REVOLVING CREDIT AGREEMENT
                          $500,000,000 REVOLVING CREDIT
                          AND COMPETITIVE BID FACILITY

                                      AMONG

                               OCEAN ENERGY, INC.,

                   CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
                    Individually and as Administrative Agent,

                            THE CHASE MANHATTAN BANK,
                        as Auction Administrative Agent,

             BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
                     Individually, and as Syndication Agent,

                             BANK ONE, TEXAS, N.A.,
                    Individually, and as Documentation Agent,

                       SOCIETE GENERALE, SOUTHWEST AGENCY,
                      Individually, and as Managing Agent,

                                BANK OF MONTREAL,
                      Individually, and as Managing Agent,

                                       AND

                        THE OTHER BANKS SIGNATORY HERETO

                                 March 30, 1999

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

                             CHASE SECURITIES INC.,
                     AS LEAD ARRANGER AND SOLE BOOK MANAGER

<PAGE>

                                TABLE OF CONTENTS

<TABLE>

<S>                <C>                                                                                           <C>    

SECTION 1.          DEFINITIONS AND ACCOUNTING MATTERS............................................................1
         1.1        Certain Defined Terms.........................................................................1
         1.2        Accounting Terms and Determinations..........................................................18
         1.3        Types of Loans...............................................................................18
         1.4        Miscellaneous................................................................................18

SECTION 2.          COMMITMENTS; COMPETITIVE BID FACILITY........................................................18
         2.1        Committed Loans..............................................................................18
         2.2        Letters of Credit............................................................................19
         2.3        Reductions and Changes of Commitments........................................................22
         2.4        Fees.........................................................................................22
         2.5        Affiliates; Lending Offices..................................................................22
         2.6        Several Obligations..........................................................................23
         2.7        Repayment of Loans; Evidence of Debt.........................................................23
         2.8        Use of Proceeds..............................................................................23
         2.9        Competitive Bid Procedure....................................................................23

SECTION 3.          BORROWINGS, PREPAYMENTS AND SELECTION OF INTEREST RATES......................................26
         3.1        Borrowings...................................................................................26
         3.2        Prepayments..................................................................................26
         3.3        Selection of Interest Rates..................................................................26

SECTION 4.          PAYMENTS OF PRINCIPAL AND INTEREST...........................................................27
         4.1        Repayment of Loans and Reimbursement Obligations.............................................27
         4.2        Interest.....................................................................................27

SECTION 5.          PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC..............................................28
         5.1        Payments.....................................................................................28
         5.2        Pro Rata Treatment...........................................................................28
         5.3        Computations.................................................................................28
         5.4        Minimum and Maximum Amounts..................................................................29
         5.5        Certain Actions, Notices, Etc................................................................29
         5.6        Non-Receipt of Funds by Administrative Agent.................................................30
         5.7        Sharing of Payments, Etc.....................................................................30

SECTION 6.          YIELD PROTECTION AND ILLEGALITY..............................................................31
         6.1        Additional Costs.............................................................................31
         6.2        Limitation on Types of Loans.................................................................33
         6.3        Illegality...................................................................................33







<PAGE>

         6.4        Substitute Alternate Base Rate Loans.........................................................34
         6.5        Compensation.................................................................................34
         6.6        Additional Costs in Respect of Letters of Credit.............................................34
         6.7        Capital Adequacy.............................................................................35
         6.8        Limitation on Additional Charges; Substitute Banks; Non-Discrimination.......................35

SECTION 7.          CONDITIONS PRECEDENT.........................................................................36
         7.1        Initial Loans................................................................................36
         7.2        Initial and Subsequent Loans.................................................................39

SECTION 8.          REPRESENTATIONS AND WARRANTIES...............................................................40
         8.1        Corporate Existence..........................................................................40
         8.2        Corporate Power and Authorization............................................................40
         8.3        Binding Obligations..........................................................................40
         8.4        No Legal Bar or Resultant Lien...............................................................40
         8.5        No Consent...................................................................................40
         8.6        Financial Condition..........................................................................41
         8.7        Investments and Guaranties...................................................................41
         8.8        Liabilities and Litigation...................................................................41
         8.9        Taxes and Governmental Charges...............................................................42
         8.10       Title to Properties..........................................................................42
         8.11       Defaults.....................................................................................42
         8.12       Location of Businesses and Offices...........................................................42
         8.13       Compliance with Law..........................................................................42
         8.14       Margin Stock.................................................................................43
         8.15       Subsidiaries.................................................................................43
         8.16       ERISA........................................................................................43
         8.17       Investment Company Act.......................................................................44
         8.18       Public Utility Holding Company Act...........................................................44
         8.19       Environmental Matters........................................................................44
         8.20       Claims and Liabilities.......................................................................45
         8.21       Solvency.....................................................................................45
         8.22       Year 2000....................................................................................45

SECTION 9.          AFFIRMATIVE COVENANTS........................................................................46
         9.1        Financial Statements and Reports.............................................................46
         9.2        Officers' Certificates.......................................................................47
         9.3        Taxes and Other Liens........................................................................48
         9.4        Maintenance..................................................................................48
         9.5        Further Assurances...........................................................................48
         9.6        Performance of Obligations...................................................................48
         9.7        Reimbursement of Expenses....................................................................49




                                                      (2)

<PAGE>

         9.8        Insurance....................................................................................50
         9.9        Accounts and Records.........................................................................50
         9.10       Notice of Certain Events.....................................................................50
         9.11       ERISA Information and Compliance.............................................................51

SECTION 10.         NEGATIVE COVENANTS...........................................................................52
         10.1       Debts, Guaranties and Other Obligations......................................................52
         10.2       Liens........................................................................................55
         10.3       Dividend Payment Restrictions................................................................58
         10.4       Mergers and Sales of Assets..................................................................58
         10.5       Proceeds of Loans............................................................................59
         10.6       ERISA Compliance.............................................................................59
         10.7       Total Leverage Ratio.........................................................................59
         10.8       Senior Leverage Ratio........................................................................60
         10.9       Minimum Net Worth............................................................................60
         10.10      Nature of Business...........................................................................60
         10.11      Covenants in Other Agreements................................................................60

SECTION 11.         DEFAULTS.....................................................................................60
         11.1       Events of Default............................................................................60
         11.2       Collateral Account...........................................................................63
         11.3       Preservation of Security for Unmatured Reimbursement Obligations.............................63
         11.4       Right of Setoff..............................................................................64

SECTION 12.         AGENTS.......................................................................................64
         12.1       Appointment, Powers and Immunities...........................................................64
         12.2       Reliance by Agents...........................................................................65
         12.3       Defaults.....................................................................................65
         12.4       Rights as a Bank.............................................................................66
         12.5       Indemnification..............................................................................66
         12.6       Non-Reliance on Agents and Other Banks.......................................................66
         12.7       Failure to Act...............................................................................67
         12.8       Resignation or Removal of Administrative Agent...............................................67

SECTION 13.         MISCELLANEOUS................................................................................68
         13.1       Waiver.......................................................................................68
         13.2       Notices......................................................................................68
         13.3       Indemnification..............................................................................68
         13.4       Amendments, Etc..............................................................................69
         13.5       Successors and Assigns.......................................................................70
         13.6       Limitation of Interest.......................................................................72
         13.7       Survival.....................................................................................73




                                                      (3)

<PAGE>

         13.8       Captions.....................................................................................74
         13.9       Counterparts.................................................................................74
         13.10      GOVERNING LAW; FORUM SELECTION;

                    CONSENT TO JURISDICTION......................................................................74
         13.11      WAIVER OF JURY TRIAL; PUNITIVE DAMAGES.......................................................75
         13.12      Severability.................................................................................75
         13.13      Chapter 15 Not Applicable....................................................................75
         13.14      Confidential Information.....................................................................75
         13.15      Tax Forms....................................................................................76
         13.16      Entire Agreement.............................................................................77
</TABLE>

                                                      (4)

<PAGE>

EXHIBITS:

Exhibit A           Unrestricted Subsidiaries
Exhibit B           Form of Request for Extension of Credit
Exhibit C           Subsidiaries (with Addresses)
Exhibit D           Form of Compliance Certificate
Exhibit E           Assignment and Acceptance
Exhibit F           Form of Competitive Bid Request
Exhibit G           Form of Notice to Banks of Competitive Bid Request
Exhibit H           Form of Competitive Bid
Exhibit I           Form of Competitive Bid Administrative Questionnaire
Exhibit J           Continuing Letters of Credit
Exhibit K           Form of Guaranty Agreement
Exhibit L           Disclosure Statement
Exhibit M           Commitments





                                                      (5)

<PAGE>

                           REVOLVING CREDIT AGREEMENT

         This  REVOLVING  CREDIT  AGREEMENT,  dated as of March  30,  1999  (the
"Effective  Date"),  is by and among  OCEAN  ENERGY,  INC.  (the  "Company"),  a
corporation  duly organized and validly  existing under the laws of the State of
Texas,  each of the  banks  which is or which  may  from  time to time  become a
signatory hereto (individually,  a "Bank" and, collectively,  the "Banks"), BANK
OF AMERICA  NATIONAL  TRUST AND  SAVINGS  ASSOCIATION  ("Bank of  America"),  as
Syndication  Agent for the Banks (in such capacity,  the  "Syndication  Agent"),
BANK ONE, TEXAS,  N.A. ("Bank One"),  as  Documentation  Agent for the Banks (in
such capacity, the "Documentation  Agent"),  SOCIETE GENERALE,  SOUTHWEST AGENCY
("Societe  Generale")  and BANK OF MONTREAL  ("Bank of  Montreal"),  as Managing
Agents  for the Banks  (in such  capacity,  the  "Managing  Agents"),  THE CHASE
MANHATTAN BANK, as Auction Administrative Agent for the Banks (in such capacity,
the  "Auction   Administrative  Agent"),  and  CHASE  BANK  OF  TEXAS,  NATIONAL
ASSOCIATION ("Chase"),  as Administrative Agent for the Banks (in such capacity,
together with its successors in such capacity, "Administrative Agent").

         The parties hereto agree as follows:

         SECTION 1.        DEFINITIONS AND ACCOUNTING MATTERS.

         1.1 Certain  Defined Terms.  As used herein,  the following terms shall
have the  following  meanings (all terms defined in this Section 1.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):

         "Additional  Costs"  shall have the  meaning  ascribed  to such term in
Section 6.1 hereof.

         "Affiliate"  shall  mean,  as to any  Person,  any other  Person  which
directly  or  indirectly  controls,  or is  under  common  control  with,  or is
controlled by, such Person and, if such Person is an  individual,  any member of
the  immediate  family   (including   parents,   siblings,   spouse,   children,
stepchildren,  grandchildren,  nephews  and nieces) of such  individual  and any
trust whose  principal  beneficiary is such individual or one or more members of
such  immediate  family and any Person who is  controlled  by any such member or
trust.  As used in  this  definition,  "control"  (including,  with  correlative
meanings,   "controlled   by"  and  "under  common  control  with")  shall  mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies  (whether through  ownership of securities or partnership
or other ownership interests, by contract or otherwise).

         "Agents"   shall   mean   the   Administrative   Agent,   the   Auction
Administrative  Agent, the  Documentation  Agent, the Syndication  Agent and the
Managing Agents, together with any successors in any such capacities.

         "Agreement"  shall  mean  this  Revolving  Credit  Agreement,  as  such
agreement from time to time may be amended,  amended and restated,  supplemented
or otherwise modified.

                                                         1

<PAGE>

         "Alternate  Base Rate" shall mean,  for any day, a rate per annum equal
to the  higher of (a) the Prime Rate in effect on such day or (b) 1/2 of 1% plus
the Federal Funds Rate in effect for such day (rounded upwards, if necessary, to
the nearest 1/16th of 1%). For purposes hereof, "Federal Funds Rate" shall mean,
for any period, a fluctuating  interest rate per annum equal for each day during
such period to 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  Business Day) by the Federal  Reserve Bank of New York,
or, 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
Administrative  Agent from three Federal  funds  brokers of recognized  standing
selected by it. For purposes of this Agreement, any change in the Alternate Base
Rate due to a change  in the  Federal  Funds  Rate  shall  be  effective  on the
effective  date of such  change in the  Federal  Funds  Rate.  If for any reason
Administrative  Agent  shall  have  determined  (which  determination  shall  be
conclusive and binding,  absent  manifest  error) that it is unable to ascertain
the  Federal  Funds Rate for any  reason,  including,  without  limitation,  the
inability  or  failure  of  Administrative  Agent to obtain  sufficient  bids or
publications in accordance with the terms hereof,  the Alternate Base Rate shall
be the Prime Rate  until the  circumstances  giving  rise to such  inability  no
longer exist. For the purposes hereof, "Prime Rate" shall mean the prime rate as
announced from time to time by Administrative  Agent, and thereafter  entered in
the minutes of  Administrative  Agent's  Loan and  Discount  Committee.  Without
notice  to the  Company  or any  other  Person,  the  Prime  Rate  shall  change
automatically  from time to time as and in the  amount by which  said prime rate
shall  fluctuate.  The Prime Rate is a reference  rate and does not  necessarily
represent   the  lowest  or  best  rate   actually   charged  to  any  customer.
Administrative  Agent  may make  commercial  loans  or  other  loans at rates of
interest at, above or below the Prime Rate.  For purposes of this  Agreement any
change in the  Alternate  Base Rate due to a change in the Prime  Rate  shall be
effective on the date such change in the Prime Rate is announced.

         "Alternate  Base Rate Loans" shall mean Loans which bear  interest at a
rate based upon the Alternate Base Rate.

         "APC" shall mean Alaska  Pipeline  Company,  an Alaska  corporation,  a
Subsidiary of the Company.

         "Applicable Lending Office" shall mean, for each Bank and for each Type
of Loan, such office of such Bank (or of an affiliate of such Bank) as such Bank
may from time to time  specify to  Administrative  Agent and the  Company as the
office  by  which  its  Loans  of such  Type are to be made  and/or  issued  and
maintained.

         "Applicable  Margin"  shall  mean,  on any  day,  with  respect  to any
Alternate Base Rate Loan or Eurodollar Loan, the applicable per annum percentage
set forth at the appropriate intersection in the table shown below, based on the
Rating as of the close of business on the preceding Business Day:

                                                         2

<PAGE>

<TABLE>

<S>                              <C>                               <C>    

                                        Alternate Base Rate              Eurodollar Loan

            Rating                    Loan Applicable Margin             Applicable Margin

            ------                    ----------------------             -----------------
BBB-/Baa3 and higher                          0.000%                          1.000%
BB+/Ba1                                       0.200%                          1.200%
BB/Ba2                                        0.450%                          1.450%
BB-/Ba3 and lower                             0.700%                          1.700%
===============================  ================================= =============================
</TABLE>

         "Applications"  shall mean all  applications and agreements for Letters
of Credit, or similar  instruments or agreements,  now or hereafter  executed by
any Person in connection with any Letter of Credit now or hereafter issued or to
be issued.

         "Bankruptcy  Code" shall mean the United  States  Bankruptcy  Code,  as
amended, and any successor statute.

         "Business Day" shall mean any day other than a day on which  commercial
banks are  authorized  or required to close in Houston,  Texas or New York,  New
York, and where such term is used in the definition of "Quarterly  Date" in this
Section 1.1 or if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or an Interest  Period for, a Eurodollar  Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment or
Interest  Period, a day which is also a day on which dealings in Dollar deposits
are carried out in the relevant interbank market.

         "Capital  Lease   Obligations"  shall  mean,  as  to  any  Person,  the
obligations  of such  Person to pay rent or other  amounts  under a lease of (or
other agreement  conveying the right to use) real and/or personal property which
obligations  are required to be classified  and accounted for as a capital lease
on a  balance  sheet  of such  Person  under  GAAP  and,  for  purposes  of this
Agreement,  the  amount  of such  obligations  shall be the  capitalized  amount
thereof, determined in accordance with GAAP.

         "Change of Control"  shall mean a change  resulting  when any Unrelated
Person or any Unrelated  Persons acting together which would  constitute a Group
together  with any  Affiliates  or Related  Persons  thereof  (in each case also
constituting  Unrelated  Persons) shall at any time either (i)  Beneficially Own
more than 35% of the  aggregate  voting  power of all classes of Voting Stock of
the  Company or (ii)  during any period of two  consecutive  years  ending on or
after the  Effective  Date,  as  determined  as of the last day of each calendar
quarter after the Effective  Date, the individuals  (the "Incumbent  Directors")
who at the  beginning of such period  constituted  the Board of Directors of the
Company  (other than additions  thereto or removals  therefrom from time to time
thereafter  approved by a vote of the Board of Directors in accordance  with the
Company's  by-laws)  shall cease for any reason to constitute 51% or more of the
Board of Directors of the Company.  As used herein (a) "Beneficially  Own" means
"beneficially own" as defined in Rule 13d-3 of the

                                                         3

<PAGE>

Securities Exchange Act of 1934, as amended, or any successor provision thereto;
provided,  however, that, for purposes of this definition, a Person shall not be
deemed to Beneficially Own securities  tendered pursuant to a tender or exchange
offer  made by or on behalf of such  Person or any of such  Person's  Affiliates
until such  tendered  securities  are accepted  for  purchase or  exchange;  (b)
"Group" means a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934,  as amended;  (c)  "Unrelated  Person" means at any time any Person
other  than the  Company  or any  Subsidiary  and  other  than any trust for any
employee  benefit  plan of the Company or any  Subsidiary  of the  Company;  (d)
"Related Person" of any Person shall mean any other Person owning (1) 5% or more
of the  outstanding  common stock of such Person or (2) 5% or more of the Voting
Stock of such  Person;  and (e) "Voting  Stock" of any Person shall mean capital
stock of such  Person  which  ordinarily  has voting  power for the  election of
directors (or persons performing  similar functions) of such Person,  whether at
all times or only so long as no senior class of securities has such voting power
by reason of any contingency.

         "Chapter  1D" shall mean Chapter 1D of Article 5069 of the Texas Credit
Title,  Title 79, Vernon's Texas Civil Statutes,  as amended  (formerly  Article
5069-1.04, Vernon's Texas Civil Statutes, as amended).

         "Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute,  together with all regulations,  rulings and  interpretations
thereof or thereunder by the Internal Revenue Service.

         "Commitment  Percentage"  shall mean,  as to any Bank,  the  percentage
equivalent  of a fraction  the  numerator  of which is the amount of such Bank's
Commitment  and  the  denominator  of  which  is  the  aggregate  amount  of the
Commitments of all Banks.

         "Commitment"  shall mean, as to any Bank,  the  obligation,  if any, of
such Bank to make Committed  Loans and incur Letter of Credit  Liabilities in an
aggregate  principal  amount at any one time outstanding up to but not exceeding
the amount,  if any, set forth  opposite such Bank's name on Exhibit M under the
caption  "Commitment"  (as the same may be reduced from time to time pursuant to
Section 2.3).

         "Committed Loans" shall mean the loans provided for in Section 2.1
hereof.

         "Competitive  Bid" shall mean an offer by a Bank to make a  Competitive
Loan pursuant to Section 2.9 hereof.

         "Competitive   Bid   Administrative   Questionnaire"   shall   mean   a
questionnaire substantially in the form of Exhibit I hereto.

         "Competitive  Bid Rate" shall mean, as to any Competitive Bid made by a
Bank pursuant to Section 2.9 hereof,  the fixed rate of interest,  in each case,
offered by the Bank making such Competitive Bid.

                                                         4

<PAGE>

         "Competitive  Bid Request" shall have the meaning ascribed to such term
in Section 2.9 hereof.

         "Competitive Loans" shall mean loans provided for in Section 2.9
hereof.

         "Consolidated  Net Worth"  means,  with  respect to the Company and its
Subsidiaries,  the sum of preferred  stock (if any),  par value of common stock,
capital  in  excess of par value of common  stock and  retained  earnings,  less
treasury  stock (if any),  goodwill,  cost in excess of fair value of net assets
acquired and all other assets that are properly classified as intangible assets,
but plus any expenses associated with the Merger occurring prior to December 31,
1999 and not in  excess  of  $30,000,000  in the  aggregate,  and the  amount of
noncash write downs  occurring on or after January 1, 1999 of long-lived  assets
in compliance with GAAP or SEC guidelines,  and excluding any  extraordinary  or
non-recurring  net gains or losses together with any related provision for taxes
on  such  gain or  loss,  realized  in  connection  with  any  extraordinary  or
nonrecurring  gains  or  losses,  and plus or  minus,  as  appropriate,  foreign
currency translation adjustments, all as determined on a consolidated basis.

         "Cover" for Letter of Credit Liabilities shall be effected by paying to
Administrative  Agent immediately  available funds, to be held by Administrative
Agent  in a  collateral  account  maintained  by  Administrative  Agent  at  its
Principal  Office  and  collaterally  assigned  as  security  for the  financial
accommodations   extended   pursuant  to  this  Agreement  using   documentation
satisfactory  to  Administrative  Agent,  in an  amount  equal  to any  required
prepayment.  Such  amount  shall be  retained  by  Administrative  Agent in such
collateral  account  until such time as (x) in the case of Cover being  provided
pursuant to Section 2.2(a),  the applicable  Letter of Credit shall have expired
and  Reimbursement  Obligations,  if any,  with respect  thereto shall have been
fully  satisfied or (y) in the case of Cover being provided  pursuant to Section
3.2(b), the outstanding  principal amount of all Revolving Credit Obligations is
not greater than the aggregate amount of the Commitments.

         "Default"  shall mean an Event of Default or an event which with notice
or lapse of time or both  would,  unless  cured or  waived,  become  an Event of
Default.

         "Disclosure Statement" shall mean the Disclosure Statement delivered to
Administrative Agent by the Company and attached as Exhibit L hereto.

         "Dividend  Payment" shall mean,  with respect to any Person,  dividends
(in cash,  property or obligations)  on, or other payments or  distributions  on
account of, or the redemption of, or the setting apart of money for a sinking or
other  analogous  fund  for  the  purchase,  redemption,   retirement  or  other
acquisition of, any shares of any class of capital stock of such Person,  or the
exchange  or  conversion  of any  shares of any class of  capital  stock of such
Person for or into any  obligations  of or shares of any other  class of capital
stock of such  Person or any other  property,  but  excluding  dividends  to the
extent  payable in, or exchanges or  conversions  for or into,  shares of common
stock of the  Company or options or warrants  to  purchase  common  stock of the
Company.

                                                         5

<PAGE>

         "Dollars" and "$" shall mean lawful money of the United States of
America.

         "EBITDAX" shall mean net earnings  (excluding material gains and losses
on sales and retirement of assets,  non-cash write downs, charges resulting from
accounting  convention  changes and deductions for exploration  expenses) before
deduction for federal and state taxes,  interest expense (including  capitalized
interest),  operating lease rentals or depreciation,  depletion and amortization
expense,  all determined in accordance  with GAAP;  provided,  however,  for the
purpose of any  calculation,  that (i) for the fiscal  quarter  ending March 31,
1998, EBITDAX shall be deemed to equal $159,765,000, (ii) for the fiscal quarter
ending June 30, 1998, EBITDAX shall be deemed to equal  $142,023,000,  (iii) for
the fiscal quarter ending  September 30, 1998,  EBITDAX shall be deemed to equal
$107,171,000,  and (iv) for the fiscal quarter ending December 31, 1998, EBITDAX
shall be deemed to equal $122,134,000.

         "ENSTAR Alaska" shall collectively mean (i) the gas distribution system
in south-central  Alaska known as ENSTAR Natural Gas Company,  a division of the
Company, and (ii) APC.

         "Environmental  Claim"  means any third party  (including  Governmental
Authorities  and  employees)  action,  lawsuit,  claim or proceeding  (including
claims or proceedings at common law or under the Occupational  Safety and Health
Act or similar  laws  relating  to safety of  employees)  which  seeks to impose
liability for (i) noise;  (ii) pollution or  contamination  of the air,  surface
water,  ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation,  handling,  treatment, storage,
disposal or  transportation;  (iv)  exposure to  Hazardous  Substances;  (v) the
safety or health of employees or (vi) the manufacture,  processing, distribution
in commerce or use of Hazardous  Substances.  An "Environmental Claim" includes,
but is not limited to, a common law action,  as well as a  proceeding  to issue,
modify or terminate an Environmental  Permit,  or to adopt or amend a regulation
to the  extent  that such a  proceeding  attempts  to redress  violations  of an
applicable  permit,  license,  or  regulation  as  alleged  by any  Governmental
Authority.

         "Environmental  Liabilities"  includes all liabilities arising from any
Environmental  Claim,  Environmental  Permit or Requirement of Environmental Law
under  any  theory  of  recovery,  at law or in  equity,  and  whether  based on
negligence,  strict  liability  or  otherwise,  including  but not  limited  to:
remedial,  removal, response,  abatement,  investigative,  monitoring,  personal
injury and damage to property or  injuries  to  persons,  and any other  related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs  and  expenses  necessary  to cause the  issuance,  reissuance  or
renewal of any  Environmental  Permit including  reasonable  attorneys' fees and
court costs.

         "Environmental  Permit"  means any permit,  license,  approval or other
authorization  under any applicable Legal  Requirement  relating to pollution or
protection of health or the  environment,  including laws,  regulations or other
requirements relating to emissions,  discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water,  ground water or land, or otherwise relating to
the manufacture,

                                                         6

<PAGE>

processing,  distribution,  use, treatment,  storage,  disposal,  transport,  or
handling of pollutants, contaminants or Hazardous Substances.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules,  regulations and interpretations by
the Internal Revenue Service or the Department of Labor thereunder.

         "ERISA  Affiliate"  shall mean any trade or  business  (whether  or not
incorporated)  which is a member of a group of which any Obligor is a member and
which is under  common  control  within  the  meaning of the  regulations  under
Section 414 of the Code.

         "Eurodollar  Base Rate" shall mean, with respect to any Interest Period
for any Eurodollar Loan, the lesser of (A) the rate per annum (rounded  upwards,
if necessary,  to the nearest  1/16th of 1%) equal to the average of the offered
quotations  appearing on Telerate  Page 3750 (or if such Telerate Page shall not
be  available,   any  successor  or  similar  service  as  may  be  selected  by
Administrative Agent and the Company) as of 11:00 a.m., Houston,  Texas time (or
as soon  thereafter  as  practicable)  on the day two Business Days prior to the
first day of such Interest  Period for Dollar  deposits having a term comparable
to such Interest Period and in an amount  comparable to the principal  amount of
the  Eurodollar  Loan to which such Interest  Period  relates or (B) the Highest
Lawful Rate.  If none of such  Telerate  Page 3750 nor any  successor or similar
service is available,  then the "Eurodollar  Base Rate" shall mean, with respect
to any Interest Period for any applicable Eurodollar Loan, the lesser of (A) the
rate per annum  (rounded  upwards,  if necessary,  to the nearest  1/16th of 1%)
determined by Administrative  Agent to be the average of the rates quoted by the
Reference Banks at  approximately  11:00 a.m.,  Houston,  Texas time (or as soon
thereafter as  practicable)  on the day two Business Days prior to the first day
of such  Interest  Period for the  offering by such  Reference  Banks to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount  comparable to the principal  amount of
the  Eurodollar  Loan to which such Interest  Period  relates or (B) the Highest
Lawful  Rate.  If any  Reference  Bank  does not  furnish  a  timely  quotation,
Administrative  Agent shall determine the relevant interest rate on the basis of
the quotation or quotations  furnished by the remaining Reference Bank or Banks;
if none of such  quotations  is available on a timely basis,  the  provisions of
Section 6.2 shall apply. Each determination of the Eurodollar Base Rate shall be
conclusive and binding,  absent  manifest  error,  and may be computed using any
reasonable averaging and attribution method.

         "Eurodollar Loans" shall mean Loans the interest on which is determined
on the basis of rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.1.

         "Eurodollar   Rate"  shall  mean,  for  any  Interest  Period  for  any
Eurodollar Loan, a rate per annum determined by Administrative Agent to be equal
to the Eurodollar Base Rate for such Loan for such Interest Period.

         "Event of  Default"  shall have the  meaning  assigned  to such term in
Section 11 hereof.

                                                         7

<PAGE>

         "Existing  Seagull Credit Facility" shall mean that certain Amended and
Restated Credit Agreement,  dated as of December 24, 1997, by and among Seagull,
each of the banks  which is or which may from  time to time  become a  signatory
thereto,  Morgan  Guaranty  Trust Company of New York, as  Documentation  Agent,
NationsBank of Texas,  N.A., as Syndication Agent, and The Chase Manhattan Bank,
as  Administrative  Agent,  as such  agreement from time to time may be amended,
amended and restated, supplemented or otherwise modified.

         "Existing  Old Ocean Bridge  Facility"  shall mean that certain  Letter
Agreement,  dated  February  3, 1999,  among The Chase  Manhattan  Bank,  Morgan
Guaranty  Trust Company of New York, Old Ocean Energy,  the Guarantor,  and Lion
GPL, S.A. and the "Security Instruments" as defined therein, as each is amended,
waived or otherwise modified to the date hereof.

         "Existing  Old Ocean Credit  Facility"  shall mean that certain  Second
Amended and Restated Global Credit Agreement,  dated as of November 20, 1998, by
and among Old Ocean Energy,  each of the lenders which is or which may from time
to time become a signatory  thereto,  Morgan Guaranty Trust Company of New York,
as Syndication Agent, Bank of America National Trust & Savings  Association,  as
Documentation  Agent,  Barclays Bank PLC, as Managing  Agent,  Paribas,  Societe
Generale,  Southwest Agency,  and Credit Suisse First Boston, as Co-Agents,  and
Chase Bank of Texas,  National  Association,  as  Administrative  Agent, as such
agreement from time to time may be amended,  amended and restated,  supplemented
or otherwise modified.

         "Facility  Amount" shall mean the aggregate  amount of the  Commitments
(which amount shall  initially be  $500,000,000),  as such amount may be reduced
from time to time pursuant to the terms of this Agreement.

         "Facility Fee  Percentage"  shall mean, on any date, the applicable per
annum  percentage set forth at the  appropriate  intersection in the table shown
below, based on the Rating as of the close of business on the preceding Business
Day:

              Rating                      Facility Fee Percentage
BBB-/Baa3 and higher                              0.250%
BB+/Ba1 and lower                                 0.300%

=================================== ==================================

         "Financial   Statements"   shall  mean  the   financial   statement  or
statements, together with the notes and schedules thereto, described or referred
to in Sections 8.6 and 9.1.

         "GAAP" shall mean as to a particular Person,  such accounting  practice
as, in the  opinion of KPMG Peat  Marwick or other  independent  accountants  of
recognized  national  standing  retained  by such Person and  acceptable  to the
Majority  Banks,   conforms  at  the  time  to  generally  accepted   accounting
principles, consistently applied. Generally accepted accounting principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards

                                                         8

<PAGE>

Board,  (b) which are applied for all periods  after the date hereof in a manner
consistent  with the manner in which such  principles and practices were applied
to the most recent audited financial statements of the relevant Person furnished
to the Banks,  except only for such changes in  principles  and  practices  with
which  the  applicable  independent  public  accountants  concur  and  which are
disclosed to the Banks in writing,  and (c) which are  consistently  applied for
all  periods  after the date  hereof so as to  reflect  properly  the  financial
condition and results of operations of such Person.

         "Governmental   Authority"   shall  mean  any  sovereign   governmental
authority,  the United States of America, any State of the United States and any
political  subdivision  of any of the foregoing,  and any central bank,  agency,
instrumentality,  department,  commission,  board, bureau,  authority,  court or
other tribunal or  quasi-governmental  authority in each case whether executive,
legislative,  judicial,  regulatory or administrative,  having jurisdiction over
the  Company,  any  of  its  Subsidiaries,  any of  their  respective  property,
Administrative Agent or any Bank.

         "Guarantee"  by  any  Person  means  any   obligation,   contingent  or
otherwise,   of  any  such  Person  directly  or  indirectly   guaranteeing  any
Indebtedness  of any other Person and,  without  limiting the  generality of the
foregoing, any obligation,  direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or  advance or supply  funds for the  purchase or
payment  of)  such  Indebtedness  (whether  arising  by  virtue  of  partnership
arrangements,  by agreement to keep-well,  to purchase assets, goods, securities
or services,  to take-or-pay,  or to maintain financial statement  conditions or
otherwise,  other than  agreements  to purchase  assets,  goods,  securities  or
services at an arm's length  price in the  ordinary  course of business) or (ii)
entered  into for the purpose of assuring in any other manner the holder of such
Indebtedness  of the payment  thereof or to protect such holder  against loss in
respect thereof (in whole or in part),  provided that the term "Guarantee" shall
not include  endorsements  for  collection or deposit in the ordinary  course of
business. The term "Guarantee" used as a verb has a corresponding meaning.

         "Guarantor" shall mean Ocean Energy, Inc., a Louisiana corporation.

         "Guaranty Agreement" shall mean the guaranty agreement substantially in
the form of Exhibit K, with appropriate insertions and deletions, executed or to
be  executed  by the  Guarantor,  as such  agreement  from  time to time  may be
amended, amended and restated, supplemented or otherwise modified.

         "Havre"  shall  mean  Havre  Pipeline  Company,  LLC,  a Texas  limited
liability company.

         "Hazardous Substance" shall mean petroleum products,  and any hazardous
or toxic waste or  substance  defined or  regulated as such from time to time by
any law, rule,  regulation or order described in the definition of "Requirements
of Environmental Law".

         "Highest  Lawful Rate" shall mean, on any day, the maximum  nonusurious
rate of interest  permitted for that day by whichever of  applicable  federal or
Texas law permits the higher interest rate,  stated as a rate per annum. On each
day, if any, that Chapter 1D establishes the Highest Lawful

                                                         9

<PAGE>

Rate,  the Highest Lawful Rate shall be the  "applicable  interest rate ceiling"
(as defined in Chapter 1D) for that day.

         "Hydrocarbons"  shall mean oil, gas,  casinghead  gas,  drip  gasoline,
natural  gasoline,  condensate and all other liquid or gaseous  hydrocarbons and
related minerals, in each case whether in a natural or a processed state.

         "Indebtedness"  shall mean, as to any Person:  (i) indebtedness of such
Person for  borrowed  money  (whether by loan or the  issuance  and sale of debt
securities)  or for the deferred  purchase or  acquisition  price of property or
services, including, without limitation,  obligations payable out of Hydrocarbon
production;  (ii)  obligations,  whether fixed or contingent,  of such Person in
respect  of  letters of credit,  acceptances  or similar  instruments  issued or
accepted  by banks and other  financial  institutions  for the  account  of such
Person or any other Person; (iii) Capital Lease Obligations of such Person; (iv)
Redemption  Obligations  of such Person and other  obligations of such Person to
redeem or otherwise  retire  shares of capital stock of such Person or any other
Person,  in each case to the extent that the redemption  obligations  will arise
prior to the stated maturity of the  Obligations;  (v) indebtedness of others of
the type described in clause (i), (ii), (iii) or (iv) above secured by a Lien on
the property of such Person, whether or not the respective obligation so secured
has been assumed by such Person,  to the extent of the fair market value of such
property;  and (vii) indebtedness of others of the type described in clause (i),
(ii),  (iii) or (iv)  above  Guaranteed  by such  Person,  to the extent of such
Guarantee.

         "Interest Period" shall mean:

         (a) With respect to any Eurodollar  Loan, the period  commencing on (i)
the date such Loan is made or converted  into or continued as a Eurodollar  Loan
or (ii) in the case of a roll-over to a successive Interest Period, the last day
of the  immediately  preceding  Interest  Period and  ending on the  numerically
corresponding  day  in  the  first,   second,  third  or  sixth  calendar  month
thereafter,  as the Company may select as provided in Section 5.5 hereof, except
that each such Interest  Period which commences on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month shall
end on the last Business Day of the appropriate subsequent calendar month.

         (b) With respect to any other  Competitive  Loan, the period commencing
on the  date  such  Loan  is  made  and  ending  on the  date  specified  in the
Competitive  Bid in which the offer to make the  Competitive  Loan was extended;
provided,  however, that each such period shall have a duration of not less than
seven calendar days or more than 180 calendar days.

Notwithstanding  the  foregoing:  (i)  no  Interest  Period  applicable  to  any
Eurodollar  Loan or any  Competitive  Loan may commence before and end after the
date of any  scheduled  reduction in the  Commitments  if,  after giving  effect
thereto,  the aggregate  principal amount of the Eurodollar Loans or Competitive
Loans which have Interest  Periods which end after such  reduction date shall be
greater than the aggregate  principal amount of the Commitments  scheduled to be
in effect after such

                                                        10

<PAGE>

reduction  date;  (ii) each Interest  Period which would  otherwise end on a day
which is not a Business Day shall end on the next  succeeding  Business Day (or,
in the case of an Interest Period for Eurodollar  Loans, if such next succeeding
Business Day falls in the next succeeding  calendar month, on the next preceding
Business Day); (iii) no Interest Period applicable to any Eurodollar Loan or any
Competitive  Loan shall extend beyond the end of the scheduled  Revolving Credit
Availability  Period, and (iv) no Interest Period for any Eurodollar Loans shall
have a duration  of less than one month and,  if the  Interest  Period  therefor
would  otherwise  be a  shorter  period,  such  Loans  shall  not  be  available
hereunder.

         "Investments"  shall mean with respect to any Person any advance,  loan
or other  extension  of credit  or  capital  contribution  (other  than  prepaid
expenses  in the  ordinary  course of  business)  to (by means of  transfers  of
property  or assets or  otherwise)  purchase or own any  stocks,  bonds,  notes,
debentures or other securities of, or incur contingent liability with respect to
(except for the  endorsement  of checks in the  ordinary  course of business and
except for the Indebtedness and Liens permitted under this Agreement), any other
Person.

         "Issuer" shall mean each Bank or any of its Affiliates issuing a Letter
of Credit hereunder.

         "Legal  Requirement"  shall mean any law, statute,  ordinance,  decree,
requirement,  order, judgment, rule, regulation (or interpretation of any of the
foregoing)  of,  and  the  terms  of  any  license  or  permit  issued  by,  any
Governmental Authority, now or hereafter in effect.

         "Letter  of Credit"  shall  mean (i) any letter of credit  issued by an
Issuer in the manner  and  subject to the terms and  provisions  of Section  2.2
hereof and (ii) each letter of credit  outstanding  on the Effective Date listed
on  Exhibit J hereto  which  letters  of credit  will be deemed to be issued and
outstanding under this Agreement as of the Effective Date.

         "Letter  of  Credit  Fee"  shall  mean a per  annum  rate  equal to the
Applicable Margin for Eurodollar Loans in effect from time to time.

         "Letter of Credit  Liabilities"  shall mean, at any time and in respect
of any Letter of Credit,  the sum of (i) the amount available for drawings under
such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations  at the time due and  payable in respect of previous  drawings  made
under such Letter of Credit.

         "Lien"  shall mean,  with  respect to any asset,  any  mortgage,  lien,
pledge, charge,  collateral assignment,  security interest or encumbrance of any
kind in respect of such  asset.  For the  purposes of this  Agreement,  a Person
shall be deemed to own  subject  to a Lien any asset  which it has  acquired  or
holds subject to the interest of a vendor or lessor under any  conditional  sale
agreement,  capital lease or other title  retention  agreement  relating to such
asset.

         "Loan Documents" shall mean this Agreement, the Guaranty Agreement, all
Applications,  all  instruments,  certificates  and  agreements now or hereafter
executed or delivered to Administrative

                                                        11

<PAGE>

Agent  or  any  Bank  pursuant  to any of the  foregoing,  and  all  amendments,
modifications,  renewals,  extensions,  increases  and  rearrangements  of,  and
substitutions for, any of the foregoing.

         "Loans" shall mean Committed Loans and Competitive Loans.

         "Majority  Banks"  shall  mean  (a)  prior  to the  termination  of the
Commitments,  Banks  having  greater  than 50% of the  aggregate  amount  of the
Commitments  and (b) after the  termination  of the  Commitments,  Banks  having
greater than 50% of the aggregate  principal  amount of the Loans and the Letter
of Credit Liabilities.

         "Margin Regulations" shall mean, as applicable,  Regulations U and X of
the Board of Governors of the Federal  Reserve  System,  as from time to time in
effect.

         "Material  Adverse Effect" shall mean a material  adverse effect on the
business,   condition   (financial  or  otherwise),   operations  or  properties
(including  proven oil and gas  reserves)  of the Company and its  Subsidiaries,
taken as a whole,  or on the  ability of the  Company to  perform  its  material
obligations under any Loan Document to which it is a party.

         "Merger" shall have the meaning set forth in Section 7.1(j).

         "Merger Agreement" shall have the meaning set forth in Section 7.1(j).

         "95 Indenture" shall mean that certain  Indenture among the Company (as
successor by merger to Old Ocean Energy), as issuer,  Guarantor (as successor by
merger to UMC), as initial  subsidiary  guarantor,  and U.S. Bank Trust National
Association (formerly known as First Bank of New York, National Association), as
trustee,  dated as of  October  30,  1995,  providing  for the  issuance  of the
Company's $150,000,000 10-3/8% Senior Subordinated Notes due 2005, as amended by
(i) the First Supplemental  Indenture thereto dated as of November 4, 1997, (ii)
the Second  Supplemental  Indenture thereto dated as of March 27, 1998 and (iii)
the Third  Supplemental  Indenture  thereto dated as of March 30, 1999,  and all
notes or securities issued under any of the foregoing, any subsidiary guarantees
issued  pursuant to the terms of any of the  foregoing,  and all  amendments and
supplements to the foregoing permitted hereunder.

         "96 Indenture" shall mean that certain  indenture dated as of September
26, 1996 among the  Company (as  successor  by merger to Old Ocean  Energy),  as
issuer, the subsidiary  guarantor named therein, and State Street Bank and Trust
Company,  as trustee,  providing for the issuance of the Company's  $160,000,000
9-3/4%  Senior  Subordinated  Notes  due  2006,  as  amended  by (i)  the  First
Supplemental  Indenture  thereto  dated as of March 27, 1998 and (ii) the Second
Supplemental  Indenture  thereto  dated as of March 30,  1999,  and all notes or
securities issued under any of the foregoing,  any subsidiary  guarantees issued
pursuant  to the  terms  of  any  of  the  foregoing,  and  all  amendments  and
supplements to the foregoing permitted hereunder.

                                                        12

<PAGE>

         "97 Indenture"  shall mean that certain  Indenture  dated as of July 2,
1997 among the Company (as successor by merger to Old Ocean Energy),  as issuer,
the subsidiary guarantor named therein, and State Street Bank and Trust Company,
as trustee,  providing  for the issuance of the  Company's  $200,000,000  8-7/8%
Senior  Subordinated  Notes due 2007,  as amended by (i) the First  Supplemental
Indenture  thereto  dated as of March 27, 1998 and (ii) the Second  Supplemental
Indenture thereto dated as of March 30, 1999, and all notes or securities issued
under any of the foregoing,  any subsidiary  guarantees  issued  pursuant to the
terms  of any of the  foregoing,  and  all  amendments  and  supplements  to the
foregoing permitted hereunder.

         "98 Senior  Subordinated  Indenture" shall mean that certain  Indenture
dated as of July 8, 1998 among the Company (as  successor by merger to Old Ocean
Energy),  as issuer,  the subsidiary  guarantor  named therein,  U.S. Bank Trust
National  Association,  as trustee,  providing for the issuance of the Company's
$250,000,000  8-3/8% Senior Subordinated Notes due 2008, as amended by the First
Supplemental  Indenture  thereto  dated as of March 30,  1999,  and all notes or
securities issued under any of the foregoing,  any subsidiary  guarantees issued
pursuant  to the  terms  of  any  of  the  foregoing,  and  all  amendments  and
supplements to the foregoing permitted hereunder.

         "Obligations" shall mean, as at any date of determination  thereof, the
sum of the following:  (i) the aggregate  principal amount of Loans  outstanding
hereunder  plus (ii) the  aggregate  amount of the Letter of Credit  Liabilities
hereunder plus (iii) all other liabilities,  obligations and indebtedness of the
Company,  any  Subsidiary  of the  Company or any other  Obligor  under any Loan
Document.

         "Obligor" shall mean the Company and the Guarantor.

         "Old Ocean Energy" shall mean Ocean Energy, Inc., a Delaware
corporation.

         "Organizational  Documents"  shall mean, with respect to a corporation,
the certificate of  incorporation,  articles of incorporation and bylaws of such
corporation;   with  respect  to  a  partnership,   the  partnership   agreement
establishing  such  partnership;  with  respect  to a joint  venture,  the joint
venture  agreement  establishing  such joint venture;  with respect to a limited
liability  company,  the  certificate  of formation and operating  agreement (or
comparable  documents) of such limited liability company;  and with respect to a
trust,  the instrument  establishing  such trust; in each case including any and
all modifications  thereof as of the date of the Loan Document referring to such
Organizational Document.

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

         "Person" shall mean an individual, a corporation,  a company, a bank, a
voluntary association, a partnership,  a trust, an unincorporated  organization,
any Governmental Authority or any other entity.

                                                        13

<PAGE>

         "Plan" shall mean an employee  pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding  standards under Section 412
of the Code and is either (a)  maintained by the Company or any ERISA  Affiliate
for employees of the Company or any ERISA  Affiliate or (b) maintained  pursuant
to a collective  bargaining  agreement or any other arrangement under which more
than one  employer  makes  contributions  and to which the  Company or any ERISA
Affiliate is then making or accruing an obligation to make  contributions or has
within the preceding five plan years made contributions.

         "Post-Default  Rate" shall  mean,  in respect of any  principal  of any
Loan,  any  Reimbursement  Obligation or any other amount payable by the Company
under  this  Agreement  or any other  Loan  Document  which is not paid when due
(whether at stated maturity,  by acceleration,  or otherwise),  a rate per annum
during the period  commencing  on the due date until such amount is paid in full
equal to the lesser of (a) the sum of (x) with respect to Eurodollar  Loans,  2%
per annum plus the applicable Eurodollar Rate then in effect plus the Applicable
Margin for  Eurodollar  Loans until the  expiration of the  applicable  Interest
Period,  (y) with respect to Competitive Loans, 2% per annum plus the applicable
fixed  rate  offered  by the  applicable  Bank and  accepted  by the  Company in
accordance with Section 2.9 hereof,  and (z) with respect to Alternate Base Rate
Loans  and  with  respect  to  Eurodollar  Loans  after  the  expiration  of the
applicable  Interest  Period (and also with respect to  indebtedness  other than
Loans),  2% plus the Alternate Base Rate as in effect from time to time plus the
Applicable Margin for Alternate Base Rate Loans or (b) the Highest Lawful Rate.

         "Principal Office" shall mean the principal office of Administrative 
Agent, presently located at 1 Chase Manhattan Plaza, 8th Floor, New York, New 
York 10081, Attention: Agent Services.

         "Quarterly  Dates"  shall  mean  the  last  day of  each  March,  June,
September and December,  provided  that, if any such date is not a Business Day,
then the relevant Quarterly Date shall be the next succeeding Business Day.

         "Rating"  shall mean the senior  unsecured  debt rating for the Company
publicly  announced  by  Standard & Poor's  Ratings  Group or Moody's  Investors
Service, Inc., or their respective successors.  In the event the ratings are not
equivalent,  the  higher  rating  shall be treated  as the  "Rating"  hereunder;
provided,  that if such  ratings  differ by more than one (1) level,  the Rating
shall be the average,  rounded  upwards,  of the two ratings.  In the event that
there is no  Rating  published  by either  Standard  & Poor's  Ratings  Group or
Moody's Investors Service, Inc. or their respective successors,  then the Rating
shall be deemed to be BB-/Ba3.

         "Redemption  Obligations"  shall  mean with  respect  to any Person all
mandatory redemption  obligations of such Person with respect to preferred stock
or other equity  securities  issued by such Person or put rights in favor of the
holder of such preferred  stock or other equity  securities,  to the extent that
such  redemption  obligations  or put  rights  will  arise  prior to the  stated
maturity of the Obligations. Notwithstanding the foregoing, customary redemption
obligations and put rights associated with a Change of Control or sale of assets
shall not constitute Redemption Obligations.

                                                        14

<PAGE>

         "Reference  Banks"  shall  mean  Chase  and such  other  Banks (up to a
maximum  of two (2)  additional  Banks) as the  Company,  with the  approval  of
Administrative  Agent (which approval shall not be unreasonably  withheld),  may
from time to time designate.

         "Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or  supplemented  from time to
time and any successor or other regulation relating to reserve requirements.

         "Regulatory Change" shall mean, with respect to any Bank, any change on
or after the date of this Agreement in Legal Requirements  (including Regulation
D) or the  adoption  or  making  on or after  such  date of any  interpretation,
directive or request  applying to a class of banks including such Bank under any
Legal Requirements  (whether or not having the force of law) by any Governmental
Authority.

         "Reimbursement Obligations" shall mean, as at any date, the obligations
of the  Company  then  outstanding  in respect  of Letters of Credit  under this
Agreement,  to reimburse  Administrative Agent for the account of the applicable
Issuer for the amount  paid by the  applicable  Issuer in respect of any drawing
under such Letter of Credit.

         "Relevant  Party" shall mean the Company and each other party to any of
the Loan Documents other than (a) the Banks and (b) the Agents.

         "Request for Extension of Credit" shall mean a request for extension of
credit duly executed by any  Responsible  Officer of the Company,  appropriately
completed and substantially in the form of Exhibit B attached hereto.

         "Requirements of Environmental  Law" means all requirements  imposed by
any law (including for example and without limitation The Resource  Conservation
and Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability  Act),  rule,  regulation,  or  order of any  federal,  state or local
executive, legislative,  judicial, regulatory or administrative agency, board or
authority  in effect at the  applicable  time which  relate to (i)  noise;  (ii)
pollution,  protection or clean-up of the air,  surface  water,  ground water or
land;  (iii) solid,  gaseous or liquid  waste  generation,  treatment,  storage,
disposal or  transportation;  (iv)  exposure to  Hazardous  Substances;  (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.

         "Reserve  Requirement"  shall  mean,  for any  Eurodollar  Loan for any
Interest Period  therefor,  the stated maximum rate for all reserves  (including
any  marginal,  supplemental  or emergency  reserves)  required to be maintained
during such Interest Period under Regulation D by any member bank of the Federal
Reserve System or any Bank against  "Eurocurrency  liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement  shall  reflect  and  include  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

                                                        15

<PAGE>

reference to which the  Eurodollar  Rate is to be  determined as provided in the
definition  of "Eurodol  lar Base Rate" in this Section 1.1 or (ii) any category
of  extensions  of credit or other assets which include  Eurodollar  Loans.  Any
determination  by  Administrative  Agent  of the  Reserve  Requirement  shall be
conclusive  and  binding,  absent  manifest  error,  and may be made  using  any
reasonable averaging and attribution method.

         "Responsible  Officer"  shall  mean  the  chairman  of the  board,  the
president,  any  executive  vice  president,  the vice  president of finance and
administration,  the chief executive  officer or the chief operating  officer or
any equivalent officer (regardless of title) and in the case of the Company, any
other vice president,  and in respect of financial or accounting matters,  shall
also include the chief  financial  officer,  the treasurer and the controller or
any equivalent officer (regardless of title).

         "Restricted Subsidiary" shall mean each Subsidiary of the Company that,
at the particular time in question, (i) owns directly or indirectly any material
assets or any  interest  in any other  Restricted  Subsidiary  and (ii) has been
designated as a Restricted  Subsidiary by the Company or has not been designated
as an  Unrestricted  Subsidiary by the Company  either (a) on Exhibit A attached
hereto or (b) in accordance with the terms and provisions of this Agreement. The
Unrestricted Subsidiaries on the Effective Date are listed on Exhibit A attached
hereto and each other  Subsidiary of Company as of the Effective Date shall be a
Restricted Subsidiary.  A Restricted Subsidiary shall remain such (even if it no
longer owns directly or indirectly any interest in any of the material assets or
any  interest  in  any  other  Restricted  Subsidiary)  until  designated  as an
Unrestricted  Subsidiary  in  accordance  with the terms and  provisions of this
Agreement.

         "Revolving Credit  Availability  Period" shall mean the period from and
including  the date hereof to but not  including  March 30, 2004 or the date the
Commitments  are  terminated  pursuant to Section  11.1,  whichever  is first to
occur.

         "Revolving  Credit   Obligations"   shall  mean,  as  at  any  date  of
determination   thereof,   the  sum  of  the   following   (determined   without
duplication):  (i) the aggregate principal amount of Loans outstanding hereunder
plus (ii) the aggregate amount of the Letter of Credit Liabilities hereunder.

         "Seagull" shall mean Seagull Energy Corporation, a Texas corporation.

         "Senior Debt" shall mean Total Debt, other than Subordinated
Indebtedness.

         "Senior  Leverage Ratio" shall mean the ratio of (a) Senior Debt to (b)
EBITDAX of the Company and its Restricted  Subsidiaries on a consolidated  basis
for the last four rolling fiscal quarters.

         "Specified Assets" shall have the meaning set forth in Section 10.4.

                                                        16

<PAGE>

         "Subordinated  Indebtedness"  shall mean all unsecured  Indebtedness of
the Company which is subordinated, upon terms satisfactory to the Administrative
Agent, in right of payment to the payment in full in cash of all Obligations.

         "Subsidiary" shall mean, with respect to any Person (the "parent"), (a)
any corporation of which at least a majority of the outstanding  shares of stock
having by the terms  thereof  ordinary  voting  power to elect a majority of the
board of directors of such  corporation  (irrespective  of whether or not at the
time stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any  contingency) is at the time
directly or  indirectly  owned or controlled by the parent or one or more of the
Subsidiaries of the parent or by the parent and one or more of the  Subsidiaries
of the parent, and (b) any partnership,  limited  partnership,  joint venture or
other form of entity, the majority of the legal or beneficial ownership of which
is at the time directly or  indirectly  owned or controlled by the parent or one
or more of the  Subsidiaries  of the  parent or by the parent and one or more of
the Subsidiaries of the parent.

         "Tangible  Net Worth"  shall mean with respect to any Person the sum of
the redemption price of preferred  stock, par value of common stock,  capital in
excess of par value of common stock  (additional  paid-in  capital) and retained
earnings, less treasury stock, goodwill, deferred development costs, franchises,
licenses,  patents,  trademarks  and  copyrights  and all other assets which are
properly  classified  as  intangible  assets  in  accordance  with GAAP less any
Redemption Obligations.

         "364-Day  Credit  Agreement"  shall mean that  certain  364-Day  Credit
Agreement  of even date  herewith  by and among the  Company,  each of the banks
which is or which  may from time to time  become a  signatory  thereto,  Bank of
America National Trust and Savings  Association,  as Documentation  Agent,  Bank
One, Texas, N.A., as Syndication Agent,  Societe Generale,  Southwest Agency and
Bank of Montreal, as Managing Agents for the Banks, The Chase Manhattan Bank, as
Auction  Administrative  Agent for the Banks, and Chase Bank of Texas,  National
Association, as Administrative Agent, as such agreement from time to time may be
amended, amended and restated, supplemented or otherwise modified.

         "Total  Debt"  shall  mean  all  Indebtedness  of the  Company  and its
Restricted  Subsidiaries on a consolidated basis, but excluding (i) Indebtedness
of the Company or any  Restricted  Subsidiary of the types  described in Section
10.1,  part (i),  clauses (c) through (g),  (j), (k) and (l), (ii) fifty percent
(50%) of the  amount of (A)  obligations  in  respect  of  letters  of credit or
similar  instruments  not  supporting  indebtedness  for borrowed  money and (B)
obligations  in  connection  with bank  guarantees,  bonds,  surety  or  similar
obligations required or requested by Governmental Authorities in connection with
the  usual  and  customary  operation  of  and  the  obtaining  of oil  and  gas
properties,  and (iii) Indebtedness of the Company or any Restricted  Subsidiary
of the types described in Section 10.1, part (i), clause (h), up to an aggregate
amount of $10,000,000.

                                                        17

<PAGE>

         "Total  Leverage  Ratio"  shall mean the ratio of (a) Total Debt to (b)
EBITDAX of the Company and its Restricted  Subsidiaries on a consolidated  basis
for the last four rolling fiscal quarters.

         "Type"  shall have the  meaning  assigned  to such term in Section  1.3
hereof.

         "Unfunded  Liabilities"  shall mean,  with respect to any Plan,  at any
time,  the amount (if any) by which (a) the present value of all benefits  under
such Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits,  all determined as of the then most recent actuarial  valuation report
for such Plan,  but only to the extent that such excess  represents  a potential
liability of any ERISA Affiliate to the PBGC or a Plan under Title IV of ERISA.

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

         "Unrestricted  Subsidiary"  shall mean each  Subsidiary  of the Company
which is (i)  designated  as an  Unrestricted  Subsidiary  on Exhibit A attached
hereto or (ii)  designated as an  Unrestricted  Subsidiary by the Company at any
time after the Effective Date and either (A) such  Subsidiary has a Tangible Net
Worth of less than  $25,000,000  or (B) with the  consent of the  Administrative
Agent and the Majority Banks. An Unrestricted Subsidiary shall remain such until
designated  as  a  Restricted  Subsidiary  in  accordance  with  the  terms  and
provisions of this Agreement.

         1.2 Accounting Terms and  Determinations.  Unless  otherwise  specified
herein,   all   accounting   terms  used  herein  shall  be   interpreted,   all
determinations  with respect to accounting  matters hereunder shall be made, and
all financial  statements and certificates  and reports as to financial  matters
required to be delivered  hereunder shall be prepared,  in accordance with GAAP.
To enable the ready  determination of compliance with the provisions hereof, the
Company  will not  change  from  December  31 in each year the date on which its
fiscal year ends, nor from March 31, June 30 and September 30 the dates on which
the first three fiscal quarters in each fiscal year end.

         1.3 Types of Loans.  Loans hereunder are  distinguished by "Type".  The
"Type" of a Loan refers to the  determination  whether such Loan is a Eurodollar
Loan, a Competitive Loan or an Alternate Base Rate Loan.

         1.4  Miscellaneous.  The words  "hereof",  "herein" and "hereunder" and
words  of  similar  import  when  used in this  Agreement  shall  refer  to this
Agreement as a whole and not to any particular provision of this Agreement.  Any
reference to Sections shall refer to Sections of this Agreement.

         SECTION 2.        COMMITMENTS; COMPETITIVE BID FACILITY.

         2.1 Committed Loans.  From time to time on or after the date hereof and
during the Revolving Credit Availability  Period, each Bank shall make Committed
Loans under this Section

                                                        18

<PAGE>

to the Company in an aggregate  principal  amount at any one time outstanding up
to but not exceeding  such Bank's  Commitment  Percentage of the amount by which
the  Facility  Amount  exceeds the  aggregate  unpaid  principal  balance of all
Competitive   Loans  and  Letter  of  Credit   Liabilities  from  time  to  time
outstanding.  Subject to the conditions  herein,  any such Committed Loan repaid
prior to the end of the Revolving Credit  Availability  Period may be reborrowed
pursuant  to the  terms  of this  Agreement;  provided,  that  any and all  such
Committed  Loans  shall be due and  payable in full at the end of the  Revolving
Credit Availability Period.

         2.2        Letters of Credit.

         (a) Letters of Credit.  Subject to the terms and conditions hereof, and
on the condition that aggregate Letter of Credit  Liabilities shall never exceed
$100,000,000,  the Company shall have the right,  in addition to Committed Loans
provided for in Section 2.1 hereof, to utilize the Commitments from time to time
from and after the Effective Date through the expiration of the Revolving Credit
Availability  Period by  obtaining  the  issuance  of  letters of credit for the
account of the Company and on behalf of the Company by the applicable  Issuer if
the Company  shall so request in the notice  referred  to in Section  2.2(b)(i).
Upon the date of the issuance of a Letter of Credit, the applicable Issuer shall
be deemed,  without  further  action by any party  hereto,  to have sold to each
Bank, and each Bank shall be deemed, without further action by any party hereto,
to have purchased from the applicable Issuer, a participation,  to the extent of
such  Bank's  Commitment  Percentage,  in such  Letter of Credit and the related
Letter of Credit  Liabilities.  Any Letter of Credit having an expiry date after
the end of the  Revolving  Credit  Availability  Period  shall  have been  fully
Covered  or shall be backed by a letter  of  credit in form and  substance,  and
issued  by an  issuer,  acceptable  to  Administrative  Agent in its  reasonably
exercised  discretion.  Subject  to the terms and  conditions  hereof,  upon the
request of the Company, if Chase is the designated Issuer, Chase shall issue the
applicable Letter of Credit and if any other Bank is the designated Issuer, such
Bank may, but shall not be obligated to, issue such Letter of Credit.

         (b) Additional  Provisions.  The following additional  provisions shall
apply to each Letter of Credit:

                    (i) The  Company  shall give  Administrative  Agent at least
three (3) Business Days' prior notice  (effective  upon receipt)  specifying the
proposed  Issuer  and the  date  such  Letter  of  Credit  is to be  issued  and
describing  the  proposed  terms of such  Letter of Credit and the nature of the
transaction  proposed to be supported thereby, and shall furnish such additional
information regarding such transaction as Administrative Agent or the applicable
Issuer may reasonably request.  Upon receipt of such notice Administrative Agent
shall  promptly  notify  each Bank of the  contents  thereof  and of such Bank's
Commitment Percentage of the amount of such proposed Letter of Credit.

                    (ii) No  Letter of  Credit  may be  issued  if after  giving
effect  thereto the  Revolving  Credit  Obligations  would  exceed the  Facility
Amount. On each day during the period commencing with the issuance of any Letter
of Credit and until such Letter of Credit shall have expired or been

                                                        19

<PAGE>

terminated,  the  Commitment of each Bank shall be deemed to be utilized for all
purposes hereof in an amount equal to such Bank's  Commitment  Percentage of the
amount then available for drawings under such Letter of Credit.

                    (iii) Upon  receipt  from the  beneficiary  of any Letter of
Credit of any  demand  for  payment  thereunder,  the  applicable  Issuer  shall
promptly  notify  the  Company  and each  Bank as to the  amount to be paid as a
result of such demand and the payment date. If at any time the applicable Issuer
shall have made a payment to a beneficiary of a Letter of Credit in respect of a
drawing under such Letter of Credit, each Bank will pay to the applicable Issuer
immediately  upon demand by the applicable  Issuer at any time during the period
commencing  after  such  payment  until  reimbursement  thereof  in  full by the
Company,  an amount equal to such Bank's Commitment  Percentage of such payment,
together  with  interest on such amount for each day from the date of demand for
such payment (or, if such demand is made after 11:00 a.m. Houston, Texas time on
such date, from the next succeeding Business Day) to the date of payment by such
Bank of such amount at a rate of interest  per annum equal to the Federal  Funds
Rate for such period.

                    (iv) The Company shall be  irrevocably  and  unconditionally
obligated  forthwith to reimburse the  applicable  Issuer for any amount paid by
the  applicable  Issuer  upon any  drawing  under any Letter of Credit,  without
presentment,   demand,   protest  or  other   formalities  of  any  kind.   Such
reimbursement  may, subject to satisfaction of any other  applicable  conditions
set forth in this Agreement be made by borrowing of Loans. In the event any such
reimbursement  is not made by  borrowing of Loans,  the Company  shall make such
reimbursement  in immediately  available funds within five (5) days after demand
therefor by the applicable  Issuer.  The applicable Issuer will pay to each Bank
such Bank's  Commitment  Percentage of all amounts received from the Company for
application in payment, in whole or in part, of the Reimbursement  Obligation in
respect  of any  Letter of  Credit,  but only to the  extent  such Bank has made
payment to the applicable Issuer in respect of such Letter of Credit pursuant to
clause (iii) above.

                    (v) The  Company  will  pay to  Administrative  Agent at the
Principal  Office for the account of each Bank a fee on such  Bank's  Commitment
Percentage of the daily average amount  available for drawings under each Letter
of Credit,  in each case for the period from and  including the date of issuance
of such Letter of Credit to and including the date of expiration or  termination
thereof at a rate per annum  equal to the  Letter of Credit  Fee in effect  from
time to time,  such fee to be paid in arrears on the Quarterly  Dates and on the
date of the expiration or termination thereof.  Administrative Agent will pay to
each Bank,  promptly after  receiving any payment in respect of letter of credit
fees referred to in the  preceding  sentence of this clause (v), an amount equal
to such Bank's Commitment  Percentage of such fees. The Company shall pay to the
applicable Issuer an  administration  and issuance fee in an amount equal to 1/8
of 1% per annum of the daily average  amount  available for drawings  under such
Letter of Credit,  in each case for the period  from and  including  the date of
issuance of such Letter of Credit to and  including  the date of  expiration  or
termination  thereof,  such fee to be paid in arrears on the Quarterly Dates and
on the date of the expiration or termination  thereof.  Such  administration and
issuance fee shall be retained by the applicable Issuer.

                                                        20

<PAGE>

                    (vi) The issuance by the applicable Issuer of each Letter of
Credit  shall,  in addition to the  conditions  precedent set forth in Section 7
hereof, be subject to the conditions  precedent that such Letter of Credit shall
be in such form and contain such terms as shall be  reasonably  satisfactory  to
the  applicable  Issuer and that the Company  shall have  executed and delivered
such other  instruments and agreements  relating to such Letter of Credit as the
applicable Issuer shall have reasonably  requested and are not inconsistent with
the terms of this Agreement including an Application therefor. In the event of a
conflict  between the terms of this Agreement and the terms of any  Application,
the terms of this Agreement  shall control.  Without  limiting the generality of
the  foregoing  sentence,  in the  event  any  such  Application  shall  include
requirements for Cover, it is agreed that there shall be no requirements for the
Company to provide Cover except as expressly required in this Agreement.

         (c) Indemnification.  The Company hereby indemnifies and holds harmless
the  Agents,  the  applicable  Issuer and each Bank from and against any and all
claims and damages, losses, liabilities,  costs or expenses which such Bank, the
applicable Issuer or Agent may incur (or which may be claimed against such Bank,
the applicable Issuer or any Agent by any Person  whatsoever) in connection with
the execution and delivery or transfer of or payment or failure to pay under any
Letter of Credit,  including,  without limitation,  any claims, damages, losses,
liabilities,  costs or expenses which such Agent, the applicable  Issuer or such
Bank,  as the case may be, may incur  (WHETHER  INCURRED  AS A RESULT OF ITS OWN
NEGLIGENCE OR  OTHERWISE) by reason of or in connection  with the failure of any
other Bank  (whether as a result of its own  negligence or otherwise) to fulfill
or comply with its  obligations  to such Agent,  the  applicable  Issuer or such
Bank, as the case may be,  hereunder (but nothing herein  contained shall affect
any rights the Company may have against such  defaulting  Bank);  provided that,
the Company shall not be required to indemnify any Bank, the  applicable  Issuer
or such  Agent  for (i) any  claims,  damages,  losses,  liabilities,  costs  or
expenses  to the  extent,  but only to the  extent,  caused  by (A) the  willful
misconduct or gross negligence of the party seeking indemnification, or (B) such
Bank's, the applicable  Issuer's or the applicable  Agent's, as the case may be,
failure  to pay under any  Letter of Credit  after the  presentation  to it of a
request required to be paid under applicable law. Nothing in this Section 2.2(c)
is intended to limit the obligations of the Company under any other provision of
this  Agreement  or (ii) any  claims,  damages,  losses,  liabilities,  costs or
expenses between or among the Agents, the Banks, the applicable Issuer and their
respective shareholders.

         (d) Co-issuance or Separate Issuance of Letters of Credit.  The Company
may, at its option,  request that any  requested  Letter of Credit which exceeds
$1,000,000 be issued severally, but not jointly, by any two or more of the Banks
or issued  through  separate  Letters of Credit issued by any two or more of the
Banks,  respectively,  each in an amount equal to a portion of the amount of the
applicable Letter of Credit requested by the Company.  In either such event, the
Banks  issuing such Letters of Credit shall each  constitute an "Issuer" and the
Letters of Credit so issued  shall each  constitute a "Letter of Credit" for all
purposes hereunder and under the Loan Documents.  Notwithstanding the foregoing,
no Bank  other  than  Chase  shall  have any  obligation  to issue any Letter of
Credit, but may do so at its option.

                                                        21

<PAGE>

         2.3        Reductions and Changes of Commitments.

         (a) Mandatory.  On March 30, 2004, all Commitments  shall be terminated
in their entirety unless terminated at an earlier date pursuant to Section 11.1.

         (b)  Optional.  The Company shall have the right to terminate or reduce
the unused portion of the Commitments at any time or from time to time, provided
that: (i) the Company shall give notice of each such termination or reduction to
Administrative  Agent as  provided  in  Section  5.5  hereof  and (ii) each such
partial  reduction  shall be permanent  and in an  aggregate  amount equal to an
integral multiple of $1,000,000 which equals or exceeds $5,000,000.

         (c)  No   Reinstatement.   Any  reduction  in  or  termination  of  the
Commitments may not be reinstated  without the approval of Administrative  Agent
and any Bank whose  Commitment  (or the  applicable  part  thereof)  is to be so
reinstated.

         2.4        Fees.

         (a) The Company  shall pay to  Administrative  Agent for the account of
each Bank a facility fee accruing from the Effective Date, computed for each day
at a rate per annum equal to the Facility Fee  Percentage  times such Bank's pro
rata share (based on its respective  Commitment) of the Facility  Amount on such
day.  Such  facility  fees shall be payable  on the  Quarterly  Dates and on the
earlier of the date the Commitments are terminated in their entirety or the last
day of the Revolving Credit Availability Period.

         (b) The Company agrees to pay to Administrative  Agent fees as provided
in the separate letter agreements executed by and between  Administrative  Agent
and the Company.

         2.5        Affiliates; Lending Offices.

         (a) Any Bank may,  if it so elects,  fulfill any  obligation  to make a
Eurodollar Loan or Competitive  Loan by causing a branch,  foreign or otherwise,
or Affiliate of such Bank to make such Loan and may transfer and carry such Loan
at, to or for the  account  of any  branch  office or  Affiliate  of such  Bank;
provided  that, in such event for the purposes of this Agreement such Loan shall
be deemed to have been made by such Bank and the  obligation  of the  Company to
repay  such Loan  shall  nevertheless  be to such Bank and shall be deemed to be
held by such Bank and,  to the  extent of such  Loan,  to have been made for the
account of such branch or Affiliate.

         (b)  Notwithstanding  any provision of this  Agreement to the contrary,
each Bank shall be entitled to fund and  maintain its funding of all or any part
of its Loans hereunder in any manner it sees fit, it being understood,  however,
that for the purposes of this Agreement all  determinations  hereunder  shall be
made as if such Bank had actually  funded and maintained  each  Eurodollar  Loan
during each Interest  Period through the purchase of deposits  having a maturity
corresponding  to such Interest Period and bearing an interest rate equal to the
Eurodollar Rate for such Interest Period.

                                                        22

<PAGE>

         2.6 Several Obligations. The failure of any Bank to make any Loan to be
made by it on the date  specified  therefor  shall not relieve any other Bank of
its obligation to make its Loan on such date, but neither  Administrative  Agent
nor any Bank shall be  responsible  for the  failure of any other Bank to make a
Loan to be made by such other Bank.

         2.7        Repayment of Loans; Evidence of Debt.

         (a) Each Bank shall  maintain in accordance  with its usual practice an
account  or  accounts  evidencing  the  indebtedness  of  Company  to such  Bank
resulting  from each Loan made by such Bank,  including the amounts of principal
and interest payable and paid to such Bank from time to time hereunder.

         (b)  Administrative  Agent  shall  maintain  accounts in which it shall
record  (i) the  amount of each Loan made  hereunder  and,  if  applicable,  the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from Company to each Bank hereunder
and (iii) the amount of any sum received by  Administrative  Agent hereunder for
the account of the Banks and each Bank's share thereof.

         (c) The entries made in the accounts  maintained  pursuant to paragraph
(a) or (b) of this Section  shall be prima facie  evidence of the  existence and
amounts of the obligations  recorded  therein;  provided that the failure of any
Bank or  Administrative  Agent to maintain  such  accounts or any error  therein
shall not in any manner affect the  obligation of any Obligor to repay the Loans
or other Obligations in accordance with the terms of this Agreement or the other
Loan Documents.

         (d) Any  Bank may  request  that  Loans  made by it be  evidenced  by a
promissory  note. In such event,  Company shall prepare,  execute and deliver to
such Bank  promissory  notes payable to the order of such Bank (or, if requested
by such Bank, to such Bank and its registered  assigns and in a form approved by
Administrative Agent).  Thereafter, the Loans evidenced by such promissory notes
and interest thereon may (including  after assignment  pursuant to Section 13.5)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein.

         2.8 Use of  Proceeds.  The  proceeds  of the  Loans  shall  be used for
general corporate purposes.

         2.9        Competitive Bid Procedure.

         (a) In order to  request  Competitive  Bids,  the  Company  shall  hand
deliver,  telex or telecopy  to Auction  Administrative  Agent a duly  completed
request  substantially  in the form of Exhibit F, with the blanks  appropriately
completed   (a   "Competitive   Bid   Request"),   to  be  received  by  Auction
Administrative  Agent not later than 11:00 a.m.,  Houston,  Texas time, five (5)
Business  Days before the date  specified  for a proposed  Competitive  Loan. No
Alternate  Base Rate Loan shall be requested in, or, except  pursuant to Section
6, made pursuant to, a Competitive  Bid Request.  A Competitive Bid Request that
does not conform substantially to the format of Exhibit F may be

                                                        23

<PAGE>

rejected  at  Auction  Administrative  Agent's  sole  discretion,   and  Auction
Administrative  Agent shall  promptly  notify the Company of such  rejection  by
telecopier.  Each  Competitive  Bid  Request  shall in each  case  refer to this
Agreement and specify (x) the date of such  Competitive  Loans (which shall be a
Business Day) and the aggregate  principal  amount  thereof  (which shall not be
less than  $25,000,000 or greater than the unused portion of the Facility Amount
on such  date and  shall be an  integral  multiple  of  $5,000,000)  and (y) the
Interest Period with respect thereto (which may not end after the termination of
the  Revolving  Credit  Availability  Period).  Promptly  after its receipt of a
Competitive   Bid  Request   that  is  not   rejected  as   aforesaid,   Auction
Administrative  Agent shall invite by telecopier (in  substantially the form set
forth in Exhibit H hereto) the Banks to bid, on the terms and conditions of this
Agreement,  to make Competitive  Loans pursuant to such Competitive Bid Request.
Notwithstanding  the  foregoing,  Auction  Administrative  Agent  shall  have no
obligation to invite any Bank to make a Competitive Bid pursuant to this Section
until  such  Bank  has   delivered   a  properly   completed   Competitive   Bid
Administrative Questionnaire to Auction Administrative Agent.

         (b) Each Bank may, in its sole discretion, make one or more Competitive
Bids to the Company responsive to each Competitive Bid Request. Each Competitive
Bid by a Bank must be received by Auction  Administrative  Agent via telecopier,
in the form of Exhibit H hereto, not later than 11:00 a.m., Houston, Texas time,
four (4)  Business  Days before the date  specified  for a proposed  Competitive
Loan.  Competitive  Bids  that do not  conform  substantially  to the  format of
Exhibit H may be rejected by Auction Administrative Agent after conferring with,
and upon the instruction of, the Company, and Auction Administrative Agent shall
notify the Bank of such rejection as soon as practicable.  Each  Competitive Bid
shall refer to this Agreement and (x) specify the principal  amount (which shall
be in a minimum  principal  amount of $5,000,000 and in an integral  multiple of
$1,000,000  and which may equal the  entire  aggregate  principal  amount of the
Competitive Loan requested by the Company) of the Competitive Loan that the Bank
is willing to make to the Company, (y) specify the Competitive Bid Rate at which
the Bank is prepared to make the  Competitive  Loan and (z) confirm the Interest
Period with  respect  thereto  specified by the Company in its  Competitive  Bid
Request.  A Competitive  Bid submitted by a Bank pursuant to this  paragraph (b)
shall be irrevocable.

         (c) Auction  Administrative Agent shall, by 2:00 p.m. four (4) Business
Days  before the date  specified  for a proposed  Competitive  Loan,  notify the
Company by telecopier of all the Competitive Bids made, the Competitive Bid Rate
and the maximum  principal amount of each Competitive Loan in respect of which a
Competitive  Bid was made and the  identity  of the Bank  that  made  each  bid.
Auction  Administrative  Agent shall send a copy of all Competitive  Bids to the
Company for its records as soon as practicable  after  completion of the bidding
process set forth in this Section 2.9.

         (d) The Company may in its sole and absolute  discretion,  subject only
to the provisions of this Section  2.9(d),  accept or reject any Competitive Bid
referred to in Section 2.9(c);  provided,  however, that the aggregate amount of
the  Competitive  Bids so accepted  by the Company may not exceed the  principal
amount of the Competitive Loan requested by the Company. The Company

                                                        24

<PAGE>

shall notify  Auction  Administrative  Agent by  telecopier  whether and to what
extent it has decided to accept or reject any or all of the bids  referred to in
Section  2.9(c),  not later than 11:00  a.m.,  Houston,  Texas  time,  three (3)
Business  Days  before  the date  specified  for a  proposed  Competitive  Loan;
provided, however, that (w) the failure by the Company to give such notice shall
be deemed to be a rejection  of all the bids  referred to in Section  2.9(c) and
(x) no bid shall be accepted for a Competitive Loan unless such Competitive Loan
is in a minimum  principal  amount of  $5,000,000  and an  integral  multiple of
$1,000,000.  Notwithstanding the foregoing, if the Company accepts more than one
bid made in response to a Competitive  Bid Request and the  available  principal
amount of Competitive Loans to be allocated among the Banks is not sufficient to
enable  Competitive  Loans to be allocated  to each Bank in a minimum  principal
amount of $5,000,000 and in integral  multiples of $1,000,000,  then the Company
shall select the Banks to be allocated  such  Competitive  Loans and shall round
allocations  up or down to the next higher or lower multiple of $1,000,000 as it
shall deem  appropriate.  In addition,  the Company shall be permitted under the
foregoing  procedures to accept a bid or bids in a principal amount of less than
$5,000,000  (i) in order to enable the  Company to accept bids equal to (but not
in excess of) the  principal  amount of the  Competitive  Loan  requested by the
Company or (ii) in order to enable the Company to accept all remaining  bids, or
all  remaining  bids at a  particular  Competitive  Bid Rate.  A notice given by
Company pursuant to this paragraph (d) shall be irrevocable.

         (e) Auction  Administrative  Agent shall  promptly  notify each bidding
Bank whether or not its  Competitive  Bid has been  accepted (and if so, in what
amount and at what  Competitive Bid Rate) by telex or telecopier sent by Auction
Administrative  Agent,  and each successful  bidder will thereupon become bound,
subject to the other applicable  conditions hereof, to make the Competitive Loan
in  respect  of  which  its  bid  has  been  accepted.   After   completing  the
notifications  referred  to  in  the  immediately  preceding  sentence,  Auction
Administrative  Agent shall (i) notify  Administrative Agent of each Competitive
Bid that has been  accepted,  the amount  thereof and the  Competitive  Bid Rate
therefor  and (ii) notify  each Bank of the  aggregate  principal  amount of all
Competitive Bids accepted.

         (f) No Competitive  Loan shall be made within five (5) Business Days of
the  date  of any  other  Competitive  Loan,  unless  the  Company  and  Auction
Administrative Agent shall mutually agree otherwise.

         (g) If  Administrative  Agent  shall  at  any  time  have a  Commitment
hereunder and shall elect to submit a Competitive Bid in its capacity as a Bank,
it shall  submit such bid directly to the Company one quarter of an hour earlier
than the latest time at which the other Banks are  required to submit their bids
to Auction Administrative Agent pursuant to paragraph (b) above.

         (h)  All  notices  required  by  this  Section  2.9  shall  be  made in
accordance   with  Section   13.2  and  the   Competitive   Bid   Administrative
Questionnaire   most  recently   placed  on  file  by  each  Bank  with  Auction
Administrative Agent.

                                                        25

<PAGE>

         SECTION 3.     BORROWINGS, PREPAYMENTS AND SELECTION OF INTEREST RATES.

         3.1 Borrowings.  The Company shall give Administrative  Agent notice of
each  borrowing to be made hereunder as provided in Sections 2.9 and 5.5 hereof.
Not later than 2:00 p.m. Houston, Texas time on the date specified for each such
borrowing  hereunder,  each Bank shall make available the amount of the Loan, if
any, to be made by it on such date to  Administrative  Agent,  at its  Principal
Office,  in immediately  available  funds,  for the account of the Company.  The
amount so  received  by  Administrative  Agent  shall,  subject to the terms and
conditions of this Agreement, be made available to the Company by depositing the
same, in immediately  available  funds, in an account  designated by the Company
maintained with Administrative Agent at the Principal Office.

         3.2        Prepayments.

         (a) Optional  Prepayments.  Subject to the  provisions of Sections 4, 5
and 6, the Company shall have the right to prepay, on any Business Day, in whole
or in part, without the payment of any penalty or fee, Loans at any time or from
time to time, provided that, the Company shall give Administrative  Agent notice
of each such prepayment as provided in Section 5.5 hereof.  Eurodollar Loans and
Competitive  Loans  may  be  prepaid  on the  last  day  of an  Interest  Period
applicable  thereto.  Neither  Eurodollar  Loans  nor  Competitive  Loans may be
otherwise   prepaid   unless   prepayment  is  accompanied  by  payment  of  all
compensation required by Section 6.

         (b)  Mandatory  Prepayments  and Cover.  The Company shall from time to
time on demand by  Administrative  Agent prepay the Loans (or provide  Cover for
Letter of Credit  Liabilities)  in such amounts as shall be necessary so that at
all times the aggregate  outstanding  principal  amount of all Revolving  Credit
Obligations shall not be in excess of the sum of (i) the aggregate amount of the
Commitments,  as reduced  from time to time  pursuant to Section 2.3 hereof plus
(ii) any Cover provided under this Section 3.2(b).

         3.3 Selection of Interest Rates. Subject to the terms and provisions of
this Agreement,  the Company shall have the right either to convert any Loan (in
whole or in part) into a Loan of another Type (provided that no such  conversion
of Eurodollar  Loans or Competitive  Loans shall be permitted  other than on the
last day of an Interest Period applicable  thereto) or to continue such Loan (in
whole or in part) as a Loan of the same Type.  In the event the Company fails to
so give such  notice  prior to the end of the  applicable  Interest  Period with
respect to any Eurodollar  Loan or Competitive  Loan,  such Loan shall become an
Alternate   Base   Rate  Loan  on  the  last  day  of  such   Interest   Period.
Notwithstanding  any other provision of this Agreement,  if a Default shall have
occurred and be continuing on the last day of an Interest Period applicable to a
Eurodollar Loan or Competitive Loan, such Loan shall  automatically be converted
to an Alternate Base Rate Loan.

                                                        26

<PAGE>

         SECTION 4.        PAYMENTS OF PRINCIPAL AND INTEREST.

         4.1  Repayment  of Loans and  Reimbursement  Obligations.  The  Company
hereby  unconditionally  promises to pay to Administrative Agent for the account
of each  Bank  (a) (i)  each  Loan  in  full at the end of the  Interest  Period
applicable to such Loan unless such Loan is continued or converted in accordance
with  the  terms  hereof,  and  (ii) the then  unpaid  principal  amount  of all
outstanding  Loans  on the  date  of the  expiration  of  the  Revolving  Credit
Availability  Period,  and  (b) the  amount  of  each  Reimbursement  Obligation
promptly upon its occurrence. The amount of any Reimbursement Obligation may, if
the  applicable  conditions  precedent  specified  in Section 7 hereof have been
satisfied, be paid with the proceeds of Loans.

         4.2        Interest.

         (a)  Subject  to  Section  13.6   hereof,   the  Company  will  pay  to
Administrative  Agent  for the  account  of each  Bank  interest  on the  unpaid
principal amount of each Loan made by such Bank for the period commencing on the
date of such Loan to but  excluding the date such Loan shall be paid in full, at
the lesser of (I) the following rates per annum:

                    (i)    if such Loan is an Alternate Base Rate Loan, the
Alternate Base Rate plus the Applicable Margin,

                    (ii)  if such  Loan is a  Eurodollar  Loan,  the  applicable
Eurodollar Rate plus the Applicable Margin, and

                    (iii) if such Loan is a  Competitive  Loan,  the  applicable
fixed  rate  offered  by the  applicable  Bank and  accepted  by the  Company in
accordance with Section 2.9 hereof,

or (II) the Highest Lawful Rate.

         (b)  Notwithstanding  any of the  foregoing but subject to Section 13.6
hereof,  the Company  will pay to  Administrative  Agent for the account of each
Bank interest at the applicable  Post-Default  Rate on any principal of any Loan
made by such  Bank,  on any  Reimbursement  Obligation  and on any other  amount
payable by the Company  hereunder  to or for the  account of such Bank (but,  if
such amount is interest, only to the extent legally allowed), which shall not be
paid  in  full  when  due  (whether  at  stated  maturity,  by  acceleration  or
otherwise),  for the period commencing on the due date thereof until the same is
paid in full.

         (c) Accrued  interest on each Alternate Base Rate Loan shall be payable
on each Quarterly Date.  Accrued interest on each Eurodollar Loan or Competitive
Bid Loan shall be payable on the last day of each Interest  Period for such Loan
(and, if such Interest Period exceeds three months' duration, on the last day of
each three month period, commencing on the first three month anniversary of such
Interest Period). Notwithstanding the foregoing, (i) accrued interest payable at
the  Post-Default  Rate shall be due and payable  from time to time on demand of
Administrative

                                                        27

<PAGE>

Agent or the  Majority  Banks  (through  Administrative  Agent) and (ii) accrued
interest on any amount  prepaid or converted  pursuant to Section 6 hereof shall
be paid on the amount so prepaid or converted.

         SECTION 5.        PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS, ETC.

         5.1        Payments.

         (a) Except to the extent  otherwise  provided  herein,  all payments of
principal,  interest,  Reimbursement Obligations and other amounts to be made by
the  Company  or any  other  Obligor  hereunder  shall  be made in  Dollars,  in
immediately available funds, to Administrative Agent at the Principal Office (or
in the case of a successor Administrative Agent, at the principal office of such
successor Administrative Agent in the United States), not later than 11:00 a.m.,
Houston,  Texas time on the date on which such  payment  shall  become due (each
such  payment  made  after  such time on such due date to be deemed to have been
made on the next succeeding Business Day).

         (b) The Company or such other Obligor shall, at the time of making each
payment  hereunder,  specify to Administrative  Agent the Loans or other amounts
payable by the Company or such  Obligor  hereunder or  thereunder  to which such
payment  is to  be  applied.  Each  payment  received  by  Administrative  Agent
hereunder  or any other Loan  Document  for the  account of a Bank shall be paid
promptly to such Bank, in  immediately  available  funds for the account of such
Bank's Applicable Lending Office.

         (c) If the due date of any payment hereunder or any other Loan Document
falls  on a day  which is not a  Business  Day,  the due  date for such  payment
(subject to the  definition  of Interest  Period)  shall be extended to the next
succeeding  Business  Day and  interest  shall be payable for any  principal  so
extended for the period of such extension.

         5.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Banks under Section 2.1 hereof shall be made ratably
from the Banks on the basis of their respective  Commitments and each payment of
commitment or facility fees shall be made for the account of the Banks, and each
termination  or  reduction  of the  Commitments  of the Banks under  Section 2.3
hereof  shall  be  applied,   pro  rata,  according  to  the  Banks'  respective
Commitments;  (b) each  payment by the  Company of  principal  of or interest on
Loans of a particular Type shall be made to Administrative Agent for the account
of the Banks pro rata in accordance with the respective unpaid principal amounts
of such Loans held by the Banks;  and (c) the Banks  (other than the  applicable
Issuer) shall purchase from the applicable Issuer  participations in the Letters
of Credit to the extent of their respective Commitment Percentages.

         5.3  Computations.  Interest on Competitive Loans and interest based on
the Eurodollar Base Rate or the Federal Funds Rate will be computed on the basis
of a year of 360 days and  actual  days  elapsed  (including  the  first day but
excluding the last day)  occurring in the period for which  payable,  unless the
effect of so  computing  shall be to cause the rate of  interest  to exceed  the
Highest

                                                        28

<PAGE>

Lawful Rate,  in which case  interest  shall be  calculated  on the basis of the
actual number of days elapsed in a year composed of 365 or 366 days, as the case
may be. All other  interest and fees shall be computed on the basis of a year of
365 (or 366) days and actual days elapsed (including the first day but excluding
the last day) occurring in the period for which payable.

         5.4 Minimum and Maximum  Amounts.  Except for prepayments made pursuant
to Section  3.2(b)  hereof,  and subject to the provisions of Section 2.9 hereof
with respect to Competitive  Loans, each borrowing and repayment of principal of
Loans,  each termination or reduction of Commitments,  each optional  prepayment
and each conversion of Type shall be in an aggregate  principal  amount at least
equal to (a) in the case of Eurodollar Loans and Competitive Loans,  $5,000,000,
and (b) in the case of  Alternate  Base Rate Loans,  $1,000,000  (borrowings  or
prepayments of Loans of different Types or, in the case of Eurodollar  Loans and
Competitive Loans,  having different Interest Periods at the same time hereunder
to be deemed separate  borrowings and prepayments for purposes of the foregoing,
one for each Type or Interest Period).  Upon any mandatory prepayment that would
reduce  Eurodollar  Loans or Competitive  Loans,  respectively,  having the same
Interest  Period to less than  $5,000,000  such  Loans  shall  automatically  be
converted  into  Alternate  Base  Rate  Loans on the last day of the  applicable
Interest  Period.  Notwithstanding  anything to the  contrary  contained in this
Agreement,  there  shall not be, at any one time,  more than eight (8)  Interest
Periods in effect with respect to Eurodollar Loans or Competitive  Loans, in the
aggregate.

         5.5 Certain Actions,  Notices,  Etc. Notices to Administrative Agent of
any  termination or reduction of  Commitments,  of borrowings  and  prepayments,
conversions and  continuations  of Loans and of the duration of Interest Periods
shall be irrevocable  and shall be effective only if received by  Administrative
Agent not later than 11:00 a.m.,  Houston,  Texas time on the number of Business
Days prior to the date of the relevant termination,  reduction, borrowing and/or
repayment, conversion or continuance specified below: <TABLE> <S> <C>

                    Notice                            Number of Business Days Prior

                    ------                            -----------------------------
Termination or Reduction of                                         2
Commitments
Borrowing or prepayment of or                                   same day
conversion into Alternate Base Rate
Loans
Borrowing or prepayment of or                                       3
conversion into or continuance of
Eurodollar Loans
=============================================== =========================================
</TABLE>

                                                        29

<PAGE>

Each such notice of  termination  or reduction  shall  specify the amount of the
Commitments  to be  terminated  or  reduced.  Each such notice of  borrowing  or
prepayment  shall  specify  the amount and Type of the Loans to be  borrowed  or
prepaid  (subject to Sections  3.2(a) and 5.4 hereof),  the date of borrowing or
prepayment (which shall be a Business Day) and, in the case of Eurodollar Loans,
the duration of the  Interest  Period  therefor  (subject to the  definition  of
"Interest  Period").  Each such  notice of  conversion  of a Loan into a Loan of
another Type shall identify such Loan (or portion  thereof) being  converted and
specify  the Type of Loan into which such Loan is being  converted  (subject  to
Section 5.4 hereof) and the date for conversion  (which shall be a Business Day)
and,  unless such Loan is being  converted into an Alternate Base Rate Loan, the
duration (subject to the definition of "Interest Period") of the Interest Period
therefor  which is to commence as of the last day of the then  current  Interest
Period therefor (or the date of conversion, if such Loan is being converted from
an Alternate  Base Rate Loan).  Each such notice of  continuation  of a Loan (or
portion  thereof) as the same Type of Loan shall  identify such Loan (or portion
thereof)  being  continued  (subject to Section  5.4  hereof)  and the  duration
(subject to the definition of "Interest Period") of the Interest Period therefor
which is to  commence  as of the last day of the then  current  Interest  Period
therefor.  Administrative  Agent shall promptly notify the affected Banks of the
contents of each such notice.  Notice of any prepayment  having been given,  the
principal amount specified in such notice, together with interest thereon to the
date of prepayment,  shall be due and payable on such prepayment  date.  Section
2.9 hereof shall control the time periods applicable to Competitive Loans.

         5.6 Non-Receipt of Funds by Administrative Agent. Unless Administrative
Agent shall have been notified by a Bank or the Company (the  "Payor")  prior to
the date on which such Bank is to make  payment to  Administrative  Agent of the
proceeds of a Loan to be made by it  hereunder  (or the payment of any amount by
such Bank to reimburse the  applicable  Issuer for a drawing under any Letter of
Credit)  or the  Company is to make a payment  to  Administrative  Agent for the
account  of one or more of the  Banks,  as the case may be (such  payment  being
herein  called the  "Required  Payment"),  which notice shall be effective  upon
receipt,  that  the  Payor  does not  intend  to make the  Required  Payment  to
Administrative Agent,  Administrative Agent may assume that the Required Payment
has been made and may,  in  reliance  upon  such  assumption  (but  shall not be
required to),  make the amount  thereof  available to the intended  recipient on
such  date  and,  if the Payor  has not in fact  made the  Required  Payment  to
Administrative  Agent on or before such date, the recipient of such payment (or,
if such recipient is the beneficiary of a Letter of Credit,  the Company and, if
the Company fails to pay the amount thereof to  Administrative  Agent  forthwith
upon demand,  the Banks  ratably in proportion  to their  respective  Commitment
Percentages)  shall,  on demand,  pay to  Administrative  Agent the amount  made
available  to it  together  with  interest  thereon  in  respect  of the  period
commencing on the date such amount was so made available by Administrative Agent
until the date  Administrative  Agent  recovers  such amount at a rate per annum
equal to the Federal Funds Rate for such period.

         5.7 Sharing of  Payments,  Etc. If a Bank shall  obtain  payment of any
principal of or interest on any Loan made by it under this Agreement,  or on any
Reimbursement  Obligation or other  obligation  then due to such Bank hereunder,
through the exercise of any right of set-off, banker's

                                                        30

<PAGE>

lien,  counterclaim or similar right, or otherwise,  it shall promptly  purchase
from  the  other  Banks  participations  in the  Loans  made,  or  Reimbursement
Obligations or other obligations  held, by the other Banks in such amounts,  and
make such other  adjustments  from time to time as shall be equitable to the end
that all the Banks shall share the benefit of such  payment (net of any expenses
which may be incurred by such Bank in obtaining or preserving  such benefit) pro
rata in accordance  with the unpaid  principal  and interest on the  Obligations
then due to each of them (provided,  however, that the foregoing shall not apply
to  payments  of  Competitive  Loans  made  prior  to  the  termination  of  the
Commitments  following the  occurrence of an Event of Default).  To such end all
the Banks shall make appropriate  adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.  The Company agrees, to the fullest extent it may effectively do so
under  applicable law, that any Bank so purchasing a participation  in the Loans
made, or Reimbursement Obligations or other obligations held, by other Banks may
exercise all rights of set-off,  bankers' lien,  counterclaim  or similar rights
with respect to such participation as fully as if such Bank were a direct holder
of Loans and  Reimbursement  Obligations  or other  obligations in the amount of
such participation.  Nothing contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of any Obligor.

         SECTION 6.        YIELD PROTECTION AND ILLEGALITY.

         6.1        Additional Costs.

         (a) Subject to Section 13.6,  the Company  shall pay to  Administrative
Agent,  on demand for the account of each Bank from time to time such amounts as
such Bank may determine to be necessary to compensate it for any costs  incurred
by such Bank  which  such Bank  determines  are  attributable  to its  making or
maintaining  of any  Eurodollar  Loan or any  Competitive  Loan hereunder or its
obligation  to make any such Loan  hereunder,  or any  reduction  in any  amount
receivable  by such  Bank  hereunder  in  respect  of any of such  Loans or such
obligation  (such increases in costs and reductions in amounts  receivable being
herein called  "Additional  Costs"),  in each case resulting from any Regulatory
Change which:

                    (i) subjects  such Bank (or makes it apparent that such Bank
         is subject) to any tax (including  without limitation any United States
         interest   equalization  tax),  levy,  impost,   duty,  charge  or  fee
         (collectively,  "Taxes"), or any deduction or withholding for any Taxes
         on or from the payment due under any Eurodollar Loan or any Competitive
         Loan or other  amounts due  hereunder,  other than income and franchise
         taxes of each  jurisdiction (or any subdivision  thereof) in which such
         Bank has an office or its Applicable Lending Office; or

                    (ii) changes the basis of taxation of any amounts payable to
         such Bank under this  Agreement  in respect of any of such Loans (other
         than changes  which affect taxes  measured by or imposed on the overall
         net income or franchise taxes of such Bank or of its Applicable

                                                        31

<PAGE>

         Lending  Office  for any of such  Loans  by each  jurisdiction  (or any
         subdivision  thereof)  in  which  such  Bank  has  an  office  or  such
         Applicable Lending Office); or

                    (iii)  imposes or modifies or increases or deems  applicable
         any  reserve,  special  deposit  or  similar  requirements  (including,
         without  limitation,  any  such  requirement  imposed  by the  Board of
         Governors of the Federal Reserve System)  relating to any extensions of
         credit or other  assets of, or any deposits  with or other  liabilities
         of, such Bank or loans made by such Bank,  or against any other  funds,
         obligations or other property owned or held by such Bank (including any
         of  such  Loans  or  any  deposits  referred  to in the  definition  of
         "Eurodollar  Base Rate" in Section 1.1  hereof) and such Bank  actually
         incurs such additional costs.

Each Bank (if so requested  by the Company  through  Administrative  Agent) will
designate a different  available  Applicable  Lending  Office for the Eurodollar
Loans or the  Competitive  Loans of such Bank or take such  other  action as the
Company  may request if such  designation  or action will avoid the need for, or
reduce the amount of, such  compensation  and will not,  in the sole  opinion of
such Bank  exercised in good faith,  be  disadvantageous  to such Bank (provided
that such Bank shall have no obligation  so to designate an  Applicable  Lending
Office for Eurodollar Loans located in the United States of America).  Each Bank
will furnish the Company with a statement  setting forth the basis and amount of
each request by such Bank for compensation under this Section 6.1(a); subject to
Section 6.8, such  certificate  shall be conclusive,  absent manifest error, and
may be prepared using any reasonable averaging and attribution methods.

         (b) Without  limiting the effect of the  foregoing  provisions  of this
Section 6.1, in the event that,  by reason of any  Regulatory  Change,  any Bank
either (i) incurs  Additional  Costs based on or measured by the excess  above a
specified level of the amount of a category of deposits or other  liabilities of
such Bank which  includes  deposits by reference  to which the interest  rate on
Eurodollar  Loans is determined  as provided in this  Agreement or a category of
extensions  of credit or other  assets of such Bank  which  includes  Eurodollar
Loans or Competitive Loans or (ii) becomes subject to restrictions on the amount
of such a category of  liabilities  or assets which it may hold,  then,  if such
Bank so elects by notice to the Company (with a copy to  Administrative  Agent),
the obligation of such Bank to make  Eurodollar  Loans or Competitive  Loans, as
the case may be,  hereunder  shall be suspended  until the date such  Regulatory
Change  ceases to be in effect (in which  case the  provisions  of  Section  6.4
hereof shall be applicable).

         (c) Good faith  determinations and allocations by any Bank for purposes
of this  Section  6.1 of the  effect  of any  Regulatory  Change on its costs of
maintaining its  obligations to make Loans or of making or maintaining  Loans or
on amounts  receivable by it in respect of Loans, and of the additional  amounts
required to compensate  such Bank in respect of any Additional  Costs,  shall be
conclusive, absent manifest error.

         (d) The Company's  obligation to pay Additional  Costs and compensation
with regard to each  Eurodollar  Loan and each  Competitive  Loan shall  survive
termination of this Agreement.

                                                        32

<PAGE>

         6.2  Limitation  on Types of Loans.  Anything  herein  to the  contrary
notwithstanding, if, with respect to any Eurodollar Loans:

         (a) Administrative  Agent determines in good faith (which determination
shall be conclusive) that quotations of interest rates for the relevant deposits
referred to in the  definition of  "Eurodollar  Base Rate" in Section 1.1 hereof
are not being provided by the Reference Banks in the relevant amounts or for the
relevant  maturities for purposes of  determining  the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or

         (b) the Majority  Banks  determine  in good faith (which  determination
shall be conclusive) and notify  Administrative Agent that the relevant rates of
interest  referred to in the definition of "Eurodollar Base Rate" in Section 1.1
hereof  upon the basis of which the rates of  interest  for such Loans are to be
determined  do not  accurately  reflect  the  cost to such  Banks of  making  or
maintaining such Loans for Interest Periods therefor; or

         (c) Administrative  Agent determines in good faith (which determination
shall be  conclusive)  that by reason of  circumstances  affecting the interbank
Dollar  market  generally,  deposits in United  States  dollars in the  relevant
interbank Dollar market are not being offered for the applicable Interest Period
and in an amount  equal to the amount of the  Eurodollar  Loan  requested by the
Company;

then  Administrative  Agent  shall  promptly  notify the  Company  and each Bank
thereof,  and, so long as such condition  remains in effect,  the Banks shall be
under no obligation to make  Eurodollar  Loans (but shall maintain until the end
of the Interest Period then in effect the Eurodollar Loans then outstanding).

         6.3 Illegality.  Notwithstanding  any other provision of this Agreement
to the  contrary,  if (x) by  reason of the  adoption  of any  applicable  Legal
Requirement  or  any  change  in  any  applicable  Legal  Requirement  or in the
interpretation  or  administration  thereof  by any  Governmental  Authority  or
compliance by any Bank with any request or directive  (whether or not having the
force  of law)  of any  central  bank or  other  Governmental  Authority  or (y)
circumstances  affecting the relevant interbank Dollar market or the position of
a Bank therein shall at any time make it unlawful or  impracticable  in the sole
discretion  of a Bank  exercised  in good faith for such Bank or its  Applicable
Lending  Office  to (a)  honor  its  obligation  to  make  Eurodollar  Loans  or
Competitive  Loans  hereunder,  or (b) maintain  Eurodollar Loans or Competitive
Loans  hereunder,  then such Bank  shall  promptly  notify the  Company  thereof
through  Administrative  Agent and such  Bank's  obligation  to make or maintain
Eurodollar  Loans or Competitive  Loans, as the case may be,  hereunder shall be
suspended  until such time as such Bank may again make and  maintain  Eurodollar
Loans or Competitive  Loans, as the case may be (in which case the provisions of
Section 6.4 hereof shall be  applicable).  Before giving such notice pursuant to
this  Section 6.3,  such Bank will  designate a different  available  Applicable
Lending Office for the Eurodollar  Loans or the  Competitive  Loans, as the case
may be, of such Bank or take such other  action as the  Company  may  request if
such designation or action will avoid the need to suspend such Bank's obligation
to make Eurodollar

                                                        33

<PAGE>

Loans or Competitive  Loans, as the case may be,  hereunder and will not, in the
sole opinion of such Bank exercised in good faith,  be  disadvantageous  to such
Bank  (provided,  that such Bank shall have no  obligation  so to  designate  an
Applicable  Lending Office for Eurodollar  Loans located in the United States of
America).

         6.4 Substitute Alternate Base Rate Loans. If the obligation of any Bank
to make or maintain  Eurodollar Loans or Competitive  Loans, as the case may be,
shall be suspended  pursuant to Section 6.1, 6.2 or 6.3 hereof,  all Loans which
would otherwise be made by such Bank as Eurodollar  Loans or Competitive  Loans,
as the case may be, shall be made instead as Alternate  Base Rate Loans (and, if
an event  referred to in Section 6.1(b) or 6.3 hereof has occurred and such Bank
so requests by notice to the Company with a copy to  Administrative  Agent, each
Eurodollar Loan or each Competitive  Loan, as the case may be, of such Bank then
outstanding shall be automatically converted into an Alternate Base Rate Loan on
the  date  specified  by such  Bank in such  notice)  and,  to the  extent  that
Eurodollar  Loans or Competitive  Loans,  as the case may be, are so made as (or
converted into) Alternate Base Rate Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans or such Competitive  Loans, as the
case may be, shall be applied instead to such Alternate Base Rate Loans.

         6.5 Compensation. Subject to Section 13.6 hereof, the Company shall pay
to  Administrative  Agent for the account of each Bank, within four (4) Business
Days after  demand  therefor by such Bank  through  Administrative  Agent,  such
amount or  amounts as shall be  sufficient  (in the  reasonable  opinion of such
Bank) to compensate  it for any loss,  cost or expense  actually  incurred by it
(exclusive of any lost profits or opportunity costs) as a result of:

         (a) any payment,  prepayment or  conversion  of a Eurodollar  Loan or a
Competitive  Loan  made by such  Bank on a date  other  than  the last day of an
Interest Period for such Loan; or

         (b) any  failure  by the  Company  to  borrow  a  Eurodollar  Loan or a
Competitive  Loan to be  made  by such  Bank  on the  date  for  such  borrowing
specified in the relevant  notice of borrowing  under Section 5.5 or Section 2.9
hereof;

such compensation to include,  without limitation,  any loss or expense actually
incurred  (exclusive of any lost profits or opportunity  costs) by reason of the
liquidation  or  reemployment  of  deposits  or  other  funds  acquired  by  the
applicable  Bank to fund or maintain  its share of any Loan.  Subject to Section
6.8, each  determination  of the amount of such  compensation by a Bank shall be
conclusive and binding,  absent  manifest  error,  and may be computed using any
reasonable averaging and attribution method.

         6.6 Additional Costs in Respect of Letters of Credit. If as a result of
any Regulatory Change there shall be imposed,  modified or deemed applicable any
tax, reserve,  special deposit or similar requirement against or with respect to
or measured by reference to Letters of Credit  issued or to be issued  hereunder
or participations in such Letters of Credit, and the result shall be to increase
the cost to any Bank of  issuing  or  maintaining  any  Letter  of Credit or any
participation

                                                        34

<PAGE>

therein, or reduce any amount receivable by any Bank hereunder in respect of any
Letter  of Credit or any  participation  therein  (which  increase  in cost,  or
reduction in amount  receivable,  shall be the result of such Bank's  reasonable
allocation of the aggregate of such increases or reductions  resulting from such
event),  then such Bank shall notify the Company through  Administrative  Agent,
and upon demand therefor by such Bank through  Administrative Agent, the Company
(subject to Section  13.6 hereof)  shall pay to such Bank,  from time to time as
specified  by such  Bank,  such  additional  amounts as shall be  sufficient  to
compensate  such Bank for such increased  costs or reductions in amount.  Before
making such demand  pursuant to this  Section  6.6,  such Bank will  designate a
different  available  Applicable Lending Office for the Letter of Credit of such
Bank or take such other action as the Company may request,  if such  designation
or action will avoid the need for,  or reduce the amount of,  such  compensation
and will not,  in the sole  opinion of such Bank  exercised  in good  faith,  be
disadvantageous  to such  Bank.  A  statement  as to  such  increased  costs  or
reductions  in  amount  incurred  by such  Bank,  submitted  by such Bank to the
Company, shall be conclusive as to the amount thereof, absent manifest error.

         6.7  Capital  Adequacy.  If  any  Bank  shall  have  determined  that a
Regulatory   Change   resulting  in  the  adoption  after  the  date  hereof  or
effectiveness after the date hereof (whether or not previously announced) of any
applicable law, rule,  regulation or treaty regarding capital  adequacy,  or any
change  therein after the date hereof,  or any change in the  interpretation  or
administration  thereof  after  the date  hereof by any  Governmental  Authority
charged with the interpretation or administration  thereof, or compliance by any
Bank (or its Applicable  Lending Office) with any request or directive after the
date hereof regarding  capital adequacy (whether or not having the force of law)
of any such Governmental  Authority has or would have the effect of reducing the
rate  of  return  on  such  Bank's  capital  as a  consequence  of  such  Bank's
obligations  hereunder,  under the Loans  made by it and  under the  Letters  of
Credit to a level  below that which such Bank could have  achieved  but for such
adoption,  change or compliance  (taking into consideration such Bank's policies
with  respect  to  capital  adequacy)  by an  amount  deemed  by such Bank to be
material,  then from time to time, upon satisfaction of the conditions precedent
set  forth  in this  Section  6.7,  upon  demand  by such  Bank  (with a copy to
Administrative Agent), the Company (subject to Section 13.6 hereof) shall pay to
such Bank such  additional  amount or amounts as will  compensate  such Bank for
such reduction.  A certificate as to such amounts,  submitted to the Company and
Administrative  Agent by such  Bank,  setting  forth the  basis for such  Bank's
determination  of such amounts,  shall constitute a demand therefor and shall be
conclusive  and binding for all purposes,  absent  manifest  error.  The Company
shall  pay the  amount  shown as due on any  such  certificate  within  four (4)
Business  Days after  delivery of such  certificate.  Subject to Section 6.8, in
preparing such  certificate,  a Bank may employ such assumptions and allocations
of costs and expenses as it shall in good faith deem  reasonable and may use any
reasonable averaging and attribution method.

         6.8        Limitation on Additional Charges; Substitute Banks;
Non-Discrimination. Anything in this Section 6 notwithstanding:

                                                        35

<PAGE>

         (a) the Company shall not be required to pay to any Bank  reimbursement
with regard to any costs or expenses,  unless such Bank  notifies the Company of
such costs or expenses within 90 days after the date paid or incurred;

         (b) none of the Banks shall be permitted to pass through to the Company
charges and costs under this Section 6 on a  discriminatory  basis (i.e.,  which
are not also  passed  through  by such  Bank to  other  customers  of such  Bank
similarly  situated  where such  customer is subject to documents  providing for
such pass through); and

         (c) if any Bank  elects to pass  through to the  Company  any  material
charge or cost under this Section 6 or elects to terminate the  availability  of
Eurodollar  Loans for any material  period of time,  the Company may,  within 60
days after the date of such event and so long as no Default  shall have occurred
and be continuing,  elect to terminate  such Bank as a party to this  Agreement;
provided  that,  concurrently  with such  termination  the Company  shall (i) if
Administrative  Agent and each of the other Banks shall  consent,  pay that Bank
all  principal,  interest  and fees and other  amounts owed to such Bank through
such date of termination or (ii) have arranged for another financial institution
approved by Administrative Agent (such approval not to be unreasonably withheld)
as of such  date,  to  become a  substitute  Bank for all  purposes  under  this
Agreement in the manner provided in Section 13.5;  provided  further that, prior
to  substitution  for any Bank,  the Company shall have given written  notice to
Administrative  Agent of such intention and the Banks shall have the option, but
no obligation, for a period of 60 days after receipt of such notice, to increase
their  Commitments  in  order  to  replace  the  affected  Bank  in lieu of such
substitution.

         SECTION 7.        CONDITIONS PRECEDENT.

         7.1 Initial Loans. The obligation of each Bank or any applicable Issuer
to make its initial Loans on or after the date hereof or issue or participate in
a Letter  of Credit on or after  the date  hereof  (if such  Letter of Credit is
issued  prior to the funding of the initial  Loans on or after the date  hereof)
hereunder is subject to the following conditions precedent,  each of which shall
have been fulfilled or waived to the satisfaction of the Administrative Agent:

         (a)  Corporate  Action  and  Status.  Administrative  Agent  shall have
received from the appropriate  Governmental  Authorities certified copies of the
Organizational  Documents  (other than bylaws) of the Company and the Guarantor,
and evidence  satisfactory to Administrative Agent of all corporate action taken
by the  Company  and the  Guarantor  authorizing  the  execution,  delivery  and
performance  of the Loan  Documents  and all  other  documents  related  to this
Agreement to which it is a party (including,  without limitation,  a certificate
of the secretary of each such party setting forth the  resolutions  of its Board
of Directors  authorizing the transactions  contemplated thereby and attaching a
copy of its bylaws),  together with such  certificates  as may be appropriate to
demonstrate the  qualification  and good standing of and payment of taxes by the
Company and the Guarantor in Texas, Louisiana, Montana, Oklahoma, New Mexico and
Wyoming, as applicable.

                                                        36

<PAGE>

         (b)  Incumbency.  The Company,  the Guarantor  and each other  Relevant
Party shall have delivered to  Administrative  Agent a certificate in respect of
the name and  signature of each of the officers (i) who is authorized to sign on
its behalf the applicable Loan Documents  related to any Loan or the issuance of
any Letter of Credit and (ii) who will,  until  replaced  by another  officer or
officers duly  authorized for that purpose,  act as its  representative  for the
purposes of signing  documents and giving  notices and other  communications  in
connection with any Loan or the issuance of any Letter of Credit. Administrative
Agent  and each  Bank may  conclusively  rely on such  certificates  until  they
receive  notice in writing from the Company,  the  Guarantor or the  appropriate
Relevant Party to the contrary.

         (c) 364-Day Credit Agreement.  Administrative Agent shall have received
counterparts  of the 364-Day  Credit  Agreement  executed and delivered by or on
behalf of each of the  parties  thereto or the  Administrative  Agent shall have
received evidence  satisfactory to it of the execution and delivery by each such
Person of a counterpart of such 364-Day Credit Agreement.

         (d) Loan  Documents.  The Company and each other  Relevant  Party shall
have duly executed and delivered the other Loan Documents to which it is a party
(in such number of copies as Administrative Agent shall have requested) and each
such Loan Document shall be in form  satisfactory to the  Administrative  Agent.
Each such Loan  Document  shall be in  substantially  the form  furnished to the
Banks prior to their  execution of this  Agreement,  together  with such changes
therein as the Administrative Agent may approve.

         (e) Fees and Expenses.  The Company  shall have paid to  Administrative
Agent for the account of each Bank all accrued  and unpaid  commitment  fees and
other fees in the amounts  previously  agreed upon in writing  among the Company
and  Administrative  Agent;  and shall have in  addition  paid to each Agent all
amounts payable under the letter agreements referred to in Section 2.4(b) hereof
and under Section 9.7 hereof on or before the date of this Agreement.

         (f) Opinions of Counsel.  Administrative  Agent shall have received (1)
an opinion of Akin, Gump, Strauss,  Hauer & Feld, L.L.P., counsel to the Company
and the Guarantor,  in form and substance reasonably satisfactory to the Agents,
and (2) such  opinions of counsel to the Company and other  Relevant  Parties as
the Agents shall reasonably  request with respect to the Company,  the Guarantor
and the Loan Documents.

         (g)  Execution  by Banks and  Agents.  Administrative  Agent shall have
received  counterparts of this Agreement  executed and delivered by or on behalf
of each of the Banks and the Agents or Administrative  Agent shall have received
evidence  satisfactory  to it of the execution and delivery by each of the Banks
and Agents of a counterpart hereof.

         (h)  Consents.   Administrative  Agent  shall  have  received  evidence
satisfactory to it that,  except as disclosed in the Disclosure  Statement,  all
material  consents of each  Governmental  Authority and of each other Person, if
any,  reasonably  required in  connection  with (a) the Loans and the Letters of
Credit,  (b) the execution,  delivery and  performance of this Agreement and the
other

                                                        37

<PAGE>

Loan Documents have been  satisfactorily  obtained,  and (c) the consummation of
the Merger and all related  transactions.  All  applicable  appeal periods shall
have expired and there shall be, in the judgment of the Administrative Agent, in
its sole discretion,  no governmental or judicial action,  actual or threatened,
restraining,  preventing or imposing burdensome conditions on the Merger and all
related transactions,  including,  without limitation, the issuance, closing and
funding of this Agreement and the facilities thereunder.

         (i) Margin Regulations.  After giving effect to such Loan or Letters of
Credit,   the  Company  and  Banks  shall  be  in  compliance  with  the  Margin
Regulations.

         (j)  Consummation  of Merger.  The merger  among  Seagull and Old Ocean
Energy  (the  "Merger")  shall  have been  consummated  as  contemplated  by and
pursuant to that certain Agreement and Plan of Merger,  dated November 24, 1998,
as amended  by  Amendment  No. 1 to  Agreement  and Plan of Merger,  dated as of
December 9, 1998 (as amended, the "Merger  Agreement"),  among such parties, and
Administrative  Agent  shall have  received  (i)  satisfactory  evidence  of the
consummation of such Merger and (ii) a certificate from a Responsible Officer of
the Company certifying that the Merger has been consummated.

         (k)  Financial  Reports;  Filings.   Administrative  Agent  shall  have
received  copies of (i) all  financial  statements,  reports,  notices and proxy
statements either (A) requested by the  Administrative  Agent or any Bank or (B)
sent by the Company,  Seagull or Old Ocean Energy to its  stockholders  and (ii)
all SEC filings concerning the Merger.

         (l)  Litigation.  No litigation or  administrative  proceeding or other
legal or regulatory  developments  prohibiting or enjoining the  consummation of
the Merger shall exist.

         (m) Event of Default under Existing Credit Facilities. Exclusive of the
Merger,  no "Event of  Default"  (as  defined  in the  Existing  Seagull  Credit
Facility)  for Seagull or "Event of Default"  (as  defined in the  Existing  Old
Ocean  Credit  Facility)  for  Old  Ocean  Energy  shall  have  occurred  and be
continuing.

         (n) Termination of Existing  Credit  Facilities.  Administrative  Agent
shall have received  evidence  satisfactory to it that all obligations under (i)
the  Existing  Seagull  Credit  Facility,  (ii) the  Existing  Old Ocean  Credit
Facility  and (iii) the  Existing  Old Ocean  Bridge  Facility,  have been paid,
fulfilled or satisfied in full or otherwise terminated.

         (o) Lien Searches.  Administrative  Agent shall have received certified
copies of Uniform  Commercial  Code  Requests  for  Information  or Copies (Form
UCC-11),  or a similar  search  report  certified by a party  acceptable  to the
Administrative  Agent,  dated a date  reasonably near to the date of the initial
Loan,  listing  all  effective  financing  statements  which  name the  Company,
Seagull, the Guarantor or, at the request of the Administrative Agent, any other
Subsidiary  (under its present  name and any  previous  names) as the debtor and
which are filed in the following

                                                        38

<PAGE>

jurisdictions:  Delaware,  Texas, Louisiana,  Montana,  Oklahoma, New Mexico and
Wyoming, together with copies of such financing statements.

         (p) Other  Documents.  Administrative  Agent shall have  received  such
other documents  consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as Administrative Agent may reasonably request.

         All provisions and payments required by this Section 7.1 are subject to
the provisions of Section 13.6.

         7.2 Initial and  Subsequent  Loans.  The obligation of each Bank or any
applicable Issuer to make any Loan (including,  without limitation,  its initial
Loan) to be made by it hereunder  (excluding  conversions  of Loans to Alternate
Base  Rate  Loans,  as to which no  conditions  precedent  exist) or to issue or
participate  in any  Letter of Credit is subject  to the  additional  conditions
precedent  that (i)  Administrative  Agent  shall have  received  a Request  for
Extension of Credit and such other  certifications as  Administrative  Agent may
reasonably  require,  (ii) in the case of Competitive  Loans,  the Company shall
have complied with the provisions of Section 2.9 hereof and (iii) as of the date
of such Loan or such issuance, and after giving effect thereto:

         (a)        no Default shall have occurred and be continuing;

         (b) except for facts timely disclosed to Administrative Agent from time
to time in  writing,  which  facts (i) are not  materially  more  adverse to the
Company  and its  Subsidiaries  or any  other  Obligor,  (ii) do not  materially
decrease the ability of the Banks to collect the Obligations as and when due and
payable and (iii) do not  materially  increase the liability of any Agent or any
of the Banks,  in each case compared to those facts  existing on the date hereof
and the  material  details  of  which  have  been  set  forth  in the  Financial
Statements  delivered to Administrative Agent prior to the date hereof or in the
Disclosure  Statement,  and except for the representations set forth in the Loan
Documents which, by their terms, are expressly (or by means of similar phrasing)
made as of the  Effective  Date or as of the  date  hereof,  as the case may be,
only, the  representations  and  warranties  made in each Loan Document shall be
true and correct in all material respects on and as of the date of the making of
such Loan or such issuance,  with the same force and effect as if made on and as
of such date;

         (c) the making of such Loan or the  issuance  of such  Letter of Credit
shall not violate any Legal Requirement applicable to any Bank; and

         (d) no event or condition  shall have occurred since the  effectiveness
of this  Agreement  which  reasonably  could be expected to result in a Material
Adverse Effect.

         Each  Request  for  Extension  of Credit by the  Company  hereunder  or
request for issuance of a Letter of Credit shall  include a  representation  and
warranty  by the Company to the effect set forth in  Subsections  7.2(a) and (b)
(both as of the date of such notice and, unless the Company otherwise

                                                        39

<PAGE>

notifies  Administrative  Agent prior to the date of such borrowing or issuance,
as of the date of such borrowing or issuance).

         SECTION 8. REPRESENTATIONS AND WARRANTIES. To induce the Banks to enter
into  this  Agreement  and to make the Loans  and  issue or  participate  in the
Letters of Credit, the Company represents and warrants (such representations and
warranties  to  survive  any  investigation  and the making of the Loans and the
issuance of the Letters of Credit) to the Banks and the Agents as follows:

         8.1 Corporate Existence. The Company, the Guarantor and each Subsidiary
of the  Company  are  corporations  duly  incorporated  and  organized,  legally
existing and in good standing under the laws of the respective  jurisdictions in
which they are incorporated,  and are duly qualified as foreign  corporations in
all jurisdictions  wherein the property owned or the business transacted by them
makes  such  qualification  necessary  and  the  failure  to  so  qualify  could
reasonably be expected to result in a Material Adverse Effect.

         8.2  Corporate  Power  and  Authorization.  Each  of the  Company,  the
Guarantor and each Subsidiary of the Company is duly authorized and empowered to
execute,  deliver,  and perform this  Agreement and the other Loan  Documents to
which it is a party;  and all corporate  action on the Company's part and on the
part of the Guarantor and each  Subsidiary of the Company for the due execution,
delivery,  and  performance  of this  Agreement and the other Loan  Documents to
which each of the Company, the Guarantor and each such Subsidiary is a party has
been duly and effectively taken.

         8.3 Binding  Obligations.  This  Agreement and the other Loan Documents
constitute  legal,  valid  and  binding  obligations  of  the  Company  and  its
Subsidiaries  and  the  Guarantor,  to  the  extent  each  is a  party  thereto,
enforceable  against the Company and its Subsidiaries and the Guarantor,  to the
extent each is a party  thereto,  in  accordance  with their  respective  terms,
except as may be  limited by any  bankruptcy,  insolvency,  moratorium  or other
similar laws or judicial  decisions  affecting  creditors'  rights generally and
general principles of equity whether considered at law or in equity.

         8.4 No Legal  Bar or  Resultant  Lien.  The  Company's  and each of its
Subsidiaries' and the Guarantor's creation,  issuance,  execution,  delivery and
performance of this Agreement and the other Loan  Documents,  to the extent they
are  parties  thereto,  do not  and  will  not  violate  any  provisions  of the
Organizational  Documents of the Company, the Guarantor or any Subsidiary of the
Company or any Legal  Requirement  to which the  Company,  the  Guarantor or any
Subsidiary  of the Company is subject or by which its  property may be presently
bound or  encumbered,  or result in the creation or  imposition of any Lien upon
any  properties of the Company,  the Guarantor or any Subsidiary of the Company,
other than those permitted by this Agreement.

         8.5 No Consent. Except as set forth in the Disclosure Statement,
the Company's and each of its Subsidiaries' and the Guarantor's execution, 
delivery, and performance of this

                                                        40

<PAGE>

Agreement,  the Merger  Agreement and the other Loan Documents to which they are
parties do not and will not require the consent or approval of any Person  other
than such consents and/or  approvals  obtained by the Company  contemporaneously
with or prior to the execution of this Agreement, including, without limitation,
any  Governmental  Authorities,  other than those consents the failure to obtain
which could not be reasonably expected to have a Material Adverse Effect.

         8.6 Financial Condition.

         (a) The audited consolidated annual financial statements of Seagull and
its Subsidiaries for the year ended December 31, 1998, which have been delivered
to the Banks, have been prepared in accordance with GAAP, and present fairly the
financial   condition  and  results  of  the   operations  of  Seagull  and  its
Subsidiaries for the period or periods stated. The audited  consolidated  annual
financial statements of Old Ocean Energy and its Subsidiaries for the year ended
December 31, 1998, which have been delivered to the Banks, have been prepared in
accordance with GAAP, and present fairly the financial  condition and results of
the  operations  of Old Ocean  Energy  and its  Subsidiaries  for the  period or
periods stated. No Material Adverse Effect has occurred since December 31, 1998,
except as disclosed to the Banks in the Disclosure Statement.

         (b) The unaudited pro forma consolidated annual financial statements of
the Company and its Subsidiaries for the year ended December 31, 1998, which are
presented  to give  effect to the Merger and which  have been  delivered  to the
Banks,  have been prepared in accordance with GAAP. No material  adverse change,
either in any case or in the aggregate,  has occurred since December 31, 1998 in
the assets, liabilities,  financial condition,  business, operations, affairs or
circumstances  of the Company and its Subsidiaries  taken as a whole,  except as
disclosed to the Banks in the Disclosure Statement.

         8.7 Investments and Guaranties. As of the Effective Date, no Subsidiary
of the Company had made  Investments in or advances to, and neither the Company,
Seagull  or Old  Ocean  Energy  nor  any  Subsidiary  of any of  them  had  made
Guarantees  of, the  obligations  of any Person,  except as (a) disclosed to the
Banks in the Disclosure Statement or (b) not prohibited by applicable provisions
of Section 10.

         8.8 Liabilities  and Litigation.  Neither the Company or any Subsidiary
of the Company,  Seagull or any  Subsidiary of Seagull,  nor Old Ocean Energy or
any Subsidiary of Old Ocean Energy, respectively, has any material (individually
or in the aggregate) liabilities,  direct or contingent, except as (a) disclosed
or referred to in the  Financial  Statements,  (b) disclosed to the Banks in the
Disclosure Statement, (c) disclosed in a notice to Administrative Agent pursuant
to Section 9.10 with respect to such as could  reasonably  be expected to have a
Material  Adverse  Effect or (d) not  prohibited  by  applicable  provisions  of
Section 10. Except as (a) described in the Financial  Statements,  (b) otherwise
disclosed to the Banks in the Disclosure Statement, (c) disclosed in a notice to
Administrative  Agent  pursuant  to Section  9.10 with  respect to such as could
reasonably be expected to have a Material  Adverse  Effect or (d) not prohibited
by applicable provisions of Section 10, no litigation,  legal, administrative or
arbitral proceeding, investigation, or other action

                                                        41

<PAGE>

of any nature exists or (to the knowledge of the Company) is threatened  against
or  affecting  the  Company or any  Subsidiary  of the  Company,  Seagull or any
Subsidiary  of  Seagull,  or Old  Ocean  Energy or any  Subsidiary  of Old Ocean
Energy,  respectively,  which  could  reasonably  be  expected  to result in any
judgment which could  reasonably be expected to have a Material  Adverse Effect,
or which in any manner  challenges  or may  challenge or draw into  question the
validity of this Agreement or any other Loan  Document,  or enjoins or threatens
to enjoin or otherwise  restrain any of the transactions  contemplated by any of
them.

         8.9 Taxes and Governmental  Charges.  The Company and its Subsidiaries,
Seagull  and  its  Subsidiaries,  and Old  Ocean  Energy  and its  Subsidiaries,
respectively,  have filed, or obtained extensions with respect to the filing of,
all  material  tax returns  and  reports  required to be filed and have paid all
material taxes, assessments, fees and other governmental charges levied upon any
of them or upon any of their  respective  properties or income which are due and
payable,  including  interest and penalties,  or have provided adequate reserves
for the payment thereof.

         8.10 Title to  Properties.  The  Company and its  Subsidiaries  and the
Guarantor  have  good  and  defensible  title  to  their  respective  properties
(including, without limitation, all fee and leasehold interests), free and clear
of all Liens except (a) those  referred to in the Financial  Statements,  (b) as
disclosed  to the  Banks in the  Disclosure  Statement  or (c) as  permitted  by
Section 10.2.

         8.11  Defaults.  Neither the Company or any  Subsidiary of the Company,
Seagull or any  Subsidiary of Seagull nor Old Ocean Energy or any  Subsidiary of
Old Ocean Energy is in default,  which default  could  reasonably be expected to
have a Material Adverse Effect,  under any indenture,  mortgage,  deed of trust,
agreement  or other  instrument  to which the Company or any  Subsidiary  of the
Company,  Seagull  or any  Subsidiary  of  Seagull  or Old  Ocean  Energy or any
Subsidiary of Old Ocean Energy, respectively, is a party or by which the Company
or any  Subsidiary of the Company,  Seagull or any  Subsidiary of Seagull or Old
Ocean  Energy  or any  Subsidiary  of Old  Ocean  Energy,  respectively,  or the
property  of the  Company  or any  Subsidiary  of the  Company,  Seagull  or any
Subsidiary of Seagull or Old Ocean Energy or any Subsidiary of Old Ocean Energy,
respectively,  is bound,  except as (a) disclosed to the Banks in the Disclosure
Statement, (b) disclosed in a notice to Administrative Agent pursuant to Section
9.10 with  respect to such as could  reasonably  be  expected to have a Material
Adverse Effect or (c) specifically permitted by applicable provisions of Section
10. No Default under this  Agreement or any other Loan Document has occurred and
is continuing.

         8.12  Location of  Businesses  and  Offices.  Except to the extent that
Administrative  Agent has been  furnished  written  notice to the contrary or of
additional locations, pursuant to Section 9.10, the Company's principal place of
business and chief  executive  offices are located at the address  stated on the
signature page hereof and the principal  places of business and chief  executive
offices of the  Guarantor and each other  Subsidiary  are described on Exhibit C
hereto.

         8.13  Compliance with Law.  Neither the Company or any Subsidiary 
of the Company, Seagull or any Subsidiary of Seagull nor Old Ocean Energy or any
Subsidiary of Old Ocean Energy

                                                        42

<PAGE>

(except as (a) disclosed to the Banks in the Disclosure Statement, (b) disclosed
in a notice to  Administrative  Agent  pursuant to Section  9.10 with respect to
such as could  reasonably be expected to have a Material  Adverse  Effect or (c)
not prohibited by applicable provisions of Section 10):

         (a) is in violation of any Legal Requirement; or

         (b) has  failed to  obtain  any  license,  permit,  franchise  or other
governmental authorization necessary to the ownership of any of their respective
properties or the conduct of their respective business;

which  violation  or failure  could  reasonably  be  expected to have a Material
Adverse Effect.

         8.14 Margin  Stock.  None of the proceeds of the Loans will be used for
the purpose of, and neither the Company, the Guarantor nor any Subsidiary of the
Company is engaged in the  business of  extending  credit for the purpose of (a)
purchasing  or carrying  any "margin  stock" as defined in  Regulation  U of the
Board of Governors  of the Federal  Reserve  System (12 C.F.R.  Part 221) or (b)
reducing or retiring any indebtedness which was originally  incurred to purchase
or carry  margin  stock,  if such  purpose  under  either (a) or (b) above would
constitute  this  transaction  a "purpose  credit"  within  the  meaning of said
Regulation U, or for any other purpose which would constitute this transaction a
"purpose credit".  Neither the Company,  the Guarantor nor any Subsidiary of the
Company is engaged principally,  or as one of its important  activities,  in the
business of extending  credit for the purpose of purchasing  or carrying  margin
stocks. Neither the Company, the Guarantor nor any Subsidiary of the Company nor
any Person acting on behalf of the Company,  the Guarantor or any  Subsidiary of
the Company has taken or will take any action  which might cause any of the Loan
Documents,  including  this  Agreement,  to  violate  Regulation  U or any other
regulation  of the Board of  Governors  of the  Federal  Reserve  System,  or to
violate any similar provision of the Securities Exchange Act of 1934 or any rule
or regulation under any such provision thereof.

         8.15  Subsidiaries.  The Company has no  Subsidiaries as of the date of
this Agreement except those shown in Exhibit C hereto.

         8.16  ERISA.  With  respect to each Plan,  the  Company  and each ERISA
Affiliate have fulfilled  their  obligations,  including  obligations  under the
minimum  funding  standards of ERISA and the Code,  and are in compliance in all
material  respects with the provisions of ERISA and the Code. The Company has no
knowledge  of any event which could  result in a liability of the Company or any
ERISA Affiliate to the PBGC or a Plan (other than to make  contributions  in the
ordinary course).  Since the effective date of Title IV of ERISA, there have not
been any nor are there now  existing any events or  conditions  that would cause
the Lien  provided  under Section 4068 of ERISA to attach to any property of the
Company or any ERISA Affiliate.  There are no Unfunded  Liabilities with respect
to any Plan. No "prohibited transaction" has occurred with respect to any Plan.

                                                        43

<PAGE>

         8.17  Investment  Company  Act.  Neither  the  Company  nor  any of its
Subsidiaries  is an  investment  company  within the  meaning of the  Investment
Company Act of 1940, as amended,  or,  directly or indirectly,  controlled by or
acting  on behalf of any  Person  which is an  investment  company,  within  the
meaning of said Act.

         8.18 Public Utility Holding Company Act. Neither the Company nor any of
its  Subsidiaries  (i) is subject to regulation under the Public Utility Holding
Company Act of 1935, as amended (the "PUHC Act"),  except as to Section  9(a)(2)
thereof (15  U.S.C.A.  ss.79(i)(a)(2)),  or (ii) is in  violation  of any of the
provisions, rules, regulations or orders of or under the PUHC Act. Further, none
of  the  transactions  contemplated  under  this  Agreement,  including  without
limitation,  the making of the Loans and the  issuance of the Letters of Credit,
shall  cause  or  constitute  a  violation  of  any of  the  provisions,  rules,
regulations  or orders of or under the PUHC Act and the PUHC Act does not in any
manner impair the legality,  validity or enforceability  of this Agreement.  The
Company has duly filed with the  Securities and Exchange  Commission  good faith
applications (each a "PUHCA  Application") under Section 2(a)(8) of the PUHC Act
(15 U.S.C.A. ss.79(b)(a)(8)) for a declaration of non-subsidiary status pursuant
to such  Section  2(a)(8)  with  respect  to  each  Person  (each  a  "Specified
Shareholder")  which  owns,  controls  or holds with power to vote,  directly or
indirectly,  a sufficient quantity of the voting securities of the Company to be
construed  as a "holding  company",  as such term is defined in the PUHC Act, in
respect  of  the  Company.  All of  the  information  contained  in  such  PUHCA
Applications,  as  amended,  was true as of the most  recent  filing  date  with
respect  thereto  (provided  that the Company may,  unless it has actual current
knowledge to the contrary, rely solely upon written information furnished by any
Specified Shareholder with respect to background information about the Specified
Shareholder and the nature of the ownership by such Specified Shareholder or its
Affiliates of the voting securities of the Company), and the Company knows of no
reason why each such PUHCA  Application,  if acted  upon by the  Securities  and
Exchange Commission, would not be approved. True and correct copies of each such
PUHCA Application and any amendments  thereto,  as filed, have been furnished to
Administrative  Agent.  The Company has not received any written notice from the
Securities and Exchange  Commission  with respect to any such PUHCA  Application
other than as disclosed in writing to Administrative Agent.

         8.19  Environmental  Matters.  Except as  disclosed  in the  Disclosure
Statement,  (i) the Company and its Subsidiaries have obtained and maintained in
effect all  Environmental  Permits  (or has  initiated  the  necessary  steps to
transfer the  Environmental  Permits into its name), the failure to obtain which
could reasonably be expected to have a Material Adverse Effect, (ii) the Company
and its Subsidiaries and their properties,  assets, business and operations have
been and are in compliance with all applicable Requirements of Environmental Law
and  Environmental  Permits  failure to comply  with which could  reasonably  be
expected  to  have  a  Material  Adverse  Effect,  (iii)  the  Company  and  its
Subsidiaries  and their  properties,  assets,  business and  operations  are not
subject to any (A)  Environmental  Claims or (B) Environmental  Liabilities,  in
either case direct or contingent,  and whether known or unknown, arising from or
based upon any act,  omission,  event,  condition or  circumstance  occurring or
existing on or prior to the date hereof  which could  reasonably  be expected to
have a Material Adverse Effect, and (iv) no Responsible Officer of the

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<PAGE>

Company or any of its  Subsidiaries  has received any notice of any violation or
alleged  violation of any  Requirements of  Environmental  Law or  Environmental
Permit or any  Environmental  Claim in connection  with its assets,  properties,
business or  operations  which could  reasonably  be expected to have a Material
Adverse Effect.  The liability  (including  without limitation any Environmental
Liability and any other damage to persons or  property),  if any, of the Company
and its Subsidiaries and with respect to their properties,  assets, business and
operations which is reasonably expected to arise in connection with Requirements
of  Environmental  Laws  currently  in effect  and other  environmental  matters
presently known by a Responsible Officer of the Company will not have a Material
Adverse  Effect.  No  Responsible  Officer of the Company  knows of any event or
condition  with  respect to  Environmental  Matters  with  respect to any of its
properties or the properties of any of its  Subsidiaries  which could reasonably
be expected to have a Material  Adverse  Effect.  For  purposes of this  Section
8.19,  "Environmental  Matters"  shall mean  matters  relating to  pollution  or
protection  of  the  environment,   including,  without  limitation,  emissions,
discharges,  releases or threatened  releases of Hazardous  Substances  into the
environment (including, without limitation, ambient air, surface water or ground
water, or land surface or subsurface), or otherwise relating to the manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Substances.

         8.20  Claims  and  Liabilities.  Except  as  disclosed  to the Banks in
writing,  neither the Company or any of its  Subsidiaries  nor the Guarantor has
accrued any liabilities under gas purchase  contracts for gas not taken, but for
which it is liable to pay if not made up and  which,  if not paid,  would have a
Material Adverse Effect.  Except as disclosed to the Banks in writing, no claims
exist  against  the  Company  or its  Subsidiaries  or  the  Guarantor  for  gas
imbalances  which claims if adversely  determined  would have a Material Adverse
Effect.  No  purchaser  of  product  supplied  by  the  Company  or  any  of its
Subsidiaries  or the  Guarantor  has any claim against the Company or any of its
Subsidiaries  for product paid for, but for which  delivery was not taken as and
when paid for, which claim if adversely determined would have a Material Adverse
Effect.

         8.21 Solvency. Neither the Company, the Guarantor nor the Company
and its Subsidiaries, on a consolidated basis, is "insolvent", as such term is 
used and defined in (i) the Bankruptcy Code and (ii) the Texas Uniform 
Fraudulent Transfer Act, Tex. Bus. & Com. Code Ann. SECTION 4.001 et seq.

         8.22  Year  2000.  Any  reprogramming  required  to permit  the  proper
functioning,  in and following the year 2000, of (i) the computer systems of the
Company and its Subsidiaries and (ii) equipment  containing  embedded microchips
(including  systems and  equipment  supplied by others or with which the systems
interface  of the  Company  and its  Subsidiaries)  and the  testing of all such
systems and equipment,  as so  reprogrammed,  will be completed by September 30,
1999. The cost to the Company and its  Subsidiaries  of such  reprogramming  and
testing  and of the  reasonably  foreseeable  consequences  of year  2000 to the
Company  and its  Subsidiaries  (including,  without  limitation,  reprogramming
errors and the  failure of others'  systems or  equipment)  will not result in a
Default  or a Material  Adverse  Effect.  Except  for such of the  reprogramming
referred to in the  preceding  sentence as may be  necessary,  the  computer and
management information systems

                                                        45

<PAGE>

of the Company and its  Subsidiaries are and, with ordinary course upgrading and
maintenance,  will continue for the term of this Agreement to be,  sufficient to
permit the Company to conduct its business without Material Adverse Effect.

         SECTION 9.  AFFIRMATIVE  COVENANTS.  A deviation from the provisions of
this  Section 9 will not  constitute  a Default  under  this  Agreement  if such
deviation is consented  to in writing by the Majority  Banks.  Without the prior
written consent of the Majority Banks, the Company agrees with the Banks and the
Agents that, so long as any of the Commitments is in effect and until payment in
full of all Obligations and the termination or expiry of all Letters of Credit:

         9.1 Financial Statements and Reports. The Company will promptly furnish
to any Bank  from time to time  upon  request  such  information  regarding  the
business and affairs and financial condition of the Company and its Subsidiaries
and the Guarantor as such Bank may reasonably  request,  and will furnish to the
Agents and each of the Banks:

         (a) Annual Reports - promptly after becoming available and in any event
within 100 days after the close of each fiscal year of the Company:

                    (i)    the audited consolidated balance sheet of the Company
                           and its Subsidiaries as of the end of such year;

                    (ii)   the audited consolidated statement of earnings of the
                           Company and its Subsidiaries for such year;

                    (iii)  the audited  consolidated  statement of cash flows of
                           the Company and its Subsidiaries for such year;

setting forth in each case in comparative form the corresponding figures for the
preceding  fiscal year,  and, in the case of the audited  Financial  Statements,
audited and  accompanied  by the related  opinion of KPMG Peat  Marwick or other
independent   certified  public  accountants  of  recognized  national  standing
acceptable  to the Majority  Banks,  which opinion shall state that such audited
balance  sheets  and  statements  have been  prepared  in  accordance  with GAAP
consistently  followed  throughout  the period  indicated and fairly present the
consolidated  financial  condition and results of  operations of the  applicable
Persons as at the end of, and for, such fiscal year; and

         (b) Quarterly Reports - as soon as available and in any event within 50
days after the end of each of the first three  quarterly  periods in each fiscal
year of the Company:

                    (i)    the unaudited consolidated balance sheet of the
                           Company and its Subsidiaries as of the end of such 
                           quarter;

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<PAGE>

                    (ii)   the unaudited  consolidated  statement of earnings of
                           the Company and its Subsidiaries for such quarter and
                           for the period from the  beginning of the fiscal year
                           to the close of such quarter;

                    (iii)  the unaudited consolidated statement of cash flows of
                           the Company and its Subsidiaries for such quarter and
                           for the period from the  beginning of the fiscal year
                           to the close of such quarter;

all of  items  (i)  through  (iii)  above  prepared  on  substantially  the same
accounting basis as the annual reports described in Subsection  9.1(a),  subject
to normal changes resulting from year-end adjustments; and

         (c)        [Intentionally omitted]; and

         (d) SEC and Other  Reports -  promptly  upon  their  becoming  publicly
available,  one copy of each financial statement,  report,  notice or definitive
proxy statement sent by the Company or any Subsidiary to shareholders generally,
and  of  each  regular  or  periodic  report  and  any  registration  statement,
prospectus or written  communication (other than transmittal letters) in respect
thereof filed by the Company or any of its Subsidiaries with, or received by the
Company or any of its Subsidiaries in connection  therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency.

         All of the balance sheets and other financial statements referred to in
this Section 9.1 will be in such detail as any Bank may  reasonably  request and
will conform to GAAP applied on a basis  consistent  with those of the Financial
Statements  as of December  31,  1998.  In  addition,  if GAAP shall change with
respect  to any  matter  relative  to  determination  of  compliance  with  this
Agreement, the Company will also provide financial information necessary for the
Banks to determine compliance with this Agreement.

         9.2        Officers' Certificates.

         (a) Concurrently with the furnishing of the annual financial statements
pursuant to Subsection 9.1(a),  commencing with the annual financial  statements
required  to be  delivered  in 1999,  the  Company  will  furnish or cause to be
furnished to Administrative Agent certificates of compliance, as follows:

                    (i)    a certificate signed by the principal financial
                           officer of the Company in the form of Exhibit D; and

                    (ii)   a certificate from the independent public accountants
                           stating  that  their  audit  has  not  disclosed  the
                           existence  of  any  condition  which   constitutes  a
                           Default,   or  if  their  audit  has   disclosed  the
                           existence  of  any  such  condition,  specifying  the
                           nature and period of existence.

                                                        47

<PAGE>

         (b)  Concurrently  with  the  furnishing  of  the  quarterly  financial
statements   pursuant  to  Subsection   9.1(b),  the  Company  will  furnish  to
Administrative Agent a principal financial officer's  certificate in the form of
Exhibit D.

         9.3  Taxes  and Other  Liens.  The  Company  will and will  cause  each
Subsidiary of the Company to pay and discharge  promptly all taxes,  assessments
and governmental  charges or levies imposed upon the Company or such Subsidiary,
or upon the income or any property of the Company or such Subsidiary, as well as
all claims of any kind (including claims for labor,  materials,  supplies,  rent
and  payment of proceeds  attributable  to  Hydrocarbon  production)  which,  if
unpaid,  might result in or become a Lien upon any or all of the property of the
Company or such Subsidiary; provided, however, that neither the Company nor such
Subsidiary  will be required to pay any such tax,  assessment,  charge,  levy or
claims if the  amount,  applicability  or validity  thereof  will  currently  be
contested in good faith by appropriate  proceedings  diligently conducted and if
the Company or such Subsidiary will have set up reserves therefor adequate under
GAAP.

         9.4  Maintenance.  Except as referred  to in Sections  8.1 and 8.13 and
except as  permitted  under  Section  10.4 the Company  will and will cause each
Subsidiary  of the  Company  to: (i)  maintain  its  corporate  existence;  (ii)
maintain  its rights and  franchises,  except for any mergers or  consolidations
otherwise  permitted by this  Agreement  and except to the extent  failure to so
maintain the same would not have a Material  Adverse  Effect;  (iii) observe and
comply (to the extent that any  failure  would have a Material  Adverse  Effect)
with all valid Legal Requirements  (including without limitation Requirements of
Environmental  Law);  and (iv)  maintain  (except  to the  extent  failure to so
maintain the same would not have a Material  Adverse Effect) its properties (and
any  properties  leased by or consigned  to it or held under title  retention or
conditional  sales  contracts)  consistent  with the  standards  of a reasonably
prudent  operator at all times and make all  repairs,  replacements,  additions,
betterments and improvements to its properties  consistent with the standards of
a reasonably prudent operator.

         9.5  Further  Assurances.   The  Company  will,  and  will  cause  each
Subsidiary  of the Company to, cure  promptly any defects in the  execution  and
delivery of the Loan  Documents,  including this  Agreement.  The Company at its
expense will promptly execute and deliver to  Administrative  Agent upon request
all such other and further  documents,  agreements and instruments (or cause any
of its Subsidiaries to take such action) in compliance with or accomplishment of
the covenants and  agreements of the Company or any of its  Subsidiaries  in the
Loan  Documents,  including this  Agreement,  or to correct any omissions in the
Loan Documents,  or to make any recordings,  to file any notices,  or obtain any
consents, all as may be necessary or appropriate in connection therewith.

         9.6  Performance  of  Obligations.  The  Company  will  pay  the  Loans
according to the reading,  tenor and effect of this  Agreement;  and the Company
will do and perform every act and discharge all of the  obligations  provided to
be performed and  discharged  by the Company under this  Agreement and the other
Loan Documents at the time or times and in the manner specified, and

                                                        48

<PAGE>

cause  each of its  Subsidiaries  to take  such  action  with  respect  to their
obligations  to be performed and  discharged  under the Loan  Documents to which
they respectively are parties.

         9.7 Reimbursement of Expenses.  Whether or not any Loan is ever made or
any Letter of Credit is ever  issued,  the  Company  agrees to pay or  reimburse
Administrative Agent for paying the reasonable fees and expenses of Mayer, Brown
& Platt,  special  counsel to the Agents,  together with the reasonable fees and
expenses  of  local  counsel  engaged  by the  Agents,  in  connection  with the
negotiation  of the terms and  structure of the  Obligations,  the  preparation,
execution and delivery of this  Agreement  and the other Loan  Documents and the
making of the Loans and the issuance of Letters of Credit hereunder,  as well as
any modification, supplement or waiver of any of the terms of this Agreement and
the other Loan  Documents.  The Company  will  promptly  upon request and in any
event within 30 days from the date of receipt by the Company of a copy of a bill
for such  amounts,  reimburse  any Bank or any Agent for all amounts  reasonably
expended,  advanced  or  incurred  by such  Bank or such  Agent to  satisfy  any
obligation of the Company under this  Agreement or any other Loan  Document,  to
protect the  properties  or business  of the  Company or any  Subsidiary  of the
Company,  to collect the  Obligations,  or to enforce the rights of such Bank or
such Agent under this Agreement or any other Loan  Document,  which amounts will
include without  limitation all court costs,  attorneys' fees (but not including
allocated costs of in-house counsel), any engineering fees and expenses, fees of
auditors,  accountants and  appraisers,  investigation  expenses,  all transfer,
stamp,  documentary  or similar  taxes,  assessments  or  charges  levied by any
governmental or revenue authority in respect of any of the Loan Documents or any
other document referred to therein, all costs, expenses,  taxes, assessments and
other charges incurred in connection with any filing, registration, recording or
perfection of any lien contemplated by any of the Loan Documents or any document
referred to therein,  fees and expenses  incurred in connection with such Bank's
participation  as a member of a creditors'  committee in a case commenced  under
the  Bankruptcy  Code or other  similar  law of the  United  States or any state
thereof,  fees and expenses  incurred in  connection  with lifting the automatic
stay  prescribed  in ss.362  Title 11 of the United  States  Code,  and fees and
expenses  incurred in connection with any action pursuant to ss.1129 Title 11 of
the United States Code and all other customary  out-of-pocket  expenses incurred
by such Bank or such  Agent in  connection  with  such  matters,  together  with
interest  after the expiration of the 30-day period stated above in this Section
if no Event of Default has occurred and is  continuing,  or from the date of the
request to the Company if an Event of Default has occurred and is continuing, at
either  (i)  the  Post-Default  Rate on  each  such  amount  until  the  date of
reimbursement  to such Bank or such Agent,  or (ii) if no Event of Default  will
have  occurred  and be  continuing,  the  Alternate  Base Rate plus the  highest
Applicable  Margin for  Alternate  Base Rate  Loans  (not to exceed the  Highest
Lawful  Rate) on each such  amount  until the date of the  Company's  receipt of
written  demand or request by such Bank or such Agent for the  reimbursement  of
same,  and  thereafter  at the  applicable  Post-Default  Rate until the date of
reimbursement  to such Bank or such Agent.  The obligations of the Company under
this Section are compensatory in nature, shall be deemed liquidated as to amount
upon receipt by the Company of a copy of any invoice therefor,  and will survive
the  non-assumption  of this Agreement in a case commenced  under the Bankruptcy
Code or other  similar law of the United States or any state  thereof,  and will
remain  binding on the Company and any trustee,  receiver,  or liquidator of the
Company appointed in any such case.

                                                        49

<PAGE>

         9.8 Insurance.  The Company and its  Subsidiaries  will maintain,  with
financially  sound and  reputable  insurers,  insurance  with  respect  to their
respective properties and business against such liabilities,  casualties,  risks
and  contingencies  and in such types and amounts as is customary in the case of
corporations  engaged in the same or similar businesses and similarly  situated.
Upon the  request  of  Administrative  Agent  acting at the  instruction  of the
Majority  Banks,   the  Company  will  furnish  or  cause  to  be  furnished  to
Administrative  Agent from time to time a summary of the  insurance  coverage of
the Company  and its  Subsidiaries  in form and  substance  satisfactory  to the
Majority  Banks in their  reasonable  judgment,  and if  requested  will furnish
Administrative Agent copies of the applicable policies. In the case of any fire,
accident  or other  casualty  causing  loss or damage to any  properties  of the
Company or any of its  Subsidiaries,  the proceeds of such policies will be used
(i) to repair or replace the damaged  property,  (ii) to prepay the Obligations,
or (iii) so long as no Default  has  occurred  and is  continuing,  for  general
corporate purposes, at the election of the Company.

         9.9  Accounts  and  Records.  The Company will keep and will cause each
Subsidiary  of the  Company  to keep books of record and  account  which  fairly
reflect all dealings or transactions in relation to their respective  businesses
and activities,  in accordance with GAAP, which books of record and account will
be maintained,  to the extent necessary to enable compliance with all provisions
of this  Agreement,  separately  for each such  Subsidiary,  the Company and any
division of the Company.

         9.10  Notice of  Certain  Events.  The  Company  will  promptly  notify
Administrative Agent (and Administrative Agent will then notify all of the Banks
and  other  Agents)  if a  Responsible  Officer  of the  Company  learns  of the
occurrence of, or if the Company causes or intends to cause, as the case may be:

                    (i) any event which  constitutes a Default,  together with a
detailed  statement by a  Responsible  Officer of the Company of the steps being
taken to cure the effect of such Default; or

                    (ii) the  receipt of any notice  from,  or the taking of any
other action by, the holder of any promissory note,  debenture or other evidence
of  indebtedness  of the  Company  or any  Subsidiary  of the  Company or of any
security (as defined in the  Securities  Act of 1933, as amended) of the Company
or any  Subsidiary  of the Company with respect to a claimed  default,  together
with a detailed statement by a Responsible Officer of the Company specifying the
notice  given or other action taken by such holder and the nature of the claimed
default and what action the Company or such  Subsidiary is taking or proposes to
take with respect thereto; or

                    (iii)  any  legal,   judicial  or   regulatory   proceedings
affecting the Company or any  Subsidiary of the Company or any of the properties
of the Company or any Subsidiary of the Company in which the amount  involved is
materially  adverse to the Company and its Subsidiaries taken as a whole, and is
not  covered  by  insurance  or which,  if  adversely  determined,  would have a
Material Adverse Effect; or

                                                        50

<PAGE>

                    (iv) any dispute  between the Company or any  Subsidiary  of
the  Company  and any  Governmental  Authority  or any other  Person  which,  if
adversely  determined,  could  reasonably be expected to have a Material Adverse
Effect; or

                    (v) the  occurrence  of a default or event of default by the
Company or any  Subsidiary of the Company under any other  agreement to which it
is a party,  which default or event of default  could  reasonably be expected to
have a Material Adverse Effect; or

                    (vi) any change in the accuracy of the  representations  and
warranties of the Company or any  Subsidiary  contained in this Agreement or any
other Loan Document; or

                    (vii) any material  violation or alleged material  violation
of  any  Requirements  of  Environmental  Law  or  Environmental  Permit  or any
Environmental Claim or any Environmental Liability; or

                    (viii) any tariff and rate cases and other material  reports
filed by the Company or any of its Subsidiaries with any Governmental  Authority
and any notice to the Company or any of its  Subsidiaries  from any Governmental
Authority concerning noncompliance with any applicable Legal Requirement; or

                    (ix)  within 10 days  after the date on which a  Responsible
Officer of the Company has actual knowledge  thereof,  the receipt of any notice
by the Company or any of its  Subsidiaries of any claim of nonpayment of, or any
attempt to collect or  enforce,  accounts  payable of the  Company or any of its
Subsidiaries  exceeding,  in the  case of any one  account  payable  at one time
outstanding, $5,000,000 and in the case of all accounts payable in the aggregate
at any one time outstanding, $10,000,000; or

                    (x) any requirement for the payment of all or any portion of
any Indebtedness of the Company or any of its  Subsidiaries  prior to the stated
maturity  thereof (whether by acceleration or otherwise) or as the result of any
failure to maintain  or the  reaching of any  threshold  amount  provided in any
promissory note, bond, debenture, or other evidence of Indebtedness or under any
credit agreement,  loan agreement,  indenture or similar  agreement  executed in
connection with any of the foregoing; or

                    (xi) any notice from the Securities and Exchange  Commission
with respect to any Application (as defined in Section 8.18 hereof).

         9.11 ERISA  Information  and  Compliance.  The  Company  will  promptly
furnish to  Administrative  Agent (i)  immediately  upon receipt,  a copy of any
notice of complete or partial  withdrawal  liability under Title IV of ERISA and
any notice  from the PBGC under Title IV of ERISA of an intent to  terminate  or
appoint a trustee to administer  any Plan,  (ii) if requested by  Administrative
Agent,  acting on the  instruction  of the Majority  Banks,  promptly  after the
filing  thereof  with the United  States  Secretary  of Labor or the PBGC or the
Internal Revenue Service,

                                                        51

<PAGE>

copies of each annual and other  report  with  respect to each Plan or any trust
created  thereunder,  (iii) immediately upon becoming aware of the occurrence of
any "reportable  event",  as such term is defined in Section 4043 of ERISA,  for
which the disclosure  requirements of Regulation  Section 2615.3  promulgated by
the PBGC have not been waived, or of any "prohibited transaction",  as such term
is defined in Section 4975 of the Code, in connection with any Plan or any trust
created  thereunder,  a written  notice signed by the President or the principal
financial  officer of the Company or the applicable  ERISA Affiliate  specifying
the nature thereof, what action the Company or the applicable ERISA Affiliate is
taking or proposes to take with respect  thereto,  and,  when known,  any action
taken by the PBGC, the Internal  Revenue Service or the Department of Labor with
respect  thereto,  (iv)  promptly  after the filing or receiving  thereof by the
Company  or  any  ERISA  Affiliate  of any  notice  of  the  institution  of any
proceedings  or other actions which may result in the  termination  of any Plan,
and (v) each  request for waiver of the funding  standards  or  extension of the
amortization periods required by Sections 303 and 304 of ERISA or Section 412 of
the Code  promptly  after the request is  submitted  by the Company or any ERISA
Affiliate  to the  Secretary of the  Treasury,  the  Department  of Labor or the
Internal  Revenue  Service,  as the case may be. To the  extent  required  under
applicable statutory funding requirements,  the Company will fund, or will cause
each ERISA Affiliate to fund, all current  service  pension  liabilities as they
are incurred under the provisions of all Plans from time to time in effect,  and
comply with all  applicable  provisions of ERISA,  except to the extent that any
such  failure to comply  could not  reasonably  be  expected  to have a Material
Adverse Effect.  The Company  covenants that it shall and shall cause each ERISA
Affiliate to (1) make  contributions  to each Plan in a timely  manner and in an
amount  sufficient to comply with the contribution  obligations  under such Plan
and the minimum funding standards requirements of ERISA; (2) prepare and file in
a timely  manner  all  notices  and  reports  required  under the terms of ERISA
including but not limited to annual reports;  and (3) pay in a timely manner all
required PBGC premiums,  in each case, to the extent failure to do so would have
a Material Adverse Effect.

         SECTION 10. NEGATIVE COVENANTS. A deviation from the provisions of this
Section 10 will not  constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority  Banks.  The Company  agrees with the
Banks and the Agents that,  so long as any of the  Commitments  is in effect and
until payment in full of all  Obligations  and the  termination or expiry of all
Letters of Credit:

         10.1       Debts, Guaranties and Other Obligations.

         (i) Of Restricted Subsidiaries.  The Company will not permit any of its
Restricted  Subsidiaries to incur, create,  assume or in any manner become or be
liable in respect of any Indebtedness  (including obligations for the payment of
rentals); and the Company will not permit any of its Restricted  Subsidiaries to
Guarantee or otherwise in any way become or be  responsible  for  obligations of
any other Person, whether by agreement to purchase the Indebtedness of any other
Person or agreement for the  furnishing of funds to any other Person through the
purchase or lease of goods,  supplies or services (or by way of stock  purchase,
capital contribution, advance or loan)

                                                        52

<PAGE>

for the purpose of paying or discharging  the  Indebtedness of any other Person,
or otherwise, except that the foregoing restrictions will not apply to:

         (a)        Indebtedness  pursuant to (1) the Loan Documents and (2) the
                    364-Day Credit Agreement and the "Loan  Documents"  referred
                    to therein;

         (b)        Indebtedness of any Restricted Subsidiary existing on the
                    date of this Agreement which is described in the Disclosure 
                    Statement, and (A) with respect to any such Indebtedness 
                    which constitutes Senior Debt, any extensions, renewals or
                    replacements of such Indebtedness upon terms no more onerous
                    to such Restricted Subsidiary than the terms of this 
                    Agreement or the terms of the instruments evidencing such 
                    Senior Debt as of the effective date of this Agreement, and
                    (B) with respect to any such Indebtedness which constitutes 
                    Subordinated Indebtedness, any extensions, renewals or 
                    replacements of such Indebtedness which (I) remains 
                    Subordinated Indebtedness and(II)does not require principal
                    repayment of such Subordinated Indebtedness prior to 
                    expiration of the Revolving Credit Availability Period;

         (c)        endorsements  of  negotiable  or  similar   instruments  for
                    collection or deposit in the ordinary course of business;

         (d)        trade payables, lease acquisition and lease maintenance 
                    obligations, extensions of credit from suppliers or 
                    contractors, liabilities incurred in exploration, 
                    development and operation of any Restricted Subsidiary's oil
                    and gas properties or similar obligations from time to time 
                    incurred in the ordinary course of business, other than for 
                    borrowed money, which are paid within 90 days after the 
                    invoice date (inclusive of applicable grace periods) or (i) 
                    are  being  contested  in  good faith,  if such  reserve as 
                    required  by GAAP  has  been  made  therefor  or (ii) trade 
                    accounts  payable  of  any  Restricted  Subsidiaries  (with 
                    respect to which no legal proceeding to enforce  collection 
                    has been commenced or, to the knowledge of any Responsible 
                    Officer  of the  Company, threatened)  not exceeding, in the
                    aggregate at any time outstanding, $50,000,000;

         (e)        taxes, assessments or other government charges which are not
                    yet due or are being  contested in good faith by appropriate
                    action promptly initiated and diligently conducted,  if such
                    reserve  as will be  required  by GAAP  will  have been made
                    therefor;

         (f)        intercompany   Indebtedness  owed  to  the  Company  by  any
                    Restricted Subsidiary and intercompany  Indebtedness owed to
                    any   Restricted   Subsidiary   by  any   other   Restricted
                    Subsidiary;

                                                        53

<PAGE>

         (g)        any  Guarantee  existing  on the date of this  Agreement  of
                    payment or  performance by any Person under any agreement so
                    long  as  the  obligation  guaranteed  does  not  constitute
                    Indebtedness for borrowed money;

         (h)        obligations of any Restricted  Subsidiary under gas purchase
                    contracts  for gas not taken,  as to which  such  Restricted
                    Subsidiary is liable to pay if not made up;

         (i)        obligations of any Restricted  Subsidiary under any contract
                    for sale for future  delivery of oil or gas  (whether or not
                    the subject oil or gas is to be  delivered) or other similar
                    agreement;

         (j)        obligations of any Restricted  Subsidiary  under any hedging
                    contract, forward contract, swap agreement, futures contract
                    or other similar agreement;

         (k)        obligations of any Restricted  Subsidiary under any interest
                    rate  or   currency   swap   agreement,   or  any   contract
                    implementing  any interest rate or currency  cap,  collar or
                    floor,  or any similar  interest  rate or  currency  hedging
                    contract;

         (l)        obligations in connection with gas imbalances arising in th
                    ordinary course of business;

         (m)        Guarantees of obligations of Havre by Guarantor in an amount
                    not  exceeding  $20,000,000  in the  aggregate in connection
                    with Indebtedness of Havre;

         (n)        liabilities  under capital leases and lease agreements which
                    do not cover oil and gas  properties  to the  extent (i) the
                    incurrence  and  existence  of such  liabilities  will still
                    enable  each  Restricted   Subsidiary  to  comply  with  all
                    requirements  of this Agreement and (ii) not  exceeding,  in
                    the aggregate at any time outstanding, $35,000,000;

         (o)        until such time as the  Guaranty  Agreement  is no longer in
                    effect,  any  Guarantee  by  Guarantor  of  the  payment  or
                    performance of the Company with respect to  Indebtedness  of
                    Company permitted by Section 10.1(iii);

         (p)        obligations  in  connection  with  bank  guarantees,  bonds,
                    surety or  similar  obligations  required  or  requested  by
                    Governmental  Authorities  in connection  with the usual and
                    customary  operation  of and  the  obtaining  of oil and gas
                    properties; and

         (q)        in addition to Indebtedness permitted by clauses (a) through
                    (p) above,  Indebtedness of any Restricted  Subsidiary in an
                    aggregate principal amount not exceeding  $10,000,000 at any
                    time outstanding.

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<PAGE>

         (ii) Of Unrestricted  Subsidiaries.  The Company will not permit any of
its  Unrestricted  Subsidiaries  to (a) incur,  create,  assume or in any manner
become or be liable in respect of any  Indebtedness  (including  obligations for
the payment of rentals),  or (b)  Guarantee or otherwise in any way become or be
responsible  for  obligations  of any other  Person,  whether  by  agreement  to
purchase the Indebtedness of any other Person or agreement for the furnishing of
funds to any other Person  through the  purchase or lease of goods,  supplies or
services (or by way of stock purchase,  capital  contribution,  advance or loan)
for the purpose of paying or discharging  the  Indebtedness of any other Person,
or  otherwise,  except  that the  foregoing  restrictions  will not apply to any
Indebtedness  not exceeding  $200,000,000 in the aggregate for all  Unrestricted
Subsidiaries.

         (iii) Of the Company.  The Company may incur  Indebtedness for borrowed
money only if such  Indebtedness  is at prevailing  market rates of interest and
contains covenants, conditions and events of default not materially more onerous
to the Company than the covenants,  conditions and event of default set forth in
one or more of the various  indentures and other debt instruments of the Company
in existence on the Effective Date.

         10.2  Liens.  The  Company  will  not and will  not  permit  any of its
Restricted  Subsidiaries to create, incur, assume or permit to exist any Lien on
any of its or their properties (now owned or hereafter acquired), except:

         (a)        Liens securing (i) the Loans or other  obligations under the
                    Loan  Documents,  and (ii) the  "Loans"  (as  defined in the
                    364-Day Credit  Agreement) and other  obligations  under the
                    364-Day Credit Agreement and the "Loan  Documents"  referred
                    to therein,  provided  that such Liens (A) are for the equal
                    and  ratable  benefit of the Agents and the Banks under each
                    of this Agreement and the 364-Day  Credit  Agreement and (B)
                    cover the same collateral;

         (b)        Liens for taxes,  assessments or other governmental  charges
                    or levies not yet due or which are being  contested  in good
                    faith  by   appropriate   action   promptly   initiated  and
                    diligently conducted, if such reserve as will be required by
                    GAAP will have been made therefor;

         (c)        Liens of landlords,  vendors,  contractors,  subcontractors,
                    carriers,  warehousemen,  mechanics, laborers or materialmen
                    or  other  like  Liens  arising  by law or  contract  in the
                    ordinary  course of  business  for sums not yet due or being
                    contested  in good  faith  by  appropriate  action  promptly
                    initiated and diligently conducted,  if such reserve as will
                    be required by GAAP will have been made therefor;

         (d)        Liens  existing on  property  owned by the Company or any of
                    its  Restricted  Subsidiaries  on the date of this Agreement
                    which  have been  disclosed  to the Banks in the  Disclosure
                    Statement,   together   with   any   renewals,   extensions,
                    amendments,  refinancings,  rearrangements,   modifications,
                    restatements or supplements, but not increases, thereof from
                    time to time;

                                                        55

<PAGE>

         (e)        pledges or deposits made in the ordinary  course of business
                    in  connection  with  worker's  compensation,   unemployment
                    insurance, social security and other like laws;

         (f)        inchoate  liens arising under ERISA to secure the contingent
                    liability of the Company permitted by Section 9.11;

         (g)        Liens in the ordinary  course of business,  not to exceed in
                    the  aggregate   $25,000,000  as  to  the  Company  and  its
                    Restricted Subsidiaries at any time in effect, regarding (i)
                    the performance of bids, tenders,  contracts (other than for
                    the  repayment of borrowed  money or the  deferred  purchase
                    price of property or  services)  or leases,  (ii)  statutory
                    obligations,  (iii)  surety  appeal  bonds or (iv)  Liens to
                    secure  progress or partial  payments made to the Company or
                    any of its Restricted  Subsidiaries  and other Liens of like
                    nature;

         (h)        covenants,  restrictions,  easements,  servitudes,  permits,
                    conditions,  exceptions,  reservations,  minor rights, minor
                    encumbrances,  minor irregularities in title or conventional
                    rights of  reassignment  prior to  abandonment  which do not
                    materially interfere with the occupation,  use and enjoyment
                    by  the  Company  or  any   Restricted   Subsidiary  of  its
                    respective  assets  in the  normal  course  of  business  as
                    presently conducted,  or materially impair the value thereof
                    for the purpose of such business;

         (i)        Liens of  operators  under  joint  operating  agreements  or
                    similar   contractual   arrangements  with  respect  to  the
                    relevant  entity's  proportionate  share of the  expense  of
                    exploration,  development  and  operation  of  oil,  gas and
                    mineral  leasehold  or  fee  interests  owned  jointly  with
                    others,  to the extent  that same relate to sums not yet due
                    or which are being  contested  in good faith by  appropriate
                    action promptly initiated and diligently conducted,  if such
                    reserve  as will be  required  by GAAP  will  have been made
                    therefor;

         (j)        Liens  created  pursuant to the  creation of trusts or other
                    arrangements  funded solely with cash,  cash  equivalents or
                    other  marketable  investments  or  securities  of the  type
                    customarily   subject  to  such  arrangements  in  customary
                    financial  practice with respect to long-term or medium-term
                    indebtedness  for borrowed money,  the sole purpose of which
                    is to make  provision  for  the  retirement  or  defeasance,
                    without prepayment,  of Indebtedness permitted under Section
                    10.1;

         (k)        Liens in favor of the Company on the assets or properties of
                    ENSTAR Alaska;

         (l)        Liens securing purchase money  Indebtedness or Capital Lease
                    Obligations incurred in compliance with Section 10.1 of this
                    Agreement;

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<PAGE>

         (m)        Liens on the capital  stock or other equity  interest of any
                    Unrestricted   Subsidiary   securing   obligations  of  such
                    Unrestricted Subsidiary;

         (n)        any Lien  existing on any real or  personal  property of any
                    corporation   or  partnership  at  the  time  it  becomes  a
                    Restricted Subsidiary or of any other Restricted Subsidiary,
                    or existing prior to the time of  acquisition  upon any real
                    or personal  property  acquired by the Company or any of its
                    Restricted Subsidiaries;

         (o)        legal or equitable encumbrances deemed to exist by reason of
                    the existence of any litigation or other legal proceeding or
                    arising out of a judgment or award with  respect to which an
                    appeal  is being  prosecuted  in good  faith by  appropriate
                    action promptly initiated and diligently conducted,  if such
                    reserve  as will be  required  by GAAP  will  have been made
                    therefor;

         (p)        any  Liens  securing  Indebtedness  neither  assumed  nor   
                    guaranteed  by  the  Company  or  any  of  its  Restricted  
                    Subsidiaries nor on which it customarily pays interest,
                    existing upon real estate or rights in or relating to real 
                    estate acquired by the Company or any of its Restricted 
                    Subsidiaries for substation, metering station, pump station,
                    storage, gathering line, transmission line, transportation 
                    line, distribution line or right-of-way purposes, and any 
                    Liens reserved in leases for rent and full 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 
                    arises  in  the  normal course  of  business  as  presently 
                    conducted and does not materially impair the use of the
                    property  covered  by  such Lien for the purposes for which 
                    such  property  is  held  by  the Company or its applicable 
                    Restricted Subsidiary;

         (q)        rights  reserved  to  or  vested  in  any   municipality  or
                    governmental,  statutory or public authority by the terms of
                    any right, power, franchise, grant, license or permit, or by
                    any  provision  of law,  to  terminate  such  right,  power,
                    franchise, grant, license or permit or to purchase, condemn,
                    expropriate  or recapture or to designate a purchaser of any
                    of the  property  of the  Company  or any of its  Restricted
                    Subsidiaries;

         (r)        rights  reserved  to  or  vested  in  any   municipality  or
                    governmental,  statutory  or public  authority to control or
                    regulate   any  property  of  the  Company  or  any  of  its
                    Restricted Subsidiaries, or to use such property in a manner
                    which does not  materially  impair the use of such  property
                    for the  purposes for which it is held by the Company or its
                    applicable Restricted Subsidiary;

         (s)        any  obligations  or duties  affecting  the  property of the
                    Company  or  any  of  its  Restricted  Subsidiaries  to  any
                    municipality,  governmental,  statutory or public  authority
                    with respect to any franchise, grant, license or permit;

                                                        57

<PAGE>

         (t)        rights of a common  owner of any  interest  in real  estate,
                    rights-of-way or easements held by the Company or any of its
                    Restricted  Subsidiaries and such common owner as tenants in
                    common or through other common ownership;

         (u)        as to assets located in Canada,  reservations,  limitations,
                    provisos and conditions in any original grant from the Crown
                    or freehold  lessor of any of the  properties of the Company
                    or its Subsidiaries;

         (v)        other Liens  securing  Indebtedness  not  exceeding,  in the
                    aggregate, $10,000,000 at any one time outstanding;

         (w)        Liens  covering  cash   collateral   accounts   relating  to
                    obligations   pursuant  to  Letters  of  Credit   issued  in
                    connection with this Agreement;

         (x)        Liens securing Indebtedness of the Company or any Restricted
                    Subsidiary  of the types  described  in  Section  10.1(i)(p)
                    covering   the  oil  and  gas   properties   to  which  such
                    Indebtedness relates,  provided that the aggregate amount of
                    all such  Indebtedness so secured under this Section 10.2(x)
                    shall not exceed  $50,000,000  in the  aggregate  at any one
                    time outstanding; and

         (y)        Liens (i) granted to or existing in favor of  third parties 
                    on margin accounts of the Company or any of  its Restricted 
                    Subsidiaries relating to exchange traded contracts  for the 
                    delivery of natural gas pursuant to which the Company or any
                    such  Restricted Subsidiary intends to take actual delivery 
                    of such natural  gas  within  forty (40) days from the then 
                    current date in the ordinary course of business and not for
                    speculative purposes,  and  (ii) on margin accounts  of the 
                    Company or any of its  Restricted Subsidiaries  relating to 
                    exchange traded contracts for the delivery of natural gas, 
                    provided,  however,  the  aggregate  balance  of the margin 
                    accounts subject to the Liens permitted by this clause (ii) 
                    shall not exceed from time to time $10,000,000.

         10.3  Dividend  Payment  Restrictions.  The Company will not declare or
make any Dividend Payment if any Default or Event of Default has occurred and is
continuing or would result therefrom.

         10.4  Mergers  and Sales of  Assets.  Except  for  sales of the  assets
described in the Disclosure Statement (the "Specified Assets"), the Company will
not (a) merge or consolidate with, or sell,  assign,  lease or otherwise dispose
of, whether in one transaction or in a series of transactions, more than (i) ten
percent (10%) in the aggregate (not including Specified Assets) of the Company's
and its Restricted Subsidiaries' consolidated total assets (whether now owned or
hereafter  acquired) to any Person or Persons  during any twelve month period or
(ii) twenty-five percent (25%) in the aggregate (not including Specified Assets)
of the Company's and its Restricted  Subsidiaries'  consolidated total assets as
of the date hereof to any Person or Persons during the Revolving Credit

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<PAGE>

Availability Period, or permit any Restricted Subsidiary to do so (other than to
the Company or another  Restricted  Subsidiary or the issuance by any Restricted
Subsidiary of any stock to the Company or another Restricted Subsidiary), or (b)
sell, assign,  lease or otherwise dispose of, whether in one transaction or in a
series of transactions, any other properties if receiving therefor consideration
other than cash or other  consideration  readily convertible to cash or which is
less than the fair  market  value of the  relevant  properties,  or  permit  any
Restricted  Subsidiary  to do so;  provided  that the Company or any  Restricted
Subsidiary  may merge or  consolidate  with any other Person and any  Restricted
Subsidiary may transfer properties to any other Restricted  Subsidiary or to the
Company so long as, in each case, (i)  immediately  thereafter and giving effect
thereto, no event will occur and be continuing which constitutes a Default, (ii)
in the case of any such merger or consolidation to which the Company is a party,
the  Company is the  surviving  Person,  (iii) in the case of any such merger or
consolidation  to  which  any  Restricted  Subsidiary  is a party  (but  not the
Company),  after giving effect to all transactions closing concurrently relating
to such merger or consolidation, the surviving Person is a Restricted Subsidiary
and (iv) the  surviving  Person  ratifies  each  applicable  Loan  Document  and
provided  further that any Restricted  Subsidiary may merge or consolidate  with
any  other  Restricted  Subsidiary  so long as,  in each  case  (i)  immediately
thereafter  and giving  effect  thereto,  no event will occur and be  continuing
which  constitutes  a  Default  and  (ii) the  surviving  Person  ratifies  each
applicable Loan Document.

         10.5 Proceeds of Loans. The Company will not permit the proceeds of the
Loans to be used for any purpose other than those permitted by this Agreement.

         10.6 ERISA Compliance. The Company will not at any time permit any Plan
maintained by it or any Restricted Subsidiary to:

         (a)        engage  in  any  "prohibited  transaction"  as such term is 
                    defined in Section 4975 of the Code;

         (b)        incur any "accumulated  funding  deficiency" as such term is
                    defined in Section 302 of ERISA; or

         (c)        terminate or be terminated in a manner which could result in
                    the  imposition  of a Lien on the property of the Company or
                    any Restricted Subsidiary pursuant to Section 4068 of ERISA,

in each  case,  to the  extent  that  permitting  the Plan to do so would have a
Material Adverse Effect.

         10.7  Total  Leverage  Ratio.  The  Company  will not  permit its Total
Leverage  Ratio to be (i) at any time through March 31, 2001,  more than 4.25 to
1.00, (ii) at any time from April 1, 2001 through March 31, 2002, more than 4.00
to 1.00, (iii) at any time on or after April 1, 2002, more than 3.75 to 1.00.

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         10.8       Senior Leverage Ratio.  The  Company  will  not  permit its 
Senior Leverage Ratio to be at any time more than 3.00 to 1.00.

         10.9 Minimum Net Worth.  The Company  will not permit its  Consolidated
Net Worth as of the end of any fiscal  quarter to be less than (i)  $770,000,000
plus (ii) an amount equal to 50% of the sum of the Company's and its  Restricted
Subsidiaries'  consolidated net income for each calendar quarter, beginning with
the calendar quarter ending March 31, 1999,  during which such  consolidated net
income is  greater  than $0 plus  (iii) an  amount  equal to 50% of the net cash
proceeds  received  by the  Company  and its  Restricted  Subsidiaries  from the
issuance of any common stock,  preferred stock or other equity for each calendar
quarter, beginning with the calendar quarter ending March 31, 1999.

         10.10 Nature of Business.  The Company will not engage in, and will not
permit any Restricted Subsidiary to engage in, businesses other than oil and gas
exploration  and  production,   gas  processing,   transmission,   distribution,
marketing and storage and gas and liquids  pipeline  operations  and  activities
related or ancillary thereto; provided, that if the Company acquires one or more
Restricted Subsidiaries in transactions otherwise permitted by the terms hereof,
any such  Restricted  Subsidiary  may be engaged in businesses  other than those
listed in this  Section  so long as the assets of such  Restricted  Subsidiaries
which are used in the conduct of such other  businesses do not  constitute  more
than  five  percent  (5%)  of the  consolidated  total  assets  of  the  Company
(inclusive of the assets of the Restricted Subsidiary so acquired).

         10.11 Covenants in Other Agreements.  The Company will not and will not
permit any of its Restricted  Subsidiaries to become a party to or to agree that
it or any of its property is bound by any agreement,  indenture,  mortgage, deed
of trust or any other  instrument  ("Instruments")  directly or  indirectly  (i)
restricting any loans, advances or any other Investments to or in the Company by
any  of  its  Restricted  Subsidiaries,  (ii)  restricting  the  ability  of any
Restricted  Subsidiary  to make tax payments or  management  fee payments to the
Company,  or  (iii)  restricting  the  ability  or  capacity  of any  Restricted
Subsidiary to make Dividend Payments to the Company,  except for (a) instruments
in existence on the date hereof and (b) instruments  entered into after the date
hereof  containing   restrictions  not  materially  more  restrictive  than  the
restrictions permitted under clause (a) above.

         SECTION 11.       DEFAULTS.

         11.1 Events of Default.  If one or more of the following events (herein
called "Events of Default") shall occur and be continuing:

         (a)  Payments - (i) the  Company or any other  Relevant  Party fails to
make any payment or prepayment of any  installment  of principal on the Loans or
any  Reimbursement  Obligation  payable  under this  Agreement or the other Loan
Documents when due or (ii) the Company or any other Relevant Party fails to make
any  payment  or  prepayment  of  interest  with  respect  to  the  Loans,   any
Reimbursement  Obligation  or any other  fee,  amount or  Obligation  under this
Agreement or the

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other Loan Documents and such failure to pay continues unremedied for  a period 
of five (5) Business Days; or

         (b)  Representations  and Warranties - any  representation  or warranty
made by the  Company or any other  Relevant  Party in this  Agreement  or in any
other Loan  Document or in any  instrument  executed in  connection  herewith or
therewith  proves to have been incorrect in any material  respect as of the date
thereof;  or any representation,  statement  (including  Financial  Statements),
certificate or data furnished or made by the Company or any other Relevant Party
(or any  officer  of the  Company  or any  other  Relevant  Party)  under  or in
connection  with this  Agreement or any other Loan Document,  including  without
limitation  in the  Disclosure  Statement,  proves  to have  been  untrue in any
material  respect,  as of the date as of which the facts  therein set forth were
stated or certified; or

         (c)  Affirmative  Covenants  - (i)  default  shall  be  made in the due
observance or  performance  of any of the  covenants or agreements  contained in
Sections  9.10 (or in Section 9.6 to the extent such  default is  considered  an
Event of  Default  under the other  Subsections  of this  Section  11.1) or (ii)
default  is  made in the  due  observance  or  performance  of any of the  other
covenants or  agreements  contained in Section 9 of this  Agreement or any other
affirmative  covenant of the Company or any other  Relevant  Party  contained in
this Agreement or any other Loan Document and such default continues  unremedied
for a period of 30 days  after (x)  notice  thereof  is given by  Administrative
Agent to the Company or (y) such default otherwise becomes known to the Company,
whichever is earlier; or

         (d)  Negative  Covenants  - default  is made in the due  observance  or
performance  by the Company of any of the covenants or  agreements  contained in
Section 10 of this Agreement or of any other negative covenant of the Company or
any other Relevant Party contained in this Agreement or any other Loan Document;
or

         (e)  Other  Obligations  -  default  is made in the due  observance  or
performance by the Company or any of its Restricted  Subsidiaries  (as principal
or guarantor or other surety) of any of the covenants or agreements contained in
any  bond,  debenture,  note or other  evidence  of  Indebtedness  in  excess of
$25,000,000  (singly or  aggregating  several such bonds,  debentures,  notes or
other  evidence of  Indebtedness)  which  default  gives the holder the right to
accelerate the maturity of such Indebtedness,  other than the Loan Documents, or
under any  credit  agreement,  loan  agreement,  indenture,  promissory  note or
similar  agreement  or  instrument  executed  in  connection  with  any  of  the
foregoing, to which it (respectively) is a party and such default is unwaived or
continues  unremedied beyond the expiration of any applicable grace period which
may be expressly allowed under such instrument or agreement; or

         (f) Involuntary  Bankruptcy or  Receivership  Proceedings - a receiver,
conservator, liquidator or trustee of the Company, the Guarantor, any Restricted
Subsidiary  or of any of their  property is  appointed by the order or decree of
any court or agency  or  supervisory  authority  having  jurisdiction,  and such
decree or order remains in effect for more than 60 days; or the Company, the

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Guarantor or any Restricted Subsidiary is adjudicated bankrupt or insolvent;  or
any of its  property is  sequestered  by court  order and such order  remains in
effect for more than 60 days;  or a petition is filed  against the Company,  the
Guarantor or any Restricted  Subsidiary  under any state or federal  bankruptcy,
reorganization,  arrangement,  insolvency,  readjustment  of debt,  dissolution,
liquidation or receivership law of any jurisdiction, whether now or hereafter in
effect, and is not dismissed within 60 days after such filing; or

         (g) Voluntary Petitions or Consents - the Company, the Guarantor or any
Restricted  Subsidiary  commences a voluntary case or other  proceeding  seeking
liquidation,  reorganization,  arrangement,  insolvency,  readjustment  of debt,
dissolution,  liquidation  or other relief with respect to itself or its debt or
other liabilities  under any bankruptcy,  insolvency or other similar law nor or
hereafter  in  effect  or  seeking  the  appointment  of  a  trustee,  receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property,  or consents to any such relief or to the appointment of or taking
possession  by any such  official  in an  involuntary  case or other  proceeding
commenced against it, or fails generally to, or cannot,  pay its debts generally
as they become due or takes any  corporate  action to authorize or effect any of
the foregoing; or

         (h)  Assignments  for Benefit of Creditors or  Admissions of Insolvency
the Company, the Guarantor or any Restricted  Subsidiary makes an assignment for
the  benefit of its  creditors,  or admits in writing its  inability  to pay its
debts  generally  as they  become  due,  or  consents  to the  appointment  of a
receiver,  trustee, or liquidator of the Company, the Guarantor,  any Restricted
Subsidiary or of all or any part of their property; or

         (i)  Undischarged  Judgments  -  judgments   (individually  or  in  the
aggregate)  for the  payment  of money in  excess  of  $10,000,000  in excess of
insurance  coverage are rendered by any court or other governmental body against
the  Company or any of its  Restricted  Subsidiaries  or the  Guarantor  and the
Company or such  Restricted  Subsidiary or the Guarantor  does not discharge the
same or provide for its  discharge in  accordance  with its terms,  or procure a
stay of execution  thereof  within 60 days from the date of entry  thereof,  and
within  said  period of 60 days from the date of entry  thereof  or such  longer
period  during which  execution  of such  judgment  will have been  stayed,  the
Company,  such Restricted  Subsidiary or the Guarantor fails to appeal therefrom
and cause the execution  thereof to be stayed during such appeal while providing
such reserves therefor as may be required under GAAP; or

         (j) Subsidiary Defaults - the Guarantor or any Restricted Subsidiary of
the Company takes,  suffers, or permits to exist any of the events or conditions
referred to in Subsections 11.1(f), (g) or (h); or

         (k) Change in Control - there should occur any Change of Control.

THEREUPON:  Administrative  Agent may  (and, if directed by the Majority Banks, 
shall) (a) declare the Commitments terminated (whereupon the Commitments  shall 
be terminated) and/or  (b)  terminate  any  Letter of Credit providing for such 
termination by sending a notice of termination

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as provided  therein and/or (c) declare the principal amount then outstanding of
and the accrued interest on the Loans and Reimbursement Obligations and all fees
and all other  Obligations  to be  forthwith  due and  payable,  whereupon  such
amounts  shall  be and  become  immediately  due  and  payable,  without  notice
(including  without  limitation  notice of acceleration  and notice of intent to
accelerate),  presentment, demand, protest or other formalities of any kind, all
of which are hereby expressly  waived by the Company;  provided that in the case
of the occurrence of an Event of Default with respect to the Company referred to
in clause (f) or (g) of this  Section 11.1 or in clause (j) of this Section 11.1
to the  extent  it  refers  to  clauses  (f) or (g),  the  Commitments  shall be
automatically  terminated and the principal  amount then  outstanding of and the
accrued interest on the Loans and Reimbursement Obligations and all fees and all
other  Obligations  payable  hereunder  shall be and  become  automatically  and
immediately due and payable, without notice (including but not limited to notice
of intent to accelerate  and notice of  acceleration)  and without  presentment,
demand,  protest  or other  formalities  of any kind,  all of which  are  hereby
expressly  waived by the Company  and/or (d)  exercise  any and all other rights
available to it under the Loan Documents, at law or in equity.

         11.2 Collateral Account.  The Company hereby agrees, in addition to the
provisions  of Section  11.1  hereof,  that upon the  occurrence  and during the
continuance of any Event of Default,  it shall,  if requested by  Administrative
Agent  or  the  Majority   Banks   (through   Administrative   Agent),   pay  to
Administrative Agent an amount in immediately  available funds equal to the then
aggregate  amount  available for drawings under all Letters of Credit issued for
the account of the Company, which funds shall be held by Administrative Agent as
Cover.

         11.3 Preservation of Security for Unmatured Reimbursement  Obligations.
In the event that,  following (i) the  occurrence of an Event of Default and the
exercise  of any  rights  available  to  Administrative  Agent  under  the  Loan
Documents,  and (ii) payment in full of the principal amount then outstanding of
and the accrued interest on the Loans and Reimbursement Obligations and fees and
all other  Obligations  payable  hereunder and under any Letters of Credit shall
remain outstanding and undrawn upon,  Administrative  Agent shall be entitled to
hold (and the  Company  hereby  grants  and  conveys to  Administrative  Agent a
security interest in and to) all cash or other property ("Proceeds of Remedies")
realized or arising out of the  exercise by  Administrative  Agent of any rights
available  to it  under  the Loan  Documents,  at law or in  equity,  including,
without  limitation,  the proceeds of any  foreclosure,  as  collateral  for the
payment of any amounts due or to become due under or in respect of such  Letters
of Credit.  Such Proceeds of Remedies  shall be held for the ratable  benefit of
the applicable Issuers. The rights,  titles,  benefits,  privileges,  duties and
obligations of  Administrative  Agent with respect  thereto shall be governed by
the terms and provisions of this Agreement.  Administrative Agent may, but shall
have no  obligation  to,  invest any such Proceeds of Remedies in such manner as
Administrative Agent, in the exercise of its sole discretion, deems appropriate.
Such Proceeds of Remedies shall be applied to Reimbursement  Obligations arising
in respect  of any such  Letters of Credit  and/or the  payment of any  Issuer's
obligations  under any such Letter of Credit when such Letter of Credit is drawn
upon.  The  Company  hereby  agrees to execute and deliver to the Agents and the
Banks such security agreements,  pledges or other documents as any of the Agents
or any of the Banks may, from time to time, require to perfect the pledge,  lien
and security  interest in and to any such  Proceeds of Remedies  provided for in
this Section 11.3.

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         11.4  Right  of  Setoff.   Upon  (i)  the  occurrence  and  during  the
continuance  of any Event of Default  referred to in clauses  (f), (g) or (h) of
Section  11.1,  or in  clause  (j) of  Section  11.1 to the  extent it refers to
clauses  (f), (g) or (h), or upon (ii) the  occurrence  and  continuance  of any
other  Event of Default and upon the making of the notice  specified  in Section
11.1 to  authorize  Administrative  Agent to declare  the Loans due and  payable
pursuant to the provisions of this Agreement,  or if (iii) the Company or any of
its Subsidiaries  becomes  insolvent,  however  evidenced,  the Banks are hereby
authorized at any time and from time to time,  without  notice to the Company or
any of its  Subsidiaries  (any such notice being expressly waived by the Company
and its  Subsidiaries),  to setoff and apply any and all  deposits  (general  or
special,  time or  demand,  provisional  or final,  whether  or not such  setoff
results  in any  loss of  interest  or  other  penalty,  and  including  without
limitation all certificates of deposit) at any time held, and any other funds or
property at any time held, and other  Indebtedness at any time owing by any Bank
to or for the credit or the  account of the  Company  against any and all of the
Obligations  irrespective  of whether or not such Bank will have made any demand
under this Agreement and although such obligations may be unmatured.  Should the
right of any Bank to  realize  funds in any  manner  set  forth  hereinabove  be
challenged and any application of such funds be reversed, whether by court order
or otherwise, the Banks shall make restitution or refund to the Company pro rata
in accordance  with their  Commitments.  The Banks agree  promptly to notify the
Company and Administrative Agent after any such setoff and application, provided
that the failure to give such notice will not affect the validity of such setoff
and  application.  The rights of the Agents and the Banks under this Section are
in addition to other rights and remedies  (including  without  limitation  other
rights of setoff) which the Agents or the Banks may have.

         SECTION 12.       AGENTS.

         12.1 Appointment,  Powers and Immunities.  Each Bank hereby irrevocably
appoints and authorizes  each Agent to act as its agent  hereunder and under the
Letters  of  Credit  and the  other  Loan  Documents  with  such  powers  as are
specifically  delegated to such Agent by the terms hereof and thereof,  together
with such other powers as are reasonably  incidental thereto.  Each Agent (which
term as used in this Section 12 shall include  reference to its  affiliates  and
its own and their affiliates' officers,  directors,  employees and agents) shall
not (a) have any duties or responsibilities  except those expressly set forth in
this Agreement, the Letters of Credit, and the other Loan Documents, or shall by
reason of this  Agreement  or any other Loan  Document be a trustee or fiduciary
for any  Bank;  (b) be  responsible  to any Bank for any  recitals,  statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document,  or in any certificate or other document referred to
or  provided  for in, or  received by any of them  under,  this  Agreement,  the
Letters  of Credit or any  other  Loan  Document,  or for the  value,  validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Letters of Credit,  or any other Loan Document or any other document referred to
or provided  for herein or therein or any  property  covered  thereby or for any
failure  by any  Relevant  Party  or any  other  Person  to  perform  any of its
obligations hereunder or thereunder;  (c) be required to initiate or conduct any
litigation or collection proceedings hereunder or under the Letters of Credit or
any other Loan  Document  except to the extent such Agent is so requested by the
Majority Banks, or (d) be responsible for any

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action  taken or omitted  to be taken by it  hereunder  or under the  Letters or
Credit or any other Loan Document or any other  document or instrument  referred
to or provided  for herein or therein or in  connection  herewith or  therewith,
INCLUDING, WITHOUT LIMITATION,  PURSUANT TO THEIR OWN NEGLIGENCE, except for its
own gross  negligence  or willful  misconduct.  Each Agent may employ agents and
attorneys-in-fact  and shall not be responsible for the negligence or misconduct
of any such agents or  attorneys-in-fact  selected by it with  reasonable  care.
Without in any way limiting any of the foregoing,  each Bank  acknowledges  that
neither any Agent nor any Issuer  shall have any greater  responsibility  in the
operation  of the Letters of Credit than is  specified in either (i) the Uniform
Customs and Practice  for  Documentary  Credits  (1993  Revision,  International
Chamber of  Commerce  Publication  No. 500) and (ii) the  International  Standby
Practices (ISP98,  International  Chamber of Commerce  Publication No. 590) . In
any foreclosure  proceeding concerning any collateral for the Loans, each holder
of a Loan if bidding for its own account or for its own account and the accounts
of other Banks is prohibited  from  including in the amount of its bid an amount
to be  applied  as a  credit  against  Obligations  owing  to  such  Bank or the
Obligations  owing to the other  Banks;  instead,  such  holder must bid in cash
only; provided that this provision is for the sole benefit of the Agents and the
Banks  and  shall  not  inure  to  the  benefit  of  the  Company  or any of its
Subsidiaries. However, in any such foreclosure proceeding,  Administrative Agent
may (but  shall  not be  obligated  to)  submit a bid for all  Banks  (including
itself) in the form of a credit against the Obligations of all of the Banks, and
Administrative  Agent or its designee may (but shall not be obligated to) accept
title to such collateral for and on behalf of all Banks.

         12.2 Reliance by Agents.  Each Agent shall be entitled to rely upon any
certification,   notice  or  other  communication   (including  any  thereof  by
telephone,  telex,  telegram or cable)  believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and  statements of legal  counsel  (which may be counsel for the
Company),  independent  accountants and other experts selected by such Agent. As
to any matters not  expressly  provided  for by this  Agreement,  the Letters of
Credit,  or any other  Loan  Document,  each  Agent  shall in all cases be fully
protected in acting,  or in refraining from acting,  hereunder and thereunder in
accordance with  instructions of the Majority Banks (or, where unanimous consent
is  required  by the terms  hereof or of the other  Loan  Documents,  all of the
Banks), and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks.  Pursuant to  instructions of the Majority Banks (except as
otherwise provided in Section 13.4 hereof),  Administrative Agent shall have the
authority  to execute  releases  of  security  documents  on behalf of the Banks
without  the  joinder  of  any  Bank.  The  Company  and  any   third-party  may
conclusively  rely  upon any such  release  delivered  by  Administrative  Agent
without  investigation  as to whether  such  release  has been  approved  by the
Majority Banks.

         12.3  Defaults.  Administrative  Agent  shall  not be  deemed  to  have
knowledge  of the  occurrence  of a  Default  (other  than  the  non-payment  of
principal of or interest on Loans or  Reimbursement  Obligations)  unless it has
received  notice from a Bank or the Company  specifying such Default and stating
that such  notice is a "Notice of  Default".  In the event  that  Administrative
Agent  receives  such a notice of the  occurrence  of a Default,  Administrative
Agent  shall give prompt  notice  thereof to the Banks (and shall give each Bank
prompt notice of each such non-payment).

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Administrative  Agent shall  (subject to Section  12.7  hereof) take such action
with  respect to such  Default as shall be  directed by the  Majority  Banks and
within its rights  under the Loan  Documents  and at law or in equity,  provided
that, unless and until Administrative Agent shall have received such directions,
Administrative  Agent may (but shall not be obligated  to) take such action,  or
refrain from taking such action,  permitted  hereby with respect to such Default
as it shall deem  advisable  in the best  interests  of the Banks and within its
rights under the Loan Documents, at law or in equity.

         12.4 Rights as a Bank.  With respect to its  Commitments  and the Loans
made and the Letter of Credit  Liabilities,  Chase,  Bank of America,  Bank One,
Societe Generale and Bank of Montreal,  respectively,  each in its capacity as a
Bank  hereunder,  shall have the same rights and powers  hereunder  as any other
Bank and may  exercise the same as though it were not acting as an Agent and the
term "Bank" or "Banks" shall,  unless the context otherwise  indicates,  include
Chase,  Bank of  America,  Bank  One,  Societe  Generale  and Bank of  Montreal,
respectively, each in its individual capacity. Administrative Agent may (without
having to account  therefor to any Bank) accept deposits from, lend money to and
generally  engage in any kind of  banking,  trust,  letter of credit,  agency or
other  business with the Company (and any of its  Affiliates)  as if it were not
acting as  Administrative  Agent, and  Administrative  Agent may accept fees and
other consideration from the Company and its Affiliates (in addition to the fees
heretofore agreed to between the Company and Administrative  Agent) for services
in connection with this Agreement or otherwise without having to account for the
same to the Banks.

         12.5  Indemnification.  The Banks agree to indemnify each Agent (to the
extent not reimbursed under Section 2.2(c),  Section 9.7 or Section 13.3 hereof,
but without  limiting the obligations of the Company under said Sections 2.2(c),
9.7 and 13.3), ratably in accordance with their respective Commitments,  for any
and  all  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,  suits,  costs,  expenses  or  disbursements  of any kind and  nature
whatsoever (INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES OF THE NEGLIGENCE OF
AGENT)  which may be imposed on,  incurred by or asserted  against such Agent in
any way relating to or arising out of this  Agreement,  the Letters of Credit or
any other Loan Document or any other  documents  contemplated  by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses which the Company is obligated to pay
under Sections 2.2(c),  9.7 and 13.3 hereof but excluding,  unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of their respective  agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other  documents,  provided
that no Bank shall be liable for any of the  foregoing  to the extent they arise
from the gross negligence or willful  misconduct of the party to be indemnified.
The  obligations  of the  Banks  under  this  Section  12.5  shall  survive  the
termination of this Agreement and the repayment of the Obligations.

         12.6  Non-Reliance on Agents and Other Banks.  Each Bank agrees that it
has received current financial  information with respect to the Company and that
it has,  independently  and without  reliance on any Agent or any other Bank and
based on such documents and information as it has deemed  appropriate,  made its
own credit analysis of the Company and decision to enter into this

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Agreement and that it will, independently and without reliance upon any Agent or
any other Bank,  and based on such  documents and  information  as it shall deem
appropriate  at the time,  continue to make its own  analysis  and  decisions in
taking or not  taking  action  under  this  Agreement  or any of the other  Loan
Documents.  Each Agent shall not be  required to keep itself  informed as to the
performance or observance by any Relevant Party of this  Agreement,  the Letters
of Credit or any of the other Loan Documents or any other  document  referred to
or provided for herein or therein or to inspect the  properties  or books of the
Company or any Relevant Party.  Except for notices,  reports and other documents
and   information   expressly   required  to  be   furnished  to  the  Banks  by
Administrative  Agent  hereunder,  under the Letters of Credit or the other Loan
Documents,  the Agents shall not have any duty or  responsibility to provide any
Bank with any credit or other  information  concerning  the  affairs,  financial
condition  or  business of the  Company or any other  Relevant  Party (or any of
their affiliates) which may come into the possession of such Agent.

         12.7  Failure  to  Act.  Except  for  action   expressly   required  of
Administrative Agent hereunder,  under the Letters of Credit and under the other
Loan  Documents,  Administrative  Agent shall in all cases be fully justified in
failing or refusing to act  hereunder  and  thereunder  unless it shall  receive
further  assurances to its  satisfaction  by the Banks of their  indemnification
obligations  under Section 12.5 hereof against any and all liability and expense
which may be incurred by it by reason of taking or  continuing  to take any such
action.

         12.8  Resignation or Removal of  Administrative  Agent.  Subject to the
appointment  and  acceptance  of a  successor  Administrative  Agent as provided
below,  Administrative  Agent may resign at any time by giving notice thereof to
the Banks and the Company,  and Administrative  Agent may be removed at any time
with or  without  cause by the  Majority  Banks.  Upon any such  resignation  or
removal,  the  Majority  Banks  shall  have the  right to  appoint  a  successor
Administrative Agent (subject to the consent of the Company, which consent shall
not be unreasonably withheld), provided deposits with a successor Administrative
Agent  shall be insured by the  Federal  Deposit  Insurance  Corporation  or its
successor. If no successor  Administrative Agent shall have been so appointed by
the Majority Banks and shall have accepted such appointment within 30 days after
the  retiring  Administrative  Agent's  giving of notice of  resignation  or the
Majority Banks' removal of the retiring  Administrative Agent, then the retiring
Administrative   Agent  may,  on  behalf  of  the  Banks,  appoint  a  successor
Administrative Agent (subject to the consent of the Company, which consent shall
not be unreasonably  withheld).  Any successor  Administrative  Agent shall be a
bank which has an office in the United States and a combined capital and surplus
of  at  least  $1,000,000,000.   Upon  the  acceptance  of  any  appointment  as
Administrative  Agent  hereunder  by  a  successor  Administrative  Agent,  such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights,  powers,  privileges  and duties of the retiring  Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and  obligations  hereunder.  A successor  Administrative  Agent shall  promptly
specify by notice to the Company and the Banks its Principal  Office referred to
in Sections 3.1 and 5.1. After any retiring  Administrative  Agent's resignation
or removal hereunder as Administrative  Agent, the provisions of this Section 12
shall  continue  in effect for its  benefit in respect of any  actions  taken or
omitted to be taken by it while it was acting as an Administrative Agent.

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         SECTION 13.       MISCELLANEOUS.

         13.1  Waiver.  No waiver of any Default  shall be a waiver of any other
Default.  No  failure  on the part of any Agent or any Bank to  exercise  and no
delay in exercising,  and no course of dealing with respect to, any right, power
or privilege  under any Loan  Document  shall operate as a waiver  thereof,  nor
shall any single or partial exercise of any right, power or privilege thereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or  privilege.  The remedies  provided in the Loan  Documents  are
cumulative and not exclusive of any remedies provided by law or in equity.

         13.2 Notices. All notices and other communications  provided for herein
(including,  without  limitation,  any  modifications of, or waivers or consents
under,  this  Agreement)  shall be given or made by telex,  telegraph,  telecopy
(confirmed  by mail),  cable,  mail or other  writing and  telexed,  telecopied,
telegraphed,  cabled,  mailed or  delivered  to the  intended  recipient  at the
"Address for Notices"  specified  below its name on the signature  pages hereof;
or, as to any party,  at such other address as shall be designated by such party
in a notice to the Company,  Administrative  Agent given in accordance with this
Section  13.2.  Except  as  otherwise  provided  in  this  Agreement,  all  such
communications  shall be deemed to have been duly received when  transmitted  by
telex or telecopier during regular business hours, delivered to the telegraph or
cable office or personally  delivered or, in the case of a mailed notice,  three
(3) days after deposit in the United States mails,  postage  prepaid,  certified
mail with return receipt requested (or upon actual receipt, if earlier), in each
case given or addressed as aforesaid.

         13.3  Indemnification.  The Company  shall  indemnify  the Agents,  the
Banks,  and each Affiliate  thereof and their  respective  directors,  officers,
employees and agents from, and hold each of them harmless  against,  any and all
losses,  liabilities,  claims or damages to which any of them may become subject
(REGARDLESS  OF WHETHER CAUSED IN WHOLE OR IN PART BY THE SIMPLE (BUT NOT GROSS)
NEGLIGENCE  OF THE PERSON  INDEMNIFIED),  insofar as such  losses,  liabilities,
claims or damages  arise out of or result from any (i) actual or proposed use by
the Company of the  proceeds  of any  extension  of credit  (whether a Loan or a
Letter of  Credit) by any Bank  hereunder,  (ii)  breach by the  Company of this
Agreement or any other Loan Document,  (iii)  violation by the Company or any of
its  Subsidiaries of any Legal  Requirement,  including but not limited to those
relating to Hazardous Substances, (iv) Liens or security interests previously or
hereafter granted on any real or personal property, to the extent resulting from
any Hazardous Substance located in, on or under any such property, (v) ownership
by  the  Banks  or the  Agents  of  any  real  or  personal  property  following
foreclosure, to the extent such losses, liabilities, claims or damages arise out
of or result from any Hazardous Substance located in, on or under such property,
including, without limitation, losses, liabilities,  claims or damages which are
imposed upon Persons under laws relating to or regulating  Hazardous  Substances
solely by virtue of  ownership,  (vi) Bank's or Agent's being deemed an operator
of any  such  real or  personal  property  by a court  or  other  regulatory  or
administrative  agency or tribunal in  circumstances in which neither any of the
Agents  nor any of the Banks is  generally  operating  or  generally  exercising
control over such property,  to the extent such losses,  liabilities,  claims or
damages arise out of or result from any

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Hazardous Substance located in, on or under such property,  (vii) investigation,
litigation  or other  proceeding  (including  any  threatened  investigation  or
proceeding)  relating to any of the foregoing,  and the Company shall  reimburse
each  Agent,  each  Bank,  and  each  Affiliate  thereof  and  their  respective
directors,  officers,  employees  and  agents,  upon  demand,  for any  expenses
(including  legal fees) incurred in connection  with any such  investigation  or
proceeding or (viii) taxes (excluding  income taxes and franchise taxes) payable
or ruled payable by any Governmental  Authority in respect of any Loan Document,
together  with  interest and  penalties,  if any;  provided,  however,  that the
Company  shall  not have any  obligations  pursuant  to this  Section  13.3 with
respect to any losses, liabilities, claims, damages or expenses (a) arising from
or relating solely to events,  conditions or circumstances  which, as to clauses
(iv), (v) or (vi) above, first came into existence or which first occurred after
the  date  on  which  the  Company  or any of its  Subsidiaries  conveyed  to an
unrelated  third  party  all of the  Company's  or the  applicable  Subsidiary's
rights,  titles  and  interests  to the  applicable  real or  personal  property
(whether  by  deed,  deed-in-lieu,   foreclosure  or  otherwise)  other  than  a
conveyance  made in violation of any Loan  Document,  (b) incurred by the Person
seeking  indemnification by reason of the gross negligence or willful misconduct
of  such  Person,  or (c)  asserted  by  one  or  more  indemnified  parties  or
stockholders  thereof against one or more  indemnified  parties.  If the Company
ever disputes a good faith claim for indemnification  under this Section 13.3 on
the basis of the proviso set forth in the preceding sentence, the full amount of
indemnification  provided  for  shall  nonetheless  be  paid,  subject  to later
adjustment  or  reimbursement  at such  time (if  any) as a court  of  competent
jurisdiction  enters  a  final  judgment  as to the  applicability  of any  such
exceptions or an agreement is reached with respect thereto.

         13.4  Amendments,  Etc. No amendment or waiver of any provision of this
Agreement or any other Loan  Document,  nor any consent to any  departure by the
Company  therefrom,  shall in any event be  effective  unless  the same shall be
agreed or  consented to by the  Majority  Banks and the  Company,  and each such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given; provided, that no amendment, waiver or consent
shall, unless in writing and signed by each Bank affected thereby, do any of the
following:  (a) increase the Commitment of such Bank (it being  understood  that
the waiver of any reduction in the Commitments or any mandatory  repayment other
than  (x)  the  repayment  of all  Loans  at the  end  of the  Revolving  Credit
Availability Period and (y) the mandatory reductions of the Commitments provided
for in Section 2.3(a) and (z) the mandatory prepayments required by the terms of
Section  3.2(b),  shall not be deemed to be an  increase in any  Commitment)  or
subject the Banks to any additional obligation;  (b) reduce the principal of, or
interest on, any Loan,  Reimbursement  Obligation or fee hereunder; (c) postpone
any  scheduled  date fixed for any payment or mandatory  prepayment of principal
of, or interest on, any Loan, Reimbursement  Obligation,  fee or other sum to be
paid  hereunder;  (d) change the percentage of any of the  Commitments or of the
aggregate  unpaid  principal  amount of any of the  Loans  and  Letter of Credit
Liabilities,  or the number of Banks,  which shall be required  for the Banks or
any of them to take any action under this  Agreement;  (e) change any  provision
contained in Sections 2.2(c), 9.7 or 13.3 hereof or this Section 13.4 or Section
6.7 hereof,  or (f) release all or  substantially  all of any  security  for the
obligations of the Company under this Agreement or all or  substantially  all of
the personal liability of any obligor created under any of the Loan Documents.

Anything in this Section 13.4 to the contrary, no

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<PAGE>

amendment,  waiver or consent  shall be made with  respect to Section 12 without
the consent of Administrative Agent.

         13.5       Successors and Assigns.

         (a) This  Agreement  shall be binding  upon and inure to the benefit of
the  Company,  the  Agents  and the Banks and their  respective  successors  and
assigns. The Company may not assign or transfer any of its rights or obligations
hereunder  without the prior written consent of all of the Banks.  Each Bank may
sell  participations  to any  Person  in all or part of any  Loan or  Letter  of
Credit, or all or part of its Commitments,  in which event, without limiting the
foregoing,  the  provisions  of  Section 6 shall  inure to the  benefit  of each
purchaser  of a  participation  and the  pro  rata  treatment  of  payments,  as
described in Section 5.2,  shall be determined as if such Bank had not sold such
participation.  In the event any Bank  shall sell any  participation,  such Bank
shall retain the sole right and responsibility to enforce the obligations of the
Company  relating  to  the  Loans  or  Letters  of  Credit,  including,  without
limitation,  the right to approve any amendment,  modification  or waiver of any
provision of this Agreement other than amendments, modifications or waivers with
respect to (i) any fees  payable  hereunder  to the Banks and (ii) the amount of
principal  or the rate of  interest  payable  on,  or the  dates  fixed  for the
scheduled repayment of principal of, the Loans.

         (b) Each Bank may assign to one or more  Banks or any other  Person all
or a portion of its  interests,  rights and  obligations  under this  Agreement,
provided,  however,  that (i) other than in the case of an assignment to another
Bank that is, at the time of such assignment,  a party hereto or an Affiliate of
such Bank, the Company must give its prior written  consent,  which consent will
not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or
Loans or Letters of Credit of the assigning Bank subject to each such assignment
(determined as of the date the Assignment and Acceptance (as defined below) with
respect to such  assignment  is delivered to  Administrative  Agent) shall in no
event be less than $10,000,000 (or $5,000,000 in the case of an assignment to an
Affiliate of a Bank or between Banks) unless either (A) if Bank's  Commitment is
less than $10,000,000 or $5,000,000, as applicable,  such amount is equal to all
of such Bank's  Commitment  under this  Agreement or (B) each of the Company and
the Administrative Agent otherwise consent, (iii) notwithstanding any other term
or  provision  of this  Agreement,  unless  the  Company  shall  have  otherwise
consented in writing (such consent not to be unreasonably  withheld),  each such
assignment  shall be pro rata with  respect to the Loans,  the Letters of Credit
and the Commitment of the assignor, and (iv) the parties to each such assignment
shall  execute and  deliver to  Administrative  Agent,  for its  acceptance  and
recording in the Register (as defined  below),  an Assignment  and Acceptance in
the form of Exhibit E hereto (each an "Assignment and  Acceptance")  with blanks
appropriately  completed,  together  with  any  note or  notes  subject  to such
assignment and a processing and  recordation  fee of $2,500 paid by the assignee
(for which the Company shall have no liability). Upon such execution,  delivery,
acceptance  and  recording,  from and after the effective date specified in each
Assignment and Acceptance,  which effective date shall be at least five Business
Days after the execution thereof,  (A) the assignee  thereunder shall be a party
hereto and, to the extent provided in such  Assignment and Acceptance,  have the
rights and obligations of a Bank hereunder and (B) the Bank thereunder shall, to
the extent provided in such Assignment and

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<PAGE>

Acceptance,   be   released   from  its   obligations   under  this   Agreement.
Notwithstanding  anything contained in this Agreement to the contrary,  any Bank
may at any time assign all or any portion of its rights under this Agreement and
the notes issued to it as collateral to a Federal Reserve Bank;  provided,  that
no such assignment  shall release the assigning Bank from any of its obligations
hereunder.

         (c) By executing and delivering an Assignment and Acceptance,  the Bank
assignor  thereunder and the assignee  thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty  that it is the legal and  beneficial  owner of the interest  being
assigned  thereby free and clear of any adverse claim,  such Bank assignor makes
no representation or warranty and assumes no responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement  or  any of the  other  Loan  Documents  or the  execution,  legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan  Documents or any other  instrument or document  furnished
pursuant  thereto;  (ii) such Bank assignor makes no  representation or warranty
and assumes no  responsibility  with respect to the  financial  condition of the
Company  or  the  performance  or  observance  by  the  Company  of  any  of its
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished  pursuant hereto;  (iii) such assignee confirms
that it has  received  a copy of this  Agreement,  together  with  copies of the
financial  statements  referred to in Section 8.6 and such other  documents  and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into such Assignment and Acceptance;  (iv) such assignee will,
independently  and without  reliance  upon any Agent,  such Bank assignor or any
other  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 this  Agreement and the other Loan  Documents;  (v) such
assignee  appoints and authorizes each Agent to take such action as agent on its
behalf and to  exercise  such  powers  under this  Agreement  and the other Loan
Documents as are delegated to such Agent by the terms hereof, together with such
powers as are reasonably  incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all obligations that by the terms
of this  Agreement and the other Loan  Documents are required to be performed by
it as a Bank.

         (d)  Administrative  Agent shall  maintain at its office a copy of each
Assignment and Acceptance  delivered to it and a register for the recordation of
the names and  addresses  of the Banks and the  Commitments  of,  and  principal
amount of the Loans owing to, each Bank from time to time (the "Register").  The
entries in the Register shall be conclusive,  in the absence of manifest  error,
and the  Company,  the Agents  and the Banks may treat  each  person the name of
which is recorded in the Register as a Bank  hereunder  for all purposes of this
Agreement  and the other Loan  Documents.  The Register  shall be available  for
inspection  by the Company or any Bank at any  reasonable  time and from time to
time upon reasonable prior notice.

         (e) Upon its receipt of an  Assignment  and  Acceptance  executed by an
assigning  Bank  and the  assignee  thereunder  together  with any note or notes
subject to such assignment,  the written consent to such assignment  executed by
the Company and the fee payable in respect thereto,

                                                        71

<PAGE>

Administrative Agent shall, if such Assignment and Acceptance has been completed
with blanks  appropriately  filled,  (i) accept such  Assignment and Acceptance,
(ii) record the  information  contained  therein in the  Register and (iii) give
prompt notice thereof to the Company.  If  applicable,  within five (5) Business
Days after receipt of notice, the Company, at its own expense, shall execute and
deliver to Administrative  Agent in exchange for the surrendered notes new notes
to the order of such assignee in an amount equal to the Commitments and/or Loans
or Letters of Credit  assumed by it pursuant to such  Assignment  and Acceptance
and, if the assigning Bank has retained Commitments and/or Loans hereunder,  new
notes to the order of the  assigning  Bank in an amount equal to the  Commitment
and/or Loans  retained by it hereunder.  Such new notes shall be in an aggregate
principal  amount equal to the aggregate  principal  amount of such  surrendered
notes,  shall be dated the effective date of such  Assignment and Acceptance and
shall otherwise be in substantially the form of the respective note. Thereafter,
such surrendered  notes, if any, shall be marked renewed and substituted and the
originals  delivered to the Company  (with  copies,  certified by the Company as
true, correct and complete, to be retained by Administrative Agent).

         (f) Any Bank may, in connection with any assignment or participation or
proposed assignment or participation  pursuant to this Section 13.5, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Company  furnished  to such Bank by or on behalf of the Company;
provided,  however,  that, prior to any such disclosure,  the Company shall have
consented thereto,  which consent shall not be unreasonably  withheld,  and each
such assignee or participant, or proposed assignee or participant, shall execute
an agreement  whereby such assignee or  participant  shall agree to preserve the
confidentiality  of any Confidential  Information  (defined in Section 13.14) on
terms substantially the same as those provided in Section 13.14.

         (g) The  Company  will  have  the  right  to  consent  to any  material
intercreditor  arrangements  in connection with an assignment by any Bank of any
interest,  right or obligation  under this Agreement  which is not pro rata with
respect to the Loans,  the Letters of Credit and the  Commitment of the assignor
and the  Company  may deny its consent to any such  arrangements  which,  in the
reasonable  judgement of the Company,  would  adversely  affect the Company in a
material respect.

         (h) The  provisions of this Section  shall not apply to the  assignment
and pledge of a Bank's rights hereunder or under any note to any Federal Reserve
Bank for collateral  purposes pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any Operating  Circular issued by such Federal
Reserve Bank;  provided that such  assignment  and pledge shall not relieve such
Bank of any of its obligations hereunder.

         13.6  Limitation  of Interest.  The  Company,  the Agents and the Banks
intend to strictly comply with all applicable laws,  including  applicable usury
laws. Accordingly,  the provisions of this Section 13.6 shall govern and control
over every other  provision of this  Agreement or any other Loan Document  which
conflicts or is inconsistent with this Section,  even if such provision declares
that it controls.  As used in this  Section,  the term  "interest"  includes the
aggregate of all charges,

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<PAGE>

fees,  benefits or other compensation which constitute interest under applicable
law,  provided that, to the maximum extent  permitted by applicable law, (a) any
non-principal  payment shall be  characterized  as an expense or as compensation
for something  other than the use,  forbearance or detention of money and not as
interest, and (b) all interest at any time contracted for, reserved,  charged or
received  shall be amortized,  prorated,  allocated  and spread,  in equal parts
during the full term of the  Obligations.  In no event  shall the Company or any
other  Person be  obligated  to pay, or any Bank have any right or  privilege to
reserve,  receive or retain, (a) any interest in excess of the maximum amount of
nonusurious  interest  permitted  under  the  laws of the  State of Texas or the
applicable laws (if any) of the United States or of any other applicable  state,
or (b) total  interest  in excess of the amount  which such Bank could  lawfully
have contracted for,  reserved,  received,  retained or charged had the interest
been calculated for the full term of the Obligations at the Highest Lawful Rate.
On each day, if any, that the interest rate (the "Stated Rate") called for under
this  Agreement or any other Loan Document  exceeds the Highest Lawful Rate, the
rate at which interest shall accrue shall automatically be fixed by operation of
this sentence at the Highest Lawful Rate for that day, and shall remain fixed at
the  Highest  Lawful  Rate for each day  thereafter  until the  total  amount of
interest accrued equals the total amount of interest which would have accrued if
there were no such  ceiling  rate as is imposed  by this  sentence.  Thereafter,
interest  shall accrue at the Stated Rate unless and until the Stated Rate again
exceeds the Highest Lawful Rate when the provisions of the immediately preceding
sentence shall again  automatically  operate to limit the interest accrual rate.
The daily  interest  rates to be used in  calculating  interest  at the  Highest
Lawful Rate shall be determined by dividing the  applicable  Highest Lawful Rate
per annum by the number of days in the calendar year for which such  calculation
is being made.  None of the terms and provisions  contained in this Agreement or
in any other Loan Document which directly or indirectly relate to interest shall
ever be construed  without  reference to this Section  13.6,  or be construed to
create a contract to pay for the use,  forbearance  or  detention of money at an
interest  rate  in  excess  of the  Highest  Lawful  Rate.  If the  term  of any
Obligation is shortened by reason of acceleration of maturity as a result of any
Default  or by any  other  cause,  or by  reason of any  required  or  permitted
prepayment,  and if for  that  (or any  other)  reason  any  Bank  at any  time,
including but not limited to, the stated  maturity,  is owed or receives (and/or
has received)  interest in excess of interest  calculated at the Highest  Lawful
Rate,  then  and in any such  event  all of any such  excess  interest  shall be
canceled automatically as of the date of such acceleration,  prepayment or other
event which produces the excess,  and, if such excess  interest has been paid to
such Bank, it shall be credited pro tanto against the then-outstanding principal
balance of the Company's  obligations to such Bank,  effective as of the date or
dates when the event occurs which  causes it to be excess  interest,  until such
excess is exhausted or all of such  principal has been fully paid and satisfied,
whichever  occurs  first,  and any  remaining  balance of such  excess  shall be
promptly  refunded to its payor.  Chapter 346 of the Texas  Finance  Code (which
regulates certain revolving credit accounts (formerly Tex. Rev. Civ. Stat. Ann.

Art. 5069, Ch. 15)) shall not apply to this Agreement.

         13.7 Survival. The obligations of the Company under Sections 2.2(c), 6,
9.7 and 13.3 hereof and the  obligations  of the Banks under Section 13.6 hereof
shall survive the repayment of the Loans and  Reimbursement  Obligations and the
termination of the Commitments and the Letters of Credit.

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<PAGE>

         13.8  Captions.  Captions  and section  headings  appearing  herein are
included  solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

         13.9  Counterparts.  This  Agreement  may be  executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
agreement  and any of the parties  hereto may execute this  Agreement by signing
any such counterpart.

         13.10 GOVERNING LAW; FORUM  SELECTION;  CONSENT TO  JURISDICTION.  THIS
AGREEMENT  AND  (EXCEPT  AS  THEREIN  PROVIDED)  THE OTHER  LOAN  DOCUMENTS  ARE
PERFORMABLE IN HARRIS COUNTY,  TEXAS, WHICH SHALL BE A PROPER PLACE OF VENUE FOR
SUIT ON OR IN RESPECT  THEREOF.  THE COMPANY  IRREVOCABLY  AGREES THAT ANY LEGAL
PROCEEDING  IN RESPECT OF THIS  AGREEMENT OR THE OTHER LOAN  DOCUMENTS  SHALL BE
BROUGHT IN THE  DISTRICT  COURTS OF HARRIS  COUNTY,  TEXAS OR THE UNITED  STATES
DISTRICT   COURT  FOR  THE  SOUTHERN   DISTRICT  OF  TEXAS,   HOUSTON   DIVISION
(COLLECTIVELY,  THE "SPECIFIED COURTS").  THE COMPANY HEREBY IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
TEXAS. THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION  WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUIT,  ACTION OR PROCEEDING  ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT
BROUGHT IN ANY SPECIFIED COURT, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIMS
THAT ANY SUCH  SUIT,  ACTION OR  PROCEEDING  BROUGHT  IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN  INCONVENIENT  FORUM.  THE COMPANY FURTHER (1) AGREES TO DESIGNATE
AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN THE CITY OF HOUSTON,  TEXAS,  IN
CONNECTION  WITH  ANY  SUCH  SUIT,  ACTION  OR  PROCEEDING  AND  TO  DELIVER  TO
ADMINISTRATIVE  AGENT  EVIDENCE  THEREOF  AND (2)  IRREVOCABLY  CONSENTS  TO THE
SERVICE OF  PROCESS  OUT OF ANY OF THE  AFOREMENTIONED  COURTS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL,  RETURN
RECEIPT REQUESTED, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS AS PROVIDED IN
THIS  AGREEMENT  OR AS  OTHERWISE  PROVIDED BY TEXAS LAW.  NOTHING  HEREIN SHALL
AFFECT  THE  RIGHT OF ANY AGENT OR ANY BANK TO  COMMENCE  LEGAL  PROCEEDINGS  OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY JURISDICTION OR TO SERVE PROCESS IN
ANY MANNER PERMITTED BY APPLICABLE LAW. THE COMPANY AGREES THAT A FINAL JUDGMENT
IN ANY SUCH  ACTION OR  PROCEEDING  SHALL BE  CONCLUSIVE  AND MAY BE ENFORCED IN
OTHER  JURISDICTIONS  BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. THIS  AGREEMENT AND (EXCEPT AS THEREIN  PROVIDED) THE OTHER LOAN  DOCUMENTS
SHALL BE GOVERNED

                                                        74

<PAGE>

BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER THAN THE CONFLICT
OF LAWS RULES) OF THE STATE OF TEXAS AND THE UNITED  STATES OF AMERICA FROM TIME
TO TIME IN EFFECT.

         13.11 WAIVER OF JURY TRIAL;  PUNITIVE DAMAGES. THE COMPANY,  EACH AGENT
AND  EACH  BANK  HEREBY  (I)  IRREVOCABLY  WAIVES,  TO THE  MAXIMUM  EXTENT  NOT
PROHIBITED  BY LAW,  ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN  RESPECT OF ANY
LITIGATION  DIRECTLY  OR  INDIRECTLY  AT ANY TIME  ARISING  OUT OF,  UNDER OR IN
CONNECTION  WITH THE LOAN DOCUMENTS OR ANY TRANSACTION  CONTEMPLATED  THEREBY OR
ASSOCIATED THEREWITH,  BEFORE OR AFTER MATURITY; (II) IRREVOCABLY WAIVES, TO THE
MAXIMUM  EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY EXEMPLARY,  PUNITIVE OR CONSEQUENTIAL  DAMAGES; (III)
CERTIFIES  THAT NO PARTY HERETO NOR ANY  REPRESENTATIVE  OR AGENT OR COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,  OR IMPLIED THAT SUCH
PARTY  WOULD NOT,  IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE  FOREGOING
WAIVERS;  AND (IV)  ACKNOWLEDGES  THAT IT HAS BEEN  INDUCED  TO ENTER  INTO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS  CONTAINED
IN THIS SECTION.

         13.12  Severability.  Whenever  possible,  each  provision  of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid,  illegal
or unenforceable in any respect under any applicable law, the validity, legality
and  enforceability of the remaining  provisions of such Loan Document shall not
be affected or impaired thereby.

         13.13  Chapter 15 Not  Applicable.  Chapter  15,  Subtitle 3, Title 79,
Revised  Civil  Statutes of Texas,  1925,  as  amended,  shall not apply to this
Agreement  or to any Loan or Letter of Credit,  nor shall this  Agreement or any
Loan or Letter of Credit be governed by or be subject to the  provisions of such
Chapter 15 in any manner whatsoever.

         13.14  Confidential  Information.    Each  Agent  and  each  Bank  
separately agrees that:

         (a) As used herein, the term  "Confidential  Information" means written
information about the Company or the transactions  contemplated herein furnished
by the Company to the Agents and/or the Banks which is  specifically  designated
as confidential by the Company;  Confidential  Information,  however,  shall not
include  information  which (i) was publicly  known or  available,  or otherwise
available on a  non-confidential  basis to any Bank,  at the time of  disclosure
from a source other than the Company,  (ii) subsequently  becomes publicly known
through no act or omission by such Bank, (iii) otherwise  becomes available on a
non-confidential basis to any Bank other than

                                                        75

<PAGE>

through disclosure by the Company or (iv) has been in the possession of any Bank
for a period  of more  than two years  from the date on which  such  information
originally  was furnished to such Bank by the Company,  unless the Company shall
have  requested  the Agents and the Banks in writing,  at least 30 days prior to
the end of  such  two-year  period,  to  maintain  the  confidentiality  of such
information  for  another two (2) year  period (or for  successive  two (2) year
periods);  provided that the Company shall not unreasonably withhold its consent
to a request made after the initial two (2) year period to eliminate information
from "Confidential Information".

         (b) Each  Agent  and each Bank  agrees  that it will  take  normal  and
reasonable  precautions  to maintain  the  confidentiality  of any  Confidential
Information  furnished to such Person;  provided,  however, that such Person may
disclose  Confidential  Information (i) upon the Company's consent;  (ii) to its
auditors; (iii) when required by any Legal Requirement;  (iv) as may be required
or  appropriate  in  any  report,   statement  or  testimony  submitted  to  any
Governmental  Authority having or claiming to have  jurisdiction over it; (v) to
such  Person's  and  its  Subsidiaries'  or  Affiliates'  officers,   directors,
employees,  agents,  representatives and professional  consultants in connection
with this Agreement or administration  of the Loans and Letters of Credit;  (vi)
as may be  required  or  appropriate,  should such Bank elect to assign or grant
participations  in any of the Obligations in connection with (1) the enforcement
of the Obligations to any such Person under any of the Loan Documents or related
agreements,  or (2) any  potential  transfer  pursuant to this  Agreement of any
Obligation  owned  by any  Bank  (provided  any  potential  transferee  has been
approved by the Company if required by this Agreement,  which approval shall not
be unreasonably withheld, and has agreed in writing to be bound by substantially
the  same  provisions  regarding  Confidential  Information  contained  in  this
Section);  (vii) as may be required or appropriate in response to any summons or
subpoena or in  connection  with any  litigation or  administrative  proceeding;
(viii) to any other Bank; (ix) to the extent  reasonably  required in connection
with the exercise of any remedy hereunder or under the other Loan Documents;  or
(x) to correct  any false or  misleading  information  which may  become  public
concerning such Person's relationship to the Company.

         13.15 Tax Forms. With respect to each Bank which is organized under the
laws of a  jurisdiction  outside  the United  States,  on the day of the initial
borrowing hereunder and from time to time thereafter if requested by the Company
or Administrative  Agent, such Bank shall provide  Administrative  Agent and the
Company 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  or  other  documents  satisfactory  to  the  Company  and
Administrative  Agent  indicating  that  all  payments  to be made to such  Bank
hereunder are subject to such tax at a rate reduced by an applicable tax treaty.
Unless the Company and  Administrative  Agent shall have  received such forms or
such  documents  indicating  that  payments  hereunder are not subject to United
States  withholding  tax or are  subject  to such  tax at a rate  reduced  by an
applicable tax treaty, the Company or Administrative  Agent shall withhold taxes
from such payments at the  applicable  statutory rate in the case of payments to
or for any Bank organized  under the laws of a  jurisdiction  outside the United
States.

                                                        76

<PAGE>

         13.16  Entire Agreement.  THIS WRITTEN 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.

                      [SIGNATURES BEGIN ON FOLLOWING PAGE]

                                                        77

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.

                     OCEAN ENERGY, INC., a Texas corporation

                                       By:

                                         Name:  Stephen A. Thorington

                     Title: Senior Vice President - Finance,

                                                Treasury & Corporate Development

                                         Address for Notices:

                                         1001 Fannin, Suite 1700

                                         Houston, Texas  77002

                        Attention: Stephen A. Thorington
                              Phone: (713) 951-1319
                               Fax: (713) 951-4846

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 1

<PAGE>

                                       CHASE BANK OF TEXAS, NATIONAL

                                       ASSOCIATION, as a Bank and as

                                       Administrative Agent

                                       By:
                                      Name:

                                       Title:

                                       Address for Notices:

                                       1 Chase Manhattan Plaza, 8th Floor
                                       New York, New York 10081

                                       Attention:  Ms. Debbie Rockower

                                       Phone:     (212) 552-7446
                                       Fax:       (212) 552-5700

                                       with a copy to:

                    Chase Bank of Texas, National Association

                                       712 Main Street
                                       Houston, Texas  77002

                                       Attention:      Manager, Energy Division

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 2

<PAGE>

                          THE CHASE MANHATTAN BANK, as

                          Auction Administrative Agent

                                              By:                               
                                              Name:

                                              Title:

                                              Address for Notices:

                                              1 Chase Manhattan Plaza, 8th Floor

                            New York, New York 10081

                                              Attention:     Ms. Debbie Rockower

                                              Phone:         (212) 552-7446
                                              Fax:           (212) 552-5700

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 3

<PAGE>

                         BANK OF AMERICA NATIONAL TRUST

                                              AND SAVINGS ASSOCIATION, as a Bank

                            and as Syndication Agent

                                              By:                               
                                              Name:

                                              Title:

                                              Address for Notices:

                                              Attention:                        
                                              Phone:                            
                                              Fax:                              
                                              with further notice to:

                                              Phone:                            
                                              Fax:                              

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 4

<PAGE>

                     BANK ONE, TEXAS, N.A., as a Bank and as

                                         Documentation Agent

                                       By:

                                         Name:    Christine M. Macan
                                         Title:   Vice President

                                         Address for Notices:

                                         910 Travis, TX2-4330
                                         Houston, Texas 77002
                                         Attention:        Jo Linda Papadakis
                                         Phone:            (713) 751-6235
                                         Fax:              (713) 751-7894

                                         with further notice to:

                                         910 Travis, TX2-4330
                                         Houston, Texas 77002
                                         Attention:        Christine M. Macan
                                         Phone:            (713) 751-3484
                                         Fax:              (713) 751-3544

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 5

<PAGE>

                           SOCIETE GENERALE, SOUTHWEST

                                             AGENCY, as a Bank and as a Managing

                                             Agent

                                             By:                                
                                             Name:    Richard Erbert
                                             Title:   Vice President

                          Lending Office for all Loans:

                          2001 Ross Avenue, Suite 4800
                               Dallas, Texas 75201

                                             Address for Notices:

                          2001 Ross Avenue, Suite 4800
                               Dallas, Texas 75201
                         Attention: Loan Administration
                              Phone: (214) 754-0171
                               Fax: (214) 979-2792

                                             with further notice to:

                                             Societe Generale
                                             1111 Bagby, Suite 2020
                                             Houston, Texas 77002
                                             Attention:   Richard Erbert
                                             Phone:       (713) 650-0824
                                             Fax:         (713) 759-6318

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 6

<PAGE>

                      BANK OF MONTREAL, as a Bank and as a

                                            Managing Agent

                                       By:

                                            Name:    Melissa Bauman
                                            Title:   Director

                                            Address for Notices:

                           115 S. LaSalle, 11th Floor
                             Chicago, Illinois 60603
                            Attention: Craig Reynolds
                              Phone: (312) 750-6047
                               Fax: (312) 750-6061

                                            with further notice to:

                                            Melissa Bauman
                                            700 Louisiana, Suite 4400
                                            Houston, Texas 77002
                                            Phone:        (713) 546-9723
                                            Fax:          (713) 223-4007

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 7

<PAGE>

                     BANKBOSTON, N.A., as a Bank and as Co-

                                          Agent

                                       By:

                                          Name:    Terrence Ronan
                                          Title:   Director

                                          Address for Notices:

                                          100 Federal Street
                                          Boston, MA 02110
                                          Attention:        Terrence Ronan
                                          Phone:   (617) 434-5472
                                          Fax:              (617) 434-3652

                                          with further notice to:

                                          100 Federal Street
                                          Boston, MA 02110
                                          Attention:        Fidel Vasquez

                                                            Loan Officer
                                          Phone:   (617) 434-1906
                                          Fax:              (617) 434-3652

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 8

<PAGE>

                           ABN AMRO BANK N.A., HOUSTON

                        AGENCY, as a Bank and as Co-Agent

                                       By:
                                      Name:

                                            Title:

                                       By:
                                      Name:

                                            Title:

                                            Address for Notices:

                                            3 Riverway, Suite 1700
                                            Houston, Texas 77056
                                            Attention:  Jamie A. Conn
                                            Phone:      (713) 964-3356
                                            Fax:           (713) 961-1699

                                            with further notice to:

                      208 South LaSalle Street, Suite 1500
                             Chicago, IL 60604-1003
                          Attention: Karen MacAllister
                              Phone: (312) 992-5123
                               Fax: (312) 992-5111

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 9

<PAGE>

                                                CREDIT SUISSE FIRST BOSTON, as a

                              Bank and as Co-Agent

                                                By:                             
                                                Name:    Douglas E. Maher
                                                Title:   Vice President

                              Address for Notices:

                                                11 Madison Avenue, 20th Floor
                                                New York, New York 10010-3629
                                                Attention:    Douglas E. Maher
                                                Phone:        (212) 325-3641
                                                Fax:          (212) 325-8615

                             with further notice to:

                                                600 Travis Street, 30th Floor

                              Houston, Texas 77002

                                                Attention:    R. Scott Brown
                                                Phone:        (713) 220-6774
                                                Fax:          (713) 237-0325

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 10

<PAGE>

                            WELLS FARGO BANK (TEXAS),
                         NATIONAL ASSOCIATION, as a Bank

                                                 By:                            
                                                 Name:    J. Alan Alexander
                                                 Title:   Vice President

                              Address for Notices:

                                                 Wells Fargo Bank, N.A.
                                                 201 Third Street, 8th Floor
                                                 San Francisco, CA 94103
                                                 Attention:  Oscar Enriquez
                                                 Phone:      (415) 477-5425
                                                 Fax:        (415) 979-0675

                             with further notice to:

                                                 Wells Fargo Bank (Texas), N.A.
                                                 Energy Dept.
                                                 1000 Louisiana, 3rd Floor
                                                 Houston, Texas 77002
                                                 Attention:  J. Alan Alexander
                                                 Phone:      (713) 319-1368
                                                 Fax:        (713) 739-1087

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 11

<PAGE>

                                                  CREDIT LYONNAIS, NEW YORK

                                BRANCH, as a Bank

                                                  By:                           
                                                  Name:    Phillipe Soustra
                                                  Title:   Senior Vice President

                              Address for Notices:

                                                  Credit Lyonnais
                                                  1000 Louisiana, Suite 5360
                                                  Houston, Texas 77002
                                                  Attention:   Jeff Baker
                                                  Phone:       (713) 753-8711
                                                  Fax:         (713) 751-0307

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 12

<PAGE>

                       THE BANK OF NOVA SCOTIA, as a Bank

                                           and as Co-Agent

                                       By:
                                      Name:

                                           Title:

                                           Address for Notices:

                      600 Peachtree Street N.E., Suite 2700
                                Atlanta, GA 30308
                            Attention: Phyllis Walker
                              Phone: (404) 877-1552
                               Fax: (404) 888-8998

                                           with further notice to:

                                           1100 Louisiana, Suite 3000
                                           Houston, Texas 77002
                                           Attention:   Mark Ammerman
                                           Phone:       (713) 759-3442
                                           Fax:         (713) 759-2425

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 13

<PAGE>

                        SOUTHWEST BANK OF TEXAS, N.A., as

                                          a Bank

                                       By:

                                          Name:    A. Stephen Kennedy
                                          Title:   Vice President/Manager Energy

                                          Lending

                                          Address for Notices:

                                          4400 Post Oak Parkway
                                          Houston, Texas 77027
                                          Attention: Ann Greer
                                          Phone:    (713) 235-8881 ext 1792
                                          Fax:      (713) 439-5954

                                          with further notice to:

                                          4400 Post Oak Parkway
                                          Houston, Texas 77027
                                          Attention: A. Stephen Kennedy
                                          Phone:    (713) 235-8881 ext 1707
                                          Fax:      (713) 439-5925

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 14

<PAGE>

                          THE BANK OF TOKYO-MITSUBISHI,
                                 LTD., as a Bank

                                               By:                              
                                               Name:

                                               Title:

                              Address for Notices:

                                               1100 Louisiana Street, Suite 2800

                            Houston, Texas 77002-5216

                            Attention: J. M. McIntyre
                              Phone: (713) 655-3845
                               Fax: (713) 655-3855

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 15

<PAGE>

                       THE BANK OF NEW YORK, as a Bank and

                                            as Co-Agent

                                       By:

                                            Name:    John N. Watt
                                            Title:   Vice President

                                            Address for Notices:

                           One Wall Street, 19th Floor
                            New York, New York 10286
                             Attention: Terry Foran
                              Phone: (212) 635-7921
                               Fax: (212) 635-7923

                                            with further notice to:

                           One Wall Street, 19th Floor
                            New York, New York 10286
                             Attention: Peter Keller
                              Phone: (212) 635-7861
                               Fax: (212) 635-7923

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 16

<PAGE>

                                             MORGAN GUARANTY TRUST

                       COMPANY OF NEW YORK, as a Bank and

                                             as Co-Agent

                                             By:                                
                                             Name:    Kevin McCann
                                             Title:   Vice President

                                             Address for Notices:

                            60 Wall Street, 5th Floor

                            New York, New York 10260

                                             Attention:   John Kowalczuk
                                             Phone:       (212) 648-0381
                                             Fax:         (212) 648-5416

                                             with further notice to:

                            60 Wall Street, 5th Floor

                            New York, New York 10260

                                             Attention:   Philip McNeal
                                             Phone:       (212) 648-0309
                                             Fax:         (212) 648-5416

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 17

<PAGE>

                                                THE FUJI BANK LIMITED, NEW YORK
                                                BRANCH, as a Bank

                                                By:                             
                                                Name:

                                                Title:

                              Address for Notices:

                                                2 World Trade Center, 79th Floor

                            New York, New York 10048

                            Attention: Ricky Simmons
                              Phone: (212) 898-2066
                               Fax: (212) 321-9407

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 18

<PAGE>

                                              THE SANWA BANK, LIMITED, as a Bank

                                              By:                               
                                              Name:

                                              Title:

                                              Address for Notices:

                          1200 Smith Street, Suite 2670
                              Houston, Texas 77002
                            Attention: Clyde Redford
                              Phone: (713) 652-3190
                               Fax: (713) 654-1462

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 19

<PAGE>

                               GUARANTY AGREEMENT

                          (Revolving Credit Agreement)

         THIS GUARANTY  AGREEMENT dated as of March 30, 1999 is by OCEAN ENERGY,
INC., a corporation  duly  organized and validly  existing under the laws of the
state  of  Louisiana  (the  "Guarantor"),  in  favor  of each  of the  financial
institutions  that is now or  hereafter  a party  to the  Credit  Agreement  (as
defined  below)  as a "Bank"  (individually,  a "Bank"  and,  collectively,  the
"Banks"); CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as administrative agent for
the  Banks (in such  capacity,  the  "Administrative  Agent"),  BANK OF  AMERICA
NATIONAL TRUST AND SAVINGS  ASSOCIATION,  as syndication agent for the Banks (in
such capacity, the "Syndication Agent"), BANK ONE, TEXAS, N.A., as documentation
agent for the Banks  (in such  capacity,  the  "Documentation  Agent"),  SOCIETE
GENERALE,  SOUTHWEST  AGENCY and BANK OF  MONTREAL,  as managing  agents for the
Banks (in such capacity,  the "Managing Agents"),  and THE CHASE MANHATTAN BANK,
as auction  administrative  agent for the Banks (in such capacity,  the "Auction
Administrative Agent").

                                    Recitals

         A.  Ocean  Energy,  Inc.,  a Texas  corporation  (the  "Company"),  the
Administrative  Agent,  the Syndication  Agent,  the  Documentation  Agent,  the
Managing Agents and the Auction Administrative Agent (collectively the "Agents")
and the Banks have executed that certain Revolving Credit Agreement of even date
herewith (such credit agreement, as amended, the "Credit Agreement").

         B. One of the terms and conditions  stated in the Credit  Agreement for
the making of the Loans,  the  issuance of Letters of Credit and  extensions  of
credit  described in the Credit  Agreement is the  execution and delivery to the
Agents and the Banks of this Guaranty Agreement.

         D. NOW, THEREFORE, (i) in order to comply with the terms and conditions
of the  Credit  Agreement,  (ii) to induce  the Banks to enter  into the  Credit
Agreement, and (iii) for other good and valuable consideration,  the receipt and
sufficiency  of which is hereby  acknowledged,  the  Guarantor  hereby agrees as
follows:

                                    Article I

                       Definitions and Accounting Matters

         Section  1.1  Terms  Defined  in  Recitals.  As used  in this  Guaranty
Agreement,  the terms defined in the Recitals shall have the meanings  indicated
in the Recitals.

         Section 1.2 Certain  Definitions.  As used in this Guaranty  Agreement,
including the Recitals,  the following terms shall have the following  meanings,
unless the context otherwise requires:

         "Guarantor Claims" shall have the meaning indicated in Section 4.1.

                                                         1

<PAGE>

         "Guaranty  Agreement" shall mean this Guaranty  Agreement,  as the same
may  from  time  to time be  amended,  amended  and  restated,  supplemented  or
otherwise modified.

         "Loan Document" shall mean "Loan Document" as defined in the Credit 
Agreement.

         "Material  Adverse Effect" shall mean a material  adverse effect on the
business,   condition   (financial  or  otherwise),   operations  or  properties
(including  proven oil and gas reserves) of the Guarantor and its  Subsidiaries,
taken as a whole,  or on the ability of the  Guarantor  to perform its  material
obligations under the Loan Documents to which it is a party taken as a whole.

         "Obligations" shall mean (a) the payment and performance of all present
and future  "Obligations"  (as  defined in the Credit  Agreement)  and any other
obligations and liabilities of the Company to the Agents and the Banks under the
Credit  Agreement,  including  but not  limited  to,  (i) the full and  punctual
payment of the Loans and any and all promissory  notes given in connection  with
the Credit Agreement,  or in modification,  renewal,  extension or rearrangement
thereof  in whole or in part,  and  (ii) the full and  punctual  payment  of all
Letter of Credit  Liabilities;  (b) all  obligations of the Guarantor under this
Guaranty  Agreement;  and (c) all  interest  (whether  pre- or post-  petition),
charges,  expenses,  reasonable  attorneys'  or other  fees and any  other  sums
payable  to  the  Agents  and  the  Banks  in  connection  with  the  execution,
administration  or enforcement of any of their rights and remedies  hereunder or
any other Loan Document.

         Section 1.3 Credit  Agreement  Definitions.  Unless  otherwise  defined
herein,  all terms  beginning  with a capital  letter  which are  defined in the
Credit Agreement shall have the same meanings herein as therein.

                                   Article II

                                    Guaranty

         Section 2.1   Obligations Guaranteed.  The Guarantor hereby irrevocably
and unconditionally guarantees the prompt payment at maturity of the 
Obligations.

         Section  2.2  Nature  of  Guaranty.   This  guaranty  is  an  absolute,
irrevocable,  completed and continuing guaranty of payment and not a guaranty of
collection,  and no notice of the Obligations or any extension of credit already
or  hereafter  contracted  by or extended  to the  Company  need be given to the
Guarantor.  This guaranty may not be revoked by the Guarantor and shall continue
to be effective  with respect to debt under the  Obligations  arising or created
after any  attempted  revocation by the Guarantor and shall remain in full force
and  effect  until  the  Obligations  are paid in full and the  Commitments  are
terminated,  notwithstanding that from time to time prior thereto no Obligations
may be  outstanding.  The Company,  the Agents and the Banks may modify,  alter,
rearrange, extend for any period and/or renew from time to time, the Obligations
and the Agents and the Banks may waive any Defaults or Events of Default without
notice to the Guarantor and in such event the Guarantor  will remain fully bound
hereunder on the Obligations. Subject to the terms of the Credit Agreement, this
Guaranty  Agreement  may be  enforced  by the  Agents  and/or  the Banks and any
subsequent holder of the Obligations and shall not be discharged by the

                                                         2

<PAGE>

assignment  or  negotiation  of all or part of the  Obligations.  The  Guarantor
hereby expressly waives presentment,  demand, notice of non-payment, protest and
notice of protest and dishonor,  notice of Event of Default, notice of intent to
accelerate the maturity and notice of acceleration of the maturity and any other
notice in connection with the Obligations, and also notice of acceptance of this
Guaranty  Agreement,  acceptance  on the part of the Agents and the Banks  being
conclusively  presumed by their request for this Guaranty Agreement and delivery
of the same to the Administrative Agent.

         Section  2.3  Banks'  Rights.  Subject  to  the  terms  of  the  Credit
Agreement,  the Guarantor  authorizes the Banks (or the Administrative  Agent on
behalf of the  Banks),  without  notice  or demand  and  without  affecting  the
Guarantor's obligation hereunder,  to take and hold agreed-upon security for the
payment of the Obligations,  and exchange,  enforce,  waive and release any such
security;  and to apply  such  security  and  direct the order or manner of sale
thereof as the Agents and the Banks in their  discretion may  determine;  and to
obtain a guaranty  of the  Obligations  from any one or more  Persons and at any
time or times to enforce, waive, rearrange, modify, limit or release any of such
other Persons from their obligations under such guaranties.

         Section 2.4  Guarantor's  Waivers.  The  Guarantor  waives any right to
require the Agents and the Banks to (a) proceed against the Company or any other
Person liable on the  Obligations,  (b) enforce  their rights  against any other
guarantor of the  Obligations,  (c) proceed or enforce  their rights  against or
exhaust  any  security  given to secure the  Obligations,  (d) have the  Company
joined with the  Guarantor  in any suit arising out of this  Guaranty  Agreement
and/or the Obligations,  or (e) pursue any other remedy whatsoever.  Neither the
Agents nor the Banks shall be required to mitigate damages or take any action to
reduce,  collect or enforce the  Obligations.  The Guarantor  waives any defense
arising by reason of any  disability,  lack of corporate  authority or power, or
other  defense of the Company or any other  guarantor  of the  Obligations,  and
shall  remain  liable  hereon  regardless  of whether  the  Company or any other
guarantor be found not liable thereon for any reason.

         Section 2.5 Maturity of Obligations; Payment. The Guarantor agrees that
if the maturity of the  Obligations  is  accelerated by bankruptcy or otherwise,
such maturity shall also be deemed  accelerated for the purpose of this Guaranty
Agreement  without  demand or  notice  to the  Guarantor.  The  Guarantor  will,
forthwith upon notice from the Administrative  Agent of the Company's failure to
pay the Obligations at maturity, pay to the Administrative Agent for the benefit
of the Agents and the Banks at the Administrative  Agent's Principal Office, the
amount due and unpaid by the Company and guaranteed  hereby.  The failure of the
Administrative  Agent to give  this  notice  shall  not in any way  release  the
Guarantor hereunder.

         Section  2.6  Banks'  Expenses.  If the  Guarantor  fails  to  pay  the
Obligations after notice from the Administrative  Agent of the Company's failure
to pay any Obligations at maturity  (whether by acceleration or otherwise),  and
if the Agents or the Banks obtain the services of an attorney for  collection of
amounts owing by the Guarantor hereunder, or obtain advice of counsel in respect
of any of their rights  under this  Guaranty  Agreement,  or if suit is filed to
enforce this Guaranty  Agreement,  or if proceedings  are had in any bankruptcy,
receivership or other judicial proceedings

                                                         3

<PAGE>

for the  establishment  or  collection  of any  amount  owing  by the  Guarantor
hereunder,  or if any  amount  owing by the  Guarantor  hereunder  is  collected
through such  proceedings,  the  Guarantor  agrees to pay to the  Administrative
Agent at its Principal  Office the reasonable  attorneys' fees of the Agents and
the Banks.

         Section 2.7 Obligation.  It is expressly  agreed that the obligation of
the  Guarantor  for the payment of the  Obligations  guaranteed  hereby shall be
primary and not secondary.

         Section 2.8 Events and  Circumstances  Not Reducing or Discharging  the
Guarantor's  Obligations.  The Guarantor hereby consents and agrees,  to each of
the following to the fullest extent permitted by law, that its obligations under
this Guaranty Agreement shall not be released, diminished,  impaired, reduced or
adversely  affected by any of the  following,  and waives any rights  (including
without  limitation  rights to notice) which it might otherwise have as a result
of or in connection with any of the following:

         (a)  Modifications,  etc.  Any  renewal,  extension,  modification,  or
increase  in the  amount of the  Commitments  as in  effect on the date  hereof,
decrease, alteration or rearrangement of all or any part of the Obligations, any
Loan  Document  or any  instrument  executed  in  connection  therewith,  or any
contract or  understanding  between the Company,  any Agent and/or the Banks, or
any other Person, pertaining to the Obligations;

         (b)  Adjustment,  etc.  Any  adjustment,   indulgence,  forbearance  or
compromise  that  might be  granted  or given by the  Agents or the Banks to the
Company, the Guarantor or any Person liable on the Obligations;

         (c)  Condition  of  the  Company  or  the  Guarantor.  The  insolvency,
bankruptcy, arrangement,  reorganization,  adjustment, composition, liquidation,
disability,  dissolution or lack of power of the Company or the Guarantor or any
other  Person  at any  time  liable  for  the  payment  of all  or  part  of the
Obligations;  or any sale,  lease or transfer of any or all of the assets of the
Company or the Guarantor,  or any changes in the  shareholders of the Company or
the Guarantor;

         (d)  Invalidity  of   Obligations.   The   invalidity,   illegality  or
unenforceability  of all or any part of the Obligations or any Loan Document for
any  reason   whatsoever,   including  without  limitation  the  fact  that  the
Obligations, or any part thereof, exceed the amount permitted by law, the act of
creating the  Obligations  or any part  thereof is ultra vires,  the officers or
representatives   executing  any  Loan   Document  or  otherwise   creating  the
Obligations  acted  in  excess  of  their  authority,  the  Obligations  violate
applicable  usury  laws,  the  Company  has valid  defenses,  claims or  offsets
(whether at law, in equity or by agreement) which render the Obligations  wholly
or  partially  uncollectible  from the Company,  the  creation,  performance  or
repayment of the Obligations (or the execution,  delivery and performance of any
Loan Document) is illegal,  uncollectible,  legally impossible or unenforceable,
or the Credit  Agreement or other Loan  Documents  have been forged or otherwise
are irregular or not genuine or authentic;

                                                         4

<PAGE>

         (e) Release of Obligors.  Any full or partial release of the obligation
of the Company on the Obligations or any part thereof, of any co-guarantors,  or
any other  Person now or  hereafter  liable,  whether  directly  or  indirectly,
jointly,  severally,  or jointly and severally,  to pay,  perform,  guarantee or
assure the payment of the Obligations or any part thereof,  it being recognized,
acknowledged  and agreed by the Guarantor  that the Guarantor may be required to
pay the  Obligations in full without  assistance or support of any other Person,
and the Guarantor has not been induced to enter into this Guaranty  Agreement on
the basis of a  contemplation,  belief,  understanding  or agreement  that other
parties  other than the Company  will be liable to perform the  Obligations,  or
that the  Agents  and the  Banks  will  look to other  parties  to  perform  the
Obligations;

         (f) Security.  The taking or accepting of any  security,  collateral or
guaranty, or other assurance of payment, for all or any part of the Obligations;

         (g) Release of  Collateral,  etc.  Any  release,  surrender,  exchange,
subordination,  deterioration,  waste,  loss or  impairment  (including  without
limitation negligent,  willful, unreasonable or unjustifiable impairment) of any
collateral,  property or security,  at any time existing in connection  with, or
assuring or securing payment of, all or any part of the Obligations;

         (h) Care and  Diligence.  The  failure  of any Agent or any Bank or any
other  Person to exercise  diligence  or  reasonable  care in the  preservation,
protection,  enforcement, sale or other handling or treatment of all or any part
of such collateral, property or security;

         (i) Status of Liens.  The fact that any  collateral,  security  or Lien
contemplated  or  intended to be given,  created or granted as security  for the
repayment of the  Obligations  shall not be properly  perfected  or created,  or
shall prove to be  unenforceable  or  subordinate  to any other  Lien,  it being
recognized  and agreed by the Guarantor  that the Guarantor is not entering into
this Guaranty  Agreement in reliance on, or in contemplation of the benefits of,
the validity,  enforceability,  collectability or value of any of the collateral
for the Obligations;

         (j) Payments Rescinded. Any payment by the Company to any Agent or Bank
is held to constitute a preference  under the bankruptcy laws, or for any reason
an Agent or Bank is required  to refund  such  payment or pay such amount to the
Company or someone else; or

         (k) Other Actions  Taken or Omitted.  Any other action taken or omitted
to be taken with respect to the Credit  Agreement  or the other Loan  Documents,
the Obligations,  or the security and collateral  therefor,  whether or not such
action or omission prejudices the Guarantor or increases the likelihood that the
Guarantor will be required to pay the Obligations  pursuant to the terms hereof;
it being the  unambiguous  and  unequivocal  intention of the Guarantor that the
Guarantor  shall be obligated to pay the Obligations  when due,  notwithstanding
any occurrence,  circumstance,  event, action, or omission  whatsoever,  whether
contemplated  or  uncontemplated,  and whether or not otherwise or  particularly
described herein,  except for the full and final payment and satisfaction of the
Obligations.

                                                         5

<PAGE>

         Section 2.9 Limitations on Obligation of the Guarantor  Hereunder.  The
parties  hereto (i) intend that the  obligation  of the  Guarantor  hereunder be
limited to the maximum  amount that would not result in the  obligation  created
hereby being  avoidable  under  Section 548 of the Federal  Bankruptcy  Code (11
U.S.C.  Section  548;  hereinafter  "Section  548")  or other  applicable  state
fraudulent  conveyance  or  transfer  law and  (ii)  agree  that  this  Guaranty
Agreement  shall be so construed.  Accordingly,  the obligation of the Guarantor
hereunder  is limited to an amount  that is the  greater of (x) the  "reasonably
equivalent value" or "fair consideration"  received by the Guarantor in exchange
for the  obligation  incurred  hereunder,  within the meaning of Section 548, as
amended,  or any  applicable  state  fraudulent  conveyance  or transfer law, as
amended;  or (y) the lesser of (1) the  maximum  amount that will not render the
Guarantor  insolvent or (2) the maximum amount that will not leave the Guarantor
with any Property deemed an unreasonably small capital.  Clauses (1) and (2) are
and shall be determined pursuant to Section 548, as amended, or other applicable
state fraudulent conveyance or transfer law, as amended.

         Section 2.10  Subrogation.  The Guarantor shall not exercise any rights
which  it  may  acquire  by  way  of  subrogation,  reimbursement,  exoneration,
indemnification  or  participation,  by any  payment  made under  this  Guaranty
Agreement, under any other Loan Document or otherwise until the Obligations have
been paid in full and the  Commitments  are  terminated.  Except as described in
this  Section,  the  Guarantor  further  waives  any  benefit  of any  right  to
participate  in any  security  now or  hereafter  held by the Agents  and/or the
Banks.

                                   Article III

                    Representations, Warranties and Covenants

         Section  3.1  Representations  and  Warranties.  In order to induce the
Agents and the Banks to accept this Guaranty Agreement, the Guarantor represents
and warrants to the Agents and Banks (which  representations and warranties will
survive the creation of the Obligations and any extension of credit  thereunder)
that:

         (a)  Benefit  to  the  Guarantor.   The  Guarantor  is  a  wholly-owned
Subsidiary of the Company and the Guarantor's guaranty pursuant to this Guaranty
Agreement  reasonably may be expected to benefit,  directly or  indirectly,  the
Guarantor;  and the Guarantor  has  determined  that this Guaranty  Agreement is
necessary  and  convenient  to the  conduct,  promotion  and  attainment  of the
business of the Guarantor and the Company.

         (b)  Corporate  Existence.  The  Guarantor:  (i) is duly  organized and
validly existing under the laws of the  jurisdiction of its formation;  (ii) has
all requisite power, and has all material governmental licenses, authorizations,
consents and approvals  necessary to own its assets and carry on its business as
now being conducted;  and (iii) is qualified to do business in all jurisdictions
in which the nature of the  business  conducted  by it makes such  qualification
necessary and where failure so to qualify would have a Material Adverse Effect.

         (c) No Breach.  The  execution  and  delivery by the  Guarantor of this
Guaranty  Agreement  and the other Loan  Documents  to which it is a party,  the
consummation of the transactions herein

                                                         6

<PAGE>

or therein contemplated, and the compliance with the terms and provisions hereof
will not (i)  conflict  with or result in a breach  of, or require  any  consent
under (A) the charter or by-laws of the Guarantor,  or (B) any applicable law or
regulation,  or any  order,  writ,  injunction  or  decree of any court or other
Governmental  Authority,  or any material  agreement or  instrument to which the
Guarantor  is a party or by which it is bound or to which it is  subject in each
case in such manner as could  reasonably be expected to have a Material  Adverse
Effect; or (ii) constitute a default under any such agreement or instrument,  or
result in the  creation or  imposition  of any Lien upon any of the  revenues or
property of the  Guarantor  in each case in such manner as could  reasonably  be
expected to have a Material Adverse Effect.

         (d) Corporate Action.  The Guarantor has all necessary  corporate power
and  authority  to  execute,  deliver and  perform  its  obligations  under this
Guaranty  Agreement  and the Loan  Documents  to  which  it is a party;  and the
execution,  delivery and performance by the Guarantor of this Guaranty Agreement
and the other  Loan  Documents  to which  such  Person is a party have been duly
authorized  by all  necessary  corporate  action  on  its  part.  This  Guaranty
Agreement and the Loan  Documents to which the  Guarantor is a party  constitute
the legal,  valid and binding obligation of the Guarantor,  enforceable  against
the  Guarantor  in  accordance  with  their  terms,  except as may be limited by
applicable  bankruptcy,   insolvency,   reorganization  or  other  similar  laws
affecting creditors' rights and general principals of equity.

         (e) Approvals.  Other than consents heretofore obtained or described in
the Credit  Agreement,  no  authorizations,  approvals  or  consents  of, and no
filings or registrations with, any Governmental  Authority are necessary for the
execution,  delivery or performance by the Guarantor of this Guaranty  Agreement
or  the  Loan  Documents  to  which  it  is a  party  or  for  the  validity  or
enforceability  thereof.  It is understood  that  continued  performance  by the
Guarantor of this Guaranty Agreement and the other Loan Documents to which it is
a party will require various  filings,  such as filings related to environmental
matters,  ERISA matters,  Taxes and intellectual  property,  filings required to
maintain  corporate and similar standing and existence,  filings pursuant to the
Uniform  Commercial  Code and other security  filings and recordings and filings
required by the SEC,  routine  filings in the ordinary  course of business,  and
filings  required in connection with the exercise by the Banks and the Agents of
remedies in connection with the Loan Documents.

         (f)  Solvency.  The  Guarantor  (i) is not  insolvent  and  will not be
rendered insolvent as a result of this Guaranty  Agreement,  (ii) is not engaged
in a  business  or a  transaction,  or  about  to  engage  in  a  business  or a
transaction,  for which any property or assets  remaining with the Guarantor are
unreasonably  small capital,  and (iii) does not intend to incur,  or believe it
will incur, debts that will be beyond its ability to pay as such debts mature.

         (g) No Representation  by Agents or Banks.  Neither any Agent, any Bank
nor any other Person has made any  representation,  warranty or statement to the
Guarantor in order to induce the Guarantor to execute this Guaranty Agreement.

         Section 3.2  Covenants.  The Guarantor acknowledges that it is has read
the Credit Agreement and hereby covenants and agrees to comply with covenants 
and agreements set forth

                                                         7

<PAGE>

therein which restrict Restricted  Subsidiaries of the Company in so far as such
covenants and agreements apply to it.

                                   Article IV

                          Subordination of Indebtedness

         Section 4.1 Subordination of all Guarantor Claims. As used herein,  the
term  "Guarantor  Claims" shall mean all debts and obligations of the Company to
the  Guarantor,  whether such debts and  obligations  now exist or are hereafter
incurred or arise,  or whether the  obligation be direct,  contingent,  primary,
secondary, several, joint and several, or otherwise, and irrespective of whether
such debts or  obligations  be evidenced by note,  contract,  open  account,  or
otherwise,  and  irrespective of the Person or Persons in whose favor such debts
or obligations may, at their inception,  have been, or may hereafter be created,
or the  manner in which  they  have been or may  hereafter  be  acquired  by the
Guarantor.  Except for  payments  permitted by the Credit  Agreement,  until the
Obligations  shall be paid and satisfied in full, the Commitments are terminated
and the Guarantor shall have performed all of its obligations  hereunder and the
Loan  Documents  to which it is a party,  the  Guarantor  shall not  receive  or
collect, directly or indirectly,  from the Company any amount upon the Guarantor
Claims.

         Section  4.2  Claims  in  Bankruptcy.  In the  event  of  receivership,
bankruptcy,  reorganization,  arrangement,  debtor's relief, or other insolvency
proceedings  involving the Company,  the  Administrative  Agent on behalf of the
Agents  and the  Banks  shall  have  the  right  to  prove  their  claim  in any
proceeding,  so as to establish their rights hereunder and receive directly from
the receiver,  trustee or other court  custodian,  dividends and payments  which
would otherwise be payable upon Guarantor  Claims.  The Guarantor hereby assigns
such dividends and payments to the  Administrative  Agent for the benefit of the
Agents and the Banks. Should any Agent or Bank receive, for application upon the
Obligations,  any such  dividend or payment  which is  otherwise  payable to the
Guarantor, and which, as between the Company and the Guarantor, shall constitute
a credit upon the Guarantor Claims, then upon payment in full of the Obligations
and the termination of the Commitments, the Guarantor shall become subrogated to
the rights of the Agents and the Banks to the extent  that such  payments to the
Agents  and the  Banks on the  Guarantor  Claims  have  contributed  toward  the
liquidation of the Obligations,  and such  subrogation  shall be with respect to
that  proportion of the  Obligations  which would have been unpaid if the Agents
and the Banks had not received dividends or payments upon the Guarantor Claims.

         Section 4.3 Payments Held in Trust.  In the event that  notwithstanding
Sections 4.1 and 4.2, the Guarantor should receive any funds,  payments,  claims
or distributions which is prohibited by such Sections,  the Guarantor agrees (a)
to hold in trust for the Agents  and the Banks an amount  equal to the amount of
all funds, payments,  claims or distributions so received, and (b) that it shall
have absolutely no dominion over the amount of such funds,  payments,  claims or
distributions  except to pay them promptly to the Administrative  Agent, for the
benefit of the Agents and the Banks; and the Guarantor covenants promptly to pay
the same to the Administrative Agent.

                                                         8

<PAGE>

         Section 4.4 Liens  Subordinate.  The Guarantor  agrees that,  until the
Obligations are paid in full and the Commitments terminated,  any Liens upon the
Company's  assets securing  payment of the Guarantor  Claims shall be and remain
inferior and subordinate to any Liens upon the Company's assets securing payment
of the  Obligations,  regardless  of whether such  encumbrances  in favor of the
Guarantor, any Agent or Bank presently exist or are hereafter created or attach.
Without the prior written consent of the  Administrative  Agent,  the Guarantor,
during  the  period  in which  any of the  Obligations  are  outstanding  or the
Commitments  are in effect,  shall not (a)  exercise or enforce  any  creditor's
right it may have against the Company, or (b) foreclose, repossess, sequester or
otherwise  take  steps or  institute  any  action  or  proceeding  (judicial  or
otherwise,  including  without  limitation the commencement of or joinder in any
liquidation,   bankruptcy,   rearrangement,   debtor's   relief  or   insolvency
proceeding) to enforce any Lien,  mortgages,  deeds of trust, security interest,
collateral rights, judgments or other encumbrances on assets of the Company held
by the Guarantor.

         Section 4.5 Notation of Records.  All  promissory  notes and,  upon the
request of the  Administrative  Agent, all accounts  receivable ledgers or other
evidence of the  Guarantor  Claims  accepted by or held by the  Guarantor  shall
contain a  specific  written  notice  thereon  that the  indebtedness  evidenced
thereby is subordinated under the terms of this Guaranty Agreement.

                                    Article V

                                  Miscellaneous

         Section 5.1  Successors  and Assigns.  This  Guaranty  Agreement is and
shall be in every  particular  available  to the  successors  and assigns of the
Agents  and the Banks and is and shall  always be fully  binding  upon the legal
representatives,  successors and assigns of the Guarantor,  notwithstanding that
some or all of the  monies,  the  repayment  of which  this  Guaranty  Agreement
applies,   may  be  actually   advanced  after  any  bankruptcy,   receivership,
reorganization or other event affecting either the Company or the Guarantor.

         Section 5.2 Notices.  Any notice or demand to the Guarantor under or in
connection with this Guaranty  Agreement may be given and shall  conclusively be
deemed and considered to have been given and received in the manner provided for
in Section 13.2 of the Credit  Agreement and to the address of the Guarantor set
forth on the signature page to this Guaranty Agreement.

         Section  5.3   Authority  of   Administrative   Agent.   The  Guarantor
acknowledges that the rights and  responsibilities  of the Administrative  Agent
under  this  Guaranty  Agreement  with  respect  to  any  action  taken  by  the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option,  right,  request,  judgment or other right or remedy provided for
herein or resulting or arising out of this Guaranty  Agreement shall, as between
the Agents and the Banks, be governed by the Credit  Agreement and by such other
agreements  with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Guarantor,  the Administrative Agent
shall be conclusively presumed to be acting as agent for the Banks with full and
valid authority so to act or refrain from acting; and the Guarantor shall not be
under any  obligation,  or  entitlement,  to make any  inquiry  respecting  such
authority.

                                                         9

<PAGE>

         Section 5.4       CONSTRUCTION.

         (a)  THIS  GUARANTY  AGREEMENT  (INCLUDING,  BUT NOT  LIMITED  TO,  THE
VALIDITY  AND  ENFORCEABILITY  HEREOF)  SHALL BE GOVERNED  BY, AND  CONSTRUED IN

ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

         (b) ANY LEGAL  ACTION  OR  PROCEEDING  WITH  RESPECT  TO THIS  GUARANTY
AGREEMENT OR THE OTHER LOAN  DOCUMENTS TO WHICH THE  GUARANTOR IS A PARTY MAY BE
BROUGHT IN THE  COURTS OF THE STATE OF TEXAS OR OF THE UNITED  STATES OF AMERICA
FOR THE  SOUTHERN  DISTRICT OF TEXAS,  AND, BY  EXECUTION  AND  DELIVERY OF THIS
GUARANTY  AGREEMENT,  THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS.  THE GUARANTOR HEREBY  IRREVOCABLY  WAIVES
ANY OBJECTION,  INCLUDING,  WITHOUT  LIMITATION,  ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE  GROUNDS  OF  FORUM  NON  CONVENIENS,  WHICH IT MAY NOW OR
HEREAFTER  HAVE  TO THE  BRINGING  OF ANY  SUCH  ACTION  OR  PROCEEDING  IN SUCH
RESPECTIVE  JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NONEXCLUSIVE  AND
DOES  NOT  PRECLUDE  THE  ADMINISTRATIVE   AGENT  OR  ANY  BANK  FROM  OBTAINING
JURISDICTION OVER THE GUARANTOR IN ANY COURT OTHERWISE HAVING JURISDICTION.

         (c) THE GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED  COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,  POSTAGE PREPAID,  TO IT, AS THE
CASE MAY BE, AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER
SUCH MAILING.

         (d) NOTHING  HEREIN  SHALL AFFECT THE RIGHT OF ANY AGENT OR ANY BANK OR
ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE  LEGAL  PROCEEDINGS OR OTHERWISE  PROCEED  AGAINST THE GUARANTOR IN ANY
OTHER JURISDICTION.

         (e) THE GUARANTOR  AND, BY ITS ACCEPTANCE  HEREOF,  EACH AGENT AND EACH
BANK HEREBY (I)  IRREVOCABLY  AND  UNCONDITIONALLY  WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW,  TRIAL BY JURY IN ANY LEGAL ACTION OR  PROCEEDING  RELATING TO
THIS GUARANTY  AGREEMENT OR ANY LOAN DOCUMENT TO WHICH IT IS A PARTY AND FOR ANY
COUNTERCLAIM  THEREIN;  (II)  IRREVOCABLY  WAIVE,  TO  THE  MAXIMUM  EXTENT  NOT
PROHIBITED  BY LAW,  ANY  RIGHT  IT MAY HAVE TO  CLAIM  OR  RECOVER  IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL

                                                        10

<PAGE>

DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY
THAT NO PARTY  HERETO NOR ANY  REPRESENTATIVE  OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS GUARANTY AGREEMENT,  THE
LOAN DOCUMENTS AND THE  TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG
OTHER THINGS,  THE MUTUAL WAIVERS AND  CERTIFICATIONS  CONTAINED IN THIS SECTION
5.4.

         Section 5.5 Survival of Obligations. To the extent that any payments on
the  Obligations  or proceeds of any collateral  are  subsequently  invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee,  debtor in possession,  receiver or other Person under any bankruptcy
law,  common law or equitable  cause,  then to such extent,  the  Obligations so
satisfied  shall be revived and  continue as if such payment or proceeds had not
been received and the Agents' and the Banks' Liens, rights,  powers and remedies
under this  Guaranty  Agreement and each Loan  Document  shall  continue in full
force and  effect.  In such event,  each Loan  Document  shall be  automatically
reinstated  and the  Guarantor  shall  take  such  action  as may be  reasonably
requested   by  the   Administrative   Agent  and  the  Banks  to  effect   such
reinstatement.

         Section 5.6  Status as Specified or Designated Senior Indebtedness. The
Guarantor hereby acknowledges and confirms that:

         (a)  this  Guaranty  Agreement  and the  obligations  of the  Guarantor
hereunder are "Guarantor Senior  Indebtedness"  and "Specified  Guarantor Senior
Indebtedness" under and for purposes of the 95 Indenture; and

         (b)  this  Guaranty  Agreement  and the  obligations  of the  Guarantor
hereunder are "Guarantor Senior  Indebtedness" and "Designated  Guarantor Senior
Indebtedness"  under and for purposes of the 96 Indenture,  the 97 Indenture and
the 98 Senior Subordinated Indenture;

and that as such,  the  Agents  and the Banks are  entitled  to the  rights  and
privileges  afforded  holders  of  Guarantor  Senior   Indebtedness,   Specified
Guarantor Senior Indebtedness or Designated  Guarantor Senior  Indebtedness,  as
applicable, under each of such Indentures.

         Section 5.7  Interest.  It is in the interest of the  Guarantor and the
Agents  and  the  Banks  to  conform  strictly  to all  applicable  usury  laws.
Accordingly,  reference is made to Section 13.6 of the Credit Agreement which is
incorporated herein by reference for all purposes.

                                                        11

<PAGE>

         WITNESS THE  EXECUTION  HEREOF,  effective as of the date first written
above.

                   OCEAN ENERGY, INC., a Louisiana corporation

                                       By:
                             Name: James C. Flores,
                                Title: President

                                    Address:  c/o Ocean Energy, Inc.

                             1001 Fannin, Suite 1700
                              Houston, Texas 77002

                                    Contact:          Stephen A. Thorington
                                    Telephone:        (713) 951-1319
                                    Telecopy:         (713) 951-4846

                                      S - 1

<PAGE>

                                       CHASE BANK OF TEXAS, NATIONAL

                                       ASSOCIATION, as a Bank and as

                                       Administrative Agent

                                       By:
                                      Name:

                                       Title:

                                       Address for Notices:

                                       1 Chase Manhattan Plaza, 8th Floor
                                       New York, New York 10081

                                       Attention:  Ms. Debbie Rockower

                                       Phone:     (212) 552-7446
                                       Fax:       (212) 552-5700

                                       with a copy to:

                    Chase Bank of Texas, National Association

                                       712 Main Street
                                       Houston, Texas  77002

                                       Attention:      Manager, Energy Division

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 2

<PAGE>

                          THE CHASE MANHATTAN BANK, as

                          Auction Administrative Agent

                                              By:                               
                                              Name:

                                              Title:

                                              Address for Notices:

                                              1 Chase Manhattan Plaza, 8th Floor

                            New York, New York 10081

                                              Attention:     Ms. Debbie Rockower

                                              Phone:         (212) 552-7446
                                              Fax:           (212) 552-5700

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 3

<PAGE>

                         BANK OF AMERICA NATIONAL TRUST

                                              AND SAVINGS ASSOCIATION, as a Bank

                            and as Syndication Agent

                                              By:                               
                                              Name:

                                              Title:

                                              Address for Notices:

                                              Attention:                        
                                              Phone:                            
                                              Fax:                              
                                              with further notice to:

                                              Phone:                            
                                              Fax:                              

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 4

<PAGE>

                     BANK ONE, TEXAS, N.A., as a Bank and as

                                         Documentation Agent

                                       By:

                                         Name:    Christine M. Macan
                                         Title:   Vice President

                                         Address for Notices:

                                         910 Travis, TX2-4330
                                         Houston, Texas 77002
                                         Attention:        Jo Linda Papadakis
                                         Phone:            (713) 751-6235
                                         Fax:              (713) 751-7894

                                         with further notice to:

                                         910 Travis, TX2-4330
                                         Houston, Texas 77002
                                         Attention:        Christine M. Macan
                                         Phone:            (713) 751-3484
                                         Fax:              (713) 751-3544

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 5

<PAGE>

                           SOCIETE GENERALE, SOUTHWEST

                                             AGENCY, as a Bank and as a Managing

                                             Agent

                                             By:                                
                                             Name:    Richard Erbert
                                             Title:   Vice President

                          Lending Office for all Loans:

                          2001 Ross Avenue, Suite 4800
                               Dallas, Texas 75201

                                             Address for Notices:

                          2001 Ross Avenue, Suite 4800
                               Dallas, Texas 75201
                         Attention: Loan Administration
                              Phone: (214) 754-0171
                               Fax: (214) 979-2792

                                             with further notice to:

                                             Societe Generale
                                             1111 Bagby, Suite 2020
                                             Houston, Texas 77002
                                             Attention:   Richard Erbert
                                             Phone:       (713) 650-0824
                                             Fax:         (713) 759-6318

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 6

<PAGE>

                      BANK OF MONTREAL, as a Bank and as a

                                            Managing Agent

                                       By:

                                            Name:    Melissa Bauman
                                            Title:   Director

                                            Address for Notices:

                           115 S. LaSalle, 11th Floor
                             Chicago, Illinois 60603
                            Attention: Craig Reynolds
                              Phone: (312) 750-6047
                               Fax: (312) 750-6061

                                            with further notice to:

                                            Melissa Bauman
                                            700 Louisiana, Suite 4400
                                            Houston, Texas 77002
                                            Phone:        (713) 546-9723
                                            Fax:          (713) 223-4007

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 7

<PAGE>

                     BANKBOSTON, N.A., as a Bank and as Co-

                                          Agent

                                       By:

                                          Name:    Terrence Ronan
                                          Title:   Director

                                          Address for Notices:

                                          100 Federal Street
                                          Boston, MA 02110
                                          Attention:        Terrence Ronan
                                          Phone:   (617) 434-5472
                                          Fax:              (617) 434-3652

                                          with further notice to:

                                          100 Federal Street
                                          Boston, MA 02110
                                          Attention:        Fidel Vasquez

                                                            Loan Officer
                                          Phone:   (617) 434-1906
                                          Fax:              (617) 434-3652

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 8

<PAGE>

                           ABN AMRO BANK N.A., HOUSTON

                        AGENCY, as a Bank and as Co-Agent

                                       By:
                                      Name:

                                            Title:

                                       By:
                                      Name:

                                            Title:

                                            Address for Notices:

                                            3 Riverway, Suite 1700
                                            Houston, Texas 77056
                                            Attention:  Jamie A. Conn
                                            Phone:      (713) 964-3356
                                            Fax:           (713) 961-1699

                                            with further notice to:

                      208 South LaSalle Street, Suite 1500
                             Chicago, IL 60604-1003
                          Attention: Karen MacAllister
                              Phone: (312) 992-5123
                               Fax: (312) 992-5111

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                      S - 9

<PAGE>

                                                CREDIT SUISSE FIRST BOSTON, as a

                              Bank and as Co-Agent

                                                By:                             
                                                Name:    Douglas E. Maher
                                                Title:   Vice President

                              Address for Notices:

                                                11 Madison Avenue, 20th Floor
                                                New York, New York 10010-3629
                                                Attention:    Douglas E. Maher
                                                Phone:        (212) 325-3641
                                                Fax:          (212) 325-8615

                             with further notice to:

                                                600 Travis Street, 30th Floor

                              Houston, Texas 77002

                                                Attention:    R. Scott Brown
                                                Phone:        (713) 220-6774
                                                Fax:          (713) 237-0325

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 10

<PAGE>

                            WELLS FARGO BANK (TEXAS),
                         NATIONAL ASSOCIATION, as a Bank

                                                 By:                            
                                                 Name:    J. Alan Alexander
                                                 Title:   Vice President

                              Address for Notices:

                                                 Wells Fargo Bank, N.A.
                                                 201 Third Street, 8th Floor
                                                 San Francisco, CA 94103
                                                 Attention:  Oscar Enriquez
                                                 Phone:      (415) 477-5425
                                                 Fax:        (415) 979-0675

                             with further notice to:

                                                 Wells Fargo Bank (Texas), N.A.
                                                 Energy Dept.
                                                 1000 Louisiana, 3rd Floor
                                                 Houston, Texas 77002
                                                 Attention:  J. Alan Alexander
                                                 Phone:      (713) 319-1368
                                                 Fax:        (713) 739-1087

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 11

<PAGE>

                                                  CREDIT LYONNAIS, NEW YORK

                                BRANCH, as a Bank

                                                  By:                           
                                                  Name:    Phillipe Soustra
                                                  Title:   Senior Vice President

                              Address for Notices:

                                                  Credit Lyonnais
                                                  1000 Louisiana, Suite 5360
                                                  Houston, Texas 77002
                                                  Attention:   Jeff Baker
                                                  Phone:       (713) 753-8711
                                                  Fax:         (713) 751-0307

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 12

<PAGE>

                       THE BANK OF NOVA SCOTIA, as a Bank

                                           and as Co-Agent

                                       By:
                                      Name:

                                           Title:

                                           Address for Notices:

                      600 Peachtree Street N.E., Suite 2700
                                Atlanta, GA 30308
                            Attention: Phyllis Walker
                              Phone: (404) 877-1552
                               Fax: (404) 888-8998

                                           with further notice to:

                                           1100 Louisiana, Suite 3000
                                           Houston, Texas 77002
                                           Attention:   Mark Ammerman
                                           Phone:       (713) 759-3442
                                           Fax:         (713) 759-2425

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 13

<PAGE>

                        SOUTHWEST BANK OF TEXAS, N.A., as

                                          a Bank

                                       By:

                                          Name:    A. Stephen Kennedy
                                          Title:   Vice President/Manager Energy

                                          Lending

                                          Address for Notices:

                                          4400 Post Oak Parkway
                                          Houston, Texas 77027
                                          Attention: Ann Greer
                                          Phone:    (713) 235-8881 ext 1792
                                          Fax:      (713) 439-5954

                                          with further notice to:

                                          4400 Post Oak Parkway
                                          Houston, Texas 77027
                                          Attention: A. Stephen Kennedy
                                          Phone:    (713) 235-8881 ext 1707
                                          Fax:      (713) 439-5925

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 14

<PAGE>

                          THE BANK OF TOKYO-MITSUBISHI,
                                 LTD., as a Bank

                                               By:                              
                                               Name:

                                               Title:

                              Address for Notices:

                                               1100 Louisiana Street, Suite 2800

                            Houston, Texas 77002-5216

                            Attention: J. M. McIntyre
                              Phone: (713) 655-3845
                               Fax: (713) 655-3855

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 15

<PAGE>

                       THE BANK OF NEW YORK, as a Bank and

                                            as Co-Agent

                                       By:

                                            Name:    John N. Watt
                                            Title:   Vice President

                                            Address for Notices:

                           One Wall Street, 19th Floor
                            New York, New York 10286
                             Attention: Terry Foran
                              Phone: (212) 635-7921
                               Fax: (212) 635-7923

                                            with further notice to:

                           One Wall Street, 19th Floor
                            New York, New York 10286
                             Attention: Peter Keller
                              Phone: (212) 635-7861
                               Fax: (212) 635-7923

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 16

<PAGE>

                                             MORGAN GUARANTY TRUST

                       COMPANY OF NEW YORK, as a Bank and

                                             as Co-Agent

                                             By:                                
                                             Name:    Kevin McCann
                                             Title:   Vice President

                                             Address for Notices:

                            60 Wall Street, 5th Floor

                            New York, New York 10260

                                             Attention:   John Kowalczuk
                                             Phone:       (212) 648-0381
                                             Fax:         (212) 648-5416

                                             with further notice to:

                            60 Wall Street, 5th Floor

                            New York, New York 10260

                                             Attention:   Philip McNeal
                                             Phone:       (212) 648-0309
                                             Fax:         (212) 648-5416

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 17

<PAGE>

                                                THE FUJI BANK LIMITED, NEW YORK
                                                BRANCH, as a Bank

                                                By:                             
                                                Name:

                                                Title:

                              Address for Notices:

                                                2 World Trade Center, 79th Floor

                            New York, New York 10048

                            Attention: Ricky Simmons
                              Phone: (212) 898-2066
                               Fax: (212) 321-9407

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 18

<PAGE>

                                              THE SANWA BANK, LIMITED, as a Bank

                                              By:                               
                                              Name:

                                              Title:

                                              Address for Notices:

                          1200 Smith Street, Suite 2670
                              Houston, Texas 77002
                            Attention: Clyde Redford
                              Phone: (713) 652-3190
                               Fax: (713) 654-1462

                 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]

                                     S - 19