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                                                                   EXHIBIT 10.32

                        AGREEMENT OF SALE AND PURCHASE

     This Agreement dated April ______, 2000, by and between C.W. Resources,
Inc., Westerman Royalty, Inc., and Carl A. Westerman (herein collectively called
SELLER) and 3TEC Energy Corporation (herein called BUYER);

                              W I T N E S S E T H:

     1. PROPERTY TO BE SOLD AND PURCHASED.  Seller agrees to sell and Buyer
agrees to purchase, for the consideration hereinafter set forth, and subject to
the terms and provisions herein contained, the following described properties,
rights and interests:

        (a) All right, title and interest of Seller (i) in and to the oil, gas
     and/or mineral leases described on Part One of Exhibit A hereto insofar as
     such leases cover depths below the base of the Woodbine Formation
     underlying the lands described in such Part One of Exhibit A and (ii) in
     and to all of the oil, gas and/or mineral leases described on Part Two or
     Part Three of Exhibit A insofar as such leases cover depths between the
     base of the Woodbine Formation and the base of the Cotton Valley Sand
     Formation underlying the lands described in such Part Two or Part Three of
     Exhibit A; SAVE AND EXCEPT all right, title and interest of Seller in and
     to the oil, gas and mineral leases described in Part Four of Exhibit A
     hereto insofar as such leases cover the lands and depths described in such
     Part Four of Exhibit A; and

        (b) All rights, titles and interests of Seller in and to, or otherwise
     derived from, all presently existing and valid oil, gas and/or mineral
     unitization, pooling, and/or communitization agreements, declarations
     and/or orders (including, without limitation, all units formed under
     orders, rules, regulations, or other official acts of any federal, state,
     or other authority having jurisdiction, and voluntary unitization
     agreements, designations and/or declarations) relating to the properties
     described in subsection (a) above, to the extent and only to the extent
     such rights, titles and interests are attributable to the properties
     described in subsection (a) above; and

        (c) All rights, titles and interests of Seller in and to all presently
     existing and valid production sales contracts, operating agreements, right
     of way easements, seismic data agreements (to the extent transferable and
     subject to the limitations set forth below), and other agreements and
     contracts which relate to any of the properties described in subsections
     (a) and (b) above, to the extent and only to the extent such rights, titles
     and interests are attributable to the properties described in subsections
     (a) and (b) above; and

        (d) All rights, titles and interests of Seller in and to all wells,
     wellhead equipment, flowlines, tanks, injection facilities, saltwater
     disposal facilities, compression facilities, gathering systems, and other
     equipment located on the properties described in subsections (a) and (b)
     above and currently in use in connection with the operation of such
     properties; and

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        (e) An undivided one-half (2) interest in and to all right, title and
     interest of Seller in and to the oil, gas and/or mineral leases described
     on Part Two of Exhibit A insofar as such leases cover depths below the base
     of the Cotton Valley Sand Formation underlying the lands described in such
     Part Two of Exhibit A; and

        (f) An undivided one-half (2) interest in and to all rights, titles and
     interests of Seller in and to, or otherwise derived from, all presently
     existing and valid oil, gas and/or mineral unitization, pooling, and/or
     communitization agreements, declarations and/or orders (including, without
     limitation, all units formed under orders, rules, regulations, or other
     official acts of any federal, state, or other authority having
     jurisdiction, and voluntary unitization agreements, designations and/or
     declarations) relating to the properties described in subsection (e) above,
     to the extent and only to the extent such rights, titles and interests are
     attributable to the properties described in subsection (e) above; and

        (g) An undivided one-half (2) interest in and to all rights, titles and
     interests of Seller in and to all presently existing and valid production
     sales contracts, operating agreements, right of way easements, seismic data
     agreements (to the extent transferable, and subject to the limitations set
     forth below), and other agreements and contracts which relate to any of the
     properties described in subsections (e) and (f) above, to the extent and
     only to the extent such rights, titles and interests are attributable to
     the properties described in subsections (e) and (f) above.

     The properties, rights and interests specified in the foregoing subsections
(a), (b), (e) and (f) are herein sometimes collectively called the "OIL AND GAS
PROPERTIES," and the properties, rights and interests specified in the foregoing
subsections (a) through (g), inclusive, are herein sometimes collectively called
the "PROPERTIES."  Without limitation, it is understood that the Properties do
not include, and there is retained by Seller, (i) any seismic data covering
lands or depths not covered by the Oil and Gas Properties, any seismic data not
owned by Seller and any seismic data which is not transferable, (ii) any field
inventory and/or warehouse stocks, (iii) any surface owned in fee and (iv) any
buildings and surface rights to the tracts on which such buildings are located.

     2. PURCHASE PRICE.

        (a) Base Purchase Price.  The purchase price for the Properties shall be
     Fifty-Five Million Dollars ($55,000,000) (such amount, adjusted as provided
     in subsection (b) below, but unadjusted by any other adjustments provided
     for in this Agreement or agreed to by the parties, being herein called the
     "BASE PURCHASE PRICE").  Such Base Purchase Price may be adjusted as
     provided in Sections 8 and 11(b)(ii) hereof (the Base Purchase

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     Price, as so adjusted, and as the same may otherwise be adjusted by mutual
     agreement of the parties, being herein called the "PURCHASE PRICE"). Except
     as may be provided in Sections 11(a)(ii) and 11(b)(ii) with respect to
     payment of the Operations Adjustment portion of the Base Purchase Price
     under certain circumstances, the Purchase Price shall be paid in readily
     available funds at the Closing as hereinafter provided.

        (b) ROYALTY AND ORRI ADJUSTMENT.  The parties recognize that the Oil and
     Gas Properties include royalties and overriding royalties which were not
     considered by Buyer in establishing the $55,000,000 amount set forth above.
     The parties, therefore, agree that such amount will be adjusted upward as
     follows:  (i) for each well or PUD location listed on Schedule I that shows
     a "RI" or "ORRI" decimal net revenue interest on such schedule, the total
     of such "RI" and "ORRI" interests will be divided by the average of the
     decimal net revenue interest shown for "BPO NRI" and "APO NRI" for such
     well or PUD location on such Schedule (or the "APO NRI" where no "BPO NRI"
     is shown) and multiplying such result by the allocated value shown for such
     well or PUD location on Schedule I and (ii) adding the total of the amounts
     computed under clause (i) to such $55,000,000 amount as set forth above.

     3. DEPOSIT.  Contemporaneously with the execution of this Agreement, Buyer,
Seller and Bank One Texas, N.A. ("ESCROW AGENT") shall execute an escrow
agreement in the form of Exhibit B attached hereto (the "ESCROW AGREEMENT").
Pursuant to the terms of the Escrow Agreement, Buyer shall deliver to the Escrow
Agent Five Million Two Hundred Thousand Dollars ($5,200,000) (such amount, plus
any interest earned thereon, being herein called the "DEPOSIT"). The costs
associated with such escrow shall be split equally between Buyer and Seller.  In
the event the transaction contemplated hereby is consummated in accordance with
the terms hereof, the Deposit shall be applied to the Purchase Price to be paid
by Buyer at the Closing.  In the event the transaction contemplated hereby fails
to close on the Closing Date as a result of a material breach of this Agreement
by Seller which occurs in the absence of a material breach of this Agreement by
Buyer, or in the event this Agreement is terminated by Buyer in accordance with
Section 9 below or is terminated by Seller in accordance with any subsection of
Section 10 below other than subsections 10(a) and 10(b), the Deposit shall be
returned to Buyer.  If the transaction contemplated hereby otherwise fails to
close on the Closing Date, Seller shall retain the Deposit.  THE PARTIES HEREBY
ACKNOWLEDGE THAT THE EXTENT OF DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF
THIS TRANSACTION TO BE CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO
ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE
OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A PENALTY AND
SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY.

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     4. REPRESENTATIONS OF SELLER.

        (a) REPRESENTATIONS.   Each Seller represents and warrants to Buyer
     that:

        (i) ORGANIZATION AND QUALIFICATION.  Each of C.W. Resources, Inc. and
     Westerman Royalty, Inc., is a corporation duly organized and legally
     existing and in good standing under the laws of the State of Texas.

        (ii) DUE AUTHORIZATION.  Each Seller has full power to enter into and
     perform its obligations under this Agreement and has taken all proper
     action to authorize entering into this Agreement and performance of its
     obligations hereunder.

        (iii)  APPROVALS.  Other than requirements (if any) that there be
     obtained consents to assignment from third parties (any material contracts
     containing such consent requirements being disclosed under section 4(a)(x)
     below) and except for approvals ("ROUTINE GOVERNMENTAL APPROVALS") required
     to be obtained from governmental entities who are lessors under leases
     forming a part of the Oil and Gas Properties (or who administer such leases
     on behalf of such lessors) which are customarily obtained post-closing, and
     except for the requirements of any maintenance of uniform interest
     provisions contained in any operating or other agreements, to Seller's
     knowledge, neither the execution and delivery of this Agreement, nor the
     consummation of the transactions contemplated hereby, nor the compliance
     with the terms hereof, will result in any default under any agreement or
     instrument to which Seller is a party or by which the Properties are bound,
     or violate any order, writ, injunction, decree, statute, rule or regulation
     applicable to Seller or to the Properties.  Seller's "knowledge," or
     "received" by Seller (except as used in connection with payment receipts),
     as used in this Agreement, shall mean to the actual knowledge of, or
     actually received by, Carl A. Westerman, Paul A. Kopasko, Dawn W. Tadlock,
     David Tadlock, Bruce Cook or Michelle Cook.

        (iv) VALID, BINDING AND ENFORCEABLE.  This Agreement constitutes (and
     the Conveyance provided for herein to be delivered at Closing will, when
     executed and delivered, constitute) the legal, valid and binding obligation
     of Seller, enforceable in accordance with its terms, except as limited by
     bankruptcy or other laws applicable generally to creditor's rights and as
     limited by general equitable principles.

        (v) LITIGATION.  Except as disclosed on the Disclosure Schedule (herein
     called the "DISCLOSURE SCHEDULE") attached hereto as Schedule II, there are
     no pending suits, actions, or other proceedings in which Seller is a party
     (or to Seller's knowledge, which have been threatened to be instituted)
     which affect the Properties (including, without limitation, any actions
     challenging or pertaining to Seller's title to any of the Properties), or
     affect the execution and delivery of this Agreement or the consummation of
     the transactions contemplated hereby.

        (vi) TITLE.  Seller is the owner of the Oil and Gas Properties, free and
     clear of

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     all liens, burdens, encumbrances and defects in title arising by, through
     or under Seller. It is expressly understood and agreed that such
     representation does not cover matters arising other than by, through or
     under Seller, and it is further expressly understood and agreed that,
     without limitation, matters arising by, through or under Seller do not
     include maintenance of leases in force or pooling and/or unitization
     matters.

        (vii)  ENVIRONMENTAL.  Except as disclosed on the Disclosure Schedule,
     to Seller's knowledge, there are no pending or threatened actions, suits,
     orders, claims, notices or proceedings, made or instituted by applicable
     governmental authorities, regarding the Properties alleging a violation or
     non-compliance with applicable environmental laws, or with respect to the
     disposal, discharge or release from the Properties of hazardous materials
     or constituents in a manner which is not in compliance with such laws.

        (viii)   GAS IMBALANCES AND PREPAYMENT.  Seller is not obligated, by
     virtue of any prepayment arrangement, a "take or pay" arrangement, gas
     balancing agreement, a production payment or any other arrangement entered
     into by it (or, to Seller's knowledge, entered into by any other party and
     binding on the Oil and Gas Properties), to deliver hydrocarbons produced
     from the Oil and Gas Properties at some future time without then or
     thereafter receiving full payment therefor.

        (ix) PROCEEDS IN SUSPENSE.  Proceeds from the sale of hydrocarbons
     produced from the Oil and Gas Properties are being received by Seller in a
     timely manner and are not being held in suspense by the purchaser of said
     hydrocarbons for any reason, other than amounts held in suspense by such
     purchaser in the ordinary course of business which are individually or in
     the aggregate not in excess of $100,000.

        (x) MATERIAL CONTRACTS; PREFERENTIAL RIGHTS.  The Disclosure Schedule
     sets forth a complete and accurate description of every material agreement
     entered into by Seller (or, to Seller's knowledge, entered into by any
     other party and binding on the Oil and Gas Properties), and relating to the
     Oil and Gas Properties, and no written claim has been received by Seller
     that it is in default under any such agreement. No hydrocarbons produced
     from the Oil and Gas Properties are subject to a sales contract or other
     arrangement entered into by Seller and relating to the production,
     gathering, transporting, processing, treating or marketing of hydrocarbons
     (other than a contract disclosed on the Disclosure Schedule), and, except
     as included in agreements set forth on the Disclosure Schedule, no person
     has any preferential right to purchase any Oil and Gas Property and no
     person has any call upon, option to purchase, preferential right to
     purchase or similar rights granted by Seller with respect to production
     from the Oil and Gas Properties and none of the persons so listed on the
     Disclosure Schedule have exercised any such rights.

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        (xi) RECEIPT OF PROCEEDS; PAYMENT OF EXPENSES.  With respect to each
     existing well identified on Schedule I, Seller is currently receiving from
     all purchasers of production from the Oil and Gas Properties at least the
     "Net Revenue Interests" set forth on such Schedule I without suspense.
     With respect to each existing well listed on Schedule I, Seller is
     currently paying the operators of the Oil and Gas Properties for the
     development and operation thereof no more than the Operating Interests set
     forth on such Schedule I, and Seller is current for all costs and expenses
     pertaining to the development and operation of the Oil and Gas Properties,
     except for those being contested in good faith.

        (xii)  PAYMENT OF ROYALTIES.  Except for the Jane Turner Sheppard et al
     vs. C.W. Resources et al. case disclosed on the Disclosure Schedule, Seller
     has received no claims that royalties and other payments due by it under
     the leases have not been properly and timely paid, or that any conditions
     necessary to keep the leases in force have not been fully performed.

        (xiii)  COMPLIANCE WITH LAWS.  Seller has received no claims, orders,
     notices or other written communications from applicable governmental
     authorities that the operation of the Oil and Gas Properties has not been
     conducted in accordance with all laws, rules, regulations, ordinances and
     orders (including without limitation, those pertaining to the environment)
     of all local, state and federal governmental bodies, authorities and
     agencies having jurisdiction of the Oil and Gas Properties.

        (xiv)  TAXES.  Ad valorem, property, production, severance, excise and
     similar taxes and assessments based on or measured by ownership of property
     or the production of hydrocarbons or the receipt of proceeds therefrom on
     the Oil and Gas Properties that have become due and payable have been
     properly and timely paid, except for those being contested in good faith.
     For purposes of this Agreement, taxes based on or measured by production
     shall be deemed attributable to the period in which the production
     occurred, regardless of the fact that such taxes may not be assessed or
     payable until some subsequent period.

        (b) DISCLAIMERS.  THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER
     CONTAINED IN SECTION 4(a) ABOVE ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
     REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
     AND, WITHOUT LIMITATION ON THE EXPRESS REPRESENTATIONS AND WARRANTIES
     CONTAINED IN SECTION 4(a) ABOVE, SELLER EXPRESSLY DISCLAIMS ANY AND ALL
     OTHER REPRESENTATIONS AND WARRANTIES (WITHOUT LIMITATION, EXCEPT FOR THE
     EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 4(a) ABOVE, THE
     PROPERTIES SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR
     REPRESENTATION WHETHER EXPRESS,

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     IMPLIED, STATUTORY OR OTHERWISE, RELATING TO THE CONDITION, QUANTITY,
     QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR
     SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT FOR ITS FITNESS
     FOR ANY PURPOSE). UPON CLOSING, BUYER SHALL HAVE INSPECTED, OR WAIVED ITS
     RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES AND SATISFIED ITSELF AS
     TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE,
     INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE
     PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES,
     ASBESTOS AND OTHER MAN MADE FIBERS, OR NATURALLY OCCURRING RADIOACTIVE
     MATERIALS ("NORM"). BUYER IS RELYING UPON ITS OWN INSPECTION OF THE
     PROPERTIES, AND BUYER SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE
     IS" CONDITION.

     5. REPRESENTATIONS OF BUYER.  Buyer represents to Seller that:

        (a) ORGANIZATION AND QUALIFICATION.  Buyer is a corporation duly
     organized and legally existing and in good standing under the laws of its
     state of incorporation and is qualified to do business and in good standing
     in the State of Texas.  Buyer is also qualified to own and operate oil and
     gas properties with all applicable governmental agencies having
     jurisdiction over the Properties, to the extent such qualification is
     necessary or appropriate or will be necessary or appropriate upon
     consummation of the transactions contemplated hereby (including, without
     limitation, Buyer has met all bonding requirements of such agencies).

        (b) DUE AUTHORIZATION.  Buyer has full power to enter into and perform
     its obligations under this Agreement and has taken all proper action to
     authorize entering into this Agreement and performance of its obligations
     hereunder.

        (c) APPROVALS.  Other than requirements (if any) that there be obtained
     consents to assignment (or waivers of preferential rights to purchase) from
     third parties, and except for Routine Governmental Approvals, neither the
     execution and delivery of this Agreement, nor the consummation of the
     transactions contemplated hereby, nor the compliance with the terms hereof,
     will result in any default under any agreement or instrument to which Buyer
     is a party, or violate any order, writ, injunction, decree, statute, rule
     or regulation applicable to Buyer.

        (d) VALID, BINDING AND ENFORCEABLE.  This Agreement constitutes (and the
     Conveyance provided for herein to be delivered at Closing will, when
     executed and delivered, constitute) the legal, valid and binding obligation
     of Buyer, enforceable in accordance with its terms, except as limited by
     bankruptcy or other laws applicable generally to creditor's rights and as
     limited by general equitable principles.

        (e) NO LITIGATION.  There are no pending suits, actions, or other
     proceedings in

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     which Buyer is a party (or, to Buyer's knowledge, which have been
     threatened to be instituted against Buyer) which affect the execution and
     delivery of this Agreement or the consummation of the transactions
     contemplated hereby.

        (f) KNOWLEDGEABLE BUYER, NO DISTRIBUTION.  Buyer is a knowledgeable
     purchaser, owner and operator of oil and gas properties, has the ability to
     evaluate (and in fact has evaluated) the Properties for purchase, and is
     acquiring the Properties for its own account and not with the intent to
     make a distribution in violation of the Securities Act of 1933 as amended
     (and the rules and regulations pertaining thereto) or in violation of any
     other applicable securities laws, rules or regulations.

     6. CERTAIN COVENANTS OF SELLER PENDING CLOSING.  Between the date of this
Agreement and the Closing Date:

        (a)  ACCESS BY BUYER.

        (i) RECORDS.  Seller will give Buyer, or Buyer's authorized
     representatives, at Seller's office and at all reasonable times before the
     Closing Date, access to Seller's records pertaining to the ownership and/or
     operation of the Properties (including, without limitation, title files,
     division order files, well files, and production, severance and ad valorem
     tax records), for the purpose of conducting due diligence reviews
     contemplated by Section 7 below.  Buyer may make copies of such records, at
     its expense, but shall, if Seller so requests, return all copies so made if
     the Closing does not occur; all costs of copying such items shall be borne
     by Buyer.  Seller shall not be obligated to provide Buyer with access to
     any records or data which Seller believes that Seller cannot provide to
     Buyer without, in Seller's reasonable opinion, breaching, or risking a
     breach of, agreements with other parties, or waiving, or risking waiving,
     legal privilege.  Notwithstanding the foregoing sentence, Seller shall
     provide Buyer a list of all records or data which Seller is withholding
     pursuant to such sentence including a general description of such records'
     contents and the specific reason claimed by Seller for such withholding.

        (ii) PHYSICAL INSPECTION.  Seller shall make a good faith effort to give
     Buyer, or Buyer's authorized representatives, at all reasonable times
     before the Closing Date and upon adequate notice to Seller, physical access
     to the Properties for the purpose of inspecting same.  Buyer recognizes
     that some or all of the Properties may be operated by parties other than
     Seller and that Seller's ability to obtain access to such properties, and
     the manner and extent of such access, is subject to such third parties.
     Buyer agrees to comply fully with the rules, regulations and instructions
     issued by Seller (and, where Properties are operated by other parties, such
     other parties) regarding the actions of Buyer while upon, entering or
     leaving the Properties.

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        (iii)  EXCULPATION AND INDEMNIFICATION.  If Buyer exercises rights of
     access under this Section or otherwise, or conducts examinations or
     inspections under this Section or otherwise, then (a) such access,
     examination and inspection shall be at Buyer's sole risk, cost and expense
     and Buyer waives and releases all claims against Seller (and the respective
     affiliates of the parties constituting Seller and the respective directors,
     officers, employees, attorneys, contractors and agents of such parties and
     such affiliates) arising in any way therefrom or in any way connected
     therewith or arising in connection with the conduct of its directors,
     officers, employees, attorneys, contractors and agents in connection
     therewith and (b) Buyer shall indemnify, defend and hold harmless Seller
     (and the respective affiliates of the parties constituting Seller and the
     respective officers, directors, employees, attorneys, contractors and
     agents of such parties and such affiliates)from any and all claims,
     actions, causes of action liabilities, damages, losses, costs or expenses
     (including, without limitation, court costs and attorneys' fees), or liens
     or encumbrances for labor or materials, arising out of or in any way
     connected with Buyer's examinations or inspections.

        (b) INTERIM OPERATION.  Seller will continue the operation of the
     Properties in the ordinary course of its business (or, where Seller is not
     the operator of a Property, will continue its actions as a non-operator in
     the ordinary course of its business), and will not sell or otherwise
     dispose of any of the Properties, provided that Seller may make sales or
     other dispositions of oil, gas and other minerals in the ordinary course of
     business after production (but, in doing so, will not enter into any new
     marketing arrangements unless the same terminate, or can be terminated, (in
     either case without penalty or other detriment) in 31 days or less), and
     may make sales or other dispositions of equipment and other personal
     property or fixtures in the ordinary course of business where the same has
     become obsolete and is no longer necessary for the operation of the
     Properties, or is replaced by an item or items of at least equal
     suitability and value.  Except for those disclosed on the Disclosure
     Schedule (with respect to which Seller may take the actions described on
     the Disclosure Schedule) Seller will not, without Buyer's written consent,
     commit to or propose the drilling of any additional wells, commit to or
     propose the deepening, plugging back or reworking of any existing wells, or
     commit to or propose the conducting of any other operations which require
     consent under the applicable operating agreement.  Except for those
     disclosed on the Disclosure Schedule (with respect to which Seller may take
     the actions described on the Disclosure Schedule) Seller will advise Buyer
     of any such proposals made by other parties, and will consult with Buyer
     concerning such proposals, but any decisions with respect to such proposals
     shall be made by Seller in its own discretion, so long as the decisions are
     made in the ordinary course of business; provided that, if the period for
     responding to such a proposal extends beyond the Closing Date, Seller will
     not respond to such proposal unless the Closing does not occur prior to the
     next to last day allowed to respond (in which case Seller may respond).
     Without expanding any obligations which Seller may have to Buyer, it is
     expressly agreed that Seller shall never have any liability to Buyer with
     respect to

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     operation of a Property greater than that which it might have as the
     operator to a non-operator under the applicable operating agreement (or, in
     the absence of such an agreement, under the AAPL 610 (1989 Revision) form
     Operating Agreement), IT BEING RECOGNIZED THAT, UNDER SUCH AGREEMENTS AND
     SUCH FORM, THE OPERATOR IS NOT RESPONSIBLE FOR ITS OWN NEGLIGENCE, AND HAS
     NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE OR WILFUL MISCONDUCT.

     7. DUE DILIGENCE REVIEWS.

        (a) REVIEW BY BUYER.  Buyer may conduct, at its sole cost, such title
     examination or investigation, and other examinations and investigations, as
     it may in its sole discretion choose to conduct with respect to the
     Properties in order to determine whether Defects (as below defined) exist.
     Should, as a result of such examinations and investigations, or otherwise,
     one or more matters come to Buyer's attention which would constitute a
     Defect (as below defined), and should there be one or more of such Defects
     which Buyer is unwilling to waive and close the transaction contemplated
     hereby notwithstanding the fact that such Defects exist, Buyer shall notify
     Seller in writing of such Defects as soon as the same are identified by
     Buyer, but in no event no later than May 24, 2000, (such Defects of which
     Buyer so provides notice are herein called "ASSERTED DEFECTS").  Such
     notification shall include, for each Asserted Defect, (i) a description of
     the Asserted Defect and the wells and/or units listed on Schedule I to
     which it relates, (i) the Defect is a Defect described in Section 7(b)(i)
     below, (ii) for each applicable well or unit, the size of any variance from
     "Net Revenue Interest" or "Working Interest" which does or could result
     from such Asserted Defect and (iii) the amount by which Buyer would propose
     to adjust the Purchase Price.   All access to Sellers records and the
     Properties in connection with such due diligence shall be subject and
     pursuant to Section 6(a) (including, without limitation, the exculpation
     and indemnification provisions contained in Section 6(a)(iii)).

        (b) NATURE OF DEFECTS.  The term "DEFECT" as used in this Section shall
     mean the following:

        (i) NRI OR WI VARIANCES.  Seller's ownership of the Properties is such
     that, with respect to a well or PUD location listed on Schedule I hereto,
     it clearly (A) entitles Seller to receive a decimal share of the oil, gas
     and other hydrocarbons produced from currently producing completions in
     such well (or, in the case of a PUD location, from the Cotton Valley Sand
     Formation), which is less than the decimal share set forth on Schedule I in
     connection with such well or PUD location in the column headed "Net Revenue
     Interest" or (B) causes Seller to be obligated to bear a decimal share of
     the cost of operation of such well (as to such completions) or PUD location
     (as to such formation) greater than the decimal share set forth on Schedule
     I in connection with such well or PUD location in the column headed
     "Working Interest" (without at least a proportionate increase in the share
     of

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     production to which Seller is entitled to receive from such well or PUD
     location).

        (ii) LIENS.  Seller's ownership of an Oil and Gas Property is subject to
     a lien other than (A) a lien for taxes which are not yet delinquent or (B)
     a mechanic's or materialmen's lien (or other similar lien), or a lien under
     an operating agreement or similar agreement, to the extent the same relates
     to expenses incurred which are not yet delinquent or (C) liens which will
     be released at or before Closing.

        (iii)  PREFERENTIAL RIGHTS AND CONSENTS.  Seller's ownership of an Oil
     and Gas Property is subject to a Preferential Right or a requirement that
     Consent to assignment be obtained, unless a waiver of such Preferential
     Right or Consent has been obtained with respect to the transaction
     contemplated hereby, or (in the case of a Preferential Right) an
     appropriate tender of the applicable interest has been made to all parties
     holding such right and, with respect to each such party, the period of time
     required for such party to exercise such right has expired without such
     party exercising such right.

        (iv) IMPERFECTIONS IN TITLE.  Seller's ownership of an Oil and Gas
     Property is subject to an imperfection in title which, if asserted, would
     cause a Defect, as defined in subparagraph (i) above, to exist, and such
     imperfection in title is not such as would normally be waived by persons
     engaged in the oil and gas business when purchasing producing properties.

        (v) PRODUCTION SALES CONTRACTS.  An Oil and Gas Property is subject to a
     production sales contract (other than a contract disclosed on the
     Disclosure Schedule or a contract which provides market sensitive pricing)
     which does not terminate by its terms on or before 185 days after the
     Closing Date and which cannot be terminated on or before 185 days after the
     Closing Date without penalty.

        (vi) ENVIRONMENTAL MATTERS.  An Oil and Gas Property is in violation of
     (whether or not Seller has been cited for such violation) applicable
     environmental laws (below defined) in any material respect ("applicable
     environmental laws" shall mean all federal, state or local laws, rules,
     orders or regulations pertaining to health or the environment, including
     those relating to waste materials and/or hazardous substances) or there is
     present upon or under such property a condition which requires or with the
     passage of time is likely to require remediation under applicable
     environmental law and such matter is not such as would normally be accepted
     by persons engaged in the oil and gas business when purchasing producing
     properties.

        (vii)  LITIGATION.  A matter which should have been disclosed on the
     Disclosure Schedule pursuant to Section 4(a)(v), but was not so disclosed.

     Notwithstanding anything in the foregoing which may appear to the contrary,
     unleased

                                       11
<PAGE>

     interests or non pooled, or ineffectively pooled, interests in a tract on
     which no well (or a drillsite for a PUD location) included in the
     Properties is located shall not constitute a "Defect." Similarly, in some
     cases where an "APO NRI" net revenue interest is shown for a well or PUD
     location on Schedule I one or more third parties have elections at payout
     (which do not have to be exercised until then) to take one of two or more
     possible interests, and such net revenue interest shown on Schedule I
     assumes one of such interests would be elected; notwithstanding anything in
     the foregoing which appears to the contrary, the fact that a third party
     may make a different election at payout than that assumed in computing the
     net revenue interest shown on Schedule I will not constitute a "Defect."
     The presence of naturally occurring radioactive materials ("NORM") in
     circumstances where, under current Texas Railroad Commission rules and
     regulations, remediation is not currently required will not constitute a
     "Defect."

        (c) PUD LOCATIONS.  Buyer and Seller have identified certain PUD
     locations at which additional wells might be drilled to the Cotton Valley
     Sand Formation, which locations are identified on Exhibit C hereto.  Such
     locations are included on Schedule I hereto (and have amounts allocated to
     them as do existing wells), and are subject to the procedures relating to
     Defects and Asserted Defects set forth above in this Section 7, and to the
     curative and purchase price adjustment procedures set forth below in this
     Section 7 and Section 8.  With respect to such locations, and such
     procedures, Buyer and Seller additionally agree as follows:

        (i) ADJUST LOCATION, SUBSTITUTE PUD.  If an Asserted Defect is
     identified with the tract on which such location is located, Buyer will use
     its best efforts to identify a reasonably acceptable alternative location
     for such PUD, on a tract not so affected, in order to eliminate such
     Defect.  Alternatively, if Seller can identify an additional PUD location
     on the Oil and Gas Properties which is not included in the PUD locations
     shown on Exhibit C, Buyer will review such location (and any supporting
     data furnished by Seller) in a good faith, and, should Buyer determine that
     such location is a reasonably acceptable alternative location, such
     location shall be substituted for the PUD location having the Asserted
     Defect, and such Asserted Defect will be eliminated.

        (ii) MINIMAL DEFECTS, INCOMPLETE POOLING.  Asserted Defects relating to
     a PUD location must affect at least 5% of Leasehold interest of the
     drillsite tract for such PUD for the same to be considered Defects subject
     to price adjustment procedures provided for below.  If Asserted Defects for
     a PUD location affect interests which exceed such amount, the price
     adjustment procedure provided for below will be followed for the interest
     affected in excess of such amount; if the interest affected do not exceed
     such amount, no price adjustment for Asserted Defects will be made.  The
     absence of complete pooling authority for all interests held by Seller in a
     PUD location will not constitute a Defect.

                                       12
<PAGE>

        (iii)  OFFSETS.  Should Seller have an interest in a PUD location that
     is more than 105% of that projected on Schedule I, such excess (with the
     amount attributable to such excess to be determined in the same manner as
     provided below for price adjustments) may be used to offset purchase price
     reductions otherwise applicable to other PUD locations due to Defects
     thereon.

        (iv) CONTINUING CURATIVE.  If an Asserted Defect is identified with
     respect to such a location, and the same cannot be cured before Closing (or
     resolved as provided in (i) above), Seller may elect to continue curative
     efforts past Closing.  In such case, the amount determined, as provided in
     Section 8 below, to be attributable to such Defect will be left in escrow
     under the Escrow Agreement and will be disbursed (A) if such Defect is
     cured within one year after Closing, to Seller when such curative is
     completed (with interest earned on such amount up to Closing being
     disbursed to Buyer, and all other interest earned on such amount being
     disbursed to Seller) or (B) otherwise, to Buyer as promptly as possible
     after such one year period (together with all interest earned on such
     amount).  If the amount to be so left in escrow exceeds $1,000,000, the
     amount so left in escrow may, at Buyer's option, be limited to not less
     than $1,000,000, and any additional amounts will be paid directly by Buyer;
     provided that payments on account of curative by Seller shall be first paid
     from the amount left in escrow (until the amount so left in escrow is
     depleted), and then paid by Buyer; and provided further that any such
     amounts to be paid directly by Buyer shall be (A) when and if curative is
     done with respect to Asserted Defects, paid to Seller in the same manner as
     provided for escrow funds above (but without interest), or (B) to the
     extent curative does not occur within such period, retained by Buyer.

        (d) SELLER'S RESPONSE.  In the event that Buyer notifies Seller of
     Asserted Defects:

        (i) CURE.  Seller may (but shall have no obligation to) attempt to cure,
     prior to Closing, one or more Asserted Defects.

        (ii) POSTPONE CLOSING.  Whether or not Seller has then begun to, or ever
     begins to, cure one or more Asserted Defects (and whether or not Seller has
     elected options (iii) or (iv) below with respect to one or more Asserted
     Defects), Seller may postpone the Closing by designating a new Closing Date
     not later than June 15, 2000.  Notwithstanding any such election to
     postpone Closing, Seller shall still have no obligation to cure Asserted
     Defects.

        (iii)  INDEMNIFICATION.  At any time, and from time to time, prior to
     Closing, and regardless of whether or not Seller has then elected any other
     option or options under this Section as to such Asserted Defect or any
     other Asserted Defect (including without limitation regardless of whether
     the procedure under Section 8 is ongoing as to such Asserted Defect),
     Seller may (but shall have no obligation to) elect, with respect to any
     Asserted Defect, to indemnify and hold Buyer harmless

                                       13
<PAGE>

     from and against any actual damages or loss (but specifically excluding
     consequential, special or similar damages) Buyer may suffer as a result of
     a third party claim based on such Asserted Defect. If and when such
     election is made as to an Asserted Defect, such Asserted Defect will be
     treated under this Agreement as if cured.

        (iv) ADJUSTMENT.  Notwithstanding any other election made under this
     Section (without limitation, it being expressly recognized that Seller may
     attempt to cure Asserted Defects while acting under this election), Seller
     may elect to have one or more Asserted Defects handled under Section 8
     below.

     8. CERTAIN PRICE ADJUSTMENTS.

        (a) PROCEDURES.  In the event that, as a part of the due diligence
     reviews provided for in Section 7 above, Asserted Defects are presented to
     Seller and Seller is unable (or unwilling) to cure such Asserted Defects
     prior to Closing, or in the event that Buyer or Seller has elected
     (pursuant to Section 15) to treat an Oil and Gas Property affected by a
     casualty loss as if it was an Oil and Gas Property affected by an Asserted
     Defect, then:

        (i) AGREE UPON ADJUSTMENT.  Buyer and Seller shall, with respect to each
     Property affected by such matters, attempt to agree upon an appropriate
     downward adjustment of the Purchase Price to account for such matters; and

        (ii) EXCLUDE PROPERTY.  With respect to each well or PUD location listed
     on Schedule I as to which Buyer and Seller are unable to agree upon
     appropriate adjustment with respect to all such matters affecting such well
     or PUD location, such well or PUD location (together with such related
     rights in any unit including the same, and other rights, as may be
     necessary or appropriate to own, operate and produce the same) will be
     excluded from the transaction contemplated hereby, and a downward
     adjustment of the Purchase Price will be made by the amount attributed on
     Schedule I to such well or PUD location.

        (b) CERTAIN ADJUSTMENTS.  In the event that Buyer raises as an Asserted
     Defect one of the following types of Defects, Seller may (but shall not be
     obligated to) propose the adjustment of the Purchase Price set forth below
     in connection with such Defect:

        (i) NRI VARIANCE/PROPORTIONATE PRICE REDUCTIONS.  If the Asserted Defect
     is (I) a Defect described in clause (A) of Section 7(b)(i) or (II) a Defect
     which otherwise affects a portion of Seller's interest in a well or PUD
     location listed on Schedule I:  a downward adjustment equal to the amount
     determined by multiplying the amount set forth for such well or PUD
     location on Schedule I by a fraction (A) the numerator of which is an
     amount equal to the "Net Revenue Interest" shown on Schedule I for such
     well or PUD location less the decimal share to which Seller

                                       14
<PAGE>

     would be entitled to as a result of its ownership interest in such well or
     PUD location which is unaffected by such Defect and (B) the denominator of
     which is the "Net Revenue Interest" shown for such well or PUD location on
     Schedule I. Notwithstanding subsection (ii) below, a Defect to which such
     subsection is applicable may, at Seller's election, be treated as a Defect
     under this subsection.

        (ii) LIENS/PAYOFF AMOUNT.  If the Asserted Defect is a Defect described
     in Section 7(b)(ii):  a downward adjustment equal to the amount of the debt
     secured by such lien.

     If Seller proposes such an adjustment, such adjustment will be deemed an
     adjustment agreed to under Section 8(a)(i) above.

        (c) LIMITATIONS ON ADJUSTMENTS.  If the Purchase Price reduction (or
     increase) with respect to a particular Asserted Defect which would result
     from the above provided for procedure does not exceed $25,000, no
     adjustment shall be made for such Asserted Defect.  If the Purchase Price
     reduction which would result from the above provided for procedure, as
     applied to all Asserted Defects for which an adjustment is to be made, does
     not exceed $250,000, then no adjustment of the Purchase Price shall occur,
     and none of the Properties which would be excluded by such procedure shall
     be excluded.  If the Purchase Price reduction which would result from the
     above provided for procedure, as applied to all Asserted Defects for which
     an adjustment is to be made exceeds $250,000, the Purchase Price shall be
     adjusted by the amount by which such reduction exceeds $250,000.

     9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER.  The obligations of
Buyer under this Agreement are subject to each of the following conditions being
met:

        (a) REPRESENTATIONS TRUE AND CORRECT.  Each and every representation of
     Seller under this Agreement shall be true and accurate in all material
     respects as of the date when made and shall be deemed to have been made
     again at and as of the time of Closing and shall at and as of such time of
     Closing be true and accurate in all material respects except as to changes
     specifically contemplated by this Agreement or consented to by Buyer.

        (b) COMPLIANCE WITH COVENANTS AND AGREEMENTS.  Seller shall have
     performed and complied in all material respects with (or compliance
     therewith shall have been waived by Buyer) each and every covenant and
     agreement required by this Agreement to be performed or complied with by
     Seller prior to or at the Closing.

        (c) PRICE ADJUSTMENT LIMITATIONS.  The aggregate downward adjustment (if
     any) of the Purchase Price which results from the procedures set forth in
     Section 8 does not exceed $2,600,000.

                                       15
<PAGE>

        (d) LITIGATION.  No suit, action or other proceedings shall, on the date
     of Closing, be pending or threatened before any court or governmental
     agency seeking to restrain, prohibit, or obtain material damages or other
     material relief in connection with the consummation of the transactions
     contemplated by this Agreement.

        (e) CONSENTS.  Seller shall have obtained all consents of third parties
     as required pursuant to the terms of the contracts identified in Paragraph
     4(a)(x) or the Disclosure Schedule.

     If any such condition on the obligations of Buyer under this Agreement is
not met as of the Closing Date, or in the event the Closing does not occur on or
before the Closing Date, and (in either case) Buyer is not in material breach of
its obligations hereunder in the absence of Seller being in material breach of
its obligations hereunder, this Agreement may, at the option of Buyer, be
terminated.  In the event such a termination by Buyer occurs the parties shall
have no further obligations to one another hereunder (other than the obligations
under Sections 3, 6(a)(iii) and 14 hereof all of which will survive such
termination).

     10.  CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER.  The obligations of
Seller under this Agreement are subject to the each of the following conditions
being met:

        (a) REPRESENTATIONS TRUE AND CORRECT.  Each and every representation of
     Buyer under this Agreement shall be true and accurate in all material
     respects as of the date when made and shall be deemed to have been made
     again at and as of the time of Closing and shall at and as of such time of
     Closing be true and accurate in all material respects except as to changes
     specifically contemplated by this Agreement or consented to by Seller.

        (b) COMPLIANCE WITH COVENANTS AND AGREEMENTS.  Buyer shall have
     performed and complied in all material respects with (or compliance
     therewith shall have been waived by Seller) each and every covenant and
     agreement required by this Agreement to be performed or complied with by
     Buyer prior to or at the Closing.

        (c) PRICE ADJUSTMENT LIMITATIONS.  The aggregate downward adjustment (if
     any) of the Purchase Price which results from the procedures set forth in
     Section 8 does not exceed $2,600,000.

        (d) LITIGATION.  No suit, action or other proceedings shall, on the date
     of Closing, be pending or threatened before any court or governmental
     agency seeking to restrain, prohibit, or obtain material damages or other
     material relief in connection with the consummation of the transactions
     contemplated by this Agreement.

     If any such condition on the obligations of Seller under this Agreement is
not met as of the Closing Date, or in the event the Closing does not occur on or
before the Closing Date, and

                                       16
<PAGE>

(in either case) Seller is not in material breach of its obligations hereunder
in the absence of Buyer being in material breach of its obligations hereunder,
this Agreement may, at the option of Seller, be terminated, in which case the
parties shall have no further obligations to one another hereunder (other than
the obligations under Sections 3, 6(a)(iii) and 14 hereof, all of which will
survive such termination).

     11.  CLOSING.

        (a) ACTIONS AT CLOSING.  The closing (herein called the "CLOSING") of
     the transaction contemplated hereby shall take place in the offices of
     Thompson & Knight LLP at 1700 Pacific Avenue, Dallas, Texas 75201, on or
     before May 31, 2000, at 10 a.m. Central Daylight Time, or at such other
     date and time (i) as the Buyer and Seller may mutually agree upon or (ii)
     to which Seller may postpone the Closing pursuant to Section 7 hereof (such
     date and time, as changed pursuant to clauses (i) and (ii), being herein
     called the "CLOSING DATE").  At the Closing:

        (i) DELIVERY OF CONVEYANCE.  Seller shall execute, acknowledge and
     deliver to Buyer a conveyance of the Properties (the "CONVEYANCE"), in the
     form attached hereto as Schedule III (and with Exhibit A hereto, with such
     modifications  as may be mutually agreed to by Buyer and Seller, being
     attached thereto), effective as to runs of oil and deliveries of gas and
     for all other purposes as of 7 o'clock a.m., local time at the locations of
     the Properties, respectively, on January 1, 2000 (herein called the
     "EFFECTIVE DATE").

        (ii) PAYMENT TO SELLER.  Buyer shall deliver to the C.W. Resources,
     Inc., by wire transfer of immediately available funds to an account
     designated by C.W. Resources, Inc. in a bank located in the United States,
     an amount equal to (A) the Purchase Price, plus (B) interest at the rate of
     8% per annum on an amount equal to the Base Purchase Price, as adjusted by
     any adjustments made under Section 8, from March 15, 2000 to (i) if Seller
     exercises its right under Section 7 to extend the Closing Date, May 31,
     2000, or (ii) otherwise, the Closing Date, less or plus (as the case may
     be) (C) any adjustments under Section 12 which are to be made at Closing,
     less (D) the Deposit.  Unless Seller has, at or before Closing, obtained
     the agreements contemplated by the fourth sentence of Section 11(b)(ii),
     the Operations Adjustment portion of the Purchase Price will not be
     required to be paid at Closing, and such payment to Seller will also be
     reduced by the amount of the Operations Adjustment plus any interest under
     clause (B) above attributable to that portion of the Purchase Price.  C.W.
     Resources, Inc. shall receive such amount on behalf of all parties
     constituting Seller, and Buyer, having so paid such amount, shall have no
     responsibility for the proper division of such amount among the parties
     constituting Seller.

                                       17
<PAGE>

        (iii)  TURN OVER POSSESSION.  Seller shall, to the extent Seller can do
     so, turn over possession of the Properties.

        (iv) SUCCESSION BY BUYER.  Buyer shall (A) furnish to Seller such
     evidence (including, without limitation, evidence of satisfaction of all
     applicable bonding requirements) as Seller may require that Buyer is
     qualified with the applicable authorities to succeed Seller as the owner
     and, where applicable, operator of the Properties, (B) with respect to
     properties operated by Seller where Buyer is to succeed Seller as operator,
     execute and deliver to Seller appropriate evidence reflecting change of
     operator as required by applicable authorities (including, without
     limitation, Form P-4 for filing with the Railroad Commission of Texas), and
     (C) execute and deliver to Seller such forms as Seller may reasonably
     request for filing with the applicable authorities to reflect Buyer's
     assumption of plugging and abandonment liabilities with respect to the
     wells located on the Properties or on units in which the Properties
     participate.

        (v) NON-FOREIGN STATUS TAX AFFIDAVIT.  If Buyer so requests, Seller will
     execute and deliver to Buyer an affidavit or other certification (as
     permitted by such code) that Seller is not a "foreign person" within the
     meaning of Section 1445 (or similar provisions) of the Internal Revenue
     Code of 1986 as amended (i.e., Seller is not a non-resident alien, foreign
     corporation, foreign partnership, foreign trust or foreign estate as those
     terms are defined in such code and regulations promulgated thereunder).

        (vi) FEDERAL AND STATE CONVEYANCE FORMS.  Seller shall, where
     appropriate, prepare, execute (and, where required, acknowledge) and
     deliver to Buyer forms of conveyance or assignment as required by the
     applicable authorities for transfers of interests in state and federal
     leases included in the Oil and Gas Properties.

        (vii)  LETTERS IN LIEU.  Seller shall, if requested by Buyer, prepare,
     execute and deliver to Buyer letters in lieu of transfer orders (or similar
     documentation), in form acceptable to both parties.

                                       18
<PAGE>

        (b)  POST CLOSING ACTIONS.

        (i) TRANSFER OF FILES.  Seller will use its best efforts to deliver to
     Buyer, at Buyer's expense, and within 15 days after Closing, all of
     Seller's lease files, abstracts and title opinions, division order files,
     production records, well files, accounting records (but not including
     general financial accounting or tax accounting records), and other similar
     files and records which directly relate to the Properties, provided that
     Seller shall not be obligated to turn over to Buyer any records or data
     which Seller believes that Seller cannot provide to Buyer without, in
     Seller's reasonable opinion, breaching, or risking a breach of, agreements
     with other parties, or waiving, or risking waiving, legal privilege.
     Notwithstanding the foregoing sentence, Seller shall provide Buyer a list
     of all records or data which Seller is withholding pursuant to such
     sentence to Buyer including a general description of such records' contents
     and the specific reason claimed by for Seller's for such withholding.

        (ii) BUYER AS SUCCESSOR OPERATOR.  Buyer desires to become successor
     operator with respect to as many of the Oil and Gas Properties operated by
     Seller as it can, other than the Oil and Gas Properties described in
     subsection 1(e) above.  IT IS RECOGNIZED THAT THERE IS NO ASSURANCE GIVEN
     BY SELLER THAT BUYER SHALL SUCCEED SELLER AS OPERATOR OF ANY PROPERTY WHERE
     OTHER PARTIES OWN INTERESTS IN THE WELLS LOCATED THEREON. Buyer and Seller
     agree to undertake reasonable efforts to cooperate toward accomplishing
     such goal.  If, despite its best efforts undertaken in good faith, Buyer is
     unable to obtain, on or before a date which is 120 days after Closing
     occurs, necessary agreements such that it will become such successor
     operator with respect to wells and units identified on Schedule I
     representing at least 90% of the value (determined based on the allocated
     amounts shown on Schedule I) of the wells and units identified on such
     Schedule I which are operated by Seller, then the Purchase Price will be
     reduced by an amount equal to $3,000,000 (the "OPERATIONS ADJUSTMENT");
     otherwise any portion of the Operations Adjustment not paid at Closing due
     to the next to last sentence of Section 11(a)(ii) (together with interest
     thereon at the rate of 8% per annum from March 15, 2000 until such payment
     is made) shall be paid to C.W. Resources, Inc. (in the same manner as
     payments under Section 11(a)(ii)) promptly after the agreements
     contemplated above are obtained and in any event not later than 125 days
     after Closing.

        (iii)  OPERATIONAL TRANSITION.  For a reasonable period of time after
     Closing, Buyer and Seller shall undertake reasonable efforts to cooperate
     with respect to transition activities as to Properties where Buyer succeeds
     Seller as operator.  To the extent Seller remains an operator after Closing
     (which it shall have no obligation to do), it shall serve as operator under
     the applicable operating agreement in the manner provided by such agreement
     and, to the extent Seller so operates any Property after Closing and/or
     provides disbursement services under subsection (iv)

                                       19
<PAGE>

     below, its obligations to Buyer with respect thereto shall be no greater
     than those which it would have to a non-operator under the applicable
     operating agreement (and, in the absence of an operating agreement, under
     the AAPL 610 (1989 Revision) form Operating Agreement), IT BEING RECOGNIZED
     THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, THE OPERATOR IS NOT RESPONSIBLE
     FOR ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS
     NEGLIGENCE OR WILFUL MISCONDUCT.

        (iv) TRANSITION OF CERTAIN ACCOUNTING MATTERS.  With respect to each Oil
     and Gas Property as to which Buyer becomes successor operator and with
     respect to which Seller is disbursing proceeds of production attributable
     to other parties entitled thereto, (i) Seller shall continue to receive
     such proceeds of production up to the Closing and, to the extent it
     actually receives such proceeds, shall be responsible for making
     disbursements, in accordance with its normal procedures (and at normal
     times), of such proceeds of production to the parties entitled to same,
     with any such proceeds of production after the Closing received by Seller
     to be promptly forwarded to Buyer (who shall thereafter account for same to
     the parties entitled thereto) and Seller shall, as promptly as possible
     after Closing, deliver to Buyer a copy of its "pay list" for each such
     property (which list shall include the names of all parties for whom it is
     holding in suspense proceeds of production).  Seller will retain all
     suspense funds, and responsibility therefor, and such suspense funds, and
     Seller's handling thereof, shall be included in the matters which Seller
     indemnifies Buyer with respect to, under Section 13 below.  Following
     delivery of the materials referred to above, Buyer shall become responsible
     for all disbursements of proceeds of production from such properties and
     such disbursement activities shall be included in the matters which Buyer
     assumes, and indemnifies Seller with respect to, under Section 13 below.

     12.  CERTAIN ACCOUNTING ADJUSTMENTS.

        (a) ADJUSTMENTS FOR REVENUES AND EXPENSES.  Appropriate adjustments
     shall be made between Buyer and Seller so that (i) Buyer will bear all
     expenses which are incurred in the operation of the Properties after the
     Effective Date (including, without limitation, all drilling costs, all
     capital expenditures, all overhead charges under applicable operating
     agreements (regardless of whether such operating agreements are with third
     parties or related entities and regardless of whether Seller is the
     operator or a non-operator)), and all other overhead charges actually
     charged by Seller (and for which Seller bills third parties for their
     respective shares) or charged to Seller by third parties, and operating
     expenses), and Buyer will receive all proceeds (net of applicable
     production, severance, and similar taxes) from sales of oil, gas and/or
     other minerals which are produced from (or attributable to) the Properties
     and which are produced after the Effective Date, and (ii) Seller will bear
     all expenses which are incurred in the

                                       20
<PAGE>

     operation of the Properties before the Effective Date and Seller will
     receive all proceeds (net of applicable production, severance, and similar
     taxes) from the sale of oil, gas and/or other minerals which were produced
     from (or attributable to) the Properties and which were produced before the
     Effective Date. It is agreed that, in making such adjustments: (i) oil
     which was produced from the Oil and Gas Properties and which was, on the
     Effective Date, stored in tanks located on the Oil and Gas Properties (or
     located elsewhere but used by Seller to store oil produced from, or
     attributable to, the Oil and Gas Properties prior to delivery to oil
     purchasers) and above pipeline connections shall be deemed to have been
     produced before the Effective Date, (ii) ad valorem and similar taxes
     assessed for periods prior to the Effective Date shall be borne by Seller
     and ad valorem taxes assessed for periods on or after the Effective Date
     shall be borne by Buyer, (iii) ad valorem and similar taxes assessed with
     respect to a period which the Effective Date splits shall be prorated based
     on the number of days in such period which fall on each side of the
     Effective Date (with the day on which the Effective Date falls being
     counted in the period after the Effective Date), (iv) casualty losses shall
     be handled in accordance with Section 15, and (v) no consideration shall be
     given to the local, state or federal income tax liabilities of any party.

        (b) INITIAL ADJUSTMENT AT CLOSING.  At least 5 days before the Closing
     Date, Seller shall provide to Buyer a statement showing its computations of
     the amount of the adjustments provided for in subsection (a) above based on
     amounts which prior to such time have actually been paid or received by
     Seller.  Buyer and Seller shall attempt to agree upon such adjustments
     prior to Closing, provided that if agreement is not reached, Seller's
     computation shall be used at Closing, subject to further adjustment under
     subsection (c) below.  If the amount of adjustments so determined which
     would result in a credit to Buyer exceed the amount of adjustments so
     determined which would result in a credit to Seller, Buyer shall receive a
     credit at Closing for the amount of such excess, and if the converse is
     true, then the amount to be paid by Buyer to Seller at Closing shall be
     increased by the amount of such excess.

        (c) ADJUSTMENT POST CLOSING.  On or before 120 days after Closing,
     Seller shall provide to Buyer a statement showing its computations
     regarding any information which may then be available pertaining to the
     adjustments provided for in subsection (a) above, and Buyer shall review
     such statement.  Buyer and Seller shall determine if Seller's statement
     accurately reflects any additional adjustments that should be made beyond
     those made at Closing (whether the same be made to account for expenses or
     revenues not considered in making the adjustments made at Closing, or to
     correct errors made in the adjustments made at Closing), and shall make any
     such adjustments by appropriate payments from Seller to Buyer or from Buyer
     to Seller.  After such adjustments are made, no further adjustments shall
     be made under this Section 12.

     13.  ASSUMPTION AND INDEMNIFICATION.   Except as provided in Section 18(b)
below with respect to the JW Litigation (below defined), and except for matters
which would constitute

                                       21
<PAGE>

breaches of the express representations and warranties of Seller set forth in
Section 4(a) above, Buyer shall, on the date of Closing, agree (and, upon the
delivery to Buyer of the Conveyance, shall be deemed to have agreed) (a) to
assume, and to timely pay and perform, all duties, obligations and liabilities
relating to the ownership and/or operation of the Properties after the Effective
Date (including, without limitation, those arising under the contracts and
agreements described in Section 1(c) above), and (b) to indemnify and hold
Seller (and the respective affiliates of the parties constituting Seller, and
the respective directors, officers, employees, attorneys, contractors and agents
of such affiliates and such parties) harmless from and against any and all
claims, actions, causes of action, liabilities, damages, losses, costs or
expenses (including, without limitation, court costs and attorneys' fees) of any
kind or character arising out of or otherwise relating to either (A) the
ownership and/or operation of the Properties after the Effective Date or (B) a
breach of Buyer's express representations and warranties set forth in Section 5
above. In connection with (but not in limitation of) the foregoing, it is
specifically understood and agreed that such duties, obligations and liabilities
arising out or otherwise relating to the ownership and/or operation of the
Properties after the Effective Date (other than matters which should have been
disclosed under Section 4(a)(vii) above, but were not) shall (notwithstanding
anything herein appearing to be to the contrary) be deemed to include all
matters arising out of the condition of the Properties on the Effective Date
(including, without limitation, within such matters all obligations to properly
plug and abandon, or replug and re-abandon, wells located on the Properties, to
restore the surface of the Properties and to comply with, or to bring the
Properties into compliance with, applicable environmental laws, rules,
regulations and orders, including conducting any remediation activities which
may be required on or otherwise in connection with activities on the
Properties), regardless of whether such condition or the events giving rise to
such condition arose or occurred before or after the Effective Date, and the
assumptions and indemnifications by Buyer provided for in the first sentence of
this section shall expressly cover and include such matters. Seller shall, on
the date of Closing, agree (and, upon the delivery to Buyer of the Conveyance
shall be deemed to have agreed) to indemnify and hold Buyer (and its affiliates,
and the respective directors, officers, employees, attorneys, contractors and
agents of such parties) harmless from and against any and all claims, actions,
causes of action, liabilities, damages, losses, costs or expenses (including,
without limitation, court costs and attorneys' fees) of any kind or character
arising out of or otherwise relating to either (A) the ownership and/or
operation of the Properties prior to the Effective Date, except to the extent
the same arise out of the condition of the Properties (such matters having been
provided for above), and except to the extent the same arise out of any matter
disclosed on the Disclosure Schedule (other than the litigation for which Seller
retains responsibility under Section 18(b) below, which is covered by such
Section 18(b)), or out of any matter made the subject of an Asserted Defect
pursuant to Section 7 above or (B) a breach of Seller's express representations
and warranties set forth in Section 4(a) above. In the event of any conflict
which may appear to exist between this Section and Section 12 above, this
Section shall control. THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL
APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS,
ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE
OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE

                                       22
<PAGE>

NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY
NOT INCLUDING GROSS NEGLIGENCE) OF ANY INDEMNIFIED PARTY, OR (ii) STRICT
LIABILITY.

     14.  NO COMMISSIONS OWED.  Seller agrees to indemnify and hold Buyer (and
its affiliates, and the respective officers, directors, employees, attorneys,
contractors and agents of Buyer and such parties) harmless from and against any
and all claims, actions, causes of action, liabilities, damages, losses, costs
or expenses (including, without limitation, court costs and attorneys' fees) of
any kind or character arising out of or resulting from any agreement,
arrangement or understanding alleged to have been made by, or on behalf of,
Seller with any broker or finder in connection with this Agreement or the
transaction contemplated hereby.  Buyer agrees to indemnify and hold Seller (and
the respective affiliates of the parties constituting Seller, and the respective
officers, directors, employees, attorneys, contractors and agents of such
affiliates and such parties) harmless from and against any and all claims,
actions, causes of action, liabilities, damages, losses, costs or expenses
(including, without limitation, court costs and attorneys' fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.

     15.  CASUALTY LOSS.  In the event of damage by fire or other casualty to
the Properties prior to the Closing, this Agreement shall remain in full force
and effect, and in such event:

        (a) OIL AND GAS PROPERTIES.  As to each such Property so damaged which
     is an Oil and Gas Property, then (unless Seller elects to repair such
     damage, which Seller shall have no obligation to do, in which case all
     rights to insurance proceeds related thereto shall belong to Seller), (i)
     at the election of either Buyer of Seller, such Property shall be treated
     as if it had an Asserted Defect associated with it and the procedure
     provided for in Section 8 shall be applicable thereto (in which case,
     unless Buyer and Seller agree to the contrary, all rights to insurance
     proceeds related thereto shall belong to Seller), or, (ii) if no such
     election is made by Buyer or Seller, the Purchase Price will not be
     adjusted, and Seller shall, at Seller's election, either collect (and when
     collected pay over to Buyer) any insurance claims related to such damage,
     or assign to Buyer such insurance claims, and, in either event, Buyer shall
     take title to the Property affected by such loss without reduction of the
     Purchase Price.

        (b) OTHER PROPERTIES.  As to each such Property so damaged which is
     other than an Oil and Gas Property, Seller shall, at Seller's election,
     either (i) repair such damage or replace such Property, (ii) collect (and
     when collected pay over to Buyer) any insurance claims related to such
     damage, or (iii) assign to Buyer any insurance claims related to such
     damage, and Buyer shall take title to the Property affected by such loss
     without reduction of the Purchase Price.

Seller has no obligation to carry insurance coverage, or to carry any particular
types or amounts

                                       23
<PAGE>

of coverage, and, in the event of a loss which is not covered by insurance,
Seller shall have no obligation to Buyer with respect thereto.

     16.  NOTICES.  All notices and other communications required under this
Agreement shall (unless otherwise specifically provided herein) be in writing
and be delivered personally, by recognized commercial courier or delivery
service which provides a receipt, by telecopier (with receipt acknowledged), or
by registered or certified mail (postage prepaid), at the following addresses:

If to Buyer:    3TEC Energy Corporation
                Two Shell Plaza
                777 Walker, Suite 2400
                Houston, Texas 77002
                Fax: (713) 821-7200
                Attention:  Floyd C. Wilson

                With a copy to:
                Hinkle Elkouri Law Firm L.L.C.
                301 N. Main, Suite 2000
                Wichita, Kansas 67202
                Fax:  (316) 264-1518
                Attention:  David S. Elkouri

If to Seller:   Carl A. Westerman
                P.O. Box 6531
                3400 West Marshall
                Longview, Texas 75604
                Fax:  (903) 759-2153

        With a copy to:

                Samuel D. Haas
                175 Calle Ventoso West
                Santa Fe, New Mexico  87501
                Fax:  (505) 988-5865

and shall be considered delivered on the date of receipt.  Either Buyer or
Seller may specify as its proper address any other post office address within
the continental limits of the United States by giving notice to the other party,
in the manner provided in this Section, at least ten (10) days prior to the
effective date of such change of address.

     17.  SURVIVAL OF PROVISIONS.  All representations and warranties made
herein by Buyer and Seller shall be continuing and shall be true and correct on
and as of the date of Closing with

                                       24
<PAGE>

the same force and effect as if made at that time (and shall inure to the
benefit of the respective successors and assigns of Buyer and Seller), and all
of such representations and warranties shall, survive the Closing and the
delivery of the Conveyance indefinitely, except that other than those set forth
in Section 4(a)(i) through 4(a)(v) above, representations and warranties of
Seller shall terminate six months after the Closing Date. The provisions of
Section 11 (to the extent the same are, by mutual agreement, not performed at
Closing), and Sections 12, 14, 16 and 18 shall (subject to any limitations set
forth therein) survive the Closing and delivery of the conveyance indefinitely.
The obligations of Buyer under Section 13 shall survive the Closing and the
delivery of the Conveyance indefinitely, and the obligations of Seller under
Section 13 shall also survive the Closing and the delivery of the Conveyance,
but (i) except as provided in subsections (ii) and (iii) below, shall terminate
one year after the Closing Date, and (ii) as to breaches of Seller's
representations and warranties, shall terminate when such representations and
warranties terminate (as provided above), and (iii) as to proper payment of
royalties due with respect to the Oil and Gas Properties under leases (interests
in which are included in the Oil and Gas Properties), or any matter that should
have been disclosed in connection with Section 4(a)(v), but was not, or any
matter that should have been disclosed in connection with Section 4(a)(vii), but
was not, shall terminate two years after the Closing Date.

     18.  MISCELLANEOUS MATTERS.

        (a) FURTHER ASSURANCES.  After the Closing, Seller shall execute and
     deliver, and shall otherwise cause to be executed and delivered, from time
     to time, such further instruments, notices, division orders, transfer
     orders and other documents, and do such other and further acts and things,
     as may be reasonably necessary to more fully and effectively grant, convey
     and assign the Properties to Buyer.

        (b) JW LITIGATION, OTHER LITIGATION.  The parties acknowledge the
     existence of that certain lawsuit styled Wagner & Brown, Ltd. vs. H.G.,
     Westerman vs. C.W. Resources, Inc., et al. (Cause No 41,534), 238th
     Judicial District Court, Midland County, Texas (the "JW LITIGATION") and
     agree that the existence of the JW Litigation shall in no way interfere
     with the consummation of the transaction contemplated hereby.  Seller shall
     retain full responsibility, and full control, over such JW Litigation,
     handling it (including, without limitation, decisions on litigation
     strategy, decisions to settle (and settlement terms) or prosecute the same
     and/or decisions to appeal or not appeal any judgment) in its sole,
     unfettered discretion, and at its sole cost (including cost of settlement
     or payment of judgment, if any) and with it having sole right to any
     amounts (including any settlement or judgment amounts) paid by other
     parties thereto.  Seller shall indemnify and hold Buyer (and its
     affiliates, and the respective officers, directors, employees, attorneys,
     contractors and agents of Buyer and such affiliates) harmless from and
     against any and all claims, actions, causes of action, liabilities,
     damages, losses, costs or expenses (including court costs and attorneys'
     fees, except attorneys' fees, and costs, for attorneys, if any, employed by
     Buyer) of any kind arising out of or resulting from such JW Litigation.

                                       25
<PAGE>

     Notwithstanding anything in the foregoing appearing to the contrary, if, as
     a result of a settlement of such JW Litigation, or a final nonappealable
     judgment with respect thereto, title to any portion of the Properties
     conveyed to Buyer pursuant to this agreement is lost, Seller's liability
     for such loss shall be an amount computed in the same manner as if such
     loss had been Defects handled under Section 8(b)(i), and such amount (which
     shall be paid to Buyer promptly after such settlement or judgment is
     finalized) shall be deemed to fully compensate Buyer for such loss; Buyer
     recognizes such risk of title loss, and, in the event the same occurs,
     agrees to relinquish the lost interest and account for revenues received
     (less expenses paid) by it with respect thereto.  Seller shall also retain
     responsibility, and full control, over those certain lawsuits styled Jane
     Turner Sheppard, et al vs. C.W. Resources, et al, Jerrell L. McBride vs.
     Clarence N. Schwab dba CNS Energy, et al, vs. Procom Energy, Inc., W. L.
     Dixon, et al vs. Amoco Production Company, et al (each disclosed on the
     Disclosure Schedule) (the "CERTAIN LITIGATION"), in the same manner, and on
     the same terms, as provided above for the JW Litigation.  Buyer will assume
     full responsibility for, and control over, all litigation disclosed on the
     Disclosure Schedule other than the JW Litigation and the Certain
     Litigation, with such assumption of responsibility and control to be on the
     same basis as provided above for Seller's responsibility for, and control
     over, the JW Litigation (except that, of course, the language providing for
     certain matters in the event of a loss of title by Buyer will be
     inapplicable).  The party having responsibility for and control of a
     litigation matter shall be entitled to receive, from the other party, and
     it is agreed that the other party shall give, its cooperation in the
     handling of such litigation (for example, and without limitation, Seller
     agrees to make its employees available for depositions, if any, and for
     testimony at any trial); similarly, the party handling a litigation matter
     will cooperate with the other party so as to minimize the impact on the
     other party's business operations to the extent reasonably possible.  It is
     agreed that the total out-of-pocket cost (including attorneys' fees, any
     settlement payments and payment of any judgement) to Buyer of handling the
     C.W. Resources, Inc. et al. vs. Valence Operating Company matter
     (identified on the Disclosure Schedule) shall be limited to $200,000 and
     that Seller will bear all out-of-pocket costs in excess of such amount;
     provided that Seller may, at any time, elect (by notice in writing to
     Buyer) to take over responsibility for, and control of, such matter (on the
     same basis as provided above for Seller's responsibility for, and control
     over, the JW Litigation), and Buyer shall have no further obligation for
     out-of-pocket costs incurred after Seller actually takes over such matter.

        (c) SHALLOW COMPLETION IN HAYNESVILLE WELL.  Should a well drilled to
     the Haynesville Formation under the Oil and Gas Properties described in
     Section 1(e) above not be completed in such formation, it is recognized
     that Buyer, as the owner of rights to depths above such formation, may take
     over Seller's interest in such well prior to its abandonment, but if Buyer
     elects to do so, it shall reimburse Seller for its portion of the cost of
     drilling such well which would be attributable to drilling such well to a
     depth sufficient to attempt a Cotton Valley Sand Formation completion.

                                       26
<PAGE>

        (d) DECEPTIVE TRADE PRACTICES WAIVER.  TO THE EXTENT APPLICABLE TO THE
     TRANSACTION CONTEMPLATED HEREBY OR ANY PORTION THEREOF, BUYER WAIVES
     BUYER'S RIGHTS UNDER THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES
     - CONSUMER PROTECTION ACT, SECTIONS 17.41 ET. SEQ. OF THE TEXAS BUSINESS
     AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
     PROTECTIONS, AND ANY COMPARABLE ACT IN ANY OTHER STATE IN WHICH THE
     PROPERTIES ARE LOCATED.  BUYER STATES THAT, AFTER CONSULTATION WITH AN
     ATTORNEY OF BUYER'S SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.

        (e) PARTIES BEAR OWN EXPENSES/NO SPECIAL DAMAGES.  Each party shall bear
     and pay all expenses (including, without limitation, legal fees) incurred
     by it in connection with the transaction contemplated by this Agreement.
     NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY NEITHER PARTY SHALL HAVE
     ANY OBLIGATIONS WITH RESPECT TO THIS AGREEMENT, OR OTHERWISE IN CONNECTION
     HEREWITH, FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.

        (f) NO SALES TAXES.  No sales, transfer or similar tax will be collected
     at Closing from Buyer in connection with this transaction.  If, however,
     this transaction is later deemed to be subject to sales, transfer or
     similar tax, for any reason, Buyer agrees to be solely responsible, and
     shall indemnify and hold Seller (and its affiliates, and its and their
     directors, officers, employees, attorneys, contractors and agents)
     harmless, for any and all sales, transfer or other similar taxes (including
     related penalty, interest or legal costs) due by virtue of this transaction
     on the Properties transferred pursuant hereto and the Buyer shall remit
     such taxes at that time.  Seller and Buyer agree to cooperate with each
     other in demonstrating that the requirements for exemptions from such taxes
     have been met.

        (g) ENTIRE AGREEMENT.  This Agreement contains the entire understanding
     of the parties hereto with respect to subject matter hereof and supersedes
     all prior agreements, understandings, negotiations, and discussions among
     the parties with respect to such subject matter; provided that any
     Confidentiality Agreement executed by Buyer and Seller, or any
     representative of Seller, in connection with the transaction contemplated
     hereby remains in full force and effect and is not superseded or modified
     by this Agreement.

        (h) AMENDMENTS, WAIVERS.  This Agreement may be amended, modified,
     supplemented, restated or discharged (and provisions hereof may be waived)
     only by an instrument in writing signed by the party against whom
     enforcement of the amendment, modification, supplement, restatement or
     discharge (or waiver) is sought.

        (i) CHOICE OF LAW.  Without regard to principles of conflicts of law,
     this Agreement shall be construed and enforced in accordance with and
     governed by the laws of the state of Texas applicable to contracts made and
     to be performed entirely within such state and the laws of the United
     States of America, except that, to the extent that the law of a state in
     which a portion of the Properties is located (or which is otherwise

                                       27
<PAGE>

     applicable to a portion of the Properties) necessary governs, the law of
     such state shall apply as to that portion of the property located in (or
     otherwise subject to the laws of) such state.

        (j) HEADINGS, TIME OF ESSENCE, ETC.  The descriptive headings contained
     in this Agreement are for convenience only and shall not control or affect
     the meaning or construction of any provision of this Agreement.  Within
     this Agreement words of any gender shall be held and construed to cover any
     other gender, and words in the singular shall be held and construed to
     cover the plural, unless the context otherwise requires.  Time is of the
     essence in this Agreement.

        (k) NO ASSIGNMENT.  Prior to Closing, neither party shall have the right
     to assign its rights under this Agreement, without the prior written
     consent of the other party first having been obtained.

        (l) LIKE KIND EXCHANGE.  Seller may elect to structure this transaction
     as a like-kind exchange pursuant to Section 1031 of the Internal Revenue
     Code of 1986, as amended, and the regulations promulgated thereunder, with
     respect to any or all of the Properties (a "Like-Kind Exchange") at any
     time prior to the date of Closing.  In order to effect a Like-Kind
     Exchange, Buyer shall cooperate and do all acts as may be reasonably
     required or requested by Seller with regard to effecting the Like-Kind
     Exchange, including, but not limited to, permitting Seller to assign its
     rights under this Agreement to a qualified intermediary of Seller's choice
     in accordance with Treasury Regulation 1.1031(k)-1(g)(4) or executing
     additional escrow instructions, documents, agreements or instruments to
     effect an exchange; provided, however, Buyer shall incur no expense in
     connection with such Like-Kind Exchange, Buyer shall not be required to
     take title to any property other than the Properties in connection with the
     Like-Kind Exchange, and Buyer's possession of the Properties will not be
     delayed by reason of any such Like-Kind Exchange.

        (m) SUCCESSORS AND ASSIGNS.  Subject to the limitation on assignment
     contained in subsection (k) above, the Agreement shall be binding on and
     inure to the benefit of the parties hereto and their respective successors
     and assigns.

        (n) COUNTERPART EXECUTION.  This Agreement may be executed in
     counterparts, all of which are identical and all of which constitute one
     and the same instrument.  It shall not be necessary for Buyer and Seller to
     sign the same counterpart.

                                       28
<PAGE>

     IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above.

                    C.W. RESOURCES, INC.

                    By:
                       ------------------------------
                       Carl A. Westerman, President

                    WESTERMAN ROYALTY, INC.

                    By:
                       ------------------------------
                       Dawne W. Tadlock, President

                    ---------------------------------
                    Carl A. Westerman

                    3TEC ENERGY CORPORATION

                    By:
                       ------------------------------
                       Floyd C. Wilson
                       President and Chief Executive Officer

                                       29
<PAGE>

                         LIST OF SCHEDULES AND EXHIBITS

Schedules -  I   Wells and Units with WI & NRI and allocated price
             II  Disclosure Schedule
             III Conveyance Form

Exhibits  -  A   Property Descriptions
             B   Escrow Agreement
             C   PUD Locations Map<PAGE>
<TABLE>
<S>     <C>
                                             ------------------------------------------
[GRAPHIC]   LIFE INSURANCE                                                              APPLICATION PART 1A
                                                                                        (INSURANCE REQUEST FORM)

1   CONTRACT INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Merrill Lynch account number Policy applied for  | |  Merrill Lynch Investor Life-SM-  | |  Merrill Lynch Investor Life Plus-SM-

    --------------------------------------------------------------------------------------------------------------------------------

2   PROPOSED INSURED #1 INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Title (Mr., Mrs., etc.)  Full Name (first, middle initial, last)            Phone Number and best time to call       | | Home
                                                                                (   )                                    | | Work
    --------------------------------------------------------------------------------------------------------------------------------
    Address (permanent residence)                                      City                       State      Zip Code

    --------------------------------------------------------------------------------------------------------------------------------
    | | Male         Marital Status       Social Security Number       Birthdate (m/d/y)          Place of Birth (city, state)
    | | Female
    --------------------------------------------------------------------------------------------------------------------------------
    Occupation (duties)                                                Annual income              Net worth

    --------------------------------------------------------------------------------------------------------------------------------

3   PROPOSED INSURED #2 INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Title (Mr., Mrs., etc.)     Full Name (first, middle initial, last)         Phone Number and best time to call       | | Home
                                                                                (   )                                    | | Work
    --------------------------------------------------------------------------------------------------------------------------------
    Address (permanent residence)                                      City                       State      Zip Code

    --------------------------------------------------------------------------------------------------------------------------------
    | | Male         Marital Status       Social Security Number       Birthdate (m/d/y)          Place of Birth (city, state)
    | | Female
    --------------------------------------------------------------------------------------------------------------------------------
    Occupation (duties)                                                Annual income              Net worth

    --------------------------------------------------------------------------------------------------------------------------------
    Relationship to Proposed Insured #1

    --------------------------------------------------------------------------------------------------------------------------------

4   OWNER INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
     | | Proposed Insured #1     | | Proposed Insured #2     | | Both (JTWROS)     | | Trust     | | Corporation     | | Other
    --------------------------------------------------------------------------------------------------------------------------------
    Title (Mr., Mrs.,  etc.)    Full Name (first, middle initial, last)

    --------------------------------------------------------------------------------------------------------------------------------
    Address (permanent residence)                                     City                           State      Zip Code

    --------------------------------------------------------------------------------------------------------------------------------
    Social Security or Tax ID Number   U.S. Citizen? | | Yes  | | No  If No, indicate country of citizenship

    --------------------------------------------------------------------------------------------------------------------------------
    Birthdate or Date of Trust (m/d/y)         Relationship to Proposed Insured #1         Relationship to Proposed Insured #2

    --------------------------------------------------------------------------------------------------------------------------------

5   BENEFICIARY INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Primary (first, middle initial, last)                      Social Security or Tax ID Number       Birthdate (m/d/y)
                                                                                                                                 %
    --------------------------------------------------------------------------------------------------------------------------------
    Relationship to Proposed Insured #1                        Relationship to Proposed Insured #2

    --------------------------------------------------------------------------------------------------------------------------------
    Primary (first, middle initial, last)                      Social Security or Tax ID Number       Birthdate (m/d/y)
                                                                                                                                 %
    --------------------------------------------------------------------------------------------------------------------------------
    Relationship to Proposed Insured #1                        Relationship to Proposed Insured #2

    --------------------------------------------------------------------------------------------------------------------------------

6   REPLACEMENT INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Is any existing annuity or life insurance policy being (or has any policy been) surrendered, lapsed, converted, borrowed
    against or otherwise reduced in value or replaced in connection with the purchase of this policy? Is any such action likely to
    occur?
    If Yes, provide details below and in Section 14 if necessary.
    Proposed Insured #1 | | Yes   | | No                            Proposed Insured #2  | | Yes   | | No
    --------------------------------------------------------------------------------------------------------------------------------
    Name of Proposed Insured           Company                                    Policy number                   Issue date (m/y)

    --------------------------------------------------------------------------------------------------------------------------------
    Name of Proposed Insured           Company                                    Policy number                   Issue date (m/y)

    --------------------------------------------------------------------------------------------------------------------------------

     [LOGO] Merrill Lynch
     MERRILL LYNCH LIFE INSURANCE COMPANY
     LITTLE ROCK, ARKANSAS

A1023                                                                Page 1 of 3
                                                                        NEW 8/99
<PAGE>

7   LIFE INSURANCE IN FORCE AND APPLIED FOR
    --------------------------------------------------------------------------------------------------------------------------------
    Does the Proposed Insured(s) have other insurance policies in force?  If Yes, provide details below and in Section 14 if
    necessary.
    Proposed Insured #1 | | Yes   | | No                            Proposed Insured #2  | | Yes   | | No
    --------------------------------------------------------------------------------------------------------------------------------
    Has the Proposed Insured(s) applied for other insurance in the last 90 days?  If Yes, provide details below and in Section 14 if
    necessary.
    Proposed Insured #1 | | Yes   | | No                            Proposed Insured #2  | | Yes   | | No
    --------------------------------------------------------------------------------------------------------------------------------
    Name of Proposed Insured           Company                                    Policy number                   Issue date (m/y)

    --------------------------------------------------------------------------------------------------------------------------------
    Face amount                        Premium                       Purpose of insurance (e.g., business, personal, etc.)
    $                                  $
    --------------------------------------------------------------------------------------------------------------------------------
    Name of Proposed Insured           Company                                    Policy number                   Issue date (m/y)

    --------------------------------------------------------------------------------------------------------------------------------
    Face amount                        Premium                       Purpose of insurance (e.g., business, personal, etc.)
    $                                  $
    --------------------------------------------------------------------------------------------------------------------------------

8   POLICY INFORMATION
A   INVESTOR LIFE                                                     B  INVESTOR LIFE PLUS
    --------------------------------------------------------------------------------------------------------------------------------
    Initial payment                  Face amount (if specified)      Periodic payments (min. $4,000)  Number of years (min. seven)
    $                                $                               $
    --------------------------------------------------------------------------------------------------------------------------------
    Periodic payments (min. $2,000)  Number of years (max. five)     Face amount (if specified)       SPIAR (if Combination Plan)
    $                                $                               $                                $
    --------------------------------------------------------------------------------------------------------------------------------

9   PREMIUM PAYMENT INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Indicate how you would like to pay premiums     | | CMA Insurance Service     | | Check     | | 1035 Exchange
    --------------------------------------------------------------------------------------------------------------------------------
    Frequency of periodic payments  | | Annually  | | Semi-annually  | | Quarterly  | | Monthly (CMA Insurance Service or PAC only)
    --------------------------------------------------------------------------------------------------------------------------------

10  DOLLAR COST AVERAGING (DCA)
    --------------------------------------------------------------------------------------------------------------------------------
    Monthly transfer amount (minimum $100)                           Number of transfers (minimum 3 months)
    $
    --------------------------------------------------------------------------------------------------------------------------------

11  ALLOCATION INSTRUCTIONS
    --------------------------------------------------------------------------------------------------------------------------------
                                            PREMIUM         DCA                                                PREMIUM       DCA
            INVESTMENT DIVISIONS           ( $ OR %)     ( $ OR %)             INVESTMENT DIVISIONS           ( $ OR %)   ( $ OR %)
    --------------------------------------------------------------------------------------------------------------------------------
    --------------------------------------------------------------------------------------------------------------------------------
    --------------------------------------------------------------------------------------------------------------------------------
    --------------------------------------------------------------------------------------------------------------------------------
    --------------------------------------------------------------------------------------------------------------------------------
    --------------------------------------------------------------------------------------------------------------------------------
                                                                      TOTALS:
                                                                     ---------------------------------------------------------------

12  WRITTEN OR TELEPHONE INSTRUCTIONS
    --------------------------------------------------------------------------------------------------------------------------------
    You authorize us to accept written or telephone instructions from
      | | Your Merrill Lynch Financial Consultant on record     | | Another authorized person you designate below
    --------------------------------------------------------------------------------------------------------------------------------
    Full Name (first, middle initial, last) and Address

    --------------------------------------------------------------------------------------------------------------------------------
    You authorize us to accept written or telephone instructions regarding
      | | Reallocations     | | Partial withdrawals and loans directed to the Merrill Lynch account indicated in Section 1
    --------------------------------------------------------------------------------------------------------------------------------

13  TAX EQUITY AND FISCAL RESPONSIBILITY ACT NOTICE
    --------------------------------------------------------------------------------------------------------------------------------
      | | No income tax to be withheld     | | Income tax to be withheld _____% (use whole percentages)
    --------------------------------------------------------------------------------------------------------------------------------

14  COMMENTS
    --------------------------------------------------------------------------------------------------------------------------------

    --------------------------------------------------------------------------------------------------------------------------------

15  MERRILL LYNCH FINANCIAL CONSULTANT'S REPORT AND SIGNATURE
    --------------------------------------------------------------------------------------------------------------------------------
    Has a current prospectus been given to the Policy Owner(s)?     | | Yes     | | No
    --------------------------------------------------------------------------------------------------------------------------------
    To the best of your knowledge, is this policy replacing or changing an existing life insurance policy or annuity? | |Yes | |No
    --------------------------------------------------------------------------------------------------------------------------------
    By signing below the undersigned confirms that they believe the coverage is suitable, and the variable life insurance policy
    applied for and investment divisions selected meet the long-term life insurance needs, financial goals and investment
    objectives of the Policy Owner(s).
    --------------------------------------------------------------------------------------------------------------------------------
     Print name                                       Signature                                          Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

A1023                                                                Page 2 of 3
                                                                        NEW 8/99
<PAGE>

                                             ------------------------------------------
[GRAPHIC]   LIFE INSURANCE                                                              APPLICATION PART 1B

16  ACKNOWLEDGEMENT AND AGREEMENT
    You have read the above and represent the answers to the questions are complete and true to the best of your knowledge and may
    be relied upon when deciding to issue your policy. A copy of this application shall be attached to and made part of the policy.
    Unless otherwise provided by a Temporary Insurance Agreement, your policy will take effect when the initial premium is paid, as
    long as:
    -  The information in the application continues to be complete and true, and
    -  The Proposed Insured(s) is still living and in the same health as stated in the application.

    We may make a correction to the application in Section 18, but will not change the plan, benefits applied for, amount of
    insurance, age at issue or underwriting class unless you agree to the change in writing. If there are any changes, you approve
    them when you accept the policy. No other changes may be made. Our rights or requirements cannot be modified or waived by any
    registered representative or examiner.

    You have received a copy of the current Prospectus and determined that the variable life insurance policy applied for meets
    your long-term life insurance needs, financial goals and investment objectives. You understand that:
    -  The investment base, cash surrender value and death benefit may increase or decrease depending on the performance of the
       various investment divisions you choose, and
    -  Your investment base and cash surrender value are not guaranteed and could be less than the premiums you paid even if you
       make no withdrawals or loans, and
    -  The death benefit of your policy will never be less than the face amount and the duration of the policy will never be less
       than the Guarantee Period (unless policy debt exceeds certain policy values).

    --------------------------------------------------------------------------------------------------------------------------------
     CERTIFICATION

    --------------------------------------------------------------------------------------------------------------------------------
         Under penalty of perjury you certify that:
    1.   Your Social Security or Tax ID Number(s) indicated in Sections 4, and 14 is correct.
    2.   You are not subject to backup withholding. (You are required to cross out this statement if you have been notified by the
         IRS that you are subject to backup withholding.)
    The IRS does not require your consent to any provision of this document other than the certification required to avoid backup
    withholding.
    --------------------------------------------------------------------------------------------------------------------------------

    OWNER'S SIGNATURE(S)
    Your signature below represents that you have read, understand and agree to the information provided above.
    --------------------------------------------------------------------------------------------------------------------------------
    Print name of Owner                               Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------
    Print name of Co-owner                            Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

17  AUTHORIZATION
    I authorize any physician, hospital, clinic, health care provider, institution, organization or person who has information
    about me or my minor children who are to be insured by this policy, including insurance companies and the Medical Information
    Bureau Inc., to give that information to Merrill Lynch Life Insurance Company. This includes information that is not
    health-related. If the record contains information relating to alcohol or drug abuse or mental health care, sufficient
    information is to be released to accomplish the purpose for which it is requested. The information will be used for risk
    evaluation, administration of claims and implementation of policy provisions and insurance statistical studies. It may be
    re-disclosed to reinsurers, to other life or health insurance companies to which I apply, and as required by law. I also
    authorize Merrill Lynch Life Insurance Company to obtain consumer investigative reports about me or my minor children to be
    insured by this policy. This authorization is valid for 2 1/2 years from the date I sign below. A photocopy of this document is
    valid as an original.

    PROPOSED INSURED'S SIGNATURE(S)
    Your signature below represents that you have read, understand and agree to the information provided in Sections 2, 3, 6, 7,
    and 17 and you acknowledge receipt of the Fair Credit Reporting Act Notice and MIB Notice.
    --------------------------------------------------------------------------------------------------------------------------------
    Print name of Proposed Insured #1                 Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------
    Print name of Proposed Insured #2                 Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

18  CORRECTIONS (COMPANY USE ONLY - NOT APPLICABLE IN PENNSYLVANIA AND WEST VIRGINIA)
    --------------------------------------------------------------------------------------------------------------------------------

    --------------------------------------------------------------------------------------------------------------------------------

A1023                                                                Page 3 of 3
                                                                        NEW 8/99
<PAGE>

                                             ------------------------------------------
[GRAPHIC]   LIFE INSURANCE                                                              APPLICATION PART 2

    --------------------------------------------------------------------------------------------------------------------------------
    INSTRUCTIONS

    Complete this form when applying for or requesting a change to a policy issued by Merrill Lynch Life Insurance Company. The
    terms "you" and "your" refer to the Proposed Insured. The terms "we", "our" and "us" refer to Merrill Lynch Life Insurance
    Company. Each Proposed Insured must complete a separate form.
    OUR ADDRESS: Merrill Lynch Variable Life Service Center, P.O. Box 9025, Springfield, MA 01102-9025

1   PROPOSED INSURED INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
    Title (Mr., Mrs.,  etc.)     Full Name (first, middle initial, last)                               Date of Birth (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------
    Social Security or Tax ID Number                                 Driver's License (state, number)

    --------------------------------------------------------------------------------------------------------------------------------
    Name of Personal Physician or Health Care Facility                                                           | | None

    --------------------------------------------------------------------------------------------------------------------------------
    Address                                                          City                      State             Zip Code

    --------------------------------------------------------------------------------------------------------------------------------

2   DURING THE PAST 10 YEARS, HAVE YOU CONSULTED A HEALTH PROFESSIONAL REGARDING:            IF YES, PROVIDE DETAILS IN SECTION 16
    --------------------------------------------------------------------------------------------------------------------------------
    a)  Chest pain, coronary artery disease or disorder of any other arteries?                           | | Yes     | | No
    b)  Heart murmur, irregular heart beat or any other disorder of the heart?                           | | Yes     | | No
    c)  High blood pressure, stroke or transient ischemic attack?                                        | | Yes     | | No

3   DURING THE PAST 10 YEARS, HAVE YOU CONSULTED A HEALTH PROFESSIONAL REGARDING:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  A cancer, tumor, skin cancer, lymphoma or leukemia?                                              | | Yes     | | No
    b)  Diabetes, elevated blood sugar or disorder of pancreas or thyroid gland?                         | | Yes     | | No
    c)  Depression, anxiety, bipolar disorder, or any other psychiatric disorder?                        | | Yes     | | No

4   DURING THE PAST 10 YEARS, HAVE YOU CONSULTED A HEALTH PROFESSIONAL REGARDING:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  The use of alcohol or has a health professional recommended limiting or stopping use?            | | Yes     | | No
    b)  Excessive use or abuse of drugs of any kind?                                                     | | Yes     | | No

5   DURING THE PAST 5 YEARS, HAVE YOU CONSULTED A HEALTH PROFESSIONAL REGARDING:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  Seizures, paralysis, loss of consciousness or any loss of memory or mental capacity?             | | Yes     | | No
    b)  Asthma, chronic obstructive pulmonary disease, emphysema, pneumonia or other lung disorder?      | | Yes     | | No
    c)  Any disorder of the bladder, urinary tract or kidneys?                                           | | Yes     | | No

6   DURING THE PAST 5 YEARS, HAVE YOU CONSULTED A HEALTH PROFESSIONAL REGARDING:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  A liver disorder including jaundice, cirrhosis and hepatitis?                                    | | Yes     | | No
    b)  Any bowel disease including Crohn's disease and ulcerative colitis?                              | | Yes     | | No
    c)  Gastrointestinal bleeding or other disorder of the stomach or esophagus?                         | | Yes     | | No

7   DURING THE PAST 5 YEARS, HAVE YOU CONSULTED A HEALTH PROFESSIONAL REGARDING:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  Arthritis or any disorder of the bones, muscles or joints?                                       | | Yes     | | No
    b)  Allergies, anemia or increased or decreased numbers of blood cells or platelets?                 | | Yes     | | No
    c)  Medically diagnosed Acquired Immune Deficiency (AIDS) or medically diagnosed HIV infection?      | | Yes     | | No

8   DURING THE PAST 1 YEAR, HAVE YOU:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  Been admitted to a hospital or health care facility?                                             | | Yes     | | No
    b)  Had diagnostic tests including X-rays, electrocardiograms or blood tests?                        | | Yes     | | No
    c)  Been advised to have surgery or treatment or testing which has not yet been completed?           | | Yes     | | No

9   DURING THE PAST 1 YEAR, HAVE YOU:
    --------------------------------------------------------------------------------------------------------------------------------
    a)  Received other medical treatment or consultation not listed above?                               | | Yes     | | No
    b)  Had weight loss of greater than 10 lbs.?                                                         | | Yes     | | No
    c)  Smoked cigarettes, used tobacco or used a product containing nicotine?                           | | Yes     | | No

10  DO YOU CURRENTLY TAKE ANY MEDICATIONS AT LEAST WEEKLY (OTHER THAN CONTRACEPTIVES)?                   | | Yes     | | No
    If Yes, list medications in Section 16.

     [LOGO] Merrill Lynch
     MERRILL LYNCH LIFE INSURANCE COMPANY
     LITTLE ROCK, ARKANSAS

A1024                                                                Page 1 of 2
                                                                        NEW 8/99
<PAGE>

                                             ------------------------------------------
[GRAPHIC]   LIFE INSURANCE                                                              APPLICATION PART 2

11  DURING THE PAST 3 YEARS:                                                              IF YES, PROVIDE DETAILS IN SECTION 16
    --------------------------------------------------------------------------------------------------------------------------------
    a)  Were you a pilot or student pilot or did you participate in soaring?                             | | Yes     | | No
    b)  Did you participate in scuba diving, vehicle racing, sky diving, hang gliding or mountain        | | Yes     | | No
        climbing?
    c)  Have you had any motor vehicle accidents or violations, or had your drivers license suspended?   | | Yes     | | No

12  DO YOU PLAN TO TRAVEL OR RESIDE OUTSIDE THE USA OR CANADA IN THE NEXT TWO YEARS?                     | | Yes     | | No

13  HAVE YOU EVER BEEN REFUSED LIFE INSURANCE OR ASKED TO PAY HIGHER PREMIUMS FOR A RATED POLICY?        | | Yes     | | No

14  FAMILY HISTORY:
                           ---------------------------------------------------------------------------------------------------------
                            Current Age(s)  Details of Health (include age at disease onset)  Age at Death        Cause of Death
    --------------------------------------------------------------------------------------------------------------------------------
     Father
    --------------------------------------------------------------------------------------------------------------------------------
     Mother
    --------------------------------------------------------------------------------------------------------------------------------
     Brother(s) & Sister(s)
    --------------------------------------------------------------------------------------------------------------------------------

                   ---------------------------------------------------------
15 WHAT IS YOUR:    Height?                  Weight?
                   ---------------------------------------------------------

16  IF YOU ANSWERED YES TO QUESTION(S) 2 - 13, PROVIDE DETAILS BELOW.  IF ADDITIONAL SPACE IS REQUIRED, USE SUPPLEMENT TO
    APPLICATION PART 2.
    --------------------------------------------------------------------------------------------------------------------------------
     Question    Details or Name of Medication                                            Name and Address of Physician
    --------------------------------------------------------------------------------------------------------------------------------

    --------------------------------------------------------------------------------------------------------------------------------

17  ACKNOWLEDGMENT AND AGREEMENT
    You have read the questions and answers on this application and any Supplement to Application Part 2, and represent that they
    are complete and true to the best of your knowledge and may be relied upon when deciding whether to issue the policy. A copy of
    this application and the Supplement to Application Part 2, if applicable, shall be attached to and made part of the policy.
    Unless otherwise provided by a Temporary Insurance Agreement, the policy will take effect when the initial premium is paid, as
    long as:
    -   The information in the application continues to be complete and true, and
    -   The Proposed Insured(s) is still living and in the same health as stated in the application.
    You agree to tell us if your health or habits change from what you stated here, before the policy is issued and the first
    premium is paid. Our rights or requirements cannot be modified or waived by any registered representative or examiner.

    PROPOSED INSURED'S SIGNATURE
    --------------------------------------------------------------------------------------------------------------------------------
    Print name                                        Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

18  WITNESS'S SIGNATURE
    --------------------------------------------------------------------------------------------------------------------------------
    Print name                                        Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

A1025                                                                Page 2 of 2
                                                                        NEW 8/99
<PAGE>

                                             ------------------------------------------
[GRAPHIC]   LIFE INSURANCE                                                              SUPPLEMENT TO
                                                                                        APPLICATION PART 2

     PROPOSED INSURED INFORMATION
    --------------------------------------------------------------------------------------------------------------------------------
     Title (Mr., Mrs., etc.)     Full Name (first, middle initial, last)                                  Date of Birth (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

    --------------------------------------------------------------------------------------------------------------------------------
     Question    Details or Name of Medication                                            Name and Address of Physician
    --------------------------------------------------------------------------------------------------------------------------------

    --------------------------------------------------------------------------------------------------------------------------------

     PROPOSED INSURED'S SIGNATURE
    --------------------------------------------------------------------------------------------------------------------------------
     Print name                                        Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

     WITNESS'S SIGNATURE
    --------------------------------------------------------------------------------------------------------------------------------
     Print name                                        Signature                                         Date (m/d/y)

    --------------------------------------------------------------------------------------------------------------------------------

     [LOGO] Merrill Lynch
     MERRILL LYNCH LIFE INSURANCE COMPANY
     LITTLE ROCK, ARKANSAS

A1025                                                                Page 1 of 1
                                                                        NEW 8/99
<PAGE>

                                             ------------------------------------------
[GRAPHIC]   LIFE INSURANCE                                                              TEMPORARY
                                                                                        INSURANCE AGREEMENT

The terms "you" and "your" refer to the Policy Owner(s).  The terms "we", "our" and "us" refer to Merrill Lynch Life
Insurance Company.

1   ELIGIBILITY
    Complete this form if you are paying a premium with your application, either from your CMA account or by check. Please do not
    include this agreement with your application if:
    -   The initial premium exceeds $300,000 or the face amount exceeds $1,000,000, or
    -   Either question in Section 4 is answered Yes, or is left unanswered

2   OUR ACKNOWLEDGEMENT
    We acknowledge that we have received the initial premium indicated in Section 4 below. We agree to provide coverage under this
    Temporary Insurance Agreement subject to the information in Sections 3A, 3B, 3C and 4 of this agreement, and the terms of the
    policy applied for.

3A  COVERAGE PROVIDED
    If the Proposed Insured(s) dies while this agreement is in effect, the beneficiary(s) named in the Application Part 1 will
    receive the lower of $300,000, or the face amount of the policy you have applied for. If we have issued more than one Temporary
    Insurance Agreement to you, the total coverage will not exceed $300,000. The payment, along with any premium you paid for
    coverage over $300,000, will be divided equally among the beneficiaries named in the Application Part 1.

3B  COVERAGE PERIOD
    Coverage begins on the later of the following:
    -   The day you give us your application and your permission to transfer funds in a form satisfactory to us, or
    -   The day you give us your application and pay your initial premium.

    Coverage ends on the earliest of the following:
    -   The day you accept your policy, or
    -   The day you call us or write us, asking us to cancel or withdraw the application, or
    -   The day we refund your premium to you for any reason, or
    -   The day we offer you a policy other than the one you applied for, or
    -   Five days after we mail a notice telling you that your policy has not been approved, or
    -   90 days from the day coverage began.

3C  COVERAGE LIMITATIONS
    The Proposed Insured(s) will not be covered by this Temporary Insurance Agreement if:
    -   Your bank does not honor your check, or
    -   Funds are not available to cover the full amount of the initial premium when we request a transfer from your account, or
    -   The Proposed Insured(s) does not answer the questions in Section 4 truthfully, or
    -   The Proposed Insured(s) commits suicide while this Temporary Insurance Agreement is in effect.

4   PROPOSED INSURED(S) INFORMATION
   --------------------------------------------------------------------------------------------------------------------------------
    Initial premium                                                   Face amount
    $                                                                 $
   --------------------------------------------------------------------------------------------------------------------------------
    IS THE PROPOSED INSURED(S) OVER THE AGE OF 75?
    Proposed Insured #1 | | Yes   | | No                             Proposed Insured #2  | | Yes   | | No
   --------------------------------------------------------------------------------------------------------------------------------
    DURING THE LAST TWO YEARS, HAS THE PROPOSED INSURED(S) BEEN TREATED FOR HEART DISEASE, STROKE, CANCER, OR HIV INFECTION?
    Proposed Insured #1 | | Yes   | | No                             Proposed Insured #2  | | Yes   | | No
   --------------------------------------------------------------------------------------------------------------------------------

5   PROPOSED INSURED'S SIGNATURE(S)
   --------------------------------------------------------------------------------------------------------------------------------
    Print name of Proposed Insured #1                 Signature                                         Date (m/d/y)

   --------------------------------------------------------------------------------------------------------------------------------
    Print name of Proposed Insured #2                 Signature                                         Date (m/d/y)

   --------------------------------------------------------------------------------------------------------------------------------

6   FINANCIAL CONSULTANT'S SIGNATURE
   --------------------------------------------------------------------------------------------------------------------------------
    Print name                                        Signature                                         Date (m/d/y)

   --------------------------------------------------------------------------------------------------------------------------------

This is a two-part form. You keep the original and we keep a duplicate.

[LOGO] Merrill Lynch                    /s/ Anthony J. Vespa
MERRILL LYNCH LIFE INSURANCE COMPANY
LITTLE ROCK, ARKANSAS                   ANTHONY J. VESPA, PRESIDENT

A1025                                                                Page 1 of 1
                                                                        NEW 8/99
</TABLE>

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