EXHIBIT 10.10
     



                             U.S. $20,000,000

                             CREDIT AGREEMENT,

                        dated as of August 14, 1998,

                                 between

                        FUTURE PETROLEUM CORPORATION,

                             as the Borrower,

                                   and

              BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,

                                as the Lender

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                             TABLE OF CONTENTS

SECTION                                                                    PAGE

ARTICLE I     DEFINITIONS AND ACCOUNTING TERMS                             -2-
1.1.   Defined Terms                                                       -2-
1.2.   Use of Defined Terms                                               -22-
1.3.   Cross-References                                                   -22-
1.4.   Accounting and Financial Determinations                            -24-

ARTICLE II     COMMITMENTS, BORROWING PROCEDURES AND NOTES                -24-
2.1.   Commitments                                                        -24-
2.1.1. Revolving Loans                                                    -24-
2.1.2. Term Loans                                                         -24-
2.1.3. Letters of Credit                                                  -24-
2.1.4. Lender Not Required To Make Loans, etc. Under Certain Circumstances-24-
2.2.   Reduction of Commitment Amounts                                    -25-
2.2.1. Optional                                                           -25-
2.2.2. Mandatory                                                          -25-
2.3.   Borrowing Procedure                                                -25-
2.4.   Loan Accounts and Notes                                            -26-
2.5.   Borrowing Base Redetermination                                     -26-
2.6.   Purposes                                                           -27-

ARTICLE III     REPAYMENTS, PREPAYMENTS, INTEREST AND FEES                -27-
3.1.   Repayments and Prepayments and Certain Borrowing Base Matters      -27-
3.1.1. Repayments and Prepayments                                         -27-
3.1.2. Borrowing Base Deficiencies and Asset Sales                        -28-
3.2.   Interest Provisions                                                -30-
3.2.1. Rate                                                               -30-
3.2.2. Post-Maturity Rates, etc                                           -30-
3.2.3. Payment Dates                                                      -30-
3.2.4. Maximum Interest                                                   -31-
3.3.   Fees                                                               -32-
3.3.1. Structuring Fee                                                    -32-
3.3.2. Closing Fee                                                        -32-
3.3.3. Engineering and Redetermination Fee                                -32-
3.3.4. Commitment Fees                                                    -32-
3.3.5. Letter of Credit Stated Amount Fee                                 -32-
3.3.6. Letter of Credit Issuance Fee                                      -33-
3.3.7. Letter of Credit Administrative Fees                               -33-
3.3.8. Borrowing Base Fee                                                 -33-
3.4.   Proceeds Account                                                   -33-

ARTICLE IV     LETTERS OF CREDIT                                          -33-
4.1.   Issuance Requests                                                  -33-
4.2.   Issuances and Extensions                                           -34-
4.3.   Expenses                                                           -36-
4.4.   Disbursements                                                      -36-
4.5.   Reimbursement                                                      -36-
4.6.   Deemed Disbursements                                               -37-
4.7.   Nature of Reimbursement Obligations                                -38-
4.8.   Increased Costs; Indemnity                                         -39-

ARTICLE V     CERTAIN INTEREST RATE AND OTHER PROVISIONS                  -40-
5.1.   Increased Capital Costs                                            -40-
5.2.   Taxes                                                              -41-
5.3.   Payments, Computations, etc.                                       -42-
5.4.   Setoff                                                             -42-
5.5.   Use of Proceeds                                                    -43-

ARTICLE VI     CONDITIONS PRECEDENT                                       -43-
6.1.   Initial Credit Extension                                           -43-
6.1.1. Resolutions, etc                                                   -43-
6.1.2. Delivery of Notes                                                  -44-
6.1.3. Guaranties                                                         -44-
6.1.4. Pledge Agreements                                                  -44-
6.1.5. Security Agreement                                                 -45-
6.1.6. Consents and Mortgage Consents                                     -45-
6.1.7. Mortgage                                                           -45-
6.1.8. Opinions of Counsel                                                -46-
6.1.9. UCC-11s                                                            -46-
6.1.10.Evidence of Insurance                                              -47-
6.1.11.Engineering Reports                                                -47-
6.1.12.Environmental Report                                               -47-
6.1.13.Budget                                                             -47-
6.1.14.Intercreditor Agreement                                            -47-
6.1.15.Closing of the Future California Merger                            -47-
6.1.16.Closing Fees, Expenses, etc                                        -47-
6.1.17.Other Documents                                                    -47-
6.2.   Inclusion of Hydrocarbon Interests in the Borrowing Base           -47-
6.2.1. Environmental Report                                               -48-
6.2.2. Mortgage                                                           -48-
6.2.3. UCC-11s                                                            -48-
6.2.4. Evidence of Insurance                                              -49-
6.2.5. Engineering Reports                                                -49-
6.2.6. Material Contracts and Related Consents; Security Agreement        -49-
6.2.7. Guaranties                                                         -49-
6.2.8. Additional Stock or Partnership Pledge                             -49-
6.2.9. Other Documents                                                    -50-
6.3.   All Credit Extensions                                              -50-
6.3.1. Compliance with Warranties, No Default, etc                        -50-
6.3.2. Credit Request                                                     -51-
6.3.3. Satisfactory Legal Form                                            -51-

ARTICLE VII     REPRESENTATIONS AND WARRANTIES                            -51-
7.1.   Organization, etc.                                                 -51-
7.2.   Due Authorization, Non-Contravention, etc.                         -52-
7.3.   Government Approval, Regulation, etc.                              -52-
7.4.   Investment Company Act                                             -52-
7.5.   Public Utility Holding Company Act                                 -52-
7.6.   Validity, etc.                                                     -52-
7.7.   Financial Information                                              -53-
7.8.   No Material Adverse Change                                         -53-
7.9.   Litigation, Labor Controversies, etc.                              -53-
7.10.  Ownership of Properties                                            -53-
7.11.  Taxes                                                              -53-
7.12.  Pension and Welfare Plans                                          -54-
7.13.  Compliance with Law                                                -54-
7.14.  Claims and Liabilities                                             -54-
7.15.  No Prohibition on Perfection of Security Documents                 -54-
7.16.  Solvency                                                           -55-
7.17.  Environmental Warranties                                           -55-
7.18.  Regulations G, U and X                                             -57-
7.19.  Year 2000 Compliance                                               -57-
7.20.  Insurance                                                          -57-
7.21.  Accuracy of Information                                            -58-

ARTICLE VIII     COVENANTS                                                -58-
8.1.   Affirmative Covenants                                              -58-
8.1.1. Financial Information, Reports, Notices, etc                       -58-
8.1.2. Compliance with Laws, etc                                          -61-
8.1.3. Maintenance and Development of Properties                          -62-
8.1.4. Insurance                                                          -62-
8.1.5. Books and Records                                                  -63-
8.1.6. Environmental Covenant                                             -63-
8.1.7. Further Assurances                                                 -64-
8.2.   Negative Covenants                                                 -65-
8.2.1. Business Activities                                                -65-
8.2.2. Indebtedness                                                       -65-
8.2.3. Liens                                                              -67-
8.2.4. Financial Condition                                                -69-
8.2.5. Investments                                                        -70-
8.2.6. Restricted Payments, etc                                           -71-
8.2.7. Rental Obligations                                                 -71-
8.2.8. Consolidation, Merger, etc                                         -71-
8.2.9. Asset Dispositions, etc                                            -72-
8.2.10.Modification of Certain Documents                                  -72-
8.2.11.Transactions with Affiliates                                       -72-
8.2.12.Negative Pledges, Restrictive Agreements, etc                      -73-
8.2.13.Take or Pay Contracts                                              -73-
8.2.14.Hydrocarbon Hedging                                                -73-

ARTICLE IX     EVENTS OF DEFAULT                                          -74-
9.1.   Listing of Events of Default                                       -74-
9.1.1. Non-Payment of Obligations                                         -74-
9.1.2. Breach of Warranty                                                 -74-
9.1.3. Non-Performance of Certain Covenants and Obligations               -74-
9.1.4. Non-Performance of Other Covenants and Obligations                 -75-
9.1.5. Default on Other Indebtedness                                      -75-
9.1.6. Judgments                                                          -75-
9.1.7. Pension Plans                                                      -76-
9.1.8. Control of the Borrower                                            -76-
9.1.9. Bankruptcy, Insolvency, etc                                        -76-
9.1.10.Impairment of Security, etc                                        -77-
9.1.11.Material Adverse Effect                                            -77-
9.2.   Action if Bankruptcy                                               -77-
9.3.   Action if Other Event of Default                                   -77-
9.4.   Rights Not Exclusive                                               -77-

ARTICLE X     MISCELLANEOUS PROVISIONS                                    -78-
10.1.  Waivers, Amendments, etc.                                          -78-
10.2.  Notices                                                            -78-
10.3.  Payment of Costs and Expenses                                      -79-
10.4.  Indemnification                                                    -80-
10.5.  Survival                                                           -81-
10.6.  Severability                                                       -81-
10.7.  Headings                                                           -81-
10.8.  Execution in Counterparts, Effectiveness, etc.                     -81-
10.9.  Governing Law; Entire Agreement                                    -82-
10.10. Successors and Assigns                                             -82-
10.11. Sale and Transfer of Loans and Notes; Participations in
       Loans and Notes                                                    -82-
10.11.1.Assignments                                                       -82-
10.11.2.Participations                                                    -84-
10.12. Forum Selection and Consent to Jurisdiction                        -85-
10.13. Waiver of Jury Trial                                               -85-
10.14. Notice                                                             -86-
SCHEDULE I          Disclosure Schedule
SCHEDULE II         Subsidiaries
SCHEDULE III        Certain Consents and Mortgage Consents

EXHIBIT A           Form of Secured Promissory Note
EXHIBIT B           Form of Security Agreement
EXHIBIT C           Form of Borrowing Request
EXHIBIT D           Form of Guaranty
EXHIBIT E-1         Form of California Mortgage
EXHIBIT E-2         Form of Multi-State Mortgage
EXHIBIT F-1         Form of Pledge Agreement (Partnership Interests)
EXHIBIT F-2         Form of Pledge Agreement (Stock)
EXHIBIT G           Form of Lender Assignment Notice
EXHIBIT H           Form of Opinion of Counsel to the Borrower, et al.
EXHIBIT I-1         Form of Pre-Closing Title Opinion of Special Counsel to the 
                    Borrower
EXHIBIT I-2         Form of Post-Closing Title Opinion of Special Counsel to
                    the Borrower
EXHIBIT J           Form of Consent
EXHIBIT K           Form of Issuance Request
EXHIBIT L           Form of Letter of Credit


<PAGE>

                               CREDIT AGREEMENT


THIS CREDIT AGREEMENT, dated as of August 14, 1998, between FUTURE PETROLEUM 
CORPORATION, a Utah corporation (the "Borrower") and BANK OF AMERICA NATIONAL 
TRUST AND SAVINGS ASSOCIATION, a national banking association (the "Lender"),


     W I T N E S S E T H:

WHEREAS, the Borrower is engaged in the business of oil and gas exploration 
and production, and activities related or ancillary thereto; and

WHEREAS, the Borrower desires to obtain Commitments from the Lender pursuant 
to which 

(a)     Loans will be made to the Borrower from time to time prior to the 
applicable Commitment Termination Date; and

(b)     Letters of Credit will be issued by an Issuer for the account of the 
Borrower from time to time prior to the Availability Termination Date;

in maximum aggregate principal amount of Loans and Letter of Credit 
Outstandings at any one time not to exceed in the aggregate the lesser of
(x) the Borrowing Base, or (y) $20,000,000; and
 
WHEREAS, the Lender is willing, on the terms and subject to the conditions 
hereinafter set forth (including Article VI), to extend such Commitments, 
and to make such Loans to the Borrower and issue such Letters of Credit; and

WHEREAS, the proceeds of such Loans will be used for general business 
purposes, including Acquisitions and the development of Oil and Gas Properties.

NOW, THEREFORE, the parties hereto agree as follows:


                                 ARTICLE I

                       DEFINITIONS AND ACCOUNTING TERMS

SECTION I.1.  Defined Terms.  The following terms (whether or not 
underscored) when used in this Agreement, including its preamble and recitals, 
shall, except where the context otherwise requires, have the following meanings 
(such meanings to be equally applicable to the singular and plural forms 
thereof):

"Acquired Properties" means those Oil and Gas Properties and other assets 
that are acquired from time to time in an Acquisition.

"Acquisition" means an acquisition by the Borrower or one or more of its 
Subsidiaries of Acquired Properties.

"Affiliate" of any Person means any other Person which, directly or 
indirectly, controls, is controlled by or is under common control with such 
Person (excluding any trustee under, or any committee with responsibility for 
administering, any Plan).  A Person shall be deemed to be "controlled by" any 
other Person if such other Person possesses, directly or indirectly, power 

(a)     to vote 10% or more of the securities (on a fully diluted 
basis) having ordinary voting power for the election of directors or 
managing general partners; or

(b)     to direct or cause the direction of the management and 
policies of such Person whether by contract or otherwise.

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

"Alternate Base Rate" means, on any date and with respect to all Base Rate 
Loans, a fluctuating rate of interest per annum equal to the higher of

(a)     the rate of interest as announced from time to time by the 
Lender as its "reference rate" at its Domestic Office; or

(b)     the Federal Funds Rate most recently determined by the Lender 
plus 1/2%.

The Alternate Base Rate is not necessarily intended to be the lowest rate of 
interest in connection with extensions of credit.  Changes in the rate of 
interest on that portion of any Loans maintained as Base Rate Loans will take 
effect simultaneously with each change in the Alternate Base Rate.  The Lender 
will give notice to the Borrower of changes in the Alternate Base Rate.

"Applicable Law" means with respect to any Person or matter, any federal, 
state, regional, tribal or local statute, law, code, rule, treaty, convention, 
application, order, decree, consent decree, injunction, directive, 
determination or other requirement (whether or not having the force of law)
relating to such Person or matter and, where applicable, any interpretation 
thereof by a Government Agency having jurisdiction with respect thereto or 
charged with the administration or interpretation thereof.

"Approvals" means each and every approval, authorization, license, permit, 
consent, variance, land use entitlement, franchise, agreement, filing or 
registration by or with any Government Agency or other Person necessary for all 
stages of developing, operating, maintaining and abandoning Oil and Gas 
Properties.

"Assignee Lender" is defined in Section 10.11.1.

"Authorized Officer" means, relative to any Obligor, those of its officers 
(or, in the case of a partnership, those of the officers of its general 
partner) whose signatures and incumbency shall have been certified to the 
Lender pursuant to Section 6.1.1.

"Availability Termination Date" means August 14, 1999.

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

"Borrower" is defined in the preamble.

"Borrowing Base" means, as at any date, (a) prior to the initial Borrowing 
Base Redetermination, $10,500,000 and (b) thereafter, (i) that amount of 
indebtedness for borrowed money under the Facility that the Lender determines 
can be supported by  the Proven Reserves attributable to Hydrocarbon Interests 
owned directly by the Borrower or its Subsidiaries which are a part of the 
Mortgaged Properties, after an engineering and economic review of such reserves 
conducted by the Lender using its normal procedures for oil and gas facilities 
of this type, taking into account the value of all those proved developed 
producing oil and gas reserves and certain portions of certain other categories 
of Proven Reserves attributable to the Mortgaged Properties.

"Borrowing Base Deficiency" means the amount by which (a) the sum of the 
aggregate outstanding principal amount of all Loans plus Letter of Credit 
Outstandings exceeds (b) the then current Borrowing Base.     

"Borrowing Base Deficiency Notification Date" means the date on which any 
notice of a Borrowing Base Deficiency is received by the Borrower.

"Borrowing Base Fee" is defined in Section 3.3.8.

"Borrowing Base Redetermination" is defined in Section 2.5.

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

"Business Day" means any day which is neither a Saturday or Sunday nor a 
legal holiday on which banks are authorized or required to be closed in 
Chicago, Illinois.

"Capital Expenditures" means, for any period, (without duplication) the 
aggregate amount of all expenditures of the Borrower and its consolidated 
Subsidiaries for fixed or capital assets made during such period which, in 
accordance with GAAP, would be classified as capital expenditures including, 
with respect to any period, payments made by the Borrower and its consolidated 
Subsidiaries with respect to Capitalized Lease Liabilities incurred during such 
period.

"Capitalization" means, at any time, the sum of (a) the total Debt of the 
Borrower and its consolidated Subsidiaries plus (b) the total equity of the 
Borrower and its consolidated Subsidiaries.

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

"Cash Equivalent Investment" means, at any time:

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

(b)     commercial paper, maturing not more than nine months from the 
date of issue, which is issued by

(i)     a corporation (other than an Affiliate of the Borrower) 
organized under the laws of any state of the United States or of the 
District of Columbia and rated at least A-1 by Standard & Poor's 
Corporation or P-1 by Moody's Investors Service, Inc., or

(ii)  the Lender;

(c)     any certificate of deposit or bankers acceptance, maturing 
not more than one year after such time, which is issued by

(i)     a commercial banking institution that is a member of 
the Federal Reserve System and has a combined capital and surplus and 
undivided profits of not less than $500,000,000, or

(ii)     the Lender; or

(d)     any repurchase agreement entered into with the Lender (or 
other commercial banking institution of the stature referred to in clause 
(c)) which 

(i)     is secured by a fully perfected security interest in 
any obligation of the type described in any of clauses (a) through 
(c); and

(ii)     has a market value at the time such repurchase 
agreement is entered into of not less than 100% of the repurchase 
obligation of the Lender (or other commercial banking institution) 
thereunder.

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

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

"Change in Control" means (a) if Bargo Energy Resources, Ltd., EnCap Equity 
1994 Limited Partnership and Energy Capital Investment Company PLC shall 
fail to collectively own at least 51% of the outstanding capital stock of 
the Borrower, on a fully diluted basis, or (b) if the Borrower ceases to 
own beneficially and of record 100% of the capital stock of each of Future 
Texas, Future Nevada and Future Newco, or (c) if Future Texas or Future 
Nevada ceases to own beneficially and of record 100% of the general partner 
and limited partner interests, respectively, in the Partnership Subsidiaries.

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

"Commitment" means the Lender's commitment pursuant to Section 2.1 to make 
Loans to the Borrower and to issue Letters of Credit in accordance with the 
terms and provisions of this Agreement.

"Commitment Amount" means the lesser of (i) $20,000,000, as reduced from 
time to time pursuant to the provisions of Section 2.2, or (ii) the Borrowing 
Base. 

"Commitment Availability" means, on any date, the excess of

(a)     the then applicable Commitment Amount, over

(b)     the sum of

(i)     the aggregate outstanding principal amount of all Loans 
on such date, plus

(ii)     the Letter of Credit Outstandings on such date.

"Commitment Termination Date" means the earliest of

(a)     the Stated Maturity Date;

(b)     the date on which either the Commitment Amount is terminated 
in full or reduced to zero pursuant to Section 2.2; and

(c)     the date on which any Commitment Termination Event occurs.

"Commitment Termination Event" means     

(a)     the occurrence of any Default described in clauses (a) 
through (d) of Section 9.1.9 with respect to the Borrower or any Subsidiary; 
or 

(b)     the occurrence and continuance of any other Event of Default 
and either 

(i)     the declaration of the Loans and other Obligations to 
be due and payable pursuant to Section 9.3, or

(ii)     in the absence of such declaration, the giving of 
notice by the Lender to the Borrower that the Commitments have been 
terminated.

"Consent" means a Consent to Assignment executed and delivered pursuant to 
Section 6.2.6, substantially in the form of Exhibit J, as amended, 
supplemented, restated or otherwise modified from time to time pursuant to 
which the Borrower's counterparty to each Material Contract (i) consents to 
the assignment of each such Material Contract to the Lender as security for 
the Obligations and (ii) provides the Lender an independent right to cure 
defaults under such Material Contract. 
      

"Consolidated Net Income" means, with respect to the Borrower and its 
consolidated Subsidiaries for any period, the consolidated net income (or loss) 
of the Borrower and its consolidated Subsidiaries for such period determined in 
accordance with GAAP.

"Contingent Liability" means, as to any Person, any direct or indirect 
liability of that Person, whether or not contingent, with or without recourse, 
(a) with respect to any Indebtedness, lease, dividend, letter of credit or 
other obligation (the "primary obligations") of another Person (the "primary 
obligor"), including any obligation of that Person (i) to purchase, repurchase 
or otherwise acquire such primary obligations or any security therefor, (ii) to 
advance or provide funds for the payment or discharge of any such primary 
obligation, or to maintain working capital or equity capital of the primary 
obligor or otherwise to maintain the net worth or solvency or any balance sheet 
item, level of income or financial condition of the primary obligor, (iii) to 
purchase property, securities or services primarily for the purpose of assuring 
the owner of any such primary obligation of the ability of the primary obligor 
to make payment of such primary obligation, or (iv) otherwise to assure or hold 
harmless the holder of any such primary obligation against loss in respect 
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety 
Instrument issued for the account of that Person or as to which that Person is 
otherwise liable for reimbursement of drawings or payments; or (c) to purchase 
any materials, supplies or other property from, or to obtain the services of, 
another Person if the relevant contract or other related document or obligation 
requires that payment for such materials, supplies or other property, or for 
such services, shall be made regardless of whether delivery of such materials, 
supplies or other property is ever made or tendered, or such services are ever 
performed or tendered.

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

"Credit Extension" means and includes

(a)     the advancing of any Revolving Loans by the Lender in 
connection with a borrowing hereunder,

(b)     the advancing of any Term Loans by the Lender in connection 
with a borrowing hereunder, and 

(c)     any issuance by an Issuer, or the extension of the Stated 
Expiry Date by an Issuer, of a Letter of Credit.

"Current Ratio" means, as of the end of each Fiscal Quarter, the ratio of

(a)     the current assets (including the  unused portion of the 
Commitment Amount) of the Borrower and its consolidated Subsidiaries

to

(b)     the current liabilities (minus current portion of its long 
term Debt) of the Borrower and its consolidated Subsidiaries.

"Debt" means the outstanding principal amount of all Indebtedness of the 
Borrower and its consolidated Subsidiaries of the nature referred to in clauses 
(a) and (b) of the definition of "Indebtedness".

"Debt to Capitalization Ratio" means, as of the end of each Fiscal Quarter, 
the ratio of (a) Debt of the Borrower and its consolidated Subsidiaries to (b) 
Capitalization of the Borrower and its consolidated Subsidiaries.

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

"Disbursement Date" is defined in Section 4.4.

"Disbursement" means the amount disbursed by the Issuer on a Disbursement 
Date.

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

"Distribution Payments" is defined in Section 8.2.6.

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

"Domestic Office" means the office of the Lender designated as such on its 
signature page hereto or designated in a Lender Assignment Notice or such other 
office of the Lender (or any successor or assign of the Lender) within the 
United States as may be designated from time to time by notice from the Lender, 
as the case may be, to each other Person party hereto.

"EBITDA" means for any period, the sum, without duplication, of the 
following:

(a)     Consolidated Net Income for such period, plus

(b)     Interest Expense for such period, plus

(c)     all depreciation and amortization of assets (including 
goodwill and other intangible assets) of the Borrower and its consolidated 
Subsidiaries deducted in determining Consolidated Net Income for such 
period, plus (minus)

(d)     all federal, state, local and foreign income taxes of the 
Borrower and its consolidated Subsidiaries deducted (or credits added) in 
determining Consolidated Net Income for such period, plus (minus)

(e)     other non-cash items deducted or added in determining 
Consolidated Net Income for such period.

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

"Engineering Report" means one or more reports, in form and substance 
satisfactory to the Lender, prepared at the sole cost and expense of the 
Borrower by a petroleum engineer acceptable to the Lender in its reasonable 
business judgment, which shall evaluate the Proven Reserves and probable 
reserves attributable to the Hydrocarbon Interests owned directly by the 
Borrower and/or its Subsidiaries and constituting part of the Mortgaged 
Properties, as of the immediately preceding January 1 or July 1.  Each 
Engineering Report shall set forth volumes, projections of the future rate of 
production, Hydrocarbons prices, escalation rates, discount rate assumptions, 
and net proceeds of production, present value of the net proceeds of 
production, estimated costs of Remedial Action, operating expenses and 
capital expenditures, in each case based upon updated economic assumptions 
reasonably acceptable to the Lender.

"Environmental Laws" means all Applicable Laws relating to public health and 
safety through protection of the environment.

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

"Event of Default" is defined in Section 9.1.

"Existing Creditors" means EnCap Equity 1994 Limited Partnership, Energy 
Capital Investment Company PLC and Gecko Booty 1994 I Limited Partnership.

"Facility" means the facility providing for the Commitment and the Loans.

"Federal Funds Rate" means, for any period, a fluctuating interest rate per 
annum equal for each day during such period to

(a)     the weighted average of the rates on overnight federal funds 
transactions with members of the Federal Reserve System arranged by federal 
funds brokers, as published by the Federal Reserve Bank of New York 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 

(b)     if such rate is not so published for any day which is a 
Business Day, the average of the quotations for such day on such 
transactions received by the Lender from three federal funds brokers of 
recognized standing selected by it.

Upon written request from the Borrower, the Lender shall advise the Borrower 
as to the details of the method of calculation of Federal Funds Rate then 
utilized by the Lender.

"Fiscal Quarter" means any quarter ending on the last day of March, June, 
September and December of a Fiscal Year.

"Fiscal Year" means any period of twelve consecutive calendar months ending 
on December 31; references to a Fiscal Year with a number corresponding to any 
calendar year (e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on the 
December 31 occurring during such calendar year.

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

"Future California" means Future CAL-TEX Corporation, a Texas corporation, 
the Subsidiary of the Borrower that will acquire the South Coles Levee Unit 
property.

"Future Nevada" means Future Energy Corporation, a Nevada corporation, the 
sole limited partner of each of the Partnership Subsidiaries and any successor 
limited partner or limited partners of any of the Partnership Subsidiaries.

"Future Texas" means Future Petroleum Corporation, a Texas corporation, the 
sole general partner of each of the Partnership Subsidiaries and any successor 
general partner or general partners of any of the Partnership Subsidiaries.

"GAAP" is defined in Section 1.4.

"Government Agency" means any federal, state, regional, tribal or local 
government or governmental department or other entity charged with the 
administration, interpretation or enforcement of any Applicable Law.

"Guaranties" means the guaranties of the Obligations, executed and delivered 
pursuant to Section 6.1.3 and Section 6.2.7, substantially in the form of 
Exhibit D, given by each of the  Borrower's Subsidiaries.

"Hazardous Material" means     

(a)     any "hazardous substance", as defined by CERCLA;

(b)     any "hazardous waste", as defined by the Resource 
Conservation and Recovery Act, as amended;

(c)     any petroleum, crude oil or fraction thereof; 

(d)     any hazardous, dangerous or toxic chemical, material, waste 
or substance within the meaning of any Environmental Law;

(e)     any radioactive material, including any naturally occurring 
radioactive material, and any source, special or by-product material as 
defined in 42 U.S.C.   2011 et seq., and any amendments or reauthorizations 
thereof;

(f)     asbestos-containing materials in any form or condition; or

(g)     polychlorinated biphenyls in any form or condition.

"Hedging Agreements" means:

(a)     interest rate swap agreements, basis swap agreements, 
interest rate cap agreements, forward rate agreements, interest rate floor 
agreements and interest rate collar agreements, and all other agreements or 
arrangements designed to protect such Person against fluctuations in 
interest rates or currency exchange rates, and

(b)  forward contracts, options, futures contracts, futures options, 
commodity swaps, commodity options, commodity collars, commodity caps, 
commodity floors and all other agreements or arrangements designed to 
protect such Person against fluctuations in the price of commodities.

"Hedging Obligations" means, with respect to any Person, all liabilities 
(including but not limited to obligations and liabilities arising in connection 
with or as a result of early or premature termination of a Hedging Agreement, 
whether or not occurring as a result of a default thereunder) of such Person 
under a Hedging Agreement.

"Highest Lawful Rate" is defined in Section 3.2.4.

"Hydrocarbon Interests" means all rights, titles and interests in and to oil 
and gas leases; oil, gas and mineral leases; other Hydrocarbon leases; mineral 
interests; mineral servitudes; overriding royalty interests; royalty interests; 
net profits interests; production payment interests; and other similar 
interests.

"Hydrocarbons" means, collectively, oil, gas, casinghead gas, drip gasoline, 
natural gasoline, condensate, distillate and all other liquid or gaseous 
hydrocarbons and related minerals and all products therefrom, in each case 
whether in a natural or a processed state.

"Impermissible Qualification" means, relative to the opinion or 
certification of any independent public accountant as to any financial 
statement of the Borrower, any qualification or exception to such opinion or
certification

(a)     which is of a "going concern" or similar nature;

(b)     which relates to the limited scope of examination of matters 
relevant to such financial statement;

(c)     which relates to the treatment or classification of any item 
in such financial statement and which, as a condition to its removal, would 
require an adjustment to such item the effect of which would be to cause the 
Borrower to be in default of any of its obligations under Section 8.2.4; or

(d)     which relates to possible errors generated by financial 
reporting and related systems due to the Year 2000 Problem.

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

"Indebtedness" of any Person means, without duplication:

(a)     all obligations of such Person for borrowed money and all 
obligations of such Person evidenced by bonds, debentures, notes or other 
similar instruments;

(b)     all obligations, contingent or otherwise, relative to the 
face amount of all letters of credit, whether or not drawn, and banker's 
acceptances issued for the account of such Person; 

(c)     all other items which, in accordance with GAAP, would be 
included as liabilities on the liability side of the balance sheet of such 
Person as of the date at which Indebtedness is to be determined;

(d)     net liabilities of such Person under all Hedging Obligations;

(e)     all net monetary obligations of such Persons with respect to 
Production Payments;

(f)     all Capitalized Lease Liabilities;

(g)     whether or not so included as liabilities in accordance with 
GAAP, all obligations of such Person to pay the deferred purchase price of 
property or services, and indebtedness (excluding prepaid interest thereon) 
secured by a Lien on property owned or being purchased by such Person 
(including indebtedness arising under conditional sales or other title 
retention agreements), whether or not such indebtedness shall have been 
assumed by such Person or is limited in recourse; and

(h)     all Contingent Liabilities of such Person.

For all purposes of this Agreement, the Indebtedness of any Person shall 
include the Indebtedness of any partnership or joint venture in which such 
Person is a general partner or a joint venturer, unless the Lender expressly
permits exclusion based on non-recourse provisions acceptable to the Lender 
set forth in the agreements regarding such Indebtedness.

"Indemnified Liabilities" is defined in Section 10.4.

"Indemnified Parties" is defined in Section 10.4.

"Interest Coverage Ratio" means, for any four consecutive Fiscal Quarters, 
the ratio of (a) EBITDA for such Fiscal Quarters to (b) Interest Expense for 
such Fiscal Quarters.

"Interest Expense" means, for any period, the consolidated interest expense 
of the Borrower and its consolidated Subsidiaries for such period (including
all imputed interest under Hedging Agreements, but excluding all fees paid 
under Section 3.3), as determined in accordance with GAAP, including the 
interest expense associated with any Capitalized Lease Liabilities of the 
Borrower and its consolidated Subsidiaries.

"Investment" means, relative to any Person,

(a)     any loan or advance made by such Person to any other Person 
(excluding commission, travel and similar advances to officers and employees 
made in the ordinary course of business and excluding prepaid expenses 
incurred in the ordinary course of business);

(b)     any Contingent Liability of such Person; and

(c)     any ownership or similar interest held by such Person in any 
other Person; provided, however, that (i) Hedging Obligations and (ii) 
Production Payments where the Borrower or its Subsidiary is the grantor or 
transferror thereof shall not be considered Investments.

The amount of any Investment shall be the original principal or capital amount 
thereof less all returns of principal or equity thereon (and without adjustment 
by reason of the financial condition of such other Person) and shall, if 
made by the transfer or exchange of property other than cash, be deemed to 
have been made in an original principal or capital amount equal to the fair 
market value of such property.

"Issuance Request" means a request for the issuance of a Letter of Credit 
and certificate duly executed by the chief executive, accounting or financial 
Authorized Officer of the Borrower, in substantially the form of Exhibit K 
attached hereto (with such changes thereto as may be agreed upon from time to 
time by the Issuer and the Borrower).

"Issuer" means the Lender or its designees, in its capacity as an issuer of 
the Letters of Credit.

"Lender Assignment Notice" means a Lender Assignment Notice substantially 
in the form of Exhibit G hereto.

"Lender" is defined in the preamble.

"Letter of Credit" is defined in Section 4.1.

"Letter of Credit Availability" means, at any time, the lesser of 

(a)     the excess of
 
(i)     $1,000,000 over 

(ii)     the then Letter of Credit Outstandings, 

or

(b)     the Commitment Availability at such time.

"Letter of Credit Outstandings" means, at any time, an amount equal to the 
sum of

(a)     the aggregate Stated Amount at such time of all Letters of 
Credit then outstanding and undrawn (as such aggregate Stated Amount shall 
be adjusted, from time to time, as a result of drawings, the issuance of 
Letters of Credit, or otherwise),

plus

(b)     the then aggregate amount of all unpaid and outstanding 
Reimbursement Obligations.

"Lien" means any security interest, mortgage, deed of trust, pledge, 
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien 
(statutory or otherwise), charge against or interest in Property to secure (i) 
the payment of a debt or (ii) the performance of an obligation or other 
priority or preferential arrangement of any kind or nature whatsoever in 
respect of any Property (including those created by, arising under or 
evidenced by any conditional sale or other title retention agreement, the 
interest of a lessor under a capital lease, any financing lease having 
substantially the same economic effect as any of the foregoing, or the 
filing of any financing statement naming the owner of the asset to which 
such lien relates as debtor, under the Uniform Commercial Code or any 
comparable law) and any contingent or other agreement to provide any of the 
foregoing.

"Loans" means the loans provided for by Section 2.1 and shall include 
Revolving Loans and Term Loans. 

"Loan Documents" means this Agreement, the Notes, the Security Documents, 
all Letters of Credit, all Hedging Agreements and all other agreements relating 
to this Agreement entered into from time to time between the Borrower (or 
any or all of its Subsidiaries or Affiliates) and the Lender (or any 
Affiliate of the Lender), and any document delivered by the Borrower or any 
of its Subsidiaries in connection with any of the foregoing.

"Material Adverse Effect" means (a) a material adverse change in, or a 
material adverse effect upon, the operations, business, properties, condition 
(financial or otherwise) or prospects of the Borrower and its Subsidiaries or 
any other Obligor; or (b) a material adverse effect upon (i) the legality, 
validity, binding effect or enforceability against the Borrower, its 
Subsidiaries or any other Obligor of any Loan Document, or (ii) the perfection 
or priority of any Lien granted under any of the Loan Documents.

"Material Contract" means each acquisition agreement, Hydrocarbon purchase 
and sale agreement, or similar contract relating to any Hydrocarbon Interests 
included in the Mortgaged Properties.

"Mortgage Consents" means all consents required under existing oil and gas 
leases or other agreements and Approvals by Governmental Agencies to the 
granting of a Mortgage to the Lender, and as reasonably determined by the 
Lender with respect to Acquired Properties that become Mortgaged Properties 
after the Effective Date.

"Mortgages" means the Mortgage, Deed of Trust, Assignment, Security 
Agreement and Financing Statements executed and delivered pursuant to Section 
6.1.7 and Section 6.2.2, substantially in the form of Exhibit E hereto, as 
amended, supplemented, restated or otherwise modified from time to time.

"Mortgaged Properties" means the Hydrocarbon Interests, Properties and 
interests described in and secured by the Mortgages, as such Properties and 
interests are from time to time constituted, all as further provided in Section 
6.1.7 and Section 6.2.2.

"Non-Redeemable Stock" means stock issued by the Borrower or any of its 
Subsidiaries, provided that such stock is not considered debt for GAAP, tax law 
or any other purpose and provided further that neither the Borrower nor any of 
its Subsidiaries has any obligation to redeem or purchase or pay dividends on 
such stock or to exchange such stock for, or convert such stock to, any other 
security, whether such obligation arises pursuant to the terms of such stock or 
any other agreement relating thereto or otherwise and whether or not such 
obligation exists in all circumstances or only upon the occurrence of a 
particular event or condition or upon the passage of time or otherwise.

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

"Obligations" means all obligations (monetary or otherwise) of the Borrower 
and/or any other Obligor arising under or in connection with this Agreement,
the Notes and each other Loan Document, including without limitation, all 
Hedging Obligations arising under Hedging Agreements between the Borrower 
(or any Affiliate of the Borrower) and the Lender (or any Affiliate of the 
Lender).

"Obligor" means the Borrower, any of its Subsidiaries or any other Person 
(other than the Lender or any Affiliate of the Lender) obligated under, or 
otherwise a party to, any Loan Document.

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

"Organic Document" means, relative to any corporate Obligor, its certificate 
of incorporation, its by-laws and all shareholder agreements, voting trusts and 
similar arrangements applicable to any of its authorized shares of capital 
stock, and, relative to any partnership Obligor, its partnership agreement.

"Participant" is defined in Section 10.11.2.

"Partners" means the general and limited partners constituting the 
Partnership Subsidiaries, being Future Texas as the general partner, and Future 
Nevada as the limited partner, and any successor general partner or limited 
partner of any Partnership Subsidiary.

"Partnership Subsidiary" means any direct or indirect Subsidiary of the 
Borrower that is a limited partnership, including Future Acquisition 1995, 
Ltd., a Texas limited partnership, BMC Development No. 1 Limited Partnership,
a Texas limited partnership and NCI Shawnee L.P., a Texas limited partnership.

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

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

"Percentage" means, relative to the Lender, 100%, as such percentage may be 
adjusted from time to time pursuant to Lender Assignment Notice(s) executed by 
the Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.

"Person" means any natural person, corporation, partnership, joint venture, 
limited liability company, firm, association, trust, Government Agency or any 
other entity, whether acting in an individual, fiduciary or other capacity.

"Plan" means any Pension Plan or Welfare Plan.

"Pledge Agreement" means a Pledge Agreement of each of the Principal 
Shareholders and the Borrower executed and delivered pursuant to Section 6.1.4 
and Section 6.2.8, substantially in the form of Exhibit F-1 hereto, and a 
Pledge Agreement of each of the Partners executed and delivered pursuant to 
Section 6.1.4 and Section 6.2.8, substantially in the form of Exhibit F-2 
hereto, in each case as amended, supplemented, restated or otherwise 
modified from time to time.

"Principal Shareholders" means Bargo Energy Resources, Ltd., EnCap Equity 
1994 Limited Partnership, Energy Capital Investment Company PLC, Carl Price and 
Don Reynolds, the controlling shareholders of the Borrower.

"Proceeds Account" is defined in Section 3.4.

"Production Payments" means a production payment (whether volumetric or 
dollar denominated) or similar royalty, overriding royalty, net profits 
interest or other similar interest in Oil and Gas Properties, or the right 
to receive all or a portion of the production or the proceeds from the sale 
of production attributable to such Oil and Gas Properties where the holder 
of such interest has recourse solely to such interest and the grantor or 
transferor thereof has an express contractual obligation to produce and sell
Hydrocarbons from such Oil and Gas Properties, or to cause such Oil and Gas 
Properties to be so operated and maintained, in each case in a reasonably 
prudent manner.

"Property" means any interest in any kind of property or asset, whether 
real, personal or mixed, or tangible or intangible.

"Proven Reserves" means collectively, "proved oil and gas reserves," "proved 
developed producing oil and gas reserves," "proved developed non-producing oil 
and gas reserves" (consisting of proved developed shut-in oil and gas reserves 
and proved developed behind pipe oil and gas reserves), and "proved undeveloped 
oil and gas reserves," as such terms are defined by the U.S. Securities and 
Exchange Commission in its standards and guidelines.

"Quarterly Payment Date" means, commencing September, 1998, the last 
Business Day of each March, June, September and December.

"Reimbursement Obligation" is defined in Section 4.5.

"Release" means a "release," as such term is defined in CERCLA.

"Remedial Action" means any action under Environmental Laws required to 
(a) clean up, remove, treat, dispose of, abate, or in any other way address 
pollutants (including Hazardous Materials) in the environment, (b) prevent the 
Release or threat of a Release or minimize the further Release of pollutants,
or (c) investigate and determine if a remedial response is needed and to 
design such a response and any post-remedial investigation, monitoring, 
operation, and maintenance and care.

"Resource Conservation and Recovery Act" means the Resource Conservation and 
Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time.

"Restricted Payment Tests" means compliance with each of the following 
restrictions (both before and immediately after giving effect to the applicable 
Distribution Payment):

(a)     Tangible Net Worth shall not be less than the sum of 
(i) $5,000,000 plus (ii) fifty percent (50%) of Consolidated Net Income of 
the Borrower and its consolidated Subsidiaries (excluding the effects of 
consolidated net losses), for all Fiscal Quarters beginning after the 
Effective Date and treated as a single accounting period, plus (iii) one-
hundred percent (100%) of the net proceeds received by the Borrower or its 
Subsidiaries from the sale of any Non-Redeemable Stock by the Borrower or 
any of its Subsidiaries at any time after the Effective Date;

(b)     the Current Ratio shall be not less than 1.1:1.0;

(c)     the Debt to Capitalization Ratio shall not be greater than 
70%;

(d)     the Interest Coverage Ratio shall be not less than 3.0:1.0;

(e)     there shall exist no Borrowing Base Deficiency; and

(f)     no Default shall have occurred and be continuing.

"Revolving Loans" means the loans provided for by Section 2.1.1.

"Security Agreement" means a security agreement and any similar instrument 
or agreement executed and delivered pursuant to Section 6.1.5 or Section 6.2.6, 
substantially in the form of Exhibit B, as amended, supplemented, restated or 
otherwise modified from time to time.

"Security Documents" means, collectively, (a) the Guaranties, (b) the Pledge 
Agreements, (c) the Mortgages, (d) the Security Agreements, (e) the Consents
and (f) the Mortgage Consents, together with any exhibits, schedules and 
other attachments to such documents and any financing statements related 
thereto, as such documents, exhibits, schedules, attachments or financing 
statements may be, from time to time, amended, supplemented, restated or 
otherwise modified.

"Stated Amount" of each Letter of Credit means the face amount or the 
"Stated Amount" of such Letter of Credit (as defined therein).

"Stated Expiry Date" is defined in Section 4.1.

"Stated Maturity Date means that date that is four (4) years after the 
Availability Termination Date.

"Subsidiary" means, with respect to any Person, (a) any corporation of which 
more than 50% of the outstanding capital stock having ordinary voting power to 
elect a majority of the board of directors of such corporation (irrespective of 
whether at the time capital stock of any other class or classes of such 
corporation shall or might have voting power upon the occurrence of any 
contingency) is at the time directly or indirectly owned by such Person, (b)
any partnership, limited liability company, joint venture, association or 
other business entity in which more than 50% of the equity interest or 
voting power is at the time directly or indirectly owned by such Person, by 
such Person and one or more other Subsidiaries of such Person, or by one or 
more other Subsidiaries of such Person or (c) any partnership in which such 
Person is a general partner.

"Surety Instruments" means all letters of credit (including standby and 
commercial), banker's acceptances, bank guaranties, shipside bonds, surety 
bonds and similar instruments.

"Tangible Net Worth" means the consolidated net worth of the Borrower and 
its consolidated Subsidiaries after subtracting therefrom the aggregate amount 
of any intangible assets of the Borrower and its consolidated Subsidiaries, 
including goodwill, franchises, licenses, patents, trademarks, trade names, 
copyrights, service marks and brand names.

"Taxes" is defined in Section 5.2.

"Term Loans" means the loans provided for by Section 2.1.2.

"Unavailable Commitment" means $20,000,000 less the Borrowing Base (in each 
case as reduced from time to time pursuant to the provisions of Section 2.2). 

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

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

"Year 2000 Compliant" is defined in Section 7.19.

"Year 2000 Problem" is defined in Section 7.19.

SECTION I.2.  Use of Defined Terms.  Unless otherwise defined or the context 
otherwise requires, terms for which meanings are provided in this Agreement 
shall have such meanings when used in the Disclosure Schedule and in each Note, 
Borrowing Request, notice and other communication or other Loan Document 
delivered from time to time in connection with this Agreement or any other Loan 
Document.

SECTION I.3.  Cross-References.  Unless otherwise specified, references in 
this Agreement and in each other Loan Document to any Article or Section are 
references to such Article or Section in this Agreement or other Loan Document, 
as applicable.

(a)     The meanings of defined terms are equally applicable to the 
singular and plural forms of the defined terms.

(b)     The words "hereof," "herein," "hereunder" and similar words 
refer to this Agreement as a whole and not to any particular provision of 
this Agreement; and subsection, Section, Schedule and Exhibit references are 
to this Agreement or such other Loan Document, as the case may be, and, 
unless otherwise specified, references in any Article, Section or definition 
to any clause are references to such clause of such Article, Section or 
definition.

(c)     (i)     The term "documents" includes any and all 
instruments, documents, agreements, certificates, indentures, notices 
and other writings, however evidenced.

(ii)     In the computation of periods of time from a specified 
date to a later specified date, the word "from" means "from and 
including"; the words "to" and "until" each mean "to but excluding," 
and the word "through" means "to and including."

(iii)     The term "property" includes any kind of property or 
asset, real, personal or mixed, tangible or intangible.

(d)     Unless otherwise expressly provided herein, (i) references to 
agreements (including this Agreement) and other contractual instruments 
shall be deemed to include all subsequent amendments and other modifications 
thereto, but only to the extent such amendments and other modifications are 
not prohibited by the terms of any Loan Document, and (ii) references to any 
statute or regulation are to be construed as including all statutory and 
regulatory provisions consolidating, amending, replacing, supplementing or 
interpreting the statute or regulation.

(e)      This Agreement and other Loan Documents may use several 
different limitations, tests or measurements to regulate the same or similar 
matters.  All such limitations, tests and measurements are cumulative and 
shall each be performed in accordance with their terms.  Unless otherwise 
expressly provided, any reference to any action of the Lender by way of 
consent, approval or waiver shall be deemed modified by the phrase "in its 
sole discretion."

(f)     This Agreement and the other Loan Documents are the result of 
negotiations among and have been reviewed by counsel to the Lender, the 
Borrower and the other parties, and are the products of all parties.  
Accordingly, they shall not be construed against the Lender merely because 
of the Lender's involvement in their preparation.

SECTION I.4.  Accounting and Financial Determinations.  Unless otherwise 
specified, all accounting terms used herein or in any other Loan Document shall 
be interpreted, all accounting determinations and computations hereunder or 
thereunder (including under Section 8.2.4) shall be made, and all financial 
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with, those generally accepted accounting principles ("GAAP") 
applied in the preparation of the financial statements referred to in 
Section 7.7.


                                 ARTICLE II

                   COMMITMENTS, BORROWING PROCEDURES AND NOTES

SECTION II.1.  Commitments.

SECTION II.1.1.  Revolving Loans.  On the terms and subject to the 
conditions of this Agreement (including Article VI), the Lender agrees to make 
revolving loans ("Revolving Loans") to the Borrower equal to the aggregate 
amount requested by the Borrower, subject to this Section 2.1.  On the terms
and subject to the conditions hereof, the Borrower may from time to time 
borrow, prepay and reborrow Revolving Loans.  From time to time on any 
Business Day during the period from and after the Effective Date to, but not
including, the earlier to occur of (x) the Availability Termination Date, 
and (y) the Commitment Termination Date, the Lender will make Revolving 
Loans to the Borrower equal to the amount of the Revolving Loans requested 
by the Borrower to be made on such day in the applicable Borrowing Request 
therefor.

SECTION II.1.2.  Term Loans.  On the terms and subject to the conditions of 
this Agreement (including Article VI), the Lender agrees to convert the 
aggregate unpaid principal amount of the Revolving Loans outstanding at the 
opening of business on the Availability Termination Date to the principal 
amount of a Term Loan, provided that (i) no Event of Default has occurred 
and is continuing at that time and (ii) the Borrower has provided a 
certificate to the Lender to that effect.  Once repaid or prepaid, Term 
Loans may not be reborrowed.

SECTION II.1.3.  Letters of Credit.  From time to time on any Business Day, 
the Issuer will issue the Letters of Credit in accordance with Article IV.

SECTION II.1.4.  Lender Not Required To Make Loans, etc. Under Certain 
Circumstances.  The Lender shall not be required to

(a)     make any Loan if, after giving effect thereto

(i)     the aggregate outstanding principal amount of all Loans would 
exceed the Commitment Amount less the Letter of Credit Outstandings, or

(ii)     a Borrowing Base Deficiency would exist; or

(iii)     an Event of Default has occurred and is continuing; or

(b)     cause an Issuer to issue any Letter of Credit if, after giving 
effect thereto

(i)     all Letter of Credit Outstandings together with the aggregate 
outstanding principal amount of all Loans would exceed the Commitment 
Amount; or

(ii)     a Borrowing Base Deficiency would exist; or

(iii)     all Letter of Credit Outstandings would exceed $1,000,000; 
or

(iv)     an Event of Default has occurred and is continuing.

SECTION II.2.  Reduction of Commitment Amounts.  Any Commitment Amount is 
subject to reduction from time to time pursuant to this Section 2.2.

SECTION II.2.1.  Optional.  The Borrower may, from time to time on any 
Business Day, voluntarily reduce the Commitment Amount; provided, however, that 
all such reductions shall require at least three Business Days' prior notice to
the Lender and be permanent, and any partial reduction of either Commitment 
Amount shall be in a minimum amount of $100,000 and in an integral multiple of 
$50,000.

SECTION II.2.2.  Mandatory.

(a)     On the Availability Termination Date, the unused portion of 
the Commitment Amount shall, without any further action, automatically and 
permanently be cancelled.

(b)     On any Commitment Termination Date, the Commitment Amount 
shall be reduced to zero.

SECTION II.3.  Borrowing Procedure.  By delivering a Borrowing Request to 
the Lender on or before 10:00 a.m. (Chicago time) on a Business Day, the 
Borrower may from time to time irrevocably request, on one (1) Business Day's 
notice, that a borrowing be made in a minimum amount of $100,000 and an 
integral multiple of $50,000, or in the unused amount of the applicable 
Commitment.  On the terms and subject to the conditions of this Agreement, 
each borrowing shall be made on the Business Day specified in such Borrowing 
Request.  The Lender shall make such funds available to the Borrower by wire 
transfer to the accounts the Borrower shall have specified in its Borrowing 
Request.

SECTION II.4.  Loan Accounts and Notes.  

(a)     The Loans made by the Lender shall be evidenced by one or 
more loan accounts or records maintained by the Lender in the ordinary 
course of business.  The loan accounts or records maintained by the Lender 
shall be rebuttable presumptive evidence of the amount of the Loans made by 
the Lender to the Borrower and the interest and payments thereon.  Any 
failure so to record or any error in doing so shall not, however, limit or 
otherwise affect the obligation of the Borrower hereunder to pay any amount 
owing with respect to the Loans.

(b)     The Loans made by the Lender shall also be evidenced by a 
Note or Notes payable to the order of the Lender in a maximum principal 
amount equal to the original, aggregate Commitment Amount.  The Borrower 
hereby irrevocably authorizes the Lender to make (or cause to be made) 
appropriate notations on the grid attached to the Notes (or on any 
continuation of such grid) or in other books and records maintained by the 
Lender, which notations, if made, shall evidence, inter alia, the date of, 
the outstanding principal of, and the interest rate applicable to the Loans 
evidenced thereby (the Borrower may from time to time reasonably request a 
copy of such grid).  Such notations shall be rebuttable presumptive evidence 
of the matters described therein; provided, however, that the failure of the 
Lender to make any such notations shall not limit or otherwise affect any 
Obligations of the Borrower or any other Obligor.

SECTION II.5.  Borrowing Base Redetermination.  

(a)     Within thirty (30) days after receipt of the Engineering 
Report required to be delivered semi-annually, commencing with the 
Engineering Report required to be delivered sixty (60) days after January 
1, 1999, the Lender shall notify the Borrower in writing of the Borrowing 
Base determined by the Lender on the basis of such Engineering Report.  
Borrower or Lender may request, and Lender will consider, one additional 
determination of the Borrowing Base at any time during each calendar year 
following the Effective Date.  Each such determination is herein called a 
"Borrowing Base Redetermination".  Each Borrowing Base Redetermination shall 
be effective as of April 1st (with respect to Engineering Reports effective 
January 1st), October 1st (with respect to Engineering Reports effective 
July 1st) or upon notice from the Lender (with respect to any requested 
redetermination) when the Borrower is notified of the amount of the 
redetermined Borrowing Base by the Lender.

(b)     The Borrowing Base is also subject to adjustment as provided 
for in Section 3.1.2.

SECTION II.6.  Purposes.  The Borrower shall apply the proceeds of each Loan 
only for general business purposes including Acquisitions and the development
of Oil and Gas Properties.


                                   ARTICLE III

                  REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

SECTION III.1.  Repayments and Prepayments and Certain Borrowing Base 
Matters.  The Borrower shall repay the unpaid principal amount of the Loans as 
set forth in this Section 3.1. 

SECTION III.1.1.  Repayments and Prepayments.  The Borrower shall repay in 
full the unpaid principal amount of each Revolving Loan, and each Revolving 
Loan shall mature and be due and payable, on the Availability Termination Date;
provided, however, that if no Event of Default has occurred and is continuing, 
the unpaid principal amount of the Revolving Loans shall, on the Availability 
Termination Date, not be due and payable but shall convert to Term Loans.  The 
Borrower shall repay in full the unpaid principal amount of each Loan upon the 
Stated Maturity Date.  Prior thereto, the Borrower

(a)     may, from time to time on any Business Day, make a voluntary 
prepayment, in whole or in part, of the outstanding principal amount of any 
Loans; provided, however, that 

(i)     all such voluntary prepayments shall require at least 
three but no more than five Business Days' prior written notice to 
the Lender (which notice is irrevocable); and

(ii)     all such voluntary partial prepayments shall be in an 
aggregate minimum amount of $100,000 and an integral multiple of 
$50,000; 

(b)     shall, on each date when any reduction in any Commitment 
Amount shall become effective, including pursuant to Section 2.2, make a 
mandatory prepayment (which shall be applied (or held for application, as 
the case may be) by the Lender to the payment of the aggregate unpaid 
principal amount of those Loans then outstanding and then to the payment of 
the then Letter of Credit Outstandings) equal to the excess, if any, of the 
aggregate outstanding principal amount of all Loans and Letter of Credit 
Outstandings over such Commitment Amount as so reduced; 

(c)     shall make prepayments as specified in Section 3.1.2; 

(d)     shall, on each Quarterly Payment Date after the Availability 
Termination Date, make a payment in an amount equal to that necessary to 
amortize the principal of all Loans equally over the remaining Quarterly 
Payment Dates and the Stated Maturity Date; and

(e)     shall, immediately upon any acceleration of the Loans 
pursuant to Section 9.2 or Section 9.3, repay all Loans, unless, pursuant 
to Section 9.3, only a portion of all Loans is so accelerated.

Each payment or prepayment of any Loans made pursuant to this Section shall be 
without premium or penalty, and shall be applicable, to the extent of such 
prepayment, in the inverse order of maturity.  No voluntary prepayment of 
principal of any Loans or any prepayment pursuant to the preceding clause (c) 
shall cause a reduction in any Commitment Amount. 

SECTION III.1.2.  Borrowing Base Deficiencies and Asset Sales.

(a)     Upon the occurrence of a Borrowing Base Deficiency, the 
Lender may notify the Borrower of such Borrowing Base Deficiency.  Within 
ten (10) days from and after the Borrowing Base Deficiency Notification 
Date, the Borrower shall notify the Lender that it shall take one of the 
following actions:

(i)     execute and deliver to the Lender supplemental or 
additional Security Documents, in form and substance reasonably 
satisfactory to the Lender and its counsel, securing payment of the 
Notes and the other Obligations and covering additional Oil and Gas 
Properties directly owned by the Borrower and its Subsidiaries which 
are not then covered by any Loan Document and which are of a type and 
nature satisfactory to the Lender, and having a value, in addition to 
other Oil and Gas Properties already subject to a Mortgage, 
sufficient to eliminate the Borrowing Base Deficiency, all as more 
particularly described in Section 8.1.7(a) and (b); or

(ii)     make a payment with respect to the Obligations, (which 
shall be applied (or held for application, as the case may be) by the 
Lender to the payment of the aggregate unpaid principal amount of 
those Loans then outstanding and then to the payment of the then 
Letter of Credit Outstandings) in an aggregate principal amount 
sufficient to eliminate such Borrowing Base Deficiency within sixty 
(60) days after the Borrowing Base Deficiency Notification.

If the Borrower shall elect to execute and deliver (or cause its 
Subsidiaries to execute and deliver) supplemental or additional Security 
Documents to the Lender pursuant to clause (i), it shall provide the Lender 
with descriptions of the additional assets to be collaterally assigned 
(together with current valuations, Engineering Reports, Security Documents 
described in clause (i) and title evidence applicable thereto, each of which 
shall be in form and substance reasonably satisfactory to the Lender) within 
sixty (60) days after the Borrowing Base Deficiency Notification Date.  Such 
supplemental or additional Security Documents shall be subject to the terms 
of Section 8.1.7.  If the Borrower fails to take any of the actions 
described in clauses (i) or (ii) above within such ten (10) day period, then 
without any necessity for notice to the Borrower or any other person, the 
Borrower shall become obligated immediately to pay Obligations in an 
aggregate principal amount equal to the applicable Borrowing Base 
Deficiency.

(b)     If the Borrower or any Subsidiary sells, transfers or 
otherwise disposes of Oil and Gas Properties included in the most recent 
determination of the Borrowing Base and that have a fair market value in the 
aggregate for the Borrower and such Subsidiaries in excess of $500,000 
during the period from the effective date of the most recent Borrowing Base 
Redetermination until the effective date of the next Borrowing Base 
Redetermination, the Borrowing Base shall be immediately reduced, until the 
effective date of the next Borrowing Base Redetermination, by an amount as 
reasonably determined by the Lender, or if the value of the applicable Oil 
and Gas Properties cannot be readily determined by the Lender, by the net 
sales proceeds realized from the sale, transfer or other disposition of such 
assets.

If such reduction shall result in a Borrowing Base Deficiency, then in lieu 
of the provisions of clause (a) of Section 3.1.2, the Borrower shall 
immediately make a payment with respect to the Obligations in an amount 
equal to such Borrowing Base Deficiency.  In addition to and cumulative of 
the foregoing , if a Borrowing Base Deficiency exists prior to such sale, 
transfer or other disposition of assets, then in lieu of the provisions of 
clause (a) of Section 3.1.2, the Borrower shall, with the written consent 
of the Lender, immediately make a payment with respect to the Obligations 
(which shall be applied (or held for application, as the case may be) by the 
Lender first to the payment of the aggregate unpaid principal amount of 
those Loans then outstanding, and then to the payment of the then Letter of 
Credit Outstandings) in an aggregate principal amount equal to the lesser 
of the amount of the Borrowing Base Deficiency (after giving effect to the 
applicable sale, transfer or other disposition) or 100% of the net sales 
proceeds realized from the applicable sale, transfer or other disposition.

(c)     In addition, if the Borrower or any of its Subsidiaries 
raises capital through the issuance of any type of equity or issues any 
subordinated debt or senior unsecured debt, the proceeds of such issuance 
will first be applied to cure any Borrowing Base Deficiency.

SECTION III.2.  Interest Provisions.  Interest on the outstanding principal 
amount of Loans shall accrue and be payable in accordance with this 
Section 3.2. 

SECTION III.2.1.  Rate.  All Loans shall accrue interest at a rate per annum 
equal to the Alternate Base Rate from time to time in effect.

SECTION III.2.2.  Post-Maturity Rates, etc.  After (w) the date any 
principal amount of any Loan shall have become due and payable (whether on the 
Stated Maturity Date, upon acceleration or otherwise), (x) the date any other
monetary Obligation of the Borrower shall have become due and payable, (y) the 
date any other Event of Default shall have occurred (and so long as such Event 
of Default shall be continuing), and (z) the date that is sixty (60) days after 
a Borrowing Base Deficiency Notification Date, if the applicable Borrowing Base 
Deficiency has not been cured, the Borrower shall pay, but only to the extent 
permitted by Applicable Law, interest (after as well as before judgment) on all 
Obligations at a rate per annum equal to the sum of the Alternate Base Rate 
plus a margin of 3%.

SECTION III.2.3.  Payment Dates.  Interest accrued on each Loan shall be 
payable, without duplication:

(a)     on the Stated Maturity Date; 

(b)     on the date of any optional or required payment or 
prepayment, in whole or in part, of principal outstanding on such Loan and 
on that portion of such Loan so paid or prepaid;

(c)     on each Quarterly Payment Date occurring after the Effective 
Date; and 

(d)     on that portion of any Loans which is accelerated pursuant to 
Section 9.2 or Section 9.3, immediately upon such acceleration.

Interest accrued on Loans or other monetary Obligations arising under this 
Agreement or any other Loan Document after the date such amount shall have 
become due and payable (whether on the Stated Maturity Date, upon acceleration 
or otherwise) shall be payable upon demand.

SECTION III.2.4.  Maximum Interest.  It is the intention of the parties 
hereto to conform strictly to applicable usury laws and, anything herein to the 
contrary notwithstanding, the Obligations of the Borrower to the Lender under 
this Agreement shall be subject to the limitation that payments of interest 
shall not be required to the extent that receipt thereof would be contrary to 
provisions of Applicable Law limiting rates of interest which may be charged or 
collected by the Lender.  Accordingly, if the transactions contemplated hereby 
would be usurious under Applicable Law with respect to the Lender then, in that 
event, notwithstanding anything to the contrary in this Agreement, it is agreed 
as follows:

(a)     the provisions of this Section 3.2.4 shall govern and 
control;

(b)     the aggregate of all consideration which constitutes interest 
under Applicable Law that is contracted for, charged or received under this 
Agreement, or under any of the other aforesaid agreements or otherwise in 
connection with this Agreement by the Lender shall under no circumstances 
exceed the maximum amount of interest allowed by Applicable Law (such 
maximum lawful interest rate, if any, with respect to the Lender herein 
called the "Highest Lawful Rate"), and any excess shall be credited to the 
Borrower by the Lender (or, if such consideration shall have been paid in 
full, such excess refunded to the Borrower);

(c)     all sums paid, or agreed to be paid, to the Lender for the 
use, forbearance and detention of the indebtedness of the Borrower to the 
Lender hereunder shall, to the extent permitted by Applicable Law, be 
amortized, prorated, allocated and spread throughout the full term of such 
indebtedness until payment in full so that the actual rate of interest is 
uniform throughout the full term thereof; and

(d)     if at any time the interest provided pursuant to 
Sections 3.2.1 and 3.2.2 together with any other fees payable pursuant to 
this Agreement and deemed interest under Applicable Law, exceeds that amount 
which would have accrued at the Highest Lawful Rate, the amount of interest 
and any such fees to accrue to the Lender pursuant to this Agreement shall 
be limited, notwithstanding anything to the contrary in this Agreement, to 
that amount which would have accrued at the Highest Lawful Rate, but any 
subsequent reductions, as applicable, shall not reduce the interest to 
accrue to such Lender pursuant to this Agreement below the Highest Lawful 
Rate until the total amount of interest accrued pursuant to this Agreement 
and such fees deemed to be interest equals the amount of interest which 
would have accrued to such Lender if a varying rate per annum equal to the 
interest provided pursuant to Sections 3.2.1 and 3.2.2 had at all times been 
in effect, plus the amount of fees which would have been received but for 
the effect of this Section 3.2.4.

SECTION III.3.  Fees.  The Borrower agrees to pay the fees set forth in this 
Section 3.3.  All such fees shall be non-refundable.  

SECTION III.3.1.  Structuring Fee.  The Borrower has paid to the Lender upon 
execution of that certain commitment letter and term sheet dated as of July 28, 
1998, a structuring fee in the amount of $50,000.  As of the Effective Date, 
such fee shall be credited against the closing fee provided for in Section 
3.3.2.

SECTION III.3.2.  Closing Fee.  On the Effective Date, the Borrower agrees 
to pay to the Lender a closing fee in the amount of $105,000.

SECTION III.3.3.  Engineering and Redetermination Fee.  The Borrower shall 
pay to the Lender an annual engineering and redetermination fee of $25,000, a 
prorated portion of which shall be payable quarterly in arrears on each 
Quarterly Payment Date and on the earlier of the Commitment Termination Date or 
the Availability Termination Date.

SECTION III.3.4.  Commitment Fees.  The Borrower shall pay to the Lender a 
commitment fee, for the period from and including the Effective Date to but not 
including the earlier to occur of (x) the Availability Termination Date, and 
(y) the Commitment Termination Date, equal to (i) 0.5 of 1% per annum of the 
average of the actual daily unused Commitment Availability, based on a year 
comprised of three hundred sixty (360) days.  Accrued commitment fees shall be 
payable in arrears on each Quarterly Payment Date and on the earlier of the 
Commitment Termination Date or the Availability Termination Date.

SECTION III.3.5.  Letter of Credit Stated Amount Fee.  The Borrower agrees 
to pay to the Issuer a fee for each Letter of Credit for the period from and 
including the date of the issuance of such Letter of Credit to (but not 
including) the date upon which such Letter of Credit expires, at a rate per 
annum equal to 1% of the Stated Amount of such Letter of Credit, based on a 
year comprised of three-hundred and sixty (360) days.  A prorated portion of
such fee shall be payable by the Borrower in arrears on each Quarterly 
Payment Date, and on the earlier of the Availability Termination Date or the
Commitment Termination Date for any period then ending for which such fee 
shall not theretofore have been paid, commencing on the first such date 
after the issuance of such Letter of Credit.

SECTION III.3.6.  Letter of Credit Issuance Fee.  The Borrower agrees to pay 
to the Issuer an issuance fee for each Letter of Credit issued by the Issuer
for the period from and including the date of issuance of such Letter of 
Credit to (but not including) the date upon which such Letter of Credit 
expires, the greater of (x) 0.25% of the Stated Amount of such Letter of 
Credit or (y) $300.  Such fee shall be payable by the Borrower in arrears on
each Quarterly Payment Date and on the date of issuance of such Letter of 
Credit.

SECTION III.3.7.  Letter of Credit Administrative Fees.  The Borrower agrees 
to pay to the Lender, the amounts described in Section 4.3.

SECTION III.3.8.  Borrowing Base Fee.  The Borrower agrees to pay to the 
Lender a Borrowing Base fee in the amount of $45,000 at the first time that the 
Borrowing Base is redetermined at an amount in excess of $10,500,000 and in the 
amount of $50,000 at the first time that the Borrowing Base is redetermined at 
an amount in excess of $15,000,000.

SECTION III.4.  Proceeds Account.  The Security Documents contain an 
assignment to the Lender by the Borrower or its Subsidiaries, as applicable, of 
all production of Hydrocarbons and all proceeds attributable thereto properly 
allocable to the Mortgaged Properties.  Notwithstanding such assignment of 
production, the Borrower may, until the Lender shall give notice to the 
contrary, receive such proceeds.  Thereafter, all such proceeds from the 
sale of such production shall be paid directly into an account of the Borrower
maintained with the Lender (the "Proceeds Account").  The Borrower hereby 
grants to the Lender, subject to the prior assignment in favor of the Lender
of such production and its proceeds, a security interest in the Proceeds 
Account and all proceeds thereof.


                                   ARTICLE IV

                                LETTERS OF CREDIT

SECTION IV.1.  Issuance Requests.  By delivering to the Issuer an Issuance 
Request on or before 12:00 noon (Chicago time), the Borrower may request, from 
time to time prior to the earlier to occur of (x) the Availability Termination 
Date and (y) the Commitment Termination Date, and on not less than three (3)
nor more than ten (10) Business Days' notice, that the Issuer issue an 
irrevocable standby letter of credit in substantially the form of Exhibit L 
hereto, or in such other form as may be mutually agreed by the Borrower and 
the Issuer (each a "Letter of Credit"), in support of financial obligations 
of the Borrower incurred in the Borrower's ordinary course of business and 
which are described in such Issuance Request.  Each Letter of Credit shall 
by its terms:

(a)     be issued in a Stated Amount which

(i)     is at least $50,000;

(ii)     does not exceed (or would not exceed) the then Letter 
of Credit Availability;

(b)     be stated to expire on a date (its "Stated Expiry Date") no 
later than the earlier of (i) one (1) year after its date of issuance, or 
(ii) one (1) year after the Availability Termination Date; and

(c)     on or prior to its Stated Expiry Date

(iA     terminate immediately upon notice to the Issuer from 
the beneficiary thereunder that all obligations covered thereby have 
been terminated, paid, or otherwise satisfied in full,

(iiA     reduce in part immediately and to the extent the 
beneficiary thereunder has notified the Issuer that the obligations 
covered thereby have been paid or otherwise satisfied in part, or

(iiiA     terminate thirty (30) Business Days after notice to 
the beneficiary thereunder from the Lender that an Event of Default 
has occurred and is continuing.

So long as no Default has occurred and is continuing, by delivery to the Issuer 
of an Issuance Request at least three (3) but not more than ten (10) Business 
Days prior to the Stated Expiry Date of any Letter of Credit, the Borrower may 
request the Issuer to extend the Stated Expiry Date of such Letter of Credit
for an additional period not to exceed the earlier of one (1) year from its 
date of extension, the Availability Termination Date or the Commitment 
Termination Date. 
 

SECTION IV.2.  Issuances and Extensions.  On the terms and subject to the 
conditions of this Agreement (including Article VI), the Issuer shall issue 
Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of 
Credit, in accordance with the Issuance Requests made therefor.  The Issuer 
will make available the original of each Letter of Credit which it issues in 
accordance with the Issuance Request therefor to the beneficiary thereof and 
will notify the beneficiary under any Letter of Credit of any extension of the 
Stated Expiry Date thereof.  Upon the expiration of any Letter of Credit, the 
Borrower may re-use any portion of the Letter of Credit Availability for the 
issuance of new Letters of Credit prior to the earlier to occur of the 
Availability Termination Date or the Commitment Termination Date. 

The Issuer is under no obligation to issue any Letter of Credit if:

(iA     any order, judgment or decree of any Government Agency or 
arbitrator shall by its terms purport to enjoin or restrain the Issuer from 
issuing such Letter of Credit, or any requirement of Applicable Law or any 
request or directive (whether or not having the force of law) from any 
Government Agency with jurisdiction over the Issuer shall prohibit, or 
request that the Issuer refrain from, the issuance of letters of credit 
generally or such Letter of Credit in particular or shall impose upon the 
Issuer with respect to such Letter of Credit any restriction, reserve or 
capital requirement (for which the Issuer is not otherwise compensated 
hereunder) not in effect on the Effective Date, or shall impose upon the 
Issuer any unreimbursed loss, cost or expense which was not applicable on 
the Effective Date and which the Issuer in good faith deems material to it;

(iiA     one or more of the applicable conditions contained in 
Article VI is not then satisfied;

(iiiA     the expiry date of any requested Letter of Credit is prior 
to the maturity date of any financial obligation to be supported by the 
requested Letter of Credit;

(ivA     any requested Letter of Credit does not provide for drafts, 
or is not otherwise in form and substance acceptable to the Issuer, or the 
issuance of a Letter of Credit shall violate any applicable policies of the 
Issuer;

(vA     any standby Letter of Credit is for the purpose of supporting 
the issuance of any letter of credit by any other Person; or

(viA     such Letter of Credit is in a face amount denominated in a 
currency other than Dollars.

The Uniform Customs and Practice for Documentary Credits most recently 
published by the International Chamber of Commerce at the time of issuance 
of any Letter of Credit shall (unless otherwise expressly provided in the 
Letters of Credit) apply to the Letters of Credit.

SECTION IV.3.  Expenses.  The Borrower agrees to pay to the Issuer all 
reasonable administrative expenses of the Issuer in connection with the 
issuance, maintenance, modification (if any) and administration of each Letter 
of Credit issued by the Issuer upon demand from time to time.

SECTION IV.4.  Disbursements.  The Issuer will notify the Borrower promptly 
of the presentment for payment of any Letter of Credit, together with notice of 
the date (the "Disbursement Date") such payment shall be made.  Subject to the 
terms and provisions of such Letter of Credit, the Issuer shall make such 
payment to the beneficiary (or its designee) of such Letter of Credit.  In 
paying any drawing under a Letter of Credit, the Issuer shall not have any 
responsibility to obtain any document (other than to obtain and review any 
sight draft and certificates expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the 
authority of the Person executing or delivering any such document.  Prior to 
12:00 noon (Chicago time) on the Disbursement Date, the Borrower will reimburse 
the Issuer for all amounts which it has disbursed under the Letter of Credit.  
To the extent the Issuer is not reimbursed in full in accordance with the 
preceding sentence, the Borrower's Reimbursement Obligation shall accrue 
interest at a fluctuating rate equal to the lesser of (i) the Highest Lawful 
Rate or (ii) the Alternate Base Rate, plus a margin of 3% per annum, payable on 
demand.  In the event the Issuer is not reimbursed by the Borrower on the 
Disbursement Date, or if the Issuer must for any reason return or disgorge such 
reimbursement, the Lender shall, on the terms and subject to the conditions of 
this Agreement, fund the Reimbursement Obligation therefor by making, on the 
next Business Day, Loans as provided in Section 2.1.1 (the Borrower being 
deemed to have given a timely Borrowing Request therefor for such amount); 
provided, however, for the purpose of determining the availability of the 
Commitments to make Loans immediately prior to giving effect to the 
application of the proceeds of such Loans, such Reimbursement Obligation 
shall be deemed not to be outstanding at such time.

SECTION IV.5.  Reimbursement.  The Borrower's obligation (a "Reimbursement 
Obligation") under Section 4.4 to reimburse the Issuer with respect to each 
Disbursement (including interest thereon) shall be absolute and unconditional 
under any and all circumstances and irrespective of any setoff, counterclaim,
or defense to payment which the Borrower may have or have had against the 
Lender, the Issuer or any beneficiary of a Letter of Credit, including any 
defense based upon the occurrence of any Default, any draft, demand or 
certificate or other document presented under a Letter of Credit proving to 
be forged, fraudulent, invalid or insufficient, the failure of any 
Disbursement to conform to the terms of the applicable Letter of Credit (if,
in the Issuer's good faith opinion, such Disbursement is determined to be 
appropriate) or any non-application or misapplication by the beneficiary of 
the proceeds of such Disbursement, or the legality, validity, form, 
regularity, or enforceability of such Letter of Credit; provided, however, 
that nothing herein shall adversely affect the right of the Borrower to 
commence any proceeding against the Issuer for any wrongful Disbursement 
made by the Issuer under a Letter of Credit as a result of acts or omissions
constituting gross negligence or wilful misconduct on the part of the 
Issuer.

SECTION IV.6.  Deemed Disbursements.  Upon the occurrence and during the 
continuation of any Event of Default or the occurrence of the Commitment 
Termination Date, an amount equal to that portion of Letter of Credit 
Outstandings attributable to outstanding and undrawn Letters of Credit shall,
at the election of the Lender, and without demand upon or notice to the 
Borrower, be deemed to have been paid or disbursed by the Lender under such 
Letters of Credit (notwithstanding that such amount may not in fact have 
been so paid or disbursed), and, upon notification by the Lender to the 
Borrower of its obligations under this Section, the Borrower shall be 
immediately obligated to reimburse the Lender the amount deemed to have been
so paid or disbursed by the Lender.  Any amounts so received by the Lender 
from the Borrower pursuant to this Section shall be held as collateral 
security for the repayment of the Borrower's obligations in connection with 
the Letters of Credit issued by the applicable Issuer.  At any time when 
such Letters of Credit shall terminate and all Obligations to the Lender are
either terminated or paid or reimbursed to the Lender in full, the 
Obligations of the Borrower under this Section shall be reduced accordingly
(subject, however, to reinstatement in the event any payment 
in respect of such Letters of Credit is recovered in any manner from the Lender 
or the Issuer), and the Lender will return to the Borrower the excess, if any, 
of

(ai     the aggregate amount deposited by the Borrower with the 
Lender and not theretofore applied by the Lender to any Reimbursement 
Obligation

over

(bi     the aggregate amount of all Reimbursement Obligations to the 
Lender pursuant to this Section, as so adjusted.

At such time when all Events of Default shall have been cured or waived, the 
Lender shall return to the Borrower all amounts then on deposit with the Lender 
pursuant to this Section.  All amounts on deposit pursuant to this Section 
shall, until their application to any Reimbursement Obligation or their return 
to the Borrower, as the case may be, bear interest for the Borrower's account
at the daily average Federal Funds Rate from time to time in effect (net of 
the costs of any reserve requirements, in respect of amounts on deposit 
pursuant to this Section, pursuant to F.R.S. Board Regulation D), which 
interest shall be held by the Lender as additional collateral security for 
the repayment of the Borrower's Obligations in connection with the Letters 
of Credit issued by the Lender.

SECTION IV.7.  Nature of Reimbursement Obligations.  The Borrower shall 
assume all risks of the acts, omissions, or misuse of any Letter of Credit by 
the beneficiary thereof.  Neither the Lender nor any Issuer (except to the 
extent of its own gross negligence or willful misconduct) shall be responsible 
for:

(ai     the form, validity, sufficiency, accuracy, genuineness, or 
legal effect of any Letter of Credit or any document submitted by any party 
in connection with the application for and issuance of a Letter of Credit, 
even if it should in fact prove to be in any or all respects invalid, 
insufficient, inaccurate, fraudulent, or forged; 

(bi     the form, validity, sufficiency, accuracy, genuineness, or 
legal effect of any instrument transferring or assigning or purporting to 
transfer or assign a Letter of Credit or the rights or benefits thereunder 
or proceeds thereof in whole or in part, which may prove to be invalid or 
ineffective for any reason;

(ci     failure of the beneficiary to comply fully with conditions 
required in order to demand payment under a Letter of Credit;

(di     errors, omissions, interruptions, or delays in transmission 
or delivery of any messages, by mail, cable, telegraph, telex, facsimile or 
otherwise;

(ei     any loss or delay in the transmission or otherwise of any 
document or draft required in order to make a Disbursement under a Letter 
of Credit or of the proceeds thereof; 

(fi     any change in the time, manner or place of payment of, or in 
any other term of, all or any of the obligations of the Borrower in respect 
of any Letter of Credit;

(gi     the existence of any claim, set-off, defense or other right 
that the Borrower may have at any time against any beneficiary or any 
transferee of any Letter of Credit (or any Person for whom any such 
beneficiary or any such transferee may be acting), the Issuer (if other than 
the Lender or its Affiliates) or any other Person, whether in connection 
with this Agreement, the transactions contemplated hereby or by the Letters 
of Credit or any unrelated transaction;

(hi     any payment by an Issuer under any Letter of Credit against 
presentation of a draft or certificate that does not strictly comply with 
the terms of any Letter of Credit; or any payment made by an Issuer under 
any Letter of Credit to any Person purporting to be a trustee in bankruptcy, 
debtor-in-possession, assignee for the benefit of creditors, liquidator, 
receiver or other representative of or successor to any beneficiary or any 
transferee of any Letter of Credit, including any arising in connection with 
any insolvency proceeding; or

(ii     any other circumstance or happening whatsoever, whether or 
not similar to any of the foregoing, including any other circumstance that 
might otherwise constitute a defense available to, or a discharge of, the 
Borrower or a guarantor.

None of the foregoing shall affect, impair, or prevent the vesting of any of
the rights or powers granted the Lender or the Issuer hereunder.  In 
furtherance and extension, and not in limitation or derogation, of any of 
the foregoing, any action taken or omitted to be taken by the Lender or the 
Issuer in good faith and not constituting gross negligence or willful 
misconduct shall be binding upon the Borrower and shall not put the Lender or
the Issuer under any resulting liability to the Borrower.

SECTION IV.8.  Increased Costs; Indemnity.  If by reason of

(ai     any change in Applicable Law after the Effective Date or any 
change in the interpretation or application by any judicial or regulatory 
authority of any Applicable Law, or

(bi     compliance by the Lender with any direction, request or 
requirement (whether or not having the force of law) of any Government 
Agency, including Regulation D of the F.R.S. Board:

(iA     the Lender shall be subject to any tax (other than 
taxes on net income and franchises), levy, charge or withholding of 
any nature or to any variation thereof or to any penalty with respect 
to the maintenance or fulfillment of its obligations under this 
Article IV, whether directly or by such being imposed on or suffered 
by the Lender; 

(iiA     any reserve, deposit or similar requirement is or 
shall be applicable, increased, imposed or modified in respect of any 
Letters of Credit issued by an Issuer; or

(iiiA     there shall be imposed on the Lender any other 
condition regarding this Article IV or any Letter of Credit,

and the result of the foregoing is directly or indirectly to increase the cost 
to the  Lender or the Issuer of issuing or maintaining any Letter of Credit or 
to reduce any amount receivable in respect thereof by the Lender or the Issuer, 
then and in any such case may, at any time after the additional cost is 
incurred or the amount received is reduced, notify the Borrower thereof, and
the Borrower shall pay on demand such amounts as the Lender or the Issuer may
specify to be necessary to compensate the Lender or the Issuer for such 
additional cost or reduced receipt, together with interest on such amount 
from the date demanded until payment in full thereof at a rate equal at all 
times to the Alternate Base Rate plus three percent (3%) per annum.  The 
determination by the Lender or the Issuer, as the case may be, of any amount
due pursuant to this Section, as set forth in a statement setting forth the 
calculation thereof in reasonable detail shall, in the absence of manifest 
error, be final and conclusive and binding on all of the parties hereto.

(ci     In addition to amounts payable as elsewhere provided in this 
Article IV, the Borrower hereby indemnifies, exonerates and holds the Lender 
and each Issuer harmless from and against any and all actions, causes of 
action, suits, losses, costs, liabilities and damages, and expenses incurred 
in connection therewith (irrespective of whether the Lender or the Issuer 
is a party to the action for which indemnification is sought), including 
reasonable attorneys' fees and disbursements, which the Lender or the Issuer 
may incur or be subject to as a consequence, direct or indirect, of 

(iA     the issuance of the Letters of Credit, other than as a 
result of the gross negligence or wilful misconduct of the Issuer as 
determined by a court of competent jurisdiction, or

(iiA     the failure of the Issuer to honor a drawing under any 
Letter of Credit as a result of any act or omission, whether rightful 
or wrongful, of any present or future de jure or de facto Government 
Agency.


                                  ARTICLE V

              CERTAIN INTEREST RATE AND OTHER PROVISIONS

SECTION V.1.  Increased Capital Costs.  If any change in, or the 
introduction, adoption, effectiveness, interpretation, reinterpretation or 
phase-in of, any Applicable Law of any Government Agency, affects or would 
affect the amount of capital required or expected to be maintained by the 
Lender or any Person controlling the Lender, and the Lender determines (in 
its sole and absolute discretion) that the rate of return on its or such 
controlling Person's capital as a consequence of its Commitments hereunder, 
issuance of Letters of Credit or the Loans made by the Lender is reduced to 
a level below that which the Lender or such controlling Person could have 
achieved but for the occurrence of any such circumstance, then, in any such 
case upon notice from time to time by the Lender to the Borrower, the 
Borrower shall immediately pay directly to the Lender additional amounts 
sufficient to compensate the Lender or such controlling Person for such 
reduction in rate of return.  A statement of the Lender as to any such 
additional amount or amounts (including calculations thereof in reasonable 
detail) shall, in the absence of manifest error, be conclusive and binding 
upon the Borrower.  In determining such amount, the Lender may use any 
method of averaging and attribution that it (in its reasonable discretion) 
shall deem applicable.

SECTION V.2.  Taxes.  All payments by the Borrower of principal of, and 
interest on, the Loans and all other amounts payable hereunder shall be made 
free and clear of and without deduction for any present or future income, 
excise, stamp or franchise taxes and other taxes, levies, assessments, imposts, 
deductions, fees, duties, withholdings or other charges and all liabilities 
with respect thereto of any nature whatsoever imposed by any taxing 
authority, but excluding franchise taxes and taxes imposed on or measured by
the Lender's net income or receipts (such non-excluded items being called 
"Taxes").  In the event that any withholding or deduction from any payment 
to be made by the Borrower hereunder is required in respect of any Taxes 
pursuant to any Applicable Law then (unless the Borrower already knows of 
such withholding or deduction, upon notice thereof from the Lender) the 
Borrower will 

(ai     pay directly to the relevant authority the full amount 
required to be so withheld or deducted;

(bi     promptly forward to the Lender an official receipt or other 
documentation satisfactory to the Lender evidencing such payment to such 
authority; and 

(ci     pay to the Lender such additional amount or amounts as is 
necessary to ensure that the net amount actually received by the Lender will 
equal the full amount the Lender would have received and retained had no 
such withholding or deduction been required.

Moreover, if any Taxes are directly asserted against the Lender with respect to 
any payment received by the Lender hereunder, the Lender may pay such Taxes and 
the Borrower will promptly pay such additional amounts (including any 
penalties, interest or expenses) as is necessary in order that the net 
amount received by such person after the payment of such Taxes (including 
any Taxes on such additional amount) shall equal the amount such person 
would have received had not such Taxes been asserted.

If the Borrower fails to pay any Taxes when due to the appropriate taxing 
authority or fails to remit to the Lender the required receipts or other 
required documentary evidence, the Borrower shall indemnify the Lender for any 
incremental Taxes or other liability (including interest, expenses or 
penalties) that may become payable by the Lender as a result of any such 
failure, whether or not such Taxes or liabilities were correctly or legally 
asserted.  Payment under this indemnity shall be made within thirty (30) 
days after the date the Lender makes written demand therefor.

Upon the request of the Borrower, each Assignee Lender that is organized 
under the laws of a jurisdiction other than the United States shall, prior to 
the due date of any payment in respect of the Borrowings, execute and deliver 
to the Borrower, on or about January 15 of each calendar year, one or more
(as the Borrower may reasonably request) United States Internal Revenue 
Service Forms 4224 or Forms 1001 or such other forms or documents (or 
successor forms or documents), appropriately completed, as may be applicable
to establish the extent, if any, to which a payment to such Assignee Lender 
is exempt from withholding or deduction of Taxes.

SECTION V.3.  Payments, Computations, etc.  Unless otherwise expressly 
provided, all payments by the Borrower pursuant to this Agreement, the Note or 
any other Loan Document shall be made by the Borrower without setoff, deduction 
or counterclaim, not later than 11:00 a.m. (Chicago time) on the date due, in 
U.S. Dollars in same day or immediately available funds, to such account with 
the Lender in Chicago, Illinois as the Lender shall specify from time to time
by notice to the Borrower.  Funds received after that time shall be deemed 
to have been received by the Lender on the next succeeding Business Day and 
any applicable interest or fee shall continue to accrue.  All interest shall be
computed on the basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which such interest is 
payable over a year comprised of three hundred sixty-five (365) days or, if 
appropriate, three hundred sixty-six (366) days.  Whenever any payment to be 
made shall otherwise be due on a day which is not a Business Day, such payment 
shall be made on the next succeeding Business Day and such extension of time 
shall be included in computing interest and fees, if any, in connection with 
such payment.

SECTION V.4.  Setoff.  The Lender shall, upon the occurrence of any Default 
described in clauses (a) through (d) of Section 9.1.9 or upon the occurrence of 
any other Event of Default, have the right to appropriate and apply to the 
payment of the Obligations owing to it (whether or not then due), and (as 
security for such Obligations) the Borrower hereby grants to the Lender a 
continuing security interest in, any and all balances, credits, deposits, 
accounts or moneys of the Borrower then or thereafter maintained with or 
otherwise held by the Lender, including without limitation, the Proceeds 
Account.  The Lender agrees promptly to notify the Borrower after any such 
setoff and application made by the Lender; provided, however, that the failure 
to give such notice shall not affect the validity of such setoff and 
application.  The rights of the Lender under this Section 5.4 are in addition
to other rights and remedies (including other rights of setoff under 
Applicable Law or otherwise) which the Lender may have.

SECTION V.5.  Use of Proceeds.  The Borrower shall apply the proceeds of 
each borrowing in accordance with Section 2.6; without limiting the foregoing, 
no proceeds of any Loan will be used to acquire any equity security of a class 
which is registered pursuant to Section 12 of the Securities Exchange Act of 
1934 or any "margin stock", as defined in F.R.S. Board Regulation U, X or G.


                                  ARTICLE VI

                              CONDITIONS PRECEDENT

SECTION VI.1.  Initial Credit Extension.  The obligation of the Lender to 
make the initial Credit Extension shall be subject to the prior or concurrent 
satisfaction of each of the conditions precedent set forth in this Section 6.1.

SECTION VI.1.1.  Resolutions, etc.  The Lender shall have received from the 
Borrower a certificate, dated not later than the date of the initial Credit 
Extension, of the respective Secretary or Assistant Secretary of each of the 
Borrower, Future California and the Partners, for themselves and on behalf of 
the Partnership Subsidiaries, as to

(ai     resolutions of the respective Boards of Directors of the 
Borrower, Future California and the Partners then in full force and effect 
authorizing the execution, delivery and performance of this Agreement, the 
Notes and each other Loan Document to be executed by it;

(bi     the incumbency and signatures of those of its officers or 
Persons authorized to act with respect to this Agreement, the Notes and each 
other Loan Document executed by it;

(ci     the Organic Documents of the Borrower, Future California, the 
Partners and the Partnership Subsidiaries; and

(di     evidence that each of the Borrower, Future California, the 
Partners and the Partnership Subsidiaries are in good standing under the 
laws of the jurisdiction of its respective organization and, as to the 
Partnership Subsidiaries, in each of the jurisdictions where the Mortgaged 
Properties are located,

upon which certificates the Lender may conclusively rely until it shall have 
received a further certificate of the Borrower canceling or amending such prior 
certificate.

SECTION VI.1.2.  Delivery of Notes.  The Lender shall have received the 
Notes duly executed and delivered by the Borrower. 

SECTION VI.1.3.  Guaranties.  The Lender shall have received executed 
counterparts of the Guaranties, dated as of the date hereof, duly executed by 
each of the Borrower's Subsidiaries.

SECTION VI.1.4.  Pledge Agreements.  The Lender shall have received executed 
counterparts of the Pledge Agreements dated as of the date hereof, duly 
executed by (a) the Principal Shareholders pledging all of their interests 
in the capital stock of the Borrower, (b) the Borrower pledging all of its 
interest in the capital stock of each of the Partners and Future California,
and (c) each of the Partners pledging all of its respective partnership 
interests in the Partnership Subsidiaries, in each case together with the 
certificates, evidencing all of the issued and outstanding shares of capital
stock or partnership interests pledged pursuant to the Pledge Agreements, 
which certificates shall in each case be accompanied by undated stock powers
duly executed in blank, or, if any securities pledged pursuant to the Pledge
Agreements are uncertificated securities, confirmation and evidence 
satisfactory to the Lender that the security interest in such uncertificated
securities has been transferred to and perfected by the Lender in accordance
with Section 8-313 and Section 8-321 of the Uniform Commercial Code, as in 
effect in the State of Illinois, and, as applicable, with the evidence of 
completion (or satisfactory arrangement for the completion) of all filings 
and recordings of the Pledge Agreements as may be necessary, or in the 
reasonable opinion of the Lender, desirable, effectively to create a valid, 
perfected first priority lien against and security interest in 
the collateral covered thereby.

SECTION VI.1.5.  Security Agreement.  The Lender shall have received 
executed counterparts of a Security Agreement, dated as of the date hereof, 
duly executed by the Borrower and each of its Subsidiaries, as applicable, 
together with

(ai     executed copies of Uniform Commercial Code financing 
statements (Form UCC-1), in proper form for filing, naming the Borrower (or 
its Subsidiary, as applicable) as the debtor and the Lender as the secured 
party, or other similar instruments or documents, filed under the Uniform 
Commercial Code of all jurisdictions as may be necessary or, in the opinion 
of the Lender, desirable to perfect the security interest of the Lender 
pursuant to such Security Agreement; and

(bi     executed copies of proper Uniform Commercial Code Form UCC-3 
termination statements, if any, necessary to release all Liens and other 
rights of any Person in any collateral described in such Security Agreement 
previously granted by any Person together with such other Uniform Commercial 
Code Form UCC-3 termination statements as the Lender may reasonably request 
from the Borrower.
 
SECTION VI.1.6.  Consents and Mortgage Consents.  The Lender shall have 
received true and correct copies, certified by the Borrower, of all Mortgage 
Consents and Consents required in connection with the Properties to be 
encumbered by Mortgages delivered pursuant to Section 6.1.7 or the Security 
Agreements delivered pursuant to Section 6.1.5, respectively.

SECTION VI.1.7.  Mortgage.  The Lender shall have received counterparts of 
a Mortgage relating to the Hydrocarbon Interests and related Oil and Gas 
Properties of the Borrower and its Subsidiaries that are included in the 
Lender's determination of the initial Borrowing Base, dated as of a recent 
date, duly executed by the Borrower and/or its Subsidiaries, as applicable,
together with

(ai     evidence of the completion (or satisfactory arrangements for 
the completion) of all recordings and filings of such Mortgage as may be 
necessary or, in the reasonable opinion of the Lender, desirable effectively 
to create a valid, perfected first priority Lien against the Properties 
purported to be covered thereby;

(bi     favorable mortgagee's title opinions in favor of the Lender 
(in form and substance and issued by title counsel reasonably satisfactory 
to the Lender, substantially in the form of Exhibit I-2 hereto), with 
respect to the Property purporting to be covered by the Mortgage setting 
forth the working interest and net revenue interest of the Borrower and/or 
its Subsidiaries in such Properties and opining that the Borrower's and/or 
its Subsidiaries' title to such property is good and marketable and valid 
and that the interests created by the Mortgage constitute valid first Liens 
thereon free and clear of all defects and encumbrances other than as 
approved by the Lender; and

(ci     such other approvals, opinions, or documents as the Lender 
may reasonably request.

SECTION VI.1.8.  Opinions of Counsel.  The Lender shall have received 
opinions, dated the date of the initial borrowing and addressed to the Lender, 
from

(ai     Kruse, Landa & Maycock, L.L.C., counsel to the Borrower, 
Future California, the Partners, the Partnership Subsidiaries, Carl Price 
and Don Reynolds, substantially in the form of Exhibit H hereto;

(bi     Thompson & Knight, P.C., counsel to EnCap Equity 1994 Limited 
Partnership, substantially in the form of Exhibit H hereto;

(ci     Butler & Binion, L.L.P., counsel to Bargo Energy Resources, 
Ltd., substantially in the form of Exhibit H hereto;

(di     Hobson Audley Hopkins & Wood, counsel to Energy Capital 
Investment Company PLC, substantially in the form of Exhibit H hereto; and

(ei     Clifford & Brown, as to the Mortgaged Properties located in 
the South Coles Levee Unit, and Matthews and Branscomb, as to the Mortgaged 
Properties located in Midland County, Texas, Moore County, Texas, and Grant 
County, Oklahoma, special title counsel to the Borrower, substantially in 
the form of Exhibit I-1 hereto.

SECTION VI.1.9.  UCC-11s.  The Lender 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 Lender, dated a 
date reasonably near to the date of the initial borrowing, listing all 
effective financing statements which name the Borrower, its Subsidiaries, 
and each other Obligor (under their present names and any previous names) as
the debtor and which are filed in the jurisdictions in the States of Texas 
and the State of residence (if outside the State of Texas) and the Borrower
and its Subsidiaries in the States of Utah, Oklahoma, New Mexico and 
California, together with copies of such financing statements (none of which
shall cover any collateral described in the Existing Mortgages).

SECTION VI.1.10.  Evidence of Insurance.  The Lender shall have received 
certificates of insurance satisfactory to it evidencing the existence of all 
insurance required to be maintained by the Borrower by this Agreement and the 
other Loan Documents.

SECTION VI.1.11.  Engineering Reports.  The Lender shall have received an 
Engineering Report, dated as of August 1, 1998  from T.J. Smith & Company, 
as to Mortgaged Properties.

SECTION VI.1.12.  Environmental Report.  The Lender shall have received the 
Phase I environmental assessments prepared by Grace, Shursen, Moore & 
Associates, Inc., EA Services, Inc., E&P Industry Compliance Services, Inc. and 
Pilko & Associates, Inc. with respect to the Mortgaged Properties located in 
Texas, New Mexico and Oklahoma, and Environmental Compliance Associates with 
respect to the Mortgaged Properties located in the South Coles Levee Unit, Kern 
County, California; a completed environmental disclosure questionnaire and such 
other information with respect to the ownership and past use of the Mortgaged 
Properties as the Lender may reasonably request, and such reports and 
questionnaire shall be satisfactory in form, substance and scope to the Lender.

SECTION VI.1.13.  Budget.  The Lender shall have received a budget for the 
Borrower for the twelve (12) months immediately following the Effective Date, 
in form, scope and detail reasonably satisfactory to the Lender.

SECTION VI.1.14.  Intercreditor Agreement.  The Lender shall have received 
executed counterparts of an intercreditor agreement, dated as of the date 
hereof, and satisfactory in form and substance to the Lender, duly executed by 
the Borrower and each of its Subsidiaries, as applicable, and each of the 
Existing Creditors together with such subordination agreements and related 
documents and agreements as are necessary to implement such intercreditor 
agreement.

SECTION VI.1.15.  Closing of the Future California Merger.  The closing 
under the Agreement and Plan of Merger among Bargo Energy Resources, Ltd., SCL-
CAL Company, the Borrower and Future California shall have occurred such that 
Future California shall have acquired the South Coles Levee Unit property.  

SECTION VI.1.16.  Closing Fees, Expenses, etc.  The Lender shall have 
received all reasonable costs and expenses due and payable pursuant to 
Sections 3.3 and 10.3, if then invoiced.

SECTION VI.1.17.  Other Documents.  The Lender shall have received such 
other documents, including Approvals, as it may reasonably request.

SECTION VI.2.  Inclusion of Hydrocarbon Interests in the Borrowing Base. 
The inclusion of any additional Hydrocarbon Interests in the Borrowing Base is 
subject to the following conditions having been satisfied and receipt by the 
Lender of the following documents, in each case with respect to each 
Hydrocarbon Interests and related Oil and Gas Properties which the Borrower
requests be included in the Borrowing Base, and each of which conditions and 
documents shall be satisfactory to the Lender in form and substance:

SECTION VI.2.1.  Environmental Report.  The Lender shall have 
received Phase I environmental assessments as of a recent date prepared by an 
environmental consulting firm as shall be acceptable to the Lender, a completed
environmental disclosure questionnaire and such other information with respect 
to the ownership and past use of the Mortgaged Properties relating to such 
Hydrocarbon Interests as the Lender may reasonably request, and such reports
and questionnaire shall be satisfactory in form, substance and scope to the 
Lender.

SECTION VI.2.2.  Mortgage.  The Lender shall have received counterparts of 
a Mortgage relating to such Hydrocarbon Interests and related Oil and Gas 
Properties, dated as of a recent date, duly executed by the Borrower and/or its
Subsidiaries, as applicable, together with

(ai     evidence of the completion (or satisfactory arrangements for 
the completion) of all recordings and filings of such Mortgage as may be 
necessary or, in the reasonable opinion of the Lender, desirable effectively 
to create a valid, perfected first priority Lien against the Properties 
purported to be covered thereby;

(bi     favorable mortgagee's title opinions in favor of the Lender 
(in form and substance and issued by title counsel reasonably satisfactory 
to the Lender, substantially in the form of Exhibit I-2 hereto), with 
respect to the Property purporting to be covered by the Mortgage setting 
forth the working interest and net revenue interest of the Borrower and/or 
its Subsidiaries in such Properties and opining that the Borrower's and/or 
its Subsidiaries' title to such property is good and marketable and valid 
and that the interests created by the Mortgage constitute valid first Liens 
thereon free and clear of all defects and encumbrances other than as 
approved by the Lender; and

(ci     such other approvals, opinions, or documents as the Lender 
may reasonably request.

SECTION VI.2.3.  UCC-11s.  The Lender 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 Lender, dated as
of a recent date, listing all effective financing statements which name the 
Borrower or its Subsidiaries (under their present names and any previous names)
as the debtor and which are filed in the jurisdictions in the State of Texas or
the state in which such Oil and Gas Properties are located and in which the 
Mortgage referenced in Section 6.2.2. is to be filed, together with copies of 
such financing statements (none of which shall cover any collateral described
in any such Mortgage).

SECTION VI.2.4.  Evidence of Insurance.  The Lender shall have received 
certificates of insurance satisfactory to it evidencing the existence of all 
insurance required to be maintained by the Borrower by this Agreement and the 
other Loan Documents with respect to the Hydrocarbon Interests and related Oil 
and Gas Properties being added to the Borrowing Base.

SECTION VI.2.5.  Engineering Reports.  The Lender shall have received an 
Engineering Report, dated as of a recent date from a petroleum engineer 
reasonably acceptable to the Lender, as to the Hydrocarbon Interests being 
added to the Borrowing Base.

SECTION VI.2.6.  Material Contracts and Related Consents; Security 
Agreement.  The Lender shall have received true and correct copies, certified
by the Borrower, and approved the form and substance of, each Material Contract
related to the Hydrocarbon Interests being added to the Borrowing Base.  In 
addition, the Lender shall have received duly executed counterparts of a 
Security Agreement or, if applicable, amendments to an existing Security 
Agreement which add any such Material Contract to the Collateral (as defined in
the Security Agreement), a Consent and, as applicable, a Mortgage Consent, for 
each such Material Contract, dated as of a recent date.

SECTION VI.2.7.  Guaranties.  The Lender shall have received duly executed 
counterparts of a Guaranty from any Subsidiary which is adding Hydrocarbon 
Interests to the Borrowing Base, unless such a Guaranty has already been 
delivered to the Lender in connection with a previous addition to the Borrowing
Base or on the Effective Date.

SECTION VI.2.8.  Additional Stock or Partnership Pledge. The Lender shall 
have received executed counterparts of the Pledge Agreement, dated not later 
than the date of such Loan, duly executed by the Borrower or the applicable 
Guarantor pledging its interest in the capital stock or partnership interest, 
as the case may be, of any Subsidiary which is adding Hydrocarbon Interests 
to the Borrowing Base, unless such Pledge Agreement has already been 
delivered to the Lender, accompanied by the original share certificate 
evidencing such capital stock and executed stock powers (in blank) and the 
evidence of satisfactory arrangement for the completion of all filings and 
recordings of the Pledge Agreement as may be necessary or, in the reasonable
opinion of the Lender, desirable, effectively to create a valid, perfected 
first priority lien against and security interest in the collateral covered 
thereby.

SECTION VI.2.9.  Other Documents.  The Lender shall have received such other 
documents as it may reasonably request.

SECTION VI.3.  All Credit Extensions.  The obligation of the Lender to make 
any Credit Extension shall be subject to the satisfaction of each of the 
conditions precedent set forth in this Section 6.3.

SECTION VI.3.1.  Compliance with Warranties, No Default, etc.  Both before 
and after giving effect to any Credit Extension (but, if any Default of the 
nature referred to in Section 9.1.5 shall have occurred with respect to any 
other Indebtedness, without giving effect to the application, directly or 
indirectly, of the proceeds of any borrowing) the following statements shall 
be true and correct 

(ai     the representations and warranties set forth in Article VII 
(excluding, however, those contained in Section 7.9) shall be true and 
correct with the same effect as if then made (unless stated to relate solely 
to an earlier date, in which case such representations and warranties shall 
be true and correct as of such earlier date);

(bi     except as disclosed by the Borrower to the Lender pursuant to 
Section 7.9

(iA     no labor controversy, litigation, arbitration or 
governmental investigation or proceeding shall be pending or, to the 
knowledge of the Borrower, threatened against the Borrower or any of 
its Subsidiaries which has or might reasonably be expected to have a 
Material Adverse Effect; and

(iiA     no development shall have occurred in any labor 
controversy, litigation, arbitration or governmental investigation or 
proceeding disclosed pursuant to Section 7.9 which has or might 
reasonably be expected to have a Material Adverse Effect; and

(ci     no Default shall have then occurred and be continuing, and 
neither the Borrower nor any other Obligor are in material violation of any 
Applicable Law or court order or decree if such violation has or might 
reasonably be expected to have a Material Adverse Effect.

SECTION VI.3.2.  Credit Request.  The Lender shall have received a Borrowing 
Request or Issuance Request, as the case may be, for such Credit Extension.  
Each of the delivery of a Borrowing Request or an Issuance Request and the 
acceptance by the Borrower of the proceeds of the borrowing or the issuance of
the Letter of Credit as applicable, shall constitute a representation and 
warranty by the Borrower that on the date of such borrowing (both immediately 
before and after giving effect to such borrowing and the application of the 
proceeds thereof) or the issuance of the Letter of Credit, as applicable, the 
statements made in Section 6.3.1 are true and correct.

SECTION VI.3.3.  Satisfactory Legal Form.  All documents executed or 
submitted pursuant hereto by or on behalf of the Borrower or any of its 
Subsidiaries shall be reasonably satisfactory in form and substance to the 
Lender and its counsel; the Lender and its counsel shall have received all 
information, approvals, opinions, documents or instruments as the Lender or its
counsel may reasonably request.


                                 ARTICLE VII

                         REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to enter into this Agreement and to make Loans 
and to issue Letters of Credit hereunder, the Borrower represents and warrants 
unto the Lender as set forth in this Article VII.

SECTION VII.1.  Organization, etc.  The Borrower is a Utah corporation and 
each of the Subsidiaries is a corporation or limited partnership, validly 
organized and existing and in good standing under the laws of the jurisdiction 
of its organization, is duly qualified to do business and is in good standing 
as a foreign limited partnership or corporation, as the case may be, in each 
jurisdiction where the nature of its business requires such qualification, 
where the failure so to qualify would have a Material Adverse Effect, and 
has full power and authority and holds all requisite governmental licenses, 
permits and other approvals to enter into and perform its Obligations under 
this Agreement, the Notes and each other Loan Document to which it is a 
party and to own and hold under lease its Property and to conduct its 
business substantially as currently conducted by it, in each case where the 
failure so to do would have a Material Adverse Effect.  As of the Effective 
Date, the Principal Shareholders are the owners of 83% of the issued and 
outstanding shares of the Borrower.  The Borrower is the sole shareholder of
Future California and of each Partner.  The Partners are the sole partners 
of the Partnership Subsidiaries.  As of the Effective Date, the Borrower has
no Subsidiaries other than as listed in Schedule IV.

SECTION VII.2.  Due Authorization, Non-Contravention, etc.  The execution, 
delivery and performance by the Borrower and each other Obligor of this 
Agreement, the Notes and each other Loan Document executed or to be executed by
it are within the Borrower's and each such Obligor's partnership (or corporate 
or other, as the case may be) powers, have been duly authorized by all necessary
partnership (or corporate or other, as the case may be) action, and do not 

(ai     contravene the Borrower's or such Obligor's Organic 
Documents; 

(bi     contravene or result in any violation of or default under any 
Applicable Law or any material contractual restriction, court decree or 
order, in each case binding on or affecting the Borrower or any other 
Obligor or any Properties, businesses, assets or revenues of the Borrower;

(ci     result in, or require the creation or imposition of, any Lien 
on (except for the Liens of the Loan Documents) any of the Borrower's or any 
other Obligor's Properties, businesses, assets or revenues.

SECTION VII.3.  Government Approval, Regulation, etc.  No authorization or 
approval or other action by, and no notice to or filing with, any Government 
Agency or other Person is required for the due execution, delivery or 
performance by the Borrower or any other Obligor of this Agreement, the Notes 
or any other Loan Document to which it is a party. 

SECTION VII.4.  Investment Company Act.  Neither the Borrower, its 
Subsidiaries nor any Affiliate thereof, is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.

SECTION VII.5.  Public Utility Holding Company Act.  Neither the Borrower 
nor any of its Subsidiaries is a "holding company" or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a 
"subsidiary company" of a "holding company", within the meaning of the Public 
Utility Holding Company Act of 1935, as amended.

SECTION VII.6.  Validity, etc.  This Agreement constitutes, and the Notes 
and each other Loan Document executed by the Borrower or any of its 
Subsidiaries will, on the due execution and delivery thereof, constitute, 
the legal, valid and binding obligations of the Borrower and such 
Subsidiaries, as applicable, enforceable in accordance with their respective
terms, and each Loan Document executed pursuant hereto by each other Obligor
will, on the due execution and delivery thereof by such Obligor, be the 
legal, valid and binding obligation of such Obligor enforceable in accordance
with its terms, in each case subject to the effect of any applicable 
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally.

SECTION VII.7.  Financial Information.  The audited consolidated balance 
sheets of the Borrower and each of its consolidated Subsidiaries as at 
December 31, 1997 and the related consolidated unaudited statements of 
operations and cash flow of the Borrower and each of its Subsidiaries, copies
of which have been furnished to the Lender, have been prepared in accordance
with GAAP consistently applied, and present fairly the consolidated financial 
condition of the partnerships and corporations covered thereby as at the date 
thereof and the results of their unaudited operations for the period then 
ended, and show all material Indebtedness of the Borrower and its consolidated 
Subsidiaries, as of the date thereof, including liabilities for taxes, material
commitments and Contingent Liabilities.

SECTION VII.8.  No Material Adverse Change.  Since the date of the audited 
financial statements described in Section 7.7, there has been no change in the 
financial condition, operations, assets, business, Properties or prospects of 
the Borrower or its Subsidiaries that has or might reasonably be expected to 
have a Material Adverse Effect.

SECTION VII.9.  Litigation, Labor Controversies, etc.  There is no pending 
or, to the knowledge of the Borrower, threatened litigation, action, 
proceeding, or labor controversy affecting the Borrower or any of its 
Subsidiaries, or any of their respective Properties, businesses, assets or 
revenues, which has or might reasonably be expected to have a Material 
Adverse Effect, except as disclosed in Item 7.9 ("Litigation") of the 
Disclosure Schedule.

SECTION VII.10.  Ownership of Properties.  Each of the Borrower and each of 
its Subsidiaries has good and merchantable title to its Properties (including,
without limitation, all Hydrocarbon Interests), free and clear of all Liens 
except (a) those referred to in the financial statements referred to in Section
7.7, (b) as disclosed to the Lender in the Disclosure Schedule or (c) as 
permitted by Section 8.2.3.  After giving full effect to all Liens permitted 
under Section 8.2.3, the Borrower and its Subsidiaries own the net interests in
Hydrocarbons produced from the Oil and Gas Properties as reflected in the most 
recent Engineering Report, and neither the Borrower nor any of its Subsidiaries
is obligated to bear costs or expenses in respect of the Oil and Gas Properties
in excess of its working interest percentage as reflected in the most recent 
Engineering Report.

SECTION VII.11.  Taxes.  Each of the Borrower and its Subsidiaries has filed 
all Federal and other tax returns and reports required by Applicable Law to 
have been filed by it and has paid all taxes and other governmental charges 
thereby shown to be owing, except any such taxes or charges which are being 
diligently contested in good faith by appropriate proceedings and for which 
adequate reserves in accordance with GAAP shall have been set aside on its 
books.

SECTION VII.12.  Pension and Welfare Plans.  During the twelve-consecutive-
month period prior to the Effective Date and prior to the date of any borrowing
hereunder, no steps have been taken to terminate any Pension Plan, and no 
contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under section 302(f) of ERISA.  No condition exists or
event or transaction has occurred with respect to any Pension Plan which 
might result in the incurrence by the Borrower or any member of the 
Controlled Group of any material liability, fine or penalty.  Except as 
disclosed in Item 7.12 ("Employee Benefit Plans") of the Disclosure Schedule
or as otherwise reflected in the Financial Statements of the Borrower and 
its consolidated Subsidiaries, neither the Borrower nor any member of the 
Controlled Group has any contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for 
continuation coverage described in Part 6 of Title I of ERISA.

SECTION VII.13.  Compliance with Law.  Neither the Borrower nor any of its 
Subsidiaries (a) is in violation of any Applicable Law of, or the terms of any 
Approval issued by, any Government Agency; or (b) has failed to obtain any 
Approval necessary to ownership of any of its properties or the conduct of its 
business (including without limitation any such authorization from the Federal 
Energy Regulatory Commission or any state conservation commission or similar 
body); which violation or failure could reasonably be expected to have a 
Material Adverse Effect.

SECTION VII.14.  Claims and Liabilities.  Except as disclosed to the Lender 
in Item 7.14 ("Claims and Liabilities") of the Disclosure Schedule, neither the
Borrower nor any of its Subsidiaries 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 Lender in Item 7.14 of the Disclosure Schedule, no claims exist
against the Borrower or any of its Subsidiaries for gas imbalances which claims
if adversely determined would have a Material Adverse Effect.  No purchaser of 
product supplied by the Borrower or any of its Subsidiaries has any claim 
against the Borrower 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. 

SECTION VII.15.  No Prohibition on Perfection of Security Documents.  None 
of the terms or provisions of any indenture, mortgage, deed of trust, agreement
or other instrument to which the Borrower or any of its Subsidiaries is a party
or by which the Borrower or any of its Subsidiaries or the property of the 
Borrower or any of its Subsidiaries is bound prohibit the filing or recordation
of any of the Loan Documents or any other action which is necessary or 
appropriate in connection with the perfection of the Liens evidenced and 
created by any of the Loan Documents.

SECTION VII.16.  Solvency.  Neither the Borrower nor any of its Subsidiaries 
is "insolvent", as such term is used and defined in the United States 
Bankruptcy Code, 11 U.S.C.   101, et seq.

SECTION VII.17.  Environmental Warranties.  As a reasonable and prudent 
operator of oil and gas producing properties, in the ordinary course of its 
business, the Borrower has conducted, with respect to the Acquired Properties 
and its existing Oil and Gas Properties, and, on an ongoing basis, conducts a 
review of the effect of Environmental Laws on business, operations and 
Properties of the Borrower and its Subsidiaries, in the course of which it 
identifies and evaluates associated liabilities and costs (including any 
capital or operating expenditures required for Remedial Action or other 
clean-up or closure of Properties presently owned or operated, any capital 
or operating expenditures required for Remedial Action or otherwise to 
achieve or maintain compliance with environmental protection standards 
imposed by any Environmental Law or as a condition of any Approval, license,
permit or contract, any related constraints on operating activities, 
including any periodic or permanent shutdown of any facility or reduction in
the level of or change in the nature of operations conducted thereat and any
actual or potential liabilities to third parties, including employees, and 
any related costs and expenses).  On the basis of this review, the Borrower 
has reasonably concluded that, except as disclosed in Item 7.17 
("Environmental Matters") of the Disclosure Schedule, to the best 
of its knowledge after due inquiry:

(a)     all facilities and Property (including underlying 
groundwater) owned, leased or operated by the Borrower or any of its 
Subsidiaries have been, and continue to be, owned, leased or operated by the 
Borrower or any of its Subsidiaries in compliance with all Environmental 
Laws where the failure to do so could reasonably be expected to have a 
Material Adverse Effect;

(b)     there have been no past, and there are no pending or 
threatened

(i)     claims, complaints, notices or inquiries to, or 
requests for information received by, the Borrower or any of its 
Subsidiaries with respect to any alleged violation of any 
Environmental Law, that, singly or in the aggregate, have or may 
reasonably be expected to have a Material Adverse Effect, or

(ii)     claims, complaints, notices or inquiries to, or 
requests for information received by, the Borrower or any of its 
Subsidiaries regarding potential liability under any Environmental 
Law or under any common law theories relating to operations or the 
condition of any facilities or Property (including underlying 
groundwater) owned, leased or operated by the Borrower or any of its 
Subsidiaries that, singly or in the aggregate, have, or may 
reasonably be expected to have a Material Adverse Effect;

(c)     there have been no Releases of Hazardous Materials at, on or 
under any Property now or previously owned or leased by the Borrower or any 
of its Subsidiaries that, singly or in the aggregate, have, or may 
reasonably be expected to have, a Material Adverse Effect;

(d)     each of the Borrower or any of its Subsidiaries, as 
applicable, has been issued and is in compliance with all permits, 
certificates, approvals, licenses and other authorizations relating to 
environmental matters and necessary or desirable for its business where the 
failure to do so could reasonably be expected to have a Material Adverse 
Effect;

(e)     no Property now or previously owned, leased or operated by 
the Borrower or any of its Subsidiaries is listed or proposed for listing 
on the National Priorities List pursuant to CERCLA, or, to the extent that 
such listing may, singly or in the aggregate, have, or may reasonably be 
expected to have a Material Adverse Effect, on the CERCLIS or on any other 
similar federal or state list of sites requiring investigation or clean-up;

(f)     there are no underground storage tanks, active or abandoned, 
including petroleum storage tanks, on or under any Property now or 
previously owned, leased or operated by the Borrower or any of its 
Subsidiaries that, singly or in the aggregate, have, or may reasonably be 
expected to have, a Material Adverse Effect;

(g)     neither the Borrower nor any Subsidiaries of the Borrower has 
directly transported or directly arranged for the transportation of any 
Hazardous Material to any location which is listed or proposed for listing 
on the National Priorities List pursuant to CERCLA, or, to the extent that 
such listing may, singly or in the aggregate, have, or may reasonably be 
expected to have a Material Adverse Effect, on the CERCLIS or on any similar 
federal or state list or which is the subject of federal, state or local 
enforcement actions or other investigations which may lead to material 
claims against the Borrower or any of its Subsidiaries for any remedial 
work, damage to natural resources or personal injury, including claims under 
CERCLA;

(h)     there are no polychlorinated biphenyls, radioactive materials 
or friable asbestos present at any Property now or previously owned or 
leased by the Borrower or any of its Subsidiaries that, singly or in the 
aggregate, have, or may reasonably be expected to have, a Material Adverse 
Effect; and

(i)     no condition exists at, on or under any property now or 
previously owned or leased by the Borrower or any of its Subsidiaries which, 
with the passage of time, or the giving of notice or both, would give rise 
to material liability under any Environmental Law that, singly or in the 
aggregate have, or may reasonably be expected to have a Material Adverse 
Effect.

SECTION VII.18.  Regulations G, U and X.  Neither the Borrower nor any of 
its Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock, and no proceeds of any Loans will be 
used for a purpose which violates, or would be inconsistent with, F.R.S. Board 
Regulation G, U or X.  Terms for which meanings are provided in F.R.S. Board 
Regulation G, U or X or any regulations substituted therefor, as from time to 
time in effect, are used in this Section with such meanings.

SECTION VII.19.  Year 2000 Compliance.

(a)     The Borrower is: (i) developing a review and assessment 
program of all areas with its and each of its Subsidiaries' businesses and 
operations (including those affected by suppliers and vendors) that could be 
adversely affected by the "Year 2000 Problem" (that is, the risk that computer 
applications (as well as imbedded microchips) used by the Borrower or any of 
its Subsidiaries (or any of their suppliers and vendors) may be unable to 
recognize and perform properly date-sensitive functions involving certain 
dates prior to and any date after December 31, 1999); (ii)  developing a 
plan and a timetable for addressing the Year 2000 Problem on a timely basis;
 and (iii) to date, implementing that plan in accordance with that timetable.

(b)     The Borrower reasonably believes that all computer 
applications (including those of their suppliers and vendors) that are material
to its or its Subsidiaries' businesses and operations will, on a timely basis, 
be able to perform properly date-sensitive functions for all dates before and 
after January 1, 2000, (that is, be "Year 2000 Compliant"), except to the
extent that a failure to do so could not reasonably be expected to have a 
Material Adverse Effect."

      SECTION VII.20.  Insurance.  The Borrower and its Subsidiaries have the 
benefit of the insurance coverage described in the certificates of insurance 
delivered pursuant to Section 6.1.10 and required to be maintained pursuant to 
Section 8.1.4.

SECTION VII.21.  Accuracy of Information.  All factual information 
heretofore or contemporaneously furnished by or on behalf of the Borrower or 
any of its Subsidiaries in writing to the Lender for purposes of or in 
connection with this Agreement or any transaction contemplated hereby 
(including without limitation each Engineering Report) is, and all other 
such factual information hereafter furnished by or on behalf of the Borrower
or any of its Subsidiaries to the Lender will be, true and accurate in every
material respect on the date as of which such information is dated or 
certified and as of the date of execution and delivery of this Agreement by 
the Lender, and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such 
information not misleading.  


                                   ARTICLE VIII

                                    COVENANTS

SECTION VIII.1.  Affirmative Covenants.  The Borrower agrees with the Lender 
that, until all Commitments have terminated and all Obligations have been paid 
and performed in full, the Borrower and each of its Subsidiaries will perform 
the obligations set forth in this Section 8.1.

SECTION VIII.1.1.  Financial Information, Reports, Notices, etc.  
The Borrower will furnish, or will cause to be furnished, to the Lender copies 
of the following financial statements, reports, notices and information:

(a)     as soon as available and in any event within 45 days after 
the end of each of the first three Fiscal Quarters of each Fiscal Year of 
the Borrower, consolidated and consolidating balance sheets of the Borrower 
and its consolidated Subsidiaries as of the end of such Fiscal Quarter and 
consolidated and consolidating statements of operations and cash flow of the 
Borrower and its consolidated Subsidiaries for such Fiscal Quarter and for 
the period commencing at the end of the previous Fiscal Year and ending with 
the end of such Fiscal Quarter, certified by the chief financial Authorized 
Officer of the Borrower;

(b)     as soon as available and in any event within 90 days after 
the end of each Fiscal Year of the Borrower, a copy of the annual audit 
report for such Fiscal Year for the Borrower and its consolidated 
Subsidiaries, including therein the audited consolidated and consolidating 
balance sheets of the Borrower and its consolidated Subsidiaries as of the 
end of such Fiscal Year and audited statements of operations and cash flow 
of the Borrower and its consolidated Subsidiaries for such Fiscal Year, in 
the case of such audited financials, each case certified (without any 
Impermissible Qualification) in a manner reasonably acceptable to the Lender 
by an independent public accountant acceptable to the Lender, together with 
a certificate from the Chief Financial Officer of the Borrower from such 
accountants containing a computation of, and showing compliance with, each 
of the financial ratios and restrictions contained in Section 8.2.4 and to 
the effect that, in making the examination necessary for the signing of such 
annual report by such accountants, they have not become aware of any Default 
that has occurred and is continuing, or, if they have become aware of such 
Default, describing such Default and the steps, if any, being taken to cure 
it;

(c)     concurrently with the delivery of the financial statements 
referred to is clauses (a) and (b), a certificate, executed by an Authorized 
Officer of the Borrower, showing (in reasonable detail and with appropriate 
calculations and computations in all respects reasonably satisfactory to the 
Lender) compliance with the financial covenants set forth in Section 8.2.4 
and also certifying, to such Authorized Officer's best knowledge, that no 
Default has occurred and is then outstanding;

(d)     on or prior to December 31st of each calendar year, a budget 
for the Borrower for the following calendar year, in form, scope and detail 
reasonably satisfactory to the Lender;

(e)     as soon as possible and in any event within five (5) Business 
Days after any responsible officer of the Borrower becomes aware of the 
occurrence of each Default and any event which has or is reasonably likely 
to have a Material Adverse Effect, a statement of an Authorized Officer of 
the Borrower setting forth details of such Default or event and the action 
which the Borrower has taken and proposes to take with respect thereto;

(f)     as soon as possible and in any event within five (5) Business 
Days after any responsible officer of the Borrower becomes aware of (x) the 
occurrence of any adverse development with respect to any litigation, 
action, proceeding or labor controversy described in Section 7.9 or (y) the 
commencement of any litigation, action, proceeding or labor controversy of 
the type described in Section 7.9, notice thereof and, to the extent 
reasonably requested by the Lender, copies of all documentation relating 
thereto not subject to the attorney-client privilege;

(g)     as soon as possible and in any event within ten (10) days 
after any responsible officer of the Borrower or any of its Subsidiaries has 
actual knowledge thereof, notice of 

(i)     any claim by any Person against the Borrower or any of 
its Subsidiaries of nonpayment of, or 

(ii)     any attempt by any Person to collect upon or enforce 

any accounts payable of the Borrower or any of its Subsidiaries, in the case 
of any single account payable in excess of $50,000, or in the case of all 
accounts payable in the aggregate in excess of $100,000;

(h)     upon, but in no event later than ten (10) days after, any 
responsible officer of the Borrower or any of its Subsidiaries becomes aware 
of (i) any and all enforcement, cleanup, removal or other governmental or 
regulatory actions instituted, completed or threatened or other 
environmental claims against the Borrower or any Subsidiary or any of its 
Properties pursuant to any applicable Environmental Laws which could have 
a Material Adverse Effect, and (ii) any environmental or similar condition 
on any real property adjoining or in the vicinity of the property of the 
Borrower or any Subsidiary that could reasonably be anticipated to cause 
such property or any part thereof to be subject to any restrictions on the 
ownership, occupancy, transferability or use of such property under any 
Environmental Laws;

(i)     as soon as available and in any event within sixty (60) days 
after January 1, 1999 and January 1st of each calendar year, an Engineering 
Report from an independent petroleum engineering firm acceptable to the 
Lender in its reasonable judgment, and as soon as available and in any event 
within sixty (60) days after July lst of each calendar year commencing in 
1999, an Engineering Report from the Borrower's internal reserve engineers, 
unless the Lender, at least sixty (60) days before the required delivery 
date of such Engineering Report, has requested that it be prepared by an 
independent petroleum engineering firm reasonably acceptable to the Lender;

(j)     promptly after (i) the sending or filing thereof, copies of 
all reports which the Borrower sends to any of its security holders, 
(ii) the sending or filing thereof, all material reports and registration 
statements which the Borrower or any of its Subsidiaries files with the 
Securities and Exchange Commission or any national securities exchange, 
(iii) the filing thereof, copies of all tariff and rate cases and other 
material reports filed with any regulatory authority (other than routine 
operating reports), and (iv) receipt thereof, copies of all notices received 
from any regulatory authority concerning material noncompliance by the 
Borrower or any of its Subsidiaries with any applicable regulations;

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

(l)     promptly after the Borrower discovers or determines that any 
computer application (including those of its suppliers or vendors) that is 
material to the businesses or operations of the Borrower and its 
Subsidiaries taken as a whole will not be Year 2000 Compliant on a timely 
basis, notice thereof and a copy of the Borrower's plan for dealing with 
such problem except to the extent such failure could not reasonably be 
expected to have a Material Adverse Effect; and

(m)     such other information respecting the condition or 
operations, financial or otherwise, of the Borrower or any of its 
Subsidiaries as the Lender may from time to time reasonably request 
including operational and accounting information with respect to the 
Mortgaged Properties including production volumes, revenues, operating 
costs, drilling and completion reports and well test data.

SECTION VIII.1.2.  Compliance with Laws, etc.  The Borrower will, and will 
cause each of its Subsidiaries to, comply with all Applicable Laws, except 
where failure to so comply would not be reasonably expected to have a 
Material Adverse Effect, such compliance to include (without limitation):

(a)     the maintenance and preservation of its limited partnership 
or corporate existence, as the case may be, and qualification as a foreign 
limited partnership or corporation, as the case may be; and

(b)     the payment, before the same become delinquent, of all taxes, 
assessments and governmental charges imposed upon it or upon its property 
except to the extent being diligently contested in good faith by appropriate 
proceedings and for which adequate reserves in accordance with GAAP shall 
have been set aside on its books.

SECTION VIII.1.3.  Maintenance and Development of Properties.

(a)     The Borrower will, and will cause each of its Subsidiaries 
to, maintain (subject to any disposition permitted by Section 8.2.9), 
preserve, protect and keep its Properties in good repair, working order and 
condition (ordinary wear and tear excepted), and make necessary and proper 
repairs, renewals and replacements so that its business carried on in 
connection therewith may be properly conducted at all times in accordance 
with standard industry practices.  In particular, the Borrower will, and 
will cause each of its Subsidiaries to, operate or cause to be operated its 
Oil and Gas Properties as a reasonable and prudent operator.  

(b)     The Borrower shall use all reasonable efforts to develop and 
bring into production in a prudent and businesslike manner all proved 
developed non-producing reserves that the Lender has considered in its 
determination of the Borrowing Base.

(c)     The Borrower shall ensure that at all times it has available 
to it, either through its employees or through independent contractors, 
petroleum engineers with appropriate experience and expertise in the proper 
operation and development of properties similar to the Mortgaged Properties.

SECTION VIII.1.4.  Insurance.  The Borrower will, and will cause each of its 
Subsidiaries to, maintain or cause to be maintained with responsible insurance 
companies insurance with respect to its properties and business against such 
casualties and contingencies and of such types and in such amounts as is 
customary in the case of similar businesses (including, where appropriate, well 
control, operator's extra expense and remediation insurance) and will furnish
to the Lender at reasonable intervals at the request of the Lender a 
certificate of an Authorized Officer of the General Partner setting forth 
the nature and extent of all insurance maintained by the Borrower and its 
Subsidiaries in accordance with this Section.  The following shall apply to 
the insurance required by this Section 8.1.4:

(a)     Each policy for property insurance covering the Mortgaged 
Property shall show the Lender as loss payee;

(b)     Each policy for liability insurance covering the Mortgaged 
Property shall show the Lender as additional insured;

(c)     Each insurance policy covering the Mortgaged Property shall 
provide that at least thirty (30) days prior written notice of cancellation, 
reduction in amount or other change in coverage, or of lapse shall be given 
to the Lender by the insurer; and

(d)     The Borrower shall, if so requested by the Lender, deliver to 
the Lender the original or a certified copy of each insurance policy 
covering the Mortgaged Property.

SECTION VIII.1.5.  Books and Records.  The Borrower will, and will cause 
each of its Subsidiaries to, keep books and records which accurately reflect
all of its material business affairs and transactions and permit the Lender 
or any of its respective representatives, at reasonable times (but in any 
event, within three (3) Business Days after notice from the Lender and 
during all normal business hours) and at reasonable intervals, to visit all 
of its offices, to discuss its financial matters with its officers, directors
and, after forty-eight (48) hours notice to the Borrower and independent 
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's and its Subsidiaries' financial matters 
with the Lender or its representatives whether or not any representative of 
the Borrower is present) and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate records.  The 
Borrower shall pay any reasonable fees of such independent public accountant
incurred in connection with the Lender's exercise of its rights pursuant to 
this Section.  Furthermore, the Borrower will permit the Lender, or its 
agents, at the cost and expense of the Borrower, to enter upon the Oil and 
Gas Properties and all parts thereof, for the purpose of investigating and 
inspecting the condition and operation thereof, and shall permit reasonable 
access to the field offices and other offices, including the principal place
of business, of the Borrower to inspect and examine the Oil and Gas 
Properties.  

SECTION VIII.1.6.  Environmental Covenant.  The Borrower will, and will 
cause each of its Subsidiaries to,

(a)     use, operate and maintain all of its facilities and 
Properties in compliance with all Environmental Laws, keep all necessary 
permits, approvals, certificates, licenses and other authorizations relating 
to environmental matters in effect and remain in compliance therewith, and 
handle all Hazardous Materials in compliance with all applicable 
Environmental Laws where failure to do so would reasonably be expected to 
have a Material Adverse Effect;

(b)     (i) promptly notify the Lender, and if requested by the 
Lender, and provide copies of all written claims, complaints, notices or 
inquiries relating to the condition of its facilities and Properties or 
compliance with Environmental Laws, (ii) use all reasonable efforts within 
ninety (90) days to have dismissed with prejudice any actions or proceedings 
relating to compliance with Environmental Laws which would or could in the 
reasonable opinion of the Lender have a Material Adverse Effect, and 
(iii) diligently pursue cure of any material underlying environmental 
problem which forms the basis of any such claim, complaint, notice or 
inquiry; and

(c)     provide such information and certifications which the Lender 
may reasonably request from time to time to evidence compliance with this 
Section 8.1.6.

SECTION VIII.1.7.  Further Assurances.

(a)     The Borrower shall, and shall cause each of its 
Subsidiaries to, upon the request of the Lender, take such actions 
and execute and deliver such documents and instruments as the Lender 
shall require to ensure that the Lender shall, at all times, have 
received currently effective, duly executed Loan Documents 
encumbering Oil and Gas Properties of the Borrower and its 
Subsidiaries constituting 85% of the  Proven Reserves to which value 
is given in the determination of the then current Borrowing Base 
(with accompanying letters in lieu of transfer orders) and 
satisfactory title evidence in form and substance reasonably 
acceptable to the Lender in its reasonable business judgment as to 
ownership of such Oil and Gas Properties; provided that, upon thirty 
(30) days notice to the Borrower, the Lender may require, and the 
Borrower and/or its Subsidiaries, as applicable, shall execute, 
acknowledge and deliver to the Lender, Mortgages effectively 
encumbering 100% of the Oil and Gas Properties of the Borrower and 
its Subsidiaries to which value is given in the determination of the 
then current Borrowing Base.

(b)     If the Lender shall determine that, as of the date of 
any Borrowing Base Redetermination, the Borrower or any of its 
Subsidiaries shall have failed to comply with the preceding 
subsection 8.1.7(a), the Lender may notify the Borrower in writing of 
such failure and, within thirty (30) days from and after receipt of 
such written notice by the Borrower, the Borrower or its Subsidiaries 
(as applicable) shall execute and deliver to the Lender supplemental 
or additional Loan Documents, in form and substance reasonably 
satisfactory to the Lender and its counsel, securing payment of the 
Notes and the other Obligations and covering additional assets not 
then encumbered by any Loan Documents (together with current 
valuations, Engineering Reports, and title evidence applicable to the 
additional assets collaterally assigned, each of which shall be in 
form and substance reasonably satisfactory to the Lender) such that 
the Lender shall have received currently effective duly executed Loan 
Documents encumbering Oil and Gas Properties constituting at least 
85% (or, as provided in Subsection 8.1.7(a), 100%) of the Proven 
Reserves of the Borrower and its Subsidiaries to which value is given 
in the determination of the then current Borrowing Base (with 
accompanying letters in lieu of transfer orders) and satisfactory 
title evidence in form and substance acceptable to the Lender in its 
reasonable business judgment as to ownership of such Oil and Gas 
Properties. 

(c)     The Borrower shall ensure that all written information, 
exhibits, certificates and reports furnished by or on behalf of the 
Borrower to the Lender do not and will not contain any untrue 
statement of a material fact and do not and will not omit to state 
any material fact or any fact necessary to make the statements 
contained therein not misleading in light of the circumstances in 
which made, and will promptly disclose to the Lender and correct any 
defect or error that may be discovered therein or in any Loan 
Document or in the execution, acknowledgment or recordation thereof.

SECTION VIII.2.  Negative Covenants.  The Borrower agrees with the Lender 
that, until all Commitments have terminated and all Obligations have been paid 
and performed in full, the Borrower will perform the obligations set forth in 
this Section 8.2.

SECTION VIII.2.1.  Business Activities.  The Borrower will not, and will not 
permit its Subsidiaries to, engage in any business activity, except those 
described in the first recital and such activities as may be incidental or 
related thereto.

SECTION VIII.2.2.  Indebtedness.  The Borrower will not, and will not permit 
any of its Subsidiaries to, create, incur, assume or suffer to exist or 
otherwise become or be liable in respect of any Indebtedness, other than, 
without duplication, the following:

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

(b)     Indebtedness in an aggregate principal amount not to exceed 
$150,000 at any time outstanding which is incurred by the Borrower or any 
of its Subsidiaries to a vendor of any assets to finance its acquisition of 
such assets;

(c)     unsecured Indebtedness incurred in the ordinary course of 
business (including (i) open accounts extended by suppliers on normal trade 
terms in connection with purchases of goods and services, and (ii) gas 
balancing, but excluding Indebtedness incurred through the borrowing of 
money or Contingent Liabilities);

(d)     Hedging Obligations incurred pursuant to the Hedging 
Agreements approved by the Lender pursuant to Sections 8.2.14;

(e)     Contingent Obligations incurred to satisfy bonding 
requirements imposed by any Government Agency not to exceed, in the 
aggregate, $150,000;

(f)     Indebtedness of its Subsidiaries existing as of the Effective 
Date which is identified in Item 8.2.2(f) of the Disclosure Schedule;

(g)     Indebtedness in respect of Capitalized Lease Obligations in 
an amount not to exceed $150,000 at any time outstanding;

(h)     Indebtedness owed by the Borrower to any of the Subsidiaries 
or by any Subsidiary of the Borrower to the Borrower or any Subsidiary;

(i)     endorsements of negotiable instruments for collection in the 
ordinary course of business;

(j)     subordinated Indebtedness of the Borrower to any of the 
Principal Shareholders which contains terms and conditions, including 
subordination provisions, acceptable to the Lender;

(k)     Indebtedness of the Borrower and its Subsidiaries which are 
Investments to the extent permitted by Section 8.2.5(b);

(l)     subordinated Indebtedness of the Borrower to Existing 
Creditors which contains terms and conditions, including subordination 
provisions, acceptable to the Lender;

(m)     additional Indebtedness not permitted by clauses (a) through 
(l) above, provided, however, that the aggregate amount of all Indebtedness 
incurred by the Borrower and its consolidated Subsidiaries pursuant to this 
clause (l) shall not exceed $150,000 at any one time outstanding;

provided, however, that no Indebtedness otherwise permitted by clause (b) shall 
be permitted if, after giving effect to the incurrence thereof, any Default 
shall have occurred and be continuing.

SECTION VIII.2.3.  Liens.  The Borrower will not, and will not permit any 
of the Subsidiaries to create, incur, assume or suffer to exist any Lien upon 
any of its Property, revenues or assets, whether now owned or hereafter 
acquired, except:

(a)     Liens securing payment of the Obligations, granted pursuant 
to any Loan Document;

(b)     Liens granted to secure payment of Indebtedness of the type 
permitted and described in clause (b) of Section 8.2.2 and covering only 
those assets acquired with the proceeds of such Indebtedness; 

(c)     Liens granted to secure payment of Indebtedness of the type 
permitted and described in clause (l) of Section 8.2.2;

(d)     Hydrocarbon production sales contracts;

(e)     Liens for taxes, assessments or other governmental charges or 
levies not at the time delinquent or thereafter payable without penalty or 
being diligently contested in good faith by appropriate proceedings and for 
which adequate reserves in accordance with GAAP shall have been set aside 
on its books;  

(f)     Liens of carriers, warehousemen, mechanics, materialmen and 
landlords incurred in the ordinary course of business for sums not overdue 
or being diligently contested in good faith by appropriate proceedings and 
for which adequate reserves in accordance with GAAP shall have been set 
aside on its books; provided, that at no time shall such sums exceed in the 
aggregate $150,000;

(g)     Liens incurred in the ordinary course of business in 
connection with workmen's compensation, unemployment insurance or other 
forms of governmental insurance or benefits, or to secure performance of 
bonds, licenses, statutory obligations, and performance bonds, tenders, 
statutory obligations, leases and contracts (other than for borrowed money), 
all other obligations of a like nature entered into in the ordinary course 
of business or to secure obligations on surety or appeal bonds, all other 
obligations of a like nature; 

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

(i)     judgment Liens in existence less than thirty (30) days after 
the entry thereof or with respect to which execution has been stayed or the 
payment of which is covered in full (subject to a customary deductible) by 
insurance maintained with responsible insurance companies;

(j)     deposits of cash to secure insurance in the ordinary course 
of business;

(k)     banker's liens arising by operation of law securing fees and 
costs of such banks, but not liens securing borrowed money;

(l)     Liens on cash collateral in favor of counterparties to 
Hedging Agreements permitted by Section 8.2.14;

(m)     Liens in favor of operators and non-operators under joint 
operating agreements or similar contractual arrangements arising in the 
ordinary course of the business of the Borrower to secure amounts owing, 
which amounts are not yet due or are being contested in good faith by 
appropriate proceedings, if such reserve as may be required by GAAP shall 
have been made therefor;

(n)     production sales agreements, division orders, operating 
agreements and other agreements customary in the oil and gas business for 
producing, processing, gathering, transporting and selling Hydrocarbons;

(o)     the terms any provisions of the leases, unit agreements, 
assignments and other transfer of title documents in the chain of title 
under which the Borrower acquired the relevant Properties;

(p)     any Liens securing Indebtedness, neither assumed nor 
guaranteed by the Borrower nor on which it customarily pays interest, 
existing upon real estate or rights in or relating to real estate acquired 
by the Borrower 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 
compliance with the terms of the leases in the case of leasehold estates, 
so long as no default has occurred in the payment or performance thereof, 
and to the extent that any such Lien referred to in this clause does not 
materially impair the use of the Properties covered by such Lien for the 
purposes for which such Properties is held by the Borrower;

(q)     the statutory Lien to secure payment of the proceeds of 
Hydrocarbon production established by Texas Bus. & Com. Code  9.319 and 
similar laws of other jurisdictions;

(r)     rights reserved to or vested in any Government Agency 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 Properties of the Borrower; and

(s)     rights of a common owner of any interest in real estate, 
rights of way, or easements held by the Borrower and such common owner as 
tenant in common or through other common ownership.

SECTION VIII.2.4.  Financial Condition.  The Borrower will not permit:

(a)     Tangible Net Worth to be less than the sum of (i) $3,000,000 
(at all times prior to December 31, 1999) and $5,000,000 (at all times from 
and after December 31, 1999), plus (ii) fifty percent (50%) of Consolidated 
Net Income of the Borrower and its consolidated Subsidiaries (excluding the 
effects of consolidated net losses) for all Fiscal Quarters beginning after 
the Effective Date and treated as a single accounting period, plus (iii) 
one-hundred percent (100%) of the net proceeds received by the Borrower or 
its Subsidiaries from the sale of any Non-Redeemable Stock by the Borrower 
or any of its Subsidiaries at any time after the Effective Date;

(b)     the Current Ratio at any time to be less than 1.1:1.0;

(c)     the Debt to Capitalization Ratio at any time to be greater 
than 82% (at all times prior to December 31,1999) and 70% (at all times from 
and after December 31,1999); or

(d)     the Interest Coverage Ratio for any four consecutive Fiscal 
Quarters (i) after the Effective Date through and including June 30, 1999, 
to be less than 2.0:1.0, and (ii) after June 30, 1999, to be less than 
3.0:1.0; provided, however, for purposes of this clause (d) of Section 8.2.4 
only,  "Interest Expense" shall not include interest on the subordinated 
Indebtedness described in clause (l) of Section 8.2.2, which interest is not 
paid in cash but added to the principal amount of such Indebtedness.

The Borrower shall not, and shall not suffer or permit any Subsidiary to, make 
any significant change in accounting treatment or reporting practices, except
as required by GAAP, or, without the consent of the Lender, such consent not 
to be unreasonably withheld, change the fiscal year of the Borrower or of any 
Subsidiary.

SECTION VIII.2.5.  Investments.  The Borrower will not, and will not permit 
any of its Subsidiaries to, make, incur, assume or suffer to exist any 
Investment in any other Person, except:

(a)     Cash Equivalent Investments;

(b)     without duplication, Investments permitted as Indebtedness 
pursuant to Section 8.2.2;

(c)     without duplication, Investments in the nature of Capital 
Expenditures; 

(d)     to the extent the formation or acquisition of any Subsidiary 
is permitted hereunder, Investments in such Subsidiary; and 

(e)     Investments permitted by Section 8.2.8;

provided, however, that

(f)     any Investment which when made complies with the requirements 
of the definition of the term "Cash Equivalent Investment" may continue to 
be held notwithstanding that such Investment if made thereafter would not 
comply with such requirements; and

(g)     no Investment otherwise permitted by clause (b) shall be 
permitted to be made if, immediately before or after giving effect thereto, 
any Default shall have occurred and be continuing.
SECTION VIII.2.6.  Restricted Payments, etc.  On and at all times after the 
Effective Date:

(a)     the Borrower will not, and will not permit any of its 
Subsidiaries (other than a wholly-owned Subsidiary) to, declare, pay or make 
any dividend or distribution (in cash, property or obligations) on any class 
or shares of any class of partnership interest (now or hereafter 
outstanding) of the Borrower or such Subsidiary or on any options, warrants 
or other rights with respect to any interest or shares of any class of 
partnership interest or capital stock (now or hereafter outstanding) of the 
Borrower or such Subsidiary or apply any of its funds, property or assets 
to the purchase, redemption, sinking fund or other retirement of, any class 
of partnership interest or capital stock (now or hereafter outstanding) of 
the Borrower, or options, warrants or other rights with respect to any 
interest or shares of or in any class of partnership interest or capital 
stock (now or hereafter outstanding) of the Borrower or such Subsidiary 
(such dividends, distributions or applications being called "Distribution 
Payments") other than Distribution Payments which do not cause the Borrower 
to be in violation of the Restricted Payment Tests; and

(b)     the Borrower will not permit any Subsidiary to make any 
Distribution Payments other than to the Borrower; and

(c)     the Borrower will not, and will not permit its Subsidiaries 
to, make any deposit for any of the foregoing purposes.

SECTION VIII.2.7.  Rental Obligations.  The Borrower will not, and will not 
permit any of its Subsidiaries to, enter into at any time any arrangement 
(excluding oil and gas leases entered into in the ordinary course of business) 
which involves the leasing by the Borrower or any Subsidiary from any lessor of 
any real or personal property (or any interest therein), except arrangements 
which, together with all other such arrangements which shall then be in effect, 
will not require the payment of an aggregate amount of rentals by the Borrower 
or any Subsidiary in excess of (excluding escalations resulting from a rise in 
the consumer price or similar index) $100,000 for any Fiscal Year or $500,000 
during the full remaining term of such arrangements; provided, however, that 
any calculation made for purposes of this Section 8.2.7 shall exclude any 
amounts (i) required to be expended for maintenance and repairs, insurance, 
taxes, assessments, and other similar charges and (ii) any amounts relating 
to Capitalized Lease Obligations.

SECTION VIII.2.8.  Consolidation, Merger, etc.  The Borrower will not, and 
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate 
with, or merge into or with, any other partnership or corporation, unless, in 
the case of such consolidation or merger, the Borrower is the surviving entity 
and Principal Shareholders retain control over the Borrower.  The Borrower will 
not create any Subsidiary except with the prior written consent of the Lender.

SECTION VIII.2.9.  Asset Dispositions, etc.  The Borrower will not, and will 
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or 
otherwise convey, or grant options, warrants or other rights with respect to, 
all or substantially all of the assets of the Borrower or any of its 
Subsidiaries in any one transaction or in any series of transactions, 
whether or not related; and the Borrower will not, and will not permit any of
its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, 
or grant options, warrants or other rights with respect to, less than all or
any substantial part of its assets (including accounts receivable) to any 
Person other than 

(a)     farmouts under standard industry terms of Properties 
not holding Proven Reserves; 

(b)     abandonment of Properties not capable of producing 
Hydrocarbons in paying quantities after the expiration of their 
primary terms; 

(c)     if such assets are not in the Borrowing Base, such 
sale, transfer, lease, contribution or conveyance is for cash or 
other consideration having a value at least equal to the fair market 
value of such assets;

(d)     if such assets are in the Borrowing Base, the Borrower 
complies with the terms of Section 3.1.2 and such sale, transfer, 
lease, contribution or conveyance is for cash in an amount at least 
equal to the fair market value of such assets; or

(e)     as permitted by Section 2.7 of the Mortgages.

SECTION VIII.2.10.  Modification of Certain Documents.  Except with respect 
to amendments that do not materially affect the rights of Lender under the Loan 
Documents, the Borrower will not amend its Organic Documents or consent to any 
amendment, supplement or other modification of any of the terms or provisions 
contained in, or applicable to, the Material Contracts or any other agreement 
affecting the Mortgaged Properties, in each case without the prior written 
consent of the Lender.

SECTION VIII.2.11.  Transactions with Affiliates.  The Borrower will not, 
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or 
permit to exist any arrangement or contract with any of its other Affiliates 
unless such arrangement or contract is fair and equitable to the Borrower and
is an arrangement or contract of the kind which would be entered into by a 
prudent Person in the position of the Borrower or such Subsidiary with a 
Person which is not one of its Affiliates.

SECTION VIII.2.12.  Negative Pledges, Restrictive Agreements, etc.  The 
Borrower will not, and will not permit any of its Subsidiaries to, enter into 
any agreement (excluding this Agreement, any other Loan Document and any 
agreement governing any Indebtedness permitted by clauses (b) or (e) of Section 
8.2.2 as in effect on the Effective Date as to the assets financed with the 
proceeds of such Indebtedness) prohibiting

(a)     the creation or assumption of any Lien upon its 
properties, revenues or assets, whether now owned or hereafter 
acquired (other than those assets subject to Liens permitted by 
Section 8.2.3(b)), or the ability of the Borrower or any other 
Obligor to amend or otherwise modify this Agreement or any other Loan 
Document; or

(b)     the ability of any Subsidiary to make any payments, 
directly or indirectly, to the Borrower by way of dividends, 
advances, repayments of loans or advances, reimbursements of 
management and other intercompany charges, expenses and accruals or 
other returns on investments, or any other agreement or arrangement 
which restricts the ability of any such Subsidiary to make any 
payment, directly or indirectly, to the Borrower.

SECTION VIII.2.13.  Take or Pay Contracts.  Except as disclosed to the 
Lender in Item 8.2.13 of the Disclosure Schedule, and except for reservation 
charges payable for reservations of capacity in gathering systems and pipelines 
incurred in the ordinary course of business on an arm's length basis for 
volumes reasonably expected to be produced from the Borrowers' Properties to be
transported through such systems and pipelines, the Borrower will not, and will 
not permit any of its Subsidiaries to, enter into or be a party to any 
arrangement for the purchase of materials, supplies, other property (including 
without limitation Hydrocarbons), or services if such arrangement requires that 
payment be made by the Borrower or such Subsidiary regardless of whether such 
materials, supplies, other property, or services are delivered or furnished to 
it.

SECTION VIII.2.14.  Hydrocarbon Hedging.  The Borrower will not, and will 
not permit any of its Subsidiaries to, enter into Hydrocarbon Hedging 
Agreements except those that (a) are with counterparties reasonably 
acceptable to the Lender, (b) do not result in Hedging Obligations that are 
at any time in excess of sixty percent (60%) of the value of the proved 
developed producing Hydrocarbon reserves owned by the Borrower and its 
Subsidiaries according to the most recent Engineering Report delivered to the
Lender and (c) the amount of the Hedging Obligation for the particular 
Hydrocarbon (i.e. - gas or oil) must not be materially in excess of the 
proportion that such Hydrocarbon bears to the total amount of proved 
developed Hydrocarbon reserves owned by the Borrower and its Subsidiaries.
(For example, if the Borrower and its Subsidiaries owned 
proved developed producing Hydrocarbon reserves that were 45% oil-producing 
Properties and 55% gas-producing Properties, then any Hydrocarbon Hedging 
Obligation of the Borrower or its Subsidiaries for oil could not be materially 
more than 45% of 60% of the value of the proved developed producing Hydrocarbon
reserves owned by the Borrower and its Subsidiaries according to the most 
recent Engineering Report delivered to the Lender.)


                                 ARTICLE IX

                             EVENTS OF DEFAULT

SECTION IX.1.  Listing of Events of Default.  Each of the following events 
or occurrences described in this Section 9.1 shall constitute an "Event of 
Default".

SECTION IX.1.1.  Non-Payment of Obligations.  The Borrower shall default in 
the payment or prepayment when due of any principal of any Loan; the Borrower 
shall default in the payment when due of any Reimbursement Obligation or 
Hedging Obligation under a Hedging Agreement in effect between the Borrower 
and the Lender or an Affiliate of the Lender; or the Borrower shall default 
(and such default shall continue unremedied for a period of five (5) days)
in the payment when due of any interest on any Loan or any fee or of any 
other Obligation.

SECTION IX.1.2.  Breach of Warranty.  Any representation or warranty of the 
Borrower or any other Obligor made or deemed to be made hereunder or in any 
other Loan Document executed by it or any other writing or certificate 
furnished by or on behalf of the Borrower or any other Obligor to the Lender
for the purposes of or in connection with this Agreement or any such other 
Loan Document (including any certificates delivered pursuant to Article VI)
is or shall be incorrect when made in any material respect.

SECTION IX.1.3.  Non-Performance of Certain Covenants and Obligations.  The 
Borrower shall default in the due performance and observance of any of its 
obligations under Section 3.1.2,  Section 8.1 (other than 8.1.2, 8.1.3 and 
8.1.6) or Section 8.2.

SECTION IX.1.4.  Non-Performance of Other Covenants and Obligations.  The 
Borrower or any other Obligor shall default in the due performance and 
observance of any other agreement contained herein or in any other Loan 
Document executed by it, and such default shall continue unremedied for a 
period of fifteen (15) days after notice thereof shall have been given to 
the Borrower by the Lender.

SECTION IX.1.5.  Default on Other Indebtedness.

(a)     A default shall occur in the payment when due (subject to any 
applicable grace period), whether by acceleration or otherwise, of any 
Indebtedness (including any subordinated indebtedness permitted by Section 
8.2.2 and any Hedging Agreements in effect between the Borrower and the 
Lender or any Affiliate of the Lender, but excluding Indebtedness described 
in Section 9.1.1) of the Borrower, any consolidated Subsidiary or other 
Obligor having a principal amount, individually or in the aggregate, in 
excess of $150,000, or a default shall occur in the performance or 
observance of any obligation or condition with respect to such Indebtedness 
if the effect of such default is to accelerate the maturity of any such 
Indebtedness or such default shall continue unremedied for any applicable 
period of time sufficient to permit any holder of such Indebtedness, or any 
trustee or agent for such holders, to cause such Indebtedness to become due 
and payable prior to its expressed maturity.

(b)     A failure to pay when due any royalty, overriding royalty or 
similar interest burdening the Oil and Gas Properties of the Borrower, in 
the aggregate, in excess of $50,000.

SECTION IX.1.6.  Judgments.  Any judgment, decree, arbitration award or 
order for the payment of money in excess of $150,000 in excess of valid and 
collectible insurance in respect thereof the payment of which is not being 
disputed or contested by the insurer or insurers shall be rendered against the 
Borrower, any consolidated Subsidiary, or other Obligor and either

(a)     enforcement proceedings shall have been commenced by any 
creditor upon such judgment or order; or

(b)     there shall be any period of ten (10) consecutive days during 
which a stay of enforcement of such judgment or order, by reason of a 
pending appeal or otherwise, shall not be in effect.

SECTION IX.1.7.  Pension Plans.  Any of the following events shall occur 
with respect to any Pension Plan

(a)     the institution of any steps by the Borrower, any member of 
its Controlled Group or any other Person to terminate a Pension Plan if, as 
a result of such termination, the Borrower or any such member could be 
required to make a contribution to such Pension Plan, or could reasonably 
expect to incur a liability or obligation to such Pension Plan; or

(b)     a contribution failure occurs with respect to any Pension 
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.

SECTION IX.1.8.  Control of the Borrower.  Any Change in Control shall 
occur.

SECTION IX.1.9.  Bankruptcy, Insolvency, etc.  The Borrower or any other 
Obligor shall

(a)     become insolvent or generally fail to pay, or admit in 
writing its inability or unwillingness to pay, debts as they become due;

(b)     apply for, consent to, or acquiesce in, the appointment of a 
trustee, receiver, sequestrator or other custodian for the Borrower or any 
other Obligor or any property of any thereof, or make a general assignment 
for the benefit of creditors; 

(c)     in the absence of such application, consent or acquiescence, 
permit or suffer to exist the appointment of a trustee, receiver, 
sequestrator or other custodian for the Borrower or any other Obligor or for 
a substantial part of the property of any thereof, and such trustee, 
receiver, sequestrator or other custodian shall not be discharged within 
sixty (60) days, provided that the Borrower and each other Obligor hereby 
expressly authorizes the Lender to appear in any court conducting any 
relevant proceeding during such 60-day period to preserve, protect and 
defend its rights under the Loan Documents;

(d)     permit or suffer to exist the commencement of any bankruptcy, 
reorganization, debt arrangement or other case or proceeding under any 
bankruptcy or insolvency law, or any dissolution, winding up or liquidation 
proceeding, in respect of the Borrower or any other Obligor, and, if any 
such case or proceeding is not commenced by the Borrower or such other 
Obligor, such case or proceeding shall be consented to or acquiesced in by 
the Borrower or such other Obligor or shall result in the entry of an order 
for relief or shall remain for sixty (60) days undismissed, provided that 
the Borrower and each other Obligor hereby expressly authorizes the Lender 
to appear in any court conducting any such case or proceeding during such 
60-day period to preserve, protect and defend its rights under the Loan 
Documents; or 

(e)     take any action authorizing, or in furtherance of, any of the 
foregoing.

SECTION IX.1.10.  Impairment of Security, etc.  Any Loan Document, or any 
Lien granted thereunder, shall (except in accordance with its terms), in whole 
or in part, terminate, cease to be effective or cease to be the legally valid, 
binding and enforceable obligation of any Obligor party thereto; the Borrower, 
any other Obligor or any other party shall, directly or indirectly, contest in 
any manner such effectiveness, validity, binding nature or enforceability; or 
any Lien securing any Obligation shall, in whole or in part, cease to be a 
perfected first priority Lien, subject only to those exceptions expressly 
permitted by such Loan Document.

SECTION IX.1.11.  Material Adverse Effect.  Any Material Adverse Effect 
shall occur.

SECTION IX.2.  Action if Bankruptcy.  If any Event of Default described in 
clauses (a) through (d) of Section 9.1.9 shall occur with respect to the 
Borrower or any other Obligor, the Commitments (if not theretofore terminated) 
shall automatically terminate and the outstanding principal amount of all 
outstanding Loans and all other Obligations shall automatically be and become 
immediately due and payable, without notice or demand.

SECTION IX.3.  Action if Other Event of Default.  If any Event of Default 
(other than any Event of Default described in  clauses (a) through (d) of 
Section 9.1.9 with respect to the Borrower or any other Obligor) shall occur
for any reason, whether voluntary or involuntary, and be continuing, the 
Lender, may by notice to the Borrower declare all or any portion of the 
outstanding principal amount of the Loans and other Obligations to be due 
and payable and/or the Commitments (if not theretofore terminated) to be 
terminated, whereupon the full unpaid amount of such Loans and other 
Obligations which shall be so declared due and payable shall be and become 
immediately due and payable, without further notice, demand or presentment, 
and/or, as the case may be, the Commitments shall terminate.

SECTION IX.4.  Rights Not Exclusive.  The rights provided for in this 
Agreement and the other Loan Documents are cumulative and are not exclusive of 
any other rights, powers, privileges or remedies provided by Applicable Law or 
in equity, or under any other instrument, document or agreement now existing or 
hereafter arising.


                                   ARTICLE X

                           MISCELLANEOUS PROVISIONS

SECTION X.1.  Waivers, Amendments, etc.  The provisions of this Agreement 
and of each other Loan Document may from time to time be amended, modified or 
waived, if such amendment, modification or waiver is in writing and consented 
to by the Borrower and the Lender.  No failure or delay on the part of the 
Lender in exercising any power or right under this Agreement or any other 
Loan Document shall operate as a waiver thereof, nor shall any single or 
partial exercise of any such power or right preclude any other or further 
exercise thereof or the exercise of any other power or right.  No notice to 
or demand on the Borrower in any case shall entitle it to any notice or 
demand in similar or other circumstances. No waiver or approval by the 
Lender under this Agreement or any other Loan Document shall, except as may 
be otherwise stated in such waiver or approval, be applicable to subsequent 
transactions.  No waiver or approval hereunder shall require any similar or 
dissimilar waiver or approval thereafter to be granted hereunder.

SECTION X.2.  Notices.

(a)     All notices and other communications provided to any party 
hereto under this Agreement or any other Loan Document shall be in writing 
and shall be hand delivered or sent by overnight courier, certified mail 
(return receipt requested), or telecopy to such party at its address or 
telecopy number set forth on the signature pages hereof or set forth in the 
Lender Assignment Notice or at such other address or telecopy number as may 
be designated by such party in a notice to the other parties.  Without 
limiting any other means by which a party may be able to provide that a 
notice has been received by the other party, a notice shall be deemed to be 
duly received (a) if sent by hand, on the date when left with a responsible 
person at the address of the recipient; (b) if sent by telefax, on the date 
of receipt by the sender of an acknowledgment or transmission reports 
generated by the machine from which the telefax was sent indicating that the 
telefax was sent in its entirety to the recipient's telefax number.

(b)  All such notices, requests and communications shall, when 
transmitted by overnight delivery, or faxed, be effective when delivered for 
overnight (next-day) delivery, or transmitted in legible form by facsimile 
machine, respectively, or if mailed, upon the third Business Day after the 
date deposited into the U.S. mail, or if delivered, upon delivery.

(c)     Any agreement of the Lender herein to receive certain notices 
by telephone or facsimile is solely for the convenience and at the request 
of the Borrower.  The Lender shall be entitled to rely on the authority of 
any Person purporting to be a Person authorized by the Borrower to give such 
notice and the Lender shall not have any liability to the Borrower or other 
Person on account of any action taken or not taken by the Lender in reliance 
upon such telephonic or facsimile notice.  The obligation of the Borrower 
to repay the Loans shall not be affected in any way or to any extent by any 
failure by the Lender to receive written confirmation of any telephonic or 
facsimile notice or the receipt by the Lender of a confirmation which is at 
variance with the terms understood by the Lender to be contained in the 
telephonic or facsimile notice.

SECTION X.3.  Payment of Costs and Expenses.  The Borrower agrees to pay 
within thirty (30) days after written demand all reasonable expenses of the 
Lender (including the reasonable fees and out-of-pocket expenses of internal
and external counsel to the Lender and of local counsel, if any, who may be 
retained by counsel to the Lender) in connection with

(a)     the negotiation, preparation, execution and delivery of this 
Agreement and of each other Loan Document, including schedules and exhibits, 
and any amendments, waivers, consents, supplements or other modifications 
to this Agreement or any other Loan Document as may from time to time 
hereafter be required, whether or not the transactions contemplated hereby 
are consummated,  

(b)     the filing, recording, refiling or rerecording of the 
Mortgages, the Security Agreements, the Pledge Agreements and/or any Uniform 
Commercial Code financing statements relating thereto and all amendments, 
supplements and modifications to, and all releases and terminations of, any 
thereof and any and all other documents or instruments of further assurance 
required to be filed or recorded or refiled or rerecorded by the terms 
hereof or of the Mortgages, the Security Agreements and the Pledge 
Agreements, and

(c)     the preparation and review of the form of any document or 
instrument relevant to this Agreement or any other Loan Document. 

The Borrower further agrees to pay, and to save the Lender harmless from all 
liability for, any stamp or other taxes (other than any income or franchise tax 
of the Lender) which may be payable in connection with the execution or 
delivery of this Agreement, the borrowings hereunder, the issuance of the 
Notes, the issuance of the Letters of Credit, or any other Loan Documents. 
The Borrower also agrees to reimburse the Lender within thirty (30) days 
after written demand for all reasonable out-of-pocket expenses (including 
attorneys' fees and legal expenses of internal and external attorneys, and 
the expenses of any accountant, engineer or other expert retained or 
utilized in connection therewith) incurred by the Lender in connection with
(x) the negotiation of any restructuring or "work-out", whether or not 
consummated, of any Obligations and (y) the enforcement of any Obligations.
All requests for payment under this Section 10.3 shall be accompanied by 
invoices containing reasonable details.

SECTION X.4.  Indemnification.  In consideration of the execution and 
delivery of this Agreement by the Lender and the extension of the Commitments, 
the Borrower hereby indemnifies, exonerates and holds the Lender, any Issuer 
and each of their respective officers, directors, employees and agents 
(collectively, the "Indemnified Parties") free and harmless from and against
 any and all actions, causes of action, suits, losses, costs, liabilities and 
damages, and expenses incurred in connection therewith (irrespective of whether 
any such Indemnified Party is a party to the action for which indemnification 
hereunder is sought), including reasonable attorneys' fees and disbursements 
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified 
Parties or any of them as a result of, or arising out of, or relating to 

(a)     this Agreement, any Loan Document or any document 
contemplated by or referred to herein; 

(b)     any transaction financed or to be financed in whole or in 
part, directly or indirectly, with the proceeds of any Loan, including any 
Acquisition, or the use of any Letter of Credit;

(c)     any investigation, litigation or proceeding related to any 
acquisition or proposed acquisition by the Borrower or any of its 
Subsidiaries of all or any portion of the stock or assets of any Person, 
whether or not the Lender is party thereto;

(d)     any investigation, litigation or proceeding related to any 
environmental cleanup, audit, compliance or other matter relating to any 
Environmental Law or the condition of any facility or Property owned, leased 
or operated by the Borrower or any of its Subsidiaries;

(e)     the presence on or under, or the escape, seepage, leakage, 
spillage, discharge, emission, discharging or releases from, any facility 
or Property owned, leased or operated by the Borrower or any of its 
Subsidiaries thereof of any Hazardous Material (including any losses, 
liabilities, damages, injuries, costs, expenses or claims asserted or 
arising under any Environmental Law), regardless of whether caused by, or 
within the control of, the Borrower or any of its Subsidiaries; or

(f)     any misrepresentation, inaccuracy or breach in or of 
Section 7.17 or Section 8.1.6, 

except for any such Indemnified Liabilities arising for the account of a 
particular Indemnified Party by reason of the relevant Indemnified Party's 
gross negligence or wilful misconduct.  If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to 
make the maximum contribution to the payment and satisfaction of each of the 
Indemnified Liabilities which is permissible under Applicable Law.  The 
obligations in this Section 10.4 shall survive payment of all other 
Obligations. At the election of any Indemnified Party, the Borrower shall 
defend such Indemnified Party using legal counsel satisfactory to such 
Indemnified Party in such Person's sole discretion, at the sole cost and 
expense of the Borrower.  All amounts owing under this Section 10.4 shall be
paid within thirty (30) days after written demand.

SECTION X.5.  Survival.  The obligations of the Borrower under Sections 10.3 
and 10.4 shall in each case survive any termination of this Agreement, the 
payment in full of all Obligations and the termination of all Commitments.  The 
representations and warranties made by each Obligor in this Agreement and in 
each other Loan Document shall survive the execution and delivery of this 
Agreement and each such other Loan Document.

SECTION X.6.  Severability.  Any provision of this Agreement or any other 
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the extent of 
such prohibition or unenforceability without invalidating the remaining 
provisions of this Agreement or such Loan Document or affecting the validity
or enforceability of such provision in any other jurisdiction.

SECTION X.7.  Headings.  The various headings of this Agreement and of each 
other Loan Document are inserted for convenience only and shall not affect the 
meaning or interpretation of this Agreement or such other Loan Document or any 
provisions hereof or thereof.

SECTION X.8.  Execution in Counterparts, Effectiveness, etc.  This Agreement 
may be executed by the parties hereto in several counterparts, each of which 
shall be executed by the Borrower and the Lender and be deemed to be an 
original and all of which shall constitute together but one and the same 
agreement.  This Agreement shall become effective when counterparts hereof 
are executed on behalf of the Borrower and the Lender.  This Agreement is 
made and entered into for the sole protection and legal benefit of the 
Borrower and the Lender and Persons indemnified hereunder, and their 
permitted successors and assigns, and no other Person shall be a direct or 
indirect legal beneficiary of, or have any direct or indirect cause of 
action or claim in connection with, this Agreement or any of the other Loan 
Documents.

SECTION X.9.  Governing Law; Entire Agreement.  THIS AGREEMENT, THE NOTES 
AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE MORTGAGES OR AS EXPRESSLY PROVIDED 
IN ANY SUCH DOCUMENT) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND 
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.  This Agreement, the 
Notes and the other Loan Documents constitute the entire understanding among 
the parties hereto with respect to the subject matter hereof and supersede 
any prior agreements, written or oral, with respect thereto.

SECTION X.10.  Successors and Assigns.  This Agreement shall be binding upon 
and shall inure to the benefit of the parties hereto and their respective 
successors and assigns; provided, however, that:

(a)     the Borrower may not assign or transfer its rights or 
obligations hereunder without the prior written consent of the Lender; and

(b)     the rights of sale, assignment and transfer of the Lender are 
subject to Section 10.11.

SECTION X.11.  Sale and Transfer of Loans and Notes; Participations in Loans 
and Notes.  The Lender may assign, or sell participations in, its Loans and 
Commitments to one or more other Persons in accordance with this Section 10.11.

SECTION X.11.1.  Assignments.  The Lender may at any time assign and 
delegate to one or more Persons, including without limitation, banks or other 
financial institutions (each Person to whom such assignment and delegation is 
to be made, being hereinafter referred to as an "Assignee Lender"), all or any 
fraction of the Lender's total Loans and Commitments (which assignment and 
delegation shall be of a constant, and not a varying, percentage of all the 
Lender's Loans and Commitments) in a minimum aggregate amount of $1,000,000 (or 
the entire remaining amount of the Lender's  Loans and Commitments); provided, 
however, that the Lender is required at all times to maintain Loans, Letter of 
Credit Outstandings and Commitments hereunder in an aggregate amount of 
$1,000,000 (unless the Lender shall have reduced its Loans, Letter of Credit 
Outstandings and Commitments to zero); provided, further, however, that the 
Borrower and each other Obligor shall be entitled to continue to deal solely
and directly with the Lender in connection with the interests so assigned and 
delegated to an Assignee Lender until

(a)     written notice of such assignment and delegation, together 
with payment instructions, addresses and related information with respect 
to such Assignee Lender, shall have been given to the Borrower by the Lender 
and such Assignee Lender, 

(b)     such Assignee Lender shall have executed and delivered to the 
Borrower and the Lender a Lender Assignment Notice, accepted by the Lender, 
and

(c)     the processing fees described below shall have been paid.

From and after the date that the Assignee Lender delivers such Lender 
Assignment Notice, (x) the Assignee Lender thereunder shall be deemed 
automatically to have become a party hereto and to the extent that rights 
and obligations hereunder have been assigned and delegated to such Assignee 
Lender in connection with such Lender Assignment Notice, shall have the 
rights and obligations of a Lender hereunder and under the other Loan 
Documents, and (y) the assignor Lender, to the extent that rights and 
obligations hereunder have been assigned and delegated by it in connection 
with such Lender Assignment Notice, shall be released from its obligations 
hereunder and under the other Loan Documents.  Within five Business Days 
after its receipt of notice that the Lender has received an executed Lender 
Assignment Notice and the Borrower has received from the Lender execution 
copies of appropriate Notes, the Borrower shall execute and 
deliver to the relevant Assignee Lender new Notes evidencing such Assignee 
Lender's assigned Loans and Commitments and, if the assignor Lender has 
retained Loans and Commitments hereunder, replacement Notes in the principal
amount of the Loans and Commitments retained by the assignor Lender hereunder
(each such Note to be in exchange for, but not in payment of, the 
corresponding Note then held by such assignor Lender).  The assignor Lender 
shall mark the predecessor Note "exchanged" and deliver it to the Borrower. 
Accrued interest on that part of the predecessor Note evidenced by the new 
Notes, and accrued fees, shall be paid as provided in the Lender Assignment 
Notice.  Accrued interest on that part of the predecessor Note evidenced by 
the replacement Notes shall be paid to the assignor Lender.  Accrued interest
and accrued fees shall be paid at the same time or times provided in the 
predecessor Notes and in this Agreement.  Such assignor Lender or such 
Assignee Lender must also pay a processing fee to the Lender upon delivery 
of any Lender Assignment Notice in the amount of $2,500.  Any attempted 
assignment and delegation not made in accordance with this Section 
10.11.1 shall be null and void.  Nothing contained in this Agreement shall 
prohibit any Lender from pledging or assigning any Note to any Federal Reserve 
Bank in accordance with Applicable Law.

SECTION X.11.2.  Participations.  The Lender may at any time sell to one or 
more Persons, including without limitation commercial banks (each of such 
commercial banks and other Persons being herein called a "Participant") 
participating interests in any of the Loans, Commitments, or other interests of 
the Lender hereunder; provided, however, that

(a)     no participation contemplated in this Section 10.11.2 shall 
relieve the Lender from its Commitments or its other obligations hereunder 
or under any other Loan Document,

(b)     the Lender shall remain solely responsible for the 
performance of its Commitments and such other obligations,

(c)     the Borrower and each other Obligor shall continue to deal 
solely and directly with the Lender in connection with the Lender's rights 
and obligations under this Agreement and each of the other Loan Documents, 
and

(d)     the Borrower shall not be required to pay any amount under 
Section 5.2 or Section 10.3 that is greater than the amount which it would 
have been required to pay had no participating interest been sold.

(e)     the Lender shall not transfer, grant or assign any 
participation under which the Participant shall have rights to approve any 
amendment to or waiver of this Agreement except to the extent such amendment 
or waiver would (i) increase the amount of the Participants' Loans or 
Commitment, (ii) reduce the principal of, or interest on, any of the 
Lender's Loans, or any fees payable to the Lender hereunder, (iii) postpone 
any date fixed for any scheduled payment of principal of, or interest on, 
any of the Lender's Loans, or any fees or other amounts payable to the 
Lender hereunder or (iv) release all of substantially collateral security 
for any Obligation, and

(f)     in a participation certificate or other document evidencing 
such participating interest, the Participant shall acknowledge that the 
confidentiality obligations of Section 10.14 shall be binding upon the 
Participant.

Each Participant shall be entitled to the benefits of Section 4.8, 5.1, 5.2, 
5.4, 10.3 and 10.4; provided that no Participant shall be entitled to receive 
any greater amount pursuant to such Sections than the transferor Lender would 
have been entitled to receive in respect of the amount of the participating 
interest transferred by such transferor Lender to such Participant had no such 
transfer occurred; and provided further that the Borrower shall not be required 
to pay an amount under any Loan Document that is greater than the amount which 
it would have been required to pay had no participating interest been sold.

The Borrower acknowledges and agrees that each Participant, for purposes of 
Sections 5.1 and 5.2 (except as provided in Section 10.11.2(d)), 10.3 and 10.4, 
shall be considered a Lender.

SECTION X.12.  Forum Selection and Consent to Jurisdiction.  ANY LITIGATION 
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, 
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER
SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF ILLINOIS OR IN 
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; 
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL 
OR OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF 
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  THE 
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR 
THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS 
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED 
THEREBY IN CONNECTION WITH SUCH LITIGATION.  THE BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.  THE BORROWER 
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY 
LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF 
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 
TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY 
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS 
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE 
BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS 
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

SECTION X.13.  Waiver of Jury Trial.  THE LENDER AND THE BORROWER HEREBY 
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A 
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, 
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY 
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR 
ACTIONS OF THE LENDER OR THE BORROWER.  THE BORROWER ACKNOWLEDGES AND AGREES 
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND 
EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND 
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS 
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.

SECTION X.14.  Notice   THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER LOAN 
DOCUMENTS REPRESENTS 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be 
executed by their respective officers thereunto duly authorized as of the day 
and year first above written.

FUTURE PETROLEUM CORPORATION, a Utah corporation


/s/ Carl Price
By Carl Price    
Title: President
Address:     2351 West Northwest Highway
             Suite 2130, Dallas, TX 75220


BANK OF AMERICA NATIONAL TRUST AND SAVINGS 
ASSOCIATION


By: 
Title: 
Address:     231 South LaSalle Street
             Chicago, Illinois  60697

All notices should be sent to:

333 Clay Street, Suite 4550
Houston, Texas  77002

Fax:  (713) 651-4888

(The Schedules and Exhibits will be provided upon request)
 

SCHEDULE I          Disclosure Schedule
SCHEDULE II         Subsidiaries
SCHEDULE III        Certain Consents and Mortgage Consents

EXHIBIT A           Form of Secured Promissory Note
EXHIBIT B           Form of Security Agreement
EXHIBIT C           Form of Borrowing Request
EXHIBIT D           Form of Guaranty
EXHIBIT E-1         Form of California Mortgage
EXHIBIT E-2         Form of Multi-State Mortgage
EXHIBIT F-1         Form of Pledge Agreement (Partnership Interests)
EXHIBIT F-2         Form of Pledge Agreement (Stock)
EXHIBIT G           Form of Lender Assignment Notice
EXHIBIT H           Form of Opinion of Counsel to the Borrower, et al.
EXHIBIT I-1         Form of Pre-Closing Title Opinion of Special Counsel to the 
                    Borrower
EXHIBIT I-2         Form of Post-Closing Title Opinion of Special Counsel to
                    the Borrower
EXHIBIT J           Form of Consent
EXHIBIT K           Form of Issuance Request
EXHIBIT L           Form of Letter of Credit