CREDIT AGREEMENT





                                  by and among


                           QUEST RESOURCE CORPORATION
                                   as Borrower


                      PONDEROSA GAS PIPELINE COMPANY, INC.,
                          QUEST OIL & GAS CORPORATION,
                                       and
                               STP CHEROKEE, INC.
                                  as Guarantors


                                       and

                        WELLS FARGO ENERGY CAPITAL, INC.
                                    as Lender







                          Dated as of November 7, 2002

<PAGE>


                                TABLE OF CONTENTS


                                                                Page
ARTICLE 1   DEFINITIONS AND ACCOUNTING TERMS......................1
      1.1  Defined Terms..........................................1
           -------------
      1.2  Accounting Terms......................................15
           ----------------
      1.3  Number and Gender of Words............................15
           --------------------------

ARTICLE 2   TERMS OF FACILITY....................................15
      2.1  Revolving Commitment..................................15
           --------------------
      2.2  Advances and Payments Under the Note..................16
           ------------------------------------
      2.3  Repayment Provisions..................................16
           --------------------
      2.4  Bank Determinations...................................17
           -------------------
      2.5  Interest Rates........................................18
           --------------
      2.6  General Provisions Relating to Interest...............18
           ---------------------------------------
      2.7  Increase in Borrowing Base Fee........................19
           ------------------------------
      2.8  Loans to Satisfy Obligations..........................19
           ----------------------------
      2.9  Voluntary Prepayment..................................20
           --------------------
      2.10 Mandatory Prepayment or Actions in Lieu Thereof.......20
           -----------------------------------------------
      2.11 Warrant...............................................20
           -------
      2.12 Subordination.........................................20
           -------------

ARTICLE 3   CONDITIONS PRECEDENT.................................21
      3.1  Conditions to Execution by Lender and Advances........21
           -----------------------------------------------
      3.2  Further   Conditions  to  Each  Advance   Pursuant  to
           --------------------------------------------------------
           Subsection 2.1(a).....................................26
           -----------------

ARTICLE 4   REPRESENTATIONS AND WARRANTIES.......................27
      4.1  Existence and Good Standing...........................27
           ---------------------------
      4.2  Due Authorization.....................................27
           -----------------
      4.3  Valid and Binding Obligations.........................28
           -----------------------------
      4.4  Scope and Accuracy of Financial Statements............28
           ------------------------------------------
      4.5  Liabilities and Litigation............................28
           --------------------------
      4.6  Title to Assets.......................................28
           ---------------
      4.7  Initial Reserve Report................................28
           ----------------------
      4.8  Gas Imbalances........................................29
           --------------
      4.9  Authorizations & Consents.............................29
           -------------------------
      4.10 Compliance with Laws..................................29
           --------------------
      4.11 Proper Filing of Tax Returns and Payments of Taxes Due29
           ------------------------------------------------------
      4.12 Public Utility Holding Company Act Compliance.........30
           ---------------------------------------------
      4.13 Investments Company Act Compliance....................31
           ----------------------------------
      4.14 Public Utility holding Company Act Compliance.........31
           ---------------------------------------------
      4.15 Lien Priority.........................................31
           -------------
      4.16 Use of Proceeds....... ...............................31
           ----------------


<PAGE>


      4.17 Full Disclosure.......................................31
           ---------------
      4.18 Places of Business....................................31
           ------------------
      4.19 Identification Numbers................................32
           ----------------------
      4.20 Subsidiaries..........................................32
           ------------
      4.21 Solvency..............................................32
           --------
      4.22 Relationship of Credit Parties........................32
           ------------------------------

ARTICLE 5   AFFIRMATIVE COVENANTS................................32
      5.1  Maintenance and Access to Records.....................32
           ---------------------------------
      5.2  Quarterly Financial Statements........................33
           ------------------------------
      5.3  Annual Financial Statements...........................33
           ---------------------------
      5.4  Compliance Certificates...............................33
           -----------------------
      5.5  Reserve Reports.......................................33
           ---------------
      5.6  Sales and Production Reports..........................34
           ----------------------------
      5.7  Edgar Filings.........................................34
           -------------
      5.8   Newly Acquired Properties............................34
           --------------------------
      5.9  Title Opinions........................................34
           --------------
      5.10 Statement of Material Adverse Effect..................34
           ------------------------------------
      5.11 Title Defects.........................................35
           -------------
      5.12 Additional Information................................35
           ----------------------
      5.13 Compliance with Laws and Payment of Taxes.............35
           -----------------------------------------
      5.14 Maintenance of Existence and Good Standing............35
           -----------------------------------------
      5.15 Further Assurances....................................35
           ------------------
      5.16 Initial Expenses of the Lender........................35
           ------------------------------
      5.17 Subsequent Expenses of the Lender.....................35
           ---------------------------------
      5.18 Maintenance of Tangible Property......................36
           --------------------------------
      5.19 Maintenance of Insurance..............................36
           ------------------------
      5.20 Right of Inspection...................................36
           -------------------
      5.21 Notice................................................37
           ------
      5.22 Collateral Protection.................................37
           ---------------------
      5.23 ERISA Information and Compliance......................37
           --------------------------------
      5.24 Subordination of Intercompany Debt....................38
           ----------------------------------
      5.25 Sale of Property......................................38
           ----------------

ARTICLE 6   NEGATIVE COVENANTS...................................38
      6.1  Other Debt of Borrower................................38
           ----------------------
      6.2  Derivative Contracts..................................39
           --------------------
      6.3  Guaranty of Payment or Performance....................40
           ----------------------------------
      6.4  Loans, Advances or Investments........................40
           ------------------------------
      6.5  Mortgages or Pledges of Assets........................40
           ------------------------------
      6.6  Cancellation of Insurance.............................40
           -------------------------
      6.7  Sales of Property.....................................40
           -----------------
      6.8  Dividends and Distributions...........................40
           ---------------------------


<PAGE>


      6.9  Changes in Structure..................................40
           --------------------
      6.10 Payment of Accounts Payable...........................40
           ---------------------------
      6.11 Transactions with Affiliates..........................41
           ----------------------------
      6.12 Nature of Business....................................41
           ------------------
      6.13 Subsidiaries..........................................41
           ------------
      6.14 ERISA Compliance......................................41
           ----------------

ARTICLE 7   EVENTS OF DEFAULT....................................42
      7.1  Events of Default.....................................42
           -----------------
      7.2  Rights Upon Occurrence of Unmatured Event of Default..45
           ----------------------------------------------------
      7.3  Rights Upon Occurrence of an Event of Default.........45
           ----------------------------------------------

ARTICLE 8   MISCELLANEOUS........................................46
      8.1  Notices...............................................46
           -------
      8.2  Amendments and Waivers................................47
           ----------------------
      8.3  Invalidity............................................47
           ----------
      8.4  Survival of Agreements................................48
           ----------------------
      8.5  Successors and Assigns................................48
           ----------------------
      8.6  Renewal, Extension or Rearrangement...................48
           -----------------------------------
      8.7  Waivers...............................................48
           -------
      8.8  Indemnity.............................................48
           ---------
      8.9  Cumulative Rights.....................................49
           -----------------
      8.10 Taxes, Etc............................................49
           -----------
      8.11 Exhibits; Conflicts...................................49
           -------------------
      8.12 Titles of Articles, Sections and Subsections..........49
           --------------------------------------------
      8.13 Jurisdiction..........................................49
           ------------
      8.14 Counterparts..........................................50
           ------------
      8.15 Effectiveness.........................................50
           -------------
      8.16 Documents.............................................50
           ---------
      8.17 Rights of Third Person................................50
           ----------------------
      8.18 Announcements.........................................50
           -------------
      8.19 Jury Trial Waived.....................................51
           -----------------
      8.20 Governing Law.........................................51
           -------------
      8.21 Arbitration...........................................51
           -----------
      8.22 Entire Agreement......................................53
           ----------------



<PAGE>


      EXHIBITS


EXHIBIT I       Form of Note
EXHIBIT II      Form of Compliance  Certificate
EXHIBIT III     Form  of  Guaranty  Agreement
EXHIBIT  IV     Initial  Borrowing  Base Properties
EXHIBIT V       Ponderosa  Gathering System
EXHIBIT VI      STP Cherokee Gathering  System
EXHIBIT VII     Form of Warrant
EXHIBIT VIII    Form of Warrant Agreement
EXHIBIT IX      Permitted Debt



<PAGE>


                                CREDIT AGREEMENT

           This CREDIT AGREEMENT,  dated as of November 7, 2002, is by and among
QUEST RESOUSRCE  CORPORATION,  a Nevada corporation (the "Borrower"),  PONDEROSA
GAS PIPELINE COMPANY, INC., a Kansas corporation ("Ponderosa"),  QUEST OIL & GAS
CORPORATION.,  a Kansas corporation ("Quest Oil & Gas"), STP CHEROKEE,  INC., an
Oklahoma  corporation  ("STP  Cherokee";  Ponderosa,  Quest  Oil & Gas,  and STP
Cherokee collectively, the "Guarantors") and WELLS FARGO ENERGY CAPITAL, INC., a
Texas corporation (the "Lender").

                    W I T N E S S E T H  T H A T:
                    _ _ _ _ _ _ _ _ _ _  _ _ _ _

           The Borrower and the  Guarantors  have requested the Lender to extend
credit to the Borrower in the form of a revolving  credit facility not to exceed
$20,000,000.00   outstanding  at  any  time  (subject  to  the  limitations  and
reductions  as herein set forth) to be used to  refinance  existing  debt of the
Borrower,  Ponderosa,  Quest Oil & Gas, and STP Cherokee, to acquire oil and gas
properties, to develop oil and gas properties and for general corporate purposes
of the Borrower and Guarantors.

           NOW,  THEREFORE,   in  consideration  of  the  mutual  covenants  and
agreements herein contained and of the loans and commitment hereinafter referred
to, the Borrower, the Guarantors and the Lender agree as follows:

                                    ARTICLE 1
                        DEFINITIONS AND ACCOUNTING TERMS

      1.1  Defined   Terms.  As  used  in  this  Agreement, the following terms
have the following meanings:

           "Advance"  means a direct advance of immediately  available  funds by
      the Lender to the Borrower pursuant to Section 2.1.

           "Affiliate"  means any Person  controlling,  controlled  by, or under
      common  control with, any other Person.  For purposes of this  definition,
      "control"  (including  "controlled  by" and "under common  control  with")
      means the  possession,  directly or indirectly,  of the power to direct or
      cause the direction of the management and policies of such Person, whether
      through the ownership of voting securities or otherwise.


<PAGE>

           "Agreement"   means  this  Credit  Agreement  and  all  exhibits  and
      schedules  hereto,  as the same may be amended from time to time according
      to the terms hereof.

           "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
     U.S.C.ss. 101, et seq.), as amended, and regulations promulgated
     thereunder.

           "Base Rate" means,  for any day, the fluctuating  rate of interest in
      effect for such day which  rate per annum  shall be equal to the higher of
      (i) the rate of interest as publicly  announced from time to time by Wells
      Fargo Bank at its  principal  office in San  Francisco,  California as its
      "prime  rate" (the  "prime  rate" is a rate set by Wells  Fargo Bank based
      upon various factors including costs and desired return,  general economic
      conditions and other factors, and is used as a reference point for pricing
      some loans,  which may be priced at, above, or below such announced rate),
      or (ii) one-half of one percent  (0.50%) per annum above the Federal Funds
      Rate in effect from time to time. Any change in the "prime rate" announced
      by Wells  Fargo Bank shall take  effect at the  opening of business on the
      day specified in the public announcement of such change.

           "Bonanza" means Bonanza Energy corporation, a Kansas corporation.

           "Borrower" has the meaning indicated in the opening paragraph hereof.

           "Borrowing Base" means the maximum value,  for loan purposes,  of the
      Borrowing  Base  Properties,   as  determined,  at  the  sole  good  faith
      discretion  of  the  Lender  in  accordance  with  its  customary  lending
      practices,  from  time to  time in  accordance  with  Section  2.4 of this
      Agreement;  provided,  however,  at any time that any Oil and Gas Property
      that is a Borrowing Base Property  ceases to be a Borrowing Base Property,
      the  Lender,  at its sole good faith  discretion  in  accordance  with its
      customary  lending  practices,  may  redetermine  the  Borrowing  Base  by
      excluding  the value,  for loan  purposes,  of such Oil and Gas  Property,
      which  determination  shall be made by the  Lender at its sole good  faith
      discretion in accordance with its customary lending  practices,  and which
      redetermined  Borrowing  Base shall  become  effective  upon notice to the
      Borrower by the Lender.

                                       2
<PAGE>


           "Borrowing  Base Period" means the period  commencing on the day that
      the  conditions  to the  initial  Advance  under  Section  3.1 and 3.2 are
      satisfied  and  ending on March 31,  2003,  and each six (6) month  period
      thereafter commencing April1 and October 1 of each year.

           "Borrowing  Base  Properties"  means at any time, any and all Oil and
      Gas Properties  that cover or relate to Proved Reserves and that have been
      given  value by the Lender in the then most  recent  determination  of the
      Borrowing  Base,  and which shall be on the  Closing  Date the Oil and Gas
      Properties set forth on Exhibit IV attached hereto.

           "Borrowing  Request" means a written  application by the Borrower for
      an Advance. Each such Borrowing Request shall specify the requested amount
      of such Advance,  the requested  date of such Advance and the purposes for
      which proceeds for such Advance will be used.

           "Business  Day"  means a day other than a  Saturday,  Sunday or legal
      holiday for commercial banks in the State of Texas.

           "Closing Date" means the date when all the  conditions  precedent set
      forth in Section 3.1of this Agreement have been satisfied or waived by the
      Lender.

           "Code" means the United  States  Internal  Revenue  Code of 1986,  as
      amended, and regulations promulgated thereunder.

           "Collateral" means the Property now or at any time hereafter securing
      the Obligations.

           "Commitment"  means the  obligation of the Lender as set forth herein
      from the date hereof through the Termination  Date to extend credit to the
      Borrower  by means of  Advances,  with the sum of all such  Advances  made
      pursuant to Section 2.1 not to exceed at any time the Commitment Limit.

           "Commitment Limit" means at any time the lesser of (a) $20,000,000.00
      or (b) the then existing Borrowing Base.

           "Compliance Certificates"  means the  certificates  of  a Responsible
     Officer of each of the Credit Parties submitted to the

                                       3
<PAGE>


      Lender from  time to time  pursuant to this Agreement, which certificates
      shall be substantially in the form attached hereto as Exhibit II.

           "Contested   in  Good  Faith"  means   contested  in  good  faith  by
      appropriate  and  lawful  proceedings  diligently  conducted,   reasonably
      satisfactory to the Lender,  (a) in which  foreclosure,  distraint,  sale,
      forfeiture,  levy,  execution or other similar  proceedings  have not been
      initiated  or have been stayed and  continue to be stayed,  (b) in which a
      good faith  contest  will not  reasonably  be  expected to have a Material
      Adverse  Effect,  and (c) for which matter a reserve or other  appropriate
      provision has been  established  in accordance  with the  requirements  of
      GAAP.

           "Credit Parties" means  collectively the Borrower,  Ponderosa,  Quest
      Oil & Gas, and STP Cherokee and "Credit Party" means any one of them.

           "Debt" of any Person means, to the extent of such Person's liability,
      (a) all  items  of  indebtedness  for  borrowed  money,  obligations,  and
      liabilities  (whether  matured or unmatured,  liquidated or  unliquidated,
      direct or indirect, joint or several,  contingent or otherwise),  which in
      accordance with GAAP should be classified upon such Person's balance sheet
      as liabilities, but in any event including liabilities secured by any Lien
      existing on Property of such Person or a Subsidiary  of such  Person,  (b)
      the  deferred  purchase  price of  Property  or  services  and  direct and
      contingent  obligations  incurred in connection with letters of credit and
      similar  agreements  and  obligations  as a lessee under leases which have
      been,  or which  in  accordance  with  GAAP  should  be,  capitalized  for
      financial reporting purposes, (c) all guaranties, endorsements (other than
      for collection or deposit in the ordinary  course of business),  and other
      contingent obligations of such Person with respect to obligations of other
      Persons of the types  described in clauses (a) and/or (b)  preceding,  (d)
      liabilities  of  unfunded  vested  benefits  under any  Plan,  (e) all net
      obligations  with respect to Derivative  Contracts and (f) all obligations
      to  supply  funds to,  invest in or  maintain  working  capital  or equity
      capital of any other  Person,  or  otherwise  to maintain the net worth or
      solvency or any balance sheet condition of any other Person.

           "Debtor  Relief  Laws"  means  the  Bankruptcy  Code  and  all  other
      applicable   liquidation,    conservatorship,    bankruptcy,   moratorium,
      rearrangement, receivership, insolvency, reorganization, or similar

                                       4
<PAGE>


      debtor relief Laws  or general equitable  principles from time to time in
      effect affecting the Rights of creditors generally.

           "Default  Rate" means a per annum rate of interest  equal to the Base
      Rate plus six percent (6%).

           "Derivative Contracts" means all future contracts, forward contracts,
      swap, cap or collar  contracts,  option  contracts,  hedging  contracts or
      other  derivative  contracts  or similar  agreements  covering oil and gas
      commodities or prices or financial, monetary or interest rate instruments.

           "EDGAR" means the Electronic Data  Gathering,  Analysis and Retrieval
      program operated by the SEC pursuant to Regulation ST of the General Rules
      and  Regulations  of the SEC under the  Securities  Act of 1933, and shall
      include any successor program.

            "ERISA" means the Employee  Retirement  Income Security Act of 1974,
      as amended, and regulations promulgated thereunder.

           "ERISA  Affiliate"  means  any  trade  or  business  (whether  or not
      incorporated)  under common  control with any or all of the Credit Parties
      within  the  meaning of  Section  414(b) or (c) of the Code (and  Sections
      414(m) and (o) of the Code for purposes of provisions  relating to Section
      412 of the Code).

           "ERISA  Event" means (a) a  Reportable  Event with respect to a Plan;
      (b) a  withdrawal  by  any  or all of  the  Credit  Parties  or any  ERISA
      Affiliate  from a Plan subject to Section 4063 of ERISA during a plan year
      in which it was a substantial  employer (as defined in Section  4001(a)(2)
      of  ERISA)  or a  cessation  of  operations  which  is  treated  as such a
      withdrawal  under  Section  4062(e) of ERISA;  (c) a  complete  or partial
      withdrawal by any or all of the Credit Parties or any ERISA Affiliate from
      a  Multiemployer  Plan or  notification  that a  Multiemployer  Plan is in
      reorganization;  (d) the filing of a notice of intent to terminate  (other
      than  pursuant  to  Section  4041(b) of ERISA),  the  treatment  of a Plan
      amendment as a termination under Section 4041(c) or 4041A of ERISA, or the
      commencement   of   proceedings  by  the  PBGC  to  terminate  a  Plan  or
      Multiemployer  Plan; (e) an event or condition  which might  reasonably be
      expected  to  constitute  grounds  under  Section  4042 of  ERISA  for the
      termination of, or the appointment of a trustee to administer, any Plan or
      Multiemployer Plan;

                                       5
<PAGE>


      or (f) the imposition of any liability under Title IV of ERISA, other than
      PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any
      or all of the Credit Parties or any ERISA Affiliate.

           "Event of Default" means any of the events  specified in Section 7.1,
      provided  that the  requirements,  if any,  for the giving of notice,  the
      lapse of time,  or both, or any other  condition  specified in Section 7.1
      have been satisfied.

           "Facility  Rate" means a per annum rate of interest equal to the Base
      Rate plus three percent (3%).

           "Federal  Funds Rate"  means,  for any day, the rate set forth in the
      weekly  statistical  release  designated  as  H.15(519),  or any successor
      publication,  published  by the  Federal  Reserve  Bank of New York on the
      preceding  Business Day opposite the caption "Federal Funds  (Effective)";
      or,  if for any  relevant  day such rate is not so  published  on any such
      preceding  Business  Day,  the rate for  such day will be the  average  as
      determined  by the  Lender  of the  rates  for  the  last  transaction  in
      overnight  federal funds  arranged  prior to 9:00 a.m. (New York, New York
      time)  on that day by each of  three  leading  brokers  of  federal  funds
      transactions in New York, New York selected by the Lender.

           "Financial Statements" means statements of financial condition, as at
      the point in time and for the period indicated, and consisting of at least
      a  balance  sheet  and  related  statements  of  operations,   changes  in
      shareholders' equity and cash flow.

           "GAAP" means, generally accepted accounting principles established by
      the  Financial  Accounting  Standards  Board and in  effect in the  United
      States from time to time during the term of this  Agreement and applied on
      a basis  consistent  with that adopted in the  Financial  Statements to be
      delivered to the Lender pursuant to the provisions of this Agreement.

           "Guarantors"  has the  meaning  indicated  in the  opening  paragraph
      hereof, and "Guarantor" means any one of the Guarantors.

           "Guaranty  Agreement" means a general continuing guaranty executed by
      a Guarantor in favor of the lender,  in  substantially  the form  attached
      hereto as Exhibit III with appropriate completions, as the same

                                       6
<PAGE>



      may be amended, supplemented, or modified from time to time, and "Guaranty
      Agreements" means more than one Guaranty Agreement.

           "Hazardous  Substances"  means any  substances  defined as "hazardous
      substances,"   "hazardous   materials,"   "hazardous   wastes"  or  "toxic
      substance" under the Comprehensive  Environmental  Response,  Compensation
      and   Liability   Act,   as  amended;   the   Superfund   Amendments   and
      Reauthorization  Act, as amended;  the Hazardous Materials  Transportation
      Act, as amended;  the Resource  Conservation and Recovery Act, as amended;
      the Toxic Substances  Control Act, as amended;  or any other law, statute,
      ordinance,   rule,  regulation  or  order  now  or  hereafter  enacted  or
      promulgated by any governmental  authority with  jurisdiction and relating
      to the protection of the environment.

           "Highest  Lawful  Rate" means the maximum rate (or, if the context so
      permits or requires,  an amount  calculated  at such rate) of interest (if
      any) that, at the time in question,  would not cause the interest  charged
      on the  Obligations  owed to the Lender to exceed the maximum  amount that
      the Lender  would be allowed to contract  for,  charge,  take,  reserve or
      receive  under  applicable  Law after taking into  account,  to the extent
      required by  applicable  Law, all relevant  payments and charges under the
      Loan Documents.

           "Intercompany  Loans" shall mean loans and other extensions of credit
      between any of the Credit Parties and/or their  wholly-owned  Subsidiaries
      to the extent made expressly subordinate to the Obligations.

           "Investment"  in any  Person  means any  stock,  bond,  note or other
      evidence  of Debt or any other  security  (other  than  current  trade and
      customer  accounts) of, investment or partnership  interest in or loan to,
      such Person.

           "Laws"  means  all  applicable  statutes,  laws,  ordinances,  rules,
      rulings,   interpretations,    regulations,    judgments,    requirements,
      governmental  authorizations (including licenses,  permits, franchises and
      other  governmental  consents  necessary for the ownership or operation of
      Property),  orders,  writs,  injunctions or decrees (or interpretations of
      any of the foregoing) of any political subdivision,  state,  commonwealth,
      nation, country,  territory,  possession,  county, parish, municipality or
      Tribunal.

                                       7
<PAGE>



           "Lender" has the meaning indicated in the opening paragraph hereof.

           "Lien"  means  any  lien,  charge,  claim,   restriction,   mortgage,
      mechanic's lien, materialmen's lien, pledge, hypothecation, inchoate lien,
      assignment, deposit arrangement, conditional sale or other title retention
      agreement, financing lease, security interest, security agreement or other
      encumbrance,  whether  arising  by  contract  or under Law,  and  includes
      reservations,   exceptions,   encroachments,   easements,   rights-of-way,
      covenants, conditions, leases and other title exceptions and the filing of
      any financing  statement under the Uniform Commercial Code of the State of
      Texas or comparable Law of any jurisdiction.

           "Liquid   Investments"   means   Investments  in  (a)  United  States
      government issued securities,  obligations of the United States government
      or any agency thereof and any obligations  guaranteed by the United States
      government  with  maturities  of not more  than one year  from the date of
      acquisition,  (b) certificates of deposit, time deposits,  Eurodollar time
      deposits or bankers'  acceptances  having in each case a tenor of not more
      than three (3) months from the date of  acquisition  issued by any bank or
      financial institution organized under the Laws of the United States or any
      state  thereof or any branch or agency of a non-United  States  commercial
      bank licensed to conduct  business in the United  States  having  combined
      capital and surplus of at least $500,000,000.00,  and (c) commercial paper
      of an issuer with a rating in one of the two highest rating  categories of
      Standard and Poor's Rating Service or Moody's  Investor  Service,  Inc. at
      the time of  acquisition  and with  maturities of no more than twelve (12)
      months from the date of acquisition thereof.

           "Litigation"   means   any   proceeding,   claim,   lawsuit,   and/or
      investigation  conducted,  or  threatened  and  known  to  the  Person  in
      question, by or before any Tribunal.

           "Loan  Documents"  means  this  Agreement,  the  Note,  the  Security
      Documents,  the Guaranty  Agreements,  the Warrant,  the Warrant  Purchase
      Agreement,  the  Subordination  Agreement and all other notes,  mortgages,
      deeds of trust,  restatements,  ratifications and amendments of mortgages,
      deeds of trust,  financing  statements,  guaranties,  security agreements,
      pledge  agreements,  documents,  instruments  and other  agreements now or
      hereafter delivered pursuant

                                       8
<PAGE>


      to the terms of,  or in connection with,  this  Agreement, the Obligations
      and/or  the  Collateral,  and all  renewals,  extensions  and restatements
      of,  and  amendments  and  supplements  to any or all of the foregoing.

           "Loans" means the loans and  extensions of credit by the Lender to or
      for the  account  of any or all of the  Credit  Parties  pursuant  to this
      Agreement.

           "Marketable  Title" means record title free and clear from reasonable
      doubt as to  matters of law and fact such that a prudent  operator  of Oil
      and Gas  Properties,  advised of the facts and their  legal  significance,
      would willingly accept.

           "Material  Adverse  Effect"  means a  material  adverse  change in or
      material  adverse  effect  on (a)  the  assets,  liabilities,  operations,
      business,  or financial condition of any or all of the Credit Parties, (b)
      the ability of any or all of the Credit  Parties to meet their  respective
      Obligations  under any of the Loan Documents on a timely basis as provided
      herein  or  therein  or (c) the  legality,  validity,  binding  effect  or
      enforceability  against a Credit Party of any Loan Document to which it is
      a party.

           "Mortgaged  Properties"  shall  mean  Oil and Gas  Properties  of the
      Credit Parties subject to the Liens of the Security Documents from time to
      time to secure the Debt evidenced by the Note.

           "Multi-employer  Plan"  means  a  "multiemployer  plan,"  within  the
      meaning of Section  4001(a)(3) of ERISA, to which any or all of the Credit
      Parties or any ERISA Affiliate  makes, is making,  or is obligated to make
      contributions or, during the preceding three (3) calendar years, has made,
      or been obligated make, contributions.

           "Note"  means  that  certain  promissory  note in the face  amount of
      $20,000,000.00  dated of even date  herewith  made by the  Borrower to the
      order of the Lender,  in the form  attached  hereto as Exhibit I, together
      with all deferrals,  renewals or extensions thereof, which promissory note
      shall evidence the Advances made to the Borrower by the Lender pursuant to
      Section 2.1 and funds advanced and applied pursuant to Section 2.8.

          "Obligations" means all present and future loans, advances, indebted-
     ness, obligations, covenants, duties and liabilities, and all

                                       9
<PAGE>


     renewals for any period,increases  and extensions thereof,or any part there
     of, now  or  hereafter  owing to the  Lender  by  any  or all of the Credit
     Parties arising from or  pursuant  to any  of the  Loan Documents, together
     with all  interest  accruing  thereon, and  costs, expenses, and attorneys'
     fees incurred  in  the enforcement or  collection  thereof,  whether  such
     indebtedness,  obligations, and  liabilities  are  direct, indirect, fixed,
     contingent, liquidated, unliquidated, joint, several, or joint and several,
     and all  other indebtedness or obligations  of  any type whatsoever now or
     hereafter owing to the Lender by any or all of the Credit Parties, whether
     or not in connection with any of the Loan Documents.

           "Oil and Gas Properties"  means fee,  leasehold or other interests in
      or  under  mineral  estates  or  oil,  gas and  other  liquid  or  gaseous
      hydrocarbon  leases  with  respect to  properties  situated  in the United
      States,  including,  without  limitation,  overriding  royalty and royalty
      interests,  leasehold estate interests, net profits interests,  production
      payment  interests  and mineral fee  interests,  together  with  contracts
      executed  in  connection  therewith  and  all  tenements,   hereditaments,
      appurtenances and properties, real or personal,  appertaining,  belonging,
      affixed or incidental thereto.

           "PBGC"  means  the  Pension  Benefit  Guaranty  Corporation,  or  any
      governmental  entity  succeeding to any of its principal  functions  under
      ERISA.

           "Pension  Plan" means a pension  plan (as defined in Section  3(2) of
      ERISA)  subject  to Title IV of ERISA,  other than a  Multiemployer  Plan,
      which any or all of the Credit Parties sponsor,  maintain, or to which any
      or all of the Credit  Parties make,  are making,  or are obligated to make
      contributions, or in the case of a multiple employer plan (as described in
      Section  4064(a) of ERISA) has made  contributions  at any time during the
      immediately preceding five (5) plan years.

           "Permitted  Liens" means:  (a) Liens for Taxes,  not yet due or which
      are being  Contested in Good Faith;  (b) Liens in connection with workers'
      compensation,  unemployment insurance or other social security (other than
      Liens  created  by  Section  4068 of  ERISA),  old age  pension  or public
      liability  obligations  which are not yet due or which are being Contested
      in Good  Faith;  (c)  vendors',  carriers',  warehousemen's,  repairmen's,
      mechanics', workmen's, materialmen's,  construction or other similar Liens
      arising by operation of Law in the

                                       10
<PAGE>


      ordinary   course  of  business  or   incident   to  the  construction  or
      improvement  of any Property in respect of  obligations  which are not yet
      due or which are being Contested in Good Faith; (d) Liens to operators and
      non-operators  under joint  operating  agreements  arising in the ordinary
      course of business to secure amounts owing,  which amounts are not yet due
      or are being  Contested in Good Faith;  (e) Liens under  production  sales
      agreements,  division  orders,  operating  agreements and other agreements
      customary  in the oil and  gas  business  for  processing,  producing  and
      selling  hydrocarbons;  (f) Liens created in favor of the Lender  securing
      Obligations  hereunder  and  other  Liens  expressly  permitted  under the
      Security Documents; (g) easements,  rights-of-way,  restrictions and other
      similar  encumbrances,  and minor  defects in the chain of title which are
      customarily accepted in the oil and gas financing industry,  none of which
      interfere  with the  ordinary  conduct of the business of the owner of the
      Property or  materially  detract  from the value or use of the Property to
      which they apply;  (h) Liens of record under terms and  provisions  of the
      leases, unit agreements, assignments and other transfer of title documents
      in the  chain of title  under  which the  owner of the  relevant  Property
      acquired such Property;  (i) Liens securing the purchase price or existing
      under  conditional  sale  or  title  retention   contracts  for  equipment
      purchased in the normal  course of business of any of the Credit  Parties,
      provided that such Lien shall not extend to or cover any other Property of
      any of the Credit  Parties;  and (j) Liens in favor of Wells Fargo Bank as
      agent, securing Debt governed by the Senior Credit Agreement.

           "Ponderosa"  has  the  meaning  indicated  in the  opening  paragraph
      hereof.

           "Ponderosa   Gathering   System"  means  that  certain  gas  pipeline
      gathering  system  and  salt  water  disposal  system  more   particularly
      described on Exhibit V attached hereto.

           "Person"   means   any   individual,   sole   proprietorship,   firm,
      corporation, trust, association,  institution, partnership, joint venture,
      limited liability company, Tribunal or other entity.

           "Plan" means an employee  benefit plan (as defined in Section 3(3) of
      ERISA) which is subject to ERISA,  other than a  Multiemployer  Plan,  and
      which any or all of the Credit Parties  sponsor,  maintain or to which any
      or all of the Credit  Parties  make,  are making or are  obligated to make
      contributions and includes any Pension Plan.

                                       11
<PAGE>


           "Property"  means  any  interest  in any kind of  property  or asset,
      whether real, personal or mixed, tangible or intangible.

           "Proved   Developed   Producing   Reserves"   means  those   reserves
      denominated as such and determined in accordance with the methods commonly
      accepted by the Society of Petroleum  Engineers for evaluating oil and gas
      reserves.

           "Proved  Reserves"  means  those  reserves  denominated  as such  and
      determined in accordance with the methods commonly accepted by the Society
      of Petroleum Engineers for evaluating oil and gas reserves.

           "Quest  Oil  and  Gas"  has  the  meaning  indicated  in the  opening
      paragraph hereof.

          "Quest  Energy  Service"  means  Quest  Energy Service, Inc., a Kansas
     corporation.

           "Reportable  Event"  means,  any of the  events  set forth in Section
      4043(b) of ERISA or the regulations thereunder,  other than any such event
      for which the 30-day  notice  requirement  under  ERISA has been waived in
      regulations issued by the PBGC.

           "Responsible  Officer"  means the  president  or any vice  president,
      treasurer,  chief financial  officer or chief  accounting  officer of each
      Credit Party.

           "Rights" means rights, remedies, powers and privileges.

           "SEC" means the  Securities  and  Exchange  Commission  of the United
      States of America, and includes any successor agency.

           "Section"  or  "Subsection"  means a section  or  subsection  in this
      Agreement unless specified otherwise.

           "Security  Documents"  means the documents  described in  Subsections
      3.1(c)(8)  of this  Agreement  and all other  documents  now or  hereafter
      existing  which  provide  the Lender with  Collateral,  as the same may be
      amended or restated from time to time.

                                       12
<PAGE>


           "Senior Credit  Agreement"  means that certain Credit Agreement dated
      of even date  herewith by and among the Borrower,  as borrower,  the other
      Credit Parties,  and Wells Fargo Bank, as lender and agent,  and the other
      lenders  thereto,  as such Credit  Agreement  may be amended  from time to
      time.

           "Senior Credit  Borrowing Base" means the "Borrowing Base" as defined
      in and determined pursuant to the terms of the Senior Credit Agreement.

           "Senior  Debt"  means  the Debt of the  Borrower  owed to the  Senior
      Lenders and governed by the Senior Credit Agreement.

           "Senior Lenders" means from time to time the Persons who are party as
      "Banks"  and  their  "Affiliates"  as  defined  under  the  Senior  Credit
      Agreement.

           "Solvent"  means,  as to any  Person at any  time,  that (a) the fair
      value of all of the  Property of such Person is greater than the amount of
      such Person's liabilities (including disputed, contingent and unliquidated
      liabilities) as such value is established  and  liabilities  evaluated for
      purposes of Section  101(32) of the Bankruptcy  Code; (b) the present fair
      saleable  value of all of the Property of such Person is not less than the
      amount that will be required to pay the probable  liability of such Person
      on its debts as they become absolute and matured; (c) such Person does not
      intend to, and does not believe that it will,  incur debts or  liabilities
      beyond such Person's ability to pay as such debts and liabilities  mature;
      and (d) such Person is not engaged in  business or a  transaction,  and is
      not about to engage in business or a transaction,  for which such Person's
      Property would constitute unreasonably small capital.

           "Subordination  Agreement" means that certain Subordination Agreement
      dated of even date herewith by and among the Lender,  Wells Fargo Bank, as
      agent for the Senior Lenders, and the Credit Parties, as amended from time
      to time.

           "Subsidiary"  of  any  Person  means  any  corporation,  association,
      partnership, joint venture or other business entity of which more than 50%
      of the  voting  stock or other  equity  interests  (in the case of Persons
      other than corporations), is owned or controlled directly or indirectly by

                                       13
<PAGE>


      the Person,  or  one  or  more of  the  Subsidiaries  of  the  Person, or
      a combination thereof.

           "STP" means  STP, Inc.,  an  Oklahoma  corporation, prior to its name
     change to STP Cherokee, Inc.

           "STP  Cherokee"  has the meaning  indicated in the opening  paragraph
      hereof.

           "STP  Cherokee  Gathering  System"  means that  certain gas  pipeline
      gathering  system  and  salt  water  disposal  system  more   particularly
      described on Exhibit VI attached hereto.

           "Taxes" means all taxes,  assessments,  filing or other fees, levies,
      imposts,   duties,   deductions,   withholdings,   stamp  taxes,  interest
      equalization taxes,  capital transaction taxes,  foreign exchange taxes or
      charges, or other charges of any nature whatsoever from time to time or at
      any time imposed by any Law or Tribunal.

           "Termination Date" means December 7, 2005.

           "Tribunal"  means any court,  governmental  department  or authority,
      commission,  board, bureau,  agency,  arbitrator or instrumentality of any
      state, political subdivision,  commonwealth,  nation,  territory,  county,
      parish  or  municipality,   whether  now  or  hereafter  existing,  having
      jurisdiction  over the Lender,  any of the Credit  Parties or any of their
      respective Property.

           "Unfunded  Pension  Liability"  means the excess of a Plan's  benefit
      liabilities under Section 4001(a) (16) of ERISA, over the current value of
      that Plan's assets, determined in accordance with the assumptions used for
      funding  the  Pension  Plan  pursuant  to Section  412 of the Code for the
      applicable Plan year.

           "Unmatured  Event of  Default"  means any event or  occurrence  which
      solely  with the lapse of time or the  giving of notice or both will ripen
      into an Event of Default.

           "Warrant"  means a Warrant,  in the form  attached  hereto as Exhibit
      VII, issued by the Borrower to the Lender to purchase  1,600,000 shares of
      common stock of the Borrower.

                                       14
<PAGE>


           "Warrant  Purchase  Agreement"  means that certain  Warrant  Purchase
      Agreement in the form attached  hereto as Exhibit VIII,  governing , among
      other things the issuance of the Warrant.

           "Wells Fargo Bank"  means Wells  Fargo Bank Texas, N.A.,  a  national
      banking association, and its successors.

      1.2 Accounting  Terms.  All accounting and financial  terms used in any of
the Loan Documents and the compliance  with each covenant  contained in the Loan
Documents  that relates to financial  matters  shall be determined in accordance
with GAAP,  except to the extent that a deviation  therefrom is expressly stated
in such Loan Documents.

      1.3 Number and Gender of Words.  Whenever the  singular  number is used in
any Loan Document, the same shall include the plural where appropriate, and vice
versa;  words of any gender in any Loan Document shall include each other gender
where appropriate; and the words "herein," "hereof," "hereunder" and other words
of similar  import refer to the relevant Loan Document as a whole and not to any
particular part, section or subdivision thereof.

                                    ARTICLE 2
                                TERMS OF FACILITY

      2.1 Revolving Commitment.  Subject to the terms and conditions (including,
without  limitation,  the  right  of the  Lender  to  terminate  the  Commitment
hereunder  upon an Event of  Default)  and  relying on the  representations  and
warranties  contained in this Agreement and the other Loan Documents,  from time
to time until the  Termination  Date,  the Lender agrees to make Advances to the
Borrower  following  receipt by the Lender of a  Borrowing  Request on or before
10:00 a.m.  Central  Standard or Daylight  Savings Time, as the case may be, one
(1) Business Day prior to the date of the requested Advance,  in such amounts as
the Borrower may request,  provided,  however,  that each Advance shall be in an
amount not less than  $50,000.00  and no Advance  shall be made which will cause
the sum of all outstanding  Advances to exceed the Commitment  Limit and further
provided  however,  the initial  advance shall be as of the date of execution of
the Agreement in the amount of $5,000,000.00.

         The Borrower may transmit  Borrowing  Requests to the Lender by mail,
personal  delivery,  telefacsimile,  telex or other method; but the Lender shall
not be obligated to make  Advances on the  requested  date unless the Lender has
received,  on or before 10:00 a.m. Central Standard or Daylight Savings Time, as
the case may be, one (1) Business Day prior to such date a Borrowing Request.

                                       15
<PAGE>


           Subject  to  the  conditions  and   limitations  set  forth  in  this
Agreement,  the  Borrower  may borrow,  repay  without  penalty or premium,  and
reborrow hereunder,  from the date of this Agreement until the Termination Date,
either the entire Commitment Limit or any lesser sum.

           Such Advances made by the Lender to the Borrower shall be made at the
office of the Lender at 1000  Louisiana,  Suite 600,  Houston,  Texas  77002 and
shall be evidenced by the Note.

      2.2  Advances and Payments  Under the Note.  The Lender shall  maintain an
account on its books in the name of the  Borrower  reflecting  the amount of all
Advances  and  other  Loans  made by the  Lender  and each  payment  made by the
Borrower.  The aggregate  unpaid amount of such Advances and Loans  reflected by
the  notations  by  the  Lender  on  its  records  shall  be  deemed  rebuttably
presumptive  evidence of the principal  amounts owing on the Note. The liability
for payment of principal and interest  evidenced by the Note shall be limited to
principal amounts actually  advanced and outstanding  pursuant to this Agreement
and the other Loan Documents and interest accrued on such amounts  calculated in
accordance with this Agreement.

      2.3  Repayment  Provisions.  Interest as it accrues on  principal  amounts
evidenced by the Note and calculated as provided herein and in the Note shall be
due  and  payable  by the  Borrower  (a) at the  end of  each  calendar  quarter
commencing  December 31, 2002 and continuing  thereafter on the last day of each
succeeding  calendar  quarter while any amount remains owing on the Note and (b)
on the date  the  principal  Debt  evidenced  by the  Note is paid in full,  the
interest  payment in each  instance to be that which has been earned and remains
unpaid.

           All  outstanding  principal  Debt  evidenced  by the  Note  shall  be
repayable by the Borrower on the Termination Date.

           Certain of the Security  Documents  contain an assignment unto and in
favor of the  Lender  of all oil,  gas and  other  minerals  produced  and to be
produced from or attributable to the Mortgaged  Properties  together with all of
the revenues and proceeds  attributable  to such  production,  and such Security
Documents  further  provide that all such revenues and proceeds  which may be so
collected  by the Lender  pursuant  to such  assignment  shall be applied to the
payment of the Note and the satisfaction of all other Debt to be secured by such
Security  Documents.  So long as the Borrower  owes Debt  governed by the Senior
Credit Agreement,  any such assignment as it relates to the Mortgaged Properties
shall be  subordinate  to all Rights of Wells  Fargo Bank,  as agent,  under the
Senior Credit Agreement. The Lender and the Credit Parties expressly acknowledge
and agree that so long as no Event of

                                       16
<PAGE>


Default shall have occurred and be continuing, the Lender shall be entitled only
to  repayment  on the Note as set forth above,  and the Credit  Parties,  to the
extent of their Rights apart from this  Agreement,  shall be entitled to receive
all proceeds from the sale of production.  In connection  with the rights of the
Lender to all proceeds of production, upon the occurrence and continuation of an
Event of Default (only if the Debt  governed by the Senior Credit  Agreement has
been  repaid in full),  each of the Credit  Parties  hereby  grants the Lender a
power of attorney,  which power is coupled with an interest and is  irrevocable,
to complete in all respects  and deliver to the  addressee  the letter  transfer
orders  to which  they are a party  executed  in  connection  with the  Security
Documents.

           All  payments  required  pursuant  to  this  Agreement  on  the  Debt
evidenced by the Note shall be made in  immediately  available  funds;  shall be
deemed received by the Lender on the next Business Day following receipt if such
receipt is after 2:00 p.m. on any Business Day; and shall be made at the offices
of the Lender at 1000  Louisiana,  Suite 600,  Houston,  Texas 77002,  provided,
however,  the Lender  may,  upon notice to the  Borrower,  designate a different
place of payment.

     2.4 Determinations. (a) The initial Borrowing Base is hereby established at
$7,500,000.00.

           (b) The Borrowing Base shall be  redetermined  by the Lender for each
Borrowing Base Period commencing April 1, 2003, and effective as of the date set
forth in a notice of redetermination delivered to the Borrower.

           (c) The  determination  of the  Borrowing  Base shall be made, at the
sole discretion of the Lender,  by reviewing the estimates of the projected rate
of production and projected revenues from the Borrowing Base Properties and such
other credit factors (including,  without limitation,  the assets,  liabilities,
cash  flow,  current  Derivative  Contracts,  business,  properties,  prospects,
management and ownership of the Credit Parties and the Senior Creditor Borrowing
Base) as the Lender in its sole  discretion  deems  significant.  The Lender may
make  adjustments,  in good faith and at its sole  discretion  and in accordance
with  its  customary  practices,  to such  estimates  of the  projected  rate of
production and projected revenues.

           (d) In addition to scheduled Borrowing Base redeterminations pursuant
to Subsection  2.4(b),  the Lender may cause a redetermination  of the Borrowing
Base at any time.  Upon  written  request  by the  Lender to the  Borrower,  the
Borrower  shall furnish  additional  reports with respect to the Borrowing  Base
Properties, which additional reports shall be in form and substance satisfactory
to the Lender,  prepared  by Cawley,  Gillespie  &  Associates,  Inc. or another
independent petroleum engineer or firm of engineers  satisfactory to the Lender,
which shall set

                                       17
<PAGE>


forth, as of the date the Lender indicates, any material additions to, deletions
from or any other material  changes in the Proved  Reserves  attributable to the
Borrowing Base Properties reflected in the report most recently furnished to the
Lender as provided  pursuant to Section 5.5. The Lender  shall  redetermine  the
Borrowing Base in accordance with the procedures set forth in Subsection  2.4(c)
which  redetermined  Borrowing  Base shall then be the effective  Borrowing Base
until further redetermination.

           (e) Notwithstanding anything to the contrary herein, the Lender shall
not set the Borrowing Base higher than the then existing  Borrowing Base without
the prior written consent of the Senior Lenders.  If the Lender redetermines the
Borrowing Base pursuant to this Section 2.4, such redetermination is higher than
the existing Borrowing Base and the Lender does not receive written consent from
the Senior Lenders for such higher redetermination,  the amount of the Borrowing
Base shall continue to be the then existing Borrowing Base.

      2.5 Interest Rates.  Principal  amounts of Advances  outstanding under the
Note shall bear interest at the lesser of (a) the Facility  Rate,  calculated on
the basis of a year of three hundred sixty-five (365) or three hundred sixty-six
(366) days,  as the case may be, or (b) the Highest  Lawful Rate,  calculated on
the basis of a year of three hundred sixty-five (365) or three hundred sixty-six
(366)  days,  as the case may be,  and if no Highest  Lawful  Rate  exists,  all
outstanding  Advances  under the Note shall bear interest at the Facility  Rate,
calculated  on the basis of a year of three  hundred  sixty-five  (365) or three
hundred sixty-six (366) days, as the case may be,.

      Should default occur in the payment of the Note and collection proceedings
be  instituted,  all past due interest and  principal  under the Note shall bear
interest at the lesser of (a) the  Default  Rate,  calculated  on the basis of a
year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as
the case may be, or (b) the Highest  Lawful Rate,  calculated  on the basis of a
year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as
the case may be, and if no Highest Lawful Rate exists, all past due interest and
principal under the Note shall bear interest at the Default Rate,  calculated on
the basis of a year of three hundred sixty-five (365) or three hundred sixty-six
(366) days, as the case may be.

      2.6 General  Provisions  Relating to Interest.  It is the intention of the
parties hereto to comply  strictly with the  applicable  usury Laws as in effect
from time to time; and in this connection, there shall never be taken, reserved,
contracted  for,  collected,  charged  or  received  on any  Loan  or any  other
Obligation  interest in excess of that which would accrue at the Highest  Lawful
Rate.  For purposes of Chapter 303 of the Texas Finance  Code,  as amended,  the
Credit  Parties  agree that the Highest  Lawful  Rate shall be the "weekly  rate
ceiling" as defined in such chapter, provided

                                       18
<PAGE>


that the Lender may also rely, to the extent  permitted by  applicable  Laws, on
alternative  maximum  rates of interest  under such other  applicable  Laws,  if
greater.

           If  under  any   circumstances  the  aggregate  amount  paid  on  the
Obligations  includes amounts that are by Law deemed to be interest which exceed
the Highest Lawful Rate (the "excess  interest"),  the Credit Parties  stipulate
that such payment and collection will have been and will be deemed to have been,
to the fullest extent  permitted by applicable  Laws, the result of mathematical
error on the part of the Credit  Parties  and the Lender,  and the Lender  shall
promptly  credit the amount of such excess  interest on the principal  amount of
the outstanding Obligations, or if the principal amount of the Obligations shall
have been paid in full, refund the excess interest to the Borrower. In the event
that the  maturity  of the Note is  accelerated  by reason of an election of the
Lender  resulting  from any  Event of  Default  or by  reason  of  operation  of
Subsection  7.3(a), or in the event of any prepayment,  then such  consideration
that  constitutes  interest under Laws applicable to the Lender may never exceed
the Highest Lawful Rate, and excess interest,  if any, provided for in the Note,
this Agreement or otherwise shall be canceled  automatically by the Lender as of
the date of such  acceleration or prepayment and, if theretofore  paid, shall be
credited by the Lender on the  principal  amount of the  Obligations,  or if the
principal  amount of the Obligations  shall have been paid in full,  refunded by
the Lender to the Borrower.

           All sums  paid,  or agreed  to be paid,  to the  Lender  for the use,
forbearance,  and  detention of the  proceeds of the Loans shall,  to the extent
permitted by  applicable  Law, be  amortized,  prorated,  allocated,  and spread
throughout  the  full  term of the  Obligations  until  paid in full so that the
actual rate of interest is uniform, but does not exceed the Highest Lawful Rate,
throughout the full term hereof.

      2.7 Increase in Borrowing  Base Fee. The Borrower  shall pay to the Lender
as a fee for any increase in the Borrowing Base resulting from  redeterminations
under Section 2.4 hereof to an amount  greater than any  previously  established
Borrowing  Base,  a fee  equal to one  percent  (1%) of the  amount by which the
Borrowing  Base was  increased  from the  amount of the  previously  established
highest  Borrowing  Base.  Any fee arising  under this Section 2.7 is to be paid
upon the effective date of the related Borrowing Base increase.

      2.8  Loans to  Satisfy  Obligations.  The  Lender  may,  but  shall not be
obligated to, make Loans and apply proceeds  thereof to the  satisfaction of any
warranty,  representation,  covenant  or other  Obligation  of any or all of the
Credit Parties contained in this Agreement or the other Loan Documents and which
are necessary,  in the good faith opinion of the Lender,  to enforce its Rights,
protect or preserve the  Collateral  or the Liens thereon in favor of the Lender
and the priorities  thereof,  or avoid a Material  Adverse  Effect.  Unless such
notice will impair the

                                       19
<PAGE>


ability of the Lender to enforce its  Rights,  result in the  diminution  of the
value of the Collateral or impair the Lender at its reasonable  discretion,  the
Lender shall give the Borrower  three (3) Business Days prior written  notice of
the  violation  of  warranty,  representation,   covenant  or  other  Obligation
violation  prior to the making of such Loan.  Any funds so advanced  and applied
shall be  evidenced  by the Note,  shall be  payable  on demand  and shall  bear
interest at the Default  Rate from the time of the making of such Loan until the
time of repayment.

      2.9 Voluntary Prepayment.  The Borrower shall have the right and option to
prepay,  at any time without premium or penalty,  all or any part of the balance
outstanding  on the Note.  Any such  prepayments  of Debt  evidenced by the Note
shall be applied first to the payment of accrued and unpaid interest thereon and
then to the reduction of principal.

      2.10  Mandatory  Prepayment  or Actions in Lieu  Thereof.  At any time the
outstanding  principal  Debt  evidenced  by the Note  shall be in  excess of the
Borrowing Base as then  determined,  the Borrower shall  immediately,  but in no
event later than  thirty  (30) days  following  any such  determination,  at the
Borrower's  election:  (a) prepay the principal Debt evidenced by the Note in an
aggregate  amount at least equal to such excess;  or (b) give written  notice to
the Lender  that it shall  elect to repay such  excess in six (6) equal  monthly
installments.

      If the Borrower elects to repay such excess in six (6) installments,  each
of such installments  shall equal one-sixth (1/6th) of such excess, the first of
such installments  shall be due and payable at the same date the Lender receives
written  notice  of  the  Borrower's  election  as  set  forth  above  and  such
installments  shall thereafter be due and payable monthly on the same day of the
month as the first installment was due and payable and shall continue until such
excess no longer exists.

      2.11  Warrant.  As  consideration  for the  Commitment  and in addition to
interest  accruing on principal  evidenced by the Note,  the Borrower  agrees to
convey to the Lender at Closing, as an additional charge, the Warrant.

      2.12  Subordination.  The Borrower is incurring  Senior Debt to the Senior
Lenders  under the Senior Credit  Agreement.  Repayments of the Debt governed by
this  Agreement,  including  under  Sections 2.3, 2.9 and 2.10 hereof,  shall be
subordinated, to the extent and manner set forth in the Subordination Agreement,
to the prior  payment in full of the Senior Debt.  The priority of Liens created
under the Security Documents and the rights and remedies of the Lender hereunder
and are subject to the terms of the Subordination Agreement.

                                       20
<PAGE>

                                    ARTICLE 3
                              CONDITIONS PRECEDENT

      3.1  Conditions  to Execution by Lender and  Advances.  The  execution and
delivery of this Agreement by the Lender and the making of the Advances pursuant
to  Section  2.1 is  subject  to the  fulfillment  of the  following  conditions
precedent,  with all  documents  to be delivered to the Lender to be in form and
substance satisfactory to the Lender:

           (a)  Evidence  satisfactory  to the  Lender  that (i) Stp,  Inc.  has
      legally and  effectively  changed  its name to STP  Cherokee,  Inc.  (such
      evidence  shall include  sufficient  documentation,  in form and substance
      satisfactory  to the various  county  clerks and recorders of mortgages in
      which the Security Documents to which STP is a party may be recorded,  for
      recordation in the various counties and jurisdictions);  (ii) the Borrower
      and Jerry D. Cash  shall  have,  upon  terms  satisfactory  to the  Lender
      completed their stock-for-stock  exchange by which STP Cherokee shall have
      been made a wholly owned  Subsidiary of Borrower;  and (iii) all requisite
      approvals and consents for such exchange have been duly obtained.

           (b)  Evidence satisfactory to the Lender that Ponderosa has acquired,
      upon  terms  satisfactory  to  the  Lender,  the gas marketing business of
      Bonanza;

           (c)  The  Lender  shall  have  received  the   following   documents,
      appropriately  executed and acknowledged  and in multiple  counterparts as
      requested by the Lender:

           (1) This Agreement executed by the Credit Parties;

           (2) The Note executed by the Borrower;

           (3) Certificates of the appropriate Tribunals of the respective state
           of  incorporation,  dated  reasonably  near the Closing  Date, to the
           effect that attached thereto are the articles of incorporation of the
           Borrower and each of the  Guarantors and that each is duly formed and
           in good  standing  with  respect to the payment of all  franchise  or
           similar Taxes;

                                       21
<PAGE>

           (4) Certificates  of the appropriate  Tribunals of all  jurisdictions
           wherein the Property owned or business  conducted by the Borrower and
           each of the  Guarantors  makes such  qualification  necessary,  dated
           reasonably  near the  Closing  Date,  to the effect  that each of the
           Borrower and Guarantors is duly qualified as a foreign corporation in
           such  jurisdictions  and is in  good  standing  with  respect  to the
           payment of franchise and similar Taxes;

           (5) A copy of the by-laws of each of the Borrower and the  Guarantors
           and all amendments thereto,  each accompanied by a certificate issued
           by the  secretary of the  relevant  Credit Party that such copies are
           correct, complete and in force and effect as of the Closing Date;

           (6) Certificate  of incumbency and signatures of all officers of each
           of the Borrower and the  Guarantors who will be authorized to execute
           those of the Loan  Documents  to which such  Credit  Party is a party
           executed by secretary for the relevant Credit Party;

           (7) A copy of the  resolutions  of the board of  directors of each of
           the Borrower and the Guarantors approving those of the Loan Documents
           to  which  such  Credit  Party  is  a  party  and   authorizing   the
           transactions  contemplated therein, duly adopted and accompanied by a
           certificate of the secretary for the relevant  Credit Party that such
           copy is a true and correct  copy of  resolutions  duly adopted by the
           board  of  directors,   that  such  resolutions  constitute  all  the
           resolutions adopted with respect to such transactions,  and that such
           resolutions  have  not  been  amended,  modified  or  revoked  in any
           respect, and are in full force and effect as of the Closing Date;

           (8) The following documents creating, evidencing and perfecting Liens
           in favor of the Lender to secure the Obligations:

                    (i) A Mortgage, Security Agreement,  Financing Statement and
               Assignment of Production from Quest Oil &

                                       22
<PAGE>


               Gas in favor of the Lender covering the Borrowing Base Properties
               owned by Quest Oil & Gas as of the date of this Agreement;

                    (ii) Financing  Statements  from  Quest  Oil  & Gas covering
               accounts  from the sale of oil and gas produced from such Oil and
               Gas  Properties  described  in (i)  above and equipment and other
               personal property associated therewith;

                    (iii) undated  letter transfer  orders directed to the party
               remitting to Quest Oil & Gas proceeds from the sale of production
               from such Oil and Gas Properties described in (i) above and
               instructing that such proceeds be remitted to the Lender for the
               account of the Borrower;

                    (iv) Security  Agreementfrom Quest Oil & Gas in favor of the
               Lender covering the  Derivative Contracts  entered  into by Quest
               Oil & Gas from time to time;

                    (v) Financing  Statements  from  Quest  Oil & Gas associated
               with the Security Agreement described in (iv) above;

                    (vi) A Mortgage, Security Agreement, Financing Statement and
               Assignment of Production from STP Cherokee in favor of the Lender
               covering the Borrowing Base Properties located in Kansas owned by
               STP Cherokee as of the date of this Agreement  and the portion of
               the STP Cherokee Gathering System located in Kansas;

                    (vii) Financing   Statements  from  STP  Cherokee   covering
               accounts from the sale  of oil and gas produced from such Oil and
               Gas Properties described in (vi) above and

                                       23
<PAGE>


               equipment and other personal property  associated therewith,  and
               the personal property associated with the STP Cherokee  Gathering
               System;

                    (viii) A  Mortgage,   Deed  of   Trust,  Security Agreement,
               Financing  Statement  and  Assignment   of  Production  from  STP
               Cherokee  in  favor  of  the  Lender  covering the Borrowing Base
               Properties  located  in  Oklahoma owned by STP Cherokee as of the
               date  of  this  Agreement  and  the  portion  of the STP Cherokee
               Gathering System located in Oklahoma;

                    (ix) Financing   Statements   from  STP   Cherokee  covering
               accounts from the sale of oil and gas  produced from such Oil and
               Gas Properties described in (viii) above and  equipment and other
               personal property associated therewith, and the personal property
               associated with the STP Cherokee Gathering System;

                     (x) undated letter  transfer  orders  directed to the party
                remitting to STP Cherokee  proceeds  from the sale of production
                from such Oil and Gas  Properties  described  in (vi) and (viii)
                above and  instructing  that such  proceeds  be  remitted to the
                Lender for the account of the Borrower;

                     (xi) Security  Agreement  from STP Cherokee in favor of the
                Lender  covering the  Derivative  Contracts  entered into by STP
                Cherokee from time to time;

                     (xii) Financing  Statements  from  STP  Cherokee associated
                with the Security Agreement described in (xi) above;

                                       24
<PAGE>


                     (xiii) Mortgage,  Security  Agreement, Financing  Statement
                and Assignment of Profits from Ponderosa covering the  Ponderosa
                Gathering System;

                     (xiv) Financing  Statements  from  Ponderosa  covering  the
                personal  property  associated  with  the  Ponderosa   Gathering
                System;

                     (xv) Security Agreement from the Borrower  covering  all of
                the capital stock of each of the Guarantors; and

                     (xvi) Financing Statement from the Borrower relating to all
                of the capital stock of each of the Guarantors;

           (9)  The Guaranty Agreements executed by each of the Guarantors;

           (10) The Warrant executed by the Borrower;

           (11) The Warrant Agreement executed by the Borrower; and

           (12) Such   other  agreements,  documents,   instruments,   opinions,
           certificates,  waivers,  consents,  and  evidence  as the  Lender may
           reasonably  request in compliance with or to accomplish the terms and
           provisions of any of the Loan Documents,  to the extent  contemplated
           by and not  inconsistent  with the other terms and provisions of this
           Agreement;

           (d) The representations  and warranties  contained in Article 4 shall
      be true and correct in all  material  respects on the date of execution of
      this Agreement;

           (e) No  Event of  Default  or  Unmatured  Event of Default shall have
      occurred and be continuing;

                                       25
<PAGE>



           (f) The  Lender  shall  have  approved  in   all  respects,   at  its
      discretion,  the Borrowing Base Properties existing as of the date of this
      Agreement,  including,  without limitation, title to and the environmental
      status of such Borrowing Base Properties;

           (g) The Credit  Parties and the Senior  Lenders shall have closed the
      credit  facility  governed by the Senior  Credit  Agreement and the Senior
      Lenders shall commit to fund the Borrower $7,500,000.00 thereunder;

           (h)  The  Subordination   Agreement  shall  have  been  executed  and
      delivered  by  Wells  Fargo  Bank as agent  for the  Senior  Lenders,  and
      acknowledged by the Credit Parties;

           (i) The Lender  shall have  received an opinion of counsel of each of
      the Credit Parties as to due incorporation and authorization to enter into
      and enforceability of the Loan Documents and perfection as to the Security
      Documents to which each such Person is a party; and

           (j)  All legal  matters  incident to the  execution of this Agreement
      shall be satisfactory to the firm of Henderson & Hammon,  L.L.P.,  special
      counsel for the Lender.

      3.2  Further  Conditions  to Each  Advance  Pursuant to Section  2.1.  The
obligation of the Lender to make any Advance  pursuant to Section 2.1 is subject
to the fulfillment of the following further conditions precedent:

           (a)  The representations and warranties contained in Article 4 shall
      be true and correct in all  material respects as of the date of Advance;

           (b) No  Event  of Default or  Unmatured  Event of Default shall have
      occurred and  be  continuing or  will have  occurred  at the completion of
      making the Advance;

           (c) No  Material   Adverse  Effect  shall  have  occurred  since  the
      Closing Date;

           (d) The   Lender  shall  have  received  a   Borrowing  Request   and
      Compliance Certificate;

                                     26

<PAGE>



           (e) The Lender shall have approved in all respects, at its discretion
      in  accordance  with  its  customary  lending  practices,  any Oil and Gas
      Properties of  the Credit  Parties being or having been added as Borrowing
      Base  Properties  since  the  last Advance, including, without limitation,
      title to and the environmental status  of such  additional  Borrowing Base
      Properties; and

           (f) All legal matters incident to the consummation of such Loan shall
      be satisfactory to the then special counsel for the Lender.


                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

           To induce  the Lender to enter  into this  Agreement  and to make the
Advances  hereunder,  each of the Credit Parties  represents and warrants to the
Lender (which  representations  and warranties shall survive the delivery of the
Note and the making of the Advances) that:

      4.1  Existence  and Good  Standing.  The Borrower is a  corporation,  duly
formed,  legally  existing and in good  standing  under the Laws of the State of
Nevada.  Each of  Ponderosa  and Quest Oil & Gas is a  corporation  duly formed,
legally existing and in good standing under the laws of the State of Kansas. STP
Cherokee is a corporation,  duly formed,  legally  existing and in good standing
under the Laws of the State of  Oklahoma.  Each of the  Credit  Parties  is duly
qualified and in good  standing as a foreign  limited  liability  company in all
jurisdictions  wherein the Property  owned or business  conducted by such Credit
Party makes such qualification necessary.

      4.2 Due  Authorization.  The  execution and delivery by each of the Credit
Parties of this  Agreement and the  borrowings  hereunder by the  Borrower,  the
execution  and delivery by the Borrower of the Note,  the execution and delivery
by each of the Credit Party of the other Loan Documents to which each respective
Credit  Parties is a party,  the  repayment  of the Loans and  interest and fees
provided in the Note and this Agreement and the  performance of all  Obligations
of each of the Credit  Parties under this Agreement and the other Loan Documents
to which each respective Credit Party is a party, are within the corporate power
of each of the  Credit  Parties,  have been  duly  authorized  by all  necessary
corporate  action and do not (a) require  the  consent of any  Tribunal or other
Person  which  has not  been  obtained,  (b)  contravene  or  conflict  with any
provision of applicable Law, or the articles of incorporation or by-laws of such
Credit  Party,  (c)  contravene,  conflict with or result in a default under any
indenture, instrument, contract or other agreement to which such Credit Party is
a party or by which its Properties may be presently bound or encumbered,  or (d)
result

                                       27
<PAGE>


in or require the creation or imposition of any Lien upon any of the Property of
such Credit Party, other than Permitted Liens.

      4.3 Valid and  Binding  Obligations.  This  Agreement  and the other  Loan
Documents  to which any of the Credit  Parties is a party  constitute  valid and
binding  obligations of such Credit Party,  enforceable in accordance with their
respective terms, except as limited by Debtor Relief Laws.

      4.4 Scope and Accuracy of  Financial  Statements.  The (a) annual  audited
consolidated  Financial Statements of the Borrower,  Ponderosa,  Quest Oil & Gas
and Quest Energy  Service as of May 31, 2002,  including any schedules and notes
pertaining thereto,  (b) reviewed year-end Financial  Statements of STP, Inc. as
of December 31, 2001,  (c) reviewed  year-end  "carved out" pro forma  Financial
Statements of STP,  Inc. as of December 31, 2001 and (d) pro forma  consolidated
Financial Statements of the Borrower,  Ponderosa,  Quest Oil & Gas, Quest Energy
Service and STP, Inc. as of December 31, 2001,  which have been delivered to the
Lender have been  prepared  in  accordance  with GAAP and fairly and  accurately
present the financial condition and the results of the operations thereof in all
material respects, as of the dates and for the periods stated therein..

      4.5 Liabilities and  Litigation.  Except for (a) liabilities  shown in the
consolidated  Financial  Statements described in Section 4.4 and (b) liabilities
incurred in the  ordinary  course of business  since the date of such  Financial
Statements,  none of the Credit  Parties  have any material  liabilities  of any
nature, direct or contingent;  and none of the Credit Parties is in default with
respect to any such material  liabilities or any material agreements by which it
is bound.

           There is no judgment against any of the Credit Parties,  nor is there
any  Litigation or other action of any nature pending before any Tribunal or, to
the knowledge of any of the Credit Parties,  threatened against or affecting any
of the Credit Parties or their respective Property.

      4.6 Title to Assets.  Each of the Credit Parties has  Marketable  Title to
the Oil and Gas Properties and gathering  assets for which such Credit Party has
executed and delivered to the Lender a Security Document  purporting to encumber
such  Property or which such Credit Party  otherwise  purports to own,  free and
clear of all Liens,  except for Permitted  Liens. The Oil and Gas Properties set
forth as  Exhibit  IV,  the  Ponderosa  Gathering  System  and the STP  Cherokee
Gathering  System are all of the Oil and Gas  Properties  and  gathering  assets
owned by the Credit Parties

      4.7  Initial  Reserve  Report. The Borrower has  heretofore  delivered  to
the Lender true and complete  copies  of  reports prepared by Cawley Gillespie &

                                       28
<PAGE>


Associates,  Inc. dated effective March 1, 2002 relating to an evaluation of oil
and  gas  reserves  attributable  to the  Borrowing  Base  Properties  described
therein.  To the knowledge of the Credit Parties,  (a) the assumptions stated or
used  in the  preparation  of  such  reserve  report  are  reasonable,  (b)  all
information  furnished by the Credit  Parties  taken as a whole,  for use in the
preparation of such reserve report was accurate in all material respects, (c) to
the best each Credit Party's knowledge there has been no material adverse change
in the amount of the estimated oil and gas reserves shown in such reserve report
since the date  thereof,  except for changes  which have occurred as a result of
production in the ordinary course of business,  and (d) such reserve report does
not omit any  statement  or  information  necessary  to cause the same not to be
misleading to the Lender in any material respect.

      4.8 Gas  Imbalances.  There  are no gas  imbalances,  take or pay or other
prepayments  with respect to any of the Borrowing  Base  Properties in excess of
$100,000  which would  require any of the Credit  Parties to deliver oil and gas
produced from any of the Borrowing  Base  Properties at some future time without
then or thereafter receiving full payment therefore.

      4.9  Authorizations  and Consents.  No authorization,  consent,  approval,
exemption,  franchise,  permit or  license  of, or filing  (except  for  filings
required to perfect and maintain perfection of the Liens created by the Security
Documents)  with, any Tribunal or any third Person is required to authorize,  or
is otherwise  required in connection  with,  the valid  execution,  delivery and
performance  by any of the  Credit  Parties  of this  Agreement,  the other Loan
Documents to which any of the Credit  Parties is a party or any other  agreement
contemplated hereby or the repayment by the Credit Parties of the Obligations.

      4.10 Compliance with Laws.  Neither the business nor any of the activities
of any of the Credit Parties as presently conducted violates any applicable Law,
the result of which violation would have a Material Adverse Effect.  Each of the
Credit Parties  possesses all licenses,  approvals,  registrations,  permits and
other  authorizations  necessary  to  enable  and to  carry  on  its  respective
businesses  in all  material  respects  as now  conducted.  All  such  licenses,
approvals, registrations, permits and other authorizations are in full force and
effect.  Furthermore,  none of the Credit Parties has any reason to believe that
it will be  unable  to  obtain  the  renewal  of any such  licenses,  approvals,
registrations, permits and other authorizations in due course.

     4.11 Proper  Filing  of  Tax  Returns and Payment of Taxes Due. Each of the
Credit Parties has duly and properly filed all Tax returns which are required to
be filed and has paid all  Taxes due pursuant to such returns or pursuant to any
assessment received, except such  Taxes, if any, as are being Contested in  Good
Faith. The

                                       29
<PAGE>


charges and reserves on the books of each Credit Party with respect to any Taxes
are adequate, and  none of  the Credit Parties owe any deficiency  or additional
assessment in a material amount in connection with Taxes.

      4.12 ERISA Compliance.

           (a) Each of the Credit Parties has complied in all material  respects
with ERISA and, where applicable, the Code regarding each Plan.

           (b) Each Plan is, and has been, maintained in substantial  compliance
with ERISA and, where applicable, the Code.

           (c) No act,  omission or transaction  has occurred which could result
in imposition on any of the Credit Parties  (whether  directly or indirectly) of
(i) either a civil penalty  assessed  pursuant to section 502(c),  (i) or (1) of
ERISA or a tax imposed  pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.

           (d) No Plan  (other  than a defined  contribution  plan) or any trust
created  under any such Plan has been  terminated  since  September 2, 1974.  No
liability to the PBGC (other than for the payment of current  premiums which are
not past due) by any of the Credit Parties has been or is expected by any of the
Credit  Parties to be  incurred  with  respect to any Plan.  No ERISA Event with
respect to any Plan has occurred.

           (e) Full payment  when due has been made of all amounts  which any of
the Credit Parties is required under the terms of each Plan or applicable law to
have paid as contributions to such Plan, and no accumulated  funding  deficiency
(as defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan.

           (f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the Credit
Parties' most recently ended fiscal year, exceed the current value of the assets
(computed on a plan  termination  basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit  liabilities.  The term  "actuarial  present
value of the benefit  liabilities"  shall have the meaning  specified in section
4041 of ERISA.

           (g) None of the Credit Parties sponsor,  maintain or contribute to an
employee  welfare benefit plan, as defined in section 3(l) of ERISA,  including,
without  limitation,  any such plan  maintained  to provide  benefits  to former
employees of such


                                       30
<PAGE>


entities,  that  may  not be terminated by the relevant Credit Party in its sole
discretion at any time without any material liability.

           (h) None of the Credit Parties sponsor, maintain or contribute to, or
has at any time in the preceding six calendar  years,  sponsored,  maintained or
contributed to, any Multiemployer Plan.

           (i) None of the Credit Parties are required to provide security under
section  401  (a)(29)  of the Code due to a Plan  amendment  that  results in an
increase in current liability for the Plan.

      4.13 Investment  Company Act Compliance.  None of the Credit Parties is an
"investment company" or directly or indirectly controlled by or acting on behalf
of any  Person  which is an  "investment  company"  within  the  meaning  of the
Investment Company Act of 1940, as amended.

      4.14 Public  Utility  Holding  Company Act Compliance. None of the  Credit
Parties is  subject  to the provisions  of the  Public  Utility Holding  Company
Act of 1935, as amended.

      4.15 Lien Priority.  The Liens created by any or all of the Credit Parties
in favor of the Lender under the Security Documents  constitute and shall remain
Liens securing the Obligations with a priority, subject only to Permitted Liens.

      4.16 Use of  Proceeds.  All  proceeds  of Advances  made  pursuant to this
Agreement  shall be used, to refinance  certain Debt of the Credit  Parties,  to
acquire  oil and gas  properties,  to  develop  oil and gas  properties  and for
general  corporate  purposes of the Credit Parties.  The proceeds of any Advance
are  not and  will  not be used  directly  or  indirectly  for  the  purpose  of
purchasing or carrying, or for the purpose of extending credit to others for the
purpose of purchasing or carrying, any "margin stock" as that term is defined in
Regulation  U of the  Board of  Governors  of the  Federal  Reserve  System,  as
amended; and in violation of Regulations G, U or X.

      4.17 Full Disclosure. All of the Loan Documents and all written statements
furnished  by  any  or  all  of  the  Credit  Parties  in  connection  with  the
consummation of the  transactions  contemplated  by this  Agreement,  when taken
together,  do not contain  any untrue  statement  of a material  fact or omit to
state a material  fact  necessary  to make the  statements  contained  herein or
therein not misleading as of the date made or deemed made.

      4.18 Places of  Business. The chief executive office  and  principal place
of  business  of  each  of the  Credit  Parties  is 5901 N. Western,  Suite 200,
Oklahoma City,

                                       31
<PAGE>


Oklahoma  73118. All  records  of  each of the Credit Parties are maintained  at
such offices.

      4.19   Identification    Numbers.    The   Borrower's   Federal   employer
identification number is 88-0182808 and its organizational identification number
is C4082-82. Ponderosa's Federal employer identification number is 48-1178535and
its organizational  identification  number is 2333672.  Quest Oil & Gas' Federal
employer   identification   number   is   48-1183666   and  its   organizational
identification number is 2362853. STP Cherokee's Federal employer identification
number is 73-1311723 and its organizational identification number is DB 462878.

      4.20  Subsidiaries.  The Borrower  owns all of the equity stock in each of
Ponderosa,  Quest Oil & Gas, Quest Energy Service and STP Cherokee.  None of the
Credit Parties has any other Subsidiary.

      4.21  Solvency.  As  of  the Closing Date,  each  of  the  Credit  Parties
is solvent.

      4.22  Relationship  of Credit  Parties.  The Credit Parties are engaged in
related  businesses and each Credit Party is directly and  indirectly  dependent
upon  each  other  Credit  Party  for  and in  connection  with  their  business
activities  and their  financial  resources.  Each Credit Party has  determined,
reasonably  and in good faith,  that such Credit Party will receive  substantial
direct and indirect  economic and  financial  benefits  from the  extensions  of
credit and  guarantees,  as  applicable,  made under  this  Agreement,  and such
extensions  of credit are in the best  interests  of such Credit  Party,  having
regard to all relevant facts and circumstances.

                                    ARTICLE 5
                              AFFIRMATIVE COVENANTS

           So long as any Debt  evidenced  by the  Note  remains  unpaid  or the
Lender remains obligated to make Advances,  and in absence of written consent of
the Lender to the contrary:

      5.1  Maintenance  and Access to Records.  Each of the Credit  Parties will
keep  adequate  records,  in accordance  with GAAP,  of all of their  respective
transactions so that at any time, and from time to time, their true and complete
financial  condition may be readily  determined and, at the Lender's  reasonable
request,  each of the  Credit  Parties  will  make all such  respective  records
available  for the  Lender's  inspection  and permit the Lender to make and take
away copies thereof.

                                       32
<PAGE>

      5.2  Quarterly  Financial  Statements.  The  Borrower  will deliver to the
Lender,  as soon as  available  but in no event later than sixty (60) days after
the end of each of the first  three  fiscal  quarters of each fiscal year of the
Borrower,  quarterly  unaudited  Financial  Statements  of the  Borrower and its
Subsidiaries on a consolidated and consolidating  basis reflecting the financial
condition and results of operations of the Borrower and its  Subsidiaries  as at
the end of such  period and from the  beginning  of such year to the end of such
quarter,  as  applicable.  Such Financial  Statements  shall be certified by the
Chief  Financial  Officer of the Borrower as having been  prepared in accordance
with GAAP and presenting the consolidated and consolidating  financial condition
and the results of the operations of the Borrower and its  Subsidiaries  subject
to changes resulting from year-end audit adjustments.  Such Financial Statements
shall also be accompanied by a certificate  showing,  in reasonable  detail, the
Credit Parties'  compliance with the financial covenants set forth in the Senior
Credit Agreement and as to the Credit Parties' Derivative Contract position.

      5.3 Annual Financial Statements.  The Borrower will deliver to the Lender,
as soon as available but in no event later than ninety (90) days after the close
of each fiscal year of the Borrower,  annual audited Financial Statements of the
Borrower and its Subsidiaries reflecting the financial condition of the Borrower
and its Subsidiaries on a consolidated and consolidating basis,  together with a
report  and  opinion  issued  by a  nationally  recognized  firm of  independent
certified  public  accountants or another firm of independent  certified  public
accountants   reasonably   satisfactory  to  the  Lender,  that  such  Financial
Statements fairly present the consolidated and consolidating  financial position
and results of  operations  of the Credit  Parties for the periods  indicated in
accordance with GAAP.  Such statements  shall be accompanied by a certificate of
the Chief Financial Officer of the Borrower showing,  in reasonable  detail, the
Credit Parties'  compliance with the financial covenants set forth in the Senior
Credit Agreement and as to the Credit Parties' Derivative Contract position.

      5.4 Compliance Certificates. The Credit Parties will deliver to the Lender
with each Financial  Statement  delivered pursuant to Sections 5.2 or 5.3 a duly
executed Compliance Certificate.

      5.5  Reserve  Reports.   Commencing  March  1,  2003,  and   semi-annually
thereafter,  as soon as  available  but in any event no later  than  March 1 and
September 1 of each year, the Borrower  shall deliver (a) a report,  in form and
substance satisfactory to the Lender, prepared by Cawley Gillespie & Associates,
Inc. or another independent  petroleum engineer or firm of engineers  reasonably
acceptable to the Lender,  which report shall set forth, as of January 1 or July
1 of such year respectively,  projections of future net income from hydrocarbons
classified  as  "Proved  Reserves"  attributable  to all of the  Borrowing  Base
Properties and (b) such
                                       33

<PAGE>


other  information  concerning  such  Oil  and  Gas Properties as the Lender may
reasonably request, including, without limitation,  engineering,  geological and
performance data.

      5.6 Sales and Production  Reports.  The Credit Parties will deliver to the
Lender,  as soon as available and in any event within thirty (30) days after the
end of each calendar  month, a report  summarizing,  as requested by the Lender,
(a) the gross volume of sales and actual  production  during such month from all
of the Borrowing  Base  Properties  and current  prices being  received for such
production,  (b) any production  imbalances,  (c) the related  severance,  gross
production,  occupation,  excise, sales,  recording,  ad valorem,  gathering and
other similar taxes, if any,  deducted from gross proceeds during such month and
(d) leasehold operating expenses and drilling expenditures  attributable thereto
and incurred during such month.

      5.7 Edgar  Filings.  The  Borrower  will  deliver to the  Lender  promptly
following the filing  thereof,  written notice of each document filed with EDGAR
pertaining to the Borrower or its Subsidiaries.

      5.8 Newly Acquired Properties.  From time to time, but not less often than
once every  calendar  quarter,  each of the Credit  Parties  shall  execute  and
deliver,  as  security  for the payment of the Note and the  performance  of the
Obligations of the Credit Parties under this Agreement,  such Security Documents
(each  substantially  in the form of the similar  instrument  given  pursuant to
Subsection  3.1(c)(8) in connection with the Borrowing Base Properties  owned by
the Credit  Parties as of the date of this  Agreement)  as necessary to create a
Lien (in priority subject only to Permitted Liens) on all Oil and Gas Properties
and gathering  assets acquired by the Credit Parties and not already  encumbered
by the Security Documents.

      5.9 Title Opinions.  On request by the Lender, the Borrower shall have had
prepared  and  delivered  to the  Lender,  title  opinions  from  legal  counsel
acceptable  to the Lender,  in form and  substance  satisfactory  to the Lender,
evidencing  the status of the relevant  Credit Party's title to and the Liens in
favor of the Lender encumbering those of the Mortgaged Properties  designated by
the Lender.

      5.10 Statement of Material  Adverse Effect.  The Borrower shall deliver to
the  Lender,  promptly  following  a  Responsible  Officer  of any of the Credit
Parties  having  actual  knowledge of any Event of Default or event or condition
causing  or  likely  to  cause a  Material  Adverse  Effect,  a  statement  of a
Responsible  Officer of the Borrower setting forth the Event of Default or event
or condition  causing or likely to cause a Material Adverse Effect and the steps
being taken with respect thereto.

                                       34
<PAGE>



      5.11 Title Defects.  Other than Permitted  Liens,  the Credit Parties will
clear any title  defects  to the  Borrowing  Base  Properties  or the  Mortgaged
Properties  that are material in value,  in the sole  reasonable  opinion of the
Lender,  and,  in the event  any such  title  defects  are not cured in a timely
manner, pay all related costs and fees incurred by the Lender to do so.

      5.12  Additional  Information.  The  Credit  Parties  will  furnish to the
Lender,  promptly upon the Lender's  request from time to time,  such additional
financial or other information  concerning the assets,  liabilities,  operations
and  transactions  of  any  or all of the  Credit  Parties,  as the  Lender  may
reasonably request.

      5.13  Compliance  with Laws and Payment of Taxes.  The Credit Parties will
comply with all Laws, except where any such non-compliance  would not reasonably
be expected to result in a Material Adverse Effect.  The Credit Parties will pay
all Taxes,  claims for labor,  supplies,  rent and other  obligations  which, if
unpaid,  might  become  a Lien  against  any of  their  respective  Oil  and Gas
Properties, except any of the foregoing being Contested in Good Faith.

      5.14  Maintenance  of  Existence  and Good  Standing.  Each of the  Credit
Parties will maintain its corporate existence or qualification and good standing
in its jurisdiction of incorporation and in all jurisdictions where the Property
owned or business conducted by such Borrower makes such qualification necessary.

      5.15 Further Assurances. Each of the Credit Parties will promptly cure any
defects, errors or omissions in the execution and delivery of the Loan Documents
and, upon notice,  take such other action and immediately execute and deliver to
the Lender all such other and further  instruments as may be reasonably required
or desired by the Lender from time to time in compliance  with the covenants and
agreements  made in this  Agreement  and the other  Loan  Documents,  including,
without limitation, taking such action as may be required to cure or correct any
defects  in title to any of the  Borrowing  Base  Properties  (other  than  such
defects in title which are Permitted Liens) and to create,  perfect and maintain
Liens on the  Collateral  and all other  Property  intended as security  for the
Obligations.

      5.16  Initial  Expenses of the  Lender.  The Credit  Parties,  jointly and
severally,  will  reimburse  the  Lender for all third  party fees and  expenses
incurred  in  connection  with  the  preparation  and  negotiation  of the  Loan
Documents,  the satisfaction of the conditions  precedent set forth in Article 3
and  the  consummation  of  the  transactions   contemplated  herein,  including
attorneys' fees and recording costs.

      5.17 Subsequent Expenses of the Lender. Upon request,  the Credit Parties,
jointly  and  severally, will  promptly  reimburse  the  Lender  for all amounts
reasonably

                                       35
<PAGE>


expended,  advanced  or   incurred   by  the  Lender  in   connection  with  the
preparation of any assignments of, renewals of and amendments to any of the Loan
Documents.  Upon  request,  the Credit  Parties,  jointly  and  severally,  will
promptly reimburse the Lender for all amounts reasonably  expended,  advanced or
incurred  by the  Lender to  collect  the Note or to  enforce  the Rights of the
Lender  under this  Agreement or any of the other Loan  Documents,  all of which
amounts shall be deemed  compensatory in nature and liquidated as to amount upon
notice to the Credit  Parties by the Lender and which amounts will include,  but
not be limited to, (i) all court  costs,  (ii)  attorneys'  fees,  (iii) fees of
auditors and accountants,  (iv)  investigation  expenses,  (v) fees and expenses
incurred  in  connection  with the  Lender's  participation  as a member  of the
creditors' committee in a case commenced under any Debtor Relief Laws, (vi) fees
and expenses  incurred in connection  with lifting the automatic stay prescribed
in 11 U.S.C. ss.362, and (vii) fees and expenses incurred in connection with any
action pursuant to 11 U.S.C.  ss.1129  incurred by the Lender in connection with
the collection of any sums due under this Agreement or the other Loan Documents,
together with interest at the Default Rate,  calculated on a per diem basis of a
year of 365  days,  on each such  amount  from the date of  notification  to the
Credit  Parties that the same was  expended,  advanced or incurred by the Lender
until the date it is repaid  to the  Lender,  with the  Obligations  under  this
Section surviving the non-assumption of this Agreement in a case commenced under
any Debtor Relief Laws and being binding upon any or all of the Credit  Parties,
any guarantor or a trustee,  receiver or liquidator of any such party  appointed
in any such case.

      5.18  Maintenance  of Tangible  Property.  Each of the Credit Parties will
maintain all of the their  respective  producing  Borrowing Base  Properties and
Mortgaged  Properties  in good repair and working  order and make all  necessary
replacements  thereof and operate such Borrowing  Base  Properties and Mortgaged
Properties in a good and workmanlike manner.

      5.19 Maintenance of Insurance.  The Credit Parties will maintain insurance
with respect to their respective Borrowing Base Properties, Mortgaged Properties
and business against such liabilities,  casualties,  risks and contingencies and
in such amounts as are  customarily  maintained in the industry.  Such insurance
shall name the Lender as an additional insured and loss payee. The Borrower will
furnish to the Lender, on the Closing Date and annually thereafter, certificates
evidencing such insurance.

      5.20 Right of  Inspection.  The Credit  Parties will permit any authorized
representative  of the Lender at its sole risk and  expense to visit and inspect
any Collateral at such reasonable times and as often as the Lender may request.

                                       36
<PAGE>



      5.21 Notice.  The Borrower will  immediately  notify the Lender of (a) the
receipt  of any notice  from,  or the taking of any action by, the holder of any
promissory  note or other  evidence  of Debt of any of the Credit  Parties  with
respect to a claimed  default,  together with a statement  specifying the notice
given or other  action  taken by such holder and what  action such Credit  Party
(ies) is taking  or  proposes  to take  with  respect  thereto;  (b) any  legal,
judicial or regulatory  proceedings affecting any of the Credit Parties in which
the amount  involved is material  and is not covered by insurance or that would,
if adversely determined, have a Material Adverse Effect; (c) any dispute between
any of the  Credit  Parties  and any  Tribunal  or any  Person  that  would,  if
adversely  determined,  have a Material Adverse Effect;  (d) information that in
any way relates to or affects  the filing of any  financing  statement  or other
security  instrument  for the purpose of  perfecting or continuing a Lien on the
Collateral;  (e) any event that materially and adversely  affects the Collateral
or the Rights of the Lender with respect to such Collateral;  (f) the occurrence
of any Event of Default;  and (g) any event or  condition  (except for events or
conditions  to the  economy of the  United  States as a whole or the oil and gas
industry  as a whole)  which  could  reasonably  be expected to cause a Material
Adverse Effect.

      5.22  Collateral  Protection.  The  Credit  Parties  will  enter  into and
maintain commodity Derivative Contracts covering at least sixty percent (60%) of
the Credit Parties' projected hydrocarbon  production volumes from the Borrowing
Base Properties over the next succeeding  twelve (12) months following such date
on a rolling, weighted average basis satisfactory to the Lender.

      5.23 ERISA Information and Compliance.  The Borrower will promptly furnish
to the  Lender (i)  promptly  after the filing  thereof  with the United  States
Secretary of Labor,  the Internal  Revenue  Service or the PBGC,  copies of each
annual  and  other  report  with  respect  to  each  Plan or any  trust  created
thereunder,  (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited  transaction,"  as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder,  a written  notice signed by a  Responsible  Officer of the Borrower
specifying  the nature  thereof,  what  action the Credit  Parties are taking or
propose to take with  respect  thereto,  and,  when known,  any action  taken or
proposed by the Internal Revenue  Service,  the Department of Labor or the PBGC,
with respect thereto, and (iii) immediately upon receipt thereof,  copies of any
notice of the PBGCs  intention to  terminate  or to have a trustee  appointed to
administer  any Plan.  With  respect to each Plan  (other  than a  Multiemployer
Plan),  the Credit  Parties  will (i)  satisfy  in full and in a timely  manner,
without incurring any late payment or underpayment charge or penalty and without
giving rise to any lien, all of the  contribution  and funding  requirements  of
section 412 of the Code (determined  without regard to subsections (d), (e), (f)
and (k)  thereof)  and of section  302 of ERISA  (determined  without  regard to
sections 303, 304 and 306 of

                                       37
<PAGE>


ERISA), and  (ii)  pay,  or  cause to be  paid,  to the PBGC in a timely manner,
without  incurring  any late  payment or  underpayment  charge or  penalty,  all
premiums required pursuant to sections 4006 and 4007 of ERISA.

      5.24  Subordination of Intercompany  Debt. Any Intercompany  Debt, whether
evidenced  by  documents,  instruments,  journal  entries or  otherwise,  now or
hereafter  owed to or held by any other Credit Party is hereby  subordinated  to
the  Debt of such  other  Credit  Party  to the  Lender,  and  any  document  or
instrument  evidencing  such  Intercompany  Debt shall  contain a legend  giving
notice  of  such  subordination.  If the  Debt  governed  by the  Senior  Credit
Agreement is paid in full, any  Intercompany  Debt of any other Credit Party due
to such Credit Party,  if the Lender so requests,  shall be collected,  enforced
and  received by such Credit Party as trustee for the Lender and be paid over to
the  Lender on  account  of the Debt but  without  affecting  in any  manner the
liability of such Credit Party under the other  provisions of this  Agreement or
any other Loan  Document.  Any Lien  claim,  right or other  encumbrance  on any
Property  of any  Credit  Party in favor of any  other  Credit  Party is  hereby
subordinated in all respects to the Liens granted to the Lender.

     5.25 Sale of Property. Without in any manner limiting  section 6.7, if  the
Credit  Parties  elect to sell  all or  substantially  all of the Borrowing Base
Properties prior to the Termination Date and the Credit Parties decide to retain
another  Person to  market or  otherwise assist the Credit Parties in such sale,
the Credit Parties will retain  the acquisition  and  divestiture  group of the
Lender to assist the Credit Parties in such sale. The Credit Parties will pay a
success fee of one percent (1%) of the gross sales price to such acquisition and
divestiture group.

                                    ARTICLE 6
                               NEGATIVE COVENANTS

           So long as any Debt  evidenced  by the Note  remains  unpaid,  or the
Lender remains  obligated to make Advances and in the absence of written consent
of the Lender to the contrary:

      6.1 Other Debt of Borrower. None of the Credit Parties will incur, create,
assume or suffer to exist any Debt except:  (a) Loans  hereunder,  (b) unsecured
current accounts  payable incurred in the ordinary course of business,  provided
such  accounts  are paid  within  sixty  (60)  days of the due date or are being
Contested in Good Faith, (c) Debt owed the Credit Parties governed by the Senior
Credit Agreement, (d) pursuant to Derivative Contracts required or allowed under
this Agreement or the Senior Credit  Agreement,  (e) Intercompany  Loans and (f)
Debt of the Borrower described on Exhibit IX attached hereto.

                                       38
<PAGE>



     6.2 Derivative Contracts. None of the Credit Parties shall enter into or in
any manner be liable under any Derivative Contract except:

           (a)  Derivative  Contracts  as required  under Section 5.22;

           (b) Derivative  Contracts entered into with the purpose and effect of
      fixing  prices  on   hydrocarbons   attributable  to  the  Borrowing  Base
      Properties and expected to be produced by the Credit Parties provided that
      at all times: (i) the aggregate of all such Derivative Contracts limits or
      reduces such market price risk for a term of no more than twenty-four (24)
      months;  (ii)  no such  contract,  when  aggregated  with  all  Derivative
      Contracts  permitted  under this Section 6.2 and/or required under Section
      5.22 requires such Person to deliver more than eighty-five  (85%) of total
      estimated  hydrocarbons to be produced during any month over the term from
      the proved Oil and Gas  Properties  as so  designated  in the most  recent
      reserve report  furnished by the Credit Parties under this Agreement,  and
      (iii) each such contract  shall be with (xx) any of the Senior  Lenders or
      any Affiliates of the Senior Lenders  thereof or (yy) with a counter-party
      or have a guarantor of the  obligation  of the  counter-party  who, at the
      time the contract is made, has long-term  obligations rated BBB or Baa2 or
      better,  respectively,  by  Standard  & Poor's  Rating  Group  or  Moody's
      Investors Service, Inc. (or a successor credit rating agency); and

           (c) Derivative  Contracts entered into with the purpose and effect of
      fixing interest rates on a principal  amount of Debt of the Credit Parties
      that is  accruing  interest  at a  variable  rate,  provided  that (i) the
      floating rate index of each such contract generally matches the index used
      to determine the floating rates of interest on the  corresponding  Debt of
      the Credit  Parties to be hedged by such  contract;  (ii) no such contract
      with a  counter-party  other  than a Senior  Lender or an  Affiliate  of a
      Senior Lender requires the Credit Parties to put up money, assets, letters
      of credit,  or other  security  against  the event of its  non-performance
      prior  to  actual  default  by  the  Borrower  in  performing  obligations
      thereunder;  and (iii) each such contract shall be with a Senior Lender or
      an  Affiliate  of a  Senior  Lender  or  with a  counter-party  or  have a
      guarantor  of the  obligation  of the  counter-party  who, at the time the
      contract is made,  has  long-term  obligations  rated AA or Aa2 or better,
      respectively,  by  Standard & Poor's  Rating  Group or  Moody's  Investors
      Service, Inc. (or a successor credit rating agency).

                                       39
<PAGE>



      6.3 Guaranty of Payment or  Performance.  None of the Credit  Parties will
guarantee any contract or otherwise be or become  liable in connection  with any
obligation of any Person,  except that the foregoing restriction shall not apply
to  endorsements  of  instruments  for  collection  in the  ordinary  course  of
business.

      6.4 Loans,  Advances or Investments.  None of the Credit Parties will make
or agree  to make or allow to  remain  outstanding  any  Investment,  including,
without  limitation,  any  loans  or  advances  or the  purchase  (for  cash  or
securities) of all or a substantial part of the Property or capital stock of any
Person,  except (a)  advances  or  extensions  of credit in the form of accounts
receivable  incurred in the ordinary course of business and upon terms common in
the  industry  for such  accounts  receivable,  (b)  Liquid  Investments  or (c)
Intercompany Loans.

      6.5  Mortgages  or  Pledges of Assets.  None of the  Credit  Parties  will
create,  incur,  assume or permit to exist any Lien on any of the Borrowing Base
Properties or Mortgaged  Properties  (now owned or hereafter  acquired),  except
Permitted Liens.

      6.6  Cancellation of Insurance.  None of the Credit Parties will allow any
insurance  policy required to be carried  hereunder to be terminated or lapse or
expire without provision for adequate renewal or replacement thereof.

      6.7 Sales of Property.  Except for the sale, transfer or other disposition
of the Mortgaged  Properties  with an aggregate  market value of  $250,000.00 or
less during any  Borrowing  Base Period  none of the Credit  Parties  will sell,
transfer or otherwise  dispose of, in one or any series of transactions,  any of
the Borrowing Base Properties or the Mortgaged Properties.

      6.8 Dividends and Distributions.  The Credit Parties will not declare, pay
or make, whether in cash or other Property, any dividend, distribution or return
of capital on, or purchase,  redeem or otherwise  acquire for value,  any of its
capital stock.

      6.9 Changes in Structure.  None of the Credit  Parties will enter into any
transaction of  consolidation,  merger or  amalgamation;  liquidate,  wind up or
dissolve (or suffer any liquidation or  dissolution);  or convey,  sell,  lease,
assign,  transfer  or  otherwise  dispose  of  all or  substantially  all of its
Property or business.

      6.10 Payment of Accounts  Payable.  None of the Credit  Parties will allow
any account  payable to be in excess of sixty (60) days past due, except such as
are being Contested in Good Faith.

                                       40
<PAGE>



      6.11  Transactions  with  Affiliates.  None  of the  Credit  Parties  will
directly or indirectly, enter into any transaction (including the sale, lease or
exchange of Property or the  rendering of service)  with any of its or the other
Credit Parties'  Affiliates,  other than upon fair and reasonable  terms no less
favorable  than could be obtained in an arm's length  transaction  with a Person
which was not an Affiliate.

      6.12 Nature of Business. None of the Credit Parties will make any material
change in the character of its business as carried on at the date hereof.

      6.13  Subsidiaries.  Other  than the  Borrower's  ownership  of all of the
capital stock of each of Ponderosa,  Quest Oil & Gas,  Quest Energy  Service and
STP Cherokee,  none of the Credit  Parties will  directly or indirectly  own any
Subsidiaries without the Lender's written approval.

      6.14 ERISA  Compliance.  None of the Credit  Parties  will at any time:

           (a) engage in any  transaction in connection with which any or all of
the  Credit  Parties  could be  subjected  to  either a civil  penalty  assessed
pursuant to section  502(c),  (i) or (1) of ERISA or a tax imposed by Chapter 43
of Subtitle D of the Code;

           (b)  terminate  any Plan in a manner,  or take any other  action with
respect to any Plan,  which could  result in any  liability to any or all of the
Credit Parties to the PBGC;

           (c) fail to make full  payment when due of all amounts  which,  under
the provisions of any Plan, agreement relating thereto or applicable law, any or
all of the Credit Parties are required to pay as contributions thereto;

           (d) permit to exist any  accumulated  funding  deficiency  within the
meaning  of  Section  302 of ERISA or  section  412 of the Code,  whether or not
waived, with respect to any Plan;

           (e) permit the  actuarial  present  value of the benefit  liabilities
under any Plan maintained by any or all of the Credit Parties which is regulated
under Title IV of ERISA to exceed the current value of the assets (computed on a
plan  termination  basis in  accordance  with  Title IV of  ERISA)  of such Plan
allocable to such benefit  liabilities (the term "actuarial present value of the
benefit liabilities" shall have the meaning specified in section 4041 of ERISA);

           (f)  contribute  to  or  assume  an  obligation  to contribute to any
Multiemployer Plan;

                                       41

<PAGE>


           (g)  acquire an  interest  in any Person  that  causes such Person to
become an ERISA  Affiliate  with respect to any or all of the Credit  Parties if
such  Person  sponsors,  maintains  or  contributes  to,  or at any  time in the
six-year  period  preceding  such  acquisition  has  sponsored,  maintained,  or
contributed  to,  (i) any  Multiemployer  Plan,  or (ii) any other  Plan that is
subject to Title IV of ERISA  under  which the  actuarial  present  value of the
benefit  liabilities  under such Plan  exceeds the  current  value of the assets
(computed on a plan  termination  basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities;

           (h) incur  a liability to or on account of a Plan under sections 515,
4062, 4063, 4064, 4201 or 4204 of ERISA;

           (i)  contribute  to or  assume an  obligation  to  contribute  to any
employee  welfare benefit plan, as defined in section 3(l) of ERISA,  including,
without  limitation,  any such plan  maintained  to provide  benefits  to former
employees of such entities, that may not be terminated by such entities in their
sole discretion at any time without any material liability; or

           (j) amend a Plan  resulting in an increase in current  liability such
that any or all of the Credit  Parties are required to provide  security to such
Plan under section 401 (a)(29) of the Code.

                                    ARTICLE 7
                                EVENTS OF DEFAULT

      7.1  Events  of  Default.   The   occurrence  of   any  of  the  following
events shall constitute an Event of Default:

           (a) The  Borrower  shall  fail to pay  when  due any  installment  of
      principal or interest on the Note or any fee or other charge payable under
      this Agreement;

           (b) Default shall occur in the due  observance or  performance of any
      affirmative  covenant  required in this  Agreement,  the Note,  any of the
      Guaranty  Agreements,  any of the  Security  Documents or any of the other
      Loan Documents,  and such default shall remain unremedied for in excess of
      twenty (20) days after notice given by the Lender;

           (c) Default shall occur in the due  observance or  performance of any
      negative  covenant  required in this Agreement,  the Note, any of Guaranty
      Agreements,  any of the  Security  Documents  or  any  of the  other  Loan
      Documents;

                                       42
<PAGE>



           (d) Any Financial Statement, representation,  warranty or certificate
      made or furnished  by or on behalf of any or all of the Credit  Parties to
      the Lender in connection with this Agreement or other Loan Document, or as
      an  inducement  to the  Lender  to enter  into this  Agreement,  or in any
      instrument  furnished in compliance with or in reference to this Agreement
      or any other Loan  Document,  shall be  materially  false,  incorrect,  or
      incomplete at or as of the time made;

           (e)  The  occurrence  of an "Event of  Default"  as  defined  in  the
      Senior Credit Agreement;

           (f)  Default  shall be made by any or all of the Credit  Parties  (as
      principal or guarantor or other surety) in payment or  performance  of any
      bond, debenture,  note or other evidence of Debt for borrowed money having
      an outstanding  principal  amount in excess of  $100,000.00,  or under any
      credit agreement,  loan agreement,  indenture,  promissory note or similar
      agreement or instrument  executed in connection with any of the foregoing,
      and such default  shall remain  unremedied  for in excess of the period of
      grace, if any, with respect  thereto,  with the effect of accelerating the
      maturity  of any  such  Debt or  establishing  a right to  accelerate  the
      maturity of such Debt;

           (g) Any or all of the Credit  Parties  shall file a petition  seeking
      relief for itself under Debtor Relief Laws,  or file an answer  consenting
      to, admitting the material  allegations of or otherwise not controverting,
      or fail timely to controvert a petition  filed  against it seeking  relief
      under Debtor Relief Laws;

           (h) An order for relief  shall be entered  against  any or all of the
      Credit Parties under any Debtor Relief Laws, which order is not stayed, or
      upon the entry of an order, judgment or decree by operation of Law or by a
      court of  competent  jurisdiction  which is not  stayed,  ordering  relief
      against any or all of the Credit Parties  under,  or approving as properly
      filed,  a  petition  seeking  relief  against  any such  Person  under the
      provisions   of  any  Debtor   Relief  Laws,  or  appointing  a  receiver,
      liquidator, assignee, sequestrator,  trustee or custodian of any or all of
      the  Credit  Parties  or of  any  substantial  part  of  their  respective
      Property, or ordering the reorganization,  winding up of the affairs of or
      liquidation of any or all of the Credit Parties, or upon the expiration of
      sixty (60) days after the filing of any involuntary  petition  against any
      or all of the Credit Parties seeking any of the relief specified in the

                                       43
<PAGE>


      preceding  Subsection  or  this  Subsection  without  the  petition being
      dismissed prior to that time;

           (i)  Any or all  of the  Credit  Parties  shall  (i)  make a  general
      assignment  for  the  benefit  of  its  creditors,  (ii)  consent  to  the
      appointment of or taking possession by a receiver,  liquidator,  assignee,
      sequestrator,  trustee or custodian of any or all of the Credit Parties or
      any substantial part of their respective Property,  (iii) admit insolvency
      or  inability to pay its debts  generally  as such debts become due,  (iv)
      fail  generally to pay its debts as such debts become due, or (v) take any
      action  (or an  action  shall  be  taken  by  its  directors  or  majority
      stockholders)  looking to the  dissolution or liquidation of any or all of
      the Credit Parties;

           (j) Final  judgment for the payment of money in excess of $100,000.00
      shall  be  rendered  against  any or all of the  Credit  Parties  and such
      judgment shall remain undischarged for a period of thirty (30) days during
      which execution shall not be effectively stayed;

           (k) The Security Documents shall for any reason, except to the extent
      permitted by the terms  thereof,  cease to be in full force and effect and
      valid,  binding and enforceable in accordance  with their terms,  cease to
      create  a  valid  Lien  of  the  priority  required  hereby  on any of the
      Collateral purported to be covered thereby, or, upon perfection,  cease to
      be a  perfected  Lien on any of the  Collateral  purported  to be  covered
      thereby,  or any or all of the Credit  Parties or any other Person who may
      have granted or purported to grant such Lien shall so state in writing;

           (l) A judgment  creditor of any Person who is the owner of any of the
      Collateral shall obtain  possession of any of the Collateral by any means,
      including, without limitation, levy, attachment or self help;

           (m) The validity or enforceability of any of the Loan Documents shall
      be  contested  by any or all of the  Credit  Parties  or any or all of the
      Credit  Parties shall deny that any or all of the Credit  Parties have any
      or further  liability  or  Obligation  under any of the Loan  Documents or
      allege that any of the Loan Documents shall be construed or enforced other
      than in accordance with their terms;

           (n)  Any  or  all  of  the  Credit  Parties  shall  have   concealed,
      removed,  or  permitted  to be  concealed or removed, any part of their

                                       44
<PAGE>


      respective  Property  with  the  intent to  hinder, delay or defraud their
      respective creditors or any of them, or made or suffered a transfer of any
      of their  respective  Property which is fraudulent under any Debtor Relief
      Laws (except for such  transfers  in favor of the  Lender);  or shall have
      made any transfer  (other than in the ordinary  course of business) of its
      Property  to or  for  the  benefit  of a  creditor  at a time  when  other
      creditors similarly situated have not been paid;

            (o) Jerry D. Cash  or  Douglas L. Lamb  shall  cease or fail for any
      reason to  serve  and  function in  their current capacity as an executive
      officer of the Borrower and shall not be succeeded  in  such position by a
      person acceptable to the Lender;

           (p)  Jerry D. Cash and  Douglas  L.  Lamb  shall  cease to own in the
      aggregate,  directly or through their immediate  family members or estates
      and/or  trusts  where they are either a trustee or a grantor,  or entities
      wholly-owned  by them, more than forty (40%) of the issued and outstanding
      capital stock of the Borrower; or

           (q) The  Borrower  shall  cease  to own any of the  capital  stock of
      Ponderosa, Quest Oil & Gas, Quest Energy Service or STP Cherokee.

      7.2 Rights Upon Occurrence of Unmatured Event of Default. At any time that
there  exists an  Unmatured  Event of  Default,  any  obligation  of the  Lender
hereunder  to make  Advances  to or for the  benefit  of the  Borrower  shall be
suspended  unless and until the Lender shall reinstate the same in writing,  the
Unmatured  Event of Default shall have been waived by the Lender or the relevant
Unmatured  Event of Default shall have been remedied  prior to the ripening into
an Event of Default.

      7.3  Rights Upon Occurrence of an Event of Default.

           (a)  Upon  the  occurrence  of any  Event  of  Default  specified  in
      Subsections  (g), (h), (i) or (n) of Section 7.1,  immediately and without
      notice, (i) all Obligations evidenced by the Note shall immediately become
      due and payable without presentment, demand, protest, notice of protest or
      dishonor, notice of intent to accelerate,  notice of acceleration or other
      notice  of any  kind,  all of which are  expressly  waived  by the  Credit
      Parties  and  (ii) all  obligations  of the  Lender,  if any,  under  this
      Agreement shall immediately and  automatically  cease and terminate unless
      and until the Lender shall reinstate any such obligation in writing.

                                       45
<PAGE>



           (b) Upon the occurrence and at any time during the continuance of any
      other Event of Default,  (i) all obligations of the Lender,  if any, under
      this Agreement  shall  immediately and  automatically  cease and terminate
      unless and until the Lender shall reinstate any such obligation in writing
      and (ii) the Lender may by written  notice to the Credit  Parties  declare
      all  Obligations  evidenced by the Note to be immediately  due and payable
      without  presentment,  demand,  protest,  notice of protest  or  dishonor,
      notice of intention to accelerate,  notice of acceleration or other notice
      of any kind, all of which are expressly waived by the Credit Parties.

           (c) The Credit Parties acknowledge and understand that under the Laws
      of the State of Texas, unless waived, the Credit Parties have the right to
      notice of the Lender's intent to accelerate the  Obligations  evidenced by
      the  Note,  the  right  to  notice  of  the  actual  acceleration  of  the
      Obligations  evidenced by the Note,  and the right to  presentment  of the
      Note by the Lender's  demand for payment.  The Credit Parties  acknowledge
      that they each  understand  that they can waive  these  rights  and by the
      execution by each Credit Party of this Agreement they agree to waive their
      right to  notice  of  intent  to  accelerate,  their  right to  notice  of
      acceleration, and their right to presentment or other demand for payment.

           (d) In addition to the foregoing, upon the occurrence of any Event of
      Default,  the Lender may exercise any or all of the Rights provided in any
      or all of the Loan Documents.

                                    ARTICLE 8
                                  MISCELLANEOUS

      8.1  Notices.  Any notice  required or  permitted  to be given under or in
connection with this Agreement or any of the other Loan Documents (except as may
otherwise be expressly required therein) shall be in writing and shall be mailed
by certified mail, return receipt requested,  postage prepaid, or sent by telex,
telegram,  telecopy or other  similar  form of rapid  transmission  confirmed by
mailing (by certified mail, return receipt  requested,  postage prepaid) written
confirmation  at  substantially  the same time as such  rapid  transmission,  or
personally   delivered  to  an  officer  of  the  receiving   party.   All  such
communications shall be mailed, sent or delivered:

                                       46
<PAGE>


           (a)  if  to  the   Borrower,  to  Quest  Resource Corporation 5901 N.
      Western, Suite 200, Oklahoma City, Oklahoma 73118, Attn: Jerry D. Cash, or
      to such other address or to such individual's or department's attention as
      the Borrower may have furnished the Lender in writing;

           (b)  if  to  Ponderosa,  to  Ponderosa  Gas Pipeline  Company,  Inc.,
      5901 N. Western, Suite 200,  Oklahoma City,  Oklahoma 73118 Attn: Jerry D.
      Cash,  or to such other address or to such  individual's  or  department's
      attention as Ponderosa may have furnished the Lender in writing;

           (c)  if to Quest Oil & Gas, to  Quest  Oil & Gas Corporation, 5901 N.
      Western, Suite 200, Oklahoma City,  Oklahoma  73118,  Attn:  Jerry D. Cash
      or to such  other address  or  to  such   individual's   or   department's
      attention  as  Quest  Oil & Gas may have  furnished the Lender in writing;

           (d)  if to STP  Cherokee,  to STP  Cherokee,  Inc., 5901 N.  Western,
      Suite 200, Oklahoma City, Oklahoma 73118  Attn:  Jerry  D. Cash or to such
      other  address  or  to such individual's or department's  attention as STP
      Cherokee may have furnished the Lender in writing; or

           (e)  if  to  the   Lender,  to  Wells  Fargo  Energy  Capital,  Inc.,
      1000  Louisiana, Suite 600,  Houston, Texas  77002,  Attn:  Gary  Milavec,
      or to such  other address or   to  such   individual's   or   department's
      attention as the Lender may have furnished  the Credit Parties in writing.

Any  communication  so addressed  and mailed shall be deemed to be given when so
mailed,  and any notice so sent by rapid  transmission is acknowledged,  and any
communication  so delivered in person shall be deemed to be given when receipted
for or actually  received by an authorized  officer of the relevant Credit Party
or the Lender, as the case may be.

      8.2 Amendments and Waivers.  Any provision of this Agreement or any of the
other Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Credit  Parties and the Lender (and/or
any other Person  which is a party to any Loan  Document  being  amended or with
respect to which a waiver is being obtained).

      8.3  Invalidity.  In  the  event  that  any  one or more of the provisions
contained  in this  Agreement  or any of the other  Loan Documents shall for any
reason

                                       47
<PAGE>


be  held  invalid,  illegal  or  unenforceable  in any respect, such invalidity,
illegality  or  unenforceability  shall not affect any other  provision  of this
Agreement or any other Loan Document.

      8.4 Survival of  Agreements.  All  representations  and  warranties of the
Credit  Parties  herein or in the other Loan  Documents  and all  covenants  and
agreements  not  fully  performed  before  the  effective  date or dates of this
Agreement or the other Loan Documents shall survive such date or dates.

      8.5 Successors  and Assigns.  All covenants and agreements by or on behalf
of the Credit  Parties  in this  Agreement  and all of the other Loan  Documents
shall bind their  respective legal  representatives,  successors and assigns and
shall  inure  to the  benefit  of the  Lender  and  its  legal  representatives,
successors and assigns.

           None of the  Credit  Parties  may  assign  its  respective  Rights or
Obligations hereunder or under the Note without the prior consent of the Lender.

      8.6 Renewal, Extension or Rearrangement.  All provisions of this Agreement
and of any other Loan Documents,  as presently existing or as they may hereafter
be  amended,  relating to the Note or other  Obligations  shall apply with equal
force and effect to each and all promissory notes hereinafter  executed which in
whole or in part  represent a renewal,  extension  for any  period,  increase or
rearrangement of any part of the Obligations originally evidenced by the Note or
of any part of such other Obligations.

      8.7  Waivers.  No waiver by the  Lender of any of its  Rights  under  this
Agreement, the other Loan Documents or otherwise shall be considered a waiver of
any other or subsequent  Right.  No course of dealing on the part of the Lender,
its officers, employees,  consultants or agents, nor any failure or delay by the
Lender with  respect to  exercising  any Right  under any of the Loan  Documents
shall operate as a waiver thereof.

      8.8  Indemnity.Whether  or not the  transactions  contemplated  hereby are
consummated, the Credit Parties, jointly and severally, shall indemnify and hold
the  Lender  and  each  of its  officers,  directors,  employees,  counsel,  and
attorneys-in-fact  (each, an "Indemnified Person") harmless from and against any
and  all  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,   suits,  costs,  charges,   expenses  and  disbursements  (including
attorneys'  fees)  of any  kind  or  nature  whatsoever  which  may at any  time
(including,  without  limitation,  at any time  following  repayment of the Debt
evidenced by the Note), be imposed on, incurred by or asserted  against any such
Person in any way  relating to or arising out of this  Agreement or any document
contemplated by or referred to herein, or the transactions

                                       48
<PAGE>

contemplated   hereby,  or  any  action  taken  or  omitted  by any such  Person
under or in connection with any of the foregoing,  including with respect to any
investigation,  litigation or proceeding  (including any proceeding  pursuant to
Debtor  Relief Laws or appellate  proceeding)  related to or arising out of this
Agreement or the Obligations or the use of the proceeds of Advances,  whether or
not any Indemnified Person is a party thereto (all the foregoing,  collectively,
the "Indemnified Liabilities") WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE
OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTY'S NEGLIGENCE IN WHOLE OR IN PART,
INCLUDING,  WITHOUT LIMITATION,  THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT,
CONCURRENT OR COMPARATIVE  NEGLIGENCE OF THE  INDEMNIFIED  PARTY,  OR ANY ONE OR
MORE OF THEM;  provided,  that  the  Credit  Parties  shall  have no  obligation
hereunder to any Indemnified  Person with respect to Indemnified  Liabilities to
the extent the same arise from the gross negligence or willful misconduct of any
Indemnified  Person. The agreements in this Section 8.8 shall survive payment of
all Obligations.

      8.9  Cumulative  Rights.  The  Rights of the Lender  under the Note,  this
Agreement and each other Loan Document shall be cumulative,  and the exercise or
enforcement  of any such Right shall not preclude the exercise or enforcement of
any other Right.

      8.10  Taxes,  Etc.  Any Taxes  (excluding  income  taxes),  together  with
interest and  penalties,  if any,  payable or ruled  payable by federal or state
authority in respect of the Note,  this  Agreement  or the other Loan  Documents
shall be paid by the Credit Parties.

      8.11  Exhibits;  Conflicts.  The exhibits  attached to this  Agreement are
incorporated  herein and shall be  considered a part of this  Agreement  for the
purposes stated herein.  In the event of any direct conflict  between any of the
provisions  of  such  exhibits  or any of  the  other  Loan  Documents  and  the
provisions of this Agreement, the provisions of this Agreement shall prevail.

      8.12 Titles of Articles,  Sections and Subsections.  All titles or heading
to articles,  Sections,  Subsections or other divisions of this Agreement or the
exhibits  hereto are only for the  convenience  of the  parties and shall not be
construed  to have any effect or meaning  with  respect to the other  content of
such  articles,  Sections,  Subsections or other  divisions,  such other content
being controlling as to the agreement between the parties hereto.

      8.13  Jurisdiction.  All actions or proceedings  with respect to the Note,
this  Agreement  or any of the other Loan  Documents  may be  instituted  in the
courts of the State of Texas, County of Harris, the United States District Court
for the Southern

                                       49
<PAGE>

District  of  Texas,  or   elsewhere  to  the  extent  that  jurisdiction  shall
exist apart from the  provisions  of this Section,  as the Lender may elect.  By
execution and delivery of this  Agreement,  the Credit Parties  irrevocably  and
unconditionally submit to the jurisdiction (both subject matter and personal) of
each such court, and irrevocably and unconditionally  waive (a) any objection it
may now or  hereafter  have to the laying of venue in any of such courts and (b)
any claim that any action or  proceeding  brought in any of such courts has been
brought in an inconvenient forum. The choice of forum and laying of venue as set
forth in this Section 8.13 was  negotiated  in good faith by the Credit  Parties
and the Lender  and is a  significant  term of the  bargain  between  the Credit
Parties and the Lender  governed by this  Agreement.  The Credit Parties and the
Lender  further  agree that service of process,  summons,  notice of document by
U.S.  registered  mail to the address of each set forth above shall be effective
service of process for any action,  suit or proceeding brought against the other
in any such court.

      8.14  Counterparts.  This  Agreement  may  be  executed  in  two  or  more
counterparts and multiple  originals of such  counterparts,  and it shall not be
necessary  that the  signatures  of all parties  hereto be  contained on any one
counterpart  hereof. Any executed Agreement or any counterpart  thereof shall be
deemed an original,  but all of which together shall constitute one and the same
instrument.

      8.15 Effectiveness.  This Agreement shall not be effective until delivered
to, accepted and executed by the Lender and the Credit Parties.

      8.16 Documents. All Loan Documents and any other certificate, agreement or
other  document  provided or to be provided  under the terms  hereof shall be in
form and substance satisfactory to the Lender.

      8.17 Rights of Third Person.  All provisions of this Agreement are imposed
solely and exclusively for the benefit of the Lender and the Credit Parties.  No
other Person shall have standing to require  satisfaction for such provisions in
accordance with their terms or be entitled to assume that the Lender will refuse
to perform its  obligations  hereunder in the absence of strict  compliance with
any or all thereof,  and any or all of such  provisions  may be freely waived in
whole or in part by the Lender at any time if in its sole discretion it deems it
advisable to do so.

      8.18  Announcements.  Each party covenants and agrees with the other that,
subject to applicable law, each party shall promptly advise and consult with the
other and obtain the other's  written  consent  before issuing any press release
with respect to this Agreement or the transactions described herein.

                                       50
<PAGE>



      8.19 JURY TRIAL  WAIVED.  THE CREDIT  PARTIES AND THE LENDER  HEREBY AGREE
THAT THEY SHALL AND HEREBY WAIVE, TO THE FULLEST EXTENT DETERMINED BY LAW, TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM,  WHETHER AT LAW OR IN EQUITY,
BROUGHT BY ANY OF THEM,  OR IN ANY MATTER  WHATSOEVER  WHICH ARISES OUT OF OR IS
CONNECTION IN ANY WAY WITH THIS AGREEMENT.

      8.20 GOVERNING  LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS  SHALL BE
GOVERNED BY AND  CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE UNITED STATES OF
AMERICA AND THE STATE OF TEXAS  (EXCEPT TO THE EXTENT THE  LOCATION OR NATURE OF
THE COLLATERAL REQUIRES THE APPLICATION OF THE LAWS OF OTHER JURISDICTIONS TO BE
APPLIED AS TO MATTERS OF  CREATION,  PERFECTION  AND  PRIORITY  OF LIENS AND THE
RIGHTS OF THE LENDER UPON DEFAULT).

      8.21 Arbitration.

      (a)  Arbitration.  Upon the  demand of any  party,  any  dispute  shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this agreement.  A "dispute"  shall mean any action,  dispute,
claim or  controversy  of any kind,  whether in contract or tort,  statutory  or
common law,  legal or equitable,  now existing or hereafter  arising under or in
connection with, or in any way pertaining to, any of the loan documents,  or any
past, present or future extensions of credit and other activities,  transactions
or  obligations  of any kind related  directly or  indirectly to any of the loan
documents,  including  without  limitation,  any of  the  foregoing  arising  in
connection  with the  exercise of any  self-help,  ancillary  or other  remedies
pursuant  to any of the loan  documents.  Any party may by  summary  proceedings
bring an action in court to compel arbitration of a dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and  expenses  incurred by such other  party in  compelling
arbitration of any dispute.

      (b) Governing Rules.  Arbitration proceedings shall be administered by the
American  Arbitration  Association  ("AAA") or such other  administrator  as the
parties  shall  mutually  agree  upon in  accordance  with  the  AAA  commercial
arbitration  rules. All disputes  submitted to arbitration  shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding  any  conflicting  choice  of law  provision  in any of the loan
documents. The arbitration shall be conducted at a location in Texas selected by
the AAA or other administrator.

                                       51
<PAGE>


If there is  any  inconsistency  between  the terms  hereof  and any such rules,
the  terms  and  procedures  set  forth  herein  shall control.  All statutes of
limitation applicable to any dispute shall apply to any arbitration  proceeding.
All discovery activities shall be expressly limited to matters directly relevant
to the  dispute  being  arbitrated.  Judgment  upon  any  award  rendered  in an
arbitration may be entered in any court having  jurisdiction;  provided however,
that nothing  contained  herein shall be deemed to be a waiver by any party that
is a lender of the protections  afforded to it under 12 U.S.C. 91 or any similar
applicable state law.


      (c)  No  Waiver;  Provisional  Remedies,  Self-Help  And  Foreclosure.  No
provision  hereof  shall  limit  the right of any  party to  exercise  self-help
remedies  such as setoff,  foreclosure  against or sale of any real or  personal
property collateral or security, or to obtain provisional or ancillary remedies,
including  without  limitation  injunctive  relief,  sequestration,  attachment,
garnishment  or other  appointment  of a  receiver,  from a court  of  competent
jurisdiction  before,  after or during the pendency of any  arbitration or other
proceeding.  The  exercise of any such  remedy  shall not waive the right of any
party to compel arbitration hereunder.

      (d) Arbitrator  Qualifications  And Powers;  Awards.  Arbitrators  must be
active  members of the Texas state bar with  expertise in the  substantive  laws
applicable to the subject  matter of the dispute.  Arbitrators  are empowered to
resolve  disputes by summary  rulings in response to motions  filed prior to the
final  arbitration  hearing.  Arbitrators  (i) shall  resolve  all  disputes  in
accordance with the  substantive  law of the state of Texas,  (ii) may grant any
remedy or relief that a court of the state of Texas could order or grant  within
the scope hereof and such ancillary relief as is necessary to make effective any
award,  and (iii) shall have the power to award  recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the federal rules of civil procedure,  the
Texas rules of civil procedure or other applicable law. Any dispute in which the
amount  in  controversy  is  $5,000,000  or less  shall be  decided  by a single
arbitrator who shall not render an award of greater than  $5,000,000  (including
damages, costs, fees and expenses).  By submission to a single arbitrator,  each
party expressly waives any right or claim to recover more than  $5,000,000.  Any
dispute in which the amount in controversy  exceeds  $5,000,000 shall be decided
by majority vote of a panel of three  arbitrators;  provided  however,  that all
three arbitrators must actively participate in all hearings and deliberations.

      (e)  Judicial Review.   Notwithstanding  anything herein to the  contrary,
in any  arbitration  in  which the  amount in controversy exceeds   $25,000,000,
the  arbitrators shall be required to make specific,  written  findings of  fact
and  conclusions  of  law.   In  such  arbitrations  (i)  the  arbitrators shall
not have the power to make any

                                       52
<PAGE>


award  which  is  not  supported  by  substantial  evidence or which is based on
legal  error,  (ii) an award shall not be binding  upon the  parties  unless the
findings of fact are supported by  substantial  evidence and the  conclusions of
law are not erroneous under the substantive law of the state of Texas, and (iii)
the parties  shall have in  addition  to the grounds  referred to in the federal
arbitration  act for  vacating,  modifying or  correcting  an award the right to
judicial  review of (a) whether the findings of fact rendered by the arbitrators
are supported by substantial  evidence,  and (b) whether the  conclusions of law
are  erroneous  under  the  substantive  law of the  state  of  Texas.  Judgment
confirming  an  award  in  such a  proceeding  may be  entered  only  if a court
determines the award is supported by substantial evidence and not based on legal
error under the substantive law of the state of Texas.

      (f)  Miscellaneous.  To the  maximum  extent  practicable,  the  AAA,  the
arbitrators  and the parties  shall take all action  required  to  conclude  any
arbitration  proceeding  within 180 days of the filing of the  dispute  with the
AAA. No arbitrator or other party to an arbitration  proceeding may disclose the
existence,  content or results thereof, except for disclosures of information by
a party  required in the ordinary  course of its business,  by applicable law or
regulation,  or to the extent  necessary to exercise any judicial  review rights
set forth herein.  If more than one agreement for  arbitration by or between the
parties  potentially  applies  to a  dispute,  the  arbitration  provision  most
directly  related to the loan  documents  or the  subject  matter of the dispute
shall control. This arbitration  provision shall survive termination,  amendment
or  expiration  of any of the loan  documents  or any  relationship  between the
parties.

      8.22 Entire Agreement. This Agreement and the other Loan Documents contain
the  entire   agreement   between  the  parties  relating  to  the  transactions
contemplated    hereby.   All   prior   or    contemporaneous    understandings,
representations,  statements and agreements, whether written or oral, are merged
herein and superseded by this  Agreement.  THIS WRITTEN  AGREEMENT AND THE OTHER
TRANSACTION  DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE  CONTRADICTED  BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS  OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL  AGREEMENTS  BETWEEN THE
PARTIES.

                                       53
<PAGE>


     IN  WITNESS  WHEREOF, the  parties hereto have caused this instrument to be
duly executed effective as of the date first above written.

                        QUEST RESOURCE CORPORATION



                        By:  /s/ Douglas L. Lamb
                         --------------------------------
                             Douglas L. Lamb
                             President

                        By:  /s/ Jerry D. Cash
                         --------------------------------
                             Jerry D. Cash
                            Treasurer/Chief Financial Officer

                        PONDEROSA GAS PIPELINE COMPANY, INC.



                        By:  /s/ Douglas L. Lamb
                         --------------------------------
                            Douglas L. Lamb
                            President

                        By:  /s/ Jerry D. Cash
                         --------------------------------
                            Jerry D. Cash
                            Treasurer/Chief Financial Officer


                        QUEST OIL & GAS CORPORATION


                        By:  /s/ Douglas L. Lamb
                         -------------------------------
                             Douglas L. Lamb
                             President

                        By:  /s/ Jerry D. Cash
                         --------------------------------
                             Jerry D. Cash
                             Treasurer/Chief Financial Officer

                (Signatures continued on next page)

                                       54
<PAGE>



                        STP CHEROKEE, INC.

                        By:  /s/ Douglas L. Lamb
                         --------------------------------
                             Douglas L. Lamb
                             President

                        By:  /s/ Jerry D. Cash
                         --------------------------------
                             Jerry D. Cash
                             Treasurer/Chief Financial Officer


                        WELLS FARGO ENERGY CAPITAL, INC.


                        By:  /s/ Clayton Taylor
                         -------------------------------
                             Clayton Taylor
                             Assistant Vice President




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