Document:

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                                                                    Exhibit 4.47

                              COLOR IMAGING, INC.

                                      AND

                                    FORM OF

                               WARRANT AGREEMENT

                         DATED AS OF __________, 2002

AGREEMENT, dated this ________ day of ____________________________________,
2002, among COLOR IMAGING, INC., a Delaware corporation (the "Company"), a
corporation, as Warrant Agent (the "Warrant Agent").

                             W I T N E S S E T H:

WHEREAS, in connection with the Company's offering to the public of 3,500,000
shares of the Company's Common Stock (as defined in Section 1) and 3,500,000
common stock purchase warrants (as defined in Section 1), each warrant entitling
the holder thereof to purchase one share of Common Stock (the "Offering"); and

WHEREAS, the Company desires to provide for the issuance of certificates
representing the Warrants; and

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the issuance and
registration of the Warrants, the issuance of certificates representing the
Warrants, the exercise of the Warrants and the rights of the holders thereof.

NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:

SECTION 1. DEFINITIONS. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:

(a) "Act" shall mean the Securities Act of 1933, as amended.

(b) "Common Stock" shall mean the authorized stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
voting and in the distribution of earnings and assets of the Company which at
the date hereof consists of 20,000,000 shares of Common Stock, par value $.01
per share.

(c) "Commission" shall mean the Securities and Exchange Commission.

(d) "Corporate Office" shall mean the office of the Warrant Agent (or its
successor) at which at any particular time its business in New York, New York,
shall be administered, which office is located on the date hereof
c/o                        .

(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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(f) "Exercise Date" shall mean, subject to the provisions of Section 5(b)
hereof, as to any Warrant, the date on which the Warrant Agent shall have
received both (i) the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder hereof or his
attorney duly authorized in writing, and (ii) payment in cash or by official
bank or certified check made payable to the Warrant Agent for the account of the
Company, of the amount in lawful money of the United States of America equal to
the applicable Exercise Price (as hereinafter defined) in good funds.

(g) "Exercise Price" shall mean, subject to modification and adjustment as
provided in Section 8, $2.00 per share of Common Stock.

(h) "Market Price" shall mean the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last reported sales
prices for the last three (3) trading days, in either case as officially
reported by the principal securities exchange on which the Common Stock is
listed or admitted to trading or by the Nasdaq Stock Market, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
or quoted by Nasdaq, the average closing bid price as furnished by Nasdaq
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or if the Common Stock is not quoted on Nasdaq, as determined in
good faith (using customary valuation methods) by resolution of the members of
the Board of Directors of the Company, based on the best information available
to it.

(i) "NASD" shall mean the National Association of Securities Dealers, Inc.

(j) "Nasdaq" shall mean the Nasdaq Stock Market.

(k) "Registered Holder" shall mean the person in whose name any certificate
representing the Warrants shall be registered on the books maintained by the
Warrant Agent pursuant to Section 6.

(l) "Transfer Agent" shall mean              , or its authorized successor.

(m) "Warrants" shall mean common stock purchase warrants offered to the public
in connection with this Offering, each Warrant entitling the holder thereof to
purchase one share of Common Stock, exercisable at an exercise price of $2.00
per share at any time effective after the effective date of the Company's
prospectus until the Warrant Expiration Date.

(n) "Warrant Certificate" shall mean a certificate representing each of the
Warrants substantially in the form annexed hereto as Exhibit A.

(o) "Warrant Expiration Date" shall mean 5:00 p.m. (New York time), on December
31, 2003; PROVIDED that if such date shall in the State of New York be a holiday
or a day on which banks are authorized to close, then 5:00 p.m. (New York time)
on the next following day which, in the State of New York, is not a holiday or a
day on which banks are authorized to close. Upon five business days' prior
written notice to the Registered Holders, the Company shall have the right to
extend the Warrant Expiration Date.

SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.

(a) Each Warrant shall initially entitle the Registered Holder of the Warrant
Certificate representing such Warrant to purchase at the Exercise Price therefor
until the Warrant Expiration Date one share of Common Stock upon the exercise
thereof in accordance with the terms hereof, subject to modification and
adjustment as provided in Section 8.

(b) Upon execution of this Agreement, Warrant Certificates representing the
number of Warrants sold pursuant to the Offering (subject to modification and
adjustment as provided in Section 8), shall be executed by the Company and
delivered to the Warrant Agent.

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(c) From time to time, up to the Warrant Expiration Date, the Warrant Agent
shall countersign and deliver Warrant Certificates in required denominations of
one or whole number multiples thereof to the person entitled thereto in
connection with any transfer or exchange permitted under this Agreement. Except
as provided herein, no Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder and those issued upon the exercise of
fewer than all Warrants held by the exercising Registered Holder, (ii) Warrant
Certificates issued upon any transfer or exchange of Warrants, (iii) Warrant
Certificates issued in replacement of lost, stolen, destroyed or mutilated
Warrant Certificates pursuant to Section 7, and (iv) at the option of the
Company, Warrant Certificates in such form as may be approved by its Board of
Directors, to reflect any adjustment or change in the Exercise Price, the number
of shares of Common Stock purchasable upon exercise of the Warrants therefor
made pursuant to Section 8 hereof.

SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES.

(a) The Warrant Certificates shall be substantially in the form annexed hereto
as Exhibit A (the provisions of which are hereby incorporated herein) and may
have such letters, numbers or other marks of identification or designation and
such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates) and issued in registered form.
Warrants shall be numbered serially with the letter "W" on the Warrants.

(b) Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board or Chief Executive Officer or President or any Vice
President and by its Treasurer or an Assistant Treasurer or its Secretary or an
Assistant Secretary, by manual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a facsimile of the Company's seal.
Warrant Certificates shall be manually countersigned by the Warrant Agent and
shall not be valid for any purpose unless so countersigned. In any case any
officer of the Company who shall have signed any of the Warrant Certificates
shall cease to be such officer of the Company before the date of issuance of the
Warrant Certificates or before countersignature by the Warrant Agent and issue
and delivery thereof, such Warrant Certificates, nevertheless, may be
countersigned by the Warrant Agent, issued and delivered with the same force and
effect as though the person who signed such Warrant Certificates had not ceased
to be such officer of the Company. After countersignature by the Warrant Agent,
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder promptly and without further action by the Company, except as otherwise
provided by Section 4(a) hereof.

SECTION 4. EXERCISE.

(a) Warrants in denominations of one or whole number multiples thereof may be
exercised by the Registered Holder thereof commencing at any time on or after
the effective date of the Company's prospectus for this Offering, but not after
the Warrant Expiration Date, upon the terms and subject to the conditions set
forth herein and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
Exercise Date and the person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder, upon exercise
thereof, as of the close of business on the Exercise Date. If Warrants in
denominations other than whole number multiples thereof shall be exercised at
one time by the same Registered Holder, the number of full shares of Common
Stock which shall be issuable upon exercise thereof shall be computed on the
basis of the aggregate number of full shares of Common Stock issuable upon such
exercise. As soon as practicable on or after the Exercise Date and in any event
within five business days after such date, if one or more Warrants have been
exercised, the Warrant Agent on behalf of the Company shall cause to be issued
to the person or persons entitled to receive the same a Common Stock certificate
or certificates for the shares of Common Stock deliverable upon such exercise,
and the Warrant Agent shall deliver the same to the person or persons entitled
thereto. Upon the exercise of any one or more Warrants, the Warrant Agent

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shall promptly notify the Company in writing of such fact and of the number of
securities delivered upon such exercise and, subject to subsection (b) below,
shall cause all payments of an amount in cash or by check made payable to the
order of the Company, equal to the Exercise Price, to be deposited promptly in
the Company's bank account.

(b) The Company shall not be required to issue fractional shares on the exercise
of Warrants. Warrants may only be exercised in such multiples as are required to
permit the issuance by the Company of one or more whole shares. If one or more
Warrants shall be presented for exercise in full at the same time by the same
Registered Holder, the number of whole shares which shall be issuable upon such
exercise thereof shall be computed on the basis of the aggregate number of
shares purchasable on exercise of the Warrants presented. If any fraction of a
share would, except for the provisions provided herein, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall pay an
amount in cash equal to such fraction multiplied by the then current market
value of a share of Common Stock, determined as follows:

(1) If the Common Stock is listed, or admitted to unlisted trading privileges on
a national securities exchange, or is traded on Nasdaq, the current market value
of a share of Common Stock shall be the closing sale price of the Common Stock
at the end of the regular trading session on the last business day prior to the
date of exercise of the Warrants on whichever of such exchanges or Nasdaq had
the highest average daily trading volume for the Common Stock on such day; or

(2) If the Common Stock is not listed or admitted to unlisted trading privileges
on any national securities exchange, or listed, quoted or reported for trading
on Nasdaq, but is traded in the over-the-counter market, the current market
value of a share of Common Stock shall be the average of the last reported bid
and asked prices of the Common Stock reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of exercise of the Warrants; or

(3) If the Common Stock is not listed, admitted to unlisted trading privileges
on any national securities exchange, or listed, quoted or reported for trading
on Nasdaq, and bid and asked prices of the Common Stock are not reported by the
National Quotation Bureau, Inc., the current market value of a share of Common
Stock shall be an amount, not less than the book value thereof as of the end of
the most recently completed fiscal quarter of the Company ending prior to the
date of exercise, determined by the members of the Board of Directors of the
Company exercising good faith and using customary valuation methods.

SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.

(a) The Company covenants that it will at all times reserve and keep available
out of its authorized Common Stock, solely for the purpose of issue upon
exercise of Warrants, such number of shares of Common Stock as shall then be
issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery thereof, be duly and validly issued and
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, and that upon
issuance such shares shall be listed on each securities exchange, if any, on
which the other shares of outstanding Common Stock of the Company are then
listed.

(b) The Company covenants that if any securities to be reserved for the purpose
of exercise of Warrants hereunder require registration with, or approval of, any
governmental authority under any federal securities law before such securities
may be validly issued or delivered upon such exercise, then the Company will
file a registration statement under the federal securities laws or a post-
effective amendment, use its best efforts to cause the same to become effective
and to keep such registration statement current while any of the Warrants are
outstanding but only until the Warrant Expiration Date (after which time the
Company shall have no obligation to keep such registration statement current)
and deliver a prospectus which complies with Section 10(a)(3) of the Act, to the
Registered Holder exercising the Warrant (except, if in the opinion of counsel
to the Company, such registration is not required under the federal securities
law or if

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the Company receives a letter from the staff of the Commission stating that it
would not take any enforcement action if such registration is not effected). The
Company will use its best efforts to obtain appropriate approvals or
registrations under state "blue sky" securities laws with respect to any such
securities. However, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.

(c) The Company shall pay all documentary, stamp or similar taxes and other
governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants; provided, however, that if shares of Common Stock are
to be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.

(d) The Warrant Agent is hereby irrevocably authorized as the Transfer Agent to
requisition from time to time certificates representing shares of Common Stock
or other securities required upon exercise of the Warrants, and the Company will
comply with all such requisitions.

SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.

(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, and, upon satisfaction
of the terms and provisions hereof, the Company shall execute and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the exchange
shall be entitled to receive.

(b) The Warrant Agent shall keep, at its office, books in which, subject to such
reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with customary practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants of the same
class.

(c) With respect to all Warrant Certificates presented for registration of
transfer, or for exchange or exercise, the subscription or exercise form, as the
case may be, on the reverse thereof shall be duly endorsed or be accompanied by
a written instrument or instruments of transfer and subscription, in form
satisfactory to the Company and the Warrant Agent, duly executed by the
Registered Holder thereof or his attorney-in-fact duly authorized in writing.

(d) A service charge may be imposed by the Warrant Agent for any exchange or
registration of transfer of Warrant Certificates. In addition, the Company may
require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.

(e) All Warrant Certificates surrendered for exercise or for exchange in case of
mutilated Warrant Certificates shall be promptly canceled by the Warrant Agent
and thereafter retained by the Warrant Agent until termination of this
Agreement.

(f) Prior to due presentment for registration of transfer thereof, the Company
and the Warrant Agent may deem and treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof and of each Warrant represented
thereby (notwithstanding any notations of ownership or writing thereon made by
anyone other than a duly authorized officer of the Company or the Warrant Agent)
for all purposes and shall not be affected by any notice to the contrary.

SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and the Warrant Agent
of evidence satisfactory to them of the ownership of and the loss, theft,
destruction or mutilation of any Warrant

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Certificate and (in the case of loss, theft or destruction) of indemnity
satisfactory to them, and (in case of mutilation) upon surrender and
cancellation thereof, the Company shall execute and the Warrant Agent shall (in
the absence of notice to the Company and/or the Warrant Agent that a new Warrant
Certificate has been acquired by a bona fide purchaser) countersign and deliver
to the Registered Holder in lieu thereof a new Warrant Certificate of like tenor
representing an equal aggregate number of Warrants. Applicants for a substitute
Warrant Certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Warrant Agent may prescribe.

SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF COMMON STOCK
DELIVERABLE.

(a) Except as hereinafter provided, in the event the Company shall, at any time
or from time to time after the date hereof and during the term of the Warrants,
issue any shares of Common Stock as a stock dividend to the holders of Common
Stock, or subdivide or combine the outstanding shares of Common Stock into a
greater or lesser number of shares (any such issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter upon
each further Change of Shares, the Exercise Price for the Warrants (whether or
not the same shall be issued and outstanding) in effect immediately prior to
such Change of Shares shall be changed to a price (including any applicable
fraction of a cent to the nearest cent) determined by dividing (i) the sum of
(a) the total number of shares of Common Stock outstanding immediately prior to
such Change of Shares, multiplied by the Exercise Price in effect immediately
prior to such Change of Shares and (b) the consideration, if any, received by
the Company upon such sale, issuance, subdivision or combination, by (ii) the
total number of shares of Common Stock outstanding immediately after such Change
of Shares.

For the purposes of any adjustment to be made in accordance with this Section
8(a), the following provisions shall be applicable:

(A) In case of the issuance or sale of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be cash, the amount of the
cash portion of the consideration therefor deemed to have been received by the
Company shall be (i) the subscription price, if shares of Common Stock are
offered by the Company for subscription, or (ii) the public offering price
(before deducting therefrom any compensation paid or discount allowed in the
sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith),
if such securities are sold to underwriters or dealers for public offering
without a subscription offering, or (iii) the gross amount of cash actually
received by the Company for such securities, in any other case.

(B) In case of the issuance or sale (otherwise than as a dividend or other
distribution on any stock of the Company, and otherwise than on the exercise of
options, rights or warrants or the conversion or exchange of convertible or
exchangeable securities) of shares of Common Stock (or of other securities
deemed hereunder to involve the issuance or sale of shares of Common Stock) for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash deemed to have been received by the
Company shall be the value of such consideration as determined in good faith by
the Board of Directors of the Company, using customary valuation methods and on
the basis of prevailing market values for similar property or services.

(C) Shares of Common Stock issuable by way of dividend or other distribution on
any stock of the Company shall be deemed to have been issued immediately after
the opening of business on the day following the record date for the
determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.

(D) The reclassification of securities of the Company other than shares of
Common Stock into securities including shares of Common Stock shall be deemed to
involve the issuance of such shares of Common Stock for a consideration other
than cash immediately prior to the close of business on the date fixed for the

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determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in subsection (B) of this Section 8(a).

(E) The number of shares of Common Stock at any one time outstanding shall be
deemed to include the aggregate maximum number of shares issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights or warrants and upon the conversion or exchange of convertible or
exchangeable securities.

(b) Upon each adjustment of the Exercise Price pursuant to this Section 8, the
number of shares of Common Stock purchasable upon the exercise of each Warrant
shall be the number derived by multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment by the Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the applicable
adjusted Exercise Price.

(c) In case of any reclassification or change of outstanding shares of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a Subsidiary in which merger the Company is the continuing corporation) and
which does not result in any reclassification or change of the then outstanding
shares of Common Stock or other capital stock issuable upon exercise of the
Warrants (other than a change in par value, or from par value to no par value,
or from no par value to par value or as a result of subdivision or combination)
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, then, as a condition
of such reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the Registered Holder of each Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of the Warrant Agent
a statement signed by its Chief Executive Officer, or President or a Vice
President and by its Treasurer or an Assistant Treasurer or its Secretary or an
Assistant Secretary evidencing such provision. Such provisions shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Sections 8(a) and (b). The above
provisions of this Section 8(c) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.

(d) Irrespective of any adjustments or changes in the Exercise Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants, the
Warrant Certificates theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates pursuant to Section
2(c) hereof, continue to express the Exercise Price per share and the number of
shares purchasable thereunder as the Exercise Price per share and the number of
shares purchasable thereunder were expressed in the Warrant Certificates when
the same were originally issued.

(e) After each adjustment of the Exercise Price pursuant to this Section 8, the
Company will promptly prepare a certificate signed by the Chairman or Chief
Executive Officer or President, and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary, of the Company setting forth: (i)
the Exercise Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant, after such adjustment, and (iii) a
brief statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder at his
last address as it shall appear on the registry books of the Warrant Agent. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such

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notice, or except as to the holder whose notice was defective. The affidavit of
an officer of the Warrant Agent or the Secretary or an Assistant Secretary of
the Company that such notice has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated herein.

(f) No adjustment of the Exercise Price shall be made as a result of or in
connection with (A) the issuance or sale of shares of Common Stock pursuant to
options, warrants, stock purchase agreements and convertible or exchangeable
securities outstanding or in effect on the date hereof and on the terms
described in the final prospectus relating to the Offering; (B) the issuance or
sale of shares of Common Stock upon the exercise of any "incentive stock
options" (as such term is defined in the Internal Revenue Code of 1986, as
amended) or non-qualified stock options under the Company's existing stock
option plans, or otherwise, described in the final prospectus relating to the
Offering (C) the issuance or sale of shares of Common Stock in an underwritten
public offering on behalf of the Company at a discount to the Market Price; or
(D) the issuance or sale of shares of Common Stock for a bona fide business
purpose of the Company in an arm's length transaction with an unaffiliated party
involving a strategic alliance, joint venture or licensing arrangement provided
the number of shares so issued or sold do not exceed, individually or in the
aggregate at any time during the term of Warrants, more than thirty percent
(30%) of the then outstanding shares of Common Stock.  In addition, Registered
Holders shall not be entitled to cash dividends paid by the Company prior to the
exercise of any Warrant or Warrants held by them.

SECTION 9. CONCERNING THE WARRANT AGENT.

(a) The Warrant Agent acts hereunder as agent and in a ministerial capacity for
the Company and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not, by issuing and delivering Warrant Certificates or
by any other act hereunder, be deemed to make any representations as to the
validity or value or authorization of the Warrant Certificates or the Warrants
represented thereby or of any securities or other property delivered upon
exercise of any Warrant or whether any stock issued upon exercise of any Warrant
is fully paid and nonassessable.

(b) The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of Warrant Certificates to make or cause to be made any adjustment
of the Exercise Price or the Redemption Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of fact contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence, bad faith or willful misconduct.

(c) The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.

(d) Any notice, statement, instruction, request, direction, order or demand of
the Company or shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board of Directors, Chief Executive Officer or Chief Financial
Officer or President or any Vice President (unless other evidence in respect
thereof is herein specifically prescribed). The Warrant Agent shall not be
liable for any action taken, suffered or omitted by it in accordance with such
notice, statement, instruction, request, direction, order or demand reasonably
believed by it to be genuine.

(e) The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse it for its reasonable expenses hereunder;
the Company further agrees to indemnify the Warrant Agent and save it harmless
from and against any and all losses, expenses and liabilities, including

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judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder EXCEPT losses,
expenses and liabilities arising as a result of the Warrant Agent's negligence,
bad faith or willful conduct.

(f) The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities resulting as a result of
the Warrant Agent=s own gross negligence or willful misconduct), after giving 30
days= prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint in writing
a new warrant agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such resignation by
the resigning Warrant Agent, then the Registered Holder of any Warrant
Certificate may apply to any court of competent jurisdiction for the appointment
of a new warrant agent. Any new warrant agent, whether appointed by the Company
or by such a court, shall be a bank or trust company having a capital and
surplus, as shown by its last published report to its stockholders, of not less
than $5,000,000 or a stock transfer company. After acceptance in writing of such
appointment by the new warrant agent is received by the Company, such new
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.

(g) Any corporation into which the Warrant Agent or any new warrant agent may be
converted or merged, any corporation resulting from any consolidation to which
the Warrant Agent or any new warrant agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent or any new
warrant agent shall be a successor warrant agent under this Agreement without
any further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding paragraph.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed to the Company and to the Registered Holders of
each Warrant Certificate.

(h) The Warrant Agent, its subsidiaries and affiliates, and any of its or their
officers or directors, may buy and hold or sell Warrants or other securities of
the Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not Warrant Agent. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.

(i) The Warrant Agent shall retain for a period of two years from the date of
exercise any Warrant Certificate received by it upon such exercise.

SECTION 10. MODIFICATION OF AGREEMENT.

The Warrant Agent and the Company may by supplemental agreement make any changes
or corrections in this Agreement (i) that they shall deem appropriate to cure
any ambiguity or to correct any defective or inconsistent provision or manifest
mistake or error herein contained; or (ii) that they may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Warrant Certificates; PROVIDED, HOWEVER, that this Agreement shall not otherwise
be modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders representing not less than 66-2/3% of the
Warrants then outstanding; PROVIDED, FURTHER, that no change in the number or
nature of the securities purchasable upon the exercise of any Warrant, or to
increase the Exercise Price therefor or to accelerate of the Warrant Expiration
Date, shall be made without the consent in writing of the Registered

                                      -9-
<PAGE>

Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed.

SECTION 11. NOTICES.

All notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been made when delivered or mailed first-
class registered or certified mail, postage prepaid, as follows: if to the
Registered Holder of a Warrant Certificate, at the address of such holder as
shown on the registry books maintained by the Warrant Agent; if to the Company
at 4350 Peachtree Industrial Boulevard, Suite 100, Norcross, Georgia 30071,
Attention: Morris Van Asperen, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if to the Warrant
Agent, at 59 Maiden Lane, New York, New York 10038.

SECTION 12. GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without giving effect to conflicts of laws.

SECTION 13. BINDING EFFECT.

This Agreement shall be binding upon and inure to the benefit of the Company,
and the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Nothing in
this Agreement is intended or shall be construed to confer upon any other person
any right, remedy or claim, in equity or at law, or to impose upon any other
person any duty, liability or obligation.

SECTION 14. TERMINATION.

This Agreement shall terminate at the close of business on the Expiration Date
of all of the Warrants or such earlier date upon which all Warrants have been
exercised or redeemed, except that the Warrant Agent shall account to the
Company for cash held by it and the provisions of Section 9 hereof shall survive
such termination.

SECTION 15. COUNTERPARTS.

This Agreement may be executed in several counterparts, which taken together
shall constitute a single document.

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

ATTEST:                                COLOR IMAGING, INC.

By: ______________________________     By: ___________________________________
Name: ____________________________     Name: _________________________________
Title: ___________________________     Title: ________________________________

ATTEST:                                _____________________, as Warrant Agent

                                      -10-
<PAGE>

By: ______________________________     By: ___________________________________
Name: ____________________________     Name: _________________________________
Title: ___________________________     Title: ________________________________

                                      -11-
<PAGE>

                                   EXHIBIT A

No. W _______ VOID AFTER DECEMBER 31, 2003                     ___________, 2002

                              __________ WARRANTS

                                    FORM OF

                            WARRANT CERTIFICATE TO
                      PURCHASE ONE SHARE OF COMMON STOCK

                              COLOR IMAGING, INC.

                           CUSIP #__________________

THIS CERTIFIES THAT, FOR VALUE RECEIVED __________________________________, or
its registered assigns (the "Registered Holder") is the owner of the number of
Warrants (the "Warrants") specified above. Each Warrant initially entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Certificate and the Warrant Agreement (as hereinafter defined), one fully
paid and nonassessable share of Common Stock, par value $.01 per share, of COLOR
IMAGING, INC., a Delaware corporation (the "Company"), any time between
_____________, 2002, and the Expiration Date (as hereinafter defined) upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of
             as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $2.00 per share, subject to adjustment (the "Exercise
Price"), in lawful money of the United States of America in cash or by check
made payable to the Warrant Agent for the account of the Company.

This Warrant Certificate and each Warrant represented hereby are issued pursuant
to and are subject in all respects to the terms and conditions set forth in the
Warrant Agreement (the "Warrant Agreement"), dated _____________, 2002, by and
between the Company, and the Warrant Agent.

In the event of certain contingencies provided for in the Warrant Agreement, the
Exercise Price and the number of shares of Common Stock subject to purchase upon
the exercise of each Warrant represented hereby are subject to modification or
adjustment.

Each Warrant represented hereby is exercisable at the option of the Registered
Holder, but no fractional interests will be issued. In the case of the exercise
of less than all the Warrants represented hereby, the Company shall cancel this
Warrant Certificate upon the surrender hereof and shall execute and deliver a
new Warrant Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Warrants.

The term "Expiration Date" shall mean 5:00 p.m. (New York time) on December 31,
2003. If such date shall in the State of New York be a holiday or a day on which
the banks are authorized to close, then the Expiration Date shall mean 5:00 p.m.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.

The Company shall not be obligated to deliver any securities pursuant to the
exercise of this Warrant unless a registration statement under the Securities
Act of 1933, as amended (the "Act"), with respect to such securities is
effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the

                                      A-1
<PAGE>

same to become effective, use its best efforts to keep such registration
statement current, if required under the Act, while any of the Warrants are
outstanding but only until the Expiration Date, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.

This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.

Prior to the exercise of any Warrant represented hereby, the Registered Holder
shall not be entitled to any rights of a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.

Prior to due presentment for registration of transfer hereof, the Company and
the Warrant Agent may deem and treat the Registered Holder as the absolute owner
hereof and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company or the Warrant Agent) for all purposes and shall not be affected
by any notice to the contrary, except as provided in the Warrant Agreement.

This Warrant Certificate shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws.

This Warrant Certificate is not valid unless countersigned by the Warrant Agent.

                                      A-2
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.

Dated: ____________,2002                  COLOR IMAGING, INC.

[SEAL]

By: ______________________________        By: _______________________________
Name: ____________________________        Name: _____________________________
Title: Secretary                          Title: ____________________________

COUNTERSIGNED:

________________, as Warrant Agent

By: _______________________________________
    Authorized Officer

                                     A-3
<PAGE>

                               SUBSCRIPTION FORM

                    To Be Executed by the Registered Holder
                         in Order to Exercise Warrants

The undersigned Registered Holder hereby irrevocably elects to exercise
_________________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of

                         PLEASE INSERT SOCIAL SECURITY
                          OR OTHER IDENTIFYING NUMBER

                    (please print or type name and address)

and be delivered to

                    (please print or type name and address)

and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.

                   IMPORTANT: PLEASE COMPLETE THE FOLLOWING

                                    Address

                          Social Security or Taxpayer
                             Identification Number

                             Signature Guaranteed

                                      A-4
<PAGE>

                                  ASSIGNMENT

                    To Be Executed by the Registered Holder
                          in Order to Assign Warrants

FOR VALUE RECEIVED, _____________________, hereby sells, assigns and transfers
unto

                       PLEASE INSERT SOCIAL SECURITY OR
                           OTHER IDENTIFYING NUMBER

                    (please print or type name and address)

______________________________________ of the Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints
__________________________ Attorney to transfer this Warrant Certificate on the
books of the Company, with full power of substitution in the premises.

Dated: _____________________
__________________________________ Signature Guaranteed

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

                                      A-5FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

                            REVOLVING LINE OF CREDIT
                            OF UP TO $175,000,000.00

                                      AMONG

                         UNION BANK OF CALIFORNIA, N.A.
  As Administrative Agent, LC Issuer, Lead Arranger, Fronting Bank and a Bank;

                               GUARANTY BANK, FSB
           As Collateral/Documentation Agent, Co-Arranger and a Bank;

                              FORTIS CAPITAL CORP.
                  As Syndication Agent, Co-Arranger and a Bank,

                                 OTHER FINANCIAL
                             INSTITUTIONS AND BANKS,
                                    As Banks,

                                       AND

                           CONTINENTAL RESOURCES, INC.

                                   As Borrower

                                 March 28, 2002

<PAGE>
                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----
ARTICLE I.

   DEFINITIONS.............................................................2

ARTICLE II.

   THE LOANS AND LETTERS OF CREDIT........................................18
     2.01      The Commitment.............................................18
     2.02      Notice and Manner of Borrowing.............................19
     2.03      Payment Procedure..........................................19
     2.04      Payments of Interest under the Notes.......................20
     2.05      General Provisions Relating to Interest....................21
     2.06      Borrowing Base Determination...............................22
     2.07      Mandatory Prepayment Due to a Loan Excess..................23
     2.08      Other Mandatory Prepayments................................23
     2.09      Prepayment and Conversion..................................24
     2.10      Increased Cost of Loans....................................24
     2.11      Change of Law..............................................26
     2.12      Mitigation: Mandatory Assignment...........................26
     2.13      Pro Rata Treatment and Payments............................27
     2.14      Sharing of Payments and Setoffs............................27
     2.15      Commitment Fee.............................................27
     2.16      Borrowing Base Increase Fee................................28
     2.17      Agent's Fee................................................28
     2.18      Addition of Borrowing Base Oil & Gas Properties............28
     2.19      Adjustment to Aggregate Commitment Amount..................28
     2.20      Facility LCs...............................................29
     2.21      Advances to Satisfy Obligations of the Borrower............32
     2.22      Assignment of Production...................................33

ARTICLE III.

   CONDITIONS.............................................................33
     3.01      General Conditions to Closing and to all Disbursements.....33
     3.02      Deliveries at the Closing..................................34
     3.03      Documents Required for Subsequent Disbursements Involving
               Additional Borrowing Base Oil and Gas Properties...........35

ARTICLE IV.

   REPRESENTATIONS AND WARRANTIES.........................................35
     4.01      Existence..................................................36
     4.02      Due Authorization..........................................36
     4.03      Valid and Binding Obligations..............................36
     4.04      Scope and Accuracy of Financial Statements.................36
     4.05      Title to Borrowing Base Oil and Gas Properties.............37
     4.06      Oil and Gas Leases.........................................37
     4.07      Interest in the Borrowing Base Oil and Gas Properties......37
     4.08      Oil and Gas Contracts......................................37
     4.09      Producing Wells............................................38
     4.10      Purchasers of Production...................................38
     4.11      Authorizations and Consents................................38
     4.12      Environmental Laws.........................................38
     4.13      Compliance with Laws, Rules, Regulations and Orders........39
     4.14      Liabilities, Litigation and Restrictions...................39
     4.15      Existing Indebtedness......................................39
     4.16      Material Commitments.......................................40
     4.17      Margin Stock...............................................40
     4.18      Proper Filing of Tax Returns and Payment of Taxes Due......40
     4.19      ERISA......................................................40
     4.20      Investment Company Act Compliance..........................41
     4.21      Public Utility Holding Company Act Compliance..............41
     4.22      Insurance..................................................41
     4.23      Material Misstatements and Omissions.......................41

ARTICLE V.

   AFFIRMATIVE COVENANTS..................................................41
     5.01      Use of Funds...............................................41
     5.02      Maintenance and Access to Records..........................41
     5.03      Quarterly Unaudited Financial Statements...................42
     5.04      Annual Audited Financial Statements........................42
     5.05      Compliance Certificate.....................................42
     5.06      Statement of Material Adverse Change.......................42
     5.07      Title Defects..............................................42
     5.08      Additional Information.....................................42
     5.09      Compliance with Laws and Payment of Assessments and Charges43
     5.10      Maintenance of Existence and Good Standing.................43
     5.11      Further Assurances.........................................43
     5.12      Initial Expenses of the Bank...............................43
     5.13      Subsequent Expenses of the Bank Parties....................43
     5.14      Maintenance of Tangible Property...........................44
     5.15      Maintenance of Insurance...................................44
     5.16      Inspection of Tangible Assets/Right of Audit...............44
     5.17      Payment of Note and Performance of Obligations.............44
     5.18      Borrowing Base.............................................44
     5.19      Compliance with Environmental Laws.........................44
     5.20      Hazardous Substances Indemnification.......................45
     5.21      Transactions with Affiliates...............................46
     5.22      Leases.....................................................46
     5.23      Operation of Borrowing Base Oil and Gas Properties.........46
     5.24      Assignments................................................46
     5.25      Change of Purchasers of Production.........................46
     5.26      Payment of Taxes, Etc......................................46
     5.27      Notice of Litigation.......................................47
     5.28      Notice of Events of Default................................47
     5.29      Notice of Change of Principal Offices......................47
     5.30      Employee Benefit Plans.....................................47
     5.31      Annual Capital Budget......................................47
     5.32      Payment of Obligations.....................................48

ARTICLE VI.

   NEGATIVE COVENANTS.....................................................48
     6.01      Other Indebtedness.........................................48
     6.02      Loans or Advances..........................................48
     6.03      Mortgages or Pledges of Assets.............................48
     6.04      Sales of Assets............................................49
     6.05      Dividends..................................................49
     6.06      Payment of Accounts Payable................................49
     6.07      Cancellation of Insurance..................................49
     6.08      Investments................................................49
     6.09      Changes in Structure or Business...........................49
     6.10      Pooling or Unitization.....................................50
     6.11      Hedge Agreements...........................................50
     6.12      Capital Stck of Borrower and Guarantors/Redemption of Senior
               Subordinated Notes.........................................50
     6.13      Margin Stock...............................................50
     6.14      Senior Subordinated Debt...................................50
     6.15      Current Ratio..............................................50
     6.16      Fixed Charge Coverage Ratio................................50
     6.17      Total Funded Debt to EBITDA................................51
     6.18      Senior Debt to EBITDA......................................51
     6.19      Total Funded Debt to Total Capitalization..................51

ARTICLE VII.

   EVENTS OF DEFAULT......................................................51
     7.01      Enumeration of Events of Default...........................51
     7.02      Rights Upon Unmatured Event of Default.....................53
     7.03      Rights Upon Default........................................53
     7.04      Remedies...................................................54
     7.05      Right of Set-off...........................................55

ARTICLE VIII.

   THE AGENTS.............................................................55
     8.01      Authorization and Action...................................55
     8.02      Agent's Reliance, Etc......................................56
     8.03      Each Agent and its Affiliates..............................56
     8.04      Bank Credit Decision.......................................56
     8.05      Agent's Indemnity..........................................57
     8.06      Successor Agents...........................................57
     8.07      Notice of Default..........................................58

ARTICLE IX.

   MISCELLANEOUS..........................................................58
     9.01      Security Interests in Deposits and Right of Offset or the
               Banker's Lien..............................................58
     9.02      Survival of Representations, Warranties and Covenants......58
     9.03      Notices and Other Communications...........................58
     9.04      Parties in Interest........................................59
     9.05      Successors and Assigns; Participation; Purchasing Banks....59
     9.06      Renewals and Extensions....................................61
     9.07      No Waiver by the Bank Parties..............................61
     9.08      Waiver, Release, and Indemnification by the Borrower.......62
     9.09      GOVERNING LAW..............................................62
     9.10      Incorporation of Exhibits and Schedules....................63
     9.11      Survival Upon Unenforceability.............................63
     9.12      Rights of Third Parties....................................63
     9.13      Amendments or Modifications................................63
     9.14      Agreement Construed as an Entirety.........................64
     9.15      Number and Gender..........................................64
     9.16      AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS..................64
     9.17      Controlling Provision Upon Conflict........................64
     9.18      Time, Place and Method of Payments.........................65
     9.19      Termination................................................65
     9.20      Non-Application of Chapter 346 of Texas Finance Code.......65
     9.21      Counterpart Execution......................................65
     9.22      Power of Attorney..........................................65
     9.23      Subordination of Intercompany Debt.........................66
     9.24      Prior Agreement............................................67

EXHIBITS

EXHIBIT A          Borrowing Base Oil and Gas Properties
EXHIBIT B          Form of Amended and Restated Replacement Notes
EXHIBIT C          Compliance Certificate
EXHIBIT D          Security Instruments
EXHIBIT E          Request for Advance

SCHEDULES

Schedule 1.01(a)   Third Restated Agreement Notes
Schedule 1.01(b)   Commitment Amount and Aggregate Commitment
Schedule 2.20(C)   Fax Numbers for all Parties
Schedule 4.01      Information Regarding the Borrower and its Subsidiaries
Schedule 4.08      Certain Oil and Gas Contracts
Schedule 4.10      List of Purchasers of Production
Schedule 4.15      Existing Indebtedness
Schedule 4.16      Material Commitments
Schedule 4.22      Insurance Certificates
Schedule 9.05(d)   Commitment Transfer Supplement
<PAGE>

                  FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

     THIS FOURTH  AMENDED AND  RESTATED  CREDIT  AGREEMENT  (this  "Agreement"),
executed  March 28, 2002,  is by and between  CONTINENTAL  RESOURCES,  INC.,  an
Oklahoma  corporation (the  "Borrower"),  UNION BANK OF CALIFORNIA,  N.A., as LC
Issuer,  Bank, Lead Arranger,  Fronting Bank and  Administrative  Agent (in such
latter  capacity and together with its successors and permitted  assigns in such
capacity the "Administrative Agent"),  GUARANTY BANK, FSB, as Co-Arranger,  Bank
and  Collateral/Documentation  Agent (in such latter  capacity and together with
its successors and permitted  assigns in such capacity the "Collateral  Agent"),
FORTIS CAPITAL CORP., as Co-Arranger, Bank and Syndication Agent (in such latter
capacity and together with its successors and permitted assigns in such capacity
the "Syndication Agent"), and the several banks and financial  institutions from
time to time parties to this Credit Agreement (the "Banks," such term to include
all undersigned Banks and all other financial  institutions  which  subsequently
become parties to this Agreement in accordance with Section 9.05 hereof).

                               W I T N E S S E T H

     WHEREAS,  on August 21, 2000,  Borrower and certain of its  Affiliates  and
certain  predecessors  to the  Banks  entered  into a  certain  Restated  Credit
Agreement (the "Original  Agreement") whereby the Banks'  predecessors  provided
Borrower and certain of its Affiliates with a  $25,000,000.00  revolving  credit
facility as evidenced by a $25,000,000.00 revolving note;

     WHEREAS, on July 9, 2001, the Original  Agreement,  as amended through such
date, was amended and restated (the "Second Restated Agreement") in order, among
other things, to increase the then-existing credit facility;

     WHEREAS, on January 17, 2002, the Second Restated Agreement was amended and
restated (the "Third Restated Agreement") in order to again, among other things,
further increase the then- existing credit facility;

     WHEREAS, the Third Restated Credit Agreement,  Borrower's  indebtedness and
obligations thereunder,  and the various notes evidencing the obligations of the
Borrower and certain of its Affiliates to the Banks' predecessors  (collectively
the  "Third  Restated  Agreement  Notes"),  which are more  fully  described  on
Schedule 1.01(a) attached  hereto,  were on the date of this Agreement  assigned
from the Banks' predecessors to the Banks hereunder;

     WHEREAS,  Borrower  and the Bank  Parties  desire to amend and  restate the
Third Restated  Agreement and the Third Restated Agreement Notes to increase the
Aggregate  Commitment  Amount to a maximum of  $175,000,000.00,  with an initial
Borrowing  Base of  $140,000,000.00,  as well  as to  make  other  modifications
thereto as set forth herein; and

     WHEREAS,  Borrower and the Bank Parties all desire to hereby  document this
Fourth Amended and Restated  Credit  Agreement,  which amends and restates,  but
does not  extinguish,  the  Borrower's  obligations  under  the  Third  Restated
Agreement.

     NOW,  THEREFORE,  in  consideration  of the mutual covenants and agreements
herein contained, the Bank Parties and the Borrower agree as follows:

                                   ARTICLE I.

                                   DEFINITIONS

     As used in this  Agreement,  the  following  terms shall have the  meanings
indicated:

     "Administrative   Agent"  means  Union  Bank  of   California,   N.A.,   as
Administrative Agent for the Banks hereunder and under the other Loan Documents,
and each successor Administrative Agent.

     "Affiliate" means, as applied to any Person, any other Person,  directly or
indirectly,  controlling,  controlled  by, or under common  control  with,  that
Person. For purposes of this definition,  "control" (including, with correlative
meanings,  the terms  "controlling",  "controlled by", and "under common control
with"), as applied to any Person, means either: (a) the possession,  directly or
indirectly,  of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities,  by
contract,  or otherwise,  or (b) the legal or beneficial  ownership of or voting
rights with respect to twenty  percent  (20%) or more of the equity  interest in
such Person.

     "Agent(s)" means, individually and collectively,  the Administrative Agent,
the Collateral  Agent, and the Syndication  Agent, and each successor to each of
such respective positions.

     "Aggregate  Commitment  Amount" means the lesser of: (a) the Borrowing Base
in  effect  from  time  to  time,  or (b) the  amount  stated  as the  Aggregate
Commitment  Amount  on  Schedule  1.01(b)  attached  hereto,  as the same may be
amended from time to time as provided in this Agreement.

     "Aggregate  Outstanding  Credit Exposure" means, at any time, the aggregate
of the Outstanding Credit Exposure of all the Banks.

     "Agreement" means this Fourth Amended and Restated Credit Agreement, as the
same may be amended or supplemented from time to time.

     "Applicable  Law" means that law in effect from time to time and applicable
to the Notes which  lawfully  permits the charging and collection of the highest
permissible lawful,  non-usurious rate of interest on the Notes,  including laws
of the State of Texas and laws of the United  States of America;  Chapter 303 of
the Texas  Finance  Code shall be  included in the laws of the State of Texas in
determining  Applicable Law; and for the purpose of applying said Chapter 303 to
the Notes, the interest  ceiling  applicable to the Notes under said Chapter 303
shall be the indicated weekly rate ceiling from time to time in effect.

     "Applicable Margin" means the applicable LIBOR Margin or RR Margin provided
for in the Pricing Grid set forth below based upon the Utilization Percentage.

     "Arranger" means, individually and collectively, the Lead Arranger and each
Co-Arranger,  each such  position  being held as of the Closing by Union Bank of
California, N.A., Guaranty Bank, FSB and Fortis Capital Corp., respectively.

     "Bank(s)"  means  any of the  banks  signatory  to  this  Agreement,  their
successors   and,  upon  the  effective   date  after   registration   with  the
Administrative   Agent  pursuant  to  Section  9.05  of  a  Commitment  Transfer
Supplement executed by a Purchasing Bank, such Purchasing Bank.

     "Bank  Parties" means the Banks,  the Fronting  Bank,  the LC Issuer,  each
Co-Arranger,  the Lead Arranger, the Syndication Agent, the Collateral Agent and
the Administrative Agent.

     "Borrower"  has  the  meaning  stated  therefor  in the  preamble  of  this
Agreement.

     "Borrowing"  means a group of Loans  made by the  Banks  to  Borrower  on a
single date.

     "Borrowing  Base" means the maximum loan amount  supported by the Borrowing
Base Oil and Gas Properties,  as determined by the Arrangers and approved by the
Required  Banks  from  time to  time in  accordance  with  Section  2.06 of this
Agreement.

     "Borrowing Base Oil and Gas Properties"  means those Oil and Gas Properties
of the Borrower and/or the Guarantors that are described in Exhibit "A" attached
hereto and made a part  hereof,  as such Exhibit "A" may be amended from time to
time,  together with any other Oil and Gas Properties of the Borrower and/or the
Guarantors  that are described in and covered by (or that  Collateral  Agent and
Borrower  or  Guarantor  have  attempted  to  describe  in) any of the  Security
Instruments, whether or not such Oil and Gas Properties are described in Exhibit
A attached hereto.

     "Breakage  Costs" means all  reasonable  losses,  expenses and  liabilities
(including,  without  limitation,  any loss,  expense or  liability  incurred by
reason of the liquidation or reemployment of deposits or other funds required by
any Bank to fund its LIBOR Loans but excluding loss of  anticipated  profit with
respect to any LIBOR Loans)  which such Bank may sustain:  (i) if for any reason
(other than a default by such Bank or the  Administrative  Agent) a borrowing of
LIBOR  Loans  does not  occur on a date  specified  therefor  in a  Request  for
Advance; (ii) if any repayment or conversion of any LIBOR Loans occurs on a date
which is not the last day of an Interest Period applicable thereto; (iii) if any
prepayment  of any LIBOR Loans is not made on any date  specified in a notice of
prepayment  given by Borrower;  or (iv) as a  consequence  of any default by the
Borrower to repay LIBOR Loans when required by the terms of this Agreement.

     "Business  Day" means a day other than a Saturday,  Sunday or legal holiday
for  commercial  banks  under  the laws of the  State  of Texas or the  State of
California,  provided  that with respect to  transactions  under this  Agreement
relating to LIBOR Loans, such day must also be a Eurodollar Business Day.

     "Business Entity" means a company, corporation,  limited liability company,
limited partnership,  partnership,  joint venture, trust, association,  or other
entity other than a natural  person,  that has been formed and exists to conduct
any line of business.

     "Cedar Hills Project" means those two certain  secondary  recovery units in
which  Borrower  will  conduct  water  flood  and high  pressure  air  injection
operations  to maximize the recovery of oil from both the Cedar Hills  North-Red
River "B" Unit in Bowman and Slope  Counties,  North Dakota,  and the West Cedar
Hills Unit in Fallon County, Montana.

     "Certificate  of  Formation"  means any  certificates,  articles,  or other
instruments  that are  required  or  permitted  to be filed with any  designated
agency  of the  jurisdiction  in which a  Business  Entity is formed in order to
evidence the legal formation of such Business Entity.

     "Change of Control" means any of the following events:  (a) any "person" or
"group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act  of  1934,  as  amended  (the  "Exchange  Act"))  has  become,  directly  or
indirectly,  the "beneficial  owner" (as defined in Rules 13d- 3 and 13d-5 under
the  Exchange  Act,  except  that a Person  shall be deemed to have  "beneficial
ownership"  of all such  shares  that any such  Person has the right to acquire,
whether  such right is  exercisable  immediately  or only  after the  passage of
time), by way of merger,  consolidation  or otherwise,  of a majority or more of
the common stock of Borrower on a  fully-diluted  basis,  after giving effect to
the  conversion  and  exercise of all  outstanding  warrants,  options and other
securities of the Borrower  (whether or not such  securities  are then currently
convertible or exercisable),  (b) during any period of two consecutive  calendar
quarters,  individuals  who at the beginning of such period were officers of the
Borrower and were also members of the  Borrower's  board of directors  cease for
any reason to  constitute a majority of the  directors  of the Borrower  then in
office unless (i) such new directors were elected by a majority of the directors
of the  Borrower who  constituted  the board of directors of the Borrower at the
beginning  of such  period (or by  directors  so elected) or (ii) the reason for
such  directors  failing to  constitute a majority is a result of  retirement by
directors  due to age,  death or  disability,  (c) Harold  Hamm no longer owns a
controlling  beneficial interest or ownership in Borrower, (d) Harold Hamm is no
longer chief executive officer of Borrower,  or (e) Borrower no longer owns 100%
of all the issued and  outstanding  shares of common stock of  Continental  Gas,
Inc.

     "Closing" has the meaning provided in Section 3.01.

     "Collateral  Agent" means Guaranty Bank,  FSB, as  Collateral/Documentation
Agent for the Banks  hereunder  and under  the other  Loan  Documents,  and each
successor Collateral/Documentation Agent.

     "Commitment"  means,  as to any Bank,  the  obligation of such Bank to make
Loans to, and  participate in Facility LCs issued upon the  application  of, the
Borrower in an aggregate  amount at any one time  outstanding  not to exceed the
lesser of (i) such  Bank's  Commitment  Amount and (ii) such  Bank's  Percentage
Share of the Borrowing Base then in effect.

     "Commitment  Amount" means at any time,  for any Bank, the amount set forth
opposite  such  Bank's name on Schedule  1.01(b)  under the heading  "Commitment
Amount," as such amount may be changed as provided in this Agreement.

     "Commitment  Transfer  Supplement" means a Commitment  Transfer  Supplement
executed by Administrative Agent and a Purchasing Bank substantially in the form
of Schedule  9.05(d) and registered  with the  Administrative  Agent pursuant to
Section 9.05(d) hereof.

     "Compliance  Certificate"  means the  certificate of the President or Chief
Financial  Officer of the Borrower  submitted to the  Administrative  Agent from
time to time pursuant to this Agreement and attesting to the financial covenants
and stating, to such officer's knowledge,  whether or not an Event of Default or
an Unmatured  Event of Default has occurred  and is  continuing  and, if such an
event has  occurred,  the  actions  being  taken by the  Borrower to remedy such
situation  and that  GAAP  has been  used in the  preparation  of the  Financial
Statements,  which  certificate  shall be in the form attached hereto as Exhibit
"C".

     "COPAS" means the Accounting Procedure Joint Operations  recommended by the
Council  of  Petroleum  Accountants,   with  respect  to  onshore  and  offshore
operations,  respectively,  including the most current  versions thereof and any
other recent versions thereof commonly in use.

     "Corporate Action" means action taken by the Governing Body of any Business
Entity (not just a  corporation)  in order to  authorize  such  Business  Entity
pursuant to its  Governing  Documentation  to enter into and become bound by the
terms of any particular transaction.

     "Corporate Power" means the power and authority of a Business Entity, under
the terms of its Governing  Documentation and applicable law, to enter into, and
become bound by, the terms of any particular transaction.

     "Credit Extension" means the making of a Loan or the issuance of a Facility
LC hereunder.

     "Credit  Extension  Date"  means the date on which a Loan is  advanced or a
Facility LC is issued.

     "Current  Assets" means at any time, all assets,  that should in accordance
with GAAP, be classified as current  assets on a  consolidated  balance sheet of
Borrower  and the  Guarantors,  plus the then  current  availability  under  the
aggregate  Commitments,   but  excluding  any  mark-to-market   valuation  under
Permitted Hedge Agreements.

     "Current  Liabilities"  means at any time, all  liabilities  that should in
accordance  with GAAP, be classified as current  liabilities  on a  consolidated
balance sheet of Borrower and the Guarantors,  but excluding any  mark-to-market
valuation  under  Permitted  Hedge  Agreements,   minus  the  amount  of  Credit
Extensions  under this Agreement that is deemed to be current in accordance with
GAAP.

     "Current  Ratio" means the ratio  derived from dividing  Current  Assets by
Current Liabilities.

     "Defensible Title" means good and defensible title, as set forth, qualified
and/or  limited  on  Exhibit  "A,"  free and clear of all  mortgages,  liens and
encumbrances, except for Permitted Encumbrances.

     "EBITDA" means,  for any reporting  period,  Borrower's and Guarantors' Net
Income on a consolidated  basis before deductions for interest  expense,  taxes,
depreciation,  depletion and amortization,  exploration expenses,  including dry
hole costs, and non-cash compensation expense.

     "Environmental  Laws" means (a) the  following  federal laws as they may be
cited,  referenced  and amended from time to time:  the Clean Air Act, the Clean
Water  Act,  the  Safe  Drinking  Water  Act,  the  Comprehensive  Environmental
Response,  Compensation  and  Liability  Act,  the  Endangered  Species Act, the
Resource  Conservation and Recovery Act, the Occupational Safety and Health Act,
the  Hazardous  Materials  Transportation  Act,  the  Superfund  Amendments  and
Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act
of 1990; (b) any and all  environmental  statutes of any state in which property
of the Borrower is situated,  as they may be cited,  referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (d) any other  federal,  state or local
statute or any requirement,  rule, regulation,  code, ordinance or order adopted
pursuant  thereto,  including,   without  limitation,   those  relating  to  the
generation, transportation, treatment, storage, recycling, disposal, handling or
release of Hazardous Substances.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time,  and the  regulations  and published  interpretations
thereof.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
which  together with the Borrower  would be treated as a single  employer  under
Section 4001 of ERISA.

     "Eurodollar Business Day" means a day on which, in the determination of the
Administrative Agent, significant dealings are carried on in the LIBOR Market.

     "Event of Default"  means any of the events  specified  in Section  7.01 of
this Agreement.

     "Facility LC" is defined in Section 2.20(A).

     "Facility LC Application" is defined in Section 2.20(C).

     "Facility Termination Date" means March 28, 2005.

     "Federal Funds Effective 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 by the Federal
Reserve Bank of New York for such day on the next succeeding Business Day or, if
such rate is not so published  for any day which is a Business  Day, the average
of  the   quotations  for  the  day  of  such   transactions   received  by  the
Administrative  Agent from three Federal  funds  brokers of recognized  standing
selected by it.

     "Financial  Statements" means the statements of the financial  condition of
the indicated Person,  on a consolidated  basis, as at the point in time and for
the  period  indicated  and  consisting  of at  least a  balance  sheet,  income
statement  and  statement  of cash flows,  and when the  foregoing  are audited,
accompanied by the certification of such Person's  independent  certified public
accountants  and  footnotes  to any of the  foregoing,  all of  which  shall  be
prepared in accordance with GAAP applied on a basis  consistent with that of the
preceding year, except for any  inconsistency  that results from changes in GAAP
from year to year.

     "First  Restated  Agreement" has the meaning stated in the Recitals of this
Agreement.

     "Floating  Rate" means a per annum interest rate determined by reference to
the following schedule:

     o    LIBOR + LIBOR Margin at Borrower's option pursuant to Section 2.04, or
          RR + RR Margin

     o    After  the  occurrence  and  during  the  continuation  of an Event of
          Default,  the Floating Rate determined in accordance with the forgoing
          schedule  shall,  in each case,  be increased by four percent (4%) per
          annum, not to exceed the Maximum Rate.

     "GAAP"  means  generally  accepted  accounting  principles,  applied  on  a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American  Institute of Certified Public  Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective  successors and
which are applicable as of the date of Closing,  except that solely for purposes
of the definition of Financial  Statements herein,  changes in GAAP from time to
time (if any)  shall be  applied  and  reflected  in the  Financial  Statements.
Accounting  principles  are applied on a "consistent  basis" when the accounting
principles  observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.

     "Governing  Body"  means,  in the  case  of a  corporation,  its  board  of
directors,  in the case of a  limited  liability  company,  its  members  or its
managers,  depending on how the management of such Business  Entity is allocated
in its Governing  Documentation,  in the case of a general  partnership or joint
venture, the partners or the joint venturers thereof,  respectively, in the case
of a limited  partnership,  the applicable Governing Body of the general partner
thereof,  if such general partner is a Business  Entity,  and in the case of any
other Business Entity not specified herein, the designees thereof that, pursuant
to  the  Governing   Documentation   of  such  Business   Entity,   fulfill  the
responsibilities typically discharged by a board of directors of a corporation.

     "Governing  Documentation"  means,  in  the  case  of  a  corporation,  its
certification  of  incorporation,  articles  of  incorporation  and by laws,  as
amended,  in the  case  of a  limited  liability  company,  its  certificate  of
formation,  its limited liability company agreement, and its operating agreement
or regulations (or similar  documentation  as denominated  under the laws of the
jurisdiction in which it is formed), in the case of a partnership, joint venture
or a limited partnership,  the applicable partnership agreement or joint venture
agreement, and the certificate of limited partnership, if applicable, and in the
case of any other  Business  Entity  not  specifically  enumerated  herein,  the
applicable  documentation  typically  utilized  in the  jurisdiction  where such
Business Entity has been formed for purposes of initially  forming such Business
Entity according to the laws of such  jurisdiction and thereafter  operating and
managing such Business Entity.

     "Guarantor(s)" means, individually and collectively, Continental Gas, Inc.,
Continental  Resources of Illinois,  Inc.,  Continental  Crude Co. and all other
Subsidiaries of Borrower.

     "Guaranty" means the unlimited  guaranty  agreement,  guaranteeing the full
payment and  performance  of all of Borrower's  Obligations  to the Bank Parties
under  this  Agreement  and the  other  Loan  Documents,  in form and  substance
satisfactory to the Administrative Agent, duly executed by each Guarantor.

     "Hazardous Substances" means flammables, explosives, radioactive materials,
hazardous wastes, asbestos or any material containing asbestos,  polychlorinated
biphenyls (PCBs), toxic substances or related materials, petroleum and petroleum
products  and  associated  oil  or  natural  gas  exploration,   production  and
development  wastes  or  any  substances  defined  as  "hazardous   substances",
"hazardous  materials",  "hazardous  wastes"  or  "toxic  substances"  under the
Comprehensive  Environmental  Response,   Compensation  and  Liability  Act,  as
amended,  the Superfund  Amendments  and  Reauthorization  Act, as amended,  the
Hazardous Materials  Transportation Act, as amended,  the Resource  Conservation
and Recovery Act, as amended,  the Toxic Substances Control Act, as amended,  or
any other  Environmental  Laws now or hereafter  enacted or  promulgated  by any
regulatory  authority or governmental  body, but only to the extent any such law
is or becomes applicable to the Borrower or any of its property.

     "Hedge Agreement" means any swap agreement,  cap, collar,  floor,  exchange
transaction,  forward  agreement or exchange or protection  agreement related to
Hydrocarbons  or  any  option  with  respect  to  such   transaction,   as  more
specifically  provided in those certain master swap agreements on  International
Swap Dealers  Association  forms and the schedules thereto and any confirmations
thereunder entered into by Borrower with any other Person.

     "Hydrocarbons"  means  crude oil,  condensate,  natural  gas,  natural  gas
liquids and other hydrocarbons.

     "Increased  Costs" has the meaning  stated  therefor in Section 2.10 (A) of
this Agreement.

     "Indebtedness"  means,  as to any Person,  (a) all items of indebtedness or
liability for borrowed money which in accordance  with GAAP would be included in
determining  total liabilities as shown on the liability side of a balance sheet
as at the date as of which  Indebtedness is to be determined,  (b)  indebtedness
secured by (or for which the holder of such indebtedness has a right, contingent
or  otherwise,  to be secured by) any  mortgage,  deed of trust,  pledge,  lien,
security  interest,  or other charge or  encumbrance  existing on or encumbering
property owned by the Person whose Indebtedness is being determined,  whether or
not the  indebtedness  secured  thereby  shall  have been  assumed,  and (c) all
indebtedness of others which such Person has directly or indirectly  guaranteed,
endorsed  (otherwise  than for  collection or deposit in the ordinary  course of
business),  discounted  with  recourse,  agreed  (contingently  or otherwise) to
purchase or repurchase or otherwise acquire,  or in respect of which such Person
has agreed to supply or  advance  funds  (whether  by way of loan,  purchase  of
securities or capital contribution,  through a commitment to pay for property or
services  regardless of the nondelivery of such property or the nonfurnishing of
such  services or  otherwise),  or in respect of which such Person has otherwise
become directly or indirectly  liable,  contingently  or otherwise,  whether now
existing or hereafter arising.

     "Interest  Period" means as to any LIBOR Loan the period  commencing on and
including  the  date of such  Loan  (or on the  effective  date of the  election
pursuant  to Section  2.04(B) by which such Loan became a LIBOR Loan) and ending
on and  including the day preceding  the  numerically  corresponding  day (or if
there is no such numerically  corresponding  day, the last day) in the 1st, 2nd,
3rd or 6th  calendar  month  after the date of such  Loan,  as  selected  by the
Borrower in accordance with Section 2.04(B), and after such selected month, such
period commencing on and including the day immediately following the last day of
the then ending  Interest  Period for such Loan and ending on and  including the
day  preceding  the  day  numerically  corresponding  to the  first  day of such
Interest Period (or if there is no such numerically  corresponding day, the last
day),  in the 1st,  2nd, 3rd or 6th  calendar  month after the first day of such
Interest Period, as so selected by the Borrower;  provided, however, that if any
Interest Period would otherwise end on a day immediately  prior to a day that is
not a  Business  Day it shall be  extended  so as to end on the day  immediately
prior to the next  succeeding  Business  Day  unless  the same  would  fall in a
different  calendar  month,  in which case such Interest Period shall end on the
day immediately preceding the first Business Day immediately preceding such next
succeeding Business Day.

     "Investment" in any Person means any stock, bond, note or other evidence of
Indebtedness  or any other  security  (other  than  current  trade and  customer
accounts) of, or loan to, such Person.

     "Laws"  means  all  ordinances,   statutes,  rules,  regulations,   orders,
injunctions,  writs,  or decrees of any  government or political  subdivision or
agency thereof, or any court or similar entity established by any thereof.

     "LC Fee" is defined in Section 2.20(D).

     "LC Issuer" has the meaning set forth in the preamble of this Agreement.

     "LC Obligations" means, at any time, the sum, without  duplication,  of (i)
the aggregate  undrawn stated amount under all Facility LCs  outstanding at such
time plus (ii) the  aggregate  unpaid  amount at such time of all  Reimbursement
Obligations.

     "LC Payment Date" is defined in Section 2.20(E).

     "Leases"  means oil and gas  leases  and all oil,  gas and  mineral  leases
constituting any part of the Borrowing Base Oil and Gas Properties.

     "LIBOR" means,  with respect to each Interest Period,  the rate of interest
per annum at which  deposits  of not less than  $1,000,000.00  in United  States
dollars are offered in the LIBOR Market for a period of time equal or comparable
to such Interest Period and in an amount equal to or comparable to the principal
amount of the LIBOR Loan to which such Interest  Period  relates as appearing on
Telerate Page 3750 as of 11:00 AM (London time) two (2) Business Days before the
first day of the applicable  Interest Period,  as adjusted for maximum statutory
reserves, provided, however, that if such rate is not available on the Telerate,
then  within  five  (5)   Business   Days  of  receipt  of   notification,   the
Administrative  Agent and the Borrower shall enter into good faith  negotiations
for a period of fifteen  (15) days (or such  shorter  period as is  required  to
agree to the alternative  basis) with a view to agreeing on an alternative basis
for  determining  the rate of  interest  applicable  to LIBOR  Loans,  and if no
alternative  basis is agreed within the fifteen (15) day period,  the LIBOR Loan
shall  be  deemed  to have  converted  to an RR  Loan as of the end of the  last
Interest Period.

     "LIBOR Loan" means any Loan from time to time for which interest thereon is
to be  computed  at a Floating  Rate based on LIBOR  plus the LIBOR  Margin,  as
elected by Borrower pursuant to Section 2.04 hereof.

     "LIBOR  Margin" means the  applicable  margin set forth in the Pricing Grid
under  the  caption,   "LIBOR  Margin,"  determined  based  on  the  Utilization
Percentage prevailing from time to time.

     "LIBOR  Market"  means the London  interbank  offered  interest rate market
created by major London clearing banks for deposits in United States dollars.

     "Limitation  Period" means any period while any amount remains owing on the
Notes when interest on such amount, calculated at the applicable rate prescribed
on the Notes,  plus any fees payable  hereunder and deemed to be interest  under
applicable Law, would exceed the Maximum Rate.

     "Loan" means,  singly, any advance by the Banks to the Borrower pursuant to
this Agreement and "Loans" means,  cumulatively,  the aggregate sum of all money
advanced by the Banks to the Borrower pursuant to this Agreement.

     "Loan  Documents"  means  this  Agreement,   the  Notes,  the  Facility  LC
Applications,  the Security Instruments, the Guaranties and all other promissory
notes,  security agreements,  and other instruments,  documents,  and agreements
executed and delivered pursuant to or in connection with this Agreement, as such
instruments,  documents,  and  agreements  may be  amended,  modified,  renewed,
extended, or supplemented from time to time.

     "Loan Excess" means, at any point in time, the amount, if any, by which the
outstanding  balance on the Aggregate  Outstanding  Credit Exposure  exceeds the
Aggregate Commitment Amount then in effect.

     "Material  Adverse  Change"  means any  change in the  business,  property,
condition  (financial  or  otherwise)  or results of  operations,  or reasonably
foreseeable  prospects of Borrower and the  Guarantors,  considered  as a whole,
which has a Material Adverse Effect, excluding any change in prevailing economic
or business conditions that are applicable,  generally,  to companies engaged in
the domestic oil and gas exploration and production  business in the continental
United  States,  including,  without  limitation,  fluctuations  in oil  and gas
prices.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
business, property,  condition (financial or otherwise),  results of operations,
or  reasonably  foreseeable  prospects  of Borrower or any  Guarantor,  (ii) the
ability of Borrower or any Guarantor to perform its  obligations  under the Loan
Documents to which it is a party, or (iii) the validity or enforceability of any
of the Loan  Documents  or the  rights or  remedies  of any of the Bank  Parties
thereunder.

     "Maximum Rate" means the maximum rate of  non-usurious  interest  permitted
from day to day by Applicable  Law,  including  Chapter 303 of the Texas Finance
Code (and as the same may be incorporated by reference in other Texas statutes),
but otherwise  without  limitation,  that rate based upon the "indicated  weekly
rate ceiling."

     "Modify" and "Modification" are defined in Section 2.20(A).

     "Multi-employer Plan" means a plan described in Section 4001(a)(3) of ERISA
which covers employees of the Borrower or any ERISA Affiliate.

     "Net Income" means, for any period, without duplication, the net income (or
loss) of Borrower and  Guarantors on a consolidated  basis after  allowances for
taxes for such period,  determined in accordance with GAAP;  provided that there
shall be  excluded  from  such net  income  (to the  extent  otherwise  included
therein) the  following:  (i) the net income of any Person in which the Borrower
or any Guarantor has an interest  (which  interest does not cause the net income
of such other Person to be  consolidated  with the net income of the Borrower or
such Guarantor in accordance  with GAAP),  except to the extent of the amount of
dividends or distributions  actually paid in such period by such other Person to
the  Borrower  or such  Guarantor;  (ii)  any  extraordinary  gains  or  losses,
including  gains or losses  attributable  to property  sales not in the ordinary
course of  business,  (iii)  the  cumulative  effect  of a change in  accounting
principles,  and (iv) any gains or losses attributable to writeups or writedowns
of assets.

     "Note"  and  "Notes"  means,  individually,  a  promissory  note  issued by
Borrower  payable to the order of a Bank  evidencing the Loans made by that Bank
pursuant to Section 2.01 hereof and being  substantially in the form of the note
attached  as  Exhibit  B hereto,  together  with any and all  further  renewals,
extensions  for any  period,  increases  or  rearrangements  thereof,  and means
collectively all of such Notes.

     "Obligations" means all obligations,  indebtedness,  and liabilities of the
Borrower to the Bank  Parties,  now  existing or  hereafter  arising  under this
Agreement  and the other Loan  Documents,  including,  but not  limited  to, the
Indebtedness evidenced by the Notes and the Reimbursement  Obligations,  and all
interest accruing thereon and all attorneys' fees and other expenses incurred in
the administration, enforcement or collection thereof.

     "Oil and Gas  Properties"  means fee,  leasehold  or other  interests in or
under mineral estates or oil, gas and other liquid or gaseous hydrocarbon leases
with respect to properties  situated in the United  States,  including,  without
limitation,   overriding  royalty  and  royalty   interests,   leasehold  estate
interests,  net profits interests,  production payment interests and mineral fee
interests,  and all  gathering  systems,  processing  plants,  compressors,  and
associated  facilities of any type  relating  thereto,  together with  contracts
executed in connection therewith and all tenements, hereditaments, appurtenances
and properties, real or personal, appertaining, belonging, affixed or incidental
thereto.

     "Original  Agreement"  has  the  meaning  stated  in the  Recitals  of this
Agreement.

     "Outstanding Credit Exposure" means, as to any Bank at any time, the sum of
(i) the aggregate  principal amount of its Loans  outstanding at such time, plus
(ii) an amount equal to its Percentage Share of the LC Obligations at such time.

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

     "Percentage  Share"  means,  as to any Bank,  a  fraction  (expressed  as a
percentage),  the numerator of which shall be such Bank's Commitment Amount, and
the  denominator  of which shall be the  Aggregate  Commitment  Amount stated on
Schedule 1.01(b) attached hereto.

     "Permitted Asset Sales" means (a) sales, leases, assignments,  transfers or
disposals  of, in one or any  series  of  related  transactions,  (i) all or any
portion of Borrower's or any  Guarantor's  assets  (except for items included in
clause  (ii) of this  definition),  whether  now  owned or  hereafter  acquired,
including  transfers to  Subsidiaries,  which,  in the aggregate,  do not exceed
$2,500,000.00  in any rolling four quarter  period,  and (ii)  Borrower's or any
Guarantor's  offshore platforms that have been abandoned or dismantled;  and (b)
sales of Hydrocarbons in the ordinary course of business.

     "Permitted Encumbrances" means:

     (A)  Liens for taxes,  assessments,  or similar  charges,  incurred  in the
          ordinary course of business that are not yet due and payable;

     (B)  Liens of mechanics, materialmen, warehousemen, carriers, or other like
          liens,  securing  obligations  incurred  in  the  ordinary  course  of
          business that are not yet due and payable;

     (C)  Pledges  or  deposits  in  connection  with  or  to  secure  workmen's
          compensation,  unemployment  insurance,  pensions  or  other  employee
          benefits;

     (D)  Encumbrances  consisting of covenants,  zoning  restrictions,  rights,
          easements,  liens or other  restrictions  on the use of real property,
          none of  which  materially  impairs  the use of such  property  by the
          Borrower or any Guarantor in the  operation of its business,  and none
          of which is violated in any  material  respect by existing or proposed
          operations;

     (E)  Liens of  operators  and/or  co-working  interest  owners  under joint
          operating agreements or similar contractual  arrangements with respect
          to  the  Borrower's  or any  Guarantor's  proportionate  share  of the
          expense of  exploration,  development  and  operation  of oil, gas and
          mineral  leasehold or fee interests owned jointly with others,  to the
          extent that same relate to sums not yet due;

     (F)  Liens securing  surety or other bonds required in the normal course of
          business not to exceed  $2,000,000.00  in the aggregate at any time in
          effect;

     (G)  The following, if the validity or amount thereof is being contested in
          good faith by appropriate and lawful proceedings,  so long as levy and
          execution  thereon have been stayed and continue to be stayed and they
          do not, in the  aggregate,  materially  detract  from the value of the
          property of Borrower or any  Guarantor,  or materially  impair the use
          thereof in the operation of its business:

          (1)  Claims  or liens  for  taxes,  assessments,  or  charges  due and
               payable and subject to interest or penalty;

          (2)  Claims,  liens, and  encumbrances  upon, and defects of title to,
               real or personal  property,  including any attachment of personal
               or real property or other legal process prior to  adjudication of
               a dispute on the merits;

          (3)  Claims  or  liens  of   mechanics,   materialmen,   warehousemen,
               carriers, or other like liens; and

          (4)  Adverse judgments on appeal;

     (H)  Liens securing payment and performance of the Obligations;

     (I)  Liens securing purchase money  obligations  included in the definition
          of Permitted Indebtedness if such liens encumber only the property for
          which such purchase money obligation was incurred; and

     (J)  Inchoate liens in respect of royalty owners.

     "Permitted Hedge Agreement" means any Hedge Agreement which Borrower or any
Guarantor enters into with or through a counterparty that has a credit rating of
at least  "A-" by  Standard  and Poors or "A3" by  Moody's  Investment  Service,
together with the confirmations  which Borrower may hereafter enter into with or
through  such  counterparty  covering,  in the  aggregate,  among all such Hedge
Agreements, not more than seventy-five percent (75%) of the Proved Reserves that
are (i) attributable to Borrower's or such Guarantor's interest in the Borrowing
Base Oil and Gas Properties and (ii) projected to be produced during the term(s)
of such Hedge Agreement(s),  provided that the floor, fixed or strike prices for
oil or gas,  respectively,  prescribed  in any such Hedge  Agreement  must be at
least  equal to or greater  than the  average  of the prices for oil or gas,  as
applicable,  then being used by the Arrangers in their price decks applicable to
Borrowing  Base  determinations,  which  average  prices  shall be  provided  to
Borrower and each Guarantor  within five (5) Business Days after written request
therefor from Borrower to Arrangers.

     "Permitted Indebtedness" means:

     (A)  The Loans and Facility LCs;

     (B)  Unsecured  current accounts payable incurred in the ordinary course of
          business which are (i) not unpaid for more than ninety (90) days after
          the date of the  invoice  therefor,  or (ii) being  contested  in good
          faith by  appropriate  proceedings,  or (iii) the subject of usual and
          customary review and evaluation;

     (C)  Extensions  of  credit  from  suppliers  or  contractors  who  are not
          Affiliates of Borrower for the performance of labor or services or the
          provision  of supplies or  materials  under  applicable  contracts  or
          agreements in connection  with  Borrower's or any  Guarantor's oil and
          gas exploration and development  activities,  which are not overdue or
          are being contested in good faith by appropriate proceedings;

     (D)  Letters of credit or performance  bonds required to be obtained by the
          Borrower  or any  Guarantor  in the normal  course of its  business to
          assure the proper  plugging and  abandonment of oil or gas drilling or
          production  locations or bonds required by any governmental  agency or
          instrumentality in the normal course of the Borrower's business;

     (E)  Purchase  money  obligations  of the Borrower and  Guarantors of up to
          $15,000,000,  in the  aggregate,  at any  time  for  the  purchase  of
          compressors,  pipelines,  engines  and other  equipment  necessary  or
          useful for injection  plants for use in Borrower's Cedar Hills Project
          so long as (i) the purchase  money  obligations do not exceed the fair
          market value of the equipment  purchased  therewith  (ii) Borrower and
          Guarantors have no personal  liability for such Indebtedness and (iii)
          the recourse of the holder thereof is limited to taking  possession of
          or foreclosing upon such compressors;

     (F)  Income taxes payable that are not overdue;

     (G)  Accrued abandonment  liabilities for abandonment  obligations that are
          not in default;

     (H)  The Indebtedness evidenced by the Senior Subordinated Notes;

     (I)  Indebtedness arising out of Permitted Hedge Agreements;

     (J)  Other unsecured indebtedness incurred by the Borrower or any Guarantor
          not to exceed, in the aggregate at any time  outstanding,  One Million
          Dollars ($1,000,000.00); and

     (K)  Any  Indebtedness  between or among the Borrower and all or any of the
          Guarantors, subject to Section 9.23.

     "Person"  means an individual,  company,  corporation,  partnership,  joint
venture,   limited  liability  company,   trust,   association,   unincorporated
organization or a government or any agency or political subdivision thereof.

     "Plan" means,  at any time,  any employee  benefit plan which is covered by
ERISA and in respect of which the  Borrower  or any ERISA  Affiliate  is (or, if
such plan were  terminated  at such time,  would under  Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.

     "Pricing Grid" means the following table:

<TABLE>
<CAPTION>
Utilization Percentage  LIBOR Margin  RR Margin  Commitment Fee  LC Fee
======================  ============  =========  ==============  =======
<C>                         <C>           <C>         <C>         <C>
90% or more                 2.50%         0.50%       .25%        2.00%
equal to or greater than
  68% but less than 90%     2.25%         0.25%       .375%       1.75%
equal to or greater than
  33% but less than 68%     2.00%         0%          .375%       1.50%
less than 33%               1.50%         0%          .375%       1.50%
</TABLE>

For purposes of determining the applicable LIBOR Margin,  RR Margin,  Commitment
Fee and/or LC Fee at any time, the applicable  Utilization  Percentage  shall be
determined based on the most recently completed fiscal quarter, as of the end of
such quarter.

     "Prior Credit Agreements" means, collectively,  the Original Agreement, the
First Restated  Agreement,  the Second Restated Agreement and the Third Restated
Agreement.

     "Prior Security Instruments" means, collectively,  all Security Instruments
as defined in, and/or executed pursuant to, any of the Prior Credit  Agreements,
except to the extent, and only to the extent,  that any of them have been wholly
or partially released of record.

     "Production Revenue" means revenues of the Borrower and the Guarantors from
the  sale of its  oil  and  gas  production  minus  any  applicable  oil and gas
production taxes and royalties.

     "Prohibited  Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time
to time.

     "Proved Reserves" means the estimated  quantities of crude oil, condensate,
natural  gas  liquids and natural  gas which  geological  and  engineering  data
demonstrate  with  reasonable  certainty to be  recoverable in future years from
known reservoirs  underlying lands or interests therein constituting Oil and Gas
Properties, under existing economic and operating conditions, using the criteria
and  parameters  required  by and  acceptable  to the  Securities  and  Exchange
Commission,  provided  that with respect to estimated  quantities  of crude oil,
condensate,  natural gas liquids  and natural gas  expected to be produced  from
secondary recovery  operations,  such determination shall be made using criteria
and parameters  generally  utilized by and  acceptable to Ryder Scott  Petroleum
Engineers or other petroleum engineers acceptable to the Arrangers.

     "Purchasing  Bank" shall have the meaning  assigned to that term in Section
9.05 hereof.

     "Reimbursement  Obligations"  means,  at any  time,  the  aggregate  of all
obligations of the Borrower then outstanding under Section 2.20 to reimburse the
LC  Issuer  for  amounts  paid by the LC Issuer  in  respect  of any one or more
drawings under Facility LCs.

     "Reportable  Event"  means any of the events  set forth in Section  4043 of
ERISA.

     "Request for  Advance"  means the written or verbal  (confirmed  in writing
within one (1) Business Day) request by the Borrower to the Administrative Agent
for an  advance by the Banks  pursuant  to this  Agreement,  which  Request  for
Advance  shall be in  substantially  the form  attached  hereto as Exhibit  "E,"
signed by an  authorized  officer  of the  Borrower  and which  shall  include a
statement  of the amount  requested to be  advanced,  the date of the  requested
advance and such other information as the Administrative Agent in its reasonable
discretion deems necessary.

     "Required  Banks" means, at any time,  Banks holding at least sixty-six and
two-thirds  percent  (662/3%)  of the  Aggregate  Commitment  Amount  or, if the
Aggregate Commitment Amount has been terminated, Banks having at least sixty-six
and two-thirds  percent (662/3%) of the Aggregate  Outstanding  Credit Exposure;
subject to the provisions of Section 9.13.

     "Required  Number" means: in the case of notices  hereunder (i) relative to
borrowings,  prepayments,  elections  of LIBOR  Loans,  selections  of  Interest
Periods for, or other  transactions  in respect of, LIBOR Loans:  by 10:00 a.m.,
Los  Angeles,  California  time on the third  Business Day prior to the proposed
activity;  or (ii) relative to all transactions in respect of RR Loans: the same
Business Day by 11:00 a.m., Los Angeles,  California time; it being  understood,
however,  that in the case of notices involving  transactions in respect of more
than one  type of Loan  (such as a  change  in type of Loan in  accordance  with
Section  2.04(B)),  "Required  Number"  means that number of days,  as indicated
above in respect of the Loans  involved,  which  would  constitute  the  longest
applicable period of time.

     "Reserve  Report"  means a  report  prepared  by an  independent  petroleum
engineer or firm of engineers  acceptable  to  Administrative  Agent or a report
prepared under the supervision of the chief petroleum  engineer of Borrower,  as
applicable  pursuant to Section 2.06, in each case regarding the Proved Reserves
attributable  to the Borrowing Base Oil and Gas  Properties,  using the criteria
and  parameters  required  by and  acceptable  to the  Securities  and  Exchange
Commission,  and  incorporating  the present  cost of  appropriate  plugging and
abandonment  obligations  to be incurred in the future,  taking into account any
plugging and abandonment  fund required to be accrued or established by Borrower
or any Guarantor out of cash flow from the Borrowing Base Oil and Gas Properties
covered by such report with respect to such future obligations.

     "RR" means a fluctuating  reference rate of interest equal to the higher of
(i) a rate per annum equal to the reference rate of interest announced from time
to time by  Administrative  Agent  (which is not  necessarily  the  lowest  rate
charged to any customer),  changing when and as said reference rate changes, and
(ii) the sum of the Federal Funds Effective Rate most recently determined by the
Administrative Agent plus one-half percent (1/2%) per annum.

     "RR Loan" means any Loan from time to time for which interest thereon is to
be  computed  on the basis of the RR plus the RR Margin,  as elected by Borrower
pursuant to Section 2.04 hereof.

     "RR Margin" means the applicable margin set forth in the Pricing Grid under
the  caption,  "RR  Margin,"  determined  based  on the  Utilization  Percentage
prevailing from time to time.

     "Second Restated  Agreement" has the meaning stated therefor in Recitations
to this Agreement.

     "Security  Instruments" means the security instruments described on Exhibit
"D," in form and substance  satisfactory to the Collateral Agent, to be executed
by  Borrower  pursuant  to  Section  3.01,  together  with  all  Prior  Security
Instruments and any and all other instruments or documents hereafter executed in
connection  with or as security for the payment of the Notes and  performance of
the Obligations.

     "Senior Debts" has the meaning stated therefor in Section 9.23.

     "Senior Subordinated Notes" means those certain $150,000,000, 10.25% Senior
Subordinated Notes issued by Borrower due August 2008.

     "Stockholders'  Equity"  means,  at any  time,  the  sum  of the  following
accounts  set forth on a  consolidated  balance  sheet of the  Borrower  and the
Guarantors, prepared in accordance with GAAP: (A) the par or stated value of all
outstanding capital stock (common and preferred);  (B) capital surplus including
paid in capital; and (C) retained earnings, excluding any non-cash items.

     "Subordinated Intercompany Debt" has the meaning stated therefor in Section
9.23.

     "Subsidiary" means, as to any Person, any corporation in which such Person,
directly or indirectly  through its  Subsidiaries,  owns more than fifty percent
(50%) of the stock of any class or  classes  having  by the  terms  thereof  the
ordinary voting power to elect a majority of the directors of such  corporation,
and any partnership,  limited partnership,  association, joint venture, or other
entity in which such Person,  directly or indirectly  through its  Subsidiaries,
has more than a fifty percent (50%) equity interest at the time.

     "Super-Majority"  means, at any time,  Banks holding at least  seventy-five
percent (75%) of the Aggregate Commitment Amount or, if the Aggregate Commitment
Amount has been terminated,  Banks having at least seventy-five percent (75%) of
the Aggregate Outstanding Credit Exposure;  subject to the provisions of Section
9.13.

     "Syndication Agent" means Fortis Capital Corp. as Syndication Agent for the
Banks  hereunder  and  under  the  other  Loan  Documents,  and  each  successor
Syndication Agent.

     "Third Restated  Agreement" has the meaning stated therefor in the Recitals
of this Agreement.

     "Transfer  Order Letters" means the letters in lieu of division or transfer
orders, in form acceptable to the Administrative Agent.

     "Unmatured  Event of Default"  means any event or  occurrence  which solely
with the lapse of time or the  giving of notice or both will ripen into an Event
of Default.

     "Utilization  Percentage" means the percentage of the Aggregate  Commitment
Amount  represented by the aggregate  principal amount of all Credit  Extensions
outstanding from time to time calculated at the end of each fiscal quarter based
on the average daily Aggregate  Commitment  Amount and the average daily balance
of all outstanding Credit Extensions during such quarter.

     Undefined  Terms.   Undefined  financial  accounting  terms  used  in  this
Agreement shall be defined according to GAAP.

                                   ARTICLE II.

                         THE LOANS AND LETTERS OF CREDIT

     2.01 The  Commitment.  From and  including  the date of this  Agreement and
prior to the Facility Termination Date, each Bank severally agrees, on the terms
and  conditions set forth in this  Agreement,  to (i) make Loans to the Borrower
and (ii)  participate  in Facility LCs issued upon the request of the  Borrower,
provided  that,  after giving effect to the making of each Loan and the issuance
of each Facility LC, such Bank's  Outstanding  Credit  Exposure shall not exceed
its  Commitment.  The  Loans  advanced  by each  Bank to the  Borrower  shall be
evidenced by the Banks' respective Notes from the Borrower. Subject to the terms
of this  Agreement,  the  Borrower  may  borrow,  repay and  reborrow  up to the
Aggregate  Commitment Amount at any time prior to the Facility Termination Date.
All  Commitments  to  extend  credit  hereunder  shall  expire  on the  Facility
Termination Date.

     The LC Issuer will issue Facility LCs hereunder on the terms and conditions
set forth in Section 2.20.

     2.02 Notice and Manner of Borrowing.

          (a) The amount and date of each Credit  Extension  shall be designated
     in a Request  for  Advance  executed  by  Borrower,  to be  received by the
     Administrative Agent at least the Required Number of, but not more than ten
     (10), Business Days prior to the date of such Credit Extension,  which date
     shall be a Business Day. The Administrative Agent shall promptly advise the
     Banks and, if applicable,  the LC Issuer,  of any Request for Advance given
     pursuant  to this  Section  2.02,  of each Bank's  Percentage  Share of any
     requested  Borrowing  and,  if  applicable,  the amount  requested  for any
     Facility LC by telephone,  confirmed  promptly in writing,  or  telecopier.
     Upon  satisfaction  of the applicable  conditions set forth in Article III,
     each Borrowing shall be made at the office of the Administrative Agent, and
     shall be funded prior to 1:00 o'clock p.m., Los Angeles,  California  time,
     on the day so requested  in  immediately  available  funds in the amount so
     requested.

          (b) Each Bank shall make each Loan to be made by it  hereunder  on the
     date of the proposed  Borrowing by wire transfer of  immediately  available
     funds to the  Administrative  Agent in Los Angeles,  California,  not later
     than 10:00 a.m., Los Angeles,  California time, and upon fulfillment of the
     applicable  conditions set forth in Article III, the  Administrative  Agent
     will make such funds  available to Borrower as Borrower shall direct to the
     Administrative  Agent from time to time or, if a Borrowing  shall not occur
     on such date because any condition  precedent  herein  specified  shall not
     have been met,  return the amounts so received to the  respective  Banks as
     soon as practicable.  Unless the  Administrative  Agent shall have received
     notice from a Bank prior to the date of any  proposed  Borrowing  that such
     Bank  will not make  available  to the  Administrative  Agent  such  Bank's
     Percentage  Share of such Borrowing,  the  Administrative  Agent may assume
     that  such  Bank  has  made  its   Percentage   Share   available   to  the
     Administrative  Agent on the date of such Borrowing in accordance with this
     paragraph  (b) and the  Administrative  Agent may,  in  reliance  upon such
     assumption, make available to Borrower on such date a corresponding amount.
     If, and to the extent  that,  such Bank shall not have made its  Percentage
     Share  available  to the  Administrative  Agent,  such  Bank  and  Borrower
     severally  agree to repay to the  Administrative  Agent forthwith on demand
     such corresponding amount together with interest thereon, for each day from
     the date such  amount is made  available  to  Borrower  until the date such
     amount  is  repaid  to the  Administrative  Agent  at (i)  in the  case  of
     Borrower,  the interest rate applicable at the time to the Loans comprising
     such  Borrowing  and  (ii) in the  case of such  Bank,  the  Federal  Funds
     Effective Rate. If such Bank shall repay to the  Administrative  Agent such
     corresponding amount, such amount shall constitute such Bank's Loan as part
     of such Borrowing for purposes of this Agreement.

     2.03 Payment Procedure. All payments and prepayments made by Borrower under
this  Agreement  shall  be made to the  Administrative  Agent at its  office  in
Monterey Park,  California for the account of the Banks in immediately available
funds before 10:00 a. m., Los Angeles,  California  time,  on the date that such
payment  is  required  to  be  made.  The  Administrative  Agent  will  promptly
thereafter  cause to be  distributed  like funds  relating  to such  payments or
prepayments  ratably to the Banks (and if the payment relates to amounts owed to
a particular Bank only, in like funds to such Bank), in each case, to be applied
in accordance with the terms of this Agreement.  Borrower hereby  authorizes the
Administrative  Agent,  if and to the extent  payment or  prepayment  (including
prepayments  required  pursuant  to  Section  2.11  hereof) is not made when due
hereunder or under the Notes or any other Loan Document,  to charge from time to
time against Borrower's account with the Administrative Agent any amount so due.
Any payment received and accepted by the Administrative  Agent (or any branch or
Affiliate  thereof)  after  such  time  shall  be  considered  for all  purposes
(including  the  calculation  of  interest,  to the extent  permitted by law) as
having been made on the next following Business Day.

     2.04  Payments  of  Interest  under  the  Notes.  Subject  to the terms and
provisions of this Agreement,  interest on the Loan,  calculated at the Floating
Rate, shall be due and payable as follows:

          (A)  Interest  on RR  Loans  shall  be  calculated  on the  basis of a
     365/366-day  year,  as  applicable,  and on LIBOR  Loans on the  basis of a
     360-day  year,  in each case  counting the actual  number of days  elapsed.
     Interest on the outstanding principal balance of the Loans shall accrue for
     each day at either a Floating  Rate based on RR plus the RR Margin for such
     day for RR Loans, or a Floating Rate based on LIBOR for the Interest Period
     which includes such day plus the LIBOR Margin for such day for LIBOR Loans,
     all as  elected  and  specified  (including  specification  as to length of
     Interest Period,  as permitted by the definition of that term, with respect
     to any  election  of a  Floating  Rate based on LIBOR) by the  Borrower  in
     accordance with Section 2.04(B); provided that:

               (1) In the absence of an  election by the  Borrower of a Floating
          Rate  based on LIBOR  plus the  LIBOR  Margin,  or,  having  made such
          election, but upon the Required Number of days prior to the end of the
          then current  Interest  Period the  Borrower  fails or is not entitled
          under the terms of this Agreement to elect to continue a Floating Rate
          based on LIBOR  plus the  LIBOR  Margin  and  specify  the  applicable
          Interest  Period  therefor,  then  upon the  expiration  of such  then
          current Interest  Period,  interest on the Loans shall accrue for each
          day at a  Floating  Rate  based on RR plus the RR Margin for such day,
          until the Borrower,  pursuant to Section  2.04(B),  elects a different
          Floating Rate and specifies the Interest Period for the Loans.

               (2)  Interest  accruing  on any LIBOR Loan  during  any  Interest
          Period  shall be payable on the first  Business Day after the last day
          of such Interest  Period except that:  (a) with respect to LIBOR Loans
          for which Borrower has selected an Interest  Period of six (6) months,
          interest  will be  payable on the first  Business  Day  following  the
          ninetieth  (90th) day after the  commencement  of such Interest Period
          and on  the  first  Business  Day of the  next  Interest  Period,  (b)
          interest will be payable on the Facility Termination Date on any LIBOR
          Loan with an Interest Period ending on the Facility  Termination Date;
          and provided that (c) all accrued interest on any LIBOR Loan converted
          or prepaid  pursuant to Section  2.11 shall be paid  immediately  upon
          such prepayment or conversion.

          (B) By at least the  Required  Number of days prior to the  advance of
     any Loan hereunder,  the Borrower shall select the initial Floating Rate to
     be charged on such Loan, and from time to time  thereafter the Borrower may
     elect,  on at least the Required Number of days  irrevocable  prior written
     (or verbal,  promptly  confirmed by written)  notice to the  Administrative
     Agent, an initial  Floating Rate for any additional  Loan, or to change the
     Floating  Rate on any Loan to any  other  Floating  Rate  (including,  when
     applicable,  the selection of the Interest Period);  provided that; (i) the
     Borrower  shall not  select an  Interest  Period  that  extends  beyond the
     Facility  Termination  Date;  (ii) except as otherwise  provided in Section
     2.11 no such  change  from a  Floating  Rate  based on LIBOR plus the LIBOR
     Margin to another  Floating Rate shall become effective on a day other than
     the day,  which must be a Business Day, next  following the last day of the
     Interest  Period last  effective  for such LIBOR Loan;  (iii) any elections
     made by the  Borrower  pursuant  to this  Section  2.04(B)  shall be in the
     amount of $1,000,000,  plus any additional increment of $1,000,000, or such
     lesser  amount as  constitutes  the  balance of all Loans then  outstanding
     hereunder;  (iv)  notwithstanding  anything  herein  to the  contrary,  the
     Borrower  may not make any election  under this Section  2.04(B) that would
     result in Loans  outstanding  based on more than six (6)  different  LIBORs
     without the consent of the  Required  Banks to do so; and (v) the first day
     of each Interest Period as to a LIBOR Loan shall be a Business Day.

          (C) Interest on RR Loans shall be paid monthly in arrears on the first
     Business Day of each calendar month (for the immediately  preceding  month)
     commencing  with the month following any month during which interest begins
     to accrue at a Floating Rate based on RR plus the RR Margin,  as elected by
     Borrower pursuant to Section 2.04(B), and on the date the principal of such
     Loans  shall  be  due  (on  the  stated  Facility   Termination   Date,  on
     acceleration, or otherwise).

     2.05 General  Provisions  Relating to Interest.  It is the intention of the
parties hereto to comply  strictly with the usury Laws of the State of Texas and
the United  States of America  and,  in this  connection,  there  shall never be
collected, charged or received on any sums advanced hereunder interest in excess
of the Maximum  Rate.  For purposes of Chapter 303 of the Texas Finance Code, as
amended,  the Borrower  agrees that the maximum rate to be charged  shall be the
"indicated (weekly) rate ceiling" as defined in said Chapter,  provided that the
Bank may also rely to the extent  permitted by  applicable  Laws of the State of
Texas or the United States of America,  on alternative maximum rates of interest
under  other  applicable  Laws of the  State of Texas or the  United  States  of
America applicable to the Loans, if greater.  Notwithstanding anything herein or
in the Notes to the contrary, during any Limitation Period, the interest rate to
be charged on amounts  evidenced  by the Notes shall be the Maximum Rate and the
obligation  of the  Borrower  for any fees  payable  hereunder  and deemed to be
interest under  applicable Law shall be suspended.  During any period or periods
of time  following a Limitation  Period,  to the extent  permitted by applicable
Laws of the State of Texas or the United States of America, the interest rate to
be charged  hereunder  shall remain at the Maximum Rate until such time as there
has been paid to each Bank (a) the amount of  interest  in excess of the Maximum
Rate that such Bank would have  received  during the  Limitation  Period had the
interest rate remained at the relevant rates  specified in the Note, and (b) all
interest  and  fees  otherwise  due to such  Bank  but for  the  effect  of such
Limitation Period.

     If under any circumstances the aggregate amounts paid on the Notes or under
this Agreement  include amounts which by Law are deemed interest and which would
exceed the amount  permitted  if the Maximum  Rate were in effect,  the Borrower
stipulates that such payment and collection will have been and will be deemed to
have been, to the extent  permitted by applicable  Laws of the State of Texas or
the United States of America,  the result of  mathematical  error on the part of
both the Borrower and the Banks,  and each Bank shall promptly refund the amount
of such excess (to the extent only of such interest  payments  above the Maximum
Rate which could  lawfully have been  collected and retained)  upon discovery of
such error by such Bank or notice thereof from the Borrower.

     2.06 Borrowing Base  Determination.  The Borrowing Base in effect as of the
Closing is One Hundred Forty Million  Dollars  ($140,000,000.00).  The Borrowing
Base shall be re-determined  semi-annually  pursuant to the following provisions
of this Section. On or before October 1, 2002, the Borrower shall furnish to the
Administrative  Agent  information  sufficient to update to an effective date of
July 1, 2002,  the most recent  Reserve  Report  provided to the  Administrative
Agent  prior to Closing  relative  to the Proved  Reserves  attributable  to the
Borrowing Base Oil and Gas  Properties.  Upon receipt of such  information,  the
Arrangers shall, in the normal course of business, make a joint determination of
the Borrowing Base,  which shall become  effective upon approval by the Required
Banks and subsequent written  notification from the Administrative  Agent to the
Borrower, and which, subject to the other provisions of this Agreement, shall be
the basis on which the Borrowing Base shall  thereafter be calculated  until the
effective date of the next redetermination of the Borrowing Base as set forth in
this  Section.  Thereafter,  on or before  each April 1 and  October 1 until the
Facility  Termination Date,  beginning April 1, 2003, the Borrower shall furnish
to the Administrative Agent a Reserve Report, in form and substance satisfactory
to the Administrative  Agent, which report shall set forth, as of each preceding
January 1 or July 1, as  applicable,  the Proved  Reserves  attributable  to the
Borrowing  Base Oil and Gas  Properties.  Each Reserve  Report that is due to be
submitted  to the  Administrative  Agent on or  before  each  April 1 shall be a
complete  report  prepared  by an  independent  petroleum  engineer  or  firm of
engineers acceptable to Administrative  Agent, and each Reserve Report due to be
submitted  on or  before  October  1 or each year  shall be  prepared  under the
supervision of the chief petroleum engineer of Borrower and shall simply update,
to  its  effective   date,  the  last  complete   Reserve  Report   provided  to
Administrative  Agent.  Upon receipt of each such Reserve Report,  the Arrangers
shall,  in the normal  course of  business,  make a joint  determination  of the
Borrowing Base which shall become  effective upon approval by the Required Banks
and  subsequent  written  notification  from  the  Administrative  Agent  to the
Borrower, and which, subject to the other provisions of this Agreement, shall be
the basis on which the Borrowing Base shall  thereafter be calculated  until the
effective date of the next redetermination of the Borrowing Base as set forth in
this Section 2.06. The Arrangers may, subject to approval of the Required Banks,
and must, upon the request of the Required Banks, redetermine the Borrowing Base
at any time, and from time to time, which redetermination shall become effective
upon approval by the Required Banks and subsequent written notification from the
Administrative  Agent to the Borrower and which, subject to the other provisions
of this  Agreement,  shall be the  basis  on  which  the  Borrowing  Base  shall
thereafter be calculated until the effective date of the next redetermination of
the Borrowing Base, as set forth in this Section.  Not more often than two times
in any calendar year, the  Administrative  Agent may request in writing that the
Borrower provide a Reserve Report regarding the Proved Reserves  attributable to
the Borrowing Base Oil and Gas  Properties  with an effective date not more than
ninety  (90)  days  prior to  Borrower's  delivery  of such  Reserve  Report  to
Administrative   Agent,   and  such   Reserve   Report  shall  be  delivered  to
Administrative  Agent within ninety (90) days after  Borrower's  receipt of such
written request.

     The  Borrower  shall  have the  right to  request,  by  written  notice  to
Administrative  Agent,  one  unscheduled  redetermination  of the Borrowing Base
between any two scheduled redeterminations thereof, subject to contemporaneously
providing to  Administrative  Agent a Reserve  Report with an effective date not
more than ninety (90) days prior to the date of such notice.

     If at any time the Arrangers cannot otherwise agree on a redetermination of
the Borrowing Base,  then the proposed  Borrowing Base shall be set on the basis
of the Administrative  Agent's calculation of the "weighted  arithmetic average"
(as  hereinafter  calculated)  of the  Borrowing  Base,  as  determined  by each
Arranger and communicated to Administrative Agent in writing, and such Borrowing
Base,  calculated by the Administrative  Agent based on the "weighted arithmetic
average" of each Borrowing Base proposed by the respective Arrangers, shall then
be subject to the approval of the  Required  Banks.  However,  the amount of the
Borrowing  Base shall  never be  increased  at any time  without  the  unanimous
consent of the Banks,  notwithstanding anything else herein to the contrary. For
purposes of this paragraph,  the "weighted  arithmetic average" of the Borrowing
Base shall be determined  by first  multiplying  the Borrowing  Base proposed in
writing to  Administrative  Agent by each Arranger by the ratio such  Arranger's
Percentage  Share over the sum of the Percentage  Shares of all  Arrangers,  and
then adding the results of each such  calculation,  with the resultant sum being
the Borrowing Base to be submitted to the Banks for approval as provided herein.

     The  Borrowing  Base shall  represent the Required  Banks'  approval of the
Arrangers' determination,  in accordance with their customary lending practices,
of the  maximum  loan  amount  with  respect to the  Borrowing  Base Oil and Gas
Properties and the Borrower acknowledges,  for purposes of this Agreement,  such
determination  by the  Arrangers  as being the  maximum  loan amount that can be
supported  by  the  Borrowing  Base  Oil  and  Gas  Properties.  In  making  any
redetermination  of the Borrowing  Base, the Arrangers and the other Banks shall
apply the  parameters  and  other  credit  factors  consistently  applied,  then
generally being utilized by the Arrangers and each such Bank, respectively,  for
Borrowing Base  redeterminations  for other similarly  situated  borrowers.  The
Borrower,  Required  Banks  and the  Arrangers  acknowledge  that (a) due to the
uncertainties of the oil and gas extraction process,  the Borrowing Base Oil and
Gas Properties are not subject to evaluation  with a high degree of accuracy and
are subject to potential rapid  deterioration  in value, and (b) for this reason
and the difficulties and expenses involved in liquidating and collecting against
the Borrowing Base Oil and Gas Properties,  the Arrangers'  determination of the
maximum loan amount with respect to the  Borrowing  Base Oil and Gas  Properties
contains an equity cushion, which equity cushion is acknowledged by the Borrower
as essential for the adequate protection of the Banks.

     2.07  Mandatory  Prepayment  Due to a Loan Excess.  Within thirty (30) days
after  receipt of written  notice from  Administrative  Agent that a Loan Excess
exists,  including,  but not limited to, any notice  establishing a redetermined
Borrowing  Base that is less than the  Aggregate  Outstanding  Credit  Exposure,
Borrower  shall  either  (i) prepay the  principal  of the Note in an  aggregate
amount at least equal to such Loan Excess, or (ii) add to the Borrowing Base Oil
and Gas Properties  additional Oil and Gas Properties of the Borrower sufficient
in value, as determined pursuant to Section 2.06, to increase the Borrowing Base
to equal the unpaid principal amount of the Notes.

     2.08 Other Mandatory Prepayments.

          (A) On each date on which the Borrower or any  Guarantor  sells any of
     its  Oil and Gas  Properties,  the  Borrowing  Base  will be  automatically
     reduced to the loan value (determined in accordance with the procedures for
     determining the Borrowing Base) of the remaining Borrowing Base Oil and Gas
     Properties,  and the Borrower shall be required to make the prepayment,  if
     any, required pursuant to Section 2.07.

          (B)  Nothwithstanding  the  provisions of Section 2.07, if on any date
     the Outstanding  Credit  Exposure  exceeds the amount of the then effective
     Aggregate  Commitment as a result of a reduction in the Borrowing Base, the
     Borrower shall be required to immediately prepay the Loans by the amount of
     such excess.

     2.09  Prepayment and  Conversion.  Upon the Required Number of days written
notice to the  Administrative  Agent,  the Borrower may,  without the payment of
penalty or premium, prepay the principal of the Loans or voluntarily convert the
applicable  Floating Rate of any Loan prior to the termination of the applicable
Interest  Period in whole or in part,  from time to time. Any partial payment or
conversion of RR Loans shall be made in the sum of not less than $1,000,000, and
any partial payment or conversion of LIBOR Loans shall be made in the sum of not
less than  $1,000,000  or any  $1,000,000  increment in addition  thereto.  With
respect to any such  prepayment  or  conversion  of any LIBOR Loan the  Borrower
agrees to pay to the Banks  upon the  request of the  Administrative  Agent such
amount or amounts as will  compensate the Banks for Breakage  Costs,  excluding,
however,  any such Breakage Costs  resulting  from a payment or prepayment  made
more than  sixty  (60) days  prior to the  Administrative  Agent's  request  for
payment of Breakage  Costs.  The payment of any such Breakage Costs to the Banks
shall be made within thirty (30) days of a request therefor from  Administrative
Agent.  If  LIBOR  cannot  be  determined  on the date of such  prepayment,  the
Administrative  Agent shall  calculate  LIBOR by  interpolating  LIBOR in effect
immediately  prior to the prepayment and LIBOR in effect  immediately  after the
prepayment.

     2.10 Increased Cost of Loans.

          (A) Notwithstanding any other provisions herein, if as a result of any
     regulatory change after the date hereof

               (1)  the  basis  of  taxation  of  payments  to any  Bank  of the
          principal  of, or interest on, any LIBOR Loan or any other amounts due
          under this  Agreement  in respect of any such LIBOR Loan  (except  for
          taxes imposed on the overall net income or receipts of such Bank,  and
          franchise  or other taxes  imposed  generally  on such  Bank),  by the
          jurisdiction (or any political  subdivision therein) in which the Bank
          has its  principal  office  (if such other  taxes do not  specifically
          affect the cost to the Bank of making the Loans) is changed;

               (2)  any  reserve,   special  deposit,   or  similar  requirement
          (including   without   limitation   any  reserve   requirement   under
          regulations of the Board of Governors of the Federal  Reserve  System)
          against  assets of,  deposits  with,  or for the account of, or credit
          extended by such Bank,  is  imposed,  increased,  modified,  or deemed
          applicable; or

               (3) any other  condition  affecting  this  Agreement or any LIBOR
          Loan is imposed on such Bank or (in the case of LIBOR Loans) the LIBOR
          Market; and

     the result of any of the foregoing is to increase the actual direct cost to
     such Bank of making or  maintaining  any such LIBOR Loan (and such increase
     shall not have been compensated by a corresponding increase in the interest
     rate  applicable to the respective  Loans) by an amount deemed by such Bank
     to be material (such increases in cost and reductions in amounts receivable
     being herein called  "Increased  Costs"),  then the Borrower shall pay such
     Bank,  within thirty (30) days after its written  demand,  such  additional
     amount or amounts as will compensate  such Bank for those Increased  Costs.
     No Bank will demand to be compensated by Borrower for such Increased  Costs
     unless  such Bank  generally  makes such  demands  to its other  LIBOR Loan
     customers who are similarly  situated.  A certificate  of such Bank setting
     forth  the  basis  for  the  determination  of  such  amount  necessary  to
     compensate such Bank as aforesaid  (including a representation by such Bank
     that it is generally making demands as required by the preceding sentence),
     accompanied by documentation  showing reasonable support for such increased
     costs or reduced  sums  received by such Bank,  shall be  delivered  to the
     Borrower  and shall be  conclusive,  save for  manifest  error,  as to such
     determination and such amount. The affected Bank shall notify the Borrower,
     as  promptly  as  practicable  after  such Bank  obtains  knowledge  of any
     Increased  Costs or other sums  payable  pursuant to this  Section 2.10 and
     determines to request compensation  therefor,  or any event occurring after
     the Closing which will entitle such Bank to  compensation  pursuant to this
     Section;  provided that,  notwithstanding  anything herein to the contrary,
     the Borrower shall not be obligated for the payment of any Increased  Costs
     or other sums  payable  pursuant  to this  Section  2.10 to the extent such
     Increased  Costs or other sums  accrued more than 90 days prior to the date
     upon which the Borrower was given such notice.  If the Borrower is required
     to indemnify or pay additional  amounts pursuant to this Section 2.10, then
     the Bank will take such  action as in the  reasonable  judgment of the Bank
     (i)  will  eliminate  or  reduce  any such  additional  payment  which  may
     thereafter accrue and (ii) is not otherwise commercially unreasonable.  The
     Bank shall use its  reasonable  efforts to obtain in a timely  fashion  any
     refund, deduction or credit of any taxes paid or reimbursed by the Borrower
     pursuant to this Section 2.10. If the Bank receives a benefit in the nature
     of a  refund,  deduction  or  credit  (including  a refund in the form of a
     deduction  from or credit  against taxes that are otherwise  payable by the
     Bank) of any taxes with  respect to which the  Borrower  has made a payment
     under Section 2.10, the Bank agrees to reimburse the Borrower to the extent
     of the benefit of such refund,  deduction or credit promptly after the Bank
     reasonably  determines  that such  refund  deduction  or credit  has become
     final;  provided,  however,  that nothing contained in this paragraph shall
     require  the  Bank  to  make  available  its  tax  returns  (or  any  other
     information  relating to its taxes which it deems to be confidential) or to
     attempt to obtain any such refund, deduction or credit, which attempt would
     be inconsistent with any reporting  position otherwise taken by the Bank on
     its tax returns.

          (B) Notwithstanding the foregoing  provisions of this Section 2.10, in
     the event  that by reason of any  regulatory  change  any Bank  either  (i)
     incurs  Increased  Costs  based on, or  measured  by,  the  excess  above a
     specified  level  of  the  amount  of  a  category  of  deposits  or  other
     liabilities  of such Bank that includes  deposits by reference to which the
     interest rate on LIBOR Loans is determined as provided in this Agreement or
     a  category  of  extensions  of  credit  or other  assets of such Bank that
     includes LIBOR Loans or (ii) becomes  subject to restrictions on the amount
     of such a category of liabilities or assets that it may hold, then, if such
     Bank so elects by written  notice to the Borrower,  the  obligation of such
     Bank to make or convert Loans of any other type into LIBOR Loans  hereunder
     shall be  suspended  until the earlier of the date such  regulatory  change
     ceases to be in effect or the date the Borrower and such Bank agree upon an
     alternative method of determining the interest rate payable by the Borrower
     on LIBOR Loans, and all LIBOR Loans of such Bank then outstanding  shall be
     converted into an RR Loan (if not otherwise  prohibited  under the terms of
     this Agreement) at such Bank's option.

     2.11 Change of Law.  Notwithstanding  any other  provision  herein,  in the
event  that  any  change  in any  Applicable  Law or in  the  interpretation  or
administration  thereof  shall make it  unlawful  for the Banks to (i) honor any
commitment it may have  hereunder to make any LIBOR Loan,  then such  commitment
shall  terminate,  or (ii) maintain any LIBOR Loan,  then all LIBOR Loans of the
Banks then  outstanding  shall be repaid and  converted to RR Loans  (unless the
Banks'  obligations  to fund Loans  hereunder  has been  suspended  by any other
provisions of this  Agreement) at the Borrower's  option in accordance  with the
election procedures set forth in Section 2.04(B); provided,  however, that prior
to the effective date of such election,  interest shall be calculated at the RR.
Any  remaining  commitment  of the Banks  hereunder to make LIBOR Loans (but not
other Loans) shall be suspended so long as they are prohibited by any applicable
law. Upon the  occurrence  of any such change,  the  Administrative  Agent shall
promptly  notify the  Borrower  thereof,  and shall  furnish to the  Borrower in
writing evidence thereof certified by the Administrative Agent.

     Any repayment or conversion of any LIBOR Loan which is required  under this
Section 2.11 or under  2.04(B)  shall be effected by payment  thereof,  together
with accrued interest thereon, on demand, and concurrently there shall occur the
borrowing of the corresponding RR Loan as provided herein.

     If any  repayment  to the Banks of any LIBOR  Loan  (including  conversions
thereof)  is made under this  Section  2.11 on a day other than a day  otherwise
scheduled  for a payment of principal of or interest on such Loan,  the Borrower
shall pay to the Banks upon the request of the Administrative  Agent such amount
or amounts as will compensate the Banks for Breakage Costs, excluding,  however,
any such Breakage Costs resulting from a prepayment or conversion made more than
sixty (60) days  prior to the  Administrative  Agent's  request  for  payment of
Breakage  Costs.  The payment of any such  Breakage  Costs to the Banks shall be
made within thirty (30) days of a request therefor from Administrative Agent.

     2.12  Mitigation:  Mandatory  Assignment.  Each Bank  shall use  reasonable
efforts  to  avoid  or  mitigate  any  Increased   Cost  or  suspension  of  the
availability  of an interest rate under Sections 2.09 through 2.10 above, to the
greatest extent practicable (including transferring the Loans to another lending
office or Affiliate of a Bank) unless, in the opinion of such Bank, such efforts
would be likely to have an adverse  effect  upon it. In the event a Bank makes a
request to the Borrower for additional payments in accordance with Sections 2.09
or 2.10,  then,  provided that no Event of Default or Unmatured Event of Default
has  occurred  and is  continuing  at such time,  the  Borrower  may, at its own
expense and in its sole discretion,  require such Bank to transfer and assign in
whole (but not in part),  without  recourse,  all of its  interests,  rights and
obligations under this Agreement to an assignee which shall assume such assigned
obligations  (which  assignee  may  be  another  Bank,  if a Bank  accepts  such
assignment);  provided that (a) such assignment shall not conflict with any law,
rule or regulation or order of any court or other governmental authority and (b)
the Borrower or such assignee  shall have paid to the  Administrative  Agent for
the account of the assigning Bank in immediately  available  funds the principal
of and interest  accrued to the date of such payment on the portion of the Loans
hereunder  held by  such  assigning  Bank  and all  other  amounts  owed to such
assigning Bank hereunder,  including  amounts owed pursuant to Sections 2.09 and
2.10 hereof,  and such  assignment  shall  otherwise  comply with Section  9.05,
including  without  limitation  the  payment of the  assignment  fee  payable to
Administrative Agent under Section 9.05.

     2.13 Pro Rata  Treatment and Payments.  Each Borrowing by Borrower from the
Banks  hereunder,  each payment by Borrower on account of any fee  hereunder and
any reduction of the  Commitments  of the Banks shall be made pro rata according
to the respective  Percentage Shares of the Banks. Each payment  (including each
prepayment)  by Borrower on account of  principal  of and  interest on the Loans
shall be made pro rata according to the respective outstanding principal amounts
of the Loans then held by the Banks. The  Administrative  Agent shall distribute
such payments to the Banks promptly upon receipt in like funds as received.

     2.14 Sharing of Payments  and  Setoffs.  Each Bank agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
Borrower (pursuant to Section 7.05, Section 9.01 or otherwise),  including,  but
not  limited  to, a secured  claim  under  Section 506 of Title 11 of the United
States  Code or other  security or interest  arising  from,  or in lieu of, such
secured claim, received by such Bank under any applicable bankruptcy, insolvency
or  other  similar  law  or  otherwise,  or by  similar  means,  obtain  payment
(voluntary or  involuntary) in respect of any Loan or Loans (other than pursuant
to Section 2.10) as a result of which the unpaid principal  portion of its Loans
shall be proportionately  less than the unpaid principal portion of the Loans of
any other Bank, it shall  simultaneously  purchase from such other Banks at face
value a  participation  in the Loans of such other Banks,  so that the aggregate
unpaid principal amount of Loans and  participations  in Loans held by each Bank
shall be in the same proportion to the aggregate  unpaid principal amount of all
Loans  then  outstanding  as the  principal  amount of its  Loans  prior to such
exercise  of  banker's  lien,  setoff,  counterclaim  or other  event was to the
principal  amount of all Loans  outstanding  prior to such  exercise of banker's
lien, setoff,  counterclaim or other event; provided,  however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.14
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or  adjustments  shall be rescinded to the extent of such  recovery
and the purchase price or prices or adjustment restored without interest.

     2.15  Commitment Fee. As  consideration  for the commitment of the Banks to
make Credit  Extensions to the Borrower  through the Facility  Termination  Date
pursuant to this  Agreement,  the Borrower  agrees to pay to the  Administrative
Agent for the account of the Banks within five (5)  Business  Days after the end
of each quarterly  period ending March 31, June 30, September 30 and December 31
of each year  (except  the first  period  shall be for a period of time from the
Closing  to June 30,  2002)  during the  period  commencing  on the date of this
Agreement to and  including  the Facility  Termination  Date and at the Facility
Termination  Date, a commitment fee equal to the percentage per annum  specified
in the Pricing Grid based on the Utilization  Percentage  (computed on the basis
of a year of 360  days)  multiplied  by an  amount  equal to the  daily  average
excess, if any, of the Aggregate  Commitment Amount over the Outstanding  Credit
Exposure,  throughout  the period  from the date of this  Agreement  or previous
calculation date provided above, whichever is later, to the relevant calculation
date or the Facility Termination Date, as the case may be.

     2.16  Borrowing Base Increase Fee. To the extent that the Borrowing Base is
increased  to an amount that  exceeds the largest  amount of  Borrowing  Base in
existence at any time prior to such increase,  a fee of one half percent (0.50%)
of the  incremental  amount of any increases in the Borrowing Base subsequent to
Closing  ("Borrowing  Base  Increase  Fee")  shall  be due upon  such  increased
Borrowing Base becoming effective. The Borrowing Base Increase Fee shall be paid
by Borrower to  Administrative  Agent, and  Administrative  Agent shall promptly
thereafter  remit to each Bank such Bank's  Percentage  Share of such  Borrowing
Base Increase Fee.

     2.17  Agent's  Fee.  At Closing  and on each  anniversary  of the  Closing,
Borrower  shall  pay to  Administrative  Agent  a fee  (the  "Agent's  Fee")  of
$75,000.00.  Administrative  Agent shall promptly  thereupon  remit one-third of
this Agent's Fee to each Arranger.

     2.18  Addition of Borrowing  Base Oil & Gas  Properties.  The Borrower may,
from time to time upon written notice to the  Administrative  Agent,  propose to
add Oil and Gas  Properties  of the Borrower to the  Borrowing  Base Oil and Gas
Properties.  Any such proposal to add Oil and Gas  Properties of the Borrower to
the Borrowing  Base Oil and Gas  Properties  shall be  accompanied  by a Reserve
Report  applicable  to such  properties  that  conforms to the  requirements  of
Section 2.06,  and evidence  sufficient to establish that Borrower (or either of
them) has Defensible Title to such Oil and Gas Properties, and any such addition
shall become effective at such time as: (a) the Arrangers,  with the approval of
the Banks,  have made a determination  of the amount by which the Borrowing Base
would be increased as the result of such  addition  and (b) the  conditions  set
forth  in  Article  III  hereof,  to the  extent  they  are  applicable  to such
additional  Oil and Gas  Properties of the  Borrower,  have been  satisfied.  In
determining  the increase in the Borrowing  Base  pursuant to this Section,  the
Arrangers  and the Banks shall apply the  parameters  and other  credit  factors
consistently  applied then  generally  being  utilized by the Arrangers and each
such Bank,  respectively,  for Borrowing Base determinations for other similarly
situated borrowers

     2.19 Adjustment to Aggregate  Commitment  Amount. At any time that Borrower
proposes  to  increase  the  Borrowing  Base by  adding  additional  Oil and Gas
Properties  to the  Borrowing  Base Oil and Gas  Properties  pursuant to Section
2.18,  Borrower may also request that Banks increase the amount of the Aggregate
Commitment  Amount.  At any time that  Borrower  makes  such a request  it shall
promptly  provide  Administrative  Agent  with  such  financial  information  as
Administrative   Agent  may  request  to  assist  the  Administrative  Agent  in
evaluating  such  request.  Following  the  receipt  of  such  information  from
Borrower,  the Arrangers shall, with the unanimous approval of the Banks in each
Bank's sole  discretion,  make a  redetermination  of the  Aggregate  Commitment
Amount,  which  shall  become  effective  upon  written  notification  from  the
Administrative  Agent to Borrower of the new Aggregate  Commitment  Amount.  The
Borrower may upon written notice to  Administrative  Agent,  not sooner than one
hundred eighty (180) days subsequent to the last such action by Borrower,  amend
the  definition  of the Aggregate  Commitment  Amount by reducing the amount set
forth in such definition.  Upon such reduction, the Banks shall not be obligated
to make Credit Extensions in excess of such reduced Aggregate Commitment Amount.
If and when the Banks  change  the  Aggregate  Commitment  Amount at  Borrower's
request,  the  commitment  fee, as  determined  pursuant to Section 2.15 of this
Agreement,  shall  be  calculated  using  such  changed  amount  for  all of the
calculation period in which such Aggregate Commitment Amount was changed.

     2.20 Facility LCs.

          (A) Issuance. The LC Issuer hereby agrees, on the terms and conditions
     set forth in this  Agreement,  to issue standby  letters of credit (each, a
     "Facility LC") and to renew, extend, increase, decrease or otherwise modify
     each Facility LC ("Modify,"  and each such action a  "Modification"),  from
     time to time from and including the date of this Agreement and prior to the
     Facility  Termination Date upon the request of the Borrower;  provided that
     immediately  after each such  Facility  LC is issued or  Modified,  (i) the
     aggregate  amount of the outstanding LC Obligations  shall not exceed Seven
     Million,  Five  Hundred  Thousand  Dollars  ($7,500,000.00)  and  (ii)  the
     Aggregate  Outstanding  Credit  Exposure  shall not  exceed  the  Aggregate
     Commitment  Amount.  Facility LC's issued  pursuant to the Original  Credit
     Agreement or the First Amended Credit  Agreement and  outstanding as of the
     Closing of this Agreement shall also constitute Facility LCs hereunder.  No
     Facility  LC shall have an expiry  date  later than the  earlier of (x) the
     thirtieth  (30th)  day  prior  to the  Facility  Termination  Date  and (y)
     eighteen (18) months after its issuance.

          (B) Participations. Upon the issuance or Modification by the LC Issuer
     of a Facility LC in accordance  with this Section 2.20, the LC Issuer shall
     be  deemed,   without   further  action  by  any  party  hereto,   to  have
     unconditionally  and irrevocably  sold to each Bank, and each Bank shall be
     deemed, without further action by any party hereto, to have unconditionally
     and  irrevocably  purchased  from the LC Issuer,  a  participation  in such
     Facility LC (and each Modification  thereof) and the related LC Obligations
     in proportion to its Percentage Share.

          (C) Notice. Subject to Section 2.20(A), the Borrower shall give the LC
     Issuer notice prior to 10:00 a.m. (Los Angeles,  California  time) at least
     five Business  Days prior to the proposed date of issuance or  Modification
     of each  Facility LC,  specifying  the  beneficiary,  the proposed  date of
     issuance  (or  Modification)  and the expiry date of such  Facility LC, and
     describing  the  proposed  terms of such  Facility LC and the nature of the
     transactions proposed to be supported thereby. Upon receipt of such notice,
     the LC Issuer  shall  promptly  notify the  Administrative  Agent,  and the
     Administrative  Agent  shall  promptly  notify each Bank,  of the  contents
     thereof and of the amount of such  Bank's  participation  in such  proposed
     Facility LC. The issuance or  Modification by the LC Issuer of any Facility
     LC shall, in addition to the conditions  precedent set forth in Article III
     (the  satisfaction of which the LC Issuer shall have no duty to ascertain),
     be subject  to the  conditions  precedent  that such  Facility  LC shall be
     satisfactory to the LC Issuer and that the Borrower shall have executed and
     delivered such  application  agreement  and/or such other  instruments  and
     agreements  relating  to  such  Facility  LC as the LC  Issuer  shall  have
     reasonably  requested (each, a "Facility LC Application").  In the event of
     any  conflict  between  the  terms of this  Agreement  and the terms of any
     Facility LC Application,  the terms of this Agreement  shall control.  Each
     notice  required or permitted to be given under this Section 2.20(C) by any
     party to any  other  party may be given by fax to the fax  contact  numbers
     specified for such party on Schedule 2.20(C) attached hereto.

          (D) LC Fees. The Borrower shall pay to the  Administrative  Agent, for
     the  account of the Banks  ratably  in  accordance  with  their  respective
     Percentage Shares, with respect to each Facility LC, a letter of credit fee
     at a rate  as  specified  in the  Pricing  Grid  based  on the  Utilization
     Percentage  applicable  at the time of issuance of the Facility LC, but not
     less than  $500.00  per  Facility  LC per annum,  such fee to be payable in
     arrears on or before the first  Business Day of each  calendar  month (each
     such fee described in this sentence an "LC Fee").  The Borrower  shall also
     pay to the LC Issuer for its own  account  (x) at the time of  issuance  of
     each  Facility  LC, a  fronting  fee  calculated  at the rate of twelve and
     five-tenths  (12.5) basis points per annum pro-rated over the term, and (y)
     documentary  and  processing  charges in  connection  with the  issuance or
     Modification  of and draws under  Facility  LCs in  accordance  with the LC
     Issuer's standard schedule for such charges as in effect from time to time.

          (E)  Administration;  Reimbursement  by Banks.  Upon  receipt from the
     beneficiary  of any  Facility  LC of any  demand  for  payment  under  such
     Facility LC, the LC Issuer shall  notify the  Administrative  Agent and the
     Administrative Agent shall promptly notify the Borrower and each other Bank
     as to the amount to be paid by the LC Issuer as a result of such demand and
     the proposed payment date (the "LC Payment Date").  The  responsibility  of
     the LC Issuer to the Borrower and each Bank shall be only to determine that
     the  documents  (including  each demand for payment)  delivered  under each
     Facility LC in connection with such  presentment  shall be in conformity in
     all material  respects with such Facility LC. The LC Issuer shall  endeavor
     to  exercise  the  same  care in the  issuance  and  administration  of the
     Facility  LCs as it does  with  respect  to  letters  of credit in which no
     participations are granted,  it being understood that in the absence of any
     gross negligence or willful misconduct by the LC Issuer, each Bank shall be
     unconditionally  and irrevocably liable without regard to the occurrence of
     any Default or any  condition  precedent  whatsoever,  to reimburse  the LC
     Issuer on demand for (i) such Bank's Percentage Share of the amount of each
     payment  made by the LC Issuer  under each  Facility  LC to the extent such
     amount is not reimbursed by the Borrower pursuant to Section 2.20(F) below,
     plus (ii) interest on the  foregoing  amount to be reimbursed by such Bank,
     for each day from the date of the LC Issuer's demand for such reimbursement
     (or, if such demand is made after 10:00 a.m. (Los Angeles, California time)
     on such date, from the next  succeeding  Business Day) to the date on which
     such Bank pays the amount to be reimbursed by it, at a rate of interest per
     annum equal to the Federal  Funds  Effective  Rate for the first three days
     and, thereafter,  at a rate of interest equal to the Floating Rate based on
     RR.

          (F)  Reimbursement by Borrower.  The Borrower shall be irrevocably and
     unconditionally  obligated  to  reimburse  the LC Issuer  on or before  the
     applicable LC Payment Date for any amounts to be paid by the LC Issuer upon
     any drawing under any Facility LC, without presentment,  demand, protest or
     other  formalities of any kind;  provided that neither the Borrower nor any
     Bank shall hereby be precluded from asserting any claim for direct (but not
     consequential) damages suffered by the Borrower or such Bank to the extent,
     but only to the  extent,  caused  by (i) the  willful  misconduct  or gross
     negligence  of the LC Issuer  in  determining  whether a request  presented
     under any Facility LC issued by it complied with the terms of such Facility
     LC or (ii) the LC Issuer's  failure to pay under any  Facility LC issued by
     it after the  presentation to it of a request  strictly  complying with the
     terms and  conditions  of such Facility LC. All such amounts paid by the LC
     Issuer and remaining unpaid by the Borrower shall bear interest, payable on
     demand,  for each day until paid at a rate per annum  equal to (x) the rate
     applicable  to RR Loans  for such day if such day  falls on or  before  the
     applicable  LC Payment Date and (y) the sum of 2% plus the rate  applicable
     to RR Loans for such day if such day falls after such LC Payment Date.  The
     LC Issuer will pay to each Bank ratably in accordance  with its  Percentage
     Share all  amounts  received by it from the  Borrower  for  application  in
     payment, in whole or in part, of the Reimbursement Obligation in respect of
     any  Facility LC issued by the LC Issuer,  but only to the extent such Bank
     has made  payment to the LC Issuer in respect of such  Facility LC pursuant
     to Section  2.20(E).  Subject to the terms and conditions of this Agreement
     (including  without  limitation  the submission of a Request for Advance in
     compliance  with  Section  2.02  and  the  satisfaction  of the  applicable
     conditions  precedent set forth in Article III), the Borrower may request a
     Loan hereunder for the purpose of satisfying any Reimbursement Obligation.

          (G)  Obligations  Absolute.  The  Borrower's  obligations  under  this
     Section  2.20  shall  be  absolute  and  unconditional  under  any  and all
     circumstances  and  irrespective of any setoff,  counterclaim or defense to
     payment which the Borrower may have or have had against the LC Issuer,  any
     Bank or any beneficiary of a Facility LC. The Borrower  further agrees with
     the LC Issuer and the Banks  that the LC Issuer and the Banks  shall not be
     responsible for, and the Borrower's  Reimbursement Obligation in respect of
     any Facility LC shall not be affected by, among other things,  the validity
     or genuineness of documents or of any  endorsements  thereon,  even if such
     documents  should  in  fact  prove  to be in any or all  respects  invalid,
     fraudulent or forged, or any dispute between or among the Borrower,  any of
     its  Affiliates,  the  beneficiary  of any  Facility  LC or  any  financing
     institution  or other party to whom any Facility LC may be  transferred  or
     any  claims  or  defenses  whatsoever  of  the  Borrower  or of  any of its
     Affiliates  against  the  beneficiary  of  any  Facility  LC  or  any  such
     transferee.  The LC Issuer  shall not be liable  for any  error,  omission,
     interruption or delay in transmission,  dispatch or delivery of any message
     or advice,  however  transmitted,  in connection  with any Facility LC. The
     Borrower  agrees  that any action  taken or omitted by the LC Issuer or any
     Bank under or in connection  with each  Facility LC and the related  drafts
     and  documents,  if done without gross  negligence  or willful  misconduct,
     shall be binding  upon the  Borrower and shall not put the LC Issuer or any
     Bank under any liability to the Borrower.  Nothing in this Section  2.20(G)
     is intended to limit the right of the Borrower to make a claim  against the
     LC Issuer for damages as  contemplated by the proviso to the first sentence
     of Section 2.20(F).

          (H) Actions of LC Issuer. The LC Issuer shall be entitled to rely, and
     shall be fully protected in relying,  upon any Facility LC, draft, writing,
     resolution,  notice, consent,  certificate,  affidavit,  letter, cablegram,
     telegram,  telecopy, telex or teletype message,  statement,  order or other
     document  believed by it to be genuine and correct and to have been signed,
     sent  or made  by the  proper  Person  or  Persons,  and  upon  advice  and
     statements  of legal  counsel,  independent  accountants  and other experts
     selected  by the LC  Issuer.  The LC  Issuer  shall be fully  justified  in
     failing or refusing to take any action under this Agreement unless it shall
     first have received such advice or  concurrence of the Required Banks as it
     reasonably  deems  appropriate  or it  shall  first be  indemnified  to its
     reasonable  satisfaction  by the Banks  against any and all  liability  and
     expense  which may be incurred by it by reason of taking or  continuing  to
     take any such action.  Notwithstanding  any other provision of this Section
     2.20, the LC Issuer shall in all cases be fully protected in acting,  or in
     refraining  from acting,  under this Agreement in accordance with a request
     of the Required Banks,  and such request and any action taken or failure to
     act pursuant thereto shall be binding upon the Banks and any future holders
     of a participation in any Facility LC.

          (I) Indemnification.  The Borrower hereby agrees to indemnify and hold
     harmless each Bank Party and their respective directors,  officers,  agents
     and  employees  from and  against any and all claims and  damages,  losses,
     liabilities,  costs or  expenses  which such Bank Party may incur (or which
     may be claimed against such Bank Party by any Person  whatsoever) by reason
     of or in connection  with the issuance,  execution and delivery or transfer
     of or  payment or  failure  to pay under any  Facility  LC or any actual or
     proposed use of any Facility LC, including, without limitation, any claims,
     damages,  losses,  liabilities,  costs or expenses  which the LC Issuer may
     incur by reason of or in connection  with (i) the failure of any other Bank
     to fulfill or comply with its  obligations to the LC Issuer  hereunder (but
     nothing  herein  contained  shall  affect any rights the  Borrower may have
     against any  defaulting  Bank) or (ii) by reason of or on account of the LC
     Issuer issuing any Facility LC which specifies that the term  "Beneficiary"
     included  therein  includes any  successor by operation of law of the named
     Beneficiary, but which Facility LC does not require that any drawing by any
     such successor  Beneficiary  be accompanied by a copy of a legal  document,
     satisfactory to the LC Issuer, evidencing the appointment of such successor
     Beneficiary;  provided that the Borrower shall not be required to indemnify
     any Bank  Party for any  claims,  damages,  losses,  liabilities,  costs or
     expenses to the extent,  but only to the extent,  caused by (x) the willful
     misconduct or gross  negligence of the LC Issuer in  determining  whether a
     request  presented  under any  Facility LC complied  with the terms of such
     Facility  LC or (y) the LC  Issuer's  failure to pay under any  Facility LC
     after the presentation to it of a request strictly complying with the terms
     and  conditions  of such  Facility LC.  Nothing in this Section  2.20(I) is
     intended to limit the obligations of the Borrower under any other provision
     of this Agreement.

          (J) Banks'  Indemnification.  Each Bank shall,  ratably in  accordance
     with its  Percentage  Share,  indemnify the LC Issuer,  its  affiliates and
     their respective directors,  officers,  agents and employees (to the extent
     not  reimbursed  by the  Borrower)  against  any cost,  expense  (including
     reasonable counsel fees and disbursements),  claim, demand, action, loss or
     liability (except such as result from such indemnitees' gross negligence or
     willful  misconduct or the LC Issuer's failure to pay under any Facility LC
     after the presentation to it of a request strictly complying with the terms
     and  conditions  of the  Facility LC) that such  indemnitees  may suffer or
     incur in  connection  with this Section 2.20 or any action taken or omitted
     by such indemnitees hereunder.

          (K) Rights as a Bank.  In its capacity as a Bank,  the LC Issuer shall
     have the same rights and obligations as any other Bank.

     2.21 Advances to Satisfy  Obligations of the Borrower.  The  Administrative
Agent or any Bank may, but shall not be obligated  to, make  advances  hereunder
for  the  benefit  of the  Banks  and  apply  same  to the  satisfaction  of any
condition,  warranty,  representation  or covenant of the Borrower  contained in
this Agreement,  and the funds so advanced and applied shall be part of the Loan
proceeds advanced under this Agreement and evidenced by the Notes.

     2.22 Assignment of Production. Certain of the Security Instruments covering
the Borrowing  Base Oil and Gas  Properties  contain an  assignment  unto and in
favor of Collateral Agent for the benefit of the Banks of all oil, gas and other
minerals  produced and to be produced from or attributable to the Borrowing Base
Oil  and  Gas  Properties  together  with  all  of  the  revenues  and  proceeds
attributable to such production,  and such Security  Instruments further provide
that all such revenues and proceeds  which may be so collected by the Collateral
Agent for the benefit of the Banks pursuant to the  assignment  shall be applied
to the payment of the Notes and the satisfaction of all other Indebtedness to be
secured  by  such  Security  Instruments.   The  Borrower  hereby  appoints  the
Collateral Agent as its agent and attorney-in-fact until this Agreement has been
terminated in accordance with Section 9.19 hereof for purposes of completing the
Transfer  Order Letters  delivered to the  Collateral  Agent pursuant to Section
3.02(B) hereof, which power is coupled with an interest and is not revocable.

                                  ARTICLE III.

                                   CONDITIONS

     The obligation of the Banks to make the Credit Extensions is subject to the
following conditions precedent:

     3.01 General Conditions to Closing and to all Disbursements. At the time of
the execution and delivery of this  Agreement by all parties who are  designated
as signatories on the signature  pages of this Agreement (the  "Closing") and at
each subsequent Credit Extension:

          (A) No Event of Default shall have occurred and be continuing,  and no
     Unmatured Event of Default shall have occurred;

          (B) The representations and warranties contained in Article IV of this
     Agreement shall be true and correct in all material respects as though such
     representations  and warranties had been made on such date,  except such as
     are  expressly  limited  to a prior  date,  which  shall have been true and
     correct in all material respects as of such prior date;

          (C) The  Collateral  Agent and the Banks  shall have  been,  and shall
     continue  to be,  satisfied,  in  their  good  faith  discretion,  that the
     Borrower  (individually  or  collectively)  holds  Defensible  Title to the
     Borrowing Base Oil and Gas  Properties,  and that such  ownership  includes
     record title to an undivided net revenue  interest in the  production  from
     each such  Borrowing  Base Oil and Gas Property  that is not less than,  as
     well as an undivided  working  interest in each  Borrowing Base Oil and Gas
     Property that is not greater than (unless there is a corresponding increase
     in the net revenue  interest  attributed  to such party  therein),  the net
     revenue interest therein and the working  interest  therein,  respectively,
     attributed to the Borrower on Exhibit "A," subject to the  limitations  and
     qualifications  on such exhibit (or  attributed to Borrower in any Security
     Instrument  applicable  to any Oil and Gas  Property  that is  added to the
     Borrowing  Base Oil and Gas  Properties in connection  with any  subsequent
     funding after the Closing);

          (D) No Material  Adverse  Change shall have occurred since the date of
     the latest  audited  Financial  Statements  provided to the  Administrative
     Agent;

          (E) All of the Prior  Security  Instruments  delivered with respect to
     the Borrowing Base Oil and Gas Properties shall have remained in full force
     and effect; and

          (F)  All  legal  matters   incidental   thereto  shall  be  reasonably
     satisfactory to legal counsel designated by the Administrative Agent.

     3.02  Deliveries at the Closing.  The Borrower shall have duly delivered or
caused to be delivered to the Collateral  Agent,  prior to or  contemporaneously
with the Closing, the following:

          (A) The Notes payable to each respective Bank, along with the Security
     Instruments covering each of the Borrowing Base Oil and Gas Properties.

          (B) Transfer Order Letters applicable to the production of oil and gas
     from any Borrowing  Base Oil and Gas  Properties  for which  Transfer Order
     letters have not previously been delivered to the Administrative Agent.

          (C) The  results  of a Uniform  Commercial  Code  search  showing  all
     financing statements and other documents or instruments on file against the
     Borrower in the Offices of the  Secretaries of State of the State of Texas,
     the State of Delaware,  the State of Louisiana  and each State in which any
     of the Borrowing  Base Oil and Gas  Properties  are located or deemed to be
     located,  and the counties and/or parishes in which the Borrower  maintains
     its principal  place of business and in which any of the Borrowing Base Oil
     and Gas Properties are located, such search to be as of a date no more than
     ten (10) days prior to the date of Closing.

          (D) A certified (as of the date of the Closing) copy of resolutions of
     Borrower's and each  Guarantor's  Governing Body authorizing the execution,
     delivery,  and  performance of this  Agreement,  the Notes,  and each other
     document to be delivered pursuant hereto;

          (E) A certificate  (dated the date of the Closing) of  Borrower's  and
     each Guarantor's corporate secretary as to the incumbency and signatures of
     the  officers of the Borrower or such  general  partner and each  Guarantor
     signing this Agreement,  the Notes, and each other document to be delivered
     pursuant hereto;

          (F) A copy,  certified as of the most recent date  practicable  by the
     Secretary of State of the state in which  Borrower and each  Guarantor  was
     formed,  of the Borrower's and each  Guarantor's  Certificate of Formation,
     together  with  a  certificate  (dated  the  date  of the  Closing)  of the
     Borrower's and each Guarantor's  corporate secretary to the effect true and
     complete   copies  of  the  Borrower's  and  each   Guarantor's   Governing
     Documentation  are attached  thereto and that such Governing  Documentation
     has not been amended except as described therein;

          (G)  Certificates,  as of the most recent  dates  practicable,  of the
     aforesaid  Secretaries  of State,  the  Secretary of State of each state in
     which the  Borrower,  each general  partner  thereof and each  Guarantor is
     qualified as a foreign  Business  Entity and the  department  of revenue or
     taxation of each of the  foregoing  states,  as to the good standing of the
     Borrower, each general partner therein and each Guarantor;

          (H) A Compliance Certificate, dated the date of the Closing;

          (I)  Payment of the  Administrative  Agent's  and  Collateral  Agent's
     attorneys' fees upon receipt of a reasonably  detailed  invoice pursuant to
     Section 5.12 hereof; and

          (J) A legal opinion or opinions of outside counsel to the Borrower and
     Guarantors, addressed to the Bank Parties, in form and substance reasonably
     satisfactory to the  Administrative  Agent,  covering,  among other matters
     reasonably  requested by Administrative  Agent or its counsel,  the matters
     addressed in Sections 4.01, 4.02, 4.03, 4.20 and 4.21 hereof and in Section
     4(d) of the Guaranty.

          (K) Duly executed counterparts of the Guaranty of each Guarantor.

          (L) Duly executed assignments,  in form and substance  satisfactory to
     the Collateral  Agent,  of the Third Restated  Agreement  Notes,  the Prior
     Security  Instruments  securing same, the Third Restated  Agreement and all
     rights  associated  therewith  from  the  holders  of  the  Third  Restated
     Agreement  Notes  to  the  Banks,  in  accordance  with  their   respective
     percentage  shares,  along with the original Third Restated Agreement Notes
     duly endorsed by the holder of each note to the Banks, in their  respective
     percentage shares.

          3.03  Documents  Required  for  Subsequent   Disbursements   Involving
     Additional Borrowing Base Oil and Gas Properties. As of the time of funding
     any  additional  advances to Borrower  that have been approved by the Banks
     pursuant to Section 2.01 and are made in  conjunction  with the addition of
     Oil and Gas  Properties  owned  by the  Borrower  or any  Guarantor  to the
     Borrowing Base Oil and Gas Properties, the Borrower or such Guarantor shall
     have  duly  delivered  to  the  Administrative   Agent:  (i)  the  Security
     Instruments that are necessary or appropriate, in the reasonable opinion of
     the  Administrative   Agent,  relating  to  such  additional  Oil  and  Gas
     Properties, and (ii) Transfer Order Letters applicable to the production of
     oil and gas from the such additional Borrowing Base Oil and Gas Properties.

                                   ARTICLE IV.

                         REPRESENTATIONS AND WARRANTIES

     To  induce  the  Administrative  Agent  and the  Banks to enter  into  this
Agreement and to make the Credit Extensions  hereunder,  Borrower represents and
warrants to the Administrative Agent and the Banks that:

     4.01 Existence. The Borrower is a Business Entity of the type specified for
such Borrower on the signature pages of this Agreement, duly organized,  legally
existing,  and in good  standing  under  the  Laws of the  State in which it was
organized;  the  Borrower has the lawful  power to own their  properties  and to
engage in the  businesses  it  conducts,  and it is duly  qualified  and in good
standing as a foreign Business Entity in the jurisdictions wherein the nature of
the business  transacted by it or property owned by it makes such  qualification
necessary;  the states in which the Borrower is  incorporated  or organized  and
qualified to do business are set forth in Schedule  4.01;  the  addresses of all
places of business of the Borrower are as set forth in Schedule  4.01;  Borrower
has not changed its name, been the surviving  company in a merger,  acquired any
business,  or changed its principal  executive  office within five (5) years and
one (1) month prior to the date hereof;  and Borrower has no Subsidiaries  other
than the Guarantors.  Borrower and each Guarantor is qualified under  applicable
Minerals  Management  Service  regulations  to act as the operator of the Leases
where required.

     4.02 Due Authorization. Upon execution of the Loan Documents, the execution
and delivery by the Borrower of this  Agreement,  the Notes,  and the borrowings
hereunder;  the execution and delivery by the Borrower and each Guarantor of the
Security  Instruments  and the Transfer  Order Letters to which each is a party;
and the repayment by the Borrower of the Indebtedness evidenced by the Notes and
interest and fees  provided in the Notes and this  Agreement  are (a) within the
Corporate Power of the Borrower and each Guarantor, as applicable; (b) have been
duly authorized by all necessary  Corporate Action,  and (c) do not and will not
(i) require the consent of any regulatory  authority or governmental  body, (ii)
contravene   or  conflict  with  any  provision  of  Law  or  of  the  Governing
Documentation  of the Borrower or any  Guarantor,  (iii)  contravene or conflict
with any indenture,  instrument or other  agreement to which the Borrower or any
Guarantor  is a party  or by  which  its  property  may be  presently  bound  or
encumbered,  or (iv) result in or require  the  creation  or  imposition  of any
mortgage, lien, pledge, security interest,  charge or other encumbrance in, upon
or of any of the properties or assets of the Borrower or any Guarantor under any
such  indenture,  instrument  or other  agreement,  other  than under any of the
Security Instruments.

     4.03 Valid and Binding Obligations. This Agreement, the Notes, the Security
Instruments and the other Loan Documents when duly executed and delivered,  will
be legal, valid and binding obligations of and enforceable against the Borrower,
in accordance with their respective terms (subject to any applicable bankruptcy,
insolvency or other Laws of general  application  affecting  creditors'  rights,
general equitable principles, whether considered in a proceeding in equity or at
law, and judicial decisions interpreting any of the foregoing).

     4.04 Scope and Accuracy of Financial  Statements.  All Financial Statements
submitted and to be submitted to the Administrative Agent hereunder are and will
be complete  and correct in all material  respects,  are and will be prepared in
accordance with GAAP  consistently  applied,  and do and will fairly reflect the
consolidated  financial  condition  and the  results  of the  operations  of the
Borrower and the Guarantors in all material respects as of the dates and for the
period stated therein  (subject only to normal year-end audit  adjustments  with
respect to such unaudited interim  statements of the Borrower),  and no Material
Adverse  Change has  occurred  since the  effective  date of the latest  audited
Financial Statements of Borrower delivered to Administrative Agent.

     4.05 Title to  Borrowing  Base Oil and Gas  Properties.  The  Borrower  and
Guarantors have Defensible Title to the working and net revenue interests in the
Borrowing  Base Oil and Gas  Properties  as set forth on Exhibit  "A",  free and
clear  of  all  mortgages,   liens  and   encumbrances,   except  for  Permitted
Encumbrances and any other exceptions,  limitations or qualifications  expressly
disclosed on Exhibit "A."

     4.06  Oil and Gas  Leases.  The  Leases  which  constitute  any part of the
Borrowing  Base Oil and Gas  Properties are in full force and effect as to those
portions within the Borrowing Base Oil and Gas Properties, are valid, subsisting
leases as to those portions  within the Borrowing Base Oil and Gas Properties to
which they pertain and all rentals,  royalties and other amounts due and payable
in  accordance  with the terms of the  Leases as to those  portions  within  the
Borrowing  Base Oil and Gas  Properties,  overriding  royalties,  net profits or
other production burdens have been duly paid or provided for; the obligations to
be performed under the Leases as to those portions within the Borrowing Base Oil
and Gas Properties  have been duly  performed;  and the Borrower is not aware of
any  default by any third  party  under any of the Leases  with  respect to such
third party's obligations.

     4.07  Interest  in the  Borrowing  Base Oil and Gas  Properties.  Except as
otherwise set forth on Exhibit "A" hereto, with respect to each of the Borrowing
Base Oil and Gas  Properties,  the  ownership of the Borrower and  Guarantors in
such  property  will,  with respect to the wells,  units  and/or  tracts of land
described in Exhibit "A" hereto in connection  with such  property,  (i) entitle
the Borrower or Guarantors,  as applicable, to receive (subject to the terms and
provisions of this  Agreement) a decimal share of the oil and gas produced from,
or  allocated  to, such wells,  units  and/or  tracts equal to not less than the
decimal  share set forth in Exhibit "A" in  connection  with such  wells,  units
and/or tracts, and (ii) cause the Borrower or Guarantors,  as applicable,  to be
obligated to bear a decimal share of the cost of  exploration,  development  and
operation  of such  wells,  units  and/or  tracts of land not  greater  than the
decimal  share set forth in Exhibit "A" in  connection  with such  wells,  units
and/or  tracts,  unless  any  increase  in  the  Borrower's  or  Guarantors,  as
applicable,  share  of  costs  is  accompanied  by a  pro-rata  increase  in the
Borrower's or Guarantors,  as applicable,  share of revenue. Except as set forth
in the instrument and agreements, if any, more particularly described in Exhibit
"A" hereto,  all such shares of production which the Borrower or Guarantors,  as
applicable, is entitled to receive, and shares of expenses which the Borrower or
Guarantors,  as  applicable,  is obligated  to bear,  are not subject to change,
except  for  changes  attributable  to  future  elections  by  the  Borrower  or
Guarantors, as applicable, not to participate in operations proposed pursuant to
customary forms of applicable joint operating agreements, and except for changes
attributable to changes in  participating  areas under any federal units wherein
participating areas may be formed, enlarged or contracted in accordance with the
rules and regulations of the applicable governmental authority.

     4.08 Oil and Gas  Contracts.  Except as set forth on Schedule 4.08 attached
hereto,  neither  Borrower  nor any  Guarantor  is  obligated,  by virtue of any
prepayment  under  any  contract  providing  for  the  sale by the  Borrower  or
Guarantor of  Hydrocarbons  which contains a  "take-or-pay"  clause or under any
similar prepayment agreement or arrangement, including, without limitation, "gas
balancing  agreements",  to deliver a material amount of  Hydrocarbons  produced
from the Borrowing  Base Oil and Gas Properties at some future time without then
or thereafter  receiving full payment therefor (i.e., in the case of oil, not in
excess of sixty (60) days,  and in the case of gas, not in excess of ninety (90)
days).  Except as set forth on Schedule 4.08 attached hereto, the Borrowing Base
Oil and Gas Properties are not subject to any contractual,  or other arrangement
for the sale of crude oil which  cannot be  canceled  on ninety  (90)  days' (or
less) notice,  unless the price provided for therein is equal to or greater than
the  prevailing  market price in the vicinity.  The  Borrowing  Base Oil and Gas
Properties  are not subject to any gas sales contract that contains any material
terms which are not  customary  in the  industry  within the region in which the
Borrowing  Base  Oil  and Gas  Properties  affected  thereby  are  located.  The
Borrowing Base Oil and Gas  Properties are not subject to any regulatory  refund
obligation and no facts exist which might cause the same to be imposed.

     4.09 Producing Wells. All producing wells located on the Borrowing Base Oil
and Gas  Properties  have  been,  during  all times  that  such  were  under the
direction or control of the Borrower and, to the  knowledge of the Borrower,  at
all  other  times,  drilled,  operated  and  produced  in  conformity  with  all
applicable  Laws,  rules,  regulations and orders of all regulatory  authorities
having jurisdiction,  are subject to no penalties on account of past production,
and are bottomed  under and are  producing  from,  and the well bores are wholly
within, the Borrowing Base Oil and Gas Properties,  or on Oil and Gas Properties
which have been pooled, unitized or communitized with the Borrowing Base Oil and
Gas Properties.

     4.10  Purchasers  of  Production.   The  persons  who  are  purchasing  the
Borrower's  or any  Guarantor's  interests  in oil and  gas  produced  from  the
Borrowing  Base Oil and Gas Properties as of the calendar month during which the
initial  Loans are made  hereunder  are  identified  on Schedule  4.10  attached
hereto.

     4.11  Authorizations  and Consents.  No authorization,  consent,  approval,
exemption,  franchise, permit or license of, or filing with, any governmental or
public  authority or any third party is required to  authorize,  or is otherwise
required in connection  with the valid execution and delivery by the Borrower or
any Guarantor of this Agreement, the Notes, and the Security Instruments, or any
other  instrument  contemplated  hereby to which  such  Person  is a party,  the
repayment  by the  Borrower of advances  against the Notes and interest and fees
provided in the Notes and this Agreement,  or the performance by the Borrower or
any Guarantor of its obligations under any of the foregoing.

     4.12  Environmental  Laws.  Except to the extent  that the failure to do so
would not have and would not be expected to have a Material Adverse Effect,  the
Borrower and each  Guarantor (a) is and has in the past been in compliance  with
all Environmental Laws and all permits,  requests and notifications  relating to
health,  safety or the  environment  applicable to the Borrower or Guarantors or
any of its properties,  assets, operations and businesses;  (b) has obtained and
adhered to and currently  possesses all necessary  permits and other  approvals,
including  interim status under the Federal  Resource  Conservation and Recovery
Act,  necessary to store,  dispose of and otherwise handle Hazardous  Substances
and to operate its properties,  assets and businesses;  (c) has reported, to the
extent  required by all federal,  state and local  statutes,  Laws,  ordinances,
regulations, rules, permits, judgments, orders and decrees, all past and present
sites owned and/or operated by the Borrower or any Guarantor where any Hazardous
Substance  has been  released,  treated,  stored or  disposed of and (d) has not
used,  stored, or Released any Hazardous  Substance in excess of amounts allowed
by  Environmental  Law.  There is (x) no location on any  property  currently or
previously  owned or operated by the Borrower  where  Hazardous  Substances  are
known to have  entered or are likely to enter  into the soil or  groundwater  or
such  property,  other than  immaterial  releases  of oil or natural  gas in the
ordinary course of business none of which releases (i) either  individually,  or
in the aggregate,  has had or may be expected to have a Material  Adverse Effect
or (ii) has  violated  or may be expected  to violate  any  Environmental  Laws,
except for any such violation that has not had and would not be expected to have
a Material Adverse Effect,  and (y) no on-site or off-site location to which the
Borrower or any Guarantor has released or  transported  Hazardous  Substances or
arranged for the transportation or disposal of Hazardous Substances, which is or
is likely to be the subject of any federal,  state, local or foreign enforcement
action or any investigation  which could lead to any material claims against any
such entity for any clean-up cost,  remedial work, damage to natural  resources,
common law or legal  liability,  including,  but not  limited to,  claims  under
Comprehensive Environmental Response,  Compensation,  and Liability Act. For the
purposes of this Section,  references to "the  Borrower" and "the  Guarantor(s)"
shall include all predecessors,  successors-in-  interest of the Borrower or any
Guarantor.

     4.13 Compliance  with Laws,  Rules,  Regulations and Orders.  Except to the
extent  that the  failure  to comply  would not  materially  interfere  with the
conduct  of the  business  of the  Borrower  or  Guarantor,  Borrower  and  each
Guarantor has complied with all applicable Laws with respect to: (1) the conduct
of its business;  and (2) the use,  maintenance,  and operation of the Borrowing
Base Oil and Gas Properties and personal properties owned or leased by it in the
conduct of its  business;  except as expressly  set forth on Exhibit "A" hereto,
Borrower and each Guarantor  possesses all licenses,  approvals,  registrations,
permits and other authorizations necessary to enable it to carry on its business
in all material  respects as now conducted,  and all such  licenses,  approvals,
registrations,  permits and other  authorizations  are in full force and effect;
and Borrower has no reason to believe that the Borrower or any Guarantor will be
unable to obtain the  renewal of any such  licenses,  approvals,  registrations,
permits and other authorizations.

     4.14 Liabilities,  Litigation and Restrictions.  Except as disclosed in the
Financial  Statements,  Borrower  and  Guarantors  do not have any  liabilities,
direct or contingent, which may materially and adversely affect it, its business
or assets.  There is no litigation or other action of any nature  pending before
any court, governmental  instrumentality,  regulatory authority or arbitral body
or, to the knowledge of the Borrower threatened against or affecting Borrower or
any  Guarantor  which might  reasonably  be expected to result in any  material,
adverse change in the Borrower or any Guarantor,  or its business or assets.  To
the  best  of  the  Borrower's  knowledge,  no  unduly  burdensome  restriction,
restraint or hazard exists by contract or Law that would have a Material Adverse
Effect.

     4.15 Existing Indebtedness.  All Indebtedness of Borrower and any Guarantor
consisting of liability to repay borrowed money or to pay money to become due on
capital  leases as of the Closing is  described  in Schedule  4.15;  and neither
Borrower  nor any  Guarantor  is in default  with respect to any of its existing
Indebtedness.

     4.16 Material Commitments.  Except as described in Schedule 4.16 hereto and
in filings made by Borrower with the Securities Exchange Commission, (a) neither
Borrower  nor any  Guarantor  has any  material  leases  (other than oil and gas
leases),  contracts or commitments of any kind (including,  without  limitation,
employment  agreements;  collective bargaining  agreements;  powers of attorney;
distribution  arrangements;  patent  license  agreements;  contracts  for future
purchase or delivery of goods or  rendering of  services;  bonuses,  pension and
retirement  plans; or accrued vacation pay,  insurance and welfare  agreements);
(b) to the best of  Borrower's  knowledge,  all  parties  to all  such  material
leases, contracts, and other commitments to which Borrower or any Guarantor is a
party have complied with the  provisions  of such leases,  contracts,  and other
commitments;  and (c) to the best of the  Borrower's  knowledge,  no party is in
default  under any thereof and no event has occurred  that but for the giving of
notice or the passage of time, or both, would  constitute a default,  except for
defaults  and  events  that  have not had and would  not be  expected  to have a
Material Adverse Effect.

     4.17 Margin Stock.  The Borrower is not engaged  principally,  or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying  margin stock (within the meaning of Regulations T, U, or
X of the Board of Governors of the Federal Reserve  System),  and no part of the
proceeds  of any  extension  of  credit  under  this  Agreement  will be used to
purchase  or carry any such margin  stock or to extend  credit to others for the
purpose of  purchasing or carrying  margin  stock.  Neither the Borrower nor any
Person  acting  on its  behalf  has  taken  any  action  that  might  cause  the
transactions  contemplated by this Agreement or the Notes to violate Regulations
T, U, or X or to violate the Securities Exchange Act of 1934, as amended.

     4.18  Proper  Filing of Tax  Returns  and  Payment of Taxes Due.  Except as
otherwise  permitted  herein,  the  Borrower  and each  Guarantor  has filed all
federal,  state,  and  local  tax  returns  and other  reports  required  by any
applicable Laws to have been filed prior to the date hereof,  has paid or caused
to be paid all taxes,  assessments,  and other governmental charges that are due
and payable prior to the date hereof,  and has made  adequate  provision for the
payment  of such  taxes,  assessments,  or other  charges  accruing  but not yet
payable;  the Borrower has no knowledge of any material deficiency or additional
assessment in connection  with any taxes,  assessments,  or charges not provided
for on its books.

     4.19 ERISA. The Borrower is in compliance in all material respects with all
applicable  provisions  of ERISA.  Neither a  Reportable  Event nor a Prohibited
Transaction  has occurred and is continuing  with respect to any plan; no notice
of intent to terminate a plan has been filed,  nor has any plan been terminated;
no  circumstances  exist which  constitute  grounds  under Section 4042 of ERISA
entitling the PBGC to institute  proceedings to terminate,  or appoint a trustee
to  administrate  a plan,  nor has the PBGC  instituted  any  such  proceedings;
neither  the  Borrower  nor any ERISA  Affiliate  has  completely  or  partially
withdrawn under Sections 4201 or 4204 of ERISA from a  Multi-Employer  Plan; the
Borrower and each ERISA Affiliate has met its minimum funding requirements under
ERISA  with  respect  to all of its plans and the  present  value of all  vested
benefits  under each plan is less than the fair market  value of all plan assets
allocable to such benefits,  as determined on the most recent  valuation date of
the plan and in  accordance  with the  provisions  of ERISA and the  regulations
thereunder for calculating the potential  liability of the Borrower or any ERISA
Affiliate  to the PBGC or the plan  under  Title IV of ERISA;  and  neither  the
Borrower nor any ERISA  Affiliate  has incurred any  liability to the PBGC under
ERISA.

     4.20  Investment  Company  Act  Compliance.  Borrower  is not  directly  or
indirectly  controlled  by,  or acting on behalf  of,  any,  Person  which is an
"Investment  Company," within the meaning of the Investment Company Act of 1940,
as amended.

     4.21  Public  Utility  Holding  Company Act  Compliance.  Borrower is not a
"holding company",  or an "affiliate" of a "holding company" or of a "subsidiary
company"  of a  "holding  company",  within the  meaning  of the Public  Utility
Holding Company Act of 1935, as amended.

     4.22  Insurance.  Borrower  and each  Guarantor  maintains  insurance  with
respect to the  properties  and  business of the  Borrower  and each  Guarantor,
respectively,  providing  coverage for such liabilities,  casualties,  risks and
contingencies and in such amounts as is customary in the industry. The insurance
coverage  reflected on the Certificate of Insurance  attached hereto as Schedule
4.22 is in full force and effect, and all premiums due thereon have been paid or
provided for.

     4.23 Material Misstatements and Omissions. No representation or warranty by
or  with  respect  to  Borrower  or any  Guarantor  contained  herein  or in any
certificate or other document furnished by the Borrower pursuant hereto contains
any  untrue  statement  of a  material  fact or omits to state a  material  fact
necessary to make such representation or warranty not misleading in light of the
circumstances under which it was made.

                                   ARTICLE V.

                              AFFIRMATIVE COVENANTS

     Borrower  covenants so long as any Indebtedness of the Borrower to any Bank
or the LC Issuer remains unpaid under this Agreement,  or any Obligations of the
Borrower or any Guarantor to any Bank Parties  remain  unsatisfied,  or any Bank
remains  obligated to make  advances  hereunder or the LC Issuer is obligated to
issue any Facility LC hereunder, to;

     5.01 Use of Funds.  Use funds  advanced  hereunder  for the purposes of (A)
refinancing  existing debt owed pursuant to the Third  Restated  Agreement,  (B)
funding  Borrower's  and  Guarantors'  working  capital  needs,  and (C) funding
Borrower's other lawful corporate purposes.

     5.02 Maintenance and Access to Records. Keep adequate records in accordance
with good accounting  practices,  of all of the transactions of the Borrower and
each Guarantor so that at any time, and from time to time,  such records present
fairly the financial  condition of the Borrower and each Guarantor  which may be
readily determined and, at the Administrative  Agent's reasonable request,  make
all financial  records and records  relating to the  Borrowing  Base Oil and Gas
Properties  available for the  Administrative  Agent's inspection and permit the
Administrative Agent to make and take away copies thereof.

     5.03   Quarterly   Unaudited   Financial   Statements.   Deliver   to   the
Administrative  Agent, on or before the forty-fifth  (45th) day after the end of
each  calendar  quarter,  unaudited  consolidated  and  consolidating  Financial
Statements of the Borrower and the Guarantors,  as at the end of such period and
from the beginning of such fiscal year to the end of the respective  period,  as
applicable,  which Financial  Statements  shall be certified by the president or
chief financial officer of the Borrower,  as being true and correct,  subject to
changes resulting from year-end audit adjustments.

     5.04 Annual Audited  Financial  Statements.  Deliver to the  Administrative
Agent,  on or before the one  hundred  twentieth  (120th) day after the close of
each  fiscal  year of the  Borrower a copy of annual  audited  consolidated  and
consolidating Financial Statements of the Borrower and the Guarantors,  together
with the report and opinion thereon of Arthur Andersen LLP or such other firm of
independent certified public accountants  acceptable to the Administrative Agent
at its reasonable discretion.

     5.05 Compliance Certificate.  At Closing and at the time of delivery of the
certified but unaudited Financial Statements pursuant to Section 5.03 above, and
the delivery of the annual audited Financial Statements pursuant to Section 5.04
above, deliver to the Administrative Agent a Compliance Certificate.

     5.06 Statement of Material  Adverse Change.  Deliver to the  Administrative
Agent,  promptly upon any officer of Borrower  having  knowledge of any Material
Adverse  Change  (or any event or  circumstance  that  would  result in any such
Material Adverse Change), a statement of the President, Chief Financial Officer,
or the Treasurer of the Borrower, setting forth the change in condition or event
or circumstance likely to result in any such change and the steps being taken by
the Borrower with respect to such change in condition or event or circumstance.

     5.07 Title Defects.  Cure any title defects,  and/or to cause any Guarantor
to cure any title defects,  to the Borrowing  Base Oil and Gas Properties  which
cause the title to the Oil and Gas  Properties  not to be  Marketable  and which
title defects cause material  reduction in value of the Oil and Gas  Properties,
considered as a whole, in the reasonable  opinion of the  Administrative  Agent,
and, in the event any such title defects are not cured in a timely  manner,  pay
all related costs and fees incurred by the Administrative  Agent for the account
of the Banks to do so; provided,  however, the Borrower may remove any of its or
Guarantor's Oil and Gas Properties from the  determination of the Borrowing Base
so long as the Indebtedness evidenced by the Revolving Notes and the LCs is less
than or equal to the Borrowing Base  (determined by the Banks in accordance with
Section 2.06 exclusive of such Oil and Gas Properties).

     5.08 Additional Information.  Furnish to the Administrative Agent copies of
all information,  if any, filed with the Securities  Exchange  Commission by the
Borrower  and  all  information  routinely  provided  by  the  Borrower  to  its
shareholders,  generally. Furnish to the Administrative Agent, promptly upon the
Administrative  Agent's reasonable request,  such additional  financial or other
information concerning the assets, liabilities,  operations, and transactions of
the Borrower, including, without limitation, information concerning title to any
of the Borrowing Base Oil and Gas Properties.

     5.09   Compliance  with  Laws  and  Payment  of  Assessments  and  Charges.
Materially  comply,  and cause any  Guarantor  to  materially  comply,  with all
applicable statutes and government regulations,  including,  without limitation,
ERISA, and pay all taxes,  assessments,  governmental charges, claims for labor,
supplies, rent and other obligations which, if unpaid, might become a lien other
than a Permitted  Encumbrance against its property,  except any of the foregoing
being  contested  in good  faith and as to which  accruals  satisfactory  to the
Administrative Agent, in its reasonable discretion, have been provided.

     5.10  Maintenance of Existence and Good  Standing.  Maintain the Borrower's
and each Guarantor's  corporate  existence and good standing in the jurisdiction
of  its   organization,   and  maintain  the  Borrower's  and  any   Guarantor's
qualification and good standing in all other jurisdictions  wherein the property
now owned or  hereafter  acquired  or business  now or  hereafter  conducted  by
Borrower or any  Guarantor  necessitates  same,  other than those  jurisdictions
wherein the failure to so qualify will not have a Material Adverse Effect on the
Borrower.

     5.11 Further  Assurances.  Promptly cure,  and/or to cause any Guarantor to
promptly cure, any defects in the execution and delivery of this Agreement,  the
Notes,  the Security  Instruments,  the  Transfer  Order  Letters,  or any other
instrument referred to herein or executed in connection with the Notes, and upon
the reasonable request of the Administrative  Agent promptly execute and deliver
to the  Administrative  Agent all such other and further  instruments  as may be
reasonably required or desired by the Administrative  Agent from time to time in
compliance with the covenants and agreements made in this Agreement.

     5.12  Initial  Expenses  of  the  Bank.  Pay  prior  to or at  Closing  all
documented  reasonable fees and expenses of Porter & Hedges,  L.L.P.,  and Hall,
Estill, Hardwick, Goble, Golden & Nelson, A Professional Corporation the special
legal counsel for the  Administrative  Agent and the  Collateral  Agent incurred
directly and solely in connection with the  preparation of this  Agreement,  the
Notes,  the Security  Instruments,  the Transfer  Order  Letters,  and any other
instrument referred to herein or executed directly and solely in connection with
the Notes, the satisfaction of the conditions precedent set forth in Article III
of this Agreement and the consummation of the transactions  contemplated in this
Agreement.

     5.13  Subsequent  Expenses  of the Bank  Parties.  Upon  request,  promptly
reimburse  any  Bank  Party  for all  documented  amounts  reasonably  expended,
advanced or incurred  by such Bank Party to collect the Notes,  restructure  the
Notes or to  enforce  the rights of such Bank Party  under this  Agreement,  the
Notes,  the Security  Instruments,  the  Transfer  Order  Letters,  or any other
instrument  referred to herein or executed in connection  with the Notes,  which
amounts shall be deemed  compensatory in nature and liquidated as to amount upon
notice to the  Borrower  by the  Administrative  Agent and  which  amounts  will
include,  but not be limited to, (a) all court costs, (b) reasonable  attorneys'
fees, (c) fees of auditors and  accountants,  (d)  investigation  expenses,  (e)
internal fees of the Administrative Agent's or Collateral Agent's in-house legal
counsel,  (f) fees and  expenses  incurred in  connection  with any Bank Party's
participation  as a member of the creditors  committee in a case commenced under
Title 11 of the United  States Code or other  similar Law of the United  States,
the State of Texas or any other jurisdiction,  (g) fees and expenses incurred in
connection  with lifting the automatic stay  prescribed in ss.ss.362 Title 11 of
the United States Code,  and (h) fees and expenses  incurred in connection  with
any action pursuant to ss.ss.1129 Title 11 of the United States Code, reasonably
incurred by any Bank Party in  connection  with the  collection  of any sums due
under this  Agreement,  together  with  interest at the Floating Rate per annum,
calculated  on a basis of a year of three  hundred sixty (360) days on each such
amount from the date of notification to the Borrower that the same was expended,
advanced or incurred by any Bank Party until, but not including,  the date it is
repaid to such  Bank  Party,  with the  obligations  under  this  Section  5.13,
surviving the  non-assumption  of this Agreement in a case commenced under Title
11 of the United  States  Code or other  similar Law of the United  States,  the
State of Texas or any other  jurisdiction and being binding upon the Borrower or
a trustee, receiver or liquidator of any such party appointed in any such case.

     5.14  Maintenance  of  Tangible  Property.  Maintain  all of its  and  each
Guarantor's  tangible  property  relating  to the  Borrowing  Base  Oil  and Gas
Properties  in good repair and  condition  and make all  necessary  replacements
thereof and operate such property in a good and workmanlike manner in accordance
with standard industry  practices,  unless the failure to do so would not have a
Material  Adverse  Effect on the Borrower or the value of any Borrowing Base Oil
and Gas Property.

     5.15  Maintenance  of  Insurance.  Continue  to  maintain,  or  cause to be
maintained,  insurance  with  respect  to the  properties  and  business  of the
Borrower and each  Guarantor  against such  liabilities,  casualties,  risks and
contingencies and in such amounts as is customary in the industry and furnish to
the Collateral Agent annually after the execution of this Agreement certificates
evidencing such insurance.

     5.16 Inspection of Tangible  Assets/Right  of Audit.  Permit any authorized
representative of the Administrative  Agent or the Collateral Agent to visit and
inspect (at the risk of the  Administrative  Agent,  the Collateral Agent and/or
such  representative)  any tangible  asset of the  Borrower and each  Guarantor,
and/or to audit the books and records of the Borrower and each Guarantor  during
normal  business  hours,  at the  expense  of the  Administrative  Agent  or the
Collateral Agent following reasonable advance notice.

     5.17  Payment  of Note  and  Performance  of  Obligations.  Pay  the  Notes
according to the reading,  tenor and effect thereof,  as modified hereby, and do
and  perform  every act and  discharge  all of the  Obligations  provided  to be
performed and discharged hereunder.

     5.18 Borrowing Base.  Maintain a Borrowing Base such that the amount of the
Outstanding  Credit Exposure will not, at any time other than during  applicable
grace  periods  expressly  set forth  elsewhere  in this  Agreement,  exceed the
Aggregate Commitment Amount.

     5.19 Compliance with Environmental Laws. To the extent necessary to avoid a
Material Adverse Effect,  comply,  and/or to cause any Guarantor to comply, with
any and all requirements of Law, including,  without  limitation,  Environmental
Laws, (a) applicable to any natural or  environmental  resource or media located
on, above,  within,  in the vicinity of, related to or affected by any Borrowing
Base  Oil and Gas  Properties  or any  other  property  of the  Borrower  or any
Guarantor,  or (b) applicable to the  performance or conduct of its  operations,
including, without limitation, all permits, licenses,  registrations,  approvals
and authorizations, and, in this regard, comply with, and require all employees,
crew members,  agents,  contractors and subcontractors  (pursuant to appropriate
contractual  provisions)  and future  lessees  (pursuant  to  appropriate  lease
provisions)  of the  Borrower  or any  Guarantor  while such  Persons are acting
within the scope of their relationship with the Borrower or any Guarantor, to so
comply with, all applicable requirements of Law, including,  without limitation,
applicable Environmental Laws, and other applicable requirements with respect to
the  property  of the  Borrower  or any  Guarantor,  and the  operation  thereof
necessary or appropriate to enable the Borrower to fulfill its obligations under
all applicable requirements of Law, including, without limitation, Environmental
Laws, applicable to the use, generation, handling, storage, treatment, transport
and disposal of any Hazardous  Substances now or hereafter located or present on
or under any such property.

     5.20 Hazardous Substances  Indemnification.  Indemnify and hold each of the
Bank  Parties  harmless  from and against any and all claims,  losses,  damages,
liabilities,  fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial actions, requirements and enforcement actions of
any  kind,  and  all  costs  and  expenses  incurred  in  connection   therewith
(including, without limitation,  attorneys' fees and expenses), arising directly
or  indirectly,  in whole or in part,  out of (a) the presence of any  Hazardous
Substances  on, under or from its property,  whether prior to or during the term
hereof,  or (b) any activity  carried on or  undertaken  on or off its property,
whether prior to or during the term hereof, and whether by the Borrower,  or any
predecessor in title or any employees,  agents, contractors or subcontractors of
the  Borrower,  or any  predecessor  in title,  or any third Persons at any time
occupying  or  present  on such  property,  in  connection  with  the  handling,
treatment,  removal,  storage,   decontamination,   cleanup,  transportation  or
disposal of any Hazardous  Substances at any time located or present on or under
such property;  with the foregoing  indemnity  further  applying to any residual
contamination  on or under the property of the Borrower,  or any property of any
other Person,  or affecting any natural  resources,  and to any contamination of
any property or natural  resources  arising in connection  with the  generation,
use, handling, storage,  transportation or disposal of any Hazardous Substances,
irrespective  of whether any of such  activities  were or will be  undertaken in
accordance with applicable  requirements of Law, including,  without limitation,
Environmental  Laws,  and  surviving  satisfaction  of all  Indebtedness  of the
Borrower  to any of the Bank  Parties  and the  termination  of this  Agreement,
unless all such Indebtedness has been satisfied wholly in cash from the Borrower
and not by way of  realization  against any  property or the  conveyance  of any
property of the  Borrower in lieu  thereof,  provided  that the claims and other
actions  of any kind  against  any of the Bank  Parties  which give rise to such
indemnity are not barred by the  applicable  statute of  limitations at the time
such claims or actions are instituted and such indemnity shall not extend to any
act or omission by any of the Bank Parties with respect to the relevant property
subsequent to the  Administrative  Agent,  the Arranger or any Bank becoming the
owner of,  taking  possession  of to the  exclusion  of the Borrower or assuming
operations of any property  previously owned by the Borrower and with respect to
which property such claim,  loss,  damage,  liability,  fine,  penalty,  charge,
proceeding,  order,  judgment,  action or requirement  arises  subsequent to the
acquisition  of title  thereto,  taking  possession  thereof  or  assumption  of
operations thereon by any of the Bank Parties.

     5.21 Transactions with Affiliates.  Conduct,  and to cause any Guarantor to
conduct,  all transactions with any Affiliate of the Borrower on an arm's-length
basis (provided that such  transactions are otherwise  permitted by the terms of
this Agreement).

     5.22 Leases.  Keep and continue,  and/or to cause any Guarantor to keep and
continue,  all Leases  comprising  the Borrowing Base Oil and Gas Properties and
related  contracts and agreements  relating  thereto in full force and effect in
accordance  with the terms thereof and not permit the same to lapse or otherwise
become  impaired  for failure to comply with the  obligations  thereof,  whether
express or implied; provided, however, that this provision shall not prevent the
Borrower or any  Guarantor  from  abandoning  and releasing any such Leases upon
their  termination as the result of cessation of production in paying quantities
that did not result from the Borrower's or such Guarantor's  failure to maintain
such production as a reasonably prudent operator.

     5.23 Operation of Borrowing Base Oil and Gas Properties. Operate or, to the
extent that the right of operation is vested in others,  exercise all reasonable
efforts to  require  the  operator  to operate  the  Borrowing  Base Oil and Gas
Properties  and all wells  drilled  thereon  and that may  hereafter  be drilled
thereon,  continuously  and in a good and  workmanlike  manner and in accordance
with all Laws of the State in which the  Borrowing  Base Oil and Gas  Properties
are  situated  and  the  United  States  of  America,  as  well  as  all  rules,
regulations, and Laws of any governmental agency having jurisdiction to regulate
the manner in which the operation of the Borrowing  Base Oil and Gas  Properties
shall be carried on, and comply with all terms and  conditions  of the Leases it
or any  Guarantor  now holds,  and any  assignment  or contract  obligating  the
Borrower or any Guarantor in any way with respect to the Borrowing  Base Oil and
Gas Properties; but nothing herein shall be construed to empower the Borrower or
any Guarantor to bind any Bank Party to any contract  obligation,  or render any
Bank Party in any way responsible or liable for bills or obligations incurred by
the Borrower or any Guarantor.

     5.24 Assignments.  Upon request of the  Administrative  Agent or Collateral
Agent,  execute  and  deliver,  and/or to cause any  Guarantor  to  execute  and
deliver,  written  notices of assignments to any persons,  corporations or other
entities  owing or which may in the future owe to the Borrower or any  Guarantor
monies or accounts arising in connection with any of the following matters:  (a)
any  oil,  gas or  mineral  production  from  the  Borrowing  Base  Oil  and Gas
Properties;  (b) any gas  contracts,  processing  contracts  or other  contracts
relating to the Borrowing Base Oil and Gas  Properties;  or (c) the operation of
or production from any part of the Borrowing Base Oil and Gas Properties.

     5.25 Change of Purchasers of Production.  On or before each  anniversary of
the Closing,  and at any other time that the Administrative Agent may so request
in writing, the Borrower shall notify the Administrative Agent in writing of the
identity  and address of each  then-current  purchaser  of  production  from the
Borrowing  Base Oil and Gas Properties  and, if requested by the  Administrative
Agent, shall provide the Administrative  Agent or Collateral Agent with Transfer
Order Letters  executed by the Borrower or any  Guarantor,  as  applicable,  and
addressed to such purchasers of production.

     5.26  Payment of Taxes,  Etc.  Pay or cause to be paid when due, all taxes,
assessments,   and  charges  or  levies  imposed  upon  it  and/or  any  of  its
Subsidiaries,  or on any of their respective  property,  or which it or they are
required  to  withhold  and  pay,  except  where  contested  in  good  faith  by
appropriate proceedings with adequate reserves therefor having been set aside on
its books,  provided,  however,  that the Borrower and the Guarantors shall each
pay or  cause  to be paid  all  such  taxes,  assessments,  charges,  or  levies
forthwith  whenever  foreclosure on any lien that may have attached (or security
therefor) appears imminent.

     5.27 Notice of  Litigation.  Give  immediate  notice to the  Administrative
Agent  of:  (1)  any  litigation  or  proceeding  in  which  it or  any  of  its
Subsidiaries is a party if an adverse  decision  therein would require it or any
of its Subsidiaries to pay more than One Million Dollars  ($1,000,000.00) in the
aggregate or deliver  assets the value of which exceeds such sum (whether or not
the claim is considered to be covered by insurance);  and (2) the institution of
any other suit or  proceeding  involving  the Borrower or any of the  Guarantors
that might materially and adversely affect its operations,  financial condition,
property, or business prospects.

     5.28  Notice  of  Events  of  Default.   Notify  the  Administrative  Agent
immediately  if it becomes aware of the occurrence of any Event of Default or of
any fact, condition,  or event that only with the giving of notice or passage of
time or both,  would  become an Event of Default  or if it becomes  aware of any
Material  Adverse  Change  (including,   without   limitation,   proceedings  in
bankruptcy,  insolvency,  reorganization,  or the  appointment  of a receiver or
trustee),  or of the failure of the Borrower or any  Guarantor to observe any of
its undertakings hereunder or under the Security Instruments.

     5.29 Notice of Change of Principal Offices. Notify the Administrative Agent
thirty  (30) days in  advance  of any change in the  location  of the  principal
offices of Borrower or any of its Subsidiaries.

     5.30 Employee  Benefit Plans.  Fund its Plan(s) in accordance  with no less
than the minimum  funding  standards  of 29 U.S.C.A.  ss. 1082  (Section  302 of
ERISA); furnish the Administrative Agent, promptly after the filing or receiving
of the same,  with copies of any  reports or other  statements  filed  with,  or
notices or other  communications  received from, the United States Department of
Labor,  the PBGC, or the Internal Revenue Service with respect to any such Plan;
promptly  advise the  Administrative  Agent of the  occurrence of any Reportable
Event or Prohibited Transaction with respect to any such Plan and the action the
Borrower  proposes  to take  with  respect  thereto;  and  promptly  advise  the
Administrative  Agent when the Borrower  knows or has reason to believe that the
PBGC or the Borrower has instituted or will institute proceedings under Title IV
of ERISA to terminate any such Plan and the action the Borrower proposes to take
with respect thereto.

     5.31 Annual Capital Budget. Within thirty (30) days after Closing, Borrower
shall prepare and submit to Arrangers an annual  capital  budget (the  "Budget")
applicable  to the  activities of Borrower and  Guarantors to be conducted:  (a)
through the projected  completion date of all capital expenditures to be made on
the Cedar Hills  Project,  and (b) through the fiscal  quarter  ending March 31,
2003,  with respect to all activities of Borrower and Guarantors  other than the
Cedar Hills  Project,  such Budget to be in form and substance  satisfactory  to
Arrangers,   and  which  shall  be  sufficient  to   demonstrate  to  Arrangers'
satisfaction  that Borrower and Guarantors  will remain in compliance  with this
Agreement and the other Loan Documents  during the period covered by the Budget.
Thereafter,  an updated  Budget shall be submitted to Arrangers  within  fifteen
(15) days after the close of each  fiscal  quarter  beginning  with the  quarter
ending June 30, 2002, so that the portion of the Budget  applicable to the Cedar
Hills  Project  activities  always  covers  the  period  through  the  projected
completion of all planned capital  expenditures on the Cedar Hills Project,  and
through the ensuing four (4) calendar quarters with respect to all activities of
Borrower and Guarantors other than the Cedar Hills Project.  Each updated Budget
submitted  to the  Arrangers  within  fifteen  (15) days after the close of each
fiscal  quarter shall also include a comparison of  Borrower's  and  Guarantors'
actual  capital  expenditures  during  such  preceding  quarter  compared to the
expenditures  forecast for such quarter on the most recent  Budget that had been
submitted to Arrangers with respect thereto.  Such comparison shall separate the
expenditures  made  on  the  Cedar  Hills  Project  from  expenditures  made  in
connection with all other activities of Borrower and Guarantors.  Borrower shall
conduct,  or shall cause  Guarantors to conduct,  as applicable,  the activities
contemplated  by the  capital  expenditures  forecast  in each  current  Budget,
substantially as and when contemplated in such Budget.

     5.32 Payment of Obligations.  Promptly pay (or renew and extend) all of its
Indebtedness  as it becomes due,  unless  payment of such  Indebtedness  is: (a)
restricted  pursuant to Article VI hereof,  or (b) being contested in good faith
by appropriate proceedings.

     5.33 Compliance with Section 2.06. Comply with Section 2.06, including, but
not limited to, the delivery of the Reserve Reports, as specified therein.

     5.34 Notice  Regarding  Early  Termination  of Hedge  Agreements.  Promptly
notify Administrative Agent regarding the occurrence of any early termination or
other unwind of any Hedge  Agreement  prior to the end of its original,  nominal
term,  such  notification  to be given by Borrower as promptly as possible after
Borrower  learns  of the  occurrence  or  impending  occurrence  of  such  early
termination, and in any event not later than two Business Days thereafter.

                                   ARTICLE VI.

                               NEGATIVE COVENANTS

     Without  the prior  written  consent  of the  Administrative  Agent and the
Required Banks and so long as any part of the principal or interest on the Notes
shall remain unpaid or any Bank remains  obligated to make  advances  hereunder,
Borrower covenants that it will not:

     6.01  Other  Indebtedness.  Incur,  create,  assume  or suffer to exist any
Indebtedness,  whether  by way of loan  or the  issuance  or sale of  securities
except Permitted Indebtedness.

     6.02  Loans  or  Advances.  Make  or  agree  to  make or  allow  to  remain
outstanding  any loans or  advances  to any  Person,  except:  (a)  advances  or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business,  (b) the intercompany  Indebtedness  owed by Borrower or any
Guarantor  to the other,  and (c) other  loans or  advances  not  exceeding  One
Million Dollars ($1,000,000), in the aggregate, at any time outstanding.

     6.03  Mortgages or Pledges of Assets.  Create,  incur,  assume or permit to
exist, any mortgage,  pledge,  security interest,  lien or encumbrance on any of
its or the Guarantors'  properties or assets (now owned or hereafter  acquired),
except for Permitted Encumbrances.

     6.04 Sales of Assets.  Except  for  Permitted  Asset  Sales,  sell,  lease,
assign,  transfer  or  otherwise  dispose  of, in one or any  series of  related
transactions, all or any portion of its Oil and Gas Properties or other material
assets,  whether  now  owned  or  hereafter  acquired,  including  transfers  to
Subsidiaries,  or  permit  any  Guarantor  to do so,  nor  enter or  permit  any
Guarantor to enter into any arrangement, directly or indirectly, with any Person
to sell and rent or lease back as lessee such property or any part thereof which
is intended  to be used for  substantially  the same  purpose or purposes as the
property sold or transferred.

     6.05 Dividends.  Declare or pay any dividend or distribution on any capital
stock of or other equity interest in Borrower  except the foregoing  restriction
shall not apply to o Cash dividends paid by the Borrower to its  shareholders in
amounts not in excess of each such shareholder's  allocable share of federal and
state  income  taxes  attributable  to the taxable  income of the  Borrower,  as
substantiated  by such  documentation  as  Administrative  Agent  my  reasonably
require,  provided  that no such  payments  shall  be  permitted  if an Event of
Default  or  Unmatured  Event of Default  involving  non-payment  of  principal,
interest,  fees  or  other  monies  owed to any of the  Bank  Parties  (a  "Cash
Default")  has  occurred  and is  continuing  or  would  result  from  any  such
payment(s),  and upon the occurrence and during the  continuance of any Event of
Default or Unmatured Event of Default that is not a Cash Default,  the aggregate
amount of such cash dividends shall not exceed $2,000,000.00 during any calendar
year; and o Dividends payable by any Guarantor to the Borrower.

     6.06 Payment of Accounts  Payable.  Allow or permit any  Guarantor to allow
any account  payable to remain  unpaid more than ninety (90) days after the date
of the invoice  therefor,  except such as are (i) being  contested in good faith
and as to which adequate provision or accrual has been made, or (ii) the subject
of usual and customary review and evaluation.

     6.07 Cancellation of Insurance.  Allow or permit any Guarantor to allow any
property and casualty  insurance  policy required to be carried  hereunder to be
terminated  or lapse  or  expire  without  provision  for  adequate  renewal  or
replacement thereof.

     6.08 Investments.  Make Investments in or purchase or otherwise acquire. or
permit any of the  Guarantors  to make  Investments  in or purchase or otherwise
acquire,  all or substantially all of the assets of any Person, or any shares of
stock of, or similar interest in, any other Person, if the result of such action
would  impair the  ability of the  Borrower  to perform  any of its  Obligations
pursuant to this Agreement,  including,  without  limitation,  the obligation to
repay the  Indebtedness  evidenced  by the Notes,  except that the  Borrower may
invest in instruments that are investment  grade,  and in short-term  commercial
paper.

     6.09  Changes  in  Structure  or  Business.  Consolidate  or merge  with or
purchase  (for  cash  or  securities),  or  permit  any  of  the  Guarantors  to
consolidate  or  merge  with  or  purchase  (for  cash  or  securities),  all or
substantially  all of the  assets or  capital  stock of any  corporation,  firm,
association  or  enterprise,  or allow any such  entity  to be  merged  into the
Borrower  or any  Guarantor,  or change  the basic  business  operations  of the
Borrower or any Guarantor, unless all of the following conditions are satisfied:
(a) Borrower has provided Administrative Agent complete and detailed information
relating  to such  merger or  purchase  at least  fifteen  (15) days in  advance
thereof, (b) Borrower or the applicable Guarantor is the survivor of such merger
or the acquiror in any such  purchase,  and (c) such merger or purchase will not
otherwise  constitute  or result in an Event of  Default or  Unmatured  Event of
Default under any other provisions of this Agreement.

     6.10 Pooling or  Unitization.  Voluntarily  pool or unitize,  or permit any
Guarantor to voluntarily pool or unitize,  all or any part of the Borrowing Base
Oil and Gas  Properties  where the pooling or  unitization  would  result in the
diminution of the Borrower's or Guarantor's net revenue from production from the
pooled or unitized lands, without the Required Banks' prior consent,  which will
not be unreasonably  withheld.  Any unitization,  pooling or  communitization or
other  action or  instrument  in  violation  of this Section 6.10 shall be of no
force or effect against any Bank.

     6.11 Hedge  Agreements.  Except for  Permitted  Hedge  Agreements  of which
Borrower  has notified  Administrative  Agent in writing at or prior to the time
that  Borrower or any  Guarantor  becomes  party  thereto,  enter into or become
obligated under any contract for sale for future delivery of Hydrocarbons  other
than  normal  production  contracts  entered  into  in  the  Borrower's  or  any
Guarantor's  normal course of business (whether or not the subject  Hydrocarbons
are to be delivered),  forward contract, Hedging Agreement,  futures contract or
any other similar  agreement,  without the prior written consent of the Required
Banks, acting in their sole discretion.

     6.12  Capital  Stock  of  Borrower  and   Guarantors/Redemption  of  Senior
Subordinated Notes. (a) issue, redeem, purchase, retire or otherwise acquire for
value any of its capital  stock or Senior  Subordinated  Notes or grant,  issue,
purchase,  retire or otherwise  acquire for value any warrant,  right, or option
pertaining thereto or other security  convertible into any of the foregoing,  or
permit any  Guarantor  to do so with  regard to its  capital  stock,  the Senior
Subordinated Notes or any warrant, right, option or security pertaining thereto,
or (b) permit any transfer, sale, redemption, retirement, or other change in the
ownership of the  outstanding  capital  stock of the  Borrower or any  Guarantor
without  the  prior  written  consent  of the  Required  Banks,  acting in their
discretion;  except for (i) issuance,  transfer or repurchase of the  Borrower's
capital  stock  which  does not  result  in a Change  of  Control  or  otherwise
constitute  or result in an Event of  Default or an  Unmatured  Event of Default
under any other  provisions of this Agreement,  and (ii) the issuance of options
pursuant to the Borrower's stock option plan as in effect at Closing.

     6.13 Margin Stock. Directly or indirectly apply any part of the proceeds of
the Loans to the purchasing or carrying of any "margin stock" within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System,  or any
regulations, interpretations or rulings thereunder.

     6.14 Senior Subordinated Debt. Make any prepayment of amounts due under the
Senior   Subordinated   Notes   without  the  prior   written   consent  of  the
Super-Majority or amend any of the terms of the Senior Subordinated Notes.

     6.15 Current Ratio.  Permit as of the end of any fiscal quarter its Current
Ratio to be less than 1.00 to 1.00.

     6.16  Fixed  Charge  Coverage  Ratio.  Permit,  as of the end of any fiscal
quarter, the ratio of EBITDA to Borrower's Total Fixed Charges to be lesser than
1.25 to 1.0,  calculated on a rolling four- quarter basis.  For purposes of this
Section, the term "Total Fixed Charges" shall include, without limitation,  cash
interest  charges,  capital  lease  rentals,  scheduled  and required  principal
amortization and cash dividends.

     6.17  Total  Funded  Debt to  EBITDA.  Permit,  as of the end of any fiscal
quarter,  the  ratio  of the  Aggregate  Outstanding  Credit  Exposure  plus the
outstanding  balance  of the Senior  Subordinated  Notes to EBITDA to be greater
than 3.75 to 1.0, calculated on a rolling four-quarter basis.

     6.18 Senior Debt to EBITDA.  Permit,  as of the end of any fiscal  quarter,
the ratio of Aggregate  Outstanding Credit Exposure to EBITDA to be greater than
2.5 to 1.0, calculated on a rolling four-quarter basis.

     6.19 Total Funded Debt to Total  Capitalization.  Permit,  as of the end of
any fiscal quarter, the ratio of: (a) Aggregate Outstanding Credit Exposure plus
the outstanding  balance of the Senior  Subordinated  Notes to (b) Stockholders'
Equity plus Aggregate  Outstanding Credit Exposure plus the outstanding  balance
of the Senior Subordinated Notes to be greater than .70 to 1.0.

                                  ARTICLE VII.

                                EVENTS OF DEFAULT

     7.01 Enumeration of Events of Default. Any of the following events shall be
considered an Event of Default as that term is used herein:

          (a)  Default  shall  be made by the  Borrower  in the  payment  of any
               installment   of  principal  or  interest   (including,   without
               limitation,  any mandatory prepayments payable pursuant to either
               Section 2.07 or 2.08 of this Agreement) on the Notes,  any LC Fee
               or  any  other  monetary  obligation  (other  than  Reimbursement
               Obligations)  payable hereunder when due, or any other fee due to
               any Bank Party hereunder  within five (5) days after such payment
               was due, or in the payment of any Reimbursement Obligation within
               one Business Day after the same becomes due;

          (b)  Default  shall be made by the Borrower in the due  observance  or
               performance  of  any  affirmative   covenant   required  in  this
               Agreement,  the  Notes,  the  Facility  LC  Applications  or  the
               Security  Instruments  and such default  continues  for more than
               thirty  (30) days  after the  earlier  of:  (i)  Borrower  having
               knowledge  thereof,  or (ii) Borrower  receiving  written  notice
               thereof from the Administrative Agent;

          (c)  Default  shall be made by the Borrower in the due  observance  or
               performance of any negative  covenant required in this Agreement,
               the  Notes,   the  Facility  LC   Applications  or  the  Security
               Instruments;

          (d)  Any representation or warranty herein made by the Borrower proves
               to have been  untrue in any respect  material to the  Borrower or
               any  Guarantor,  or  any  representation,   statement  (including
               Financial  Statements),  certificate or data furnished or made by
               the Borrower to the Administrative  Agent in connection  herewith
               proves  to  have  been  untrue  in any  respect  material  to the
               Borrower or any  Guarantor  as of the date the facts  therein set
               forth were stated or certified;

          (e)  Default  shall  be  made by any  Borrower  or any  Guarantor  (as
               principal or other surety) in payment or performance of any bond,
               debenture,  note or other evidence of  Indebtedness  for borrowed
               money, or under any credit agreement, loan agreement,  indenture,
               promissory  note or similar  agreement or instrument  executed in
               connection with any of the forgoing, relating to any Indebtedness
               in an aggregate amount of One Million Dollars  ($1,000,000.00) or
               more,  and such default shall remain  unremedied for in excess of
               the period of grace, if any, with respect thereto.

          (f)  Any Borrower or any Guarantor (i) discontinues its usual business
               or applies  for or  consents  to the  appointment  of a receiver,
               trustee or liquidator  of it or all or a substantial  part of its
               assets,  or (ii) files a  voluntary  petition  commencing  a case
               under Title 11 of the United  States Code,  seeking  liquidation,
               reorganization  or  rearrangement  or  taking  advantage  of  any
               bankruptcy,  insolvency,  debtor's relief or other similar Law of
               the United  States the State of Texas or any other  jurisdiction,
               or (iii) makes a general assignment for the benefit of creditors,
               or (iv) is unable,  or admits in writing its inability to pay its
               debts  generally  as they  become  due,  or (v)  files an  answer
               admitting the material allegations of a petition filed against it
               in any case commenced under Title 11 of the United States Code or
               any  reorganization,   insolvency,   conservatorship  or  similar
               proceeding under any bankruptcy,  insolvency,  debtor's relief or
               other similar Law of the United States, the State of Texas or any
               other jurisdiction;

          (g)  An  order,  judgment  or  decree  shall be  entered  against  any
               Borrower or any Guarantor by any court of competent  jurisdiction
               or by any other duly authorized  authority,  on the petition of a
               creditor  or  otherwise,  granting  relief  under Title 11 of the
               United States Code or under any bankruptcy,  insolvency, debtor's
               relief or other  similar Law of the United  States,  the State of
               Texas or any other  jurisdiction,  approving  a petition  seeking
               reorganization  or an  arrangement  of its debts or  appointing a
               receiver, trustee, conservator,  custodian or liquidator of it or
               all or any  substantial  part of its  assets,  and the failure to
               have such order,  judgment or decree dismissed within thirty (30)
               days of its entry;

          (h)  Any  Borrower  or  any  Guarantor  has  concealed,   removed,  or
               permitted to be concealed or removed,  any part of its  property,
               with intent to hinder,  delay or defraud its  creditors or any of
               them;  or has made or suffered a transfer of any of its  property
               which would be  characterized  as a fraudulent  conveyance  under
               bankruptcy  or  similar  Laws;  or has made any  transfer  of its
               property to or for the benefit of a creditor at a time when other
               creditors  similarly situated have not been paid; or has suffered
               or permitted, while insolvent, any creditor to obtain a lien upon
               any of its property through legal  proceedings or distraint which
               is not vacated within thirty (30) days from the date thereof;

          (i)  the Liens under the Security Instruments cease to be perfected or
               cease  to be  first  priority  Liens  subject  to only  Permitted
               Encumbrances; or

          (j)  a Material Adverse Change occurs.

     7.02 Rights Upon Unmatured Event of Default.  At any time that there exists
an Unmatured Event of Default,  any obligation of the Banks and the LC Issuer to
make Credit  Extensions shall be suspended  unless and until the  Administrative
Agent,  with  the  approval  of the  Super-Majority  and  the LC  Issuer,  shall
reinstate the same in writing,  the  Unmatured  Event of Default shall have been
waived by the Administrative  Agent, with approval of the Super-Majority and the
LC Issuer or the relevant  Unmatured  Event of Default  shall have been remedied
prior to ripening into an Event of Default.

     7.03  Rights  Upon  Default.  Upon the  happening  of an  Event of  Default
specified in Subsections  7.01 (f) or (g), the  obligations of the Banks and the
LC Issuer to make Credit Extensions hereunder shall automatically  terminate and
all  Obligations  then  outstanding  hereunder and the interest  accrued thereon
shall  automatically  become immediately due and payable without any election or
action on the part of the Administrative  Agent, any Bank or the LC Issuer. Upon
the happening and during the  continuation  of any other Event of Default,  upon
the request of the  Super-Majority  subject to Section 9.13, the  Administrative
Agent shall  terminate or suspend the obligations of the Banks and the LC Issuer
to  make  Credit  Extensions  hereunder,   or  declare  the  Obligations  to  be
immediately due and payable,  or both, and upon such declaration with respect to
the Obligations they shall become  immediately due and payable.  In either case,
the entire  principal and interest shall  thereupon  become  immediately due and
payable,  without notice  (including,  without  limitation,  notice of intent to
accelerate   maturity  or  notice  of  acceleration  of  maturity)  and  without
presentment,  demand,  protest,  notice of protest or other notice of default or
dishonor of any kind, except as provided to the contrary  elsewhere herein,  all
of which are hereby expressly waived by the Borrower.

     If,  within  thirty  (30) days after  acceleration  of the  maturity of the
Obligations or termination of the obligations of the Banks and LC Issuer to make
Credit  Extensions  hereunder as the result of any Event of Default  (other than
any Event of Default  specified  in  subsections  7.01(f) or (g)) and before any
judgement  or decree  for the  payment  of the  Obligations  due shall have been
obtained or entered,  the Super-Majority (in their sole discretion) shall direct
with respect to the  Obligations  relating to the Loans or the LC Issuer (in its
sole discretion)  shall direct with respect to Obligations  relating to Facility
LCs, the  Administrative  Agent shall,  by notice to the  Borrower,  rescind and
annul such acceleration and/or termination.

     7.04 Remedies. After any acceleration, as provided for in Section 7.03, the
Bank Parties  shall have,  in addition to the rights and remedies  given them by
this Agreement and the Security Instruments, all those allowed by all applicable
Laws, including, but without limitation,  the Uniform Commercial Code as enacted
in any  jurisdiction  in which any of the Borrowing  Base Oil and Gas Properties
may be located. Without limiting the generality of the foregoing, the Collateral
Agent, upon the request of the Super-Majority shall,  immediately without demand
of performance and without other notice (except as specifically required by this
Agreement or the Security Instruments) or demand whatsoever to the Borrower, all
of which are hereby expressly waived, and without advertisement,  sell at public
or private sale or otherwise realize upon, in Garfield County,  Oklahoma,  or in
any other place where the Borrowing  Base Oil and Gas Properties may be located,
or in such other  place or places as the  Collateral  Agent may  designate,  the
whole  or,  from  time to  time,  any  part of the  Borrowing  Base  Oil and Gas
Properties, or any interest which the Borrower may have therein. After deducting
from the proceeds of sale or other disposition of the Borrowing Base Oil and Gas
Properties all expenses  (including all reasonable expenses for legal services),
the Bank shall apply such proceeds toward the  satisfaction of the  Obligations.
Any  remainder of the proceeds  after  satisfaction  in full of the  Obligations
shall be distributed as required by applicable Laws. Notice of any sale or other
disposition  shall be given to the  Borrower  at least five (5) days  before the
time of any public sale or of the time after which any intended  private sale or
other  disposition  of the Borrowing  Base Oil and Gas Properties is to be made,
which the  Borrower  hereby  agrees shall be  reasonable  notice of such sale or
other disposition. The Borrower agrees to assemble, or to cause to be assembled,
at its own expense, documents evidencing its ownership of the Borrowing Base Oil
and Gas Properties and such other documents or items as the Collateral Agent may
reasonably  request  at such  place or  places  as the  Collateral  Agent  shall
designate.  At any such sale or other  disposition,  the Collateral Agent and/or
any Bank, to the extent  permissible  under  applicable  Laws,  may purchase the
whole or any part of the Borrowing  Base Oil and Gas  Properties,  free from any
right of redemption  on the part of the  Borrower,  which right is hereby waived
and released.  Without limiting the generality of any of the rights and remedies
conferred  upon the  Collateral  Agent for the  benefit of the Banks  under this
paragraph,  the  Collateral  Agent  may,  to the full  extent  permitted  by the
applicable Laws:

          (A) Enter  upon the  premises  of the  Borrower  (and,  to the  extent
     necessary in the judgment of the Collateral  Agent,  exclude  therefrom the
     Borrower or any  Affiliate  thereof) and take  immediate  possession of the
     Borrowing Base Oil and Gas Properties,  either  personally or by means of a
     receiver  appointed  by  a  court  of  competent  jurisdiction,  using  all
     necessary force to do so;

          (B) At the  Collateral  Agent's  option,  use,  operate,  manage,  and
     control the Borrowing Base Oil and Gas Properties in any lawful manner;

          (C) Collect and receive all rents, income, revenue,  earnings, issues,
     and profits therefrom for the benefit of the Banks; and

          (D) Maintain,  repair,  renovate,  alter, or remove the Borrowing Base
     Oil and Gas Properties as the Banks may determine in their discretion.

     7.05 Right of Set-off.  Upon the  occurrence of any Event of Default,  each
Bank may, and is hereby authorized by the Borrower, at any time and from time to
time, to the fullest extent permitted by applicable Laws, without advance notice
to the  Borrower  (any such  notice  being  expressly  waived by the  Borrower),
set-off and apply any and all  deposits  (general  or  special,  time or demand,
provisional  or final) at any time held and any other  indebtedness  at any time
owing by such Bank to or for the credit or the account of the  Borrower  against
any or all of the Obligations of the Borrower now or hereafter existing, whether
or not such  Obligations  have matured and irrespective of whether such Bank may
have  exercised any other rights that they have or may have with respect to such
Obligations,  including,  without limitation, any acceleration rights. Each Bank
agrees  promptly to notify the Borrower after any such set-off and  application,
provided  that the failure to give such notice  shall not affect the validity of
such  set-off and  application.  The rights of each Bank under this Section 7.05
are in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which the Banks may have.

                                  ARTICLE VIII.

                                   THE AGENTS

     8.01 Authorization and Action.  Each Bank hereby  irrevocably  appoints and
authorizes  each Agent to act on its behalf and to exercise  such  powers  under
this Agreement and the other Loan Documents as are specifically  delegated to or
required  of such Agent by the terms  hereof  and  thereof,  together  with such
powers as are  reasonably  incidental  thereto.  As to any matters not expressly
provided for by this Agreement or the other Loan Documents  (including,  without
limitation,  enforcement or collection of the Notes), no Agent shall be required
to exercise any  discretion or take any action,  but shall be required to act or
to refrain from acting (and, as between such Agent and the Banks, shall be fully
protected in so acting or refraining  from acting) upon the  instructions of the
Required Banks,  and such  instructions  shall be binding upon all Banks and all
holders of Notes; provided, however, that no Agent shall be required to take any
action which  exposes  such Agent to personal  liability or which is contrary to
this Agreement, the other Loan Documents or applicable law.

     8.02 Agent's  Reliance,  Etc.  Neither any Agent nor any of its  directors,
officers,  agents or employees  shall be liable to any Bank for any action taken
or omitted to be taken by it or them under or in connection  with this Agreement
or the other  Loan  Documents  (i) with the  consent  or at the  request  of the
Required  Banks or (ii) in the absence of its or their own gross  negligence  or
willful  misconduct (it being the express intention of the parties that no Agent
nor its directors,  officers,  agents and employees shall have any liability for
actions and omissions under this Section 8.02 resulting from their sole ordinary
or  contributory  negligence).  Without  limitation  of  the  generality  of the
foregoing,  each  Agent:  (i) may treat  the  payee of each  Note as the  holder
thereof until such Agent  receives  written notice of the assignment or transfer
thereof signed by such payee and in form  satisfactory  to such Agent;  (ii) may
consult  with  legal  counsel  (including  counsel  for  Borrower  or any of its
Subsidiaries),  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;  (iii) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements,  warranties or representations  made
in or in connection with this Agreement or the other Loan Documents; (iv) except
as otherwise expressly provided herein,  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  or the other Loan  Documents  or to inspect  the
property (including the books and records) of Borrower and its Subsidiaries; (v)
shall not be responsible to any Bank for the due execution,  legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document  furnished pursuant hereto or
thereto; and (vi) shall incur no liability under or in respect of this Agreement
or the other Loan Documents by acting upon any notice,  consent,  certificate or
other  instrument  or writing  (which may be by telegram,  telecopier,  cable or
telex) reasonably  believed by it to be genuine and signed or sent by the proper
party or parties;  and (vii) the  provisions  of this Section 8.02 shall survive
the termination of this Agreement and/or the payment or assignment of any of the
Indebtedness under this Agreement.

     8.03 Each Agent and its  Affiliates.  With respect to its  Commitment,  the
Credit  Extensions  made by it and the Note  issued to it as a Bank,  each Agent
shall have the same  rights and powers  under this  Agreement  or the other Loan
Documents  as any other Bank and may  exercise the same as though it were not an
Agent. The term "Bank" or "Banks" shall, unless otherwise  expressly  indicated,
include each Agent in its individual capacity. Each 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  Borrower,  any of its respective
Subsidiaries  and any  Person  who may do  business  with or own  securities  of
Borrower, any of its respective  Subsidiaries,  all as if such Agent were not an
Agent and without any duty to account therefor to the Banks.

     8.04 Bank Credit Decision.  Each Bank  acknowledges and agrees that it has,
independently  and without reliance upon the  Administrative  Agent or any other
Agent and based on the Financial Statements referred to in Section 5.04 and such
other  documents  and  information  as it has deemed  appropriate,  made its own
credit  analysis  and  decision  to enter  into this  Agreement.  Each Bank also
acknowledges  and agrees that it will,  independently  and without reliance upon
the  Administrative  Agent or any other  Agent and based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking  action under this  Agreement  and the
other Loan Documents.

     8.05  Agent's  Indemnity.  No Agent  shall be  required  to take any action
hereunder or to prosecute or defend any suit in respect of this Agreement or the
other Loan  Documents  unless  indemnified to such Agent's  satisfaction  by the
Banks against loss, cost,  liability and expense.  If any indemnity furnished to
such Agent shall become impaired, it may call for additional indemnity and cease
to do the acts indemnified against until such additional  indemnity is given. In
addition,  the Banks agree to indemnify such Agent (to the extent not reimbursed
by Borrower), ratably according to the respective principal amounts of the Notes
then held by each of them (or if no Notes are at the time  outstanding,  ratably
according to either (i) the respective amounts of their Commitments,  or (ii) if
no  Commitments  are  outstanding,  the  respective  amounts of the  Commitments
immediately  prior to the time the Commitments  ceased to be outstanding),  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 such
Agent in any way  relating  to or arising  out of this  Agreement  or any action
taken or omitted by such Agent under this  Agreement or the other Loan Documents
(including,  without limitation, any action taken or omitted under Article II of
this Agreement);  provided, that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.  Each Bank agrees, however, that it expressly intends, under
this Section  8.05,  to indemnify  each Agent  ratably as aforesaid for all such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses and disbursements arising out of or resulting from such Agent's
ordinary or contributory negligence.  Without limitation of the foregoing,  each
Bank agrees to reimburse  such Agent  promptly upon demand for its ratable share
of any out-of-pocket  expenses  (including  reasonable counsel fees) incurred by
such Agent in connection with the  preparation,  execution,  administration,  or
enforcement of, or legal advice in respect of rights or responsibilities  under,
this Agreement and the other Loan Documents to the extent that such Agent is not
reimbursed  for such expenses by Borrower.  The  provisions of this Section 8.05
shall survive the termination of this Agreement and/or the payment or assignment
of any of the Indebtedness under this Agreement.

     8.06 Successor Agents.  Each Agent may resign at any time by giving written
notice  thereof to the Banks and  Borrower  and may be removed as an Agent under
this Agreement and the other Loan Documents at any time with or without cause by
the Required  Banks.  Upon any such  resignation or removal,  the Required Banks
with the  concurrence  of  Borrower  shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks,
and shall have  accepted  such  appointment,  within 30 calendar  days after the
retiring  Agent's giving of notice of resignation or the Required Banks' removal
of the retiring  Agent,  then the retiring Agent may, on behalf of the Banks and
with the concurrence of Borrower, appoint a successor Agent. Upon the acceptance
of any  appointment  as Agent  hereunder and under the other Loan Documents by a
successor  Agent,  such successor  Agent shall  thereupon  succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this  Agreement  and the  other  Loan  Documents.  After  any  retiring  Agent's
resignation  or removal as Agent  hereunder and under the other Loan  Documents,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this  Agreement  and
the other Loan Documents.

     8.07  Notice of  Default.  No Agent  shall be deemed to have  knowledge  or
notice of the  occurrence of any Unmatured  Event of Default or Event of Default
hereunder  unless such Agent shall have received  notice from a Bank or Borrower
referring to this Agreement, describing such Unmatured Event of Default or Event
of Default and stating  that such notice is a "notice of  default." If any Agent
receives  such a notice,  such  Agent  shall give  notice  thereof to the Banks;
provided, however, if such notice is received from a Bank, such Agent also shall
give notice thereof to Borrower.  The Administrative  Agent shall be entitled to
take action or refrain from taking action with respect to such  Unmatured  Event
of Default or Event of Default as provided in Section 8.01 and Section 8.02.

                                   ARTICLE IX.

                                  MISCELLANEOUS

     9.01  Security  Interests  in Deposits  and Right of Offset or the Banker's
Lien. The Borrower hereby transfers,  assigns, pledges and grants to each Bank a
security  interest  (as  security  for the  payment  and/or  performance  of the
Obligations   of  the   Borrower,   with  such  interest  of  each  Bank  to  be
retransferred,  reassigned  and/or  released  by such Bank at the expense of the
Borrower upon payment in full and/or complete performance by the Borrower of all
such  Obligations)  and the right,  exercisable  at such time as any  obligation
hereunder shall mature,  whether by  acceleration  of maturity or otherwise,  of
offset or banker's lien against all funds or other  property of the Borrower now
or hereafter or from time to time on deposit with or in the  possession  of such
Bank,  including,  without  limitation,  all  certificates  of deposit and other
depository accounts.

     9.02  Survival  of   Representations,   Warranties   and   Covenants.   All
representations  and warranties of the Borrower and all covenants and agreements
herein  made shall  survive  the  execution  and  delivery of the Notes and this
Agreement so long as any debt is outstanding  under the Notes, or any renewal or
extension of this Agreement or the Notes, or the Banks remain  obligated to make
advances hereunder.

     9.03 Notices and Other Communications. Notices, requests and communications
hereunder  shall be in  writing  and  shall be  sufficient  in all  respects  if
delivered  to the  relevant  address  indicated  below  (including  delivery  by
registered or certified United States mail, facsimile, telex, telegram or hand):

        (A)      If to
                 Borrower:        CONTINENTAL RESOURCES, INC.
                                  302 N. Independence, Suite 300
                                  Enid, Oklahoma 73701
                                  Attention: Harold Hamm and Roger Clement

        (B)      If to
                 any of the
                 Bank Parties:    UNION BANK OF CALIFORNIA, N.A.
                                  500 North Akard, Suite 4200
                                  Dallas, Texas 75201
                                  Attention: John Clark

     Any party may, by proper written notice hereunder to the other,  change the
individuals or addresses to which such notices to it shall thereafter be sent.

     9.04 Parties in Interest.  All covenants and agreements herein contained by
or on  behalf  of the  Borrower  shall  be  binding  upon the  Borrower  and its
successors  and assigns  and inure to the benefit of the Bank  Parties and their
respective successors and assigns.

     9.05 Successors and Assigns; Participation; Purchasing Banks.

          (a) Whenever in this  Agreement any of the parties  hereto is referred
     to, such reference  shall be deemed to include the successors and permitted
     assigns of such party; and all covenants,  promises and agreements by or on
     behalf  of  Borrower,  the  Administrative  Agent  or the  Banks  that  are
     contained  in this  Agreement  shall bind and inure to the benefit of their
     respective  successors  and permitted  assigns.  Borrower may not assign or
     transfer  any of its rights or  obligations  hereunder  without the written
     consent of all the Banks.

          (b)  Each  Bank  may,   without   the   consent  of   Borrower,   sell
     participations to one or more banks or other financial  institutions in all
     or a portion of its rights and  obligations  under this  Agreement  and the
     other Loan Documents  (including,  without limitation,  all or a portion of
     its Commitment, the Loans owing to it, and the Notes held by it); provided,
     however,  that (i) the selling Bank's  obligations under this Agreement and
     the other  Loan  Documents  shall  remain  unchanged,  (ii) such Bank shall
     remain solely  responsible to the other parties hereto for the  performance
     of such  obligations,  (iii) Borrower,  the  Administrative  Agent, and the
     other Banks shall  continue  to deal solely and  directly  with the selling
     Bank in  connection  with such  Bank's  rights and  obligations  under this
     Agreement and the other Loan Documents,  (iv) the selling Bank shall remain
     the holder of its Note(s) for all  purposes of this  Agreement,  and (v) no
     participant  under any such  participation  shall have any right to approve
     any amendment or waiver of any provision of this  Agreement or any Note, or
     any  consent to any  departure  by the  Borrower  therefrom,  except to the
     extent that such amendment, waiver or consent would reduce to the principal
     of,  or  interest  on,  the  Notes  or any fees or  other  amounts  payable
     hereunder,  in each case to the extent  subject to such  participation,  or
     postpone any regularly  scheduled  payment of principal of, or interest on,
     the Notes or any fees or other amounts payable  hereunder,  in each case to
     the extent subject to such participation.

          (c) With the prior written consent of Borrower and the  Administrative
     Agent,  each Bank may  assign  to one or more  banks or other  entities  (a
     "Purchasing  Bank"),  all  or  a  portion  of  its  interests,  rights  and
     obligations  under this Agreement and the other Loan Documents  (including,
     without limitation, all or a portion of its Commitment and the same portion
     of the Loans at the time owing to it and the Notes  held by it);  provided,
     however,  that (i) each such assignment  shall be of a constant,  and not a
     varying,  percentage  of all the assigning  Bank's  rights and  obligations
     under this Agreement and the other Loan Documents, (ii) after giving effect
     to such  assignment,  the  Purchasing  Bank's  Commitment  must be at least
     $5,000,000 (either solely as the result of such assignment or as the result
     of  multiple  assignments  from two or more  assigning  Banks),  (iii)  the
     parties  to  each  such  assignment   shall  execute  and  deliver  to  the
     Administrative  Agent a Commitment  Transfer  Supplement  together with any
     Notes subject to such Commitment  Transfer  Supplement,  (iv) the assigning
     Bank shall pay to Administrative  Agent an assignment fee of $3,500, (v) an
     assigning  Bank shall not assign a portion of such Bank's  Commitment in an
     amount less than an amount  equal to the lesser of such  Bank's  Commitment
     hereunder and  $2,500,000  and (vi) if the assigning  Bank has retained any
     Commitment  hereunder,  such assigning Bank's  Commitment shall be at least
     $5,000,000 after giving effect to such assignment.  Upon such execution and
     delivery,  from and after the effective date  specified in each  Commitment
     Transfer  Supplement,  which effective date shall be at least five Business
     Days after the execution  thereof (x) the Purchasing Bank thereunder  shall
     be a party  hereto and,  to the extent  herein  provided in such,  have the
     rights  and  obligations  of a Bank  hereunder  and (y) the  assignor  Bank
     thereunder  shall, to the extent provided in such  assignment,  be released
     from its  obligations  under this  Agreement  and the other Loan  Documents
     (and, in the case of a Commitment  Transfer  Supplement covering all of the
     remaining  portion of an assigning Bank's rights and obligations under this
     Agreement and the other Loan Documents, such Bank shall cease to be a party
     hereto).  Such Commitment Transfer Supplement shall be deemed to amend this
     Agreement to the extent,  and only to the extent,  necessary to reflect the
     addition of such Purchasing Bank and the resulting adjustment of Percentage
     Shares  arising  from  the  purchase  by such  Purchasing  Bank of all or a
     portion of the rights and  obligations  of such  assigning  Bank under this
     Agreement, the Notes and the other Loan Documents.

          (d) The  Administrative  Agent shall  maintain at its office a copy of
     each Commitment Transfer Supplement  delivered to it and a register for the
     recordation  of the names  and  addresses  of the Banks and the  Commitment
     Amount of, and principal  amount of the Loans owing to, each Bank from time
     to time (the "Register").  The entries in the Register shall be conclusive,
     in the absence of manifest error, and Borrower,  the Administrative  Agent,
     and the Banks may treat each Person  whose name is recorded in the Register
     as a Bank hereunder for all purposes of this Agreement.  The Register shall
     be available for inspection by Borrower or any Bank at any reasonable  time
     and from time to time upon reasonable prior notice.

          (e) Upon its receipt of a Commitment  Transfer  Supplement executed by
     an assigning Bank and a Purchasing  Bank together with any Notes subject to
     such  Commitment  Transfer  Supplement  and  the  written  consent  to such
     Commitment Transfer  Supplement,  the Administrative Agent shall (i) accept
     such Commitment Transfer Supplement,  (ii) record the information contained
     therein in the Register and (iii) give prompt  notice  thereof to the Banks
     and  Borrower.  Within five (5) Business Days after receipt of such notice,
     Borrower   shall,   at  its  own  expense,   execute  and  deliver  to  the
     Administrative  Agent, in exchange for the surrendered  Notes,  replacement
     Notes  dated  as of the  effective  date  of  such  surrendered  Notes  and
     otherwise  substantially  in the form of the Notes replaced thereby payable
     to the order of such  Purchasing  Bank in an amount equal to the Commitment
     assumed by it pursuant to such Commitment  Transfer  Supplement and, if the
     assigning Bank has retained any  Commitment  hereunder,  replacement  Notes
     dated as of the  effective  date of the  surrendered  Notes  and  otherwise
     substantially  in the form of the Notes  replaced  thereby  payable  to the
     order of the  assigning  Bank in an amount equal to the  Commitment of such
     assigning Bank retained by it hereunder. Such replacement Notes shall be in
     an aggregate  principal  amount equal to the aggregate  principal amount of
     such  surrendered  Notes.   Contemporaneously  with  the  delivery  of  the
     replacement  Notes, the canceled Notes shall be returned to Borrower marked
     "Replaced."

          (f) Each Bank agrees to hold any confidential information which it may
     receive from the Borrower pursuant to this Agreement in confidence,  except
     for  disclosure  (i) to  its  Affiliates  and  to  other  Banks  and  their
     respective  Affiliates,  (ii) to  legal  counsel,  accountants,  and  other
     professional advisors to such Bank, (iii) to regulatory officials,  (iv) to
     any Person as requested pursuant to or as required by law,  regulation,  or
     legal process, (v) to any Person in connection with any legal proceeding to
     which  such  Bank is a  party,  (vi)  to such  Bank's  direct  or  indirect
     contractual   counterparties  in  swap  agreements  or  to  legal  counsel,
     accountants and other  professional  advisors to such  counterparties,  and
     (vii)  permitted  by this  Section.  Notwithstanding  any  other  provision
     herein, any Bank may, in connection with any assignment or participation or
     proposed  assignment  or  participation  pursuant  to  this  Section  9.05,
     disclose  to  the  assignee  or   participant   or  proposed   assignee  or
     participant,  any information  relating to Borrower or any other Subsidiary
     of Borrower furnished to such Bank by or on behalf of Borrower or any other
     Subsidiary of Borrower;  provided, that prior to any such disclosure,  each
     such assignee or  participant  or proposed  assignee or  participant  shall
     agree to  preserve  the  confidentiality  of any  confidential  information
     relating to Borrower and any of its Subsidiaries received from such Bank to
     the same extent as required by this Section.

          (g)  Assignment  to Federal  Reserve  Bank or Federal  Home Loan Bank.
     Notwithstanding  any other language in this Agreement,  any Bank may at any
     time assign all or any portion of its rights under this  Agreement  and the
     Notes to a Federal  Reserve Bank or a Federal Home Loan Bank as  collateral
     in accordance  with Regulation A and the applicable  operating  circular of
     such Federal Reserve Bank or Federal Home Loan Bank.

     9.06 Renewals and Extensions.  All provisions of this Agreement relating to
the Notes  shall  apply with equal  force and effect to each and all  promissory
notes  hereafter  executed  which  in  whole  or in part  represent  a  renewal,
extension,  amendment,   modification  or  rearrangement  of  any  part  of  the
Indebtedness originally represented by the Notes.

     9.07 No Waiver by the Bank Parties. No course of dealing on the part of the
Bank Parties,  their  officers or employees,  nor any failure or delay by any of
the Bank  Parties  with  respect  to  exercising  any of its  rights,  powers or
privileges under this Agreement,  the Notes,  the Facility LC Applications,  the
Security Instruments,  or any other instrument referred to herein or executed in
connection  with the Notes  shall  operate as a waiver  thereof.  The rights and
remedies of the Bank Parties under this  Agreement,  the Notes,  the Facility LC
Applications,  the Security  Instruments,  or any other  instrument  referred to
herein or executed in  connection  with the Notes  shall be  cumulative  and the
exercise or partial  exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.

     No Credit  Extensions  hereunder  shall  constitute  a waiver of any of the
covenants  or  warranties  of the  Borrower  contained  herein  or of any of the
conditions to the Banks' or the LC Issuer's  obligation  to make further  Credit
Extensions  hereunder.  In the event that the  Borrower is unable to satisfy any
such covenant,  warranty or condition,  no such Credit  Extension shall have the
effect of precluding the Banks or the LC Issuer from  thereafter  declaring such
inability to be an Event of Default as hereinabove provided.

     9.08 Waiver,  Release, and Indemnification by the Borrower.  To the maximum
extent permitted by applicable Laws, the Borrower:

          (A) Waives (1) protest of all commercial paper at any time held by any
     Bank on which the Borrower is in any way liable; (2) except as the same may
     herein be specifically  granted,  notice of  acceleration  and intention to
     accelerate;  and (3) notice and opportunity to be heard, after acceleration
     in the manner provided in Section 7.03,  before exercise by  Administrative
     Agent, any Bank or the LC Issuer of the remedies of self-help,  set-off, or
     of other  summary  procedures  permitted by any  applicable  Laws or by any
     agreement with the Borrower,  and,  except where required  hereby or by any
     applicable Laws, notice of any other action taken by Administrative  Agent,
     any Bank or the LC Issuer;

          (B)  Releases  each Agent,  each of the Bank Parties and the LC Issuer
     and their respective officers, employees,  directors, attorneys, and agents
     from all claims  for loss or damage  caused by any act or  omission  on the
     part of any of them except willful misconduct or gross negligence; and

          (C) Agrees to  indemnify  and hold the Bank  Parties and the LC Issuer
     and their respective officers, employees,  directors, attorneys, and agents
     harmless from and against all claims,  damages,  liabilities  and expenses,
     known or unknown,  accrued and unaccrued,  unless attributable to the gross
     negligence  or willful  misconduct  of the Bank  Parties,  the LC Issuer or
     their respective officers,  employees,  directors,  attorneys,  and agents,
     that may now or hereafter  be asserted  against any of the Bank Parties and
     the  LC  Issuer  and  their  respective  officers,  employees,   directors,
     attorneys,   and  agents  in   connection   with  or  arising  out  of  any
     investigation,  litigation or proceeding directly or indirectly relating to
     or arising out of any of the transactions contemplated by this Agreement.

     9.09  GOVERNING  LAW.  THIS  AGREEMENT  AND THE NOTE  SHALL BE DEEMED TO BE
CONTRACTS  MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS. EACH PARTY HERETO AGREES THAT IN CONNECTION WITH
ANY  LITIGATION  BROUGHT BY ANY PARTY  HERETO  AGAINST  ANY OTHER  PARTY  HERETO
SEEKING TO ENFORCE ANY RIGHTS,  REMEDIES OR OBLIGATIONS  UNDER THIS AGREEMENT OR
ANY OF THE OTHER  LOAN  DOCUMENTS,  EACH PARTY  CONCLUSIVELY  WAIVES IT RIGHT TO
TRIAL BY JURY.

     9.10  Incorporation  of Exhibits and Schedules.  The Exhibits and Schedules
attached to this Agreement are incorporated herein for all purposes and shall be
considered a part of this Agreement.

     9.11  Survival Upon  Unenforceability.  In the event any one or more of the
provisions contained in this Agreement, the Notes, the Security Instruments,  or
in any other  instrument  referred to herein or executed in connection  with the
Notes shall, for any reason, be held to be invalid,  illegal or unenforceable in
any respect,  such invalidity,  illegality or unenforceability  shall not affect
any other  provision  hereof or of any other  instrument  referred  to herein or
executed in connection herewith.

     9.12 Rights of Third Parties.  All provisions herein are imposed solely and
exclusively for the benefit of the Bank Parties and Borrower and no other Person
shall have  standing to require  satisfaction  of such  provisions in accordance
with their  terms or be  entitled  to assume  that any Bank will  refuse to make
advances in the absence of strict compliance with any or all thereof. Any or all
of  such   provisions  may  be  freely  waived  in  whole  or  in  part  by  the
Administrative  Agent,  the  Banks  and the LC  Issuer  at any  time if in their
discretion they deem it advisable to do so.

     9.13  Amendments  or  Modifications.  Subject  to the  provisions  of  this
Section,  the Required  Banks (or the  Administrative  Agent with the consent in
writing of the  Required  Banks)  and the  Borrower  may enter  into  agreements
supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Banks or the Borrower
hereunder or waiving any Event of Default hereunder; provided, however, that:

          (a) no such supplemental  agreement shall,  without the consent of all
     of the Banks:

               (i)  Extend  the  final  maturity  of  any  Loan,   postpone  any
                    regularly  scheduled  payment  of  principal  of  any  Loan,
                    forgive all or any portion of the principal  amount thereof,
                    or reduce the rate or extend the time of payment of interest
                    or fees thereon.

               (ii) Reduce  the  percentage   specified  in  the  definition  of
                    Required Banks.

               (iii)Reduce  the  percentage   specified  in  the  definition  of
                    Super-Majority.

               (iv) Extend the Facility  Termination  Date, or reduce the amount
                    or extend  the  payment  date for,  the  mandatory  payments
                    required  under  Sections  2.07 or  2.08,  or  increase  the
                    Aggregate  Commitment  Amount or the  Commitment of any Bank
                    hereunder, or permit the Borrower to assign its rights under
                    this Agreement.

               (v)  Amend  the  requirement  that  the  Borrowing  Base  may  be
                    increased only with the consent of all Banks.

               (vi) Release any  guarantor of any Loan or, except as provided in
                    the Security  Instruments,  release all or substantially all
                    of the Borrowing Base Oil and Gas Properties.

               (vii) Amend this Section 9.13.

          (b) No amendment of any  provision of this  Agreement  relating to the
     Administrative  Agent shall be effective without the written consent of the
     Administrative Agent.

     9.14 Agreement  Construed as an Entirety.  This Agreement,  for convenience
only, has been divided into Articles and Sections and it is understood  that the
rights,  powers,  privileges,  duties and other legal  relations  of the parties
hereto shall be determined from this Agreement as an entirety and without regard
to the  aforesaid  division  into  Articles and  Sections and without  regard to
headings prefixed to said Articles or Sections.

     9.15 Number and Gender.  Whenever the context  requires,  reference  herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be  construed  to  include  the  masculine,  feminine,  and  neuter,  when  such
construction  is  appropriate,  and specific  enumeration  shall not exclude the
general, but shall be construed as cumulative.

     9.16 AGREEMENT  SUPERSEDES ALL PRIOR AGREEMENTS.  THIS AGREEMENT,  TOGETHER
WITH THE NOTES, THE FACILITY LC APPLICATIONS,  THE SECURITY INSTRUMENTS, AND ANY
OTHER  WRITTEN  INSTRUMENTS  EXECUTED  PURSUANT  TO  THIS  AGREEMENT  REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT   HEREOF   AND  MAY  NOT  BE   CONTRADICTED   BY   EVIDENCE   OF  PRIOR,
CONTEMPORANEOUS,  OR  SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES  AND  SHALL
SUPERSEDE ANY PRIOR  AGREEMENT  BETWEEN THE PARTIES  HERETO,  WHETHER WRITTEN OR
ORAL,  RELATING TO THE SUBJECT HEREOF,  UNLESS SUCH PRIOR AGREEMENT IS EXPRESSLY
CONTINUED  IN EFFECT  UNDER  THE  TERMS  HEREOF.  THERE  ARE NO  UNWRITTEN  ORAL
AGREEMENTS BETWEEN THE PARTIES.

     9.17  Controlling  Provision  Upon  Conflict.  In the  event of a  conflict
between the provisions of this Agreement and those of the Notes, the Facility LC
Applications,  the  Security  Instruments  or any other  instrument  referred to
herein  or  executed  in  connection  with the  Notes,  the  provisions  of this
Agreement  shall  control;  provided if any of the Facility LC  Applications  or
Security  Instruments contain any representations,  warranties,  or covenants of
the  Borrower  that are in addition to or are more  restrictive  on the Borrower
than those set forth in this  Agreement,  such  additional  or more  restrictive
representations, warranties, and covenants shall control.

     9.18 Time, Place and Method of Payments.  All payments required pursuant to
this Agreement or the Notes shall be made in immediately  available funds; shall
be  deemed  received  by the  Administrative  Agent  on the  next  Business  Day
following  receipt if such receipt is after 4:00 p.m.  Los  Angeles,  California
time, on any Business Day, and shall be made at the principal  banking  quarters
of the Administrative Agent in Monterey Park, California.

     9.19 Termination. This Agreement and the Aggregate Commitment Amount may be
canceled  by the  Borrower  without  premium  or penalty  prior to the  Facility
Termination Date upon at least thirty (30) days' prior written notice, provided,
that the  Obligations  that are then due and payable are paid and  performed  in
full to the satisfaction of the  Administrative  Agent and the Banks;  provided,
however  that  any  such   cancellation   hereunder   shall  not  terminate  any
obligations, representations or warranties of the Borrower to the Administrative
Agent and/or the Banks  hereunder  and under other Loan  Documents  that survive
beyond the Facility  Termination  Date. Upon the earlier to occur of the (i) the
Facility  Termination  Date,  and (ii)  cancellation  of this  Agreement and the
Aggregate  Commitment  Amount prior thereto in accordance with this Section 9.19
and upon payment and  performance  in full of the  Obligations  that are due and
payable to the satisfaction of the Banks, the  Administrative  Agent agrees,  at
the  Borrower's  request and sole cost and  expense,  to execute and deliver any
such lien release documents and other documentation  reasonably requested by the
Borrower to release or terminate the  Administrative  Agent's liens and security
interests hereunder and under the other Loan Documents.

     9.20  Non-Application  of Chapter 346 of Texas Finance Code. The provisions
of  Chapter  346 of the Texas  Finance  Code are  specifically  declared  by the
parties  hereto  not to be  applicable  to this  Agreement  or any of the  other
Security Instruments or to the transactions contemplated hereby.

     9.21  Counterpart  Execution.   This  Agreement  may  be  executed  as  one
instrument  signed by all parties or in separate  counterparts  hereof,  each of
which  counterparts  shall be  considered  an original and all of which shall be
deemed  to be one  instrument,  and  any  signed  counterpart  shall  be  deemed
delivered  by the  party  signing  it if  sent  to any  other  party  hereto  by
electronic facsimile transmission.

     9.22 Power of Attorney.  To the fullest  extent  permitted by Law and until
this  Agreement is terminated in accordance  with Section 9.19 hereof,  Borrower
hereby appoints Collateral Agent as its attorney-in-fact  (without requiring the
Collateral Agent to act as such) to execute any Security  Instrument in the name
of the Borrower,  and to perform all other acts that the Collateral  Agent deems
appropriate  to perfect and continue its liens,  security  interests,  and other
rights  in,  and to  protect  and  preserve,  the  Borrowing  Base  Oil  and Gas
Properties and other collateral  covered by or described in (or, as evidenced by
this  Agreement,  intended  to  have  been  covered  by)  any  of  the  Security
Instruments, but only to the extent required of Borrower under the terms of this
Agreement.

     9.23   Subordination   of   Intercompany   Debt.  The  term   "Subordinated
Intercompany  Debt" as used in this  Section  shall mean and include any and all
indebtedness, liabilities and obligations of Borrower to any Guarantor, absolute
or  contingent,   direct  or  indirect,  joint,  several  or  independent,   now
outstanding or owing or which may hereafter be existing or incurred,  arising by
operation  of law or  otherwise,  due or to become due, or held or to be held by
any  Guarantor,  whether  created  directly  or  acquired  by  assignment,  as a
participation,  conditionally, as collateral security from another or otherwise,
including indebtedness, obligations and liabilities of Borrower to any Guarantor
as a member of any  partnership,  syndicate,  association  or other  group,  and
whether  incurred  by  Borrower  as  principal,  surety,  endorser,   guarantor,
accommodation party or otherwise,  including, without limiting the generality of
the foregoing, all indebtedness,  liabilities and obligations of Borrower to any
Guarantor  arising  out of any  operating  agreement,  management  agreement  or
similar agreement between Borrowers and any of the Guarantors.  The term "Senior
Debts" as used in this Section shall mean and include any and all  indebtedness,
liabilities and  obligations of Borrower to the Banks or LC Issuer,  absolute or
contingent,  direct or indirect, joint, several or independent,  now outstanding
or owing or which may hereafter be existing or incurred, arising by operation of
law or  otherwise,  due or to become  due,  or held or to be held by Banks or LC
Issuer, whether created directly or acquired by assignment,  as a participation,
conditionally,  as  collateral  security  from another or  otherwise,  including
indebtedness, obligations and liabilities of Borrower to Banks or LC Issuer as a
member of any  partnership,  syndicate,  association or other group, and whether
incurred by Borrower as principal,  surety, endorser,  guarantor,  accommodation
party or otherwise and including,  without limitation, all Obligations,  as that
term is defined in this  Agreement.  During such time as any Senior Debts remain
unpaid and an Event of Default or Unmatured Event of Default has occurred and is
continuing,  no Guarantor will ask for, demand, sue for, take, receive or accept
from Borrower, by set off or in any other manner, any payment or distribution on
account of the  Subordinated  Intercompany  Debt,  nor  present  any  instrument
evidencing  the  Subordinated  Intercompany  Debt for  payment  (other than such
presentment as may be necessary to prevent  discharge of other liable parties on
such instrument),  unless the advance written consent or written demand to do so
has been received by such Guarantor from  Administrative  Agent on behalf of the
Banks.  In the event any Guarantor  shall  receive any payments,  distributions,
property, security or proceeds on account of the Subordinated Intercompany Debt,
which such party is not entitled to receive under the  provisions  this Section,
such  party  will  hold any  amount  so  received  in trust for the Banks and LC
Issuer,   as   applicable,   and  will  forthwith  turn  over  such  payment  to
Administrative  Agent in the form received by such Guarantor  (together with any
necessary  endorsement) to be applied on the Senior Debts and any such sums paid
to  Administrative  Agent by such  Guarantor  shall  not be  deemed to reduce or
extinguish the Subordinated  Intercompany Debt of Borrower to any Guarantor.  No
Guarantor  shall commence any action or proceeding  against  Borrower to recover
all or any part of the  Subordinated  Intercompany  Debt or join  with any other
creditor,  unless  Banks  and  LC  Issuer  shall  also  join,  in  bringing  any
proceedings against Borrower under any bankruptcy, reorganization,  readjustment
of debt,  arrangement  of debt,  receivership,  liquidation or insolvency law or
statute of the Federal or any state government unless and until all Senior Debts
shall  have been paid in full.  In the  event of any  receivership,  insolvency,
bankruptcy,   assignment  for  the  benefit  of  creditors,   reorganization  or
arrangement  with  creditors,  adjustment  of debt,  whether or not  pursuant to
bankruptcy  laws,  the  sale  of  all  or  substantially   all  of  the  assets,
dissolution,  liquidation, or any other marshaling of the assets and liabilities
of Borrower,  any Guarantor  will at Bank's request  promptly and  expeditiously
file any claim, proof of claim, proof of interest or other instrument of similar
character  necessary  to enforce the  obligations  of Borrower in respect of the
Subordinated  Intercompany  Debt and will hold in trust for Banks and LC Issuer,
as  applicable,  and pay  over to  Administrative  Agent  in the  form  received
(together  with any necessary  endorsement),  to be applied on the Senior Debts,
any and all monies,  dividends or other assets received in any such  proceedings
on account of the  Subordinated  Intercompany  Debt  unless and until the Senior
Debts shall be paid in full. No Guarantor  will assign or transfer to others any
claim such  Guarantor has or may have against any Borrower as long as any of the
Senior Debts remains outstanding.

     9.24 Prior  Agreement.  This  Agreement  amends,  extends,  rearranges  and
restates but does not  extinguish,  the Borrower's  obligations  under the Third
Restated  Agreement.  All liens and security  interests that exist to secure the
indebtedness  evidenced by the Third Restated  Agreement shall continue in force
and effect to secure the indebtedness evidenced by the Notes.

                            [signature pages follow]

     IN WITNESS  WHEREOF,  this Agreement is executed as of the date first above
written.

                                            BORROWER

                    CONTINENTAL RESOURCES, INC.

                    By:      ROGER CLEMENT
                             Roger Clement
                             Senior Vice President and Chief Financial Officer

                    ADMINISTRATIVE AGENT, LEAD ARRANGER, LC
                    ISSUER, FRONTING BANK AND BANK:

                    UNION BANK OF CALIFORNIA, N.A.

                    By:      RANDALL OSTERBERG
                             Randall Osterberg,
                             Senior Vice President

                    By:      JOHN CLARK
                             John Clark,
                             Vice President

                    COLLATERAL/DOCUMENTATION AGENT,
                    CO-ARRANGER AND BANK:

                    GUARANTY BANK, FSB

                    By:      RICHARD MENCHACA
                             Richard Menchaca,
                             Vice President

                    SYNDICATION AGENT, CO-ARRANGER AND BANK:

                    FORTIS CAPITAL CORP.

                    By:      DARRELL W. HOLLEY
                             Darrell W. Holley,
                             Managing Director

                    By:      CHRISTOPHER S. PARADA
                             Christopher S. Parada,
                             Vice President

The undersigned  Guarantors join in the execution of this Agreement for purposes
of agreeing to: (a) be bound by the  provisions of Section 9.23 hereof,  and (b)
comply with each of the  affirmative  covenants  in Article V hereof and each of
the negative  covenants in Article VI hereof,  to the same extent that  Borrower
has agreed therein to cause Guarantors to comply with such covenants.

                                CONTINENTAL GAS, INC.

                                By:      RANDY E. MOEDER
                                         Randy E. Moeder
                                         President

                                CONTINENTAL RESOURCES OF
                                ILLINOIS, INC.

                                By:      ROGER CLEMENT
                                         Roger Clement
                                         Senior Vice President
                                         and Chief Financial Officer

                                CONTINENTAL CRUDE CO.

                                By:      ROGER CLEMENT
                                         Roger Clement
                                         Senior Vice President
                                         and Chief Financial Officer
<PAGE>
                                   EXHIBIT "A"

                                 BORROWING BASE
                             OIL AND GAS PROPERTIES

     This Exhibit A (together with the Borrowing Base Oil and Gas Properties, as
defined in this  Agreement) sets forth the description of the Borrowing Base Oil
& Gas Properties covered by the Agreement to which this Exhibit is attached. All
of the terms  defined in the  Agreement  are used in this  Exhibit with the same
meanings given therein.

     This Exhibit and the Agreement cover and include the following:

          (a) All of Borrower's and each Guarantor's  right,  title and interest
     in and to the oil, gas and mineral  leases  described  herein  and/or lands
     described in and subject to such oil, gas and mineral  leases  (regardless,
     as to such  leases  and/or  lands,  of any  surface  acreage  and/or  depth
     limitations  set  forth  in any  description  of any of such  oil,  gas and
     mineral leases),  and all of Borrower's and each Guarantor's  right,  title
     and interest in and to any of the oil, gas and minerals in, on or under the
     lands, if any, described on this Exhibit,  including,  without  limitation,
     all contractual  rights,  fee interests,  leasehold  interests,  overriding
     royalty interests,  non-participating royalty interests, mineral interests,
     production payments, net profits interests,  or any other interest measured
     by or payable out of production of oil, gas or other minerals from the oil,
     gas and mineral leases and/or lands described herein; and

          (b) All of the foregoing  interests of the Borrower and each Guarantor
     as such  interests  may be enlarged by the discharge of any payments out of
     production or by the removal of any charges or  encumbrances  together with
     the Borrower's and each  Guarantor's  interests in, to and under or derived
     from all  renewals  and  extensions  of any  oil,  gas and  mineral  leases
     described  herein, it being  specifically  intended hereby that any new oil
     and gas lease (i) in which an interest  is acquired by the  Borrower or any
     Guarantor after the termination or expiration of any oil and gas lease, the
     interests  of the  Borrower or such  Guarantor  in, to and under or derived
     from which are subject to the lien and security  interest hereof,  and (ii)
     that  covers all or any part of the  property  described  in and covered by
     such  terminated or expired leases,  shall, to the extent,  and only to the
     extent such new oil and gas lease may cover such property,  be considered a
     renewal or extension of such terminated or expired lease; and

          (c) All right,  title and interest of Borrower and each  Guarantor in,
     to  and  under  or  derived  from  any  operating,   farmout,  and  bidding
     agreements,  assignments  and  subleases,  whether or not described in this
     Exhibit,  to the  extent,  and only to the  extent,  that such  agreements,
     assignments  and subleases (i) cover or include any of the  Borrower's  and
     each  Guarantor's  present  right,  title and interest in and to the leases
     and/or lands described in this Exhibit,  or (ii) cover or include any other
     undivided  interests  now or  hereafter  held  by  the  Borrower  and  each
     Guarantor  in, to and under the described  leases and/or lands,  including,
     without limitation,  any future operating,  farmout and bidding agreements,
     assignments,   subleases  and  pooling,   unitization  and  communitization
     agreements and the units created thereby (including, without limitation all
     units formed under orders, regulations, rules or other official acts of any
     governmental body or agency having  jurisdiction) to the extent and only to
     the extent that such agreements,  assignments, subleases, or units cover or
     include the described leases and/or lands; and

          (d) All right,  title, and interest of the Borrower and each Guarantor
     in, to and under or derived from all presently  existing and future advance
     payment  agreements,  oil,  casinghead  gas and gas  sales,  exchange,  and
     processing contracts and agreements  including,  without limitation,  those
     contracts and agreements  that are described on this Exhibit to the extent,
     and only to the extent, those contracts and agreements cover or include the
     described leases and/or lands herein; and

          (e) All right,  title and interest of the Borrower and each  Guarantor
     in, to and under or derived from all existing and future permits, licenses,
     easements  and  similar  rights  and  privileges  that  relate  to  or  are
     appurtenant to any of the described leases and/or lands.

     Notwithstanding  the intention of this Agreement to cover all of the right,
title and interest of Borrower and each Guarantor in and to the described leases
and/or lands,  except as expressly set forth herein Borrower hereby specifically
warrants  and  represents  that the  interests  covered by this  Exhibit are not
greater  than the  working  interest  nor less  than the net  revenue  interest,
overriding royalty interest, net profit interest, production payment interest or
other interest  payable out of or measured by production set forth in connection
with each oil and gas well described in this Exhibit.  In the event the Borrower
or any Guarantor owns any other or greater  interest,  such additional  interest
shall  also be  covered  by and  included  in this  Agreement.  The  designation
"Working Interest" or "W.I." means an interest owned in an oil, gas, and mineral
lease  (including  operating  rights and/or record title interest in oil and gas
leases issued pursuant to the Outer Continental Shelf Lands Act) that determines
the cost bearing percentage of the owner of such interest.  The designation "Net
Revenue  Interest" or "NRI" means net revenue  interest,  or that portion of the
production  attributable to the owner of a working  interest after deduction for
all royalty burdens, overriding royalty burdens, or other burdens on production,
except  severance,  production,  windfall  profits and other similar taxes.  The
designation  "Overriding  Royalty  Interest"  or  "ORRI"  means an  interest  in
production  which is free of any  obligation  for the  expense  of  exploration,
development  and  production,  bearing  only  its pro rata  share of  severance,
production, windfall profits and other similar taxes.

<PAGE>
                                   EXHIBIT "B"

                      AMENDED AND RESTATED REPLACEMENT NOTE

$[175,000,000]                  Dallas, Texas                     March 28, 2002

     On the  dates  hereinafter  prescribed,  for  value  received,  CONTINENTAL
RESOURCES,  INC., an Oklahoma corporation (herein called "Borrower"),  having an
address at 302 North Independence,  Enid, Oklahoma 73702, promises to pay to the
order of _____________________  (herein called "Bank"), by payment to UNION BANK
OF CALIFORNIA,  N.A., the Administrative  Agent in the Credit Agreement (defined
below) at 1980 Saturn Drive,  Monterey Park,  California 91754 (i) the principal
amount of U.S. [ONE HUNDRED  SEVENTY-FIVE]  MILLION DOLLARS  ($[175,000,000]) or
the  principal  amount  advanced  pursuant to the terms of the Credit  Agreement
(defined herein) as of the date of maturity  hereof,  whether by acceleration or
otherwise,  whichever  may be the lesser,  and (ii)  interest  on the  principal
balance  from time to time  advanced and  remaining  unpaid from the date of the
advance  until  maturity  at a rate  of  interest  equal  to  lesser  of (a) the
"Floating Rate" (as defined and calculated in the Credit Agreement),  or (b) the
Maximum Rate (as defined and calculated in the Credit  Agreement).  Any increase
or decrease in interest rate  resulting  from a change in the Maximum Rate shall
be effective  immediately when such change becomes effective,  without notice to
the  Borrower,  unless  Applicable  Law (as  defined  in the  Credit  Agreement)
requires that such increase or decrease not be effective  until a later time, in
which event such  increase or decrease  shall be effective at the earliest  time
permitted under the provisions of such law.

     Notwithstanding  the  foregoing,  if during any period  the  Floating  Rate
exceeds the Maximum  Rate,  the rate of interest in effect on this Note shall be
limited to the Maximum Rate during each such period, but at all times thereafter
the rate of  interest  in effect on this Note shall be the  Maximum  Rate or, if
there is no Maximum Rate, the Agreed Maximum Rate (as defined below),  until the
total  amount of  interest  accrued  on this  Note  equals  the total  amount of
interest  which would have accrued  hereon if the Floating Rate had at all times
been in effect.

     This Note is a revolving credit note and it is contemplated  that by reason
of  prepayments  hereon  there  may be  times  when  no  indebtedness  is  owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder  subsequent
to each such  occurrence.  Each  principal  advance and each payment hereof made
pursuant to this Note shall be reflected by the Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid,  accrued interest remaining outstanding on
this Note.

     "Agreed  Maximum  Rate"  means a per annum rate of seven and  three-fourths
percent (7.75%) plus the Floating Rate from time to time in effect, which Agreed
Maximum  Rate shall apply only during any period  while there is no Maximum Rate
applicable to this Note.

     Other  capitalized  terms used herein,  that are not defined herein,  shall
have the meanings prescribed therefor in the Credit Agreement.

     The  Borrower  and the Bank  hereby  agree  that  Chapter  346 of the Texas
Finance Code, shall not apply to this Note or the loan transaction evidenced by,
and referenced  in, the Credit  Agreement  (hereinafter  defined) in any manner,
including without limitation, to any account or arrangement evidenced or created
by, or provided for in, this Note.

     The  principal  sum of  this  Note,  after  giving  credit  for  unadvanced
principal,  if any, remaining at final maturity,  shall be due and payable on or
before March 28, 2005;  interest to accrue upon the  principal  sum from time to
time owing and unpaid  hereunder  shall be due and  payable as  provided  in the
Credit Agreement; provided, however, the final installment of interest hereunder
shall be due and  payable  not later  than the  maturity  of the  principal  sum
hereof, howsoever such maturity may be brought about.

     In no event shall the  aggregate  of the  interest  on this Note,  plus any
other  amounts  paid in  connection  with the loan  evidenced by this Note which
would under Applicable Law be deemed  "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
The Bank and the Borrower  specifically  intend and agree to limit contractually
the interest  payable on this Note to not more than an amount  determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay  interest  at a rate in excess  of the  Maximum  Rate,  and  neither  the
Borrower nor any other party liable herefor shall ever be liable for interest in
excess of that  determined  at the  Maximum  Rate,  and the  provisions  of this
paragraph  shall  control  over  all  provisions  of this  Note or of any  other
instruments pertaining to or securing this Note. If any amount of interest taken
or  received  by the Bank shall be in excess of the  maximum  amount of interest
which,  under  Applicable  Law, could lawfully have been collected on this Note,
then the excess shall be deemed to have been the result of a mathematical  error
by the  parties  hereto and shall be  refunded  promptly  to the  Borrower.  All
amounts paid or agreed to be paid in connection with the indebtedness  evidenced
by this Note which would under Applicable Law be deemed "interest" shall, to the
extent permitted by Applicable Law, be amortized, prorated, allocated and spread
throughout the full term of this Note.

     This Note is secured by all security  agreements,  collateral  assignments,
mortgages and lien instruments  executed by the Borrower (or by any other party)
in favor of Guaranty  Bank,  FSB, as Collateral  Agent for the Banks,  including
those executed  simultaneously  herewith,  those  executed  heretofore and those
hereafter  executed,  and  including  specifically  and without  limitation  the
Security  Instruments  described and defined in that certain  Fourth Amended and
Restated  Credit  Agreement  dated  as of the  date  first  stated  above  among
Borrower,   Bank  and  certain  other   financial   institutions   (the  "Credit
Agreement").

     This Note is issued pursuant to the Credit  Agreement.  Reference is hereby
made to the Credit  Agreement for a statement of the rights and  obligations  of
the  holder of this Note and the  duties  and  obligations  of the  Borrower  in
relation  thereto;  but neither this  reference to the Credit  Agreement nor any
provisions  thereof  shall  affect  or impair  the  absolute  and  unconditional
obligation of the Borrower to pay any  outstanding  and unpaid  principal of and
interest  on this Note  when due,  in  accordance  with the terms of the  Credit
Agreement.  Each advance and each  payment  made  pursuant to this Note shall be
reflected by notations made by the Bank on its records and the aggregate  unpaid
amounts  reflected  by the  notations on the records of the Bank shall be deemed
rebuttably presumptive evidence of the principal amount owing under this Note.

     In the event of default in the payment when due of any of the  principal of
or any interest on this Note,  or in the event of default under the terms of the
Credit Agreement or any of the Security  Instruments,  or if any event occurs or
condition  exists which authorizes the acceleration of the maturity of this Note
under any  agreement  made by the  Borrower,  the Bank (or other  holder of this
Note) may, at its  option,  without  presentment  or demand or any notice to the
Borrower  or any other  person  liable  herefor,  declare  the unpaid  principal
balance of and accrued interest on this Note to be immediately due and payable.

     If this Note is  collected  by suit or through  the  Probate or  Bankruptcy
Court,  or any  judicial  proceeding,  or if this Note is not paid at  maturity,
however  such  maturity may be brought  about,  and is placed in the hands of an
attorney  for  collection,  then  the  Borrower  agrees  to pay  reasonable  and
documented  attorneys'  fees,  not to exceed 10% of the full amount of principal
and  interest  owing  hereon  at the time this Note is placed in the hands of an
attorney.

     The Borrower and all sureties,  endorsers and guarantors of this Note waive
demand,  presentment  for  payment,  notice of  nonpayment,  protest,  notice of
protest,  notice of intent to accelerate  maturity,  notice of  acceleration  of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security  herefor,  and agree to any  substitution,
exchange or release of any such  security or the release of any party  primarily
or  secondarily  liable hereon and further  agrees that it will not be necessary
for the  Bank,  in order  to  enforce  payment  of this  Note by them,  to first
institute  suit or exhaust its remedies  against any  Borrower or others  liable
herefor,  or to enforce its rights against any security herefor,  and consent to
any one or more extensions or  postponements  of time of payment of this Note on
any terms or any other  indulgences with respect hereto,  without notice thereof
to any of them.  The Bank may transfer this Note,  and the rights and privileges
of the  Bank  under  this  Note  shall  inure  to  the  benefit  of  the  Bank's
representatives, successors or assigns.

     This Note amends, extends,  rearranges and restates those certain [describe
each Third Restated Agreement Note] (the "Prior Notes").  All liens and security
interests  that exist to secure the  indebtedness  evidenced by that Prior Notes
shall continue in force and effect to secure the indebtedness  evidenced by this
Note.

                            [signature page follows]

     Executed as of the date and year first set forth above.

                                        CONTINENTAL RESOURCES, INC.
Attest:

                                        By:

Secretary
<PAGE>

                                   EXHIBIT "C"

                             COMPLIANCE CERTIFICATE

     I, the President of CONTINENTAL RESOURCES,  INC. (the "Company"),  pursuant
to Section 5.05 of the Revolving Credit Agreement dated as of March 28, 2002, by
and among the Company, UNION BANK OF CALIFORNIA,  N.A., as Administrative Agent,
and the other Banks that are party thereto (the  "Agreement") do hereby certify,
as of the date hereof, that to my knowledge:

     (a)  No Event of Default (as defined in the  Agreement) has occurred and is
          continuing,  and no  Unmatured  Event of  Default  (as  defined in the
          Agreement)  has occurred and is  continuing  except for the  following
          events (include actions taken to cure such situations):

     (b)  No Material  Adverse  Change has occurred  since the effective date of
          the latest audited  consolidated  Financial  Statements of the Company
          delivered to the Administrative Agent;

     (c)  Except as otherwise stated in the Schedule,  if any,  attached hereto,
          each of the representations and warranties of the Company contained in
          Article IV of the Agreement is true and correct in all respects; and

     (d)  The Company's  consolidated financial condition for the quarter ending
          __________ is as follows:

<TABLE>
<CAPTION>
                                                                                   Actual
                                     Date or Time            Required Ratio or    Ratio or
         Financial Covenant             Period                    Amount           Amount
         ------------------             ------                    ------           ------
<S>    <C>                        <C>                             <C>             <C>
(a)    Current Ratio              As of the end of each           1.0 to 1.0
       (Current Assets to         fiscal quarter
       Current Liabilities)

(b)    Fixed Charge Coverage      As of the end of each           1.25 to 1.0
       Ratio (EBITDA to Total     fiscal quarter, during
       Fixed Charges)             the preceding four
                                  quarters

(c)    Total Funded Debt to       As of the end of each           3.75 to 1.0
       EBITDA                     fiscal quarter

(d)    Senior Debt to EBITDA      As of the end of each           2.50 to 1.0
                                  fiscal quarter

(e)    Total Funded Debt to       As of the end of each            .70 to 1.0
       Total Capitalization       fiscal quarter
</TABLE>

     This certificate is executed this _____ day of_________,_____.

                                 CONTINENTAL RESOURCES, INC.

                                 By:
                                                                  , President
<PAGE>

                                   EXHIBIT "D"

                              SECURITY INSTRUMENTS

     The  Security   Instruments   securing  the  Borrower's   Obligations   and
Indebtedness to the Bank shall include the following, each in form and substance
satisfactory to the Bank:

     1. ACT(s) OF MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING AND ASSIGNMENT OF
PRODUCTION  covering  the  Borrowing  Base Oil and Gas  Properties  situated  in
Louisiana  and/or  in the  Gulf  of  Mexico  Outer  Continental  Shelf  offshore
Louisiana,  the  personal  property  and  equipment  therein  and  thereon,  the
production of oil, gas, and other  minerals  therefrom,  and all of the products
and  proceeds  thereof,  to be  duly  executed  by  Borrower  or  Guarantor,  as
applicable, with respect to all of the Borrowing Base Oil and Gas Properties.

     2. DEED(S) OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT
OF PRODUCTION  covering the Borrowing  Base Oil and Gas  Properties  situated in
Texas or other  states  and/or in the Gulf of  Mexico  Outer  Continental  Shelf
offshore Texas,  the personal  property and equipment  therein and thereon,  the
production of oil, gas, and other  minerals  therefore,  and all of the products
and  proceeds  thereof,  to be  duly  executed  by  Borrower  or  Guarantor,  as
applicable, with respect to all of the Borrowing Base Oil and Gas Properties.

     3.  SECURITY  AGREEMENT  granting  the  Collateral  Agent a first  priority
security  interest  in all of the  Borrower's  and its  Subsidiaries'  accounts,
equipment, machinery, fixtures, inventory, chattel paper, documents, instruments
and general intangibles relating to or arising out of the Oil and Borrowing Base
Oil and Gas Properties,  and the business of the Borrower,  whether now owned or
hereafter acquired, and all products and proceeds thereof.

     4. STOCK PLEDGE BY BORROWER  covering all of the stock owned by Borrower in
each Guarantor, together with any products and proceeds thereof.

     5.  FINANCING  STATEMENTS  in  connection  with  the  Security  Instruments
described in the preceding  paragraphs,  in form and number  satisfactory to the
Collateral Agent as the Collateral Agent,  from to time, may specify  (including
additional  or  supplemental  financing  statements,   amendments  thereto,  and
continuation statements thereof).

     6. OTHER SECURITY  INSTRUMENTS.  Such other instruments as are necessary or
appropriate  from time to time,  in the good  faith  opinion  of the  Collateral
Agent,  to perfect  to the  satisfaction  of the  Collateral  Agent,  its liens,
security  interests,  and  other  rights  in the  Borrowing  Base  Oil  and  Gas
Properties and in any and all other  collateral  covered by or described in (or,
as  evidenced  by the  Agreement,  intended to have been  covered by) any of the
other Security Instruments described above.
<PAGE>
                                   EXHIBIT "E"

                               REQUEST FOR ADVANCE

     I, the undersigned officer of CONTINENTAL RESOURCES,  INC. (the "Company"),
pursuant to Section 2.01 of the Revolving Credit Agreement dated as of March 28,
2002, as amended from time to time (the "Agreement"),  by and between UNION BANK
OF CALIFORNIA,  N.A.  ("Administrative  Agent"),  the banks and other  financial
institutions  from time to time parties to the Agreement (the "Banks"),  and the
Company, do hereby make the requests indicated below on this day of , 200 :
 _
|_|      1.       Loans:

         (a)      Amount of new Loan: $

         (b)      Requested funding date:        , 200

         (c)      $              of such Loan is to be an RR Loan;

                  $              of such Loan is to be a LIBOR Loan.

                  Requested Interest Period for LIBOR Loan:     months.
 _
|_|      2.       Continuation or conversion of LIBOR Loan maturing
                  on        , 200  :

         (a)      Amount to be continued as a LIBOR Loan is $              ,
                  with an Interest Period of      months;

         (b)      Amount to be converted to an RR Loan is $              .
 _
|_|      3.       Conversion of Prime Rate Loan:

         (a)      Requested conversion date:           , 200    .

         (b)      Amount to be converted to a LIBOR Loan is $           ,
                  with an Interest Period of                       months.

         4.       The  undersigned  certifies that the funds advanced from the
                  Banks to the  Company  pursuant  to  paragraphs  1 through 3
                  hereof,  as applicable,  shall be used by the Company solely
                  for the purposes permitted by the Agreement.

         5.       The  undersigned   certifies  that  to  my  knowledge  after
                  reasonable inquiry into the applicable facts, as of the date
                  hereof,  the  Company is in compliance with  all  of  the
                  representations, warranties, terms, conditions and covenants
                  contained  in the  Agreement  and no Event  of  Default  or
                  Unmatured  Event of Default has occurred and is continuing
                  under the Agreement.

         6.       The undersigned certifies that  to  my  knowledge  after
                  reasonable inquiry into the applicable facts, as of the date
                  hereof,  no Material Adverse Change has occurred since the
                  effective date of the latest audited Financial Statements of
                  the Company delivered to the Administrative Agent;

     This certificate is executed this ____ day of ___________, 200 .

                                CONTINENTAL RESOURCES, INC.

                                By:

<PAGE>

                                Schedule 1.01(a)

                         Third Restated Agreement Notes

1.   Those three  certain  Replacement  Revolving  Notes in the  aggregate  face
     amount of $45,700,000. each dated January 17, 2002, executed by Borrower et
     al. and made  payable to MidFirst  Bank,  Local  Oklahoma  Bank,  N.A.  and
     Guaranty Bank, FSB, respectively.

2.   Those three certain  Replacement Term Notes in the aggregate face amount of
     $24,300,000.  each dated January 17, 2002,  executed by Borrower et al. and
     made payable to MidFirst Bank, Local Oklahoma Bank, N.A. and Guaranty Bank,
     FSB, respectively.

<PAGE>

                                Schedule 1.01(b)

               Commitment Amounts and Aggregate Commitment Amount

                                   Percentage        Commitment
             Bank                     Share            Amount
             ----                     -----            ------
Union Bank of California, N.A.    33.33333372%     $   58,333,334.00
Guaranty Bank, FSB                33.33333314%     $   58,333,333.00
Fortis Capital Corp.              33.33333314%     $   58,333,333.00
                                                   -----------------
Aggregate Commitment Amount:                       $  175,000,000.00

<PAGE>
                                Schedule 2.20(C)

                           Fax Numbers for all Parties

Union Bank of California, N.A........................214-922-4209

Guaranty Bank, FSB...................................713-890-8868

Fortis Capital Corp..................................214-754-5982

Continental Resources, Inc.,
Continental Gas, Inc.,
Continental Resources of Illinois, Inc, and
Continental Crude Co.................................580-548-5182
<PAGE>

                         COMMITMENT TRANSFER SUPPLEMENT

     THIS COMMITMENT TRANSFER SUPPLEMENT (this "Commitment Transfer Supplement")
dated as of the date set  forth in Item 1 of  Schedule  I  hereto,  is among the
Transferor  Bank set  forth in Item 2 of  Schedule  I  hereto  (the  "Transferor
Bank"),  each  Purchasing  Bank  set  forth  in  Item 3 of  Schedule  1  (each a
"Purchasing Bank"), and UNION BANK OF CALIFORNIA,  N.A., as Administrative Agent
for the Banks under, and as defined in, the Credit Agreement described below (in
such capacity, the "Administrative Agent").

                                    RECITALS

     WHEREAS,   this  Commitment  Transfer  Supplement  is  being  executed  and
delivered in accordance with Section 9.05(c) of the Revolving  Credit  Agreement
dated as of March 28, 2002, by and among CONTINENTAL RESOURCES, INC., a Delaware
corporation and certain of its Affiliates ("Borrower"),  the Transferor Bank and
the other Banks party thereto and the Administrative Agent (as from time to time
amended,  supplemented  or  otherwise  modified  in  accordance  with the  terms
thereof,  the "Credit  Agreement";  terms  defined  therein being used herein as
therein defined);

     WHEREAS,  each  Purchasing  Bank (if it is not  already a Bank party to the
Credit Agreement) wishes to become a Bank party to the Credit Agreement; and

     WHEREAS,  the Transferor  Bank is selling and assigning to each  Purchasing
Bank, rights, obligations and commitments under the Credit Agreement;

     NOW, THEREFORE, the parties hereto agree as follows:

                                  GENERAL TERMS

     Section 1. Upon receipt by the Administrative Agent of five counterparts of
this  Commitment  Transfer  Supplement,  to each of  which is  attached  a fully
completed Schedule I and Schedule II, and each of which has been executed by the
Transferor  Bank,  each  Purchasing  Bank (and any other person  required by the
Credit  Agreement  to  execute  this  Commitment   Transfer   Supplement),   the
Administrative Agent will transmit to the Borrower, the Transferor Bank and each
Purchasing  Bank a  Transfer  Effective  Notice,  substantially  in the  form of
Schedule III to this  Commitment  Transfer  Supplement  (a  "Transfer  Effective
Notice").  Such Transfer  Effective Notice shall set forth, inter alia, the date
on which the transfer  effected by this  Commitment  Transfer  Supplement  shall
become effective (the "Transfer  Effective Date"),  which date shall be at least
five (5) Business Days  following the date of such  Transfer  Effective  Notice.
From and after the Transfer  Effective Date each Purchasing Bank shall be a Bank
party to the Credit Agreement for all purposes thereof.

     Section 2. At or before 12:00 Noon,  local time of the Transferor  Bank, on
the Transfer  Effective  Date,  each Purchasing Bank shall pay to the Transferor
Bank, in immediately  available funds, an amount equal to the purchase price, as
agreed  between the  Transferor  Bank and such  Purchasing  Bank (the  "Purchase
Price"), of the portion being purchased by such Purchasing Bank (such Purchasing
Bank's  "Purchased  Percentage") of the outstanding  Credit Extensions and other
amounts owing to the Transferor  Bank under the Credit  Agreement and the Notes.
Effective  upon  receipt by the  Transferor  Bank of the  Purchase  Price from a
Purchasing  Bank,  the Transferor  Bank hereby  irrevocably  sells,  assigns and
transfers to such Purchasing Bank, without recourse, representation or warranty,
and each Purchasing Bank hereby  irrevocably  purchases,  takes and assumes from
the  Transferor  Bank,  such  Purchasing  Bank's  Purchased  Percentage  of  the
Commitment  of  the  Transferor  Bank  and  the  presently   outstanding  Credit
Extensions  and other  amounts  owing to the  Transferor  Bank  under the Credit
Agreement and the Notes together with all instruments,  documents and collateral
security pertaining thereto.

     Section 3. The Transferor Bank has made  arrangements  with each Purchasing
Bank with respect to (a) the portion,  if any, to be paid, and the date or dates
for  payment,  by the  Transferor  Bank to  such  Purchasing  Bank  of any  fees
heretofore  received by the  Transferor  Bank  pursuant to the Credit  Agreement
prior to the Transfer  Effective Date, and (b) the portion,  if any, to be paid,
and the date or dates for payment,  by such  Purchasing  Bank to the  Transferor
Bank of fees or interest received by such Purchasing Bank pursuant to the Credit
Agreement from and after the Transfer Effective Date.

     Section 4. (a) All principal  payments that would otherwise be payable from
and after the Transfer  Effective  Date to or for the account of the  Transferor
Bank pursuant to the Credit Agreement and the Notes shall,  instead,  be payable
to or for the account of the Transferor  Bank and the Purchasing  Banks,  as the
case may be, in accordance with their respective  interests as reflected in this
Commitment Transfer Supplement.

     (b) All interest,  fees and other amounts that would  otherwise  accrue for
the account of the  Transferor  Bank from and after the Transfer  Effective Date
pursuant to the Credit  Agreement and the Notes shall,  instead,  accrue for the
account of, and be payable to, the Transferor Bank and the Purchasing  Banks, as
the case may be, in accordance with their  respective  interests as reflected in
this Commitment Transfer Supplement.

     (c) In the  event  that any  amount  of  interest,  fees or  other  amounts
accruing prior to the Transfer Effective Date was included in the Purchase Price
paid by any Purchasing  Bank, the Transferor  Bank and each Purchasing Bank will
make  appropriate  arrangements  for  payment  by the  Transferor  Bank  to such
Purchasing Bank of such amount upon receipt thereof from the Borrower.

     Section 5. On or prior to the Transfer  Effective Date, the Transferor Bank
will deliver to the Administrative Agent its Note. Within five (5) Business Days
after Borrower's receipt of notice from  Administrative  Agent of Administrative
Agent's  receipt of this  Commitment  Transfer  Supplement,  the  Borrower  will
deliver to the  Administrative  Agent, in exchange for the surrendered Note from
the  Transferor  Bank, a new Note for each  Purchasing  Bank and the  Transferor
Bank, to the extent the Transferor Bank has retained any of its  Commitment,  in
each  case in  principal  amounts  reflecting,  in  accordance  with the  Credit
Agreement,  their respective  Commitment  Amounts (as adjusted  pursuant to this
Commitment  Transfer  Supplement).  As provided in Section 9.05(e) of the Credit
Agreement,  each  such new Note  shall be dated  the date of the  original  Note
delivered  pursuant to the Credit  Agreement (the  "Effective  Date").  Promptly
after the Transfer Effective Date, the Administrative Agent will send to each of
the Transferor  Bank and the Purchasing  Banks its new Note and will send to the
Borrower the  superseded  Note of the  Transferor  Bank,  marked  "Canceled"  or
"Replaced" as appropriate.

     Section  6.  Concurrently  with the  execution  and  delivery  hereof,  the
Transferor  Bank will  provide to each  Purchasing  Bank (if it is not already a
Bank party to the Credit  Agreement)  conformed  copies of all  documents in the
Transferor Bank's possession that were delivered to the Administrative  Agent on
the Effective Date in satisfaction of the conditions  precedent set forth in the
Credit Agreement.

     Section  7. Each of the  parties  to this  Commitment  Transfer  Supplement
agrees  that at any time and from time to time upon the  written  request of any
other party,  it will execute and deliver  such  further  documents  and do such
further acts and things as such other party may  reasonably  request in order to
effect the purposes of this Commitment Transfer Supplement.

     Section 8. By executing and delivering this Commitment Transfer Supplement,
the  Transferor  Bank and each  Purchasing  Bank  confirm to and agree with each
other and the Administrative  Agent and the Banks as follows: (i) other than the
representation  and warranty  that it is the legal and  beneficial  owner of the
interest  being  assigned  hereby  free and  clear  of any  adverse  claim,  the
Transferor   Bank  makes  no   representation   or   warranty   and  assumes  no
responsibility  with respect to any  statements,  warranties or  representations
made in or in connection with the Credit  Agreement or the execution,  legality,
validity,  enforceability,  genuineness,  sufficiency  or  value  of the  Credit
Agreement,  the  Notes,  any other  Loan  Document  or any other  instrument  or
document  furnished  pursuant  thereto;   (ii)  the  Transferor  Bank  makes  no
representation  or warranty  and assumes no  responsibility  with respect to the
financial  condition of the Borrower,  any Subsidiary of either of the Borrowers
or the  performance or observance by the Borrower or any Subsidiary of either of
the Borrowers of any of their respective obligations under the Credit Agreement,
the Notes, any other Loan Document or any other instrument or document furnished
pursuant hereto; (iii) each Purchasing Bank confirms that it has received a copy
of the  Credit  Agreement,  together  with  copies of the  Financial  Statements
referred to in Section 3.1(D),  the Financial  Statements  delivered pursuant to
Sections 5.03 and 5.04, if any, and such other  documents and  information as it
has deemed  appropriate  to make its own credit  analysis  and decision to enter
into this  Commitment  Transfer  Supplement;  (iv) each  Purchasing  Bank  will,
independently and without reliance upon the Administrative Agent, the Transferor
Bank or any other Bank and based on such  documents and  information as it shall
deem  appropriate  at the time,  continue  to make its own credit  decisions  in
taking or not taking action under the Credit Agreement; (v) each Purchasing Bank
appoints  and  authorizes  the  Administrative  Agent  to take  such  action  as
Administrative  Agent on its behalf and to exercise such powers under the Credit
Agreement as are  delegated to the  Administrative  Agent by the terms  thereof,
together  with  such  powers  as  are  reasonably  incidental  thereto,  all  in
accordance with Article VIII of the Credit  Agreement;  and (vi) each Purchasing
Bank  agrees  that it will  perform in  accordance  with their  terms all of the
obligations  which by the  terms of the  Credit  Agreement  are  required  to be
performed by it as a Bank.

     Section 9. Each party hereto represents and warrants to and agrees with the
Administrative  Agent that it is aware of and will comply with the  provision of
Section 2.16 of the Credit Agreement.

     Section 1. Schedule II hereto sets forth the revised Commitment Amounts and
Percentage  Shares of the Transferor  Bank and each  Purchasing  Bank as well as
administrative information with respect to each Purchasing Bank.

     SECTION 2. THIS COMMITMENT  TRANSFER  SUPPLEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

     IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement  to be  executed  by their  respective  duly  authorized  officers on
Schedule I hereto as of the date set forth in Item I of Schedule I hereto.

<PAGE>

                                                           Schedule I to
                                                  Commitment Transfer Supplement

                          COMPLETION OF INFORMATION AND
                            SIGNATURES FOR COMMITMENT
                               TRANSFER SUPPLEMENT

                    Re:  Revolving  Credit Agreement dated as of March 28, 2002,
                         among Continental  Resources,  Inc., and certain of its
                         Affiliates,  the Banks,  and Union Bank of  California,
                         N.A., as Administrative Agent for the Banks thereunder.

Item 1   (Date of Commitment Transfer
          Supplement):                 [Insert date of Commitment Transfer
                                        Supplement]

Item 2   (Transferor Bank):            [Insert name of Transferor Bank]

Item 3   (Purchasing Bank[s]):         [Insert name[s] of Purchasing Bank[s]]

Item 4   (Signatures of Parties
          to Commitment Transfer
          Supplement):                                      , as Transferor Bank

                                       By:
                                       Title:___________________________________

                                                            , as Purchasing Bank

                                       By:
                                       Title:___________________________________

                                                            , as Purchasing Bank

                                       By:
                                       Title:___________________________________
<PAGE>

CONSENTED TO AND ACKNOWLEDGED:

CONTINENTAL RESOURCES, INC.

By:
Name:
Title:

UNION BANK OF CALIFORNIA, N.A.
         as Administrative Agent

By:
Name:
Title:

[Consents Required only when
Purchasing Bank is not already
a Bank or Affiliate thereof]

ACCEPTED FOR RECORDATION
         IN REGISTER:

UNION BANK OF CALIFORNIA, N.A.
         as Administrative Agent

By:___________________________________
Title:__________________________________

<PAGE>
                                                                  Schedule II to
                                                  Commitment Transfer Supplement

                       LIST OF LENDING OFFICES, ADDRESSES
                       FOR NOTICES AND COMMITMENT AMOUNTS

[Name of Transferor Bank]
                           Revised Commitment Amount:           $______________

                           Revised Commitment Percentage:       ______________

[Name of Purchasing Bank]
                           New Commitment Amount:               $_____________

                           New Commitment Percentage:           ______________

Address for Notices:

[address]

Attention:
Telex:
Answer back:
Telephone:
Telecopier:

Lending Office:

<PAGE>
                       [Form of Transfer Effective Notice]

                                                                 Schedule III to
                                                  Commitment Transfer Supplement

     To: [Insert Name of Borrower, Transferor Bank and each Purchasing Bank]

     The  undersigned,  as  Administrative  Agent  under  the  Revolving  Credit
Agreement  dated  as of  March  28,  2002,  among  Continental  Resources,  Inc.
("Borrower"),  the  Banks  and other  financial  institutions  from time to time
parties  thereto and Union Bank of  California,  N.A. as  Administrative  Agent,
acknowledges  receipt of five executed  counterparts  of a completed  Commitment
Transfer  Supplement,  as described in Schedule I hereto.  [Note: attach copy of
Schedule  I  from  Commitment  Transfer   Supplement.]  Terms  defined  in  such
Commitment Transfer Supplement are used herein as therein defined.

          1. Pursuant to such Commitment  Transfer  Supplement,  you are advised
     that the  Transfer  Effective  Date  will be  [Insert  fifth  Business  Day
     following date of Transfer Effective Notice].

          2. Pursuant to such  Commitment  Transfer  Supplement,  the Transferor
     Bank is  required  to deliver  its Note to the  Administrative  Agent on or
     before the Transfer Effective Date.

          3. Pursuant to such Commitment  Transfer  Supplement,  the Borrower is
     required  to  deliver  to the  Administrative  Agent on or before the fifth
     (5th) Business Day from its receipt of this notice,  in return for the Note
     surrendered  to the  Administrative  Agent  by  the  Transferor  Bank,  the
     following Notes [Describe each Note for Transferor Bank and Purchasing Bank
     as to principal amount and payee], dated March 28, 2002.

          4. Pursuant to such  Commitment  Transfer  Supplement  each Purchasing
     Bank is required to pay its  Purchase  Price to the  Transferor  Bank at or
     before 12:00 Noon on the Transfer  Effective Date in immediately  available
     funds.

                                    Very truly yours,

                                    UNION BANK OF CALIFORNIA, N.A.,
                                    as Administrative Agent

                                    By:
                                    Title:

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