UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12

Castle Energy Corporation
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(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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computed pursuant to Exchange Act Rule 0-11 (Set forth the
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was determined):

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by the Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
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2) Form, Schedule of Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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May [29], 2001

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Castle Energy Corporation (the "Company") to be held on
Wednesday, July 11, 2001, at 9:30 A.M., Eastern Daylight Time, at the Marriott
Philadelphia West, 111 Crawford Avenue, West Conshohocken, Pennsylvania.

At the Annual Meeting, you will be asked to consider and vote upon two
matters: a proposal to elect the nominees named in the accompanying Proxy
Statement as Directors to serve for the period indicated and a proposal to
reappoint KPMG LLP as the Company's independent auditors for the fiscal year
ending September 30, 2001.

Whether or not you are personally able to attend the Annual Meeting, please
complete, sign, date and return the enclosed proxy as soon as possible. This
action will not limit your rights to vote in person if you wish to attend the
Annual Meeting.

A copy of the Company's annual report on Form 10-K for the year ended
September 30, 2000 was previously sent to you. Copies of Form 10-Q for the
quarters ended December 31, 2000 and March 31, 2001 are available on the
internet or upon request.

I look forward to seeing you at the Annual Meeting.

Sincerely,

/s/ JOSEPH L. CASTLE II
----------------------------------------
Joseph L. Castle II
Chairman and Chief Executive Officer

CASTLE ENERGY CORPORATION

Notice of Annual Meeting of Stockholders
to be held on July 11, 2001

May [29], 2001
To The Stockholders:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Castle Energy Corporation, a Delaware corporation (the "Company"),
will be held at Marriott Philadelphia West, 111 Crawford Avenue, West
Conshohocken, Pennsylvania, on Wednesday, July 11, 2001 at 9:30 A.M., Eastern
Daylight Time, for the following purposes:

1. To elect the nominees named in the Proxy Statement as Directors to serve
for the period indicated and until their successors have been elected.

2. To consider and take action upon a proposal to reappoint KPMG LLP as the
Company's independent accountants for the fiscal year ending September 30, 2001.

3. To transact any other business as may properly come before the Annual
Meeting.

Stockholders of record at the close of business on May 18, 2001 will be
entitled to notice of and to vote at the Annual Meeting.

The Company's Annual Report to Stockholders for the fiscal year ended
September 30, 2000 was previously sent to the stockholders.

A complete list of stockholders entitled to vote at the Annual Meeting will
be kept at the office of the Company, One Radnor Corporate Center, Suite 250,
100 Matsonford Road, Radnor, Pennsylvania 19087, for examination by any
stockholder, during ordinary business hours, for a period of not less than ten
days prior to the Annual Meeting.

By Order of the Board of Directors

/s/ JOSEPH L. CASTLE II
----------------------------------------
Joseph L. Castle II
Chairman and Chief Executive Officer

IMPORTANT: PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
SELF-ADDRESSED RETURN ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY
AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO
SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.

PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
July 11, 2001

INTRODUCTION

The accompanying proxy is solicited by the Board of Directors of Castle
Energy Corporation, a Delaware corporation (the "Company"), to be voted at the
Annual Meeting of Stockholders to be held on July 11, 2001 and any adjournment
or adjournments thereof (the "Annual Meeting"). When such proxy is properly
executed and returned, the shares of the Company's Common Stock, par value $.50
per share ("Common Stock"), it represents will be voted at the Annual Meeting as
directed. If no specification is indicated, the shares will be voted "FOR" the
election of the nominees to serve as Director for the term designated and "FOR"
the reappointment of KPMG LLP ("KPMG") as the Company's independent accountants
for the fiscal year ending September 30, 2001. Any stockholder granting a proxy
has the power to revoke it at any time prior to its exercise by notice of
revocation to the Company in writing, by voting in person at the Annual Meeting
or by execution of a later dated proxy; provided, however, that such action is
taken in sufficient time to permit the necessary examination and tabulation of
the subsequent proxy or revocation before the vote is taken.

The shares entitled to vote at the Annual Meeting consist of shares of
Common Stock, with each holder of record as of the close of business on May 18,
2001 (the "Record Date") entitled to one vote for each such share held. As of
the Record Date hereof there were [6,632,884] shares of Common Stock outstanding
and entitled to vote at the Annual Meeting. This Proxy Statement and
accompanying proxy are being sent to stockholders of the Company on or about May
29, 2001.

The address of the Company's principal executive offices is One Radnor
Corporate Center, Suite 250, 100 Matsonford Road, Radnor, Pennsylvania 19087,
and the telephone number is (610) 995-9400.

-1-

TABLE OF CONTENTS

Page
----

INTRODUCTION............................................................................ 1

PRINCIPAL HOLDERS OF VOTING SECURITIES.................................................. 3

SECURITY OWNERSHIP OF MANAGEMENT........................................................ 4

DIRECTORS AND EXECUTIVE OFFICERS........................................................ 5

EXECUTIVE COMPENSATION.................................................................. 7

Summary Compensation................................................................ 7
Option Grants in Last Fiscal Year (Year Ended September 30, 2000)................... 8
Aggregate Option Exercises In Last Fiscal Year and Fiscal Year End Option Values.... 8
Employment Agreements............................................................... 8
Severance/Retention Agreements...................................................... 8
Section 16(a) Beneficial Ownership Reporting Compliance............................. 9
Compensation Committee Interlocks and Insider Participation......................... 9
Board Compensation Committee Report on Executive Compensation....................... 9
Board Audit Committee Report........................................................ 10
Fees Billed by the Independent Auditors to the Company.............................. 11
Performance Graph................................................................... 12

BOARD OF DIRECTORS AND BOARD COMMITTEES................................................. 13
Fiscal 2000 Board Meetings.......................................................... 13
Board Committees.................................................................... 14
Compensation of Directors........................................................... 14

PROPOSAL TO ELECT DIRECTORS............................................................. 14

PROPOSAL TO REAPPOINT INDEPENDENT ACCOUNTANTS........................................... 15

OTHER MATTERS........................................................................... 16

VOTE REQUIRED........................................................................... 16

STOCKHOLDER PROPOSALS................................................................... 16

EXPENSES OF SOLICITATION................................................................ 16

APPENDIX "A" - - AUDIT COMMITTEE CHARTER................................................ 17

-2-

PRINCIPAL HOLDERS OF VOTING SECURITIES

The following table sets forth, as of [May 18, 2001], the names of all
persons who were known by the Company to be the beneficial owners (as defined in
the rules of the Securities and Exchange Commission (the "Commission")), of more
than five percent of the shares of Common Stock of the Company:

Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership(1) Class(1)
- ------------------------------------ ----------------------- ----------

Joseph L. Castle II and Sally W. Castle 1,644,024(2) 24.43%
One Radnor Corporate Center, Suite 250
100 Matsonford Road
Radnor, Pennsylvania 19087

FMR Corp. 1,167,000(3) 17.59%
82 Devonshire Street
Boston, Massachusetts 02109

Kestrel Investment Management 861,300(4) 12.99%
411 Borel Avenue, Suite 403
San Mateo, California 94402

Dimension Fund Advisors, Inc. 455,150(4) 6.86%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401-1038

- ---------------
(1) Based on a total of [6,632,884] shares of Common Stock issued and
outstanding as of [May 18, 2001]. On January 31, 2000, the Company
effected a stock split in the form of a two hundred percent stock dividend
on all outstanding common shares. The result was the number of outstanding
common shares tripled effective January 31, 2000. In calculating each
respective holder's percentage ownership and beneficial ownership in the
table above, shares of Common Stock which the holder has the right to
acquire within 60 days are included.

(2) Joseph L. Castle II and Sally W. Castle are husband and wife. As such,
each is deemed to beneficially own 1,644,024 shares of Common Stock which
consists of (a) 1,434,699 shares of Common Stock owned by Mr. Castle, (b)
111,825 shares of Common Stock owned by Mrs. Castle and (c) 97,500 shares
of Common Stock issuable upon exercise of options which are exercisable
within 60 days by Mr. Castle at $4.08 per share.

(3) These shares are beneficially owned by Fidelity Management & Research
Company as a result of its serving as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940 and as investment adviser to certain other funds which are
generally offered to limited groups of investors. Based on information
furnished by stockholder as of [December 31, 2000], the most recent date
as of which such information was so furnished.

(4) Based on information furnished by stockholder as of [December 31, 2000],
the most recent date as of which such information was so furnished.

-3-

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of [May 18, 2001], the shares of Common
Stock beneficially owned by each executive officer named in the Summary of
Compensation Table below (the "Named Executives"), by each director of the
Company and by the directors and executive officers of the Company as a group,
with sole voting and investment power unless otherwise indicated:

Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
- ------------------------------------------------------------- ------------------------ -------------

Joseph L. Castle II.......................................... 1,644,024(3) 24.43%
Richard E. Staedtler......................................... 150,150(4) 2.21%
Martin R. Hoffmann........................................... 111,000(5) 1.65%
Timothy M. Murin............................................. 90,675(6) 1.35%
Sidney F. Wentz.............................................. 105,000(7) 1.56%
John P. Keller............................................... 96,000(8) 1.43%
Russell S. Lewis............................................. 47,000(9) --
William C. Liedtke, III...................................... 45,000(11) --
All directors and executive officers
as a group (8 persons)....................................... 2,303,849 31.19%

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

(1) Based on a total of [6,632,884] shares of Common Stock issued and
outstanding as of [May 18, 2001]. On January 31, 2000, the Company
effected a stock split in the form of a two hundred percent stock dividend
on all outstanding common shares. The result was the number of outstanding
common shares tripled effective January 31, 2000. In calculating each
respective holder's percentage ownership and beneficial ownership in the
table above, shares of Common Stock which the holder has the right to
acquire within 60 days are included.

(2) Percentages of less than one percent are omitted.

(3) Joseph L. Castle II and Sally W. Castle are husband and wife. As such,
each is deemed to beneficially own 1,644,024 shares of Common Stock.
Represents (a) 1,434,699 shares of Common Stock owned by Mr. Castle and
111,825 shares of Common Stock owned by Mrs. Castle and (b) 97,500 shares
of Common Stock issuable upon exercise of options which are exercisable
within 60 days by Mr. Castle at $4.08 per share.

(4) Represents 150 shares of Common Stock owned by Mr. Staedtler and 150,000
shares of Common Stock issuable upon exercise of options which are
exercisable within 60 days at $4.38 per share.

(5) Represents 6,000 shares of Common Stock owned by an individual retirement
account for the benefit of Mr. Hoffmann, 15,000 shares of Common Stock
issuable upon exercise of options which are exercisable within 60 days at
$3.75 per share, 15,000 shares of Common Stock issuable upon exercise of
options which are exercisable within 60 days at $3.71 per share, 15,000
shares of Common Stock issuable upon exercise of options which are
exercisable within 60 days at $3.79 per share, 15,000 shares of Common
Stock issuable upon exercise of options, which are exercisable within 60
days at $4.50 per share, 15,000 shares of Common Stock issuable upon
exercise of options, which are exercisable within 60 days at $5.75 per
share, 15,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $8.58 per share and 15,000 shares
of Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $7.00 per share.

-4-

(6) Represents 8,175 shares of Common Stock owned by Mr. Murin, 7,500 shares
of Common Stock issuable upon exercise of options which are exercisable
within 60 days at $3.42 per share and 75,000 shares of Common Stock
issuable upon exercise of options which are exercisable within 60 days at
$5.75 per share.

(7) Represents 15,000 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days at $3.75 per share, 15,000 shares of
Common Stock issuable upon exercise of options which are exercisable
within 60 days at $3.71 per share, 15,000 shares of Common Stock issuable
upon exercise of options which are exercisable within 60 days at $3.79 per
share, 15,000 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days at $4.50 per share, 15,000 shares of
Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $5.75 per share, 15,000 shares of Common Stock issuable
upon exercise of options, which are exercisable within 60 days at $8.58
per share and 15,000 shares of Common Stock issuable upon exercise of
options, which are exercisable within 60 days at $7.00 per share.

(8) Represents 6,000 shares of Common Stock owned by Mr. Keller and 30,000
shares of Common Stock issuable upon exercise of options which are
exercisable within 60 days at $3.79 per share, 15,000 shares of Common
Stock issuable upon exercise of options, which are exercisable within 60
days at $4.50 per share, 15,000 shares of Common Stock issuable upon
exercise of options, which are exercisable within 60 days at $5.75 per
share, 15,000 shares of Common Stock issuable upon exercise of options,
which are exercisable within 60 days at $8.58 per share and 15,000 shares
of Common Stock issuable upon exercise of options, which are exercisable
within 60 days at $7.00 per share.

(9) Represents 17,000 shares of Common Stock owned by Mr. Lewis, 15,000 shares
of Common Stock issuable upon exercise of options which are exercisable
within 60 days at $5.25 per share and 15,000 shares of Common Stock
issuable upon exercise of options, which are exercisable within 60 days at
$7.00 per share.

(10) Represents 45,000 shares of Common Stock issuable upon exercise of
options, which are exercisable within 60 days at $8.08 per share.

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information concerning the directors and
executive officers of the Company and its significant subsidiaries as of [May
18, 2001]:

Named Directors and Executive
Officers of the Company Age Position(s)
----------------------------- --- -----------

Joseph L. Castle II .................... 68 Chairman of the Board and Chief Executive Officer of the
Company
Sidney F. Wentz......................... 69 Director
Martin R. Hoffmann...................... 69 Director
John P. Keller.......................... 61 Director
Richard E. Staedtler.................... 56 Director, Chief Financial Officer and Chief Accounting
Officer
Russell S. Lewis........................ 46 Director
William C. Liedtke III.................. 49 Vice President and General Counsel

Executive Officer of Significant
Subsidiaries of the Company
--------------------------------
Timothy M. Murin........................ 45 President of Castle Exploration Company, Inc. ("CECI"),
Castle Texas Production L.P. ("CTPLP"), Castle Offshore
LLC ("COLLC"), Castle Texas Oil and Gas L.P.
("CTOGLP") and Castle Texas Exploration L.P.
("CTELP"), subsidiaries of the Company

-5-

A description of the business experience of each of the directors and
executive officers of the Company and the executive officer of significant
subsidiaries of the Company is as follows:

Directors and Executive Officers of the Company

Joseph L. Castle II has been a Director of the Company since 1985. Mr.
Castle is the Chairman of the Board of Directors and Chief Executive Officer of
the Company, having served as Chairman from December 1985 through May 1992 and
since December 20, 1993. Mr. Castle also served as President of the Company from
December 1985 through December 20, 1993, when he reassumed his position as
Chairman of the Board. Previously, Mr. Castle was Vice President of Philadelphia
National Bank; a corporate finance partner at Butcher and Sherrerd; an
investment banking firm, and a Trustee of The Reading Company. Mr. Castle has
worked in the energy industry in various capacities since 1971. Mr. Castle is a
director of Comcast Corporation and Charming Shoppes, Inc. Since May of 2000,
Mr. Castle has served as the Chairman of the Board of Trustees of the Diet Drug
Products Liability ("Phen-Fen") Settlement Trust.

Sidney F. Wentz has been a director of the Company since June 1995. Mr.
Wentz was Chairman of the Board of The Robert Wood Johnson Foundation, the
nation's largest health care philanthropy from June 1989 until his retirement in
1999. Commencing in 1967, he held several positions with Crum and Forster, an
insurance holding company, retiring as Chairman and Chief Executive Officer in
1988. Previously, he was an attorney with the law firm of White & Case and then
Corporate Attorney for Western Electric Company/AT&T. Mr. Wentz is a director of
Ace Limited, a Bermuda-based insurance company and the Bank of Somerset Hills,
and a trustee of Drew University.

Martin R. Hoffmann has been a director of the Company since June 1995. Mr.
Hoffmann was previously of counsel to the Washington, D.C. office of the law
firm of Skadden, Arps, Slate, Meagher & Flom LLP. He was a Senior Visiting
Fellow at the Center for Technology, Policy and Industrial Development of the
Massachusetts Institute of Technology from May 1993 to May 1995 and a private
business consultant since 1993. From 1989 to 1993, Mr. Hoffmann served as Vice
President and General Counsel of Digital Equipment Corporation. Mr. Hoffmann
also served in various capacities at the United States Department of Defense,
including General Counsel from 1974 to 1975 and Secretary of the Army from 1975
to 1977. He is a Director of Seachange International, Inc. of Maynard,
Massachusetts.

John P. Keller has been a director of the Company since April 1997. Since
1972, Mr. Keller has served as the President of Keller Group, Inc., a
privately-held corporation with subsidiaries in Ohio, Pennsylvania and Virginia.
In 1993 and 1994, Mr. Keller also served as the Chairman of American Appraisal
Associates, an appraisal company. Mr. Keller is also a director of A.M. Castle &
Co. and Old Kent Financial Corporation.

Richard E. Staedtler has been a director of the Company since May 1997 and
has been Senior Vice President and Chief Financial Officer of the Company since
November 1994. Mr. Staedtler served as a director of the Company from 1986
through September 1992, and as Chief Financial Officer of the Company from 1984
through June 1993, when he formed Terrapin Resources, Inc. to purchase Minden
Energy Corporation, then a wholly-owned subsidiary of the Company. Mr. Staedtler
also serves as President of Terrapin, which previously provided certain
administrative services to the Company until June 30, 1998.

Russell S. Lewis has been a director of the Company since April 11, 2000.
From 1994 to 1999, Mr. Lewis was the Chief Executive Officer of TransCore, Inc.,
a company which sells and installs electronic toll collection systems. Since
1999, Mr. Lewis has been the owner and President of Lewis Capital Group, a
company investing in and providing consulting services to growth-oriented
companies. Since March 2000, Mr. Lewis has been Senior Vice President of
Corporate Development at VeriSign, Inc.

William C. Liedtke III was appointed Vice President and General Counsel of
the Company on February 1, 2000. From April 1999 to January 2000, Mr. Liedtke
was President of WCL III, Inc. He served as Chief Executive

-6-

Officer of Redeco Energy Inc. from October 1997 to March 1999, having previously
served as its Vice President and Chief Operating Officer since February 1995.
Mr. Liedtke served as an Independent General Partner of Merrill Lynch Oklahoma
Venture Partners LP from August 1999 to December 2000 when the partnership wound
up.

Executive Officer of Significant Subsidiaries of the Company

Timothy M. Murin has been the President of CECI since June 1993. From
August 1986 to June 1993, Mr. Murin served as the Vice President - Exploration
and Production of CECI and thereafter as President of CECI. From August 3, 1993
until January 1997 and from May 1997 to the present, Mr. Murin has been
President of CTPLP. From December 1999 until the present Mr. Murin has also been
President of COLLC. In 2000, Mr. Murin also was appointed as the President of
CTELP and CTOGLP.

EXECUTIVE COMPENSATION

Summary Compensation

The following table summarizes all compensation earned by the Company's
Chief Executive Officer and each of the other executive officers whose total
annual salary and bonus exceeded $100,000 for the fiscal year ended September
30, 2000.

SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
----------
Fiscal Year ---------------------------------------- Underlying All Other
Ended Other Annual Options/ Compensation
Name and Principal Position September 30, Salary($) Bonus($) Compensation(2) SARs(#) ($)(1)
- --------------------------- ------------- --------- -------- --------------- -------- ------------

Joseph L. Castle II............. 2000 $375,000 $6,341
Chairman of the Board, 1999 $362,500 $378,513 $5,400
Chief Executive Officer 1998 $356,875 $126,171 $6,234
and Director of the
Company

Richard E. Staedtler............ 2000 $260,000 $40,000 $7,800
Director of the Company 1999 $251,674 $50,000 $182,817 $7,534
Chief Financial Officer 1998 $229,168 $50,000 $ 60,939 $6,875
Chief Accounting Officer

Timothy M. Murin................ 2000 $155,000 $27,500 $3,488
President of Castle Exploration 1999 $150,834 $27,500 $81,252 $5,571
CECI, CTPLP, COLLC, 1998 $108,333 $20,000 $27,084 75,000(3) $3,521
CTELP and CTOGLP

William C. Liedtke, III 2000 $100,000 $5,000 $1,500
Vice President and 1999
General Counsel 1998

- ---------------------
(1) Represents Company matching contributions under the Company's 401(k) Plan.

(2) Represents payments made pursuant to agreements with the Company. See
"Severance/Retention Agreements."

(3) Restated to reflect 200% stock dividend effective January 31, 2000.

-7-

Option Grants in Last Fiscal Year

The following options were granted to the Named Executive Officers during
the fiscal year ended September 30, 2000.

OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 2000

Potential Realizable
Number of Percent-of Value at Assumed
Securities Total Options Annual Rates of Stock Price
Underlying Granted to Appreciation for Option Term
Options Employees Exercise Expiration ----------------------------
Name Granted (#) In Fiscal Year Price ($/sh) Date 5% 10%
- ------------------------- ------------- ----------------- ------------ --------------- --------------- ------------

Joseph L. Castle II......
Richard E. Staedtler.....
Timothy M. Murin.........
William C. Liedtke, III.. 45,000 100% $8.08 01/02/2010 $210,263 $533,363

Aggregate Option Exercises In Last Fiscal Year And Fiscal Year End Option Values

The following table shows certain information regarding option exercises
during the fiscal year ended September 30, 2000, the total number of unexercised
options held at September 30, 2000 by the Named Executive Officers and the
values for unexercised "in-the-money" options, which represent the positive
spread between the exercise price of such stock options and the fair market
value of the shares of Common Stock as of September 29, 2000, the last trading
day in the fiscal year ended September 30, 2000, which was $7.4375 per share.

FISCAL YEAR END OPTION VALUES

Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options at Options at
Fiscal Year-End Fiscal Year-End
Shares Value (#) ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) $ Unexercisable Unexercisable
---- -------------- -------- -------------- -------------

Joseph L. Castle II............ 97,500/- $327,356/-
Richard E. Staedtler........... 150,000/- $458,625/-
Timothy M. Murin............... 82,500/- $156,694/-
William C. Liedtke, III........ 45,000/- -----/-----

Employment Agreements

Under the terms of his deferred compensation/retirement agreement, Mr.
Joseph L. Castle II, Chairman and Chief Executive Officer, was entitled to an
$848,000 benefit at September 30, 1996. In June 1997, the Compensation Committee
changed the compensation base upon which the $848,000 benefit was computed,
resulting in an increase in such benefit by $157,000 to $1,005,000 as of
September 30, 1997. In October 1997, the Company paid Mr. Castle $285,456. In
October 1998, the Company paid Mr. Castle $302,163. The Company paid the
remaining $417,381 in October 1999.

Severance/Retention Agreements

The Company entered into severance agreements with Messrs. Castle,
Staedtler and Murin in June 1996 during the period when the Company sought to
sell its assets to outside parties. Pursuant to the terms of the severance
agreements, each officer was entitled to severance compensation in the event the
Company sold substantially all of its assets and the purchaser did not retain
such Named Executive Officer. Severance compensation under such circumstances
was equal to one-month's salary for each full year of service with the Company
and/or its subsidiaries. In addition, the severance agreements included a
retention provision whereby such Named Executive Officers were entitled to
receive such retention compensation if they remained with the Company through
June 1, 1998 - whether or not they were

-8-

subsequently terminated. For the period from June 1, 1998 to May 31, 1999
Messrs. Castle, Staedtler and Murin received such retention pay.

The Company entered into severance agreements with Messrs. Staedtler and
Murin in June 1999. These severance agreements provide for a year's severance
compensation in the event substantially all of the Company's assets are sold and
the named executive is terminated as a result of such sale. Upon his employment
by the Company, Mr. Liedtke became covered by the Company's severance plan which
provides for one month of severance compensation for each full year of
employment by the Company, with a minimum compensation of three months' base
salary in the event substantially all of the Company's assets are sold and Mr.
Liedtke is terminated as a result of such sale

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and owners of more
than 10% of any class of the Company's securities registered pursuant to Section
12 of the Exchange Act to file reports of ownership and changes in ownership
with the Commission. The Commission's rules also require such persons to furnish
the Company with a copy of all Section 16(a) reports that they file. Based
solely upon a review of the copies of the reports and written representations
furnished to the Company, all such reporting persons complied with such
reporting obligations during the fiscal year ended September 30, 2000.

Compensation Committee Interlocks and Insider Participation

For the fiscal year ended September 30, 2000, the Compensation Committee
consisted of Sidney F. Wentz, Chairman, Martin R. Hoffmann, John P. Keller and
Russell S. Lewis. All four members are outside directors of the Company.

Board Compensation Committee Report on Executive Compensation

Overall Policy. This report is provided by the Compensation Committee to
assist stockholders in understanding the Compensation Committee's objectives and
procedures in establishing the compensation of the Company's Chief Executive
Officer and other executive officers.

The Company's executive compensation programs are designed to retain and
reward executives who are successful in helping the Company achieve its business
objectives. The key components of the executive compensation program are base
salary, annual incentive awards and equity participation. These components are
administered with the goal of providing total compensation that is competitive
with compensation levels in the external marketplace. The program also
recognized meaningful differences in individual performance. Each year the
Compensation Committee reviews the elements of executive compensation to insure
that the total compensation program, and each of its elements, meet the overall
objectives discussed above.

Base Salary. Executive officers' salaries (and salary increases, which are
reviewed annually) are determined on a subjective basis with consideration given
to the level of job responsibility, the competitiveness of the executives'
salaries to the external marketplace and the degree to which the executive's
individual objectives have been achieved. Individual objectives vary by business
unit and strategic business goals. These factors are not considered on any
formula basis.

Bonus Program. Bonus payments are subjectively determined and are designed
to reward and encourage individual excellence. In determining whether to award a
discretionary bonus, the Compensation Committee considers the individual's
special achievements, such as his contribution to actions taken during the past
year that contribute to the strategic growth, profitability and competitiveness
of the Company. Bonus payments tend to reflect results of the most recent fiscal
year and thus emphasize achievement of short-term business plans. In addition,
special bonuses are considered for exceptional efforts made during the year in
connection with a particular transaction or business situation.

Equity Participation. The Compensation Committee believes that it is in the
Company's best interests to grant stock options from time-to-time to executive
officers in order to align the interests of those executive officers with the
stockholders and to maximize long-term stockholder value. The purpose of the
Company's 1992 Executive Equity

-9-

Incentive Plan (the "Incentive Plan"), approved by the stockholders of the
Company in May 1993, is to increase the ownership of Common Stock of the Company
by those key employees who contribute to the continued growth, development and
financial success of the Company and its subsidiaries and to attract and retain
key employees and reward them for the Company's profitable performance. The
Incentive Plan is administered by the Compensation Committee.

Actual individual awards are subjectively determined based on marketplace
competitive practices and on such factors as the recipient's position, annual
salary and individual and Company performance as well as historical equity
grants and ownership positions. The Compensation Committee believes that equity
participation helps create a long-term partnership between management/owners and
other stockholders. The policy of granting stock options and encouraging stock
ownership has played a strong part in retaining an excellent team of executives
and managers.

Compensation of the Chief Executive Officer. The Compensation Committee
considers the same factors described above in determining the salary of Mr.
Castle, the Chairman and Chief Executive Officer of the Company. Mr. Castle's
salary earned in fiscal 2000 was $375,000 versus $362,500 in fiscal 1999. In
June 1999, the Compensation Committee increased Mr. Castle's annual salary from
$360,000 to $375,000.

Mr. Castle was not granted any stock options in fiscal 2000.

In addition to the foregoing, Mr. Castle was paid $302,163 in October 1998
and $417,381 in October 1999 under his deferred compensation/retirement plan.
Such payments were due to Mr. Castle at September 30, 1997 (see "Employment
Agreements").

The Compensation Committee believes that performance based bonuses and
stock options should constitute a significant portion of Mr. Castle's total
compensation. The Compensation Committee based the award of Mr Castle's
retention and deferred compensation largely upon Mr. Castle's efforts in the
Company's sale of its Rusk County, Texas oil and gas and pipeline assets to
Union Pacific Resources Corporation in May 1997. This sale resulted in a gain of
$19,667,000 for the Company.

Tax Deductibility of Executive Compensation. The Omnibus Budget
Reconciliation Act (OBRA) of 1993 added Section 162(m) to the Internal Revenue
Code. This section eliminates a company's tax deduction for any compensation
over one million dollars paid to any one of the Named Executive Officers,
subject to several statutory exceptions. The Company desires to preserve the tax
deductibility of all compensation paid to its executive officers and other
members of management. The Company and its subsidiaries did not pay any of the
Named Executive Officers over one million dollars in fiscal 2000.

Compensation Committee:

Martin R. Hoffmann
John P. Keller
Russell S. Lewis
Sidney F. Wentz (Chairman)

Board Audit Committee Report

In connection with the September 30, 2000 financial statements, the audit
committee: (1) reviewed and discussed the audited financial statements of the
Company with management of the Company, (2) discussed with KPMG, the independent
auditors for the Company, the matters required to be discussed by Statement on
Accounting Standards No. 61; and (3) received and discussed with KPMG the
matters required by Independence Standards Board Standard No. 1, including the
independence of KPMG. Based upon these reviews and discussions, the audit
committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K filed with the
Securities and Exchange Commission.

The audit committee considered the compatibility of the provision of
non-audit services by KPMG with the maintenance of KPMG's independence.

On April 11, 2000, the Audit Committee adopted a written charter, a copy of
which is attached to this proxy as Appendix "A".

-10-

Audit Committee:

Martin R. Hoffmann (Chairman)
John P. Keller
Russell S. Lewis
Sidney F. Wentz

Fees Billed by the Independent Auditors to the Company

Audit Fees - The aggregate fees billed to the Company by KPMG, the
independent auditors for the Company, in connection with (i) the audit of the
Company's September 30, 2000 financial statements was $128,000 and (ii) the
review of the financial statements included in the Company's Form 10-Q quarterly
reports for the fiscal year ended September 30, 2000 was $27,000.

Financial Design and Implementation Fees - No fees were billed by KPMG for
information technology services rendered by KPMG during the fiscal year ended
September 30, 2000.

All Other Fees - The aggregate fees billed by KPMG for non-audit services
other than information technology services during the fiscal year ended
September 30, 2000 was $8,790 for tax-related services.

-11-

Performance Graph

The Company is currently engaged in only one segment of the petroleum
industry - exploration and production. The following performance graph for this
segment (Comparison of Five Year-Cumulative Total Returns1) sets forth a
comparison of cumulative total return since September 30, 1995 among the
Company, the NASDAQ stock market (Market Index for U.S. Companies only) and
public crude petroleum and natural gas companies (SIC 1310-1319).

[GRAPHIC OMITTED]

Comparison of Five-Year Cumulative Total Returns
Performance Report for
CASTLE ENERGY CORPORATION

Prepared by the Center for Research in Security Prices
Produced on 01/11/2001 including data to 09/29/2000

Company Index: CUSIP Ticker Class Sic Exchange

14844930 CECX 1310 NASDAQ

Fiscal Year-end is 09/30/2000

Market Index: Nasdaq Stock Market (US Companies)

Peer Index: NASDAQ Stocks (SIC 1310-1319 US Companies)

Crude Petroleum and Natural Gas

Date Company Index Market Index Peer Index

09/29/1995 100.000 100.000 100.000
10/31/1995 75.000 99.424 94.791
11/30/1995 85.526 101.753 96.475
12/29/1995 93.914 101.215 103.269
01/31/1996 81.579 101.722 106.926
02/29/1996 82.895 105.601 109.514
03/29/1996 97.368 105.955 107.081
04/30/1996 126.316 114.733 116.444
05/31/1996 113.158 119.995 124.117
06/28/1996 107.895 114.584 129.971
07/31/1996 107.895 104.385 121.916
08/30/1996 98.026 110.250 122.248
09/30/1996 90.790 118.681 133.579
10/31/1996 88.158 117.361 139.761
11/29/1996 99.342 124.636 145.535
12/31/1996 113.158 124.531 149.265
01/31/1997 123.684 133.367 151.777
02/28/1997 107.895 125.985 127.622
03/31/1997 115.790 117.770 130.200
04/30/1997 113.816 121.441 123.159
05/30/1997 134.211 135.195 135.226
06/30/1997 140.790 139.352 144.253
07/31/1997 135.688 154.034 144.238
08/29/1997 148.991 153.803 155.476
09/30/1997 151.651 162.917 177.651
10/31/1997 150.506 154.430 175.218
11/28/1997 147.818 155.246 158.073
12/31/1997 149.834 152.524 142.241

- --------------
(1) Assumes $100 invested on September 30, 1995 in the Company's Common
Stock, the NASDAQ Stock Market (Market Index for U.S. Companies only) and Peer
Group Comprised of all Public Crude Petroleum and Natural Gas Companies (SIC
Codes 1310-1319).

-12-

Comparison of Five-Year Cumulative Total Returns
Performance Report for
CASTLE ENERGY CORPORATION

Produced on 01/11/2001 including data to 09/29/2000

Date Company Index Market Index Peer Index

01/30/1998 145.341 157.354 134.999
02/27/1998 171.150 172.141 134.644
03/31/1998 190.166 178.503 144.448
04/30/1998 201.261 181.522 144.680
05/29/1998 220.429 171.436 131.749
06/30/1998 213.584 183.428 127.658
07/31/1998 191.111 181.288 110.757
08/31/1998 189.731 145.353 85.801
09/30/1998 193.871 165.518 94.715
10/30/1998 210.198 172.790 92.690
11/30/1998 211.590 190.357 79.809
12/31/1998 194.885 215.086 69.085
01/29/1999 182.635 246.306 67.161
02/26/1999 181.231 224.249 57.339
03/31/1999 179.826 241.217 63.673
04/30/1999 173.758 248.988 70.687
05/28/1999 205.672 242.092 70.604
06/30/1999 204.254 263.874 74.902
07/30/1999 197.397 259.116 79.124
08/31/1999 192.391 270.072 79.336
09/30/1999 194.537 270.444 79.986
10/29/1999 197.709 292.119 72.709
11/30/1999 196.266 327.659 70.429
12/31/1999 292.956 399.714 71.452
01/31/2000 299.025 384.947 71.689
02/29/2000 205.761 458.086 72.258
03/31/2000 180.721 448.622 85.982
04/28/2000 173.650 377.336 85.885
05/31/2000 214.315 331.817 106.109
06/30/2000 220.909 390.041 114.548
07/31/2000 250.160 368.910 103.498
08/31/2000 257.908 412.499 122.702
09/29/2000 263.443 358.891 132.817

LEGEND
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 09/29/1995.

Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business, The University of Chicago. Used with
permission. All rights reserved. (C)Copyright 2001

BOARD OF DIRECTORS AND BOARD COMMITTEES

Fiscal 2000 Board Meetings

The Board of Directors of the Company held 7 meetings during the fiscal
year ended September 30, 2000.

During such fiscal year, each of the incumbent directors attended not less than
75% of the total number of meetings of the Board of Directors and of the
Committees of the Board of Directors on which such director served.

-13-

Board Committees

The Audit Committee consists of Mr. Hoffmann (Chairman), Mr. Wentz, Mr.
Keller and Mr. Lewis. All four Audit Committee members are outside directors.
The functions of the Audit Committee are to: (a) recommend the appointment of
the Company's independent public accountants; (b) review the financial reports
of the Company; (c) monitor the effectiveness of the independent audit; (d)
assure that the scope and implementation of the independent audit is not
restricted or the independence of the independent accountants compromised; (e)
review the independent accountants' reports to management on internal controls
and recommend such actions as may be appropriate; and (f) review and approve the
engagement by management of all non-audit and special services involving, in the
aggregate, fees in excess of $15,000 per year. All members of the Audit
Committee are independent pursuant to Rule 4200(a)(15) of the National
Association of Security Dealers' listing standards. The Audit Committee held one
meeting during the fiscal year ended September 30, 2000.

The Company has not established a nominating committee.

The Compensation Committee consists of Mr. Wentz (Chairman), Mr. Hoffmann,
Mr. Keller and Mr. Lewis. All four Compensation Committee members are outside
directors. The Compensation Committee establishes overall compensation programs
and policies for the Company. The Compensation Committee monitors the selection
and performance as well as reviews and approves the compensation of key
executives, and administers the Incentive Plan. The Compensation Committee held
one meeting during the fiscal year ended September 30, 2000.

Compensation of Directors

All of the outside directors are paid director's fees of $32,000 per year.
In addition, all outside directors receive fees for attending meetings of the
board of directors. The fee per meeting is $1,500. Committee members also
receive a $500 fee for attending each committee meeting.

In addition, each outside director is granted an option to purchase 15,000
shares of Common Stock each calendar year under the Company's 1992 Executive
Equity Incentive Plan. The option is granted on the first business day of each
calendar year. The exercise price for such options is the closing price of the
Company's stock on the date of grant. The option is exercisable six months after
it is granted. Effective January 2, 2001 the Company issued to each of Messrs.
Hoffmann, Wentz, Keller and Lewis options to purchase 15,000 shares of Common
Stock at $7.00 per share. The options expire on January 2, 2010.

PROPOSAL TO ELECT DIRECTORS

At the Annual Meeting, the Stockholders will be asked to elect two
directors, constituting one class of directors, to serve for the term indicated
and until such director's successor are elected and qualified. In the
unanticipated event that one or both of the nominees for director becomes
unavailable, it is intended that proxies will be voted for such substitute
nominees as may be designated by the Board of Directors.

The Company's Bylaws, as amended, provide that the number of directors of
the Company shall be not less than four, nor more than nine, as shall be
determined by the Board of Directors. Both the Bylaws and the Company's
Certificate of Incorporation also provide that the directors shall be divided
into three classes, each class to consist of, as nearly as possible, one third
of the number of directors who constitute the entire Board. At each annual
meeting of stockholders of the Company, successors to the class of directors
whose term expires at such meeting shall then be elected for a three-year term.
The Bylaws further provide that if the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible.

The shares represented by the enclosed Proxy will be voted as directed. If
no choice is specified in the Proxy, the shares represented by the enclosed
Proxy will be voted "For" the nominees set forth below. The Board of Directors
recommends voting "FOR" the nominees to serve in the class indicated.

Information concerning the nominees for the class of directors to be
elected, as well as those continuing directors not standing for election at the
Annual Meeting, is set forth below:

The following individuals are nominated to serve as directors whose term
will expire at the 2004 Annual Meeting.

-14-

Joseph L. Castle II has been a Director of the Company since 1985. Mr.
Castle is the Chairman of the Board of Directors and Chief Executive Officer of
the Company, having served as Chairman from December 1985 through May 1992 and
since December 20, 1993. Mr. Castle also served as President of the Company from
December 1985 through December 20, 1993 when he reassumed his position as
Chairman of the Board. Previously, Mr. Castle was Vice President of Philadelphia
National Bank; a corporate finance partner at Butcher and Sherrerd, an
investment banking firm, and a Trustee of The Reading Company. Mr. Castle has
worked in the energy industry in various capacities since 1971. Mr. Castle is a
director of Comcast Corporation and Charming Shoppes, Inc. Since May of 2000,
Mr. Castle has served as the Chairman of the Board of Trustees of the Diet Drug
Products Liability ("Phen-Fen") Settlement Trust.

Sidney F. Wentz has been a director of the Company since June 1995. Mr.
Wentz was Chairman of the Board of The Robert Wood Johnson Foundation, the
nation's largest health care philanthropy from June 1989 until his retirement in
June 1999. Commencing in 1967, he held several positions with Crum and Forster,
an insurance holding company, retiring as Chairman and Chief Executive Officer
in 1988. Previously, he was an attorney with the law firm of White & Case and
then Corporate Attorney for Western Electric Company/AT&T. Mr. Wentz is a
director of Ace Limited, a Bermuda-based insurance company and the Bank of
Somerset Hills, and a trustee of Drew University.

The following individuals are directors whose terms will expire at the 2002
Annual Meeting:

The following individuals are directors in the class whose term will expire
at the 2003 Annual Meeting:

Richard E. Staedtler has been a director of the Company since May 1997 and
has been Senior Vice President and Chief Financial Officer of the Company since
November 1994. Mr. Staedtler served as a director of the Company from 1986
through September 1992, and as Chief Financial Officer of the Company from 1984
through June 1993, when he formed Terrapin Resources, Inc. ("Terrapin") to
purchase Minden Energy Corporation, then a wholly-owned subsidiary of the
Company. Mr. Staedtler also serves as President of Terrapin, which previously
provided certain administrative services to the Company until June 30, 1998.

PROPOSAL TO REAPPOINT INDEPENDENT ACCOUNTANTS

The Board of Directors has selected the accounting firm of KPMG LLP
("KPMG") to be the Company's independent accountants to audit the books and
records of the Company and its subsidiaries for the fiscal year ending September
30, 2001. The firm has no material relationship with the Company and is
considered well qualified. Should the stockholders of the Company not ratify the
selection of KPMG or should the fees proposed by KPMG become excessive or the
services provided by KPMG become unsatisfactory, the selection of another firm
of independent certified public accountants will be undertaken by the Board of
Directors. Representatives of KPMG are expected to be present

-15-

at the Annual Meeting, and will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.

The shares represented by the enclosed Proxy will be voted as directed. If
no choice is specified in the Proxy, the shares represented by the enclosed
Proxy will be voted "FOR" the selection of KPMG as the Company's independent
accountants. The Board of Directors recommends a vote "FOR" the proposal to
ratify the selection of KPMG as the Company's independent accountants.

OTHER MATTERS

The Board of Directors knows of no other matters to be brought before the
Annual Meeting. Should any other matter be properly raised at the Annual
Meeting, however, it is the intention of each of the persons named in the Proxy
to vote in accordance with his judgment as to each such matter raised.

VOTE REQUIRED

The two nominees within the class of directors for election to the Board of
Directors at the Annual Meeting who receive the greatest number of votes for
director, a quorum being present, shall become the directors for such class. The
affirmative vote of the holders of a majority of the Common Stock present in
person or by proxy and entitled to vote at the Annual Meeting is required to
ratify the selection of KPMG as the independent accountants of the Company.
Abstentions and non-votes will not be tabulated as negative votes with respect
to any matter presented at the Annual Meeting, but will be included in computing
the number of shares of Common Stock present for purposes of determining the
presence of a quorum for the Annual Meeting.

STOCKHOLDER PROPOSALS

Any proposals of stockholders which are intended to be presented at the
2002 Annual Meeting of Stockholders must be received by the Secretary of the
Company by January 15, 2002 for consideration for inclusion in the Proxy
Statement. In addition, the persons named as proxies on the form of proxy mailed
in connection with the solicitation of proxies on behalf of the Company's Board
of Directors for use at the 2002 Annual Meeting of Stockholders will be
authorized to vote in their own discretion on any stockholder proposal not
included in the Company's Proxy Statement if the Company does not receive
written notice of such proposal by April 1, 2002. Such proxy holders' authority
to vote in their discretion on stockholder purposes as to which the Company does
receive notice by April 1, 2002 will be determined in accordance with the rules
of the Securities and Exchange Commission.

EXPENSES OF SOLICITATION

The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made initially by mail. The directors and officers and
other employees of the Company may, without compensation other than their usual
compensation, solicit proxies by mail, telephone, telegraph or personal
interview. The Company will also reimburse brokerage firms, banks, voting
trustees, nominees and other recordholders for their reasonable out-of-pocket
expenses in forwarding proxy materials to the beneficial owners of Common Stock.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ JOSEPH L. CASTLE II
---------------------------------------
JOSEPH L. CASTLE II
Radnor, Pennsylvania Chairman and Chief Executive Officer
May [29], 2001

-16-

APPENDIX "A"

CASTLE ENERGY CORPORATION

AUDIT COMMITTEE CHARTER

The Board of Directors of Castle Energy Corporation ("Company") has adopted
this Charter for its Audit Committee ("Committee"):

I. COMPOSITION

The Committee shall consist of all independent directors other than those
who choose not to serve. One member shall be appointed Committee Chairman of the
Board of Directors. The Committee, and its Chairman, as constituted immediately
prior to the adoption of this Charter shall remain in effect until the Board of
Directors determines otherwise.

II. AUTHORITY

The Committee is authorized to carry out the responsibilities set forth in
this Charter and any other assignments requested by the Board of Directors. The
Committee is authorized to retain persons or entities having special competence
as necessary to assist the Committee in fulfilling its responsibilities. The
Committee shall have access to the Company's outside counsel for advice and
information.

III. PURPOSE

The Committee is to serve as a focal point for communication among the
Board of Directors, the Company's independent accountants and the Company's
management, as the respective duties of such groups, or their constituent
members, relate to the Company's financial accounting and reporting and to its
internal controls.

The Committee is not intended to be part of the Company's operational or
managerial decision making process. The Company's management, and not the
Committee or the independent accountants, is responsible for producing the
Company's financial statements and reports and for instituting and maintaining
internal controls. The independent accountants are responsible for attesting to
the fair presentation of the financial statements in accordance with generally
accepted accounting principles ("GAAP") and for becoming familiar with and
commenting upon the adequacy of the Company's internal controls. It is the
Committee's task, in all instances within its own limitations, to review these
functions of management and the independent accountants and to report to the
Board of Directors with respect thereto.

IV. MEETINGS

4.1 Number and Manner. The Committee is to meet at least one (1) time per
year, and as many other times as the Board of Directors, the Committee or the
Committee Chairman deems necessary. The Committee may meet or otherwise take
action in the same manner or manners as may the Board of Directors.

4.2 Attendance. The Committee or the Chairman of the Committee may request
that member(s) of management, representatives of the independent accountants, or
any of them, be present at meetings of the Committee. (See, also, Part 5.1.2,
below). The Committee's outside counsel should be made available to attend all
meetings of the Committee.

4.3 Minutes. Minutes of each Committee Meeting are to be prepared and sent
to Committee members.

V. SPECIFIC DUTIES

The Audit Committee is to perform the following duties:

5.1 Communication.

-17-

5.1.1 Access to Committee. Inform the independent accountants and
management that any of them may communicate with the Committee, directly or
through its Chairman, at any time with respect to any matters which he or she
reasonably believes are related to the Committee's responsibilities.

5.1.2 Chief Financial Officer. The Chief Financial Officer shall be
specifically advised by the Committee that, in addition to the expectation that
each of them is to communicate with the Committee as provided in 5.1.1, above,
each of them is expected to be prepared to report to the Committee at formal
meetings upon request of the Committee or its Chairman.

5.2 Adequacy of Internal Controls and Financial Reporting.

5.2.1 Internal Controls

(a) Policies and Procedures Manual. Meet with management, the Chief
Financial Officer and the independent accountants regarding the Company's
Policies and Procedures Manual ("Manual") to review the adequacy of internal
controls and financial reporting, including, but not limited to: matters
involving compliance with the Foreign Corrupt Practices Act of 1977;
questionable payments or lapses of internal controls; adequacy and effectiveness
of controls over computer-processed financial information; management's expenses
and perquisites, including any use of corporate assets; the likely impact on the
Company's Policies and Procedures Manual of changes in accounting positions
proposed by the FASB or other regulatory bodies, and the methods employed in,
and the status of, monitoring compliance with the Manual.

5.2.2 Financial Reporting

(a) Annual Report. Upon or near completion of the annual audit, review with
management and the independent accountants, the audited financial results for
the year, prior to their release to the public.

This review is to encompass, among other things:

(i) The latest drafts of the Company's Form 10-K, including the
financial statements, notes to the financial statements and
management's discussion and analysis ("MD&A"), as well as any other
material financial statement and supplemental disclosures required by
GAAP or the Securities and Exchange Commission ("SEC").

(ii) Whether the independent accountants reviewed the MD&A
section.

(iii) Whether management or the independent accountants are aware
of any material inconsistency or know of any misstatement, or
omission, of material fact in the audited financial statements or Form
10-K.

(iv) Significant transactions encountered in such audit which are
not a normal part of the Company's operations.

(v) Changes in accounting standards or rules promulgated by the
Financial Accounting Standards Board ("FASB"), the SEC or other
regulatory bodies, that had a material effect on the audited financial
statements; and changes, if any, during the year in the significant
accounting standards used by the Company.

(vi) Significant adjustments proposed by the independent
accountants with respect to such audit.

(vii) Management's judgments and accounting estimates of
significance with respect to matters relevant to the audit such as:
asset valuations; contingencies; allowance for doubtful receivables;
depreciable lives for plant and equipment; amortization periods for
intangible assets; accrued taxes; accrued programming costs; accrued
copyright charges; self-insurance reserves; accruals for income taxes
associated with certain items; estimates of net operating loss
carryforwards.

-18-

(viii) Disagreements with management which, if not satisfactorily
resolved, would have caused the independent accountants to modify
their report on the Company's audited financial statements.

(ix) Management's consultation with other accountants about
auditing and accounting matters. (x) Accounting and auditing issues of
significance discussed with management prior to retention.

(xi) Difficulties of significance encountered in performing the
audit.

(xii) Significant variances in the financial statements from year
to year or period to period.

(xiii) The substance of any significant issues relevant to the
audit raised by counsel concerning litigation, contingencies, claims
or assessments.

(xiv) Open years on federal income tax returns; whether there are
any significant items that have been or might be disputed by the
Internal Revenue Service, and the status of the related tax reserves.

(xv) Significant concerns of the independent accountants and
whether they believe anything else should be discussed with the
Committee that has not yet been raised or covered elsewhere.

(b) Interim Reports. Each Committee member is to be provided with copies of
the Company's quarterly reports to shareholders and Forms 10-Q and 8-K,
including related financial statements and exhibits where practical, promptly
after their mailing or filing. Contemporaneously, management shall provide each
Committee member with an explanation of any significant matters which affected
such report; provided, however, that management is expected to inform the
Committee in advance of any proposed significant changes in accounting or
financial reporting practices contained in such reports and of any other unusual
events that could have a significant impact on such reports.

5.2.3 Annual Audit Process: Audit Scope; Post-Audit Review; Evaluation of
Audit Process.

(a) Scope of Audit. Discuss with the independent accountants and approve,
before the independent accountants perform a significant portion of the annual
audit, the scope and general extent of the independent accountants' audit
examination, including their engagement letter. The Committee should be provided
by the independent accountants with an explanation of the factors considered by
the accountants in determining the audit scope, including, among other things,
(i) the quality of the internal control structure; (ii) the extent of
involvement of the internal audit group in the audit examination; (iii) other
areas to be covered during the audit engagement, and (iv) the extent to which
the planned audit scope can be relied upon to detect fraud or weaknesses in
internal controls.

(b) Post-Audit Review. Subsequent to the completion of the audit for the
last calendar year, the Committee should conduct a post-audit review which shall
include the following:

(1) Review of the independent accountants' report to the Committee,
and management's response thereto, on internal control structure in
connection with the audit concerning material weakness conditions,
reportable conditions and other comments and recommendations.

(2) Review with management and the independent accountants any matters
relating to the audit that may be of interest to the Committee in
fulfilling its obligation to oversee the financial reporting process for
which management is responsible, which review may include, among others:

A. The independent accountants' responsibilities under generally
accepted accounting standards described in the engagement letter.

B. Any matters set forth under 5.2.2(a), above, entitled
"Financial Reporting."

C. Inquiry of the independent accountants as to whether
information contained in the Annual Report to Shareholders containing
financial statements for the last calendar year is consistent with

-19-

the information reflected in the financial statements contained in the
Form 10-K for such year, and whether the independent accountants are
aware of any material inconsistency or know of any misstatement, or
omission, of material fact in either document.

D. Review of management advisory services provided the Company by
the independent accountants during the last calendar year, and fees
related thereto.

E. Review letter(s) of management representations, if any, given
to the independent accountants in connection with the audit and
inquire whether the independent accountants encountered any
difficulties in obtaining such letter(s) or any specific
representations therein.

(1) Independent Accountants. Elicit from the independent accountants
(a) an evaluation of the cooperation received by the independent
accountants from management and the internal audit group during the audit
examination for the last calendar year, including the independent
accountants' access to all requested records, data and information, and (b)
an evaluation of the quality of (i) management's financial and accounting
staff and (ii) the internal audit group and the adequacy of its staffing.

(2) Management. Elicit from management an evaluation of the competence
of the independent accountants.

5.2.4 Reports to Board. The Chairman of the Committee shall provide an oral
report at each Board of Directors meeting on the deliberations, conclusions and
recommendations of, and the actions taken by, the Committee since the last Board
meeting.

VI. INDEPENDENT ACCOUNTANTS

6.1 Retention or Replacement of Independent Accountants. Determine
Committee's recommendation to the Board of Directors on whether to retain or
replace the independent accountants.

6.2 Search. Conduct, with management, the search process in the event the
independent accountants are to be replaced.

6.3 Fees. Review the independent accountants' fees negotiated by
management.

VII. OTHER FUNCTIONS OF COMMITTEE

7.1 Code of Conduct. Obtain management's report on compliance with the
Company's Code of Conduct.

7.2 Investigations. Where appropriate in the Committee's discretion,
request the independent accountants, counsel or others to perform special or
supplementary investigations or reviews of any control areas not required for
audit purposes, and any areas of possible improprieties.

7.3 Amendments. Recommend to the Board of Directors any appropriate
modification or amendment to this Charter.

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