Document:

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                                                                  EXHIBIT 10.26

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of February 26, 2004 (the "EFFECTIVE DATE") among Continental
Southern Resources, Inc., a Nevada corporation (the "COMPANY"), the parties set
forth Exhibit A hereto (each, a "PURCHASER" and collectively, the "PURCHASERS"),
and the parties set forth on the signature page.

                                                 R E C I T A L S:

         A. The Purchasers have purchased shares of the Company's Common Stock
(as defined below) pursuant to Subscription Agreements (each, a "SUBSCRIPTION
AGREEMENT" and collectively, the "SUBSCRIPTION AGREEMENTS") by and between the
Company and each Purchaser.

         B. The Company has issued a warrant (the "WARRANT") to purchase shares
of the Company's Common Stock to Sanders Morris Harris Inc., a Texas corporation
("SMH").

         C. Lancer Offshore, Inc., an international business company organized
under the laws of the British Virgin Islands, and Lancer Partners, LP, a
Connecticut limited partnership (together, "LANCER"), own shares of the
Company's Common Stock.

         D. The Company, the Purchasers, SMH, and Lancer desire to set forth the
registration rights to be granted by the Company to the Purchasers, SMH, and
Lancer.

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, and conditions set forth herein, in the
Subscription Agreements, or otherwise, the parties mutually agree as follows:

                                                A G R E E M E N T:

         1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:

         "Blackout Period" means, with respect to a registration, a period in
each case commencing on the day immediately after the Company notifies the
Purchasers, SMH, and Lancer that they are required, pursuant to Section 4(f), to
suspend offers and sales of Registrable Securities during which the Company, in
the good faith judgment of its Board of Directors, determines (because of the
existence of, or in anticipation of, any acquisition, financing activity, or
other transaction involving the Company, or the unavailability for reasons
beyond the Company's control of any required financial statements, disclosure of
information which is in its best interest not to publicly disclose, or any other
event or condition of similar significance to the Company) that the registration
and distribution of the Registrable Securities to be covered by such
registration statement, if any, would be seriously detrimental to the Company
and its shareholders and ending on the earlier of (1) the date upon which the
material non-public information commencing the Blackout Period is disclosed to
the public or ceases to be material and (2) such time as the Company notifies
the selling Holders that the Company will no longer

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delay such filing of the Registration Statement, recommence taking steps to make
such Registration Statement effective, or allow sales pursuant to such
Registration Statement to resume; provided, however, that (a) the Company shall
limit its use of Blackout Periods, in the aggregate, to 60 Trading Days in any
12-month period and (b) no Blackout Period may commence sooner than 60 days
after the end of a prior Blackout Period.

         "Business Day" means any day of the year, other than a Saturday,
Sunday, or other day on which the Commission is required or authorized to close.

         "Closing Date" means February 26, 2004, or such other time as is
mutually agreed between the Company and the Purchasers for the closing of the
sale referred to in Recital A above.

         "Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

         "Common Stock" means the common stock, par value $.001 per share, of
the Company and any and all shares of capital stock or other equity securities
of: (i) the Company which are added to or exchanged or substituted for the
Common Stock by reason of the declaration of any stock dividend or stock split,
the issuance of any distribution or the reclassification, readjustment,
recapitalization or other such modification of the capital structure of the
Company; and (ii) any other corporation, now or hereafter organized under the
laws of any state or other governmental authority, with which the Company is
merged, which results from any consolidation or reorganization to which the
Company is a party, or to which is sold all or substantially all of the shares
or assets of the Company, if immediately after such merger, consolidation,
reorganization or sale, the Company or the stockholders of the Company own
equity securities having in the aggregate more than 50% of the total voting
power of such other corporation.

         "Equity Securities" means (i) any Common Stock, (ii) any security
convertible, with or without consideration, into any Common Stock (including any
option to purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase any Common Stock, or (iv) any such
warrant or right.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.

         "Family Member" means (a) with respect to any individual, such
individual's spouse, any descendants (whether natural or adopted), any trust all
of the beneficial interests of which are owned by any of such individuals or by
any of such individuals together with any organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any
such individual, and any corporation, association, partnership or limited
liability company all of the equity interests of which are owned by those above
described individuals, trusts or organizations and (b) with respect to any
trust, the owners of the beneficial interests of such trust.

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         "Form S-1" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the Commission, which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the Commission.

         "Form S-3" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the Commission, which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the Commission.

         "Holder" means each Purchaser, SMH, Lancer, or any successor or
Permitted Assignee of a Purchaser, SMH, or Lancer who acquire rights in
accordance with this Agreement with respect to the Registrable Securities
directly or indirectly from a Purchaser, SMH, or Lancer, including from any
Permitted Assignee.

         "Inspector" means any attorney, accountant, or other agent retained by
a Purchaser for the purposes provided in Section 4(j).

         "Offering Price" means the Offering Price set forth in the Placement
Agent Agreement dated January 23, 2004, between the Company and SMH.

         "Permitted Assignee" means (a) with respect to a partnership, its
partners or former partners in accordance with their partnership interests, (b)
with respect to a corporation, its shareholders in accordance with their
interest in the corporation, (c) with respect to a limited liability company,
its members or former members in accordance with their interest in the limited
liability company, (d) with respect to an individual party, any Family Member of
such party, (e) an entity that is controlled by, controls, or is under common
control with a transferor, or (f) a party to this Agreement.

         The terms "register," "registered," and "registration" refers to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

         "Registrable Securities" means (i) shares of Common Stock issued to
each Purchaser pursuant to the Subscription Agreements (ii) shares of Common
Stock issued or issuable to SMH pursuant to the Warrant, and (ii) 2,000,000
shares of Common Stock owned by Lancer, but in each case excluding (A) any
Registrable Securities that have been publicly sold or may be publicly sold
immediately without registration under the Securities Act either pursuant to
Rule 144 of the Securities Act or otherwise; (B) any Registrable Securities sold
by a person in a transaction pursuant to a registration statement filed under
the Securities Act or (C) any Registrable Securities that are at the time
subject to an effective registration statement under the Securities Act.

         "Registration Statement" means the registration statement required to
be filed by the Company pursuant to Section 3(a).

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         "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute promulgated in replacement thereof, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.

         "SEC Effective Date" means the date the Registration Statement is
declared effective by the Commission.

         "Trading Day" means a day on whichever (a) the national securities
exchange, (b) the Nasdaq Stock Market, or (c) such other securities market, in
any such case which at the time constitutes the principal securities market for
the Common Stock, is open for general trading of securities.

         2. Term. This Agreement shall continue in full force and effect for a
period of two (2) years from the Effective Date, unless terminated sooner
hereunder.

         3. Registration.

         (a) Registration on Form S-1 or S-3. As promptly as reasonably
practicable after the date hereof, but in any event not later than 180 days
after the Closing Date (the "REGISTRATION FILING DATE"), the Company shall file
with the Commission a shelf registration statement on Form S-1 or, if the
Company is eligible to use such form, Form S-3 relating to the resale by the
Holders of all of the Registrable Securities; provided, however, that the
Company shall not be obligated to effect any such registration, qualification,
or compliance pursuant to this Section 3(a), or keep such registration effective
pursuant to Section 4: (i) in any particular jurisdiction in which the Company
would be required to qualify to do business as a foreign corporation or as a
dealer in securities under the securities or blue sky laws of such jurisdiction
or to execute a general consent to service of process in effecting such
registration, qualification or compliance, in each case where it has not already
done so; or (ii) during any Blackout Period, in which case the Registration
Filing Date shall be extended to the date immediately following the last day of
such Blackout Period.

         (b) Piggyback Registration. If prior to the date that the Company files
a registration pursuant to Section 3(a), the Company shall determine to register
for sale for cash any of its Common Stock, for its own account or for the
account of others (other than the Holders), other than (i) a registration
relating solely to employee benefit plans or securities issued or issuable to
employees, consultants (to the extent the securities owned or to be owned by
such consultants could be registered on Form S-8) or any of their Family Members
(including a registration on Form S-8), (ii) a registration relating solely to a
Commission Rule 145 transaction, a registration on Form S-4 in connection with a
merger, acquisition, divestiture, reorganization, or similar event, or (iii) a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities that are also being registered, the
Company shall promptly give to the Holders written notice thereof (and in no
event shall such notice be given less than 20 calendar days prior to the filing
of such registration statement), and shall, subject to Section 3(c), include in
such registration (and any related qualification under blue sky laws or other
compliance) (a "PIGGYBACK REGISTRATION"), all of the Registrable Securities
specified in a written request or requests, made within 10 calendar days after
receipt of such written notice

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from the Company, by any Holder or Holders. However, the Company may, without
the consent of the Holders, withdraw such registration statement prior to its
becoming effective if the Company or such other shareholders have elected to
abandon the proposal to register the securities proposed to be registered
thereby.

         (c) Underwriting. If a Piggyback Registration is for a registered
public offering involving an underwriting, the Company shall so advise the
Holders in writing or as a part of the written notice given pursuant to Section
3(b). In such event the right of any Holder to registration pursuant to Section
3(b) shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and any other
shareholders of the Company distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company or
selling shareholders, as applicable. Notwithstanding any other provision of this
Section 3(c), if the underwriter or the Company determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may exclude some or all Registrable Securities from such
registration and underwriting. The Company shall so advise all Holders (except
those Holders who failed to timely elect to distribute their Registrable
Securities through such underwriting or have indicated to the Company their
decision not to do so), and the number of shares of Registrable Securities that
may be included in the registration and underwriting, if any, shall be allocated
among such Holders as follows:

               (i) In the event of a Piggyback Registration that is initiated by
         the Company, the number of shares that may be included in the
         registration and underwriting shall be allocated first to the Company
         and then, subject to obligations and commitments existing as of the
         date hereof, to all selling shareholders, including the Holders, who
         have requested to sell in the registration on a pro rata basis
         according to the number of shares requested to be included; and

              (ii) In the event of a Piggyback Registration that is initiated
         by the exercise of demand registration rights by a shareholder or
         shareholders of the Company (other than the Holders), then the number
         of shares that may be included in the registration and underwriting
         shall be allocated first to such selling shareholders who exercised
         such demand and then, subject to obligations and commitments existing
         as of the date hereof, to all other selling shareholders, including the
         Holders, who have requested to sell in the registration, on a pro rata
         basis according to the number of shares requested to be included.

         No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities and/or other securities so withdrawn
from such underwriting shall also be withdrawn from such registration; provided,
however, that, if by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Holders may be included in such
registration (up to the

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maximum of any limitation imposed by the underwriters), then the Company shall
offer to all Holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities pursuant to
the terms and limitations set forth herein in the same proportion used above in
determining the underwriter limitation.

         4. Registration Procedures. In the case of each registration,
qualification, or compliance effected by the Company pursuant to Section 3
hereof, the Company will keep each Holder including securities therein
reasonably advised in writing (which may include e-mail) as to the initiation of
each registration, qualification, and compliance and as to the completion
thereof. With respect to any registration statement filed pursuant to Section 3,
the Company will use its commercially reasonable best efforts to:

         (a) prepare and file with the Commission with respect to such
Registrable Securities, a registration statement on Form S-1, Form S-3, or any
other form for which the Company then qualifies or which counsel for the Company
shall deem appropriate, and which form shall be available for the sale of the
Registrable Securities in accordance with the intended method(s) of distribution
thereof, and use its commercially reasonable efforts to cause such registration
statement to become and remain effective at least for a period ending with the
first to occur of (i) the sale of all Registrable Securities covered by the
registration statement, (ii) the availability under Rule 144 for the Holder to
immediately, freely resell without restriction all Registrable Securities
covered by the registration statement, (iii) one year after a registration
statement filed pursuant to Section 3(a) is declared effective by the Commission
(provided, however, that if the Company files a registration Form S-1 and
subsequently becomes eligible to use Form S-3, it may file a post-effective
amendment to such Form S-1 on Form S-3 prior to the end of such period and use
its best efforts to cause such registration statement as amended to become
effective until the end of such one-year period), or (iv) 90 days after a
Piggyback Registration is declared effective by the Commission (in either case,
the "EFFECTIVENESS PERIOD"); provided, however, if at the end of such one-year
period, any Holder is not able to immediately, freely resell all Registrable
Securities that it owns, the Effectiveness Period shall continue until
terminated pursuant to clause (i) or (ii)(but in no event, more than two years
after the SEC Effective Date); and provided that no later than two business days
before filing with the Commission a registration statement or prospectus or any
amendments or supplements thereto, the Company shall (i) furnish to (A) one
special counsel ("HOLDERS COUNSEL") selected by the Company for the benefit of
the Holders (which Holders Counsel initially shall be John T. Unger of Thompson
& Knight LLP, Houston, Texas) and David E. Wells of Hunton & Williams, LLP,
counsel to Lancer, copies of all such documents proposed to be filed (excluding
any exhibits other than applicable underwriting documents), in substantially the
form proposed to be filed, which documents shall be subject to the review of
such Holders Counsel, and (ii) notify each Holder of Registrable Securities
covered by such registration statement of any stop order issued or threatened by
the Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered;

         (b) if a registration statement is subject to review by the Commission,
promptly respond to all comments and diligently pursue resolution of any
comments to the satisfaction of the Commission;

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         (c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
during the Effectiveness Period (but in any event at least until expiration of
the 90-day period referred to in Section 4(3) of the Securities Act and Rule
174, or any successor thereto, thereunder, if applicable), and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended method(s) of disposition by the sellers thereof set
forth in such registration statement;

         (d) furnish, without charge, to each Holder of Registrable Securities
covered by such registration statement (i) a reasonable number of copies of such
registration statement (including any exhibits thereto other than exhibits
incorporated by reference), each amendment and supplement thereto as such Holder
may request, (ii) such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any other
prospectus filed under Rule 424 under the Securities Act) as such Holders may
request, in conformity with the requirements of the Securities Act, and (iii)
such other documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Holder,
but only during the Effectiveness Period;

         (e) use its commercially reasonable best efforts to register or qualify
such Registrable Securities under such other applicable securities or blue sky
laws of such jurisdictions as any Holder of Registrable Securities covered by
such registration statement reasonably requests as may be necessary for the
marketability of the Registrable Securities (such request to be made by the time
the applicable registration statement is deemed effective by the Commission) and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder; provided that
the Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (e), (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;

         (f) as promptly as practicable after becoming aware of such event,
notify each Holder of such Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event which comes to the Company's attention if as a result of
such event the prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and the Company shall promptly prepare and furnish to such Holder a supplement
or amendment to such prospectus (or prepare and file appropriate reports under
the Exchange Act) so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, unless suspension of
the use of such prospectus otherwise is authorized herein or in the event of a
Blackout Period, in which case no supplement or amendment need be furnished (or
Exchange Act filing made) until the termination of such suspension or Blackout
Period;

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         (g) comply, and continue to comply during the period that such
registration statement is effective under the Securities Act, in all material
respects with the Securities Act and the Exchange Act and with all applicable
rules and regulations of the Commission with respect to the disposition of all
securities covered by such registration statement, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first full calendar month after the SEC Effective Date, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.

         (h) as promptly as practicable after becoming aware of such event,
notify each Holder of Registrable Securities being offered or sold pursuant to
the Registration Statement of the issuance by the Commission of any stop order
or other suspension of effectiveness of the Registration Statement at the
earliest possible time;

         (i) permit the Holders of Registrable Securities being included in the
Registration Statement and their legal counsel, at such Holders' sole cost and
expense (except as otherwise specifically provided in Section 6) to review and
have a reasonable opportunity to comment on the Registration Statement and all
amendments and supplements thereto at least two Business Days prior to their
filing with the Commission;

         (j) make available for inspection by any Holder and any Inspector
retained by such Holder, at such Holder's sole expense, all Records as shall be
reasonably necessary to enable such Holder to exercise its due diligence
responsibility, and cause the Company's officers, directors, and employees to
supply all information which such Holder or any Inspector may reasonably request
for purposes of such due diligence; provided, however, that such Holder shall
hold in confidence and shall not make any disclosure of any record or other
information which the Company determines in good faith to be confidential, and
of which determination such Holder is so notified at the time such Holder
receives such information, unless (i) the disclosure of such record is necessary
to avoid or correct a misstatement or omission in the Registration Statement and
a reasonable time prior to such disclosure the Holder shall have informed the
Company of the need to so correct such misstatement or omission and the Company
shall have failed to correct such misstatement of omission, (ii) the release of
such record is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction or (iii) the information in such
record has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such records to any Inspector until
and unless such Inspector shall have entered into a confidentiality agreement
with the Company with respect thereto, substantially in the form of this Section
4(j), which agreement shall permit such Inspector to disclose records to the
Holder who has retained such Inspector. Each Holder agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning a Holder provided to
the Company pursuant to this Agreement unless (i) disclosure of such information
is necessary to comply with federal or state securities laws, (ii) disclosure of
such

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information to the Staff of the Division of Corporation Finance is necessary to
respond to comments raised by the Staff in its review of the Registration
Statement, (iii) disclosure of such information is necessary to avoid or correct
a misstatement or omission in the Registration Statement, (iv) release of such
information is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction, or (v) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning a Holder is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Holder and allow such Holder, at such Holder's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information;

         (k) use its best efforts to cause all the Registrable Securities
covered by the Registration Statement to be listed or quoted on the principal
securities market on which securities of the same class or series issued by the
Company are then listed or traded;

         (l) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities at all times;

         (m) cooperate with the Holders of Registrable Securities being offered
pursuant to the Registration Statement to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts as the Holders
may reasonably request and registered in such names as the Holders may request;
and

         (n) take all other reasonable actions necessary to expedite and
facilitate disposition by the Holders of the Registrable Securities pursuant to
the Registration Statement.

         5. Suspension of Offers and Sales. Each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(f) hereof or of the
commencement of an Blackout Period, such Holder shall discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4(f) hereof or notice
of the end of the Blackout Period, and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company's expense) all copies
(including, without limitation, any and all drafts), other than permanent file
copies, then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period mentioned in Section
4(a)(iii) hereof shall be extended by the greater of (i) ten business days or
(ii) the number of days during the period from and including the date of the
giving of such notice pursuant to Section 4(f) hereof to and including the date
when each Holder of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 4(f) hereof.

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         6. Registration Expenses. The Company shall pay all expenses in
connection with any registration, including, without limitation, all
registration, filing, stock exchange and NASD fees, printing expenses, all fees
and expenses of complying with securities or blue sky laws, the fees and
disbursements of counsel for the Company and of its independent accountants, and
the reasonable fees and disbursements of a Holders Counsel; provided that, in
any underwritten registration, each party shall pay for its own underwriting
discounts and commissions and transfer taxes. Except as provided above in this
Section 6 and Section 10, the Company shall not be responsible for the expenses
of any attorney or other advisor employed by a Holder of Registrable Securities.

         7.       Preemptive Rights.

         (a) Subsequent Offerings. In the event the Company issues and sells
Equity Securities other than the Equity Securities excluded by Section 7(e)
hereof at a price or conversion or exercise price, as the case may be, that is
less than $2.00 per share of Common Stock, each Holder who qualifies as an
"accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities act (an "ELIGIBLE HOLDER") shall have a preemptive right to
purchase such number of shares of Equity Securities necessary for such Eligible
Holder to maintain its percentage ownership position in the Company. Each
Eligible Holder's preemptive share is equal to the ratio of (a) the number of
shares of the Company's Common Stock of which such Eligible Holder is deemed to
be a holder immediately prior to the issuance of such Equity Securities to (b)
the total number of shares of the Company's outstanding Common Stock (including
all shares of Common Stock issued or issuable upon conversion of any security of
the Company or upon the exercise of any outstanding warrants, options, or rights
to subscribe to or purchase any Common Stock or other security of the Company)
immediately prior to the issuance of the Equity Securities.

         (b) Exercise of Preemptive Rights. If the Company issues any Equity
Securities, it shall give each Eligible Holder written notice of such issuance,
describing the Equity Securities and the price and the terms and conditions upon
which the Company issued the same and shall provide each Eligible Holder with
access to any information regarding such offering and the Company, provided to
the purchasers of Equity Securities. Each Eligible Holder shall have 10 Business
Days from the giving of such notice to exercise its preemptive right to purchase
Equity Securities for the price and upon the terms and conditions specified in
the notice by giving written notice to the Company and stating therein the
quantity of Equity Securities to be purchased. Notwithstanding the foregoing,
the Company shall not be required to offer or sell such Equity Securities to any
Holder who would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale.

         (c) Issuance of Equity Securities to Other Persons. The Company shall
have 90 days after expiration of the 10-Business Day period set forth in Section
7(b) to sell the Equity Securities in respect of which the Holders' rights were
not exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Company's notice
to the Eligible Holders pursuant to Section 7(b) hereof. If the Company has not
sold such Equity Securities within 90 days of the notice provided pursuant to
Section 7(b),

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 the Company shall not thereafter issue or sell any Equity
Securities, without first offering such securities to the Eligible Holders in
the manner provided above.

         (d) Termination and Waiver of Preemptive Rights. The preemptive rights
established by this Section 7 shall terminate upon the earlier of (i) the
effective date of a registration statement pursuant to Section 3(a) or (ii)
twelve months after the Closing Date.

         (e) Excluded Securities. The preemptive rights established by this
Section 4 shall have no application to any of the following Equity Securities:

               (i) up to 7,200,000 shares (as may be adjusted for any stock
         dividend, combinations, splits, recapitalizations and the like) of
         Common Stock (and/or options, warrants or other Common Stock purchase
         rights issued pursuant to such options, warrants or other rights)
         issued or to be issued after the date hereof to employees, officers or
         directors of, or consultants or advisors to the Company or any
         subsidiary, pursuant to stock purchase or stock option plans or other
         arrangements that are approved by the board of directors of the
         Company;

              (ii) capital stock of the Company issued or issuable pursuant to
         any rights or agreements outstanding as of the date of this Agreement,
         options and warrants outstanding as of the date of this Agreement, and
         capital stock issued pursuant to or upon the exercise of any such
         rights or agreements granted after the date of this Agreement; provided
         that in the case of rights or agreements granted after the date of this
         Agreement, the pre-emptive right established by this Section 7 applied
         with respect to the initial sale or grant by the Company of such rights
         or agreements and such rights or agreements were approved by the board
         of directors of the Company;

             (iii) shares of Common Stock issued in connection with any stock
         split, dividend, combination, distribution, or recapitalization; or

              (iv) any Equity Securities issued for consideration other than
         cash in connection with any merger, consolidation, strategic alliance,
         acquisition, or similar business combination approved by the board of
         directors of the Company.

         8. Assignment of Rights. No Holder may assign its rights under this
Agreement to any party without the prior written consent of the Company;
provided, however, that a Holder may assign its rights under this Agreement
without such restrictions to a Permitted Assignee as long as (a) such transfer
or assignment is effected in accordance with applicable securities laws; (b)
such transferee or assignee agrees in writing to become subject to the terms of
this Agreement; and (c) the Company is given written notice by such Holder of
such transfer or assignment, stating the name and address of the transferee or
assignee and identifying the Registrable Securities with respect to which such
rights are being transferred or assigned.

         9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing.

                                       11

<PAGE>

         10.      Indemnification.

         (a) In the event of the offer and sale of Registrable Securities held
by Holders under the Securities Act, the Company shall, and hereby does,
indemnify and hold harmless, to the fullest extent permitted by law, each
Holder, its directors, officers, partners, each other person who participates as
an underwriter in the offering or sale of such securities, and each other
person, if any, who controls or is under common control with such Holder or any
such underwriter within the meaning of Section 15 of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, and expenses to
which the Holder or any such director, officer, partner or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such shares
were registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company shall reimburse the Holder, and each such director, officer,
partner, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating, defending or
settling any such loss, claim, damage, liability, action or proceeding; provided
that the foregoing shall not apply to, and the Company shall not be liable, in
any such case (i) to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of such Holder specifically stating
that it is for use in the preparation thereof, (ii) provided that the Company
has complied with its obligations hereunder to furnish such Holder with copies
of the applicable prospectus, if the person asserting any such loss, claim,
damage, liability (or action or proceeding in respect thereof) who purchased the
Registrable Securities that are the subject thereof did not receive a copy of an
amended preliminary prospectus or the final prospectus (or the final prospectus
as amended or supplemented) at or prior to the written confirmation of the sale
of such Registrable Securities to such person because of the failure of such
Holder or underwriter to so provide such amended preliminary or final prospectus
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact made in such preliminary prospectus was corrected in
the amended preliminary or final prospectus (or the final prospectus as amended
or supplemented), or (iii) provided that the plan of distribution mechanics
described in the applicable prospectus are, in form and substance, reasonable
and customary for transactions of this type, to the extent that the Holders
failed to comply with the terms of such plan of distribution mechanics. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holders, or any such director, officer, partner,
underwriter or controlling person and shall survive the transfer of such shares
by the Holder.

                                       12

<PAGE>

         (b) As a condition to including any Registrable Securities to be
offered by a Holder in any registration statement filed pursuant to this
Agreement, each such Holder agrees to be bound by the terms of this Section 10
and to indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors and officers, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, legal
counsel and accountants for the Company, any underwriter, any other Holder
selling securities in such registration statement and any controlling person
within the meaning of the Securities Act of any such underwriter or other
Holder, against any losses, claims, damages or liabilities, joint or several, to
which the Company or any such director or officer or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (i) an untrue
statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information about such Holder as a
Holder of the Company furnished to the Company, (ii) provided that the Company
has complied with its obligations hereunder to furnish such Holder with copies
of the applicable prospectus, if the person asserting any such loss, claim,
damage, liability (or action or proceeding in respect thereof) who purchased the
Registrable Securities that are the subject thereof did not receive a copy of an
amended preliminary prospectus or the final prospectus (or the final prospectus
as amended or supplemented) at or prior to the written confirmation of the sale
of such Registrable Securities to such person because of the failure of such
Holder or underwriter to so provide such amended preliminary or final prospectus
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact made in such preliminary prospectus was corrected in
the amended preliminary or final prospectus (or the final prospectus as amended
or supplemented), or (iii) provided that the plan of distribution mechanics
described in the applicable prospectus are, in form and substance, reasonable
and customary for transactions of this type, to the extent that the Holders
failed to comply with the terms of such plan of distribution mechanics. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holders, or any such director, officer, partner,
underwriter or controlling person and shall survive the transfer of such shares
by the Holder, and such Holder shall reimburse the Company, and each such
director, officer, legal counsel and accountants, underwriter, other Holder, and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating, defending, or settling and such loss, claim,
damage, liability, action, or proceeding; provided, however, that such indemnity
agreement found in this Section 10(b) shall in no event exceed the gross
proceeds from the offering received by such Holder. Such indemnity shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling person and shall
survive the transfer by any Holder of such shares.

         (c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Section 10(a) or (b) hereof (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party of the
commencement of such action; provided that the failure of any indemnified party
to give notice

                                       13

<PAGE>

as provided herein shall not relieve the indemnifying party of its obligations
under Section 10(a) or (b) hereof, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in the reasonable
judgment of counsel to such indemnified party a conflict of interest between
such indemnified and indemnifying parties may exist or the indemnified party may
have defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defenses thereof or the indemnifying party fails to defend
such claim in a diligent manner, other than reasonable costs of investigation.
Neither an indemnified nor an indemnifying party shall be liable for any
settlement of any action or proceeding effected without its consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement, which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party shall
have the right to retain, at its own expense, counsel with respect to the
defense of a claim.

(d) In the event that an indemnifying party does or is not permitted to assume
the defense of an action pursuant to Section 10(c) or in the case of the expense
reimbursement obligation set forth in Section 10(a) and (b), the indemnification
required by Section 10(a) and (b) hereof shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills received or expenses, losses, damages, or liabilities are incurred.

         (e) If the indemnification provided for in this Section 10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall (i) contribute to the amount paid or payable by such indemnified party as
a result of such loss, liability, claim, damage or expense as is appropriate to
reflect the proportionate relative fault of the indemnifying party on the one
hand and the indemnified party on the other (determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, not only the proportionate relative
fault of the indemnifying party and the indemnified party, but also the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, as well as any other relevant equitable considerations. No
indemnified party guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall

                                       14

<PAGE>

be entitled to contribution from any indemnifying party who was not guilty of
such fraudulent misrepresentation.

         (f) Other Indemnification. Indemnification similar to that specified in
the preceding subsections of this Section 10 (with appropriate modifications)
shall be given by the Company and each Holder of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation or governmental authority other than the
Securities Act.

         11.      Miscellaneous

         (a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and the United States of America,
both substantive and remedial. Any judicial proceeding brought against either of
the parties to this agreement or any dispute arising out of this Agreement or
any matter related hereto shall be brought in the courts of the State of Texas,
Harris County, or in the United States District Court for the Southern District
of Texas and, by its execution and delivery of this agreement, each party to
this Agreement accepts the jurisdiction of such courts. The foregoing consent to
jurisdiction shall not be deemed to confer rights on any person other than the
parties to this Agreement.

         (b) Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, Permitted Assigns, executors and administrators of the parties
hereto. In the event the Company merges with, or is otherwise acquired by, a
direct or indirect subsidiary of a publicly traded company, the Company shall
condition the merger or acquisition on the assumption by such parent company of
the Company's obligations under this Agreement.

         (c) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.

         (d) Notices, etc. All notices or other communications which are
required or permitted under this Agreement shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, by electronic mail, or by courier or overnight carrier, to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:

         If to the Company:       Continental Southern Resources, Inc.
                                  111 Presidential Boulevard, Suite 158A
                                  Bala Cynwyd, Pennsylvania 19004
                                  Attention: Stephen P. Harrington
                                  Facsimile:  610-__________
                                  e-mail: shags@comcast.com

                                       15

<PAGE>

         If to the Purchasers:    To each Purchaser at the address
                                  set forth on Exhibit A

         with a copy to:          Sanders Morris Harris Inc.
                                  600 Travis, Suite 3100
                                  Houston, Texas 77002
                                  Attention: President
                                  Facsimile:  ( 713) 224-1101
                                  e-mail: ben.morris@smhhou.com

         If to Lancer:            Marty Steinberg, Esq., as the Receiver for
                                  Lancer Management Group II, LLC, Lancer
                                  Offshore, Inc., and as the party in control
                                  of Lancer Partners, LP.
                                  c/o David E. Wells
                                  Hunton & Williams, LLP
                                  1111 Brickell Avenue,
                                  Suite 2500
                                  Miami, Florida 33131
                                  Facsimile: (305) 810-2460
                                  e-mail: dwells@hunton.com

or at such other address as any party shall have furnished to the other parties
in writing.

         (e) Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder of any Registrable Securities, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of such Holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereunder occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement, or any waiver on the part of any Holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.

         (f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

         (g) Severability. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         (h) Amendments. The provisions of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of a majority

                                       16

<PAGE>

of the number of shares of Registrable Securities outstanding as of the date of
such amendment or waiver. The Purchasers acknowledge that by the operation of
this Section 11(h), the holders of a majority of the outstanding Registrable
Securities may have the right and power to diminish or eliminate all rights of
the Purchasers under this Agreement.

         (i) Limitation on Subsequent Registration Rights. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of at least a majority of the Registrable Share then outstanding, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to those
granted to the Holder hereunder.

                       [Signatures on the following page]

                                       17

<PAGE>

This Registration Rights Agreement is hereby executed as of the date first above
written.

                                    COMPANY:

                                    CONTINENTAL SOUTHERN RESOURCES, INC.

                                    By:  /s/ STEPHEN P. HARRINGTON
                                         --------------------------------------
                                    Name: Stephen P. Harrington
                                    Title:   President

                                    SANDERS MORRIS HARRIS INC., Individually
                                    and as Agent and Attorney in Fact for the
                                    Purchasers listed on Exhibit A attached
                                    hereto

                                    By:  /s/ JOHN MALANGA
                                         --------------------------------------
                                    Name:  John Malanga
                                    Title: Vice President

                                    LANCER OFFSHORE, INC.

                                    By:  /s/ MARTY STEINBERG
                                         --------------------------------------
                                    Name:  Marty Steinberg
                                    Title: Receiver

                                    LANCER PARTNERS, LP

                                    By:  /s/ MARTY STEINBERG
                                         --------------------------------------
                                    Name:  Marty Steinberg
                                    Title: Party in Control

                                       18

<PAGE>

                                    Exhibit A

                              Purchaser Information

[INTENTIONALLY OMITTED]

                                       19<PAGE>
                                                                  EXHIBIT 10.28

                           INTEREST PURCHASE AGREEMENT

                                 BY AND BETWEEN

                      CONTINENTAL SOUTHERN RESOURCES, INC.

                                       AND

                                  KNOX GAS, LLC

                                FEBRUARY 26, 2004

<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS
<S>               <C>                                                                                             <C>

         1.1      The Purchase and Sale...........................................................................1
         2.1      Closing Date....................................................................................2
         2.2      Closing Deliveries..............................................................................2
         3.1      Organization and Qualification..................................................................3
         3.2      Authorization; Validity and Effect of Agreement.................................................3
         3.3      No Conflict; Required Filings and Consents......................................................4
         3.4      Investment Intent...............................................................................4
         3.5      Brokers and Finders Fees........................................................................5
         4.1      Organization and Qualification..................................................................5
         4.2      Authorization; Validity and Effect of Agreement.................................................5
         4.3      No Conflict; Required Filings and Consents......................................................5
         4.4      Title to LP Interest............................................................................6
         4.5      Brokers and Finders.............................................................................6
         5.1      Access to Information...........................................................................6
         5.2      Confidentiality; No Solicitation................................................................7
         5.3      Best Efforts; Consents..........................................................................8
         5.4      Further Assurances..............................................................................8
         5.5      Public Announcements............................................................................8
         5.6      Notification of Certain Matters.................................................................9
         5.7      Prohibition on Trading in Securities............................................................9
         6.1      Mutual Conditions to Obligations of the Company and Knox Gas....................................9
         6.2      Conditions to Obligations of Knox Gas..........................................................11
         6.3      Conditions to Obligations of the Company.......................................................11
         7.1      Indemnification by the Parties.................................................................12
         7.2      Indemnification Procedures for Third-Party Claims..............................................12
         7.3      Indemnification Procedures for Non-Third Party Claims..........................................13
         7.4      Limitations on Indemnification.................................................................14
         7.5      Exclusive Remedy...............................................................................14
         8.1      Entire Agreement...............................................................................14
         8.2      Amendment and Modifications....................................................................15
         8.3      Extensions and Waivers.........................................................................15
         8.4      Successors and Assigns.........................................................................15
         8.5      Survival of Representations, Warranties and Covenants..........................................15
         8.6      Headings; Definitions..........................................................................15
         8.7      Severability...................................................................................16
         8.8      Specific Performance...........................................................................16
         8.9      Expenses.......................................................................................16
         8.10     Notices........................................................................................16
         8.11     Governing Law..................................................................................17
         8.12     Arbitration....................................................................................17
         8.13     Counterparts...................................................................................17
         8.14     Certain Definitions............................................................................17
</TABLE>

                                       i

<PAGE>

Exhibits

1.1(b)(ii)    Form of Note

2.2(a)(2)     Form of Pledge Agreement

3.1           Certificate of Formation and Operating Agreement of Knox Gas, LLC

                                       ii

<PAGE>

                           INTEREST PURCHASE AGREEMENT

         THIS INTEREST PURCHASE AGREEMENT (the "Agreement"), is made and entered
into this 26th day of February, 2004, by and between CONTINENTAL SOUTHERN
RESOURCES, INC. a Nevada corporation (the "Company"), and KNOX GAS, LLC, a
Delaware limited liability company ("Knox Gas").

                                    RECITALS

         WHEREAS, the Board of Directors of the Company and the Managers and
Members of Knox Gas have approved, and deem it advisable and in the best
interests of their respective companies and stockholders or interest holders, as
the case may be, to consummate the transactions contemplated hereby upon the
terms and subject to the conditions set forth in this Agreement; and

         WHEREAS, the Company wishes to sell to Knox Gas, and Knox Gas wishes to
purchase, a certain partnership interests owned by the Company in exchange for
cash consideration and a note payable (the transactions contemplated hereby
(other than those set forth in Section 6.1 hereof) collectively referred to
herein as, the "Transactions").

         NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:

                                    ARTICLE I

                              THE PURCHASE AND SALE

         1.1      THE PURCHASE AND SALE.

                  (a) The Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Company shall sell, and Knox Gas
shall purchase, the Company's ninety-nine percent (99%) limited partnership
interest (the "LP Interest") in Knox Miss. Partners, L.P. ("Knox Miss"), and the
Company's one percent (1%) membership interest in Knox Miss., LLC, the general
partner in Knox Miss (the "Membership Interest"; together with the LP Interest,
the "Interests").

                  (b) Purchase Price. In consideration for the sale of the
Interests by the Company to Knox Gas and for other covenants and agreements of
the Company contained herein, Knox Gas shall transfer to the Company five
million dollars ($5,000,000) (the "Purchase Price") as follows:

                           (i)      Five  hundred thousand dollars ($500,000)
(the "Deposit") as of the date hereof, which amount will be applied against the
Purchase Price on the Closing Date (as defined below); and

<PAGE>

                           (ii)     The issuance of a note dated as of the
Closing Date substantially in the form attached hereto as Exhibit 1.1(b)(ii)
(the "Note") payable to the Company in the amount of four million, five hundred
thousand dollars ($4,500,000), issuable to the Company upon the Closing Date and
secured by the Pledge Agreement (as defined in Section 2.2(a)(ii)).

                                   ARTICLE II

                                   THE CLOSING

         2.1      CLOSING DATE.

                  The closing of the Transactions (the "Closing") shall take
place as of the date hereof (the "Closing Date") at the offices of the Company
or at such other place as may be mutually agreed upon in writing by the parties
hereto.

         2.2      CLOSING DELIVERIES.

                  (a) At the Closing, Knox Gas shall deliver or cause to be
delivered to the Company the following documents:

                           (i)      The Note;

                           (ii)     A pledge agreement substantially in the form
attached hereto as Exhibit 2.2(a)(ii) (the "Pledge Agreement");

                           (iii)    An incumbency certificate signed by the
Manager of Knox Gas dated at or about the Closing Date;

                           (iv)     A certificate of good standing from the
Secretary of State of the State of Delaware, dated at or about the Closing Date,
to the effect that Knox Gas is in good standing under the laws of said state;

                           (v)      Certificate of Formation of Knox Gas
certified by the Secretary of State of the State of Delaware at or about the
Closing Date and the Operating Agreement of Knox Gas certified by the Manager of
Knox Gas at or about the Closing Date;

                           (vi)     Manager and/or Member resolutions of Knox
Gas dated at or about the Closing Date authorizing the Transactions, certified
by the Manager of Knox Gas;

                           (vii)    Such other documents, instruments and
consents required to consummate the Transactions and to comply with the terms
hereof.

                  (b)      At the  Closing, the Company shall deliver or cause
to be delivered to Knox Gas the following documents:

                           (i)      All agreements evidencing the Interests;

                                       2

<PAGE>

                           (ii)     An incumbency certificate signed by all of
the executive officers of the Company dated at or about the Closing Date;

                           (iii)    A certificate of good standing from the
Secretary of State of the State of Nevada, dated at or about the Closing Date,
to the effect that the Company is in good standing under the laws of said state;

                           (iv)     Board resolutions of the Company dated at or
about the Closing Date authorizing the Transactions, certified by the Secretary
of the Company; and

                           (v)      Such other documents, instruments and
consents required to consummate the Transactions and to comply with the terms
hereof.

                  (c) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and shall have taken all such other actions as are required under this
Agreement.

                                   ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF KNOX GAS

                  Knox Gas hereby makes the following representations and
warranties to the Company.

         3.1      ORGANIZATION AND QUALIFICATION.

                  Knox Gas is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, with full power
and authority to own and operate its business as presently conducted, except
where the failure to be or have any of the foregoing would not have a Material
Adverse Effect. Knox Gas is duly qualified as a foreign entity to do business
and is in good standing in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except for such failures to be so qualified or in good
standing as would not, individually or in the aggregate, have a Material Adverse
Effect. Knox Gas has no subsidiaries. True, correct and complete copies of the
Certificate of Formation and Operating Agreement of Knox Gas, as amended to
date, are attached hereto as Exhibit 3.1.

         3.2      AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT.

                  Knox Gas has the requisite power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
Transactions. The execution and delivery of this Agreement by Knox Gas and the
performance by Knox Gas of its obligations hereunder and the consummation of the
Transactions have been duly authorized by its Manager, all other necessary
company action on the part of Knox Gas has been taken, and no other company
proceedings on the part of Knox Gas are necessary to authorize this Agreement
and the Transactions. This Agreement has been duly and validly executed and
delivered by Knox Gas

                                       3

<PAGE>

and, assuming that it has been duly authorized, executed and delivered by the
other parties hereto, constitutes a legal, valid and binding obligation of Knox
Gas, enforceable against it in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.

         3.3      NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

                  Neither the execution and delivery of this Agreement by Knox
Gas nor the performance by Knox Gas of its obligations hereunder, nor the
consummation of the Transactions, will: (i) conflict with Knox Gas's Certificate
of Formation or Operating Agreement; (ii) violate any statute, law, ordinance,
rule or regulation applicable to Knox Gas or any of the properties or assets of
Knox Gas; or (iii) violate, breach, be in conflict with or constitute a default
(or an event that, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of Knox Gas under, or result in the creation or
imposition of any Liens upon any properties, assets or business of Knox Gas
under, any material contract or any order, judgment or decree to which Knox Gas
is a party or by which Knox Gas or any of its assets or properties is bound or
encumbered except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, would not have a Material Adverse Effect or would not prevent the
consummation of this Agreement or the Transactions.

         3.4      INVESTMENT INTENT.

                  The Interests being acquired in connection with the
Transactions is being acquired for Knox Gas's own account for investment
purposes only and not with a view to, or with any present intention of,
distributing or reselling any of such Interests. Knox Gas acknowledges and
agrees that the Interests has not been registered under the Securities Act or
under any state securities laws, and that the Interests may not be, directly or
indirectly, sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act and
applicable state securities laws, except pursuant to an available exemption from
such registration. Knox Gas also acknowledges and agrees that neither the SEC
nor any securities commission or other Governmental Authority has (a) approved
the transfer of the Interests or passed upon or endorsed the merits of the
transfer of the Interest, this Agreement or the Transactions; or (b) confirmed
the accuracy of, determined the adequacy of, or reviewed this Agreement. Knox
Gas has such knowledge, sophistication and experience in financial, tax and
business matters in general, and investments in securities in particular, that
it is capable of evaluating the merits and risks of this investment in the
Interests, and Knox Gas has made such investigations in connection herewith as
it deemed necessary or desirable so as to make an informed investment decision
without relying upon the Company for legal or tax advice related to this
investment. Knox Gas and each of its Members are "accredited investors" within
the meaning of Rule 501 promulgated under the Securities Act.

                                       4

<PAGE>

         3.5      BROKERS AND FINDERS FEES.

                  Neither Knox Gas nor any of its officers, directors, employees
or managers has employed any broker or finder or incurred any liability for any
investment banking fees, brokerage fees, commissions or finders fees in
connection with the Transactions for which Knox Gas has or could have any
liability.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby makes the following representations and warranties
to Knox Gas:

         4.1      ORGANIZATION AND QUALIFICATION.

                  The Company is duly organized, validly existing and in good
standing under the laws of its jurisdiction of its organization, with the
corporate power and authority to own and operate its business as presently
conducted, except where the failure to be or have any of the foregoing would not
have a Material Adverse Effect. The Company is duly qualified as a foreign
corporation or other entity to do business and is in good standing in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except for such
failures to be so qualified or in good standing as would not have a Material
Adverse Effect.

         4.2      AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT.

                  The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement by the
Company and the performance by the Company of its obligations hereunder and the
consummation of the Transactions have been duly authorized by its Board of
Directors and all other necessary corporate action on the part of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Transactions. This Agreement has been duly and
validly executed and delivered by the Company and, assuming that it has been
duly authorized, executed and delivered by the other parties hereto, constitutes
a legal, valid and binding obligation of the Company, in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.

         4.3      NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

                  Neither the execution and delivery of the Agreement by the
Company nor the performance by the Company of its obligations hereunder, nor the
consummation of the Transactions, will: (i) conflict with the Company's Articles
of Incorporation or Bylaws; (ii) violate any statute, law, ordinance, rule or
regulation, applicable to the Company or any of the

                                       5

<PAGE>

properties or assets of the Company; or (iii) violate, breach, be in conflict
with or constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, or permit the termination of any
provision of, or result in the termination of, the acceleration of the maturity
of, or the acceleration of the performance of any obligation of the Company, or
result in the creation or imposition of any Lien upon any properties, assets or
business of the Company under, any material contract or any order, judgment or
decree to which the Company is a party or by which it or any of its assets or
properties is bound or encumbered except, in the case of clauses (ii) and (iii),
for such violations, breaches, conflicts, defaults or other occurrences which,
individually or in the aggregate, would not have a material adverse effect on
its obligation to perform its covenants under this Agreement.

         4.4      TITLE TO LP INTEREST.

                  The Company has good and marketable title to the LP Interest
and is the sole record and beneficial owner of the LP Interest, free and clear
of any Liens. With the exception of this Agreement, there are no outstanding
options, warrants, agreements, conversion rights, preemptive rights or other
rights to purchase or otherwise acquire the LP Interest, nor are there any
obligations of any Person to purchase, redeem or otherwise acquire the LP
Interest. There are no voting trusts or other agreements or understandings to
which the Company is a party with respect to the voting of the LP Interest, nor
is there any indebtedness of the Company issued and outstanding that has general
voting rights with respect to the LP Interest.

         4.5      BROKERS AND FINDERS.

                  Neither the Company nor any of its officers, directors,
employees or managers has employed any broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the Transactions for which the Company has or
could have any liability.

                                    ARTICLE V

                                CERTAIN COVENANTS

         5.1      ACCESS TO INFORMATION.

                  At all times prior to the Closing or the earlier termination
of this Agreement in accordance with the provisions of Article VIII, and in each
case subject to Section 5.2 below, each party hereto shall provide to the other
party (and the other party's authorized representatives) reasonable access
during normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such party,
provided that the party granted such access shall not interfere unreasonably
with the operation of the business conducted by the party granting access, and
provided that no such access need be

                                       6

<PAGE>

granted to privileged information or any agreements or documents subject to
confidentiality agreements.

         5.2      CONFIDENTIALITY; NO SOLICITATION.

                  (a) Confidentiality. Each party shall hold, and shall cause
its respective Affiliates and representatives to hold, all Confidential
Information made available to it in connection with the transactions
contemplated under this Agreement in strict confidence, shall not use such
information except for the sole purpose of evaluating the Transactions and shall
not disseminate or disclose any of such information other than to its directors,
officers, managers, employees, shareholders, interest holders, Affiliates,
agents and representatives, as applicable, who need to know such information for
the sole purpose of evaluating the Transactions and with respect to
representatives, advisors and Affiliates of the Persons involved in the
transactions described in Section 6.1, including potential investors in the
contemplated private offering of the Company's common stock, par value $.001 per
share ("Common Stock") (each of whom shall be informed in writing by the
disclosing party of the confidential nature of such information and directed by
such party in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Article VIII, each party
shall immediately return to the other party all such information, all copies
thereof and all information prepared by the receiving party based upon the same.
The above limitations on use, dissemination and disclosure shall not apply to
Confidential Information that (i) is learned by the disclosing party from a
third party entitled to disclose it; (ii) becomes known publicly other than
through the disclosing party or any third party who received the same from the
disclosing party, provided that the disclosing party had no Knowledge that the
disclosing party was subject to an obligation of confidentiality; (iii) is
required by law or court order to be disclosed by the parties; or (iv) is
disclosed with the express prior written consent thereto of the other party. The
parties shall undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this subsection (a). Notwithstanding anything contained herein to
the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only that amount of
information as the disclosing party is advised by its counsel is necessary to
strictly comply with such court order or subpoena.

                  (b) No Solicitation. Except as otherwise contemplated in this
Agreement, the Company shall not, directly or indirectly, solicit any inquiries
or proposals for, or enter into or continue or resume any discussions with
respect to or enter into any negotiations or agreements relating to the sale or
exchange of the Interests. The Company shall promptly notify the Company if any
such proposal or offer, or any inquiry or contact with any Person or entity with
respect thereto, is made.

                                       7

<PAGE>

         5.3      BEST EFFORTS; CONSENTS.

                  Subject to the terms and conditions herein provided, each of
the Company and Knox Gas agrees to use all reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated under this Agreement and to cooperate
with the others in connection with the foregoing, including using its reasonable
efforts to (i) obtain all waivers, consents and approvals from other parties to
loan agreements, leases, mortgages and other contracts necessary for the
consummation of such transactions, (ii) make all filings with, and obtain all
consents, approvals and authorizations that are required to be obtained from,
Governmental Authorities, (iii) lift or rescind any injunction, restraining
order, decree or other order adversely affecting the ability of the parties
hereto to consummate such transactions, (iv) effect all necessary registrations
and filings and submissions of information requested by Governmental
Authorities, and (v) fulfill all conditions to this Agreement. Each of the
Company and Knox Gas shall use all reasonable efforts to prevent the entry,
enactment or promulgation of any threatened or pending preliminary or permanent
injunction or other order, decree or ruling or statute, rule, regulation or
executive order that would adversely affect the ability of the parties hereto to
consummate such transactions.

         5.4      FURTHER ASSURANCES.

                  Subject to Section 5.3, each of the parties hereto agrees to
use its reasonable best efforts before and after the Closing Date to take or
cause to be taken all action, to do or cause to be done, and to assist and
cooperate with the other party hereto in doing, all things necessary, proper or
advisable under applicable laws to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated under this
Agreement, including, but not limited to (i) the satisfaction of the conditions
precedent to the obligations of any of the parties hereto; (ii) to the extent
consistent with the obligations of the parties set forth in Section 5.3, the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the performance of the obligations
hereunder; and (iii) the execution and delivery of such instruments, and the
taking of such other actions, as the other party hereto may reasonably require
in order to carry out the intent of this Agreement.

         5.5      PUBLIC ANNOUNCEMENTS.

                  The Company and Knox Gas shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to this Agreement or the transactions contemplated hereunder, and shall not
issue any other press release or make any other public statement without prior
consent of the other parties, except as may be required by law or, with respect
to the Company, by obligations pursuant to rule or regulation of the Exchange
Act, the Securities Act, any rule or regulation promulgated thereunder or any
rule or regulation of the National Association of Securities Dealers.

                                       8

<PAGE>

         5.6      NOTIFICATION OF CERTAIN MATTERS.

                  Each party hereto shall promptly notify the other party in
writing of any events, facts or occurrences that would result in any breach of
any representation or warranty or breach of any covenant by such party contained
in this Agreement.

         5.7      PROHIBITION ON TRADING IN SECURITIES.

                  Knox Gas acknowledges that information concerning the matters
that are the subject matter of this Agreement may constitute material non-public
information under United States federal securities laws, and that United States
federal securities laws prohibit any Person who has received material non-public
information relating to the Company from purchasing or selling securities of the
Company, or from communicating such information to any Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell securities of the Company. Accordingly, until such time as
any such non-public information has been adequately disseminated to the public,
Knox Gas shall not purchase or sell any securities of the Company, or
communicate such information to any other Person.

                                   ARTICLE VI

                  CONDITIONS TO CONSUMMATION OF THE TRANSACTION

         6.1      MUTUAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND KNOX GAS.

                  The obligations of the Company and Knox Gas to consummate the
Transactions shall be subject to the fulfillment, or written waiver by each of
the Company and Knox Gas, at or prior to the Closing, of each of the following
conditions:

                  (a) Trident Growth Fund, L.P. ("Trident") shall receive (i) an
aggregate of approximately 375,000 shares of common stock, $.001 per share
("Common Stock"), of the Company in full satisfaction and release of all
amounts, liabilities and obligations due and owing by Parent to Trident under
that certain First Amended Loan Agreement between the Company and Trident, the
First Amended Security Agreement between the Company and Trident and the 6%
Secured Convertible Promissory Note in the principal amount of $600,000, all
dated July 29, 2003 (collectively, the "Trident 2003 Loan Documents"), and (ii)
$1,500,000 cash, payable in good funds, in full satisfaction and release of all
amounts, liabilities and obligations due and owing by the Company to Trident
under that certain Loan Agreement between the Company and Trident, the Security
Agreement between the Company and Trident and the 12% Secured Convertible
Promissory Note in the principal amount of $1,500,000, all dated April 5, 2002
(the "Trident 2002 Loan Documents," and together with the Trident 2003 Loan
Documents, the "Trident Loan Documents"). In connection with the foregoing,
Trident shall deliver and surrender to the Company (i) the original promissory
notes issued by the Company in connection with the Trident Loan Documents, (ii)
a release of the Company from any and all obligations under the Trident Loan
Documents, and (iii) any other documentation necessary to facilitate the
termination and release of all Liens on any asset of the Company;

                                       9

<PAGE>

                  (b) Michael P. Marcus ("Marcus") shall convert the full
$1,550,000 principal amount due under the 12% convertible promissory notes
issued by the Company to Marcus, dated October 18 and 30, 2002, and all accrued
interest due thereunder, into shares of Common Stock. In connection with the
foregoing, Marcus shall deliver and surrender to the Company (i) the original
promissory notes issued by the Company in connection with the underlying loan
documents, (ii) a release of the Company from any and all obligations under the
underlying loan documents, and (iii) any other documentation necessary to
facilitate the termination and release of all Liens on any asset of the Company;

                  (c) The holders of all of the Company's outstanding shares of
Series C Convertible Preferred Stock (the "Series C Preferred Stock") shall
enter into an agreement with the Company, pursuant to which, on or prior to
Closing, they will convert their shares of Series C Preferred Stock, and waive
certain registration rights and other rights of such holders under such
agreements;

                  (d) The Company, CSOR Acquisition Corp. and NSNV, Inc. ("North
Sea") shall enter into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which, on or prior to Closing, North Sea shall merge with and into
CSOR Acquisition Corp., with the separate corporate existence of North Sea
ceasing and CSOR Acquisition Corp. continuing as the surviving corporation (the
"Merger");

                  (e) The Company shall purchase from RAM Trading Limited all of
the shares of Series B Convertible Preferred Stock currently owned by Lancer
Offshore, Inc. and approximately 14,100,000 shares of Common Stock currently
owned by Lancer Offshore, Inc. and Lancer Partners, L.P.;

                  (f) The Company shall complete a private offering of Common
Stock for a minimum of $45,000,000 of gross proceeds (the "Equity Offering");

                  (g) The Company shall purchase from the holders of all of the
Company's outstanding shares of Series A Convertible Preferred Stock and Series
B Preferred Stock not owned by Lancer Offshore, Inc., Michael Laurer or their
respective Affiliates (the "Non-Lancer/Laurer Series B Preferred Stock"), all of
the shares of Series A Preferred Stock and Non-Lancer/Laurer Series B Preferred
Stock in exchange for certain non-core assets of the Company, and in connection
therewith provide a general release of the Company and its Affiliates from any
and all pre-Closing claims

                  (h) The Company shall have entered into employment agreements
with each of William L. Transier and John N. Seitz;

                  (i) No domestic or foreign governmental or regulatory agency,
authority, bureau, commission, department, official or similar body or
instrumentality thereof, or any governmental court, arbitral tribunal located or
having jurisdiction in the United States shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, decree,
judgment, injunction or other order, whether temporary, preliminary or permanent
which is then in effect and has the effect of making the Closing illegal or
otherwise prohibiting consummation

                                       10

<PAGE>

of the Closing; provided, that the parties use reasonable commercial efforts to
challenge any decree, judgment or injunction or other order that is not final
and non-applicable, but in no event will any party be required to expend in
excess of $25,000 with respect to such challenge; and

                  (j) There shall not be pending, instituted or threatened by
any Person or Governmental Authority any suit, action, investigation or
proceeding seeking to (i) alter, prevent, materially delay, restrain or prohibit
the consummation of the Merger, the Equity Offering or the other transactions
contemplated by this Agreement, (ii) obtain from the Company any damages that
would have, or could reasonably be expected to have, a Material Adverse Effect
on the Company, or (iii) seeking to prohibit or limit the ownership or operation
by the Company of its businesses or assets in a manner that would have, or could
reasonably be expected to have, a Material Adverse Effect on the Company.

         6.2      CONDITIONS TO OBLIGATIONS OF KNOX GAS.

                  The obligations of Knox Gas to consummate the Transactions
shall be subject to the fulfillment, or written waiver by Knox Gas, at or prior
to the Closing, of each of the following conditions:

                  (a) The representations and warranties of the Company set out
in this Agreement shall be true and correct in all material respects at and as
of the time of the Closing as though such representations and warranties were
made at and as of such time;

                  (b) The Company shall have performed and complied in all
material respects with all covenants, conditions, obligations and agreements
required by this Agreement to be performed or complied with by the Company on or
prior to the Closing Date;

                  (c) There shall be delivered to Knox Gas an officer's
certificate of the Company to the effect that the conditions set forth in
Section 6.2(a) and (b) have been satisfied; and

                  (d) The Company shall have made all the deliveries required of
the Company under Section 2.2(a).

         6.3      CONDITIONS TO OBLIGATIONS OF THE COMPANY.

                  The obligations of the Company to consummate the Transactions
shall be subject to the fulfillment, or written waiver by the Company, at or
prior to the Closing of each of the following conditions:

                  (a) The representations and warranties of Knox Gas set out in
this Agreement shall be true and correct in all material respects at and as of
the time of the Closing as though such representations and warranties were made
at and as of such time;

                  (b) Knox Gas shall have performed and complied in all material
respects with all covenants, conditions, obligations and agreements required by
this Agreement to be performed or complied with by Knox Gas on or prior to the
Closing Date;

                                       11

<PAGE>

                  (c) There shall be delivered to the Company a certificate of
the Manager of Knox Gas to the effect that the conditions set forth in Section
6.2(a) and (b) hereof have been satisfied;

                  (d) Knox Gas shall have made all the deliveries required of
Knox Gas under Section 2.2(b); and

                  (e) The Company shall have completed a due diligence review of
the business, operations, financial condition and prospects of Knox Gas and
shall have been satisfied with the results of its due diligence review in its
sole and absolute discretion.

                                   ARTICLE VII

                                 INDEMNIFICATION

         7.1      INDEMNIFICATION BY THE PARTIES.

                  From and after the Closing Date, the Company or Knox Gas, as
the case may be (the "Indemnitor"), shall indemnify and hold harmless Knox Gas
or the Company, as the case may be (the "Indemnitee"), and its respective
officers and directors (the Indemnitee and each such officer and director an
"Indemnified Party"), from and against any and all demands, claims, actions or
causes of action, judgments, assessments, losses, liabilities, damages or
penalties and reasonable attorneys' fees and related disbursements
(collectively, "Claims") suffered by such Indemnified Party resulting from or
arising out of (i) any inaccuracy in or breach of any of the representations or
warranties made by the Indemnitor herein, in any certificate, or in any other
document delivered herewith or otherwise required hereby at the time they were
made, and, except for representations and warranties that speak as of a specific
date or time (which need only be true and correct as of such date or time), on
and as of the Closing Date, (ii) any breach or nonfulfillment of any covenants
or agreements made by the Indemnitor, and (iii) any misrepresentation made by
the Indemnitor, in each case as made herein or in the Exhibits annexed hereto or
in any closing certificate, schedule or any ancillary certificates or other
documents or instruments furnished by the Indemnitor pursuant hereto or in
connection with the Transactions.

         7.2      INDEMNIFICATION PROCEDURES FOR THIRD-PARTY CLAIMS.

                  (a) Upon obtaining Knowledge of any Claim by a third party
which has given rise to, or is expected to give rise to, a claim for
indemnification hereunder, the Indemnitee shall give written notice ("Notice of
Claim") of such claim or demand to the Indemnitor, specifying in reasonable
detail such information as the Indemnified Party may have with respect to such
indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). Subject to
the limitations set forth in Section 7.2(b) hereof, no failure or delay by the
Indemnitee in the performance of the foregoing shall reduce or otherwise affect
the obligation of the Indemnitor to indemnify and hold the Indemnified Party
harmless, except to the extent that such failure or delay shall have actually
adversely affected

                                       12

<PAGE>

Indemnitor's ability to defend against, settle or satisfy any Claims for which
the Indemnified Party entitled to indemnification hereunder.

                  (b) If the claim or demand set forth in the Notice of Claim
given by the Indemnitee pursuant to Section 7.2(a) hereof is a claim or demand
asserted by a third party, the Indemnitor shall have fifteen (15) days after the
date on which Notice of Claim is given to notify the Indemnitee in writing of
its election to defend such third party claim or demand on behalf of the
Indemnified Party. If the Indemnitor elects to defend such third party claim or
demand, the Indemnitee shall make available to the Indemnitor and its agents and
representatives all records and other materials that are reasonably required in
the defense of such third party claim or demand and shall otherwise cooperate
with, and assist the Indemnitor in the defense of, such third party claim or
demand, and so long as the Indemnitor is defending such third party claim in
good faith, the Indemnified Party shall not pay, settle or compromise such third
party claim or demand. If the Indemnitor elects to defend such third party claim
or demand, the Indemnified Party shall have the right to participate in the
defense of such third party claim or demand, at such Indemnified Party's own
expense. In the event, however, that such Indemnified Party reasonably
determines that representation by counsel to the Indemnitor of both the
Indemnitor and such Indemnified Party could reasonably be expected to present
counsel with a conflict of interest, then the Indemnified Party may employ
separate counsel to represent or defend it in any such action or proceeding and
the Indemnitor will pay the fees and expenses of such counsel. If the Indemnitor
does not elect to defend such third party claim or demand or does not defend
such third party claim or demand in good faith, the Indemnified Party shall have
the right, in addition to any other right or remedy it may have hereunder, at
the Indemnitor's expense, to defend such third party claim or demand; provided,
however, that (i) such Indemnified Party shall not have any obligation to
participate in the defense of, or defend, any such third party claim or demand;
(ii) such Indemnified Party's defense of or its participation in the defense of
any such third party claim or demand shall not in any way diminish or lessen the
obligations of the Indemnitor under the agreements of indemnification set forth
in this Article VII; and (iii) such Indemnified Party may not settle any claim
without the consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed.

                  (c) The Indemnitor and the Indemnitee and the other
Indemnified Party, if any, shall cooperate fully in all aspects of any
investigation, defense, pre-trial activities, trial, compromise, settlement or
discharge of any claim in respect of which indemnity is sought pursuant to this
Article VII, including, but not limited to, by providing the other party with
reasonable access to employees and officers (including as witnesses) and other
information.

                  (d) Except for third party claims being defended in good
faith, the Indemnitor shall satisfy its obligations under this Article VII in
respect of a valid claim for indemnification hereunder which is not contested by
the Indemnitor in good faith in cash within thirty (30) days after the date on
which Notice of Claim is given.

         7.3      INDEMNIFICATION PROCEDURES FOR NON-THIRD PARTY CLAIMS.

                  In the event any Indemnified Party should have an
indemnification claim against the Indemnitor under this Agreement that does not
involve a claim by a third party, the

                                       13

<PAGE>

Indemnified Party shall promptly deliver notice of such claim to the Indemnitor
in writing and in reasonable detail. The failure by any Indemnified Party to so
notify the Indemnitor shall not relieve the Indemnitor from any liability that
it may have to such Indemnified Party, except to the extent that the Indemnitor
has been actually prejudiced by such failure. If the Indemnitor does not notify
the Indemnified Party within fifteen (15) Business Days following its receipt of
such notice that the Indemnitor disputes such claim, such claim specified by the
Indemnitor in such notice shall be conclusively deemed a liability of the
Indemnitor under this Article VII and the Indemnitor shall pay the amount of
such liability to the Indemnified Party on demand, or in the case of any notice
in which the amount of the claim is estimated, on such later date when the
amount of such claim is finally determined. If the Indemnitor disputes its
liability with respect to such claim in a timely manner, the Indemnitor and the
Indemnified Party shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations, such dispute shall be
submitted to arbitration pursuant to Section 8.12.

         7.4      LIMITATIONS ON INDEMNIFICATION.

                  No claim for indemnification under this Article VII shall be
  asserted by, and no liability for such indemnify shall be enforced against,
  the Indemnitor to the extent the Indemnified Party has theretofore received
  indemnification or otherwise been compensated for such Claim. In the event
  that an Indemnified Party shall later collect any such amounts recovered under
  insurance policies with respect to any Claim for which it has previously
  received payments under this Article VII from the Indemnitor, such Indemnified
  Party shall promptly repay to the Indemnitor such amount recovered.

         7.5      EXCLUSIVE REMEDY.

                  The indemnification provisions of this Article VII (i) shall
be the exclusive remedy following the Closing with respect to breaches thereof,
(ii) shall apply without regard to, and shall not be subject to, any limitation
by reason of set-off, limitation or otherwise and (iii) are intended to be
comprehensive and not to be limited by any requirements of law concerning
prominence of language or waiver of any legal right under any law (including,
without limitation, rights under any workers compensation statute or similar
statute conferring immunity from suit). The obligations of the parties set forth
in this Article VII shall be conditioned upon the Closing having occurred.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.1      ENTIRE AGREEMENT.

                  This Agreement and the Schedules and Exhibits hereto contain
the entire agreement between the parties and supercede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.

                                       14

<PAGE>

         8.2      AMENDMENT AND MODIFICATIONS.

                  This Agreement may not be amended, modified or supplemented
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such amendment, modification or supplement is sought.

         8.3      EXTENSIONS AND WAIVERS.

                  At any time prior to the Closing, the parties hereto entitled
to the benefits of a term or provision may (a) extend the time for the
performance of any of the obligations or other acts of the parties hereto, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any document, certificate or writing delivered pursuant hereto, or (c) waive
compliance with any obligation, covenant, agreement or condition contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument or instruments in writing
signed by the party against whom enforcement of any such extension or waiver is
sought. No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty, covenant or
agreement.

         8.4      SUCCESSORS AND ASSIGNS.

                  This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, provided,
however, that no party hereto may assign its rights or delegate its obligations
under this Agreement without the express prior written consent of the other
party hereto. Except as provided in Article VII, nothing in this Agreement is
intended to confer upon any person not a party hereto (and their successors and
assigns) any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

         8.5      SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.

                  The representations and warranties contained herein shall
survive the Closing and shall thereupon terminate twelve (12) months from the
Closing, except that the representations contained in Sections 3.1, 3.2, 3.4,
4.1, 4.2 and 4.4 shall survive indefinitely. All covenants, conditions,
obligations and agreements contained herein which by their terms contemplate
actions following the Closing shall survive the Closing and remain in full force
and effect in accordance with their terms. All other covenants, conditions,
obligations and agreements contained herein shall not survive the Closing and
shall thereupon terminate.

         8.6      HEADINGS; DEFINITIONS.

                  The Section and Article headings contained in this Agreement
are inserted for convenience of reference only and will not affect the meaning
or interpretation of this Agreement. All references to Sections or Articles
contained herein mean Sections or Articles of this Agreement unless otherwise
stated. All capitalized terms defined herein are equally applicable to both the
singular and plural forms of such terms.

                                       15

<PAGE>

         8.7      SEVERABILITY.

                  If any provision of this Agreement or the application thereof
  to any Person or circumstance is held to be invalid or unenforceable to any
  extent, the remainder of this Agreement shall remain in full force and effect
  and shall be reformed to render the Agreement valid and enforceable while
  reflecting to the greatest extent permissible the intent of the parties.

         8.8      SPECIFIC PERFORMANCE.

                  The parties hereto agree that in the event that any party
fails to consummate the Transactions in accordance with the terms of this
Agreement, irreparable damage would occur, no adequate remedy at law would exist
and damages would be difficult to determine, and that the parties shall be
entitled to specific performance in such event, without the necessity of proving
the inadequacy of money damages as a remedy, in addition to any other remedy at
law or in equity.

         8.9      EXPENSES.

                  Whether or not the Transactions are consummated, and except as
otherwise expressly set forth herein, all legal and other costs and expenses
incurred in connection with the Transactions shall be paid by the party
incurring such expenses and shall be paid at the Closing.

         8.10     NOTICES.

                  All notices hereunder shall be sufficiently given for all
purposes hereunder if in writing and delivered personally, sent by documented
overnight delivery service or, to the extent receipt is confirmed, telecopy,
telefax or other electronic transmission service to the appropriate address or
number as set forth below.

         If to the Company:                         with a copy to:
         -----------------                          --------------

         Continental Southern Resources, Inc.       Porter & Hedges, L.L.P.
         1001 Fannin Street, 17th Floor             700 Louisiana, Suite 3500
         Houston, Texas 77010                       Houston, Texas 77002
         Attention:  William L. Transier            Attention: Chris A. Ferazzi

         If to Knox Gas:
         --------------

         Knox Gas, LLC
         111 Presidential Boulevard
         Suite 158A
         Bala Cynwyd, PA 19004
         Attention:  Manager

                                       16

<PAGE>

         8.11     GOVERNING LAW.

                  This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without regard to the laws that
might otherwise govern under applicable principles of conflicts of laws thereof,
except to the extent that Delaware law shall apply to the internal corporate
governance of Knox Gas.

         8.12     ARBITRATION.

                  If a dispute arises as to the interpretation of this
Agreement, it shall be decided in an arbitration proceeding conforming to the
Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in Philadelphia, Pennsylvania. The decision of the Arbitrators shall
be conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.

         8.13     COUNTERPARTS.

                  This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.

         8.14     CERTAIN DEFINITIONS.

                  As used herein:

                  (a) "Affiliate" shall have the meanings ascribed to such term
in Rule 12b-2 of the Exchange Act;

                  (b) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which federally chartered financial institutions are not open
for business in the City of Philadelphia, Pennsylvania;

                  (c) "Confidential Information" shall mean the existence and
contents of this Agreement and the Schedules and Exhibits hereto, and all
proprietary technical, economic, environmental, operational, financial and/or
business information or material of one party which, prior to or following the
Closing Date, has been disclosed by the Company, on the one hand, or Knox Gas,
on the other hand, in written, oral (including by recording), electronic, or
visual form to, or otherwise has come into the possession of, the other.

                  (d) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended;

                  (e) "Governmental Authority" shall mean any nation or
government, any state, municipality or other political subdivision thereof and
any entity, body, agency, commission or court, whether domestic, foreign or
multinational, exercising executive, legislative, judicial,

                                       17

<PAGE>

regulatory or administrative functions of or pertaining to government and any
executive official thereof;

                  (f) "Knowledge" shall mean (i) with respect to an individual,
knowledge of a particular fact or other matter, if such individual is aware of
such fact or other matter, and (ii) with respect to a Person that is not an
individual, knowledge of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, knowledge of such fact or other matter;

                  (g) "Liens" shall mean liens, pledges, charges, claims,
security interests, purchase agreements, options, title defects, restrictions on
transfer or other encumbrances, or any agreements (other than this Agreement) to
do any of the foregoing, of any nature whatsoever, whether consensual, statutory
or otherwise;

                  (h) "Material Adverse Effect" shall mean, with respect to any
Person, any adverse effect on the business, assets, liabilities, condition
(financial or otherwise) or results of operation of such Person and its
subsidiaries, if any, which is material to such Person and its subsidiaries, if
any, taken as a whole;

                  (i) "Person" shall mean any individual, corporation,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or any agency or institution thereof;

                  (j) "SEC" shall mean the Securities and Exchange Commission;
and

                  (k) "Securities Act" shall mean the Securities Act of 1933, as
amended.

                  [Remainder of page intentionally left blank]

                                       18

<PAGE>

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

                                    CONTINENTAL SOUTHERN RESOURCES, INC.

                                    By:  /s/ WILLIAM L. TRANSIER
                                         ------------------------------
                                         William L. Transier
                                         Co-Chief Executive Officer

                                    KNOX GAS, LLC

                                    By:  /s/ ERNEST BARTLETT
                                         ------------------------------
                                         Name:  Ernest Bartlett, President
                                         Title: FEQ Investments, Managing Member

                                       19

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