  distributed  as a dividend  to each  holder of Series A
                  Preferred  Stock  shall be equal  to the cash  amount  of such
                  dividend  payable to such holder on such dividend payment date
                  divided  by the  average  quote  per  share  of  Common  Stock
                  reported by OTC Bulletin  Board or any other stock exchange on
                  which the Common Stock is traded, as determined by the Company
                  (the "Per Share  Market  Value") for the fifteen  (15) trading
                  days immediately  preceding such dividend payment date, or (C)
                  in any combination of cash and shares of Common Stock that the
                  Corporation  may  determine in its sole  discretion,  with the
                  number  of  shares  of  Common  Stock  to  be  distributed  in
                  connection  therewith to be  calculated on the basis set forth
                  in Section 6(a)(iii)(B).

                  (iv) No  fractional  shares of Common  Stock or scrip shall be
                  issued  upon  payment  of any  dividends  in  shares of Common
                  Stock.  If more  than one share of  Series A  Preferred  Stock
                  shall be held by the same  holder at the time of any  dividend
                  payment  date,  the  number of full  shares  of  Common  Stock
                  issuable upon payment of such  dividends  shall be computed on
                  the  basis  of  the   aggregate   dividend   amount  that  the
                  Corporation  has  determined  to pay in Common  Stock  shares.
                  Instead of any  fractional  shares of Common Stock which would
                  otherwise  be issuable  upon  payment of such  dividends,  the
                  Corporation shall pay out of funds legally available  therefor
                  a cash  adjustment  in  respect of such  fractional  interest,
                  rounded to the nearest one hundredth  (1/100th) of a share, in
                  an amount equal to that fractional interest of the average Per
                  Share   Market   Value  for  the  fifteen  (15)  trading  days
                  immediately  preceding such dividend payment date,  rounded to
                  the nearest cent ($.01).

         b. Allocation of Dividends.  Dividends on the Series A Preferred Stock,
         if paid,  or if  declared  and set apart for  payment,  must be paid or
         declared and set apart for payment on all outstanding  shares of Series
         A Preferred  Stock  contemporaneously.  In the event  dividends  on the
         Series A  Preferred  Stock and any  other  series  of  Preferred  Stock
         ranking on a parity  therewith in respect thereto or any other class or
         series  of  capital  stock  of  the  Corporation  ranking  on a  parity
         therewith  in respect  thereto are  declared and paid in an amount less
         than all accumulated and current  dividends on all of such shares,  the
         total amount  declared  and paid shall be  allocated  among all of such
         shares so that the per share  dividend to be declared  and paid on each
         share is the same  percentage of the sum of the  accumulated  dividends
         for each such share.  In the event  dividends  are declared and paid on
         the Series A  Preferred  Stock in a  combination  of cash and shares of
         Common  Stock,  the  percentage  of the  dividend  paid in cash and the
         percentage  of the  dividend  paid in  stock  must be the same for each
         share of Series A Preferred Stock.

<PAGE>

         c. Dividend  Priorities.  The Corporation  shall not declare or pay any
         distributions  to the holders of the Common Stock or any other class or
         series of capital stock ranking junior to the Series A Preferred  Stock
         in respect of  dividends  during any period of time in which any shares
         of Series A Preferred  Stock are  outstanding or in which any dividends
         payable  on any  shares  of  Series  A  Preferred  Stock  have not been
         declared and paid in full. In this Section 6(c),  "distribution"  means
         the transfer of cash or property without consideration,  whether by way
         of dividend or otherwise  (except a dividend solely in shares of Common
         Stock),  or the purchase or redemption by the  Corporation of shares of
         Common  Stock or any other shares of capital  stock of the  Corporation
         ranking junior to the Series A Preferred  Stock in respect of dividends
         for cash or  property,  but  does not  include  the  repurchase  by the
         Corporation of shares from an officer, director, employee or consultant
         of the Corporation.

7.       Reacquired  Shares.  Any shares of Series A Preferred Stock  purchased,
         converted  or  otherwise  acquired  by the  Corporation  in any  manner
         whatsoever  shall not be  reissued  as part of such series and shall be
         retired promptly after the acquisition  thereof.  All such shares shall
         upon  their  retirement   become  authorized  but  unissued  shares  of
         Preferred Stock.

         SECOND: That said determination of the powers, designation, preferences
and  the   relative,   participating,   optional  or  other   rights,   and  the
qualifications,  limitations or restrictions thereof, relating to said series of
Preferred  Stock,  was duly made by the Board of  Directors  of the  Corporation
pursuant  to  the  provisions  of  the  Certificate  of   Incorporation  of  the
Corporation, as amended, and in accordance with the provisions of Section 151 of
the General Corporation Law of the State of Delaware.

         IN WITNESS WHEREOF,  said Corporation has caused this Certificate to be
signed by Norbert Sporns, its President, on the ___ day of ____________, _____.

                                        HQ SUSTAINABLE MARITIME INDUSTRIES, INC.

                                        By: ____________________________________
                                        Name: Norbert Sporns
                                        Title: President

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