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EXHIBIT 4.2

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                              MANAGEMENT AGREEMENT


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                                  BY AND AMONG

                      BANC ONE CAPITAL PARTNERS VIII, LTD.,

                           BOCP ENERGY PARTNERS, L.P.

                                       AND

                             ENCAP INVESTMENTS L.C.



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                           DATED AS OF AUGUST 21, 1997




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                              TABLE OF CONTENTS
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                                                                           PAGE
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ARTICLE I  DEFINITIONS, REFERENCES AND CONSTRUCTION..........................1
      Section 1.1.  Definitions..............................................1
      Section 1.2.  References and Construction..............................4

ARTICLE II  ENGAGEMENT AS MANAGER............................................5
      Section 2.1.  Engagement...............................................5
      Section 2.2.  Delegation of Rights, Power and Authority................5
      Section 2.3.  Representatives of BOCP..................................9

ARTICLE III  DUTIES AND OBLIGATIONS OF MANAGER..............................10
      Section 3.1.  Investments.............................................10
      Section 3.2.  Time Devoted to Partnership Business....................10
      Section 3.3.  Other Activities........................................11

ARTICLE IV  LIABILITY AND INDEMNIFICATION...................................13
      Section 4.1.  Liability...............................................13
      Section 4.2.  Indemnification.........................................13

ARTICLE V  REIMBURSEMENT; MANAGEMENT FEE....................................14
      Section 5.1.  Payment or Reimbursement of Organization Costs and
                      Operating Costs.......................................14
      Section 5.2.  Management Fee..........................................15
      Section 5.3.  Transaction, Break-up and Other Fees....................16
      Section 5.4.  Corporate Finance Fees..................................17

ARTICLE VI  CERTAIN BANKING REGULATORY CONSIDERATIONS.......................18
      Section 6.1.  Regulatory Limitations..................................18
      Section 6.2.  Voting Power............................................19
      Section 6.3.  Equity Ownership........................................19
      Section 6.4.  Disposition of Investment...............................19
      Section 6.5.  Information.............................................20
      Section 6.6.  Applicable Regulations and Other Definitions............20

ARTICLE VII  CERTAIN EVENTS CONCERNING PRINCIPALS...........................20

ARTICLE VIII  REPORTING; BANKING; AND CONFIDENTIALITY.......................21
      Section 8.1.  Reports.................................................21
      Section 8.2.  Bank Accounts...........................................21
      Section 8.3.  Confidentiality.........................................22
      Section 8.4.  BOCP Reports............................................23

ARTICLE IX  TERM............................................................23
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ARTICLE X   RELATIONSHIP OF THE PARTIES.....................................24

ARTICLE XI AMENDMENTS; MEETINGS.............................................24
      Section 11.1  Amendments..............................................24
      Section 11.2  Meetings................................................25

ARTICLE XII  ADVISORY BOARD.................................................25

ARTICLE XIII  MISCELLANEOUS.................................................27
      Section 13.1.  Notices................................................27
      Section 13.2.  Entire Agreement.......................................27
      Section 13.3.  Severability...........................................27
      Section 13.4.  No Waiver..............................................28
      Section 13.5.  Applicable Law.........................................28
      Section 13.6.  Successors and Assigns.................................28
      Section 13.7.  Attorneys' Fees........................................28
      Section 13.8.  Related Agreements.....................................28
      Section 13.9.  No Third Party Beneficiaries...........................28
      Section 13.10. Counterparts...........................................28
      Section 13.11. Representations and Warranties of the Manager..........28
      Section 13.12. Representations and Warranties of BOCP and the
                       Partnership..........................................30
      Section 13.13. Survival of Representations and Warranties.............31
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                              MANAGEMENT AGREEMENT

      THIS MANAGEMENT AGREEMENT (this "AGREEMENT") is made and entered into as
of the 21st day of August, 1997, by and among Banc One Capital Partners VIII,
Ltd., an Ohio limited liability company ("BOCP"), BOCP Energy Partners, L.P., a
Texas limited partnership (the "PARTNERSHIP"), and EnCap Investments L.C., a
Texas limited liability company ("ENCAP").

                                   RECITALS:

      A. BOCP is the sole general partner of the Partnership. As provided in the
Partnership Agreement (as defined herein), the Partnership has been formed to
make Target Energy-Related Assets (as defined herein).

      B. BOCP and the Partnership desire to engage EnCap, and EnCap desires to
be engaged by BOCP and the Partnership, as manager of the Partnership on the
terms and conditions set forth herein.

                                   AGREEMENT:

      NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, the parties hereto do hereby agree as
follows:

                                    ARTICLE I

                    DEFINITIONS, REFERENCES AND CONSTRUCTION

      SECTION 1.1. DEFINITIONS.

      (a) When used in this Agreement, the following terms shall have the
respective meanings set forth below:

      "ADVISORY BOARD" shall have the meaning assigned to it in Article XII.

      "AFFILIATES" shall mean, when used with respect to another person, a
person controlling, controlled by or under common control with such other
person; provided, however, that the term "Affiliate" when used with respect to
the Manager shall include the Principals, the employees of the Manager and the
parents, spouses and descendants of the Principals and the employees of the
Manager, but such term shall not include (i) any partner of the Partnership,
(ii) the Partnership, or (iii) any general partner of a limited partnership in
which an Existing Fund is a limited partner only. As used in this definition of
"Affiliate", the term "CONTROL" shall mean the possession, directly or

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indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract, or otherwise. As used in this Agreement, the term "PERSON" shall
include an individual, a corporation, a partnership, a limited liability
company, an association or other entity, an estate, a joint stock company and a
trust.

      "BOCP" shall have the meaning assigned to it in the introductory paragraph
to this Agreement.

      "BRIDGE LOAN" shall have the meaning assigned to it in Section 2.2(b)(vi).

      "CORPORATE FINANCE FEE" shall have the meaning assigned to it in Section
5.4.

      "DESIGNATED PRINCIPALS" shall mean David B. Miller, Gary R. Petersen, D.
Martin Phillips and Robert L. Zorich.

      "ECIC" shall have the meaning assigned to it in Section 3.3(c).

      "ENCAP" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.

      "ENCAP FUND PARTNERSHIP" shall have the meaning assigned to it in Section
3.3(c).

      "EXISTING FUND" shall mean EnCap Equity 1994 Limited Partnership, a Texas
limited partnership, EnCap Equity 1996 Limited Partnership, a Texas limited
partnership, ECIC, or ECIC Corporation, a Texas corporation.

      "MANAGEMENT FEE" shall have the meaning assigned to it in Section 5.2(a).

      "MANAGER" shall have the meaning assigned to it in Section 2.1.

      "OPERATING COSTS" shall mean all direct, out-of-pocket costs and expenses
reasonably incurred either by the Partnership or by the Manager or an Affiliate
thereof on behalf of the Partnership relating to the management, conduct and
operation of Partnership business, including (a) the fees and expenses
associated with the preparation of the Partnership's financial statements and
the reports and other information to investors under the Partnership Agreement,
tax returns and Forms K-1, printing expenses, mailing and courier expenses, fees
and expenses of establishing bank or custodial accounts and insurance costs and
expenses, (b) the fees, costs and expenses incurred in connection with
investigating, negotiating, acquiring, holding, selling or exchanging of
Investments (including fees and expenses of lawyers, accountants, petroleum
engineers and consultants, brokerage or finder's fees, investment banker's fees,
commitment fees, underwriting discounts or sales fees, but excluding travel and
entertainment expenses in connection therewith), (c) fees, costs and expenses of
the type described in clause (b) above incurred in connection with potential or
proposed but unconsummated transactions, (d) legal, audit and other expenses
incurred in connection with the

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registration of the offer and sale of Securities owned by the Partnership under
the Securities Act of 1933, as amended, and any applicable state or foreign
securities laws, (e) the costs and other amounts attributable to the
Partnership's obligations under Section 4.2, (f) the costs and expenses
attributable to the Advisory Board and the conduct of its meetings or
attributable to the annual meetings of as provided in Section 11.2, and (g)
other extraordinary, nonrecurring expenses, including the costs and expenses of
prosecuting or defending a litigation claim; provided, however, that Operating
Costs shall not include any of the following costs and expenses incurred by the
Partnership or the Manager or any of its Affiliates: (i) the salaries, wages and
employee benefits of all officers, directors, and employees of the Manager or an
Affiliate thereof, (ii) office rent, utility charges and equipment and furniture
costs and expenses, and (iii) any other general, administrative and overhead
expense, including insurance premiums relating to the matters described in this
clause (iii) and the preceding clauses (i) and (ii).

      "PARALLEL INVESTMENT ENTITY" shall have the meaning assigned to it in
Section 3.3(c).

      "PARTNERSHIP" shall have the meaning assigned to it in the introductory
paragraph to this Agreement.

      "PARTNERSHIP AGREEMENT" shall mean that certain Agreement of Limited
Partnership of even date herewith, by and between BOCP, as general partner, and
EnCap, as limited partner, establishing the Partnership.

      "PRINCIPALS" shall mean Eugene C. Fiedorek, David B. Miller, Gary R.
Petersen, D. Martin Phillips and Robert L. Zorich.

      "SUBSEQUENT FUND" shall have the meaning assigned to such term in Section
3.3(b).

      "TRIGGER EVENT" shall have the meaning assigned to such term in Article
VII.

      "UNPAID COMMITMENT" shall mean, (a) with respect to the BOCP at a given
point in time, the sum of BOCP's Unpaid Debt Commitment and Unpaid Equity
Commitment, and (b) with respect to EnCap at a given point in time, EnCap's
Unpaid Equity Commitment.

      (b) When used in this Agreement, the following terms shall have the
respective meanings assigned to them in the Partnership Agreement:

      "ACT"
      "ADVANCES"
      "AVAILABLE CASH"
      "BUSINESS DAY"
      "CAPITAL CONTRIBUTION"
      "CATCH-UP PAYOUT"
      "COMMITMENT PERIOD"

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      "EQUITY-LINKED COMPANY"
      "EQUITY-LINKED INVESTMENTS"
      "FOLLOW-ON INVESTMENTS
      "INITIAL FUNDING DATE"
      "INVESTMENTS"
      "MARKET VALUE"
      "MEZZANINE LOAN"
      "NON-DEFAULTING PARTNER"
      "PORTFOLIO COMPANY"
      "PREFERRED RETURN PAYOUT"
      "PRIMARY INVESTMENT PERIOD"
      "PROJECT EQUITY COMPANY"
      "SECURITIES"
      "TARGET ENERGY-RELATED ASSETS"
      "TOTAL COMMITMENTS"
      "UNPAID DEBT COMMITMENT"
      "UNPAID EQUITY COMMITMENT"

      SECTION 1.2. REFERENCES AND CONSTRUCTION.

      (a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.

      (b) Titles appearing at the beginning of any of such subdivisions are for
convenience only and shall not constitute part of such subdivisions and shall be
disregarded in construing the language contained in such subdivisions.

      (c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.

      (d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.

      (e) Examples shall not be construed to limit, expressly or by implication,
the matters they illustrate.

      (f) The word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions.

      (g) All references herein to "$" or "dollars" shall refer to U.S. Dollars.

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      (h) Exhibit 13.8 to this Agreement is attached hereto. Such Exhibit is
incorporated herein by reference for all purposes and references to this
Agreement shall also include such Exhibit unless the context in which used shall
otherwise require.

                                  ARTICLE II

                             ENGAGEMENT AS MANAGER

      SECTION 2.1. ENGAGEMENT. Subject to the terms and conditions hereof, (a)
BOCP and the Partnership hereby engage EnCap as manager of the Partnership and
(b) EnCap agrees to be engaged by BOCP and the Partnership as manager of the
Partnership. EnCap will sometimes be referred to herein as the "MANAGER".

      SECTION 2.2. DELEGATION OF RIGHTS, POWER AND AUTHORITY.

      (a) Subject to terms and conditions hereof (including the limitations
contained in this subsection (a) and in subsections (b) and (c) below), BOCP
hereby delegates to the Manager all of BOCP's management rights as general
partner under the Partnership Agreement, and the concomitant power and
authority, including the following:

            (i) to cause the Partnership to make or purchase privately
      negotiated Investments in, or with respect to, Target Energy-Related
      Assets;

            (ii) to monitor the Partnership's Investments and to vote, take any
      action or exercise any right, directly or indirectly, required of or
      accorded to the Partnership with respect to the Investments or any other
      Partnership assets;

            (iii) to sell, exchange, transfer or otherwise dispose of all or any
      portion of the Investments or other Partnership assets;

            (iv) to negotiate, make and to enter into such agreements and
      contracts with such parties and to give such receipts, releases and
      discharges with respect to any and all of the foregoing and any matters
      incident thereto as the Manager may deem advisable or appropriate;

            (v) to employ from time to time third parties to render services to
      the Partnership, including but not limited to, attorneys, independent
      certified public accountants, petroleum engineers, consultants, brokers,
      agents and advisors (including attorneys, accountants, petroleum
      engineers, consultants, brokers, agents and advisors who also may act as
      attorneys, accountants, petroleum engineers, consultants, brokers, agents
      and advisors for the Manager or any of its Affiliates), to the extent that
      the service to be rendered to the Partnership by any such third party is
      generally related to the business purpose or the day-to-day investment
      activities of the Partnership;


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            (vi) to procure and maintain in force such insurance as the Manager
      shall deem prudent to serve as protection against liability for loss and
      damage which may be occasioned by the activities to be engaged in by the
      Partnership;

            (vii) to control any matters affecting the rights and obligations of
      the Partnership, including the conduct of any litigation or arbitration
      proceedings and the incurring of legal expenses and the settlement of
      claims and litigation, to the extent that any such matter is generally
      related to the business purpose or the day-to-day investment activities of
      the Partnership;

            (viii) to open, maintain and close bank accounts and custodial
      accounts and to execute and deliver all checks, drafts, endorsements and
      other orders for the payment of Partnership funds;

            (ix) to appear and to represent the Partnership before any
      governmental authority or regulatory agency and to make all necessary or
      appropriate filings before such authority or agency, to the extent that
      any such appearance, representation or filing is generally related to the
      business purpose or the day-to-day investment activities of the
      Partnership;

            (x) to request payment of Advances and Capital Contributions as
      provided in Article III of the Partnership Agreement;

            (xi) to determine Available Cash;

            (xii) to cause the Partnership to make payments in respect of
      Advances and distributions of cash, Securities and other assets to the
      Partners as provided in Article IV and Section 9.3 of the Partnership
      Agreement;

            (xiii) to determine the Market Value of Partnership assets under the
      circumstances provided in the Partnership Agreement; and

            (xiv) to take such other action, execute and deliver such other
      documents and perform such other acts as may be deemed by the Manager to
      be necessary or advisable to carry out the business and affairs of the
      Partnership.

Without limiting anything herein, in connection with the exercise of the rights,
power and authority delegated to it hereunder by BOCP, the Manager shall be
subject to any limitations on such rights, power and authority set forth in the
Partnership Agreement.

      (b) Notwithstanding any other provisions of this Agreement or the
Partnership Agreement to the contrary, the Manager shall not have the right,
power or authority to, and shall not, do, perform or authorize any of the
following without having received the prior written consent of BOCP:


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            (i) guarantee in the name or on behalf of the Partnership the
      payment of money or the performance of any contract or other obligation of
      any person; provided that the Manager shall be permitted to cause the
      Partnership to make a guarantee in connection with making an Investment in
      or with respect to a Portfolio Company (A) so long as the aggregate amount
      of such guarantees outstanding at any time plus the aggregate Unpaid Debt
      Commitment and Unpaid Equity Commitments outstanding at such time do not
      exceed the Total Commitments and (B) provided that the amount of any such
      guarantee shall be considered to be an outstanding Investment for the
      purposes of applying the restrictions set forth below in this Section
      2.2(b);

            (ii) cause the Partnership to file a voluntary petition in
      bankruptcy or take any other similar action;

            (iii) merge or consolidate the Partnership with any partnership or
      other entity, convert the Partnership into another type of entity, or
      cause the Partnership to participate in an exchange of interests or some
      other type of business combination with any partnership or other entity;

            (iv) cause the Partnership to engage in any transactions with the
      Manager or any of its Affiliates except as expressly provided for herein;

            (v) except as provided in paragraph (vi) below, cause the
      Partnership to expend more than 15% of the Total Commitments in any single
      Investment hereunder; provided, however, that in connection with a given
      Project Equity Company in which the Partnership acquires an interest
      hereunder, the foregoing provisions of this paragraph (v) shall not
      preclude the Manager from causing the Partnership to purchase additional
      Securities in or contribute additional capital to such Project Equity
      Company for the purpose of financing an additional acquisition by such
      Project Equity Company of Target Energy-Related Assets which are not
      significantly related geographically to the Target Energy-Related Assets
      owned or held by such Project Equity Company, so long as the purchase
      price of such additional Securities or the amount of such additional
      capital does not exceed 15% of the Total Commitments; provided, further,
      that the foregoing provisions of this paragraph (v) shall not preclude the
      Manager from causing the Partnership to form a new Project Equity Company
      and to make a new Project Equity Investment with respect thereto, even
      though the person with which the Partnership is making such Project Equity
      Investment is an Equity-Linked Company or is a person with which or to
      which the Partnership has previously made a Project Equity Investment or a
      Mezzanine Loan (as applicable), so long as the amount of such new Project
      Equity Investment does not exceed 15% of the Total Commitments; and,
      provided, further, that the foregoing provisions of this paragraph (v)
      shall not preclude the Manager from causing the Partnership to make a new
      Mezzanine Loan even though the person to which the Mezzanine Loan is to be
      made is an Equity-Linked Company or is a person with which the Partnership
      has previously made a Project Equity Investment, so long as the amount of
      such new Mezzanine Loan does not exceed 15% of the Total Commitments;

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            (vi) cause the Partnership to make a "bridge" or interim loan (a
      "BRIDGE LOAN"), except to the extent the Manager determines in its sole
      discretion that such Bridge Loan is required in order to facilitate the
      making of a permanent Investment and provided that the amount of such
      Bridge Loan, when added to the amount of such permanent Investment, does
      not exceed 25% of the Total Commitments;

            (vii) cause the Partnership to make Mezzanine Loans hereunder which
      in the aggregate would exceed 25% of the Total Commitments or to make
      Equity-Linked Investments hereunder which in the aggregate would exceed
      35% of the Total Commitments;

            (viii) cause the Partnership to have invested and unrepaid at any
      time Investments made to or with respect to any Portfolio Company and its
      Affiliates in an aggregate amount in excess of 20% of the Total
      Commitments;

            (ix) cause the Partnership to make an investment in any fund or
      similar collective investment entity that provides for a carried interest
      or management fee to be paid to any person, except that the Manager shall
      have the power and authority to cause the Partnership to invest in any
      partnership or other entity if such partnership or other entity (A) is or
      will be primarily engaged in the energy business and is not or will not be
      primarily engaged in the business of owning or investing in entities
      managed by third parties (i.e., entities that are not majority-owned
      subsidiaries), or (B) has been approved by two-thirds or more of the
      members of the Advisory Board;

            (x) cause the Partnership to borrow any money or pledge or encumber
      Partnership assets;

            (xi) cause the Partnership to reinvest the proceeds received by the
      Partnership from the sale of any Investment;

            (xii) cause the Partnership to extend the 10-year period referenced
      in Section 9.1(a) of the Partnership Agreement;

            (xiii) cause the Partnership to invest in any issuer where the
      Manager or an Affiliate thereof has an equity or debt interest in such
      issuer; provided, and without limiting clause (c) of the definition of
      Affiliate, that nothing in this Agreement shall prohibit or restrict the
      Partnership from making an Investment in any Portfolio Company (A) which
      is a limited partnership, the general partner of which is also the general
      partner of a limited partnership in which an Existing Fund is a limited
      partner, or (B) which is another entity, the manager or operator of which
      is also the general partner, manager or operator of a limited partnership
      or other entity in which an Existing Fund is a limited partner and/or a
      debt or equity investor; provided, further, that the preceding clauses (A)
      and (B) shall not authorize the Partnership

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<PAGE>   12
      to make any Investment in a Portfolio Company and where the Manager or any
      of its Affiliates is also a general partner, manager or operator of any
      such limited partnership or other entity;

            (xiv) select the Partnership's outside accountants in connection
      with the preparation and maintenance of the Partnership's books of
      account; or

            (xv) exercise any of the rights, power and authority set forth in
      either Section 2.2(a)(vii) or Section 2.2(a)(ix) to the extent any such
      matter, appearance, representation or filing generally relates to
      compliance, or a violation or potential violation, by BOCP or its
      Affiliates with Applicable Regulations (as such term is defined in Article
      VI).

      (c) Notwithstanding subsection (a) above or anything else in this Article
II or elsewhere herein to the contrary, BOCP expressly reserves to itself, and
does not delegate to Manager hereunder:

            (i) all monetary or financial obligations or rights of BOCP under
      the Partnership Agreement, including (A) the obligation of BOCP to make
      Advances or Capital Contributions to the Partnership under Article III of
      the Partnership Agreement and (B) the right of BOCP to receive allocations
      and distributions under Article IV and Section 9.3 of the Partnership
      Agreement;

            (ii) all rights and elections BOCP may have as a "Non-Defaulting
      Partner" under Section 3.3 of the Partnership Agreement; and

            (iii) all rights BOCP may have under the Partnership Agreement
      pertaining to matters requiring the vote, consent or agreement of, or
      waiver by, BOCP, including the matters referenced in Sections 9.1(c),
      10.1(a), 10.2 and 11.9 of the Partnership Agreement.

      SECTION 2.3. REPRESENTATIVES OF BOCP. Upon request of the Manager, BOCP
shall provide to the Manager a list of each officer, attorney-in-fact, employee
and other person who is then authorized to act for or on behalf of BOCP with
respect to the matters provided for in this Agreement. The Manager shall be
entitled to fully rely on any vote, consent, election or other action given,
made or taken by such person on behalf of BOCP, and until the Manager is
notified in writing to the contrary, such person shall be authorized to take all
action on behalf of BOCP which BOCP is authorized to take hereunder.


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<PAGE>   13
                                  ARTICLE III

                       DUTIES AND OBLIGATIONS OF MANAGER

      SECTION 3.1.  INVESTMENTS.

      (a) The Manager will use its best efforts to find investment opportunities
suitable for the Partnership.

      (b) Notwithstanding anything herein to the contrary, Investments by the
Partnership in oil and gas properties, either through a Project Equity
Investment or a Mezzanine Loan, shall be supported by proved oil and gas
reserves. Further, the Manager agrees that prior to making such an Investment
hereunder, the proved oil and gas reserves will be confirmed for the Partnership
by any of the following independent petroleum engineers: Cawley, Gillespie &
Associates, Inc.; DeGolyer & MacNaughton; Miller and Lents; Netherland, Sewell &
Associates, Inc.; Ryder Scott Company; T.J. Smith & Associates; or such other
firm of independent petroleum engineers as shall be designated by the Manager
and approved by the Advisory Board.

      (c) The Manager in its sole discretion may offer co-investment
opportunities to BOCP and its designated Affiliates, on terms identical or
substantially similar to, and no more favorable than (in any material respect),
those offered to the Partnership. BOCP, to the extent it or its designated
Affiliate desires to participate in such opportunities, shall notify the Manager
in writing at any time of the types, amounts and other parameters of the
co-investments in which BOCP or such Affiliate has an interest. In this regard,
it is the intention of the Manager to so offer co-investment opportunities, when
practicable and feasible, and in any event prior to offering such opportunities
to a person other than ECIC, the Parallel Investment Entities, the investors in
the Parallel Investment Entities and BOCP and its designated Affiliates;
provided, that the Manager shall be under no obligation to do so. The Manager
shall not provide investment advice with respect to any such co- investment
opportunity, and should BOCP or a designated Affiliate participate in such a co-
investment opportunity, it shall be solely responsible for making its own
decision as to the merits of such opportunity.

      (d) In the event in excess of 35% of the Total Commitments are to be
called by the Partnership under Section 3.2 of the Partnership Agreement in any
twelve-month period, the Manager shall give notice of such event to BOCP as soon
as is reasonably possible.

      SECTION 3.2. TIME DEVOTED TO PARTNERSHIP BUSINESS. During the period
commencing as of the date hereof and ending on the first to occur of (a) the end
of the Commitment Period and (b) the point in time at which a Subsequent Fund
organized in accordance with the terms hereof makes its first investment, the
Manager and the Designated Principals (while active as employees of the
Manager), on a collective basis, shall devote a substantial majority of their
business time to the business and operations of the Partnership, ECIC and the
Parallel Investment Entities; provided, however, that it is specifically
understood and agreed that neither the Manager nor the Designated Principals,
either individually or on a collective basis, shall be required to devote full
time to Partnership business. After such period, the Manager and the Designated
Principals (while active as employees of the Manager) shall devote such amount
of their business time as is reasonably necessary to manage properly the affairs
and activities of the Partnership.

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<PAGE>   14
      SECTION 3.3.  OTHER ACTIVITIES.

      (a) During the Primary Investment Period, the Manager and its Affiliates,
either directly or indirectly, shall not purchase or make any Investment in or
with respect to Target Energy-Related Assets, except for the following: (i) any
investments, securities or other assets currently held by the Manager or any
Affiliate thereof, including the interest of the Manager in the Existing Funds;
(ii) any investments, securities or other assets acquired by or in connection
with (1) the Existing Funds to the extent they represent either an investment
which had been presented to the investors of an Existing Fund prior to the date
of this Agreement or an additional or "follow-on" investment in or in connection
with investments and/or limited partnerships in which an Existing Fund held an
interest prior to the date of this Agreement, or (2) (subject to subsection (b)
below) any new funds hereafter formed by the Manager or its Affiliates; (iii)
any investments, securities or other assets received in exchange for, as a
result of a merger, consolidation, conversion, exchange, combination or other
reorganization involving, or as distributions from partnerships or other
entities currently holding, investments, securities or other assets referred to
in clauses (i) and (ii) above; (iv) any personal investments of the Principals
and other Affiliates of the General Partner who are natural persons hereafter
made (A) other than the type described in the following subclause (B), up to an
aggregate amount of $500,000 per Principal and other such Affiliate per year, or
(B) in publicly traded securities, and provided such personal investments are
not (x) in an Equity-Linked Company in which the Partnership has an Investment
then outstanding hereunder, (y) a Project Equity Company in which the
Partnership has an Investment then outstanding hereunder, an Affiliate of such
Project Equity Company or assets held by such Project Equity Company, or (z) any
person to whom the Partnership has a Mezzanine Loan then outstanding hereunder;
(v) as provided in subsection (c) below; and (vi) any investments approved by
the Advisory Board. Without limiting the foregoing, the determination as to
whether an investment opportunity appears to come within the scope of the
Partnership's business shall be made by the Manager in good faith; however, it
is agreed that even if an investment opportunity appears to come within the
scope of the Partnership's business, the Manager may make a good faith
determination that it is not in the best interests of the Partnership to place
such investment opportunity with the Partnership and, in such event, shall have
the right and power to recommend such investment opportunity to another party.

      (b) During the Primary Investment Period, the Manager and its Affiliates
shall not form or acquire a new investment fund for the same or similar purpose
for which the Partnership has been formed and cause such fund to commence
investment activities (a "SUBSEQUENT FUND"), unless the Manager or such
Affiliate receives the prior written approval of BOCP. If, in accordance with
the immediately preceding sentence and prior to the expiration of the Commitment
Period, the Manager organizes a Subsequent Fund, the Manager shall in good faith
equitably apportion any prospective investment opportunities between the
Partnership and the Subsequent Fund, giving due consideration to the amount of
the Unpaid Commitments, the types of investments previously made by the
Partnership, diversification (geographic or otherwise) and other salient
factors.

      (c) BOCP recognizes that the Manager serves as an investment advisor to
Energy Capital Investment Company PLC ("ECIC") pursuant to that certain
Investment Advisory Agreement dated as of February 4, 1994, and, subject to the
last sentence of this subsection (c), agrees that unless the

                                    -11-

<PAGE>   15
Board of Directors of ECIC elects not to participate in any Investment in Target
Energy-Related Assets or unless the Board of Directors of ECIC, the Manager, the
EnCap Fund Partnership and BOCP otherwise agree, the Partnership and ECIC will
co-invest in each investment opportunity selected by the Manager for the
Partnership. BOCP further recognize that in conjunction with the activities
contemplated hereunder, the Manager or an Affiliate (i) will organize EnCap
Energy Capital Fund III, L.P., a Texas limited partnership (the "ENCAP FUND
PARTNERSHIP") and (ii) may also organize one or more parallel investment
entities to facilitate participation by foreign and certain other investors in
investment opportunities of the type contemplated by the Partnership Agreement
and hereunder (the EnCap Fund Partnership and such other investment entities
being herein called the "PARALLEL INVESTMENT ENTITIES"); and, subject to the
last sentence of this subsection (c), BOCP agrees that such Parallel Investment
Entities (whether one or more and if organized) will co-invest in each
investment opportunity selected by the Manager for the Partnership.
Notwithstanding the foregoing or anything else herein to the contrary, BOCP and
the Manager agree that (A) any co-investment by the Partnership with ECIC and
the Parallel Investment Entities shall be on the same proportionate terms and
conditions (including price of Securities or loan amount, as applicable) as the
co-investment made by ECIC and the Parallel Investment Entities, including
maturity dates and other maturity, liquidation and distribution features, (B)
the percentage amount of any Investment allocated to ECIC shall not exceed 15%,
(C) the Partnership's percentage share of each Investment shall be equal to the
product of A times B, where "A" is 100% minus that percentage of the Investment
allocated to ECIC, and where "B" is a fraction, the numerator of which is the
Unpaid Commitments then available for investment by the Partnership in such
Investment and the denominator of which is the aggregate capital then available
for investment in such Investment by the Partnership and the Parallel Investment
Entities, and (D) the General Partner shall not organize any Parallel Investment
Entity other than (1) the EnCap Fund Partnership and (2) EnCap Energy Capital
Fund III-B, L.P., a Texas limited partnership organized for certain non-taxable
investors and with a subsidiary to acquire Project Equity Investments.

      (d) Subject to Section 3.2 and except as provided in subsections (a),(b)
and (c) above of this Section 3.3, the Manager or any Affiliate of the Manager
may engage or invest, directly or indirectly, in any business activity or
venture of any nature or description, including those that may be the same as or
similar to the Partnership's business and in direct competition therewith, and
the Manager or such Affiliate shall have no obligation to offer any such
business activity or venture to the Partnership. Except as otherwise expressly
provided in subsection (a) above and Sections 5.3 and 5.4, neither the
Partnership nor any partner thereof shall have any right, by virtue of this
Agreement or the relationship contemplated hereby, in such investments or such
other activities or ventures, and such investments, activities or ventures, even
if the same or directly competitive with the business of the Partnership, shall
not be deemed wrongful or improper or in violation of this Agreement.

                                    -12-
<PAGE>   16

                                  ARTICLE IV

                         LIABILITY AND INDEMNIFICATION

      SECTION 4.1.  LIABILITY.

      (a) Neither the Manager, its Affiliates, their respective partners,
members, officers, directors, employees or agents, shall be liable, responsible,
or accountable in damages or otherwise to the BOCP or the Partnership for any
action taken or failure to act (EVEN IF SUCH ACTION OR FAILURE TO ACT
CONSTITUTED THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE MANAGER,
AFFILIATE, PARTNER, MEMBER, OFFICER, DIRECTOR, EMPLOYEE OR AGENT) in connection
with the operations, business and affairs of the Partnership and the performance
by the Manager of its duties and obligations hereunder, unless such act or
failure to act was the result of bad faith, fraud, willful or intentional
misconduct or criminal wrongdoing, gross negligence or a breach of a material
term of this Agreement.

      (b) The Manager may consult with legal counsel, accountants, petroleum
engineers, appraisers, investment bankers, and other consultants and advisers
selected by it with due care and any written opinion of any such person as to
matters which the Manager reasonably believes to be within such person's
professional or expert competence shall be full and complete authorization and
protection in respect of any action taken or omitted by the Manager hereunder in
good faith and in accordance with such opinion.

      (c) Subject to Section 4.1(c), the Manager may rely and shall be protected
in acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document reasonably believed by it to be genuine and to have
been signed or presented by the proper party or parties.

      SECTION 4.2.  INDEMNIFICATION.

      (a) THE PARTNERSHIP SHALL INDEMNIFY AND SAVE HARMLESS THE MANAGER, ITS
AFFILIATES, AND THEIR RESPECTIVE MEMBERS, PARTNERS, OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS (IN THIS SECTION SOMETIMES INDIVIDUALLY CALLED AN
"INDEMNITEE") FROM ALL CLAIMS, CAUSES OF ACTION, JUDGEMENTS, LIABILITIES,
DAMAGES, CHARGES, FEES AND EXPENSES OF ANY KIND ARISING FROM THE OPERATIONS,
BUSINESS AND AFFAIRS OF THE PARTNERSHIP OR THE PERFORMANCE BY THE MANAGER OF ITS
DUTIES AND OBLIGATIONS HEREUNDER; PROVIDED, HOWEVER, THAT NO INDEMNITEE SHALL BE
INDEMNIFIED BY THE PARTNERSHIP FOR ANY ACTS OR OMISSIONS BY THE INDEMNITEE THAT
CONSTITUTE BAD FAITH, FRAUD, WILLFUL OR INTENTIONAL MISCONDUCT OR CRIMINAL
WRONGDOING, GROSS NEGLIGENCE OR A BREACH OF A MATERIAL TERM OF THIS AGREEMENT.
BOCP AND THE PARTNERSHIP RECOGNIZE THAT AN INDEMNITEE MAY BE ENTITLED TO
INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY GIVE RISE TO ORDINARY,
CONCURRENT OR COMPARATIVE NEGLIGENCE.


                                    -13-

<PAGE>   17
      (b) Without limiting subsection (a) above, the Partnership shall pay or
reimburse expenses incurred by an Indemnitee in connection with the Indemnitee's
appearance as a witness or other participation in a proceeding involving or
affecting the Partnership at a time when the Indemnitee is not a named defendant
or respondent in the proceeding.

      (c) The indemnification provided by this Section shall be in addition to
any other rights to which each Indemnitee may be entitled under any agreement or
vote of the partners of the Partnership, as a matter of law or otherwise, both
as to action in the Indemnitee's capacity as the Manager or an officer,
director, member, employee or agent of the Manager or an Affiliate thereof or as
a person serving at the request of the Manager as set forth above and to action
in another capacity, and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the benefit of the heirs, successors,
assigns, administrators and personal representatives of the Indemnitees. Any
Indemnitee shall first seek recovery under any other indemnity or any insurance
policies by which such Indemnitee is indemnified or covered or from any issuer
in which the Partnership has an investment, as the case may be, prior to such
Indemnitee receiving any indemnification payment from BOCP or the Partnership.

      (d) An Indemnitee shall not be denied indemnification in whole or in part
under this Section because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted and approved pursuant to the terms of this Agreement and in
the absence of fraud on behalf of the Indemnitee and its Affiliates.

                                    ARTICLE V

                          REIMBURSEMENT; MANAGEMENT FEE

      SECTION 5.1. PAYMENT OR REIMBURSEMENT OF ORGANIZATION COSTS AND OPERATING
                   COSTS.

      (a) The Partnership shall pay, or shall reimburse the Manager or any
Affiliate thereof for its payment of, all out-of-pocket fees, costs and expenses
incurred by it in connection with the negotiation, execution and delivery of
this Agreement and all related documents.

      (b) The Partnership shall pay, or shall reimburse the Manager or any
Affiliate thereof for its payment of, all Operating Costs.

      (c) To the extent any Operating Costs or other costs are attributable to
any of the Partnership, a Parallel Investment Entity and ECIC, such costs shall
be allocated among such entities based on their respective (i) interests in an
Investment if such costs are attributable to such Investment or (ii) aggregate
amounts of capital agreed to be contributed and/or loaned to them by their
respective partners and Affiliates if such costs are not attributable to any
Investment.

                                    -14-
<PAGE>   18
      SECTION 5.2.  MANAGEMENT FEE.

      (a) During the period (in this Section 5.2(a) called the "INITIAL PERIOD")
commencing as of the date hereof and ending on the first to occur of March 31,
June 30, September 30 or December 31 following the earlier of (i) the end of the
Commitment Period, (ii) the point in time at which a Subsequent Fund organized
in accordance with the terms hereof makes its first investment, or (iii) the
occurrence of a Trigger Event (unless BOCP otherwise agrees in writing), the
Partnership shall pay to the Manager an annual fee equal to 2.0% of the Total
Commitments. After the expiration of the Initial Period, the Partnership shall
make quarterly payment to the Manager at a rate equal to 1.5% per annum of the
Base Amount (as defined below and, for any given payment, determined as of the
day immediately prior to the date such payment is due hereunder). As used in
this Section 5.2(a), the term "BASE AMOUNT" shall mean (A) the sum of the
aggregate Advances and Capital Contributions of the partners under the
Partnership Agreement as of the end of the Initial Period, increased by (B)
additional amounts advanced or contributed by the partners under the Partnership
Agreement to fund Follow-On Investments, and reduced by (but not below zero) (C)
amounts paid in respect of Advances or distributed to the partners under the
Partnership Agreement to the extent such amounts constitute a return of capital
and any writedown or writeoff of an Investment where the Manager has determined
that part or all of such Investment will not be repaid or recouped by the
Partnership. As used in this Section 5.2(a), "RETURN OF CAPITAL" shall mean
payments in respect of Advances or distributions that constitute depletion,
depreciation and amortization in the case of operating income from Project
Equity Investments and equity kickers related to Mezzanine Loans, repayments of
principal in the case of Mezzanine Loans, remaining cost basis in the case of
Investments sold or otherwise disposed of, and other applicable customary
returns of basis for any Investment, all as determined by the Manager in good
faith in accordance with (1) its customary accounting practices for financial
reporting purposes and (2) Section 7.1(a) of the Partnership Agreement. The fee
described in this Section 5.2(a) is herein called the "MANAGEMENT FEE".

      (b) Except as provided below, payments of the Management Fee shall be made
quarterly in advance on each fee payment date of each year. The first payment
(i) shall be due on the Initial Funding Date for the period from the date hereof
up to but not including the next fee payment date, whichever will first occur
after the Initial Funding Date, and (ii) shall be prorated based on the number
of days in such period. On that fee payment date (whichever has first occurred
after the Initial Funding Date) and on each fee payment date thereafter, the
Management Fee for the next three-month period shall be due. As used in this
Section 5.2(b), the term "FEE PAYMENT DATE" shall mean January 1, April 1, July
1 and October 1 of each year.

      SECTION 5.3. TRANSACTION, BREAK-UP AND OTHER FEES.

      (a) The Manager or an Affiliate thereof shall be permitted to charge and
receive a transaction or similar fee (a "TRANSACTION FEE") in connection with
any Investment made by the Partnership hereunder, which Transaction Fee shall be
payable by the Portfolio Company (or, in the instance of a Project Equity
Company, the person with whom the Partnership has formed such Project Equity
Company); provided, however, that 50% of any Transaction Fee paid to and
received by the Manager or its Affiliates (as to the Partnership's proportionate
interest in such Investment) shall reduce on a dollar-for-dollar basis any
future payment of the Management Fee due and payable under

                                    -15-

<PAGE>   19
Section 5.2; provided, further, that if the Transaction Fee paid to and received
by the Manager or its Affiliate (as to the Partnership's proportionate interest
in such Investment) exceeds 2% of the funds committed by the Partnership with
respect to such Investment, such excess amount (to the extent it has not been
used to reduce the Management Fee pursuant to the preceding proviso) shall
further reduce on a dollar-for-dollar basis any future payment of the Management
Fee due and payable under Section 5.2.

      (b) Any fee, reimbursement, or other form of compensation in the nature of
a commitment or break-up or other arrangement payable to the Manager, an
Affiliate thereof or the Partnership (with respect to the Partnership's
proportionate interest in a proposed Investment) as a result of the failure to
consummate such investment by the Partnership hereunder (a "BREAK-UP FEE") shall
be paid or disbursed as follows: (i) first, to reimburse the Partnership or the
Manager for Operating Costs incurred in connection with the proposed
transaction; and (ii) second, any portion of the Break-up Fee remaining after
the reimbursement provided in clause (i) above shall be paid to the Manager or
its Affiliate; provided, however, that 50% of the amount paid to and received by
the Manager or its Affiliate (as to the Partnership's proportionate interest in
such Investment) shall reduce on a dollar-for- dollar basis any future payment
of the Management Fee due and payable under Section 5.2.

      (c) The Manager and its Affiliates shall be permitted to receive and
retain fees from any Portfolio Company in which the Partnership then has an
Investment (or otherwise paid by any Portfolio Company or any other person in
connection with an Investment in which the Partnership has an interest) for
providing advisory, investment banking, monitoring or directors' services
("CONSULTING FEES"); provided, however, that 100% of the amount of any such
Consulting Fees paid to and received by the Manager and its Affiliates (with
respect to the Partnership's proportionate interest in such Investment) shall
reduce on a dollar-for-dollar basis any future payment of the Management Fee due
and payable under Section 5.2.

      (d) All of the foregoing calculations relating to any Transaction Fee,
Break-up Fee or Consulting Fee shall be limited to the proportionate interest
that the Partnership has in any related Investment or proposed Investment, and
the foregoing provisions of this Section 5.3 shall not apply in any respect to
the proportionate interests that ECIC and the Parallel Investment Entities may
have in such Investment.

      SECTION 5.4.  CORPORATE FINANCE FEES.

      (a) The Management Fees payable to the Manager shall be reduced by an
amount (the "CORPORATE FINANCE FEE") for each CF Year equal to the product of A
times B times C, where "A" is 50%, where "B" is the Partnership Percentage, and
where "C" is the remainder of the Corporate Finance Profit for such CF Year
minus $2.5 million (or, with respect to the final CF Year, $2.5 million
multiplied by a fraction, the numerator of which is the number of days in the
final CF Year and the denominator of which is 365). The Manager and its
Affiliates shall be permitted to receive and retain the Corporate Finance Fee,
and the amounts so retained shall reduce on a dollar-for-dollar basis any future
payment of the Management Fee due and payable under Section 5.2.

                                    -16-

<PAGE>   20
      (b) As used in this Section 5.4, the following terms shall have the
respective meaning set forth below:

             (i) "CF YEAR" shall mean each twelve-month period commencing on
      October 1 of each year and ending on September 30 of the following year
      that occurs during the period beginning October 1, 1997, and ending upon
      termination of the Commitment Period, provided that the final CF Year
      shall end upon termination of the Commitment Period.

            (ii) "CORPORATE FINANCE ACTIVITIES" shall mean all advisory,
      consulting and other services rendered by the Manager and its Affiliates
      to third parties for a fee except those services where the Manager or its
      Affiliates are managing the investment of a fund or monies of a third
      party or are advising or consulting in connection therewith. Without
      limiting the foregoing, the Corporate Finance Activities shall not include
      (1) the activities or services of the Manager or its Affiliates relating
      to or in connection with any Existing Fund, the Partnership, any Parallel
      Investment Entity, any Subsequent Fund or any other fund or investment
      activity that is a successor (in terms of activities) to any of the
      foregoing, (2) any services or activities which were rendered or which
      occurred prior to the date of this Agreement, (3) any services or
      activities as to which the Manager or its Affiliates were engaged, or can
      reasonably demonstrate were in the process of being engaged, as of the
      date of this Agreement, (4) any investments made by the Manager or any of
      its Affiliates prior to the date of this Agreement, or (5) any investments
      made after the date of this Agreement by the Manager or any of its
      Affiliates for cash, exchange of property or other value except services.

            (iii) "CORPORATE FINANCE PROFIT" shall mean for any CF Year the
      remainder of D minus E, where "D" is equal to all cash and non-cash
      revenues received by the Manager and its Affiliates during such CF Year
      from or as a direct consequence of their Corporate Finance Activities, and
      where "E" is equal to the General and Administrative Expenses paid by the
      Manager and its Affiliates during such CF Year with respect to their
      Corporate Finance Activities. In determining when revenues are received by
      the Manager and its Affiliates for the purposes of calculating the
      Corporate Finance Profit for any CF Year pursuant to this Section 5.4, (1)
      fees that are payable on a monthly or other periodic basis for services
      rendered for such month or period shall be considered to be received as of
      the end of the month to which they relate and (2) contingent, success,
      incentive and other fees that are payable on a contingent basis such as
      the closing of a transaction or financing or the occurrence of another
      event relating to the Manager's client or customer shall be considered to
      be received as of the date of such closing or occurrence of such event, in
      each case regardless of when such revenues or fees are actually received
      by the Manager or its Affiliate, but provided that no reduction in the
      Management Fee shall occur pursuant to Section 5.4(a) unless and until
      such fees are actually received by the Manager or its Affiliate.

            (iv) "GENERAL AND ADMINISTRATIVE EXPENSES" shall mean (1) all direct
      costs and expenses paid by the Manager or its Affiliates with respect to
      their Corporate Finance

                                    -17-

<PAGE>   21
      Activities and (2) the portion of the in-house tax, accounting
      bookkeeping, engineering and similar types of costs and expenses,
      telephone, communications, secretarial, clerical, travel and entertainment
      expenses, office rent and other office expenses, depreciation,
      amortization, rental and repair expense of office and business equipment,
      salaries, benefits and other compensation expenses of consultants and
      employees (except the Principals), other direct and indirect
      administrative expenses and other costs and expenses that are necessary or
      appropriate to the conduct of the Corporate Finance Activities which are
      paid by the Manager or its Affiliates and are allocated to the Corporate
      Finance Activities by the Manager in a manner which is fair and reasonable
      and consistent with applicable generally accepted accounting principles
      and industry practices.

            (v) "PARTNERSHIP PERCENTAGE" shall mean 85% of a fraction expressed
      as a percentage, the numerator of which is the Total Commitments and the
      denominator of which is the sum of the Total Commitments and the
      commitments of all partners of the Parallel Investment Entities to
      contribute capital and loan funds to the Parallel Investment Entities.

                                  ARTICLE VI

                   CERTAIN BANKING REGULATORY CONSIDERATIONS

      SECTION 6.1. REGULATORY LIMITATIONS. Notwithstanding Article II or Article
III or anything else herein to the contrary, the Manager shall not cause the
Partnership to participate in any Investment or exercise any right, duty or
election provided for in this Agreement or under the terms of any Investment, to
the extent that such participation or exercise would, or might be reasonably be
foreseen to, cause or result in a Regulatory Limitation with respect to a Banc
One Entity. As used in this Section 6.1, the term "REGULATORY LIMITATION" shall
mean any set of facts or circumstances wherein or whereby (a) it has been
asserted (or BOCP reasonably believes that there is a risk of assertion) by any
governmental authority that the Partnership is not entitled to participate in an
Investment or exercise any such right, duty or election with respect to all or
any portion of such Investment, or that any such participation or exercise by
the Partnership with respect to all or any portion of such Investment would
cause or result in a violation by or imposition of a material cost upon a Banc
One Entity under any Applicable Regulation (as defined in Section 6.6); (b) the
Banc One Entities are deemed, individually or in the aggregate, to own, hold,
control or have power (including voting power) over a greater quantity of
Securities than are permitted under the Applicable Regulations; or (c) the
Manager reasonably believes that any such participation or exercise by a Banc
One Entity could result in the imposition of a material cost or expense, or
expose a Banc One Entity to review or inquiry by any governmental authority,
under the Applicable Regulations.

      SECTION 6.2. VOTING POWER. Notwithstanding Article II or Article III or
anything else herein to the contrary, the Manager shall not, without the prior
written consent of BOCP, cause the Partnership to participate in any Investment
or exercise any right, duty or election provided for in this Agreement or under
the terms of any Investment, to the extent that such participation or exercise
would, or might be reasonably be foreseen to, cause or result in the Partnership
(together with the

                                    -18-

<PAGE>   22
Banc One Entities) to have (or be deemed to have) more than 4.99% of the voting
power to elect the board of directors or similar management board of any entity
related to such Investment.

      SECTION 6.3. EQUITY OWNERSHIP. Notwithstanding Article II or Article III
or anything else herein to the contrary, the Manager shall not cause the
Partnership to participate in any Investment or exercise any right, duty or
election provided for in this Agreement or under the terms of any Investment, to
the extent that such participation or exercise would, or might be reasonably be
foreseen to, cause or result in the Partnership (together with the Banc One
Entities) to beneficially own (or be deemed to beneficially own) more than
24.99% of the aggregate equity or capital of any entity related to such
Investment.

      SECTION 6.4. DISPOSITION OF INVESTMENT. Notwithstanding anything in this
Agreement to the contrary, if any time BOCP determines (and delivers to the
Manager an opinion of legal counsel, which may be a reasoned opinion expressed
on the basis of a "more likely than not" standard to the effect) that the
ownership or control of an Investment previously acquired by the Partnership
under this Agreement is or is reasonably likely to cause or result in (a) a
violation by or an imposition of a material cost upon a Banc One Entity under
any Applicable Regulation or (b) the Banc One Entities are deemed, individually
or in the aggregate, to own, hold, control or have power (including voting
power) over a greater quantity of Securities than are permitted under the
Applicable Regulations, BOCP shall have the right to give written notice thereof
to the Manager requesting that the Manager cause the Partnership to make a full
or partial disposition of such Investment to the extent necessary to enable the
Banc One Entities to comply with such Applicable Regulations. If any such notice
from BOCP is given to the Manager, the Manager shall have a period of 90 days
following receipt of such notice and legal opinion to use its reasonable best
efforts to (i) eliminate the necessity for such disposition by correction of the
condition giving rise to the violation of the Regulatory Limitation (to the
extent such correction is reasonably within the control of the Manager), (ii)
obtain a ruling or exemption from the appropriate regulatory authority
eliminating the necessity for such disposition, (iii) arrange for the
disposition of the required portion of the Investment at a price equal to the
fair market value thereof (including a disposition to the Manager or an
Affiliate thereof), or (iv) arrange for another method to eliminate the
necessity of the disposition that is reasonably satisfactory to BOCP. If the
event that the necessity to dispose all or a part of an Investment is not
eliminated within such 90-day period or such longer period as BOCP and the
Manager shall agree, the Manager shall reasonably cooperate with BOCP to assist
it in effecting such disposition.

      SECTION 6.5. INFORMATION. The Manager shall, upon written request
therefor, furnish to BOCP or its designated representative all information
concerning any Investment reasonably necessary in order to enable the Banc One
Entities to assess compliance with the Applicable Regulations or to prepare or
furnish any information requested or required by the FRB, OCC, SEC or the NASD
in connection with the Partnership's participation in such Investment.

      SECTION 6.6. APPLICABLE REGULATIONS AND OTHER DEFINITIONS. As used in this
Article VI, (a) "APPLICABLE REGULATIONS" shall mean the Bank Holding Company Act
and the regulations promulgated thereunder by the Board of Governors of the FRB,
the National Bank Act and the

                                    -19-

<PAGE>   23
regulations promulgated thereunder by the OCC, the Securities and Exchange Act
of 1934 and the regulations promulgated thereunder by the SEC with respect to
broker-dealers, and the By-Laws and Rules of Fair Practice promulgated by the
NASD, (b) the "FRB" shall mean the Board of Governors of the Federal Reserve
System, (c) the "OCC" shall mean the Office of the Comptroller of the Currency,
(d) the "SEC" shall mean the Securities and Exchange Commission, (e) the "NASD"
shall mean the National Association of Securities Dealers, Inc. and (f) the
"BANC ONE ENTITIES" shall mean Banc One Corporation, Banc One Capital
Corporation, the Partnership or any of their respective Affiliates.

                                  ARTICLE VII

                     CERTAIN EVENTS CONCERNING PRINCIPALS

      Upon the occurrence of a Trigger Event (as defined below), and for the
remainder of the Commitment Period (in this Section called the "TRIGGER EVENT
PERIOD"), without the written consent of BOCP, the Manager shall not cause the
Partnership to make or purchase any Investments other than (a) Investments with
respect to which the Partnership was, at the time of the Trigger Event,
contractually obligated to make, (b) acquiring any Securities issued as a
dividend on, in a reclassification with respect to, or in exchange for
Securities that the Partnership owns at such time, or (c) acquiring or receiving
any equity kicker or similar consideration in connection with a Mezzanine Loan
previously made by the Partnership. During the Trigger Event Period and
thereafter and except as provided above in this Article VII, the Manager shall
continue to manage the Investments and other assets owned by the Partnership at
that time and shall continue to have all of the rights and powers that it would
have otherwise had with respect to such Investments or other assets as if a
Trigger Event had not occurred. As used in this Article VII, the term "TRIGGER
EVENT" shall mean either (i) two or more of the Designated Principals cease to
be involved in the day-to-day operation of the Manager because of retirement,
termination, death, disability or any other reason, or (ii) the sale or other
transfer of voting securities or equity interests in the Manager such that
immediately after the last such sale or transfer Principals who are employees of
the Manager no longer own, either directly or indirectly, 50% or more of the
voting securities or equity interests in the Manager.

                                 ARTICLE VIII

                   REPORTING; BANKING; AND CONFIDENTIALITY

      SECTION 8.1. REPORTS. The Manager shall furnish to BOCP the following
reports and other information at the respective times indicated:

      (a) within 60 days after the end of each quarter, a report or reports
which (i) sets forth a description of each Investment made by the Partnership
during such quarter, (ii) contains a list of each Investment of the Partnership
as of the end of such quarter and the cost or fair market value of such
Investment as of such date as estimated by the Manager based on the most recent
engineering

                                    -20-

<PAGE>   24
information in the possession of the Manager with respect to such Investment,
(iii) summarizes the performance of each Investment of the Partnership for such
quarter and identifies any material variances from any projections or plans
previously furnished to BOCP for such Investment and (iv) contains a current
valuation of BOCP's allocable share of Partnership assets, as estimated by the
Manager based on the most recent engineering information in the possession of
the Manager with respect to each Investment of the Partnership;

      (b) within 60 days after the end of each quarter, detail of any items that
occurred during such quarter which offset the Management Fee pursuant to
Sections 5.3 and 5.4;

      (c) within 120 days after the end of each fiscal year of the Partnership,
(i) a report or reports which shall discuss and review the status of each
Investment and its performance for such year and (ii) a schedule showing the
calculation of the Corporate Finance Fee for most recent CF Year (as defined in
Section 5.4);

      (d) promptly upon the request of BOCP (and subject to Section 8.3), such
information concerning the Partnership or any of its Investments as BOCP may
reasonably request and which the Manager can provide without unreasonable
effort; and

      (e) such other reports and information as the Manager may determine from
time to time.

      SECTION 8.2. BANK ACCOUNTS. Notwithstanding anything in the Partnership
Agreement to the contrary, the Manager shall cause one or more accounts to be
maintained in a bank or banks, each having capital and surplus accounts totaling
not less than $500,000,000, which accounts shall be used for the payment of the
expenditures incurred by the Partnership in connection with the business of the
Partnership, and in which shall be deposited any and all receipts of the
Partnership. The Manager shall determine the number of and the persons who will
be authorized as signatories on each such bank account. There shall not be
deposited in any of such accounts any funds other than the funds belonging to
the Partnership, and no other funds shall in any way be commingled with such
funds, except the Manager may use one bank account for the Partnership, the
Parallel Investment Entities and ECIC for the purpose of paying money to, and
receiving payments of money from, Portfolio Companies. All funds of the
Partnership in excess of $1,000,000 on hand at any time and not invested in any
Portfolio Companies (and not pending anticipated investment within 30 days)
shall be invested only in United States government securities having a remaining
maturity of one year or less, repurchase agreements secured by such government
securities or government guaranteed securities of like remaining maturity,
commercial paper rated A-1 or better by Standard and Poor's Corporation, or
other time deposits or bankers acceptances with any bank meeting the minimum
capital and surplus requirements stated above.

      SECTION 8.3. CONFIDENTIALITY. Except as may be required by applicable law
or valid subpoena or other lawful process or by the rules of any applicable
stock exchange or other self-regulatory body or other regulatory requirements,
BOCP agrees that it will (consistent with its reasonable practices and
procedures adopted in good faith for handling confidential information) keep
confidential all

                                    -21-
<PAGE>   25
written information furnished to it by the Manager which the Manager reasonably
believes should be kept confidential and which the Manager clearly designates
thereon as "confidential" and will not disclose any such information to any
person whatsoever (other than BOCP's officers, directors, employees, beneficial
owners, attorneys, accountants, advisors or potential transferees (provided each
of such persons is informed of the confidential nature of such information) or
the Manager or an investor in ECIC or a Parallel Investment Entity); provided,
however, that the foregoing covenant of BOCP shall not apply to any information
that (a) was or becomes generally available to the public other than as a result
of disclosure by BOCP, (b) becomes available to BOCP from a source other than
the Manager or an Affiliate thereof, provided that such source is not (to the
knowledge of BOCP) bound by a confidentiality agreement with the Manager or such
Affiliate or (c) BOCP can establish was within it's possession prior to it being
furnished to BOCP by or on behalf of the Manager or an Affiliate thereof,
provided that the source of such information was not (to the knowledge of BOCP)
bound by a confidentiality agreement with the Manager or any of its Affiliates
in respect thereof (the information described above which BOCP is required to
maintain as confidential hereunder being called in this Article VIII
"CONFIDENTIAL INFORMATION"). If BOCP is compelled by law, subpoena, legal
process, rules of any stock exchange or any other self-regulatory body, or
regulatory requirements to disclose any Confidential Information with which BOCP
reasonably believes it is legally obligated to comply, BOCP shall use its
reasonable best efforts to give prompt notice of such fact to the Manager so
that the Manager may, if it so desires, seek a protective order or other
governmental or judicial relief at Partnership expense to prevent disclosure of
such Confidential Information; provided, however, that no such notice shall be
required in connection with any routine or periodic examination or similar
process by any regulatory or self-regulatory body or authority. BOCP
acknowledges and agrees that instances may arise when the Manager or an
Affiliate thereof is subject to and may comply with a valid and effective
agreement with a third party prohibiting the Manager or such Affiliate from
distributing or otherwise disseminating to another party (e.g., BOCP) certain
information, such as geological, geophysical or other data pertaining to Target
Energy-Related Assets with respect to which the Manager desires for the
Partnership to make an Investment hereunder or the Partnership has made an
Investment hereunder. If requested by BOCP, the Manager shall use its reasonable
best efforts to obtain an amendment or waiver of any such agreement to permit
any such data to be provided to BOCP upon the execution by BOCP of a similar
agreement and in any event shall attempt in advance of such execution of any
such agreement to obtain permission for BOCP to receive such information.

      SECTION 8.4. BOCP REPORTS. The Manager agrees to use its reasonable best
efforts to provide to BOCP such information as BOCP shall reasonably and timely
request in order for BOCP to timely fulfill its reporting responsibilities under
its limited liability company governing documents.


                                    -22-

<PAGE>   26

                                  ARTICLE IX

                                     TERM

      This Agreement shall commence as of the date hereof and shall continue
until the termination of the Partnership for state law purposes, unless sooner
terminated upon the occurrence of any of the following events:

      (a)   The consent in writing of the parties hereto.

      (b)   The Manager:

            (i)   makes a general assignment for the benefit of creditors;

            (ii)  files a voluntary bankruptcy petition;

            (iii) becomes the subject of an order for relief or is declared
      insolvent in any federal or state bankruptcy or insolvency proceeding;

            (iv) files a petition or answer seeking for the Manager a
      reorganization, arrangement, composition, readjustment, liquidation,
      dissolution, or similar relief under any law;

            (v) files an answer or other pleading admitting or failing to
      contest the material allegations of a petition filed against the Manager
      in a proceeding of the type described in subsection (i) through (iv)
      above;

            (vi) seeks, consents to, or acquiesces in the appointment of a
      trustee, receiver, or liquidator of the Manager or of all or any
      substantial part of the Manager's properties; or

            (vii) 120 days expire after the date of the commencement of a
      proceeding against the Manager seeking reorganization, arrangement,
      composition, readjustment, liquidation, dissolution, or similar relief
      under any law if the proceeding has not been previously dismissed, or 90
      days expire after the date of the appointment, without the Manager's
      consent or acquiescence, of a trustee, receiver, or liquidator of the
      Manager or of all or any substantial part of the Manager's properties if
      the appointment has not been vacated or stayed, or 90 days expire after
      the date of expiration of a stay, if the appointment has not previously
      been vacated.

      (c) BOCP terminates this Agreement for cause. As used in this Article IX,
the term "FOR CAUSE" shall mean (i) the commission of criminal misconduct,
fraud, willful or intentional misconduct, gross negligence or a material
violation of applicable securities laws by the Manager or any officer, director
or member thereof, or (ii) a material breach by the Manager of any of its duties
or obligations hereunder, or any of its material representations made herein,
which breach is not cured within 60 days after receipt by the Manager of a
written notice from BOCP (provided, that if such breach is not reasonably
susceptible to cure within such 60-day period and if the Manager is diligently

                                    -23-

<PAGE>   27
and in good faith taking action to cure such breach, such 60-day period shall be
extended for the period of time reasonably necessary for the Manager to cure
such breach, not to exceed 120 days).

                                   ARTICLE X

                          RELATIONSHIP OF THE PARTIES

      Notwithstanding anything in this Agreement to the contrary, (a) the
relationship of the Manager to BOCP and the Partnership shall be and remain that
of an independent contractor; (b) neither the Manager nor any member, officer,
employee or agent thereof shall be deemed to be an employee of BOCP or the
Partnership by virtue of this Agreement; (c) nothing contained herein shall be
deemed or construed to create a partnership between BOCP or the Partnership, on
the one hand, and the Manager, on the other hand, or to cause any party hereto
to be responsible in any way for the debts or obligations of any other party
hereto; and (d) nothing contained herein shall be deemed or construed (i) to
constitute an assignment of BOCP's interest as a general partner in the
Partnership to the Manager or (ii) to cause the Manager to be a general partner
of the Partnership or have the liabilities of a general partner in a limited
partnership.

                                  ARTICLE XI

                             AMENDMENTS; MEETINGS

      SECTION 11.1. AMENDMENTS. This Agreement may be changed, modified, or
amended only by an instrument in writing duly executed by BOCP, the Partnership
and the Manager.



                                    -24-
<PAGE>   28
      SECTION 11.2. MEETINGS.

      (a) Commencing with calendar year 1998 and in each calendar year
thereafter until the termination of the Partnership, an annual meeting among the
Manager, BOCP and the investors in the Parallel Investment Entities shall be
held. Such annual meetings shall be at such time and place as the Manager shall
determine, except that the first annual meeting shall be held within one year
following the date of this Agreement. Notice of each annual meeting, setting
forth the time and the place thereof, shall be delivered to BOCP not less than
30 days prior to the meeting date. At each such annual meeting, the Manager
shall discuss with BOCP and the investors in the Parallel Investment Entities
the operations, business and affairs of the Partnership and the Parallel
Investment Entities. The costs and expenses incurred by BOCP of traveling to and
attending the annual meeting shall be the responsibility of BOCP (and shall not
be the obligation of the Partnership or the Manager), except that the
Partnership and the Parallel Investment Entities shall provide at their expense
suitable meeting facilities (which expense shall be deemed an Operating Cost).

      (b) The Manager shall cause the Designated Principals shall make
themselves available to respond to BOCP's requests for information.

                                  ARTICLE XII

                                ADVISORY BOARD

      (a) The Manager shall, promptly following the last of the dates provided
in the respective agreements governing the Parallel Investment Entities as of
which additional investors can no longer be admitted to any such entity, select
and form an "ADVISORY BOARD" (as herein called), which shall consist of at least
three but not more than five individuals who are representatives of BOCP and of
investors (excluding the General Partner or an Affiliate thereof) in any
Parallel Investment Entity; provided, however, that no single Eligible Investor
shall have more than one representative serving on the Advisory Board at any one
time; and provided, further, that one member of the Advisory Board shall at all
times be a limited partner of the EnCap Fund Partnership and a second member of
the Advisory Board shall at all times be a limited partner of EnCap Energy
Capital Fund III-B, L.P. The initial members of the Advisory Board shall serve
until December 31, 1998. As of January 1 of each year thereafter, the Manager
shall nominate a new Advisory Board which must be approved in writing by a
majority in interest of BOCP and the investors in each Parallel Investment
Entity voting as a single group (based on the amounts of their respective
agreements to contribute and/or loan capital to the Partnership or a Parallel
Investment Entity and excluding any vote by the General Partner) and which shall
serve for the remainder of such calendar year and until the successor board has
been so approved. Any vacancy arising on the Advisory Board shall be filled by
the Manager. Any member of the Advisory Board may be removed at any time, with
or without cause, by written consent signed by the 66 2/3% in interest of BOCP
and the investors in each Parallel Investment Entity as a single group (based on
the amounts of their respective agreements to contribute and/or loan capital to
the Partnership or a Parallel Investment Entity and excluding any vote by the
General Partner). Any

                                    -25-

<PAGE>   29
member of the Advisory Board may, by written notice to the Manager, appoint an
alternate to act for such member in his or her absence and/or at any meeting of
the Advisory Board.

      (b) The functions of the Advisory Board shall be (i) to resolve any
questions relating to a conflict of interest or a potential conflict of interest
between the Manager or any of its Affiliates, on one hand, and the Partnership,
BOCP, a Parallel Investment Entity, or the investors therein, on the other hand,
and to approve any contract or other transaction between the Partnership and a
Parallel Investment Entity, on the one hand, and the Manager or an Affiliate
thereof, on the other hand; (ii) to consult with and advise the Manager on such
other matters, including investment strategy, about which the Manager may from
time to time, in its sole discretion, determine to consult with the Advisory
Board; (iii) to review with the Manager the annual operating budgets of the
Partnership and the Parallel Investment Entities; (iv) to approve each
determination of Market Value which is used in the calculation of Preferred
Return Payout or Catch-Up Payout; and (v) to approve such other matters and
perform such other functions as are provided for in this Agreement and/or in any
agreements governing a Parallel Investment Entity; provided, that the functions
and activities of the Advisory Board and each member thereof acting in such
capacity shall be limited to those permitted under Section 3.03(b) of the Act
for limited partners who are deemed not to participate in the control of the
business of a partnership. The approval of the Advisory Board of any conflict,
potential conflict or transaction pursuant to subsection (i) above in this
Section shall constitute the approval thereof or the consent thereto by BOCP as
required pursuant to, or for purposes of, Section 2.2 or elsewhere in this
Agreement.

      (c) The Advisory Board shall have the authority to adopt rules and
procedures, not inconsistent with this Agreement or the agreement governing each
Parallel Investment Entity, relating to the conduct of its affairs; provided,
however, that (i) in any event such rules and procedures shall include the
requirement that each member shall be required to recuse himself from voting on
any matter being considered by the Advisory Board for which such member (or the
investor represented by such member) has a conflict of interest, (ii) except
when a greater number is required elsewhere in this Agreement, all approvals,
disapprovals, and other actions taken by the Advisory Board shall be authorized
by a majority in number of the members of the Advisory Board then holding office
and eligible to vote on the matter being considered, and (iii) except as
provided in subsection (b) above, in no event shall the Advisory Board (or any
member thereof) have the power to bind the Partnership, BOCP, the Parallel
Investment Entities, or the investors in each Parallel Investment Entity, or the
authority to act for or on behalf of any of them. Without expanding the terms of
subsection (b) above, the Manager shall, if requested by the Advisory Board,
meet with or otherwise make itself reasonably available to, the Advisory Board
on a quarterly basis and at a mutually convenient time.

      (d) The members of the Advisory Board shall exercise their best judgment
in carrying out their functions. Each member of the Advisory Board, BOCP and
each investor in a Parallel Investment Entity associated with a member of the
Advisory Board and their respective Affiliates shall be indemnified to the
extent set forth in the respective agreements governing the Partnership and the
Parallel Investment Entities, except that the expense of such indemnity shall be
borne in the manner provided in Section 5.1(c).

                                    -26-

<PAGE>   30
      (e) The Advisory Board will serve without compensation. The Partnership,
however, will reimburse all reasonable out-of-pocket expenses of any member
representing the Partnership incurred in attending meetings and otherwise as a
result of their service on the Advisory Board. Such reimbursement shall be borne
in the manner provided in Section 5.1(c).



                                 ARTICLE XIII

                                 MISCELLANEOUS

      SECTION 13.1. NOTICES. All notices, demands, requests, or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be given either (a) by hand delivery, (b) by
United States mail, certified or registered, return receipt requested, postage
prepaid, (c) by electronic facsimile or (d) by overnight courier service
(charges prepaid) with proof of delivery. Each party's address for notices and
other communications hereunder shall be that set forth below such party's
signature hereto. Each party hereto may change its address for notices and
communications by giving notice in writing to the other party, stating its new
address for notices, in accordance with this Section 13.1. Notices sent by hand
delivery shall be deemed to have been given when received; notices mailed in
accordance with the foregoing shall be deemed to have been given five Business
Days following the date mailed; notice sent by electronic facsimile shall be
deemed given on the first Business Day after electronically confirmed; and
notices sent by overnight courier service shall be deemed to have been given on
the next Business Day following the date so sent.

      SECTION 13.2. ENTIRE AGREEMENT. This Agreement, the Subscription Agreement
pursuant to which the General Partner subscribes for its interest as a general
partner of the Partnership, the Partnership Agreement and the Assignment
Agreements (as described in Exhibit 13.8) constitute the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersede and replace any description or summary of terms contained in the
offering materials or other writings provided to prospective investors in the
Encap Fund Partnership or any discussions concerning the subject matter hereof.

      SECTION 13.3. SEVERABILITY. If any provision of this Agreement is held to
be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.

      SECTION 13.4. NO WAIVER. The failure of any party to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such party's right to demand strict compliance in the future.

                                    -27-

<PAGE>   31
No consent or waiver, express or implied, to or of any breach or default in the
performance of any obligation hereunder shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or any other
obligation hereunder.

      SECTION 13.5. APPLICABLE LAW. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas.

      SECTION 13.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns; provided, however, that no party hereto
may assign, transfer or otherwise dispose of all or any part of its rights,
duties or obligations hereunder without the consent of the other party.

      SECTION 13.7. ATTORNEYS' FEES. Subject to Section 5.1(a), each party
agrees to pay any attorneys' fees or expenses incurred by it in connection with
the negotiation, execution and delivery of this Agreement.

      SECTION 13.8. RELATED AGREEMENTS. Except for the documents and other
instruments listed in Exhibit 13.8, the Manager shall not enter into any side
letter or similar written agreement with any existing or future investor in any
Parallel Investment Entity that has the effect of establishing rights in or with
respect to such Parallel Investment Entity or otherwise benefitting such
investor in a manner in or with respect to such Parallel Investment Entity more
favorable in any material respect to such investor than the rights and benefits
established in or with respect to the Partnership in favor of BOCP by the
Partnership Agreement and this Agreement unless, in any such case, BOCP has been
offered the opportunity to receive such rights and benefits of such side letter
or similar written agreement.

      SECTION 13.9. NO THIRD PARTY BENEFICIARIES. Except as expressly and
specifically provided in Section 4.2, nothing in this Agreement, either express
or implied, is intended to or shall confer upon any person other than the
parties hereto, and their respective successors and permitted assigns, any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.

      SECTION 13.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute but one and the same document.

      SECTION 13.11. REPRESENTATIONS AND WARRANTIES OF THE MANAGER. The Manager
represents, warrants and covenants to BOCP and the Partnership as follows:

      (a) The Manager is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Texas.


                                    -28-

<PAGE>   32
      (b) The Manager has the requisite power and authority to execute and
deliver this Agreement and the Partnership Agreement and to perform its
respective obligations hereunder and thereunder.

      (c) The execution, delivery and performance by the Manager of this
Agreement and the Partnership Agreement have been duly and validly authorized,
and no other action is required to be taken to authorize such execution,
delivery and performance.

      (d) The execution, delivery and performance by the Manager of this
Agreement and the Partnership Agreement are within the powers of the Manager and
will not be in contravention of or result in any breach or constitute a default
under any applicable law, rule or regulation or any loan, note or other
agreement or instrument to which the Manager is a party or by which it or any of
its properties are bound.

      (e) This Agreement and the Partnership Agreement have been duly and
validly executed and are binding and enforceable as against the Manager.

      (f) Except for a change of law over which the Manager has no control (and
the Manager shall immediately notify BOCP when the Manager learns of such
occurrence), the foregoing representations, warranties and covenants shall
remain true and accurate during the term of this Agreement, and the Manager will
neither take action nor permit action to be taken which would cause any of the
foregoing representations to become untrue or inaccurate.

      (g) No consent, approval, authorization or order of any court or
governmental agency or authority or of any third party which has not been
obtained is required in connection with the execution, delivery and performance
by the Manager of this Agreement or the Partnership Agreement.

      (h) To the best knowledge of the Manager, the Manager and its Affiliates
and persons acting on their behalf have not taken any action, or failed to take
any action, which has caused the organization of the Partnership and the
issuance of the interests in the Partnership to come within the registration
requirements of the Securities Act of 1933, as amended, or any applicable state
blue sky laws. The offer and sale by the Manager of partnership interests in the
Partnership and in the Parallel Investment Entities has been and will be made
only to investors who represent to the Manager that they were or are, as
applicable, "accredited investors" within the meaning of Regulation D of the
Securities Act of 1933, as amended. Neither the Manager, directly or indirectly,
nor any agent acting on its behalf has offered or will offer such interests or
any similar security to any person so as to bring the issuance and sale of such
interests within the registration requirements of such Act.

      (i) To the best of the Manager's knowledge, the private placement
memorandum, prepared with respect to the Partnership and the Parallel Investment
Entities and distributed to BOCP and the investors in the Parallel Investment
Entities by the Manager and/or Donaldson, Lufkin & Jenrette Securities
Corporation, did not, as of the date it was prepared, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading

                                    -29-

<PAGE>   33
(other than facts which are recognized to be industry risks normally associated
with the oil and gas business); provided, however, that the terms and provisions
of this Agreement, the Partnership Agreement and the agreements governing the
Parallel Investment Entities supersede in all respects the terms described in
such memorandum for the Partnership and the Parallel Investment Entities.

      SECTION 13.12. REPRESENTATIONS AND WARRANTIES OF BOCP AND THE PARTNERSHIP.
Each of BOCP and the Partnership severally represent, warrant and covenant to
the Manager as follows:

      (a) It is an entity duly organized, validly existing and in good standing
under the laws of the State of its formation.

      (b) It has the requisite power and authority to execute and deliver this
Agreement and to perform its respective obligations hereunder.

      (c) The execution, delivery and performance by it of this Agreement have
been duly and validly authorized, and no other action is required to be taken to
authorize such execution, delivery and performance.

      (d) The execution, delivery and performance by it of this Agreement are
within its powers and will not be in contravention of or result in any breach or
constitute a default under any applicable law, rule or regulation or any loan,
note or other agreement or instrument to which it is a party or by which it or
any of its properties are bound.

      (e) This Agreement has been duly and validly executed and is binding and
enforceable against it.

      (f) Except for a change of law over which it has no control (and it shall
immediately notify the Manager when it learns of such occurrence), the foregoing
representations, warranties and covenants shall remain true and accurate during
the term of this Agreement, and it will neither take action nor permit action to
be taken which would cause any of the foregoing representations to become untrue
or inaccurate.

      (g) No consent, approval, authorization or order of any court or
governmental agency or authority or of any third party which has not been
obtained is required in connection with the execution, delivery and performance
by it of this Agreement.

      SECTION 13.13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and covenants made by the parties hereto in this
Agreement or any other document contemplated hereby shall be considered to have
been relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement, or such other document, regardless of any
investigation made by or on behalf of any such party.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                    -30-

<PAGE>   34
      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.


                                    BANC ONE CAPITAL PARTNERS VIII, LTD.

                                    By:____________________________________
                                    Name:__________________________________
                                    Title:___________________________________


                                    ADDRESS FOR NOTICE PURPOSES:

                                    Banc One Capital Partners VIII, Ltd.
                                    150 E. Gay Street, 24th Floor
                                    Columbus, Ohio 43215
                                    Fax No.: (614)217-0180
                                    Attention: ___________________





SIGNATURE PAGE--MANAGEMENT AGREEMENT
<PAGE>   35
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.


                                    BOCP ENERGY PARTNERS, L.P.


                                    By: BANC ONE CAPITAL PARTNERS VIII,
                                          LTD., General Partner


                                    By:________________________________
                                    Name:______________________________
                                    Title:_______________________________


                                    ADDRESS FOR NOTICE PURPOSES:

                                    BOCP Energy Partners, L.P.
                                    150 E. Gay Street, 24th Floor
                                    Columbus, Ohio 43215
                                    Fax No.: (614)217-0180
                                    Attention: ___________________







SIGNATURE PAGE--MANAGEMENT AGREEMENT
<PAGE>   36
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.


                                    ENCAP INVESTMENTS L.C.


                                    By:______________________________
                                    Name: Robert L. Zorich
                                    Title: Managing Director


                                    ADDRESS FOR NOTICE PURPOSES:

                                    EnCap Investments L.C.
                                    1100 Louisiana, Suite 3150
                                    Houston, Texas 77002
                                    Fax No.: (713)659-6130
                                    Attention: Robert L. Zorich








SIGNATURE PAGE--MANAGEMENT AGREEMENT