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SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT
 Dated as of  November 15 , 2005
 made by
 Parallel Petroleum Corporation,  Parallel, L.P.
 and
 each of the other Obligors (as defined herein)
 in favor of
 BNP Paribas,  as Administrative Agent




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TABLE OF CONTENTS
 PageARTICLE I Definitions
    
    
    1Section 1.01
    
    Definitions
    
    
    1Section 1.02
    
    Other Definitional Provisions
    
    
    3Section 1.03
    
    Rules of Interpretation
    
    
    4ARTICLE II Guarantee
    
    
    4Section 2.01
    
    Guarantee
    
    
    4Section 2.02
    
    Right of Contribution
    
    
    4Section 2.03
    
    No Subrogation  Amendments, Etc. with respect to the Borrower
    
    
    5Section 2.04
    
    Obligations
    
    
    5Section 2.05
    
    Waivers
    
    
    6Section 2.06
    
    Guarantee Absolute and Unconditional
    
    
    6Section 2.07
    
    Reinstatement
    
    
    7Section 2.08
    
    Payments
    
    
    8ARTICLE III Grant of Security Interest
    
    
    8Section 3.01
    
    Grant of Security Interest
    
    
    8Section 3.02
    
    Transfer of Pledged Securities
    
    
    8ARTICLE IV Representations and Warranties
    
    
    8Section 4.01
    
    Representations in Credit Agreement
    
    
    8Section 4.02
    
    Title; No Other Liens
    
    
    9Section 4.03
    
    Perfected Priority Liens
    
    
    9Section 4.04
    
    Obligor Information
    
    
    9Section 4.05
    
    Pledged Securities
    
    
    9Section 4.06
    
    Benefit to the Guarantor
    
    
    10Section 4.07
    
    Solvency
    
    
    10ARTICLE V Covenants
    
    
    10Section 5.01
    
    Covenants in Credit Agreement Maintenance of Perfected Security Interest;
    
    
    10Section 5.02
    
    Further Documentation
    
    
    10Section 5.03
    
    Changes in Locations, Name, Etc
    
    
    11Section 5.04
    
    Pledged Securities
    
    
    11ARTICLE VI Remedial Provisions
    
    
    13Section 6.01
    
    Code and Other Remedies
    
    
    13Section 6.02
    
    Pledged Securities
    
    
    14Section 6.03
    
    Registration Rights
    
    
    16Section 6.04
    
    Private Sales of Pledged Securities
    
    
    16Section 6.05
    
    Waiver; Deficiency
    
    
    17Section 6.06
    
    Non-Judicial Enforcement
    
    
    17ARTICLE VII The Administrative Agent
    
    
    17Section 7.01
    
    Administrative Agent's Appointment as Attorney-in-Fact, Etc
    
    
    17Section 7.02
    
    Duty of Administrative Agent
    
    
    19Section 7.03
    
    Filing of Financing Statements
    
    
    19Section 7.04
    
    Authority of Administrative Agent
    
    
    20ARTICLE VIII Subordination of Indebtedness
    
    
    20Section 8.01
    
    Subordination of All Obligor Claims
    
    
    20
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PageSection 8.02
    
    Claims in Bankruptcy
    
    
    20Section 8.03
    
    Payments Held in Trust
    
    
    21Section 8.04
    
    Liens Subordinate
    
    
    21Section 8.05
    
    Notation of Records
    
    
    21ARTICLE IX Miscellaneous
    
    
    21Section 9.01
    
    Waiver
    
    
    21Section 9.02
    
    Notices
    
    
    21Section 9.03
    
    Payment of Expenses, Indemnities, Etc
    
    
    21Section 9.04
    
    Amendments in Writing
    
    
    22Section 9.05
    
    Successors and Assigns
    
    
    22Section 9.06
    
    Survival; Revival; Reinstatement
    
    
    22Section 9.07
    
    Counterparts; Integration; Effectiveness
    
    
    23Section 9.08
    
    Severability
    
    
    23Section 9.09
    
    Set-Off
    
    
    23Section 9.10
    
    Governing Law; Submission to Jurisdiction
    
    
    24Section 9.11
    
    Headings
    
    
    25Section 9.12
    
    Acknowledgments
    
    
    25Section 9.13
    
    Additional Obligors and Pledgors
    
    
    26Section 9.14
    
    Releases
    
    
    26Section 9.15
    
    Acceptance
    
    
    27Section 9.16
    
    Intercreditor Agreement
    
    
    27
  I            Form of Assumption AgreementII            Form of Supplement
  Exhibit A            Form of Acknowledgment and Consent
  1
    
    Notice Addresses of Obligors2
    
    Description of Pledged Securities3
    
    Filings and Other Actions Required to Perfect Security Interests4
    
    Location of Jurisdiction of Organization and Chief Executive Office
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PPC PLP Borrowers Obligors Administrative Agent Lenders Credit Agreement
 R E C I T A L S
 Credit Agreement
   ARTICLE I
Definitions
 Definitions
   Agreement
 Bankruptcy Code
 Borrower Obligations




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Collateral
 Guaranteed Creditors
 Guaranteed Documents
 Guarantor Obligations
 Guarantors
 Issuers
 LLC
 LLC Agreement
 Obligations
 Obligor Claims
 - 2 -




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Partnership
 Partnership Agreement
 Pledged LLC Interests
 Pledged Partnership Interests
 Pledged Securities
 Pledgor
 Proceeds
 Securities Act
 UCC
 Other Definitional Provisions
 - 3 -




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Rules of Interpretation mutatis mutandis
 ARTICLE II
Guarantee
 Guarantee
      Right of Contribution
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No Subrogation
 Amendments, Etc. with respect to the Borrower Obligations
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Waivers
 Guarantee Absolute and Unconditional
        - 6 -




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Reinstatement
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Payments
 ARTICLE III
Grant of Security Interest
 Grant of Security Interest Collateral
    Transfer of Pledged Securities
 ARTICLE IV
Representations and Warranties
  Representations in Credit Agreement
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Title; No Other Liens
 Perfected Priority Liens
 Obligor Information
 Pledged Securities
   - 9 -




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Benefit to the Guarantor
 Solvency
 ARTICLE V
Covenants
  Covenants in Credit Agreement
 Maintenance of Perfected Security Interest; Further Documentation
  - 10 -




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Changes in Locations, Name, Etc
 Pledged Securities
  - 11 -




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mutatis mutandis
   - 12 -




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ARTICLE VI
Remedial Provisions
 Code and Other Remedies
  - 13 -




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Pledged Securities
  - 14 -




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- 15 -




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Registration Rights
 Private Sales of Pledged Securities
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Waiver; Deficiency
 Non-Judicial Enforcement
 ARTICLE VII
The Administrative Agent
 Administrative Agents Appointment as Attorney-in-Fact, Etc
  - 17 -




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- 18 -




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Duty of Administrative Agent
 Filing of Financing Statements
 - 19 -




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Authority of Administrative Agent
 ARTICLE VIII
Subordination of Indebtedness
 Subordination of All Obligor Claims Obligor
Claims
 Claims in Bankruptcy
 - 20 -




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Payments Held in Trust
 Liens Subordinate
 Notation of Records
 ARTICLE IX
Miscellaneous
 Waiver
 Notices
 Payment of Expenses, Indemnities, Etc
 - 21 -




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Amendments in Writing
 Successors and Assigns
 Survival; Revival; Reinstatement
  - 22 -




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Counterparts; Integration; Effectiveness
    Severability
 Set-Off
 - 23 -




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Governing Law; Submission to Jurisdiction
     - 24 -




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Headings
 Acknowledgments
    EACH PARTY HERETO AGREES AND COVENANTS THAT IT
WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE SECURITY INSTRUMENTS ON THE BASIS THAT THE
 - 25 -




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PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT CONSPICUOUS.
 Additional Obligors and Pledgors
 Releases
 Release Upon Payment in Full
 Partial Releases
 Retention in Satisfaction
 - 26 -




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Acceptance
 Intercreditor Agreement
 - 27 -




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BORROWERS:
    
    
    
    PARALLEL PETROLEUM CORPORATIONBy:
    
    /s/ Steven D. Foster

Steven D. Foster, Chief Financial OfficerPARALLEL, L.P.by: Parallel Petroleum Corporation, itsGeneral PartnerBy:
    
    /s/ Steven D. Foster

Steven D. Foster, Chief Financial OfficerGUARANTORS:
    
    
    
    PARALLEL, L.L.C.By:
    
    /s/ Steven D. FosterSteven D. Foster, Chief Financial Officer




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ADMINISTRATIVE AGENT:
    
    
    
    BNP PARIBASBy:
Name:
    
    /s/ Brian M. Malone

Brian M. MaloneTitle:
    
    Managing DirectorBy:
Name:
    
    /s/ Gabe Ellisor

Gabe EllisorTitle:
    
    Vice President




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Assumption Agreement
 Additional Obligor Administrative
Agent Lenders
  PPC PLP Borrowers Credit Agreement
 Guarantee and Collateral Agreement
    Guarantee and Collateral Agreement




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Governing Law
  [ADDITIONAL OBLIGOR]By:Name:Title:




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Supplement
 Additional
Pledgor Administrative Agent Lenders
  PPC PLP Borrowers Credit Agreement
 Guarantee and Collateral Agreement
    Guarantee and Collateral Agreement




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Collateral
 Governing Law
  [ADDITIONAL PLEDGOR]By:Name:Title:




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Acknowledgment and Consent
 Guarantee Agreement
  mutatis mutandis
 [NAME OF ISSUER]By:Title:Address for Notices:Fax:




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*
    
    This consent is necessary only with respect to any Issuer which is not also a Obligor. This
consent may be modified or eliminated with respect to any Issuer that is not controlled by a
Obligor.




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Schedule 1
 NOTICE ADDRESSES OF OBLIGORS




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Schedule 2
 DESCRIPTION OF PLEDGED SECURITIES
 Pledged Securities:
 Percentage
    
    Percentage
    
    Type of
    
    No. of
    
    CertificateOwner
    
    Issuer
    
    Owned
    
    Pledged
    
    Security
    
    Shares
    
    No.Parallel Petroleum Corporation
    
    Parallel, L.L.C.
    
    
    100
    %
    
    
    100
    %
    
    Limited Liability
Company Membership
Interest
    
    n/a
    
    No. 1Parallel Petroleum Corporation
    
    Parallel, L.P.
    
    
    1
    %
    
    
    1
    %
    
    Limited Partnership
Interest
    
    n/a
    
    GP  1Parallel, L.L.C.
    
    Parallel, L.P.
    
    
    99
    %
    
    
    99
    %
    
    Limited Partnership
Interest
    
    n/a
    
    LP  1




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Schedule 3
 FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
 1.
    
    Filing of UCC-1 Financing Statement with respect to the Collateral with the Secretary of
State of the State of Texas for Parallel, L.P.2.
    
    Filing of UCC-1 Financing Statement with respect to the Collateral with the Secretary of
State of the State of Delaware for Parallel Petroleum Corporation and Parallel, L.L.C.




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Schedule 4
 LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
 (1)
    
    Legal name of Borrower:      Parallel Petroleum Corporation
 
      (2)
    
    Legal name of Borrower:      Parallel, L.P.




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(3)
    
    Legal name of Obligor: Parallel, L.L.C.