FOURTH AMENDED AND RESTATED CREDIT AGREEMENT,

                           dated as of March 15, 2002

                                      among

                         MAGNUM HUNTER RESOURCES, INC.,
                                as the Borrower,

                                       and

                    CERTAIN COMMERCIAL LENDING INSTITUTIONS,
                                  as the Banks,

                                       and

                             BANKERS TRUST COMPANY,
    as Administrative Agent, as Collateral Agent and as Issuer for the Banks,

                                       and

                                   CIBC INC.,
                              as Syndication Agent,

                                       and

                                  BNP PARIBAS,
                     as Documentation Agent and Co-Arranger,

                                       and

                            CIBC WORLD MARKETS CORP.,
                                 as Co-Arranger,

                                       and

                         DEUTSCHE BANC ALEX. BROWN INC.
                    as Sole Lead Arranger and Sole Bookrunner

<PAGE>

                  FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

     THIS FOURTH AMENDED AND RESTATED  CREDIT  AGREEMENT,  dated as of March 15,
2002, among MAGNUM HUNTER RESOURCES,  INC., a Nevada  corporation  ("Borrower"),
the  various  financial  institutions  that  are or may  become  parties  hereto
(collectively,  the "Banks"),  and BANKERS TRUST COMPANY ("Bankers  Trust"),  as
administrative agent (in such capacity together with any successors thereto, the
"Administrative  Agent") for the Banks,  as  collateral  agent for the Banks (in
such capacity together with any successor thereto,  the "Collateral Agent"), and
as letter of credit issuing bank (in such capacity  together with any successors
thereto,  the "Issuer"),  CIBC INC., as syndication agent for the Banks (in such
capacity together with any successors  thereto,  the "Syndication  Agent"),  BNP
PARIBAS, a French Bank acting through its Houston Agency, as documentation agent
for the  Banks (in such  capacity  together  with any  successors  thereto,  the
"Documentation  Agent")  and  as  co-arranger,  CIBC  WORLD  MARKETS  CORP.,  as
co-arranger  and DEUTSCHE BANC ALEX.  BROWN INC., as Sole Lead Arranger and Sole
Bookrunner.

                              W I T N E S S E T H:

     WHEREAS, the Borrower,  Bankers Trust, as administrative agent,  collateral
agent and letter of credit issuing bank,  CIBC Inc., as syndication  agent,  BNP
Paribas,  as documentation  agent, and certain banks (the "Original Banks") have
heretofore  entered into a Third Amended and Restated Credit  Agreement dated as
of May 17, 2001, as amended by that certain First Amendment to Third Amended and
Restated Credit  Agreement dated as of June 26, 2001, and by that certain Second
Amendment to Third Amended and Restated  Credit  Agreement dated as of September
14, 2001,  and by that  certain  Third  Amendment to Third  Amended and Restated
Credit  Agreement  dated as of  September  20, 2001 (as so  amended,  the "Third
Amended and Restated  Credit  Agreement"),  providing for  commitments  from the
Original  Banks to make  revolving  loans for the benefit of the Borrower on the
terms and subject to the conditions set forth therein;

     WHEREAS,  the Borrower  desires to amend and restate the Third  Amended and
Restated Credit Agreement in order to restructure,  rearrange, renew, extend and
continue all indebtedness  evidenced by and outstanding  under the Third Amended
and Restated  Credit  Agreement  (the "Prior  Indebtedness"),  and to modify the
commitments  from the Banks pursuant to which Loans will be made by the Banks to
the  Borrower  and  Letters  of Credit  will be issued by the  Issuer  under the
several  responsibilities of the Banks for the account of the Borrower from time
to time prior to the Commitment Termination Date;

     WHEREAS,  the Banks and the Issuer are willing, on the terms and subject to
the conditions hereinafter set forth (including Article V), to amend and restate
the  Third  Amended  and  Restated  Credit  Agreement  in order to  restructure,
rearrange,  renew,  extend and continue all Prior Indebtedness and to modify the
commitments  and make such Loans to the  Borrower and issue and  participate  in
such Letters of Credit for the account of the Borrower; and

     WHEREAS, the proceeds of such Loans and Letters of Credit will be used

<PAGE>

     (a) to restructure,  rearrange,  renew, extend and continue the debt of the
Borrower under the Third Amended and Restated Credit Agreement;

     (b) to finance the cash consideration component of the Prize Merger;

     (c) to refinance the Prize Credit Facility;

     (d) for general  corporate  purposes  including working capital purposes of
the Borrower; and

     (e) for the acquisition, exploration, development and production of oil and
gas properties and other energy related assets;

     NOW,  THEREFORE,  the  parties  hereto  agree  that the Third  Amended  and
Restated Credit Agreement is amended and restated in its entirety as follows:

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

     SECTION  1.1.   Defined  Terms.   The  following   terms  (whether  or  not
underscored)  when used in this Agreement,  including its preamble and recitals,
shall, except where the context otherwise requires,  have the following meanings
(such  meanings  to be equally  applicable  to the  singular  and  plural  forms
thereof):

     "1997  Indenture"  means that certain  Indenture  dated as of May 29, 1997,
executed by the Borrower,  the guarantors party thereto and First Union National
Bank of North  Carolina,  as  trustee,  as the same  may be  amended,  restated,
modified or supplemented from time to time.

     "2002 Indenture" means,  collectively,  one or more Indentures  executed by
the Borrower in connection with a Permitted 2002 Bond  Transaction,  as the same
may be amended, restated, modified or supplemented from time to time.

     "Additional  Mortgages"  shall  mean a  mortgage,  deed of trust,  security
agreement,  assignment  and  financing  statement  substantially  in the form of
Exhibit G hereto, with appropriate insertions.

     "Administrative  Agent" is defined in the preamble and includes  each other
Person as shall have subsequently been appointed as the successor Administrative
Agent pursuant to Section 9.4.

     "Affiliate"  means, when used with respect to any Person,  any other Person
(including any member of the immediate  family of any such natural  person) who,
directly or indirectly,  beneficially owns or controls ten percent (10%) or more
of the total voting power of shares of Capital  Stock of such Person  having the
right  to vote  for  directors  under  ordinary  circumstances,  and any  Person
controlling, controlled by or under common control with any such Person. As used
in this definition,  "control" means the possession,  directly or indirectly, of
the power to

                                       2

<PAGE>

     direct or cause the direction of the  management  and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

     "Agent" means any of the  Administrative  Agent, the Syndication Agent, the
Documentation  Agent,  and the  Collateral  Agent.  "Agents"  means all of them.

     "Agreement"  means,  on any date,  this Fourth Amended and Restated  Credit
Agreement as originally in effect on the Effective  Date and as thereafter  from
time to time amended,  supplemented and restated,  or otherwise  modified and in
effect on such date.

     "Alternate  Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum (rounded upwards,  if necessary,
to the next  1/100 of 1%) equal to the higher of (a) the rate of  interest  most
recently determined by Bankers Trust at its Domestic Office as its base rate for
Dollar loans;  and (b) the Federal  Funds Rate most  recently  determined by the
Administrative  Agent plus one-half  percent (1/2%).  The Alternate Base Rate is
not necessarily intended to be the lowest rate of interest determined by Bankers
Trust in connection with  extensions of credit.  Changes in the rate of interest
on that  portion of any Loans  maintained  as Base Rate  Loans will take  effect
simultaneously  with each change in the Alternate Base Rate. The  Administrative
Agent will give notice  promptly to the Borrower and the Banks of changes in the
Alternate  Base Rate;  provided  that failure to give such notice shall not give
rise to any liability.

     "Applicable  Margin" means, on any date, with respect to any Base Rate Loan
or LIBO  Rate Loan or Letter of Credit  then  outstanding,  as  applicable,  the
applicable  per annum  percentage  set forth below based on the  Borrowing  Base
Usage on the immediately preceding Business Day:
<TABLE>
<CAPTION>
<S>                                  <C>                       <C>                        <C>
================================ ========================== =========================== ===========================
        Borrowing Base
          Usage (BBU)                 Base Rate Loans            LIBO Rate Loans            Letters of Credit
BBU < 25%                                   0%                        1.25%                       1.25%
25% <= BBU < 50%                           0.25%                      1.50%                       1.50%
50 <= BBU < 75%                            0.50%                      1.75%                       1.75%
75% <= BBU < 90%                           0.75%                      2.00%                       2.00%
BBU = 90%                                  1.00%                      2.25%                       2.25%
================================ ========================== =========================== ===========================
</TABLE>

     Changes in the  Applicable  Margin  resulting from changes in the Borrowing
Base Usage will occur automatically without prior notice and will take immediate
effect.

     "Approved  Engineer" means any independent  engineer recognized in the U.S.
oil  and  gas  loan  syndication  market  and  reasonably  satisfactory  to  the
Administrative Agent. It is agreed that Netherland & Sewell,  Associates,  Inc.,
Cawley,  Gillespie & Associates,  Inc.,  and  DeGolyler &  MacNaughton  are each
deemed to be an Approved Engineer.

                                       3
<PAGE>

     "Arranger"  means any of  Deutsche  Banc  Alex.  Brown  Inc.,  as sole lead
arranger and sole  bookrunner,  or CIBC World Markets  Corp. or BNP Paribas,  as
co-arrangers. "Arrangers" means all of them.

     "Asset"  shall mean,  as to any Person,  all property of any kind,  name or
nature, real or personal,  tangible or intangible,  legal or equitable,  whether
now owned or hereafter acquired,  including, without limitation, the Hydrocarbon
Interests, money, stock, contract rights, franchises,  value as a going concern,
causes  of  action,  undivided  fractional  ownership  interests,   intellectual
property  rights,  and anything of any value which can be made available for, or
may be appropriated to, the payment of debts.

     "Assignee Bank" is defined in Section 10.11.1.

     "Authorization"  means  any  consent,   registration,   filing,  agreement,
notarization,  certificate,  license, approval, permit, authority, grant, right,
easement, decree, waiver, privilege or exemption from, by or with any government
or Governmental Authority, whether given or withheld by express action or deemed
given or withheld by failure to act within any  specified  time period,  and all
corporate, creditors and stockholders' approvals or consents.

     "Authorized  Officer" means those officers of the Borrower whose signatures
and  incumbency  shall have been certified to the  Administrative  Agent and the
Banks pursuant to Section 5.1.1.

     "Bank Assignment Agreement" means a Bank Assignment Agreement substantially
in the form of Exhibit D hereto.

     "Bankers Trust" is defined in the preamble.

     "Banks" is defined in the preamble.

     "Base  Rate Loan"  means a Loan  bearing  interest  at a  fluctuating  rate
determined by reference to the Alternate Base Rate.

     "Beneficial  Owner" shall be determined in accordance  with Rules 13d-3 and
13d-5 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934,  as amended and as it may be amended from time to time, or
any successor  provision  thereto,  except that a Person shall be deemed to have
"beneficial  ownership" of all shares that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of time.

     "Borrower" is defined in the preamble.

     "Borrower Pledge  Agreement" means that certain Second Amended and Restated
Pledge Agreement of the Borrower,  as amended by that certain First Amendment to
Borrower  Pledge  Agreement  and as  further  amended  by  that  certain  Second
Amendment to Borrower Pledge  Agreement in  substantially  the form of Exhibit H
hereto,  in favor of the Collateral  Agent for the benefit of itself,  the other
Agents,  the  Banks  and the  Issuer,  as the  same  may be  amended,  restated,
supplemented, or modified from time to time.

                                       4
<PAGE>

     "Borrowing"  means each extension of credit made by the Banks or the Issuer
by way of Loans of the same type,  having the same  Interest  Period made by the
same Banks on the same  Business Day pursuant to the same  Borrowing  Request or
pursuant to the same Letter of Credit.

     "Borrowing  Base" means the Borrowing  Base from time to time  certified by
the Administrative Agent and all the Banks pursuant to Section 2.8.

     "Borrowing  Base  Deficiency"  means  that  (x) the  outstanding  aggregate
principal amount of all Loans and Letter of Credit Liabilities,  exceeds (y) the
Borrowing Base then in effect.

     "Borrowing Base Deficiency  Determination Date" means any date on which the
Administrative  Agent shall have  notified  the Borrower  that a Borrowing  Base
Deficiency has occurred and is continuing.

     "Borrowing  Base  Deficiency  Payment  Date"  means,  with  respect to each
Borrowing Base Deficiency Determination Date, the corresponding day of the month
in each of the six consecutive months occurring immediately after such Borrowing
Base  Deficiency  Determination  Date or if any of such  months  does not have a
corresponding  day, then,  with respect to such  month(s),  the last day of such
month(s),  provided  that if any such  corresponding  day is not a Business Day,
then the Borrowing Base  Deficiency  Payment Date for such month(s) shall be the
Business Day most closely preceding such corresponding day.

     "Borrowing  Base  Usage"  means,  on any date,  the ratio  (expressed  as a
percentage)  of (a)  the  total  unpaid  principal  amount  of  all  outstanding
Borrowings  (including,  without  limitation,  all  Loans  and  Letter of Credit
Liabilities)  on such date after giving  effect to all  Borrowings  made on such
date to (b) the Borrowing Base then in effect.

     "Borrowing  Request" means a loan request and certificate  duly executed by
an Authorized Officer of the Borrower,  substantially in the form of Exhibit B-1
hereto.

     "Business  Day" means (a) any day which is neither a Saturday or Sunday nor
a legal  holiday on which banks are  authorized  or required to be closed in New
York, New York, Dallas, Texas, Houston,  Texas or London,  England; (b) relative
to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day
on which  dealings in Dollars are carried on in the New York  interbank  market;
and (c) relative to the issuance or renewal of, or payment or disbursement  with
respect to, each Letter of Credit, any day on which the Issuer is not authorized
or required to be closed by the laws of the  jurisdiction in which the Issuer is
domiciled.

     "Capital  Stock" means any and all shares,  interests,  participations,  or
other  equivalents  (however  designated)  of capital stock of a corporation  or
securities  convertible  into or exchangeable  therefor,  any and all equivalent
ownership  interests  in a Person  (other  than a  corporation)  and any and all
warrants or options to purchase any of the foregoing.

     "Capitalized  Lease  Liabilities"  means all  monetary  obligations  of the
Borrower  under any leasing or similar  arrangement  which,  in accordance  with
GAAP,  would be  classified  as  capitalized  leases,  and, for purposes of this
Agreement and each other Loan Document,  the amount of such obligations shall be
the  capitalized  amount  thereof,  determined in accordance  with GAAP, and the
stated  maturity  thereof  shall be the date of the last  payment of rent or any

                                       5
<PAGE>

     other  amount due under such lease  prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty.

     "Cash Equivalent Investment" means, at any time:

     (a) any  evidence of  Indebtedness,  maturing  not more than one year after
such time, issued or guaranteed by the United States Government;

     (b)  commercial  paper,  maturing not more than six months from the date of
issue,  which is issued by (i) a  corporation  (other than an  Affiliate  of the
Borrower)  organized  under the laws of any state of the United States or of the
District of Columbia and rated one of the three highest rating categories by S&P
or Moody's, or (ii) any Bank (or its holding company);

     (c) any  certificate  of deposit or bankers  acceptance,  maturing not more
than one year  after  such  time,  which is issued by  either  (i) a  commercial
banking  institution  that is a member of the Federal  Reserve  System and has a
combined   capital  and  surplus  and   undivided   profits  of  not  less  than
$250,000,000, and whose long-term certificates of deposit or bankers acceptances
are, at the time of acquisition thereof by the Borrower, rated A-1 by S&P or P-1
by Moody's or (ii) any Bank;

     (d)  any  repurchase  agreement  entered  into  with  any  Bank  (or  other
commercial  banking  institution  of the stature  referred to in clause  (c)(i))
which (i) is in any  obligation  of the type  described  in any of  clauses  (a)
through (c); and (ii) has a market value at the time such  repurchase  agreement
is entered into of not less than 100% of the repurchase  obligation of such Bank
(or other commercial banking institution) thereunder;

     (e) investments in certificates of deposit  maturing within six months from
the date of issuance  thereof issued by a bank or trust company  organized under
the laws of the United States or any state thereof, having capital,  surplus and
undivided  profits   aggregating  at  least  $250,000,000  and  whose  long-term
certificates of deposit are, at the time of acquisition thereof by the Borrower,
rated A-1 by S&P or P-1 by Moody's;

     (f) deposit  accounts (i) in a bank or trust  company  organized  under the
laws of the United  States or any state  thereof,  having  capital,  surplus and
undivided profits  aggregating at least  $250,000,000 and whose commercial paper
or short term bank deposits (or that of the holding company with which such bank
or trust company is affiliated) are rated A-1 by S&P or P-1 by Moody's;

     (g) marketable direct obligations  issued or unconditionally  guaranteed by
the United States  government or issued by any agency  thereof and backed by the
full  faith and credit of the  United  States,  as the case may be, in each case
maturing no later than one year from the date of acquisition; or

     (h) money  market,  mutual or  similar  funds  that  invest in  obligations
referred to clauses (a), (b), (c), (e), (f), or (g) of this  definition,  and in
each case such funds having assets in excess of $250,000,000.

                                       6
<PAGE>

     "CERCLA" means the Comprehensive  Environmental Response,  Compensation and
Liability Act of 1980, as amended.

     "CERCLIS"  means  the  Comprehensive  Environmental  Response  Compensation
Liability Information System List.

     "Change in Control"  means an  occurrence  of one or more of the  following
events:  (a) any Person,  or any Persons acting together in a manner which would
constitute a "group" (a "Group") for purposes of Section 13(d) of the Securities
Exchange Act of 1934,  as amended and as it may be amended from time to time, or
any successor provision thereto,  together with any Affiliates  thereof,  become
the  Beneficial  Owners of Capital  Stock of the  Borrower  through a  purchase,
merger  or other  acquisition  transaction  (in one  transaction  or a series of
related  transactions),  entitling  such  Person  or  Persons  and its or  their
Affiliates to exercise more than 50% of the total voting power of all classes of
the  Borrower's  Capital  Stock  entitled to vote  generally  in the election of
directors,  (b) a plan is adopted  relating to the liquidation or dissolution of
the Borrower,  (c) the Borrower shall  consolidate  with or merge into any other
Person or convey,  transfer or lease its properties and assets  substantially as
an  entirety  to any Person  other than a  Restricted  Subsidiary,  or any other
Person shall  consolidate  with or merge into the Borrower  (other than,  in the
case of this clause (c),  pursuant to any  consolidation or merger where Persons
who are  Beneficial  Owners of the  Borrower's  Capital  Stock  entitled to vote
generally in the  election of directors  immediately  prior  thereto  become the
Beneficial  Owners of  shares  of  Capital  Stock of the  surviving  corporation
entitling  such  Persons to exercise  more than 50% of the total voting power of
all  classes of such  surviving  corporation's  Capital  Stock  entitled to vote
generally in the election of directors or persons holding similar positions), or
(d) during any calendar  year period,  individuals  who at the beginning of such
period constituted the board of directors of the Borrower (together with any new
directors  whose  election to such board of directors,  or whose  nomination for
election by the stockholders of the Borrower,  was approved by a vote of 66-2/3%
of the directors then still in office who were either directors at the beginning
of such period or whose  election or nomination  for election was  previously so
approved)  cease  for any  reason  to  constitute  a  majority  of the  board of
directors of the Borrower then in office.

     "Chevron  L/C"  means  that  certain  letter  of credit  originally  issued
September 27, 1999 by Fleet National Bank (formerly  known as BankBoston)  under
the Prize  Credit  Facility  for the  account  of Prize and in favor of  Chevron
U.S.A., Inc. in the stated amount of $2,500,000 expiring June 1, 2002; provided,
however,  that the term "Chevron L/C" shall not include any renewal or extension
of such letter of credit.

     "Code" means the Internal  Revenue  Code of 1986,  as amended,  reformed or
otherwise modified from time to time.

     "Collateral  Property" means any Mortgaged Property,  Collateral or Pledged
Collateral as defined in any Security Document.

     "Commitment"  means,  relative  to  any  Bank  on  any  date,  such  Bank's
obligation to make Loans  pursuant to Section 2.1.1 and to issue or  participate
in Letters of Credit pursuant to Section 2.1.2 and Section 2.1.3.

                                       7
<PAGE>

     "Commitment  Amount"  means,  on any date,  the  lesser of (a) the  Maximum
Facility  Amount  then in  effect,  and (b) the  Borrowing  Base then in effect,
provided  that in the event  that the  aggregate  value of all  margin  accounts
maintained by the Borrower or any Restricted  Subsidiary with respect to Hedging
Obligations  shall  exceed   $1,000,000,   the  Commitment  Amount  (as  defined
immediately above) shall be further reduced  automatically by an amount equal to
the aggregate value of all such margin accounts.

     "Commitment  Termination  Date" means the  earliest of (a) Stated  Maturity
Date;  (b) the date on which  the  Commitment  Amount is  terminated  in full or
reduced  to  zero  pursuant  to  Section  2.2;  and (c) the  date on  which  any
Commitment  Termination Event occurs. Upon the occurrence of any event described
in clause (b) or (c), the Commitments shall terminate  automatically and without
further action.

     "Commitment  Termination  Event"  means (a) the  occurrence  of any Default
described  in  clauses  (a)  through  (d) of Section  8.1.9 with  respect to the
Borrower;  or (b) the occurrence  and  continuance of any other Event of Default
and either (i) the  declaration  of the Loans to be due and payable  pursuant to
Section 8.3, or (ii) in the absence of such declaration, the giving of notice by
the Administrative  Agent, acting at the direction of the Majority Banks, to the
Borrower that the Commitments  have been terminated as a result of such Event of
Default.

     "Consolidated  Current  Assets"  means,  at any  particular  time,  (i) all
amounts which in conformity with GAAP,  would be included as current assets on a
consolidated  balance  sheet of the  Borrower and the  Restricted  Subsidiaries,
provided that current assets shall not include non-cash assets described in, and
calculated  pursuant to, Financial  Accounting  Standard Bulletin 133, plus (ii)
Unused Availability.

     "Consolidated  Current  Liabilities"  means,  at any  particular  time, all
amounts which, in conformity with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries;
provided,  however,  that current  liabilities shall not include (i) the current
portion  of  long-term  Indebtedness  under  this  Agreement  and the other Loan
Documents  and (ii)  liabilities  described  in,  and  calculated  pursuant  to,
Financial Accounting Standard Bulletin 133.

     "Consolidated   EBITDA"   means,   for  the  Borrower  and  the  Restricted
Subsidiaries  (including,  on a pro forma basis with respect to any period prior
to the consummation of the Prize Merger,  Prize and the Prize Subsidiaries) on a
consolidated  basis,  with respect to any period for which a determination is to
be made, the sum of (i) gross profit  (revenues less cost of sales),  minus (ii)
operating expenses,  minus (iii) general and administrative  expenses, plus (iv)
cash equity  earnings of any  unconsolidated  Subsidiary  of the Borrower or any
partnership,  joint  venture  or  entity  in which  the  Borrower  or any of its
Subsidiaries  has an  equity  interest,  minus  (v) cash  equity  losses  of any
unconsolidated  Subsidiary of the Borrower or any partnership,  joint venture or
entity in which the Borrower or any of its  Subsidiaries has an equity interest,
plus (vi)  interest,  dividends  or other  income,  all of (i)  through  (vi) as
determined in accordance with GAAP.

     "Consolidated  Interest  Coverage Ratio" means, at any particular time, the
ratio of (a) Consolidated EBITDA to (b) Total Interest Expense.

                                       8
<PAGE>

     "Contingent  Liability"  means, as to any Person,  those direct or indirect
liabilities of that Person with respect to any  Indebtedness,  lease,  dividend,
letter  of  credit or other  monetary  or  financial  obligation  (the  "primary
obligations")  of another  Person (the "primary  obligor"),  including,  without
limitation,  any obligation of such Person,  whether or not  contingent,  (a) to
purchase,  repurchase  or  otherwise  acquire such  primary  obligations  or any
property constituting direct or indirect security therefor, or (b) to advance or
provide  funds (i) for the payment or discharge of any such primary  obligation,
or (ii) to maintain  working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary  obligation,  or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such  primary  obligation  of the ability of the primary  obligor to make
payment of such primary obligation,  or (d) otherwise to assure or hold harmless
the owner of any such primary  obligation  against loss in respect thereof.  The
amount of any  Contingent  Liabilities  shall be deemed to be an amount equal to
the stated or determinable  amount of the primary obligation in respect of which
such  Contingent  Liabilities  are made or, if not stated or  determinable,  the
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.

     "Continuation/Conversion   Notice"  means  a  notice  of   continuation  or
conversion  and  certificate  duly  executed  by an  Authorized  Officer  of the
Borrower, substantially in the form of Exhibit C hereto.

     "Controlled  Group" means all members of a controlled group of corporations
and all members of a controlled  group of trades or  businesses  (whether or not
incorporated)  under common  control  which,  together  with the  Borrower,  are
treated  as a single  employer  under  Section  414(b)  or 414(c) of the Code or
Section 4001 of ERISA.

     "Current  Ratio"  means,  at any date of  determination,  the  ratio of (a)
Consolidated Current Assets to (b) Consolidated Current Liabilities.

     "Default" means any Event of Default or any condition,  occurrence or event
which,  after  notice  or lapse of time or both,  would  constitute  an Event of
Default.

     "Default Rate" is defined in Section 3.2.2.

     "Determination  Date"  means  each  April 1 and  October  1 of  each  year,
commencing October 1, 2002.

     "Disclosure  Schedule"  means the Disclosure  Schedule  attached  hereto as
Schedule I, as it may be amended,  supplemented or otherwise  modified from time
to time by the Borrower with the written consent of the Majority Banks.

     "Dollar" and the sign "$" mean lawful money of the United States.

     "Domestic  Office"  means,  relative  to any Bank,  the office of such Bank
designated  as such  below  its  signature  hereto  or  designated  in the  Bank
Assignment  Agreement or such other office of a Bank (or any successor or assign
of such Bank) within the United States as may be designated from time to time by
notice from such Bank, as the case may be, to each other Person party hereto.  A
Bank may have separate  Domestic Offices for purposes of making,  maintaining or
continuing,  as the case may be, Base Rate Loans or its participation in Letters
of Credit.

                                       9
<PAGE>

     "Effective Date" means the date this Agreement becomes  effective  pursuant
to Section 10.8.

     "Environmental  Laws"  means  federal,   state  or  local  laws,  rules  or
regulations,  and  any  judicial,  arbitral  or  administrative  interpretations
thereof,  including,  without limitation,  any applicable judicial,  arbitral or
administrative  order,  judgment,  permit,  approval,  decision or determination
pertaining  to  health,  safety  or the  environment  in  effect  at the time in
question,  including,  without  limitation,  CERCLA, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act, as amended, the
Resource  Conservation and Recovery Act, as amended ("RCRA"),  the Safe Drinking
Water Act, as  amended,  the Toxic  Substances  Control  Act,  as  amended,  the
Superfund Amendment and  Reauthorization Act of 1986, as amended,  the Hazardous
Materials  Transportation Act, as amended,  comparable state and local laws, and
other  environmental  conservation  and protection  laws.  The terms  "hazardous
substance," "release" and "threatened release" shall have the meanings specified
in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") shall have
the  meanings  specified  in RCRA  and the term  "oil"  shall  have the  meaning
specified in Oil Pollution Act, as amended  ("OPA");  provided,  that (i) in the
event either CERCLA,  RCRA or OPA is amended so as to broaden the meaning of any
term defined thereby,  such broader meaning shall apply, with respect to Section
6.12, from and after the date of adoption of such  amendment,  and, with respect
to Section  10.4,  as of the earliest  date to which such  amendment  has effect
(including  retroactive  effect),  (ii) to the  extent  the laws of the state or
states in which any Property of the Borrower is located  establish a meaning for
"hazardous   substance,"   "release,"   "threatened   release,"  "solid  waste,"
"disposal" or "oil" which is broader than that specified in CERCLA, RCRA or OPA,
such broader  meaning shall apply,  with respect to Section 6.12, from and after
the date of adoption of such amendment, and, with respect to Section 10.4, as of
the earliest  date to which such  amendment  has effect  (including  retroactive
effect).

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended,  and any  successor  statute  of  similar  import,  together  with  the
regulations thereunder,  in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.

     "Event of Default" is defined in Section 8.1.

     "Existing Mortgages" means each of the mortgages,  deeds of trust, security
agreements and financing statements described in Schedule II hereto.

     "Extension  Request"  means a request  to extend  the  then-current  Stated
Maturity Date of this Agreement, substantially in the form of Exhibit K hereto.

     "Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to (a) the  weighted  average of the
rates on  overnight  federal  funds  transactions  with  members of the  Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next  preceding

                                       10
<PAGE>

     Business Day) by the Federal  Reserve Bank of New York; or (b) if such rate
is not so  published  for any day which is a Business  Day,  the  average of the
quotations  for such day on such  transactions  received  by Bankers  Trust from
three federal funds brokers of recognized national standing selected by it.

     "Fee Letter"  means any fee letter or other  agreement  dated  February 12,
2002, between or among the Borrower, Bankers Trust and Deutsche Bank Alex. Brown
Inc.  with  respect to fees  payable by the  Borrower  in  connection  with this
Agreement,  as the same may be  amended,  supplemented,  restated  or  otherwise
modified from time to time.

     "Final Borrowing Base Deficiency  Payment Date" means, with respect to each
Borrowing Base Deficiency Date, the  corresponding day of the month in the sixth
month after notice is given by the  Administrative  Agent to the Borrower of the
occurrence  of a  Borrowing  Base  Deficiency,  or if  such  month  has no  such
corresponding day, than the last day of such month.

     "Fiscal Quarter" means any calendar quarter of a Fiscal Year.

     "Fiscal Year" means any period of twelve consecutive calendar months ending
on December 31; each reference to a Fiscal Year with a number  corresponding  to
any calendar year (e.g. the "2001 Fiscal Year") refers to the Fiscal Year ending
on the December 31 occurring during such calendar year.

     "F.R.S.  Board" means the Board of Governors of the Federal  Reserve System
or any successor thereto.

     "Funded  Debt"  means,  on a  consolidated  basis for the  Borrower and the
Restricted Subsidiaries,  as of any date of determination (without duplication):
(a) all obligations for borrowed money, (b) all obligations  evidenced by bonds,
notes, debentures, or other similar instruments,  (c) all obligations to pay the
deferred  purchase price of property or services,  except trade accounts payable
of such Person  arising in the  ordinary  course of business  that have not been
outstanding  for more than one hundred  twenty  (120) days since the date of the
related invoice, (d) all Capital Lease Obligations,  (e) all obligations secured
by a Lien  existing  on  property  owned  by the  Borrower  and  the  Restricted
Subsidiaries,  whether or not the obligations  secured thereby have been assumed
by the  Borrower  or are  non-recourse  to the  credit of such  Person,  (f) all
Contingent Liabilities, (g) all reimbursement obligations (whether contingent or
otherwise)  in respect of letters  of credit,  bankers'  acceptances,  surety or
other  bonds and similar  instruments  and (h) all  Hedging  Obligations  to the
extent secured by cash deposited as a result of margin calls;  provided that for
purposes hereof, obligations of the types described in the foregoing clauses (a)
through (h) owing to an  Unrestricted  Subsidiary  by the Borrower or one of its
Restricted  Subsidiaries  that  have  not  been  expressly  subordinated  to the
Obligations on terms reasonably  satisfactory to the Administrative  Agent shall
be deemed to be Funded  Debt.  Funded  Debt  shall not  include  any  obligation
incurred in connection with Hedging  Obligations  (other than those described in
clause (h)  above).  Funded Debt shall not include  Trade  Guarantees  except as
provided in the definition thereof.

                                       11
<PAGE>

     "Funded Debt to EBITDA Ratio" means,  at any particular  time, the ratio of
(i)  all  Funded  Debt of the  Borrower  and its  Restricted  Subsidiaries  on a
consolidated basis to (ii) Consolidated EBITDA.

     "GAAP" is defined in Section 1.4.

     "Gas Gathering Systems" means the gas plant and those certain gas gathering
systems  consisting of all equipment,  assets,  rights-of-way,  surface  leases,
contracts  and  related  assets more  particularly  described  on  Schedule  1.1
attached hereto.

     "Governmental  Authority"  means the government of the United States or any
other nation or country or any political  subdivision thereof,  whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

     "Gruy" means Gruy Petroleum Management Company, a Texas corporation and one
of the Guarantors.

     "Guarantor" means each present and future Material Restricted Subsidiary of
the Borrower.

     "Hazardous  Material"  means any  pollutant or  contaminant  or  hazardous,
dangerous or toxic  chemical,  material or  substance  within the meaning of any
applicable  national,  regional,  state or local law,  regulation,  ordinance or
requirement (including consent decrees and administrative orders) relating to or
imposing  liability or standards of conduct  concerning any hazardous,  toxic or
dangerous waste, substance or material, all as amended or hereafter amended.

     "Hedge Agreements" means (i) interest rate hedge agreements,  interest rate
cap  agreements,   interest  rate  swap  agreements  and  interest  rate  collar
agreements,  or any other similar agreements or arrangements,  or (ii) commodity
hedge,  commodity swap, exchange,  forward,  futures,  collar or cap agreements,
fixed price  agreements  or any other  agreements  or  arrangements  designed to
protect such Person against  fluctuations in commodity  prices, or (iii) foreign
exchange  contract,  currency  hedge  agreement,  currency  option  or any other
agreement or arrangement designed to protect such Person against fluctuations in
currency  exchange  rates, in each case, as amended,  supplemented,  restated or
otherwise modified from time to time.

     "Hedging   Obligations"   means,  with  respect  to  any  Person,  (a)  all
liabilities of such Person under interest rate hedge  agreements,  interest rate
cap  agreements,   interest  rate  swap  agreements  and  interest  rate  collar
agreements,  or any  other  similar  agreements  or  arrangements,  and  (b) all
liabilities of such Person under commodity hedges,  commodity swaps,  exchanges,
forward, future, collar or cap agreements, fixed price agreements, and all other
agreements  or  arrangements   designed  to  protect  such  Person  against  the
fluctuations in commodity prices.

     "herein",  "hereof",  "hereto",  "hereunder" and similar terms contained in
this  Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.

                                       12
<PAGE>

     "Highest Lawful Rate" is defined in Section 4.11.

     "Hydrocarbons"  means oil, gas,  casing head gas,  condensate,  distillate,
liquid  hydrocarbons,  gaseous  hydrocarbons,  all products refined,  separated,
settled and dehydrated therefrom and all products refined therefrom,  including,
without limitation, kerosene, liquefied petroleum gas, refined lubricating oils,
diesel fuel,  drip  gasoline,  natural  gasoline,  helium,  sulfur and all other
minerals.

     "Hydrocarbon Interests" means all rights, titles, interests and estates now
owned  or  hereafter   acquired  by  the  Borrower  or  any  of  its  Restricted
Subsidiaries  in any and all oil,  gas and other  liquid or gaseous  hydrocarbon
properties and interests,  including  without  limitation,  mineral fee or lease
interests,   production  sharing  agreements,   concession  agreements,  license
agreements,  service agreements,  risk service agreements or similar Hydrocarbon
interests granted by an appropriate Governmental Authority,  farmout, overriding
royalty and royalty interests,  net profit interests,  oil payments,  production
payment interests and similar interests in Hydrocarbons,  including any reserved
or residual interests of whatever nature.

     "Impermissible   Qualification"   means,   relative   to  the   opinion  or
certification of any independent public accountant as to any financial statement
of the Borrower, any qualification or exception to such opinion or certification
(a) which is of a "going  concern" or similar  nature;  (b) which relates to the
limited scope of examination of matters relevant to such financial statement; or
(c)  which  relates  to the  treatment  or  classification  of any  item in such
financial  statement and which, as a condition to its removal,  would require an
adjustment to such item the effect of which would be to cause the Borrower to be
in default of any of its obligations under Section 7.2.4.

     "including"   means  including  without  limiting  the  generality  of  any
description  preceding  such term,  and, for purposes of this Agreement and each
other Loan Document,  the parties hereto agree that the rule of ejusdem  generis
shall not be  applicable to limit a general  statement,  which is followed by or
referable  to an  enumeration  of specific  matters,  to matters  similar to the
matters specifically mentioned.

     "Indebtedness"  of  any  Person  means,   without   duplication:   (a)  all
obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds,  debentures,  notes or other  similar  instruments;  (b) all
reimbursement obligations,  contingent or otherwise, relative to the face amount
of all letters of credit,  whether or not drawn, and banker's acceptances issued
for the account of such  Person;  (c) all  obligations  of such Person as lessee
under leases which have been or should be, in accordance with GAAP,  recorded as
Capitalized Lease Liabilities;  (d) liabilities of such Person under any Hedging
Agreements;  to the  extent  secured by cash  deposited  as a result of a margin
call, but expressly excluding all other obligations  incurred in connection with
Hedging  Agreements;  (e) all  obligations  of such  Person to pay the  deferred
purchase price of property or services (except trade accounts payable arising in
the ordinary course of business),  and indebtedness  (excluding prepaid interest
thereon)  secured by a Lien on property owned or being  purchased by such Person
(including indebtedness arising under conditional sales or other title retention
agreements),  whether or not such  indebtedness  shall have been assumed by such
Person or is limited in recourse;  (f) all Contingent Liabilities of such Person
in  respect  of any of the  foregoing;  and (g) all  liabilities  in  respect of

                                       13
<PAGE>

     unfunded  vested  benefits  under  any  Plan.  For  all  purposes  of  this
Agreement,  the Indebtedness of any Person shall include the Indebtedness of any
partnership  or joint  venture  in which such  Person is a general  partner or a
joint venturer,  provided,  however,  that  notwithstanding  the foregoing,  the
Indebtedness  of such  Person  shall not include  (x) any  Indebtedness  of such
partnership or joint venture that is, by its express terms, non-recourse to such
Person,  or (y) in the case of Indebtedness for which recourse to such Person is
limited,  that portion of such  Indebtedness for which such Person is not liable
pursuant  to  express   limited   recourse  terms  contained  in  the  agreement
documenting  such  Indebtedness,  in each  case,  such  non-recourse  or limited
recourse terms being subject to the prior approval of the  Administrative  Agent
(which approval shall not be unreasonably withheld).

     "Indemnified Liabilities" is defined in Section 10.4.

     "Indemnified Parties" is defined in Section 10.4.

     "Indentures"  means,   collectively,   the  1997  Indenture  and  the  2002
Indenture.

     "Interest  Period"  means,  relative  to any LIBO Rate  Loans,  the  period
beginning  on (and  including)  the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and shall end on (but  exclude) the day which  numerically  corresponds  to such
date  one,  two,  three or six  months  thereafter  (or,  if such  month  has no
numerically  corresponding  day, on the last  Business  Day of such  month),  in
either  case as the  Borrower  may select in its  relevant  notice  pursuant  to
Section  2.3 or 2.4;  provided,  however,  that (a) the  Borrower  shall  not be
permitted to select Interest  Periods to be in effect at any one time which have
expiration  dates  occurring  on more than  five  different  dates;  (b) if such
Interest  Period would  otherwise end on a day which is not a Business Day, such
Interest  Period shall end on the next following  Business Day (unless,  if such
Interest Period applies to LIBO Rate Loans, such next following  Business Day is
the first Business Day of a calendar  month,  in which case such Interest Period
shall end on the  Business Day next  preceding  such  numerically  corresponding
day); and (c) no Interest Period may end later than the date set forth in clause
(a) of the  definition  of  "Commitment  Termination  Date";  and (d)  until the
earlier of (i) the 90th day following  the  Effective  Date and (ii) the date on
which the Administrative Agent shall have notified the Borrower that the primary
syndication  of the  credit  facility  evidenced  by  this  Agreement  has  been
completed (in the  Administrative  Agent's sole  discretion),  no LIBO Rate Loan
shall be made or continued as, and no Base Rate Loan shall be converted  into, a
LIBO Rate Loan, having an Interest Period exceeding one month.

     "Investment" means, relative to any Person, (a) any loan or advance made by
such  Person to any other  Person  (excluding  commission,  travel  and  similar
advances to officers and employees made in the ordinary course of business); (b)
any  Contingent  Liability  of such  Person;  and (c) any  ownership  or similar
interest held by such Person in any other Person.  The amount of any  Investment
shall be the original principal or capital amount thereof (without adjustment by
reason of the financial  condition of such other  Person) and shall,  if made by
the  transfer or exchange  of property  other than cash,  be deemed to have been
made in an original  principal or capital  amount equal to the fair market value
of such property.

     "Issuer" is defined in the preamble.

                                       14
<PAGE>

     "Knowledge"  means either (a) actual knowledge of a responsible  officer of
the Borrower or employee of the Borrower  charged  with  responsibility  for the
matter at issue or in  question  or (b)  knowledge  that a  prudent  responsible
officer of the Borrower or employee of the Borrower charged with  responsibility
for the  matter  at issue  or in  question  could be  expected  to  discover  or
otherwise become aware of in the course of conducting the Borrower's business.

     "Letter of Credit" is defined in Section 2.1.2.

     "Letter of Credit  Commitment  Amount"  means at any time the lesser of (i)
$20,000,000, as such amount may be reduced from time to time pursuant to Section
2.2 or (ii) the Borrowing Base then in effect.

     "Letter of Credit  Liabilities"  means,  at any time,  with  respect to any
Letter of  Credit,  the sum of (i) the  undrawn  face  amount of such  Letter of
Credit plus (ii) the aggregate unpaid amount,  if any, of all obligations of the
Borrower to reimburse the Issuer and the Banks in respect of drawings under such
Letter of Credit.

     "Letter of Credit Request" means a letter of credit request and certificate
duly executed by an Authorized Officer of the Borrower substantially in the form
of Exhibit B-2 hereto, with appropriate insertions made therein.

     "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the
rate of interest equal to the offered quotation  appearing on Telerate Page 3750
or if such Telerate Page shall not be available, on the LIBO page on the Reuters
Screen (or on any page that can reasonably be considered a replacement  page) at
approximately  11:00 a.m. New York time (or as soon  thereafter as  practicable)
two  Business  Days prior to the  beginning of such  Interest  Period for Dollar
deposits having a term comparable to such Interest  Period.  If no such Telerate
Page 3750 or Reuters Screen LIBO page (or replacement  page) is available,  then
the "LIBO Rate" shall mean, relative to any Interest Period for LIBO Rate Loans,
the rate of interest  equal to (rounded  upwards,  if necessary,  to the nearest
1/100  of 1%) the  rate  per  annum at  which  Dollar  deposits  in  immediately
available  funds are  offered  to  Bankers  Trust  LIBOR  Office in the New York
interbank  market as at or about 11:00 a.m. New York time (or as soon thereafter
as practicable) two Business Days prior to the beginning of such Interest Period
for  delivery  on the  first  day of  such  Interest  Period,  and in an  amount
approximately  equal to the  amount of  Bankers  Trust  LIBO Rate Loan and for a
period approximately equal to such Interest Period.

     "LIBO Rate Loan"  means a Loan  bearing  interest,  at all times  during an
Interest Period applicable to such Loan, at a fixed rate of interest  determined
by reference to the LIBO Rate (Reserve Adjusted).

                                       15
<PAGE>

     "LIBO Rate  (Reserve  Adjusted)"  means,  relative  to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined pursuant to the following formula:

             LIBO Rate        =                    LIBO Rate
                                   -------------------------------------------
        (Reserve Adjusted)              1.00 - LIBOR Reserve Percentage

     The LIBO Rate  (Reserve  Adjusted)  for any  Interest  Period for LIBO Rate
Loans will be determined by the  Administrative  Agent on the basis of the LIBOR
Reserve  Percentage  in effect two  Business  Days  before the first day of such
Interest Period.

     "LIBOR  Office"  means,  relative  to any  Bank,  the  office  of such Bank
designated  as such  below  its  signature  hereto  or  designated  in the  Bank
Assignment  Agreement or such other office of a Bank as designated  from time to
time by notice  from such Bank to the  Borrower  and the  Administrative  Agent,
whether or not outside the United  States,  which shall be making or maintaining
LIBO Rate Loans of such Bank hereunder.

     "LIBOR Reserve Percentage" means,  relative to any Interest Period for LIBO
Rate Loans,  the average maximum rate (expressed as a decimal) at which reserves
are required to be maintained  during such Interest Period under Regulation D of
the F.R.S.  Board by member banks of the Federal Reserve System in New York City
with  deposits  exceeding   $1,000,000,000   (including  all  basic,  emergency,
supplemental,   marginal  and  other   reserves  and  taking  into  account  any
transitional  adjustments or other scheduled changes in reserve requirements) as
"Eurocurrency  Liabilities",  as such term is  defined  in  Regulation  D of the
F.R.S.  Board.  Without limiting the effect of the foregoing,  the LIBOR Reserve
Percentage  shall reflect any other  reserves  required to be maintained by such
member  banks by reason of any  Regulatory  Change  against (i) any  category of
liabilities  which  includes  deposits  by  reference  to which the  LIBOR  Rate
(Reserve  Adjusted) is to be  determined,  or (ii) any category of extensions of
credit or other assets which include LIBO Rate Loans.

     "Lien" means, with respect to any Person, any security interest,  mortgage,
pledge,  hypothecation,   assignment,  deposit  arrangement,  encumbrance,  lien
(statutory  or  otherwise),  charge  against or  interest  in property to secure
payment  of a  debt  or  performance  of an  obligation  or  other  priority  or
preferential arrangement of any kind or nature whatsoever.  For purposes of this
Agreement,  the term "Lien"  shall  include any cash  deposited as a result of a
margin call,  but shall exclude  contractual  provisions  contained in any Hedge
Agreement   establishing   margin   requirements,   set-off  rights  or  netting
arrangements, and shall exclude negative pledges.

     "Loan" is defined in Section 2.1.1.

     "Loan  Document" means this  Agreement,  the Notes,  each Letter of Credit,
each  application  for a Letter of Credit,  each Security  Document,  each Hedge
Agreement with any Bank or the Issuer, or any Affiliate of any thereof, each Fee
Letter,  each Borrowing Request,  each Subsidiary Guaranty Agreement together in
each case with all exhibits,  schedules and attachments  thereto,  and all other
agreements,  documents or instruments from time to time executed or delivered in
connection with or pursuant to any of the foregoing.

                                       16
<PAGE>

     "Majority  Banks" means,  at any time,  Banks in the  aggregate  holding at
least 66-2/3% of the then aggregate  unpaid  principal amount of the outstanding
Borrowings, or, if no such principal amount is then outstanding, Banks having at
least 66-2/3% of the Commitments.

     "Marketing LLC" means NGTS LLC, a Texas limited liability company.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
business, operations,  affairs, property, financial condition, assets or results
of operations of the Borrower and its  Subsidiaries  on a consolidated  basis or
(ii) the ability of the Borrower or any other Obligor to perform its obligations
under any of the Loan Documents or (iii) the validity or  enforceability of this
Agreement or the other Loan Documents.

     "Material  Restricted  Subsidiary"  means,  at any  time,  each  Restricted
Subsidiary having total gross assets equal to or exceeding $1,000,000.

     "Maximum Facility Amount" means $750,000,000, as such amount may be reduced
pursuant to Section  2.2(a) or as such  amount may be reduced  from time to time
pursuant to Section 2.2(b) or terminated pursuant to Section 8.3.

     "Moody's" means Moody's Investors Service, Inc.

     "Mortgage" means (i) the Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing  Statement dated as of March 15, 2002, executed
by Prize or any Prize  Subsidiary in favor of the Collateral  Agent, as the same
may be further  amended,  supplemented or otherwise  modified from time to time,
and (ii) the Existing Mortgages, as amended, supplemented, or otherwise modified
from time to time, and (iii) any other Mortgage executed and delivered  pursuant
to  Section  7.1.7,  whether  substantially  in the form of  Exhibit G hereto or
otherwise, as amended, supplemented, restated or otherwise modified from time to
time.

     "Mortgaged Properties" is defined in each Mortgage.

     "Net  Cash  Proceeds"  means in  connection  with (a) any  issuance  by the
Borrower or any of its Restricted  Subsidiaries of any  Indebtedness,  equity or
debt securities or instruments,  (b) the incurrence of other loans other than as
permitted by Section  7.2.2 or (c) the  disposition  of any assets  permitted by
Section  7.2.9,  the cash  proceeds  received  from such  issuance  or sale,  as
applicable,  net of all investment banking fees, legal fees,  accountants' fees,
underwriting  discounts and  commissions  and other customary fees and expenses,
actually incurred and satisfactorily documented in connection therewith.

     "Note" means a promissory note of the Borrower  payable to any Bank, in the
form of Exhibit A hereto (as such  promissory  note may be amended,  endorsed or
otherwise modified from time to time),  evidencing the aggregate Indebtedness of
the Borrower to such Bank resulting from  outstanding  Loans, and also means all
other  promissory  notes accepted from time to time in substitution  therefor or
renewal thereof.

     "Obligations"  means all  obligations,  Indebtedness and liabilities of the
Borrower  or any  Restricted  Subsidiary  or any,  some or all of  them,  to the
Agents,  the Banks or the Issuer, or any Affiliate of any of the foregoing party
to a Hedge  Agreement  with a Loan  Party,  or any,  some  or

                                       17
<PAGE>

     all of them, now existing or hereafter  arising under or in connection with
this Agreement,  the Notes, the Letters of Credit, and each other Loan Document,
whether direct, indirect,  related,  unrelated,  fixed, contingent,  liquidated,
unliquidated,  joint, several, or joint and several,  including the obligations,
Indebtedness and liabilities of the Borrower,  and all interest accruing thereon
(including any interest that accrues after the commencement of any proceeding by
or against the Borrower or any other Person  under any  bankruptcy,  insolvency,
liquidation,  moratorium,  receivership,  reorganization  or other debtor relief
law) and all attorneys'  fees and other  expenses  incurred in the collection or
enforcement thereof.

     "Obligor" means the Borrower and each Subsidiary of the Borrower which is a
party to a Loan Document,  including,  without  limitation,  Prize and the Prize
Subsidiaries.

     "Oil  and  Gas   Business"   means   (a)  the   acquisition,   exploration,
exploitation, development, operation, management and disposition of interests in
Hydrocarbon  Interests and  Hydrocarbons;  (b) gathering,  marketing,  treating,
processing,  storage,  selling  and  transporting  of any  production  from such
interests or Hydrocarbon Interests, including, without limitation, the marketing
of Hydrocarbons obtained from unrelated Persons; (c) any business relating to or
arising from exploration for or development,  production, treatment, processing,
storage, transportation or marketing of oil, gas and other minerals and products
produced in  association  therewith;  and (d) any activity  that is ancillary or
necessary or desirable to  facilitate  the  activities  described in clauses (a)
through (c) of this definition.

     "Oil and Gas Properties"  means  Hydrocarbon  Interests;  the Assets now or
hereafter pooled or unitized with Hydrocarbon Interests;  all presently existing
or future  unitization,  pooling agreements and declarations of pooled units and
the units created thereby  (including without limitation all units created under
orders,  regulations and rules of any  Governmental  Authority) which may affect
all or any  portion of the  Hydrocarbon  Interests;  all  operating  agreements,
contracts and other agreements which relate to any of the Hydrocarbon  Interests
or the production,  sale, purchase,  exchange or processing of Hydrocarbons from
or attributable to such Hydrocarbon Interest;  all Hydrocarbons in and under and
which may be produced and saved or attributable  to the  Hydrocarbon  Interests,
the lands covered thereby and all oil in tanks and all rents,  issues,  profits,
proceeds,  products,  revenues  and other  income  from or  attributable  to the
Hydrocarbon Interests; all tenements, hereditaments, appurtenances and Assets in
any manner  appertaining,  belonging,  affixed or incidental to the  Hydrocarbon
Interests,  Assets, Gas Gathering System, rights, titles,  interests and estates
described or referred to above,  including any and all Assets, real or personal,
now owned or  hereinafter  acquired and  situated  upon,  used,  held for use or
useful in connection  with the operating,  working or development of any of such
Hydrocarbon Interests or Asset (excluding drilling rigs, automotive equipment or
other  personal  property  which  may be on such  premises  for the  purpose  of
drilling a well or for other similar  temporary  uses) and including any and all
oil wells,  gas wells,  injection wells or other wells,  buildings,  structures,
fuel separators,  liquid extraction plants,  plant compressors,  pumps,  pumping
units,  field gathering  systems,  tanks and tank batteries,  fixtures,  valves,
fittings,  machinery and parts, engines, boilers, meters, apparatus,  equipment,
appliances,  tools, implements,  cables, wires, towers, casing, tubing and rods,
surface  leases,  rights-of-way,  easements  and  servitudes  together  with all
additions,  substitutions,  replacements,  accessions and attachments to any and
all of the foregoing.

                                       18
<PAGE>

     "Organic  Document" means,  for any Person,  its certificate or articles of
incorporation,  its by-laws,  certificate  of  formation,  regulations,  limited
liability  company  agreement,   partnership  agreement,  or  similar  governing
document,  and all  shareholder  membership or  partnership  agreements,  voting
trusts and similar arrangements.

     "Participant" is defined in Section 10.11.

     "PBGC"  means the  Pension  Benefit  Guaranty  Corporation  and any  entity
succeeding to any or all of its functions under ERISA.

     "Pension Plan" means a "pension  plan",  as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section  4001(a)(3)  of ERISA),  and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled  Group,  may have  liability,  including any liability by reason of
having been a substantial  employer  within the meaning of section 4063 of ERISA
at any time during the preceding five years,  or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.

     "Percentage" means, relative to any Bank, the percentage set forth opposite
its name (i) from  the  Effective  Date  until  the  consummation  of the  first
Permitted 2002 Bond  Transaction to be  consummated,  on Schedule III-A attached
hereto, or (ii) from and after the consummation of the first Permitted 2002 Bond
Transaction,  on Schedule III-B attached hereto, in each case as such percentage
may be adjusted  from time to time (x)  pursuant to one or more Bank  Assignment
Agreements executed by such Bank and its Assignee Bank(s) and delivered pursuant
to Section 10.11 or (y) as otherwise expressly permitted by this Agreement.

     "Permitted 2002 Bond Transaction" means, collectively,  the issuance by the
Borrower of senior unsecured notes or senior  subordinated notes in an aggregate
principal amount not exceeding  $350,000,000,  and the execution and delivery by
the  Borrower of one or more  Indentures  and related  documentation  containing
customary terms and conditions for senior unsecured notes or senior subordinated
notes of like tenor and amount,  each satisfactory to the Administrative  Agent,
the Arranger and the Borrower  (including,  without limitation,  that the senior
unsecured  notes shall not mature sooner than the sixth  anniversary of the date
of issuance  thereof)  pursuant to which such senior  unsecured  notes or senior
subordinated notes shall have been issued; provided, however, that such issuance
of senior secured notes or senior  subordinated  notes shall have occurred on or
before the date that is six months immediately following the Effective Date. Any
issuance or  proposed  issuance by the  Borrower  of senior  unsecured  notes or
senior  subordinated  notes after such six month period  shall not  constitute a
Permitted 2002 Bond Transaction.

     "Person" means any natural person, corporation,  limited liability company,
partnership,  firm, association,  trust, government,  governmental agency or any
other entity, whether acting in an individual, fiduciary or other capacity.

     "Plan" means any Pension Plan or Welfare Plan.

                                       19
<PAGE>

     "Pledge  Agreement" means (i) the Borrower Pledge  Agreement,  and (ii) any
Subsidiary Pledge Agreement, as each may be amended,  supplemented,  restated or
otherwise modified from time to time.

     "Prior Indebtedness" is defined in the second recital.

     "Prize" means Prize Energy Corp., a Delaware corporation.

     "Prize Credit  Facility" means the Amended and Restated  Credit  Agreement,
dated as of February 8, 2000,  between  Prize  Energy  Resources,  L.P., a Prize
Subsidiary, as borrower, Prize, as parent guarantor, and Fleet National Bank, as
administrative  agent,  certain other agents,  and various banks, as lenders (as
amended, modified or supplemented).

     "Prize  Merger"  means the  merger of Prize with and into  Pintail  Energy,
Inc.,  a  Delaware  corporation,  pursuant  to the  terms  of the  Prize  Merger
Agreement.

     "Prize  Merger  Agreement"  means that certain Plan and Agreement of Merger
dated as of December 17, 2001,  among the Borrower,  Pintail  Energy,  Inc., and
Prize.

     "Prize Properties" means those Oil and Gas Properties owned by Prize or any
Prize Subsidiary immediately prior to the consummation of the Prize Merger.

     "Prize  Subsidiary"  means any  Subsidiary of Prize.  "Prize  Subsidiaries"
means all Subsidiaries of Prize.

     "Proved Producing Reserves" means Proved Reserves that are recoverable from
existing wells with current operating methods and expenses and are producing.

     "Proved  Reserves"  means those  recoverable  Hydrocarbons  which have been
estimated  with  reasonable   certainty,   as  demonstrated  by  geological  and
engineering data, to be economically recoverable from the Oil and Gas Properties
by existing producing methods under existing economic conditions.

     "Quarterly Payment Date" means the last day of each March, June, September,
and  December  or, if any such day is not a Business  Day,  the next  succeeding
Business Day.

     "Regulatory  Change" means,  with respect to any Bank, any change after the
date of this  Agreement  in United  States  federal,  state,  or foreign laws or
regulations  (including  Regulation  D of the F.R.S.  Board) or the  adoption or
making after such date of any interpretations,  directives, or requests applying
to a class of banks including such Bank of or under any United States federal or
state,  or any foreign laws or  regulations  (whether or not having the force of
law) by any  court  or  governmental  or  monetary  authority  charged  with the
interpretation or administration thereof.

     "Release" means "release" as such terms are defined in CERCLA.

     "Required  Deficiency  Payment"  means,  for each Borrowing Base Deficiency
Payment Date occurring after a Borrowing Base Deficiency Determination Date (the
"Subject

                                       20
<PAGE>

     Determination  Date") in accordance with the terms hereof,  an amount equal
to one-sixth of the Borrowing Base Deficiency  (plus accrued  interest  thereon)
existing on the Subject Determination Date; provided,  that if the amount of the
Borrowing Base  Deficiency has increased  after the Subject  Determination  Date
then  each  remaining   Required   Deficiency  Payment  shall  be  increased  to
substantially  equal amounts  sufficient  to reduce to zero the  Borrowing  Base
Deficiency on or before the then Final Borrowing Base Deficiency Payment Date.

     "Reserve  Report"  means a report  setting  forth the  Proved  Reserves  by
reserve category attributable to the Hydrocarbon  Interests  constituting Proved
Reserves owned directly by the Borrower or any Restricted Subsidiary included in
the Borrowing  Base, a projection  of the rate of  production  and net operating
income with respect thereto,  as of a specified date, and such other information
as is customarily  obtained from and provided in such reports,  satisfactory  in
form and substance to the  Administrative  Agent,  the Issuer or the Banks.  All
Reserve  Reports  dated as of  December  31,  shall be  prepared  by an Approved
Engineer,  and all other Reserve Reports shall be prepared by engineers employed
by, or under contract to, the Borrower and certified by an Authorized Officer of
the Borrower.

     "Restricted  Subsidiary"  means each  Subsidiary of the Borrower other than
the Unrestricted Subsidiaries of the Borrower.

     "S&P" means Standard & Poor's Ratings Group.

     "Security Documents" means, individually,  (i) any Pledge Agreement and all
amendments,  supplements,  restatements or other modifications made from time to
time thereto, (ii) any Mortgage and all amendments, supplements, restatements or
other modifications made from time to time thereto, (iii) any additional similar
document  required by the Collateral  Agent pursuant to Section 7.1.7,  and (iv)
collectively, all of the foregoing.

     "Senior Unsecured Debt" means senior unsecured  Indebtedness  issued by the
Borrower  pursuant to the terms of the Indentures  upon the terms and conditions
set forth therein in an aggregate  amount not exceeding the sum of  $140,000,000
plus the aggregate  principal  amount of notes issued under the  Permitted  2002
Bond Transaction.

     "Solvent" means,  with respect to any Person at any time, a condition under
which:  (a) the fair saleable  value of such Person's  assets is, on the date of
determination,  greater  than the  total  amount  of such  Person's  liabilities
(including  contingent  and  unliquidated  liabilities)  at such time;  (b) such
Person is able to pay all of its  liabilities as such  liabilities  mature;  (c)
such Person does not intend to, and does not,  believe that it will, incur debts
or liabilities beyond such Person's ability to pay such debts and liabilities as
they mature;  and (d) such Person does not have unreasonably  small capital with
which to conduct its business. For purposes of this definition (i) the amount of
a Person's  contingent  or  unliquidated  liabilities  at any time shall be that
amount  which,  in light  of all the  facts  and  circumstances  then  existing,
represents  the amount which can  reasonably  be expected to become an actual or
matured  liability;  (ii) the "fair  saleable  value"  of an asset  shall be the
amount which may be realized within a reasonable time either through  collection
or sale of such asset at its regular market value; and (iii) the "regular market
value" of an asset  shall be the amount  which a capable and  diligent  business
person  could

                                       21
<PAGE>

     obtain for such asset from an  interested  buyer who is willing to purchase
such asset under ordinary selling conditions.

     "Stated  Amount"  has the meaning  assigned to such term in the  respective
Letter of Credit.

     "Stated  Maturity  Date" means March 15, 2005 (as such date may be extended
from time to time pursuant to Section 2.9).

     "Subordinated  Debt" means all unsecured  Indebtedness  of the Borrower for
money  borrowed  which  is   subordinated,   upon  terms   satisfactory  to  the
Administrative Agent, in right of payment to the payment of all Obligations.

     "Subsidiary"  means,  with  respect  to any  Person,  (a) a  corporation  a
majority of whose voting stock is at the time, directly or indirectly,  owned by
such Person,  by one or more  Subsidiaries  of such Person or by such Person and
one or more subsidiaries of such Person,  (b) a partnership in which such Person
or a Subsidiary  of such Person is, at the date of  determination,  a general or
limited partner of such  partnership,  but only if such Person or its subsidiary
is entitled to receive more than 50% of the assets of such  partnership upon its
dissolution  and which is otherwise  directly or  indirectly  controlled by such
Person,  or (c) any other Person (other than a corporation  or  partnership)  in
which such Person, directly or indirectly, at the date of determination thereof,
as (i) at least a  majority  ownership  interest  or (ii) the  power to elect or
direct the election of a majority of the  directors or other  governing  body of
such Person.  Unless the context otherwise clearly requires,  references in this
Agreement to a "Subsidiary" or the  "Subsidiaries"  refer to a Subsidiary or the
Subsidiaries  of the  Borrower.  For purposes of this  Agreement,  Prize and the
Prize Subsidiaries are each deemed to be Subsidiaries of the Borrower.

     "Subsidiary  Guaranty  Agreement" means (i) that certain Fourth Amended and
Restated Guaranty  Agreement executed by the Material  Restricted  Subsidiaries,
including Prize and the Prize Subsidiaries, in substantially the form of Exhibit
J hereto, in favor of the Collateral Agent for the benefit of itself,  the other
Agents,  the Banks and the Issuer,  as the foregoing  may be amended,  restated,
supplemented  or modified from time to time, and (ii) each  Subsidiary  Guaranty
Agreement  delivered  pursuant to Section 7.1.7 hereto, as each of the foregoing
may be amended, restated, supplemented, or modified from time to time.

     "Subsidiary  Pledge  Agreement"  means  that  certain  Second  Amended  and
Restated Pledge Agreement of the Material Restricted  Subsidiaries as amended by
that certain  First  Amendment to  Subsidiary  Pledge  Agreement  and as further
amended by that certain  Second  Amendment  to  Subsidiary  Pledge  Agreement in
substantially the form of Exhibit I hereto, in favor of the Collateral Agent for
the benefit of itself,  the other  Agents,  the Banks and the  Issuer,  and each
Subsidiary Pledge Agreement or counterpart thereof delivered pursuant to Section
7.1.7 hereto, as each may be amended, restated, supplemented, or modified.

     "Taxes" is defined in Section 4.6.

     "Total  Interest  Expense"  means,  with  respect to any period for which a
determination  thereof is to be made, the sum, without  duplication,  of (i) the
aggregate  amount of all interest  accrued  (whether or not paid) or capitalized
during such period, on all Indebtedness plus (ii) the

                                       22
<PAGE>

     portion of any Capitalized Lease Liabilities  allocable to interest expense
in accordance with GAAP plus (iii) the interest  portion of any deferred payment
obligation  minus (iv) to the extent  included in the foregoing  clause (i), the
non-cash  accretion  of  the  discount  and  amortization  of the  fees  payable
hereunder to the  Administrative  Agent, the Collateral Agent, the Documentation
Agent, the Issuer, the Banks and the Arrangers,  all determined for the Borrower
and its Restricted Subsidiaries (including, on a pro forma basis with respect to
any period prior to the  consummation  of the Prize Merger,  Prize and the Prize
Subsidiaries) on a consolidated basis in accordance with GAAP.

     "Trade  Guarantees"  means  Contingent  Liabilities  in lieu of  letters of
credit  issued on behalf of the  Marketing  LLC for which the Borrower or one of
its  Subsidiaries is severally,  or jointly and severally with one or more other
Persons,  or both, liable,  provided that all such Contingent  Liabilities shall
not exceed  $15,000,000 in the aggregate,  unless otherwise incurred pursuant to
Section  7.2.2(m).  All joint and several Trade  Guarantees  shall be subject to
written  indemnification  agreements,  in form and  substance  and from  Persons
satisfactory to the Agents, in their sole discretion,  the effect of which shall
be to reduce the  liability of the Borrower to not more than the  percentage  of
the joint and several  Trade  Guarantee  equal to the  Borrower's  then  current
ownership  interest in Marketing LLC. Trade  Guarantees up to $15,000,000  shall
not be treated as Funded Debt for purposes of computing  the  Borrower's  Funded
Debt to EBITDA Ratio.  For the avoidance of doubt,  Contingent  Liabilities that
would otherwise fall within the definition of Trade  Guarantees but for the fact
that  the  aggregate   amount  of  all  such  Contingent   Liabilities   exceeds
$15,000,000,  may  be  incurred  under  Section  7.2.2(m).  Notwithstanding  the
foregoing,  the Majority  Banks shall at all times  reserve the right to include
the entire amount of joint and several Trade Guarantees, or any portion thereof,
as Funded Debt in computing the Borrower's Funded Debt to EBITDA Ratio, based on
such factors as the Majority Banks may from time to time deem material, in their
discretion;  provided,  however,  that the Administrative Agent on behalf of the
Majority  Banks must give the Borrower  written notice at least 90 days prior to
the end of the Fiscal Quarter in order for any amount of joint and several Trade
Guarantees in excess of the  Borrower's and its  Subsidiaries'  ratable share of
such  joint and  several  Trade  Guarantees  to be  included  as Funded  Debt in
computing the Borrower's Funded Debt to EBITDA Ratio for such Fiscal Quarter.

     "Transfer" is defined in Section 7.2.9.

     "type" means,  relative to any Loan,  the portion  thereof,  if any,  being
maintained as a Base Rate Loan or a LIBO Rate Loan.

     "United  States" or "U.S."  means the United  States of America,  its fifty
States and the District of Columbia.

     "Unrestricted  Subsidiaries" means (a) Hunter Butcher International Limited
Liability Company, (b) Canvasback Energy, Inc., a Delaware corporation,  (c) any
Subsidiary of an Unrestricted  Subsidiary,  and (d) any future Subsidiary formed
or acquired by the Borrower  that is designated by the board of directors of the
Borrower as an Unrestricted  Subsidiary;  provided,  however, that no Subsidiary
shall be designated as an  Unrestricted  Subsidiary if (i) a Default or Event of
Default  has  occurred  and is  continuing,  (ii)  all or any  portion  of  such
Subsidiary's assets are pledged to the Agents and the Banks under this Agreement
or any other Loan

                                       23
<PAGE>

     Document,  (iii)  all or any  portion  of  such  Subsidiary's  Oil  and Gas
Properties  are included in the  calculation  of the  Borrowing  Base,  (iv) the
creation or formation of such Subsidiary  would not otherwise be permitted under
Section 10.3 or 10.5 hereof,  or (v) the  creation,  existence,  or formation of
such  Subsidiary  would not be permitted  under any other  material  contract or
agreement to which the Borrower is a party.

     "Unused  Availability"  means at any time an amount  equal to the excess of
(i) the Commitment  Amount over (ii) the sum of (a)  outstanding  Loans plus (b)
Letter of Credit Liabilities.

     "Welfare Plan" means a "welfare  plan",  as such term is defined in section
3(1) of ERISA.

     "Wholly Owned Restricted  Subsidiary" means a Restricted  Subsidiary of the
Borrower all of whose Capital Stock, except for director's qualifying shares, is
owned directly or indirectly by the Borrower.

     SECTION 1.2. Use of Defined Terms.  Unless otherwise defined or the context
otherwise  requires,  terms for which  meanings are  provided in this  Agreement
shall have such meanings when used in the Disclosure  Schedule and in each Note,
Borrowing Request,  Continuation/Conversion  Notice,  Loan Document,  notice and
other  communication  delivered  from  time  to  time in  connection  with  this
Agreement or any other Loan Document.

     SECTION 1.3.  Cross-References.  Unless otherwise specified,  references in
this  Agreement  and in each other Loan  Document  to any Article or Section are
references  to such  Article  or Section  of this  Agreement  or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article,  Section or definition  to any clause are  references to such clause of
such Article, Section or definition.

     SECTION 1.4.  Accounting  and Financial  Determinations.  Unless  otherwise
specified,  all accounting terms used herein or in any other Loan Document shall
be interpreted,  all accounting  determinations  and  computations  hereunder or
thereunder  (including  under  Section  7.2.4) shall be made,  and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, those United States generally  accepted  accounting  principles
("GAAP") applied in the preparation of the financial  statements  referred to in
Section  6.5.  In the event  any  change in GAAP  after  the date  hereof  would
materially  affect the  calculation  of the  financial  covenants  contained  in
Section  7.2.4,  the Borrower  and the Majority  Banks agrees to enter into good
faith  negotiations  for an agreement to revise such financial  covenants or the
definitions  of terms used  therein to take into  account  such changes in GAAP;
provided,  however, that until the Borrower and the Banks have entered into such
an  agreement,  such  financial  calculations  shall  continue  to  be  made  in
accordance with GAAP as in effect immediately prior to such change.

                                   ARTICLE II

                  THE COMMITMENTS, BORROWING PROCEDURES, NOTES,
                      LETTERS OF CREDIT AND BORROWING BASE

                                       24
<PAGE>

     SECTION 2.1. The Commitments. On the terms and subject to the conditions of
this Agreement  (including  Article V), each Bank severally agrees to make Loans
and participate in Letters of Credit,  and the Issuer agrees to issue Letters of
Credit, as described in this Section 2.1.

     SECTION 2.1.1. Loan Commitment.  On the terms and subject to the conditions
of this Agreement  (including  Article V), each Bank hereby  severally agrees to
make loans to the Borrower (relative to such Bank, and of any type, its "Loans")
from  time  to  time on any  Business  Day  occurring  prior  to the  Commitment
Termination Date, equal to such Bank's Percentage of the aggregate amount of the
Borrowing  requested  by the  Borrower  to be  made on such  Business  Day.  The
commitment of each Bank described in this Section 2.1.1 is herein referred to as
its "Commitment". On the terms and conditions hereof, the Borrower may from time
to time borrow, prepay and reborrow Loans.

     SECTION 2.1.2.  Commitment to Issue Letters of Credit. The Issuer agrees to
issue under the several  responsibilities  of the Banks in accordance with their
respective Percentages, from time to time after the Effective Date and until the
date that is thirty (30) days prior to the Commitment  Termination  Date, one or
more  standby  letters of credit  (herein  collectively  called the  "Letters of
Credit" and  individually  called a "Letter of  Credit")  for the account of the
Borrower and in the name of the Borrower or any Restricted  Subsidiary,  and for
the general corporate  purposes of the Borrower.  Each Letter of Credit shall be
denominated in U.S.  Dollars,  shall be payable only upon  presentation of sight
drafts or other forms of demand  together with any other  documents which may be
required  to be  presented  at the time of any  drawing  thereunder  (the  exact
wording of any such documents,  if any, having been specified in, or attached as
a copy to, the relevant Letter of Credit  Request),  and shall be otherwise upon
such terms as the Borrower may specify in a Letter of Credit  Request  delivered
to the Issuer at least three (3) Business Days (or such shorter period as may be
agreed among the Issuer, the  Administrative  Agent and the Borrower) before the
proposed  date of  issuance  thereof.  Each Letter of Credit must be in form and
substance  satisfactory  to the Issuer and shall  have a fixed  expiration  date
occurring  not later than one (1) year after the date of the  issuance  thereof,
provided that each Letter of Credit may contain  provisions to extend the expiry
thereof  automatically  for one or more successive  periods of not more than one
year; provided, however, that in no event shall any Letter of Credit provide for
an expiry later than ten (10) days prior to the Commitment  Termination Date. It
is  understood  by the parties  hereto that for all purposes of this  Agreement,
each  renewal,  if  applicable,  of a Letter of Credit  shall be  considered  an
issuance  thereof  and the  Borrower  shall be  required  to comply with all the
provisions of this Agreement with respect to any such renewal to the same extent
as if a new  Letter  of Credit  was being  issued  on such  renewal  date.  Upon
fulfillment of the applicable  conditions set forth in Article V with respect to
such Letter of Credit and subject to the terms  hereof,  the Issuer  shall issue
such Letter of Credit  promptly  to the  requested  beneficiary  and give to the
Banks prompt written notice (in  reasonable  detail) of such issuance.  Promptly
after the  issuance  of or  amendment  to a Letter of Credit,  the Issuer  shall
notify the Administrative  Agent and the Borrower,  in writing, of such issuance
or amendment, and such notice shall be accompanied by a copy of such issuance or
amendment.  Upon receipt of such notice, the  Administrative  Agent shall notify
the Banks in writing of such issuance or amendment  and, upon receipt of written
request from a Bank,  shall  provide  such Bank with copies of such  issuance or
amendment.

                                       25
<PAGE>

     SECTION  2.1.3.  Purchase  and Sale of  Participations  in Each  Letter  of
Credit.  Upon the terms and subject to the  conditions of this  Agreement,  each
Bank hereby purchases from the Issuer, and the Issuer hereby sells to such Bank,
an undivided  participation  in and to each Letter of Credit and the obligations
of  the  Borrower  under  this  Agreement  with  respect  thereto  equal  to its
respective  Percentage.   The  Borrower  agrees  that  each  Bank  purchasing  a
participation  from the Issuer  pursuant to this Section  2.1.3 may exercise all
its rights to payment against the Borrower  including the right of setoff,  with
respect to such  participation as fully as if such Bank were the direct creditor
of the Borrower in the amount of such participation.

     SECTION 2.1.4. Banks Not Permitted or Required to Make Loans. No Bank shall
be  permitted  or  required  to make  any  Loan and the  Borrower  shall  not be
permitted to effectuate a reduction in the Maximum  Facility  Amount pursuant to
Section 2.2 if, after giving effect thereto,

     (a) the aggregate  outstanding  principal  amount of all Loans of all Banks
plus the aggregate amount of all Letter of Credit  Liabilities  would exceed the
Commitment Amount, or

     (b) the  aggregate  outstanding  principal  amount  of all  Loans  plus the
aggregate  amount of all of the Letter of Credit  Liabilities of such Bank would
exceed such Bank's Percentage of the Commitment Amount.

     SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit.
The Issuer shall not be permitted or required to issue any Letter of Credit, nor
shall the  Borrower be permitted to  effectuate  any  reduction in the Letter of
Credit  Commitment  Amount  pursuant  to Section  2.2 if,  after  giving  effect
thereto,

     (a) the aggregate amount of all Letter of Credit  Liabilities  would exceed
the Letter of Credit Commitment Amount, or

     (b) the aggregate amount of all outstanding Loans plus all Letter of Credit
Liabilities would exceed the Commitment Amount.

     SECTION 2.2. Reduction of Maximum Facility Amount.

     (a) Upon the consummation of the first Permitted 2002 Bond Transaction, the
Maximum  Facility Amount shall  automatically  and without further action by the
Borrower,  the Administrative  Agent or the Banks, be reduced by an amount equal
to the  aggregate  amount  of  notes  issued  under  such  Permitted  2002  Bond
Transaction,  provided  that the Maximum  Facility  Amount  shall not be reduced
below $500,000,000.

     (b) The Borrower may, from time to time on any Business Day occurring after
the time of the initial  extension of credit hereunder,  voluntarily  reduce the
Maximum  Facility  Amount;  provided,  however,  that all such reductions  shall
require at least three (3)  Business  Days' prior  notice to the  Administrative
Agent and shall be permanent,  and any partial reduction of the Maximum Facility
Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of
$500,000.

                                       26
<PAGE>

     SECTION 2.3.  Borrowing  Procedures  for Loans.  By  delivering a Borrowing
Request to the  Administrative  Agent on or before (i) 11:00 a.m., New York time
in the case of Base Rate Loans on the Business Day on which such Borrowing is to
be made and (ii) 12:00 noon, New York time in the case of a LIBO Rate Loan three
(3) Business  Days prior to the  Business  Day on which such  Borrowing is to be
made, the Borrower may from time to time irrevocably request that a Borrowing be
made in a minimum amount of $500,000 and an integral multiple of $100,000, or in
the unused amount of the Commitments. The Administrative Agent at its option may
accept  telephonic  requests for Loans,  provided that such acceptance shall not
constitute  a  waiver  of the  Administrative  Agent's  right to  delivery  of a
Borrowing  Request in connection with subsequent  Loans. Any telephonic  request
for a Loan by the  Borrower  shall be  promptly  confirmed  by  submission  of a
properly completed  Borrowing Request to the Administrative  Agent. On the terms
and subject to the conditions of this  Agreement,  each  Borrowing  comprised of
Loans shall be comprised of the type of Loans, and shall be made on the Business
Day,  specified  in such  Borrowing  Request.  On or before 12:00 noon (New York
time) on such Business Day each Bank shall deposit with the Administrative Agent
same day funds in an amount  equal to such Bank's  Percentage  of the  requested
Borrowing.  Such  deposit  will be made to an account  which the  Administrative
Agent  shall  specify  from time to time by notice to the  Banks.  To the extent
funds are  received  from the Banks,  the  Administrative  Agent shall make such
funds  available to the  Borrower by wire  transfer to the accounts the Borrower
shall have specified in its Borrowing Request.  No Bank's obligation to make any
Loan shall be affected by any other Bank's failure to make any Loan.

     SECTION  2.4.  Continuation  and  Conversion  Elections.  By  delivering  a
Continuation/Conversion  Notice to the  Administrative  Agent on or before 12:00
noon,  New York time,  on a Business  Day,  the  Borrower  may from time to time
irrevocably elect, on not less than three (3) Business Days' notice, that all or
any portion in an aggregate  minimum amount of $500,000 and an integral multiple
of  $100,000,  of any Loans to the  Borrower be, in the case of Base Rate Loans,
converted into LIBO Rate Loans or, in the case of LIBO Rate Loans,  converted on
the  last day of the then  current  Interest  Period  into a Base  Rate  Loan or
continued   as  a  LIBO   Rate  Loan  (in  the   absence   of   delivery   of  a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three
(3) Business Days before the last day of the then current  Interest  Period with
respect  thereto,  such LIBO Rate Loan  shall,  on such last day,  automatically
convert to a LIBO Rate Loan  having an  Interest  Period of one month  except as
provided in clause (ii) of the proviso to this Section 2.4); provided,  however,
that (i) each such  conversion  or  continuation  shall be pro  rated  among the
applicable  outstanding  Loans of all Banks to the Borrower,  (ii) no portion of
the outstanding  principal  amount of any Loans may be so continued as, or be so
converted into, LIBO Rate Loans when any Default has occurred and is continuing,
and (iii)  continuation  of a LIBO Rate Loan, the conversion of a Base Rate Loan
into a LIBO  Rate  Loan or the  conversion  of a LIBO Rate Loan into a Base Rate
Loan pursuant to this Section 2.4 shall not  constitute a Borrowing for purposes
of Section 5.2.1 or Article VI of this Agreement.

     SECTION  2.5.  Funding.  Each  Bank  may,  if it  so  elects,  fulfill  its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign  branches or Affiliates  (or an  international  banking  facility
created  by such  Bank) to make or  maintain  such  LIBO  Rate  Loan;  provided,
however,  that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Bank,  and the  obligations of the Borrower to repay such

                                       27
<PAGE>

     LIBO Rate Loan shall  nevertheless  be to such Bank for the account of such
foreign branch,  Affiliate or international banking facility.  In addition,  the
Borrower hereby consents and agrees that, for purposes of any  determination  to
be made for purposes of Sections 4.1, 4.2, 4.3 or 4.4, it shall be  conclusively
assumed that each Bank elected to fund all LIBO Rate Loans by purchasing  Dollar
deposits in its LIBOR Office's interbank eurodollar market.

     SECTION  2.6.  Notes.  Each  Bank's  Loans  under its  Commitment  shall be
evidenced  by a Note  payable  to the order of such Bank in a maximum  principal
amount  equal to such Bank's  Percentage  of the Maximum  Facility  Amount.  The
Borrower hereby  irrevocably  authorizes each Bank to make (or cause to be made)
appropriate  notations  on the  grid  attached  to such  Bank's  Note (or on any
continuation  of such grid or otherwise in its  records),  which  notations,  if
made, shall evidence, inter alia, the date of, the outstanding principal of, and
the interest rate and Interest Period applicable to the Loans evidenced thereby.
Such notations  shall be conclusive and binding on the Borrower  absent manifest
error;  provided,  however,  that  the  failure  of any  Bank to make  any  such
notations shall not limit or otherwise affect any Obligations of the Borrower.

     SECTION 2.7. Certain Provisions Relating to the Letters of Credit.

     SECTION 2.7.1. Borrower's Agreement to Repay Letter of Credit Drawings. The
Borrower hereby agrees to reimburse the Issuer,  forthwith,  for each payment or
disbursement  made by the Issuer to settle its obligations under any draft drawn
under any Letter of Credit,  with interest on the amount so paid or disbursed by
the Issuer from and  including  the date of payment or  disbursement  to but not
including  the date the  Issuer  is  reimbursed  therefor,  at a rate per  annum
(computed on the basis of a year  consisting of 365, or where  appropriate  366,
days) equal to the rate set forth in Section  3.2.1(a).  In the event the Issuer
is not  reimbursed  by the Borrower on the  disbursement  date, or if the Issuer
must for any reason return or disgorge such  reimbursement,  the Banks shall, on
the  terms  and  subject  to  the  conditions  of  this   Agreement,   fund  the
reimbursement obligation therefor by making, on the next Business Day, Base Rate
Loans as provided in Section 2.1.1 to the Borrower (the Borrower being deemed to
have given a timely  Borrowing  Request  therefor  for such amount) by the Banks
making payment to the Issuer's account;  provided,  however,  for the purpose of
determining the availability of the Commitments to make Loans  immediately prior
to  giving  effect  to the  application  of the  proceeds  of such  Loans,  such
reimbursement obligation shall be deemed not to be outstanding at such time. The
Issuer  agrees to provide to the Borrower  prompt  notice of any such payment or
disbursement  made by the Issuer or Loans made by the Banks;  provided  that the
Issuer's  failure to provide such prompt notice shall not limit or impair in any
way the Borrower's obligations hereunder. The Borrower's obligation to reimburse
the Issuer  forthwith  under this Section  2.7.1 for payments and  disbursements
made by the Issuer under any Letter of Credit shall be  irrespective  of any set
off,  counterclaim or defense to payment which the Borrower may have or have had
against the Issuer, or the legality,  validity,  regularity or enforceability of
such Letter of Credit; provided, however, the Borrower shall not be obligated to
reimburse the Issuer for any wrongful payment or disbursement made by the Issuer
under any Letter of Credit which payment occurs as a result of acts or omissions
constituting gross negligence or willful misconduct on the part of the Issuer or
any of its  officers,  employees  or agents  determined  by a court of competent
jurisdiction in a final non-appealable judgment.

                                       28
<PAGE>

     SECTION 2.7.2.  Reimbursement Obligations of the Banks under the Letters of
Credit. If the Borrower shall fail pursuant to the terms of Section 2.7.1 hereof
forthwith to reimburse the Issuer for each payment or  disbursement  made by the
Issuer to settle  its  obligations  under any draft  drawn  under any  Letter of
Credit and the Banks shall not have made a Loan as provided in Section  2.7.1 to
fund such  reimbursement  obligation,  then upon  demand by the Issuer each Bank
shall  forthwith  make  available  to the Issuer at its office  indicated on its
signature page hereto (or at such other address  designated by the Issuer to the
Administrative  Agent)  immediately  available  funds in an amount equal to such
Bank's pro rata share (according to its respective  Percentage) of the amount so
paid or disbursed by the Issuer. Each Bank shall jointly and severally indemnify
and hold  harmless  the Issuer from and against any and all losses,  liabilities
(including,  without  limitation,  liabilities for penalties),  actions,  suits,
judgments, demands, damages, costs and expenses (including,  without limitation,
attorneys'  fees and  expenses)  resulting  from any failure on the part of such
Bank to  provide,  or from any delay in  providing,  the Issuer with such Bank's
share of the amount of any payment or disbursement  made by the Issuer to settle
its  obligations  under any draft drawn under any Letter of Credit in accordance
with the provisions of the preceding sentence.

     The obligation of each Bank to provide the Issuer with such Bank's pro rata
share of the amount of any payment or disbursement  made by the Issuer to settle
its  obligations  under any draft drawn under any Letter of Credit in accordance
with  the  provisions  of  the  preceding   paragraph   shall  be  absolute  and
unconditional  under any and all  circumstances and irrespective of any set off,
withholding, abatement, reduction, counterclaim or defense to payment which such
Bank may have or have had against the Issuer, including, without limitation, any
defense  based  upon  the  occurrence  of any  Default,  any  draft,  demand  or
certificate or other document  presented  under a Letter of Credit proving to be
forged,  fraudulent,  invalid  or  insufficient,  the  failure of the demand for
payment  under such  Letter of Credit to conform to the terms of such  Letter of
Credit or the legality, validity, regularity or enforceability of such Letter of
Credit  or any  failure  of any  disbursement  to  conform  to the  terms of the
applicable  Letter of Credit  (if,  in the  Issuer's  good faith  opinion,  such
disbursement  is  determined  to  be  appropriate)  or  any  non-application  or
misapplication  by  the  beneficiary  of  the  proceeds  of  such  disbursement;
provided,  however,  that no Bank shall be  obligated  to  reimburse  the Issuer
pursuant to the  preceding  provisions  of this  Section  2.7.2 for any wrongful
payment  or  disbursement  made by the  Issuer  under any  Letter of Credit as a
result of acts or omissions  constituting gross negligence or willful misconduct
on the part of the Issuer or any of its officers, employees or agents determined
by a court of competent jurisdiction in a final non-appealable judgment.

     SECTION 2.7.3.  Action Upon Occurrence of Default.  If any Event of Default
described  in clauses  (a)  through  (d) of  Section  8.1.9  shall  occur and be
continuing, the Borrower shall automatically,  without demand or request, and if
any other Event of Default shall occur and be continuing, the Borrower shall, if
requested by the Administrative Agent or the Majority Banks, immediately deposit
with and pledge to the Administrative Agent cash or Cash Equivalent  Investments
satisfactory to the Administrative  Agent, in an amount equal to the outstanding
Letter of Credit Liabilities as security for the Obligations.

     SECTION 2.7.4. Cash Collateral  Procedures.  Any amounts so received by the
Administrative  Agent pursuant to the provisions of Section 2.7.3 or Section 3.1
shall be held as collateral  security first for the repayment of all Obligations
in  connection  with the Letters of

                                       29
<PAGE>

     Credit and second for the repayment of all other  Obligations.  All amounts
being held pursuant to this Section 2.7.4 shall,  until their application to any
Obligations or their return to the Borrower,  as the case may be, at the written
request of an Authorized Officer of the Borrower, be invested in Cash Equivalent
Investments  designated  by the  Borrower  and  reasonably  satisfactory  to the
Administrative   Agent  but  under  the  sole   dominion   and  control  of  the
Administrative Agent. Such amounts and such Cash Equivalent Investments shall be
held by the Administrative Agent as additional  collateral security for, and the
Borrower  hereby  grants to the  Administrative  Agent and its  bailees  for the
benefit of the  Agents,  the Issuer  and the Banks a security  interest  in such
amounts and such Cash Equivalent Investments (including all interest thereon and
all proceeds  thereof) to secure,  the repayment of the Obligations under and in
connection with the Letters of Credit and all other Obligations. Any losses, net
of  earnings,   and  reasonable  fees  and  expenses  of  such  Cash  Equivalent
Investments shall be charged against the principal amount invested.  None of the
Agents, the Issuer and the Banks shall be liable for any loss resulting from any
Cash Equivalent  Investment  made by the  Administrative  Agent,  whether at the
Borrower's  request or  otherwise.  The  Administrative  Agent is not  obligated
hereby, or by any other Loan Documents,  to make or maintain any Cash Equivalent
Investment,  except upon timely written request by an Authorized  Officer of the
Borrower.  If and to the  extent  that (a) all  Obligations  have been fully and
indefeasibly paid and satisfied,  and (b) the commitments and obligations of the
Issuer  and the  Banks  under the  Letters  of Credit  and this  Agreement  have
terminated, the Administrative Agent shall promptly (and in any event by the end
of the next Business Day) return to the Borrower by wire transfer in immediately
available funds, all amounts previously paid to the Administrative  Agent by the
Borrower  pursuant  to  Section  2.7.3 or Section  3.1  together  with  interest
thereon,  if any,  not  theretofore  applied  to reduce  amounts  payable by the
Borrower to the Agents, the Issuer or any Bank under this Agreement or any other
Loan Document.

     SECTION  2.7.5.  Nature of  Reimbursement  Obligations.  The Borrower shall
assume,  and, to the extent set forth in Section 2.7.2 each Bank shall severally
assume its pro rata share of, all risks of the acts, omissions, or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of
its own gross  negligence or willful  misconduct or that of any of its officers,
employees  or agents as  determined  by a court of competent  jurisdiction  in a
final  non-appealable  judgment)  shall  not be  responsible  for (a) the  form,
validity,  sufficiency,  accuracy, genuineness, or legal effect of any Letter of
Credit or any document submitted by any party in connection with the application
for and issuance of a Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient,  inaccurate,  fraudulent, ineffective
or forged; (b) the form, validity, sufficiency,  accuracy, genuineness, or legal
effect of any instrument  transferring or assigning or purporting to transfer or
assign a Letter of  Credit or the  rights or  benefits  thereunder  or  proceeds
thereof in whole or in part,  which may prove to be invalid or  ineffective  for
any  reason;  (c) failure of the  beneficiary  to comply  fully with  conditions
required in order to demand payment under a Letter of Credit,  including failure
of any  documents  to bear  adequate  reference  to such  Letter of Credit;  (d)
errors, omissions,  interruptions,  or delays in transmission or delivery of any
messages, by mail, cable, telegraph,  telex, or otherwise; (e) any loss or delay
in the  transmission  or otherwise of any document or draft required in order to
make a payment  or  disbursement  under a Letter  of  Credit or of the  proceeds
thereof; (f) the use which may be made of any Letter of Credit or of any acts of
any beneficiary or transferee in connection  therewith;  (g) any error, neglect,
default,  suspension or insolvency,  of any of the Issuer's correspondents;  (h)
errors in translation or for errors in interpretation of technical terms; or (i)
any other  circumstance  whatsoever in making or failing to

                                       30
<PAGE>

     make payment under a Letter of Credit.  None of the foregoing shall affect,
impair, or prevent the vesting of any of the rights or powers granted the Issuer
or any Bank hereunder.  In furtherance  and extension,  and not in limitation or
derogation,  of any of the foregoing, any action taken or omitted to be taken by
the  Issuer  in  connection  with a Letter  of  Credit  in good  faith  (and not
constituting  gross negligence or wilful  misconduct as determined by a court of
competent jurisdiction in a final non-appealable judgment) shall be binding upon
the  Borrower  and each Bank and shall not put the  Issuer  under any  resulting
liability to the Borrower or any Bank, as the case may be.

     SECTION 2.8. Borrowing Base.

     SECTION 2.8.1.  Determination of the Borrowing Base. During the period from
the date hereof to the date of the first  determination  of the  Borrowing  Base
pursuant to the  provisions  of Section 2.8.2 or Section  2.8.3(i),  the initial
amount  of the  Borrowing  Base  has been set by the  Administrative  Agent  and
acknowledged  by the  Borrower  and  agreed to by the Banks to be  $500,000,000;
provided, however, that (i) if the aggregate principal amount of notes issued by
the Borrower under a Permitted 2002 Bond Transaction that is consummated  within
fifteen (15) days immediately  following the Effective Date equals $250,000,000,
then the initial Borrowing Base shall be reduced  automatically to $325,000,000;
(ii) if the aggregate  principal  amount of notes issued under a Permitted  2002
Bond  Transaction  that is  consummated  within  fifteen  (15) days  immediately
following  the  Effective  Date is greater than  $250,000,000,  then the initial
Borrowing Base shall be reduced automatically to an amount equal to $325,000,000
minus the  difference  between (x) the aggregate  principal  amount of all notes
issued under any Permitted 2002 Bond Transaction and (y)  $250,000,000,  until a
new  Borrowing  Base shall  have been  determined  in  accordance  with  Section
2.8.3(ii); and (iii) if any Permitted 2002 Bond Transaction is consummated after
fifteen (15) days  immediately  following the Effective Date  (regardless of the
aggregate principal amount of notes issued thereunder),  then the Borrowing Base
then in  effect  shall  be  reduced  automatically  by an  amount  equal  to the
aggregate  principal  amount of all notes issued under such  Permitted 2002 Bond
Transaction  until a new Borrowing Base shall have been determined in accordance
with Section 2.8.3(ii).

     SECTION 2.8.2.  Redetermination of Borrowing Base. The Borrowing Base shall
be redetermined  semiannually  as provided  below.  Upon delivery of the Reserve
Reports  required  by  Section  7.1.1(m)  and  such  other  reports,   data  and
supplemental  information as may, from time to time, be reasonably  requested by
the  Administrative  Agent and the Banks,  together with a  certificate  from an
Authorized Officer certifying that, to the best of such officer's Knowledge, (A)
the factual  information  upon which such Reserve  Reports are based is true and
correct,  (B) the certificate  identifies the Oil and Gas Properties  covered by
the Reserve Reports that have not been previously  included in any prior Reserve
Report,  and (C) the Mortgaged  Properties  constitute  not less than 80% of the
present value of the Proved Reserves (whether  developed or undeveloped) and (D)
no Mortgaged  Properties  have been sold since the last  Determination  Date, on
each Determination Date or on such other date as otherwise permitted  hereunder,
the Administrative Agent shall redetermine the Borrowing Base in accordance with
its  customary  practices  and  standards  for loans secured by similar types of
property.  Within 30 days of its receipt of the relevant  Reserve  Reports,  the
Administrative Agent shall recommend a redetermined Borrowing Base in writing to
the Banks (the  "Recommended  Borrowing  Base").  Within  ten days  after  their
receipt  of  the   Recommended   Borrowing   Base,  each  Bank  shall  give

                                       31
<PAGE>

     the  Administrative  Agent written  notice of whether such Bank approves of
the  Recommended  Borrowing  Base,  and  if  such  Bank  does  not  approve  the
Recommended  Borrowing Base, then the maximum  Borrowing Base acceptable to such
Bank. For any  redetermination  of the Borrowing  Base that would,  if approved,
result in an increase of the then-effective  Borrowing Base, the approval of all
of the Banks shall be required.  For any other  redetermination of the Borrowing
Base,  the approval of the Majority  Banks shall be required.  In the event that
all of the  Banks or the  Majority  Banks,  as  applicable,  shall  approve  the
Recommended Borrowing Base, the Administrative Agent shall, by written notice to
each Bank and the Borrower,  designate  the  Recommended  Borrowing  Base as the
Borrowing Base, which shall become  immediately  effective;  provided,  however,
that in the event that the Recommended Borrowing Base would, if approved, result
in an increase of the then-effective Borrowing Base and one or more of the Banks
shall disapprove (or be deemed to have disapproved)  such Recommended  Borrowing
Base but the Majority Banks shall approve such Recommended  Borrowing Base (such
Bank hereinafter called a "Dissenting Bank"), then the Administrative  Agent (i)
shall,  by  written  notice  to each  Bank and the  Borrower,  designate  as the
Borrowing Base the greater of (1) the greatest  amount  resulting in an increase
of the then-effective  Borrowing Base that was approved by all the Banks and (2)
the greatest amount equal to or less than the then-effective Borrowing Base that
was  approved by the Majority  Banks,  and (ii) shall notify the Borrower of the
name of each Dissenting Bank. The Borrower may, within 90 days after the date on
which the Borrower  received  notice of the Borrowing  Base and the  information
specified in clauses (i) and (ii) of the proviso above and so long as no Default
shall have  occurred  and be  continuing,  elect to  terminate  such  Dissenting
Bank(s) as a party to this  Agreement;  provided  that,  concurrently  with such
termination the Borrower shall (x) if the  Administrative  Agent, the Issuer and
each of the other  Banks shall  consent,  pay to each such  Dissenting  Bank all
principal, interest and fees and other amounts owed to each such Dissenting Bank
through such date of termination or (y) have arranged for an assignee acceptable
to the  Administrative  Agent and the Issuer to become a substitute Bank for all
purposes under this  Agreement in the manner  provided in Section  10.11.1;  and
further provided,  however, that, prior to substitution for any Dissenting Bank,
the Borrower shall have given written notice to the Administrative Agent of such
intention and, if requested by the Borrower, the Banks other than any Dissenting
Bank shall have the option, but no obligation,  to increase their Commitments in
order to replace the Dissenting  Bank. Upon the termination of a Dissenting Bank
in any manner provided above, the Recommended Borrowing Base shall automatically
and  immediately  become the Borrowing Base.  Anything  herein  contained to the
contrary notwithstanding,  any determination or redetermination of the Borrowing
Base must be  approved  by all the Banks using  their  customary  practices  and
standards  for oil and gas loans and  letters  of credit and based upon the most
recent Reserve Report and other information;  it being understood that the Banks
have no commitment or  obligation  whatsoever to increase the Borrowing  Base to
any amount in excess of (w) $500,000,000,  if no Permitted 2002 Bond Transaction
shall have been consummated, (x) $325,000,000, if the aggregate principal amount
of notes issued under the Permitted  2002 Bond  Transaction  consummated  within
fifteen (15) days of the Effective Date equals $250,000,000, (y) an amount equal
to $325,000,000 minus the difference between (A) the aggregate  principal amount
of  all  notes  issued  under  the  Permitted  2002  Bond  Transaction  and  (B)
$250,000,000 if the Permitted 2002 Bond Transaction  shall have been consummated
within  fifteen (15) days  immediately  following the Effective  Date, or (z) an
amount equal to the Borrowing Base then in effect minus the aggregate  principal
amount  of  all  notes  issued  under  any  Permitted  2002  Bond   Transactions
consummated after the effective date

                                       32
<PAGE>

     of the  Borrowing  Base in effect at the time of such  Permitted  2002 Bond
Transaction;  and nothing herein contained shall be construed to be a commitment
to increase the Borrowing Base.

     SECTION 2.8.3.  Special  Redetermination  of Borrowing Base. In addition to
the  redeterminations  of the Borrowing Base required pursuant to Section 2.8.2,
special redeterminations thereof may be made (i) for any reason at the option of
either the  Borrower  or the  Majority  Banks (but not more than one time during
each calendar year by each) and (ii)  automatically upon the consummation of the
Permitted  2002 Bond  Transaction  if the  aggregate  principal  amount of notes
issued thereunder exceeds $250,000,000 or if any Permitted 2002 Bond Transaction
shall have been consummated  after fifteen (15) days  immediately  following the
Effective Date. To request a special  redetermination of the Borrowing Base, the
Person(s) requesting such  redetermination  shall provide the (x) Administrative
Agent and (y) the Borrower or the Banks,  as applicable,  with a written request
of such redetermination.  Any such special redetermination of the Borrowing Base
shall be made by the  Banks  using  their  customary  standards  for oil and gas
lending and shall be based upon the most recent Reserve Report  delivered to the
Banks  by the  Borrower  and  such  other  reports  and  data as the  Banks  may
reasonably   request.   Following  (A)  receipt  of  a  request  for  a  special
redetermination  in accordance with clause (i) of this Section 2.8.3, or (B) the
occurrence  of any event  described  in clause (ii) of this Section  2.8.3,  the
Borrowing Base shall be  redetermined  in accordance  with Section 2.8.2. If the
special  redetermination results in a decrease in the Borrowing Base such that a
Borrowing  Base  Deficiency  exists  after  giving  effect to such  redetermined
Borrowing  Base,  the  Borrower  shall (A) repay the Loans  and/or  deposit cash
collateral,  as applicable,  or (B) execute and deliver (or cause to be executed
and  delivered)  additional  Security  Documents,  in either case as required by
Section 3.1(b) or (c) or both.

     SECTION 2.8.4.  General  Provisions With Respect to the Borrowing Base. For
the  purposes of this  Agreement,  the  Borrowing  Base to be  certified  by the
Administrative  Agent and the Banks from time to time may be, at the  discretion
of the Borrower,  the lesser of (x) the sum of the aggregate principal amount of
the Loans  and the  aggregate  face  amount of the  Letters  of Credit  that the
Administrative  Agent,  the Issuer and the Banks are willing to have outstanding
to the Borrower, and (y) the amount requested by the Borrower. The determination
of the Borrowing Base shall be made by the Administrative  Agent, the Issuer and
the Banks in  accordance  with the other  provisions of Section 2.8 based on the
most recently  delivered  Reserve Report and other relevant  information  and in
accordance with their  customary  practices for oil and gas loans and letters of
credit as in effect from time to time.

     SECTION 2.9.  Extension of Stated Maturity Date. (a) Provided no Default or
Event of Default shall have occurred and be continuing, the Borrower may request
not more than twice an extension of the then current  Stated  Maturity Date each
time for an additional  one-year  period by giving notice to the  Administrative
Agent (an "Extension  Request"),  substantially in the form of Exhibit K hereto,
at the time that the Borrower  delivers the Reserve  Report  required by Section
7.1.1(m)(i)  for the period  ending  December 31, 2003, or not later than thirty
(30) days  immediately  following  delivery  of such  Reserve  Report,  and,  if
previously  so  extended,  at the time that the  Borrower  delivers  the Reserve
Report  required by Section  7.1.1(m)(i) for the period ending December 31 2004,
or not later  than  thirty  (30) days  immediately  following  delivery  of such
Reserve Report. The Administrative Agent shall promptly transmit the contents of
each such  Extension  Request  to each  Bank.  Each  Bank  may,  in its sole and
absolute  discretion,

                                       33

     indicate  its consent to such  requested  extension by  acknowledging  such
Extension  Request and indicating in its  acknowledgment  whether it consents to
the  extension of the then  current  Stated  Maturity  Date and  returning  such
acknowledgment to the Administrative Agent not later than the date on which such
Bank delivers its approval or  disapproval  of the  Recommended  Borrowing  Base
required by Section  2.8.2 with respect to each such  Reserve  Report or fifteen
(15) days after receipt of the Extension Request, whichever is later. Failure to
acknowledge  such  Extension  Request  shall be deemed to be a rejection  of the
Extension Request by such Bank and  notwithstanding  any other term or provision
hereof,  no Bank shall have any  obligation  to consent to any  extension of the
Stated   Maturity  Date  and  no  extension   shall  be  effective   unless  the
Administrative Agent shall have received  acknowledged  consents from all of the
Banks.

     (b)  Provided  the  Administrative   Agent  shall  have  received  consents
acknowledged  by all of the Banks with  respect to a requested  extension of the
Stated Maturity Date in accordance with Section 2.9(a),  the then current Stated
Maturity Date shall be extended for an additional  one-year period, in each case
subject  to the other  terms and  conditions  of this  Agreement,  and any other
modification agreed to by the parties in connection with such extension.

     SECTION 2.10. Replacement of Issuer. The Issuer may be replaced at any time
by written agreement among the Borrower,  the Administrative Agent, the replaced
Issuer and the  successor  Issuer,  which  successor  Issuer must be a financial
institution that is a Bank; provided,  however,  that, Bankers Trust, as Issuer,
may by written agreement between Bankers Trust, as replaced Issuer, and Deutsche
Bank AG New York  Branch,  as  successor  Issuer,  (with a copy of such  written
agreement  to be  provided  to the  Administrative  Agent) be replaced as Issuer
hereunder and under the other Loan  Documents.  The  Administrative  Agent shall
notify the Banks of any such  replacement  of the  Issuer.  At the time any such
replacement shall become  effective,  the Borrower shall pay any fees which have
become  payable for the account of the replaced  Issuer under this Agreement and
under any other Loan  Document,  and the  Administrative  Agent  shall  allocate
between the replaced Issuer and the successor Issuer the quarterly  fronting fee
payments  under  Section  3.3.5 when and as received  from the  Borrower for the
account of the replaced Issuer and/or the successor  Issuer, as the case may be.
From and after the  effective  date of any such  replacement,  (a) the successor
Issuer  shall have all of the rights and  obligations  of the Issuer  under this
Agreement  and under the other Loan  Documents  with  respect to the  Letters of
Credit to be issued  thereafter and (b) references  herein and in the other Loan
Documents to the term "Issuer"  shall be deemed to refer to such successor or to
any previous Issuer, as the context shall require.  After the replacement of the
Issuer  hereunder,  the  replaced  Issuer  shall remain a party hereto and shall
continue  to have all the  rights  and  obligations  of the  Issuer  under  this
Agreement  with  respect  to the  Letters  of Credit  issued by it prior to such
replacement, but shall not be required to issue additional, or any amendment to,
Letters of Credit.

                                  ARTICLE III

                   REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

     SECTION 3.1.  Repayments and Prepayments.  The Borrower shall repay in full
the unpaid principal amount of each Loan upon the Stated Maturity Date therefor.
Prior thereto, the Borrower:

                                       34
<PAGE>

     (a)  may,  from  time  to  time  on any  Business  Day,  make  a  voluntary
prepayment,  in whole or in part,  of the  outstanding  principal  amount of any
Loans of the Borrower;  provided, however, that (i) any such prepayment shall be
made pro rata among Loans to the  Borrower of the same type and, if  applicable,
having the same Interest Period,  of all Banks;  (ii) if the Borrower makes such
prepayment  of any  LIBO  Rate  Loan on any day  other  than the last day of the
Interest  Period for such Loan then the Borrower  shall be  responsible  for the
increased  cost to the Banks as provided  more fully in Section  4.4;  (iii) all
such  voluntary  prepayments  shall  require at least three (3) but no more than
five (5) Business Days' prior written notice to the  Administrative  Agent;  and
(iv) all such voluntary  partial  prepayments  shall be in an aggregate  minimum
amount of $500,000 and an integral multiple of $100,000;

     (b)  shall,  on each  date  when any  reduction  in or  termination  of the
Commitment Amount shall become effective (including pursuant to Section 2.2, but
excluding any such  reduction or  termination  resulting  from a Borrowing  Base
Deficiency), and on each date when the outstanding aggregate principal amount of
all Loans and Letter of Credit  Liabilities,  exceeds the Commitment  Amount (as
reduced by the aggregate value of all margin accounts maintained by the Borrower
and any  Restricted  Subsidiary in respect of Hedging  Obligations in accordance
with the definition of "Commitment Amount"),  first, make a mandatory prepayment
in an amount at least equal to the aggregate,  outstanding  principal  amount of
all Loans in excess of the Commitment  Amount as reduced or terminated,  and, if
such  mandatory  prepayment  was not  sufficient to reduce the unpaid  principal
balance  of the  Loans to an  amount  that,  when  added  to  Letter  of  Credit
Liabilities,  does not exceed the  Commitment  Amount as reduced or  terminated,
then second,  deposit cash collateral with the Administrative  Agent as security
for the Obligations, such prepayments and cash deposits to be in an amount equal
to the excess,  if any, of the aggregate,  outstanding  principal  amount of all
Loans and Letter of Credit  Liabilities over the Commitment Amount as so reduced
or terminated;

     (c)  shall,   within   ten  (10)  days  of  receipt  of  notice   from  the
Administrative  Agent that a Borrowing Base  Deficiency then exists (or delivery
of notice from the Borrower of a Borrowing Base Deficiency  required pursuant to
Section 7.1.1(e)), either (i) make a mandatory prepayment equal to the amount of
the  Borrowing  Base  Deficiency or elect to make payments at least equal to the
Required  Deficiency  Payment on each Borrowing Base Deficiency Payment Date, or
(ii) notify the Administrative Agent that it shall execute and deliver, or cause
one or more of its  Restricted  Subsidiaries  to  execute  and  deliver,  to the
Collateral  Agent within thirty (30) days from and after receipt by the Borrower
of notice of the Borrowing Base Deficiency,  supplemental or additional Security
Documents,  in form and substance reasonably  satisfactory to the Administrative
Agent and the Collateral  Agent securing payment of the Obligations and covering
other  Properties  of the  Borrower or its  Restricted  Subsidiaries,  including
additional Oil and Gas Properties  directly owned by the Borrower or one or more
of the  Restricted  Subsidiaries  which  are not then  covered  by any  Security
Document and which are of a type and nature  satisfactory to the  Administrative
Agent,  and having a value (as  determined by the  Administrative  Agent and the
Banks in their sole  discretion),  in addition  to other Oil and Gas  Properties
already  subject to a Mortgage,  sufficient  to  eliminate  the  Borrowing  Base

                                       35
<PAGE>

     Deficiency;  provided,  that if the  Borrower  shall  elect to execute  and
deliver  (or cause one or more of its  Restricted  Subsidiaries  to execute  and
deliver)  supplemental or additional  Security  Documents to the  Administrative
Agent  pursuant to  subclause  (ii) of this  Section  3.1(c),  it shall  provide
concurrently  with  notice of such  election  to the  Administrative  Agent with
descriptions of the additional assets to be collaterally assigned (together with
current valuations,  engineering  reports,  Security Documents described in such
subclause  (ii),  title  evidence  or  opinions  applicable  thereto  and  other
documents  including  opinions  of  counsel,  each of which shall be in form and
substance  reasonably  satisfactory to the  Administrative  Agent);  and further
provided that if the Administrative  Agent has not received within such ten (10)
day period the required  notice from the Borrower  that the Borrower  shall take
the actions described in subclause (ii) within such thirty (30) day period, then
without  any  necessity  for notice to the  Borrower  or any other  person,  the
Borrower shall be deemed to have elected to make mandatory  prepayments equal to
at least the Required  Deficiency  Payment for each  Borrowing  Base  Deficiency
Payment Date;

     (d) shall,  if a Permitted 2002 Bond  Transaction is consummated  after the
Effective Date under this  Agreement,  make a mandatory  prepayment in an amount
equal to the lesser of (i) the  aggregate  principal  amount of all Loans of the
Borrower then outstanding under this Agreement, and (ii) the aggregate principal
amount of the notes  issued  by the  Borrower  under  such  Permitted  2002 Bond
Transaction (net of any reasonable costs incurred by the Borrower as a result of
the issuance of such notes);

     (e) shall, immediately upon any acceleration of the Stated Maturity Date of
any Loans  pursuant to Section 8.2 or Section  8.3,  repay all Loans and deposit
cash  collateral  with the  Administrative  Agent as security  for the Letter of
Credit Liabilities, unless, pursuant to Section 8.3, only a portion of all Loans
and Letters of Credit is so accelerated;

     (f) shall,  on the first  Business Day following any  disposition of assets
(other than  dispositions  of  Hydrocarbons  in the ordinary course of business)
permitted  by Section  7.2.9,  make a payment  of 100% of the Net Cash  Proceeds
received  from such  disposition  to be  applied  to the  outstanding  Loans (or
deposited as cash collateral with the  Administrative  Agent as security for the
Letter of Credit  Liabilities);  provided,  however,  that if no Borrowing  Base
Deficiency  shall exist as a result of such  disposition and no Event of Default
has occurred and is continuing,  then subject to the  requirements of clause (g)
of this Section 3.1 the  Borrower  may retain such funds and such payment  shall
not be required; and

     (g) shall,  if the Borrower and its  Subsidiaries  shall hold cash and Cash
Equivalents exceeding  $100,000,000 in the aggregate for any period of three (3)
consecutive  Business Days, make a payment on the first Business Day immediately
following such three (3)  consecutive  Business Day period in an amount equal to
the excess of the fair market value of the cash and Cash Equivalents held by the
Borrower and its Subsidiaries on such Business Day over  $100,000,000;  provided
that  for  purposes  of this  clause  (g),  cash or Cash  Equivalents  held by a
qualified  intermediary  pursuant to a

                                       36
<PAGE>

     deferred  exchange  agreement  shall not be  treated  as being  held by the
Borrower or its Subsidiaries.

     Each  prepayment of any Loan made pursuant to this Section shall be without
premium or penalty, except for reimbursements as may be required by Section 4.4.
No  prepayment  of  principal  of any  Loans  shall  cause  a  reduction  in the
Commitment  Amount.  All amounts paid  pursuant to this Section shall be applied
first as  prepayments  on the Loans and to the extent all Loans are repaid,  any
excess amount shall be  transferred  to the  Administrative  Agent to be held as
cash  collateral for the  Obligations  and applied  thereto  pursuant to Section
2.7.4.

     SECTION 3.2.  Interest  Provisions.  Interest on the outstanding  principal
amount of Loans shall accrue and be payable by the Borrower in  accordance  with
this Section 3.2.

     SECTION 3.2.1.  Rates.  Pursuant to an  appropriately  delivered  Borrowing
8Request or  Continuation/Conversion  Notice,  the Borrower may elect that Loans
comprising a Borrowing to the Borrower accrue interest at a rate per annum:

     (a) on that portion maintained from time to time as a Base Rate Loan, equal
to the sum of the  Alternate  Base Rate  from  time to time in  effect  plus the
Applicable Margin with respect to Base Rate Loans;

     (b) on that portion  maintained  as a LIBO Rate Loan,  during each Interest
Period applicable thereto,  equal to the sum of the LIBO Rate (Reserve Adjusted)
for such Interest  Period plus the  Applicable  Margin with respect to LIBO Rate
Loans.

     All LIBO Rate Loans shall bear interest from and including the first day of
the  applicable  Interest  Period  to (but not  including)  the last day of such
Interest  Period at the interest rate determined as applicable to such LIBO Rate
Loan.

     SECTION 3.2.2.  Post-Default  Rates. After the date (after giving effect to
any grace period) any principal  amount of any Loan is due and payable  (whether
on the Stated Maturity Date, upon acceleration or otherwise), or after any other
monetary  Obligation  of the  Borrower  shall have become due and  payable,  the
Borrower shall pay, but only to the extent permitted by law,  interest (after as
well  as  before  judgment)  at a rate  per  annum  equal  to the sum of (x) the
Alternate Base Rate plus (y) 2.00% plus (z) the  Applicable  Margin from time to
time in effect for Base Rate Loans (the "Default Rate").

     SECTION  3.2.3.  Payment  Dates.  Interest  accrued  on each Loan  shall be
payable, without duplication,  by the Borrower: (a) on the Stated Maturity Date;
(b) on the date of any payment or prepayment,  in whole or in part, of principal
outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly
Payment Date occurring  after the Effective  Date; (d) with respect to LIBO Rate
Loans,  the last day of each  applicable  Interest Period (and, if such Interest
Period shall exceed 90 days, on the 90th day of such Interest Period);  (e) with
respect  to any Base Rate  Loans  converted  into LIBO Rate  Loans on a day when
interest  would not otherwise  have been payable  pursuant to clause (c), on the
date of  such  conversion;  and (f) on that  portion  of any  Loans  the  Stated
Maturity  Date of which is  accelerated  pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.  Interest accrued on Loans or other monetary
Obligations  arising under this  Agreement or any other Loan Document  after the
date

                                       37

     such amount is due and payable  (whether on the Stated  Maturity Date, upon
acceleration  or otherwise) or after the occurrence of an Event of Default shall
be payable, by the Borrower upon demand.

     SECTION 3.3.  Fees.  The Borrower  agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.

     SECTION  3.3.1.   Commitment  Fee.  The  Borrower  agrees  to  pay  to  the
Administrative  Agent for the account of each Bank, for the period commencing on
the date hereof and continuing through the final Commitment  Termination Date, a
commitment  fee equal to (i) such  Bank's  Percentage  of the sum of the average
daily unused portion of the Commitment  Amount during the period  preceding each
Quarterly  Payment Date and  occurring on or after the prior  Quarterly  Payment
Date,  multiplied by (ii) the rate set forth in the following  grid opposite the
applicable  Borrowing Base Usage (which  percentage  shall change  automatically
without notice as and when the Borrowing Base Usage  changes).  Such  commitment
fees shall be payable by the Borrower in arrears on each Quarterly Payment Date,
commencing  with the first such day  following the  Effective  Date,  and on the
Commitment Termination Date.

   Borrowing Base Usage (BBU)             Commitment Fee
   --------------------------             --------------
            BBU <  50%                        25.0 bps
            BBU >= 50%                        37.5 bps

     SECTION 3.3.2. [Intentionally Omitted].

     SECTION 3.3.3.  Fees Pursuant to Fee Letter.  The Borrower agrees to pay to
the Agents and the  Arrangers for their own  respective  accounts as provided in
any Fee Letter all fees set forth  therein on the dates and in the  amounts  set
forth therein.

     SECTION 3.3.4.  Letter of Credit Standby Fee Payable to Banks. The Borrower
agrees to pay a fee to the Administrative Agent for the account of the Banks and
the Issuer,  to be  distributed  ratably (in  accordance  with their  respective
Percentages),  for each Letter of Credit for the period from and  including  the
date of the issuance of such Letter of Credit to (and  including)  the date upon
which such Letter of Credit expires or terminates in accordance  with its terms,
at a per annum rate equal to the  Applicable  Margin from time to time in effect
with  respect  to  Letters of Credit on the daily  undrawn  face  amount of such
Letter of Credit  during  the  applicable  period.  Such fee shall be payable in
arrears on each Quarterly  Payment Date,  with the first such payment to be made
on the first  Quarterly  Payment Date  following  the issuance of such Letter of
Credit.

     SECTION  3.3.5.  Letter of Credit  Fronting  Fee  Payable  to  Issuer.  The
Borrower agrees to pay to the Issuer for its own account a fronting fee for each
Letter of Credit at a per annum rate equal to  one-eighth of one percent (1/8 of
1%) of the daily  undrawn face amount of such Letter of Credit but not less than
$500 (per annum) for each Letter of Credit. Such fee shall be payable in arrears
on each  Quarterly  Payment Date,  with the first such payment to be made on the
first Quarterly Payment Date following the issuance of such Letter of Credit. In
addition to the foregoing  fees,  the Borrower shall pay or reimburse the Issuer
for such normal and  customary

                                       38
<PAGE>

     costs and  expenses as are  incurred  by the Issuer in  issuing,  effecting
payment under,  transferring,  amending or otherwise administering any Letter of
Credit.

                                   ARTICLE IV

                     CERTAIN LIBO RATE AND OTHER PROVISIONS

     SECTION 4.1. Fixed Rate Lending Unlawful.  If any Bank shall determine that
the introduction of or any change in or in the  interpretation  of any law after
the Effective Date makes it unlawful,  or any central bank or other governmental
authority  asserts  that it is  unlawful,  for such  Bank to make,  continue  or
maintain  any Loan as,  or to  convert  any Loan  into,  a LIBO Rate  Loan,  the
obligations of such Bank to make,  continue,  maintain or convert any such Loans
shall,  upon such  determination,  forthwith be suspended  until such Bank shall
notify the Administrative  Agent that the circumstances  causing such suspension
no longer exist, and all such Bank's LIBO Rate Loans shall automatically convert
into  Base  Rate  Loans at the end of the then  current  Interest  Periods  with
respect thereto or sooner, if required by such law or assertion.

     SECTION 4.2. Deposits  Unavailable.  If the Administrative Agent shall have
determined  that (a) Dollar  deposits in the relevant amount or for the relevant
Interest  Period are not available to Bankers  Trust in its relevant  market (or
both); or (b) by reason of  circumstances  affecting  Bankers  Trust's  relevant
market,  adequate  means  do  not  exist  for  ascertaining  the  interest  rate
applicable   hereunder  to  LIBO  Rate  Loans,   then,   upon  notice  from  the
Administrative  Agent to the Borrower and the Banks,  (x) the obligations of all
Banks under  Section 2.3 and Section 2.4 to make or continue any Loans as, or to
convert any Loans into,  LIBO Rate Loans shall  forthwith be suspended until the
Administrative   Agent  shall  notify  the  Borrower  and  the  Banks  that  the
circumstances  causing such  suspension no longer  exist;  and (y) all LIBO Rate
Loans shall  automatically  convert  into Base Rate Loans at the end of the then
current Interest Periods with respect thereto.

     SECTION 4.3.  Increased LIBO Rate Loan Costs,  etc. The Borrower  agrees to
reimburse  each  Bank  for any  increase  in the cost to such  Bank  of,  or any
reduction  in the  amount  of any sum  receivable  by such Bank in  respect  of,
making,  continuing or maintaining  (or of its  obligation to make,  continue or
maintain) any Loans as, or of converting  (or of its  obligation to convert) any
Loans into, LIBO Rate Loans. Such Bank shall promptly notify the  Administrative
Agent and the Borrower in writing of the  occurrence  of any such event,  and in
any event, within 180 days, after it obtains knowledge thereof and determines to
request  such  compensation  such notice to state,  in  reasonable  detail,  the
reasons  therefor,  the additional amount required fully to compensate such Bank
for such  increased  cost or reduced amount and the basis upon which such amount
is computed (and including  calculations in reasonable detail).  Such additional
amount  shall be payable by the  Borrower  directly to such Bank upon 45 days of
its receipt of such notice,  and such notice  shall,  in the absence of manifest
error, be presumed  correct.  The Borrower shall not be obligated to pay for any
such  amounts  if such Bank does not notify the  Borrower  that such  additional
amounts  are  owing  within  180 days of the date such  Bank  obtains  knowledge
thereof.

     Anything in this  Section 4.3 or in Section 4.5 below  notwithstanding,  if
any Bank  elects to require  payment by the  Borrower  of any amount  under this
Section 4.3 or Section 4.5, the Borrower  may,  within 60 days after the date of
receiving  notice  thereof and so long as no Default

                                       39
<PAGE>

     shall have occurred and be  continuing,  elect to terminate  such Bank (for
purposes of this paragraph, the "Terminated Bank") as a party to this Agreement;
provided that,  concurrently with such termination the Borrower shall (i) if the
Administrative Agent, the Issuer and each of the Banks other than the Terminated
Bank shall consent, pay the Terminated Bank all principal, interest and fees and
other amounts owed to such Terminated Bank through such date of termination,  or
(ii) have arranged for an assignee  acceptable to the  Administrative  Agent and
the Issuer to become a substitute  Bank for all purposes under this Agreement in
the  manner  provided  in  Section  10.11.1;  provided  further  that,  prior to
substitution  for any  Terminated  Bank,  the Borrower  shall have given written
notice to the  Administrative  Agent of such  intention and, if requested by the
Borrower, the Banks (other than the Terminated Banks) shall have the option, but
no obligation,  for a period of sixty (60) days after receipt of such notice, to
increase their Commitments in order to replace the Terminated Bank.

     SECTION 4.4. Funding Losses.  In the event any Bank shall incur any loss or
expense  (including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to make,  continue
or maintain  any portion of the  principal  amount of any Loan as, or to convert
any  portion of the  principal  amount of any Loan into,  a LIBO Rate Loan) as a
result of (a) any conversion or repayment or prepayment of the principal  amount
of any LIBO  Rate  Loans on a date  other  than  the  scheduled  last day of the
Interest  Period  applicable  thereto,   whether  pursuant  to  Section  3.1  or
otherwise;  (b) any Loans not being made as LIBO Rate Loans in  accordance  with
the  Borrowing  Request  therefor;  or (c) any Loans not being  continued as, or
converted into,  LIBO Rate Loans in accordance with the  Continuation/Conversion
Notice  therefor,  then,  upon the written  notice of such Bank to the  Borrower
(with a copy to the Administrative Agent), the Borrower shall, within forty-five
days of its  receipt  thereof,  pay  directly  to such Bank such  amount as will
reimburse  such Bank for such loss or expense.  Such written notice (which shall
include  calculations  in reasonable  detail) shall,  in the absence of manifest
error, be conclusive.

     SECTION 4.5.  Increased  Capital  Costs.  If after the  Effective  Date any
change  in,  or  the  introduction,  adoption,  effectiveness,   interpretation,
reinterpretation  or phase-in of, any law or regulation,  directive,  guideline,
decision  or  request  (whether  or not  having  the force of law) of any court,
central bank, regulator or other governmental  authority affects or would affect
the amount of capital  required or expected to be  maintained by any Bank or the
Issuer or any Person  controlling such Bank or the Issuer,  and such Bank or the
Issuer determines (in its sole and absolute  discretion) that the rate of return
on its or such controlling  Person's capital as a consequence of its Commitment,
its issuance of a Letter of Credit or its  participation  in a Letter of Credit,
or the Loans made by such Bank or the  Issuer is  reduced to a level  materially
below that which such Bank or the Issuer or such  controlling  Person could have
achieved but for the occurrence of any such circumstance, then, in any such case
upon notice from time to time by such Bank or the Issuer to the  Borrower but in
no event  later than 180 days after  such Bank  makes  such  determination,  the
Borrower shall  immediately  pay directly to such Bank or the Issuer  additional
amounts  sufficient  to  compensate  such Bank,  the Issuer or such  controlling
Person  for  such  reduction  in rate of  return;  provided,  however,  that the
Borrower  shall  not be  required  to make  such  payment  if such Bank does not
provide  notice of such  determination  within 180 days thereof.  A statement of
such Bank or the Issuer as to any such additional  amount or amounts  (including
calculations  thereof in reasonable  detail)  shall,  in the absence of manifest
error or written  objection by the Borrower  within 10 days after its receipt of
such

                                       40
<PAGE>

     statement,  be  conclusive.  In determining  such amount,  such Bank or the
Issuer may use any reasonable  method of averaging and attribution that it shall
deem applicable.

     SECTION 4.6.  Taxes.  (a) All payments by the Borrower of principal of, and
interest on, the Loans,  reimbursement  of Letter of Credit  Liabilities and all
other amounts payable  hereunder and under any other Loan Document shall be made
free and clear of and without deduction for any present or future excise,  stamp
or other  similar  taxes,  fees,  duties,  withholdings  or other charges of any
nature whatsoever imposed by any taxing authority, but excluding franchise taxes
and taxes  imposed on or measured by any Bank's or the Issuer's  income or gross
receipts (such non-excluded  items being called "Taxes").  In the event that any
withholding or deduction  from any payment to be made by the Borrower  hereunder
is required  in respect of any Taxes  pursuant to any  applicable  law,  rule or
regulation (except for any withholding  required in respect of any Agent or Bank
or the Issuer by the laws of any  jurisdiction  (other  than the United  States)
where  such Agent or Bank or the Issuer is doing  business),  then the  Borrower
will (i) pay directly to the relevant  authority the full amount  required to be
so withheld or deducted;  (ii) promptly forward to the  Administrative  Agent an
official receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment to such authority;  and (iii) pay to the  Administrative
Agent for the account of such Agent or Bank or the Issuer such additional amount
or amounts as is  necessary to ensure that the net amount  actually  received by
such Agent or Bank or the Issuer will equal the full  amount  such Person  would
have received had no such withholding or deduction been required.  Moreover,  if
any Taxes are  directly  asserted  against  any Agent or Bank or the Issuer with
respect to any payment  received by such Agent or Bank or the Issuer  hereunder,
such  Agent or Bank or the  Issuer  may pay such  Taxes  and the  Borrower  will
promptly pay such  additional  amounts  (including  any  penalties,  interest or
expenses (other than any such penalties, interest or expense as a result of acts
or omissions constituting gross negligence as determined by a court of competent
jurisdiction in a final non-appealable  judgment on the part of such Person)) as
is  necessary  in order that the net amount  received by such  Person  after the
payment of such Taxes  (including  any Taxes on such  additional  amount)  shall
equal the  amount  such  Person  would  have  received  had such  Taxes not been
asserted.

     If a Bank becomes  aware that any such  withholding  or deduction  from any
payment to be made by the Borrower hereunder or under any other Loan Document is
required,  then such Bank shall promptly notify the Administrative Agent and the
Borrower thereof stating the reasons therefor and the additional amount required
to be paid  under  this  Section.  Each Bank shall  execute  and  deliver to the
Administrative  Agent  and the  Borrower  such  forms as it may be  required  to
execute and  deliver  pursuant  to Section  4.6(b).  To the extent that any such
withholding  or deduction  results from the failure or  unreasonable  delay of a
Bank to provide a form required by Section  4.7(b) (unless such failure or delay
is due to some prohibition  under  applicable  requirement of Law), the Borrower
shall have no obligation  to pay the  additional  amount  required by clause (b)
below.  Anything  in this  Section  4.6  notwithstanding,  if any Bank elects to
require payment by the Borrower of any material  amount under this Section,  the
Borrower may,  within 60 days after the date of receiving  notice thereof and so
long as no Default  shall have  occurred and be  continuing,  elect to terminate
such Bank (for purposes of this paragraph,  the "Terminated Bank") as a party to
this Agreement;  provided that,  concurrently with such termination the Borrower
shall (i) if the  Administrative  Agent,  the Issuer and each of the Banks other
than the Terminated  Bank shall consent,  pay the Terminated Bank all principal,

                                       41

<PAGE>

     interest and fees and other  amounts owed to such  Terminated  Bank through
such date of  termination,  or (ii) have arranged for an assignee  acceptable to
the  Administrative  Agent and the  Issuer to become a  substitute  Bank for all
purposes  under this  Agreement  in the  manner  provided  in  Section  10.11.1;
provided  further that,  prior to  substitution  for any  Terminated  Bank,  the
Borrower  shall have given written  notice to the  Administrative  Agent of such
intention  and,  if  requested  by the  Borrower,  the  Banks  (other  than  the
Terminated  Banks)  shall have the option,  but no  obligation,  for a period of
sixty (60) days after receipt of such notice,  to increase their  Commitments in
order to replace the Terminated Bank.

     If the Borrower fails to pay any Taxes when due to the  appropriate  taxing
authority or fails to remit to the Administrative  Agent, for the account of any
Agent or Bank or the Issuer, the required receipts or other required documentary
evidence,  the Borrower shall indemnify such Agent or Bank or the Issuer for any
incremental  Taxes,  interest or penalties that may become payable by such Agent
or Bank or the  Issuer as a result of any such  failure.  For  purposes  of this
Section 4.6, a distribution hereunder by any Agent, any Bank or the Issuer to or
for the account of any Agent,  any Bank or the Issuer  shall be deemed a payment
by the Borrower.

     (b) Each Bank which is organized  under the laws of a jurisdiction  outside
the United States shall, (i) on the day of the initial  borrowing from each such
Bank  hereunder  and (ii)  from  time to time  thereafter  if  requested  by the
Borrower or the Administrative  Agent,  provide the Administrative Agent and the
Borrower with the forms prescribed by the Internal Revenue Service of the United
States certifying as to such Bank's status for purposes of determining exemption
from United States  withholding taxes with respect to all payments to be made to
such  Bank  hereunder  and under the other  Loan  Documents  or other  documents
satisfactory  to such  Bank,  the  Borrower  and the  Administrative  Agent  and
indicating  that all  payments to be made to such Bank  hereunder  and under the
other Loan Documents are not subject to United States  withholding  tax.  Unless
the Borrower and the Administrative Agent shall have received such forms or such
documents  indicating  that payments to such Bank  hereunder and under the other
Loan  Documents are not subject to United States  withholding  tax, the Borrower
and the  Administrative  Agent  shall be  entitled  to  withhold  United  States
withholding taxes from such payments at the applicable statutory rate.

     SECTION  4.7.  Payments,  Computations,  etc.  Unless  otherwise  expressly
provided, all payments by the Borrower pursuant to this Agreement,  the Notes or
any other Loan  Document  shall be made by the  Borrower  to the  Administrative
Agent for the pro rata  account of the Banks and the Issuer  entitled to receive
such payment.  All such payments required to be made to the Administrative Agent
shall be made, without set off, deduction or counterclaim,  not later than 12:00
noon,  New York  time,  on the date due,  in same day or  immediately  available
funds,  to such account as the  Administrative  Agent shall specify from time to
time by notice to the Borrower.  Funds  received after that time shall be deemed
to have  been  received  by the  Administrative  Agent  on the  next  succeeding
Business Day. The Administrative Agent shall promptly remit in same day funds to
each Bank and the Issuer its share,  if any,  of such  payments  received by the
Administrative  Agent for the account of such Bank and the Issuer.  All interest
and fees shall be computed on the basis of the actual number of days  (including
the first day but excluding the last day) occurring  during the period for which
such  interest or fee is payable  over a year  comprised of 360 days (or, in the
case of interest on a Base Rate Loan,  365 days or, if  appropriate,  366 days).
Whenever  any payment to be made shall  otherwise be due on a day

                                       42

<PAGE>

     which is not a Business  Day,  such  payment  shall  (except  as  otherwise
required by clause (c) of the  definition  of the term  "Interest  Period"  with
respect to LIBO Rate Loans) be made on the next succeeding Business Day and such
extension of time shall be included in computing  interest and fees,  if any, in
connection with such payment.

     SECTION 4.8. Sharing of Payments.  (a) If any Bank shall obtain any payment
or other recovery (whether voluntary,  involuntary, by application of set off or
otherwise) on account of any Loan or any Letter of Credit  Liability (other than
pursuant  to the terms of  Sections  4.3,  4.4 4.5 and 4.6) in excess of its pro
rata share of payments then or therewith  obtained by all Banks, such Bank shall
purchase  from the other  Banks  such  participations  in Loans made by them and
Letter of Credit  Liabilities  held by them as shall be  necessary to cause such
purchasing Bank to share the excess payment or other recovery  ratably with each
of them; provided,  however, that if all or any portion of the excess payment or
other recovery is thereafter  recovered from such purchasing  Bank, the purchase
shall  be  rescinded  and  each  Bank  which  has  sold a  participation  to the
purchasing  Bank shall repay to the  purchasing  Bank the purchase  price to the
ratable  extent of such  recovery  together with an amount equal to such selling
Bank's ratable share  (according to the proportion of the amount of such selling
Bank's  required  repayment  to the  purchasing  Bank  to the  total  amount  so
recovered  from the  purchasing  Bank) of any  interest or other  amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.  The
Borrower  agrees that any Bank so purchasing a  participation  from another Bank
pursuant to this Section may, to the fullest extent  permitted by law,  exercise
all its rights of payment  (including  pursuant to Section  4.9) with respect to
such  participation  as fully as if such Bank were the  direct  creditor  of the
Borrower  in  the  amount  of  such  participation.   If  under  any  applicable
bankruptcy,  insolvency  or other similar law, any Bank receives a secured claim
in lieu of a set off to which this  Section  applies,  such Bank  shall,  to the
extent  practicable,  exercise its rights in respect of such secured  claim in a
manner  consistent  with the rights of the Banks  entitled under this Section to
share in the benefits of any recovery on such secured claim.

     SECTION 4.9. Set off. Each Bank shall,  upon the  occurrence of any Default
described  in  clauses  (a)  through  (d) of Section  8.1.9 with  respect to the
Borrower or, with the consent of the Majority Banks,  upon the occurrence of any
other Event of Default,  have the right to  appropriate  and apply in set off to
the payment of the  Obligations  owing to it (whether or not then due),  and (as
security for such Obligations) any and all balances, credits, deposits, accounts
or  moneys  of the  Borrower  then or  thereafter  maintained  with  such  Bank;
provided,  however, that any such appropriation and application shall be subject
to the  provisions  of Section  4.8.  Each Bank  agrees  promptly  to notify the
Borrower  and the  Administrative  Agent after any such set off and  application
made by such Bank; provided, however, that the failure to give such notice shall
not affect the validity of such set off and application. The rights of each Bank
under this Section are in addition to other rights and remedies (including other
rights of set off under applicable law or otherwise) which such Bank may have.

     SECTION  4.10.  Use of Proceeds.  The Borrower  shall apply the proceeds of
each  Borrowing in  accordance  with the fourth  recital;  without  limiting the
foregoing,  no proceeds of any Loan will be used to acquire any equity  security
of a class which is registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or any "margin stock",  as defined in F.R.S.  Board  Regulation U in
violation of F.R.S. Board Regulation U.


                                       43
<PAGE>

     SECTION 4.11.  Maximum Interest.  It is the intention of the parties hereto
to  conform  strictly  to  applicable  usury  laws and,  anything  herein to the
contrary  notwithstanding,  the obligations of the Borrower to each Bank and the
Issuer under this Agreement  shall be subject to the limitation that payments of
interest  shall not be  required  to the extent that  receipt  thereof  would be
contrary to  provisions of law  applicable  to such Bank or the Issuer  limiting
rates of interest  which may be charged or collected by such Bank or the Issuer.
Accordingly,  if the  transactions  contemplated  hereby would be usurious under
applicable  law  (including  the Federal and state laws of the United  States of
America, or of any other jurisdiction whose laws may be mandatorily  applicable)
with  respect  to a Bank or the  Issuer  then,  in that  event,  notwithstanding
anything to the  contrary in this  Agreement,  it is agreed as follows:  (a) the
provisions  of this Section 4.11 shall govern and control;  (b) the aggregate of
all  consideration  which  constitutes  interest  under  applicable  law that is
contracted for,  charged or received under this  Agreement,  or under any of the
other  aforesaid  agreements or otherwise in connection  with this  Agreement by
such Bank or the Issuer shall under no  circumstances  exceed the maximum amount
of interest  allowed by applicable  law (such maximum  lawful  interest rate, if
any, with respect to such Bank or the Issuer  herein called the "Highest  Lawful
Rate"),  and any excess  shall be credited  to the  Borrower by such Bank or the
Issuer  (or,  if such  consideration  shall have been paid in full,  such excess
promptly refunded to the Borrower);  (c) all sums paid, or agreed to be paid, to
such  Bank  or  the  Issuer  for  the  use,  forbearance  and  detention  of the
indebtedness of the Borrower to such Bank or the Issuer  hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness  until payment in full so that the
actual rate of interest is uniform throughout the full term thereof;  and (d) if
at any time the  interest  provided  pursuant to Section 3.2  together  with any
other  fees  payable  pursuant  to this  Agreement  and  deemed  interest  under
applicable  law,  exceeds  that amount  which would have  accrued at the Highest
Lawful Rate,  the amount of interest and any such fees to accrue to such Bank or
the Issuer pursuant to this Agreement shall be limited, notwithstanding anything
to the contrary in this Agreement to that amount which would have accrued at the
Highest  Lawful Rate, but any subsequent  reductions,  as applicable,  shall not
reduce  the  interest  to  accrue to such Bank or the  Issuer  pursuant  to this
Agreement  below the  Highest  Lawful  Rate until the total  amount of  interest
accrued  pursuant to this  Agreement and such fees deemed to be interest  equals
the amount of interest  which would have accrued to such Bank or the Issuer if a
varying  rate per annum equal to the interest  provided  pursuant to Section 3.2
had at all times been in effect,  plus the amount of fees which  would have been
received but for the effect of this Section 4.11.

                                   ARTICLE V

                             CONDITIONS TO BORROWING

     SECTION 5.1.  Initial  Borrowing.  The obligations of the Banks to fund the
initial  Borrowing  shall be subject to the prior or concurrent  satisfaction of
each of the conditions precedent set forth in this Section 5.1.

     SECTION  5.1.1.  Resolutions,  etc.  The  Administrative  Agent  shall have
received  from  each  Obligor  a  certificate,  dated  the  date of the  initial
Borrowing,  of its Secretary or Assistant Secretary as to (a) resolutions of its
Board of  Directors  or other  governing  body  then in full  force  and  effect
authorizing the execution, delivery and performance of this Agreement, the


                                       44
<PAGE>

     Notes and each  other  Loan  Document  to be  executed  by it;  and (b) the
incumbency  and  signatures  of those  of its  officers  authorized  to act with
respect to each Loan Document  executed by it, upon which  certificate each Bank
may conclusively rely until it shall have received a further  certificate of the
Secretary of such  Obligor  canceling or amending  such prior  certificate.  The
Administrative  Agent  shall  have  received  certificates  of  the  appropriate
government  officials  of the state of  organization  of each  Obligor as to the
existence and good  standing of such Person,  each dated within 30 days prior to
the date of delivery pursuant hereto.

     SECTION 5.1.2.  Delivery of Notes and Subsidiary  Guaranty  Agreement.  The
Administrative Agent shall have received, for the account of each Bank, its Note
duly  executed  and  delivered  by the  Borrower  and  the  Subsidiary  Guaranty
Agreement executed and delivered by each Obligor party thereto.

     SECTION  5.1.3.  Payment  of  Outstanding  Prize  Indebtedness,   etc.  All
Indebtedness  identified in Item 7.2.2(b) of the Disclosure  Schedule (including
any  Indebtedness of Prize or any Prize Subsidiary  outstanding  under the Prize
Credit Facility),  together with all interest, all prepayment premiums and other
amounts  due and  payable  with  respect  thereto,  shall have been paid in full
(including,  to the extent necessary,  from proceeds of the initial  Borrowing),
the Prize Credit  Facility  shall have been  terminated,  and all Liens securing
payment of any Indebtedness thereunder shall have been, or concurrently with the
Effective Date are being, released.

     SECTION  5.1.4.  Mortgage.  The  Collateral  Agent shall have  received (a)
amendments to the Existing  Mortgages and Additional  Mortgages covering Oil and
Gas  Properties  of Prize or the Prize  Subsidiaries  and/or the Borrower or its
Subsidiaries  such that the Collateral  Agent shall have a valid perfected first
Lien on not  less  than  80% in the  aggregate  of the  value of all Oil and Gas
Properties set forth in the Reserve  Reports dated as of December 31, 2001, each
duly  executed and delivered by each Obligor party thereto in form and substance
satisfactory to the Administrative Agent and the Collateral Agent for the prompt
completion  of all  recording  and filing of such  Security  Documents as may be
necessary  or, in the  reasonable  opinion  of the  Administrative  Agent or the
Collateral  Agent,  desirable to create or  continue,  as  appropriate,  a valid
perfected  first Lien against the Collateral  Property  covered by the Mortgage,
(b) a schedule reconciling the present value of the Proved Reserves set forth in
the Reserve Reports delivered pursuant to Section 5.1.8 with the list of Oil and
Gas Properties  covered by an Existing Mortgage or an Additional  Mortgage,  and
(c) an  appropriate  authorization  in  favor  of the  Collateral  Agent to file
Uniform  Commercial  Code Form UCC-1 and UCC-3  statements,  necessary or in the
opinion of the  Administrative  Agent or the  Collateral  Agent,  desirable,  to
create in the Collateral Agent for the benefit of the Agents, the Issuer and the
Banks  all Liens and other  rights  of any  Person as a valid,  perfected  first
priority Lien in the Collateral Property described in the Mortgage.

     SECTION 5.1.5. Pledge Agreements;  Stock Certificates and Blank Powers. The
Collateral  Agent  shall have  received  an  amendment  to the  Borrower  Pledge
Agreement and to each Subsidiary Pledge Agreement, duly executed by the relevant
Obligor  together with an appropriate  authorization  in favor of the Collateral
Agent to file  Uniform  Commercial  Code Form UCC-1 and UCC-3  statements,  duly
executed  blank  stock  powers and all stock  certificates  necessary  or in the
opinion of the  Administrative  Agent or the  Collateral  Agent,  desirable,  to
create in the Collateral Agent for the benefit of the Agents, the Issuer and the
Banks  all Liens


                                       45
<PAGE>

     and other rights of any Person as a valid, perfected first priority Lien in
the Collateral Property described in the respective Pledge Agreements.

     SECTION 5.1.6. Opinions of Counsel. (a) The Administrative Agent shall have
received  opinions,  dated the date of the initial  extension  of credit or such
other date acceptable to the  Administrative  Agent and addressed to the Agents,
the Issuer and all Banks, from (a) Thompson & Knight, L.L.P., special counsel to
the  Obligors,  substantially  in the form of  Exhibit E hereto,  and (b) Morgan
Johnston, general counsel for the Obligors, substantially in the form of Exhibit
F hereto.

     (b) The  Administrative  Agent shall have received for distribution to each
Bank (in sufficient  number to provide at least one copy to each Bank) favorable
opinions from a local counsel to the Obligors in the State of Louisiana dated as
of the date of delivery thereof, in form and substance  reasonably  satisfactory
to the Administrative  Agent and its counsel which shall include an opinion that
the  Mortgages  dated  March  15,  2002,  and any  corresponding  UCC  financing
statements to be filed in the State of Louisiana, respectively, are effective to
create a valid, perfected Lien in favor of the Collateral Agent on the Mortgaged
Properties  located  in the  State  of  Louisiana  and are in  proper  form  for
recordation in such state.

     SECTION 5.1.7.  Financial  Information.  The  Administrative  Agent and the
Banks shall have received true and correct copies of the most recently  prepared
audited and unaudited  consolidated financial statements of the Borrower and its
Subsidiaries  and audited and  unaudited  consolidated  financial  statements of
Prize and the Prize Subsidiaries, together with pro forma consolidated financial
statements for the Borrower, Prize and their respective Subsidiaries prepared in
accordance with the requirements of Regulation S-X for  registration  statements
on Form  S-4 as if such a  registration  statement  for a debt  issuance  by the
Borrower became effective on the Effective Date.

     SECTION  5.1.8.  Engineers'  Report.  The  Administrative  Agent shall have
received  Reserve  Reports  dated as of December 31, 2001,  prepared by Approved
Engineers  covering the Hydrocarbon  Interests included in the initial Borrowing
Base.

     SECTION 5.1.9.  Certificate as to Insurance  Policies.  The  Administrative
Agent shall have  received a  certificate  of the Borrower in form and substance
satisfactory to the Administrative Agent,  certified by an Authorized Officer of
the Borrower as true and correct in all  material  respects  and  describing  in
detail all  insurance  maintained  by Borrower  and its  Subsidiaries  as of the
Effective Date and certifying that such insurance  satisfies the requirements of
Section 7.1.4.

     SECTION 5.1.10.  Material Adverse Change.  No material adverse change shall
have occurred  since  September 30, 2001 in the financial  condition,  business,
operations,  or prospects of the Borrower and the Restricted  Subsidiaries taken
as a whole or in their consolidated assets, liabilities and properties and there
shall be no material  threatened or pending litigation  adversely  affecting its
consolidated property.

     SECTION  5.1.11.  Satisfactory  Review and Legal Form. All legal matters in
connection  with  this  Agreement  and  the   consummation  of  the  transaction
contemplated  hereby


                                       46
<PAGE>

     and by the Loan Documents shall be approved by the Administrative Agent and
its legal  counsel,  and there shall have been  furnished to the  Administrative
Agent by the Borrower,  at the Borrower's expense,  such agreements with respect
to the Borrower's and the  Restricted  Subsidiaries'  Oil and Gas Properties not
mortgaged  under the Third  Amended and Restated  Credit  Agreement  (including,
without limitation,  environmental reports, opinions of counsel, title opinions,
and  other  records  and  information)  and such  other  documents,  agreements,
information and records (including,  without limitation,  documents,  agreement,
information and records  pertaining to the hedging  arrangements of the Borrower
and its Subsidaries),  in form, substance, scope and methodology satisfactory to
the  Administrative  Agent in its sole  discretion,  as it may  reasonably  have
requested for that purpose.

     SECTION 5.1.12. Closing Fees, Expenses, etc. The Administrative Agent shall
have received the Fee Letter, duly executed by the Borrower.  The Administrative
Agent shall also have  received for its own account,  the account of the Issuer,
or for the account of the  Arrangers or each Bank, as the case may be, all fees,
costs  and  expenses  due and  payable  pursuant  to  Section  3.3 and,  if then
invoiced, Section 10.3.

     SECTION 5.1.13. UCC Searches.  The Administrative Agent shall have received
from the Borrower copies of Uniform Commercial Code searches with respect to the
Obligors in the jurisdictions set forth in Schedule 5.1.13.

     SECTION 5.1.14. Prize Merger Documentation.  The Administrative Agent shall
have received a certificate  from an Authorized  Officer of each of the Borrower
and Pintail  Energy,  Inc.,  dated as of the  Effective  Date,  certifying  that
attached  thereto is a true and correct copy of the Prize Merger  Agreement  and
certifying  that:  (a) on and as of the Effective  Date, and except as otherwise
previously disclosed pursuant to the provisions hereof, there does not exist any
pending or threatened litigation, judgment, order, injunction or other restraint
issued or filed with respect to the making of the initial Borrowing hereunder or
which could reasonably be expected to impair  materially the right or ability of
each of the Borrower,  Pintail Energy, Inc. and Prize to effect the Prize Merger
substantially  in accordance  with the terms and  conditions of the Prize Merger
Agreement and to comply with the  requirements of Section 7.1.6 hereof;  (b) the
Prize Merger  Agreement,  at the time of the mailing thereof to the shareholders
of Prize,  and any documents,  at the time of mailing  thereof,  mailed to Prize
shareholders  in  relation  to any Prize  Merger  Agreement  did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein contained, in light of the circumstances
under which made,  not  misleading;  (c) each of the Borrower,  Pintail  Energy,
Inc.,  Prize and the Prize  Subsidiaries,  as the case may be, has  received all
governmental  and third party  approvals  necessary in connection with the Prize
Merger and the financing  contemplated  by this Agreement and such approvals are
in full force and effect;  (d) holders of shares of stock of Prize  constituting
at least a majority of all of the  outstanding  shares of capital  stock  having
ordinary  voting power with respect to the election of the board of directors of
Prize  (including  all shares  issuable  upon the  exercise  of the  exercisable
outstanding  options or warrants),  and all other conditions to the Prize Merger
have  been  satisfied   (and  not  waived,   except  with  the  consent  of  the
Administrative  Agent); (e) there are no government,  corporate,  contractual or
legal  restrictions  that  would  restrict,  limit or  otherwise  impede  prompt
consummation of the Prize Merger and the transactions  contemplated by the Prize
Merger  Agreement;  and (f) after  giving  effect to the  Prize  Merger  and the
transactions  described in the Prize  Merger  Agreement,  neither


                                       47
<PAGE>

     Prize nor any Prize  Subsidiary  shall have outstanding any shares of stock
constituting preferred equity.

     SECTION 5.1.15.  Hedging Schedule.  The Administrative  Agent and each Bank
shall have  received a schedule of all Hedging  Agreements to which the Borrower
or any of its  Subsidiaries  (including  Prize and the Prize  Subsidiaries) is a
party,  which schedule  shall indicate the amount of all Hedging  Obligations of
the Borrower or its Subsidiaries, as applicable, thereunder.

     SECTION 5.2. All Borrowings  and Letters of Credit.  The obligation of each
Bank to fund any Loan on the occasion of any  Borrowing  (including  the initial
Borrowing)  and of the  obligations  of the Issuer to issue any Letter of Credit
(including the initial Letter of Credit) and of the Banks to participate therein
shall be subject to the  satisfaction  of each of the  conditions  precedent set
forth in this Section 5.2.

     SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and
after giving effect to any Borrowing (but, if any Default of the nature referred
to in Section 8.1.5 shall have occurred with respect to any other  Indebtedness,
without  giving  effect  to the  application,  directly  or  indirectly,  of the
proceeds of such Borrowing) the following statements shall be true and correct:

     (a) the  representations  and warranties set forth in Article VI and in the
other Loan  Documents  shall be true and correct with the same effect as if then
made  (unless  stated to relate  solely to an earlier  date,  in which case such
representations  and  warranties  shall be true and  correct as of such  earlier
date);

     (b)  no  labor   controversy,   litigation,   arbitration  or  governmental
investigation  or  proceeding  shall be  pending  or,  to the  knowledge  of the
Borrower,   threatened   against  the  Borrower  or  any  of  their   respective
Subsidiaries  which would  reasonably  be  expected  to have a Material  Adverse
Effect or which purports to affect the legality,  validity or  enforceability of
this Agreement, the Notes or any other Loan Document; and

     (c) no Default shall have then occurred and be continuing, and the Obligors
are not in violation  of any law or  governmental  regulation  or court order or
decree except for such  violations as would not reasonably be expected to have a
Material Adverse Effect.

     SECTION  5.2.2.  Borrowing  Request.  The  Administrative  Agent shall have
received a Borrowing  Request or Letter of Credit  Request for such Borrowing or
such  Letter of Credit,  as  applicable.  Each of the  delivery  of a  Borrowing
Request or a Letter of Credit  Request and the acceptance by the Borrower of the
proceeds  of such  Borrowing  or the  issuance  of such  Letter  of  Credit,  as
applicable, shall constitute a representation and warranty by the Borrower that,
on the date of such  Borrowing  or the date of issuance of such Letter of Credit
(both  immediately  before and after  giving  effect to such  Borrowing  and the
issuance of such Letter of Credit and the application of the proceeds  thereof),
the  statements  made in Section 5.2.1 are true and correct.  By delivering  the
initial Borrowing Request,  the Borrower shall be deemed to have represented


                                       48
<PAGE>

     and warranted  that on and as of the date of the initial  Borrowing each of
the conditions set forth in Article V has been satisfied.

     SECTION 5.2.3. Satisfactory Legal Form. All documents executed or submitted
pursuant hereto by or on behalf of any Obligor shall be satisfactory in form and
substance to the Administrative  Agent and its counsel; the Administrative Agent
and its  counsel  shall have  received  all  information,  approvals,  opinions,
documents  or  instruments  as  the  Administrative  Agent  or its  counsel  may
reasonably request.

     SECTION 5.2.4. All Letters of Credit. The obligation of the Issuer to issue
each Letter of Credit is, in addition to the conditions  precedent  specified in
Sections  5.1 (with  respect to the  initial  Letter of Credit)  and Section 5.2
(with respect to all Letters of Credit), subject to the condition precedent that
the Issuer shall have  received,  at least three (3) Business  Days prior to the
requested  issuance  thereof,  a Letter  of  Credit  Request  from the  Borrower
relating to such Letter of Credit.

     SECTION 5.2.5.  Excess Cash and Cash  Equivalents.  The Banks shall have no
obligation to make any Loans if, after giving effect to the  application  of the
proceeds of any  Borrowings  hereunder,  the  aggregate  amount of cash and Cash
Equivalents  held by the  Borrower  and its  Subsidiaries  shall  have  exceeded
$35,000,000  for the  period of three  (3)  consecutive  days  ending on the day
immediately prior to such Borrowing;  provided that for purposes of this Section
5.2.5, cash or Cash Equivalents held by a qualified  intermediary  pursuant to a
deferred  exchange  agreement shall not be treated as being held by the Borrower
or its Subsidiaries.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

     In order to induce the Banks,  the Issuer and the Agents to enter into this
Agreement  and to make  Borrowings  and issue Letters of Credit  hereunder,  the
Borrower  represents  and warrants unto the Agents,  the Issuer and each Bank as
set forth in this Article VI.

     SECTION 6.1. Organization, etc. Each Obligor is a corporation,  partnership
or limited liability company validly organized and existing and in good standing
under  the  laws  of the  jurisdiction  of its  incorporation,  organization  or
formation. Each Obligor is qualified to do business and is in good standing as a
foreign entity in each  jurisdiction  where the nature of its business  requires
such qualification, except where the failure to so qualify, would not reasonably
be expected to have a Material  Adverse Effect.  Each Obligor has full power and
authority and holds all requisite franchises,  patents, copyrights,  trademarks,
trade names or rights  thereto,  licenses,  permits and other  approvals  (i) to
enter into and perform its Obligations under this Agreement,  the Notes and each
other Loan  Document to which it is a party and (ii) except where  failure to do
so would not reasonably be expected to have a Material  Adverse  Effect,  to own
and hold under lease its property and to conduct its business  substantially  as
currently conducted by it.

     SECTION  6.2. Due  Authorization,  Non-Contravention,  etc. The  execution,
delivery and performance by each Obligor of this  Agreement,  the Notes and each
other Loan


                                       49
<PAGE>

     Document  executed  or to be  executed  by it,  are within  such  Obligor's
powers,  have been  duly  authorized  by all  necessary  action,  and do not (a)
violate any Obligor's Organic Documents;  (b) violate the terms or provisions of
the  Indenture;   (c)  violate  any  other  contractual   restriction,   law  or
governmental  regulation  or court decree or order  binding on or affecting  any
Obligor or its Assets;  or (d) result in, or require the creation or  imposition
of, any Lien on any of any Obligor's  properties  except for Liens granted under
the Loan Documents.

     SECTION 6.3.  Government  Approval,  Regulation,  etc. No  authorization or
approval or other action by, and no notice to or filing with,  any  Governmental
Authority or regulatory  body or other Person is required for the due execution,
delivery or performance by any Obligor of this Agreement, the Notes or any other
Loan Document to which it is a party other than recording of Security  Documents
with appropriate Governmental Authorities. No Obligor is an "investment company"
within the meaning of and subject to regulation under the Investment Company Act
of 1940, as amended,  or a "holding  company",  or a  "subsidiary  company" of a
"holding company",  or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of and subject to regulation
under the Public Utility Holding Company Act of 1935, as amended.

     SECTION 6.4. Validity,  etc. This Agreement constitutes,  and the Notes and
each other Loan  Document  executed by an Obligor will, on the due execution and
delivery thereof,  constitute,  the legal, valid and binding obligations of such
Obligor enforceable in accordance with their respective terms.  Without limiting
the foregoing,  each Security  Document  executed by an Obligor  constitutes the
legal,  valid and binding  obligation of such Obligor  enforceable in accordance
with its  respective  terms,  and creates a valid and perfected  first  priority
security interest in the Assets of such Obligor as provided therein.

     SECTION 6.5.  Financial  Information.  The  Borrower  has  delivered to the
Administrative Agent audited  consolidated  financial statements of the Borrower
and its  Subsidiaries as at and for the fiscal year ended December 31, 2000, and
unaudited  consolidated  financial  statements  of  (i)  the  Borrower  and  its
Subsidiaries and (ii) Prize and the Prize Subsidiaries,  in each case, as at and
for each of the  Fiscal  Quarters  ended  March  31,  2001,  June  30,  2001 and
September 30, 2001.  Such financial  statements have been prepared in accordance
with GAAP,  and fairly and accurately  present,  on a  consolidated  basis,  the
financial  condition of the Borrower and its  Subsidiaries  as of the respective
dates indicated therein and the results of operations for the respective periods
indicated therein. To the Borrower's Knowledge,  neither the Borrower nor any of
its Subsidiaries has any material contingent liabilities, liabilities for taxes,
unusual forward or long-term  commitments,  or unrealized or anticipated  losses
from any unfavorable commitments except as scheduled or referred to or reflected
in such financial statements.

     SECTION 6.6. No Material Adverse Change. There has been no material adverse
change  in  the  business,   condition  (financial  or  otherwise)   operations,
prospects,  or properties of the Borrower and its Subsidiaries  taken as a whole
since  the  effective  date of the  most  recent  audited  financial  statements
delivered to the Agents, the Issuer and the Banks.

     SECTION 6.7. Litigation, Labor Controversies,  etc. There is no pending or,
to the Borrower's Knowledge, threatened litigation, action, proceeding, or labor
controversy  affecting


                                       50
<PAGE>

     Borrower  or  any  Subsidiary,  or  any  of  their  respective  properties,
businesses,  assets or revenues,  which could  reasonably  be expected to have a
Material  Adverse Effect or which  purports to affect the legality,  validity or
enforceability of this Agreement,  the Notes or any other Loan Document,  except
as disclosed in Item 6.7 ("Litigation,  Labor  Controversies") of the Disclosure
Schedule.  To the  Borrower's  Knowledge,  there  are no  outstanding  judgments
against the Borrower or any Subsidiary.

     SECTION  6.8.  Subsidiaries.  As  of  date  hereof,  the  Borrower  has  no
Subsidiaries except those Subsidiaries set forth in Item 6.8 ("Subsidiaries") of
the Disclosure Schedule.

     SECTION 6.9. Ownership of Properties. Each Obligor owns good and defensible
title to, or valid  leasehold  interests in, all of its  properties  and assets,
real and personal,  tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights),  free and clear
of all Liens,  charges or claims (including  infringement claims with respect to
patents,  trademarks,  copyrights  and the  like)  and  free  and  clear  of all
limitations and restrictions on, and consent  requirements  for,  disposition or
transfer,  except  as  permitted  pursuant  to  Section  7.2.3  and  except  for
imperfections and burdens that do not in the aggregate  materially  detract from
the value  thereof.  The  interests  and  properties  described  in Schedule 6.9
constitute  all the  Hydrocarbon  Interests  owned by the Borrower and the other
Obligors as of the date of this Agreement.  The Collateral Property includes all
the  Capital  Stock  of each  Obligor  (other  than  the  Borrower),  all  Hedge
Agreements  to which any  Obligor  is a party and all notes  receivable  of each
Obligor.

     SECTION 6.10.  Taxes.  Except as set forth in Item 6.10 ("Tax  Matters") of
the  Disclosure  Schedule,  the Borrower and each  Subsidiary  has filed all tax
returns  and  reports  required by law to have been filed by it and has paid all
taxes and governmental  charges thereby shown to be owing, except any such taxes
or charges  which are being  diligently  contested in good faith by  appropriate
proceedings  and for which adequate  reserves in accordance with GAAP shall have
been set aside on its books.  The Borrower knows of no pending  investigation of
the  Borrower or any  Subsidiary  by any taxing  authority or of any pending but
unassessed tax liability of the Borrower or any Subsidiary.

     SECTION    6.11.     Pension    and    Welfare     Plans.     During    the
twelve-consecutive-month  period  prior to the date  hereof  and,  on a  rolling
basis, prior to the date of any Borrowing hereunder, no steps have been taken to
terminate any Pension Plan under Section  4041(c) of ERISA,  and no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise to
a Lien  under  section  302(f)  of  ERISA.  No  condition  exists  or  event  or
transaction  has occurred with respect to any Pension Plan which might result in
the  incurrence  by the  Borrower or any member of the  Controlled  Group of any
liability,  fine or penalty. Except as disclosed in Item 6.11 ("Employee Benefit
Plans") of the Disclosure  Schedule,  neither the Borrower nor any member of the
Controlled   Group  has  any   contingent   liability   with   respect   to  any
post-retirement   benefit  under  a  Welfare  Plan,  other  than  liability  for
continuation coverage described in Part 6 of Title I of ERISA.

     SECTION 6.12.  Environmental  Warranties.  Except as set forth in Item 6.12
("Environmental Matters") of the Disclosure Schedule:


                                       51
<PAGE>

     (a) To the  Borrower's  Knowledge,  except  where the  failure to obtain or
comply could not reasonably be expected to have a Material  Adverse Effect,  the
Borrower and each Subsidiary and all of their  respective  Assets and operations
are in compliance in all material respects with all Environmental  Laws. Neither
the Borrower nor any  Subsidiary is aware of, and none of the Borrower or any of
its  Subsidiaries  has  received  notice  of,  any  past,   present,  or  future
conditions, events, activities, practices, or incidents which may interfere with
or prevent the material  compliance or continued  material  compliance of any of
them with all Environmental Laws;

     (b) To the  Borrower's  Knowledge,  except  where the  failure to obtain or
comply could not reasonably be expected to have a Material  Adverse Effect,  the
Borrower and each of its  Subsidiaries has obtained all permits,  licenses,  and
authorizations  that are required under applicable  Environmental  Laws, and has
received no notice that all such permits are not in good  standing,  or that any
such Person is not in  compliance  with all of the terms and  conditions of such
permits;

     (c) To the  Borrower's  Knowledge,  except  where the  failure to obtain or
comply could not reasonably be expected to have a Material  Adverse  Effect,  no
Hazardous  Materials  exist on, about,  or within or have been used,  generated,
stored,  transported,  disposed of on, or Released from any of the Assets of the
Borrower  or any of its  Subsidiaries  except in amounts  that would not violate
applicable law. The use which the Borrower or any of its Subsidiaries  makes and
intends  to make of its  properties  and  Assets  will  not  result  in the use,
generation, storage, transportation,  accumulation,  disposal, or Release of any
Hazardous  Material on, in, or from any of their  properties or assets except in
amounts that would not violate applicable law;

     (d) To the  Borrower's  Knowledge,  neither  the  Borrower  nor  any of its
Subsidiaries  nor any of such Person's  currently or previously  owned or leased
properties or operations is subject to any outstanding or threatened  order from
or agreement with any  Governmental  Authority or other Person or subject to any
judicial or docketed  administrative  proceeding  with respect to any failure to
comply with Environmental Laws;

     (e) To the  Borrower's  Knowledge,  except  where the  failure to obtain or
comply could not reasonably be expected to have a Material Adverse Effect, there
are no conditions or  circumstances  associated with the currently or previously
owned  or  leased  properties  or  operations  of  the  Borrower  or  any of its
Subsidiaries that could reasonably be expected to give rise to any Environmental
Liabilities;

     (f) Neither the Borrower nor any  Subsidiary  is a treatment,  storage,  or
disposal  facility  requiring  a permit  under  the  Resource  Conservation  and
Recovery Act, 42 U.S.C.ss.6901 et seq., regulations thereunder or any comparable
provision of state law. To the  Borrower's  Knowledge,  the Borrower and each of
its  Subsidiaries  is in substantial  compliance  with all applicable  financial
responsibility requirements of all Environmental Laws;


                                       52
<PAGE>

     (g) Neither the Borrower nor any  Subsidiary  has filed,  or to the best of
the  Borrower's  and each  Subsidiary's  Knowledge,  failed to file,  any notice
required under applicable Environmental Law reporting a Release; and

     (h) Neither the Borrower nor any Subsidiary has received notice that a Lien
arising  under any  Environmental  Law has attached to any of their  property or
revenues.

     SECTION  6.13.  Regulations  U and X. The  Borrower  is not  engaged in the
business of extending  credit for the purpose of purchasing  or carrying  margin
stock,  and no proceeds of any Loans will be used for a purpose which  violates,
or would be inconsistent  with, F.R.S.  Board Regulation U or X. Terms for which
meanings  are  provided in F.R.S.  Board  Regulation  U or X or any  regulations
substituted  therefor,  as from time to time in effect, are used in this Section
with such meanings.

     SECTION 6.14. Accuracy of Information.  All factual information  heretofore
or contemporaneously furnished by or on behalf of any of the Obligors in writing
to the  Administrative  Agent or the Collateral  Agent or any Bank or the Issuer
for purposes of or in connection with this  Agreement,  any other Loan Document,
or any transaction contemplated hereby or thereby is, and all other such factual
information  hereafter  furnished  by or on behalf of any of the Obligors to the
Administrative  Agent or the Collateral Agent or any Bank or the Issuer will be,
true  and  accurate  in every  material  respect  on the  date as of which  such
information  is dated or certified  and as of the date of execution and delivery
of this Agreement by the  Administrative  Agent,  the Collateral  Agent and such
Bank or the Issuer,  and such  information  is not, or shall not be, as the case
may be, incomplete by omitting to state any material fact necessary to make such
information  not misleading in any material  respect.  There is no fact known to
any Obligor which has a Material  Adverse Effect,  or which could  reasonable be
expected  to  have  a  Material  Adverse  Effect,  on  the  business,  condition
(financial  or  otherwise),  operations,  or  properties of the Borrower and its
Subsidiaries  taken as a whole  that has not been  disclosed  in  writing to the
Administrative Agent, the Collateral Agent, the Issuer and the Banks.

     SECTION 6.15. No Defaults  under Other  Agreements.  Except as disclosed in
Item 6.15 ("Existing Defaults") of the Disclosure Schedule, neither the Borrower
nor any of its  Subsidiaries  is in default in the payment  when due (subject to
any  applicable  grace period),  whether by  acceleration  or otherwise,  of any
Indebtedness  in excess of  $5,000,000,  and no  defaults  have  occurred in the
performance  or  observance of any  obligation or condition  with respect to any
such Indebtedness if the effect of such default is to accelerate the maturity of
any Indebtedness.

     SECTION 6.16. Solvency. Each Obligor is Solvent.

     SECTION  6.17.  Agreements.  Neither the Borrower nor any  Subsidiary  is a
party to any  indenture,  loan,  or credit  agreement,  or to any lease or other
material  agreement  or  instrument,  or  subject to any  charter  or  corporate
restriction  which  could  have a  material  adverse  effect  on  the  business,
condition (financial or otherwise),  operations, prospects, or properties of the
Borrower and its Subsidiaries (taken as a whole), or the ability of the Borrower
or any Obligor to pay and perform its  obligations  under the Loan  Documents to
which it is a party.  Neither the Borrower nor any  Restricted  Subsidiary is in
default in any respect in the


                                       53
<PAGE>

     performance,   observance,  or  fulfillment  of  any  of  the  obligations,
covenants,  or  conditions  contained  in any material  agreement or  instrument
material to its business to which it is a party.

     SECTION  6.18.  Compliance  with Laws,  etc.  The  Borrower and each of its
Subsidiaries  has complied with all  applicable  statutes,  rules,  regulations,
orders and  restrictions  of any  government  or any  instrumentality  or agency
thereof,  having jurisdiction over the conduct of their respective businesses or
the ownership of their respective Hydrocarbon Interests except where the failure
to so comply would not reasonably be expected to have a Material Adverse Effect.

     SECTION 6.19. Direct Benefit.  The initial Borrowings and Letters of Credit
hereunder and all additional  Borrowings and Letters of Credit hereunder are for
the direct benefit of the Borrower,  or in the case of any initial or additional
Letters of Credit,  one or more of the  Guarantors,  and the  initial  Loans and
Letters of Credit  hereunder are used to continue the Prior  Indebtedness  under
the Third Amended and Restated Credit Agreement, to refinance and replace direct
and indirect  Indebtedness of Prize and the Prize  Subsidiaries  owing under the
Prize Credit  Facility and to fund the cash portion of the merger  consideration
and any expenses related to any of the foregoing purposes.  The Borrower and the
Guarantors  are engaged as an  integrated  group in the  business of oil and gas
exploration  and  related  fields,  and  any  benefits  to the  Borrower  or any
Guarantor is a benefit to all of them, both directly or indirectly,  inasmuch as
the  successful  operation and  condition of the Borrower and the  Guarantors is
dependent  upon the  continued  successful  performance  of the functions of the
integrated group as a whole.

                                  ARTICLE VII

                                    COVENANTS

     SECTION 7.1.  Affirmative  Covenants.  The Borrower agrees with each Agent,
the Issuer and each Bank that,  until all  Commitments  have  terminated and all
Obligations  have been paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.1.

     SECTION 7.1.1. Financial Information,  Reports,  Notices, etc. The Borrower
will furnish,  or will cause to be furnished,  to the  Administrative  Agent for
distribution  to each Bank copies (in sufficient  number to provide at least one
copy to each Bank) of the following financial statements,  reports,  notices and
information:

     (a) as soon as  available  and in any event within 50 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, (1)
consolidated balance sheets, statements of earnings, and statements of cash flow
as of the  end of  such  Fiscal  Quarter  (and,  if  required  by GAAP or by any
Governmental Authority, consolidating balance sheets, statements of earnings and
statements  of cash flows) of the Borrower  for such Fiscal  Quarter and for the
period commencing at the end of the previous Fiscal Year and ending with the end
of such Fiscal Quarter,  certified by an Authorized  Officer of the Borrower and
(2) a schedule of all Hedging  Obligations  of the Borrower  and its  Restricted
Subsidiaries in reasonable detail;


                                       54
<PAGE>

     (b) as soon as available  and in any event within 105 days after the end of
each Fiscal Year of the Borrower, (1) a copy of the annual audit report for such
Fiscal Year for the Borrower,  including therein  consolidated (and, if required
by GAAP or by any Governmental Authority, consolidating) financial statements of
the Borrower as of the end of such Fiscal Year prepared in the manner  described
in clause (a) above and certified  (without any Impermissible  Qualification) by
independent  certified  public  accountants  of nationally  recognized  standing
selected by the  Borrower and (2) a schedule of all Hedging  Obligations  of the
Borrower and its Restricted Subsidiaries in reasonable detail;

     (c) as soon as available and in any event within 15 days of the delivery to
the Administrative  Agent of the financial  statements  described in clauses (a)
and (b) above, a certificate, executed by an Authorized Officer of the Borrower,
showing (in reasonable detail and with appropriate calculations and computations
in all respects  satisfactory to the  Administrative  Agent) compliance with the
financial covenants set forth in Section 7.2.4. together with a statement to the
effect that the Borrower has not become aware of any Default or Event of Default
that has occurred or is continuing, or, if the Borrower has become aware of such
Default or Event of Default, describing such Default or Event of Default and the
steps, if any, being taken to cure it;

     (d)  concurrently  with the  certificate  delivered  pursuant to clause (c)
above, (i) a production  statement which identifies the most recent  information
available  relating  to  the  gross  volumes  of  Hydrocarbons  produced  in the
aggregate from the Hydrocarbon  Interests included in the Borrowing Base, (ii) a
statement of revenues and expenses  attributable  to the  Hydrocarbon  Interests
included in the  Borrowing  Base for such  Fiscal  Quarter  ended,  and (iii) an
operating report which identifies the most recent information available relating
to the aggregate Hydrocarbons throughput of the Gas Gathering Systems,  revenues
and  expenses  and  operating  reports each  attributable  to the Gas  Gathering
Systems for such Fiscal Quarter then ended, such production report and statement
of  revenues  and  expenses  and  operating  reports  each  to be in a form  and
substance reasonably satisfactory to the Administrative Agent and the Banks;

     (e) promptly upon the Borrower learning of the occurrence of any Default or
Borrowing Base Deficiency,  a statement of an Authorized Officer of the Borrower
setting  forth  details of such Default or  Borrowing  Base  Deficiency  and the
action which the Borrower has taken and proposes to take with respect thereto;

     (f)  promptly  upon the  Borrower  learning  of (x) the  occurrence  of any
material adverse development with respect to any litigation, action, proceeding,
or labor  controversy  described in Section 6.7 or (y) the  commencement  of any
labor  controversy,  litigation,  action or proceeding of the type  described in
Section  6.7,  or (z) any  material  adverse  development  with  respect  to any
litigation,  action,  proceeding or controversy affecting any Obligor,  which in
the Borrower's opinion,  could reasonably be expected to have a material adverse
effect on the business, operations, affairs, condition (financial or otherwise),
prospects or assets of the Borrower on a consolidated basis;


                                       55
<PAGE>

(g)      promptly  after the  sending or filing  thereof,  copies of all reports
         which the Borrower sends to its stockholders generally, and all reports
         on form 10-K, 10-Q, 8-K, all definitive proxy statements, and effective
         registration statements (other than registration statements on Form S-8
         or  successor  forms for sales of  securities  under  Plans)  which the
         Borrower  files with the  Securities  and  Exchange  Commission  or any
         national securities exchange;

     (h) immediately  upon becoming aware of the institution of any steps by the
Borrower or any  Affiliate of the Borrower to terminate any Pension Plan, or the
failure to make a required  contribution  to any Pension Plan if such failure is
sufficient to give rise to a Lien under section  302(f) of ERISA,  or the taking
of any  action  with  respect  to a  Pension  Plan  which  could  result  in the
requirement  that the Borrower  furnish a bond or other  security to the PBGC or
such Pension  Plan,  or the  occurrence of any event with respect to any Pension
Plan which could result in the incurrence by the Borrower of any liability, fine
or penalty, or any material increase in the contingent liability of the Borrower
with respect to any  post-retirement  Welfare Plan benefit,  notice  thereof and
copies of all documentation relating thereto;

     (i) as soon as  possible,  and in any event  within 50 days after March 31,
2002,  pro forma  consolidated  balance  sheets,  statements  of  earnings,  and
statements  of cash flow for Prize and the  Prize  Subsidiaries  for the  Fiscal
Quarter ended March 31, 2002, presented both for the whole Fiscal Quarter and as
of the end of each month of such Fiscal Quarter;

     (j) Notice of Material Adverse Change. As soon as possible and in any event
within 10 days after the occurrence thereof,  written notice of any matter that,
in  the  good  faith  opinion  of the  Borrower's  management  after  exercising
reasonable  business  judgment,  could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise),  operations,
prospects, or properties of the Borrower and its Subsidiaries taken as a whole;

     (k) promptly upon the aggregate value of all margin accounts established by
the  Borrower or any of its  Subsidiaries  with  respect to Hedging  Obligations
exceeding  $1,000,000,  written notice of the aggregate value of all such margin
accounts;

     (l)  such  other  information   respecting  the  condition  or  operations,
financial or otherwise,  of the Borrower and its Subsidiaries as any Bank or the
Issuer  through  the  Administrative  Agent  may  from  time to time  reasonably
request; and

     (m) Reserve Reports.

     (i) On or before April 1 of each calendar year,  commencing  April 1, 2003,
at the Borrower's  expense,  Reserve  Reports  prepared by an Approved  Engineer
dated as of December 31 of the preceding year; and

     (ii) On or before  October 1 of each calendar year,  commencing  October 1,
2002, at the Borrower's expense,  Reserve Reports prepared by the Borrower dated
as of June 30 of such year;


                                       56
<PAGE>

     SECTION 7.1.2.  Compliance  with Laws,  Maintenance of Existence,  etc. The
Borrower will and will cause each Material  Restricted  Subsidiary to (a) comply
in all material  respects  with all  applicable  laws,  rules,  regulations  and
orders,  (b) do all things  necessary  and proper to maintain  and  preserve its
respective  corporate or other  existence and  franchises  and privileges in the
jurisdiction  of its  formation  and quality and remain  qualified  as a foreign
entity  authorized  to do business in each  jurisdiction  where it has Assets or
properties or conducts  business  except where a failure to so qualify or remain
qualified  would not reasonably be expected to have a Material  Adverse  Effect;
and (c) pay,  before the same  become  delinquent,  all taxes,  assessments  and
governmental  charges  imposed upon it or upon its property except to the extent
being  diligently  contested in good faith by  appropriate  proceedings  and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books. The Borrower will conduct,  and will cause each Restricted  Subsidiary to
conduct, its business in an orderly and efficient manner in accordance with good
business practices.

     SECTION 7.1.3.  Maintenance of Properties.  The Borrower, in its reasonable
business judgment,  and in the ordinary conduct of its business,  will, and will
cause each Restricted  Subsidiary to, maintain,  preserve,  protect and keep its
respective  properties  in good repair,  working order and  condition,  and make
necessary and proper  repairs,  renewals and  replacements  so that its business
carried on in connection therewith may be properly conducted at all times unless
the Borrower  determines in good faith that the continued  maintenance of any of
its properties is no longer economically desirable.

     SECTION  7.1.4.  Insurance.  The  Borrower  will  maintain  or  cause to be
maintained with responsible  insurance  companies  insurance with respect to its
and its Restricted Subsidiaries' properties and business against such casualties
and  contingencies  and of such types and in such amounts as is customary in the
case of similar  businesses  in similar  locales and will,  upon  request of the
Administrative Agent, furnish to each Bank at reasonable intervals a certificate
of an  Authorized  Officer  setting forth the nature and extent of all insurance
maintained  by the Borrower in  accordance  with this  Section.  Each  insurance
policy covering  Collateral  Property shall provide that such policy will not be
canceled or reduced without 30 days' prior written notice to the  Administrative
Agent.  In the event an Event of Default occurs and continues for a period of 90
days, the Borrower will cause,  within 5 days,  each insurance  policy  covering
Collateral  Property to name the Collateral Agent as additional insured and loss
payee for the benefit of itself, the other Agents, the Banks and the Issuer.

     SECTION  7.1.5.  Books and Records.  The  Borrower  will and will cause its
Restricted  Subsidiaries to keep books and records which accurately  reflect all
of its business affairs and transactions and permit the Administrative Agent and
each Bank or any of their  respective  representatives,  at reasonable times and
intervals,  to visit all of its offices,  to discuss its financial  matters with
its  officers  and  independent  public  accountant  (and  the  Borrower  hereby
authorizes such independent  public accountant with prior notice to the Borrower
and an  opportunity to attend,  to discuss the Borrower's and its  Subsidiaries'
financial matters with each Bank or its representatives) and to examine (and, at
the expense of the Borrower,  photocopy extracts from) any of its or their books
or other  records.  The Borrower shall pay any fees of such  independent  public
accountant incurred in connection with the Administrative  Agent's or any Bank's
exercise of its rights pursuant to this Section.


                                       57
<PAGE>

     SECTION 7.1.6.  Consummation  the Merger.  The Borrower agrees to cause its
Subsidiaries  to take and  complete  not later than the close of business on the
Effective  Date all  actions  necessary  to  effectuate  the merger  transaction
between Pintail Energy,  Inc. and Prize described in the Prize Merger Agreement,
which actions shall include,  but not be limited to, (a) the satisfaction of all
of the conditions set forth in article 6 of the Prize Merger  Agreement  (unless
such  condition  is amended or the  satisfaction  of such  condition  is validly
waived by the parties to the Prize Merger  Agreement  and, if the condition that
is being  amended or waived is  material  in the  opinion of the  Administrative
Agent,  the  Administrative  Agent shall have consented in advance in writing to
such  amendment or waiver) and (b) the filing of a  certificate  of ownership in
the appropriate office in the State of Delaware, which certificate shall provide
an effective date for such merger transaction not later than the Effective Date.
The Borrower  further agrees to cause evidence of the filing of the  certificate
effectuating such merger transaction to be delivered to the Administrative Agent
not later than the close of business on the Effective Date and to provide to the
Administrative Agent an opinion of counsel to the surviving entity substantially
in the form of  Exhibit  L.  Concurrently  with the  consummation  of the  Prize
Merger,  the Borrower  shall delist all  securities of Prize other than warrants
for common  stock of Prize from any national  exchange on which such  securities
have heretofore been listed and shall promptly deliver a Pledge Agreement to the
Administrative  Agent,  pursuant to which the Borrower shall have pledged all of
the shares of common stock of Prize.

     SECTION 7.1.7. Agreement to Deliver Security Documents. The Borrower agrees
to and will cause its Restricted Subsidiaries to deliver promptly:

     (a) to further secure the Obligations  whenever requested by the Collateral
Agent or the Administrative  Agent in good faith, Pledge Agreements,  Mortgages,
mortgages,  deeds, deeds of trust,  security agreements,  financing  statements,
continuation  statements,  extensions agreements and other similar agreements or
instruments  (in addition to those required to be delivered  under Article V) in
form and substance  satisfactory to the Collateral  Agent or the  Administrative
Agent in good faith for the purpose of granting, confirming and perfecting first
and prior liens or security  interests in any property which is at such time (i)
Collateral  Property or which was intended to be Collateral Property pursuant to
any Loan Document  previously  executed and not then released by the  Collateral
Agent, or (ii) Capital Stock or other ownership  interests in each Subsidiary of
the  Borrower;   provided,   however,  that  the  Borrower  and  the  Restricted
Subsidiaries  shall at all times  maintain in effect in favor of the  Collateral
Agent such  Mortgages as are  necessary to grant,  confirm and perfect first and
prior liens or security  interests  in at least 80% of the present  value of the
Proved  Reserves  (whether  developed  or  undeveloped);  and further  provided,
however,  that  in the  event  that  the  Hydrocarbon  Interests  on  which  the
Collateral Agent has a first priority  perfected Lien shall constitute less than
80%  of  the  present  value  of  the  Proved  Reserves  (whether  developed  or
undeveloped),  the  Borrower  shall  promptly  notify the  Collateral  Agent and
execute or cause to be executed additional  Mortgages necessary to increase such
percentage to at least 80%. The Borrower  shall cause each Person that becomes a
Material  Restricted  Subsidiary after the date hereof to execute and deliver to
the Collateral  Agent a counterpart of each of the Subsidiary  Pledge  Agreement
and  Subsidiary  Guaranty  Agreement  within 15 days after such Person becomes a
Restricted Subsidiary.  Contemporaneously with the execution and delivery of any
such counterpart of the Subsidiary Pledge Agreement,  the Borrower shall deliver
to the Collateral  Agent the original  certificates  evidencing all  outstanding
Capital Stock of such Restricted Subsidiary, together with stock


                                       58
<PAGE>

     powers relating  thereto duly executed in blank and such other documents as
the  Administrative  Agent may reasonably  request.  The Borrower also agrees to
deliver  whenever  requested by the  Collateral  Agent in good faith,  favorable
opinions (in addition to those  required to be delivered  under  Article V) from
legal counsel acceptable to the Administrative  Agent in good faith with respect
to any Collateral  Property  confirming that such Collateral Property is subject
to Security  Documents  securing  Obligations  that constitute and create legal,
valid and duly perfected Liens in such properties and interests and the proceeds
thereof, and covering such other matters as the Administrative Agent may request
in good faith; and

     (b) if requested by the  Administrative  Agent,  title opinions in form and
substance  reasonably  acceptable  to  the  Administrative  Agent  from  counsel
reasonably  acceptable  to the  Administrative  Agent with respect to any of the
Proved Reserves covered by a Mortgage or included in the Borrowing Base.

     SECTION 7.1.8.  Perfection and Protection of Security  Interests and Liens.
The Borrower will and will cause its  Subsidiaries  to from time to time deliver
or cause to be  delivered  to the  Collateral  Agent any  financing  statements,
continuation  statements,  extension  agreements and other  documents,  properly
completed and executed (and  acknowledged when required) by the relevant Person,
in  form  and  substance  satisfactory  to  the  Administrative  Agent  and  the
Collateral  Agent,  which the  Administrative  Agent requests for the purpose of
perfecting,  confirming  or  protecting  any Liens or other rights in Collateral
Property.

     SECTION 7.1.9. Compliance with Other Contractual Obligations.  The Borrower
shall,  and shall cause its Restricted  Subsidiaries,  to perform and observe in
all material  respects all of the  covenants  and  agreements  contained in each
contract or  agreement  to which it is a party that are provided to be performed
and observed on the part of such Person,  taking into account any grace  period,
and shall in the reasonable  business judgment of the Borrower diligently and in
good faith enforce, using appropriate procedures and proceedings, all of its and
its  Subsidiaries'  material  rights and remedies  under  (including  taking all
diligent  actions  required to collect  amounts owed to such Person by any other
parties thereunder) each such contract or agreement.

     SECTION 7.1.10.  Replacement  Notes.  If a Permitted 2002 Bond  Transaction
shall have been  consummated  after the Effective Date, then the Borrower agrees
to deliver  to the  Administrative  Agent for the  account of each Bank Notes in
replacement and substitution for any Notes delivered by the Borrower pursuant to
Section  5.1.2,  which Notes shall be dated the same date as the original  Notes
and shall be in an  aggregate  amount  equal to the Maximum  Facility  Amount as
reduced pursuant to Section 2.2(a).

     SECTION 7.2. Negative  Covenants.  The Borrower agrees with each Agent, the
Issuer  and each  Bank  that,  until all  Commitments  have  terminated  and all
Obligations  have been paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.2.

     SECTION  7.2.1.  Business  Activities.  The Borrower  will not and will not
permit its Restricted  Subsidiaries to engage in any business  activity,  except
the Oil and Gas Business.


                                       59
<PAGE>

     SECTION 7.2.2. Indebtedness.  The Borrower will not and will not permit its
Restricted Subsidiaries to create, incur, assume or suffer to exist or otherwise
become  or be  liable  in  respect  of any  Indebtedness,  other  than,  without
duplication, the following:

     (a) Indebtedness in respect of the Loans and other Obligations;

     (b) until the date of the initial  Borrowing,  Indebtedness  identified  in
Item 7.2.2(b) ("Indebtedness to be Repaid") of the Disclosure Schedule;

     (c)  Indebtedness  existing as of the Effective Date which is identified in
Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule;

     (d)  unsecured   accounts  payable  by  the  Borrower  and  its  Restricted
Subsidiaries  incurred  in the  ordinary  course  of  business  (including  open
accounts  extended  by  suppliers  on  normal  trade  terms in  connection  with
purchases of goods and services, but excluding Indebtedness incurred through the
borrowing of money or Contingent Liabilities);

     (e) Trade Guarantees;

     (f)  Indebtedness  subordinate  to  the  Obligations  on  terms  reasonably
satisfactory to the  Administrative  Agent (such approval not to be unreasonably
withheld)  payable (i) solely in common stock of the Borrower or such Restricted
Subsidiary,  or (ii) in cash or common stock of the Borrower or such  Restricted
Subsidiary at the sole option of the obligor thereof,  provided that neither the
Borrower nor any Restricted  Subsidiary shall make aggregate cash payments after
the date  hereof  with  respect to such  Indebtedness  in an amount in excess of
$5,000,000;

     (g) unsecured Indebtedness of the Borrower or any Restricted Subsidiary, in
respect of  performance  bonds,  surety  bonds,  and appeal bonds issued for its
account, in each case in the ordinary course of business;

     (h) Indebtedness  not otherwise  permitted under this Section 7.2.2 that is
created,  incurred or assumed  after the  Effective  Date which is in respect of
Capitalized  Lease Liabilities or sales leaseback  transactions  covering assets
sold and then leased back;  provided  that the aggregate  outstanding  principal
amount of all such Indebtedness does not exceed  $17,500,000 in the aggregate at
any one time  outstanding  for all such  Indebtedness  of the  Borrower  and the
Restricted Subsidiaries;

     (i) unsecured  Indebtedness  of the Borrower or any  Restricted  Subsidiary
owing to the Borrower or to any other Restricted  Subsidiary  provided that such
other Restricted Subsidiary is also a Guarantor;

     (j) Indebtedness  not otherwise  permitted under this Section 7.2.2 that is
created,  incurred or assumed after the Effective Date by the Borrower or one or
more  Restricted  Subsidiaries  to a vendor  of any  equipment  to  finance  its
acquisition  of such equipment and costs  associated  with placing such acquired
equipment in service;  provided that the aggregate  outstanding principal amount
of all such Indebtedness does


                                       60
<PAGE>

     not exceed  $25,000,000 at any time  outstanding and provided  further that
the recourse of the vendor shall be limited to the equipment so acquired;

     (k) [Intentionally Omitted];

     (l) [Intentionally Omitted];

     (m) unsecured  Indebtedness of the Borrower or a Restricted Subsidiary owed
to a Person or Persons not otherwise  permitted under this Section 7.2.2 that is
created,  incurred  or  assumed  after the  Effective  Date;  provided  that the
aggregate  principal amount of such Indebtedness shall not exceed $20,000,000 at
any  time  outstanding;  further  provided  that  if the  Person  to  whom  such
Indebtedness is owed is an Unrestricted Subsidiary, such Indebtedness shall not,
without the prior express written consent of the Majority Banks, accrue interest
at a rate  exceeding  the rate of  interest  at which the  Borrower  could  have
borrowed  Base Rate  Loans or LIBO Rate  Loans,  whichever  is less,  under this
Agreement  on the  date on  which  the  borrower  or its  Restricted  Subsidiary
incurred such Indebtedness;

     (n) Indebtedness incurred under any Permitted 2002 Bond Transaction; and

     (o)  reimbursement  obligations  owing to Fleet National Bank in respect of
the Chevron L/C.

     provided,  however, that no additional  Indebtedness otherwise permitted by
clauses (f),  (h),  (i), (j), (k), (l) or (m) shall be incurred if, after giving
effect to the  incurrence  thereof,  any Default or Event of Default  shall have
occurred and be continuing.

     SECTION 7.2.3.  Liens. The Borrower will not and will not permit any of its
Restricted  Subsidiaries  to create,  incur,  assume or suffer to exist any Lien
upon any of its  property,  revenues or assets,  whether now owned or  hereafter
acquired, except:

     (a) Liens securing  payment of the Obligations and any Hedging  Obligations
owed to a Bank,  an Agent,  or the  Issuer  or any  Affiliate  thereof,  granted
pursuant to any Security Document;

     (b) Liens granted to secure payment of  Indebtedness  of the type permitted
and  described in Section  7.2.2(h)  and (j) and  covering  only those assets or
equipment,  as the case may be,  acquired or financed  with the proceeds of such
Indebtedness;

     (c) Liens for taxes,  assessments or other  governmental  charges or levies
not at the  time  delinquent  or being  diligently  contested  in good  faith by
appropriate  proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;

     (d) Liens of carriers, warehousemen,  mechanics, materialmen, landlords and
other  like Liens  incurred  in the  ordinary  course of  business  for sums not
overdue or being diligently  contested in good faith by appropriate  proceedings
and for which  adequate  reserves  in  accordance  with GAAP shall have been set
aside on its books;

                                       61
<PAGE>

     (e) Liens  incurred in the ordinary  course of business in connection  with
workmen's  compensation,  unemployment  insurance or other forms of governmental
insurance or benefits;

     (f) judgment  Liens  resulting from a judgment or order to pay money not in
excess of $2,500,000 above applicable  insurance  coverage  rendered against the
Borrower or any  Restricted  Subsidiary  (or, in the event the  Borrower or such
Restricted  Subsidiary  shall have an  indemnity  reasonably  acceptable  to the
Majority  Banks from a Person  satisfactory  to the Majority Banks (which Person
acknowledges  in writing its  liability  for such  indemnity) in respect of such
judgment,  decree or order for the payment of money,  if after giving  effect to
such  indemnity,  the Borrower's or such  Restricted  Subsidiary's  liability in
respect of such judgment, decree or order is not in excess of $2,500,000, as the
case may be) and neither  enforcement  proceedings  shall have been commenced by
any creditor upon such  judgment or order,  nor shall there have been any period
of 30  consecutive  days during which a stay of  enforcement of such judgment or
order,  by  reason  of a pending  appeal  or  otherwise,  shall not have been in
effect;

     (g)   easements,   rights-of-way,    servitudes,   permits,   reservations,
exceptions,  covenants and other restrictions as to the use of real property and
other similar  encumbrances  incurred in the ordinary  course of business which,
with respect to all of the foregoing,  do not secure the payment of Indebtedness
and which,  in the aggregate,  are not substantial in amount and which do not in
any case materially  detract from the value of the Hydrocarbon  Interest subject
thereto or materially interfere with the ordinary conduct of the business of the
Borrower;

     (h) defects,  irregularities and deficiencies in the title to any rights of
way or any  Hydrocarbon  Interest of the Borrower or any  Restricted  Subsidiary
which in the aggregate do not materially impair the use of such rights of way or
any  Hydrocarbon  Interest for the purposes for which such rights of way and any
other Hydrocarbon Interest are held by such Person, and defects,  irregularities
and  deficiencies  in title to any  Hydrocarbon  Interest of the Borrower or any
Restricted Subsidiary,  which defects,  irregularities or deficiencies have been
cured by possession under applicable statutes of limitations;

     (i) royalties,  overriding  royalties and revenue interests,  provided that
the value of the  Hydrocarbon  Interests  shown on the Reserve Reports is net of
such Liens;

     (j) any Lien securing  Indebtedness,  neither assumed nor guaranteed by the
Borrower or any Restricted Subsidiary nor on which it customarily pays interest,
existing  upon real estate or rights in or  relating to real estate  acquired by
such Obligor for substation,  metering station, pump station,  storage gathering
line,   transmission  line,   transportation  line,  distribution  line  or  for
right-of-way  purposes,  and any  Liens  reserved  in  leases  for  rent and for
compliance with the terms of the leases in the case of leasehold estates, to the
extent that any such Lien  referred  to in this  clause (j) does not  materially
impair the use or value of the  property  subject to such Lien for the  purposes
for which such property is held;

                                       62
<PAGE>

     (k) Liens  arising out of all  presently  existing and future  division and
transfer  orders,   advance  payment  agreements,   processing  contracts,   gas
processing plant  agreements,  operating  agreements,  gas balancing or deferred
production  agreements,  pooling,  unitization  or  communitization  agreements,
pipeline, gathering or transportation agreements,  platform agreements, drilling
contracts,   injection   or   repressuring   agreements,   cycling   agreements,
construction  agreements,  salt water or other  disposal  agreements,  leases or
rental agreements, farm-out and farm-in agreements,  exploration and development
agreements, and any and all other contracts or agreements covering, arising out,
used or useful in connection with or pertaining to the exploration, development,
operation,  production,  sale, use,  purchase,  exchange,  storage,  separation,
dehydration,  treatment,  compression,  gathering,  transportation,  processing,
improvement, marketing, disposal, or handling of any Hydrocarbon Interest of the
Borrower or any Restricted  Subsidiary provided that such agreements are entered
into in the ordinary  course of business and contain  terms  customary  for such
agreements in the industry and provided  further that no Liens described in this
paragraph (k) shall be granted or created in connection  with the  incurrence of
Indebtedness;

     (l)  customary  preferential  rights to purchase and calls on production by
sellers  relating  to  Hydrocarbon  Interests  acquired  by the  Borrower or any
Restricted Subsidiary after the Effective Date;

     (m) Liens on required  margin  collateral in accounts  which secure Hedging
Obligations;  provided,  that the  obligations  secured by such Liens  shall not
exceed $20,000,000 in the aggregate;

     (n) Liens  existing as of the  Effective  Date which is  identified in Item
7.2.3(n) ("Existing Liens") of the Disclosure Schedule;

     (o) Liens securing performance of bids, tenders, trade contracts, statutory
obligations,  return  of money  bonds  and other  obligations  of a like  nature
incurred in the ordinary course of business (all of the foregoing other than for
Indebtedness) or to secure  obligations on surety or appeal bonds, not to exceed
$2,500,000 in the aggregate  for all such  obligations  secured by such Liens at
any one time outstanding; and

     (p) Liens arising solely by virtue of any statutory or common law provision
relating to banker's liens,  rights of set-off or similar rights and remedies as
to  deposit  accounts  or other  funds  maintained  with a  creditor  depository
institution;  provided,  that (i) such deposit  account is not a dedicated  cash
collateral  account and is not  subject to  restrictions  against  access by the
Borrower  or  any  Restricted  Subsidiary  in  excess  of  those  set  forth  by
regulations  promulgated by the F.R.S.  Board,  and (ii) such deposit account is
not  intended by the Borrower or any  Subsidiary  to provide  collateral  to the
depository institution.

     SECTION 7.2.4. Financial Condition. The Borrower will not permit:

     (a) its  Funded  Debt to  EBITDA  Ratio to be more  than 3.5 to 1.0 for any
consecutive four-Fiscal Quarter period ending after September 30, 2001, provided
that

                                       63
<PAGE>

     the  Borrower,  the  Administrative  Agent and the Banks agree that the pro
forma  Consolidated  EBITDA shall equal  $35,700,000.00  for the Fiscal  Quarter
ending December 31, 2001, $44,700,000.00 for the Fiscal Quarter ending September
30,  2001,  $55,200,000.00  for the Fiscal  Quarter  ending June 30,  2001,  and
$69,700,000.00 for the Fiscal Quarter ending March 31, 2001;

     (b) Consolidated Interest Coverage Ratio to be less than 2.5 to 1.0 for any
four-Fiscal  Quarter  period  ending  on the  last  day of any  Fiscal  Quarter,
provided that the Borrower,  the  Administrative  Agent and the Banks agree that
the pro forma  Consolidated  EBITDA  shall  equal the  amounts  set forth in the
preceding  clause (a) of this  Section  7.2.4 and the pro forma  Total  Interest
Expense shall equal  $12,200,000.00  for the Fiscal Quarter ending  December 31,
2001,   $12,200,000.00  for  the  Fiscal  Quarter  ending  September  30,  2001,
$12,200,000.00  for the Fiscal Quarter ending June 30, 2001, and  $12,200,000.00
for the Fiscal Quarter ending March 31, 2001; or

     (c) the  Current  Ratio to be less than 1.0 to 1.0 at the end of any Fiscal
Quarter.

     SECTION 7.2.5.  Investments.  The Borrower will not and will not permit any
Restricted  Subsidiary  to, make,  incur,  or assume any Investment in any other
Person except as provided in this Section 7.2.5:

     (a)  Investments  existing on the  Effective  Date and  identified  in Item
7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule;

     (b) Investments permitted as Indebtedness pursuant to Section 7.2.2;

     (c) extensions of trade credit in the ordinary course of business;

     (d) Investments in Cash Equivalent Investments;

     (e) [Intentionally Omitted];

     (f)  Investments  in  joint  ventures  made  pursuant  to  exploration  and
development  activity in the ordinary  course of business of the Borrower or any
Restricted Subsidiaries;

     (g)  the  endorsement  of  negotiable  instruments  for  collection  in the
ordinary course of business;

     (h) the  acquisition  of the Capital  Stock or securities of a Wholly Owned
Restricted Subsidiary;

     (i)  Investments  made with common stock of the Borrower or any  Restricted
Subsidiary,  provided that any such  Investment  shall not result in a Change in
Control;

     (j) [Intentionally Omitted]; and

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     (k) so long as no Default has  occurred  and is  continuing  and so long as
after giving effect  thereto  Borrowing  Base Usage is not greater than 80%, the
Borrower may make Investments not otherwise  permitted  pursuant to this Section
7.2.5 not to  exceed  $20,000,000  in the  aggregate  for all such  Investments;
provided that if the Borrower or any of its Restricted  Subsidiaries  shall have
made any Investments  pursuant to this clause (k) and the Borrower or any of its
Restricted  Subsidiaries  shall  thereafter  receive any dividends or returns of
capital from an  Unrestricted  Subsidiary  (but expressly  excluding any amounts
received  as loans  pursuant  to Section  7.2.2(m)),  then the amount  available
thereafter  to the  Borrower  and its  Restricted  Subsidiaries  for  additional
Investments  pursuant to this clause (k) shall be increased dollar for dollar by
the amount of such  dividends  or  returns of capital up to a maximum  amount of
availability not to exceed $20,000,000 at any time;

     provided,  however,  that (i) any Investment  which when made complies with
the requirements of the definition of the term "Cash Equivalent  Investment" may
continue to be held  notwithstanding  that such  Investment  if made  thereafter
would  not  comply  with such  requirements;  and (ii) no  Investment  otherwise
permitted by clause (k) shall be permitted to be made if,  immediately before or
after giving effect thereto, any Default or Event of Default shall have occurred
and be continuing.

     SECTION 7.2.6.  Restricted Payments,  etc. The Borrower shall not and shall
not permit any Restricted Subsidiary to (a) declare, pay or make any dividend or
distribution  (in cash,  property or  obligations) on any shares of any class of
the Borrower's Capital Stock (now or hereafter  outstanding) or on any warrants,
options or other  rights with  respect to any shares of any class of its Capital
Stock (now or  hereafter  outstanding)  other than  dividends  or  distributions
payable in the  Borrower's  common stock or warrants to purchase the  Borrower's
common stock or splitups or  reclassifications  of the Borrower's  Capital Stock
into additional or other shares of its common stock or apply any of its or their
funds,  property or assets to the  purchase,  redemption,  sinking fund or other
retirement of, or purchase or redeem,  any shares of any class of the Borrower's
Capital  Stock (now or hereafter  outstanding),  or  warrants,  options or other
rights  with  respect  to any shares of any class of its  Capital  Stock (now or
hereafter  outstanding);  (b) except as  expressly  permitted  in writing by the
Administrative Agent with the consent of the Majority Banks, make any payment or
prepayment of principal of, or make any payment of interest on, any Indebtedness
on any day other than the stated,  scheduled date for such payment or prepayment
set forth in the documents and instruments  memorializing such Indebtedness,  or
which would violate the subordination  provisions of any Subordinated  Debt; (c)
redeem, purchase or defease, any Subordinated Debt; and (d) make any deposit for
any  of  the  foregoing  purposes  (collectively,  the  "Restricted  Payments");
provided,  however,  that so long as no Default is continuing  and, after giving
effect to any such  payment,  Borrowing  Base Usage is not greater than 80%, the
Borrower and its Restricted  Subsidiaries may make payments otherwise prohibited
by the  foregoing  clauses (a), (b) and (c) so long as the aggregate of all such
payments  does not  exceed  the sum of (A)  $20,000,000,  plus  (B)  twenty-five
percent (25%) of the Borrower's  consolidated net income,  to be calculated on a
cumulative  basis,  for each Fiscal Year  commencing with the Fiscal Year ending
December 31, 2001, minus (C) if the Borrower's  consolidated net income shall be
a loss, one hundred percent (100%) of the Borrower's  consolidated  net loss, to
be calculated on a cumulative  basis,  for each Fiscal Year  commencing with the
Fiscal Year ending December 31, 2001, minus (D) all Investments made pursuant to

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     Section 7.2.5(k) minus (E) the sum of all Restricted Payments made pursuant
to this Section  7.2.6.  For purposes of this Section  7.2.6,  consolidated  net
income of the Borrower shall exclude the following  items:  (i) after-tax  gains
from the sale of assets or  abandonments  or  reserves  relating  thereto,  (ii)
after-tax items  classified as extraordinary  or nonrecurring  gains,  (iii) net
income of any Person  acquired in a "pooling of interests"  transaction  accrued
prior to the date such Person  becomes a Restricted  Subsidiary  or is merged or
consolidated with the Borrower or any Restricted Subsidiary, (iv) the net income
(but not loss) of any Restricted  Subsidiary to the extent that the  declaration
of dividends or similar  distributions  by that  Restricted  Subsidiary  of that
income is restricted by charter,  contract,  operation of law or otherwise,  (v)
the net income of any Person  other than a  Restricted  Subsidiary  in which the
Borrower or any Restricted  Subsidiary has an interest,  except to the extent of
cash  dividends or  distributions  actually paid to the Borrower or a Restricted
Subsidiary  by such Person,  (vi) income or loss  attributable  to  discontinued
operations  (including,  without limitation,  operations disposed of during such
period whether or not such  operations  were  classified as  discontinued),  and
(vii) any non-cash charges related to a ceiling test write-down under GAAP.

     SECTION 7.2.7.  Limitation on Baskets.  Notwithstanding the foregoing,  the
Borrower  will not and will not permit its  Restricted  Subsidiaries  to create,
incur,  assume or suffer to exist Indebtedness  otherwise  permitted pursuant to
Section 7.2.2(h),  (j), or (m), Restricted Payments otherwise permitted pursuant
to Section 7.2.6 or Investments otherwise permitted pursuant to Section 7.2.5(k)
to the extent that the aggregate of all such Indebtedness created,  incurred and
assumed as  permitted  by  Section  7.2.2(h),  (j),  and (m)  together  with the
Restricted  Payments made pursuant to Section 7.2.6  together with the aggregate
of all  Investments  made  pursuant  to  Section  7.2.5(k)  shall  exceed in the
aggregate at any time outstanding $50,000,000.

     SECTION 7.2.8. Consolidation,  Merger, etc. The Borrower will not, and will
not  permit  any  Restricted  Subsidiary  to,  become  a party  to a  merger  or
consolidation,  or purchase or otherwise acquire all or substantially all of the
business  or assets of any Person or all or  substantially  all of the shares or
other evidence of beneficial ownership of any Person, or wind-up,  dissolve,  or
liquidate;   provided,  however,  that:  (a)  the  Borrower  or  any  Restricted
Subsidiary  shall be permitted to become a party to a merger or consolidation or
acquire  all or  substantially  all  of  the  assets  of  any  Person  or all or
substantially all of the shares or other beneficial  ownership of any Person, so
long as (i) no Default is existing or would result therefrom,  (ii) the Borrower
has given the Administrative Agent at least 10 days prior notice of such merger,
consolidation   or   acquisition,   (iii)  the  Borrower  has  provided  to  the
Administrative  Agent  calculations  demonstrating the pro forma compliance with
all financial and other covenants contained herein,  after giving effect to such
merger,  consolidation  or  acquisition,  based on the most  recently  delivered
financial statements,  (iv) the total cash consideration paid in connection with
all such mergers,  consolidations,  or acquisitions is otherwise permitted to be
paid by  Section  7.2.5(k)  and any  Indebtedness  assumed  or  incurred  by the
Borrower or any  Restricted  Subsidiary  in  connection  with all such  mergers,
consolidations or acquisitions, is otherwise permitted to be incurred by Section
7.2.2, and (v) the Borrower or such Restricted Subsidiary (unless such merger is
with the  Borrower),  as the case may be, is the surviving  corporation  in such
merger or  consolidation;  and (b) any  Restricted  Subsidiary may be dissolved,
liquidated or merged into the Borrower or another Restricted Subsidiary, so long
as such

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     dissolution, liquidation or merger results in all assets of such Restricted
Subsidiary being owned by the Borrower or another Restricted Subsidiary.

     SECTION 7.2.9.  Disposition of Assets.  The Borrower will not sell,  lease,
assign, transfer, or otherwise dispose of any of its assets having a fair market
value in excess of $25,000,  or permit any  Restricted  Subsidiary to do so with
any of its assets,  except (a)  dispositions of Hydrocarbons and other inventory
in the ordinary course of business, (b) dispositions of obsolete,  damaged, worn
out or replaced  equipment,  (c) sales or  transfers of assets from a Restricted
Subsidiary or the Borrower to another Restricted Subsidiary or the Borrower, (d)
sales for cash or pursuant to a like-kind  exchange  (whether  such  exchange is
consummated  contemporaneously  or pursuant to a deferred exchange agreement) of
Oil and Gas Properties  (including  volumetric production payments but excluding
sales of assets pursuant to sale/leaseback  transactions  permitted  pursuant to
Section 7.2.2(h) hereof) having an aggregate fair market value of 10% or less of
the then current  Borrowing  Base during any fiscal year,  (e) sales for cash or
pursuant  to  a  like-kind   exchange  (whether  such  exchange  is  consummated
contemporaneously  or pursuant to a deferred exchange agreement) of other assets
having a fair market value of not more than  $2,500,000  during any fiscal year,
or (f) the assignment or termination of any Hedge Agreement.

     SECTION 7.2.10.  Transactions  with  Affiliates.  The Borrower will not and
will not permit any  Restricted  Subsidiary to enter into,  or cause,  suffer or
permit to exist any  arrangement  or  contract  with any  Affiliate  unless such
arrangement or contract is fair and equitable to the Borrower or such Restricted
Subsidiary,  as the  case  may be,  and is on  terms  no less  favorable  to the
Borrower  or such  Restricted  Subsidiary,  as the  case  may be,  than,  and is
otherwise, an arrangement or contract of the kind which would be entered into by
a prudent Person in the position of the Borrower or such  Restricted  Subsidiary
with a Person which is not one of its Affiliates except for

     (i) the payment of reasonable  and  customary  regular fees to directors of
the Borrower,

     (ii) loans and  advances (A) to officers,  directors  and  employees of the
Borrower or any Restricted  Subsidiary for travel,  entertainment and moving and
other relocation  expenses made in direct furtherance and in the ordinary course
of business of the Borrower or such Restricted  Subsidiary,  (B) to officers and
directors of the Borrower or any Restricted  Subsidiary as approved by the board
of directors of the Borrower, and (C) outstanding loans and advances existing as
of the Effective Date and identified in Item 7.2.10 ("Outstanding Loans") of the
Disclosure Schedule,

     (iii)  transactions in the ordinary course of business between the Borrower
and the Restricted Subsidiaries and between Restricted Subsidiaries,

     provided,  however,  the aggregate  principal  amount of loans and advances
made  pursuant  to clauses  (ii) (A) and (B) of this  sentence  shall not exceed
$500,000 at any one time outstanding.

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     SECTION 7.2.11. Negative Pledges, Restrictive Agreements, etc. The Borrower
will  not and  will not  permit  any  Restricted  Subsidiary  to enter  into any
agreement  (excluding this Agreement,  any other Loan Document and any agreement
governing any Indebtedness permitted either by clause (b) of Section 7.2.2 as in
effect on the Effective  Date and, with respect to clause (a) below,  by clauses
(h) and (j) of Section 7.2.2 solely as to the assets  financed with the proceeds
of such  Indebtedness)  prohibiting  (a) the creation or  assumption of any Lien
upon its Oil and Gas Properties, whether now owned or hereafter acquired; or (b)
the ability of any Obligor to amend or  otherwise  modify this  Agreement or any
other Loan Document; or (c) the ability of any Restricted Subsidiary to make any
payments, directly or indirectly, to the Borrower by way of dividends, advances,
repayments  of  loans  or  advances,  reimbursements  of  management  and  other
intercompany charges, expenses and accruals or other returns on investments,  or
any other  agreement  or  arrangement  which  restricts  the ability of any such
Obligor to make any payment, directly or indirectly, to any other such Obligor.

     SECTION 7.2.12.  Limitation on Issuance of Subsidiaries' Capital Stock. The
Borrower will not and will not permit any of its Restricted  Subsidiaries to, at
any time issue, sell, assign, or otherwise dispose of (a) any of such Restricted
Subsidiary's  Capital Stock, (b) any securities  exchangeable for or convertible
into or  carrying  any rights to  acquire  any of such  Restricted  Subsidiary's
Capital Stock, or (c) any option, warrant, or other right to acquire any of such
Restricted  Subsidiary's  Capital  Stock;  provided,  however,  nothing  in this
Agreement of any of the Loan Documents shall restrict the Borrower or any of the
Restricted  Subsidiaries  from issuing  Capital Stock of the Borrower or Capital
Stock in a Restricted  Subsidiary which is convertible into Capital Stock of the
Borrower in  connection  with any purchase or  investment  in any Person that is
otherwise permitted under this Agreement.

     SECTION 7.2.13.  Environmental Protection.  The Borrower will not, and will
not permit any of its Restricted  Subsidiaries to, (a) use (or permit any tenant
to  use)  any of  their  respective  properties  or  assets  for  the  handling,
processing,  storage,  transportation,  or  disposal of any  Hazardous  Material
except in amounts that will not violate applicable law, (b) conduct any activity
that is  likely  to cause a  Release  or  threatened  Release  of any  Hazardous
Material,  or (c) otherwise  conduct any activity or use any of their respective
properties  or assets in any manner  that is likely in any  material  respect to
violate any Environmental Law or create any Environmental  Liabilities for which
the Borrower or any of its Subsidiaries would be responsible.

     SECTION 7.2.14.  Accounting. The Borrower will not, and will not permit any
of the Restricted Subsidiaries to, change its fiscal year or make any change (a)
in accounting treatment or material reporting  practices,  except as required by
GAAP  and  disclosed  to the  Administrative  Agent,  or  (b)  in tax  reporting
treatment, except as required by law and disclosed to the Administrative Agent.

     SECTION  7.2.15.   Hedge  Agreements.   The  Borrower  and  the  Restricted
Subsidiaries  have not entered and shall not enter into Hedge  Agreements of the
type  described  in clause (ii) of the  definition  thereof,  provided  that the
Borrower and the  Restricted  Subsidiaries  may enter into (a) Hedge  Agreements
which  provide for a floor,  but not a cap in an amount not to exceed during any
calendar year 100% of the  Borrower's  and the  Restricted  Subsidiaries'  total
projected  production  from  Oil and Gas  Properties,  which  constitute  Proved
Producing  Reserves for such

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<PAGE>

     year, and (b) Hedge  Agreements  which provide for a cap  (including  fixed
price swaps), provided such Hedge Agreements shall not cover during any calendar
year more than 75% of the  Borrower's  and the  Restricted  Subsidiaries'  total
projected  production  from  Oil  and Gas  Properties  which  constitute  Proved
Producing Reserves for such year; provided that (x) such Hedge Agreements have a
tenor of no more than three (3) years from the date of such Hedge Agreement; (y)
such  Hedge   Agreements  shall  be  with   counterparties   acceptable  to  the
Administrative Agent; and (z) for purposes hereof the Banks and their respective
Affiliates and ChevronTexaco,  Inc., Morgan Stanley Dean Witter,  Inc., J. Aron,
Inc., and Cinergy Corp. and their  respective  Affiliates  shall be deemed to be
acceptable counterparties. Such projections shall, at all times, be equal to the
projections  set out in the most current  Reserve  Report then available for the
Borrower's  and  the  Restricted  Subsidiaries'  Oil and  Gas  Properties  which
constitute Proved Producing Reserves.

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

     SECTION 8.1. Listing of Events of Default.  Each of the following events or
occurrences  described  in this  Section  8.1  shall  constitute  an  "Event  of
Default".

     SECTION 8.1.1.  Non-Payment of Obligations.  Any Obligor shall default (and
such default shall  continue  unremedied  for a period of three (3) days) in the
payment  or  prepayment  when due of any  principal  of any Loan  including  any
Required  Deficiency  Payment,  or in the  payment  when  due  of any  interest,
commitment fee or of any other Obligation.

     SECTION 8.1.2. Breach of Representation or Warranty.  Any representation or
warranty of any Obligor made or deemed to be made hereunder or in any other Loan
Document  executed by it or any other writing or certificate  furnished by or on
behalf of any Obligor to the any Agent,  the  Arrangers,  the Issuer or any Bank
for the purposes of or in connection  with this Agreement or any such other Loan
Document  (including  any  certificates  delivered  pursuant to Article V) is or
shall be false or in any material respect incorrect when made or deemed made.

     SECTION 8.1.3.  Non-Performance  of Certain Covenants and Obligations.  The
Borrower  shall  default in the due  performance  and  observance  of any of its
obligations under Section 7.1.1(e), 7.1.2(b), 7.1.5, 7.2.2, 7.2.4, 7.2.5, 7.2.6,
7.2.8, 7.2.9 7.2.12, 7.2.13, or 7.2.15.

     SECTION 8.1.4.  Non-Performance  of Other  Covenants and  Obligations.  Any
Obligor  shall  default  in the due  performance  and  observance  of any  other
agreement  contained  herein or in any other Loan  Document  executed by it, and
such  default  shall  continue  unremedied  for a period of 10 days after notice
thereof shall have been given to such Obligor by the Administrative Agent or the
Issuer.

     SECTION 8.1.5. Default on Other Indebtedness.  A default shall occur in the
payment  when  due  (subject  to  any  applicable  grace  period),   whether  by
acceleration  or otherwise,  of any  Indebtedness  the amount of which  exceeds,
either  individually or in the aggregate,  $5,000,000  (other than  Indebtedness
described in Section 8.1.1) of the Borrower,  any  Restricted  Subsidiary or any
Obligor,  or a default  shall  occur in the  performance  or  observance

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<PAGE>

     of any  obligation or condition with respect to such  Indebtedness,  if the
effect of such default is to accelerate the maturity of any such Indebtedness or
such  default  shall  continue  unremedied  for any  applicable  period  of time
sufficient to permit the holder or holders of such  Indebtedness  or any trustee
or agent for such holders,  to cause such  Indebtedness to become or be declared
due and payable prior to its expressed maturity.

     SECTION 8.1.6. Judgments. Any judgment or order for the payment of money in
excess of  $5,000,000  above  applicable  insurance  coverage  shall be rendered
against the Borrower, any Restricted Subsidiary or any Obligor (or, in the event
the Borrower, such Restricted Subsidiary or such Obligor shall have an indemnity
reasonably  acceptable to the Majority Banks from a Person  satisfactory  to the
Majority  Banks (which  Person  acknowledges  in writing its  liability for such
indemnity)  in  respect  of such  judgment,  decree or order for the  payment of
money, if after giving effect to such indemnity, the Borrower's, such Restricted
Subsidiary's or Obligor's liability in respect of such judgment, decree or order
is in excess  of  $5,000,000,  as the case may be) and  either  (a)  enforcement
proceedings  shall have been  commenced  by any creditor  upon such  judgment or
order;  or (b) there shall be any period of 30  consecutive  days during which a
stay of enforcement of such judgment or order,  by reason of a pending appeal or
otherwise, shall not be in effect.

     SECTION 8.1.7.  Pension Plans. Any of the following events shall occur with
respect to any Pension Plan: (a) the institution of any steps by the Borrower or
any  Restricted  Subsidiary,  any  member of its  Controlled  Group or any other
Person to  terminate  a Pension  Plan if, as a result of such  termination,  the
Borrower or any  Restricted  Subsidiary  or any such member could be required to
make a contribution to such Pension Plan, or could reasonably  expect to incur a
liability or obligation to such Pension Plan, in excess of $5,000,000;  or (b) a
contribution  failure occurs with respect to any Pension Plan sufficient to give
rise to a Lien under Section 302(f) of ERISA.

     SECTION 8.1.8. Change of Control. Any Change in Control shall occur.

     SECTION 8.1.9.  Bankruptcy,  Insolvency,  etc. The Borrower, any Restricted
Subsidiary  or any  Obligor  shall  (a) be  liquidated  or become  insolvent  or
generally  fail to pay, or admit in writing its  inability or  unwillingness  to
pay,  debts as they become due; (b) apply for,  consent to, or acquiesce in, the
appointment  of a trustee,  receiver,  sequestrator  or other  custodian for the
Borrower,  any  Restricted  Subsidiary  or any  Obligor or any  property  of any
thereof,  or make a general assignment for the benefit of creditors;  (c) in the
absence of such application, consent or acquiescence,  permit or suffer to exist
the appointment of a trustee, receiver,  sequestrator or other custodian for the
Borrower,  any Restricted Subsidiary or any Obligor or for a substantial part of
the property of any thereof, and such trustee,  receiver,  sequestrator or other
custodian  shall not be discharged  within 60 days,  provided that the Borrower,
each  Restricted  Subsidiary  and each Obligor hereby  expressly  authorizes the
Administrative  Agent, the Collateral  Agent, the Issuer and each Bank to appear
in any court  conducting  any relevant  proceeding  during such 60-day period to
preserve,  protect and defend their rights under the Loan Documents;  (d) permit
or  suffer  to  exist  the  commencement  of  any  bankruptcy,   reorganization,
liquidation,  debt  arrangement or other case or proceeding under any bankruptcy
or insolvency law, or any dissolution,  winding up or liquidation proceeding, in
respect of the Borrower,  any Restricted  Subsidiary or any Obligor, and, if any
such case or  proceeding  is not  commenced  by the

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<PAGE>

     Borrower,  such  Restricted  Subsidiary  or  such  Obligor,  such  case  or
proceeding or winding up shall be consented to or acquiesced in by the Borrower,
such Restricted  Subsidiary or such Obligor,  or shall result in the entry of an
order for relief or shall remain for 60 days undismissed, or (e) take any action
authorizing, or in furtherance of, any of the foregoing.

     SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any Lien
granted  thereunder,  shall  (except in accordance  with its terms),  terminate,
cease to be effective or cease to be the legally valid,  binding and enforceable
obligation of any Obligor party  thereto;  any Obligor or any other party shall,
directly  or  indirectly,  contest in any manner such  effectiveness,  validity,
binding  nature or  enforceability;  or any Lien securing any  Obligation  shall
cease to be a perfected  first priority Lien,  subject only to those  exceptions
expressly permitted by such Loan Document.

     SECTION 8.1.11. Attachment, etc. The Borrower, any Restricted Subsidiary or
any  Obligor  shall  fail to  discharge  within a period  of 30 days  after  the
commencement  thereof any attachment,  sequestration,  or similar  proceeding or
proceedings involving an aggregate amount in excess of $2,500,000 against any of
its assets or properties unless the Borrower, such Restricted Subsidiary or such
Obligor is in good faith contesting such action and taking  affirmative steps to
discharge the same, and adequate reserves have been set aside in accordance with
GAAP.

     SECTION 8.1.12.  Seizure, etc. The Borrower, any Restricted Subsidiary,  or
any  Obligor,  or any of  their  properties,  revenues,  or  assets  aggregating
$1,000,000  or  greater,  shall  become the  subject of an order of  forfeiture,
seizure, or divestiture (whether under RICO or otherwise) and the same shall not
have been discharged (or provisions shall not be made for such discharge) within
30 days from the date of entry thereof.

     SECTION  8.1.13.  Change  of  Control  Offer.  The  holders  of the  Senior
Unsecured  Debt shall  require the  Borrower to purchase all or a portion of the
notes  issued under  either or both of the  Indentures  pursuant to a "Change of
Control Offer" (as defined in each Indenture,  or if not defined  therein,  then
pursuant to the comparable defined term used therein).

     SECTION 8.2.  Action if  Bankruptcy.  If any Event of Default  described in
clauses (a) through (d) of Section 8.1.9 shall occur,  the  Commitments  (if not
theretofore  terminated)  shall  automatically  terminate  and  the  outstanding
principal  amount  of all  outstanding  Loans and all  other  Obligations  shall
automatically  be and become  immediately  due and  payable,  without  notice or
demand and the Borrower shall be obligated to deliver cash  collateral  pursuant
to Section 2.7.4.

     SECTION  8.3.  Action if Other  Event of  Default.  If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of Section
8.1.9  with  respect  to the  Borrower)  shall  occur  for any  reason,  whether
voluntary or involuntary,  and be continuing, the Administrative Agent, upon the
direction of the Majority Banks,  shall by notice to the Borrower declare all or
any  portion  of the  outstanding  principal  amount  of  the  Loans  and  other
Obligations to be due and payable without further notice, demand or presentment,
and/or  the  Commitments  (if  not  theretofore  terminated)  to be  terminated,
whereupon the full unpaid amount of such Loans and other Obligations which shall
be so declared due and payable shall be and become

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<PAGE>

     immediately  due and payable and the Borrower shall be obligated to deliver
cash collateral  pursuant to Section 2.7.4,  without  further notice,  demand or
presentment, and/or, as the case may be, the Commitments shall terminate.

                                   ARTICLE IX

                            THE AGENTS AND THE ISSUER

     SECTION  9.1.  Actions.  Each Bank  hereby  appoints  Bankers  Trust as its
Administrative  Agent and as its Collateral Agent under and for purposes of this
Agreement,  the Notes and each other Loan  Document.  Each Bank  authorizes  the
Administrative  Agent  and the  Collateral  Agent to act on  behalf of such Bank
under this Agreement, the Notes and each other Loan Document and, in the absence
of other written instructions from the Majority Banks received from time to time
by the  Administrative  Agent or the Collateral Agent (with respect to which the
Administrative Agent or the Collateral Agent agrees that it will comply,  except
as otherwise  provided in this Section or as otherwise  advised by counsel),  to
exercise such powers hereunder and thereunder as are  specifically  delegated to
or required of the  Administrative  Agent or the  Collateral  Agent by the terms
hereof and thereof,  together with such powers as may be  reasonably  incidental
thereto.  Each Bank  hereby  indemnifies  (which  indemnity  shall  survive  any
termination of this Agreement) the  Administrative  Agent,  the Collateral Agent
and the Issuer,  pro rata  according to such Bank's  Percentage,  whether or not
related to any singular,  joint or concurrent  negligence of the  Administrative
Agent and the  Collateral  Agent and the  Issuer,  from and  against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or  nature  whatsoever  which may at any time be  imposed  on,  incurred  by, or
asserted against,  the Administrative  Agent, the Collateral Agent or the Issuer
in any way relating to or arising out of this Agreement, the Notes and any other
Loan  Document,  including  reasonable  attorneys'  fees,  and as to  which  the
Administrative Agent, the Collateral Agent or the Issuer, as the case may be, is
not reimbursed by the Borrower;  provided, however, that no Bank shall be liable
for the  payment  of any  portion  of  such  liabilities,  obligations,  losses,
damages,  claims, costs or expenses which are determined by a court of competent
jurisdiction in a final non-appealable judgment to have resulted solely from the
Administrative   Agent's  or  the  Collateral  Agent's  or  the  Issuer's  gross
negligence or wilful misconduct. The Administrative Agent, the Collateral Agent,
and the Issuer  shall not be  required to take any action  hereunder,  under the
Notes or under any other Loan  Document,  or to  prosecute or defend any suit in
respect of this  Agreement,  the Notes or any other Loan Document,  unless it is
indemnified  hereunder  to its  satisfaction.  If any  indemnity in favor of the
Administrative  Agent,  the  Collateral  Agent or the Issuer  shall be or become
inadequate,  in  the  Administrative  Agent's,  the  Collateral  Agent's  or the
Issuer's  determination,  as the  case may be,  the  Administrative  Agent,  the
Collateral Agent or the Issuer may call for additional  indemnification from the
Banks  and  cease  to do the  acts  indemnified  against  hereunder  until  such
additional  indemnity is given.  Notwithstanding  any  provision to the contrary
contained  elsewhere  in this  Agreement  or in any  other  Loan  Document,  the
Administrative  Agent,  the  Collateral  Agent and the Issuer shall not have any
duties or  responsibilities,  except as  expressly  set  forth  herein,  and the
Administrative  Agent,  the Collateral Agent and the Issuer shall not have or be
deemed to have any fiduciary  relationship with any Bank or any other Agent, and
no  implied  covenants,  functions,  responsibilities,  duties,  obligations  or
liabilities  shall be read into this  Agreement  or any other Loan  Document  or
otherwise exist against any the  Administrative  Agent,  the Collateral Agent or
the Issuer.

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     SECTION 9.2. Funding Reliance,  etc. Unless the Administrative  Agent shall
have been notified by telephone, confirmed in writing, by any Bank by 5:00 p.m.,
New York  time,  on the day  prior to a  Borrowing  that such Bank will not make
available the amount which would  constitute its Percentage of such Borrowing on
the date specified therefor,  the Administrative Agent may assume that such Bank
has made such amount available to the Administrative Agent and, in reliance upon
such assumption,  make available to the Borrower a corresponding  amount. If and
to the extent  that such Bank shall not have made such amount  available  to the
Administrative  Agent,  such Bank and the Borrower  severally agree to repay the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon,  for each day from the date the Administrative Agent made such
amount  available  to the  Borrower  to the date  such  amount  is repaid to the
Administrative  Agent,  at the  interest  rate  applicable  at the time to Loans
comprising such Borrowing.

     SECTION 9.3.  Exculpation.  The Administrative  Agent, the Collateral Agent
and the Issuer and their  respective  directors,  officers,  employees or agents
shall not be liable to any Bank or any Agent or the Issuer for any action  taken
or omitted to be taken by it under this Agreement or any other Loan Document, or
in  connection  herewith or therewith,  except for its own wilful  misconduct or
gross  negligence as determined by a court of competent  jurisdiction in a final
non-appealable  judgment,  nor responsible for any recitals or warranties herein
or therein, nor for the effectiveness, enforceability, validity or due execution
of this Agreement or any other Loan Document,  nor for the creation,  perfection
or priority of any Liens  purported to be created by any of the Loan  Documents,
or the validity, genuineness, enforceability, existence, value or sufficiency of
any collateral  security,  nor to make any inquiry respecting the performance by
the Borrower of its obligations hereunder or under any other Loan Document.  Any
such inquiry which may be made by the Administrative Agent, the Collateral Agent
or the Issuer shall not  obligate it to make any further  inquiry or to take any
action.  Each of the  Administrative  Agent, the Collateral Agent and the Issuer
shall be entitled to rely upon advice of counsel  concerning  legal  matters and
upon  any  notice,  consent,   certificate,   statement  or  writing  which  the
Administrative  Agent, the Collateral Agent or the Issuer believes to be genuine
and to have been presented by a proper Person.

     SECTION  9.4.  Successor.  Subject to the  appointment  of a  successor  as
provided below, the  Administrative  Agent or the Collateral Agent may resign at
any time upon at least 30 days' prior notice to the  Borrower and all Banks.  If
the  Administrative  Agent or the Collateral Agent at any time shall resign,  so
long as no Event of Default shall have occurred and be continuing,  the Borrower
with the consent of the remaining  Agents (and if an Event of Default shall have
occurred and be continuing,  the Majority Banks) may appoint another a successor
Administrative  Agent or  Collateral  Agent  which  shall  thereupon  become the
Administrative Agent or Collateral Agent, respectively,  hereunder. In the event
the successor Administrative Agent or the Collateral Agent is not at the time of
its  appointment,  a Bank  hereunder,  so long as no Event of Default shall have
occurred and be continuing,  the Borrower shall have the right to consent to the
successor  Administrative  Agent or Collateral Agent, which consent shall not be
unreasonably  withheld  or  delayed.  If no  successor  Administrative  Agent or
Collateral  Agent shall have been so  appointed by the Borrower and the Majority
Banks,  and shall  have  accepted  such  appointment,  within 30 days  after the
retiring   Administrative   Agent's  or  Collateral  Agent's  giving  notice  of
resignation, then the retiring Administrative Agent or the Collateral Agent may,
on behalf of the Banks,  appoint a successor  Administrative Agent or Collateral
Agent,

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<PAGE>

     respectively,  which  shall  be one of the  Banks or a  commercial  banking
institution  organized  under the laws of the U.S.  (or any State  thereof) or a
U.S. branch or agency of a commercial banking institution, and having a combined
capital  and  surplus  of at  least  $100,000,000.  Upon the  acceptance  of any
appointment as Administrative Agent or Collateral Agent hereunder by a successor
Administrative Agent or Collateral Agent, such successor Administrative Agent or
Collateral  Agent shall be entitled to receive from the retiring  Administrative
Agent or  Collateral  Agent such  documents of transfer and  assignment  as such
successor  Administrative  Agent or Collateral Agent may reasonably request, and
shall thereupon succeed to and become vested with all rights, powers, privileges
and duties of the retiring  Administrative  Agent or Collateral  Agent,  and the
retiring   Administrative   Agent  shall  be  discharged  from  its  duties  and
obligations under this Agreement.  After any retiring  Administrative Agent's or
Collateral  Agent's  resignation   hereunder  as  the  Administrative  Agent  or
Collateral  Agent,  respectively,  the  provisions  of (a) this Article IX shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was the  Administrative  Agent or Collateral Agent under this Agreement;  and
(b) Section 10.3 and Section 10.4 shall continue to inure to its benefit.

     SECTION 9.5.  Extensions  of Credit by the Agents,  the  Arrangers  and the
Issuer.  Each of the Agents,  the  Arrangers  and the Issuer shall have the same
rights  and  powers  with  respect  to (x)  the  Loans  made by it or any of its
Affiliates,  and  (y)  the  Notes  held  by it or any of its  Affiliates  or any
interest in any Letter of Credit issued by it as any other Bank and may exercise
the same as if it were not an Agent,  the  Arrangers or the Issuer,  as the case
may be. Each of the Agents,  the Arrangers  and the Issuer and their  respective
Affiliates may accept deposits from, lend money to, and generally  engage in any
kind of business  with the  Borrower or  Affiliate of the Borrower as if it were
not an Agent, the Arrangers or the Issuer hereunder, as the case may be.

     SECTION  9.6.  Credit  Decisions.  Each  Bank  acknowledges  that  it  has,
independently of the Agents, the Arrangers,  the Issuer and each other Bank, and
based on such Bank's  review of the  financial  information  and  reserve  based
information of the Borrower and its Subsidiaries  (including Prize and the Prize
Subsidiaries),   this  Agreement,  the  other  Loan  Documents  (the  terms  and
provisions of which being  satisfactory to such Bank) and such other  documents,
information and investigations as such Bank has deemed appropriate, made its own
credit decision to extend its Commitment.  Each Bank also  acknowledges  that it
will,  independently  of the Agents,  the  Arrangers,  the Issuer and each other
Bank, and based on such other documents,  information and  investigations  as it
shall deem appropriate at any time, continue to make its own credit decisions as
to  exercising  or not  exercising  from time to time any rights and  privileges
available to it under this Agreement or any other Loan Document.

     SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt notice
to the  Collateral  Agent,  the Issuer  and each Bank of each  notice or request
required or  permitted to be given to the  Administrative  Agent by the Borrower
pursuant to the terms of this Agreement  (unless  concurrently  delivered to the
Issuer or the Banks by such Borrower).  The Administrative Agent will distribute
to the  Collateral  Agent,  the Issuer and each Bank each document or instrument
received for its account and copies of all other communications  received by the
Administrative Agent from the Borrower for distribution to the Collateral Agent,
the  Issuer and the Banks by the  Administrative  Agent in  accordance  with the
terms of this Agreement.

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     SECTION  9.8.   Documentation  Agent,   Syndication  Agent,  Arrangers  and
Bookrunner.  The Documentation  Agent, the Syndication  Agent, the Arrangers and
the   sole   bookrunner   shall   not   have   any   obligations,   liabilities,
responsibilities  or duties under this  Agreement  or the other Loan  Documents.
Without limiting the foregoing,  the Documentation Agent, the Syndication Agent,
the Arrangers,  and the sole bookrunner  shall not have or be deemed to have any
fiduciary  relationship with any Bank or any other Agent. Each Bank acknowledges
that it has not relied,  and will not rely, on any of the Banks so identified or
on the  Documentation  Agent,  the Syndication  Agent, the Arrangers or the sole
bookrunner  in deciding to enter into this  Agreement or in taking or not taking
action hereunder.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

     SECTION 10.1.  Waivers,  Amendments,  etc. The provisions of this Agreement
and of each other Loan  Document  may from time to time be amended,  modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the  Borrower  and  the  Majority  Banks;  provided,  however,  that  no such
amendment,  modification  or waiver  which  would:  (a) modify  any  requirement
hereunder  that  any  particular  action  be  taken  by all the  Banks or by the
Majority Banks shall be effective  unless  consented to by each Bank; (b) modify
this Section 10.1 or Section 2.8,  change the definition of "Majority  Banks" or
"Borrowing Base",  increase the Commitment Amount or the Percentage of any Bank,
reduce any fees described in Article III, release any collateral security except
that the  Collateral  Agent may release  Collateral  Property to the extent such
Collateral  Property is disposed of pursuant  to, and as permitted  by,  Section
7.2.9 of the this Agreement  (however,  nothing contained in this clause affects
the obligation of the Borrower to comply with Section  3.1(e)),  reduce or limit
the  Obligations  of any  Subsidiary  Guarantor  under the  Subsidiary  Guaranty
Agreement,  or extend the Commitment  Termination Date shall be made without the
consent of each Bank, and the Issuer;  (c) except as otherwise provided pursuant
to Section 2.9,  extend the due date for, or reduce the amount of, any scheduled
repayment  or  prepayment  of  principal of or interest on any Loan or any other
obligation  (or reduce the principal  amount of or rate of interest on any Loan)
shall be made  without  the  consent of each  Bank;  (d)  affect  adversely  the
interests,   rights  or  obligations  of  the   Administrative   Agent  qua  the
Administrative  Agent or the Collateral Agent qua Collateral Agent or the Issuer
qua the Issuer  (including  any change with  respect to the  obligations  of the
Borrower or the Banks with respect to the Letter of Credit Liabilities) shall be
made without consent of the  Administrative  Agent,  the Collateral Agent or the
Issuer,  as the case may be, or (e) modify  Section  10.4 without the consent of
the Issuer, the Administrative Agent, the Arrangers and each Bank. No failure or
delay on the part of any Agent,  any Bank,  the Issuer or the holder of any Note
in exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power or right  preclude any other or further  exercise  thereof or the
exercise of any other power or right.  No notice to or demand on the Borrower in
any  case  shall  entitle  it to any  notice  or  demand  in  similar  or  other
circumstances.  No waiver or approval by any Agent,  any Bank, the Issuer or the
holder of any Note under this Agreement or any other Loan Document shall, except
as may be  otherwise  stated  in such  waiver  or  approval,  be  applicable  to
subsequent  transactions.  No waiver or  approval  hereunder  shall  require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.

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<PAGE>

     SECTION 10.2. Notices. All notices and other communications provided to any
party hereto under this Agreement or any other Loan Document shall be in writing
or by facsimile and  addressed,  delivered or  transmitted  to such party at its
address or facsimile number set forth below its signature hereto or set forth in
the Bank  Assignment  Agreement or at such other address or facsimile  number as
may be designated by such party in a notice to the other parties. Any notice, if
mailed and properly  addressed with postage prepaid or if properly addressed and
sent by pre-paid  courier  service,  shall be deemed  given when  received;  any
notice, if transmitted by facsimile,  shall be deemed given when transmitted and
a receipt,  demonstrating  successful  transmission,  is received by the Sender.
Delivery by telecopier of an executed  counterpart of any amendment or waiver of
any provision of this Agreement or any other Loan Document shall be effective as
delivery of an original executed counterpart hereof.

     SECTION 10.3. Payment of Costs and Expenses.  The Borrower agrees to pay on
demand all  reasonable  expenses of the  Administrative  Agent,  the  Collateral
Agent,  the  Issuer  and  the  Arrangers  (including  the  reasonable  fees  and
out-of-pocket expenses of special New York counsel and of local counsel, if any,
who may be retained by said  counsel) in  connection  with (a) the  negotiation,
preparation,  execution  and delivery of this  Agreement  and of each other Loan
Document,  including  schedules  and  exhibits,  and  any  amendments,  waivers,
consents, supplements or other modifications to this Agreement or any other Loan
Document  as may from time to time  hereafter  be  required,  whether or not the
transactions contemplated hereby are consummated, and (b) the filing, recording,
refiling or  rerecording  of each of the Security  Documents  and/or any Uniform
Commercial  Code  financing  statements  relating  thereto  and all  amendments,
supplements and  modifications to any thereof and any and all other documents or
instruments of further assurance  required to be filed or recorded or refiled or
rerecorded  by the  terms  hereof  or of the  Security  Documents,  and  (c) the
preparation  and review of the form of any  document or  instrument  relevant to
this  Agreement or any other Loan  Document.  Each Bank agrees to reimburse  the
Administrative  Agent,  the  Collateral  Agent and the Issuer on demand for such
Bank's pro rata share (based upon its  respective  Percentage) of any such costs
or expenses not paid by the Borrower. The Borrower further agrees to pay, and to
save the Administrative  Agent, the Collateral Agent, the Arrangers,  the Issuer
and the Banks  harmless from all  liability  for, any stamp or other taxes which
may be payable in connection  with the execution or delivery of this  Agreement,
the  Borrowings  hereunder,  or the  issuance  of the  Notes or any  other  Loan
Documents.  The Borrower also agrees to reimburse the Administrative  Agent, the
Collateral  Agent and each Bank upon  demand  for all  reasonable  out-of-pocket
expenses (including  reasonable  attorneys' fees and legal expenses) incurred by
the  Administrative  Agent, the Collateral Agent or such Bank in connection with
(x)  the  negotiation  of  any  restructuring  or  "work-out",  whether  or  not
consummated, of any Obligations and (y) the enforcement of any Obligations.  All
such requests for payment shall be accompanied by invoices containing reasonable
detail. The Administrative Agent, the Collateral Agent, the Issuer and each Bank
agree to the extent feasible,  and to the extent a conflict of interest does not
exist  in  the  reasonable  opinion  of any of  the  Administrative  Agent,  the
Collateral  Agent,  the Issuer and the Banks or their  counsel,  to use the same
counsel (i.e. one law firm in each relevant jurisdiction) in connection with any
investigation, litigation or other proceeding under this Section 10.3.

     SECTION  10.4.  Indemnification.  In  consideration  of the  execution  and
delivery  of  this  Agreement  by  each  Bank,  the  Administrative  Agent,  the
Collateral Agent and the Issuer,  and the extension of the Commitments,  and the
arrangement of the facility represented by this

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<PAGE>

     Agreement by the Arrangers, the Borrower hereby indemnifies, exonerates and
holds the Administrative Agent, the Collateral Agent, the Arrangers,  the Issuer
and each Bank and each of their respective  officers,  directors,  employees and
agents  (collectively,  the  "Indemnified  Parties")  free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages,  and expenses  incurred in connection  therewith  (irrespective  of
whether  any  such  Indemnified  Party  is a  party  to  the  action  for  which
indemnification  hereunder is sought),  including reasonable attorneys' fees and
disbursements  (collectively,  the "Indemnified  Liabilities"),  incurred by the
Indemnified  Parties  or any of them as a  result  of,  or  arising  out of,  or
relating to (a) any transaction  financed or to be financed in whole or in part,
directly or  indirectly,  with the  proceeds of any  Borrowing  or any Letter of
Credit;  (b) the entering into and  performance  of this Agreement and any other
Loan  Document  by  any of  the  Indemnified  Parties;  (c)  any  investigation,
litigation or proceeding related to any environmental cleanup, audit, compliance
or other matter  relating to the protection of the environment or the Release by
the Borrower or any Subsidiary of any Hazardous Material; (d) the presence on or
under,  or  the  escape,  seepage,  leakage,  spillage,   discharge,   emission,
discharging  or  releases  from,  any real  property  owned or  operated  by the
Borrower or any  Subsidiary of any  Hazardous  Material  (including  any losses,
liabilities,  damages,  injuries,  costs, expenses or claims asserted or arising
under any  Environmental  Law);  or (e) any  misrepresentation  or inaccuracy or
breach of Section 6.12  regardless  of whether  caused by, or within the control
of, the Borrower or any Subsidiary; in each case except for any such Indemnified
Liabilities arising for the account of a particular  Indemnified Party by reason
of the relevant  Indemnified  Party's gross  negligence or wilful  misconduct as
determined  by a court  of  competent  jurisdiction  in a  final  non-appealable
judgment,  or such Indemnified  Party's own unexcused breach of any provision of
any Loan Document (as determined by the final non-appealable judgment of a court
of competent  jurisdiction),  PROVIDED  THAT IT IS THE  INTENTION OF THE PARTIES
HERETO  THAT THE  INDEMNIFIED  PARTIES BE  INDEMNIFIED  IN THE CASE OF THEIR OWN
NEGLIGENCE,  REGARDLESS  OF WHETHER  SUCH  NEGLIGENCE  IS SOLE OR  CONTRIBUTORY,
ACTIVE OR PASSIVE,  IMPUTED,  JOINT OR TECHNICAL.  If and to the extent that the
foregoing  undertaking may be unenforceable for any reason,  the Borrower hereby
agrees to make the maximum  contribution to the payment and satisfaction of each
of the Indemnified  Liabilities  which is permissible  under applicable law. The
Administrative  Agent,  the Collateral  Agent, the Issuer and each Bank agree to
the extent feasible,  and to the extent a conflict of interest does not exist in
the reasonable  opinion of the  Administrative  Agent, the Collateral Agent, the
Issuer and the Bank or their  counsel,  to use the same single counsel (i.e. one
law firm in each relevant  jurisdiction)  in connection with any  investigation,
litigation or other proceeding under this Section 10.4.

     SECTION 10.5. Survival. The obligations of the Borrower under Sections 4.3,
4.4,  4.5,  4.6,  9.3,  10.3 and 10.4,  and the  obligations  of the Banks under
Section 9.1, shall in each case survive any termination of this  Agreement,  the
payment in full of all Obligations and the termination of all  Commitments.  The
representations  and  warranties  made  by the  Borrower  or by  its  Restricted
Subsidiaries in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan Document.

     SECTION 10.6.  Severability.  Any provision of this  Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such  provision and such  jurisdiction,  be ineffective to the extent of such
prohibition or unenforceability without

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<PAGE>

     invalidating  the  remaining  provisions  of this  Agreement  or such  Loan
Document or affecting the validity or  enforceability  of such  provision in any
other jurisdiction.

     SECTION 10.7. Headings.  The various headings of this Agreement and of each
other Loan Document are inserted for  convenience  only and shall not affect the
meaning or  interpretation  of this Agreement or such other Loan Document or any
provisions hereof or thereof.

     SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This Agreement
may be executed by the parties hereto in several  counterparts and each of which
shall be deemed to be an original and all of which shall constitute together but
one  and  the  same  agreement.  This  Agreement  shall  become  effective  when
counterparts  hereof executed on behalf of the Borrower and each Bank (or notice
thereof  satisfactory to the  Administrative  Agent) shall have been received by
the  Administrative  Agent and  notice  thereof  shall  have  been  given by the
Administrative Agent to the Borrower and each Bank.

     SECTION 10.9.  Governing Law; Entire Agreement.  THIS AGREEMENT,  THE NOTES
AND EACH OTHER LOAN  DOCUMENT  SHALL EACH BE DEEMED TO BE A CONTRACT  MADE UNDER
AND GOVERNED BY, AND  CONSTRUED IN  ACCORDANCE  WITH,  THE INTERNAL  LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES  THEREOF  RELATING TO
CONFLICT OF LAW, EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
This  Agreement,  the Notes and the other Loan  Documents  constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.

     SECTION 10.10. Successors and Assigns. This Agreement shall be binding upon
and shall  inure to the  benefit  of the  parties  hereto  and their  respective
successors and assigns; provided, however, that: (a) the Borrower may not assign
or  transfer  its rights or  obligations  hereunder  without  the prior  written
consent  of the  Administrative  Agent,  the  Issuer  and all  Banks;  provided,
however,  that for purposes of this Section 10.10 if the survivor of a merger is
obligated in respect of all obligations of the Borrower  hereunder and under all
other Loan Documents,  a merger permitted pursuant to Section 7.2.8 hereof shall
not be an  assignment  or  transfer  of the  Borrower's  rights  or  obligations
hereunder;  and (b) the rights of sale, assignment and transfer of the Banks are
subject to Section 10.11.

     SECTION 10.11. Sale and Transfer of Loans and Note; Participations in Loans
and  Note.  Each  Bank may  assign,  or sell  participations  in,  its Loans and
Commitment to one or more other Persons in accordance with this Section 10.11.

     SECTION  10.11.1.  Assignments.  Any Bank, (a) with the written consents of
the  Administrative  Agent, the Issuer and, so long as no Event of Default shall
have  occurred and be  continuing,  the Borrower  (which  consents  shall not be
unreasonably  delayed or withheld) may at any time assign and delegate to one or
more commercial  banks or other financial  institutions,  and (b) with notice to
the  Borrower  and the  Administrative  Agent and the  Issuer,  but  without the
consent of the Borrower,  the Administrative Agent or the Issuer, may assign and
delegate to any of its  Affiliates or to any other Bank already a Bank hereunder
(each Person described in either

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<PAGE>

     of the foregoing  clauses as being the Person to whom such  assignment  and
delegation is to be made, being hereinafter  referred to as an "Assignee Bank"),
all or any  fraction of such Bank's total  Loans,  participations  in Letters of
Credit and Commitment  (which  assignment and delegation shall be of a constant,
and not a varying,  percentage of all the assigning Bank's Loans and Commitment)
in a minimum aggregate amount of $5,000,000 except that no assignment to another
Bank already a Bank  hereunder  need be in such minimum  amount so long as after
such  assignment  the  assignor  shall hold no interest or a minimum  $5,000,000
interest;  provided,  however,  that any such  Assignee  Bank  will  comply as a
condition  precedent  to the  effectiveness  of the  assignment  to it with  the
provisions contained in Section 4.6(b) and further, provided, however, that, the
Borrower  and the  Administrative  Agent and the  Issuer  shall be  entitled  to
continue  to deal  solely and  directly  with such Bank in  connection  with the
interests so assigned and delegated to an Assignee Bank until (i) written notice
of such assignment and delegation, together with payment instructions, addresses
and related  information  with respect to such  Assignee  Bank,  shall have been
given to the Borrower and the  Administrative  Agent and the Issuer by such Bank
and such  Assignee  Bank,  (ii) such  Assignee  Bank  shall  have  executed  and
delivered  to the  Borrower,  the  Issuer  and the  Administrative  Agent a Bank
Assignment Agreement, accepted by the Administrative Agent and the Issuer, (iii)
if necessary,  appropriate forms have been delivered by the prospective Assignee
Bank to the Borrower,  as provided in Section  4.6(b),  and (iv) the  processing
fees described below shall have been paid and provided,  further,  however, that
so long as an Event of  Default  shall  have  occurred  and be  continuing,  the
consent of the Borrower otherwise required by the foregoing clause (a) shall not
be required.

     From and after the date that the  Administrative  Agent  accepts  such Bank
Assignment  Agreement,   (x)  the  Assignee  Bank  thereunder  shall  be  deemed
automatically  to have  become a party  hereto and to the extent that rights and
obligations  hereunder have been assigned and delegated to such Assignee Bank in
connection  with such Bank  Assignment  Agreement,  shall  have the  rights  and
obligations of a Bank hereunder and under the other Loan Documents,  and (y) the
assignor  Bank, to the extent that rights and  obligations  hereunder  have been
assigned and delegated by it in connection with such Bank Assignment  Agreement,
shall be  released  from its  obligations  hereunder  and under  the other  Loan
Documents.  Promptly after its receipt of notice that the  Administrative  Agent
has received an executed Bank Assignment  Agreement,  the Borrower shall consent
to such assignment, if applicable, and execute and deliver to the Administrative
Agent (for delivery to the relevant  Assignee Bank) a new Note  evidencing  such
Assignee  Bank's  assigned  Loans and  Commitment  and, if the assignor Bank has
retained Loans and a Commitment  hereunder,  a replacement Note in the principal
amount of the Loans and Commitment retained by the assignor Bank hereunder (such
Note to be in exchange  for,  but not in payment of, that Note then held by such
assignor Bank).  Each such Note shall be dated the date of the predecessor Note.
The assignor Bank shall mark the predecessor  Note "exchanged" and deliver it to
the Borrower. Accrued interest on that part of the predecessor Note evidenced by
the new Note, and accrued fees, shall be paid as provided in the Bank Assignment
Agreement.  Accrued  interest on that part of the predecessor  Note evidenced by
the replacement  Note shall be paid to the assignor Bank.  Accrued  interest and
accrued fees shall be paid at the same time or times provided in the predecessor
Note and in this  Agreement.  Such assignor Bank or such Assignee Bank must also
pay a  processing  fee to the  Administrative  Agent upon  delivery  of any Bank
Assignment  Agreement  in the amount of  $3,500,  it being  understood  that the
Borrower shall not be obligated to reimburse such assignor Bank or Assignee Bank
for such  processing  fee. Any attempted  assignment  and delegation not made in
accordance  with this

                                       79
<PAGE>

     Section 10.11.1 shall be null and void. The foregoing  provisions shall not
apply to, or  restrict,  or  require  the  consent of or notice of any Person to
effectuate,  the  pledge or  assignment  by any Bank of its  rights  under  this
Agreement and its Notes and the other Loan  Documents (i) if an Event of Default
has occurred and is continuing, or (b) to any Federal Reserve Bank.

     SECTION  10.11.2.  Participations.  Any Bank may at any time sell to one or
more commercial  banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant")  participating  interests in any of
the Loans,  its  participation  in Letters of Credit,  its Commitment,  or other
interests of such Bank hereunder;  provided,  however, that (a) no participation
contemplated  in this Section 10.11 shall relieve such Bank from its  Commitment
or its other  obligations  hereunder or under any other Loan Document,  (b) such
Bank shall remain solely  responsible  for the performance of its Commitment and
such other obligations,  (c) the Borrower and the  Administrative  Agent and the
Issuer shall  continue to deal solely and directly  with such Bank in connection
with such Bank's  rights and  obligations  under this  Agreement and each of the
other  Loan  Documents,  (d)  no  Participant,  unless  such  Participant  is an
Affiliate of such Bank,  or is itself a Bank,  shall be entitled to require such
Bank to take or refrain from taking any action hereunder or under any other Loan
Document,  except that such Bank may agree with any  Participant  that such Bank
will not,  without  such  Participant's  consent,  take any  actions of the type
described in clause (b) or (c) of Section 10.1,  and (e) the Borrower  shall not
be required to pay any amount under  Section 4.6 that is greater than the amount
which it would have been  required  to pay had no  participating  interest  been
sold.

     SECTION 10.12. Renewal and Continuation of Existing Loans. On the Effective
Date,  all of the Prior  Indebtedness  outstanding  on such date shall hereby be
restructured,  rearranged,  renewed,  extended and continued as provided in this
Agreement and all Loans outstanding under the Second Amended and Restated Credit
Agreement shall on the Effective Date become Loans outstanding hereunder.

     In  connection  herewith,  Banks party to the Second  Amended and  Restated
Credit  Agreement  (the  "Existing  Banks")  hereby sell,  assign,  transfer and
convey, and Banks party to this Agreement hereby purchase and accept, so much of
the Prior  Indebtedness (as defined in the second recital) such that each Bank's
percentage  of the loans and  obligations  outstanding  pursuant  to the  Second
Amended and Restated Credit Agreement,  as continued pursuant to this Agreement,
shall be equal to such Bank's  Percentage on the Effective  Date.  The foregoing
assignments,  transfers  and  conveyances  are without  recourse to the Existing
Banks and without any warranties whatsoever by any Agent or any Existing Bank as
to title, enforceability, collectibility, documentation or freedom from liens or
encumbrances, in whole or in part, other than the warranty of each Existing Bank
that it has not  previously  sold,  transferred,  conveyed  or  encumbered  such
Interests.

     SECTION 10.13. Other Transactions.  Nothing contained herein shall preclude
the Administrative Agent, the Collateral Agent, the Issuer, the Arrangers or any
other Bank from engaging in any transaction,  in addition to those  contemplated
by this  Agreement or any other Loan  Document,  with the Borrower or any of its
Affiliates in which the Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.

                                       80
<PAGE>

     SECTION 10.14. [Intentionally Blank].

     SECTION  10.15.  Treatment of Certain  Information;  Confidentiality.  Each
Bank,  the  Administrative  Agent,  the  Collateral  Agent,  the  Issuer and the
Arrangers  agree (on  behalf of itself  and each of its  affiliates,  directors,
officers,  employees and  representatives)  to keep  confidential any non-public
information  supplied to it by the Borrower  pursuant to this Agreement that the
Borrower  identifies to such Bank,  the  Administrative  Agent,  the  Collateral
Agent,  the Issuer or the Arrangers (as the case may be) as  confidential at the
time Borrower so supplies such information,  provided, that nothing herein shall
limit the  disclosure  of any such  information  (i) to the extent  required  by
statute,  rule,  regulation or judicial process,  (ii) to counsel for any of the
Banks,  the  Administrative  Agent,  the  Collateral  Agent,  the  Issuer or the
Arrangers, (iii) to bank examiners, auditors or accountants, (iv) to the Issuer,
the Arrangers, the Administrative Agent, the Collateral Agent or any other Bank,
(v) in  connection  with any summons or subpoena to which any one or more of the
Banks, the Issuer,  the Arrangers,  the  Administrative  Agent or the Collateral
Agent is a party,  (vi) to a subsidiary or affiliate of such Person, or (vii) to
any assignee or participant (or prospective  assignee or participant) so long as
such subsidiary,  affiliate, assignee or participant (or prospective assignee or
participant),  as the case may be, first  executes and delivers to the Borrower,
an agreement containing provisions substantially identical to those contained in
this Section 10.15; and provided  further,  that in no event shall any Bank, the
Issuer,  the Arrangers,  the  Administrative  Agent or the  Collateral  Agent be
obligated or required to return any  materials  furnished to it by the Borrower,
unless in violation of this Section 10.15, each Bank agrees that it will use its
reasonable  efforts  to  advise  the  Borrower  as soon as  practicable,  of any
disclosure of information in connection with (v) above.

     SECTION 10.16. Forum Selection and Consent to Jurisdiction.  ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS,  THE ISSUER, THE ARRANGER,
THE BANKS OR THE  BORROWER  MAY BE BROUGHT AND  MAINTAINED  IN THE COURTS OF THE
STATE  OF NEW YORK OR IN THE  UNITED  STATES  DISTRICT  COURT  FOR THE  SOUTHERN
DISTRICT  OF NEW YORK;  PROVIDED,  HOWEVER,  THAT ANY SUIT  SEEKING  ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT,  AT THE  ADMINISTRATIVE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY  MAY BE FOUND.  EACH OF THE  BORROWER,  THE  AGENTS,  THE  ISSUER,  THE
ARRANGERS  AND  THE  BANKS  HEREBY  EXPRESSLY  AND  IRREVOCABLY  SUBMITS  TO THE
JURISDICTION  OF THE  COURTS OF THE STATE OF NEW YORK AND OF THE  UNITED  STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED  THEREBY IN  CONNECTION  WITH SUCH  LITIGATION.  THE  BORROWER  FURTHER
IRREVOCABLY  CONSENTS  TO THE  SERVICE OF PROCESS BY  REGISTERED  MAIL,  POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF
THE

                                       81
<PAGE>

     BORROWER,  THE AGENTS,  THE ISSUER,  THE  ARRANGERS,  AND THE BANKS  HEREBY
EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY
OBJECTION  WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH  LITIGATION  BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH  LITIGATION HAS BEEN BROUGHT IN AN  INCONVENIENT  FORUM.  TO THE EXTENT
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY  COURT OF FROM  ANY  LEGAL  PROCESS  (WHETHER  THROUGH  SERVICE  OR  NOTICE,
ATTACHMENT PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY,  THE BORROWER HEREBY  IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS  OBLIGATIONS  UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.  THE PARTIES  HERETO AGREE THAT NOTHING IN THIS SECTION  SHALL AFFECT
THEIR  RIGHT TO SERVE  LEGAL  PROCESS IN ANY OTHER  MANNER  PERMITTED  BY LAW OR
AFFECT ITS  RIGHTS TO BRING ANY ACTION OR  PROCEEDING  AGAINST  ANY OTHER  PARTY
HERETO OR TO SUCH PARTY'S PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.

     SECTION 10.17. Waiver of Jury Trial. THE AGENTS, THE ISSUER, THE ARRANGERS,
THE BANKS AND THE BORROWER EACH HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY  LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY AGENT,  THE ISSUER,  ANY ARRANGER,
ANY BANK OR THE  BORROWER.  THE  BORROWER  ACKNOWLEDGES  AND AGREES  THAT IT HAS
RECEIVED FULL AND  SUFFICIENT  CONSIDERATION  FOR THIS PROVISION (AND EACH OTHER
PROVISION  OF EACH  OTHER  LOAN  DOCUMENT  TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE ISSUER, THE ARRANGERS AND
THE BANKS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.

     SECTION  10.18.  No Oral  Agreements.  THIS  AGREEMENT  AND THE OTHER  LOAN
DOCUMENTS  REPRESENT  THE FINAL  AGREEMENT  BETWEEN  THE  PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR  CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


                                       82
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their  respective  officers  thereunto duly authorized as of the day
and year first above written.

                                 MAGNUM HUNTER RESOURCES, INC., as
                                 Borrower


                                 By
                                   ----------------------------------------
                                 Name:    Gary C. Evans
                                 Title:   President and
                                          Chief Executive Officer

                                 Address: 600 East Las Colinas Blvd., Suite 1100
                                          Irving, Texas 75039

                                 Facsimile No.: (972) 443-6483
                                 Attention:     Chris Tong

                                       S-1

<PAGE>

                       BANKERS TRUST COMPANY, as Administrative Agent,
                       Collateral Agent  and Issuer for the Banks


                       By
                         ----------------------------------------------------
                       Name:                 Marcus M. Tarkington
                       Title:                Director

                       Address:              31 West 52nd Street, 7th
                       Floor
                                             New York, New York 10019

                       Facsimile No.:        (646) 324-2218
                       Attention:            Marcus Tarkington

                                      S-2
<PAGE>

                             CIBC INC., as Syndication Agent


                             By
                               -----------------------------------------
                             Name:
                             Title:

                             Address:              CIBC Inc.
                                                   475 Lexington Avenue, 7th
                             Floor,
                                                   New York, New York  10017

                             Facsimile No.:        212/856-3763
                             Attention:            Marybeth Ross

                                      S-3
<PAGE>


                         BNP PARIBAS, as Documentation Agent


                         By
                           --------------------------------
                         Name:
                         Title:


                         By
                           --------------------------------------------
                         Name:
                         Title:



                         Address:              1200 Smith Street, Suite 3100
                                               Houston, Texas 77002


                         Facsimile No.:        (713) 659-5305
                         Attention:            Leah E. Hughes

                                      S-4
<PAGE>

                               BANKS

                               BANKERS TRUST COMPANY

                               By
                               Name:    Marcus M. Tarkington
                               Title:   Director

                               Domestic
                               Office:           31 West 52nd Street, 7th Floor
                                                 New York, New York 10019

                               LIBOR
                               Office:           31 West 52nd Street, 7th Floor
                                                 New York, New York  10019

                               Facsimile:        (646) 324-2218

                                      S-5

<PAGE>


                         CIBC INC.

                         By
                         Name:
                         Title:

                         Domestic
                         Office:             2727 Paces Ferry Road, Suite 1200
                                             2 Paces West, Building 2
                                             Atlanta, Georgia  30339

                         Facsimile No.:      770-319-4950

                         Attention:          Tonya Hunter

                         LIBOR Office:       2727 Paces Ferry Road, Suite 1200
                                             2 Paces West, Building 2
                                             Atlanta, Georgia  30339

                         Facsimile No.:      770-319-4950

                         Attention:          Tonya Hunter

                         With a copy to:

                         CIBC Inc.
                         1600 Smith Street, Suite 3000
                         Houston, TX  77002
                         Attention:  Mark Wolf


                                      S-6
<PAGE>

                          BNP PARIBAS

                          By
                          Name:
                          Title:

                          By
                          Name:
                          Title:

                          Domestic
                          Office:             1200 Smith Street
                                              Suite 3100
                                              Houston, Texas  77002

                          Telephone:          (713) 982-1153
                          Facsimile No.:      (713) 659-6915

                          Attention:          Brian Malone

                          LIBOR Office:       1200 Smith Street
                                              Suite 3100
                                              Houston, Texas  77002

                          Telephone:          (713) 982-1126
                          Facsimile No.:      (713) 659-5305

                          Attention:          Leah E. Hughes

                          With a copy to:     Candace Grayson


                                      S-7
<PAGE>

                         BANK OF SCOTLAND

                         By
                         Name:  Joseph Fratus
                         Title:    Vice President

                         By
                         Name:
                         Title:

                         Domestic
                         Office:             Bank of Scotland, New York Office
                                             565 Fifth Avenue, 5th Floor
                                             New York, New York 10017

                         Telephone:          (212) 460-0800
                         Facsimile No.:      (212) 557-9460

                         Attention:          Joseph Fratus

                         LIBOR Office:       Bank of Scotland, New York Office
                                             565 Fifth Avenue, 5th Floor
                                             New York, New York 10017

                         Facsimile No.:      (212) 557-9460

                         Attention:          Joseph Fratus

                         With a copy to:     Bank of Scotland, Houston Office
                         One City Centre
                                             1021 Main Street, Suite 1370
                                             Houston, Texas 77002
                                             Attention:  Richard Butler


                                      S-8
<PAGE>

                      BANK OF NOVA SCOTIA

                      By
                      Name:
                      Title:

                      By
                      Name:
                      Title:

                      Domestic
                      Office:             The Bank of Nova Scotia
                                          Atlanta Agency
                                          Suite 2700, 600 Peachtree St. NE
                                          Atlanta, Georgia 30308

                      Telephone:          (404)-877-1541
                      Facsimile No.:      (404) 888-8998

                      Attention:          Trudy Robinson

                      LIBOR Office:       The Bank of Nova Scotia
                                          Atlanta Agency
                                          Suite 2700, 600 Peachtree St. NE
                                          Atlanta, Georgia 30308

                      Facsimile No.:      (404) 888-8998

                      Attention:          Trudy Robinson

                      With a copy to:     Scotia Capital
                                          Houston Rep. Office
                                          1100 Louisiana, Suite 3000
                                          Houston, Texas 77002
                                          Attention:  Greg D. Smith

                                      S-9

<PAGE>

                          UNION BANK OF CALIFORNIA, N.A.

                          By
                          Name:
                          Title:

                          By
                          Name:
                          Title:

                          Domestic
                          Office:             500 N. Akard, Suite 4200
                                              Dallas, Texas  75201

                          Telephone:          (214) 922-4204
                          Facsimile No.:      (214) 922-4209

                          Attention:          Dustin Gaspari


                          LIBOR Office:       500 N. Akard, Suite 4200
                                              Dallas, Texas  75201

                          Facsimile No.:      (214) 922-4209

                          Attention:          Dustin Gaspari


                          With a copy to:


                                      S-10
<PAGE>

                   FORTIS CAPITAL CORP.

                   By
                   Name:
                   Title:

                   By
                   Name:
                   Title:

                   Domestic
                   Office:             100 Crescent Court, Suite 1777
                                       Dallas, Texas  75201

                   Telephone:          (214) 953-9311
                   Facsimile No.:      (214) 754-5982

                   Attention:          David Montgomery
                                       Vice President

                   LIBOR Office:       100 Crescent Court, Suite 1777
                                       Dallas, TX  75201

                   Facsimile No.:      (214) 754-5982

                   Attention:          David Montgomery
                                       Vice President

                   With a copy to:


                                      S-11
<PAGE>

                                   Schedule I


     Item 6.7 - Litigation, Labor Controversies:

     Item 6.8 - Subsidiaries

     Item 6.10 - Tax Matters

     Item 6.11 - Employee Benefits Plans:

     Item 6.12 - Environmental Matters:

     Item 6.15 - Existing Defaults:

     Item 7.2.2(b) - Indebtedness to be Repaid:

     Item 7.2.2(c) - Ongoing Indebtedness:

     Item 7.2.3(n) - Existing Liens

     Item 7.2.5(a) - Ongoing Investments:

     Item 7.2.10 - Outstanding Loans


<PAGE>

                                   Schedule II


<PAGE>

                                 Schedule III-A

    NAME OF BANK                       PERCENTAGE            MAXIMUM NOTE AMOUNT
Bankers Trust Company                  36.00000%              270,000,000.00
CIBC Inc.                              21.60000%              162,000,000.00
BNP Paribas                            14.40000%              108,000,000.00
Bank of Scotland                       12.00000%               90,000,000.00
Bank of Nova Scotia                     8.00000%               60,000,000.00
Fortis Capital Corp.                    8.00000%               60,000,000.00
Union Bank of California, N.A.          0.00000%                      -0-

<PAGE>

                                 Schedule III-B

    NAME OF BANK                PERCENTAGE                   MAXIMUM NOTE AMOUNT
Bankers Trust Company            30.83334%                    154,166,666.67
CIBC Inc.                        18.50000%                     92,500,000.00
BNP Paribas                      12.33333%                     61,666,666.67
Bank of Scotland                 10.00000%                     50,000,000.00
Bank of Nova Scotia              10.00000%                     50,000,000.00
Fortis Capital Corp.             10.00000%                     50,000,000.00
Union Bank of California, N.A.    8.33333%                     41,666,666.66

<PAGE>


                       Schedule 1.1 - Gas Gathering System

<PAGE>

                         Schedule 5.1.13 - UCC Searches


(a)      Prize Energy Corporation
                                    Delaware Secretary of State
                                    Oklahoma Secretary of State

(b)      Prize Operating Company
                                    Delaware Secretary of State
                                    Oklahoma Secretary of State
                                    Texas Secretary of State

(c)      PEC (Delaware), Inc.
                                    Delaware Secretary of State
                                    Oklahoma Secretary of State
                                    Texas Secretary of State

(d)      Oklahoma Gas Processing, Inc.
                                    Delaware Secretary of State
                                    Oklahoma Secretary of State

(e)      Prize Energy Resources, L.P.
                                    Delaware Secretary of State
                                    Oklahoma Secretary of State
                                    Texas Secretary of State


<PAGE>

                      Schedule 6.9 - Hydrocarbon Interests

<PAGE>

              Schedule 5.1.15 - Hedging Agreements and Obligations

<PAGE>

                                                                       EXHIBIT A

                              REVOLVING CREDIT NOTE

$_____________________                                            March 15, 2002

     FOR VALUE  RECEIVED,  the  undersigned,  MAGNUM HUNTER  RESOURCES,  INC., a
Nevada  corporation,  (the  "Borrower"),  hereby promises to pay to the order of
______________________  (the "Bank") on the Stated  --------  ---- Maturity Date
the principal sum of __________________  DOLLARS ($___________) or, if less, the
aggregate unpaid principal amount of all Loans shown on the books and records of
the Bank or shown on the schedule attached hereto (and any continuation thereof)
made by the Bank to the  Borrower  pursuant to that certain  Fourth  Amended and
Restated  Credit  Agreement,  dated  as of March  15,  2002  (together  with all
amendments and other  modifications,  if any, from time to time  thereafter made
thereto,  the  "Credit  -------  Agreement"),  among the  Borrower,  the various
financial  institutions  that  are or  may  become  a  party  ---------  thereto
(including the Bank)  (collectively,  the "Banks"),  Bankers Trust  Company,  as
administrative  -----  agent  (in such  capacity  together  with any  successors
thereto,  the "Administrative  Agent") for the  ---------------------  Banks, as
collateral  agent for the Banks (in such capacity  together with any  successors
thereto,  the "Collateral Agent"), and as letter of credit issuing bank (in such
capacity together with any successors ------------------ thereto, the "Issuer"),
CIBC Inc., as syndication  agent for the Banks,  BNP Paribas,  as  documentation
------ agent for the Banks and as  co-arranger,  CIBC World  Markets  Corp.,  as
co-arranger and Deutsche Banc Alex.  Brown Inc. and CIBC World Markets Corp., as
Sole Lead Arranger and Sole Bookrunner.

     The Borrower also promises to pay interest on the unpaid  principal  amount
hereof  from  time to time  outstanding  from the  date  hereof  until  maturity
(whether by acceleration  or otherwise) and, after maturity,  until paid, at the
rates per annum and on the dates specified in the Credit Agreement.

     Payments of both  principal  and  interest are payable in same day funds in
lawful  money of the  United  States of America to  Bankers  Trust  Company,  as
Administrative  Agent, at the office of the  Administrative  Agent located at 31
West 52nd  Street,  New York,  New York  10019,  or at such  other  place as the
Administrative  Agent shall designate in writing to the Borrower.  The amount of
each Loan made by the Bank to the Borrower and the borrowing  date,  the rate of
interest  applicable  thereto and all payments  made on account of principal and
interest  hereof,  shall be  recorded  by the Bank  and,  prior to any  transfer
hereof,  endorsed  on the  grid  attached  hereto  which  is part of this  Note;
provided,  however,  that the  failure of the Bank to make such  notation or any
error therein  shall not in any manner affect the  obligation of the Borrower to
repay  such  Loan in  accordance  with  the  terms of this  Note and the  Credit
Agreement.

     This Note is an extension,  renewal,  and  replacement  of, and is given in
substitution and exchange for,  certain  promissory notes of the Borrower in the
original  aggregate  principal  amount of $225,000,000  executed by the Borrower
under that certain Third Amended and Restated  Credit  Agreement dated as of May
17, 2001 (the "Prior  Credit  Agreement"),  among the  Borrower,  Bankers  Trust
Company, as administrative  agent, CIBC Inc., as syndication agent,

                                       1
<PAGE>

     Paribas,  as documentation agent and as collateral agent, and certain banks
and other  financial  institutions  which were,  or thereafter  became,  parties
thereto,  as such Prior Credit  Agreement was or may have been from time to time
thereafter  amended  or  modified,  and the  indebtedness  evidenced  hereby and
thereby is a continuing  indebtedness  and nothing  herein  contained or implied
shall be construed to deem such  indebtedness or any accrued and unpaid interest
thereon paid,  satisfied,  novated or terminated,  or any collateral or security
therefore released or terminated.

     Notwithstanding  anything to the contrary,  in accordance with Section 4.11
of the  Credit  Agreement,  in no  event  shall  any  payment  or  consideration
applicable to any amount  hereunder and which would  constitute  interest exceed
the maximum amount of interest  allowed by applicable  law, as amended from time
to time.  Any payment of interest or in the nature of interest in excess of such
limitation  shall be credited  as a payment of  principal  unless the  principal
amount  hereunder  has been paid in full,  in which  case such  amount  shall be
refunded.

     This Note is a Note  referred to in, and  evidences  Indebtedness  incurred
under, the Credit Agreement, to which reference is made for a description of the
security for this Note and for a statement of the terms and  conditions on which
the Borrower are permitted and required to make  prepayments  and  repayments of
principal  of  the  Indebtedness  evidenced  by  this  Note  and on  which  such
Indebtedness may be declared to be immediately due and payable. Unless otherwise
defined, terms used herein have the meanings provided in the Credit Agreement.

     All parties hereto, whether as makers,  endorsers, or otherwise,  severally
waive presentment for payment,  demand, protest,  notice of dishonor,  notice of
acceleration and notice of intent to accelerate.

               [Remainder of this page intentionally left blank.]



                                       2
<PAGE>

     THIS NOTE SHALL BE DEEMED TO BE A CONTRACT  MADE UNDER AND  GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.

                                           MAGNUM HUNTER RESOURCES, INC.


                                           By
                                             ----------------------------------
                                              Name:
                                              Title:



                                       3
<PAGE>



                          LOANS AND PRINCIPAL PAYMENTS


--------------------------------------------------------------------------------
                                                     Unpaid
        Amount of               Amount of Principal Principal
        Loan Made                 Repaid Interest    Balance
     ---------------            ------------------- ----------
     ---------------            ------------------- ----------
       Base    LIBO  Period (if   Base    LIBO      Base   LIBO  Total  Notation
Date   Rate    Rate  applicable)  Rate    Rate      Rate   Rate          Made By
----   ----    ----  -----------  ----    ----      ----   ----         --------

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


                                       4
<PAGE>

                                                                     EXHIBIT B-1

                                BORROWING REQUEST

Bankers Trust Company
-------------------
New York, New York  ____
Attention:        [Name]
                  [Title]



Gentlemen and Ladies:

     This  Borrowing  Request is delivered to you pursuant to Section 2.3 of the
Fourth  Amended  and  Restated  Credit  Agreement,  dated as of March  15,  2002
(together  with all  amendments,  if any,  from  time to time made  thereto  the
"Credit Agreement") among Magnum Hunter Resources,  Inc., a Nevada corporation (
"Borrower"),  the various financial  institutions that are or may become a party
thereto  (collectively,  the "Banks"),  Bankers Trust Company, as administrative
agent  (in  such   capacity   together   with  any   successors   thereto,   the
"Administrative  Agent") for the Banks,  as  collateral  agent for the Banks (in
such capacity together with its successors thereto, the "Collateral Agent"), and
as letter of credit issuing bank (in such capacity  together with any successors
thereto,  the  "Issuer"),  CIBC Inc.  as  syndication  agent for the Banks,  BNP
Paribas,  as  documentation  agent for the Bank and as  co-arranger,  CIBC World
Markets Corp., as co-arranger  and Deutsche Banc Alex.  Brown Inc., as sole lead
arranger and sole  bookrunner.  Unless  otherwise  defined herein or the context
otherwise  requires,  terms used herein have the meanings provided in the Credit
Agreement.

     The  undersigned  Borrower  hereby  requests  that a Loan  be  made  in the
aggregate  principal amount of $__________ on __________,  ____ as a *[LIBO Rate
Loan having an Interest Period of _______ months] [Base Rate Loan].

     The undersigned  Borrower  hereby  acknowledges  that,  pursuant to Section
5.2.2 of the Credit  Agreement,  each of the delivery of this Borrowing  Request
and the  acceptance  by Borrower of the proceeds of the Loans  requested  hereby
constitutes a representation  and warranty by the undersigned  Borrower that, on
the date of such Loans,  and before and after giving  effect  thereto and to the
application of the proceeds therefrom, all statements set forth in Section 5.2.1
of the Credit Agreement are true and correct in all material respects.

     The undersigned Borrower agrees that if, prior to the time of the Borrowing
requested  hereby,  any  matter  certified  to herein by it will not be true and
correct at such time as if then made (except for  representations and warranties
as are by their express terms limited to a specific date),  it will  immediately
so notify the Administrative  Agent. Except to the extent, if any, that prior to
the time of the  Borrowing  requested  hereby  the  Administrative  Agent  shall
receive  written  notice to the contrary  from the  undersigned  Borrower,  each
matter  certified  to herein  __________________________________

*Select appropriate interest rate option.

<page>

     shall be deemed once again to be  certified as true and correct at the date
of such Borrowing as if then made (except for  representations and warranties as
are by their express terms limited to a specific date).

     After giving  effect to the  application  of the proceeds of the  Borrowing
requested hereby, the Borrower shall not have cash or Cash Equivalents in excess
of $35,000,000.

     As of  the  date  hereof,  the  aggregate  value  of  all  margin  accounts
maintained  by the  Borrower or any  Restricted  Subsidiary  with respect to the
Hedging Obligations equals $_____________.

     Please wire  transfer the proceeds of the  Borrowing to the accounts of the
following persons at the financial institutions indicated respectively:

Amount to Be            Person to be Paid                 Name, Address, etc.
------------       -----------------------------          -------------------
Transferred        Name             Account No.           of Transferee Bank
-----------        ----             -----------

$

                                                           Attention:

$

                                                           Attention:

Balance of                [Borrower]
such proceeds
                                                           Attention:

     The undersigned  Borrower has caused this Borrowing  Request to be executed
and delivered, and the certification and warranties contained herein to be made,
by its duly Authorized Officer this ___ day of ___________, ___.

                                              Magnum Hunter Resources, Inc.

                                              By
                                                  --------------------
                                                  Name:
                                                  Title:

                                       2
<PAGE>


                                                                     EXHIBIT B-2

                            LETTER OF CREDIT REQUEST

TO:      Bankers Trust Company
         as Administrative Agent
         60 Wall Street, 17th Floor
         New York, New York  10005
         Attention:        Commercial Loan Division,
                           Standby Letter of Credit Unit
                           Mail Stop NYC60-1702

Ladies and Gentlemen:

     The  undersigned is an officer of MAGNUM HUNTER  RESOURCES,  INC., a Nevada
corporation  (the  "Borrower"),  and is  authorized  to make  and  deliver  this
certificate  pursuant  to  that  certain  Fourth  Amended  and  Restated  Credit
Agreement dated as of March 15, 2002, among Borrower,  Bankers Trust Company, as
administrative  agent  (in  such  capacity,  the  "Administrative   Agent"),  as
collateral  agent  and as  letter  of  credit  issuing  bank,  BNP  Paribas,  as
documentation  agent, CIBC Inc., as syndication  agent, the lenders from time to
time party  thereto (as the same may be amended,  supplemented  or modified from
time to time, the "Credit Agreement"). All terms defined in the Credit Agreement
shall have the same meaning herein.

     In accordance with the Credit Agreement,  the Borrower hereby requests that
___________________** issue a Letter of Credit. The Letter of Credit shall:

     (a) be issued on ___________________, 200__;***

     (b) be in the amount of $_____________;****

     (c) permit [a single drawing/multiple drawings];

     (d) be payable upon presentation of a sight draft; and

     (e) expire on _______________, 200__.*****

     The   Letter   of   Credit   is  to  be   delivered   by  the   Issuer   to
__________________.******

--------
**      Insert name of Issuer.
***     Insert date not later than thirty days prior to Commitment Termination
        Date.
****    Insert fax amount of Letter of Credit, which shall not exceed the sum
        of the Letter of Credit Commitment Amount and all outstanding Letter of
        Credit Liabilities.
*****   Insert date not later than the earlier of (a) one year issuance or (b)
        the date ten (10) days prior to the Commitment Termination Date.
******  Insert name of Borrower or name and address of beneficiary.

<page>

     In connection  with the foregoing and pursuant to the terms and  provisions
of the Credit  Agreement,  the undersigned  hereby certifies to the Agents,  the
Banks and the Issuer that the following statements are true and correct:

     (i) The  representations  and  warranties  contained  in  Article VI of the
Credit  Agreement  and in each of the  other  Loan  Documents  are not  false or
misleading  in any  material  respect on and as of the date hereof with the same
force and effect as if made on and as of such date.

     (ii) No Default has  occurred  and is  continuing  or would result from the
issuance of the Letter of Credit requested hereunder.

     (iii) The face  amount of the Letter of Credit  requested  hereunder,  when
added to all outstanding Loans and Letter of Credit Liabilities, will not exceed
the Commitment Amount.

     (iv) The proposed terms of the Letter of Credit requested hereunder and the
transactions  proposed to be supported  thereby are  accurately  and  completely
described herein.

     (v) All information supplied below is true, correct, and complete as of the
date hereof.

                                       2
<PAGE>

                                   Information

(a)  Commitment Amount                                            $_________
(b)  Sublimit availability for Letters of Credit                  $20,000,000.00
(c)  Aggregate outstanding principal amount of all Loans          $_________
(d)  Aggregate outstanding amount of all Letter of Credit
     Liabilities                                                  $_________

(e)  Net availability for Loans: [line (a) minus the sum of line
     (c) and line (d)]                                            $_________


(f)  Net availability for Letters of Credit:  [line (b) minus
     line (d)]                                                    $_________

(g)  Face amount of requested Letter of Credit                    $_________
(h)  Date requested for issuance of Letter of Credit              ______, 200__

     As of  the  date  hereof,  the  aggregate  value  of  all  margin  accounts
maintained by the Borrower or any Restricted  Subsidiary with respect to Hedging
Obligations equals $_____________.


                                        BORROWER:

                                        MAGNUM HUNTER RESOURCES, INC.


                                        By:
                                           ------------------------------------
                                        Name:
                                        Title:


Dated as of:_________________
                  [insert date of proposed
                  issuance of Letter of Credit]


                                       3
<PAGE>


                                                                       EXHIBIT C

                         CONTINUATION/CONVERSION NOTICE

Bankers Trust Company
-------------------
New York, New York  _____

Attention:        [Name]
                  [Title]

Gentlemen and Ladies:

     This Continuation/Conversion Notice is delivered to you pursuant to Section
2.4 of the Fourth Amended and Restated Credit  Agreement,  dated as of March 15,
2002 (together with all  amendments,  if any, from time to time made thereto the
"Credit Agreement") among Magnum Hunter Resources,  Inc., a Nevada corporation (
"Borrower"),  the various financial  institutions that are or may become a party
thereto  (collectively,  the "Banks"),  Bankers Trust Company, as administrative
agent  (in  such   capacity   together   with  any   successors   thereto,   the
"Administrative  Agent") for the Banks,  as  collateral  agent for the Banks (in
such capacity together with its successors thereto, the "Collateral Agent"), and
as letter of credit issuing bank (in such capacity  together with any successors
thereto,  the  "Issuer"),  CIBC Inc.  as  syndication  agent for the Banks,  BNP
Paribas, as documentation agent and as co-arranger, CIBC World Markets Corp., as
co-arranger  and Deutsche  Banc Alex.  Brown Inc.,  as sole lead arranger and as
sole  bookrunner.  Unless  otherwise  defined  herein or the  context  otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.

     The undersigned Borrower hereby requests that on ____________, ____,

     (1) $___________ of the presently outstanding principal amount of the Loans
originally  made  on  __________,   _____  [and  $__________  of  the  presently
outstanding principal amount of the Loans originally made on __________, _____],

     (2) and all  presently  being  maintained  as *[Base Rate Loans] [LIBO Rate
Loans],

     (3) be [converted into] [continued as],

     (4) [LIBO Rate Loans having an Interest Period of ______ months] [Base Rate
Loans].

     The undersigned Borrower hereby:

     (a) certifies and warrants that no Default has occurred and is  continuing;
and

------
*  Select appropriate interest rate option.

<page>

     (b) agrees that if prior to the time of such continuation or conversion any
matter certified to herein by it will not be true and correct at such time as if
then made, it will immediately so notify the Agent.

     Except to the extent, if any, that prior to the time of the continuation or
conversion  requested  hereby the  Administrative  Agent shall  receive  written
notice to the contrary from the undersigned  Borrower,  each matter certified to
herein  shall be  deemed to be  certified  at the date of such  continuation  or
conversion as if then made except for such representations and warranties as are
by their express terms limited to a specific date.

     After giving  effect to the  application  of the proceeds of the  Borrowing
requested hereby, the Borrower shall not have cash or Cash Equivalents in excess
of $35,000,000.

     As of  the  date  hereof,  the  aggregate  value  of  all  margin  accounts
maintained by the Borrower or any Restricted  Subsidiary with respect to Hedging
Obligations equals $_____________.

     The undersigned Borrower has caused this Continuation/Conversion  Notice to
be executed and delivered, and the certification and warranties contained herein
to be made, by its Authorized Officer this ___ day of _________, _____.

                                         Magnum Hunter Resources, Inc.


                                          By
                                             ----------------------------------
                                             Name:
                                             Title:

                                       2
<PAGE>

                                                                       EXHIBIT D

                            BANK ASSIGNMENT AGREEMENT

To:      Magnum Hunter Resources, Inc.

To:      Bankers Trust Company
         as the Administrative Agent and as Issuer

Gentlemen and Ladies:

     We refer to clause (d) of Section  10.11.1 of the of the Fourth Amended and
Restated  Credit  Agreement,  dated  as of March  15 , 2002  (together  with all
amendments, if any, from time to time made thereto the "Credit Agreement") among
Magnum Hunter Resources,  Inc., a Nevada corporation ( "Borrower"),  the various
financial institutions that are or may become a party thereto (collectively, the
"Banks"),  Bankers  Trust  Company,  as  administrative  agent (in such capacity
together with any successors thereto, the "Administrative Agent") for the Banks,
as collateral agent for the Banks (in such capacity together with its successors
thereto,  the "Collateral Agent"), and as letter of credit issuing bank (in such
capacity  together with any  successors  thereto,  the  "Issuer"),  CIBC Inc. as
syndication  agent for the Banks, BNP Paribas,  as  documentation  agent for the
Banks and as co-arranger,  CIBC World Markets Corp., as co-arranger and Deutsche
Banc  Alex.  Brown  Inc.,  as sole lead  arranger  and sole  bookrunner.  Unless
otherwise  defined herein or the context otherwise  requires,  terms used herein
have the meanings provided in the Credit Agreement.

     This  agreement  is  delivered  to you  pursuant  to clause  (d) of Section
10.11.1  of the Credit  Agreement  and also  constitutes  notice to each of you,
pursuant  to clause (c) of  Section  10.11.1  of the  Credit  Agreement,  of the
assignment and  delegation to  _______________  (the  "Assignee") of ___% of the
Loans,  participations in Letters of Credit and Commitment of _____________ (the
"Assignor")  outstanding  under the Credit  Agreement on the date hereof.  After
giving effect to the foregoing assignment and delegation, the Assignor's and the
Assignee's  Percentages  for the purposes of the Credit  Agreement are set forth
opposite such Person's name on the signature pages hereof.

     [Add paragraph dealing with accrued interest and fees with respect to Loans
assigned.]

     The  Assignee  (i)  confirms  that it has  received  a copy  of the  Credit
Agreement,  together  with  copies of the  financial  statements  referred to in
Section 7.1.1 thereof and such other  documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this Bank
Assignment  Agreement  and the  Credit  Agreement,  (ii)  agrees  that it  will,
independently and without reliance upon any Agent, any Assignor, the Issuer, any
Arranger or any Bank and based on such  documents  and  information  as it shall
deem  appropriate  at the time,  continue  to make its own credit  decisions  in
taking or not taking action under the Credit  Agreement;  (iii)  represents  and
warrants  that its name set forth  herein is its legal name;  (iv)  appoints and
authorizes each Agent to take such action as agent on its behalf and to exercise
such powers and  discretion  under the Loan  Documents as are  delegated to such
Agent by the terms  thereof,  together  with such powers and  discretion  as are
reasonably  incidental  thereto;  (vi) agrees that it will perform in accordance
with  their  terms  all of the  obligations  that  by the

<page>

     terms of the Credit Agreement are required to be performed by it as a Bank;
and (vii)  attaches any U.S.  Internal  Revenue  Service  forms  required  under
Section 4.6(b) of the Credit Agreement.

     Except as otherwise  provided in the Credit Agreement,  effective as of the
date of acceptance hereof by the Administrative Agent and the Issuer

     (a) the Assignee

     (i)  shall be deemed  automatically  to have  become a party to the  Credit
Agreement,  have all the rights  and  obligations  of a "Bank"  under the Credit
Agreement  and the other  Loan  Documents  as if it were an  original  signatory
thereto to the extent specified in the second paragraph hereof; and

     (ii) agrees to be bound by the terms and conditions set forth in the Credit
Agreement  and the other  Loan  Documents  as if it were an  original  signatory
thereto; and

     (b) the Assignor  shall be released from its  obligations  under the Credit
Agreement  and the other Loan  Documents  to the extent  specified in the second
paragraph hereof.

     The Assignor and the Assignee  hereby agree that the [Assignor]  [Assignee]
will pay to the  Administrative  Agent the processing fee referred to in Section
10.11.1 of the Credit Agreement upon the delivery hereof.

     The Assignee  hereby  advises each of you of the  following  administrative
details  with  respect to the  assigned  Loans and  Commitment  and requests the
Administrative Agent to acknowledge receipt of this document:

     (A) Address for Notices:

     Institution Name:

     Attention:

     Domestic Office:

     Telephone:

     Facsimile:

     Telex (Answerback):

     LIBOR Office:

     Telephone:

     Facsimile:

<page>

     Telex (Answerback):

     (B) Payment Instructions:

     The Assignee  shall furnish the tax form required by the Section 4.6 of the
Credit  Agreement,  if any, no later than the date of  acceptance  hereof by the
Administrative Agent.

     This  Agreement  may be executed by the  Assignor  and Assignee in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken  together  shall  constitute one and the same
agreement.

<PAGE>

Adjusted Percentage                                          [ASSIGNOR]
-------------------

    Commitment
    and
    Loans:                             ___%
                                                             By:
                                                             Name:
                                                             Title:

Percentage                                                   [ASSIGNEE]
----------                                                   ----------

    Commitment
    and
    Loans:                             ___%
                                                              By:
                                                              Name:
                                                              Title:


<PAGE>


Accepted and Acknowledged
this ___ day of _______, _____


BANKERS TRUST COMPANY,
as Administrative Agent and as Issuer

By:
   -----------------------------------------
Name:
     ---------------------------------------
Title:
      --------------------------------------


MAGNUM HUNTER RESOURCES, INC.
as the Borrower


By:
   -----------------------------------------
Name:
     ---------------------------------------
Title:
      --------------------------------------



<PAGE>


                                                                       EXHIBIT E

                  [Opinion of Special Counsel to the Obligors]



<PAGE>


                                                                       EXHIBIT F

                  [Opinion of In-House Counsel to the Obligors]



<PAGE>


                                                                       EXHIBIT G

                               [Form of Mortgage]



<PAGE>


                                                                       EXHIBIT H

             [Form of First Amendment to Borrower Pledge Agreement]



<PAGE>


                                                                       EXHIBIT I

            [Form of First Amendment to Subsidiary Pledge Agreement]



<PAGE>


                                                                       EXHIBIT J

       [Form of Third Amended and Restated Subsidiary Guaranty Agreement]



<PAGE>


                                                                       EXHIBIT K

                                     FORM OF
                                EXTENSION REQUEST
                           ____________________, 200__



Bankers Trust Company
31 West 52nd Street, 7th Floor
New York, New York 10019

Attention: _______________

Gentlemen:

     Reference  is made to the Fourth  Amended and  Restated  Credit  Agreement,
dated as of March 15, 2002 (together with all  amendments,  if any, from time to
time made thereto the "Credit Agreement") among Magnum Hunter Resources, Inc., a
Nevada corporation ( "Borrower"), the various financial institutions that are or
may become a party thereto,  Bankers Trust Company, as administrative  agent (in
such capacity together with any successors thereto, the "Administrative  Agent")
for the Banks, as collateral agent for the Banks (in such capacity together with
its successors thereto, the "Collateral Agent"), and as letter of credit issuing
bank,  CIBC  Inc.  as  syndication   agent  for  the  Banks,  BNP  Paribas,   as
documentation agent for the Banks and as co-arranger,  CIBC World Markets Corp.,
as  co-arranger  and Deutsche  Banc Alex.  Brown Inc., as sole lead arranger and
sole  bookrunner.  Unless  otherwise  defined  herein or the  context  otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.

     Borrower  hereby  gives notice to the  Administrative  Agent as required by
Section 2.9 of the Credit Agreement of its request to extend the Stated Maturity
Date for an additional one-year period.

     Borrower hereby  certifies that (i) this request complies with the terms of
the Credit  Agreement  and the  provisions  of Section  2.9  thereof and (ii) no
Default or Event of Default has  occurred  and is  continuing  as of the date of
this request.

                                           Sincerely,

                                           MAGNUM HUNTER RESOURCES, INC.

                                           By:
                                               -------------------------------
                                                Name:
                                                Title:


<PAGE>
                                                                       EXHIBIT L

                                    FORM OF
                           POST-MERGER LEGAL OPINION

<PAGE>

                                Table of Contents
<TABLE>
<CAPTION>
<S>     <C>                                                                                                     <C>

                                                                                                                Page


ARTICLE I             DEFINITIONS AND ACCOUNTING TERMS...........................................................2

         SECTION 1.1.               Defined Terms................................................................2

         SECTION 1.2.               Use of Defined Terms........................................................24

         SECTION 1.3.               Cross-References............................................................24

         SECTION 1.4.               Accounting and Financial Determinations.....................................24

ARTICLE II            THE COMMITMENTS, BORROWING PROCEDURES, NOTES, LETTERS OF CREDIT AND
                      BORROWING BASE............................................................................24

         SECTION 2.1.               The Commitments.............................................................25

                  SECTION 2.1.1.            Loan Commitment.....................................................25

                  SECTION 2.1.2.            Commitment to Issue Letters of Credit...............................25

                  SECTION 2.1.3.            Purchase and Sale of Participations in Each Letter
                                            of Credit...........................................................26

                  SECTION 2.1.4.            Banks Not Permitted or Required to Make Loans.......................26

                  SECTION 2.1.5.            Issuer Not Permitted or Required to Issue Letters
                                            of Credit...........................................................26

         SECTION 2.2.               Reduction of Maximum Facility Amount........................................26

         SECTION 2.3.               Borrowing Procedures for Loans..............................................27

         SECTION 2.4.               Continuation and Conversion Elections.......................................27

         SECTION 2.5.               Funding.....................................................................27

         SECTION 2.6.               Notes.......................................................................28

         SECTION 2.7.               Certain Provisions Relating to the Letters of Credit........................28

                  SECTION 2.7.1.            Borrower's Agreement to Repay Letter of Credit
                                            Drawings............................................................28

                  SECTION 2.7.2.            Reimbursement Obligations of the Banks under the
                                            Letters of Credit...................................................29

                  SECTION 2.7.3.            Action Upon Occurrence of Default...................................29

                  SECTION 2.7.4.            Cash Collateral Procedures..........................................29

                  SECTION 2.7.5.            Nature of Reimbursement Obligations.................................30

         SECTION 2.8.               Borrowing Base..............................................................31

                  SECTION 2.8.1.            Determination of the Borrowing Base.................................31

                  SECTION 2.8.2.            Redetermination of Borrowing Base...................................31

                  SECTION 2.8.3.            Special Redetermination of Borrowing Base...........................33
</TABLE>

                                      -i-
<page>

                               TABLE OF CONTENTS
                                  (continued)
<TABLE>
<CAPTION>
<S>     <C>                                                                                                    <C>
                                                                                                               Page

                  SECTION 2.8.4.            General Provisions With Respect to the Borrowing
                                            Base................................................................33

         SECTION 2.9.               Extension of Stated Maturity Date...........................................33

         SECTION 2.10.              Replacement of Issuer.......................................................34

ARTICLE III           REPAYMENTS, PREPAYMENTS, INTEREST AND FEES................................................34

         SECTION 3.1.               Repayments and Prepayments..................................................34

         SECTION 3.2.               Interest Provisions.........................................................37

                  SECTION 3.2.1.            Rates...............................................................37

                  SECTION 3.2.2.            Post-Default Rates..................................................37

                  SECTION 3.2.3.            Payment Dates.......................................................37

         SECTION 3.3.               Fees........................................................................38

                  SECTION 3.3.1.            Commitment Fee......................................................38

                  SECTION 3.3.2.            [Intentionally Omitted].............................................38

                  SECTION 3.3.3.            Fees Pursuant to Fee Letter.........................................38

                  SECTION 3.3.4.            Letter of Credit Standby Fee Payable to Banks.......................38

                  SECTION 3.3.5.            Letter of Credit Fronting Fee Payable to Issuer.....................38

ARTICLE IV            CERTAIN LIBO RATE AND OTHER PROVISIONS....................................................39

         SECTION 4.1.               Fixed Rate Lending Unlawful.................................................39

         SECTION 4.2.               Deposits Unavailable........................................................39

         SECTION 4.3.               Increased LIBO Rate Loan Costs, etc.........................................39

         SECTION 4.4.               Funding Losses..............................................................40

         SECTION 4.5.               Increased Capital Costs.....................................................40

         SECTION 4.6.               Taxes.......................................................................41

         SECTION 4.7.               Payments, Computations, etc.................................................42

         SECTION 4.8.               Sharing of Payments.........................................................43

         SECTION 4.9.               Set off.....................................................................43

         SECTION 4.10.              Use of Proceeds.............................................................43

         SECTION 4.11.              Maximum Interest............................................................44

ARTICLE V             CONDITIONS TO BORROWING...................................................................44

         SECTION 5.1.               Initial Borrowing...........................................................44

                  SECTION 5.1.1.            Resolutions, etc....................................................44

</TABLE>

                                      -ii-
<page>

                               TABLE OF CONTENTS
                                  (continued)
<TABLE>
<CAPTION>
<S>     <C>                                                                                                    <C>
                                                                                                               Page

                  SECTION 5.1.2.            Delivery of Notes and Subsidiary Guaranty Agreement.................45

                  SECTION 5.1.3.            Payment of Outstanding Prize Indebtedness, etc......................45

                  SECTION 5.1.4.            Mortgage............................................................45

                  SECTION 5.1.5.            Pledge Agreements; Stock Certificates and Blank
                                            Powers..............................................................45

                  SECTION 5.1.6.            Opinions of Counsel.................................................46

                  SECTION 5.1.7.            Financial Information...............................................46

                  SECTION 5.1.8.            Engineers' Report...................................................46

                  SECTION 5.1.9.            Certificate as to Insurance Policies................................46

                  SECTION 5.1.10.           Material Adverse Change.............................................46

                  SECTION 5.1.11.           Satisfactory Review and Legal Form..................................46

                  SECTION 5.1.12.           Closing Fees, Expenses, etc.........................................47

                  SECTION 5.1.13.           UCC Searches........................................................47

                  SECTION 5.1.14.           Prize Merger Documentation..........................................47

                  SECTION 5.1.15.           Hedging Schedule....................................................48

         SECTION 5.2.               All Borrowings and Letters of Credit........................................48

                  SECTION 5.2.1.            Compliance with Warranties, No Default, etc.........................48

                  SECTION 5.2.2.            Borrowing Request...................................................48

                  SECTION 5.2.3.            Satisfactory Legal Form.............................................49

                  SECTION 5.2.4.            All Letters of Credit...............................................49

                  SECTION 5.2.5.            Excess Cash and Cash Equivalents....................................49

ARTICLE VI            REPRESENTATIONS AND WARRANTIES............................................................49

         SECTION 6.1.               Organization, etc...........................................................49

         SECTION 6.2.               Due Authorization, Non-Contravention, etc...................................49

         SECTION 6.3.               Government Approval, Regulation, etc........................................50

         SECTION 6.4.               Validity, etc...............................................................50

         SECTION 6.5.               Financial Information.......................................................50

         SECTION 6.6.               No Material Adverse Change..................................................50

         SECTION 6.7.               Litigation, Labor Controversies, etc........................................50

         SECTION 6.8.               Subsidiaries................................................................51
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         SECTION 6.9.               Ownership of Properties.....................................................51

         SECTION 6.10.              Taxes.......................................................................51

         SECTION 6.11.              Pension and Welfare Plans...................................................51

         SECTION 6.12.              Environmental Warranties....................................................51

         SECTION 6.13.              Regulations U and X.........................................................53

         SECTION 6.14.              Accuracy of Information.....................................................53

         SECTION 6.15.              No Defaults under Other Agreements..........................................53

         SECTION 6.16.              Solvency....................................................................53

         SECTION 6.17.              Agreements..................................................................53

         SECTION 6.18.              Compliance with Laws, etc...................................................54

         SECTION 6.19.              Direct Benefit..............................................................54

ARTICLE VII           COVENANTS.................................................................................54

         SECTION 7.1.               Affirmative Covenants.......................................................54

                  SECTION 7.1.1.            Financial Information, Reports, Notices, etc........................54

                  SECTION 7.1.2.            Compliance with Laws, Maintenance of Existence, etc.................57

                  SECTION 7.1.3.            Maintenance of Properties...........................................57

                  SECTION 7.1.4.            Insurance...........................................................57

                  SECTION 7.1.5.            Books and Records...................................................57

                  SECTION 7.1.6.            Consummation the Merger.............................................58

                  SECTION 7.1.7.            Agreement to Deliver Security Documents.............................58

                  SECTION 7.1.8.            Perfection and Protection of Security Interests
                                            and Liens...........................................................59

                  SECTION 7.1.9.            Compliance with Other Contractual Obligations.......................59

                  SECTION 7.1.10.           Replacement Notes...................................................59

         SECTION 7.2.               Negative Covenants..........................................................59

                  SECTION 7.2.1.            Business Activities.................................................59

                  SECTION 7.2.2.            Indebtedness........................................................60

                  SECTION 7.2.3.            Liens...............................................................61

                  SECTION 7.2.4.            Financial Condition.................................................63

                  SECTION 7.2.5.            Investments.........................................................64
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                  SECTION 7.2.6.            Restricted Payments, etc............................................65

                  SECTION 7.2.7.            Limitation on Baskets...............................................66

                  SECTION 7.2.8.            Consolidation, Merger, etc..........................................66

                  SECTION 7.2.9.            Disposition of Assets...............................................67

                  SECTION 7.2.10.           Transactions with Affiliates........................................67

                  SECTION 7.2.11.           Negative Pledges, Restrictive Agreements, etc.......................68

                  SECTION 7.2.12.           Limitation on Issuance of Subsidiaries' Capital
                                            Stock...............................................................68

                  SECTION 7.2.13.           Environmental Protection............................................68

                  SECTION 7.2.14.           Accounting..........................................................68

                  SECTION 7.2.15.           Hedge Agreements....................................................68

ARTICLE VIII          EVENTS OF DEFAULT.........................................................................69

         SECTION 8.1.               Listing of Events of Default................................................69

                  SECTION 8.1.1.            Non-Payment of Obligations..........................................69

                  SECTION 8.1.2.            Breach of Representation or Warranty................................69

                  SECTION 8.1.3.            Non-Performance of Certain Covenants and
                                            Obligations.........................................................69

                  SECTION 8.1.4.            Non-Performance of Other Covenants and Obligations..................69

                  SECTION 8.1.5.            Default on Other Indebtedness.......................................69

                  SECTION 8.1.6.            Judgments...........................................................70

                  SECTION 8.1.7.            Pension Plans.......................................................70

                  SECTION 8.1.8.            Change of Control...................................................70

                  SECTION 8.1.9.            Bankruptcy, Insolvency, etc.........................................70

                  SECTION 8.1.10.           Impairment of Security, etc.........................................71

                  SECTION 8.1.11.           Attachment, etc.....................................................71

                  SECTION 8.1.12.           Seizure, etc........................................................71

                  SECTION 8.1.13.           Change of Control Offer.............................................71

         SECTION 8.2.               Action if Bankruptcy........................................................71

         SECTION 8.3.               Action if Other Event of Default............................................71

ARTICLE IX            THE AGENTS AND THE ISSUER.................................................................72

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         SECTION 9.1.               Actions.....................................................................72

         SECTION 9.2.               Funding Reliance, etc.......................................................73

         SECTION 9.3.               Exculpation.................................................................73

         SECTION 9.4.               Successor...................................................................73

         SECTION 9.5.               Extensions of Credit by the Agents, the Arrangers and the
                                    Issuer......................................................................74

         SECTION 9.6.               Credit Decisions............................................................74

         SECTION 9.7.               Copies, etc.................................................................74

         SECTION 9.8.               Documentation Agent, Syndication Agent, Arrangers and
                                    Bookrunner..................................................................75

ARTICLE X             MISCELLANEOUS PROVISIONS..................................................................75

         SECTION 10.1.              Waivers, Amendments, etc....................................................75

         SECTION 10.2.              Notices.....................................................................76

         SECTION 10.3.              Payment of Costs and Expenses...............................................76

         SECTION 10.4.              Indemnification.............................................................76

         SECTION 10.5.              Survival....................................................................77

         SECTION 10.6.              Severability................................................................77

         SECTION 10.7.              Headings....................................................................78

         SECTION 10.8.              Execution in Counterparts, Effectiveness, etc...............................78

         SECTION 10.9.              Governing Law; Entire Agreement.............................................78

         SECTION 10.10.             Successors and Assigns......................................................78

         SECTION 10.11.             Sale and Transfer of Loans and Note; Participations in
                                    Loans and Note..............................................................78

                  SECTION 10.11.1.          Assignments.........................................................78

                  SECTION 10.11.2.          Participations......................................................80

         SECTION 10.12.             Renewal and Continuation of Existing Loans..................................80

         SECTION 10.13.             Other Transactions..........................................................80

         SECTION 10.14.             [Intentionally Blank].......................................................81

         SECTION 10.15.             Treatment of Certain Information; Confidentiality...........................81

         SECTION 10.16.             Forum Selection and Consent to Jurisdiction.................................81

         SECTION 10.17.             Waiver of Jury Trial........................................................82

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         SECTION 10.18.             No Oral Agreements..........................................................82
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SCHEDULE I         -   Disclosure Schedule
SCHEDULE II        -   Existing Mortgages
SCHEDULE III-A     -   Percentages (Prior to Permitted 2002 Bond Transaction)
SCHEDULE III-B     -   Percentages (After Permitted 2002 Bond Transaction)
SCHEDULE 1.1       -   Gas Gathering Systems
SCHEDULE 5.1.13    -   UCC Searches
SCHEDULE 5.1.15    -   Hedging Agreements and Obligations
SCHEDULE 6.9       -   Hydrocarbon Interests

EXHIBIT A          -   Form of Note
EXHIBIT B-1        -   Form of Borrowing Request
EXHIBIT B-2        -   Form of Letter of Credit Request
EXHIBIT C          -   Form of Continuation/Conversion Notice
EXHIBIT D          -   Form of Bank Assignment Agreement
EXHIBIT E          -   Form of Opinion of Special Counsel to Obligors
EXHIBIT F          -   Form of Opinion of In-House Counsel to Obligors
EXHIBIT G          -   Form of Mortgage
EXHIBIT H          -   Form of Second Amendment to Borrower Pledge Agreement
EXHIBIT I          -   Form of Second Amendment to Subsidiary Pledge Agreement
EXHIBIT J          -   Form of Fourth Amended and Restated Subsidiary Guaranty
                       Agreement
EXHIBIT K          -   Form of Extension Request
EXHIBIT L          -   Form of Post-Merger Legal Opinion