AMONG

                           SEAGULL ENERGY CORPORATION,

                            THE CHASE MANHATTAN BANK,
                    Individually and as Administrative Agent,

                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                    Individually, and as Documentation Agent,

                           NATIONSBANK OF TEXAS, N.A.,
                     Individually, and as Syndication Agent,

                                       AND

                        THE OTHER BANKS SIGNATORY HERETO

                                December 24, 1997


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


                             CHASE SECURITIES INC.,
                                   as Arranger




<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


<S>                 <C>
Section 1.          Definitions and Accounting Matters........................ 1
         1.1        Certain Defined Terms..................................... 1
         1.2        Accounting Terms and Determinations.......................17
         1.3        Types of Loans............................................17
         1.4        Miscellaneous.............................................17

Section 2.          Commitments; Competitive Bid Facility.....................17
         2.1        Committed Loans...........................................17
         2.2        Letters of Credit.........................................17
         2.3        Reductions and Changes of Commitments.....................20
         2.4        Fees......................................................21
         2.5        Affiliates; Lending Offices...............................21
         2.6        Several Obligations.......................................21
         2.7        Repayment of Loans; Evidence of Debt......................21
         2.8        Use of Proceeds...........................................22
         2.9        Competitive Bid Procedure.................................22

Section 3.          Borrowings, Prepayments and Selection of Interest Rates...24
         3.1        Borrowings................................................24
         3.2        Prepayments...............................................24
         3.3        Selection of Interest Rates...............................25

Section 4.          Payments of Principal and Interest........................25
         4.1        Repayment of Loans and Reimbursement Obligations..........25
         4.2        Interest..................................................25

Section 5.          Payments; Pro Rata Treatment; Computations, Etc...........26
         5.1        Payments..................................................26
         5.2        Pro Rata Treatment........................................27
         5.3        Computations..............................................27
         5.4        Minimum and Maximum Amounts...............................27
         5.5        Certain Actions, Notices, Etc.............................27
         5.6        Non-Receipt of Funds by Administrative Agent..............28
         5.7        Sharing of Payments, Etc..................................29

Section 6.          Yield Protection and Illegality...........................30
         6.1        Additional Costs..........................................30
         6.2        Limitation on Types of Loans..............................31
                                      (1)
<PAGE>

         6.3        Illegality................................................32
         6.4        Substitute Alternate Base Rate Loans......................32
         6.5        Compensation..............................................33
         6.6        Additional Costs in Respect of Letters of Credit..........33
         6.7        Capital Adequacy..........................................34
         6.8        Limitation on Additional Charges; Substitute Banks;
                     Non-Discrimination.......................................34

Section 7.          Conditions Precedent......................................35
         7.1        Initial Loans.............................................35
         7.2        Initial and Subsequent Loans..............................36

Section 8.          Representations and Warranties............................37
         8.1        Corporate Existence.......................................37
         8.2        Corporate Power and Authorization.........................37
         8.3        Binding Obligations.......................................37
         8.4        No Legal Bar or Resultant Lien............................38
         8.5        No Consent................................................38
         8.6        Financial Condition.......................................38
         8.7        Investments and Guaranties................................38
         8.8        Liabilities and Litigation................................38
         8.9        Taxes and Governmental Charges............................39
         8.10       Title to Properties.......................................39
         8.11       Defaults..................................................39
         8.12       Location of Businesses and Offices........................39
         8.13       Compliance with Law.......................................39
         8.14       Margin Stock..............................................40
         8.15       Subsidiaries..............................................40
         8.16       ERISA.....................................................40
         8.17       Investment Company Act....................................40
         8.18       Public Utility Holding Company Act........................40
         8.19       Environmental Matters.....................................41
         8.20       Claims and Liabilities....................................42
         8.21       Solvency..................................................42

Section 9.          Affirmative Covenants.....................................42
         9.1        Financial Statements and Reports..........................42
         9.2        Officers' Certificates....................................44
         9.3        Taxes and Other Liens.....................................44
         9.4        Maintenance...............................................44
         9.5        Further Assurances........................................45
         9.6        Performance of Obligations................................45
         9.7        Reimbursement of Expenses.................................45
                                      (2)
<PAGE>

         9.8        Insurance.................................................46
         9.9        Accounts and Records......................................46
         9.10       Notice of Certain Events..................................47
         9.11       ERISA Information and Compliance..........................48

Section 10.         Negative Covenants........................................49
         10.1       Debts, Guaranties and Other Obligations...................49
         10.2       Liens.....................................................51
         10.3       Guarantees................................................54
         10.4       Dividend Payment Restrictions.............................54
         10.5       Mergers and Sales of Assets...............................54
         10.6       Proceeds of Loans.........................................55
         10.7       ERISA Compliance..........................................55
         10.8       Amendment of Certain Documents............................55
         10.9       Total Debt/Capitalization Ratio...........................55
         10.10      EBITDAX/Interest Ratio....................................55
         10.11      Nature of Business........................................55
         10.12      Covenants in Other Agreements.............................56

Section 11.         Defaults..................................................56
         11.1       Events of Default.........................................56
         11.2       Collateral Account........................................59
         11.3       Preservation of Security for Unmatured Reimbursement
                     Obligations..............................................59
         11.4       Right of Setoff...........................................59

Section 12.         Agents....................................................60
         12.1       Appointment, Powers and Immunities........................60
         12.2       Reliance by Agents........................................61
         12.3       Defaults..................................................61
         12.4       Rights as a Bank..........................................61
         12.5       Indemnification...........................................62
         12.6       Non-Reliance on Agents and Other Banks....................62
         12.7       Failure to Act............................................63
         12.8       Resignation or Removal of Administrative Agent............63

Section 13.         Miscellaneous.............................................63
         13.1       Waiver....................................................63
         13.2       Notices...................................................64
         13.3       Indemnification...........................................64
         13.4       Amendments, Etc...........................................65
         13.5       Successors and Assigns....................................65
         13.6       Limitation of Interest....................................68
                                      (3)
<PAGE>

         13.7       Survival..................................................69
         13.8       Captions..................................................69
         13.9       Counterparts..............................................69
         13.10      Governing Law.............................................69
         13.11      Severability..............................................70
         13.12      Chapter 15 Not Applicable.................................70
         13.13      Confidential Information..................................70
         13.14      Tax Forms.................................................71
         13.15      Amendment and Restatement.................................72
</TABLE>


EXHIBITS:

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


                                      (4)
<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

     This AMENDED AND RESTATED CREDIT  AGREEMENT,  dated as of December 24, 1997
(the  "Effective  Date"),  is by  and  among  SEAGULL  ENERGY  CORPORATION  (the
"Company"),  a corporation duly organized and validly existing under the laws of
the  State of Texas;  each of the banks  which is or which may from time to time
become a  signatory  hereto  (individually,  a  "Bank"  and,  collectively,  the
"Banks"); MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan"), as Documentation
Agent for the Banks (in such capacity, the "Documentation  Agent");  NATIONSBANK
OF TEXAS,  N.A.  ("NationsBank"),  as  Syndication  Agent for the Banks (in such
capacity,   the  "Syndication   Agent");   and  THE  CHASE  MANHATTAN  BANK,  as
Administrative  Agent  for the  Banks  (in  such  capacity,  together  with  its
successors in such capacity, "Administrative Agent").

         The parties hereto agree as follows:

         Section 1. Definitions and Accounting Matters.

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

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

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

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

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

     "Alternate  Base Rate" shall  mean,  for any day, a rate per annum equal to
the higher of (a) the Prime Rate in effect on such day or (b) 1/2 of 1% plus the

<PAGE>

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

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

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

     "APC Long Term  Financing  Documents"  shall mean that  certain  Inducement
Agreement and that certain Note Agreement  (together with the Notes,  as defined
therein),  each  dated  as of May  14,  1992,  by and  among  the  Company,  Aid
Association  for Lutherans,  The Equitable Life Assurance  Society of the United
States,  Equitable Variable Life Insurance Company,  Provident Life and Accident
Insurance Company and Teachers Insurance & Annuity  Association of America,  any
documentation   executed  in   connection   with  any   renewal,   extension  or
rearrangement  of  the  Indebtedness  that  is  the  subject  of  the  foregoing
documents,  the Gas Sales Contract, the Intercompany Mortgage, as defined in the
above-mentioned Note Agreement, and any documents executed in replacement of any
of the  foregoing  documents,  if any,  and  only if  Administrative  Agent  has
received notice thereof pursuant to Section 10.8.

     "Applicable  Lending Office" shall mean, for each Bank and for each Type of
Loan, such office of such Bank (or of an affiliate of such Bank) as such Bank
                                      (2)
<PAGE>

may from time to time  specify to  Administrative  Agent and the  Company as the
office  by  which  its  Loans  of such  Type are to be made  and/or  issued  and
maintained.

     "Applicable  Margin"  shall mean,  on any day,  (i) zero  percent (0%) with
respect to any Alternate  Base Rate Loan and (ii) with respect to any Eurodollar
Loan,  the  applicable  per  annum  percentage  set  forth  at  the  appropriate
intersection  in the table shown  below,  based on the Rating as of the close of
business on the preceding Business Day:

                                 Eurodollar Loan
                     Rating                                Applicable Margin

              BBB/Baa2 and higher                                  0.20

              BBB-/Baa3                                            0.275

              BB+/Ba1                                              0.40

              BB/Ba2 and lower                                     0.45

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

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

     "Beluga Financing  Documents" shall mean that certain Inducement  Agreement
and that certain Note Agreement  (together with the Notes, as defined  therein),
each dated June 17,  1985,  and  amended as of June 15,  1990,  by and among the
Company,  The Equitable  Life Assurance  Society of the United  States,  and the
Travelers Insurance Company,  any documentation  executed in connection with any
renewal,  extension or rearrangement of the Indebtedness  that is the subject of
the foregoing documents,  the Gas Sales Contract,  the Intercompany Mortgage, as
defined in the  above-mentioned  Note Agreement,  and any documents  executed in
replacement  of any of the foregoing  documents,  if and only if  Administrative
Agent has received notice thereof pursuant to Section 10.8.

     "Business  Day"  shall  mean any day other  than a day on which  commercial
banks are  authorized  or required to close in Houston,  Texas or New York,  New
York, and where such term is used in the definition of "Quarterly  Date" in this
Section 1.1 or if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or an Interest  Period for, a Eurodollar  Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment or
Interest  Period, a day which is also a day on which dealings in Dollar deposits
are carried out in the relevant interbank market.
                                      (3)
<PAGE>

     "Capital  Expenditures"  shall  mean  expenditures  in  respect of fixed or
capital assets  (calculated in accordance with GAAP) excluding  expenditures for
the  restoration,  repair or replacement of any fixed or capital asset which was
destroyed  or  damaged,  in whole  or in part,  to the  extent  financed  by the
proceeds of an insurance  policy.  Expenditures in respect of  replacements  and
maintenance  consistent  with the  business  practices  of the  Company  and its
Subsidiaries in respect of plant facilities,  machinery, fixtures and other like
capital  assets  utilized in the  ordinary  course of  business  are not Capital
Expenditures to the extent such  expenditures are not capitalized in preparing a
balance sheet of the Company in accordance with GAAP.

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

    "Capitalization"  shall  mean an amount  equal to the sum of (a) Total  Debt
plus (b) the  shareholder's  equity of the  Company  and its  Subsidiaries  on a
consolidated basis.

     "Change of Control" shall mean a change resulting when any Unrelated Person
or any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons  thereof (in each case also  constituting
Unrelated  Persons) shall at any time either (i)  Beneficially Own more than 35%
of the  aggregate  voting power of all classes of Voting Stock of the Company or
(ii) during any period of two consecutive years ending on or after the Effective
Date,  as  determined  as of the last day of each  calendar  quarter  after  the
Effective Date, the individuals (the "Incumbent Directors") who at the beginning
of such period  constituted  the Board of Directors  of the Company  (other than
additions thereto or removals therefrom from time to time thereafter approved by
a vote of the Board of Directors in accordance with the Company's by-laws) shall
cease for any reason to constitute  51% or more of the Board of Directors of the
Company.  As used  herein  (a)"Beneficially  Own"  means  "beneficially  own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any
successor  provision  thereto;  provided,  however,  that,  for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities tendered
pursuant  to a tender or  exchange  offer made by or on behalf of such Person or
any of such Person's  Affiliates until such tendered securities are accepted for
purchase or exchange;  (b)"Group"  means a "group" for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended;  (c)"Unrelated Person" means
at any time any Person other than the Company or any  Subsidiary  and other than
any trust for any employee  benefit plan of the Company or any Subsidiary of the
Company;  (d) "Related  Person" of any Person shall mean any other Person owning
(1) 5% or more of the outstanding  common stock of such Person or (2) 5% or more
of the Voting Stock of such Person;  and (e) "Voting  Stock" of any Person shall
mean  capital  stock of such Person  which  ordinarily  has voting power for the
election of directors (or persons  performing similar functions) of such Person,
whether at all times or only so long as no senior class of  securities  has such
voting power by reason of any contingency.

                                      (4)
<PAGE>

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

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

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

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

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

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

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

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

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

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

     "Cover"  for Letter of Credit  Liabilities  shall be  effected by paying to
Administrative  Agent immediately  available funds, to be held by Administrative
Agent  in a  collateral  account  maintained  by  Administrative  Agent  at  its
Principal  Office  and  collaterally  assigned  as  security  for the  financial
accommodations   extended   pursuant  to  this  Agreement  using   documentation
satisfactory  to  Administrative  Agent,  in an  amount  equal  to any  required
prepayment.  Such  amount  shall be  retained  by  Administrative  Agent in such
collateral account until such time as (x) in the case of Cover being provided
                                      (5)
<PAGE>

pursuant to Section 2.2(a),  the applicable  Letter of Credit shall have expired
and  Reimbursement  Obligations,  if any,  with respect  thereto shall have been
fully  satisfied or (y) in the case of Cover being provided  pursuant to Section
3.2(b)(1),  the outstanding principal amount of all Revolving Credit Obligations
is not greater than the aggregate amount of the Commitments.

     "Current Maturities" shall mean, on any day on which Current Maturities are
calculated,  the sum of (a) scheduled  principal payments on Funded Indebtedness
which are  payable  within one (1) year  after  such day plus (b) the  principal
component  of  payments  required  to be made  with  respect  to  Capital  Lease
Obligations  within  one (1) year of said  date  plus  (c),  to the  extent  not
included  above,  all items which in accordance with GAAP would be classified as
current maturities of long term debt.

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

     "Disclosure  Statement" shall mean the Disclosure  Statement dated December
31, 1992 delivered to Administrative Agent by the Company.

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

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

     "EBITDAX" shall mean net earnings  (excluding  material gains and losses on
sales and  retirement of assets,  non-cash write downs,  charges  resulting from
accounting  convention  changes and deductions for exploration  expenses) before
deduction for federal and state taxes,  interest expense (including  capitalized
interest),  operating lease rentals or depreciation,  depletion and amortization
expense, all determined in accordance with GAAP.

     "EBITDAX/Interest Ratio" shall mean the ratio of (a) EBITDAX of the Company
and its Restricted  Subsidiaries on a consolidated  basis to (b) operating lease
rentals and cash  interest  expense on all  Indebtedness  of the Company and its
Restricted  Subsidiaries  on a consolidated  basis for any rolling four calendar
quarter  period  ending on the last day of every  calendar  quarter  during  the
period with respect to which the EBITDAX/Interest Ratio is to be calculated.

     "ENSTAR Alaska" shall collectively mean (i) the gas distribution  system in
south-central  Alaska  known as ENSTAR  Natural Gas  Company,  a division of the
Company, and (ii) APC.
                                      (6)
<PAGE>

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

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

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

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

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

     "Eurodollar  Base Rate" shall mean, with respect to any Interest Period for
any Eurodollar Loan, the lesser of (A) the rate per annum (rounded  upwards,  if
necessary,  to the  nearest  1/16th of 1%) equal to the  average of the  offered
quotations  appearing on Telerate  Page 3750 (or if such Telerate Page shall not
be  available,   any  successor  or  similar  service  as  may  be  selected  by
Administrative Agent and the Company) as of 11:00 a.m., Houston, Texas time (or
                                      (7)
<PAGE>

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

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

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

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

     "Existing  Competitive Loans" shall mean the Competitive Loans described on
Exhibit C hereto.

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

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

                                                Facility Fee
                        Rating                   Percentage

                   BBB/Baa2 and higher             0.125
                                      (8)
<PAGE>

                   BBB-/Baa3                       0.150

                   BB+/Ba1                         0.20

                   BB/Ba2 and lower                0.30

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

     "Funded  Indebtedness"  shall  mean all  Indebtedness  which  by its  terms
matures  more  than one (1) year from the date as of which  any  calculation  of
Funded  Indebtedness is made, and any Indebtedness  maturing within one (1) year
from such date which is  renewable at the option of the obligor to a date beyond
one (1) year from such date (if any Indebtedness provides for amortization, only
the amount of the principal payment required to be made within one (1) year from
the date as of "Funded Indebtedness").

     "GAAP" shall mean as to a particular Person,  such accounting  practice as,
in the  opinion  of KPMG  Peat  Marwick  or  other  independent  accountants  of
recognized  national  standing  retained  by such Person and  acceptable  to the
Majority  Banks,   conforms  at  the  time  to  generally  accepted   accounting
principles, consistently applied. Generally accepted accounting principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards Board, (b) which are applied for all periods after the date
hereof in a manner  consistent  with the  manner in which  such  principles  and
practices  were applied to the most recent audited  financial  statements of the
relevant  Person  furnished  to the  Banks,  except  only  for such  changes  in
principles  and  practices  with  which  the   applicable   independent   public
accountants  concur and which are  disclosed  to the Banks in  writing,  and (c)
which are  consistently  applied for all periods  after the date hereof so as to
reflect  properly the  financial  condition  and results of  operations  of such
Person.

     "Gas Sale Contract" shall mean that certain Gas Sale Contract dated January
1, 1984, between APC, as Seller,  and ENSTAR Natural Gas Company,  as Purchaser,
as amended on June 17, 1985,  and from time to time  thereafter,  if and only if
Administrative  Agent has  received  notice  thereof  pursuant to Section  10.8.
"Governmental  Authority" shall mean any sovereign governmental  authority,  the
United  States of  America,  any State of the United  States  and any  political
subdivision   of  any  of  the   foregoing,   and  any  central  bank,   agency,
instrumentality,  department,  commission,  board, bureau,  authority,  court or
other tribunal or  quasi-governmental  authority in each case whether executive,
legislative,  judicial,  regulatory or administrative,  having jurisdiction over
the  Company,  any  of  its  Subsidiaries,  any of  their  respective  property,
Administrative Agent or any Bank.

     "Guarantee" by any Person means any obligation, contingent or otherwise, of
any such Person  directly or indirectly  guaranteeing  any  Indebtedness  of any
                                      (9)

<PAGE>

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

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

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

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

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

         "Interest Period" shall mean:

     (a) With respect to any Eurodollar  Loan, the period  commencing on (i) the
date such Loan is made or converted into or continued as a Eurodollar Loan or
                                      (10)
<PAGE>

(ii) in the case of a roll-over to a successive Interest Period, the last day of
the  immediately  preceding  Interest  Period  and  ending  on  the  numerically
corresponding  day  in  the  first,   second,  third  or  sixth  calendar  month
thereafter,  as the Company may select as provided in Section 3.3 hereof, except
that each such Interest  Period which commences on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month shall
end on the last Business Day of the appropriate subsequent calendar month.

     (b) With respect to any Alternate Base Rate Loan, the period  commencing on
the date such Loan is made and ending on the next succeeding Quarterly Date.

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

Notwithstanding  the  foregoing:  (i)  no  Interest  Period  applicable  to  any
Eurodollar  Loan or any  Competitive  Loan may commence before and end after the
date of any  scheduled  reduction in the  Commitments  if,  after giving  effect
thereto,  the aggregate  principal amount of the Eurodollar Loans or Competitive
Loans which have Interest  Periods which end after such  reduction date shall be
greater than the aggregate  principal amount of the Commitments  scheduled to be
in effect  after such  reduction  date;  (ii) each  Interest  Period which would
otherwise  end on a day  which  is not a  Business  Day  shall  end on the  next
succeeding  Business Day (or, in the case of an Interest  Period for  Eurodollar
Loans,  if such  next  succeeding  Business  Day  falls in the  next  succeeding
calendar  month, on the next preceding  Business Day);  (iii) no Interest Period
applicable to any Eurodollar  Loan or any  Competitive  Loan shall extend beyond
the end of the  scheduled  Revolving  Credit  Availability  Period,  and (iv) no
Interest Period for any Eurodollar  Loans shall have a duration of less than one
month and, if the Interest  Period therefor would otherwise be a shorter period,
such Loans shall not be available hereunder.

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

     "Issuer" shall mean each Bank issuing a Letter of Credit hereunder.

     "Legal  Requirement"  shall  mean  any  law,  statute,  ordinance,  decree,
requirement,  order, judgment, rule, regulation (or interpretation of any of the
foregoing)  of,  and  the  terms  of  any  license  or  permit  issued  by,  any
Governmental Authority, now or hereafter in effect.
                                      (11)
<PAGE>

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

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

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

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

     "Loan  Documents"  shall  mean  this  Agreement,   all  Applications,   all
instruments,  certificates and agreements now or hereafter executed or delivered
to  Administrative  Agent or any Bank pursuant to any of the foregoing,  and all
amendments,  modifications,  renewals, extensions,  increases and rearrangements
of, and substitutions for, any of the foregoing.

     "Loans" shall mean Committed Loans and Competitive Loans.

     "Majority   Banks"  shall  mean  (a)  prior  to  the   termination  of  the
Commitments,  Banks  having  greater  than 50% of the  aggregate  amount  of the
Commitments  and (b) after the  termination  of the  Commitments,  Banks  having
greater than 50% of the aggregate  principal  amount of the Loans and the Letter
of Credit  Liabilities.  "Material Adverse Effect" shall mean a material adverse
effect on the  business,  condition  (financial  or  otherwise),  operations  or
properties  (including  proven  oil and gas  reserves)  of the  Company  and its
Subsidiaries,  taken as a whole, or on the ability of the Company to perform its
material obligations under any Loan Document to which it is a party.

     "Mesa Contract"  shall mean that certain  Purchase and Sale Agreement dated
February 6, 1991  executed  by and among Mesa  Limited  Partnership,  a Delaware
limited  partnership,  Mesa Operating  Limited  Partnership,  a Delaware limited
partnership,  and Mesa  Midcontinent  Limited  Partnership,  a Delaware  limited
partnership,  as Sellers,  and the Company, as Buyer, as amended by that certain
First  Amendment to Purchase and Sale  Agreement  dated February 22, 1991 and as
further amended by that certain Second  Amendment to Purchase and Sale Agreement
dated March 8, 1991.
                                      (12)
<PAGE>

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

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

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

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

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

     "Post-Default  Rate" shall mean,  in respect of any  principal of any Loan,
any  Reimbursement  Obligation or any other amount  payable by the Company under
this Agreement or any other Loan Document which is not paid when due (whether at
stated  maturity,  by acceleration,  or otherwise),  a rate per annum during the
period commencing on the due date until such amount is paid in full equal to the
lesser of (a) the sum of (x) with respect to Eurodollar Loans, 2% per annum plus
the applicable  Eurodollar  Rate then in effect plus the  Applicable  Margin for
Eurodollar  Loans until the expiration of the applicable  Interest  Period,  (y)
with respect to Competitive  Loans, 2% per annum plus the applicable  fixed rate
offered by the  applicable  Bank and accepted by the Company in accordance  with
Section 2.9 hereof  (or,  in the case of the  Existing  Competitive  Loans,  the
applicable  fixed rate  specified on Exhibit C hereto),  and (z) with respect to
Alternate  Base Rate  Loans  and with  respect  to  Eurodollar  Loans  after the
expiration  of  the  applicable  Interest  Period  (and  also  with  respect  to
indebtedness  other than Loans),  2% plus the  Alternate  Base Rate as in effect
from time to time plus the  Applicable  Margin for Alternate  Base Rate Loans or
(b) the Highest Lawful Rate.
                                      (13)
<PAGE>

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

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

     "Rating"  shall  mean the  senior  debt  rating  for the  Company  publicly
announced by Standard & Poor's Ratings Group or Moody's Investors Service,  Inc.
In the event the ratings are not equivalent,  the higher rating shall be treated
as the "Rating"  hereunder;  provided,  that if such ratings differ by more than
one (1) level,  the Rating shall be the  average,  rounded  upwards,  of the two
ratings.

     "Redemption  Obligations"  shall  mean  with  respect  to  any  Person  all
mandatory redemption  obligations of such Person with respect to preferred stock
or other equity  securities  issued by such Person or put rights in favor of the
holder of such preferred  stock or other equity  securities,  to the extent that
the  redemption  obligations  will  arise  prior to the stated  maturity  of the
Obligations.

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

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

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

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

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

     "Request  for  Extension of Credit"  shall mean a request for  extension of
credit duly executed by any  Responsible  Officer of the Company,  appropriately
completed and substantially in the form of Exhibit B attached hereto.
                                      (14)
<PAGE>

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

     "Reserve  Requirement" shall mean, for any Eurodollar Loan for any Interest
Period  therefor,  the  stated  maximum  rate for all  reserves  (including  any
marginal,  supplemental or emergency  reserves) required to be maintained during
such  Interest  Period  under  Regulation  D by any member  bank of the  Federal
Reserve System or any Bank against  "Eurocurrency  liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement  shall  reflect  and  include  any  other  reserves  required  to be
maintained by such member banks by reason of any  Regulatory  Change against (i)
any category of liabilities  which  includes  deposits by reference to which the
Eurodollar Rate is to be determined as provided in the definition of "Eurodollar
Base Rate" in this Section 1.1 or (ii) any category of  extensions  of credit or
other assets which include Eurodollar Loans. Any determination by Administrative
Agent  of the  Reserve  Requirement  shall be  conclusive  and  binding,  absent
manifest error,  and may be made using any reasonable  averaging and attribution
method.

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

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

     "Revolving  Credit  Availability  Period"  shall mean the  period  from and
including the date hereof to but not including December 31, 2002 or the date the
Commitments  are  terminated  pursuant to Section  11.1,  whichever  is first to
occur.
                                      (15)
<PAGE>

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

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

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

     "Total  Debt"  shall  mean  the sum,  without  duplication,  of (i)  Funded
Indebtedness of the Company and its  Subsidiaries  on a consolidated  basis plus
(ii) Current  Maturities of the Company and its  Subsidiaries  on a consolidated
basis plus (iii) borrowed money Indebtedness of the Company and its Subsidiaries
on a consolidated basis that is not Funded Indebtedness.

     "Total Debt/Capitalization Ratio" shall mean the ratio of (a) Total Debt to
(b) Capitalization.

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

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

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

     "Unrestricted  Subsidiary"  shall mean each Subsidiary of the Company which
is (i) an entity  undertaking oil and gas operations  with all or  substantially
all of its business activities  occurring outside the United States and (ii) (A)
designated as an Unrestricted Subsidiary on Exhibit A attached hereto or (B)
                                      (16)

<PAGE>

designated  as an  Unrestricted  Subsidiary by the Company at any time after the
Effective  Date and either (I) such  Subsidiary has a Tangible Net Worth of less
than  $25,000,000 or (II) with the consent of the  Administrative  Agent and the
Majority Banks. An Unrestricted Subsidiary shall remain such until designated as
a Restricted  Subsidiary  in  accordance  with the terms and  provisions of this
Agreement.

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

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

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

     2.1 Section 2. Commitments; Competitive Bid Facility.

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

     Letters of Credit. of Credit

     (a) Letters of Credit.  Subject to the terms and conditions  hereof, and on
the condition that  aggregate  Letter of Credit  Liabilities  shall never exceed
$100,000,000,  the Company shall have the right,  in addition to Committed Loans
provided for in Section 2.1 hereof, to utilize the Commitments from time to time
from and after the Effective Date through the expiration of the Revolving Credit
Availability  Period by  obtaining  the  issuance  of  letters of credit for the
account of the Company and on behalf of the Company by the applicable  Issuer if
the Company shall so request in the notice referred to in Section 2.2(b)(i).
                                      (17)

<PAGE>

Upon the date of the issuance of a Letter of Credit, the applicable Issuer shall
be deemed,  without  further  action by any party  hereto,  to have sold to each
Bank, and each Bank shall be deemed, without further action by any party hereto,
to have purchased from the applicable Issuer, a participation,  to the extent of
such  Bank's  Commitment  Percentage,  in such  Letter of Credit and the related
Letter of Credit  Liabilities.  Any Letter of Credit having an expiry date after
the end of the  Revolving  Credit  Availability  Period  shall  have been  fully
Covered  or shall be backed by a letter  of  credit in form and  substance,  and
issued  by an  issuer,  acceptable  to  Administrative  Agent in its  reasonably
exercised  discretion.  Subject  to the terms and  conditions  hereof,  upon the
request of the Company, if Chase is the designated Issuer, Chase shall issue the
applicable Letter of Credit and if any other Bank is the designated Issuer, such
Bank may, but shall not be obligated to, issue such Letter of Credit.

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

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

          (ii) No Letter of Credit may be issued if after giving effect  thereto
     the Revolving Credit  Obligations would exceed the Facility Amount. On each
     day during the period  commencing with the issuance of any Letter of Credit
     and until such Letter of Credit shall have expired or been terminated,  the
     Commitment  of each Bank shall be deemed to be  utilized  for all  purposes
     hereof in an  amount  equal to such  Bank's  Commitment  Percentage  of the
     amount then available for drawings under such Letter of Credit.

          (iii) Upon receipt from the beneficiary of any Letter of Credit of any
     demand for payment thereunder,  the applicable Issuer shall promptly notify
     the  Company  and each Bank as to the amount to be paid as a result of such
     demand and the payment  date.  If at any time the  applicable  Issuer shall
     have made a payment to a beneficiary  of a Letter of Credit in respect of a
     drawing under such Letter of Credit,  each Bank will pay to the  applicable
     Issuer  immediately upon demand by the applicable Issuer at any time during
     the period  commencing  after such payment until  reimbursement  thereof in
     full by the Company,  an amount equal to such Bank's Commitment  Percentage
     of such  payment,  together  with interest on such amount for each day from
     the date of demand for such payment (or, if such demand is made after 11:00
     a.m.  Houston,  Texas time on such date, from the next succeeding  Business
     Day)  to the  date of  payment  by such  Bank of such  amount  at a rate of
     interest per annum equal to the Federal Funds Rate for such period.
                                      (18)
<PAGE>

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

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

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

     (c) Indemnification.  The Company hereby indemnifies and holds harmless the
Agents,  the applicable Issuer and each Bank from and against any and all claims
and  damages,  losses,  liabilities,  costs or  expenses  which such  Bank,  the
applicable Issuer or Agent may incur (or which may be claimed against such Bank,
the applicable Issuer or any Agent by any Person whatsoever) in connection with
                                      (19)

<PAGE>

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

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

     2.3 Reductions and Changes of Commitments.ommitments

     (a) Mandatory. On December 31, 2002, all Commitments shall be terminated in
their entirety unless terminated at an earlier date pursuant to Section 11.1.

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

     (c) No  Reinstatement.  Any reduction in or termination of the  Commitments
may not be reinstated without the approval of Administrative  Agent and any Bank
whose Commitment (or the applicable part thereof) is to be so reinstated.
                                      (20)
<PAGE>


     2.4 Fees.

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

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

     2.5 Affiliates; Lending Offices.ng Offices

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

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

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

     2.7 Repayment of Loans; Evidence of Debt.

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

     (b)  Administrative  Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made  hereunder and the Interest  Period  applicable
thereto, (ii) the amount of any principal or interest due and payable or to
                                      (21)

<PAGE>

become due and payable from Company to each Bank  hereunder and (iii) the amount
of any sum received by  Administrative  Agent  hereunder  for the account of the
Banks and each Bank's share thereof.

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

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

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

     2.9 Competitive Bid Procedure. Procedure

     (a) In order to request  Competitive  Bids, the Company shall hand deliver,
telex or telecopy to Administrative Agent a duly completed request substantially
in  the  form  of  Exhibit  G,  with  the  blanks  appropriately   completed  (a
"Competitive  Bid Request"),  to be received by  Administrative  Agent not later
than 11:00  a.m.,  Houston,  Texas  time,  five  Business  Days  before the date
specified for a proposed  Competitive Loan. No Alternate Base Rate Loan shall be
requested in, or, except  pursuant to Section 6, made pursuant to, a Competitive
Bid Request.  A Competitive Bid Request that does not conform  substantially  to
the  format  of  Exhibit  G may  be  rejected  at  Administrative  Agent's  sole
discretion,  and Administrative  Agent shall promptly notify the Company of such
rejection by telecopier.  Each  Competitive Bid Request shall in each case refer
to this  Agreement  and specify (x) the date of such  Competitive  Loans  (which
shall be a Business Day) and the aggregate principal amount thereof (which shall
not be less than  $25,000,000 or greater than the unused portion of the Facility
Amount on such date and shall be an integral multiple of $5,000,000) and (y) the
Interest Period with respect thereto (which may not end after the termination of
the  Revolving  Credit  Availability  Period).  Promptly  after its receipt of a
Competitive Bid Request that is not rejected as aforesaid,  Administrative Agent
shall invite by  telecopier  (in  substantially  the form set forth in Exhibit H
hereto) the Banks to bid, on the terms and conditions of this Agreement, to make
Competitive Loans pursuant to such Competitive Bid Request.  Notwithstanding the
foregoing,  Administrative  Agent shall have no obligation to invite any Bank to
make a  Competitive  Bid  pursuant to this  Section  2.9(a)  until such Bank has
delivered a properly completed  Competitive Bid Administrative  Questionnaire to
Administrative Agent.
                                      (22
<PAGE>

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

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

     (d) The Company may in its sole and  absolute  discretion,  subject only to
the  provisions of this Section  2.9(d),  accept or reject any  Competitive  Bid
referred to in Section 2.9(c);  provided,  however, that the aggregate amount of
the  Competitive  Bids so accepted  by the Company may not exceed the  principal
amount of the  Competitive  Loan  requested  by the Company.  The Company  shall
notify  Administrative  Agent by  telecopier  whether  and to what extent it has
decided  to accept  or  reject  any or all of the bids  referred  to in  Section
2.9(c),  not later than 11:00 a.m.,  Houston,  Texas time,  three  Business Days
before the date specified for a proposed  Competitive Loan;  provided,  however,
that (w) the failure by the Company to give such notice  shall be deemed to be a
rejection of all the bids referred to in Section  2.9(c) and (x) no bid shall be
accepted for a  Competitive  Loan unless such  Competitive  Loan is in a minimum
principal  amount  of  $5,000,000  and  an  integral   multiple  of  $1,000,000.
Notwithstanding the foregoing,  if the Company accepts more than one bid made in
response to a  Competitive  Bid Request and the  available  principal  amount of
Competitive  Loans to be allocated  among the Banks is not  sufficient to enable
Competitive  Loans to be allocated to each Bank in a minimum principal amount of
$5,000,000  and in integral  multiples  of  $1,000,000,  then the Company  shall
select  the  Banks to be  allocated  such  Competitive  Loans  and  shall  round
allocations  up or down to the next higher or lower multiple of $1,000,000 as it
shall deem  appropriate.  In addition,  the Company shall be permitted under the
foregoing  procedures to accept a bid or bids in a principal amount of less than
$5,000,000  (i) in order to enable the  Company to accept bids equal to (but not
in excess of) the  principal  amount of the  Competitive  Loan  requested by the
Company or (ii) in order to enable the Company to accept all remaining bids, or
                                      (23)

<PAGE>

all  remaining  bids at a  particular  Competitive  Bid Rate.  A notice given by
Company pursuant to this paragraph (d) shall be irrevocable.

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

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

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

     (h) All notices  required by this  Section 2.9 shall be made in  accordance
with  Section 3.2 and the  Competitive  Bid  Administrative  Questionnaire  most
recently placed on file by each Bank with Administrative Agent.

     Section 3. Borrowings, Prepayments and Selection of Interest Rates.

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

     3.2 Prepayments.

     (a) Optional Prepayments. Subject to the provisions of Sections 4, 5 and 6,
the Company shall have the right to prepay,  on any Business Day, in whole or in
part,  without the payment of any penalty or fee, Loans at any time or from time
to time,  provided that, the Company shall give  Administrative  Agent notice of
each such  prepayment  as provided in Section 5.5 hereof.  Eurodollar  Loans and
Competitive Loans may be prepaid on the last day of an Interest Period
                                      (24)

<PAGE>

applicable  thereto.  Neither  Eurodollar  Loans  nor  Competitive  Loans may be
otherwise   prepaid   unless   prepayment  is  accompanied  by  payment  of  all
compensation required by Section 6.

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

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

     Section 4. Payments of Principal and Interest.

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

     4.2 Interest.

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

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

          (ii) if such Loan is a Eurodollar Loan, the applicable Eurodollar Rate
     plus the Applicable Margin, and
                                      (25)
<PAGE>

          (iii) if such Loan is a Competitive  Loan, the  applicable  fixed rate
     offered by the  applicable  Bank and accepted by the Company in  accordance
     with Section 2.9 hereof (or, in the case of Existing Competitive Loans, the
     applicable fixed rate specified on Exhibit C hereto),

          or (II) the Highest Lawful Rate.

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

     (c) Accrued  interest on each Loan shall be payable on the last day of each
Interest  Period for such Loan  (and,  if such  Interest  Period  exceeds  three
months' duration,  quarterly,  commencing on the first quarterly  anniversary of
the first day of such Interest Period), except that (i) accrued interest payable
at the Post-Default Rate shall be due and payable from time to time on demand of
Administrative  Agent or the Majority Banks (through  Administrative  Agent) and
(ii) accrued  interest on any amount prepaid or converted  pursuant to Section 6
hereof shall be paid on the amount so prepaid or converted.

     Section 5. Payments; Pro Rata Treatment; Computations, Etc.

     5.1 Payments.

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

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

     (c) If the due date of any  payment  hereunder  or any other Loan  Document
falls  on a day  which is not a  Business  Day,  the due  date for such  payment
(subject to the definition of Interest Period) shall be extended to the next
                                      (26)
<PAGE>
succeeding  Business  Day and  interest  shall be payable for any  principal  so
extended for the period of such extension.

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

     5.3  Computations.  Interest on Competitive Loans and interest based on the
Eurodollar  Base Rate or the Federal Funds Rate will be computed on the basis of
a year of 360  days  and  actual  days  elapsed  (including  the  first  day but
excluding the last day)  occurring in the period for which  payable,  unless the
effect of so  computing  shall be to cause the rate of  interest  to exceed  the
Highest  Lawful Rate, in which case interest shall be calculated on the basis of
the actual  number of days elapsed in a year composed of 365 or 366 days, as the
case may be. All other  interest  and fees shall be  computed  on the basis of a
year of 365 (or 366) days and actual days elapsed  (including  the first day but
excluding the last day) occurring in the period for which payable.

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

     5.5 Certain Actions,  Notices,  Etc. Notices to Administrative Agent of any
termination  or  reduction  of  Commitments,   of  borrowings  and  prepayments,
conversions and  continuations  of Loans and of the duration of Interest Periods
shall be irrevocable  and shall be effective only if received by  Administrative
Agent not later than 11:00 a.m. Houston, Texas time on the number of Business
                                      (27)
<PAGE>
Days prior to the date of the relevant termination,  reduction, borrowing and/or
repayment, conversion or continuance specified below:

                               Number of Business
                       Notice                               Days Prior

              Termination or
              Reduction of Commitments                          2

              Borrowing or prepayment
              of or conversion into or
              continuance of Alternate Base
              Rate Loans                                    same day

              Borrowing or
              prepayment of or conversion
              into or continuance of
              Eurodollar Loans                                  3

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

     5.6 Non-Receipt of Funds by  Administrative  Agent.  Unless  Administrative
Agent shall have been notified by a Bank or the Company (the  "Payor")  prior to
the date on which such Bank is to make  payment to  Administrative  Agent of the
proceeds of a Loan to be made by it hereunder (or the payment of any amount by
                                      (28)

<PAGE>

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

     5.7  Sharing  of  Payments,  Etc.  If a Bank  shall  obtain  payment of any
principal of or interest on any Loan made by it under this Agreement,  or on any
Reimbursement  Obligation or other  obligation  then due to such Bank hereunder,
through the exercise of any right of set-off,  banker's  lien,  counterclaim  or
similar right,  or otherwise,  it shall  promptly  purchase from the other Banks
participations  in  the  Loans  made,  or  Reimbursement  Obligations  or  other
obligations  held,  by the other  Banks in such  amounts,  and make  such  other
adjustments  from  time to time as  shall be  equitable  to the end that all the
Banks shall share the benefit of such payment (net of any expenses  which may be
incurred by such Bank in  obtaining  or  preserving  such  benefit)  pro rata in
accordance with the unpaid principal and interest on the Obligations then due to
each of them (provided,  however, that the foregoing shall not apply to payments
of Competitive Loans made prior to the termination of the Commitments  following
the  occurrence  of an Event of  Default).  To such end all the Banks shall make
appropriate  adjustments among themselves (by the resale of participations  sold
or  otherwise) if such payment is rescinded or must  otherwise be restored.  The
Company agrees,  to the fullest extent it may effectively do so under applicable
law,  that  any  Bank so  purchasing  a  participation  in the  Loans  made,  or
Reimbursement Obligations or other obligations held, by other Banks may exercise
all rights of  set-off,  bankers'  lien,  counterclaim  or similar  rights  with
respect to such  participation  as fully as if such Bank were a direct holder of
Loans and  Reimbursement  Obligations or other obligations in the amount of such
participation.  Nothing  contained herein shall require any Bank to exercise any
such  right or shall  affect the right of any Bank to  exercise,  and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of the Company.
                                      (29)

<PAGE>

Section 6. Yield Protection and Illegality.

     6.1 Additional Costs.

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

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

          (ii) changes the basis of taxation of any amounts payable to such Bank
     under this  Agreement  in respect of any of such Loans  (other than changes
     which  affect  taxes  measured  by or imposed on the  overall net income or
     franchise taxes of such Bank or of its Applicable Lending Office for any of
     such Loans by each jurisdiction (or any subdivision  thereof) in which such
     Bank has an office or such Applicable Lending Office); or

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

Each Bank (if so requested  by the Company  through  Administrative  Agent) will
designate a different  available  Applicable  Lending  Office for the Eurodollar
Loans or the  Competitive  Loans of such Bank or take such  other  action as the
Company  may request if such  designation  or action will avoid the need for, or
reduce the amount of, such  compensation  and will not,  in the sole  opinion of
such Bank  exercised in good faith,  be  disadvantageous  to such Bank (provided
that such Bank shall have no obligation  so to designate an  Applicable  Lending
Office for Eurodollar Loans located in the United States of America).  Each Bank
will furnish the Company with a statement  setting forth the basis and amount of
each request by such Bank for compensation under this Section 6.1(a); subject to
                                      (30)

<PAGE>

Section 6.8, such  certificate  shall be conclusive,  absent manifest error, and
may be prepared using any reasonable averaging and attribution methods.

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

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

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

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

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

     (b) the Majority Banks determine in good faith (which  determination  shall
be  conclusive)  and  notify  Administrative  Agent that the  relevant  rates of
interest referred to in the definition of "Eurodollar Base Rate" in Section 1.1
                                      (31)

<PAGE>

hereof  upon the basis of which the rates of  interest  for such Loans are to be
determined  do not  accurately  reflect  the  cost to such  Banks of  making  or
maintaining such Loans for Interest Periods therefor; or

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

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

     6.3  Illegality.  Notwithstanding  any other provision of this Agreement to
the  contrary,  if (x)  by  reason  of the  adoption  of  any  applicable  Legal
Requirement  or  any  change  in  any  applicable  Legal  Requirement  or in the
interpretation  or  administration  thereof  by any  Governmental  Authority  or
compliance by any Bank with any request or directive  (whether or not having the
force  of law)  of any  central  bank or  other  Governmental  Authority  or (y)
circumstances  affecting the relevant interbank Dollar market or the position of
a Bank therein shall at any time make it unlawful or  impracticable  in the sole
discretion  of a Bank  exercised  in good faith for such Bank or its  Applicable
Lending  Office  to (a)  honor  its  obligation  to  make  Eurodollar  Loans  or
Competitive  Loans  hereunder,  or (b) maintain  Eurodollar Loans or Competitive
Loans  hereunder,  then such Bank  shall  promptly  notify the  Company  thereof
through  Administrative  Agent and such  Bank's  obligation  to make or maintain
Eurodollar  Loans or Competitive  Loans, as the case may be,  hereunder shall be
suspended  until such time as such Bank may again make and  maintain  Eurodollar
Loans or Competitive  Loans, as the case may be (in which case the provisions of
Section 6.4 hereof shall be  applicable).  Before giving such notice pursuant to
this  Section 6.3,  such Bank will  designate a different  available  Applicable
Lending Office for the Eurodollar  Loans or the  Competitive  Loans, as the case
may be, of such Bank or take such other  action as the  Company  may  request if
such designation or action will avoid the need to suspend such Bank's obligation
to make Eurodollar Loans or Competitive Loans, as the case may be, hereunder and
will  not,  in the  sole  opinion  of such  Bank  exercised  in good  faith,  be
disadvantageous to such Bank (provided,  that such Bank shall have no obligation
so to designate an Applicable Lending Office for Eurodollar Loans located in the
United States of America).

     6.4 Substitute  Alternate Base Rate Loans. If the obligation of any Bank to
make or maintain  Eurodollar  Loans or  Competitive  Loans,  as the case may be,
shall be suspended  pursuant to Section 6.1, 6.2 or 6.3 hereof,  all Loans which
would otherwise be made by such Bank as Eurodollar  Loans or Competitive  Loans,
as the case may be, shall be made instead as Alternate  Base Rate Loans (and, if
an event  referred to in Section 6.1(b) or 6.3 hereof has occurred and such Bank
so requests by notice to the Company with a copy to  Administrative  Agent, each
Eurodollar Loan or each Competitive  Loan, as the case may be, of such Bank then
outstanding shall be automatically converted into an Alternate Base Rate Loan on
the  date  specified  by such  Bank in such  notice)  and,  to the  extent  that
Eurodollar  Loans or Competitive  Loans,  as the case may be, are so made as (or
converted into) Alternate Base Rate Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans or such Competitive  Loans, as the
case may be, shall be applied instead to such Alternate Base Rate Loans.
                                      (32)

<PAGE>

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

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

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

such compensation to include,  without limitation,  any loss or expense actually
incurred  (exclusive of any lost profits or opportunity  costs) by reason of the
liquidation  or  reemployment  of  deposits  or  other  funds  acquired  by  the
applicable  Bank to fund or maintain  its share of any Loan.  Subject to Section
6.8, each  determination  of the amount of such  compensation by a Bank shall be
conclusive and binding,  absent  manifest  error,  and may be computed using any
reasonable  averaging and  attribution  method.  No costs shall be payable under
this  Section  solely  by  reason  of the  conversion  of  loans  designated  as
"Eurodollar  Loans" under that certain Credit  Agreement  referred to in Section
13.15 hereof into the Existing Competitive Loans.

     6.6 Additional Costs in Respect of Letters of Credit. If as a result of any
Regulatory Change there shall be imposed, modified or deemed applicable any tax,
reserve,  special deposit or similar  requirement  against or with respect to or
measured by reference to Letters of Credit  issued or to be issued  hereunder or
participations  in such  Letters of Credit,  and the result shall be to increase
the cost to any Bank of  issuing  or  maintaining  any  Letter  of Credit or any
participation  therein, or reduce any amount receivable by any Bank hereunder in
respect of any Letter of Credit or any participation  therein (which increase in
cost,  or  reduction  in amount  receivable,  shall be the result of such Bank's
reasonable allocation of the aggregate of such increases or reductions resulting
from such event), then such Bank shall notify the Company through Administrative
Agent, and upon demand therefor by such Bank through  Administrative  Agent, the
Company  (subject to Section 13.6 hereof)  shall pay to such Bank,  from time to
time as specified by such Bank, such  additional  amounts as shall be sufficient
to compensate such Bank for such increased costs or reductions in amount. Before
making such demand  pursuant to this  Section  6.6,  such Bank will  designate a
different  available  Applicable Lending Office for the Letter of Credit of such
Bank or take such other action as the Company may request,  if such  designation
or action will avoid the need for,  or reduce the amount of,  such  compensation
and will not,  in the sole  opinion of such Bank  exercised  in good  faith,  be
disadvantageous  to such  Bank.  A  statement  as to  such  increased  costs  or
reductions  in  amount  incurred  by such  Bank,  submitted  by such Bank to the
Company, shall be conclusive as to the amount thereof, absent manifest error.
                                      (33)

<PAGE>

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

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

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

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

     (c) if any Bank elects to pass through to the Company any  material  charge
or cost  under  this  Section 6 or  elects  to  terminate  the  availability  of
Eurodollar  Loans for any material  period of time,  the Company may,  within 60
days after the date of such event and so long as no Default  shall have occurred
and be continuing,  elect to terminate  such Bank as a party to this  Agreement;
provided  that,  concurrently  with such  termination  the Company  shall (i) if
Administrative  Agent and each of the other Banks shall  consent,  pay that Bank
all  principal,  interest  and fees and other  amounts owed to such Bank through
such date of termination or (ii) have arranged for another financial institution
approved by Administrative Agent (such approval not to be unreasonably withheld)

                                      (34)

<PAGE>

 as of such  date,  to become a  substitute  Bank for all  purposes  under  this
Agreement in the manner provided in Section 13.5;  provided  further that, prior
to  substitution  for any Bank,  the Company shall have given written  notice to
Administrative  Agent of such intention and the Banks shall have the option, but
no obligation, for a period of 60 days after receipt of such notice, to increase
their  Commitments  in  order  to  replace  the  affected  Bank  in lieu of such
substitution.

     Section 7. Conditions Precedent.

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

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

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

     (c) [Intentionally omitted].

     (d) Loan  Documents.  The Company and each other  Relevant Party shall have
duly executed and delivered the other Loan  Documents to which it is a party (in
such number of copies as  Administrative  Agent shall have  requested)  and each
such Loan Document shall be in form  satisfactory to the Agents.  Each such Loan
Document  shall be in  substantially  the form  furnished  to the Banks prior to
their  execution of this  Agreement,  together with such changes  therein as the
Agents may approve.
                                      (35)
<PAGE>

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

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

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

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

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

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

     7.2  Initial  and  Subsequent  Loans.  The  obligation  of each Bank or any
applicable Issuer to make any Loan (including,  without limitation,  its initial
Loan) to be made by it  hereunder  or to issue or  participate  in any Letter of
Credit is subject to the additional conditions precedent that (i) Administrative
Agent  shall have  received  a Request  for  Extension  of Credit and such other
certifications as Administrative Agent may reasonably require,  (ii) in the case
of  Competitive  Loans,  the Company shall have complied with the  provisions of
Section 2.9 hereof and (iii) as of the date of such Loan or such  issuance,  and
after giving effect thereto:

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

     (b) except for facts timely disclosed to Administrative  Agent from time to
time in writing,  which facts (i) are not materially more adverse to the Company
and its Subsidiaries,  (ii) do not materially  decrease the ability of the Banks
to collect the Obligations as and when due and payable and (iii) do not
                                      (36)

<PAGE>

materially increase the liability of any Agent or any of the Banks, in each case
compared to those facts existing on the date hereof and the material  details of
which  have  been  set  forth  in  the   Financial   Statements   delivered   to
Administrative  Agent prior to the date hereof or in the  Disclosure  Statement,
and except for the  representations  set forth in the Loan Documents  which,  by
their terms,  are  expressly  (or by means of similar  phrasing)  made as of the
Effective  Date  or as of the  date  hereof,  as the  case  may  be,  only,  the
representations  and  warranties  made in each Loan  Document  shall be true and
correct  in all  material  respects  on and as of the date of the making of such
Loan or such  issuance,  with the same  force and effect as if made on and as of
such date;

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

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

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

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

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


     8.3  Binding  Obligations.  This  Agreement  and the other  Loan  Documents
constitute  legal,  valid  and  binding  obligations  of  the  Company  and  its
Subsidiaries,  to the extent each is a party  thereto,  enforceable  against the
Company  and  its  Subsidiaries,  to the  extent  each is a  party  thereto,  in
accordance  with  their  respective  terms,  except  as  may be  limited  by any
bankruptcy,  insolvency,  moratorium or other similar laws or judicial decisions
affecting  creditors' rights generally and general  principles of equity whether
considered at law or in equity.
                                      (37)

<PAGE>

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

     8.5 No  Consent.  Except  as set  forth in the  Disclosure  Statement,  the
Company's and each of its Subsidiaries' execution,  delivery, and performance of
this Agreement and the other Loan Documents to which they are parties do not and
will not require the consent or approval of any Person other than such  consents
and/or approvals obtained by the Company  contemporaneously with or prior to the
execution of this Agreement,  including,  without  limitation,  any Governmental
Authorities,  other than those consents the failure to obtain which could not be
reasonably expected to have a Material Adverse Effect.

     8.6  Financial   Condition.   The  audited  consolidated  annual  financial
statements of the Company and its  Subsidiaries  for the year ended December 31,
1996 and the unaudited  consolidated interim financial statements of the Company
and its Subsidiaries for the quarter and three-month  period ended September 30,
1997,  which have been delivered to the Banks,  have been prepared in accordance
with  GAAP,  and  present  fairly the  financial  condition  and  results of the
operations of the Company and its  Subsidiaries for the period or periods stated
(subject only to normal year-end audit adjustments with respect to the unaudited
interim  statements).  No material adverse change,  either in any case or in the
aggregate,  has occurred  since  September 30, 1997 in the assets,  liabilities,
financial  condition,  business,  operations,  affairs or  circumstances  of the
Company and its Subsidiaries taken as a whole,  except as disclosed to the Banks
in the Disclosure Statement.

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

     8.8 Liabilities  and Litigation.  Neither the Company nor any Subsidiary of
the Company has any material  (individually  or in the  aggregate)  liabilities,
direct or  contingent,  except as (a)  disclosed or referred to in the Financial
Statements,  (b)  disclosed  to the  Banks  in  the  Disclosure  Statement,  (c)
disclosed  in a notice to  Administrative  Agent  pursuant to Section  9.10 with
respect to such as could  reasonably  be  expected  to have a  Material  Adverse
Effect or (d) not  prohibited by applicable  provisions of Section 10. Except as
(a) described in the Financial Statements,  (b) otherwise disclosed to the Banks
in the Disclosure  Statement,  (c) disclosed in a notice to Administrative Agent
pursuant to Section 9.10 with respect to such as could reasonably be expected to
have a Material Adverse Effect or (d) not prohibited by applicable provisions of
Section  10,  no  litigation,  legal,  administrative  or  arbitral  proceeding,
investigation, or other action of any nature exists or (to the knowledge of the
                                      (38)

<PAGE>

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

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

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

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

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

     8.13  Compliance  with Law.  Neither the Company nor any  Subsidiary of the
Company (except as (a) disclosed to the Banks in the Disclosure  Statement,  (b)
disclosed  in a notice to  Administrative  Agent  pursuant to Section  9.10 with
respect to such as could  reasonably  be  expected  to have a  Material  Adverse
Effect or (c) not prohibited by applicable provisions of Section 10):

     (a) is in violation of any Legal Requirement; or
                                      (39)

<PAGE>

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

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

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

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

     8.16 ERISA. With respect to each Plan, the Company and each ERISA Affiliate
have  fulfilled  their  obligations,  including  obligations  under the  minimum
funding  standards of ERISA and the Code,  and are in compliance in all material
respects with the provisions of ERISA and the Code. The Company has no knowledge
of any event  which  could  result in a  liability  of the  Company or any ERISA
Affiliate  to the  PBGC  or a Plan  (other  than to  make  contributions  in the
ordinary course).  Since the effective date of Title IV of ERISA, there have not
been any nor are there now  existing any events or  conditions  that would cause
the Lien  provided  under Section 4068 of ERISA to attach to any property of the
Company or any ERISA Affiliate.  There are no Unfunded  Liabilities with respect
to any Plan other than those specifically described in the certificate delivered
in accordance with Section 7.1(i). No "prohibited transaction" has occurred with
respect to any Plan.

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

     8.18 Public Utility Holding Company Act. Neither the Company nor any of its
Subsidiaries  (i) is subject to  regulation  under the  Public  Utility  Holding
                                      (40)

<PAGE>

Company Act of 1935, as amended (the "PUHC Act"),  except as to Section  9(a)(2)
thereof  (15  U.S.C.A.  79(i)(a)(2)),  or  (ii)  is in  violation  of any of the
provisions, rules, regulations or orders of or under the PUHC Act. Further, none
of  the  transactions  contemplated  under  this  Agreement,  including  without
limitation,  the making of the Loans and the  issuance of the Letters of Credit,
shall  cause  or  constitute  a  violation  of  any of  the  provisions,  rules,
regulations  or orders of or under the PUHC Act and the PUHC Act does not in any
manner impair the legality,  validity or enforceability  of this Agreement.  The
Company has duly filed with the  Securities and Exchange  Commission  good faith
applications  (each an "Application")  under Section 2(a)(8) of the PUHC Act (15
U.S.C.A.  79(b)(a)(8))  for a declaration of  non-subsidiary  status pursuant to
such   Section   2(a)(8)   with  respect  to  each  Person  (each  a  "Specified
Shareholder")  which  owns,  controls  or holds with power to vote,  directly or
indirectly,  a sufficient quantity of the voting securities of the Company to be
construed  as a "holding  company",  as such term is defined in the PUHC Act, in
respect of the Company.  All of the information  contained in such Applications,
as amended,  was true as of the most recent  filing  date with  respect  thereto
(provided that the Company may,  unless it has actual  current  knowledge to the
contrary,  rely solely  upon  written  information  furnished  by any  Specified
Shareholder  with  respect  to  background   information   about  the  Specified
Shareholder and the nature of the ownership by such Specified Shareholder or its
Affiliates of the voting securities of the Company), and the Company knows of no
reason why each such  Application,  if acted upon by the Securities and Exchange
Commission,  would  not be  approved.  True  and  correct  copies  of each  such
Application  and any  amendments  thereto,  as  filed,  have been  furnished  to
Administrative  Agent.  The Company has not received any written notice from the
Securities and Exchange  Commission with respect to any such  Application  other
than as disclosed in writing to Administrative Agent.

     8.19  Environmental   Matters.   Except  as  disclosed  in  the  Disclosure
Statement,  (i) the Company and it Subsidiaries  have obtained and maintained in
effect all  Environmental  Permits  (or has  initiated  the  necessary  steps to
transfer the  Environmental  Permits into its name), the failure to obtain which
could reasonably be expected to have a Material Adverse Effect, (ii) the Company
and its Subsidiaries and their properties,  assets, business and operations have
been and are in compliance with all applicable Requirements of Environmental Law
and  Environmental  Permits  failure to comply  with which could  reasonably  be
expected  to  have  a  Material  Adverse  Effect,  (iii)  the  Company  and  its
Subsidiaries  and their  properties,  assets,  business and  operations  are not
subject to any (A)  Environmental  Claims or (B) Environmental  Liabilities,  in
either case direct or contingent,  and whether known or unknown, arising from or
based upon any act,  omission,  event,  condition or  circumstance  occurring or
existing on or prior to the date hereof  which could  reasonably  be expected to
have a Material Adverse Effect,  and (iv) no Responsible  Officer of the Company
or any of its  Subsidiaries  has received any notice of any violation or alleged
violation of any  Requirements of Environmental  Law or Environmental  Permit or
any Environmental Claim in connection with its assets,  properties,  business or
operations which could reasonably be expected to have a Material Adverse Effect.
The liability (including without limitation any Environmental  Liability and any
other  damage  to  persons  or  property),  if  any,  of  the  Company  and  its
Subsidiaries  and  with  respect  to  their  properties,  assets,  business  and
operations which is reasonably expected to arise in connection with Requirements
of  Environmental  Laws  currently  in effect  and other  environmental  matters
presently known by a Responsible Officer of the Company will not have a Material
                                      (41)

<PAGE>

Adverse  Effect.  No  Responsible  Officer of the Company  knows of any event or
condition  with  respect to  Environmental  Matters  with  respect to any of its
properties or the properties of any of its  Subsidiaries  which could reasonably
be expected to have a Material  Adverse  Effect.  For  purposes of this  Section
8.19,  "Environmental  Matters"  shall mean  matters  relating to  pollution  or
protection  of  the  environment,   including,  without  limitation,  emissions,
discharges,  releases or threatened  releases of Hazardous  Substances  into the
environment (including, without limitation, ambient air, surface water or ground
water, or land surface or subsurface), or otherwise relating to the manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Substances.

     8.20 Claims and  Liabilities.  Except as disclosed to the Banks in writing,
neither  the  Company 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 Banks in writing, no claims exist against the Company
or its  Subsidiaries  for gas  imbalances  which claims if adversely  determined
would have a Material  Adverse Effect.  No purchaser of product  supplied by the
Company or any of its  Subsidiaries  has any claim against the Company or any of
its  Subsidiaries  for product paid for, but for which delivery was not taken as
and when paid for,  which claim if  adversely  determined  would have a Material
Adverse Effect.

     8.21 Solvency. Neither the Company nor the Company and its Subsidiaries, on
a consolidated  basis, is  "insolvent",  as such term is used and defined in (i)
the Bankruptcy Code and (ii) the Texas Uniform Fraudulent Transfer Act, Tex.
Bus. & Com. Code Ann. 24.001 et seq.

     Section 9. Affirmative  Covenants.  A deviation from the provisions of this
Section 9 will not  constitute a Default under this  Agreement if such deviation
is  consented  to in writing by the Majority  Banks.  Without the prior  written
consent of the Majority Banks,  the Company agrees with the Banks and the Agents
that, so long as any of the  Commitments  is in effect and until payment in full
of all Loans  hereunder,  the termination or expiry of all Letters of Credit and
payment in full of Letter of Credit  Liabilities,  all interest  thereon and all
other amounts payable by the Company hereunder:

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

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

          (i) the  audited  consolidated  balance  sheet of the  Company and its
     Subsidiaries as of the end of such year;
                                      (42)

<PAGE>

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

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

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

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

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

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

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

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

     (c) [Intentionally omitted]; and

     (d)  SEC  and  Other  Reports  -  promptly  upon  their  becoming  publicly
available,  one copy of each financial statement,  report,  notice or definitive
proxy statement sent by the Company or any Subsidiary to shareholders generally,
and  of  each  regular  or  periodic  report  and  any  registration  statement,
prospectus or written  communication (other than transmittal letters) in respect
thereof filed by the Company or any of its Subsidiaries with, or received by the
Company or any of its Subsidiaries in connection  therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency.
                                      (43)

<PAGE>

     All of the balance  sheets and other  financial  statements  referred to in
this Section 9.1 will be in such detail as any Bank may  reasonably  request and
will conform to GAAP applied on a basis  consistent  with those of the Financial
Statements  as of December  31,  1996.  In  addition,  if GAAP shall change with
respect  to any  matter  relative  to  determination  of  compliance  with  this
Agreement, the Company will also provide financial information necessary for the
Banks to determine compliance with this Agreement.

     9.2 Officers' Certificates.

     (a)  Concurrently  with the furnishing of the annual  financial  statements
pursuant to Subsection 9.1(a),  commencing with the annual financial  statements
required  to be  delivered  in 1998,  the  Company  will  furnish or cause to be
furnished to Administrative Agent certificates of compliance, as follows:

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

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

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

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

     9.4 Maintenance.  Except as referred to in Sections 8.1 and 8.13 and except
as permitted  under Section 10.5 the Company will and will cause each Subsidiary
of the Company to: (i)  maintain  its  corporate  existence;  (ii)  maintain its
rights and  franchises,  except  for any  mergers  or  consolidations  otherwise
permitted by this  Agreement and except to the extent failure to so maintain the
same would not have a Material Adverse Effect;  (iii) observe and comply (to the
extent that any failure  would have a Material  Adverse  Effect)  with all valid
Legal Requirements (including without limitation Requirements of Environmental
                                      (44)

<PAGE>

Law);  and (iv) maintain  (except to the extent  failure to so maintain the same
would not have a Material  Adverse  Effect) its  properties  (and any properties
leased by or consigned to it or held under title retention or conditional  sales
contracts) consistent with the standards of a reasonably prudent operator at all
times  and  make  all  repairs,   replacements,   additions,   betterments   and
improvements  to its  properties  consistent  with the standards of a reasonably
prudent operator.

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

     9.6 Performance of Obligations. The Company will pay the Loans according to
the  reading,  tenor and effect of this  Agreement;  and the Company will do and
perform every act and discharge all of the obligations  provided to be performed
and  discharged by the Company under this Agreement and the other Loan Documents
at the  time  or  times  and in the  manner  specified,  and  cause  each of its
Subsidiaries  to take  such  action  with  respect  to their  obligations  to be
performed and discharged under the Loan Documents to which they respectively are
parties.

     9.7 Reimbursement of Expenses.  Whether or not any Loan is ever made or any
Letter  of  Credit  is ever  issued,  the  Company  agrees  to pay or  reimburse
Administrative Agent for paying the reasonable fees and expenses of Mayer, Brown
& Platt,  special  counsel to the Agents,  together with the reasonable fees and
expenses  of  local  counsel  engaged  by the  Agents,  in  connection  with the
negotiation  of the terms and  structure of the  Obligations,  the  preparation,
execution and delivery of this  Agreement  and the other Loan  Documents and the
making of the Loans and the issuance of Letters of Credit hereunder,  as well as
any modification, supplement or waiver of any of the terms of this Agreement and
the other Loan  Documents.  The Company  will  promptly  upon request and in any
event within 30 days from the date of receipt by the Company of a copy of a bill
for such  amounts,  reimburse  any Bank or any Agent for all amounts  reasonably
expended,  advanced  or  incurred  by such  Bank or such  Agent to  satisfy  any
obligation of the Company under this  Agreement or any other Loan  Document,  to
protect the  properties  or business  of the  Company or any  Subsidiary  of the
Company,  to collect the  Obligations,  or to enforce the rights of such Bank or
such Agent under this Agreement or any other Loan  Document,  which amounts will
include without  limitation all court costs,  attorneys' fees (but not including
allocated costs of in-house counsel), any engineering fees and expenses, fees of
auditors,  accountants and  appraisers,  investigation  expenses,  all transfer,
stamp,  documentary  or similar  taxes,  assessments  or  charges  levied by any
governmental or revenue authority in respect of any of the Loan Documents or any
other document referred to therein, all costs, expenses,  taxes, assessments and
other charges incurred in connection with any filing, registration, recording or
                                      (45)

<PAGE>

perfection of any lien contemplated by any of the Loan Documents or any document
referred to therein,  fees and expenses  incurred in connection with such Bank's
participation  as a member of a creditors'  committee in a case commenced  under
the  Bankruptcy  Code or other  similar  law of the  United  States or any state
thereof,  fees and expenses  incurred in  connection  with lifting the automatic
stay prescribed in 362 Title 11 of the United States Code, and fees and expenses
incurred in connection  with any action  pursuant to 1129 Title 11 of the United
States Code and all other customary out-of-pocket expenses incurred by such Bank
or such Agent in connection with such matters,  together with interest after the
expiration  of the 30-day  period  stated  above in this  Section if no Event of
Default has occurred and is  continuing,  or from the date of the request to the
Company if an Event of Default has occurred and is continuing, at either (i) the
Post-Default  Rate on each such amount until the date of  reimbursement  to such
Bank or such Agent,  or (ii) if no Event of Default  will have  occurred  and be
continuing,  the  Alternate  Base Rate plus the  highest  Applicable  Margin for
Alternate  Base Rate Loans (not to exceed the Highest  Lawful Rate) on each such
amount until the date of the Company's  receipt of written  demand or request by
such Bank or such Agent for the  reimbursement  of same,  and  thereafter at the
applicable  Post-Default  Rate until the date of  reimbursement  to such Bank or
such Agent.  The obligations of the Company under this Section are  compensatory
in nature,  shall be deemed  liquidated as to amount upon receipt by the Company
of a copy of any invoice therefor,  and will survive the  non-assumption of this
Agreement in a case commenced  under the Bankruptcy Code or other similar law of
the United States or any state  thereof,  and will remain binding on the Company
and any trustee,  receiver,  or liquidator of the Company  appointed in any such
case.

     9.8  Insurance.  The  Company  and its  Subsidiaries  will  maintain,  with
financially  sound and  reputable  insurers,  insurance  with  respect  to their
respective properties and business against such liabilities,  casualties,  risks
and  contingencies  and in such types and amounts as is customary in the case of
corporations  engaged in the same or similar businesses and similarly  situated.
Upon the  request  of  Administrative  Agent  acting at the  instruction  of the
Majority  Banks,   the  Company  will  furnish  or  cause  to  be  furnished  to
Administrative  Agent from time to time a summary of the  insurance  coverage of
the Company  and its  Subsidiaries  in form and  substance  satisfactory  to the
Majority  Banks in their  reasonable  judgment,  and if  requested  will furnish
Administrative Agent copies of the applicable policies.  Subject to the terms of
Section 3 hereof,  in the case of any fire,  accident or other casualty  causing
loss or damage to any properties of the Company or any of its Subsidiaries,  the
proceeds  of such  policies  will be used (i) to repair or replace  the  damaged
property or (ii) to prepay the Obligations, at the election of the Company.

     9.9  Accounts  and  Records.  The  Company  will keep and will  cause  each
Subsidiary  of the  Company  to keep books of record and  account  which  fairly
reflect all dealings or transactions in relation to their respective  businesses
and activities,  in accordance with GAAP, which books of record and account will
be maintained,  to the extent necessary to enable compliance with all provisions
of this  Agreement,  separately  for each such  Subsidiary,  the Company and any
division of the Company.
                                      (46)

<PAGE>

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

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

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

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

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

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

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

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

     (viii) any tariff and rate cases and other  material  reports  filed by the
Company  or any of its  Subsidiaries  with any  Governmental  Authority  and any
notice to the Company or any of its Subsidiaries from any Governmental Authority
concerning noncompliance with any applicable Legal Requirement; or
                                      (47)

<PAGE>

     (ix)  within 10 days after the date on which a  Responsible  Officer of the
Company has actual knowledge  thereof,  the receipt of any notice by the Company
or any of its  Subsidiaries  of any claim of  nonpayment  of, or any  attempt to
collect or enforce,  accounts  payable of the Company or any of its Subsidiaries
exceeding,  in the case of any one  account  payable  at one  time  outstanding,
$1,000,000  and in the case of all accounts  payable in the aggregate at any one
time outstanding, $3,000,000; or

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

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

     9.11 ERISA Information and Compliance. The Company will promptly furnish to
Administrative  Agent (i)  immediately  upon  receipt,  a copy of any  notice of
complete or partial withdrawal  liability under Title IV of ERISA and any notice
from the PBGC  under  Title IV of ERISA of an intent to  terminate  or appoint a
trustee to  administer  any Plan,  (ii) if  requested by  Administrative  Agent,
acting on the  instruction  of the  Majority  Banks,  promptly  after the filing
thereof  with the United  States  Secretary of Labor or the PBGC or the Internal
Revenue  Service,  copies of each annual and other  report with  respect to each
Plan or any trust created  thereunder,  (iii) immediately upon becoming aware of
the  occurrence of any  "reportable  event",  as such term is defined in Section
4043 of ERISA,  for which the  disclosure  requirements  of  Regulation  Section
2615.3  promulgated  by the PBGC  have not been  waived,  or of any  "prohibited
transaction", as such term is defined in Section 4975 of the Code, in connection
with any Plan or any trust created  thereunder,  a written  notice signed by the
President or the principal  financial  officer of the Company or the  applicable
ERISA Affiliate  specifying the nature  thereof,  what action the Company or the
applicable  ERISA Affiliate is taking or proposes to take with respect  thereto,
and, when known,  any action taken by the PBGC, the Internal  Revenue Service or
the Department of Labor with respect thereto,  (iv) promptly after the filing or
receiving  thereof by the  Company or any ERISA  Affiliate  of any notice of the
institution  of any  proceedings  or  other  actions  which  may  result  in the
termination  of any  Plan,  and (v)  each  request  for  waiver  of the  funding
standards or extension of the amortization  periods required by Sections 303 and
304 of ERISA or Section 412 of the Code promptly  after the request is submitted
by the Company or any ERISA  Affiliate  to the  Secretary of the  Treasury,  the
Department of Labor or the Internal Revenue Service,  as the case may be. To the
extent required under applicable  statutory  funding  requirements,  the Company
will fund,  or will cause each ERISA  Affiliate  to fund,  all  current  service
pension  liabilities as they are incurred under the provisions of all Plans from
time to time in effect,  and comply  with all  applicable  provisions  of ERISA,
except to the extent that any such  failure to comply  could not  reasonably  be
expected to have a Material Adverse Effect.  The Company covenants that it shall
and shall cause each ERISA Affiliate to (1) make contributions to each
                                      (48)

<PAGE>

Plan  in a  timely  manner  and in an  amount  sufficient  to  comply  with  the
contribution  obligations  under  such Plan and the  minimum  funding  standards
requirements  of ERISA;  (2) prepare and file in a timely manner all notices and
reports  required  under the terms of ERISA  including but not limited to annual
reports;  and (3) pay in a timely  manner all required  PBGC  premiums,  in each
case, to the extent failure to do so would have a Material Adverse Effect.

     Section 10.  Negative  Covenants.  A deviation  from the provisions of this
Section 10 will not  constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority  Banks.  The Company  agrees with the
Banks and the Agents that,  so long as any of the  Commitments  is in effect and
until payment in full of all Loans  hereunder,  the termination or expiry of all
Letters  of Credit  and  payment  in full of Letter of Credit  Liabilities,  all
interest thereon and all amounts payable by the Company hereunder:

     10.1 Debts,  Guaranties  and Other  Obligations.  (i) The Company  will not
permit any of its  Restricted  Subsidiaries  (other than APC) to incur,  create,
assume or in any  manner  become or be liable  in  respect  of any  Indebtedness
(including  obligations  for the payment of  rentals);  and the Company will not
permit any of its  Restricted  Subsidiaries  (other  than APC) to  Guarantee  or
otherwise  in any way  become or be  responsible  for  obligations  of any other
Person, whether by agreement to purchase the Indebtedness of any other Person or
agreement for the  furnishing of funds to any other Person  through the purchase
or lease of goods,  supplies or services (or by way of stock  purchase,  capital
contribution,  advance  or loan) for the  purpose of paying or  discharging  the
Indebtedness  of any other  Person,  or  otherwise,  except  that the  foregoing
restrictions will not apply to:

     (a)  liabilities,  direct  or  contingent,  of  any  Restricted  Subsidiary
          existing  on the date of this  Agreement  which are  reflected  in the
          Financial  Statements  or the  Disclosure  Statement and all renewals,
          extensions,   refinancings  and  rearrangements,  but  not  increases,
          thereof;

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

     (c)  trade payables,  lease acquisition and lease maintenance  obligations,
          extensions  of  credit  from  suppliers  or  contractors,  liabilities
          incurred in  exploration,  development and operation of any Restricted
          Subsidiary's  oil and gas properties or similar  obligations from time
          to time  incurred in the ordinary  course of business,  other than for
          borrowed  money,  which are paid within 90 days after the invoice date
          (inclusive of applicable  grace periods) or (i) are being contested in
          good faith, if such reserve as required by GAAP has been made therefor
          or (ii) trade  accounts payable of any Restricted  Subsidiaries  (with
          respect to which no legal  proceeding to enforce  collection  has been
          commenced or, to the knowledge of any Responsible  Officer of the
                                      (49)

<PAGE>

          Company,  threatened)  not  exceeding,  in the  aggregate  at any time
          outstanding, $25,000,000;

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

     (e)  intercompany  Indebtedness  owed  to the  Company  by  any  Restricted
          Subsidiary  and  intercompany  Indebtedness  owed  to  any  Restricted
          Subsidiary  by  any  other   Restricted   Subsidiary  which  is  fully
          subordinated to the Obligations;

     (f)  any Guarantee by any  Restricted  Subsidiary of payment or performance
          by any  Restricted  Subsidiary  under  any  agreement  so  long as the
          obligation  guaranteed does not constitute  Indebtedness  for borrowed
          money;  (g) any Guarantee by any  Restricted  Subsidiary  permitted by
          Section 10.3;

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

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

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

     (k)  obligations in connection with gas imbalances  arising in the ordinary
          course of business;

     (l)  Indebtedness not exceeding  $1,000,000 in the aggregate  borrowed from
          the Amarillo Economic  Development  Commission and related  Guarantees
          and related obligations of any Restricted Subsidiary;

     (m)  liabilities  under leases and lease  agreements which do not cover oil
          and gas  properties to the extent the incurrence and existence of such
          liabilities  will still enable each  Restricted  Subsidiary  to comply
          with all requirements of this Agreement; and

                                      (50)

<PAGE>

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

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

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

     (a)  Liens  securing  the  Loans  or  other  Indebtedness  under  the  Loan
          Documents;

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

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

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

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

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

                                      (51)

<PAGE>

     (g)  Liens  in the  ordinary  course  of  business,  not to  exceed  in the
          aggregate   $10,000,000   as  to  the  Company   and  its   Restricted
          Subsidiaries  at any time in effect,  regarding (i) the performance of
          bids,  tenders,  contracts  (other than for the  repayment of borrowed
          money or the  deferred  purchase  price of  property or  services)  or
          leases, (ii) statutory obligations,  (iii) surety appeal bonds or (iv)
          Liens to secure  progress or partial  payments  made to the Company or
          any of its Restricted Subsidiaries and other Liens of like nature;

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

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

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

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

     (l) the Vendor Financing Arrangements (as defined in the Mesa Contract);

     (m)  purchase  money Liens  securing an  aggregate  amount of  Indebtedness
          which shall not exceed $25,000,000 at any one time outstanding;

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

                                      (52)

<PAGE>

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

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

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

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

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

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

     (u)  any Liens arising from the matters  described in  Schedule 3.19 of the
          Mesa Contract;

                                      (53)

<PAGE>

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

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

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

     10.3  Guarantees.  The  Company  will not and will  not  permit  any of its
Restricted  Subsidiaries  to  enter  into  any  Guarantees  of  the  payment  or
performance by any  Unrestricted  Subsidiary under any agreement in an aggregate
amount for all such  Guarantees  relating to such  Unrestricted  Subsidiaries in
excess of $50,000,000.

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

     10.5  Mergers  and  Sales of  Assets.  The  Company  will not (a)  merge or
consolidate with, or sell, assign, lease or otherwise dispose of, whether in one
transaction or in a series of  transactions,  more than ten percent (10%) in the
aggregate of the Company's and its Restricted  Subsidiaries'  consolidated total
assets (whether now owned or hereafter acquired) to any Person or Persons during
any twelve month  period,  or permit any  Restricted  Subsidiary to do so (other
than to the  Company or another  Restricted  Subsidiary  or the  issuance by any
Restricted  Subsidiary  of  any  stock  to the  Company  or  another  Restricted
Subsidiary),  or (b) sell, assign, lease or otherwise dispose of, whether in one
transaction or in a series of  transactions,  any other  properties if receiving
therefor   consideration  other  than  cash  or  other   consideration   readily
convertible  to cash or which is less than the fair market value of the relevant
properties,  or permit any  Restricted  Subsidiary  to do so;  provided that the
Company or any Restricted  Subsidiary  may merge or  consolidate  with any other
Person  and any  Restricted  Subsidiary  may  transfer  properties  to any other
Restricted  Subsidiary  or to  the  Company  so  long  as,  in  each  case,  (i)
immediately  thereafter  and giving effect  thereto,  no event will occur and be
continuing which  constitutes a Default,  (ii) in the case of any such merger or
consolidation  to which the  Company is a party,  the  Company is the  surviving
Person,  (iii) in the case of any such  merger  or  consolidation  to which  any
Restricted  Subsidiary is a party (but not the Company),  after giving effect to
all transactions closing concurrently relating to such merger or consolidation,

                                      (54)

<PAGE>

the surviving  Person is a Restricted  Subsidiary and (iv) the surviving  Person
ratifies each applicable Loan Document and provided  further that any Restricted
Subsidiary may merge or consolidate with any other Restricted Subsidiary so long
as, in each case (i) immediately  thereafter and giving effect thereto, no event
will occur and be continuing which  constitutes a Default and (ii) the surviving
Person ratifies each applicable Loan Document.

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

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

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

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

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

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

     10.8 Amendment of Certain Documents.  The Company will not amend, modify or
obtain or grant a waiver of (except for waivers only of  cross-defaults  created
by a Default under this Agreement),  or allow APC to enter into any amendment or
modification  or obtain  or grant any  waiver of  (except  for  waivers  only of
cross-defaults  created by a Default  under this  Agreement),  any  provision of
those documents  relating to or constituting the Beluga  Financing  Documents or
the APC Long Term Financing  Documents,  without prior written  notification  to
Administrative Agent.

     10.9 Total Debt/Capitalization Ratio. The Company will not permit its Total
Debt/Capitalization Ratio to be, at any time, more than 60%.

     10.10   EBITDAX/Interest   Ratio.   The   Company   will  not   permit  the
EBITDAX/Interest  Ratio to be, at any time,  less than 3.75:1.00 for any rolling
four calendar quarter period ending on the last day of any calendar quarter.

     10.11  Nature of  Business.  The  Company  will not engage in, and will not
permit any Restricted Subsidiary to engage in, businesses other than oil and gas
exploration  and  production,   gas  processing,   transmission,   distribution,
marketing and storage and gas and liquids  pipeline  operations  and  activities
related or ancillary thereto; provided, that if the Company acquires one or more
Restricted Subsidiaries in transactions otherwise permitted by the terms hereof,
any such Restricted Subsidiary may be engaged in businesses other than those
                                      (55)

<PAGE>

listed in this  Section  so long as the assets of such  Restricted  Subsidiaries
which are used in the conduct of such other  businesses do not  constitute  more
than  five  percent  (5%)  of the  consolidated  total  assets  of  the  Company
(inclusive of the assets of the Restricted Subsidiary so acquired).

     10.12  Covenants  in Other  Agreements.  The Company  will not and will not
permit any of its Restricted  Subsidiaries to become a party to or to agree that
it or any of its property is bound by any agreement,  indenture,  mortgage, deed
of trust or any other instrument directly or indirectly

     (i)  restricting any loans,  advances or any other Investments to or in the
          Company by any of its Restricted Subsidiaries;

     (ii) restricting  the  ability  of any  Restricted  Subsidiary  to make tax
          payments or management fee payments;

     (iii)restricting the capitalization structure of any Restricted Subsidiary;
          or

     (iv) restricting  the ability or capacity of any  Restricted  Subsidiary to
          make Dividend Payments;

Notwithstanding the foregoing, either of ENSTAR Alaska or APC may become a party
to, or grant a Lien in any of its  property  by way of, or agree that it will be
bound by, any indenture,  mortgage, deed of trust or other instrument containing
provisions  of the types  described  above in this Section  10.12 so long as the
terms and provisions  thereof are not materially more restrictive than the terms
or provisions which are legally binding on ENSTAR Alaska or APC on the Effective
Date.

     Section 11. Defaults.

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

     (a)  Payments - (i) the Company or any other  Relevant  Party fails to make
any payment or  prepayment of any  installment  of principal on the Loans or any
Reimbursement  Obligation  payable  under  this  Agreement  or  the  other  Loan
Documents when due or (ii) the Company or any other Relevant Party fails to make
any  payment  or  prepayment  of  interest  with  respect  to  the  Loans,   any
Reimbursement  Obligation or any other fee or amount under this Agreement or the
other Loan  Documents and such failure to pay continues  unremedied for a period
of five (5) Business Days; or

     (b) Representations and Warranties - any representation or warranty made by
the Company or any other  Relevant  Party in this Agreement or in any other Loan
Document or in any  instrument  executed  in  connection  herewith or  therewith
proves to have been incorrect in any material respect as of the date thereof; or
any representation,  statement (including Financial Statements),  certificate or
data furnished or made by the Company or any other Relevant Party (or any
                                      (56)

<PAGE>

officer of the Company or any other Relevant  Party) under or in connection with
this Agreement or any other Loan Document,  including without  limitation in the
Disclosure Statement,  proves to have been untrue in any material respect, as of
the date as of which the facts therein set forth were stated or certified; or

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

     (d) Negative  Covenants - (i) default  shall be made in the  observance  or
performance of any of the covenants or agreements  contained in Section 10.8 and
such default  continues  unremedied for a period of five (5) Business Days after
(x) notice thereof is given by  Administrative  Agent to the Company or (y) such
default  otherwise becomes known to the Company,  whichever is earlier,  or (ii)
default is made in the due  observance or  performance  by the Company of any of
the other  covenants or agreements  contained in Section 10 of this Agreement or
of any other  negative  covenant  of the  Company  or any other  Relevant  Party
contained in this Agreement or any other Loan Document; or

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

     (f)  Involuntary  Bankruptcy  or  Receivership  Proceedings  - a  receiver,
conservator,  liquidator  or trustee of the Company or of any of its property is
appointed by the order or decree of any court or agency or supervisory authority
having jurisdiction, and such decree or order remains in effect for more than 60
days;  or the  Company  is  adjudicated  bankrupt  or  insolvent;  or any of its
property is sequestered by court order and such order remains in effect for more
than 60 days;  or a petition is filed  against  the  Company  under any state or
federal bankruptcy,  reorganization,  arrangement,  insolvency,  readjustment of
debt, dissolution, liquidation or receivership law of any jurisdiction, whether
                                      (57)

<PAGE>

now or  hereafter  in  effect,  and is not  dismissed  within 60 days after such
filing; or

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

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

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

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

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

THEREUPON:  Administrative  Agent may (and,  if directed by the Majority  Banks,
shall) (a) declare the Commitments  terminated  (whereupon the Commitments shall
be  terminated)  and/or (b)  terminate  any Letter of Credit  providing for such
termination by sending a notice of  termination  as provided  therein and/or (c)
declare the principal amount then outstanding of and the accrued interest on the
Loans and  Reimbursement  Obligations and all fees and all other amounts payable
hereunder to be forthwith due and payable,  whereupon  such amounts shall be and
become immediately due and payable, without notice (including without limitation
notice of acceleration and notice of intent to accelerate), presentment, demand,
protest or other  formalities  of any kind,  all of which are  hereby  expressly
waived by the Company;  provided that in the case of the  occurrence of an Event
of Default with respect to the Company  referred to in clause (f) or (g) of this
Section 11.1 or in clause (j) of this Section 11.1 to the extent it refers to
                                      (58)

<PAGE>

clauses (f) or (g), the Commitments  shall be  automatically  terminated and the
principal  amount then  outstanding of and the accrued interest on the Loans and
Reimbursement  Obligations and all fees and all other amounts payable  hereunder
shall be and become  automatically  and  immediately  due and  payable,  without
notice  (including  but not limited to notice of intent to accelerate and notice
of acceleration) and without presentment,  demand,  protest or other formalities
of any kind, all of which are hereby  expressly waived by the Company and/or (d)
exercise any and all other rights  available to it under the Loan Documents,  at
law or in equity.

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

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

     11.4 Right of Setoff. Upon (i) the occurrence and during the continuance of
any Event of Default  referred to in clauses (f), (g) or (h) of Section 11.1, or
in clause (j) of Section  11.1 to the  extent it refers to clauses  (f),  (g) or
(h), or upon (ii) the occurrence  and  continuance of any other Event of Default
and upon the  making  of the  notice  specified  in  Section  11.1 to  authorize
Administrative  Agent to  declare  the Loans  due and  payable  pursuant  to the
provisions of this Agreement, or if (iii) the Company or any of its Subsidiaries
becomes insolvent, however evidenced, the Banks are hereby authorized at any
                                      (59)

<PAGE>

time  and  from  time to  time,  without  notice  to the  Company  or any of its
Subsidiaries  (any such  notice  being  expressly  waived by the Company and its
Subsidiaries),  to setoff and apply any and all  deposits  (general  or special,
time or demand,  provisional or final, whether or not such setoff results in any
loss of  interest  or  other  penalty,  and  including  without  limitation  all
certificates  of deposit)  at any time held,  and any other funds or property at
any time held,  and other  Indebtedness  at any time owing by any Bank to or for
the credit or the account of the Company  against any and all of the Obligations
irrespective  of whether  or not such Bank will have made any demand  under this
Agreement and although such  obligations  may be unmatured.  Should the right of
any Bank to realize funds in any manner set forth  hereinabove be challenged and
any application of such funds be reversed,  whether by court order or otherwise,
the Banks shall make restitution or refund to the Company pro rata in accordance
with their  Commitments.  The Banks  agree  promptly  to notify the  Company and
Administrative  Agent after any such setoff and  application,  provided that the
failure to give such  notice  will not affect the  validity  of such  setoff and
application.  The rights of the Agents and the Banks  under this  Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which the Agents or the Banks may have.

     Section 12. Agents.

     12.1  Appointment,  Powers and  Immunities.  Each Bank  hereby  irrevocably
appoints and authorizes  each Agent to act as its agent  hereunder and under the
Letters  of  Credit  and the  other  Loan  Documents  with  such  powers  as are
specifically  delegated to such Agent by the terms hereof and thereof,  together
with such other powers as are reasonably  incidental thereto.  Each Agent (which
term as used in this Section 12 shall include  reference to its  affiliates  and
its own and their affiliates' officers,  directors,  employees and agents) shall
not (a) have any duties or responsibilities  except those expressly set forth in
this Agreement, the Letters of Credit, and the other Loan Documents, or shall by
reason of this  Agreement  or any other Loan  Document be a trustee or fiduciary
for any  Bank;  (b) be  responsible  to any Bank for any  recitals,  statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document,  or in any certificate or other document referred to
or  provided  for in, or  received by any of them  under,  this  Agreement,  the
Letters  of Credit or any  other  Loan  Document,  or for the  value,  validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Letters of Credit,  or any other Loan Document or any other document referred to
or provided  for herein or therein or any  property  covered  thereby or for any
failure  by any  Relevant  Party  or any  other  Person  to  perform  any of its
obligations hereunder or thereunder;  (c) be required to initiate or conduct any
litigation or collection proceedings hereunder or under the Letters of Credit or
any other Loan  Document  except to the extent such Agent is so requested by the
Majority  Banks,  or (d) be  responsible  for any action  taken or omitted to be
taken by it hereunder or under the Letters or Credit or any other Loan  Document
or any other  document  or  instrument  referred  to or  provided  for herein or
therein or in connection herewith or therewith,  INCLUDING,  WITHOUT LIMITATION,
PURSUANT TO THEIR OWN NEGLIGENCE, except for its own gross negligence or willful
misconduct.  Each Agent may employ agents and attorneys-in-fact and shall not be
responsible   for  the   negligence   or   misconduct  of  any  such  agents  or
attorneys-in-fact selected by it with reasonable care. Without in any way
                                      (60)

<PAGE>

limiting any of the foregoing, each Bank acknowledges that neither any Agent nor
any Issuer shall have any greater responsibility in the operation of the Letters
of Credit than is specified in the Uniform  Customs and Practice for Documentary
Credits (1993 Revision,  International Chamber of Commerce Publication No. 500).
In any  foreclosure  proceeding  concerning any  collateral for the Loans,  each
holder of a Loan if bidding  for its own  account or for its own account and the
accounts of other Banks is prohibited from including in the amount of its bid an
amount to be applied as a credit against  Obligations  owing to such Bank or the
Obligations  owing to the other  Banks;  instead,  such  holder must bid in cash
only; provided that this provision is for the sole benefit of the Agents and the
Banks  and  shall  not  inure  to  the  benefit  of  the  Company  or any of its
Subsidiaries.  However, in any such foreclosure proceeding, Agent may (but shall
not be obligated to) submit a bid for all Banks  (including  itself) in the form
of a credit  against the  Obligations  of all of the Banks,  and  Administrative
Agent or its designee  may (but shall not be obligated  to) accept title to such
collateral for and on behalf of all Banks.

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

     12.3 Defaults.  Administrative  Agent shall not be deemed to have knowledge
of the  occurrence of a Default  (other than the  non-payment of principal of or
interest on Loans or  Reimbursement  Obligations)  unless it has received notice
from a Bank or the Company  specifying such Default and stating that such notice
is a "Notice of Default". In the event that Administrative Agent receives such a
notice of the  occurrence of a Default,  Administrative  Agent shall give prompt
notice thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment).  Administrative  Agent shall (subject to Section 12.7 hereof) take
such action with  respect to such  Default as shall be directed by the  Majority
Banks and within its rights  under the Loan  Documents  and at law or in equity,
provided that,  unless and until  Administrative  Agent shall have received such
directions,  Administrative  Agent may (but shall not be obligated to) take such
action,  or refrain  from taking such action,  permitted  hereby with respect to
such Default as it shall deem  advisable in the best  interests of the Banks and
within its rights under the Loan Documents, at law or in equity.

     12.4 Rights as a Bank.  With respect to its  Commitments and the Loans made
and Letter of Credit Liabilities,  Chase, Morgan and NationsBank,  respectively,
                                      (61)

<PAGE>

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

     12.5  Indemnification.  The Banks  agree to  indemnify  each  Agent (to the
extent not reimbursed under Section 2.2(c),  Section 9.7 or Section 13.3 hereof,
but without  limiting the obligations of the Company under said Sections 2.2(c),
9.7 and 13.3), ratably in accordance with their respective Commitments,  for any
and  all  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,  suits,  costs,  expenses  or  disbursements  of any kind and  nature
whatsoever (INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES OF THE NEGLIGENCE OF
AGENT)  which may be imposed on,  incurred by or asserted  against such Agent in
any way relating to or arising out of this  Agreement,  the Letters of Credit or
any other Loan Document or any other  documents  contemplated  by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses which the Company is obligated to pay
under Sections 2.2(c),  9.8 and 13.3 hereof but excluding,  unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of their respective  agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other  documents,  provided
that no Bank shall be liable for any of the  foregoing  to the extent they arise
from the gross negligence or willful  misconduct of the party to be indemnified.
The  obligations  of the  Banks  under  this  Section  12.5  shall  survive  the
termination of this Agreement and the repayment of the Obligations.

     12.6  Non-Reliance on Agents and Other Banks.  Each Bank agrees that it has
received current  financial  information with respect to the Company and that it
has, independently and without reliance on any Agent or any other Bank and based
on such  documents and  information as it has deemed  appropriate,  made its own
credit  analysis of the Company and  decision to enter into this  Agreement  and
that it will,  independently  and without  reliance  upon any Agent or any other
Bank, and based on such documents and  information as it shall deem  appropriate
at the time,  continue to make its own analysis  and  decisions in taking or not
taking  action  under this  Agreement or any of the other Loan  Documents.  Each
Agent shall not be required to keep  itself  informed as to the  performance  or
observance by any Relevant Party of this Agreement, the Letters of Credit or any
of the other Loan  Documents or any other  document  referred to or provided for
herein or therein or to inspect  the  properties  or books of the Company or any
Relevant Party. Except for notices,  reports and other documents and information
expressly  required  to be  furnished  to  the  Banks  by  Administrative  Agent
hereunder,  under the Letters of Credit or the other Loan Documents,  the Agents
shall not have any duty or responsibility to provide any Bank with any credit or
                                      (62)

<PAGE>

other information concerning the affairs, financial condition or business of the
Company or any other Relevant Party (or any of their  affiliates) which may come
into the possession of such Agent.

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

     12.8  Resignation  or  Removal  of  Administrative  Agent.  Subject  to the
appointment  and  acceptance  of a  successor  Administrative  Agent as provided
below,  Administrative  Agent may resign at any time by giving notice thereof to
the Banks and the Company,  and Administrative  Agent may be removed at any time
with or  without  cause by the  Majority  Banks.  Upon any such  resignation  or
removal,  the  Majority  Banks  shall  have the  right to  appoint  a  successor
Administrative  Agent,  provided deposits with a successor  Administrative Agent
shall be insured by the Federal Deposit Insurance  Corporation or its successor.
If no  successor  Administrative  Agent  shall  have  been so  appointed  by the
Majority Banks and shall have accepted such appointment within 30 days after the
retiring  Administrative Agent's giving of notice of resignation or the Majority
Banks'  removal  of  the  retiring   Administrative  Agent,  then  the  retiring
Administrative   Agent  may,  on  behalf  of  the  Banks,  appoint  a  successor
Administrative  Agent. Any successor  Administrative Agent shall be a bank which
has an office in the  United  States and a combined  capital  and  surplus of at
least  $250,000,000.  Upon the acceptance of any  appointment as  Administrative
Agent   hereunder  by  a  successor   Administrative   Agent,   such   successor
Administrative  Agent shall thereupon  succeed to and become vested with all the
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations hereunder.  A successor  Administrative Agent shall promptly specify
by notice to the  Company  and the Banks its  Principal  Office  referred  to in
Sections 3.1 and 5.1. After any retiring  Administrative  Agent's resignation or
removal  hereunder as  Administrative  Agent,  the provisions of this Section 12
shall  continue  in effect for its  benefit in respect of any  actions  taken or
omitted to be taken by it while it was acting as an Administrative Agent.

     Section 13. Miscellaneous.

     13.1  Waiver.  No  waiver  of any  Default  shall be a waiver  of any other
Default.  No  failure  on the part of any Agent or any Bank to  exercise  and no
delay in exercising,  and no course of dealing with respect to, any right, power
or privilege  under any Loan  Document  shall operate as a waiver  thereof,  nor
shall any single or partial exercise of any right, power or privilege thereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or  privilege.  The remedies  provided in the Loan  Documents  are
cumulative and not exclusive of any remedies provided by law or in equity.
                                      (63)


<PAGE>

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

     13.3  Indemnification.  The Company shall indemnify the Agents,  the Banks,
and each Affiliate thereof and their respective directors,  officers,  employees
and agents from,  and hold each of them  harmless  against,  any and all losses,
liabilities,  claims  or  damages  to  which  any of  them  may  become  subject
(REGARDLESS  OF WHETHER CAUSED IN WHOLE OR IN PART BY THE SIMPLE (BUT NOT GROSS)
NEGLIGENCE  OF THE PERSON  INDEMNIFIED),  insofar as such  losses,  liabilities,
claims or damages  arise out of or result from any (i) actual or proposed use by
the Company of the  proceeds  of any  extension  of credit  (whether a Loan or a
Letter of  Credit) by any Bank  hereunder,  (ii)  breach by the  Company of this
Agreement or any other Loan Document,  (iii)  violation by the Company or any of
its  Subsidiaries of any Legal  Requirement,  including but not limited to those
relating to Hazardous Substances, (iv) Liens or security interests previously or
hereafter granted on any real or personal property, to the extent resulting from
any Hazardous Substance located in, on or under any such property, (v) ownership
by  the  Banks  or the  Agents  of  any  real  or  personal  property  following
foreclosure, to the extent such losses, liabilities, claims or damages arise out
of or result from any Hazardous Substance located in, on or under such property,
including, without limitation, losses, liabilities,  claims or damages which are
imposed upon Persons under laws relating to or regulating  Hazardous  Substances
solely by virtue of  ownership,  (vi) Bank's or Agent's being deemed an operator
of any  such  real or  personal  property  by a court  or  other  regulatory  or
administrative  agency or tribunal in  circumstances in which neither any of the
Agents  nor any of the Banks is  generally  operating  or  generally  exercising
control over such property,  to the extent such losses,  liabilities,  claims or
damages  arise out of or result from any Hazardous  Substance  located in, on or
under  such  property,  (vii)  investigation,  litigation  or  other  proceeding
(including any threatened  investigation  or proceeding)  relating to any of the
foregoing,  and the Company  shall  reimburse  each Agent,  each Bank,  and each
Affiliate  thereof  and their  respective  directors,  officers,  employees  and
agents,  upon  demand,  for any  expenses  (including  legal  fees)  incurred in
connection with any such  investigation or proceeding or (viii) taxes (excluding
income taxes and franchise  taxes) payable or ruled payable by any  Governmental
Authority in respect of any Loan Document, together with interest and penalties,
if any;  provided,  however,  that the  Company  shall not have any  obligations
pursuant to this Section 13.3 with respect to any losses,  liabilities,  claims,
damages or expenses (a) arising from or relating solely to events, conditions or
circumstances  which,  as to clauses  (iv),  (v) or (vi) above,  first came into
existence or which first occurred after the date on which the Company or any of
                                      (64)

<PAGE>

     its Subsidiaries  conveyed to an unrelated third party all of the Company's
or the applicable  Subsidiary's  rights,  titles and interests to the applicable
real or  personal  property  (whether  by  deed,  deed-in-lieu,  foreclosure  or
otherwise) other than a conveyance made in violation of any Loan Document or (b)
incurred by the Person seeking indemnification by reason of the gross negligence
or willful  misconduct of such Person. If the Company ever disputes a good faith
claim for  indemnification  under this  Section 13.3 on the basis of the proviso
set forth in the preceding sentence, the full amount of indemnification provided
for shall  nonetheless be paid,  subject to later adjustment or reimbursement at
such time (if any) as a court of competent  jurisdiction enters a final judgment
as to the applicability of any such exceptions.

     13.4  Amendments,  Etc. No  amendment  or waiver of any  provision  of this
Agreement or any other Loan  Document,  nor any consent to any  departure by the
Company  therefrom,  shall in any event be  effective  unless  the same shall be
agreed or  consented to by the  Majority  Banks and the  Company,  and each such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given; provided, that no amendment, waiver or consent
shall, unless in writing and signed by each Bank affected thereby, do any of the
following:  (a) increase the Commitment of such Bank (it being  understood  that
the waiver of any reduction in the Commitments or any mandatory  repayment other
than  (x)  the  repayment  of all  Loans  at the  end  of the  Revolving  Credit
Availability Period and (y) the mandatory reductions of the Commitments provided
for in Section 2.3(a) and (z) the mandatory prepayments required by the terms of
Section  3.2(b),  shall not be deemed to be an  increase in any  Commitment)  or
subject the Banks to any additional obligation;  (b) reduce the principal of, or
interest on, any Loan,  Reimbursement  Obligation or fee hereunder; (c) postpone
any  scheduled  date fixed for any payment or mandatory  prepayment of principal
of, or interest on, any Loan, Reimbursement  Obligation,  fee or other sum to be
paid  hereunder;  (d) change the percentage of any of the  Commitments or of the
aggregate  unpaid  principal  amount of any of the  Loans  and  Letter of Credit
Liabilities,  or the number of Banks,  which shall be required  for the Banks or
any of them to take any action under this  Agreement;  (e) change any  provision
contained in Sections 2.2(c), 9.7 or 13.3 hereof or this Section 13.4 or Section
6.7 hereof,  or (f) release all or  substantially  all of any  security  for the
obligations of the Company under this Agreement or all or  substantially  all of
the personal  liability of any obligor  created under any of the Loan Documents.
Anything in this Section 13.4 to the contrary,  no amendment,  waiver or consent
shall be made with  respect to Section 12 without the consent of  Administrative
Agent.

     13.5 Successors and Assigns.

     (a) This  Agreement  shall be binding  upon and inure to the benefit of the
Company,  the Agents and the Banks and their respective  successors and assigns.
The  Company  may not  assign  or  transfer  any of its  rights  or  obligations
hereunder  without the prior written consent of all of the Banks.  Each Bank may
sell  participations  to any  Person  in all or part of any  Loan or  Letter  of
Credit, or all or part of its Commitments,  in which event, without limiting the
foregoing,  the  provisions  of  Section 6 shall  inure to the  benefit  of each
purchaser  of a  participation  and the  pro  rata  treatment  of  payments,  as
described in Section 5.2, shall be determined as if such Bank had not sold such
                                      (65)

<PAGE>

participation.  In the event any Bank  shall sell any  participation,  such Bank
shall retain the sole right and responsibility to enforce the obligations of the
Company  relating  to  the  Loans  or  Letters  of  Credit,  including,  without
limitation,  the right to approve any amendment,  modification  or waiver of any
provision of this Agreement other than amendments, modifications or waivers with
respect to (i) any fees  payable  hereunder  to the Banks and (ii) the amount of
principal  or the rate of  interest  payable  on,  or the  dates  fixed  for the
scheduled repayment of principal of, the Loans.

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

     (c) By executing  and  delivering an Assignment  and  Acceptance,  the Bank
assignor  thereunder and the assignee  thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty  that it is the legal and  beneficial  owner of the interest  being
assigned  thereby free and clear of any adverse claim,  such Bank assignor makes
no representation or warranty and assumes no responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement or any of the other Loan Documents or the execution, legality,
                                      (66)

<PAGE>

validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan  Documents or any other  instrument or document  furnished
pursuant  thereto;  (ii) such Bank assignor makes no  representation or warranty
and assumes no  responsibility  with respect to the  financial  condition of the
Company  or  the  performance  or  observance  by  the  Company  of  any  of its
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished  pursuant hereto;  (iii) such assignee confirms
that it has  received  a copy of this  Agreement,  together  with  copies of the
financial  statements  referred to in Section 8.6 and such other  documents  and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into such Assignment and Acceptance;  (iv) such assignee will,
independently  and without  reliance  upon any Agent,  such Bank assignor or any
other  Bank and  based  on such  documents  and  information  as it  shall  deem
appropriate at the time,  continue to make its own credit decisions in taking or
not taking action under this  Agreement and the other Loan  Documents;  (v) such
assignee  appoints and authorizes each Agent to take such action as agent on its
behalf and to  exercise  such  powers  under this  Agreement  and the other Loan
Documents as are delegated to such Agent by the terms hereof, together with such
powers as are reasonably  incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all obligations that by the terms
of this  Agreement and the other Loan  Documents are required to be performed by
it as a Bank.

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

     (e) Upon  its  receipt  of an  Assignment  and  Acceptance  executed  by an
assigning  Bank  and the  assignee  thereunder  together  with any note or notes
subject to such assignment,  the written consent to such assignment  executed by
the Company and the fee payable in respect thereto,  Administrative Agent shall,
if such  Assignment and Acceptance has been completed with blanks  appropriately
filled,  (i) accept such Assignment and Acceptance,  (ii) record the information
contained  therein in the Register and (iii) give prompt  notice  thereof to the
Company.  If applicable,  within five Business Days after receipt of notice, the
Company, at its own expense,  shall execute and deliver to Administrative  Agent
in exchange for the surrendered notes new notes to the order of such assignee in
an amount equal to the Commitments  and/or Loans or Letters of Credit assumed by
it pursuant to such  Assignment  and  Acceptance  and, if the assigning Bank has
retained  Commitments  and/or  Loans  hereunder,  new  notes to the order of the
assigning Bank in an amount equal to the Commitment  and/or Loans retained by it
hereunder. Such new notes shall be in an aggregate principal amount equal to the
aggregate  principal  amount  of such  surrendered  notes,  shall be  dated  the
effective  date of such  Assignment  and  Acceptance  and shall  otherwise be in
substantially the form of the respective note. Thereafter, such surrendered
                                      (67)

<PAGE>

notes,  if any,  shall be  marked  renewed  and  substituted  and the  originals
delivered to the Company (with copies, certified by the Company as true, correct
and complete, to be retained by Administrative Agent).

     (f) Any Bank may, in connection  with any  assignment or  participation  or
proposed assignment or participation  pursuant to this Section 13.5, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Company  furnished  to such Bank by or on behalf of the Company;
provided,  however,  that, prior to any such disclosure,  the Company shall have
consented thereto,  which consent shall not be unreasonably  withheld,  and each
such assignee or participant, or proposed assignee or participant, shall execute
an agreement  whereby such assignee or  participant  shall agree to preserve the
confidentiality  of any Confidential  Information  (defined in Section 13.13) on
terms substantially the same as those provided in Section 13.13.

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

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

     13.6 Limitation of Interest.  The Company,  the Agents and the Banks intend
to strictly comply with all applicable  laws,  including  applicable usury laws.
Accordingly,  the  provisions of this Section 13.6 shall govern and control over
every  other  provision  of this  Agreement  or any other  Loan  Document  which
conflicts or is inconsistent with this Section,  even if such provision declares
that it controls.  As used in this  Section,  the term  "interest"  includes the
aggregate of all charges,  fees, benefits or other compensation which constitute
interest under applicable law, provided that, to the maximum extent permitted by
applicable  law, (a) any  non-principal  payment  shall be  characterized  as an
expense or as  compensation  for something  other than the use,  forbearance  or
detention  of  money  and not as  interest,  and (b) all  interest  at any  time
contracted  for,  reserved,  charged or received  shall be amortized,  prorated,
allocated and spread, in equal parts during the full term of the Obligations. In
no event shall the Company or any other  Person be obligated to pay, or any Bank
have any right or privilege to reserve,  receive or retain,  (a) any interest in
excess of the maximum amount of nonusurious interest permitted under the laws of
the State of Texas or the  applicable  laws (if any) of the United  States or of
any other applicable  state, or (b) total interest in excess of the amount which
such Bank could lawfully have contracted for,  reserved,  received,  retained or
charged had the interest been calculated for the full term of the Obligations at
the Highest  Lawful  Rate.  On each day,  if any,  that the  interest  rate (the
"Stated  Rate")  called for under  this  Agreement  or any other  Loan  Document
exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall
                                      (68)

<PAGE>

automatically  be fixed by operation of this sentence at the Highest Lawful Rate
for that day,  and shall  remain  fixed at the Highest  Lawful Rate for each day
thereafter until the total amount of interest accrued equals the total amount of
interest  which  would have  accrued if there  were no such  ceiling  rate as is
imposed by this sentence.  Thereafter,  interest shall accrue at the Stated Rate
unless and until the Stated Rate again exceeds the Highest  Lawful Rate when the
provisions  of the  immediately  preceding  sentence  shall again  automatically
operate to limit the interest  accrual rate. The daily interest rates to be used
in  calculating  interest at the  Highest  Lawful  Rate shall be  determined  by
dividing the  applicable  Highest Lawful Rate per annum by the number of days in
the calendar year for which such  calculation  is being made.  None of the terms
and  provisions  contained in this Agreement or in any other Loan Document which
directly  or  indirectly  relate to  interest  shall ever be  construed  without
reference to this Section  13.6, or be construed to create a contract to pay for
the use,  forbearance or detention of money at an interest rate in excess of the
Highest  Lawful Rate.  If the term of any  Obligation  is shortened by reason of
acceleration of maturity as a result of any Default or by any other cause, or by
reason of any required or permitted  prepayment,  and if for that (or any other)
reason any Bank at any time,  including but not limited to, the stated maturity,
is owed or  receives  (and/or  has  received)  interest  in excess  of  interest
calculated  at the Highest  Lawful  Rate,  then and in any such event all of any
such  excess  interest  shall be canceled  automatically  as of the date of such
acceleration,  prepayment or other event which produces the excess, and, if such
excess  interest  has been paid to such  Bank,  it shall be  credited  pro tanto
against the then-outstanding  principal balance of the Company's  obligations to
such Bank,  effective as of the date or dates when the event occurs which causes
it to be  excess  interest,  until  such  excess  is  exhausted  or all of  such
principal has been fully paid and  satisfied,  whichever  occurs first,  and any
remaining  balance  of such  excess  shall be  promptly  refunded  to its payor.
Chapter 346 of the Texas Finance Code (which regulates  certain revolving credit
accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply
to this Agreement.

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

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

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

     13.10  Governing Law. This  Agreement and (except as therein  provided) the
other Loan Documents are performable in Harris County,  Texas,  which shall be a
proper place of venue for suit on or in respect thereof. The Company irrevocably
agrees that any legal proceeding in respect of this Agreement or the other Loan
                                      (69)

<PAGE>

 Documents  shall be brought in the district  courts of Harris County,  Texas or
the United States  District  Court for the Southern  District of Texas,  Houston
Division (collectively,  the "Specified Courts"). The Company hereby irrevocably
submits to the nonexclusive  jurisdiction of the state and federal courts of the
State of Texas.  The Company hereby  irrevocably  waives,  to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any suit,  action or  proceeding  arising  out of or relating to any
Loan Document  brought in any Specified  Court,  and hereby further  irrevocably
waives any claims that any such suit,  action or proceeding  brought in any such
court has been brought in an inconvenient  forum. The Company further (1) agrees
to designate and maintain an agent for service of process in the City of Houston
in  connection  with any such  suit,  action or  proceeding  and to  deliver  to
Administrative  Agent  evidence  thereof  and (2)  irrevocably  consents  to the
service of  process  out of any of the  aforementioned  courts in any such suit,
action or proceeding by the mailing of copies thereof by certified mail,  return
receipt requested, postage prepaid, to the Company at its address as provided in
this  Agreement  or as  otherwise  provided by Texas law.  Nothing  herein shall
affect  the  right of any Agent or any Bank to  commence  legal  proceedings  or
otherwise proceed against the Company in any jurisdiction or to serve process in
any manner permitted by applicable law. The Company agrees that a final judgment
in any such  action or  proceeding  shall be  conclusive  and may be enforced in
other  jurisdictions  by suit on the judgment or in any other manner provided by
law. THIS  AGREEMENT AND (EXCEPT AS THEREIN  PROVIDED) THE OTHER LOAN  DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER
THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF TEXAS AND THE UNITED  STATES OF
AMERICA FROM TIME TO TIME IN EFFECT.

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

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

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

     (a) As used  herein,  the term  "Confidential  Information"  means  written
information about the Company or the transactions  contemplated herein furnished
by the Company to the Agents and/or the Banks which is  specifically  designated
as confidential by the Company;  Confidential  Information,  however,  shall not
include  information  which (i) was publicly  known or  available,  or otherwise
available on a  non-confidential  basis to any Bank,  at the time of  disclosure
from a source other than the Company,  (ii) subsequently  becomes publicly known
through no act or omission by such Bank, (iii) otherwise  becomes available on a
non-confidential basis to any Bank other than through disclosure by the Company
                                      (70)

<PAGE>

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

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

     13.14 Tax Forms.  With  respect to each Bank which is  organized  under the
laws of a  jurisdiction  outside  the United  States,  on the day of the initial
borrowing hereunder and from time to time thereafter if requested by the Company
or Administrative  Agent, such Bank shall provide  Administrative  Agent and the
Company with the forms  prescribed by the Internal Revenue Service of the United
States certifying as to such Bank's status for purposes of determining exemption
from United States  withholding taxes with respect to all payments to be made to
such  Bank  hereunder  or  other   documents   satisfactory   to  the  Bank  and
Administrative  Agent  indicating  that  all  payments  to be made to such  Bank
hereunder are subject to such tax at a rate reduced by an applicable tax treaty.
Unless the Company and  Administrative  Agent shall have  received such forms or
such  documents  indicating  that  payments  hereunder are not subject to United
States  withholding  tax or are  subject  to such  tax at a rate  reduced  by an
applicable tax treaty, the Company or Administrative  Agent shall withhold taxes
from such payments at the  applicable  statutory rate in the case of payments to
or for any Bank organized  under the laws of a  jurisdiction  outside the United
States.
                                      (71)

<PAGE>

     13.15 Amendment and Restatement.  This Agreement amends and restates in its
entirety that certain Credit Agreement dated as of June 17, 1997 executed by and
among the Company, the Banks and Administrative Agent, as amended.


                      [SIGNATURES BEGIN ON FOLLOWING PAGE]

                                      (72)
<PAGE>


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

                                SEAGULL ENERGY CORPORATION, a Texas corporation


                                By: /s/ Stephen A. Thorington
                                Name: Stephen A. Thorington
                                Title:   Vice President - Finance and Treasurer

                                Addresses for Notices:

                                1001 Fannin, Suite 1700
                                Houston, Texas  77002
                                Attention: Steve Thorington


                                      S-1
<PAGE>


                                THE CHASE MANHATTAN BANK, as a Bank and as
                                Administrative Agent


                                By:
                                Name:
                                Title:
Commitment:
                                Address for Notices:
$50,000,000
                                1 Chase Manhattan Plaza, 8th Floor
                                New York, New York 10081

                                Attention:  Ms. Lisa Pucciarelli

                                Phone:   (212) 552-7886
                                Fax:     (212) 552-5777


                                with a copy to:

                                Texas Commerce Bank National Association
                                712 Main Street
                                Houston, Texas  77002
                                Attention:  Manager, Energy Division



                                      S-2
<PAGE>

                                MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
                                Bank and as Documentation Agent


                                By: /s/John Kowalczuk
Commitment:                     Name: John Kowalczuk
                                Title: Vice President
$50,000,000
                                Address for Notices:

                                60 Wall Street
                                New York, N.Y.  10260-0060
                                Attention:   Mr. John Kowalczuk
                                Phone:        (212) 648-7612
                                Fax:          (212) 648-5967

                                with further notice to:

                                Sandra H. Doherty
                                500 Christiana Stanton Road
                                Newark, DE 19713-2107
                                Phone:        (302) 634-8122
                                Fax:          (302) 634-1092




                                      S-3
<PAGE>

                                NATIONSBANK OF TEXAS, N.A., as a Bank and as
                                Syndication Agent



                                By: /s/ James V. Ducote
Commitment:                     Name: James V. Ducote
                                Title: Vice President
$50,000,000
                                Address for Notices:

                                700 Louisiana, 8th Floor
                                Houston, Texas  77002

                                Attention:  Jo A. Tamalis

                                Phone:       (713) 247-6856
                                Fax:         (713) 247-6568





                                      S-4
<PAGE>


                                 BANKBOSTON, N.A., as a Bank


                                 By: /s/ Terrence Ronan
Commitment:                      Name: Terrence Ronan
                                 Title: Vice President
$30,000,000
                                 Address for Notices:

                                 100 Federal Street
                                 Energy & Utilities 01-08-04
                                 Boston, Massachusetts  02110

                                 Attention: Terrence Ronan

                                 Phone:      (617) 434-5472
                                 Fax:        (617) 434-3652




                                      S-5
<PAGE>


                                  ABN AMRO BANK N.V., HOUSTON AGENCY, as a Bank


                                  By: /s/C. Lipshutz
Commitment:                       Name: Cheryl Lipshutz
                                  Title: Group Vice President
$11,250,000

                                  By: /s/Stephanie Ballete
                                  Name: Stephanie Ballete
                                  Title: Credit Officer


                                  Address for Notices:

                                  Three Riverway, Suite 1700
                                  Houston, Texas  77056

                                  Attention: Ms. Cheryl Lipshutz

                                  Phone:      (713) 964-3351
                                  Fax:        (713) 629-7533




                                      S-6
<PAGE>


                                   THE BANK OF NEW YORK, as a Bank


                                   By: /s/Ian K. Stewart
Commitment:                        Name: Ian K. Stewart
                                   Title: Senior Vice President
$20,000,000
                                   Address for Notices:

                                   One Wall Street, 19th Floor
                                   New York, New York  10286

                                   Attention:  Ms. Felicia LaForgia

                                   Phone:       (212) 635-7861
                                   Fax:         (212) 635-7923


                                      S-7
<PAGE>

                                   BANQUE PARIBAS HOUSTON AGENCY, as a Bank


                                   By: /s/Marian Livingston
Commitment:                        Name: Marian Livingston
                                   Title: Vice President
$20,000,000

                                   By: /s/Barton D. Schonest
                                   Name: Barton D. Schonest
                                   Title: Managing Director


                                   Address for Notices:

                                   1200 Smith, Suite 3100
                                   Houston, Texas  77002

                                   Attention:  Marian Livingston

                                   Phone:       (713) 659-4811
                                   Fax:         (713) 659-6915


                                      S-8
<PAGE>

                                   CREDIT LYONNAIS NEW YORK BRANCH, as a Bank


                                   By: /s/ Pascal Poupeller
Commitment:                        Name: Pascal Poupeller
                                   Title: Executive Vice President
$20,000,000


                                   Address for Notices:

                                   1000 Louisiana, Suite #5360
                                   Houston, Texas  77002

                                   Attention:  Mr. John Falbo

                                   Phone:       (713) 753-8704
                                   Fax:         (713) 751-0307

                                      S-9
<PAGE>


                                   THE FUJI BANK, LIMITED HOUSTON AGENCY, as
                                   a Bank


                                   By: /s/ Yoshaki Imoue
Commitment:                        Name: Yoshaki Imoue
                                   Title: Vice President and Manager
$11,250,000
                                   Address for Notices:

                                   One Houston Center
                                   Suite 4100
                                   1221 McKinney Street
                                   Houston, Texas  77010

                                   Attention:  Mr. Tommy Watts

                                   Phone:       (713) 650-7868
                                   Fax:         (713) 659-0048


                                      S-10
<PAGE>

                                   THE FIRST NATIONAL BANK OF CHICAGO, as a Bank


                                   By: /s/ Dixon P. Schultz
Commitment:                        Name: Dixon P. Schultz
                                   Title: Vice President
$30,000,000
                                   Address for Notices:

                                   One First National Plaza
                                   10th Floor, Mail Suite 0634
                                   Chicago, Illinois 60670

                                   Attention:  Mr. John Beirne


                                   with a copy to:

                                   1100 Louisiana, Suite 3200
                                   Houston, Texas 77002

                                   Attention:  Ms. Dixon Schultz

                                   Phone:       (713) 654-7239
                                   Fax:         (713) 654-7370








                                      S-11
<PAGE>


                                    SOCIETE GENERALE, SOUTHWEST AGENCY, as
                                    a Bank


                                    By: /s/ Paul E. Cornell
Commitment:                         Name: Paul E. Cornell
                                    Title: First Vice President
$30,000,000
                                    Address for Notices:

                                    2001 Ross Avenue, Suite 4800
                                    Dallas, Texas 75201

                                    Attention: Mr. Mark Ghent

                                    Phone:      (214) 979-2792
                                    Fax:        (214) 979-1104

                                    with a copy to:

                                    1111 Bagby, Suite 2020
                                    Houston, Texas  77002

                                    Attention:  Mr. Richard Erbert

                                    Phone:       (713) 759-6318
                                    Fax:         (713) 650-0824




                                      S-12
<PAGE>


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


                                    By: /s/ Michael G. Meiss
Commitment:                         Name: Michael G. Meiss
                                    Title: Vice President
$11,250,000
                                    Address for Notices:

                                    1100 Louisiana, Suite 2800
                                    Houston, Texas  770002-5216

                                    Attention:  Mr. John M. McIntyre

                                    Phone:       (713) 655-3845
                                    Fax:         (713) 655-3855


                                      S-13
<PAGE>

                                    BANK OF SCOTLAND, as a Bank


                                    By: /s/ Annie Chintat
Commitment:                         Name: Annie Chintat
                                    Title: Vice President
$11,250,000
                                    Address for Notices:

                                    565 Fifth Avenue
                                    New York, New York  10017

                                    Attention:  Ms. Annie Chintat

                                    Phone:       (212) 450-0871
                                    Fax:         (212) 557-9460




                                      S-14
<PAGE>

                                     CREDIT AGRICOLE INDOSUEZ, as a Bank


                                     By: /s/ W. Leroy Startz
Commitment:                          Name: W. Leroy Startz
                                     Title: First Vice President
$11,250,000

                                     By: /s/ David Eouhl, FVP
                                     Name: David Eouhl, FVP
                                     Title: Head of Corporate Banking - Chicago



                                     Address for Notices:

                                     600 Travis, Suite 2340
                                     Houston, Texas 77002

                                     Attention:  Mr. Brian Knezeak

                                     Phone:       (713) 223-7001
                                     Fax:         (713) 223-7029


                                      S-15
<PAGE>


                                     CHRISTIANIA BANK OG KREDITKASSE, as a Bank


                                     By: /s/ William S. Phillips
Commitment:                          Name: William S. Phillips
                                     Title: Vice President
$11,250,000
                                     By: /s/ Peter Dodge
                                     Name: Peter Dodge
                                     Title: First Vice President


                                     Address for Notices:

                                     11 West 42nd Street
                                     7th Floor
                                     New York, New York  10036

                                     Attention:  Mr. Peter Dodge

                                     Phone:       (212) 827-4835
                                     Fax:         (212) 827-4888



                                      S-16

<PAGE>


                                      DEN NORSKE BANK AS, as a Bank


                                      By: /s/ Byron L. Cooley
Commitment:                           Name: Byron L. Cooley
                                      Title: Senior Vice President
$11,250,000

                                      By: /s/ Morten Bjornsen
                                      Name: Morten Bjornsen
                                      Title: Senior Vice President

                                      Address for Notices:

                                      333 Clay
                                      Suite 4890
                                      Houston, Texas  77002
                                      Attention:  Mr. Byron L. Cooley

                                      Phone:       (713) 844-9258
                                      Fax:         (713) 757-1167


                                      S-17
<PAGE>

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


                                      By: /s/ Alan Alexander
Commitment:                           Name: Alan Alexander
                                      Title: Vice President
$20,000,000
                                      Address for Notices:

                                      1000 Louisiana Street
                                      3rd Floor/MAC 5002-031
                                      Houston, Texas  77002

                                      Attention:  Mr. Alan Alexander

                                      Phone:       (713) 250-1651
                                      Fax:         (713) 250-7912



                                      S-18
<PAGE>


                                       THE BANK OF NOVA SCOTIA, as a Bank


                                       By: /s/ FCH Ashby
Commitment:                            Name: FCH Ashby
                                       Title: Senior Manager Loan Operations
$30,000,000
                                       Address for Notices:

                                       600 Peachtree Street, Suite 2700
                                       Atlanta, Georgia 30308

                                       Attention:  Mr. Cleve Bushey

                                       Phone:       (404) 877-1500
                                       Fax:         (404) 888-8998




                                      S-19
<PAGE>


                                       CIBC INC., as a Bank


                                       By: /s/ Aleksandra K. Dymanus
Commitment:                            Name: Aleksandra K. Dymanus
                                       Title: Authorized Signatory
$30,000,000

                                       Address for Notices:

                                       Two Paces West
                                       2727 Paces Ferry Road
                                       Suite 1200
                                       Atlanta, Georgia 30339
                                       Attention: Loan Operations

                                       with a copy to:

                                       Canadian Imperial Bank of Commerce
                                       Two Houston Center
                                       909 Fannin Street
                                       Houston, Texas  77010

                                       Attention:  Mr. Brian Myers

                                       Phone:       (713) 655-5230
                                       Fax:         (713) 650-3727




                                      S-20
<PAGE>


                                       MELLON BANK N.A., as a Bank


                                       By: /s/ Roger E. Howard
Commitment:                            Name:   Roger E. Howard
                                       Title:     Vice President
$11,250,000
                                       Address for Notices:

                                       Mellon Bank N.A.
                                       One Mellon Bank Center
                                       Room 151-4425
                                       Pittsburgh, Pennsylvania 15258-0001

                                       Attention: Manager, Energy Services Group

                                       Phone:       (412) 236-2785
                                       Fax:         (412) 236-1840



                                      S-21
<PAGE>


                                       BANK OF MONTREAL, as a Bank


                                       By: /s/ Melissa A. Bauman
Commitment:                            Name: Melissa A. Bauman
                                       Title: Director
$30,000,000

                                       Address for Notices:

                                       700 Louisiana, Suite 4400
                                       Houston, Texas 77002

                                       Attention: Mr. Brian Otis

                                       Phone:      (713) 546-9720
                                       Fax:        (713) 223-4007


                                      S-22
<PAGE>



                                    Exhibit A

                            Unrestricted Subsidiaries

1.       Seagull UK Ltd.
2.       SGO Isle of Man Ltd.
3.       Seagull Energy International, Inc.
4.       SGO Southeast Asia, Inc.
5.       Seagull Ireland Ltd.
6.       Seagull International Holdings Ltd.
7.       Seagull East Zeit Petroleum Ltd.
8.       Seagull South Hurghada Petroleum Ltd.
9.       Seagull (Cote D'Ivoire) Ltd.
10.      Seagull (Cote D'Ivoire) CI-12 Ltd.
11.      Seagull (Cote D'Ivoire) CI-104 Ltd.
12.      Seagull (Egypt) Ltd.
13.      Seagull (Egypt) Darag, Ltd.
14.      Seagull (Egypt) East Beni Suef, Ltd.
15.      GNR International (Argentina), Inc.
16.      Seagull (Malaysia) Ltd.
17.      Texneft Inc.
18.      GNR International (Turkey), Inc.
19.      Seagull WAG Petroleum Ltd.

                                  Exhibit A-1
<PAGE>


                                    Exhibit B

                     Form of Request for Extension of Credit

                     [SEAGULL ENERGY CORPORATION LETTERHEAD]

                         REQUEST FOR EXTENSION OF CREDIT

                            ________________, 199____

The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention:      Agent Services

Gentlemen:

     The  undersigned  hereby  certifies  that he is the  __________________  of
SEAGULL ENERGY  CORPORATION,  a Texas  corporation (the "Company"),  and that as
such he is  authorized  to execute  this  Request for  Extension  of Credit (the
"Request") on behalf of the Company  pursuant to the Amended and Restated Credit
Agreement (as it may be amended, supplemented or restated from time to time, the
"Agreement")  dated as of December  24, 1997,  by and among the Company,  MORGAN
GUARANTY  TRUST  COMPANY  OF NEW YORK,  as  Documentation  Agent for the  Banks,
NATIONSBANK OF TEXAS,  N.A., as Syndication  Agent for the Banks,  and THE CHASE
MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative  Agent"),
and the Banks therein  named.  The Loan being  requested  hereby is to be in the
amount set forth in (b) below and is requested  to be made on  ________________,
199___,  which  is a  Business  Day.  The  Loan  is to be  (check  one)  [___] a
Eurodollar  Loan  [___] an  Alternate  Base  Rate  Loan.  If the Loan is to be a
Eurodollar Loan, the Interest Period is to be (check one) [__] 1, [__] 2, [__] 3
or [__] 6 months. On behalf of the Company,  the undersigned  further certifies,
represents  and  warrants  that  to  his  knowledge,  after  due  inquiry  (each
capitalized  term  used  herein  having  the  same  meaning  given  to it in the
Agreement unless otherwise specified herein):

     (a) As of the date hereof:

     (1) The Facility  Amount  [COMPLETE  WITH THE  AGGREGATE  COMMITMENTS)  is:
$----------

     (2)  Aggregate  outstanding  amount of  Revolving  Credit  Obligations  is:
$----------


                                  Exhibit B-1
<PAGE>

     (3) Amount  currently  available  under the Agreement (the amount in (a)(1)
above minus the amount in (a)(2) above is: $__________

     (b) If and only if the amount shown in Line (a)(3)  above is positive,  the
Company  hereby  requests under this Request a Loan in the amount of $__________
(which is no more than the positive amount set forth in Line (a)(3) above).

     (c) Except for the facts heretofore  disclosed to the Administrative  Agent
in writing,  which facts (I) are not materially  more adverse to the Company and
its  Subsidiaries,  (II) do not materially  decrease the ability of the Banks to
collect the  Obligations as and when due and payable and (III) do not materially
increase the  liability of any Agent or any of the Banks,  in each case compared
to those facts  existing on the date  hereof and the  material  details of which
have been set forth in the Financial  Statements delivered to the Administrative
Agent prior to the date hereof or in the  Disclosure  Statement,  and except for
the  representations  set forth in the Loan Documents which, by their terms, are
expressly  (or  by  means  of  similar  phrasing)  made  as of the  date  of the
Agreement,  only, the  representations and warranties made in each Loan Document
are true and correct in all material  respects on and as of the time of delivery
hereof,  with  the same  force  and  effect  as if made on and as of the time of
delivery hereof.

     (d) The interest rate and Interest  Period  selected  above comply with all
applicable provisions of the Agreement.

     (e) No Default has occurred and is continuing.

     Thank you for your attention to this matter.

                                Very truly yours,

                                SEAGULL ENERGY CORPORATION,
                                a Texas corporation

                                By: _
                                Name:
                                Title:

                                  Exhibit B-2
<PAGE>



                                    Exhibit C

                           Existing Competitive Loans

                                    Interest
Institution            Issue Date     Maturity       Rate       Amount


                                      NONE



                                  Exhibit C-1
<PAGE>



                                    Exhibit D

                          Subsidiaries (with Addresses)

1.       Seagull Energy E&P Inc.
2.       Seagull Midcon Inc.
3.       Seagull Mid-South Inc.
4.       Seagull Energy Canada Holding Company
5.       Seagull UK Ltd.
6.       SGO Isle of Man Ltd.
7.       Seagull Energy International, Inc.
8.       SGO Southeast Asia, Inc.
9.       Seagull Ireland Ltd.
10.      Seagull International Holdings Ltd.
11.      Seagull East Zeit Petroleum Ltd.
12.      Seagull South Hurghada Petroleum Ltd.
13.      Global Natural Resources Inc.
14.      Global Natural Resources Corporation of Nevada
15.      Seagull (Cote D'Ivoire) Ltd.
16.      Seagull (Cote D'Ivoire) CI-12 Ltd.
17.      Seagull (Cote D'Ivoire) CI-104 Ltd
18.      Seagull (Egypt) Ltd.
19.      Seagull (Egypt) Darag, Ltd.
20.      Seagull (Egypt) East Beni Suef, Ltd.
21.      GNR International (Argentina), Inc.
22.      Seagull (Malaysia) Ltd.
23.      Texneft Inc.
24.      GNR Eastern
25.      GNR International (Turkey), Inc.
26.      Thousand Oaks Development Corporation
27.      Seagull Pipeline & Marketing Company
28.      Seagull Marketing Services, Inc.
29.      Seagull Power Services Inc.
30.      Seagull Products Pipeline Corporation
31.      Seagull Field Services Company
32.      Seagull Pipeline Company
33.      Alaska Pipeline Company
34.      Seagull WAG Petroleum Ltd.
In each case, the address for notice is:    c/o Seagull Energy Corporation
                                                1001 Fannin, Suite 1700
                                                Houston, Texas  77002

                                  Exhibit D-1
<PAGE>


                                    Exhibit E

                                     Form of

                             Compliance Certificate

     The undersigned,  the ___________________ of SEAGULL ENERGY CORPORATION,  a
Texas  corporation  (the  "Company"),  hereby certifies that he is authorized to
execute this  certificate on behalf of the Company,  pursuant to the Amended and
Restated  Credit  Agreement  (the "Credit  Agreement")  dated as of December 24,
1997, by and among the Company,  MORGAN  GUARANTY  TRUST COMPANY OF NEW YORK, as
Documentation  Agent for the Banks,  NATIONSBANK OF TEXAS,  N.A., as Syndication
Agent for the Banks, and THE CHASE MANHATTAN BANK, as  Administrative  Agent for
the Banks ("Administrative Agent"), and the Banks therein named, as amended; and
that a review  of the  Company  and its  Subsidiaries  has been  made  under his
supervision with a view to determining  whether the Company and its Subsidiaries
have fulfilled all of their  respective  obligations  under the Credit Agreement
and the other Loan Documents;  and on behalf of the Company  further  certifies,
represents  and  warrants  that  to  his  knowledge,  after  due  inquiry  (each
capitalized  term used herein  having the same meaning given to it in the Credit
Agreement unless otherwise specified):

As of ___________________, 199___:

     (a) The  Company  and its  Subsidiaries  have  fulfilled  their  respective
obligations  under the Credit  Agreement  and the other Loan  Documents  as each
applies after giving effect to any amendments,  consents and/or waivers that may
be in effect from time to time.

     (b) Except for the facts heretofore  disclosed to the Administrative  Agent
under the Credit  Agreement in writing,  which facts (I) are not materially more
adverse to the Company and its Subsidiaries, (II) do not materially decrease the
ability of the Banks to collect the  Obligations as and when due and payable and
(III) do not  materially  increase  the  liability  of the  Agents or any of the
Banks,  in each case compared to those facts existing on the date hereof and the
material  details  of which  have  been set  forth in the  Financial  Statements
delivered to the  Administrative  Agent under the Credit  Agreement prior to the
date  hereof  or in  the  Disclosure  Statements  provided  for  in  the  Credit
Agreement,  and except for the  representations  set forth in the Loan Documents
which, by their terms,  are expressly (or by means of similar  phrasing) made as
of the date of the Credit Agreement,  only, the  representations  and warranties
made in each Loan Document are true and correct in all material  respects on and
as of the time of delivery hereof,  with the same force and effect as if made on
and as of the time of delivery hereof.

     (c) The Financial  Statements  delivered to the Administrative  Agent under
the Credit  Agreement  concurrently  with this Compliance  Certificate have been
prepared in accordance  with GAAP  consistently  followed  throughout the period
indicated and fairly present the consolidated financial condition and results of

                                  Exhibit E-1

<PAGE>

operations  of the  applicable  Persons  as at the end of,  and for,  the period
indicated  (subject,  in the case of quarterly Financial  Statements,  to normal
changes resulting from year-end adjustments).

     (d) No  Default  has  occurred  and  is  continuing.  In  this  regard  the
compliance  with  the  provisions  of  Sections  10.9 and  10.10  of the  Credit
Agreement is as follows:

(i)  Section 10.9 of the Credit Agreement - Total Debt/Capitalization Ratio]

     Revolving Credit Obligations (including Competitive Loans)] $__________

     Other Current Maturities and borrowed money  Indebtedness   $__________

          Total Debt                                         (1) $__________

          Total Shareholders Equity                              $__________

          Total Capitalization                               (2) $__________

          Total  Debt/Capitalization Ratio (1) (2)                   ______%

                        Note: Must be no greater than 60%

(ii) Section  10.10 of the Credit  Agreement -  EBITDAX/Interest  Ratio (For the
     rolling four calendar quarter period ended _________________, 199____)

     Earnings Applicable to Common Stock1                        $__________

     Interest Expense (including capitalized interest)           $__________

     Income Tax Expense                                          $__________

     Material Gains/Losses                                       $__________

     Depreciation, Depletion & Amortization                      $__________

     Exploration Expenses                                        $__________

     Operating Lease Rentals                                     $__________

1 Excludes Cumulative Effect of Changes in Accounting Methods

                                  Exhibit E-2
<PAGE>

     EBITDAX (the sum of the foregoing)                      (1) $__________

     Operating Lease Rentals                                 (a) $__________

     Cash Interest Expense                                   (b) $__________

                           Total [(a) plus (b)]              (2) $__________

     EBITDAX/Interest (1)/(2)                                     __________

     Note:    Must be no less than 3.75:1.

     (e) There has occurred no material adverse change, either in any case or in
the  aggregate,  in the  assets,  liabilities,  financial  condition,  business,
operations,  affairs or circumstances of the Company and its Subsidiaries  taken
as a whole since the date of the most recent Financial  Statements  delivered to
the Banks.

DATED as of ____________________, 199___.

                                              SEAGULL ENERGY CORPORATION

                                              By:
                                              Name:
                                              Title:


                                  Exhibit E-3
<PAGE>

                                    Exhibit F

                                     Form of

                            Assignment and Acceptance

                         Dated: _______________.199____


     Reference is made to the Amended and Restated Credit  Agreement dated as of
December 24, 1997 (as restated,  amended,  modified,  supplemented and in effect
from time to time, the "Credit Agreement"),  among SEAGULL ENERGY CORPORATION, a
Texas corporation (the "Company"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation  Agent for the Banks,  NATIONSBANK OF TEXAS,  N.A., as Syndication
Agent for the Banks, and THE CHASE MANHATTAN BANK, as  Administrative  Agent for
the Banks  ("Administrative  Agent"),  and the Banks therein named.  Capitalized
terms used herein and not otherwise  defined shall have the meanings assigned to
such terms in the Credit Agreement. This Assignment and Acceptance,  between the
Assignor  (as defined and set forth on Schedule I hereto and made a part hereof)
and the  Assignee (as defined and set forth on Schedule I hereto and made a part
hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and
made a part hereof).

     1. The  Assignor  hereby  irrevocably  sells and  assigns  to the  Assignee
without recourse to the Assignor,  and the Assignee hereby irrevocably purchases
and  assumes  from the  Assignor  without  recourse to the  Assignor,  as of the
Effective  Date, an undivided  interest (the "Assigned  Interest") in and to all
the Assignor's  rights and  obligations  under the Credit  Agreement  respecting
those, and only those,  credit  facilities  contained in the Credit Agreement as
are  set  forth  on  Schedule  1  (collectively,   the  "Assigned   Facilities,"
individually, an "Assigned Facilities"), in a principal amount for each Assigned
Facility as set forth on Schedule I.

     2. The  Assignor  (i) makes no  representation  or warranty  and assumes no
responsibility  with respect to any  statements,  warranties or  representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of the Credit  Agreement,  any other Loan Document or any other instrument
or  document  furnished  pursuant  thereto,  other than that it is the legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility  with respect to the financial  condition
of the Company or its  Subsidiaries  or the  performance  or  observance  by the
Company  or its  Subsidiaries  of any of its  respective  obligations  under the
Credit  Agreement,  any other Loan Document or any other  instrument or document
furnished pursuant thereto;  and (iii) if applicable,  attaches the note(s) held
by it evidencing the Assigned  Facility or  Facilities,  as the case may be, and
requests that the  Administrative  Agent exchange such note(s) for a new note or
notes  payable to the Assignor (if the Assignor has retained any interest in the
Assigned Facility or Facilities) and a new note or notes payable to the Assignee
in the respective amounts which reflect the assignment being made hereby (and

                                  Exhibit F-1

<PAGE>

after giving effect to any other  assignments which have become effective on the
Effective Date).

     3. The Assignee (i) represents  and warrants that it is legally  authorized
to enter into this Assignment and Acceptance and that it is a permitted assignee
under Section 13.5 of the Credit Agreement; (ii) confirms that it has received a
copy of the Credit Agreement,  together with copies of the financial  statements
referred to in Section 8.6, or if later,  the most recent  financial  statements
delivered  pursuant  to  Section  9.1  thereof,  and such  other  documents  and
information as it has deemed appropriate to make its own credit analysis;  (iii)
agrees that it will,  independently and without reliance upon the Administrative
Agent,  the  Assignor  or any  other  Bank  and  based  on  such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit decisions in taking or not taking action under the Credit Agreement; (iv)
appoints  and  authorizes  the each  Agent to take  such  action as agent on its
behalf and to exercise  such powers under the Credit  Agreement as are delegated
to such Agent by the terms thereof,  together with such powers as are reasonably
incidental  thereto;  (v) agrees that it will be bound by the  provisions of the
Credit  Agreement  and  will  perform  in  accordance  with  its  terms  all the
obligations  which by the  terms of the  Credit  Agreement  are  required  to be
performed by it as a Bank; (vi) if the Assignee is organized under the laws of a
jurisdiction  outside the United  States,  attaches the forms  prescribed by the
Internal  Revenue  Service of the United States  certifying as to the Assignee's
exemption from United States  withholding  taxes with respect to all payments to
be made to the Assignee  under the Credit  Agreement or such other  documents as
are  necessary to indicate  that all such  payments are subject to such tax at a
rate reduced by an applicable tax treaty, and (vii) has supplied the information
requested on the administrative questionnaire attached hereto as Exhibit A.

     4. Following the execution of this  Assignment and  Acceptance,  it will be
delivered to the  Administrative  Agent for acceptance by it and the Company and
recording by the Administrative  Agent pursuant to Section 13.5(e) of the Credit
Agreement,  effective  as of the  Effective  Date (which  Effective  Date shall,
unless  otherwise  agreed  to by the  Administrative  Agent,  be at  least  five
Business Days after the execution of this Assignment and Acceptance).

     5. Upon such  acceptance and recording,  from and after the Effective Date,
the  Administrative  Agent shall make all  payments  in respect of the  Assigned
Interest (including payments of principal,  interest, fees and other amounts) to
the Assignee,  whether such amounts have accrued prior to the Effective  Date or
accrue  subsequent to the Effective  Date.  The Assignor and Assignee shall make
all appropriate  adjustments in payments for periods prior to the Effective Date
by the  Administrative  Agent or with  respect to the making of this  assignment
directly between themselves.

     6. From and after the Effective  Date, (i) the Assignee shall be a party to
the  Credit  Agreement  and,  to the  extent  provided  in this  Assignment  and
Acceptance,  have the rights and obligations of a Bank thereunder,  and (ii) the
Assignor  shall,  to the extent  provided  in this  Assignment  and  Acceptance,
relinquish  its rights and be  released  from its  obligations  under the Credit
Agreement.

                                  Exhibit F-2

<PAGE>

     7. THIS  ASSIGNMENT AND  ACCEPTANCE  SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Assignment  and
Acceptance  to be  executed  by their  respective  duly  authorized  officers on
Schedule I hereto.


                                  Exhibit F-3
<PAGE>

                     Schedule I to Assignment and Acceptance


Legal Name of Assignor: ____________________________________

Legal Name of Assignee: ____________________________________

Effective Date of Assignment:_______________________, 199___

<TABLE>

<S>          <C>               <C>                  <C>

                           Percentage Assigned of Each
                             Facility (to at least 8
                                  Principal             decimals) (Shown as a
                                 Amount (or,           percentage of aggregate
                                 with respect         original principal amount
                                  to Letters        [or, with respect to Letters
               Assigned         of Credit, face          Credit, fact amount]
              Facilities       amount) Assigned             of all Banks


Committed Loans:               $_______________              __________%

Letter of Credit               $_______________              __________%
participation
interests:

Competitive Loans:             $_______________

</TABLE>


Accepted:

THE CHASE MANHATTAN BANK,                         ____________________________
  as Administrative Agent                          as Assignor


By:______________________                         By:_________________________
Name:                                             Name:
Title:                                            Title:


                                  Exhibit F-4

<PAGE>


 SEAGULL ENERGY CORPORATION                       ____________________________
                                                    as Assignee

By:______________________                         By:_________________________
Name:                                             Name:
Title:                                            Title:






                                  Exhibit F-5

<PAGE>


                                    Exhibit G

                                     Form of

                             Competitive Bid Request


The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services

Dear Sirs:

     Reference is made to the Amended and Restated Credit  Agreement dated as of
December 24, 1997, as modified and amended (the "Credit  Agreement"),  among the
undersigned, the Banks named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication
Agent for the Banks, and THE CHASE MANHATTAN BANK, as  Administrative  Agent for
the Banks  ("Administrative  Agent").  Capitalized  terms  used  herein  and not
otherwise  defined herein shall have the meanings  assigned to such terms in the
Credit  Agreement.  The undersigned  hereby gives you notice pursuant to Section
2.9 of the Credit Agreement that it requests a Competitive Loan under the Credit
Agreement,  and in that  connection  sets  forth  below the terms on which  such
Competitive Loan is requested to be made:

(A)      Borrowing Date of Competitive Loan
         (which is a Business Day)                     ____________________

(B)      Principal Amount of Competitive Loan 1        ____________________

(C)      Interest Period and the last day thereof 2    ____________________


                                  Exhibit G-1
<PAGE>

     By each of the  delivery  of this  Request  for  Competitive  Bids  and the
acceptance  of any or all of the Loans  offered by the Banks in response to this
Competitive  Bid Request,  the  undersigned  represents  and  warrants  that the
applicable  conditions to lending  specified in the Credit  Agreement  have been
satisfied with respect to the Competitive Loan requested hereby.

                                 Very truly yours,

                                 SEAGULL ENERGY CORPORATION

                                 By:_______________________
                                 Name:
                                 Title:

                                  Exhibit G-2

<PAGE>


                                    Exhibit H

                                     Form of

                   Notice to Banks of Competitive Bid Request


[Name of Bank]
[Address of Bank]

Attention:________________                              _______________, 199___

Dear Sirs:

     Reference is made to the Amended and Restated Credit  Agreement dated as of
December 24, 1997,  as modified  and amended  (the  "Credit  Agreement"),  among
Seagull Energy  Corporation  (the  "Company"),  the Banks named therein,  MORGAN
GUARANTY  TRUST  COMPANY  OF NEW YORK,  as  Documentation  Agent for the  Banks,
NATIONSBANK OF TEXAS,  N.A., as Syndication  Agent for the Banks,  and THE CHASE
MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative  Agent").
Capitalized  terms used herein and not otherwise  defined  herein shall have the
meanings assigned to such terms in the Credit Agreement. The Company delivered a
Request for Competitive Bid by [Date] /Time].1 Your  Competitive Bid must comply
with Section 2.9 of the Credit  Agreement and the terms set forth below on which
the Notice of Competitive Loan was made:

(A)      Date of Competitive Loan                 _____________________________
(B)      Principal Amount of Competitive Loan     _____________________________
(C)      Interest Period and the last day thereof _____________________________

                                                  Very truly yours,

                                                  THE CHASE MANHATTAN BANK

                          By:__________________________
                                      Name:
                                     Title:


                                  Exhibit H-1

<PAGE>


                                    Exhibit I

                                     Form of

                                 Competitive Bid


The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services                               __________, 199___

Dear Sirs:

     The  undersigned,  [Name of Bank],  referred to in the Amended and Restated
Credit  Agreement  dated as of December 24,  1997,  as modified and amended (the
"Credit Agreement"), among Seagull Energy Corporation (the "Company"), the Banks
named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent
for the Banks,  NATIONSBANK OF TEXAS,  N.A., as Syndication Agent for the Banks,
and  THE  CHASE   MANHATTAN  BANK,  as   Administrative   Agent  for  the  Banks
("Administrative  Agent").  Capitalized  terms  used  herein  and not  otherwise
defined  herein  shall have the  meanings  assigned  to such terms in the Credit
Agreement.  The  undersigned  hereby makes a Competitive Bid pursuant to Section
2.9 of the Credit  Agreement,  in response to the Request for  Competitive  Bids
(the "Competitive Bid Request") made by the Company on  _______________,  19___,
and in that connection sets forth below the terms on which such  Competitive Bid
is made:

(A) Principal Amount1                            _____________________________
(B) Competitive Bid Rate2                        _____________________________
(C) Interest Period and the last day thereof3    _____________________________




                                  Exhibit I-1
<PAGE>

     The undersigned hereby confirms that it is prepared to extend credit to the
Company upon  acceptance by the Company of this bid in  accordance  with Section
2.9 of the Credit Agreement.

                                                 Very truly yours,

                                                 [NAME OF BANK]


                                                 By:
                                                 Name:
                                                 Title:

                               Exhibit I-2

<PAGE>


                                    Exhibit J

                                     Form of

                  Competitive Bid Administrative Questionnaire

                                 Primary Contact
                              Competitive Auctions


Bank Name:  ___________________________________________________________________
Address:    ___________________________________________________________________

Primary Contact: ______________________________________________________________
Title:      ___________________________________________________________________
Department: ___________________________________________________________________
Telephone Number:______________________________________________________________
Telecopier Number:_____________________________________________________________

                                Alternate Contact
                              Competitive Auctions

Alternate Contact:_____________________________________________________________
Title:       __________________________________________________________________
Department:  __________________________________________________________________
Telephone Number:______________________________________________________________
Telecopier Number:_____________________________________________________________

                                  Exhibit J-1
<PAGE>


                                    Exhibit K

                          Continuing Letters of Credit


1.       Issuer:           The Chase Manhattan Bank
         Beneficiary:      Insurance Company of North America
         L/C No.: P259686
         Amount:  $300,000
         Date of Issue:    03/08/91
         Expiration:       01/30/99

2.       Issuer:           The Chase Manhattan Bank
         Beneficiary:      American Home Assurance Co.
         L/C No.: P753483
         Amount:  $998,000
         Date of Issue:    01/30/95
         Expiration:       01/30/98

3.       Issuer:           The Chase Manhattan Bank
         Beneficiary:      American Home Assurance Co.
         L/C No.: P770604
         Amount:  $662,000
         Date of Issue:    12/01/95
         Expiration:       12/01/99

4.       Issuer:           NationsBank of Texas, N.A.
         Beneficiary:      UMC Petroleum
         L/C No.: NBLC2 (150039)
         Amount:  $50,000
         Date of Issue:    06/26/95
         Expiration:       01/01/98

5.       Issuer:           NationsBank of Texas, N.A.
         Beneficiary:      Michigan Dept. of Natural Resources
         L/C No.: NBLC3 (413425)
         Amount:  $50,000
         Date of Issue:    09/03/93
         Expiration:       11/01/98

                                  Exhibit K-1
<PAGE>

6.       Issuer:           NationsBank of Texas, N.A.
         Beneficiary:      Hambros Channel Island Trust
         L/C No.: NBLC4 (913560)
         Amount:  $16,645,954.91
         Date of Issue:    08/08/96
         Expiration:       08/11/98



1/   Excludes Cumulative Effect of Changes in Accounting Methods

1/   Not less than  $25,000,000 or greater than the unused Total  Commitment and
     in integral multiples of $5,000,000.

2/   Which,  subject to the Credit Agreement,  shall have a duration of not less
     than seven  calendar days nor more than 180 calendar  days, and which shall
     end not later than the Termination Date.

1/   The  Competitive  Bid must be received by the Auction  Agent not later than
     11:00 a.m., Houston,  Texas time, four Business Days before the date of the
     proposed Competitive Loan.

1/   Not less than  $10,000,000 or greater than the available  Total  Commitment
     and in integral multiples of $1,000,000.  Multiple bids will be accepted by
     the Auction Agent.

2/   Expressed as a percentage

3/   The  Interest  Period  must  be  the  Interest  Period   specified  in  the
     Competitive Bid Request.

                                  Exhibit K-2