|TERM LOAN
AGREEMENT
Dated as of
March 21, 2000
Between
MARINER
ENERGY LLC
as Borrower
and
ENRON NORTH AMERICA CORP.,
as Lender
|------------------------------------------------------------------------------------------------------------------------------

|TABLE OF CONTENTS
|-----------------
|                 
|
|Section 1.01     
|Section 1.02     
|Section 1.03     
|
|Section 2.01     
|Section 2.02     
|Section 2.03     
|Section 2.04     
|
|Section 3.01     
|Section 3.02     
|
|Section 4.01     
|Section 4.02     
|Section 4.03     
|
|Section 5.01     
|
|Section 6.01     
|Section 6.02     
|
|Section 7.01     
|Section 7.02     
|Section 7.03     
|
|Section 8.01     
|Section 8.02     
|
|Section 9.01     
|Section 9.02     
|Section 9.03     
|Section 9.04     
|Section 9.05     
|Section 9.06     
|Section 9.07     
|Section 9.08     
|Section 9.09     
|Section 9.10     
|Section 9.11     
|Section 9.12     
|Section 9.13     
|Section 9.14     
|Section 9.15     
|Exhibit A        
|Exhibit B        
|Exhibit C        

THIS TERM LOAN
AGREEMENT (this Agreement) dated as of March 21, 2000 is
between: MARINER ENERGY LLC, a Delaware limited liability company (together with
its permitted successors and assigns hereunder, the Borrower)
and ENRON NORTH AMERICA CORP., a Delaware corporation (together with its
permitted successors and assigns hereunder, the Lender).

R E C I T A L S

A.     the Lender and
Mariner Energy, Inc., a Delaware corporation and a wholly owned indirect
subsidiary of the Borrower (Mariner Energy, Inc.), previously
entered into the Revolving Credit Agreement dated as of April 15, 1999 pursuant
to which, and upon the terms and conditions stated therein, the Lender made
loans to Mariner Energy, Inc. in the current outstanding aggregate principal
amount of $25,000,000 (the Revolving Loan).

B.     The Lender and the
Borrower previously entered into the Second Amended and Restated Credit
Agreement dated as of April 15, 1999 under which a loan (the Existing
Term Loan) in the aggregate principal amount $50,000,000 is currently
outstanding upon the terms and conditions stated therein.

C.     The Borrower
has requested that the Lender provide a term loan in the amount of $112,000,000
for the purposes of repaying the Existing Term Loan and the Revolving Loan,
paying fees associated with the loan and making contributions to Mariner Energy,
Inc. for its general corporate purposes and to make Interest Payment Advances
(as defined herein) from time to time.

In consideration of
the mutual covenants and agreements herein contained, the parties hereto agree
as follows:

ARTICLE
I.     Definitions and Accounting Matters

Section 1.01   Terms  Defined  Above.   As  used  herein,   the  terms   "Borrower"
"Existing Term Loan," "Lender,"  "Mariner Energy,  Inc." and "Revolving Loan" shall have the
meanings indicated above.

Section 1.02   
Certain Defined Terms. As used herein, the following terms shall have the
following meanings (all terms defined in this Article I 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 assigned such term in Section 5.01(a).

Advance
shall mean an advance made pursuant to Section 2.01.

Affiliate
of any Person shall mean (i) any Person directly or indirectly controlled by,
controlling or under common control with such first Person, (ii) any director or
officer of such first Person or of any Person referred to in clause (i) above
and (iii) if any Person in clause (i) above is an individual, any member of the
immediate family (including parents, spouse and children) 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 its
correlative meanings, controlled by and under common
control with) shall mean any Person which owns directly or indirectly
10% or more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person.

Agreement
shall mean this Agreement, as the same may from time to time be amended or
supplemented.

Business
Day shall mean any day other than a day on which commercial banks are
authorized or required to close in New York, New York.

Closing Date shall mean March 21, 2000.

Commitment
shall mean an initial amount equal to $112,000,000 (the Original
Commitment) plus, the amount of Interest Payment Advances made from
time to time to pay interest on the Loan in accordance with Section 2.01(b).

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

EBITDA
shall mean, as to the Borrower and its Subsidiaries on a consolidated basis, and
for any twelve month period, the amount equal to net income of the Borrower and
its Subsidiaries, plus, to the extent deducted from net income, interest
expense, depreciation, depletion and impairment, amortization of leasehold and
intangibles, other non-cash expenses (including deferred taxes), and cash taxes;
provided, that, gains or losses on the disposition of assets shall not be
included in EBITDA.

Environmental
Laws shall mean any and all Governmental Requirements pertaining to
health or the environment in effect in any and all jurisdictions in which the
Borrower or any of its Subsidiaries is conducting or at any time has conducted
business, or where any Property of the Borrower or any of its Subsidiaries is
located, including without limitation, the Oil Pollution Act of 1990
(OPA), the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980
(CERCLA), as amended, the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 (RCRA), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term oil shall
have the meaning specified in OPA, the terms hazardous substance and
release (or threatened release) have the meanings
specified in CERCLA, and the terms solid waste and
disposal (or disposed) have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Borrower or any
of its Subsidiaries is located establish a meaning for oil,
hazardous substance, release, solid waste or
disposal which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply.

Event of
Default shall have the meaning set forth in Section 8.01.

Fee
Letter shall mean that certain letter agreement dated the date hereof
between the Borrower and ECT Securities Limited Partnership.

Final
Maturity Date shall mean the earlier of (i) the date the Note is
prepaid pursuant to Section 2.04 hereof, (ii) the date the Note becomes due and
payable pursuant to the provisions of Section 8.02, (iii) the date that is one
Business Day following the IPO Date, and (iv) March 20, 2003.

GAAP
shall mean United States generally accepted accounting principles as applied in
accordance with Section 1.03.

Governmental
Authority shall include the country, the state, county, city and
political subdivisions in which any Person or such Persons Property is
located or which exercises valid jurisdiction over any such Person or such
Persons Property, and any court, agency, department, commission, board,
bureau or instrumentality of any of them including monetary authorities which
exercises valid jurisdiction over any such Person or such Persons
Property. Unless otherwise specified, all references to Governmental Authority
herein shall mean a Governmental Authority having jurisdiction over, where
applicable, the Borrower or any of its Subsidiaries or any of their respective
Property or the Lender.

Governmental
Requirement shall mean any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
environmental laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

Highest
Lawful Rate shall mean the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Note under laws applicable to the Lender which are
presently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow.

Indebtedness
shall mean for any Person, without duplication, (i) all indebtedness or other
obligations of such Person for borrowed money and all indebtedness of such
Person with respect to any other items (other than accounts payable, income
taxes payable, deferred taxes and deferred credits) which would, in accordance
with GAAP, be classified as a liability on the balance sheet of such Person,
(ii) obligations of such Person to pay the deferred purchase price of property
or services (other than accounts payable in the ordinary course of business),
(iii) obligations of such Person (contingent or otherwise) under reimbursement
or similar agreements with respect to the issuance of letters of credit, (iv)
the aggregate of the present values (discounted in accordance with sound
financial practice at a rate of 10.00% per annum) of the net amount of all
rental and other minimum lease payments that such Person is obligated to pay, or
has guaranteed, during the remaining term of all Principal Operating Leases
(and, in the case of guarantees by such Person, all leases which would be
Principal Operating Leases if such Person were the lessee thereunder) (including
any period for which any such lease has been extended or may, at the option of
the lessor, be extended) (the net amount of rental and other minimum lease
payments required to be paid under any such lease for any such term shall be the
amount of the rent payable by the lessee with respect to such period, after
excluding amounts required to be paid on account of maintenance and repairs,
insurance, Taxes, assessments, water rates and similar charges and contingent
rents such as those based on sales), (v) all indebtedness or other obligations
of any other Person of the type specified in clause (i), (ii), (iii), or (iv)
above, the payment or collection of which such Person has guaranteed (except by
reason of endorsement for collection in the ordinary course of business) or in
respect of which such Person is liable, contingently or otherwise, including,
without limitation, liable by way of agreement to purchase products or
securities, to provide funds for payment, to maintain working capital or other
balance sheet conditions or otherwise to assure a creditor against loss, and
(vi) all indebtedness or other obligations of any other Person of the type
specified in clause (i), (ii), (iii), (iv), or (v) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien, upon or in property (including, without
limitation, accounts and contract rights) owned by such Person, whether or not
such Person has assumed or becomes liable for the payment of such indebtedness
or obligations.

Indemnity
Matters shall mean any and all actions, suits, proceedings (including
any investigations, litigation or inquiries), claims, demands and causes of
action made or threatened against a Person and, in connection therewith, all
losses, liabilities, damages (including, without limitation, consequential
damages) or reasonable costs and expenses of any kind or nature whatsoever
incurred by such Person whether caused by the sole or concurrent negligence of
such Person seeking indemnification.

Interest
Payment Advance shall mean an advance made pursuant to Section 2.01(b)
of this Agreement.

IPO
Date shall mean the closing date of the initial public offering of
equity securities of the Borrower in a firm commitment underwriting registered
under the Securities Act of 1933, as amended.

Loan
shall mean the Loan extended hereunder and all indebtedness, liabilities and
obligations of the Borrower evidenced by this Agreement, as this Agreement may
be amended, renewed, extended, supplemented, restated, refinanced, increased, or
otherwise modified from time to time, including, without limitation, as this
Agreement may be refinanced with and increased by different lenders under a
different agreement.

Note
shall mean the note evidencing the Loan, substantially in the form of Exhibit A
hereto, together with any and all renewals, extensions for any period,
increases, rearrangements, substitutions or modifications thereof.

Other
Taxes shall have the meaning assigned such term in Section 4.03(b).

Person
shall mean any individual, corporation, company, voluntary association,
partnership, joint venture, trust, unincorporated organization or government or
any agency, instrumentality or political subdivision thereof, or any other form
of entity.

Post-Default
Rate shall mean, in respect of any principal or any other amount
payable by the Borrower under this Agreement or the Note 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
or the default is cured or waived equal to 17% per annum, but in no event to
exceed the Highest Lawful Rate.

Principal
Office shall mean the principal office of the Lender, presently
located at 1400 Smith Street, Houston, Texas 77002.

Principal
Operating Lease shall mean a lease (other than a capital lease) of the
Borrower or any of its Subsidiaries in respect of which lease the aggregate of
the present values (discounted in accordance with sound financial practice at a
rate of 10% per annum) of the net amount of all rental and other minimum lease
payments that the Borrower or any of its Subsidiaries is obligated to pay during
the remaining term of such lease (including any period for which any such lease
has been extended or may, at the option of the lessor, be extended) is equal to
or greater than five percent of the net worth of the Borrower and its
Subsidiaries on a consolidated basis at the time such determination is made. The
net amount of rental and other minimum lease payments required to be paid under
any Principal Operating Lease for any such term shall be the amount of rent
payable by the lessee with respect to such period, after excluding amounts
required to be paid on account of maintenance and repairs, insurance, Taxes,
assessments, water rates and similar charges and contingent rents such as those
based on sales; provided, that, in no event shall the Borrowers lease of
office space for its principal place of business be considered a Principal
Operating Lease.

Property
shall mean any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.

Refunding
Debt means Indebtedness for borrowed money incurred by the Borrower or
any of its Subsidiaries after the date hereof; provided, however,
the Loan and any Senior Indebtedness are not Refunding Debt.

Regulatory
Change shall mean any change after the Closing Date in any
Governmental Requirement or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders
(including the Lender) of or under any Governmental Requirement (whether or not
having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.

Senior
Indebtedness shall mean obligations in respect of any and all of the
loans to Mariner Energy, Inc. pursuant to that certain Amended and Restated
Credit Agreement dated June 28, 1999 among Mariner Energy, Inc. and the banks
party thereto, and all indebtedness, liabilities and obligations of Mariner
Energy, Inc., evidenced by such credit agreement, as such agreement may be
amended, renewed, extended, supplemented, restated, refinanced, increased, or
otherwise modified from time to time, including without limitation, as such
agreement may be refinanced with and increased by different lenders under a
different agreement.

Subsidiary
shall mean, as to any Person, (i) any corporation more than 50% of whose stock
of any class or classes having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation (irrespective of whether
or not at the time stock of any 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 owned by such Person and/or one or more Subsidiaries of such Person and
(ii) any partnership, association, joint venture, limited liability company or
other entity in which such Person and/or one or more Subsidiaries of such Person
has more than a 50% equity interest at the time.

Taxes
shall have the meaning assigned such term in Section 4.03(a).

Section 1.03   
Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations hereunder shall be made, and all financial records shall be
maintained in accordance with GAAP applied on a consistent

ARTICLE
II.      Loan and Commitments

Section 2.01   Loan.

(a)     Loan.
The Loan shall be made in Advances and Interest Payment Advances in an aggregate
amount not to exceed the Commitment. The first Advance, in the amount of
$30,885,800, shall be made on the Closing Date and applied to (i) the payment of
the fee described in the Fee Letter and (ii) a contribution by the Borrower to
Mariner Energy, Inc. for its general corporate purposes. Another Advance shall
be made on May 1, 2000, in an amount equal to $81,114,200 and applied to (i)
repay the then outstanding principal amount of the Existing Term Loan plus
interest accrued thereon (ii) repay the outstanding principal amount of the
Revolver and (iii) pay the fee described in the Fee Letter. Any amount of the
second Advance remaining after the applications described in the preceding
sentence shall be used for general corporate purposes or contributed to Mariner
Energy, Inc. for its general corporate purposes.

(b)     Interest
Payment Advances. It is intended that any and all interest payments due on
the Loan before the Final Maturity Date shall, except to the extent the Borrower
makes such interest payment from other sources, be paid with the proceeds of an
Interest Payment Advance on each interest payment date in an amount equal to
such interest payment. No borrowing request shall be necessary to permit the
Lender to make any Interest Payment Advances to pay interest on the Note.

(c)     Not a Revolving Facility.  Loan payments may not be reborrowed.

Section 2.02   Warrants. In further consideration for Lender entering into this
Agreement, Borrower will on the Closing Date issue to Lender two warrants (the
Warrants) in the form of Exhibits B-1 and B-2 hereto, one
covering 600,000 and the other 300,000 Common Shares (as defined in Section
7.01) with an initial exercise price of $.01 per share. Pursuant to the
provisions of Section E.4 of the Amended and Restated Shareholders Agreement
among Borrower and the other parties thereto dated as of October 12, 1998 (the
Shareholders Agreement) 100% of the shareholders of the
Borrower have executed a Waiver and Consent Regarding Preemptive Rights in the
form attached as Exhibit C hereto in connection with the issuance of the
Warrants. Borrower agrees that the registration rights that Lender (formerly
known as Enron Capital & Trade Resources Corp. (ECT)) has under
the Shareholders Agreement shall apply to any and all Common Shares acquirable
upon the exercise of the Warrants.

Section 2.03    Note.
The Loan shall be evidenced by a single promissory note of the Borrower in
substantially the form of Exhibit A hereto dated as of the Closing Date,
payable to the order of the Lender and otherwise duly completed. The date,
amount of each Advance and each Interest Payment Advance, interest rate, and all
payments made on account of the principal on the Note, shall be recorded by the
Lender on its books for the Note, and, prior to any transfer, endorsed by the
Lender on the schedule attached to the Note or any continuation thereof. Such
records shall be deemed conclusive absent manifest error.

Section 2.04   Prepayments.

(a)      Optional
Prepayments. The Borrower may prepay the Loan upon not less than
three (3) Business Days prior written notice to the Lender, which
notice shall specify the prepayment date (which shall be a Business Day). Such
prepayments shall be in the minimum principal amount of $1,000,000 and in
integral multiples of $100,000, or in the aggregate unpaid principal amount of
the Loan outstanding. Upon such prepayment, all accrued and unpaid interest with
respect to the prepaid principal amount of the Loan is due and payable by the
Borrower to the Lender on the date of such prepayment.

(b)     Mandatory Prepayments.  The Borrower shall prepay the Loan:

| | (i)     in whole or in part, together with interest accrued thereon, from the net cash
proceeds received by the Borrower with respect to the securities offering
effected on the IPO Date, within one Business Day after the IPO Date; and                                         
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)     
in whole or in part, together with interest accrued thereon, from the net cash
proceeds of Refunding Debt or sale of equity (other than in an initial public
offering) within one Business Day after the date any Refunding Debt is incurred
or such sale is consummated.

Any partial prepayment
shall be applied first to accrued, unpaid interest on and then to the principal
of the Note. Prepayments permitted or required under Section 2.04 shall be
without premium or penalty.

ARTICLE
III.     Payments of Principal and Interest

Section 3.01      Repayment
of Loan. Subject to the prepayments permitted or required by Section 2.04,
the Borrower will pay to the Lender the entire outstanding principal balance of
the Loan on the Final Maturity Date.

Section 3.02     Interest.

(a)     The Borrower will pay
to the Lender interest on the unpaid principal amount of each Advance and
Interest Payment Advance, for the period commencing on the date each such
advance is funded to but excluding the date each such advance plus interest
thereon shall be paid in full at the rate of 15% per annum.

(b)     Notwithstanding the
foregoing, the Borrower will pay to the Lender interest at the Post-Default Rate
on any principal of the Loan, and (to the fullest extent permitted by law) on
any other amount payable by the Borrower hereunder or under the Note 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 and unpaid
interest on the Loan shall be payable semiannually on the last Business Day of
each April and October, commencing October 30, 2000, and at maturity (whether by
acceleration or otherwise), and after maturity, on demand.

(d)     Each determination by
the Lender of an interest payment or fee hereunder shall, except in cases of
manifest error, be final, conclusive and binding on the parties.

ARTICLE
IV.     Payments; Computations; Etc.

Section 4.01     
Payments. All payments of principal, interest and other amounts to be
made by the Borrower under this Agreement and the Note shall be made in Dollars,
in immediately available funds, to the Lender at CitiBank N.A., New York, New
York, ABA No. 021000089 for the account of ECT Finance, Account No. 4067-3621,
Re: Mariner, not later than 11:00 a.m. (New York time) on the date on which such
payments 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). Such
payments shall be made without (to the fullest extent permitted by applicable
law) defense, set-off or counterclaim. All payments shall be applied first to
interest and then to principal.

Section 4.02     
Computations. Interest on the Loan shall 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 such calculation
would exceed the Highest Lawful Rate, in which case interest shall be calculated
on the per annum basis of a year of 365 or 366 days, as the case may be.

Section 4.03     Taxes.

(a)     Payments Free and
Clear. Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 4.01, free and clear of, and without deduction for,
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, taxes
imposed on Lenders income, and franchise or similar taxes imposed on the
Lender, by (i) any jurisdiction (or political subdivision thereof) of which the
Lender, is a citizen or resident, (ii) the jurisdiction (or any political
subdivision thereof) in which the Lender is organized, or (iii) any jurisdiction
(or political subdivision thereof) in which the Lender is presently or hereafter
doing business which taxes are imposed solely as a result of doing business in
such jurisdiction (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
Taxes). If the Borrower shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to the Lender
(i) the sum payable shall be increased by the amount necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.03) the Lender shall receive
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable law.

(b)     Other Taxes. In
addition, to the fullest extent permitted by applicable law, the Borrower agrees
to pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies that arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as Other
Taxes).

(c)     INDEMNIFICATION.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WILL INDEMNIFY
THE LENDER FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT
LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON
AMOUNTS PAYABLE UNDER THIS SECTION 4.03) PAID BY THE LENDER, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY
ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED
AND THE LENDERS PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH
INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE THE LENDER
MAKES WRITTEN DEMAND THEREFOR. IF THE LENDER RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH THE LENDER HAS RECEIVED PAYMENT
FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT
AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS
AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE
BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO),
PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST
(BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER,
UPON THE REQUEST OF THE LENDER, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS
PENALTIES, INTEREST OR OTHER CHARGES) TO THE LENDER IN THE EVENT THE LENDER IS
REQUIRED TO REPAY SUCH REFUND OR CREDIT.

ARTICLE
V.     Capital Adequacy

Section 5.01     Capital Adequacy; Additional Costs.

(a)     Capital
Adequacy. The Borrower shall pay directly to the Lender from time to time on
request such amounts as the Lender may reasonably determine to be necessary to
compensate it or its parent or holding company for any costs
(Additional Costs) which it determines are attributable to
the maintenance by it or its parent or holding company pursuant to any
Governmental Requirement following any Regulatory Change, of capital in respect
of the Note or the Advances (such compensation to include, without limitation,
an amount equal to any reduction of the rate of return on assets or equity of
the Lender or its parent or holding company to a level below that which the
Lender or its parent or holding company could have achieved but for such
Governmental Requirement). The Lender will notify the Borrower that the Lender
is entitled to compensation pursuant to this Section 5.01(a) as promptly as
practicable after it determines to request such compensation.

(b)     Compensation
Procedure. If Lender notifies the Borrower of the incurrence of Additional
Costs under this Section 5.01, such notice to the Borrower shall set forth the
basis and amount of its request for compensation. Determinations and allocations
by the Lender for purposes of this Section 5.01 of the effect of capital
maintained pursuant to Section 5.01(c), on its costs or rate of return of
maintaining the Advances or its obligation to make the Advances, or on amounts
receivable by it in respect of the Advances, and of the amounts required to
compensate the Lender under this Section 5.01, shall be conclusive and
binding for all purposes, provided that such determinations and allocations are
made on a reasonable basis. Any request for additional compensation under this
Section 5.01 shall be paid by the Borrower within thirty (30) days of the
receipt by the Borrower of the notice described in this Section 5.01(b).

ARTICLE
VI.     Covenants

Section 6.01     Financial  Covenants.  So  long  as the  Loan  remains  unpaid,  the
Borrower shall:

(a)     Cash Flow Coverage
Ratio. Maintain for itself and its Subsidiaries on a consolidated basis and
for each twelve month period ending on the last day of each fiscal quarter, a
ratio of (i) EBITDA to (ii) the sum of (A) interest expense of the Borrower and
its Subsidiaries on a consolidated basis during such period (including interest
expense accrued during such period whether or not paid) plus (B)
maintenance capital expenditures of the Borrower and its Subsidiaries on a
consolidated basis during such twelve month period plus (C) cash taxes
paid by or on behalf of the Borrower and its Subsidiaries on a consolidated
basis during such period of at least 1.25 to 1.00. For purposes of this Section
6.01(a), maintenance capital expenditures shall mean the annual
capital expenditures made by the Borrower and its Subsidiaries on a consolidated
basis as necessary to maintain proved producing reserves at the levels set forth
for the Properties listed in the most recent annual Ryder Scott Company Reserve
Report relating to the Company; and

(b)     Interest Coverage
Ratio. Maintain for itself and its Subsidiaries on a consolidated basis and
for each twelve month period ending on the last day of each fiscal quarter, a
ratio of (i) EBITDA to (ii) interest expense of the Borrower and its
Subsidiaries on a consolidated basis during such period (including interest
expense accrued during such period whether or not paid) of at least 1.65 to
1.00.

Section 6.02     Limitation
on Indebtedness. The Borrower shall not, and shall not permit its
Subsidiaries to, create, incur, assume or suffer to exist any consolidated
Indebtedness other than consolidated Indebtedness outstanding on the Closing
Date, Refunding Debt, the Loan and the Senior Indebtedness.

ARTICLE VII.     REPRESENTATIONS AND WARRANTIES OF THE BORROWER

The
Borrower represents and warrants to the Lender as follows:

Section 7.01     
Organization, Standing and PowerSection 7.01 Organization, Standing and
Power. The Borrower is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own its properties and carry on its
business as now being conducted.

Section 7.02     Capital StructureSection 7.02 Capital Structure.

(a)     The authorized equity
securities of the Borrower (the Company Securities) consists
of 50,000,000 common shares, par value $.01 per share (the Common
Shares), and 1,000,000 preferred shares, $.01 par value per share (the
Preferred Shares), of which as of the date hereof, (A)
13,928,304 Common Shares are issued and outstanding, (B) 2,228,304 Common Shares
have been authorized and reserved for issuance under employee option and other
plans, (C) 0 Common Shares are held by the Borrower in its treasury. Except as
described in this Section 7.02, the Borrower has no authorized,
issued or outstanding Company Securities as of the date of this Agreement.

(b)     There are no
outstanding convertible securities, warrants, share or stock options, share or
stock appreciation rights or other rights to receive or purchase any Company
Securities of the Borrower except as described in Section 7.02(a)(B) and in
connection with the Existing Term Loan (such convertible securities, warrants,
share or stock options, share or stock appreciation rights or other rights
disclosed thereon, collectively, the Borrower Options).
Except for the Borrower Options and except as provided in this Agreement and the
Warrants, there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Borrower or any of its Subsidiaries is a party or by which any of them is bound
obligating the Borrower or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, any equity securities of the Borrower or
of any of its Subsidiaries or obligating the Borrower or any of its Subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking.

(c)     All outstanding Common
Shares which may be issued upon exercise of the Warrants will be, when issued in
accordance with the terms of the Warrants, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive or similar rights.

Section 7.03     Authority; No Violations; ApprovalsSection 7.03 Authority; No Violations; Approvals.

(a)     The Borrower has all
requisite power and authority to enter into this Agreement and to consummate
each of the transactions and perform each of the obligations contemplated hereby
and thereby. The execution and delivery of this Agreement and the Warrants and
the consummation of each of the transactions and the performance of each of the
obligations contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Borrower. This Agreement has been, and, on
the Closing Date the Warrants will be, duly executed and delivered by the
Borrower. This Agreement and the Warrants constitute valid and binding
obligations of the Borrower enforceable in accordance with their terms, subject,
as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or affecting
creditors rights and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

(b)     The execution and
delivery of this Agreement and the Warrants does not, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, require the consent of
any other Person to or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to the loss of any
material benefit under, or give rise to a right of purchase under, result in the
creation of any lien upon any of the material properties or assets of the
Borrower or its Subsidiaries under, or otherwise result in a material detriment
to the Borrower or its Subsidiaries under, any provision of (A) any
organizational documents of the Borrower or any of its Subsidiaries,
(B) any loan or credit agreement, note, bond, mortgage, indenture, lease,
instrument, permit, concession, franchise, license or other contract or
agreement, arrangement or understanding to which the Borrower or any of its
Subsidiaries is a party or otherwise is bound or by which any of them or their
respective properties are bound, (C) any joint venture or other ownership
arrangement to which the Borrower or any of its Subsidiaries is a party or
otherwise is bound or by which any of them or their respective properties are
bound or (D) any Governmental Requirement applicable to the Borrower or any
of its Subsidiaries or any of their respective properties or assets.

(c)     No approval, consent or
filing with or from any Governmental Authority is required by or with respect to
the Borrower or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the Warrants by the Borrower or the consummation
by the Borrower of the transactions contemplated hereby or thereby.

ARTICLE
VIII.     Events of Default; Remedies

Section 8.01     Events  of  Default.  One or  more  of the  following  events  shall
constitute an "Event of Default":

(a)     the  Borrower  shall  default in the payment or  prepayment  when due of (i) any
principal of or interest on the Loan or any fees in respect thereof; or

(b)     the Borrower shall
default in the performance of any other covenant on the part of the Borrower to
be performed hereunder, and such default continues for a period of thirty (30)
days after receipt of written notice from the Lender of such default; or

(c)     the Borrower or any of
its Subsidiaries shall admit in writing its inability to, or be generally unable
to, pay their respective debts as such debts become due; or

(d)     the Borrower or any of
its Subsidiaries shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its Property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect),
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, liquidation or composition
or readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), or (vi) take any corporate action for the purpose of effecting any
of the foregoing; or

(e)     a proceeding or case
shall be commenced, without the application or consent of the Borrower or any of
its Subsidiaries, as applicable, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or such
Subsidiary of all or any substantial part of its assets, or (iii) similar relief
in respect of the Borrower or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of 60 days; or (iv) an order
for relief against the Borrower or such Subsidiary shall be entered in an
involuntary case under the Federal Bankruptcy Code (as now or hereafter in
effect); or

(f)     a judgment or judgments
for the payment of money in excess of $5,000,000 in the aggregate shall be
rendered by a court against the Borrower or any of its Subsidiaries and the same
shall not be discharged (or provision shall not be made for such discharge), or
a stay of execution thereof shall not be procured, within thirty (30) days from
the date of entry thereof and the Borrower or such Subsidiary shall not, within
said period of 30 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or

(g)     proceeds  from the  issuance  of any  Refunding  Debt are not used to repay  the
Loan; or

(h)     the Borrower or any of its Subsidiaries  becomes an "investment  company" within
the meaning of the Investment Company Act of 1940, as amended; or

(i)     the Borrower or any of
its Subsidiaries becomes a holding company, a subsidiary
company of a holding company, an affiliate of a
holding company, or an affiliate of a subsidiary
company of a holding company, in each case, as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended; or

(j)     the Borrower or any of its Subsidiaries shall:

| | (i)     
fail to make any payment or payments of any Indebtedness when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness, or                                                                                    
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)     
fail to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument evidencing Indebtedness
(other than any failure to perform any term contemplated by sub-clause (i)
hereof) and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Indebtedness,

if, in either case, the
effect of such failure to perform or observe is to accelerate, or to permit the
acceleration of, the maturity of any Indebtedness (other than Indebtedness in
respect of the Loan or this Agreement), and any obligee (or obligees) of such
Indebtedness has or have claimed a default thereunder, and has or have not
waived in writing the Borrowers or the Borrowers Subsidiaries
obligation to such performance or observance.

Section 8.02     Remedies.

(a)     In the case of an Event
of Default other than one referred to in clauses (c), (d) or (e) of Section
8.01, the Lender may, by notice to the Borrower, declare the principal amount
then outstanding of, and the accrued interest on, the Loan and all other amounts
payable by the Borrower hereunder and under the Note to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.

(b)     In the case of the
occurrence of an Event of Default referred to in clauses (c), (d) or (e) of
Section 8.01, the principal amount then outstanding of, and the accrued interest
on, the Loan and all other amounts payable by the Borrower hereunder and under
the Note shall become automatically immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.

(c)     All proceeds received
after maturity of the Note, whether by acceleration or otherwise shall be
applied first to reimbursement of expenses and indemnities provided for in this
Agreement; second to accrued interest on the Note; third to principal
outstanding on the Note; and, to the extent of any excess, to the Borrower or as
otherwise required by any Governmental Requirement.

ARTICLE
IX.     Miscellaneous

Section 9.01     Waiver.
No failure on the part of the Lender to exercise and no delay in exercising, and
no course of dealing with respect to, any right, power or privilege under this
Agreement or the Note shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or the
Note preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

Section 9.02     
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, telecopy, courier or
U.S. Mail or in writing and telexed, telecopied, 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 each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted, if transmitted before 1:00 p.m. local
time on a Business Day (otherwise on the next succeeding Business Day) by telex
or telecopier and evidence or confirmation of receipt is obtained, or personally
delivered or, in the case of a mailed notice, on the date deposited in the
mails, postage prepaid, in each case given or addressed as aforesaid.

Section 9.03     Payment of Expenses, Indemnities, etc.  The Borrower agrees:

(a)     To pay all reasonable
expenses of the Lender, in its capacity as Lender hereunder, but not in any
other capacity, in the administration (both before and after the execution
hereof and including advice of counsel as to the rights and duties of the Lender
with respect thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing of,
preservation of rights under, enforcement of, and refinancing, renegotiation or
restructuring of, this Agreement and any amendment, waiver or consent relating
thereto (including, without limitation, travel, photocopy, mailing, courier,
telephone and other similar expenses of the Lender, the cost of environmental
audits, surveys and appraisals at reasonable intervals, the reasonable fees and
disbursements of counsel and other outside consultants for the Lender and, in
the case of enforcement, the reasonable fees and disbursements of counsel for
the Lender), and to reimburse promptly the Lender for all amounts expended,
advanced or incurred by the Lender to satisfy any obligation of the Borrower
under this Agreement;

(b)     TO INDEMNIFY THE LENDER
AND ITS AFFILIATES (OTHER THAN THE BORROWER AND ITS SUBSIDIARIES) AND EACH OF
THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS,
ACCOUNTANTS AND EXPERTS (INDEMNIFIED PARTIES) FROM, HOLD EACH
OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM
FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR
INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO)
AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE BORROWER OR ANY OF ITS SUBSIDIARIES OF THE PROCEEDS OF THE
LOAN, OTHER THAN INDEMNITY MATTERS SOUGHT AGAINST THE INDEMNIFIED PARTIES BY ANY
THIRD PARTY FOR USURPATION OF A CORPORATE OPPORTUNITY OF SUCH THIRD PARTY, (II)
THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT BY BORROWER, (III) THE
OPERATIONS OF THE BUSINESS OF THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (IV)
THE FAILURE OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH THE TERMS
OF THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER
EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO
DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY
REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL
INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS OF THE LENDERS
SHAREHOLDERS AGAINST THE LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND

(c)     TO INDEMNIFY AND HOLD
HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL
LOSSES, CLAIMS, COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS,
DAMAGES AND LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER
ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER, ANY OF ITS SUBSIDIARIES OR ANY
OF THEIR RESPECTIVE PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR RESPECTIVE PROPERTIES, (II) AS
A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR SUCH
SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES OF ANY OF THEIR RESPECTIVE PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR RESPECTIVE PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE
TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (V)
ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THIS
AGREEMENT, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS
SECTION 9.03(C) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE
ACTS OR OMISSIONS OF THE LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS
SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER
BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR
OTHERWISE).

(d)     No Indemnified Party
may settle any claim to be indemnified without the consent of the indemnitor,
such consent not to be unreasonably withheld; provided, that the indemnitor may
not reasonably withhold consent to any settlement that an Indemnified Party
proposes, if the indemnitor does not have the financial ability to pay all its
obligations outstanding and asserted against the indemnitor at that time,
including the maximum potential claims against the Indemnified Party to be
indemnified pursuant to this Section 9.03.

(e)     In the case of any
indemnification hereunder, the Lender shall give notice to the Borrower of any
such claim or demand being made against the Indemnified Party and the Borrower
shall have the non-exclusive right to join in the defense against any such claim
or demand provided that if the Borrower provides a defense, the Indemnified
Party shall bear its own cost of defense unless there is a conflict between the
Borrower and such Indemnified Party.

(f)     THE FOREGOING
INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR
CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR
PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF
STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED
PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN
ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF
INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM
THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.

(g)     The Borrowers
obligations under this Section 9.03 shall survive any termination of this
Agreement and the payment of the Note and shall continue thereafter in full
force and effect.

(h)     The Borrower shall pay
any amounts due under this Section 9.03 within thirty (30) days of the receipt
by the Borrower of notice of the amount due.

Section 9.04     Amendments,  Etc. Any  provision of this  Agreement  may be amended,
modified or waived with the Borrower's and the Lender's prior written consent.

Section 9.05      Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.

Section 9.06     Assignments and Participations.

(a)     The Borrower may not
assign its rights or obligations hereunder or under the Note without the prior
consent of the Lender.

(b)     The Lender may assign
to one or more assignees all or a portion of its rights and obligations under
this Agreement. Any assignment will become effective upon the execution and
delivery of the assignment to the Borrower. Upon receipt and acceptance of such
executed assignment, the Borrower, will, at the Lenders expense, execute
and deliver a new Note to each of the assignor and/or assignee, as appropriate,
in accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 9.06(b), the
assignee will become a Lender, if not already a Lender,
for all purposes of this Agreement. The assignor shall be relieved of its
obligations hereunder to the extent of such assignment (and if the assigning
Lender no longer holds any rights or obligations under this Agreement, such
assigning Lender shall cease to be a Lender hereunder except that
its rights under Sections 5.01, 5.05 and 9.03 shall not be affected).

(c)     The Lender may
transfer, grant or assign participations in all or any part of its interests
hereunder pursuant to this Section 9.06(c) to any Person, provided that:
(i) the Lender shall remain the Lender for all purposes of this
Agreement and the transferee of such participation shall not constitute a
Lender hereunder; and (ii) no participant under any such
participation shall have rights to approve any amendment to or waiver of any
provision of this Agreement or the Note, except to the extent such amendment or
waiver would (x) extend the Final Maturity Date or (y) reduce the
interest rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to the Loan in
which such participant is participating, or postpone the payment of any thereof.
In the case of any such participation, the participant shall not have any rights
under this Agreement (the participants rights against the Lender in
respect of such participation to be those set forth in the agreement creating
such participation), and all amounts payable by the Borrower hereunder shall be
determined as if the Lender had not sold such participation, provided
that such participant shall be entitled to receive additional amounts under
Article V on the same basis as if it were a Lender and be indemnified under
Section 9.03 as if it were a Lender.

(d)     The Lender may furnish
any information concerning the Borrower in its possession from time to time to
assignees and participants (including prospective assignees and participants);
provided that any such assignee or participant enters into a confidentiality
agreement in form and substance reasonably satisfactory to the Borrower to the
effect that such assignee or participant will use such information only for the
purposes of such assignment or participation and will maintain the
confidentiality of such information.

Section 9.07     
Invalidity. In the event that any one or more of the provisions contained
in the Agreement or the Note shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of such documents.

Section 9.08     
Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

Section 9.09     
References. The words herein, hereof,
hereunder and other words of similar import when used in this
Agreement refer to this Agreement as a whole, and not to any particular article,
section or subsection. Any reference herein to a Section shall be deemed to
refer to the applicable Section of this Agreement unless otherwise stated
herein. Any reference herein to an exhibit or schedule shall be deemed to refer
to the applicable exhibit or schedule attached hereto unless otherwise stated
herein.

Section 9.10     
Survival. The obligations of the parties under Section 4.03, Article V,
and Section 9.03 shall survive the repayment of the Loan. To the extent that any
payments of the Loan 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 portion of the Loan
so satisfied shall be revived and continue as if such payment or proceeds had
not been received and the Lenders liens, security interests, rights,
powers and remedies under this Agreement shall continue in full force and
effect.

Section 9.11     
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.

Section 9.12      NO ORAL
AGREEMENTS. THIS AGREEMENT AND THE NOTE EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND
THEREOF. THIS AGREEMENT AND THE NOTE 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 RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE NOTE.

Section 9.13     GOVERNING LAW; WAIVERS; ARBITRATION.

(a)     THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

(b)     EACH OF THE BORROWER
AND THE LENDER HEREBY (I) 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 DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (II) 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 (III) ACKNOWLEDGE THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 9.13.

(c)     ANY ACTION, DISPUTE,
CLAIM OR CONTROVERSY OF ANY KIND BETWEEN THE BORROWER AND THE LENDER ARISING OUT
OF, OR PERTAINING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (A
DISPUTE) SHALL BE RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH
THE TERMS HEREOF. ANY PARTY MAY, BY SUMMARY PROCEEDINGS, BRING AN ACTION IN
COURT TO COMPEL ARBITRATION OF ANY DISPUTE. ANY ARBITRATION SHALL BE
ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION (AAA) IN
ACCORDANCE WITH THE TERMS OF THIS SECTION, THE COMMERCIAL ARBITRATION RULES OF
THE AAA, AND, TO THE MAXIMUM EXTENT APPLICABLE, THE FEDERAL ARBITRATION ACT.
JUDGMENT ON ANY AWARD RENDERED BY AN ARBITRATOR MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY ARBITRATION SHALL BE CONDUCTED BEFORE A THREE PERSON
PANEL OF ARBITRATORS. SUCH PANEL SHALL CONSIST OF ONE PERSON DESIGNATED BY THE
BORROWER, ONE DESIGNATED BY THE LENDER AND ONE DESIGNATED BY THE NOMINEES OF THE
BORROWER AND THE LENDER (COLLECTIVELY, THE ARBITRATORS). SUCH
ARBITRATORS DESIGNATED BY EACH OF THE BORROWER AND THE LENDER DO NOT HAVE TO BE
NEUTRAL. IF EITHER OF THE BORROWER OR THE LENDER FAILS TO DESIGNATE AN
ARBITRATOR WITHIN TEN (10) DAYS AFTER THE FILING OF THE DISPUTE WITH THE AAA, OR
EITHER OF THE BORROWERS OR THE LENDERS ARBITRATORS FAILS TO
DESIGNATE A THIRD ARBITRATOR WITHIN THIRTY (30) DAYS AFTER THEIR APPOINTMENTS,
SUCH PARTY-APPOINTED ARBITRATOR AND THE THIRD ARBITRATOR, AS APPLICABLE, SHALL
BE APPOINTED BY THE AAA. ANY ARBITRATION PROCEEDING HEREUNDER SHALL BE CONDUCTED
IN HOUSTON, TEXAS AND SHALL BE CONCLUDED WITHIN 180 DAYS OF THE FILING OF THE
DISPUTE WITH THE AAA. THE ARBITRATORS SHALL BE EMPOWERED TO AWARD SANCTIONS AND
TO TAKE SUCH OTHER ACTIONS AS THEY DEEM NECESSARY, TO THE SAME EXTENT A JUDGE
COULD IMPOSE SANCTIONS OR TAKE SUCH OTHER ACTIONS PURSUANT TO THE FEDERAL RULES
OF CIVIL PROCEDURE AND APPLICABLE LAW. NO AWARD BY THE ARBITRATORS SHALL ASSESS
CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES BUT MAY ASSESS COSTS AND EXPENSES
IN A MANNER DEEMED EQUITABLE. THE ARBITRATORS SHALL MAKE SPECIFIC WRITTEN
FINDINGS OF FACT AND CONCLUSIONS OF LAW. THE DECISION OF THE ARBITRATORS SHALL
BE FINAL AND BINDING ON EACH PARTY. ALL FEES OF THE ARBITRATORS AND ANY
ENGINEER, ACCOUNTANT OR OTHER CONSULTANT ENGAGED BY THE ARBITRATORS, SHALL BE
PAID BY THE BORROWER AND THE LENDER AS AWARDED BY THE ARBITRATORS.

Section 9.14     
Interest. It is the intention of the parties hereto that Lender shall
conform strictly to usury laws applicable to it. Accordingly, if the
transactions contemplated hereby would be usurious as to the Lender under laws
applicable to it (including the laws of the United States of America or any
other jurisdiction whose laws may be mandatorily applicable to the Lender
notwithstanding the other provisions of this Agreement, or the laws of the State
of Texas if the choice of New York law is not given effect notwithstanding
Section 35.51 of the Texas Business and Commerce Code and Section 5.1401 of the
New York General Obligations Law), then, in that event, notwithstanding anything
to the contrary in this Agreement or the Note or any agreement entered into in
connection with or as security for the Loan, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under law
applicable to the Lender that is contracted for, taken, reserved, charged or
received by the Lender in connection with the Loan shall under no circumstances
exceed the maximum amount allowed by such applicable law, and any excess shall
be canceled automatically and if theretofore paid shall be credited by the
Lender on the principal amount of the Loan (or, to the extent that the principal
amount of the Loan shall have been or would thereby be paid in full, refunded by
the Lender to the Borrower); and (ii) in the event that the maturity of the
Loan is accelerated resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to the Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by the Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Loan (or, to the extent that the principal amount of the
Loan shall have been or would thereby be paid in full, refunded by the Lender to
the Borrower). All sums paid or agreed to be paid to the Lender for the use,
forbearance or detention of sums due hereunder shall, to the extent permitted by
law applicable to the Lender, be amortized, prorated, allocated and spread
throughout the full term of the Loan evidenced by the Note until payment in full
so that the rate or amount of interest on account of the Loan hereunder does not
exceed the maximum amount allowed by such applicable law.

Section 9.15      EXCULPATION
PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A
DUTY TO READ THIS AGREEMENT AND AGREES THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS OF THIS AGREEMENT; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN
ENTERING INTO THIS AGREEMENT; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS
OF THIS AGREEMENT RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME
ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY
FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT
CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS
AGREEMENT ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT CONSPICUOUS.

The parties hereto have
caused this Agreement to be duly executed as of the day and year first above
written.

|BORROWER: | MARINER ENERGY LLC                                                                                                                                
|--------- | --------------------------------------------------------------------------------------------------------------------------------------------------
|          | By:                                                                                                                                               
|          | Name:  Frank A. Pici                                                                                                                              
|          | Title:  Chief Financial Officer                                                                                                                   
|          | Address for Notices:                                                                                                                              
|          | 580 WestLake Park Blvd.Suite 1300Houston, Texas 77079
Telecopier No.:  (281) 584-5690Telephone No.:  (281) 584-5540Attention:  VP, Finance and CFO
|LENDER:   | ENRON NORTH AMERICA CORP.                                                                                                                         
|          | By:                                                                                                                                               
|          | Name:                                                                                                                                             
|          | Title:                                                                                                                                            
|          | Address for Notices:                                                                                                                              
|          | 1400 Smith StreetHouston, Texas 77002
Telecopier No.:  (713) 646-3602Telephone No.:  (713) 853-5259Attention:  Donna Lowry                        

EXHIBIT AFORM OF NOTE

March 21, 2000

FOR VALUE RECEIVED, MARINER
ENERGY LLC, a Delaware limited liability company (the
Borrower) hereby promises to pay to the order of ENRON NORTH
AMERICA CORP. or its designees (the Lender), at New York, New
York, or such other location as the Lender may hereafter specify, the principal
sum equal to the Advances and Interest Payment Advances (as those terms are
defined in the Loan Agreement (defined below)) in lawful money of the United
States of America and in immediately available funds, on the date and in the
principal amount provided in the Loan Agreement (defined below), and to pay
interest at such location, in like money and funds, at the rate per annum and on
the dates provided in the Loan Agreement.

     In addition to and
cumulative of any payments permitted or required to be made against this Note
pursuant to the Loan Agreement, this Note, including all principal and accrued
interest then unpaid, shall be due and payable on the Final Maturity Date. All
payments shall be applied first to accrued interest and the balance to
principal, except as otherwise expressly provided in the Loan Agreement.
Prepayments on this Note shall be applied in the manner set forth in the Loan
Agreement.

     This Note is the Note
referred to in that certain Term Loan Agreement of even date herewith between
the Borrower and the Lender and evidences the Loan made by the Lender thereunder
(such Agreement as the same may be amended or supplemented from time to time,
the Loan Agreement). Capitalized terms used in this Note have
the respective meanings assigned to them in the Loan Agreement.

     The Lender is hereby
authorized by the Borrower to endorse on Schedule A (or a continuation thereof)
attached to this Note the date and the amount of each Advance, Interest Payment
Advance, and payment or prepayment of principal of the Loan received by the
Lender, provided that any failure by the Lender to make any such endorsement
shall not affect the obligations of the Borrower under the Loan Agreement or
under this Note in respect of the Loan.

     This Note is issued
pursuant to the Loan Agreement and is entitled to the benefits provided for in
the Loan Agreement. All of the terms of the Loan Agreement, including without
limitation, the usury savings provisions thereof, are incorporated herein by
this reference. The Loan Agreement provides for the acceleration of the maturity
of this Note upon the occurrence of certain events, for prepayments of the Loan
upon the terms and conditions specified therein and other provisions relevant to
this Note.

     THIS NOTE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

|MARINER ENERGY LLC             
|-------------------------------
|By:                            
|Name:  Frank A. Pici           
|Title:  Chief Financial Officer

SCHEDULE A

This Note evidences the
Loan made by the Lender with respect to the Loan under the within-described Loan
Agreement to the Borrower, in the principal amounts set forth below, subject to
the payments of principal set forth below:

|Date Advancesor InterestPaymentAdvances | PrincipalAmount ofAdvances orInterestPaymentAdvances | Date of Paymentor Prepayment | Amount Paidor Prepaid | LoanBalanceOutstanding
|--------------------------------------- | ---------------------------------------------------- | ---------------------------- | --------------------- | ----------------------
|                                        |                                                      |                              |                       |                       
|March 21, 2000                          | $30,855,8000                                         |                              |                       | $30,855,800           
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |                       
|                                        |                                                      |                              |                       |