This agreement (this "Agreement") made and entered into this____ day of October, 2000, by and between Gladstone Energy, Inc. (referred to in this agreement as "Seller"), and EXCO Resources, Inc. (referred to in this Agreement as "Buyer") evidences the agreement of Seller to sell and convey to Buyer, and the agreement of Buyer to purchase and acquire from Seller, the Subject Properties, as that term is defined below, upon the terms and conditions set forth below.

1. DEFINITION OF THE SUBJECT PROPERTIES. As used herein, the term "Subject Properties" means all interest owned by Seller as of the Effective Date, as defined in Paragraph 6. Below, to the following properties, rights and interests:

2. PURCHASE PRICE. The purchase price ("Purchase Price") payable to Seller for the Subject Properties is $267,000.

2.1 ADJUSTMENT. The Purchase Price shall be adjusted prior to closing by an amount determined as follows:

Buyer and Seller agree to cooperate in the determination of the above-described amounts; provided, however, Buyer's obligation to close the purchase of the Subject Properties and to pay the Purchase Price shall be contingent upon reaching an agreement as to such amounts prior to closing.

2.2        POST CLOSING ADJUSTMENT. Buyer and Seller acknowledge that the adjustment to the Purchase Price described in Paragraph 2.1 above is a preliminary estimate only and that there may be additional revenues or expenses discovered after the closing which should have been included in such adjustment. Therefore, within ninety (90) days after closing (the "Post Closing Date"), the parties shall make a final determination of the expenses and revenues described in paragraphs 2.1 (a) and (b) above which are attributable to the Subject Properties. If it is determined that there were additional revenues or expenses which were properly includable in the adjustment to the Purchase Price and such additional revenues or expenses caused an error in the adjustment of the Purchase Price of more than $500.00, the party in whose favor such error was made agrees to pay the other party an amount equal to the amount of such error (the "Adjustment Amount").

3. REPRESENTATIONS OF SELLER. Seller represents that:

4. ENVIRONMENTAL REVIEW. Buyer shall have until the Closing to examine, test, evaluate, and otherwise conduct an environmental investigation of the Subject Properties for actual and potential environmental damage or liability, if any. On the Closing, Buyer will advise Seller of the results thereof. If the Environmental Review by Buyer reflects a material reduction in the value of the Subject Properties, Buyer shall have the option to either terminate this Agreement without penalty or waive the requirement or condition which caused such termination right to exist. Any actual or potential environmental damages, or liability shall be of such nature, extent or consequence, that under current statutes or regulations regarding such matters, any reasonable, prudent person would regard it as a material potential environmental damage or liability. Buyer may exercise such option to terminate, if applicable, at or before Closing.

5.        ENVIRONMENTAL ACCEPTANCE. Notwithstanding any other provision herein to the contrary, if Buyer purchases the Subject Properties, Buyer shall have accepted the Subject Properties "As Is", and Buyer shall be liable for any environmental cleanup required on the Subject Properties.

6. CLOSING. The purchase and sale transaction described in and contemplated by this Agreement shall take place on October 9, 2000, at 12:00 p.m. Dallas, Texas time, but in any event not later than October 13, 2000. Closing shall take place in the office of Buyer at 5735 Pineland, Suite 235, Dallas, Texas 75231, or at such other place and time agreed upon between Buyer and Seller. The Effective Date of the purchase and sale contemplated by this Agreement shall be at 7 a.m. on the first day of August, 2000. At Closing:

7. CONDITIONS TO OBLIGATIONS OF BUYER AT CLOSING. The obligations of Buyer to purchase the Subject Properties under and pursuant to this Agreement is subject to the satisfaction, at or before Closing, of the following conditions :

8. INDEMNITIES AND ASSUMPTION OF LIABILITIES. With the exception of environmental conditions (as stated in Paragraph 5. Above) for a period of three (3) years from and after Closing, Seller agrees to indemnify and hold Buyer harmless from all actions, damages, liabilities, claims and expenses (including reasonable attorney's fees) arising out of or relating to any act or omission by Seller with respect to its interest in the Subject Properties occurring prior to the Effective Date, and for any liability and damages caused by Sellers' negligence or breach of this Agreement prior to Closing.

Buyer agrees to indemnify and hold Seller harmless against and form all actions, damages, liabilities, claims, and expenses (including reasonable attorney's fees) arising out of or relating to the Subject Properties from and after the Effective Date and for all acts or omissions of Buyer occurring from and after the Effective Date.

As to the Subject Properties, Seller shall remain responsible for all claims relating to the drilling, operations, production and sale of hydrocarbons from the Subject Properties and the proper accounting and payment by Seller to parties for their interests therein, and any retroactive payment, refunds or penalties to any party or entity, insofar as such claims relate to occurrences and periods of time prior to the Effective Date, and Seller shall defend, indemnify and hold Buyer harmless from all such claims. Buyer shall be responsible for all such claims that relate to act and omissions relating to the Subject Properties from and after the Effective Date.

All proceeds from the sale of production actually sold and delivered by Seller prior to the Effective Date and attributable to the Subject Properties shall belong to and be retained by Seller, and all proceeds from the sale of production actually sold and delivered after the Effective Date attributable to the Subject Properties shall belong to and be the property of Buyer.

9. PRORATION OF TAXES. Ad valorem, property, production, severance, excise, and similar taxes relating to the Subject Properties shall be prorated as of the Effective Date. Seller shall be responsible for all such items relating to the period of time prior to the Effective Date and Buyer shall be responsible for all such items that relate to the period from and after the Effective Date.

10. FURTHER ASSURANCES. Each party shall execute and deliver to the other such further instruments and assurances, and shall take such other actions as may be necessary to carry out the intent of this Agreement. Seller agrees to execute appropriate transfer orders or letters in lieu of transfer orders effective as of the Effective Date.

11. LOSS. Any loss to the wells comprising part of the Subject Properties between the date of this Agreement and the date of Closing resulting from fire, lightning, storm, or other casualty or from negligence of Seller, its operator, agents or employees, or the breach of this Agreement by Seller, shall be borne by Seller, and if there is material damage to such wells, Buyer shall have the option to terminate this Agreement upon written notice to Seller.

12. PROHIBITED ACTIONS. Prior to Closing, Seller shall not, without Buyer's prior written consent:

13. EXPENSES. Each party shall pay the fees and expenses of its own counsel and accountants incurred in connection with this transaction.

14. BROKERS. Each party represents that to the best of its knowledge and belief, no outside parties have participated in the negotiation of this transaction on behalf of either party, and no firm or person shall be entitled to any finder's or broker's fee with respect to the transaction contemplated by this Agreement.

15. INCORPORATION OF EXHIBITS. All exhibits to this Agreement constitute an integral part of and are incorporated in this Agreement.

16. LAW. Texas law shall govern the rights and obligations of the parties under this Agreement.

17. CERTAIN DEFINITIONAL PROVISIONS.

18. NOTICES. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given if delivered in person or by facsimile transmission (FAX) or when deposited with the United States Postal Service registered or certified mail, return receipt requested, postage prepaid, addressed to the party to receive such notice at the address set forth below:

19. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Texas, County of Dallas, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world such party may be found.

20. FURTHER ASSURANCES. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

21. WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

22. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to the subject matter hereof. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment.

23. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. None of the parties may assign any of their rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld, except that Buyer may assign any of its rights under this Agreement to any subsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

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

25. PARAGRAPH HEADINGS, CONSTRUCTION. The headings of Paragraphs in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms.

26. TIME OF ESSENCE. With regard to all dates and time periods provided for in this Agreement, time is of the essence.

27. GOVERNING LAW. This Agreement will be governed by the laws of the State of Texas.

28. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

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

SELLER:

Gladstone Energy, Inc.

By:     /s/ Johnathan M. Hill                    
     Johnathan M. Hill, President

BUYER:

EXCO Resources, Inc.

By:       /s/ Ted W. Eubank, President      
     Ted W. Eubank, President

5. That certain Operating Agreement dated August 12, 1980, by and among AAA Operating Company, Inc., as Operator, and Gladstone Resources, Inc, et al, as Non-Operators, covering the following lands insofar and only insofar as they cover and pertain to the Mesaverde and Chacra Formations to wit: