Document:

ACKNOWLEDGMENT, WAIVER AND AMENDMENT NO. 1
                                       TO
             AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING

     ACKNOWLEDGMENT,  WAIVER AND  AMENDMENT  NO. 1 TO THE AMENDED  AND  RESTATED
AGREEMENT FOR WHOLESALE  FINANCING (this  "Amendment") is made as of January 30,
2000 by and among IBM CREDIT CORPORATION,  a Delaware  corporation,  MTS HOLDING
COMPANY, a Delaware  corporation  ("MTSI"),  MICROAGE COMPUTER CENTERS,  INC., a
Delaware corporation ("MCCI"),  MICROAGE TECHNOLOGY SERVICES, L.L.C., a Delaware
limited  liability  company  ("MTS") and PINACOR,  INC., a Delaware  corporation
("Pinacor",  and  together  with,  MCCI,  MTS  and  MTSI,  the  "Customers"  and
individually  a "Customer")  and  MICROAGE,  INC., a Delaware  corporation  (the
"Parent",  and together with MTSI,  MCCI, MTS and Pinacor,  the "Loan Parties").
Notwithstanding the foregoing, and unless otherwise indicated, any obligation of
a "Customer" or "Customers"  herein shall be the joint and several obligation of
MTS, MTSI, MCCI and Pinacor.

                                    RECITALS

     A. Customers,  Parent and IBM Credit have entered into that certain Amended
and Restated  Agreement for Wholesale  Financing dated as of October 29,1999 (as
amended by this  Amendment  and as further  amended,  supplemented  or otherwise
modified  from  time to  time,  the  "Agreement").  All  capitalized  terms  not
otherwise  defined  herein shall have the  respective  meanings set forth in the
Agreement.

     B. As described in Schedule I attached to this Amendment,  the Loan Parties
have  proposed  to  create  two new  bankruptcy-remote  Subsidiaries  (the  "New
Mortgage  Subsidiaries") to facilitate a $13,000,000  mortgage  financing on the
property at 1003 West Southern,  Tempe,  Arizona (the "Property").  The proposed
lender of such mortgage  financing has requested  that the New  Subsidiaries  be
excluded from the operation of Section 7.15 of the Agreement (Subsidiaries).

     C. As described in Schedule II attached to this Amendment, the Loan Parties
have  proposed  to sell the assets of Latin  America  Division  of  Pinacor  and
Pinacor's  Subsidiaries  that  distribute  technology  product in Latin  America
(Collectively,  "PLA").  The  proposed  structure of the sale of PLA includes an
Investment in the buyer of such assets in the form of intercompany  notes and an
agreement  to  arrange  to have  issued a  $4,000,000  letter of credit  for the
account of such buyer for a period of six months.

     D. The Loan  Parties  have  proposed to form a new  Subsidiary  of MTS (the
"BtoB  Subsidiary")  to which MTS would  contribute  its  business  to  business
Internet assets and business.  The Loan Parties have requested that up to 20% of
the capital stock of the BtoB  Subsidiary be made  available as stock options or
other  equity  incentives  for  officers,  directors  and  employees of the BtoB
Subsidiary.

     E.  The Loan  Parties  have  requested  that  (i) the  financial  covenants
contained in Section 10.2 of the  Agreement be amended as set forth below,  (ii)
certain  other  covenants  contained  in the  Agreement  be amended as set forth
below,  and (iii) IBM Credit waive certain terms and provisions of the Agreement
as set forth below.

     F. IBM Credit is willing to waive such terms and  provisions,  on the terms
and  conditions  stated  below,  and is willing to grant the request of the Loan
Parties and the Loan  Parties and IBM Credit have agreed to amend the  Agreement
as hereinafter set forth.

                                  Page 1 of 12
<PAGE>
                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration  of the  premises  and  other  good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, Loan Parties and IBM Credit hereby agree as follows:

SECTION 1.  MODIFICATION OF AGREEMENT.  The Amendment is effective as of January
30, 2000 and, subject to the satisfaction of the conditions  precedent set forth
in Section 3, the Agreement is hereby amended as follows:

     A.  Attachment  A to the  Amended  and  Restated  Agreement  for  Wholesale
Financing is hereby  amended by deleting  such  Attachment A in its entirety and
substituting,  in lieu  thereof,  the  Attachment  A attached  hereto.  Such new
Attachment A shall be effective as of the date  specified in the new  Attachment
A. The changes  contained in the new Attachment A include,  without  limitation,
the following:

     (a)  Section  I. (A) is  amended by  decreasing  the  Credit  Line from Two
Hundred Fifty  Million  Dollars  ($250,000,000)  to Two Hundred  Twenty  Million
Dollars ($220,000,000);

     (b)  Section  I.  (B) (ii) is  amended  by  decreasing  the  percentage  of
collateral  value IBM  Credit  willl give for an  Irrevocable  Letter of Credit,
issued by an Issuing Bank under the Credit Agreement to IBM Credit ("ILOC") from
(i) 150% to 133% for the period  beginning  February 8, 2000 and ending April 7,
2000 May 14,  2000,  (ii) 125% to 110% for the period  beginning  April 8May 15,
2000 and  ending on the  Termination  Date of the amount  available  to be drawn
under such ILOC.

     (c) Section I. (B) is further amended by adding the following  paragraph at
the end of this Section:

     "Notwithstanding  any other provision of the Agreement,  the Borrowing Base
as defined in Section I(B) of this  Attachment A shall not exceed the sum of (i)
the value of the Authorized  Brand Borrowing Base and (ii) the available  amount
of the ILOC and (iii) Thirty Million Dollars ($30,000,000)."

     (d) Section  I.(D) is amended by  increasing  the Extended  Period  Finance
Charge from LIBOR plus 300 basis points to LIBOR plus 375 basis points.

     (e) Section I.(E) is amended by increasing  the  Delinquency  Fee Rate from
LIBOR plus 550 basis points to LIBOR plus 650 basis points.

     B. Section 1.1 of the  Agreement is hereby  amended by deleting item (8) of
the definition of "Permitted Indebtedness" in its entirety, and substituting, in
lieu thereof, the following:

     "(8)  Indebtedness  secured by a mortgage on the real  property  located at
1330 West  Southern,  Tempe,  Arizona in an  aggregate  principal  amount not to
exceed  $15,000,000,   together  with   indemnification  and  guaranty  of  rent
obligations customary for such mortgage financings; and"

     C. Section 1.1 of the Agreement is hereby amended by inserting  immediately
following (8) of the definition "Permitted Indebtedness", the following:

     "(9) other  Indebtedness  consented  to by IBM  Credit in writing  prior to
incurring such Indebtedness."

     D. Section 1.1. of the Agreement is hereby  amended by adding the following
definition of "BtoB Subsidiary" in the proper alphabetical order:

     "BtoB  Subsidiary" means the Subsidiary of MTS capitalized with business to
business Internet assets and business to business of MTS."

                                  Page 2 of 12
<PAGE>
     E. Section 8.6(D) is hereby amended in full to read as follows:

     "(D) the Parent and the Customers and the BtoB  Subsidiary  may issue stock
options to the directors, officers and employees of such Loan Party:"

     F.  Section  7.1(A)  of the  Agreement  is  hereby  amended  by  inserting,
immediately  following  the phrase "As soon as  available  and",  the  following
language:

     "(x) in any  event  within  45 days  after  the  end of each  Fiscal  Year,
preliminary  Consolidated and Consolidating  statements of income and cash flows
of the Parent and its  Subsidiaries  for such Fiscal Year, in reasonable  detail
and  duly  certified  (subject  to  year-end  audit  adjustments)  by the  chief
financial officer of the Parent as having been prepared in accordance with GAAP,
together with (i) a certificate of said officer  stating no Default has occurred
and is continuing or, if a Default had occurred and is  continuing,  a statement
as to the nature  thereof and the action that the Parent has taken and  proposes
to take with  respect  thereto and (ii) a schedule in form  satisfactory  to IBM
Credit of the computations used by the Parent in determining compliance with the
covenants contained in Section 10.2, PROVIDED that in the event of any change in
GAAP used in the preparation of such Financial Statements, the Parent shall also
provide,  if necessary for the  determination of compliance with Section 10.2, a
statement of  reconciliation  conforming  such Financial  Statements to GAAP and
(y)"

     G.  Section  7.1(C)  of the  Agreement  is  hereby  amended  by  inserting,
immediately  following the phrase  "within 30 days after the end of each month",
the  parenthetical  phrase  "(other  than any month  that is the last month of a
Fiscal  Year or of the first  three  fiscal  quarters of a Fiscal Year for which
Financial  Statements  are delivered  pursuant to Section  7.1(A) or (B), as the
case may be)".

     H.  Section  7.1(J) of the  Agreement  is hereby  amended by deleting  this
Section in its entirety and substituting, in lieu thereof, the following:

     "on each  Business Day, or as  otherwiase  agreed in writing,  a Collateral
Management Report, as of the end of the previous Business Day;"

     I.  Section  10.1 of the  Agreement  is hereby  amended by (i) deleting the
definition of "Fixed Charged  Coverage  Ratio" in its entirety,  and (ii) adding
the following definition in the appropriate alphabetical order:

     "'Interest  Coverage Ratio' means, at any date of determination,  the ratio
of (a) Consolidated  EBITDA to (b) interest payable on, and amortization of debt
discount in respect of, all Debt for Borrowed Money (including expenses incurred
under the Receivables Sales Agreements and flooring subsidiaries,  in each case,
of or by the Parent Guarantor and its Subsidiaries  during the applicable period
most recently ended for which financial statements are required to the delivered
to IBM Credit pursuant to Section 7.1(A) or (B), as the case may be."

and (iii) by amending  clause (a) of the  definition of  "Debt/EBITDA  Ratio" in
full to read as follows:

     "(a) the  average of the sum of (i)  Consolidated  total Debt for  Borrowed
Money plus (ii) the Available  Amount of Letters of Credit,  in each case of the
Parent  Guarantor and its  Subsidiaries  as at the end of each week ended within
the most  recently  ended  fiscal  quarter  of the  Parent  Guarantor  for which
financial  statements  are required to be  delivered  to IBM Credit  pursuant to
Section 7.1 (A) or (B), as the case may be".

     J. Section 10.2(a) of the Agreement is hereby amended by deleting the table
set forth therein in its entirety and substituting therefor the following table:

                                  Page 3 of 12
<PAGE>
                PERIOD                                                  RATIO
                ------                                                  -----
Four Fiscal Quarters ended April 30, 2000                             17.00:1.00
Four Fiscal Quarters ended July 31, 2000                              17.00:1.00
Four Fiscal Quarters ended October 31, 2000                            8.00:1.00
Four Fiscal Quarters ended January 31, 2001                            6.00:1.00
Four Fiscal Quarters ended April 30, 2001                              5.00:1.00
Four Fiscal Quarters ended July 31, 2001                               4.00:1.00
Four Fiscal Quarters ended October 31, 2001                            3.50:1.00
Four Fiscal Quarters ended January 31, 2002                            3.50:1.00
Four Fiscal Quarters ended April 30, 2002                              3.50:1.00
Four Fiscal Quarters ended July 31, 2002                               3.50:1.00

     K. Section  10.2(b) of the  Agreement is hereby  amended in full to read as
follows:

     (b) INTEREST  COVERAGE  RATIO.  Maintain at all times an Interest  Coverage
Ratio of not less than the ratio set forth for each period set forth below.

                PERIOD                                                  RATIO
                ------                                                  -----
For the Month ended February 29, 2000                                  0.20:1.00
For the Month ended March 31, 2000                                     0.30:1.00
Fiscal Quarter ended April 30,  2000                                   0.30:1.00
Two Fiscal Quarters ended July 31,  2000                               0.60:1.00
Three Fiscal Quarters ended October 31,  2000                          1.00:1.00
Four Fiscal Quarters ended January 31,  2001                           1.10:1.00
Four Fiscal Quarters ended April 30,  2001                             1.30:1.00
Four Fiscal Quarters ended July 31,  2001                              1.50:1.00
Four Fiscal Quarters ended October 31,  2001                           1.75:1.00
Four Fiscal Quarters ended January 31,  2002                           2.00:1.00
Four Fiscal Quarters ended April 30,  2002                             2.00:1.00
Four Fiscal Quarters ended July 31,  2002                              2.00:1.00

     L. Section 10.2(c) of the Agreement is hereby amended by deleting the table
set forth therein in its entirety and substituting therefor the following table:

                PERIOD                                                 $ AMOUNT
                ------                                                 --------
Two Fiscal Quarters ended April 30, 2000                               5,000,000
Three Fiscal Quarters ended July 31, 2000                             18,000,000
Four Fiscal Quarters ended October 31, 2000                           41,000,000
Four Fiscal Quarters ended January 31, 2001                           65,000,000
Four Fiscal Quarters ended April 30, 2001                             80,000,000
Four Fiscal Quarters ended July 31, 2001                              85,000,000
Four Fiscal Quarters ended October 31, 2001                           90,000,000
Four Fiscal Quarters ended January 31, 2002                           90,000,000
Four Fiscal Quarters ended April 30, 2002                             90,000,000
Four Fiscal Quarters ended July 31, 2002                              95,000,000

                                  Page 4 of 12
<PAGE>
     M. The  Agreement  is  hereby  modified  by  deleting  Attachment  F in its
entirety and substituting, in lieu thereof, the Attachment F attached hereto.

SECTION 2. ADDITIONAL  WAIVERS TO THE AGREEMENT.  Effective January 30, 2000 and
subject to the satisfaction of the conditions  precedent set forth in Section 3,
IBM  Credit  hereby  agrees  to  waive   compliance  with  the   representations
requirements  of (a) (i) Section  8.7(E) of the  Agreement to but only to permit
the Loan Parties to contribute the Property to the New Mortgage Subsidiaries and
(ii)  Section 7.15 of the  Agreement  to the extent  required to exclude the New
Mortgage  Subsidiaries from the operation of Section 7.15 of the Agreement,  (b)
(i) Section 8.2 of the  Agreement to but only to permit the Loan Parties to sell
the assets of PLA,  (ii) Section 8.7 of the  Agreement to but only to permit the
Loan Parties to acquire an equity interest in the buyer of the assets of PLA and
(iii) Section 8.12 of the Agreement to but only to provide a letter of credit in
an amount not to exceed  $4,000,000  to the buyer of the assets for a period not
to exceed six months, (c) Section 8.7 of the Agreement to but only to permit the
contribution of the assets and business of the business  Internet  operations of
MTS to the  BtoB  Subsidiary  and  further  investment  in an  aggregate  amount
outstanding  not to exceed  $15,000,000  at any time and (d)  Section 8.8 to but
only to permit the creation of the BtoB Subsidiary.

SECTION 3. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective as
of January 30, 2000,  and only when,  on or before  February 11, 2000 IBM Credit
shall have received (a) counterparts of this Amendment duly executed by the Loan
Parties,  (b) the consent attached hereto duly executed by each Subsidiary,  (c)
evidence that the provisions of the Credit Agreement have been waived or amended
in a manner  consistent  with  Sections  1 and 2 of this  Amendment,  and (d) an
amendment and waiver fee in immediately  available  funds equal to Seven Hundred
Seventy Thousand Dollars ($770,000),  (e) the  Acknowledgement  attached hereto,
duly executed by Citibank N.A., as Administrative Agent and (f) amendment to the
Irrevocable Letter of Credit NO.  NY-20511-30026459,  to provide for adjustments
in the Available Amount (as defined therein) consistent with Attachment F to the
Agreement.

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES. The Loan Parties
represent and warrant as follows:

     (a)  Each  Loan  Party  is duly  organized,  validly  existing  and in good
standing  under the laws of the  jurisdiction  of its  organization  and is duly
qualified  and  authorized  to do  business  and is in  good  standing  in  each
jurisdiction  it  presently  is engaged in  business  and is  required  to be so
qualified.

     (b) The  execution,  delivery and  performance  by the Loan Parties of this
Amendment and the Agreement and Other Documents,  as amended hereby, to which it
is or is to be a party, and the  consummation of the  transactions  contemplated
hereby,  are within each Loan Party's  powers,  have been duly authorized by all
necessary  corporate or other action and do not (i)  contravene any Loan Party's
charter, by-laws or other organizational  documents,  (ii) violate any law, rule
or  regulation  (including,  without  limitation,  Regulation  X of the Board of
Governors  of the  Federal  Reserve  System),  or  any  order,  writ,  judgment,
injunction,  decree,  determination  or award,  binding on or affecting any Loan
Party, any of its Subsidiaries or any of their  properties,  (iii) conflict with
or result in the breach of, or constitute a default  under,  any contract,  loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding
on or  affecting  any  Loan  Party,  any of  its  Subsidiaries  or any of  their
properties or (iv) except for the Liens  contemplated  under the  Agreement,  as
amended hereby, result in or require the creation or imposition of any Lien upon
or  with  respect  to any of the  properties  of any  Loan  Party  or any of its
Subsidiaries.

     (c) No  authorization  or approval or other  action by, and no notice to or
filing with, any  governmental  authority or regulatory  body or any other third
party is required for the due  execution,  delivery or  performance  by any Loan
Party of this  Amendment  or the  Agreement  or any of the Other  Documents,  as
amended hereby, to which it is or is to be a party.

     (d) This Amendment has been duly executed and delivered by each Loan Party.
This Amendment and each of the Agreement and Other Documents, as amended hereby,
to which any Loan Party, is a party are legal, valid and binding  obligations of
such Loan Party,  enforceable  against such Loan Party in accordance  with their
respective terms.

                                  Page 5 of 12
<PAGE>
     (e) There is no  action,  suit,  investigation,  litigation  or  proceeding
affecting  any  Loan  Party  or  any  of its  Subsidiaries  (including,  without
limitation, any Environmental Liability) pending or threatened before any court,
Governmental Authority or arbitrator that (i) would be reasonably likely to have
a Material  Adverse  Effect  (other than the Disclosed  Litigation  set forth in
Attachment   B)  or  (ii)   purports  to  affect  the   legality,   validity  or
enforceability  of this Amendment or any Other Documents,  as amended hereby, or
the consummation of any of the transactions contemplated hereby.

SECTION  5.  REFERENCE  TO AND  EFFECT  ON THE  AGREEMENT.  (a) On and after the
effectiveness  of this  Amendment,  each  reference  in the  Agreement  to "this
Agreement",  "hereunder",  "hereof"  or words of like  import  referring  to the
Agreement,  and  each  reference  in the  Other  Documents  to "the  Agreement",
thereunder",  "thereof" or words of like import referring to the Agreement shall
mean and be a reference to the Agreement, as amended by this Amendment.

     (b) The Agreement, and each of the Other Documents, as specifically amended
by this Amendment, are and shall continue to be in full force and effect and are
hereby in all respects  ratified and confirmed.  Without limiting the generality
of the foregoing,  the Agreement and all of the Collateral  described therein do
and shall continue to secure the payment of all  Obligations of the Loan Parties
under  the  Agreement  and Other  Documents,  in each  case as  amended  by this
Amendment.

     (c) The execution,  delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as an amendment or waiver of, or an
indication of IBM Credit's  willingness to amend or waive,  any right,  power or
remedy of IBM Credit under the Agreement or the Other Documents,  nor constitute
an amendment or waiver of any provision of the Agreement or the Other  Documents
or the same Sections of the Agreement  amended hereby for any other date or time
period other than  specified  herein  (whether or not such other  provisions  or
compliance  with such  Sections  for another date or time period are effected by
the circumstances addressed in this Amendment).

SECTION 6. COSTS AND EXPENSES. The Loan Parties agree to pay on demand all costs
and  expenses  of IBM  Credit in  connection  with the  preparation,  execution,
delivery and  administrations,  modification and amendment of this Amendment and
the other  instruments  and  documents  to be  delivered  hereunder  (including,
without limitation, the reasonable fees and expenses of counsel for IBM Credit).

SECTION 7.  EXECUTION IN  COUNTERPARTS.  This  Amendment  may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which when  taken  together  shall  constitute  but one and the same  agreement.
Delivery of any executed  counterpart  of a signature  page to this Amendment by
telecopier shall be effective as delivery of a manually executed  counterpart of
this Amendment.

SECTION 8. GOVERNING  LAW. This Amendment and the rights and  obligations of the
parties under this Amendment shall be governed by, and construed and interpreted
in  accordance  with,  the laws of the State of New York  without  regard to the
principles of the conflicts of laws thereof.

                                  Page 6 of 12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective  officers  thereunto duly undersigned,  as of the date first
above written.

IBM CREDIT CORPORATION                  MTS HOLDING COMPANY

By:  /s/ Ronald  J. Bachner             By: /s/ James R. Daniel
    ---------------------------------       ------------------------------------
Print Name: Ronald  J. Bachner          Print Name: James R. Daniel
Title: Mgr, Commercial Financing        Title: Treasurer
       Solutions Americas

PINACOR, INC.                           MICROAGE COMPUTER CENTERS, INC.

By: /s/ James R. Daniel                 By: /s/ James R. Daniel
    ---------------------------------       ------------------------------------
Print Name: James R. Daniel             Print Name: James R. Daniel
Title: Treasurer                        Title: Treasurer

MICROAGE, INC.                          MICROAGE TECHNOLOGY SERVICES, L.L.C.

By: /s/ James R. Daniel                 By: MTS HOLDING COMPANY, MANAGER
    ---------------------------------
Print Name: James R. Daniel             By: /s/ James R. Daniel
Title: Treasurer                            ------------------------------------
                                        Print Name: James R. Daniel
                                        Title: Treasurer

                                  Page 7 of 12
<PAGE>
                                     CONSENT

                          Dated as of February 17, 2000

     The   undersigned,   each  a  Guarantor  under  the  Amended  and  Restated
Collateralized   Guaranty  dated  as  of  October  29,  1999  (collectively  the
"undersigned") in favor of IBM Credit, hereby consents to the attached Amendment
and hereby confirms and agrees that (a)  notwithstanding  the  effectiveness  of
such Amendment,  the Amended and Restated Collateralized Guaranty and each Other
Document  to which the  undersigned  is a party is and shall  continue to be, in
full force and effect and is hereby ratified and confirmed in all respects,  and
(b) the  Amended  and  Restated  Collateralized  Guaranty  to which  each of the
undersigned is a party and all of the Collateral described therein do, and shall
continue to,  secure the payment of the  Obligations  (in each case,  as defined
therein).

                                        MCCI HOLDING COMPANY

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MICROAGE TELESERVICES, L.L.C.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        QUALITY INTEGRATION SERVICES, L.L.C.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name:  Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MAXSOURCE, L.L.C.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                  Page 8 of 12
<PAGE>
                                        MICROAGE L&D L.L.C.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MICROAGE OF CALIFORNIA, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MCSS, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        CLERIS, INC. (F/K/A ECADVANTAGE, INC.)

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        PINACOR LOGISTICS SERVICES, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        COMPLETE DISTRIBUTION, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                  Page 9 of 12
<PAGE>
                                        CONTRACT PC, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        CONNECTWORKS, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        PHOENIX CONNECTIONS, INC.

                                        By: /s/ Kandi Egan
                                           -------------------------------------
                                        Print Name: Kandi Egan
                                                   -----------------------------
                                        Title: President
                                              ----------------------------------

                                        MICROAGE ADMINISTRATION, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MICROAGE TECHNOLOGIES, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MICROAGE VENTURES, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                  Page 10 of 12
<PAGE>
                                        MICROAGE PAYMASTER, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        INTRACOM MARKETING, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        PCCLEARANCE, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MICROAGE INFOSYSTEMS SERVICES, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        PRITECH SOLUTIONS, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                        MICROAGE GOVERNMENT, INC.

                                        By: /s/  Jeffrey D. McKeever
                                           -------------------------------------
                                        Print Name: Jeffrey D. McKeever
                                                   -----------------------------
                                        Title: Chairman
                                              ----------------------------------

                                  Page 11 of 12
<PAGE>
                                 ACKNOWLEDGMENT

     The undersigned,  Citibank,  N.A., as Administrative Agent on behalf of the
Lenders under the Credit  Agreement (as defined in the Agreement  defined below)
acknowledges  receipt of a copy of the  foregoing  amendment  to the Amended and
Restated  Agreement  for Wholesale  Financing,  dated as of October 29, 1999 (as
amended,  supplemented  or otherwise  modified  from to time,  the  "Agreement")
between IBM Credit Corporation,  MTS Holding Company, MicroAge Computer Centers,
Inc., MicroAge Technology Services,  L.L.C.,  Pinacor, Inc. and MicroAge,  Inc.,
and consents to the terms thereof.

Executed this 17th day of February 2000.

CITIBANK, N.A., as Administrative Agent

By: /s/ Citibank Signatory
    --------------------------------
    Title:
          --------------------------

                                  Page 12 of 12FIRST AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT

                  This First Amended and Restated Loan and Security Agreement is
made as of November 30, 1999 by and among GMAC COMMERCIAL  CREDIT LLC (successor
in interest to BNY Financial Corporation)  ("Lender" or "GMAC"),  having offices
at 1290 Avenue of the Americas,  New York, New York 10104 and GREKA  INTEGRATED,
INC.  ("Greka"),  SABA REALTY,  INC. ("Saba"),  and SANTA MARIA REFINING COMPANY
("Santa  Maria")  (each of  Greka,  Saba and  Santa  Maria is  individually  and
collectively hereinafter referred to as the "Borrower"),  having their principal
place of business at 3201 Airpark Drive,  Suite 201, Santa Maria, CA 93455.  The
liability of Greka, Saba, and Santa Maria hereunder shall be joint and several.

         WHEREAS,  on April 30,  1999,  Borrower  and the Lender  entered into a
certain Loan and Security Agreement  ("Original Loan Agreement")  whereby Lender
provided to  Borrower,  inter alia,  (i) a term loan in the  original  principal
amount of $6,000,000 ("Original Term Loan") and (ii) a revolving credit facility
in the  original  principal  amount of up to  $5,000,000  (and  increased  up to
$6,000,000 as of September 24, 1999) ("Original Revolving Credit"); and

         WHEREAS,  Borrower  has  requested  and  Lender is willing to amend and
restate the Original Loan Agreement to provide,  inter alia, for (i) an increase
in the original principal amount of the Original Term Loan to $25,000,000,  (ii)
an  increase  in  the  maximum  amount  of  the  Original  Revolving  Credit  to
$10,000,000 and (iii) modifications to certain other terms and provisions of the
Original Agreement; and

         WHEREAS,  Borrower and Lender are willing to enter into this  Agreement
on the terms and conditions set forth herein.

         NOW,   THEREFORE,   in   consideration  of  the  mutual  covenants  and
undertakings and the terms and conditions  contained herein,  the parties hereto
agree as follows:

                  1. (A) General Definitions.  When used in this Agreement,  the
following terms shall have the following meanings:

                  "Advance  Rates"  means  the  Inventory  Advance  Rate and the
Receivables Advance Rate.

                  "Affiliate" of any Person means (a) any Person which, directly
or  indirectly,  is in control of, is controlled  by, or is under common control
with such  Person,  or (b) any Person who is a director  or officer  (i) of such
Person,  (ii) of any Subsidiary of such Person or (iii) of any Person  described
in clause (a) above. For purposes of this definition,  control of a Person shall
mean the power,  direct or  indirect,  (i) to vote 5% or more of the  securities
having  ordinary  voting power for the election of directors of such Person,  or
(ii) to direct or cause the  direction  of the  management  and policies of such
Person whether by contract or otherwise.

<PAGE>

                  "Agent" has the meaning specified in Section 25 herein.

                  "Alternate  Base  Rate"  means,  for any day, a rate per annum
equal to the  higher  of (i) the  Prime  Rate in effect on such day and (ii) the
Federal Funds Rate in effect on such day plus 1/2 of 1% per annum.

                  "Ancillary Agreements" means all agreements,  instruments, and
documents including, without limitation, mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
whether  heretofore,  concurrently,  or  hereafter  executed  by or on behalf of
Borrower  or  delivered  to  Lender,  relating  to  this  Agreement  or  to  the
transactions contemplated by this Agreement.

                  "Bank" means The Bank of New York.

                  "Borrowing Base Certificate"  shall have the meaning set forth
in Section 9.

                  "Business  Day"  means  any  day  other  than a day  on  which
commercial banks in New York are authorized or required by law to close.

                  "Change of Ownership"  means (a) any transfer  (whether in one
or more  transactions)  of ownership of not less than 50% of the common stock of
Borrower  held  by the  Original  Owners  (including  for  the  purposes  of the
calculation of percentage  ownership,  any shares of common stock into which any
capital stock of Borrower held by any of the Original  Owners is  convertible or
for  which any such  shares of the  capital  stock of  Borrower  or of any other
Person may be exchanged and any shares of common stock issuable to such Original
Owners upon exercise of any warrants, options or similar rights which may at the
time of calculation be held by such Original  Owners) to a Person who is neither
an  Original  Owner nor an  Affiliate  of an  Original  Owner or (b) any merger,
consolidation  or  sale  of  substantially  all of the  property  or  assets  of
Borrower.

                  "Closing  Date" means  November 30, 1999 or such other date as
may be agreed upon by the parties hereto.

                  "Collateral" means and includes:

             I.      With respect to Santa Maria:

                           (A) all of its Inventory;

                           (B) all of its Equipment;

                                      -2-

<PAGE>

                           (C) all of its General Intangibles;

                           (D) all of its Receivables;

                           (E) All of its Investment Property;

                           (F) all of its books,  records,  ledgercards,  files,
correspondence,  computer  programs,  tapes,  disks and related data  processing
software (owned by it or in which it has an interest) which at any time evidence
or contain  information  relating  to (A),  (B),  (C),  (D) and (E) above or are
otherwise  necessary  or  helpful  in  the  collection  thereof  or  realization
thereupon;

                           (G)  all of its  documents  of  title,  policies  and
certificates  of  insurance,  securities,  chattel  paper,  other  documents  or
instruments evidencing or pertaining to (A), (B), (C), (D), (E) and (F) above;

                           (H) all of its guaranties,  liens on real or personal
property,  leases,  and other agreements and property which in any way secure or
relate to (A), (B),  (C),  (D), (E), (F) and (G) above,  or are acquired for the
purpose of securing and enforcing any item thereof;

                           (I) (i) all of its cash  held as cash  collateral  to
the extent not otherwise constituting Collateral,  all other cash or property at
any time on  deposit  with or held by  Lender  for the  account  of Santa  Maria
(whether for safekeeping,  custody, pledge, transmission or otherwise), (ii) all
of its present or future deposit accounts (whether time or demand or interest or
non-interest  bearing) of Santa Maria with Lender or any other Person  including
those to which any such cash may at any time and from time to time be  credited,
(iii) all of its investments and  reinvestments  (however  evidenced) of amounts
from time to time credited to such accounts,  and (iv) all interest,  dividends,
distributions  and  other  proceeds  payable  on or  with  respect  to (x)  such
investments and reinvestments and (y) such accounts;

                           (J) All of its oil and natural gas or other  reserves
and oil and gas  rights  located  on or under or in any  manner  related  to the
premises described in Schedule 1(A)(1) attached hereto (the "Santa Maria Oil and
Gas  Properties")  and if  purchased  by  Borrower,  the  Vintage  Oil  and  Gas
Properties; and

                           (K) all products and proceeds of (A),  (B), (C), (D),
(E), (F), (G),  (H), (I) and and (J) above  (including,  but not limited to, all
claims to items  referred to in (A),  (B), (C), (D), (E), (F), (G), (H), (I) and
(J) above) and all claims of Santa Maria  against third parties for (x) (i) loss
of, damage to, or  destruction  of, and (ii) payments due or to become due under
leases,  rentals and hires of, any or all of (A),  (B), (C), (D), (E), (F), (G),
(H), (I) and (J) above and (y) proceeds payable under, or unearned premiums with
respect to, policies of insurance in whatever form;

                                      -3-
<PAGE>

         II.  With  respect  to Greka:  (A) All of the  issued  and  outstanding
capital  stock of Saba,  and  Santa  Maria  owned by Greka as more  particularly
described on Schedule 1(A)(2) annexed hereto (the "Shares") and all proceeds and
products thereof,  which shall include,  without  limitation,  all dividends and
distributions  thereon,  whether in cash,  securities or kind,  all  securities,
Investment  Property  and /or  assets of any type to which the  holder of any of
such Shares may now or  hereafter  be  entitled  as a result of splits,  reverse
splits,   mergers,   consolidations,   recapitalization  and/or  reorganizations
affecting  any  of  the  Shares  and/or  resulting  from  liquidations  and  /or
dissolutions, split-ups, spin-offs,  reclassifications or the like affecting any
of the Shares;

         III.  With respect to Saba:  (A) all  fixtures,  equipment,  buildings,
structures, improvements, building materials, machinery, machines, tools, parts,
pumps, engines,  motors, boilers,  incinerators located at or used in connection
with or affixed to the real  property  more  particularly  described on Schedule
1(A)(3)   annexed  hereto  and  all   substitution,   accessories,   accessions,
replacements,  improvements and additions to any or all of the foregoing and all
of the  collateral  described in  subsections  (F), (G), (H) and (K) of II above
owned by Saba relating to any of the foregoing;

         IV. Real  Property:  In addition to the  foregoing,  the real  property
owned by Santa Maria and/or Saba more particularly described on Schedule 1(A)(3)
attached  hereto shall be deemed to be part of the Collateral and subject to all
of the provisions of this Agreement relating to the Collateral.

                  "Co-Lender"  means any party who may now or hereafter become a
Co-Lender hereunder pursuant to Section 25 hereof.

                  "Commitment(s)"  shall mean the respective  maximum  principal
dollar  amount of Loans  which  each  Co-Lender  is  obligated  to extend to the
Borrower,  as more fully set forth on the signature  page(s)  hereto,  expressed
both as a dollar amount and as a percentage of the total Commitments.

                  "Conoco  Indemnity  Agreement"  shall  mean the  environmental
indemnification contained in the Purchase and Exchange Agreement dated April 13,
1994 by and among Douglas Oil Company of California, Conoco, Inc. and Borrower.

                  "Contract  Rate" means an interest rate per annum equal to (i)
Alternate Base Rate plus (ii) one percent (1%); provided,  however, the Contract
Rate shall not at any time be less than six percent  (6%).  Notwithstanding  the
foregoing,  provided  no Event of Default  shall have  occurred  hereunder,  the
Contract  Rate shall be reduced to an  interest  rate per annum equal to (i) the
Alternate Base Rate plus three quarters of one percent (.75%) as of December 31,
2000 and (ii) the Alternate  Base Rate plus one-half of one percent (.50%) as of
December 31, 2001,  further  provided,  however,  that upon the occurrence of an
Event of Default should there have been any reduction of the Contract Rate, then
in such event the Contract Rate shall revert to the Alternate Base Rate plus one
percent (1%).

                                      -4-
<PAGE>

                  "Credit  Risk"  means the risk of loss  resulting  solely  and
exclusively  from a  Customer's  financial  inability  to pay at  maturity  with
respect to any Receivable purchased hereunder.

                  "Current  Assets" at a particular  date,  means all cash, cash
equivalents, accounts and inventory of Borrower and all other items which would,
in conformity  with GAAP, be included under current assets on a balance sheet of
Borrower as at such date; provided, however, that such amounts shall not include
(a) any amounts for any indebtedness  owing by an Affiliate of Borrower,  unless
such  indebtedness  arose in connection with the sale of goods or other property
in the ordinary course of business and would otherwise constitute current assets
in  conformity  with GAAP,  (b) any shares of stock  issued by an  Affiliate  of
Borrower,  (c) the cash surrender  value of any life insurance  policy,  (d) any
assets which would be  classified  as  intangible  assets under GAAP, or (e) any
prepaid expenses.

                  "Current  Liabilities" at a particular date, means all amounts
which would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower as at such date, but in any event  including,  without
limitation,  the amounts of (a) all indebtedness  payable on demand,  or, at the
option of the Person to whom such  indebtedness  is owed,  not more than  twelve
(12) months  after such date,  (b) any  payments in respect of any  indebtedness
(whether  installment,  serial  maturity,  sinking  fund  payment or  otherwise)
required to be made not more than twelve  (12) months  after such date,  (c) all
reserves in respect of liabilities or indebtedness  payable on demand or, at the
option of the Person to whom such  indebtedness  is owed,  not more than  twelve
(12) months  after such date,  the  validity of which is contested at such date,
and (d) all  accruals  for  federal or other taxes  measured  by income  payable
within a twelve (12) month period.

                  "Customer"  means and includes the account debtor with respect
to any  Receivable,  the prospective  purchaser of goods,  services or both with
respect to any contract or contract  right,  and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.

                  "Default  Rate"  means a rate  equal to two  percent  (2%) per
annum in excess of the Contract  Rate or the  Overadvance  Rate, as the case may
be.

                  "Dispute"   means  any  cause   asserted  for   nonpayment  of
Receivables,  including, without limitation, any alleged defense,  counterclaim,
offset, dispute or other claim (real or merely asserted) whether arising from or
relating  to the sale of goods or  rendition  of  services  or  arising  from or
relating to any other transaction or occurrence.

                                      -5-
<PAGE>

                  "Eligible   Inventory"  means  and  includes   finished  goods
Inventory  of Santa Maria which  Lender,  in its sole and  absolute  discretion,
determines:  (a) is subject to the security interest of Lender and is subject to
no other liens or encumbrances  whatsoever (other than Permitted Liens);  (b) is
in good condition and meets all standards imposed by any governmental agency, or
department or division thereof having regulatory  authority over such Inventory,
its use or sale  including  but not limited to the Federal Fair Labor  Standards
Act of 1938 as amended, and all rules, regulations and orders thereunder; (c) is
currently  either  usable or salable in the normal  course of business at prices
not less than  cost;  (d) is  located at Santa  Maria's  premises  in the United
States ; and (e) is otherwise  acceptable  to Lender as determined in good faith
by Lender in the reasonable exercise of its discretion.

                  "Eligible  Receivables"  means and  includes  each  Receivable
which conforms to the following criteria: (a) shipment of the merchandise or the
rendition  of  services  has  been  completed;   (b)  no  return,  rejection  or
repossession of the merchandise has occurred;  (c) merchandise or services shall
not have been rejected or disputed by the Customer and there shall not have been
asserted any offset, defense,  counterclaim,  or Dispute; (d) continues to be in
full conformity with the  representations  and warranties made by Santa Maria to
Lender with respect thereto;  (e) Lender is, and continues to be, satisfied with
the  credit  standing  of the  Customer  in  relation  to the  amount  of credit
extended; (f) is documented by an invoice in a form approved by Lender and shall
not be unpaid  (i) more than 120 days from  invoice  date;  or (ii) more than 60
days past due date;  (g) less than fifty percent  (50%) of the aggregate  unpaid
amount of invoices  due from such  Customer  remain  unpaid more than sixty (60)
days from due date;  (h) is not  evidenced by chattel  paper or an instrument of
any kind with respect to or in payment of the Receivable  unless such instrument
is duly endorsed to and in possession of Lender or represents a check in payment
of a Receivable;  (i) the Customer is not located  outside of the United States;
(j) is not subject to any lien,  other than Permitted  Liens; (k) does not arise
out of transactions with any employee, officer, agent, director,  stockholder or
Affiliate of Santa Maria;  (l) is payable to Santa Maria; (m) does not arise out
of a bill and hold sale prior to shipment and, if the Receivable arises out of a
sale to any  Person  to  which  Santa  Maria is  indebted,  the  amount  of such
indebtedness,  and any anticipated indebtedness,  is deducted in determining the
face amount of such Receivable;  (n) is net of any returns,  discounts,  claims,
credits and allowances;  (o) if the Receivable  arises out of contracts  between
Santa  Maria and the United  States,  any state,  or any  department,  agency or
instrumentality  of any of them, Santa Maria has so notified Lender, in writing,
prior to the creation of such Receivable,  and, if Lender so requests, there has
been  compliance  with  any  governmental   notice  or  approval   requirements,
including, without limitation,  compliance with the Federal Assignment of Claims
Act;  (p) is a good and  valid  account  representing  an  undisputed  bona fide
indebtedness  incurred by the  Customer  therein  named,  for a fixed sum as set
forth in the invoice relating thereto with respect to an unconditional  sale and
delivery  upon the stated  terms of goods sold by Santa  Maria,  or work,  labor
and/or services  rendered by Santa Maria;  and (q) is otherwise  satisfactory to
Lender as determined in good faith by Lender in the  reasonable  exercise of its
discretion.

                  "Equipment"  means and  includes  all now  owned or  hereafter
acquired equipment,  machinery and goods (excluding  Inventory),  whether or not
constituting  fixtures,   including,   without  limitation,   plant  and  office
equipment,  tools, dies, parts, data processing  equipment,  furniture and trade
fixtures,  trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefor and all accessions thereto.

                                      -6-
<PAGE>

                  "Event of Default"  means the  occurrence of any of the events
set forth in Section 18.

                  "Federal Funds Rate" means,  for any day, 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  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 quotations  for such day on such  transactions
received by The Bank of New York from three  Federal funds brokers of recognized
standing selected by The Bank of New York.

                  "First Term Loan Advance"  shall have the meaning set forth in
Section 2(k)(1).

                  "Formula  Amount"  shall have the meaning set forth in Section
2(d).

                  "GAAP"  means  generally   accepted   accounting   principles,
practices and procedures in effect from time to time.

                  "General  Intangibles"  means  and  includes  all now owned or
hereafter  acquired  general  intangibles as said term is defined in the Uniform
Commercial  Code  in  effect  in  the  State  of  New  York  including,  without
limitation,  trademarks,  trade names,  trade styles,  trade secrets,  equipment
formulation,  manufacturing  procedures,  quality  control  procedures,  product
specifications,   patents,  patent  applications,   copyrights,   registrations,
contract  rights,  chooses  in  action,  causes of  action,  corporate  or other
business  records,  inventions,  designs,  goodwill,  claims  under  guarantees,
licenses,  franchises,  tax  refunds,  tax  refund  claims,  computer  programs,
computer data bases, computer program flow diagrams,  source codes, object codes
and all other intangible property of every kind and nature.

                  "Hazardous Substance" means, without limitation, any flammable
explosives,  radon,  radioactive  materials,  asbestos,  urea  formaldehyde foam
insulation,   polychlorinated  byphenyls,   petroleum  and  petroleum  products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous  Materials  Transportation
Act, as amended (49 U.S.C.  Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New  York  State  Environmental  Conservation  Law or any  other  applicable
environmental law and in the regulations adopted pursuant thereto.

                  "Incipient  Event of  Default"  means any act or event  which,
with the giving of notice or passage of time or both,  would constitute an Event
of Default.

                                      -7-
<PAGE>

                  "Initial Santa Maria Oil and Gas  Properties"  means the Santa
Maria Oil and Gas Properties  which are described on Schedule  1(A)(1)  attached
hereto.

                  "Inventory"  means and includes all of Santa Maria's now owned
or hereafter acquired goods,  merchandise and other personal property,  wherever
located,  to be  furnished  under any  contract  of  service or held for sale or
lease,  all raw  materials,  work in process,  finished  goods and materials and
supplies  of any  kind,  nature  or  description  which  are or might be used or
consumed in Santa Maria's  business or used in selling or furnishing such goods,
merchandise  and other  personal  property,  and all documents of title or other
documents representing them.

                  "Inventory  Advance  Rate" shall have the meaning set forth in
the definition of Inventory Availability.

                  "Inventory  Availability" means the amount of Revolving Credit
Advances against Eligible  Inventory of Santa Maria Lender may from time to time
during the Term make available to Borrower up to 65% ("Inventory  Advance Rate")
of the value of Eligible Inventory (calculated on the basis of the lower of cost
or market, on a first-in first-out basis).

                  "Investment  Property" shall have the meaning now or hereafter
ascribed to such term in the New York Uniform Commercial Code, as amended.

                  "Loans" means the Revolving Credit Advances, the Term Loan and
all other extensions of credit hereunder.

                  "Majority Lenders" means at any time the Co-Lenders (which may
be the Agent)  holding at least  fifty-one  (51%) percent of the then  aggregate
unpaid  principal  amount of the Loans,  or if no such principal  amount is then
outstanding, at least fifty one percent (51%) of the aggregate Commitments.

                  "Matured Funds Rate" means the rate of interest,  announced by
Lender from time to time, as the rate applicable to matured funds,  such rate to
be adjusted  automatically  on the effective  date of any change in such rate as
announced by Lender.

                  "Maximum Loan Amount" means $35,000,000.

                  "Maximum Revolving Amount" means $10,000,000.

                  "Net Face Amount" of Receivables  means the gross face invoice
amount  thereof,  less returns,  discounts  (the  calculation  of which shall be
determined by Lender where optional terms are given),  anticipation or any other
unilateral  deductions  taken  by  Customers,  and  credits  and  allowances  to
Customers of any nature.

                                      -8-
<PAGE>

                  "Obligations"  means and  includes  all Loans,  all  advances,
debts,  liabilities,  obligations,  covenants  and duties  owing by  Borrower to
Lender (or any corporation that directly or indirectly controls or is controlled
by or is  under  common  control  with  Lender)  of every  kind and  description
(whether or not evidenced by any note or other instrument and whether or not for
the payment of money or the performance or  non-performance  of any act), direct
or  indirect,  absolute  or  contingent,  due or to become due,  contractual  or
tortious,  liquidated or  unliquidated,  whether existing by operation of law or
otherwise now existing or hereafter arising including,  without limitation,  any
debt,  liability or  obligation  owing from  Borrower to others which Lender may
have  obtained  by  assignment  or  otherwise  and  further  including,  without
limitation,  all interest, charges or any other payments Borrower is required to
make by law or otherwise  arising under or as a result of this Agreement and the
Ancillary  Agreements,  together  with all  reasonable  expenses and  reasonable
attorneys'  fees  chargeable  to  Borrower's  account or  incurred  by Lender in
connection  with  Borrower's  account  whether  provided  for  herein  or in any
Ancillary Agreement.

                  "Oil and Gas  Properties"  means the  Santa  Maria Oil and Gas
Properties and the Vintage Oil and Gas Properties.

                  "Original Owners" means Greka Energy  Corporation with respect
to Greka and Greka with respect to Santa Maria and Saba.

                  "Overadvance  Rate" means a rate equal to one percent (1%) per
annum in excess of the Contract Rate.

                  "Permitted  Liens" means (i) liens of carriers,  warehousemen,
mechanics and materialmen  incurred in the ordinary course of business  securing
sums not  overdue;  (ii) liens  incurred in the  ordinary  course of business in
connection with workers' compensation,  unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being  diligently  contested in good faith provided that adequate
reserves  with  respect  thereto  are  maintained  on the books of  Borrower  in
conformity with GAAP,  (iii) liens in favor of Lender,  (iv) liens for taxes (a)
not yet due or (b) being  diligently  contested  in good  faith,  provided  that
adequate  reserves with respect  thereto are maintained on the books of Borrower
in conformity with GAAP, and (v) liens specified on Schedule 1(A)(4) hereto.

                  "Person" means an individual, partnership,  corporation, trust
or  unincorporated  organization,   or  a  government  or  agency  or  political
subdivision thereof.

                  "Prime  Rate" means the prime  commercial  lending rate of The
Bank of New York as  publicly  announced  in New York,  New York to be in effect
from time to time, such rate to be adjusted  automatically,  without notice,  on
the  effective  date of any  change  in such  rate.  This  rate of  interest  is
determined  from  time to time  and is  neither  tied  to any  external  rate of
interest  or index nor does it  necessarily  reflect the lowest rate of interest
actually charged to any particular class or category of customers.

                                      -9-
<PAGE>

                  "Receivables"  means and  includes  all of Santa  Maria's  now
owned or hereafter acquired accounts and contract rights, instruments, insurance
proceeds,  documents,  chattel paper, letters of credit and Santa Maria's rights
to receive payment  thereunder,  any and all rights to the payment or receipt of
money or other forms of  consideration  of any kind at any time now or hereafter
owing or to be owing to Santa Maria, all proceeds thereof and all files in which
Santa Maria has any interest whatsoever  containing  information  identifying or
pertaining  to any of  Santa  Maria's  Receivables,  together  with all of Santa
Maria's rights to any merchandise  which is represented  thereby,  and all Santa
Maria's rights,  title, security and guaranties with respect to each Receivable,
including,  without limitation,  all rights of stoppage in transit, replevin and
reclamation and all rights as an unpaid vendor.

                  "Receivables Advance Rate" shall have the meaning set forth in
the definition of Receivables Availability.

                  "Receivables  Availability"  means  the  amount  of  Revolving
Credit Advances against Eligible Receivables Lender may from time to time during
the term of this Agreement  make  available to Borrower up to 85%  ("Receivables
Advance Rate") of the net face amount of Eligible Receivables.

                  "Reports" shall have the meaning set forth in Section 14.

                  "Retained  Goods"  shall have the meaning set forth in Section
8(h).

                  "Revolving  Credit  Advances" shall have the meaning set forth
in Section 2(d).

                  "Santa  Maria Oil and Gas  Properties"  shall have the meaning
                  set  forth  in  Section  1.1,   definition  of   "Collateral",
                  Subsection I.(J).

                  "Sanction/Embargo  Programs"  shall  mean  economic  and other
sanctions and embargo program restrictions  promulgated by the government of the
United  States of  America  or any office or agency  thereof  including  but not
limited  to the  President  and the  Office of  Foreign  Assets  Control  of the
Treasury Department, or either of them.

                  "Second Term Loan Advance" shall have the meaning set forth in
Section 2(k)(2).

                  "Secondary Santa Maria Oil and Gas Properties" means the Santa
Maria Oil and Gas Properties  which are described on Schedule  1(A)(1)  attached
hereto.

                  "Settlement Date" means two (2) Business Days after the day on
which the applicable Receivable is actually collected by Lender.

                                      -10-
<PAGE>

                  "Subordinated Debt" means any debt subordinated to Lender upon
terms and conditions satisfactory to Lender in its sole discretion.

                  "Subsidiary" of any Person means a corporation or other entity
of whose shares of stock or other  ownership  interests  having  ordinary voting
power (other than stock or other ownership  interests  having such power only by
reason of the happening of a  contingency)  to elect a majority of the directors
of such  corporation,  or other Persons  performing  similar  functions for such
entity, are owned, directly or indirectly, by such Person.

                  "Tangible  Net  Worth"  at a  particular  date  means  (a) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP consistently  applied excluding such other assets as are
properly  classified  as  intangible  assets under GAAP,  less (b) the aggregate
amount of all liabilities of the Borrower.

                  "Term"  means the Closing  Date  through  November  30,  2003,
subject  to  acceleration  upon the  occurrence  of an Event of Default or other
termination hereunder.

                  "Term  Loan"  shall have the  meaning  set forth in  paragraph
2(k).

                  "Term Loan Note" shall have the meaning set forth in paragraph
2(l).

                  "Third Term Loan Advance"  shall have the meaning set forth in
Section 2(k)(3).

                  "Total   Liabilities"   at  a   particular   date   means  all
Indebtedness of Borrower as at such date.

                  "Vintage  Oil  and  Gas  Properties"  means  the  oil  and gas
reserves and oil and gas rights which may be acquired by Santa Maria  located on
or  under  or in any  manner  related  to the real  property  more  particularly
described in Schedule 1(A)(5) attached hereto.

                  "Working  Capital" at a particular  date means the excess,  if
any, of Current Assets over Current Liabilities at such date.

                  "Year 2000 Issue" means the  inability  of computer  software,
hardware and firmware  systems and/or  equipment  containing  embedded  computer
chips  owned or  operated by a Person or used or relied upon in the conduct of a
Person's business  (including  systems and equipment  supplied by others or with
which such person's computer systems  interface) to properly receive,  transmit,
process, manipulate, store, retrieve, re-transmit,  without errors or delays, or
in any  other  way  to  accurately  recognize  or  otherwise  utilize  data  and
information  in all  respects in relation to the year 2000 or the  inclusion  of
dates on or after January 1, 2000.

                           (B) Accounting  Terms.  Any accounting  terms used in
this  Agreement  which are not  specifically  defined  shall  have the  meanings
customarily given them in accordance with GAAP.

                                      -11-
<PAGE>

                           (C)  Other  Terms.  All  other  terms  used  in  this
Agreement and defined in the Uniform  Commercial Code as adopted in the State of
New York, shall have the meaning given therein unless otherwise defined herein.

                  2.  Sale of Receivables; Purchase Price;  Accounts Receivables
Management; Loans.

                           (a) Santa Maria  hereby  assigns and sells to Lender,
as absolute owner,  and Lender hereby purchases from Santa Maria all Receivables
created on and after the date  hereof,  which arise from Santa  Maria's  sale of
merchandise or rendition of services.

                           (b) Lender  shall not  assume the Credit  Risk on any
Receivables. Accordingly, all Receivables shall be purchased by Lender with full
recourse  to Santa  Maria in the event of  non-payment  thereof  for any  reason
whatsoever  and Lender may charge back to  Borrower's  account the amount of any
Receivable  that is not paid on its due date.  The  procedure  manual Lender has
delivered  to Borrower  describes  Lender's  current  practices  and  procedures
regarding its accounts receivable management and record keeping services. Lender
reserves the right to vary such  practices and  procedures  from time to time in
its sole discretion.  Lender shall have no liability to Borrower for any alleged
failure on Lender's part to provide adequate accounts receivable  management and
record keeping services by including,  without limitation,  any liability of any
kind whatsoever for  consequential  or other damages or penalties based upon any
such alleged failure on Lender's part.

                           (c) The purchase  price of  Receivables  shall be the
Net Face Amount  thereof.  The  purchase  price will be  credited to  Borrower's
account and remitted to Borrower on the Settlement Date.  Lender may deduct from
the  amount  payable  to  Borrower  on any  Settlement  Date  reserves  for  all
Obligations  then  chargeable to  Borrower's  account and  Obligations  which in
Lender's sole judgment may be chargeable to Borrower's account thereafter.

                           (d)  Subject  to the terms and  conditions  set forth
herein and in the Ancillary Agreements, Lender may, in its sole discretion, make
revolving  credit  advances (the "Revolving  Credit  Advances") to Borrower from
time to time during the Term which,  in the  aggregate at any time  outstanding,
will not exceed the lesser of (x) the Maximum  Revolving Amount or (y) an amount
equal to the sum of:

                                    (1)  Receivables Availability, plus

                                    (2)  Inventory Availability, minus

                                    (3)  such reserves as Lender may in its sole
and absolute  discretion  deem proper and necessary from time to time.

                                      -12-
<PAGE>

                  The sum of 2(d)(1)  plus (2) minus (3) shall be referred to as
the "Formula  Amount".  In this regard,  Borrower  agrees that it shall submit a
Borrowing  Base  Certificate  to  Lender,  in form and  substance  and with such
frequency,  as more  fully  described  in  Section  9  below,  to  include  such
calculations,  in each instance  that Lender may deem  necessary or desirable in
order to verify whether Borrower is in compliance with the preceding limitations
pertaining to Revolving Credit Advances.

                           (e)  Notwithstanding the limitations set forth above,
Lender  retains  the right to lend  Borrower  from time to time such  amounts in
excess of such limitations as Lender may determine in its sole discretion.

                           (f)  Borrower   acknowledges  that  the  exercise  of
Lender's  discretionary  rights  hereunder  may  result  during the term of this
Agreement  in one or more  increases  or  decreases  in the  Advance  Rates  and
Borrower  hereby  consents to any such increases or decreases which may limit or
restrict advances requested by Borrower.

                           (g) If  Borrower  does  not pay any  interest,  fees,
costs,  charges or  commissions  to Lender when due,  Borrower  shall thereby be
deemed to have requested,  and Lender is hereby  authorized at its discretion to
make and charge to Borrower's account, a Revolving Credit Advance to Borrower as
of such date in an amount equal to such unpaid interest, fees, costs, charges or
commissions.

                           (h) Any sums  expended  by Lender  due to  Borrower's
failure  to  perform  or  comply  with its  obligations  under  this  Agreement,
including  but not  limited  to the  payment  of taxes,  insurance  premiums  or
leasehold  obligations,  shall be charged to  Borrower's  account as a Revolving
Credit Advance and added to the Obligations.

                           (i) Lender will  account to Borrower  monthly  with a
statement of all Loans and other advances, charges and payments made pursuant to
this  Agreement,  and such  account  rendered by Lender  shall be deemed  final,
binding and  conclusive  unless Lender is notified by Borrower in writing to the
contrary  within  thirty  (30) days of the date each  account was  rendered  and
received (receipt presumed seven (7) days after mailing)  specifying the item or
items to which objection is made.

                           (j) During the Term, Borrower may borrow,  prepay and
reborrow  Revolving  Credit  Advances,  all in  accordance  with the  terms  and
conditions hereof.

                           (k)  Subject  to the terms and  conditions  set forth
herein and in the Ancillary Agreements, Lender will make a term loan to Borrower
in the sum of $25,000,000 ("Term Loan") which shall be advanced as follows:

                                    1.      An   advance   in  the   amount   of
                                            $16,500,000    ("First   Term   Loan
                                            Advance")  shall be made  under  the
                                            Term Loan on the Closing Date,  upon
                                            satisfaction of all of the terms and
                                            conditions  contained  herein and in
                                            the Ancillary Documents.

                                      -13-
<PAGE>

                                    2.      At  any  time   following  the  date
                                            hereof  through and including  March
                                            31,  2000,  Borrower  may request an
                                            advance  in  the  amount  of  up  to
                                            $1,000,000  solely for the  purchase
                                            of the Secondary Santa Maria Oil and
                                            Gas  Properties  ("Second  Term Loan
                                            Advance").  Lender's  obligation  to
                                            make the  Second  Term Loan  Advance
                                            shall be subject to the satisfaction
                                            of all of the  following  conditions
                                            precedent:

                                                     (A)  Borrower   shall  have
                                                     provided   to  Lender  such
                                                     approvals,    environmental
                                                     audits  (but  only upon the
                                                     occurrence  of a  Hazardous
                                                     Discharge or  Environmental
                                                     Complaint    which   occurs
                                                     following the date hereof),
                                                     consents  or  documents  as
                                                     Lender    may    reasonably
                                                     request; and

                                                     (B)  Borrower   shall  have
                                                     provided   to   lender   an
                                                     opinion  of  counsel   from
                                                     Jeffers,  Mangels, Butler &
                                                     Marmaro  LLP, or such other
                                                     law  firm as is  reasonably
                                                     acceptable  to  Lender,  in
                                                     substantially    the   form
                                                     delivered  to  Lender as of
                                                     the date hereof with regard
                                                     to the Initial  Santa Maria
                                                     Oil and Gas Properties.

                                                     (C)  Borrower   shall  have
                                                     submitted  to Lender a copy
                                                     of     all      acquisition
                                                     documents  relating  to the
                                                     purchase  of the  Secondary
                                                     Santa  Maria  Oil  and  Gas
                                                     Properties in substantially
                                                     the   form   delivered   to
                                                     Lender with  respect to the
                                                     Initial Santa Maria Oil and
                                                     Gas Properties; and

                                                     (D)  Borrower   shall  have
                                                     executed  and  delivered to
                                                     Lender such  documents  and
                                                     instruments as Lender deems
                                                     necessary to grant, assign,
                                                     convey   and/or  pledge  to
                                                     Lender  a  first   priority
                                                     security  interest  in  the
                                                     assets to be purchased with
                                                     the   Second    Term   Loan
                                                     Advance  free and  clear of
                                                     all liens and  encumbrances
                                                     of any kind  which  are not
                                                     consented  to by the Lender
                                                     and  Borrower   shall  have
                                                     provided   to   Lender   an
                                                     Attorney's  Certificate  of
                                                     Title  issued by a law firm
                                                     acceptable     to    Lender
                                                     opining  (i) to  the  first
                                                     priority     of    Lender's
                                                     security interests therein,
                                                     and  (ii)   that   Lender's
                                                     interests are subject to no
                                                     liens,              claims,
                                                     encumbrances,            or
                                                     restrictions  of  any  kind
                                                     unless   consented   to  by
                                                     Lender; and

                                      -14-
<PAGE>

                                                     (E) all representations and
                                                     warranties contained herein
                                                     shall be true  and  correct
                                                     on and as of  the  date  of
                                                     such request as though made
                                                     on and as of such date; and

                                                     (F) no  Incipient  Event of
                                                     Default or Event of Default
                                                     shall have occurred  and/or
                                                     be continuing.

                                                     (G)   Borrower   must  have
                                                     submitted   to  Lender  the
                                                     completed  Form of  Request
                                                     for   Term   Loan   Advance
                                                     attached hereto as Schedule
                                                     2(k).

                                            3.       At any time  following  the
                                                     date  hereof   through  and
                                                     including  March 31,  2000,
                                                     Borrower   may  request  an
                                                     advance in the amount of up
                                                     to $7,500,000.00 solely for
                                                     the purchase of the Vintage
                                                     Oil  and   Gas   Properties
                                                     ("Third      Term      Loan
                                                     Advance").         Lender's
                                                     obligation   to  make   the
                                                     Third  Term  Loan   Advance
                                                     shall  be  subject  to  the
                                                     satisfaction  of all of the
                                                     following        conditions
                                                     precedent:

                                                     (A)  Borrower   shall  have
                                                     provided   to  Lender  such
                                                     approvals,    environmental
                                                     audits,     consents     or
                                                     documents   as  Lender  may
                                                     reasonably request; and

                                                     (B)  Borrower   shall  have
                                                     provided   to   lender   an
                                                     opinion  of  counsel   from
                                                     Jeffers,  Mangels, Butler &
                                                     Marmaro  LLP, or such other
                                                     law  firm as is  reasonably
                                                     acceptable  to  Lender,  in
                                                     substantially    the   form
                                                     delivered  to  Lender as of
                                                     the date hereof with regard
                                                     to the Initial  Santa Maria
                                                     Oil and Gas Properties.

                                                     (C)  Borrower   shall  have
                                                     submitted  to Lender a copy
                                                     of     all      acquisition
                                                     documents  relating  to the
                                                     purchase of the Vintage Oil
                                                     and  Gas  Properties,   the
                                                     terms  and   conditions  of
                                                     which acquisition documents
                                                     must  be   satisfactory  to
                                                     Lender   in  its  sole  and
                                                     absolute   discretion  with
                                                     respect   to  the   payment
                                                     terms and with  respect  to
                                                     title  to the  Vintage  Oil
                                                     and  Gas   Properties   and
                                                     reasonably  satisfactory to
                                                     Lender    in   all    other
                                                     respects; and

                                      -15-
<PAGE>

                                                     (D)  Borrower   shall  have
                                                     executed  and  delivered to
                                                     Lender such  documents  and
                                                     instruments as Lender deems
                                                     necessary to grant, assign,
                                                     convey   and/or  pledge  to
                                                     Lender  a  first   priority
                                                     security  interest  in  the
                                                     assets to be purchased with
                                                     the Third Term Loan Advance
                                                     free and clear of all liens
                                                     and   encumbrances  of  any
                                                     kind    which    are    not
                                                     consented  to by the Lender
                                                     and  Borrower   shall  have
                                                     provided   to   Lender   an
                                                     Attorney's  Certificate  of
                                                     Title  issued by a law firm
                                                     acceptable     to    Lender
                                                     opining  (i) to  the  first
                                                     priority     of    Lender's
                                                     security interests therein,
                                                     and  (ii)   that   Lender's
                                                     interests are subject to no
                                                     liens,              claims,
                                                     encumbrances,            or
                                                     restrictions  of  any  kind
                                                     unless   consented   to  by
                                                     Lender; and

                                                     (E)  Borrower   shall  have
                                                     provided to Lender evidence
                                                     receipt    of    additional
                                                     funds,     from     sources
                                                     acceptable to Lender in its
                                                     sole      and      absolute
                                                     discretion,   necessary  to
                                                     complete the acquisition of
                                                     the  Vintage  Oil  and  Gas
                                                     Properties   together  with
                                                     fully-executed
                                                     subordination agreements in
                                                     form     and      substance
                                                     acceptable  to Lender  with
                                                     respect to any funds loaned
                                                     to Borrower  in  connection
                                                     with such acquisition; and

                                                     (F) all representations and
                                                     warranties contained herein
                                                     shall be true  and  correct
                                                     on and as of  the  date  of
                                                     such request as though made
                                                     on and as of such date; and

                                                     (G) no  Incipient  Event of
                                                     Default or Event of Default
                                                     shall have occurred  and/or
                                                     be continuing.

                                                     (H)   Borrower   must  have
                                                     submitted   to  Lender  the
                                                     completed  Form of  Request
                                                     for   Term   Loan   Advance
                                                     attached hereto as Schedule
                                                     2(k).

                                      -16-
<PAGE>

                           (l) Principal  payments  under the Term Loan shall be
fixed as of and shall be based upon the outstanding  principal balance hereof as
of March 31, 2000 (the "March 2000  Principal").  The Term Loan shall be payable
in monthly payments of principal,  each in the amount of 3.428568 percent of the
March 2000 Principal on the first day of each of the months of April, May, June,
July, August, September and October of each year commencing on April 1, 2000 and
continuing  through and including  October 1, 2002.  Commencing on April 1, 2003
and on the  same  day of each of the  months  of May,  June,  July,  August  and
September  of such  year the note  shall  be  payable  in  monthly  payments  of
principal,  each  in the  amount  of  four  (4.0%)  percent  of the  March  2000
Principal.  (For example,  if the full face value hereof has been advanced as of
March  31,  2000,  this  Term Loan  shall be  payable  in  monthly  payments  of
principal, each in the amount of $857,142 on the first day of each of the months
of April, May, June, July, August, September and October of each year commencing
on  April 1,  2000  and  continuing  through  and  including  October  1,  2002.
Commencing  on April 1,  2003 and on the same day of each of the  months of May,
June, July,  August and September of such year the Term Loan shall be payable in
monthly payments of principal,  each in the amount of $1,000,000.) All remaining
principal and accrued interest  outstanding under the Term Loan shall be due and
payable  in full on  October  1,  2003.  The  Term  Loan  shall  be  subject  to
acceleration upon the occurrence of an Event of Default hereunder or termination
of this  Agreement and shall  otherwise be evidenced by and subject to the terms
and conditions set forth in a secured  promissory note in substantially the form
of the note attached hereto as Schedule 2(l) ("Term Loan Note").

                           (m) The aggregate balance of Loans outstanding at any
time  shall not  exceed  the  Maximum  Loan  Amount.  The  aggregate  balance of
Revolving  Credit Advances  outstanding at any time shall not exceed the Formula
Amount.

                           3. Repayment of Loans.

                           (a)  Borrower   shall  be  required  to  (i)  make  a
mandatory  prepayment  hereunder  at any  time  that the  aggregate  outstanding
principal  balance of the Revolving  Credit  Advances made by Lender to Borrower
hereunder is in excess of the Formula  Amount in an amount equal to such excess,
and (ii) repay on the expiration of the Term (x) the then aggregate  outstanding
principal balance of Revolving Credit Advances made by Lender to Greka hereunder
together with accrued and unpaid interest, fees, charges and commissions and (y)
all other amounts owed Lender under this Agreement and the Ancillary Agreements.

                           (b)  The  Term  Loan  shall  be due  and  payable  as
provided in paragraph 2(l) hereof and in the Term Loan Note.

                           4. Procedure for Revolving Credit Advances.  Borrower
may by written notice request a borrowing of Revolving  Credit Advances prior to
1:00 P.M.  New York time on the  Business  Day of its request to incur,  on that
day,  a  Revolving  Credit  Advance.  All  Revolving  Credit  Advances  shall be
disbursed from whichever office or other place Lender may designate from time to
time and,  together  with any and all other  Obligations  of Borrower to Lender,
shall be charged to the Borrower's  account on Lender's  books.  The proceeds of
each  Revolving  Credit  Advance made by the Lender  shall be made  available to
Borrower on the day so  requested by way of credit to the  Borrower's  operating
account maintained with Borrower such bank as Borrower designated to Lender. Any
and all Obligations due and owing hereunder may be charged to Borrower's account
and shall constitute Revolving Credit Advances.

                                      -17-
<PAGE>

                           5.       Interest; Fees; Commissions.

                                    (a)     Interest.

                                            (1)  Except as  modified  by Section
                                            5(a)(3)  below,  interest  on  Loans
                                            shall be  payable  in arrears on the
                                            first  day of each  month.  Interest
                                            payments  hereunder may, at Lender's
                                            option  be   charged  by  Lender  to
                                            Borrower's account. Interest charges
                                            shall  be  computed  on  the  unpaid
                                            balance  of the  Loans  for each day
                                            they are  outstanding  at a rate per
                                            annum equal to the Contract Rate. In
                                            the  event the  aggregate  amount of
                                            Revolving  Credit  Advances  exceeds
                                            the  Formula  Amount for five (5) or
                                            more  days in any month  during  the
                                            Term,  the average  daily balance of
                                            Revolving  Credit  Advances  in that
                                            month  shall  bear  interest  at the
                                            Overadvance Rate.

                                            (2) Interest  shall  be  computed on
                                            the  basis  of  actual  days elapsed
                                            over a 360-day year.

                                            (3) Upon the  occurrence  and during
                                            the   continuance  of  an  Event  of
                                            Default,  interest shall  be payable
                                            at the Default Rate.

                                            (4)  Notwithstanding  the foregoing,
                                            in no event  shall  interest  exceed
                                            the maximum rate permitted under any
                                            applicable law or regulation, and if
                                            any  provision of this  Agreement or
                                            an   Ancillary   Agreement   is   in
                                            contravention  of  any  such  law or
                                            regulation,  such provision shall be
                                            deemed   amended  to   provide   for
                                            interest  at said  maximum  rate and
                                            any excess  amount  shall  either be
                                            applied,  at Lender's option, to the
                                            outstanding  Loans in such  order as
                                            Lender  shall  determine or refunded
                                            by Lender to Borrower.

                                            (5)  Borrower  shall pay  principal,
                                            interest   and  all  other   amounts
                                            payable  hereunder,   or  under  any
                                            Ancillary  Agreement,   without  any
                                            deduction whatsoever, including, but
                                            not  limited to, any  deduction  for
                                            any set-off or counterclaim.

                                      -18-
<PAGE>

                                    (b)     Fees.

                                            (1)  Closing  Fee.  Upon  closing of
                                            this   Agreement   by  Borrower  and
                                            Lender, Borrower shall pay to Lender
                                            a closing fee in an amount  equal to
                                            $500,000,  payable  $400,000  on the
                                            Closing  Date  and  $100,000  on the
                                            date of  funding  of the Third  Term
                                            Loan Advance.

                                            (2)   Collateral   Monitoring   Fee.
                                            Borrower   shall  pay  to  Lender  a
                                            monthly Collateral Monitoring Fee in
                                            the     amount     of     $5,000.00.
                                            Additionally,      upon     Lender's
                                            performance    of   any   collateral
                                            monitoring,    including   but   not
                                            limited  to any  field  examination,
                                            collateral    analysis    or   other
                                            business  analysis,   the  need  for
                                            which is to be  determined by Lender
                                            and which  monitoring  is undertaken
                                            by Lender or for Lender's benefit, a
                                            per diem  amount  equal to  Lender's
                                            then standard  rate per person,  for
                                            each person employed to perform such
                                            monitoring, together with all out of
                                            pocket  costs,   disbursements   and
                                            expenses  incurred by the Lender and
                                            the    person     performing    such
                                            collateral   monitoring,   shall  be
                                            charged   to   Borrower's   account.
                                            Additionally,   in  the  event  that
                                            Lender    shall   for   any   reason
                                            determine  in  the  exercise  of its
                                            reasonable  discretion  that  any of
                                            the  Collateral  may be  impaired or
                                            suffer   a    decline    in   value,
                                            diminution  or  waste,   Lender  may
                                            cause to be  conducted,  at the sole
                                            cost and expense of Borrower, but no
                                            more  than  one (1) time per year in
                                            between   annual   reserve   reports
                                            provided   there   is  no  Event  of
                                            Default,  by  Netherland  Sewell and
                                            Associates    (or   by    appraisers
                                            acceptable to Lender and Borrower in
                                            all respects),  roll forward reserve
                                            reports"   of  the   Oil   and   Gas
                                            Properties owned by Borrower.

                                    (c) Increased  Costs.  In the event that any
                                    applicable   law,   treaty  or  governmental
                                    regulation,  or any change therein or in the
                                    interpretation  or application  thereof,  or
                                    compliance  by Lender (for  purposes of this
                                    Section  5(c),   the  term  "Lender"   shall
                                    include  Lender and any  corporation or bank
                                    controlling  Lender)  with  any  request  or
                                    directive  (whether  or not having the force
                                    of law)  from  any  central  bank  or  other
                                    financial,   monetary  or  other  authority,
                                    shall:

                                            (1) subject Lender to any tax of any
                                            kind whatsoever with respect to this
                                            Agreement  or  change  the  basis of
                                            taxation  of  payments  to Lender of
                                            principal,  fees,  interest  or  any
                                            other  amount  payable  hereunder or
                                            under   any   Ancillary   Agreements
                                            (except  for  changes in the rate of
                                            tax on the  overall  net  income  of
                                            Lender by the  jurisdiction in which
                                            it maintains its principal office);

                                      -19-
<PAGE>

                                            (2)    impose,    modify   or   hold
                                            applicable   any  reserve,   special
                                            deposit,   assessment   or   similar
                                            requirement  against assets held by,
                                            or  deposits  in or for the  account
                                            of,  advances  or loans by, or other
                                            credit  extended  by,  any office of
                                            Lender, including without limitation
                                            pursuant  to  Regulation  D  of  the
                                            Board of  Governors  of the  Federal
                                            Reserve System; or

                                            (3)   impose  on  Lender  any  other
                                            condition   with   respect  to  this
                                            Agreement    or    any     Ancillary
                                            Agreements; and the result of any of
                                            the  foregoing  is to  increase  the
                                            cost to Lender of  making,  renewing
                                            or maintaining  its Loans  hereunder
                                            by an amount that Lender deems to be
                                            material  or to reduce the amount of
                                            any payment  (whether of  principal,
                                            interest or otherwise) in respect of
                                            any of the Loans by an  amount  that
                                            Lender deems to be  material,  then,
                                            in any case Borrower  shall promptly
                                            pay Lender,  upon its  demand,  such
                                            additional amount as will compensate
                                            Lender for such  additional  cost or
                                            such reduction,  as the case may be.
                                            Lender  shall   through  an  officer
                                            certify    the    amount   of   such
                                            additional   cost  or  reduction  to
                                            Borrower,   and  such  certification
                                            shall be conclusive  absent manifest
                                            error.

                                   (d)      Capital Adequacy.

                                            (1) In the event that  Lender  shall
                                            have  determined that any applicable
                                            law,  rule,  regulation or guideline
                                            regarding capital  adequacy,  or any
                                            change therein, or any change in the
                                            interpretation   or   administration
                                            thereof    by    any    governmental
                                            authority,     central    bank    or
                                            comparable  agency  charged with the
                                            interpretation   or   administration
                                            thereof,  or  compliance  by  Lender
                                            (for  purposes of this Section 5(d),
                                            the  term  "Lender"   shall  include
                                            Lender and any  corporation  or bank
                                            controlling Lender) with any request
                                            or   directive   regarding   capital
                                            adequacy  (whether or not having the
                                            force of law) of any such authority,
                                            central bank or  comparable  agency,
                                            has or  would  have  the  effect  of
                                            reducing   the  rate  of  return  on
                                            Lender's capital as a consequence of
                                            its obligations hereunder to a level
                                            below that which  Lender  could have
                                            achieved  but  for  such   adoption,
                                            change or  compliance  (taking  into
                                            consideration Lender's policies with
                                            respect to capital  adequacy)  by an
                                            amount   deemed   by  Lender  to  be
                                            material,  then,  from time to time,
                                            Borrower  shall  pay upon  demand to
                                            Lender  such  additional  amount  or
                                            amounts  as will  compensate  Lender
                                            for such  reduction.  In determining
                                            such amount or  amounts,  Lender may
                                            use  any  reasonable   averaging  or
                                            attribution  methods. The protection
                                            of this  Section  shall be available
                                            to Lender regardless of any possible
                                            contention    of    invalidity    or
                                            inapplicability  with respect to the
                                            applicable   law,    regulation   or
                                            condition.

                                      -20-
<PAGE>

                                            (2) A  certificate  of  Lender by an
                                            officer setting forth such amount or
                                            amounts  as  shall be  necessary  to
                                            compensate  Lender  with  respect to
                                            Section  5(d) hereof when  delivered
                                            to  Borrower   shall  be  conclusive
                                            absent manifest error.

                           (e)  Matured  Funds.  On the last  day of each  month
                           during  the  Term,  Lender  shall  credit  Borrower's
                           account  with  interest at the Matured  Funds Rate in
                           effect during such month on the average daily balance
                           during such month of any amounts payable by Lender to
                           Borrower hereunder which are not drawn by Borrower on
                           the Settlement Date.

                           6.      Security Interest.

                           (a) Pursuant to the Original  Agreement,  Greka, Saba
and Santa Maria hereby  ratify and  reaffirm the security  interest of Lender in
the  Collateral  as created and  perfected  pursuant to the  Original  Agreement
("Prior  Security  Interests").  Greka,  Saba and Santa Maria hereby confirm and
agree that the UCC-1 financing  statements  executed and delivered in connection
with the  Original  Agreement  remain in full force and effect and  continue  to
perfect the Prior Security  Interest and the security  interests created hereby.
All security  interests  created hereby shall be in addition and supplemental to
that  created  as  aforesaid  and  shall  relate  back to the date of the  Prior
Security Interests.

                           (b)  In  extension   of  and  without   limiting  the
provisions of Section 6(a) above,  to secure the prompt payment to Lender of the
Obligations,  Borrower hereby assigns, pledges and grants to Lender a continuing
security  interest  in and to the  Collateral,  whether now owned or existing or
hereafter  acquired or arising and wheresoever  located (whether or not the same
is subject to Article 9 of the Uniform  Commercial  Code). All of the Borrower's
ledger sheets, files, records,  books of account,  business papers and documents
relating to the Collateral  shall,  until delivered to or removed by Lender,  be
kept by Borrower  in trust for Lender  until all  Obligations  have been paid in
full.  Each  confirmatory  assignment  schedule  or  other  form  of  assignment
hereafter  executed by Borrower shall be deemed to include the foregoing  grant,
whether or not the same appears therein.

                           (c) Lender may file one or more financing  statements
disclosing  Lender's  security  interest in the  Collateral  without  Borrower's
signature  appearing thereon or Lender may sign on Borrower's behalf as provided
in Section 13 hereof.  The parties  agree that a carbon,  photographic  or other
reproduction of this Agreement shall be sufficient as a financing statement.  If
any Receivable  becomes  evidenced by a promissory note or any other  instrument
for the payment of money,  Borrower will immediately  deliver such instrument to
Lender appropriately endorsed.

                                      -21-
<PAGE>

                           7.   Representations   Concerning   the   Collateral.
Borrower  represents  and  warrants  (each of  which  such  representations  and
warranties  shall be  deemed  repeated  upon the  making of each  request  for a
Revolving  Credit  Advance  and made as of the time of each and every  Revolving
Credit Advance hereunder):

                           (a) all the  Collateral (i) is owned by Borrower free
and clear of all claims, liens,  security interests and encumbrances  (including
without  limitation  any claims of  infringement)  except (A) those in  Lender's
favor  and  (B)  Permitted  Liens  and  (ii)  is not  subject  to any  agreement
prohibiting  the  granting  of a security  interest  or  requiring  notice of or
consent to the granting of a security interest;

                           (b) all Receivables (i) represent  complete bona fide
transactions  which require no further act under any circumstances on Borrower's
part to  make  such  Receivables  payable  by  Customers,  (ii)  to the  best of
Borrower's  knowledge,  are not  subject to any  present,  future or  contingent
Disputes;  (iii)  do not  represent  bill  and hold  sales,  consignment  sales,
guaranteed sales, sale or return or other similar  understandings or obligations
of any Affiliate or Subsidiary of Borrower;  (iv) included in any Borrowing Base
Certificate  as an  Eligible  Receivable  meets all  criteria  specified  in the
definition  of Eligible  Receivables,  except as may  otherwise be  specifically
disclosed  in  such  Borrowing  Base  Certificate  or as  otherwise  theretofore
disclosed in writing to Lender; and (v) Borrower has no knowledge of any fact or
circumstance not disclosed to Lender in the pertinent Borrowing Base Certificate
or otherwise in writing,  which would impair the validity or  collectibility  of
any  Receivable  and that all documents in connection  with each  Receivable are
genuine.

                           (c) in the event any  amounts  due and owing from any
account  debtor to Borrower on any Eligible  Receivable  shall become subject to
any  Dispute,  or to any  other  adjustment  otherwise  permitted  to be made in
accordance  with the  terms and  provisions  hereof  in the  ordinary  course of
business and prior to the occurrence of an Event of Default hereunder,  Borrower
agrees that it shall,  at the time of the  submission of the next Borrowing Base
Certificate required to be delivered to Lender immediately following the date on
which Borrower  learns  thereof,  provide Lender with notice  thereof.  Borrower
further  agrees  that it shall also  notify  Lender  promptly of all returns and
credits  in  respect  of  any  Receivables  included  within  a  Borrowing  Base
Certificate, which notice shall specify the Receivables affected.

                           8. Covenants  Concerning the  Collateral.  During the
Term, Borrower covenants that it shall:

                           (a) not dispose of any of the  Collateral  whether by
sale,  lease or  otherwise  except for (i) the sale of Inventory in the ordinary
course of business, and (ii) the disposition or transfer of obsolete and wornout
Equipment in the ordinary  course of business during any fiscal year of Borrower
having an aggregate  fair market value of not more than $250,000 and only to the
extent  that (x) the  proceeds  of any  such  disposition  are  used to  acquire
replacement  Equipment  which is subject to  Lender's  first  priority  security
interest or (y) the proceeds of which are remitted to Lender in reduction of the
Obligations;

                                      -22-
<PAGE>

                           (b) not encumber,  mortgage,  pledge, assign or grant
any security  interest in any  Collateral or any of  Borrower's  other assets to
anyone other than Lender except as set forth on Schedule  1(C)  attached  hereto
and made a part hereof;

                           (c) place notations upon Borrower's  books of account
and any financial  statement  prepared by Borrower to disclose Lender's security
interest in the Collateral;

                           (d)  defend  the  Collateral  against  the claims and
demands of all parties.

                           (e)  keep  and  maintain  the   Collateral   in  good
operating  condition,  except  for  ordinary  wear and tear,  and shall make all
necessary  repairs  and  replacements  thereof  so that the value and  operating
efficiency  shall at all times be maintained and  preserved.  Borrower shall not
permit any such items to become a fixture to real estate or  accessions to other
personal property;

                           (f) not extend the  payment  terms of any  Receivable
without prompt notice thereof to Lender;

                           (g) perform all other  steps  requested  by Lender to
create and maintain in Lender's favor a valid perfected first security  interest
in all Collateral; and

                           (h) promptly provide Lender with duplicate  originals
of all credits which  Borrower  issues to its Customers and  immediately  notify
Lender of any  merchandise  returns  or  Disputes.  Borrower  shall  settle  all
Disputes  at no cost or  expense  to Lender.  Should  Lender so elect,  upon the
occurrence of any Event of Default, Lender may at any time in its discretion (i)
withdraw Borrower's authority to issue credits to its Customers without Lender's
prior  written  consent;  (ii)  litigate  Disputes or settle them  directly with
Customers on terms  acceptable to Lender;  or (iii) direct Borrower to set aside
and identify as Lender's  property any returned or  repossessed  merchandise  or
other goods which by sale resulted in Receivables theretofore assigned to Lender
("Retained  Goods").  All Retained Goods (and the proceeds thereof) shall be (A)
held by  Borrower  in trust for  Lender as  Lender's  property,  (B)  subject to
Lender's  security  interest  hereunder,  and (C) disposed of only in accordance
with Lender's express written instructions.

                                      -23-
<PAGE>

                           9.  Collection  and  Maintenance  of  Collateral  and
Records. Lender may at any time verify Borrower's Receivables utilizing an audit
control  company or any other agent of Lender.  Lender or Lender's  designee may
notify Customers, at any time at Lender's sole discretion,  of Lender's security
interest in Receivables,  collect them directly and charge the collection  costs
and  expenses to  Borrower's  account,  but,  unless and until Lender does so or
gives Borrower other instructions,  Borrower shall instruct all of its Customers
to make payments on account of Receivables to an account under Lender's dominion
and  control at such bank as Lender may  designate,  as provided by the terms of
Section  23.  To the  extent  Borrower  receives  any  payments  on  account  of
Receivables,  it shall  hold such  payments  for  Lender's  benefit  in trust as
Lender's  trustee and immediately  deliver them to Lender in their original form
with all necessary endorsements or, as directed by Lender, deposit such payments
as  directed  by Lender  pursuant  to  Section  22 hereof.  Lender  will  credit
(conditional upon final  collection) all such payments to Borrower's  account on
the Settlement Date.  Promptly after the creation of any  Receivables,  Borrower
shall  provide  Lender with  schedules  describing  all  Receivables  created or
acquired  by  Borrower  and  shall  execute  and  deliver  confirmatory  written
assignments of such Receivables to Lender, but Borrower's failure to execute and
deliver such schedules or written  confirmatory  assignments of such Receivables
shall not affect or limit Lender's  security  interest or other rights in and to
the  Receivables.  Borrower  shall  furnish,  at  Lender's  request,  copies  of
contracts,  invoices or the equivalent,  and any original  shipping and delivery
receipts for all merchandise sold or services  rendered and such other documents
and information as Lender may require. All of Borrower's invoices shall bear the
terms stated on the applicable  customer order,  and no change from the original
terms of such customer order shall be made without the prior written  consent of
Lender.  Borrower shall provide Lender on a monthly  (within ten (10) days after
the end of each month),  or more  frequent  basis,  as  requested  by Lender,  a
summary report of Borrower's current  Inventory,  certified as true and accurate
by Borrower's  President or Chief  Financial  Officer,  as well as an aged trial
balance of Borrower's existing accounts payable.  Borrower shall provide Lender,
as requested  by Lender,  such other  schedules,  documents  and/or  information
regarding the Collateral as Lender may require.  Without limiting the foregoing,
Borrower shall provide to Lender a borrowing base certificate upon Santa Maria's
invoicing of customers,  but no less  frequently  than weekly  ("Borrowing  Base
Certificate"),  which  must be in form and  substance  acceptable  to Lender and
which  Borrowing  Base  Certificate  shall certify to Lender,  and shall contain
sufficient  information  and  calculations  as  Lender  may  deem  necessary  or
desirable,   in  order  to  verify  any  Receivables   Availability,   Inventory
Availability,  the  applicable  Formula  Amount and  whether or not  Receivables
and/or  Inventory  included  therein are Eligible  Receivables  and/or  Eligible
Inventory.  Without limiting the foregoing, a Borrowing Base Certificate must be
executed  and  delivered  by  Borrower to Lender at the time of or prior to each
request for Revolving Credit Advances pursuant to Section 4. Each such Borrowing
Base Certificate shall be delivered to Lender at its office described in Section
26 below, on each relevant Business Day.

                           10.  Inspections.  During normal business hours, and,
so long as no Event of Default or Incipient Event of Default shall have occurred
hereunder,  upon  thirty-six  (36) hours prior notice to Borrower,  Lender shall
have  the  right  to  (a)  visit  and  inspect  Borrower's  properties  and  the
Collateral,  (b) inspect, audit and make extracts from Borrower's relevant books
and  records,  including,  but not limited to,  management  letters  prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants,  Borrower's business,  assets,  liabilities,  financial
condition,  results of operations and business prospects.  Borrower will deliver
to Lender any instrument necessary for Lender to obtain records from any service
bureau maintaining records for Borrower.

                                      -24-
<PAGE>

                           11.  Financial  Information.  Borrower  shall provide
Lender (a) as soon as available,  but in any event within ninety (90) days after
the end of each of Borrower's fiscal years,  Borrower's  balance sheet as at the
end of such fiscal year and the related statements of income,  retained earnings
and statement of cash flow for such fiscal year,  setting  forth in  comparative
form the figures as at the end of and for the previous fiscal year,  which shall
have been reported on by independent  certified public  accountants who shall be
satisfactory  to Lender and shall be accompanied by an unqualified  audit report
issued  by  such  independent  certified  public  accountants;  (b) as  soon  as
available,  drafts  of  Borrower's  balance  sheet  as at  the  end of  each  of
Borrower's fiscal years and the related statements of income,  retained earnings
and  statement  of cash flow for such fiscal  year,  which have been  internally
prepared by Borrower;  (c) as soon as available,  but in any event within thirty
(30) days after the close of each month and quarter, the balance sheet as at the
end of such month and  quarter and the related  statements  of income,  retained
earnings and changes in statement of cash flow for such month and quarter, which
have been internally  prepared by Borrower.  All financial  statements  required
under (a), (b) and (c) above shall be prepared in accordance with GAAP,  subject
to year  end  adjustments  in the  case of  monthly  and  quarterly  statements.
Together with the financial statements furnished pursuant to (a) above, Borrower
shall deliver a certificate of Borrower's certified public accountants addressed
to Lender  stating that (i) they have caused this  Agreement  and the  Ancillary
Agreements to be reviewed and (ii) in making the  examination  necessary for the
issuance of such financial  statements,  nothing has come to their  attention to
lead them to believe  that any Event of Default  or  Incipient  Event of Default
exists and, in  particular,  they have no  knowledge  of any Event of Default or
Incipient Event of Default or, if such is not the case, specifying such Event of
Default or  Incipient  Event of Default  and its nature,  when it  occurred  and
whether it is  continuing.  At the times the financial  statements are furnished
pursuant to (a), (b) and (c) above,  a certificate  of  Borrower's  President or
Chief Financial  Officer shall be delivered to Lender stating that,  based on an
examination sufficient to enable him to make an informed statement,  no Event of
Default  or  Incipient  Event of  Default  exists,  or, if such is not the case,
specifying  such Event of Default or Incipient  Event of Default and its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such event. If any internally  prepared  financial  information,
including that required under this section,  is  unsatisfactory in any manner to
Lender,  Lender  may  request  that  Borrower's   independent  certified  public
accountants review same.

                           In addition to the  foregoing  financial  statements,
Borrower shall furnish Lender no less than thirty (30)

days prior to the  beginning  of each  fiscal year  commencing  with fiscal year
2000, a month by month projected  operating budget and cash flow for such fiscal
year (including an income statement for each month and a balance sheet as at the
end  of  the  last  month  in  each  fiscal  quarter),  such  projections  to be
accompanied by a certificate  signed by Borrower's  President or Chief Financial
Officer to the effect that such  projections  have been prepared on the basis of
sound  financial  planning  practice  consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.

                           12.   Additional   Representations,   Warranties  and
Covenants.  Borrower represents and warrants (each of which such representations
and  warranties  shall be deemed  repeated  upon the  making of a request  for a
Revolving  Credit  Advance  and  made as of the  time of each  Revolving  Credit
Advance made hereunder), and covenants that:

                           (a) Saba and Santa Maria is each a  corporation  duly
organized and validly  existing  under the laws of the State of  California  and
Greka is a corporation duly organized and validly existing under the laws of the
State of Colorado and each  Borrower is duly  qualified  and in good standing in
every other state or  jurisdiction  in which the nature of  Borrower's  business
requires such qualification except where the failure to qualify would not have a
material adverse effect on the Borrower's business.;

                                      -25-
<PAGE>

                           (b) the execution,  delivery and  performance of this
Agreement and the Ancillary  Agreements (i) have been duly authorized,  (ii) are
not in contravention of Borrower's  certificate of incorporation,  by-laws or of
any indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound and (iii) are within Borrower's corporate powers;

                           (c)  this  Agreement  and  the  Ancillary  Agreements
executed  and  delivered  by Borrower are  Borrower's  legal,  valid and binding
obligations, enforceable in accordance with their terms;

                           (d) it  keeps  and will  continue  to keep all of its
books and records  concerning  the  Collateral at Borrower's  executive  offices
located at the address set forth in the introductory paragraph of this Agreement
and will not move such books and records  without  giving Lender at least thirty
(30) days prior written notice;

                           (e) (1) the operation of Borrower's  business and the
Collateral is and will  continue to be in  compliance  in all material  respects
with all applicable federal,  state and local laws, including but not limited to
all applicable environmental laws and regulations and Sanction/Embargo Programs.

                                  (2) Borrower has  established  and  maintained
and will  continue  to  maintain  a  system  to  assure  and  monitor  continued
compliance  with  all  applicable   environmental  laws,  and   Sanction/Embargo
Programs, which system shall include periodic reviews of such compliance.

                                  (3) in the event the Borrower  obtains,  gives
or receives notice of any release or threat of release of a reportable  quantity
of any Hazardous  Substances  on its property (any such event being  hereinafter
referred to as a "Hazardous  Discharge")  or receives  any notice of  violation,
request for information or notification  that it is potentially  responsible for
investigation  or cleanup of  environmental  conditions on its property,  demand
letter or complaint, order, citation, or other written notice with regard to any
Hazardous  Discharge  or  violation  of any  environmental  laws  affecting  its
property or  Borrower's  interest  therein (any of the  foregoing is referred to
herein as an "Environmental Complaint") from any Person or entity, including any
state agency  responsible in whole or in part for  environmental  matters in the
state in which such  property  is located  or the  United  States  Environmental
Protection Agency (any such person or entity hereinafter the "Authority"),  then
the Borrower  shall,  within five (5) Business Days, give written notice of same
to the Lender  detailing facts and  circumstances of which the Borrower is aware
giving  rise  to  the  Hazardous   Discharge  or  Environmental   Complaint  and
periodically  inform Lender of the status of the matter.  Such information is to
be  provided  to allow the  Lender  to  protect  its  security  interest  in the
Collateral and is not intended to create nor shall it create any obligation upon
the Lender with respect thereto.

                                      -26-
<PAGE>

                                  (4)  Borrower  shall  respond  promptly to any
Hazardous Discharge or Environmental  Complaint and take all necessary action in
order  to  safeguard  the  health  of any  Person  and to avoid  subjecting  the
Collateral to any lien, charge, claim or encumbrance.  If Borrower shall fail to
respond  promptly to any  Hazardous  Discharge  or  Environmental  Complaint  or
Borrower shall fail to comply with any of the requirements of any  environmental
laws,  the Lender may, but without the obligation to do so, for the sole purpose
of protecting the Lender's interest in Collateral:  (A) give such notices or (B)
enter onto  Borrower's  property (or authorize  third parties to enter onto such
property) and take such actions as the Lender (or such third parties as directed
by the Lender) deem  reasonably  necessary or  advisable,  to clean up,  remove,
mitigate or otherwise  deal with any such Hazardous  Discharge or  Environmental
Complaint. All reasonable costs and expenses directly incurred by the Lender (or
such third parties) in the exercise of any such rights,  including any sums paid
in connection with any judicial or administrative  investigation or proceedings,
fines and  penalties,  together with interest  thereon from the date expended at
the Default Rate for Revolving  Credit Advances shall be paid upon demand by the
Borrower,  and until paid shall be added to and become a part of the Obligations
secured  by the  liens  created  by the  terms of this  Agreement  or any  other
agreement between Lender and Borrower.

                                  (5) Borrower  shall defend and  indemnify  the
Lender and hold the Lender harmless from and against all loss, liability, damage
and expense,  claims,  costs,  fines and penalties,  including  attorney's fees,
directly  suffered  or  incurred  by the  Lender  under or on  account of A. any
environmental laws,  including,  without  limitation,  the assertion of any lien
thereunder,  with  respect  to any  Hazardous  Discharge,  the  presence  of any
Hazardous  Substances  affecting  Borrower's  property,  whether or not the same
originates or emerges from  Borrower's  property or any contiguous  real estate,
including  any loss of  value of the  Collateral  as a result  of the  foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of the Lender, and B.
any Sanction/Embargo  Program. The Borrower's obligations under Section 12(e)(v)
A. shall arise upon the discovery of the presence of any Hazardous Substances on
the  Borrower's  property,   whether  or  not  any  federal,   state,  or  local
environmental  agency has taken or threatened any action in connection  with the
presence of any Hazardous Substances, and under Section 12(e)(v) B on failure to
comply with any  Sanction/Embargo  Program.  The  Borrower's  obligation and the
indemnifications hereunder shall survive the termination of this Agreement.

                                  (6)  For   purposes   of  Section   12(e)  all
references to Borrower's  property  shall be deemed to include all of Borrower's
right, title and interest in and to all owned and/or leased premises;

                           (f)  based  upon  the  Employee   Retirement   Income
Security Act of 1974  ("ERISA"),  as amended,  and the regulations and published
interpretations  thereunder:  (i)  Borrower  has not  engaged in any  Prohibited
Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal
Revenue  Code of 1986,  as amended,  and the rules and  regulations  promulgated
thereunder;  (ii) Borrower has met all applicable  minimum funding  requirements
under Section 302 of ERISA in respect of its plans,  if any;  (iii) Borrower has
no knowledge of any event or  occurrence  which would cause the Pension  Benefit
Guaranty  Corporation  to  institute  proceedings  under  Title  IV of  ERISA to
terminate  any  employee  benefit  plan(s);   (iv)  Borrower  has  no  fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than Borrower's employees;  and (v) Borrower has not withdrawn,
completely  or  partially,  from any  multiemployer  pension plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980;

                                      -27-
<PAGE>

                           (g) it is  solvent,  able  to pay its  debts  as they
mature,  has capital  sufficient to carry on its business and all  businesses in
which  it is  about  to  engage  and  the  fair  saleable  value  of its  assets
(calculated  on a  going  concern  basis)  is in  excess  of the  amount  of its
liabilities;

                           (h) there is no  pending  or  threatened  litigation,
actions or proceedings which involve the possibility of materially and adversely
affecting the Borrower's business, assets,  operations,  condition or prospects,
financial or otherwise,  or the Collateral or the ability of Borrower to perform
this Agreement;

                           (i) all balance  sheets and income  statements  which
have been delivered to Lender fairly,  accurately and properly state  Borrower's
financial  condition  on a basis  consistent  with  that of  previous  financial
statements,  and  there  has  been no  material  adverse  change  in  Borrower's
financial condition as reflected in such statements since the date thereof,  and
such statements do not fail to disclose any fact or facts which might materially
and adversely affect Borrower's financial condition;

                           (j) (x) it possesses  all of the  licenses,  patents,
copyrights,  trademarks,  trade  names and  permits  necessary  to  conduct  its
business,  (y) there has been no assertion or claim of violation or infringement
with  respect  thereof,  and  (z)  all  such  licenses,   patents,   copyrights,
trademarks, trade names and permits are listed on Schedule 12(j);

                           (k) it will  pay or  discharge  when  due all  taxes,
assessments and governmental charges or levies imposed upon it;

                           (l) it will promptly inform Lender in writing of: (i)
the commencement of all proceedings and  investigations  by or before and/or the
receipt of any notices from, any  governmental or  nongovernmental  body and all
actions and proceedings in any court or before any arbitrator  against or in any
way concerning  any of Borrower's  properties,  assets or business,  involving a
possible  liability in excess of $50,000 which might singly or in the aggregate,
have a materially  adverse effect on Borrower;  (ii) any amendment of Borrower's
certificate  of  incorporation  or  by-laws;  (iii)  any  change  in  Borrower's
business, assets,  liabilities,  condition (financial or otherwise),  results of
operations  or  business  prospects  which  has had or might  have a  materially
adverse  effect on  Borrower;  (iv) any Event of Default or  Incipient  Event of
Default;  (v) any  default or any event which with the passage of time or giving
of notice or both would constitute a default under any agreement for the payment
of money to which  Borrower is a party or by which Borrower or any of Borrower's
properties may be bound which would have a material adverse effect on Borrower's
business,  operations,  property or condition  (financial  or  otherwise) or the
Collateral;  (vi) any change in the location of  Borrower's  executive  offices;
(vii) any change in the location of Borrower's  Inventory or Equipment  from the
locations  listed on  Schedule  12(l)  attached  hereto,  (viii)  any  change in
Borrower's corporate name; (ix) any material delay in Borrower's  performance of
any of its  obligations  to any  Customer  and of any  assertion of any material
claims,  offsets,   counterclaims  or  Disputes  by  any  Customer  and  of  any
allowances,  credits  and/or other  monies  granted by it to any  Customer;  (x)
furnish to and inform Lender of all material adverse information relating to the
financial  condition  of any account  debtor;  and (xi) any  material  return of
goods;

                                      -28-
<PAGE>

                           (m) it will not (i) create,  incur,  assume or suffer
to  exist  any  secured  indebtedness  (exclusive  of trade  debt) or  unsecured
indebtedness in excess of $250,000, other than Borrower's indebtedness to Lender
and as set forth on Schedule 12(m) attached hereto and made a part hereof;  (ii)
declare,  pay or make any dividend or  distribution  on any shares of the common
stock or  preferred  stock of  Borrower  or apply any of its funds,  property or
assets  to the  purchase,  redemption  or  other  retirement  of any  common  or
preferred  stock  of  Borrower;   (iii)  directly  or  indirectly,   prepay  any
indebtedness (other than to Lender), or repurchase,  redeem, retire or otherwise
acquire any  indebtedness  of  Borrower  in excess of $250,000 in the  aggregate
during any fiscal year of Borrower;  (iv) make advances,  loans or extensions of
credit to any Person in excess of  $250,000 in the  aggregate  during any fiscal
year of Borrower;  (v) become either  directly or  contingently  liable upon the
obligations  of any Person by  assumption,  endorsement  or guaranty  thereof or
otherwise in excess of $250,000;  (vi) enter into any merger,  consolidation  or
other  reorganization  with or into any other Person or acquire all or a portion
of the assets or stock of any Person or permit any other  Person to  consolidate
with or merge with it; (vii) form any Subsidiary or enter into any  partnership,
joint venture or similar arrangement; (viii) materially change the nature of the
business in which it is presently  engaged;  (ix) change its fiscal year or make
any changes in  accounting  treatment  and  reporting  practices  without  prior
written  notice to Lender  except as  required  by GAAP or in the tax  reporting
treatment or except as required by law; (x) enter into any transaction  with any
Affiliate,  except in the ordinary course of its business on arms' length terms;
or (xi) bill Receivables under any name except the present name of the Borrower;
(xii) sell,  transfer or lease or otherwise  dispose of any of its properties or
assets in  excess  of  $250,000  in the  aggregate  during  any  fiscal  year of
Borrower, except in the ordinary course of its business;

                           (n)   all   financial   projections   of   Borrower's
performance  prepared by Borrower or at  Borrower's  direction  and delivered to
Lender  will  represent,  at the time of  delivery  to Lender,  Borrower's  best
estimate  of  Borrower's  future  financial  performance  and will be based upon
assumptions  which are reasonable in light of Borrower's  past  performance  and
then current business conditions;

                           (o) Borrower will not make capital expenditures in an
amount in excess of $3,000,000 in the aggregate  during  Borrower's  2000 fiscal
year.  On or before the end of each fiscal year of Borrower,  this covenant will
be  reset  for the  immediately  succeeding  fiscal  year  at a  level  mutually
acceptable to Lender and Borrower;

                                      -29-
<PAGE>

                           (p) Borrower shall  maintain a fixed charge  coverage
ratio  (calculated by dividing the sum of dividends,  scheduled debt  repayment,
interest payments  (including cash interest payments to Greka Energy Corporation
and/or Saba Petroleum  Company and excluding  accrued  interest payable to Greka
Energy Corporation and/or Saba Petroleum  Company),  cash portion of taxes paid,
and cash capital  expenditures into EBITDA, all as calculated in accordance with
GAAP) of no less than 1.3:1.  For  purposes  of this  Section  12(p),  the fixed
charge coverage ratio shall be measured at December 31, 1999 for the immediately
preceding nine (9) months and at March 31, 2000 and for each June 30,  September
30,  December 31 and March 31 thereafter for the  immediately  preceding  twelve
(12) month period;

                           (q) it shall  cause to be  maintained  at all times a
ratio of Total  Liabilities to Tangible Net Worth plus  Subordinated Debt of not
greater  than the ratio of:  1.5 to 1 as of  Borrower's  fiscal  quarter  ending
December 31, 1999 and continuously thereafter;

                           (r) the  outstanding  balance  of the Term Loan shall
not at any time  exceed  75% of the then  current PV 10 value of the Oil and Gas
Properties  owned by  Borrower.  Provided no other Event of Default or Incipient
Event  of  Default  shall  have  occurred  hereunder  and  Borrower  remains  in
compliance  with all  other  financial  covenants  set  forth  herein,  upon the
occurrence  of a violation  of this  covenant,  Borrower  shall be  permitted an
opportunity  to cure such  violation  within 60 days following the occurrence of
any such violation, provided, however, that such cure will not be permitted more
than two (2) times during the Term and not more than once during any consecutive
12 month period.

                           (s) none of the proceeds of the Loans  hereunder will
be used directly or indirectly  to  "purchase" or "carry"  "margin  stock" or to
repay  indebtedness  incurred to "purchase" or "carry" "margin stock" within the
respective  meanings of each of the quoted terms under Regulation G of the Board
of  Governors  of the  Federal  Reserve  System  as now  and  from  time to time
hereafter in effect;

                           (t) it will  bear the full risk of loss from any loss
of any nature  whatsoever  with respect to the  Collateral.  At its own cost and
expense in amounts and with carriers acceptable to Lender, it shall (i) keep all
its insurable  properties  and  properties  in which it has an interest  insured
against the hazards of fire, flood,  sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards,  and for such amounts, as is
customary in the case of companies  engaged in businesses  similar to Borrower's
including, without limitation,  business interruption insurance; (ii) maintain a
bond in such  amounts  as is  customary  in the  case of  companies  engaged  in
businesses similar to Borrower's insuring against larceny, embezzlement or other
criminal  misappropriation  of insured's  officers and  employees who may either
singly or jointly  with others at any time have access to the assets or funds of
Borrower  either  directly  or through  authority  to draw upon such funds or to
direct  generally the  disposition  of such assets;  (iii)  maintain  public and
product  liability  insurance  against  claims  for  personal  injury,  death or
property damage suffered by others; (iv) maintain all such workers' compensation
or  similar  insurance  as may be  required  under  the  laws  of any  state  or
jurisdiction  in which Borrower is engaged in business;  (v) furnish Lender with
(x) copies of all policies and evidence of the  maintenance  of such policies at
least thirty (30) days before any  expiration  date,  and (y)  appropriate  loss
payable endorsements in form and substance satisfactory to Lender, naming Lender
as loss payee and providing  that as to Lender the insurance  coverage shall not
be impaired  or  invalidated  by any act or neglect of Borrower  and the insurer
will provide Lender with at least thirty (30) days notice prior to cancellation.
Borrower  shall  instruct the  insurance  carriers that in the event of any loss
thereunder,  the carriers  shall make payment for such loss to Lender and not to
Borrower and Lender jointly. If any insurance losses are paid by check, draft or
other  instrument  payable to Borrower  and Lender  jointly,  Lender may endorse
Borrower's name thereon and do such other things as Lender may deem advisable to
reduce the same to cash.  Lender is hereby  authorized to adjust and  compromise
claims.  All loss  recoveries  received by Lender upon any such insurance may be
applied to the Obligations, in such order as Lender in its sole discretion shall
determine.  Notwithstanding  the  foregoing,  to the extent  that any  insurance
proceeds received by Lender do not belong to Borrower or result from the loss of
property of Borrower which is not  Collateral,  Lender will return such proceeds
to Borrower.  Any surplus  shall be paid by Lender to Borrower or applied as may
be otherwise  required by law. Any deficiency  thereon shall be paid by Borrower
to Lender, on demand; and

                                      -30-
<PAGE>

                           (u) it shall not purchase or acquire  obligations  or
stock of, or any other interest in, or make any investment in any entity, except
(A)  obligations  issued or  guaranteed  by the United  States of America or any
agency thereof,  (B) commercial  paper with maturities of not more than 180 days
and a published  rating of not less than A-1 or P-1 (or the equivalent  rating),
(C) certificates of time deposit and bankers'  acceptances  having maturities of
not more  than 180  days and  repurchase  agreements  backed  by  United  States
government  securities  of a  commercial  bank if (x) such  bank has a  combined
capital and surplus of at least  $500,000,000,  or (y) its debt obligations,  or
those of a holding company of which it is a subsidiary,  are rated not less than
A (or the  equivalent  rating)  by a  nationally  recognized  investment  rating
agency,  (D) U.S. money market funds that invest solely in obligations issued or
guaranteed  by the  United  States  of  America  or an Agency  thereof,  and (E)
Eurodollar time deposits with financial  institutions with a published rating of
not less than A-1 or P-1 (or the equivalent rating).

                           (v) (1) Borrower and its  Subsidiaries  have reviewed
the effect that the Year 2000 Issue would have on their  respective  businesses.
The costs to Borrower  and its  Subsidiaries  of any  reprogramming  required to
avoid the Year 2000 Issue to permit the proper functioning of Borrower's and its
Subsidiaries'  computer  software,  hardware and firmware  systems and equipment
containing  embedded  microchips  and the  proper  processing  of data,  and the
testing of such reprogramming, and of the reasonably foreseeable consequences of
the Year 2000 Issue to Borrower and its  Subsidiaries  (including  reprogramming
errors and the failure of systems or equipment  supplied by others or with which
Borrower's and its Subsidiaries'  computer systems interface) are not reasonably
expected to result in an Event of Default or to have a material  adverse  effect
on Borrower's or its Subsidiaries' businesses, assets, operations,  prospects or
condition (financial or otherwise).

                                  (2)  Borrower has  evaluated  and assessed the
potential  impact of the Year 2000 Issue upon  Borrower's and its  Subsidiaries'
customers,  key  suppliers  and  vendors  and their  efforts to manage the risks
arising out of the Year 2000 Issue,  and Borrower has determined that Borrower's
and its Subsidiaries' businesses,  assets,  operations,  prospects and condition
(financial and otherwise) shall not be materially adversely affected by any such
impact or risks.

                                      -31-
<PAGE>

                                  (3) Borrower  shall take, and shall cause each
of its  Subsidiaries  to take, all necessary  action to complete in all material
respects, the reprogramming of computer software,  hardware and firmware systems
and  equipment  containing  embedded  microchips  owned  or  operated  by or for
Borrower  and its  Subsidiaries  or used or relied  upon in the conduct of their
businesses  (including  systems and  equipment  supplied by others or with which
such  systems  of  Borrower  or any of its  Subsidiaries  interface)  reasonably
necessary to avoid the Year 2000 Issue to permit the proper  functioning of such
computer systems and other equipment and the proper  processing of data, and the
testing of such systems and  equipment,  as so  reprogrammed.  At the request of
Lender,  Borrower shall  provide,  and shall cause each of its  Subsidiaries  to
provide,  to Lender  reasonable  assurance of its compliance  with the preceding
sentence.

                           (w) Borrower  will cause  Randeep S. Grewal to remain
active in the management of Borrower as the Chairman,  Chief Executive  Officer,
President  and  director  of  Borrower  for a period  of at least  two (2) years
following the Closing Date.

                           (x) In the  event  that any  Borrower  shall  sell or
dispose of any real property or in the event Borrower shall sell any subsidiary,
all  proceeds of such sale shall first be applied to repay  amounts  outstanding
under the Term Loan.  Such  payments  will be  applied by Lender in the  inverse
order of maturity.

                           (y)  Borrower  will  use the  proceeds  of  Revolving
Credit Advances only for its proper working capital purposes.  Borrower will use
the  proceeds of the Term Loan only for the  purchase of the Santa Maria Oil and
Gas  Properties,  the  Vintage Oil and Gas  Properties  and the  refinancing  of
Borrower's existing indebtedness to Lender.

                           (z) Santa Maria shall not  transfer any of its assets
to any other Borrower.

                           (aa)  Upon the  occurrence  of any  Event of  Default
hereunder, Borrower shall immediately cease any and all payments to Greka Energy
Corporation.  Until the  occurrence  of any Event of Default  Borrower  may make
distributions of funds to Greka Energy Corporation in the ordinary course of its
business.

                           (bb) Borrower  shall at all times  maintain a minimum
Tangible Net Worth of at least $26,000,000.

                           (cc) Additional  Warranties.  Santa Maria  covenants,
represents and warrants that:

                                  (1) Interests in Property.  Santa Maria is and
will continue to be the lawful owner of the property more particularly described
on Schedule  12(cc)  annexed  hereto ( the Property") and the interests of Santa
Maria in the  Property,  as set  forth in  Schedule12(cc)  hereto,  are true and
correct  as of the  date  hereof  and  shall  not  change  so long as any of the
Obligations remain outstanding.

                                      -32-
<PAGE>

                                  (2)  Leases  in  Effect.  All  of  the  Leases
specifically  described in Schedule  12(cc)  hereof (the  "Leases")  are in full
force and effect, and all covenants,  express or implied, in respect thereof, or
of any  assignment  thereof  which may affect the validity of any of the Leases,
have been performed.

                                  (3)  Gas  Contracts.  Santa  Maria  (i) is not
obligated in any  material  respect by virtue of any  prepayment  made under any
contract  containing  a  "take-or-pay"  or  "prepayment"  provision or under any
similar agreement to deliver  hydrocarbons  produced from or allocated to any of
the Property at some future date without  receiving full payment therefor at the
time of delivery, and (ii) has not produced gas, in any material amount, subject
to, and  neither  Santa Maria nor any of the  Property is subject to,  balancing
rights of third  parties or balancing  duties under  governmental  requirements,
except  as to such  matters  for which  Santa  Maria  has  established  monetary
reserves  adequate in amount to satisfy such obligations and has segregated such
reserves from other accounts.

                                  (4) Refunds. No orders of, proceedings pending
before,  or other  governmental  requirements of, the Federal Energy  Regulatory
Commission,   or  any  other  similar  state  or  federal   regulatory  body  or
governmental authority exist which could result in Santa Maria being required to
refund any material portion of the proceeds  received or to be received from the
sale of hydrocarbons constituting part of the Property.

                                  (5)  Maintenance  of Leases.  Santa Maria will
keep and continue all Leases,  estates and  interests  herein  described and all
contracts and agreements relating thereto in full force and effect in accordance
with the terms thereof and will not permit the same to lapse or otherwise become
impaired for failure to comply with the obligations thereof,  whether express or
implied.  In this  connection,  Santa  Maria shall not release any of the Leases
without the prior written consent of Lender.

                                  (6)  Operation of Property.  Santa Maria shall
operate or, to the extent that the right of operation is vested in others,  will
exercise  its best  efforts to require the  operator to operate the Property and
all  wells  drilled   thereon  and  that  may  hereafter  be  drilled   thereon,
continuously and in good workmanlike manner in accordance with the best usage of
the field and in  accordance  with all laws of the United  States of America and
the state in which the Property is situated,  as well as all rules,  regulations
and laws of any governmental  agency having  jurisdiction to regulate the manner
in which the operation of the Property shall be carried on, and will comply with
all terms and  conditions  of the  Leases  it now holds and each  assignment  or
contract  obligating  Santa Maria in any way with respect to the  Property;  but
nothing  herein shall be construed to empower  Santa Maria to bind the Lender to
any contract or obligation or render the Lender in any way responsible or liable
for bills or obligations incurred by Santa Maria.

                                      -33-
<PAGE>

                                  (7) Transfer or Division Orders.  Upon request
of Lender,  Santa Maria will execute and deliver  written notices of assignments
to any persons,  corporations or other entities owing or which may in the future
owe to Santa Maria monies or accounts  arising in  connection  with (a) any oil,
gas or mineral  production from all or any portion of the Property;  (b) any gas
contracts,  processing  contracts  or  other  contracts  relating  to all or any
portion of the Property;  or (c) the operation of or production  from all or any
portion of the  Property.  The  notices of  assignments  shall  advise the third
parties that all of the monies or accounts described above have been assigned to
Lender,  and if  required by Lender,  shall also  require and direct that future
payments  thereof,  including amounts then owing and unpaid, be paid directly to
Lender.

                                  (8) Uneconomic Wells. Should proceeds from the
sale of  production  from  any oil  and/or  gas  well  constituting  part of the
Property (net of production,  severance and windfall profit taxes and royalties,
overriding  royalties and other payments out of or measured by  production)  not
exceed the expense of  operation  of such well  (including,  but not limited to,
operator's  overhead,  payments to  contractors  and  suppliers and annual taxes
assessed on the basis of the value of the property  prorated on a monthly basis,
but expressly  excluding  any portion of the cost of drilling or completing  the
relevant well or the cost of non-routine  workover or remedial  operators) for a
period in excess of three  consecutive  calendar  months,  then, upon receipt by
Santa Maria of written  notification from Lender,  Santa Maria will (a) take all
necessary  steps to abandon the relevant well, or (b) provide from sources other
than proceeds from the sale of production  attributable  to the Property  (i.e.,
through borrowings or contractual commitments obtained from third parties not in
violation of any provision of this Deed of Trust) the funds  required to pay the
share of Santa Maria of the expenses associated with the continuing operation of
such well.

                                  13.   Power  of  Attorney.   Borrower   hereby
appoints  Lender or any other  Person whom Lender may  designate  as  Borrower's
attorney,  with power to: (i)  endorse  Borrower's  name on any  checks,  notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into Lender's possession;  (ii) sign Borrower's name on any invoice or bill
of lading relating to any Receivables,  drafts against Customers,  schedules and
assignments  of  Receivables,  notices of assignment,  financing  statements and
other public records, verifications of account and notices to or from Customers;
(iii) verify the validity, amount or any other matter relating to any Receivable
by mail, telephone,  telegraph or otherwise with Customers; (iv) execute customs
declarations  and such other  documents  as may be required  to clear  Inventory
through Customs;  (v) do all things  necessary to carry out this Agreement,  any
Ancillary  Agreement  and  all  related  documents;  and  (vi) on or  after  the
occurrence  and  continuation  of an Event of  Default,  notify the post  office
authorities to change the address for delivery of Borrower's  mail to an address
designated by Lender, and to receive,  open and dispose of all mail addressed to
Borrower.  Borrower  hereby  ratifies  and  approves  all acts of the  attorney.
Neither  Lender nor the attorney will be liable for any acts or omissions or for
any error of judgment or mistake of fact or law. This power,  being coupled with
an  interest,  is  irrevocable  so long as any  Receivable  which is assigned to
Lender or in which Lender has a security  interest  remains unpaid and until the
Obligations have been fully satisfied.

                                      -34-
<PAGE>

                                  14.  Expenses.   Borrower  shall  pay  all  of
Lender's   out-of-pocket  costs  and  expenses,   including  without  limitation
reasonable fees and  disbursements of counsel retained or employed by Lender and
appraisers,  in connection with the preparation,  execution and delivery of this
Agreement and the Ancillary  Agreements,  and in connection with the prosecution
or defense of any action,  contest,  dispute,  suit or proceeding concerning any
matter in any way arising out of, related to or connected with this Agreement or
any Ancillary Agreement.  Borrower shall also pay all of Lender's  out-of-pocket
costs  and  expenses,   including   without   limitation   reasonable  fees  and
disbursements of counsel retained or employed by Lender,  in connection with (a)
the preparation,  execution and delivery of any waiver, any amendment thereto or
consent proposed or executed in connection with the transactions contemplated by
this Agreement or the Ancillary  Agreements,  (b) Lender's obtaining performance
of the Obligations under this Agreement and any Ancillary Agreements, including,
but not limited to, the enforcement or defense of Lender's  security  interests,
assignments of rights and liens hereunder as valid perfected security interests,
(c) any  attempt to  inspect,  verify,  protect,  collect,  sell,  liquidate  or
otherwise  dispose of any Collateral,  and (d) any  consultations  in connection
with any of the foregoing.  Borrower shall also pay Lender's then standard price
for  furnishing  Borrower or its designees  copies of any  statements,  records,
files or other data  (collectively,  "Reports")  requested  by  Borrower  or its
designees,  other than  reports of the kind  furnished  to Borrower and Lender's
other borrowers on a regular,  periodic basis in the ordinary course of Lender's
business.  Borrower shall also pay Lender's  customary bank charges,  including,
without  limitation,  all wire transfer  fees  incurred by Lender,  for all bank
services  performed  or  caused  to be  performed  by  Lender  for  Borrower  at
Borrower's  request.  All such  costs and  expenses  together  with all  filing,
recording  and search  fees,  taxes and  interest  payable by Borrower to Lender
shall be payable on demand and shall be secured by the Collateral. If any tax by
any  governmental  authority  is or  may be  imposed  on or as a  result  of any
transaction  between  Borrower  and Lender which Lender is or may be required to
withhold  or pay,  Borrower  agrees to  indemnify  and hold  Lender  harmless in
respect of such taxes,  and Borrower will repay to Lender the amount of any such
taxes which shall be charged to Borrower's  account;  and until  Borrower  shall
furnish  Lender  with  indemnity   therefor  (or  supply  Lender  with  evidence
satisfactory  to it that due provision  for the payment  thereof has been made),
Lender may hold without interest any balance  standing to Borrower's  credit and
Lender shall retain its security  interests in any and all Collateral.  Borrower
hereby acknowledges that Lender shall not be liable in any manner whatsoever for
any selling expenses,  orders, purchases or contracts of any kind resulting from
any  transaction  between  Borrower and any other  Person,  and Borrower  hereby
indemnifies  and holds Lender  harmless with respect  thereto,  which  indemnity
shall survive termination of this Agreement.

                                  15.  Assignment.  Lender may assign any or all
of the  Obligations  together  with any or all of the security  therefor and any
transferee  shall  succeed  to all of  Lender's  rights  with  respect  thereto.
Borrower shall be promptly notified of any such assignment.  Notwithstanding the
foregoing,   Lender  shall  not  knowingly  Transfer  the  Obligations  (or  any
substantial portion thereof) to any person or entity (i) whose primary source of
revenue is from gas or oil  production  and (ii) with whom  Borrower's  business
materially competes in conflict of Borrower's interest.  As used in this Section
15,  "Transfer"  shall mean a voluntary  sale,  assignment  or  conveyance  to a
separate legal entity from the Lender and no Transfer shall occur as a result of
merger,  acquisition,  consolidation or by operation of law. Upon such transfer,
Lender  shall be released  from all  responsibility  for the  Collateral  to the
extent same is assigned to any transferee.  Lender may from time to time sell or
otherwise grant  participations  in any of the Obligations and the holder of any
such participation  shall,  subject to the terms of any agreement between Lender
and such holder,  be entitled to the same benefits as Lender with respect to any
security for the  Obligations  in which such holder is a  participant.  Borrower
agrees that each such holder may exercise  any and all rights of banker's  lien,
set-off and counterclaim with respect to its participation in the Obligations as
fully as though Borrower were directly  indebted to such holder in the amount of
such  participation.  Borrower  may not assign or transfer  any of its rights or
obligations  under this Agreement  without the prior written  consent of Lender,
and no such assignment or transfer of any such obligation shall relieve Borrower
thereof  unless  Lender  shall  have  consented  to such  release  in a  writing
specifically referring to the obligation from which Borrower is to be released.

                                      -35-
<PAGE>

                                  16. Waivers.  Borrower waives  presentment and
protest of any  instrument and notice  thereof,  notice of default and all other
notices to which Borrower might otherwise be entitled.

                                  17. Term of  Agreement.  Lender may  terminate
this Agreement at any time upon one hundred and twenty (120) days' prior written
notice to Borrower. If not so terminated,  this Agreement shall continue in full
force  and  effect  until  the  expiration  of  the  Term.  The  Term  shall  be
automatically extended for successive periods of one (1) year each unless either
party shall have  provided the other with a written  notice of  termination,  at
least  ninety  (90) days  prior to the  expiration  of the  initial  Term or any
renewal Term.  The Borrower may terminate  this Agreement at any time upon sixty
(60) days' prior written notice ("Termination Date") upon payment in full of the
Obligations;  provided, that Borrower pays an early termination fee in an amount
equal to the Required  Percentage  of the  Reducing  Facility  Amount.  Reducing
Facility Amount shall mean $10,000,000, plus the outstanding balance of the Term
Loan as of the date of  termination  (without  giving effect to any  prepayments
made on the Term Loan). For the purposes hereof,  Required Percentage shall mean
(a) 3% from the Closing Date through November 29, 2001, (b) 2% from November 30,
2001  through  November  29,  2002 and (c) 1% from  November  30,  2002  through
November 29, 2003 and during any year of any renewal Term.

                                  18. Events of Default.  The  occurrence of any
of the following shall constitute an Event of Default:

                                  (a)  failure  to  make  payment  of any of the
Obligations when required hereunder;

                                  (b)  failure  to pay any taxes when due unless
such taxes are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been provided on Borrower's books;

                                  (c) failure to perform under and/or committing
any breach of this Agreement or any Ancillary  Agreement or any other  agreement
between  Borrower and Lender or failure to perform any  non-monetary  obligation
with respect to which a cure is expressly permitted hereunder within thirty (30)
days following the occurrence of such failure;

                                      -36-
<PAGE>

                                  (d)   occurrence   of  a  default   under  any
agreement to which  Borrower is a party with third  parties which has a material
adverse  affect upon  Borrower's  business,  operations,  property or  condition
(financial or otherwise)  including all leases for any premises where  Inventory
or Equipment is located;

                                  (e) any representation,  warranty or statement
made  by  Borrower  hereunder,  in any  Ancillary  Agreement,  any  certificate,
statement or document  delivered  pursuant to the terms hereof, or in connection
with the transactions contemplated by this Agreement should at any time be false
or misleading in any material respect;

                                  (f) an  attachment or levy is made upon any of
Borrower's  assets having an aggregate value in excess of $250,000,or a judgment
is rendered against Borrower or any of Borrower's property involving a liability
of more than $250,000, which shall not have been vacated, discharged,  stayed or
bonded pending appeal or  reconsideration  within sixty (60) days from the entry
thereof;

                                  (g) any  change  in  Borrower's  condition  or
affairs (financial or otherwise) which in Lender's  reasonable belief materially
impairs the Collateral or the ability of Borrower to perform its Obligations;

                                  (h) any lien  created  hereunder  or under any
Ancillary  Agreement for any reason ceases to be or is not a valid and perfected
lien having a first priority  interest other than as to assets which are subject
to Permitted Liens which are purchase money security interests,  but only to the
extent Lender's lien is not a first priority security interest in such assets;

                                  (i) Borrower shall (i) apply for or consent to
the  appointment  of, or the taking of  possession  by, a  receiver,  custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) make a general  assignment  for the benefit of creditors,  (iii) commence a
voluntary  case  under  the  federal  bankruptcy  laws (as now or  hereafter  in
effect),  (iv) be  adjudicated  a  bankrupt  or  insolvent,  (v) file a petition
seeking to take  advantage of any other law providing for the relief of debtors,
(vi)  acquiesce  to, or fail to have  dismissed,  within  thirty (30) days,  any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;

                                  (j)  Borrower   shall  admit  in  writing  its
inability,  or be generally unable, to pay its debts as they become due or cease
operations of its present business;

                                  (k) Greka Energy  Corporation  shall (i) apply
for or consent to the appointment  of, or the taking  possession by, a receiver,
custodian,  trustee or liquidator  of itself or of all or a substantial  part of
its property,  (ii) admit in writing its inability,  or be generally  unable, to
pay its debts as they become due or cease  operations  of its present  business,
(iii) make a general  assignment  for the benefit of creditors,  (iv) commence a
voluntary  case  under  the  federal  bankruptcy  laws (as now or  hereafter  in
effect),  (v) be  adjudicated  a  bankrupt  or  insolvent,  (vi) file a petition
seeking to take  advantage of any other law providing for the relief of debtors,
(vii)  acquiesce to, or fail to have  dismissed,  within  thirty (30) days,  any
petition filed against it in any involuntary  case under such  bankruptcy  laws,
or(viii) take any action for the purpose of effecting any of the foregoing;

                                      -37-
<PAGE>

                                  (l)  Borrower  directly or  indirectly  sells,
assigns,  transfers,   conveys,  or  suffers  or  permits  to  occur  any  sale,
assignment,  transfer or  conveyance  of any assets of Borrower or any  interest
therein, except as permitted herein;

                                  (m) Borrower  fails to operate in the ordinary
course of business;

                                  (n) Lender  shall in good  faith  deem  itself
insecure or unsafe or shall have a reasonable  belief that there is or will be a
material diminution in value, removal or material waste of the Collateral;

                                  (o) a default by Borrower in the payment, when
due, of any principal of or interest on any  indebtedness  for money borrowed in
excess of $250,000;

                                  (p) any Change of Ownership; or

                                  (q) The  occurrence  of any default  under the
Conoco  Indemnification  Agreement  which would have the effect of impairing the
enforceability or financial benefits to Borrower of such Agreement;

                                  19.  Remedies.  (a) Upon the  occurrence of an
Event of Default  pursuant to Section 18 (i) herein,  all  Obligations  shall be
immediately due and payable and this Agreement shall be deemed terminated;  upon
the occurrence and  continuation  of any other of the Events of Default,  Lender
shall have the right to demand repayment in full of all Obligations,  whether or
not otherwise due and/or to terminate this  Agreement  without  advance  notice.
Until all  Obligations  have been  fully  satisfied,  Lender  shall  retain  its
security interest in all Collateral. Lender shall have, in addition to all other
rights and remedies provided herein,  the rights and remedies of a secured party
under the Uniform  Commercial  Code, and under other  applicable  law, all other
legal and equitable  rights to which Lender may be entitled,  including  without
limitation, the right to take immediate possession of the Collateral, to require
Borrower to assemble  the  Collateral,  at  Borrower's  expense,  and to make it
available  to  Lender  at a place  designated  by  Lender  which  is  reasonably
convenient  to both  parties  and to enter any of the  premises  of  Borrower or
wherever the  Collateral  shall be located,  with or without force or process of
law,  and to keep and store the same on said  premises  until  sold (and if said
premises shall be the property of Borrower, Borrower agrees not to charge Lender
for  storage  thereof  for a period up to at least sixty (60) days after sale or
disposition of said Collateral). Further, Lender may, at any time or times after
default by Borrower,  sell and deliver all  Collateral  held by or for Lender at
public or private sale for cash,  upon credit or  otherwise,  at such prices and
upon such terms as Lender,  in Lender's sole  discretion,  deems  advisable,  or
Lender may otherwise recover upon the Collateral in any commercially  reasonable
manner as Lender,  in its sole discretion,  deems  advisable.  Except as to that
part of the Collateral  which is perishable or threatens to decline  speedily in
value or is of a type customarily sold on a recognized  market,  the requirement
of reasonable  notice shall be met if such notice is mailed  postage  prepaid to
Borrower at Borrower's  address as shown in Lender's records,  at least ten (10)
days before the time of the event of which notice is being given.  Lender may be
the purchaser at any sale, if it is public.  In connection  with the exercise of
the foregoing  remedies,  Lender is granted  permission to use all of Borrower's
trademarks,  trade names, trade styles, patents, patent applications,  licenses,
franchises and other  proprietary  rights which are used in connection  with (a)
Inventory  for the purpose of disposing of such  Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished  goods.  The proceeds of
sale shall be applied first to all costs and expenses of sale, including but not
limited to attorneys'  fees, and second to the payment (in whatever order Lender
elects) of all  Obligations.  Lender  will  return any  excess to  Borrower  and
Borrower shall remain liable to Lender for any deficiency.

                                      -38-
<PAGE>

                                  20. Waiver;  Cumulative  Remedies.  Failure by
Lender to  exercise  any right,  remedy or option  under this  Agreement  or any
supplement hereto or any other agreement between Borrower and Lender or delay by
Lender in exercising the same, will not operate as a waiver; no waiver by Lender
will  be  effective  unless  it is in  writing  and  then  only  to  the  extent
specifically  stated.  Lender's rights and remedies under this Agreement will be
cumulative and not exclusive of any other right or remedy which Lender may have.

                                  21.   Application   of   Payments.    Borrower
irrevocably  waives the right to direct the  application of any and all payments
at any time or times hereafter  received by Lender from or on Borrower's behalf,
and Borrower  hereby  irrevocably  agrees that Lender shall have the  continuing
exclusive  right to apply and reapply any and all payments  received at any time
or times hereafter against  Borrower's  Obligations  hereunder in such manner as
Lender  may deem  advisable  notwithstanding  any  entry by  Lender  upon any of
Lender's books and records.  In the event that Lender shall elect to reapply any
payments hereunder, Lender will not perform such reapplication in a manner which
would result in a payment default under the Term Loan.

                                  22. Depository Accounts.  Any payment received
by Borrower on account of any Collateral  shall be held by Borrower in trust for
Lender,  and Borrower shall  promptly  deliver same in kind to Lender or deposit
all such  payments  into a cash  collateral  account  at such bank as Lender may
designate for  application  to payment of the  Obligations.  Borrower shall also
execute such further documents as Lender may deem necessary to establish such an
account and all funds  deposited in such  account  shall  immediately  be deemed
Lender's property.

                                  23.  Lock Box  Accounts.  Borrower  shall,  at
Lender's request, instruct all of its Customers to make such payments on account
of Receivables to an account under Lender's dominion and control at such bank as
Lender may  designate.  Borrower  shall also execute  such further  documents as
Lender may deem necessary to establish such an account,  and all funds deposited
in such account shall immediately be deemed Lender's property.

                                      -39-
<PAGE>

                                  24. Revival.  Borrower  further agrees that to
the extent  Borrower  makes a payment or  payments to Lender,  which  payment or
payments  or any part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other  party under any  bankruptcy  act,  state or federal  law,
common law or equitable cause, then, to the extent of such payment or repayment,
the  obligation  or part thereof  intended to be satisfied  shall be revived and
continued in full force and effect as if said payment had not been made.

<PAGE>

                                  25.  Syndication.  Borrower  acknowledges that
after  the date  hereof,  Lender  may at any time and from  time to time  select
additional  Co-Lenders to make Loans to Borrower under this  Agreement,  so that
this  Agreement  shall then  constitute a syndicated  credit  facility.  In such
event, the term "Lender" for all purposes of this Agreement,  as well as each of
the other Ancillary  Agreements,  shall instead refer to GMAC as agent,  for the
benefit of itself  and each and all of the other  Co-Lenders  ("Agent").  In any
such  case,  the  Agent  shall  exclusively  make all  determinations  as to the
management,  handling and  enforcement  of this  Agreement in all  respects,  on
behalf of itself and each of the other  Co-Lenders,  subject  to no  limitations
whatsoever.  Without  limiting the  foregoing:  (a) the term "Lender" shall mean
each and all of the Co-Lenders in the syndicated  facility,  including,  without
limitation, GMAC or any successor in interest to GMAC, the Agent itself and each
of the other Co-Lenders;  (b) each and all of the  representations,  warranties,
covenants,  Collateral  and  agreements,  protections,  guarantees,  rights  and
remedies  referred to or otherwise set forth in this Agreement and the Ancillary
Agreements are to run for the benefit of the Agent, on behalf of itself and each
other  Co-Lender;  and (c) each Co-Lender is accordingly also to have all of the
rights, security interests, remedies and other benefits and protections provided
to the  Lender  in  this  Agreement  and the  Ancillary  Agreements,  except  as
otherwise set forth in this Agreement.  Each Co-Lender is also to acknowledge in
writing,  to the Agent,  the Borrower and each of the other  Co-Lenders (if any)
and in a manner  satisfactory  to the Agent and the Borrower (in the case of the
Borrower on the condition that the Borrower shall not unreasonably  withhold its
approval thereto), that it shall be a party to this Agreement as a Co-Lender and
that  it  shall  have  all of the  responsibilities  of the  Lender  under  this
Agreement  and the  Ancillary  Agreements  of the Lender and of a  Co-Lender  in
accordance with the pertinent provisions thereof, including, without limitation,
the manner of the handling of the Loans and the maximum  principal dollar amount
of Loans which each such Co-Lender  shall be obligated to extend as Loans to the
Borrower as their respective Commitment. Moreover, in any case where an Agent is
acting for itself and other Co-Lenders  hereunder,  the Borrower agrees to cause
any guarantors to execute and deliver such additional  documentation as GMAC, as
Agent (or any successor  Agent) may request at any time and from time to time in
order to reflect or evidence that each and all of their  respective  guarantees,
whether now existing or hereafter arising, run for the benefit and protection of
the Agent,  on behalf of itself and the other  Co-Lenders  and include,  without
limitation,  all Loans due or to become  due to each and all of the  Co-Lenders;
provided,  however, that such documentation shall permit the payment to Agent on
behalf of Co-Lenders and shall not increase the aggregate liability  thereunder.
In the event that such a syndicated facility may exist by reason of the addition
of any  Co-Lender(s),  GMAC (or any successor Agent as provided for below) is to
act in the capacity of Agent under such  syndicated  Agreement,  for itself as a
Co-Lender entitled to all of the rights and benefits of a Co-Lender and for each
and  all  of the  other  Co-Lenders  under  this  Agreement  and  the  Ancillary
Agreements.  Without limiting the generality of the foregoing, in the event that
a  syndicated  facility  may  exist  hereunder  by reason  of the  existence  of
Co-Lenders,  no  Co-Lender  other  than  Agent  shall  have the right to conduct
audits,  declare an Incipient Event of Default or an Event of Default or conduct
due diligence in accordance with this Agreement,  establish,  set,  maintain and
adjust  reserves or reserve  requirements  to the same extent that the Lender is
permitted when a syndicated  facility does not exist. As of the Closing Date and
in relation to any such Agent/Co-Lender  arrangements,  the following additional
provisions are to supplement this Agreement:

                                      -40-
<PAGE>

                                  (a) Agent and Co-Lender  Provisions.  Borrower
recognizes  that after the  Closing  Date,  the Lender  may,  in  Lender's  sole
discretion:  (i) select additional Co-Lenders at any time and from time to time;
and (ii) resign at any time as Agent,  provided that such  resignation  complies
with the terms of this Section 25 (a).

                                  Should   the  Agent,   whether   GMAC  or  any
successor  Agent,  serve  under  this  Agreement  and act for  itself  and other
Co-Lenders  as to the Loans,  the  following  supplemental  provisions  shall be
applicable  and shall survive the  termination  of any such  Co-Lender or agency
relationships:

                                         (1) Authorization  and Action.  Each of
the  Co-Lenders  hereby  irrevocably   appoints  and  authorizes  the  Agent  to
exclusively  take all actions as Agent on its behalf and to exercise all rights,
powers and remedies  under this  Agreement as are delegated to the Lender or the
Agent by the terms thereof as modified herein, together with such rights, powers
and remedies as are reasonably  incidental  thereto.  The duties of the Agent to
each Co-Lender  shall be mechanical and  administrative  in nature and the Agent
shall not by reason of this  Agreement  or otherwise be a trustee or a fiduciary
for any of the  Co-Lenders.  The Agent shall have no duties or  responsibilities
except those expressly set forth herein.  The Agent shall be fully authorized to
act or to refrain  from  acting at any time and from time to time in  accordance
with its sole discretion  under the terms and provisions of this Agreement,  the
Ancillary Agreements and each of them. The Agent may at all times act or refrain
from acting  without any  requirement  of seeking the approval or the consent of
any of the Co-Lenders.  As to all matters set forth in this Agreement, the Agent
shall not be required  to exercise  any  discretion  or take any action,  but as
noted herein shall be  authorized to act or to refrain from acting (and shall be
fully protected in so acting or so refraining from acting) upon the instructions
of the  Majority  Lenders,  and  such  instructions  shall be  binding  upon all
Co-Lenders;  provided, however, that the Agent shall not be required to take any
action  which  exposes the Agent to personal  liability  or which is contrary to
this Agreement or applicable law. It is agreed that the Agent may perform any of
its duties hereunder by or through its officers, directors, agents or employees.

                                      -41-
<PAGE>

                                         (2) Liability of Agent. The Agent shall
have no duties or  responsibilities  except  those  expressly  set forth in this
Agreement.  Neither  the Agent  nor any of its  directors,  officers,  agents or
employees  shall be liable for any action  taken or omitted to be taken by it or
them under or in connection  with this  Agreement as Agent in the absence of its
or their own gross  negligence  or  willful  misconduct.  Without  limiting  the
foregoing,  the Agent: (A) may consult with legal counsel (including counsel for
the Borrower),  independent  public accountants and other experts selected by it
and shall not be liable  for any  action  taken or  omitted  to be taken in good
faith by it in  accordance  with the  advice  of such  counsel,  accountants  or
experts;  (B) makes no warranty or representation to any Co-Lender and shall not
be   responsible   to  any   Co-Lender   for  any   statements,   warranties  or
representations made in or in connection with this Agreement; (C) shall not have
any duty to ascertain or to inquire as to the  performance  or observance of any
of the terms,  covenants,  or conditions  of this  Agreement on the apart of the
Borrower,  or to inspect the property  (including  the books and records) of the
Borrower;  (D) shall not be  responsible to any Co-Lender for the due execution,
legality, validity,  enforceability,  genuineness,  perfection,  sufficiency, or
value of this Agreement or any other instrument or document  furnished  pursuant
thereto;  and (E) shall incur no liability under or in respect of this Agreement
by acting upon any notice,  consent,  certificate or other instrument or writing
(which may be by telegram,  telex, or facsimile  transmission) believed by it to
be genuine and signed or sent by the proper party or parties.  Without  limiting
the foregoing, the Agent shall have no obligation whatsoever to any of the other
Co-Lenders  or to any other  Person to assure that the  Collateral  exists or is
owned by the  Borrower or is cared for,  protected  or insured or that the Liens
granted  to  the  Agent  herein  or  pursuant   hereto  have  been  properly  or
sufficiently  or  lawfully  created,  perfected,  protected  or  enforced or are
entitled to any particular priority, or to exercise or continue exercising,  any
of the rights,  authorities and powers granted or available to the Agent in this
Agreement, it being understood and agreed that in respect of the Collateral,  or
any act,  omission or event related thereto,  the Agent may act in any manner it
may deem appropriate, in its sole discretion,  given the Agent's own interest in
the Collateral as one of the Co-Lenders.

                                         (3)  Rights of Agent as a Lender.  With
respect to its making of Loans  under this  Agreement,  the Agent shall have the
same rights and powers  under this  Agreement as if and to the same extent as if
the same ran directly to itself or any other Co-Lender and may exercise the same
in the place and stead of each such  Co-Lender  as though it were not the Agent;
and the term  "Lender",  "Co-Lender" or  "Co-Lenders"  shall  therefore,  unless
otherwise expressly indicated, include the Agent in its individual capacity. The
Agent and its Affiliates may accept deposits from, lend money to, act as trustee
under  indentures  of, and  generally  engage in any kind of  business  with the
Borrower,  its  Subsidiaries  or Affiliates,  and any Person who may do business
with or own  securities  of the Borrower or any  Subsidiary  or Affiliate of the
Borrower, all as if the Agent were not the Agent and without any duty to account
therefor to the Co-Lenders.

                                         (4) Independent Credit Decisions.  Each
of the  Co-Lenders  shall  acknowledge  that it has,  independently  and without
reliance  upon the Agent or any of the  other  Co-Lenders  and  based  upon such
documents  and  information  as it has  deemed  appropriate,  shall make its own
credit  analysis and decision to enter into this Agreement as a Co-Lender and to
be bound by all of the terms and provision hereof,  each of the Co-Lenders shall
also acknowledge that it will, independently and without reliance upon the Agent
or any of the other Co-Lenders 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. Except for notices, reports
and other  documents and information  expressly  required to be furnished to the
Co-Lenders   by  the  Agent   hereunder,   the  Agent  shall  have  no  duty  or
responsibility  to  provide  any of the  Co-Lenders  with  any  credit  or other
information  concerning  the affairs,  financial  condition,  or business of the
Borrower, or any Subsidiary or any Affiliate of the Borrower which may come into
the possession of the Agent or any of its Affiliates.

                                      -42-
<PAGE>

                                         (5)      General      Immunity      and
Indemnification.  Neither the Agent nor any of its directors,  officers, agents,
attorneys or employees  shall be liable to any Co-lender for any action taken or
omitted to be taken by it or them  hereunder or in connection  herewith,  except
for its or their own willful  misconduct  or gross  negligence.  The  Co-Lenders
agree to  indemnify  the Agent (to the extent not  reimbursed  by the  Borrower)
ratably  according  to the  respective  amounts of their  Commitments,  from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits,  costs,  expenses or  disbursements  of any kind or
nature  whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way  relating  to or arising out of this  Agreement,  or any action
taken or omitted by the Agent under this  Agreement,  provided  that none of the
Co-Lenders  shall be liable for any  portion of any of the  foregoing  resulting
from the Agent's gross negligence of willful  misconduct.  Without limitation of
any of the foregoing,  each of the Co-Lenders  agrees to reimburse the Agent (to
the extent not reimbursed by the Borrower)  promptly upon demand for its ratable
share of any  out-of-pocket  expenses  (including  counsel fees) incurred by the
Agent in connection with the preparation,  administration, or enforcement of, or
legal advice in respect of, rights or  responsibilities  under or in relation to
this Agreement.  The Borrower  unconditionally  and without limitation agrees to
indemnify,  defend and hold harmless the Agent,  on its own behalf and on behalf
of each of the  other  Co-Lenders,  from and  against  any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind or nature  whatsoever,  arising out of any
litigations, investigations, claims or proceedings, pending or threatened, which
may be imposed on,  incurred by, or asserted  against any of such  Co-Lenders or
the  Agent  in any way  relating  to or  arising  out of the  Borrower  and this
Agreement  and the Ancillary  Agreements  but not arising out of a dispute among
any of the Co-Lenders, Lender or the Agent, provided that the Borrower shall not
be liable  for any  portion  of any of the  foregoing  resulting  from the gross
negligence or willful misconduct of the Agent or the Co-Lender,  as the case may
be; this indemnity  shall survive any  termination of this Agreement and payment
in full of the Obligations. Without limitation of any of the foregoing, Borrower
unconditionally agrees to reimburse the Agent and the Co-Lenders,  promptly upon
demand in full, for any and all out-of-pocket  expenses  (including counsel fees
of the Agent)  incurred by the Agent in connection  with the enforcement of this
Agreement  as to the  Borrower.  In  determining  whether to become a  Co-Lender
hereunder it is recognized that certain  out-of-pocket  expenses may be incurred
by prospective  Co-Lenders (other than the Agent); the Borrower  unconditionally
agrees to reimburse the Agent and each such prospective  Co-Lender promptly upon
demand in full for any and all out-of-pocket expenses (including counsel fees of
each such prospective Co-Lender) incurred in connection with such review.

                                         (6)  Successor  Agent.   GMAC  and  any
successor Agent(s) (each, the "Agent") may resign at any time by giving at least
30 days' prior written notice  thereof to the  Co-Lenders and the Borrower.  Any
successor  Agent shall be a member of the New York Clearing  House, or any other
bank or other financial institution with assets of at least $1 Billion. Upon the
acceptance of any  appointment  as Agent  hereunder by a successor  Agent,  such
successor  Agent shall  thereupon  succeed to and become  vested with all of the
rights, powers,  privileges,  and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and  obligations  under or in relation
to this  Agreement.  After  retiring,  or the  Agent's  resignation  or  removal
hereunder as Agent, the provisions of this subsection shall inure to its benefit
as to any  actions  taken or omitted to be taken by it while it was Agent  under
this Agreement. In the case of any such removal or resignation, however, nothing
contained in this paragraph, is or shall be deemed to limit or change any duties
or responsibilities that the Agent may otherwise have to Borrower as a Co-Lender
under this Agreement,  which limitations or changes may only occur in accordance
with other pertinent terms and provisions hereof.

                                      -43-
<PAGE>

                                         (7)  Revolving  Credit.   Each  of  the
Co-Lenders  severally  agree,  on the  terms  and  conditions  set forth in this
Agreement,  to make Loans to the  Borrower  from time to time  during the period
from the date of their respective  Commitment as a Co-Lender hereunder up to and
including  the last  day of the Term in an  aggregate  principal  amount  not to
exceed at any time  outstanding the amount set opposite such Co-Lender's name in
a written  acknowledgment  satisfactory to Agent and to Borrower,  provided that
the Borrower shall not unreasonably withhold approval thereof,  confirming their
respective undertaking to become a Co-Lender hereunder and to be bound by all of
the terms and provisions  hereof,  as such amount may be reduced pursuant to the
provisions  hereof dealing with  "reduction of  Commitment".  The Agent may, but
shall  not be  obligated  to,  advance  Loans on  behalf  of each and all of the
Co-Lenders to the Borrower.  It is understood  that the obligation of Co-Lenders
to  fund  Loans   hereunder   shall  be  irrevocable  and  not  subject  to  any
qualification  or exception  whatsoever and shall be made in accordance with the
terms  and  conditions  of this  Agreement  under all  circumstances,  including
without  limitation any lack of validity or  enforceability of this Agreement or
any of the Ancillary Agreements,  the existence of any claim, setoff, defense or
other  right which the  Borrower  or any third  party may have at any time,  any
statement of the Borrower or any third party being untrue or  inaccurate  in any
respect,  the surrender or impairment of any Collateral  for the  performance or
observance  of  this  Agreement  or  any  of  the  Ancillary  Agreements  or the
occurrence  of any Incipient  Event of Default or Event of Default.  Each of the
Loans as to which a Co-Lender has so  acknowledged  its  willingness  to co-lend
hereunder  shall be made  available  to the Agent by each of the  Co-Lenders  in
accordance with the terms of this  Agreement,  and shall be remitted in a timely
manner in the proportion that  Co-Lender's  Commitment bears to the total amount
of all the Co-Lenders'  Commitments  hereunder.  Without limiting the foregoing,
each Co-Lender agrees that by no later than the day of each Revolving Loan to be
made  to the  Borrower,  it  shall  deposit  its  pro  rata  share  thereof,  in
immediately  available  funds, in the Borrower's Loan Account with the Agent, or
in such other account satisfactory to the Agent as the Borrower may from time to
time designate. Within the limits of their respective Commitments,  the Borrower
may borrow, repay and reborrow under the revolving Loans.

                                      -44-
<PAGE>

                                  The  failure  of any  Co-Lender  to  make  any
requested  Revolving  Loan to be made by it on the date specified for such Loan,
whether or not such  Co-Lender may be a Restricted  Co-Lender (as defined and as
described below),  shall not relieve it or any other Co-Lender of its respective
obligation  (if  any)  to  make  Loans  hereunder,  but no  Co-Lender  shall  be
responsible  for the failure of any other  Co-Lender to make Loans to be made by
such other Co-Lender(s).  In the event,  however,  that any particular Co-Lender
decides  not to fund any of the Loans to the  Borrower in  accordance  with this
Agreement,  by  reason  of  any  Federal  or  State  banking  agency  regulatory
supervision, limits, constraints or other restrictions applicable to the overall
business  operations  of Co-Lender,  and arises  strictly in relation to general
regulatory   difficulties   or  concerns   applicable  to  that  Co-Lender  (the
"Restricted Co-Lender"),  then: (y) the Restricted Co-Lender unconditionally and
irrevocably  agrees  with the Agent  that the Agent  shall,  following  any such
failure to fund,  have the right at any time to seek to  replace  and to replace
that  Restricted  Co-Lender  with another  Co-Lender  under this  Agreement,  or
alternatively,  the  Agent  itself,  may be  substituted  in the  place  of such
Restricted  Co-Lender.  Under  such  circumstances,  upon any  such  replacement
occurring  and upon  payment  to the  Restricted  Co-Lender  by any  replacement
Co-Lender,  or by the Agent,  of the principal  balance of all Loans owed to the
Restricted  Co-Lender,  together  with all  accrued  interest  thereon:  (A) the
Restricted  Co-Lender  shall no longer act as a Co-Lender to the Borrower  under
this Agreement; and (B) simultaneously, the Restricted Co-Lender shall be deemed
to have fully released and  discharged  the Agent,  the Borrower and each of the
Co-Lenders  from any and all  obligations,  claims and  liabilities  under or in
relation to this  Agreement  (but this shall not release or be deemed to release
the  Restricted  Co-Lender  from any claims,  liabilities  or obligations to the
Agent, the other Co-Lenders, or to the Borrower by reason of the lack of funding
or any  related  matters);  and (z) if and to the extent that the  Borrower  may
certify in writing  to the Agent that the lack of funding of the  Borrower  by a
Restricted Co-Lender may materially and adversely affect the Borrower's business
operations and for so long as necessary  until  arrangements  with a replacement
Co-Lender  may be put into place,  the Agent agrees to fund any  amount(s)  that
otherwise were to have been funded by the  Restricted  Co-Lender and to increase
the amount of the Agent's  Commitment  to the Borrower  accordingly,  until such
time, if any, as replacement Co-Lender arrangements may be finalized.

                                         (8)  Loan  Account.   The  Agent  shall
maintain a loan  account  ("Loan  Account")  in which shall be recorded  (i) all
Loans made by the Agent on behalf of the Co-Lenders to the Borrower  pursuant to
this  Agreement,  (ii) all payments made by the Borrower on all such Loans,  and
(iii) all other  appropriate  debits and credits as provided in this  Agreement,
including without  limitation,  all fees,  charges,  expenses and interest.  All
entries in the  Borrower's  Loan Account  shall be made in  accordance  with the
Agent's customary accounting practices as in effect from time to time.

                                         (9) Notice and Manner of Borrowing. The
Borrower  shall give the Agent a Notice of Borrowing  under this  Agreement,  at
least on (1) Business Day before each request for a Revolving Loan,  specifying:
(i) the date of such requested Loan; and (ii) the amount of such Loan. The Agent
shall promptly  notify each Co-Lender of each such Notice.  Not later than 12:00
a.m. (New York Time) on the date of such  Revolving  Loans,  each Co-Lender will
make  available to the Agent such  Co-Lender's  pro rata share of such Revolving
Loans.  After the  Agent's  receipt of such funds not later than 4:00 p.m.  (New
York  time) on the date of such  Revolving  Loans,  the  Agent  will  make  such
requested  Revolving  Loan  available to the Borrower in  immediately  available
funds, up to an aggregate  outstanding amount at any time and from time to time,
not to exceed the Maximum  Loan Amount by  crediting  the amount  thereof to the
Borrower's  Loan Account at the Payment  Office or into  another  account of the
Borrower  specifically  designated by the Borrower on the date and in the amount
set forth in the applicable Notice of Borrowing.

                                      -45-
<PAGE>

                                         (10)  Nonreceipt  of  Funds  by  Agent.
Unless the Agent shall have received  notice from a Co-Lender  prior to the date
on which such Co-Lender is to provide funds to the Agent for a Loan to be and by
such  Co-Lender  that such  Co-Lender  will not make available to the Agent such
funds, the Agent may assume that such Co-Lender has made such funds available to
the  Agent on the date of such Loan in  accordance  with the  provisions  hereof
entitled "Notice and Manner of Borrowing",  and the Agent in its sole discretion
may,  but shall not be  obligated  to, in reliance  upon such  assumption,  make
available to the  Borrower on such date a  corresponding  amount.  If and to the
extent that such  Co-Lender  shall not have so made such funds  available to the
Agent,  such  Co-Lender  agrees to repay to the Agent  forthwith  on demand such
corresponding  amount together with interest thereon, for each day from the date
such  amount is made  available  to the  Borrower  until the date such amount is
repaid to the Agent,  at the customary  rate set by the Agent for the correction
of errors among  correspondent  banks for three  Business Days and thereafter at
the  Alternate  Base  Rate.  If such  Co-Lender  shall  repay to the Agent  such
corresponding  amount  forthwith,  such amount so repaid shall  constitute  such
Co-Lender's Loan for purposes of this Agreement.  If such Co-Lender does not pay
such  corresponding  amount  forthwith upon Agent's demand  therefor,  the Agent
shall promptly notify the Borrower,  and the Borrower shall immediately pay such
corresponding  amount to the Agent with interest thereon,  for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid to the  Agent,  at the rate of  interest  applicable  at the time to such
proposed Loan.

                                  Unless the Agent  shall have  received  notice
from  the  Borrower  prior  to the  date  on  which  any  payment  is due to the
Co-Lenders  hereunder  that the Borrower will not make such payment in full, the
Agent may assume that the Borrower has made such payment in full to the Agent on
such date and the Agent in its sole  discretion  may, but shall not be obligated
to, in reliance upon such assumption,  cause to be distributed to each Co-Lender
on such due date an amount  equal to the amount then due to such  Co-Lender.  If
and to the extent the  Borrower  shall not have so made such  payment in full to
the Agent,  each  Co-Lender  shall repay to the Agent  forthwith  on demand such
amount  distributed to such Co-Lender  together with interest thereon,  for each
day from the date such amount is distributed  to such  Co-Lender  until the date
such Co-Lender repays such amount to the Agent, at the customary rate set by the
Agent for the correction of errors among  correspondent banks for three Business
Days and thereafter at the Alternate Base Rate. All of the provisions  contained
in this  subsection  (k) shall,  however,  be subject  to the  provisions  above
dealing with any Restricted Co-Lender(s).

                                         (11) Amendment, Termination, Waiver and
Action by the Agent. No Amendment,  modification,  termination, or waiver of any
provision of this  Agreement  or any of the  Ancillary  Agreements  to which the
Borrower is a party,  nor consent to any  departure by the Borrower  from any of
the Ancillary Agreements to which it is a party, shall in any event be effective
unless  the same shall be in  writing  and  signed by the  Agent,  and then such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given; provided,  however, that except to the limited
extent  specifically  and  affirmatively  required  by the terms and  provisions
hereof, the Agent is at liberty and without any applicable restriction,  to act,
or to omit to act, to enforce or to refrain from  enforcing,  in accordance with
the terms and  provisions of this  Agreement,  without any notice to and without
obtaining any consent or approval of any of the Co-Lenders hereunder.  The Agent
need not take any action hereunder and no amendment,  waiver or consent shall be
called for to be entered into by the Agent hereunder.

                                      -46-
<PAGE>

                                         (12)    Execution   and   Delivery   of
Supplemental  Documents and Action.  Borrower agrees at the request of the Agent
made at any time  and  from  time to time  to:  (a)  execute  and to cause to be
delivered  to the Agent,  on behalf of itself  and each of the other  Co-Lenders
hereunder such further  documentation  as the Agent or any of the Co-Lenders may
deem  reasonably  necessary or  desirable  in order to  implement  the terms and
provisions hereof; and (b) take such reasonable  additional steps and actions as
the Agent requests for any of such purposes.

                                         (13)   Confidentiality.   Each  of  the
Co-Lenders  agrees to be bound in all  respects by the terms and  provisions  of
this Agreement,  including  without  limitation all  confidentiality  provisions
hereof and the Co-Lenders  shall keep  confidential  all information  which this
Agreement states is not to be disseminated and shall otherwise fully comply with
all confidentiality requirements of this Agreement.

                                         (14) Fees and Entitlements. Each of the
Co-Lenders  agree that they shall not be  entitled to receive any portion of any
fees, charges or any other compensation which the Agent is or at any time may be
entitled to charge or receive under or in relation to this  Agreement,  or under
or in relation to any other  agreement or arrangement  that the Agent may now or
hereafter have with or concerning the Borrower,  or any of its  Subsidiaries  or
Affiliates.  As their  exclusive  entitlement  as a  Co-Lender  and in any other
capacity  under or in  relation  to this  Agreement  or  otherwise,  each of the
Co-Lenders  other than the Agent shall each be entitled solely to the payment of
principal  and  interest  due  or to  become  due  under  the  Revolving  Loans,
corresponding  to  payments  made in  relation  to  Loans  made to the  Borrower
hereunder pursuant to the respective Commitments of each such Co-Lender.

                                         (15)  Counterparts.  Any  agreement  or
consent of the Co-Lenders may be executed in any number of  counterparts  and by
different   Co-Lenders   and  other  parties  to  this   Agreement  in  separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of  which  when  taken  together  shall  constitute  one  and  the  same
agreement.

                                         (16)  Statements.   All  Loans  to  the
Borrower, and all other debits and credits provided for in this Agreement, shall
be evidenced by entries made by the Agent in its internal  data control  systems
showing  the date,  amount and reason for each such debit or credit.  Until such
time as the Agent shall have  rendered to the  Borrower  written  statements  of
account as provided herein,  the balance in the Borrower's Loan Account,  as set
forth in the  Agent's  most recent  printout,  shall be  rebuttably  presumptive
evidence of the amounts due and owing the Co-Lenders by the Borrower. Each month
the Agent shall render to the Borrower a statement  setting forth the balance of
the Borrower's Loan Account, including principal,  interest,  expenses and fees.
Each such  statement  shall be subject to  adjustment  by the Agent,  but shall,
absent  manifest errors or omissions,  be presumed  correct and binding upon the
Borrower and shall  constitute an account stated unless,  within sixty (60) days
after receipt of any statement from the Agent, the Borrower shall deliver to the
Agent  written  objection  thereto  specifying  the  error  or  errors,  if any,
contained in such statement.

                                      -47-
<PAGE>

                                         (17)  Defaults/Action by Agent.  Should
an Event of  Default  exist or occur  which  may be  declared  hereunder  at the
Agent's option, the Agent shall at the written election to that effect delivered
to the Agent by the Majority  Lenders,  declare such an Event of Default to have
occurred under this Agreement. For all purposes of this Agreement,  however, the
Agent may  assume  that no Event of Default or  Incipient  Event of Default  has
occurred and is  continuing  unless  Agent has actual  knowledge of the Event of
Default or Incipient Event of Default,  has received notice from the Borrower or
a  Co-Lender  stating the nature of the Event of Default or  Incipient  Event of
Default and in the instance where such notice is from a Co-Lender,  stating that
the Co-Lender  considers  the Event of Default or Incipient  Event of Default to
have occurred and to be continuing.

                                         Except where an affirmative  obligation
on the part of the Agent to act is specifically set forth herein,  requiring the
Agent to act,  the  Agent  may,  but  shall  not be  required  to  exercise  its
discretion  to act or not to act.  The Agent shall not be required to act or not
act if to do so would expose Agent to liability,  would be inconsistent with the
Agent's  practice in similar  situations when acting solely for its own account,
or would be contrary to this Agreement or any of the Ancillary  Agreements or to
applicable law.

                                  26. Notices.  Any notice or request  hereunder
may be given to Borrower or Lender at the  respective  addresses set forth below
or as may  hereafter be specified in a notice  designated as a change of address
under  this  paragraph.  Any  notice  or  request  hereunder  shall  be given by
registered or certified mail, return receipt requested,  or by overnight mail or
by telecopy  (confirmed by mail).  Notices and requests shall be, in the case of
those by mail or overnight mail, deemed to have been given when deposited in the
mail or with the overnight  mail carrier,  and, in the case of a telecopy,  when
confirmed.

                           Notices shall be provided as follows:

                           If to the Lender:

                           GMAC COMMERCIAL CREDIT LLC
                           1290 Avenue of the Americas
                           New York, New York 10104
                           Attention: Frank Imperato
                           Telephone: (212) 408-7026
                           Telecopy:  (212) 408-7126

                                      -48-
<PAGE>

If to the Borrower:        Greka Integrated, Inc.
                           3201 Air Park Drive, Suite 201
                           Santa Maria, CA 93455
                           Attention: Randeep S. Grewal, Chairman, CEO & Pres.
                           Telephone: (805)347-8700
                           Telecopy:   (805) 347-1072

With a copy to:
                           Greka Integrated, Inc.
                           630 Fifth Avenue
                           New York, N.Y. 10111

                           Attention: Susan Whalen, Esq.
                           Telephone: (212) 218-4680
                           Telecopy:   (212) 218-4679

                  27.  Governing  Law and Waiver of Jury Trial.  THIS  AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED  AND ENFORCED IN ACCORDANCE  WITH THE LAWS OF
THE STATE OF NEW YORK.  LENDER  SHALL HAVE THE RIGHTS AND  REMEDIES OF A SECURED
PARTY UNDER APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL
CODE OF NEW YORK.  BORROWER  AGREES THAT ALL ACTIONS  AND  PROCEEDINGS  RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER
OBLIGATIONS  SHALL BE  LITIGATED  IN THE UNITED  STATES  DISTRICT  COURT FOR THE
SOUTHERN  DISTRICT  OF NEW YORK OR, AT  LENDER'S  OPTION,  IN ANY  OTHER  COURTS
LOCATED IN NEW YORK STATE OR ELSEWHERE AS LENDER MAY SELECT AND THAT SUCH COURTS
ARE CONVENIENT FORUMS AND BORROWER SUBMITS TO THE PERSONAL  JURISDICTION OF SUCH
COURTS. BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF
PROCESS  UPON  BORROWER  MAY BE MADE BY CERTIFIED  OR  REGISTERED  MAIL,  RETURN
RECEIPT REQUESTED,  DIRECTED TO BORROWER AT BORROWER'S ADDRESS IN CALIFORNIA AND
NEW YORK  APPEARING  ON  LENDER'S  RECORDS,  AND SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON RECEIPT VIA NATIONALLY  RECOGNIZED  OVERNIGHT COURIER SERVICE THE
SECOND BUSINESS DAY FOLLOWING  DEPOSIT WITH SUCH COURIER  SERVICE.  BOTH PARTIES
HERETO  WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR  PROCEEDING  BETWEEN
BORROWER AND LENDER,  AND  BORROWER  WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR
PROCEEDING  INSTITUTED  BY LENDER  WITH REGARD TO THIS  AGREEMENT  OR ANY OF THE
OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS  (OTHER THAN COMPULSORY  COUNTERCLAIMS)
WHICH IT MAY HAVE.

                  28.  Limitation  of  Liability.   Borrower   acknowledges  and
understands  that in order to  assure  repayment  of the  Obligations  hereunder
Lender may be required to exercise  any and all of Lender's  rights and remedies
hereunder  and agrees that  neither  Lender nor any of Lender's  agents shall be
liable for acts taken or  omissions  made in  connection  herewith or  therewith
except for gross negligence or actual bad faith.

                                      -49-
<PAGE>

                  29.  Entire  Understanding.  This  Agreement and the Ancillary
Agreements  contain the entire  understanding  between  Borrower  and Lender and
constitute  the  complete  agreement  between  the parties  with  respect to the
subject   matter  hereof  and  thereof,   and  any  promises,   representations,
warranties, understandings, or guarantees not contained in this Agreement or the
Ancillary Agreements shall have no force and effect.

                  30.  Modification.   Neither  this  Agreement,  the  Ancillary
Agreements,  nor any portion or  provisions  thereof  may be changed,  modified,
amended, waived, supplemented,  discharged, cancelled or terminated orally or by
any course of dealing,  or in any manner  other than by an agreement in writing,
signed by the parties hereto and thereto.

                  31.  Severability.  Wherever  possible each  provision of this
Agreement or the Ancillary  Agreements shall be interpreted in such manner as to
be  effective  and valid under  applicable  law,  but if any  provision  of this
Agreement or the  Ancillary  Agreements  shall be prohibited by or invalid under
applicable  law  such  provision  shall be  ineffective  to the  extent  of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions thereof.

                  32.   Captions.   All   captions  are  and  shall  be  without
substantive meaning or content of any kind whatsoever.

                  33.  Counterparts.  This  Agreement  may be executed in one or
more  counterparts,  each of which taken together  shall  constitute one and the
same instrument.

                  34. Construction.  The parties acknowledge that each party and
its  counsel  have  reviewed  this   Agreement  and  that  the  normal  rule  of
construction to the effect that any  ambiguities are to be resolved  against the
drafting party shall not be employed in the  interpretation of this Agreement or
any amendments, schedules or exhibits thereto.

         IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.

                                               GREKA INTEGRATED, INC.
ATTEST:

/s/ Susan M. Whalen                            By:/s/ Randeep S. Grewal
--------------------                              -----------------------------
SECRETARY                                         Randeep S. Grewal
                                                  Title: Chairman, CEO & Pres.

                                               SABA REALTY, INC.
ATTEST:

/s/ Susan M. Whalen                            By:/s/ Randeep S. Grewal
--------------------                              -----------------------------
SECRETARY                                         Randeep S. Grewal
                                                  Title: Chairman, CEO & Pres.

                                      -50-
<PAGE>

                                               SANTA MARIA REFINING COMPANY
ATTEST:

/s/ Susan M. Whalen                            By:/s/ Randeep S. Grewal
--------------------                              -----------------------------
SECRETARY                                         Randeep S. Grewal
                                                  Title: Chairman, CEO & Pres.

ATTEST:

                                               GMAC COMMERCIAL CREDIT LLC

/s/ illegible                                  By:/s/Frank Imperato, SVP
---------------------------                       -----------------------------
SECRETARY                                         Title:

                                      -51-
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                                    SCHEDULES

Schedule 1(A)(1) - Santa Maria Oil and Gas Properties  (including  specification
of Initial Santa Maria Oil and Gas Properties and Secondary  Santa Maria Oil and
Gas Properties) - Attached

Schedule 1(A)(2) - Description of Pledged Shares

1.       Certificate  No. 2 for one hundred (100) shares of common stock of Saba
         Realty, Inc.

2.       Certificate No. 2 for one hundred (100) shares of common stock of Santa
         Maria Refining Company.

Schedule 1(A)(3) - Description of Real Property - Attached

Schedule 1(A)(4) - Permitted Liens:

All  encumbrances  disclosed  in  Lender's  UCC  search  of  Borrowers  and  all
encumbrances disclosed in Lender's title policy.

All encumbrances listed on the title opinion dated November 30, 1999 issued with
respect to the Initial  Santa Maria Oil and Gas  Properties,  except the lien in
favor of Bank One Texas, N.A. and provided that the following liens are released
on or before March 31, 2000:

         5.       Oil and Gas Lien in favor of NATCO  against Saba  Petroleum in
                  the amount of $11,  596.12  affecting the Bell Parcel recorded
                  August 20, 1998

         6.       Oil and Gas Lien in favor of R.M.R.  against Saba Petroleum in
                  the amount of $166,228.60 recorded July 21, 1999

         7.       Oil and Gas lien in favor of Pool California  Energy Services,
                  Inc. against Saba Petroleum, Inc. in the amount of $105,164.23
                  recorded May 20, 1999

         8.       State Tax Lien in the amount of $38, 688.00 recorded April 15,
                  1999

All purchase  money security  interest for the purchase of equipment  within the
limitations for capital expenditures in this Agreement.

Liens for taxes not yet due and payable or those being  contested  in good faith
by appropriate  proceedings  diligently conducted so long as such proceedings do
not involve the risk of sale, forfeiture or loss of any of the Collateral or any
interest therein.

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 Materialmen's,  mechanics, workmen's, carriers' or other similar liens relating
 to the  Collateral  for amounts not yet due and payable or being  contested  in
 good faith and by appropriate  proceedings  diligently conducted and so long as
 such proceedings do not involve the risk of sale,  forfeiture or loss of any of
 the Collateral or any interest therein.

 Liens not in excess of  $250,000 in the  aggregate  which have been duly bonded
and released in a manner satisfactory to Lender.

 Schedule 1(A)(5) - Vintage Oil and Gas Properties - Attached

 Schedule 2(k) - Form of Request for Term Loan Advance - Attached

 Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights - Attached

 Schedule 12(l) - Inventory Locations

 1660 Sinton Road, Santa Maria, California 93454

 Schedule 12(m) - Permitted Indebtedness

 None, other than (I) indebtedness for purchase money security  interests as set
 forth above and (ii) indebtedness to Saba Petroleum Company and/or Greka Energy
 Corporation  relating to debt created to facilitate the purchase of the Vintage
 Oil and Gas  Properties  and the  Santa  Maria  Oil and Gas  Properties,  which
 indebtedness  must be disclosed in advance to the Lender and must be subject to
 a Subordination  Agreement in form and substance  satisfactory to Lender in all
 respects.

Schedule 12(cc) - Property and Leases - Attached

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