Document:

<PAGE>

                                                                    EXHIBIT 10.3

                                October 31, 2000

Mr. Ken L. Kenworthy, Jr.
Chief Executive Officer
GMX Resources Inc.
9400 N. Broadway, Suite 600
Oklahoma City, Oklahoma 73114

                                LETTER AGREEMENT

Dear Ken:

         Local Oklahoma Bank, N.A. ("Lender") has committed to a credit
facility in favor of GMX Resources Inc., Endeavor Pipeline Inc. and Expedition
Natural Resources Inc. (collectively, the "Borrowers") in the amount of up to
$15,000,000.00.

         To effectuate this commitment, Lender will attempt to purchase GMX
Resources Inc.'s ("GMX") current facility with Bank One, Oklahoma, N.A.
consisting of a credit agreement, guaranty agreements, mortgages and other
security documents and as evidenced by that certain Amended and Restated
Promissory Note dated effective May 19, 1999 in the original principal amount
of $20,000,000.00 (the "Bank One Loan"). In the event that Lender is
successful in purchasing the Bank One Loan, (a) Borrowers shall execute (i)
any amendments to the current loan documents necessary to make the current
facility consistent with the Commitment Letter (defined below) and (ii) such
additional documentation necessary to maintain compliance with all terms and
conditions of the Bank One Loan as Lender may reasonably request, all as soon
as reasonably possible after the purchase of the Bank One Loan; and (b) Lender
will return the Promissory Note by Borrowers to the order of Lender in the
principal amount of $15,000,000.00 executed in connection with this Letter
Agreement.

         In the event that Lender is unsuccessful in purchasing the Bank One
Loan, Borrowers and Lender shall execute new loan documents substantially
similar to the loan documents evidencing the Bank One Loan, except as noted in
the letter dated October 25, 2000 (the "Commitment Letter") by Lender and
agreed to and accepted by GMX on the same date. In the event of any conflict
between this Letter Agreement and the Commitment Letter, the Commitment Letter
shall control. Borrowers shall execute the loan documents along with such
additional mortgages, deeds of trust or similar instruments as Lender may
require and shall provide such other agreements, opinions, certificates,
waivers, consents and evidence as Lender may reasonably request, all as soon
as reasonably possible

<PAGE>

Mr. Ken L. Kenworthy, Jr.
October 31, 2000
Page 2

after Lender is notified that Bank One, Oklahoma, N.A. has declined Lenders
offer to purchase the Bank One Loan.

         The terms of that certain Credit Agreement dated February 18, 1998 by
and between GMX and Bank One, Oklahoma, N.A., as amended from time to time,
most recently by that certain Third Amendment to Credit Agreement dated April
14, 2000 are incorporated into this Letter Agreement by reference. However, in
the event of any conflict between the terms of the Commitment Letter and the
Bank One, Oklahoma, N.A. Credit Agreement, the terms of the Commitment Letter
shall control.

         If you are in agreement with the terms outlined herein, please so
indicate with your signature below and return to me at your earliest
convenience.

Sincerely,

/s/ John K. Slay, Jr.

John K. Slay, Jr.
Senior Vice President

Agreed and accepted this 31st day of October, 2000

BORROWERS:

By:         /s/ Ken L. Kenworthy, Jr.
         ----------------------------------------
         Ken L. Kenworthy, Jr.
         Chief Executive Officer
         GMX Resources Inc.

By:         /s/ Ken L. Kenworthy, Jr.
         ----------------------------------------
         Printed Name:  Ken L. Kenworthy, Jr.
         Title:  President
         Endeavor Pipeline Inc.

<PAGE>

Mr. Ken L. Kenworthy, Jr.
October 31, 2000
Page 3

By:         /s/ Ken L. Kenworthy, Jr.
         ----------------------------------------
         Printed Name:  Ken L. Kenworthy, Jr.
         Title:  President
         Expedition Natural Resources Inc.

GUARANTORS:

By:         /s/ Ken L. Kenworthy, Jr.
         ----------------------------------------
         Ken L. Kenworthy, Jr., Individually

By:         /s/ Ken L. Kenworthy, Sr.
         ----------------------------------------
         Ken L. Kenworthy, Sr., Individually

By:         /s/ Ken L. Kenworthy, Jr.
         ----------------------------------------
         Ken L. Kenworthy, Jr., Trustee
         Ken L. Kenworthy, Jr. Trust u/a/d 3/29/96

PLEDGOR:

By:         /s/ Karen M. Kenworthy
         ----------------------------------------
         Karen M. Kenworthy, Trustee
         Karen M. Kenworthy Trust u/a/d 3/29/96

<PAGE>

                                 PROMISSORY NOTE
                            (REDUCING REVOLVING NOTE)

$15,000,000.00                                           Oklahoma City, Oklahoma
                                                                October 31, 2000

         FOR VALUE RECEIVED, the undersigned, GMX Resources Inc., an Oklahoma
corporation, Endeavor Pipeline Inc., an Oklahoma corporation, and Expedition
Natural Resources Inc., an Oklahoma corporation (jointly and severally, the
"Borrower"), hereby jointly and severally promise to pay to the order of
LOCAL OKLAHOMA BANK, N.A. ("Bank"), on or before May 1, 2003 (the "Maturity
Date"), the principal sum of Fifteen Million and No/100 Dollars
($15,000,000.00), or as much thereof as is disbursed and remains outstanding
hereunder, together with interest on the unpaid balance from time to time
outstanding at the rates hereinafter provided.

         Prior to the occurrence of any Event of Default (as defined in the
Commitment Letter referred to below), the unpaid principal balance from time
to time outstanding hereunder shall bear interest at a fluctuating rate per
annum equal to the Base Rate (defined below) plus one half of one percent
(.5%). Upon notice from Bank to Borrower of the occurrence of any Event of
Default, the unpaid principal amount from time to time outstanding under this
Note shall bear interest at a fluctuating rate per annum equal to the default
rate as set forth below (but not less than the Base Rate in effect on the
date of the occurrence of the Event of Default). The interest rate applicable
to this Note shall change as of the effective date of any change in the Base
Rate. The interest rate will be calculated on the basis of actual number of
days elapsed, but computed as if each calendar year consisted of a 360-day
year. As used herein, "Base Rate" means, at any time, that rate of interest
equal to the interest rate then most recently announced or published in the
"Money Rates" section of THE WALL STREET JOURNAL (Southwest Edition), as the
"Prime Rate" which such rate may not be the lowest interest rate charged by
the Bank, and which Prime Rate shall change upon any change in such announced
or published Prime Rate of the Bank, all without notice to the Borrower.

         If any Event of Default occurs and is not cured within the
applicable cure period, if any, described in the Commitment Letter, in lieu
of the interest rate provided in this Note, all sums owing by Borrower to
Bank shall bear interest at the rate equal to five percent (5%) per annum in
excess of the Base Rate, accrued from the date after the applicable grace
period to cure the Event of Default, to the date on which such Event of
Default is cured to the reasonable satisfaction of the Bank.

         Beginning on the first (1st) day of December, 2000 and continuing on
the first (1st) day of each month thereafter, Borrower shall, at a minimum,
make a payment of all accrued but unpaid interest on this Note. If the Loan
Balance exceeds the Commitment Amount as a result of a Monthly Commitment
Reduction with respect to the Loan on the first (1st) day of any month, the
Borrower shall immediately make such principal payments as may be necessary
to reduce the Loan Balance to an amount at or below the Commitment Amount.
The entire outstanding principal balance of this Note and all unpaid interest
accrued thereon shall be due and payable on the Maturity Date.

                                        1

<PAGE>

         All payments, including prepayments, made by Borrower, shall be made
to Bank at any one of its offices in the State of Oklahoma, on or before 2:00
p.m., local time, on the date due, in lawful money of the United States of
America and in immediately available funds. If any payment is due on a day
other than a business day, the due date thereof shall be extended to the next
succeeding business day.

         This Note is executed and delivered by Borrower pursuant to, and is
entitled to the benefits of, that certain letter dated October 25, 2000 and
accepted on the same date (the "Commitment Letter"), between Borrower and
Bank. It is contemplated that the Commitment Letter will be consolidated into
a Credit Agreement based upon the terms set forth in the Commitment Letter.
Reference is hereby made to the Commitment Letter for the terms and
provisions regarding the availability of credit, the collateral security for
payment of this Note, the prepayment rights and obligations of Borrower, the
right of the holder of this Note to accelerate the maturity hereof on the
occurrence of certain Events of Default specified therein, and for all other
pertinent purposes. This Note is the "Note" referred to in the Commitment
Letter. All capitalized terms not otherwise defined herein shall be defined
as set forth in the Commitment Letter.

         Upon the occurrence and during the continuation of any Event of
Default, the holder of this Note may apply payments received on any amount
due hereunder or under the terms of any instrument now or hereafter
evidencing or securing any said indebtedness as said holder may determine.

         It is the intent of Bank and Borrower to conform strictly to all
applicable usury laws, and any interest on the principal balance hereof in
excess of that allowed by said usury laws shall be subject to reduction to
the maximum amount of interest allowed under said laws. If any interest in
excess of the maximum amount of interest allowable by said usury laws is
inadvertently paid to the holder hereof, at any time, any such excess
interest shall be refunded by the holder to the party or parties entitled to
the same after receiving notice of payment of such excess interest.

         The records of the holder of this Note shall be prima facie evidence
of the amount owing on this Note.

         If, and as often as, this Note is placed in the hands of an attorney
for collection or to defend or enforce any of the holder's rights hereunder,
Borrower will pay to the holder hereof its reasonable attorneys' fees,
together with all court costs and other expenses paid by such holder.

         Borrower, endorsers, sureties, guarantors and all other parties who
may become liable for all or any part of this Note severally waive demand,
presentment, notice of dishonor, protest, notice of protest, and notice of
non-payment, and consent to: (a) any and all extensions of time for any term
or terms regarding any payment due under this Note, including partial
payments or renewals before or after maturity; (b) changes in interest rates;
(c) any substitutions or release of collateral; and (d) the addition,
substitution or release of any party liable for payment of this Note.

                                        2

<PAGE>

         No waiver of any payment or other right under this Note or any
related agreement shall operate as a waiver of any other payment or right.
All of the holder's rights hereunder are cumulative and not alternative. This
Note shall inure to the benefit of the successors and assigns of Bank or
other holder and shall be binding upon the successors and assigns of Borrower.

         This Note has been delivered to and accepted by Bank in the State of
Oklahoma, is to be performed in the State of Oklahoma and shall be deemed a
contract made under the laws of the State of Oklahoma.

         IN WITNESS WHEREOF, the undersigned has executed this instrument
effective for all purposes as of October 31, 2000.

                                         "BORROWER"

                                         GMX RESOURCES INC.,
                                         an Oklahoma corporation

                                            /s/ Ken L. Kenworthy, Jr.
                                         --------------------------------------
                                         By: Ken L. Kenworthy, Jr.
                                         Title: Chief Executive Officer

                                         ENDEAVOR PIPELINE INC.,
                                         an Oklahoma corporation

                                            /s/ Ken L. Kenworthy, Jr.
                                         --------------------------------------
                                         By: Ken L. Kenworthy, Jr.
                                         Title: President

                                         EXPEDITION NATURAL RESOURCES INC.,
                                         an Oklahoma corporation

                                            /s/ Ken L. Kenworthy, Jr.
                                         --------------------------------------
                                         By: Ken L. Kenworthy, Jr.
                                         Title: President

                                        3

<PAGE>

October 25, 2000

Mr. Ken L. Kenworthy
Chief Financial Officer
GMX Resources Inc.
9400 N. Broadway, Suite 600
Oklahoma City, Oklahoma

Re:    Proposed Terms

Dear Ken:

Local Oklahoma Bank, N.A. appreciates the opportunity to propose the
following terms for your review and our mutual consideration for further
discussion. These terms are subject to the Lender's underwriting and credit
approval process and do not constitute or imply a commitment by Local
Oklahoma Bank, N.A.

LENDER:           Local Oklahoma Bank, N.A.

BORROWER:         GMX Resources Inc. and Subsidiaries

GUARANTOR:        Ken Kenworthy, Jr. and Ken Kenworthy, Sr. shall each provide
                  their personal guarantees, each limited to $1,000,000;
                  however, said guarantees shall be in addition to any value
                  derived from the pledge of their stock ownership in the
                  Borrower.

FACILITY TYPE:    Reducing Revolving Line of Credit

AMOUNT:           An amount which shall not exceed at any one time outstanding
                  the lesser of (i) $15,000,000.00; or (ii) the Borrowing Base
                  (hereafter defined) minus the sum of all Monthly Commitment
                  Reductions (hereafter defined); (the lesser of i and ii is
                  hereinafter referred to as the "Commitment Amount". The
                  outstanding principal balance of the promissory note plus any
                  outstanding letters of credit issued under the facility is
                  hereinafter referred to as the "Loan Balance". The Commitment
                  Amount minus the Loan Balance is referred to herein as the
                  "Available Credit") which such obligation shall be evidenced
                  by a promissory note (the "Note").

PURPOSE:          Loan proceeds shall be used to (i) refinance existing
                  indebtedness of Borrower at Bank One, Oklahoma, N.A.; (ii)
                  repay indebtness to shareholders originally incurred to fund
                  retirement all issues of Series B preferred stock (iii)
                  acquire interest in the Bosh #1 and Hancock #1 from Tara
                  Energy Partnership (iv) finance future acquisition and
                  development of oil and gas properties; (v) issue letters of
                  credit to meet governmental bonding requirements and; (vi)
                  temporary working

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 2

                  capital, subject to a $250,000 sub-limit; (vii) other
                  corporate purposes as may be authorized by the Lender in its
                  sole discretion.

BORROWING
BASE:             The "Borrowing Base" in effect at any time shall be that
                  amount as established by Lender, in its sole and absolute
                  discretion and consistent with its general lending policies
                  then in effect, and based upon its evaluation of the
                  Borrower's Collateral and such other credit factors
                  consistently applied (including, without limitation, the
                  assets, liabilities, cash flow, business, properties,
                  prospects, management and ownership of the Borrower) as Lender
                  customarily considers in evaluating similar oil and gas
                  credits. Borrower recognizes that decreases in the Borrowing
                  Base may be caused by such factors as declines in production
                  volumes, other adverse changes in operating conditions, price
                  decreases, other adverse market or economic conditions, and
                  increases in interest rates. Lender may, in its sole
                  discretion, require additional Borrowing Base determinations
                  at any time.

                  The Borrowing Base and the amount of any scheduled monthly
                  reductions to the Commitment Amount (a "Monthly Commitment
                  Reduction") shall be redetermined by Lender, in its sole and
                  absolute discretion, each January 1st and July 1st during the
                  term hereof following Lender's review and evaluation of
                  Borrower's oil and gas properties. The initial Borrowing Base
                  is anticipated to be $7,250,000.00 and the Half Life of the
                  Borrower's Oil and Gas properties is 69 months. The initial
                  Monthly Commitment Reduction shall be $105,000.00 per month
                  beginning December 1st and continuing on the first (1st) day
                  of each month thereafter until Borrower is notified of a
                  change to either the Borrowing Base and/or the Monthly
                  Commitment Reduction.

                  If after any redetermination of the Borrowing Base, the Loan
                  Balance should exceed the redetermined Borrowing Base, one or
                  more of the following remedies may be required by Lender in
                  its discretion.

                                    (a)     The Borrowing Base may be adjusted
                                            to an amount consistent with the
                                            redetermined availability.

                                    (b)     A reduction of the Loan Balance may
                                            be required by virtue of principal
                                            prepayment to an amount sufficient
                                            to reduce the Loan Balance to an
                                            amount less than or equal to the
                                            redetermined availability.

                                    (c)     The pledge of additional collateral
                                            of sufficient value and acceptable
                                            to Lender may be required to raise
                                            the Borrowing Base level above the
                                            outstanding Loan Balance.

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 3

COLLATERAL:       The Loan Agreement, the Note and all advances thereunder
                  together with all obligations pursuant to all loan documents
                  executed in conjunction with any of the above (the
                  "Obligations") shall be secured by (i) all oil and gas
                  properties now owned or hereafter developed or acquired by
                  Borrower and (ii) all of Guarantors' stock ownership in the
                  Borrower. In conjunction with the execution of the Loan
                  Agreement and Note, Borrower shall execute (i) a mortgage,
                  deed of trust or similar instrument on oil and gas properties
                  representing, at least, eighty five percent (85%) of the total
                  value of all oil and gas properties owned by Borrower, as
                  determined by Lender. Any properties not mortgaged to Lender
                  shall not be pledged or encumbered by Borrower and shall be
                  available to Lender to be mortgaged at its discretion.

RATE:             Amounts outstanding under the facility shall accrue interest
                  at the floating Prime Rate of interest, adjusted on the day of
                  each change, plus 1/2%. Prime Rate shall be as quoted in the
                  Wall Street Journal (Southwest Edition).

FEES:             (A)      COMMITMENT FEE. A $10,000 Commitment Fee shall apply
                           to the initial Commitment Amount. A one-half of one
                           percent (1/2%) Commitment Fee shall apply to any
                           subsequent increases to the Commitment Amount made in
                           accordance with scheduled redeterminations of the
                           Borrowing Base. Additional fees may be negotiated
                           between Lender and Borrower if Lender is requested to
                           complete an unscheduled redetermination of the
                           Borrowing Base.

                  (B)      NON-USE FEE. Borrower shall pay a one-half of one
                           percent (1/2%) per annum non-use fee on the unused
                           balance of the Commitment Amount quarterly in
                           arrears.

                  (C)      ENGINEERING FEE. Borrower shall pay Lender an initial
                           Engineering Fee of $5,000 upon the closing of the
                           proposed facility. Subsequent engineering fees of
                           $2,500 shall be paid upon each scheduled semi-annual
                           redetermination of the Borrowing Base and/or each
                           unscheduled redetermination requested by the
                           Borrower.

                  (D)      LETTER OF CREDIT FEE. A fee equal to the greater of
                           (i) 2.00% per annum of the face amount of any letter
                           of credit issued under the facility; or (ii) $250.00
                           shall be due and payable on or before the issuance of
                           any Letter of Credit.

                  (E)      PREPAYMENT FEE. A fee equal to 1/2% of the average
                           Loan Balance over the immediately preceding 12 months
                           (if less than 12 months, then the average Loan
                           Balance since inception) shall be due in the event
                           the Borrower prepays all or any substantial part of
                           the Loan Balance directly or indirectly with any
                           funds provided by or obtained from a lender other

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 4

                           than Lender herein or from the sale or offering of
                           any equity interest whatsoever in Borrower or any
                           affiliate. Lender agrees that said pre-payment fee
                           shall be credited towards any new commitment fee
                           required by Lender as a condition of refinancing.

MATURITY:          May 1, 2003

REPAYMENT
 PROGRAM:         Beginning November 1, 2000 and continuing on the first (1st)
                  day of each month thereafter during the term hereof, Borrower
                  shall make a payment of all accrued but unpaid interest on the
                  Note. In the event the Loan Balance exceeds the Commitment
                  Amount, Borrower shall prepay, without premium or penalty, a
                  principal amount sufficient to reduce the Loan Balance to an
                  amount at or below the Available Credit. All unpaid principal
                  together with any accrued but unpaid interest shall be due and
                  payable in full at Maturity.

CONDITIONS:       The obligations of Lender to enter into this agreement and to
                  make any advances under the Note is subject to the
                  satisfaction of the following conditions precedent, unless
                  waived in writing by Lender:

                  1.       Lender shall have received an executed version of a
                           Loan Agreement, Note, Guaranty Agreements, any oil
                           and gas mortgages or other instruments, UCC financing
                           statements, and any other loan documents required by
                           Lender;

                  2.       Lender shall have received copies of the Articles of
                           Incorporation and all amendments thereto and the
                           Bylaws and all amendments thereto of Borrower
                           accompanied by a certificate issued by the secretary
                           of Borrower to the effect that such copy is correct
                           and complete;

                  3.       Certificates of Incumbency and signatures or other
                           evidence of all officers of Borrower who are
                           authorized to execute the loan documents on behalf of
                           Borrower;

                  4.       Copies of resolutions approving the loan documents
                           and authorizing the transactions contemplated herein
                           and therein duly adopted by the Borrower's board of
                           directors accompanied by a certificate of the
                           Borrower's Secretary to the effect that such copies
                           are true and correct copies of such consents, duly
                           adopted at meetings or by unanimous consent of the
                           Borrower's board of directors;

                  5.       Lender shall have received a certificate dated as of
                           a recent date from the Secretary of State or other
                           appropriate governmental authority evidencing the
                           existence or qualification and good standing of
                           Borrower in all

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 5

                           jurisdictions wherein its failure to be so qualified
                           would constitute a material adverse effect upon
                           Borrower's ability to repay the Note;

                  6.       Lender shall have received undated "Letters in Lieu
                           of Transfer" in form and substance satisfactory to
                           Lender from the Borrower to each purchaser of
                           production and distributor of the proceeds of
                           production from or attributable to the properties
                           pledged to the Lender authorizing and directing the
                           addresses to make further payments attributable to
                           production from said properties directly to Lender.
                           Lender agrees that none of such letters provided by
                           Borrower pursuant to this Section 6 will be sent to
                           the addressees prior to the occurrence of an Event of
                           Default, at which time the Lender may, at its option
                           and in addition to the exercise of any of its other
                           rights and remedies, send any or all of such letters.

                  7.       Lender shall have received such other agreements,
                           documents, items, instruments, opinions,
                           certificates, waivers, consents, and evidence as the
                           Lender may reasonably request.

                  8.       Lender shall have reviewed and approved of Borrower's
                           title ownership to the oil and gas properties to be
                           pledged as collateral.

                  9.       Borrower shall have disclosed any and all pending or
                           threatened litigation matters to Lender and Lender
                           shall be satisfied that such litigation matters are
                           not expected to result in any material impairment of
                           the ownership of the Borrower in any Collateral or to
                           have a Material Adverse Effect on the Borrower.

Lender shall have no obligation to advance any funds under this loan upon the
occurrence of and during the continuance of any Event of Default, until such
event has been waived and/or cured to the satisfaction of Lender.

AFFIRMATIVE
COVENANTS:        1.       Within 90 days following the conclusion of each
                           fiscal year of the Borrower, Borrower shall furnish
                           to the Lender a consolidated financial statement
                           prepared in accordance with GAAP and audited by and
                           issued with an "unqualified opinion" from an
                           independent firm of certified public accountants
                           acceptable to Lender. Concurrent with the financial
                           statements, Borrower shall provide a Compliance
                           Certificate executed by a responsible officer of
                           Borrower ("Responsible Officer") stating that such
                           Officer, after due inquiry, has no knowledge of a
                           Default or Event of Default and containing a
                           computation of, and demonstrating compliance with,
                           the financial covenants set forth herein.

                  2.       Within 60 days of the end of each calendar quarter,
                           Borrower shall provide Lender a consolidating/
                           consolidated financial statement prepared by the
                           Borrower in a manner consistent with the annual
                           audited financial

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 6

                           statements. Concurrent with the financial
                           statements, Borrower shall provide a Compliance
                           Certificate executed by Borrower's Responsible
                           Officer stating that such Officer, after due inquiry,
                           has no knowledge of a Default or Event of Default
                           and containing a computation of, and demonstrating
                           compliance with, the financial covenants set forth
                           herein.

                  3.       Within 30 days of the annual anniversary date of the
                           last financial statement provided, each of the
                           Guarantor's shall provide to Lender a current and
                           complete financial statement, signed by the
                           Guarantor. A complete financial statement shall
                           include a (i) balance sheet (ii) statement of
                           income and debt service obligations (iii) most
                           recent tax return (iv) statement of contingent
                           liabilities.

                  4.       Beginning December 15, 2001 and annually, thereafter,
                           Borrower will provide Lender with an engineering
                           report in form and substance acceptable to Lender,
                           prepared by an independent petroleum engineering
                           firm acceptable to Lender, covering the Borrower's
                           oil and gas properties, (together with such other
                           appropriate information as may be requested by
                           Lender). Said report shall have been prepared with
                           an effective date of January 1, of the proceeding
                           year and shall include reporting of any material
                           gas balancing liabilities.

                  5.       Beginning June 15, 2001 and annually thereafter,
                           Borrower shall provide Lender with an in-house
                           petroleum reserve report (and/or such other
                           appropriate information as may be required and/or
                           acceptable to Lender in lieu of an in-house
                           petroleum reserve report) on all of the Borrower's
                           oil and gas properties. Said report and/or
                           information shall have been prepared so as to
                           allow Lender to update the last provided
                           independent engineering report and complete its
                           semi-annual redetermination of the Borrowing Base.

                  6.       Within 60 days of the end of each calendar quarter,
                           Borrower shall provide Lender with quarterly
                           report, in form and substance satisfactory to the
                           Lender, indicating the immediately preceding
                           quarter's sales volume, sales revenues, production
                           taxes, operating expense and net operating income
                           from or attributable to the oil and gas properties
                           pledged to secure the Note hereunder, with
                           detailed calculations and worksheets, and, in the
                           case of take or pay or prepayment agreements
                           during such quarter, provide copies of same.

                  7.       The Borrower will at all times remain in compliance
                           with all federal and state laws, including
                           environmental laws and ERISA, except where such
                           noncompliance will not have a material adverse
                           effect upon Borrowers' ability to repay the
                           obligations set forth herein.

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 7

                  8.       The Borrower will pay all reasonable legal and other
                           reasonable customary out-of-pocket expenses
                           incurred by the Lender in connection with this
                           transaction to include all mortgage filing, title
                           due diligence and legal fees.

                  9.       Borrower will maintain its depository
                           accounts with Local Oklahoma Bank, N.A.

                  10.      Borrower will promptly cure any defects in the
                           execution and delivery of any of the documents
                           executed in conjunction herewith and contemplated
                           hereby and will execute, acknowledge, and deliver
                           any such other documents, assurances, instruments and
                           information as shall be necessary to fulfill the
                           terms hereof.

                  11.      Borrower and shall maintain its current line of
                           business, as engaged in as of the date hereof, unless
                           otherwise consented to in writing by Lender.

FINANCIAL
COVENANTS:        1.       Beginning with the period ending 12/31/00, the
                           Borrower shall maintain a minimum "Adjusted Current
                           Ratio". The "Adjusted Current Ratio" is for all
                           purposes herein defined as current assets (as defined
                           by GAAP) plus any unfunded availability under the
                           credit facility divided by current liabilities (as
                           defined by GAAP) exclusive of any balances
                           outstanding the proposed credit facilities from
                           Lender that would otherwise be accounted for as a
                           current liability. The minimum Adjusted Current
                           Ratio shall be .80:1.00 for the quarterly reporting
                           period ended 09/30/00 and 1.00:1.00 for the quarterly
                           reporting period ending 12/31/00 and each quarterly
                           reporting period thereafter.

                  2.       Beginning with the quarter ending 12/31/00, Borrower
                           shall maintain a "Debt Service Coverage Ratio" of
                           at least 1.10:1.00. The "Debt Service Coverage
                           Ratio" shall be calculated as the quotient of the
                           sum of Net Income as defined by GAAP, minus
                           dividends, plus depreciation, depletion and
                           amortization expense, plus interest expense (for
                           the quarter ended), DIVIDED BY the sum of the
                           quarterly principal reductions required to
                           amortize the Loan Balance (as of quarter end) over
                           the Half Life the Borrower's Oil and Gas
                           Properties (not to exceed 84 months), plus
                           interest expense for the quarter then ended, plus
                           any other current maturities of long term debt
                           (including Capital Lease Obligations) realized
                           during the quarter then ended.

                  3.       Beginning with the quarterly reporting period ending
                           12/31/00, the Borrower shall maintain a minimum
                           Tangible Net Worth of not less than 100% of the
                           Tangible Net Worth reported in the 09/30/00
                           financial

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 8

                           statement, plus (i) 75% of Net Income realized for
                           each quarter thereafter and (ii) 75% of any increase
                           in Tangible Net Worth resulting from any infusion of
                           equity subsequent to 09/30/00.

NEGATIVE
COVENANTS:        1.       Borrower will not further create, assume, or suffer
                           to exist any mortgage, pledge, lien, charge or
                           encumbrance on any of the property of the
                           Borrower, personal or real, tangible or
                           intangible, referenced without the prior written
                           agreement of the Lender.

                  2.       Borrower will not, during any fiscal year sell,
                           transfer, or otherwise dispose of any substantial
                           portion (defined as amounts exceeding $100,000 in
                           the aggregate) of their assets, now owned or
                           hereafter acquired, whether pursuant to a single
                           transaction or a series of transactions without
                           the prior written agreement of the Lender.

                  3.       Borrower will not enter into any merger or
                           consolidation with any person or entity or permit
                           any such merger or consolidation of the Borrower
                           without the prior written Agreement of the Lender.

                  4.       Borrower will not make any other loans, advances, or
                           other extensions of credit, direct or indirect, to
                           or for the benefit of any person or entity or
                           Affiliate aggregating in excess of $100,000 in the
                           aggregate and will not enter into any other
                           transactions, including without limitation, the
                           purchase, sale, or exchange of property, or the
                           rendering of services, with any person or entity
                           or Affiliate without the prior written agreement
                           of the Lender. For the purposes of this Letter
                           Agreement, the term "Affiliate" shall mean any
                           Person which, directly or indirectly, controls, is
                           controlled by or is under common control with the
                           relevant Person. For the purposes of this
                           definition, "control" (including, with correlative
                           meanings, the terms "controlled by" and "under
                           common control with"), as used with respect to any
                           Person, shall mean a member of the board of
                           directors, a partner or an officer of such Person,
                           or any other Person with possession, directly or
                           indirectly, of the power to direct or cause the
                           direction of the management and policies of such
                           Person, through the ownership (of record, as
                           trustee, or by proxy) of voting shares,
                           partnership interests or voting rights, through a
                           management contract or otherwise. Any Person
                           owning or controlling directly or indirectly ten
                           percent or more of the voting shares, partnership
                           interests or voting rights, or other equity
                           interest of another Person shall be deemed to be
                           an Affiliate of such Person.

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 9

                  5.       Borrower will not, directly or indirectly purchase,
                           redeem, or otherwise, retire any shares, pay any
                           dividends, or apply or set apart any sum of money
                           for same, without the written agreement of the
                           Lender.

                  6.       Borrower will not further create or incur any
                           indebtedness which aggregately exceeds $100,000
                           except (i) advances under this current facility;
                           (ii) current accounts payable arising in the
                           ordinary course of business.

                  7.       Borrower will not directly or indirectly, guarantee,
                           agree to purchase or repurchase, or become liable
                           or remain liable with respect to the indebtedness
                           of any person or entity in excess of $100,000
                           without the written agreement of the Lender.

                  8.       Borrower will not enter into any transaction
                           providing (i) for the hedging, forward sale, swap
                           or any derivation thereof of crude oil or natural
                           gas or other commodities; or (ii) for a swap,
                           collar, floor, cap, option, corridor, or other
                           contract which is intended to reduce or eliminate
                           the risk of fluctuation in interest rates, as such
                           terms are referred to in the capital markets,
                           except the foregoing prohibitions shall not apply
                           to transactions consented to in writing by the
                           Lender.

                  9.       Borrower will not make any principal reductions to
                           its shareholders on any existing indebtedness to
                           such shareholders without the prior written
                           consent of Lender. Interest payments may be made
                           on existing shareholder debt so long as (i) the
                           annual rate of interest paid on such shareholder
                           debt is not in excess of that paid to the Lender
                           and (ii) the Borrower is not in default of its
                           Loan Agreement with Lender.

EVENTS OF DEFAULT: Each of the following shall constitute an Event of Default
hereunder:

                  1.       Non-payment of principal and/or interest.
                  2.       Violation of any of the terms, conditions or
                           covenants contained herein.
                  3.       Any adverse change in the Borrower's financial
                           condition.
                  4.       Substantial change in the management of the Borrower.
                  5.       Insolvency or bankruptcy of the Borrower
                  6.       Any false representation or warranty by the Borrower.
                  7.       Guarantor's failure to comply with the terms of its
                           Guaranty Agreement.
                  8.       Any "Event of Default" under the Note.

REMEDIES:         Upon the occurrence of Events of Default No. 5 or No. 6,
                  immediately and without notice, (i) all obligations shall
                  automatically become immediately due and payable, without
                  presentment, demand, protest, notice of protest, default or
                  dishonor, notice of intent to accelerate maturity, notice of
                  acceleration of maturity or other notice of any kind, except
                  as may be provided to the contrary elsewhere herein, all of
                  which

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 10

                  are hereby expressly waived by the Borrower, and (ii) the
                  commitment to advance shall immediately cease and terminate
                  unless and until reinstated by the Lender in writing, and in
                  such event, the Lender is hereby authorized at any time and
                  from time to time, without notice to the Borrower (any such
                  notice being expressly waived by the Borrower), to set-off and
                  apply any and all deposits of the Borrower (general or
                  special, time or demand, provisional or final) held by the
                  Lender, except to the extent any such deposits contain funds
                  of persons other than Borrower to any and all other
                  indebtedness at any time owing by the Lender to or for the
                  credit or account of the Borrower against any and all of the
                  obligations.

                  Upon the occurrence of any Event of Default other than Event
                  of Default No. 5 or No. 6, Borrower shall have thirty (30)
                  days after receiving written notification of the Event of
                  Default (Notwithstanding the aforementioned sentence, Borrower
                  shall have 10 days after receiving written notification of the
                  occurrence of Event of Default No. 1 herein to cure such a
                  Default) to cure such Default but, during such cure period,
                  the Lender will not, as a result of such Default, accelerate
                  the Note or exercise any of its rights pursuant to the Loan
                  Documents, and such Default will not constitute an "Event of
                  Default", unless such Default is not remedied to the
                  reasonable satisfaction of Lender within 30 days (or 10 days
                  as the case may be) after Borrowers' receipt of such written
                  notification. In the event Borrower shall fail to effectuate
                  such a cure Lender may declare all obligations immediately due
                  and payable, without presentment, demand, protest, notice of
                  protest, default or dishonor, notice of intent to accelerate
                  maturity, notice of acceleration of maturity or other notice
                  of any kind, except as may be provided to the contrary
                  elsewhere herein, all of which are hereby expressly waived by
                  the Borrower, and the Lender's commitment shall immediately
                  cease and terminate unless and until reinstated by the Lender
                  in writing, and in such event, the Lender is hereby authorized
                  at any time and from time to time, without notice to the
                  Borrower (any such notice being expressly waived by the
                  Borrower), to set-off and apply any and all deposits
                  containing funds of the Borrower (general or special, time or
                  demand, provisional or final) held by the Lender, and any and
                  all other indebtedness at any time owing by the Lender to or
                  for the credit or account of the Borrower against any and all
                  of the obligations although such Obligations may be unmatured.

                  Subject to the provisions of this Agreement, upon the
                  occurrence of any Event of Default the Lender may, in addition
                  to the foregoing, exercise any or all of its rights and
                  remedies provided by law or pursuant to any other loan
                  documents executed in conjunction herewith

The proposed terms are not intended to be exhaustive or complete; however,
should be representative of the most substantial of those that would survive
to a final comprehensive loan agreement.

<PAGE>

Mr. Ken L. Kenworthy
October 25, 2000
Page 11

If you are agreeable to the proposed terms contained herein, please so
indicate with your signature below upon the receipt of which, we shall
proceed with submitting the same for approval. Thank you for the opportunity
to provide this proposal and we look forward to working with you.

Sincerely,

/s/ John K. Slay, Jr.

John K. Slay, Jr.
Senior Vice President

Agreed and accepted this 25th day of October, 2000.

  /s/ Ken L. Kenworthy, Jr.                          /s/ Ken L. Kenworthy
--------------------------------                   -----------------------------
Ken L. Kenworthy, Jr.                              Ken L. Kenworthy
Chief Executive Officer                            Chief Financial Officer
GMX Resources Inc.                                 GMX Resources Inc.

<PAGE>

                                CREDIT AGREEMENT

                  THIS AGREEMENT is made effective as of February 18, 1998, by
and GMX RESOURCES INC., an Oklahoma corporation (hereinafter referred to as
"Borrower") and BANK ONE, OKLAHOMA, N.A., a national banking association
(hereinafter referred to as "Bank").

                                   WITNESSETH:

                  WHEREAS, the Borrower desires to borrow up to a maximum
principal amount of $20,000,000.00 from the Bank in the form of a reducing
revolving line of credit, the proceeds of which shall be used by the Borrower
for the purpose of acquisition, exploration, development and operation of oil
and gas interests and to provide for general working capital needs of the
Borrower; and

                  WHEREAS, the Borrower desires to secure its obligations to
the Bank as described herein with the oil and gas properties and other assets
as described herein, all pursuant to the terms and conditions of this
Agreement and other loan and security documents described herein.

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

                  1.       DEFINITIONS. As used in this Agreement, the
following terms with their initial letter capitalized shall have the following
meanings, except where the context otherwise requires:

                           1.1      AGREEMENT. The term "Agreement" shall mean
         this Credit Agreement, as the same may from time to time be amended,
         supplemented or modified.

                           1.2      BASE RATE.  The term "Base Rate"shall mean
         that fluctuating annual rate of interest adopted by the Bank, from time
         to time (whether or not charged or published), as its "Base Rate."

                           1.3      BORROWING BASE. The term "Borrowing Base"
         shall mean, with respect to the Borrower at all times during the term
         of the Loan, the loan value of the Oil and Gas Properties securing the
         Loan. For purposes of determining the Borrowing Base, the loan value of
         the Oil and Gas Properties shall be determined by the Bank in
         accordance with the Bank's lending policies as may be in effect from
         time to time, other credit factors consistently applied from time to
         time, and such other guidelines as may be determined by the Bank in its
         sole discretion. The determination of the loan values, the properties
         constituting the Borrowing Base and the value of such properties shall
         be at the Bank's sole discretion acting in good faith and using
         assumptions regarding pricing, discount rate and other credit factors
         consistent with those used by the Bank at the time of determination
         with other similar credits, and for purposes of this Agreement such

<PAGE>

         determination may be made semi-annually throughout the term of the Loan
         as of January 1 and July 1 of each year, beginning July 1, 1998. On
         each Evaluation Date, the Bank shall make two determinations of the
         Borrowing Base as follows: (1) the loan value of the Oil and Gas
         Properties as of said Evaluation Date together with the applicable
         amount of the Monthly Commitment Reductions for the period ending with
         the next succeeding Evaluation Date, and (2) an amount determined by
         the Bank to be the anticipated loan value of the Oil and Gas Properties
         on the next succeeding Evaluation Date, such amount not being subject
         to any Monthly Commitment Reductions. The Borrowing Base for the period
         beginning with said Evaluation Date and ending on the next succeeding
         Evaluation Date shall be the amount of (1) or (2) above which is
         elected by the Borrower pursuant to Section 2.4 hereof. Any of the Oil
         and Gas Properties which are not subject to the Loan Documents or are
         not supported by title evidence satisfactory to the Bank and its
         counsel, will not be included in the calculation of the Borrowing Base.
         The initial Borrowing Base for the loan shall be $5,500,000.00 from
         closing to July 1, 1998, subject to the initial Monthly Commitment
         Reductions of $55,000.00 as described herein, at which time the
         Borrowing Base shall be redetermined as provided above.

                           1.4      BUSINESS DAY. The term "Business Day"
         shall mean any day other than a Saturday or Sunday or other holiday on
         which commercial banks are open for business with the public in
         Oklahoma City, Oklahoma.

                           1.5      CASH FLOW. The term "Cash Flow" means (i)
         Net Income of the Borrower, PLUS (ii) all depreciation, depletion,
         gains, losses and other noncash items of the Borrower, LESS (iii) all
         cash dividends paid, all as determined in accordance with GAAP.

                           1.6      COLLATERAL. The term "Collateral" shall
         have the meaning ascribed to such term as in provided in Section 6
         hereof.

                           1.7      CURRENT ASSETS. The term "Current Assets"
         shall mean all of the current assets of the Borrower, as determined in
         accordance with GAAP.

                           1.8      CURRENT LIABILITIES. The term "Current
         Liabilities" shall mean all. of the current liabilities of the
         Borrower, as determined in accordance with GAAP.

                           1.9      DEBT. The term "Debt" means, as to any
         person, all indebtedness, liabilities and obligations of such person,
         determined in accordance with GAAP, including all contingent and
         indirect obligations and liabilities.

                           1.10     DEBT COVERAGE RATIO. The term "Debt
         Coverage Ratio" means the quotient of (i) Cash Flow for the previous
         calendar quarter, divided by (ii) the amount of the Monthly Commitment
         Reductions for that calendar quarter, whether Borrower elects
         determination (1) or (2) under Section 1.3 above.

                           1.11     ENVIRONMENTAL LAWS. The term
         "Environmental Laws" means all federal, state and local laws, rules,
         regulations, ordinances, and consent decrees relating to health,
         safety, hazardous substances, and environmental matters applicable to
         Borrower's

                                       2

<PAGE>

         business and facilities. Such laws and regulations include, but are not
         limited to, the Resource Conservation and Recovery Act, Comprehensive
         Environmental Response; Compensation and Liability Act; Toxic
         Substances Control Act; Clean Water Act; Clean Air Act; Comprehensive
         Environmental Response, Compensation and Liability Information System;
         all state and federal superlien and environmental cleanup programs; and
         all other applicable environmental laws and regulations of all
         applicable jurisdictions.

                           1.12     ERISA. The term "ERISA" means the Employee
         Retirement Income Security Act of 1974, as amended, together with all
         regulations issued pursuant thereto.

                           1.13     EVALUATION DATE. The term "Evaluation
         Date" shall mean each January 1 and July 1 throughout the term of the
         Loan, beginning July 1, 1998.

                           1.14     EVENTS OF DEFAULT. The term "Events of
         Default" shall have the meaning ascribed to such term as in provided in
         Section 10 hereof.

                           1.15     GAAP. The term "GAAP" shall mean the
         generally accepted accounting principles, practices and procedures, set
         forth by the Accounting Principles Board and the American Institute of
         Certified Public Accountants and the Financial Accounting Standards
         Board, which are applicable as of the date of the end of the fiscal
         quarter immediately preceding such date of determination.

                           1.16     LETTERS OF CREDIT. The term "Letters of
         Credit" shall mean all letters of credit issued by the Bank for the
         benefit of the Borrower, and any affiliate of the Borrower, during the
         term of the Loan.

                           1.17     LIBOR INTEREST PERIOD. The term "LIBOR
         Interest Period" means, with respect to each particular LIBOR Portion
         of the Loan, a period of 1 month, as specified in the Rate Election
         applicable thereto, beginning on and including the date specified in a
         Rate Election (which must be a Business Day), and ending on but not
         including the same day of the month as the day on which it began or the
         last day of the month if shorter, provided that each LIBOR Interest
         Period which would otherwise end on a day which is not a Business Day
         shall end on the next succeeding Business Day (unless such next
         succeeding Business Day is the first Business Day of a calendar month,
         in which case such LIBOR Interest Period shall end on the immediately
         preceding Business Day). No LIBOR Interest Period may be elected which
         would extend past the date on which the Loan is due and payable.

                           1.18     LIBOR PORTION. The term "LIBOR Portion"
         means any portion of the unpaid principal balance of the Loan which
         Borrower designates as such in a Rate Election. The Loan shall have no
         more than three LIBOR Portions outstanding at any time.

                           1.19     LIBOR RATE. The term "LIBOR Rate" means,
         with respect to each particular LIBOR Portion within either of the
         Loans and with respect to the LIBOR

                                       3

<PAGE>

         Interest Period, the rate of interest per annum determined by Bank in
         accordance with its customary general practices to be representative of
         the rates at which deposits of dollars are offered to Bank at
         approximately 9:00 a.m. Oklahoma City, Oklahoma time two Business Days
         prior to the first day of such LIBOR Interest Period (by prime banks in
         the London interbank market which have been selected by Bank in
         accordance with its customary general practices) for delivery on the
         first day of such LIBOR Interest Period in an amount equal or
         comparable to the amount of the Bank's LIBOR Portion within such Loan
         and for a period of time equal or comparable to the length of the LIBOR
         Interest Period. The LIBOR Rate determined by Bank with respect to a
         particular LIBOR Portion shall be fixed at such rate for the duration
         of the associated LIBOR Interest Period.

                           1.20     LIEN. The term "Lien" shall mean any lien,
         mortgage, security interest, tax lien, pledge, encumbrance, conditional
         sale or title retention arrangement, or any other interest in property
         designed to secure the repayment of Debt, whether arising by agreement
         or under any statute or law, or otherwise.

                           1.21     LOAN. The term "Loan" shall mean the loan
         contemplated by this Agreement and evidenced by the Note and the
         Letters of Credit, and as evidenced and secured by the Loan Documents,
         and any and all other loans and extensions of credit made by the Bank
         to the Borrower, whether now existing or hereafter incurred.

                           1.22     LOAN DOCUMENTS. The term "Loan Documents"
         shall collectively mean this Agreement, the Note, the Letters of
         Credit, all mortgages, security agreements, financing statements,
         assignments, transfer orders and all other loan or security documents
         and instruments executed and delivered in connection with the Loan, and
         all renewals, extensions, amendments, modifications, replacements and
         supplements thereof and thereto.

                           1.23     MATERIAL ADVERSE EFFECT. The term
         "Material Adverse Effect" means any set of circumstances or events
         which (i) could have a material adverse effect upon the validity,
         performance or enforceability of this Agreement or any other Loan
         Documents, (ii) could be material and adverse to the financial
         condition or business operations of the Borrower, (iii) could
         materially impair the ability of the Borrower to perform its
         obligations under this Agreement or any other Loan Documents, or (iv)
         constitutes an Event of Default.

                           1.24     MAXIMUM COMMITMENT AMOUNT. The term
         "Maximum Commitment Amount" shall mean the lesser of the amount of: (A)
         $20,000,000.00; or (B) the amount of (i) the Borrowing Base, less (ii)
         the aggregate amount of the Monthly Commitment Reductions with respect
         to the Loan. The initial Maximum Commitment Amount shall be
         $5,500,000.00.

                           1.25     MONTHLY COMMITMENT REDUCTION. The term
         "Monthly Commitment Reduction" shall mean the monthly amount as
         designated by the Bank, which shall reduce the maximum principal amount
         available for advances on the Note, on a monthly basis

                                       4

<PAGE>

         from each Evaluation Date until the next occurring Evaluation Date.
         The initial Monthly Commitment Reduction shall be $55,000.00 per month.

                           1.26     MORTGAGED PROPERTY. The term "Mortgaged
         Property" shall mean all of the Oil and Gas Properties initially listed
         in Exhibit "A" attached hereto and all additional Oil and Gas
         Properties which may hereafter be subject to a valid first and prior
         mortgage in favor of the Bank.

                           1.27     NET INCOME. The term "Net Income" shall
         mean all net profit or loss after taxes of the Borrower, as determined
         in accordance with GAAP.

                           1.28     NOTE. The term "Note" shall mean that
         certain Promissory Note dated even date herewith in the principal face
         amount of $20,000,000.00 made by Borrower and payable to the order of
         the Bank, together with all renewals, extensions, modifications and
         substitutions thereto and therefor.

                           1.29     OIL AND GAS PROPERTIES. The term "Oil and
         Gas Properties" shall mean all of the Borrower's rights, title and
         interests in and to all oil and gas properties and other mineral
         interests of whatsoever kind or character, whether now owned or
         hereafter acquired by the Borrower.

                           1.30     PBGC. The term "PBGC" means the Pension
         Benefit Guaranty Corporation and any successor to all or any of its
         functions under ERISA.

                           1.31     PERMITTED DEBT. The term "Permitted Debt"
         means (i) any accounts payable, taxes, insurance, operating expenses
         and all other general and administrative expenses and other obligations
         of the Borrower incurred in the normal course of Borrower's business
         operations, such obligations being in amounts and of the types as are
         consistent with those identified in the latest financial statements of
         the Borrower, and (ii) any existing indebtedness secured by any
         Permitted Lien.

                           1.32     PERMITTED LIENS. The term "Permitted
         Liens" means: (i) pledges or deposits made to secure payment of
         workers' compensation insurance (or to participate in any fund in
         connection with workers' compensation insurance), unemployment
         insurance, pensions or social security programs, (ii) Liens imposed by
         mandatory provisions of law such as for materialmen's, mechanics',
         warehousemen's and other like Liens arising in the ordinary course of
         business, securing Debt whose payment is not yet due or if the same is
         due, it is being contested in good faith by appropriate proceedings and
         the imposition of which would not have a Material Adverse Effect on the
         Borrower, (iii) Liens for taxes, assessments and governmental charges
         or levies imposed upon a person or upon such person's income or profits
         or property, if the same are not yet due and payable or if the same are
         being contested in good faith by appropriate proceedings and the
         imposition of which would not have a Material Adverse Effect on the
         Borrower, and (iv) pledges or deposits to secure public or statutory
         obligations and deposits to secure (or in lieu of) surety, stay, appeal
         or customs bonds and deposits to secure the payment of taxes,
         assessments, customs duties or other similar charges.

                                       5

<PAGE>

                           1.33     RATE ELECTION.  The term "Rate Election"
         means a completed rate election in the form of Exhibit "B" hereto.

                           1.34     REGULATION D. The term "Regulation D"
         means Regulation D of the Board of Governors of the Federal Reserve
         System, as in effect from time to time.

                           1.35     REGULATION U. The term "Regulation U"
         means Regulation U of the Board of Governors of the Federal Reserve
         System, as in effect from time to time.

                           1.36     REGULATION X. The term "Regulation X"
         means Regulation X promulgated by the Board of Governors of the Federal
         Reserve System, as in effect from time to time.

                           1.37     REQUEST FOR ADVANCE. The term "Request for
         Advance" means a completed request for cash advances in the form of
         Exhibit "C" hereto.

                           1.38     TANGIBLE NET WORTH. The term "Tangible Net
         Worth" means the difference between the Borrower's (i) Total Assets,
         excluding any intangibles, and (ii) Total Liabilities, all as set forth
         in the financial statements of the Borrower and as determined under
         GAAP.

                           1.39     TOTAL ASSETS. The term "Total Assets"
         shall mean the Total Assets of Borrower as reflected on Borrower's
         financial statements and as accounted for under GAAP.

                           1.40     TOTAL LIABILITIES. The term "Total
         Liabilities" shall mean the Total Liabilities of Borrower as reflected
         on Borrower's financial statements and as accounted for under GAAP.

                           1.41     UNIFORM COMMERCIAL CODE.  The term "Uniform
         Commercial Code" means the Uniform Commercial Code of the State of
         Oklahoma (12A O.S. Section 9-101 et. seq.), as amended from time to
         time.

                           1.42     OTHER DEFINITIONAL PROVISIONS.

                                    (a)     All terms defined in this Agreement
         shall have the above-defined meanings when used in the Note or any Loan
         Document, certificate, report or other document made or delivered
         pursuant to this Agreement, unless the context shall otherwise require.

                                    (b)     Unless otherwise specified herein,
         all accounting terms shall be interpreted in accordance with GAAP.

                                    (c)     Defined terms used herein in the
         singular shall include the plural and VICE VERSA.

                                       6

<PAGE>

                                    (d)     The words "hereof", "herein",
         "hereunder" and similar terms when used in this Agreement shall refer
         to this Agreement as a whole and not to any particular provision of
         this Agreement.

                  2.       LOAN TERMS. Subject to the terms and conditions
hereof and the terms and conditions of the Loan Documents, the Bank agrees to
extend credit to the Borrower, and the Borrower agrees to such extensions of
credit from the Bank, in the amount of the Maximum Commitment Amount, subject
to the limitations on advances contained herein, together with interest
thereon as described herein, which extensions of credit will be evidenced by
the Note and the Letters of Credit. These extensions of credits will be in the
form of a reducing revolving line of credit which shall be advanced, repaid
and readvanced from time to time in accordance with the terms and conditions
of this Agreement. All issued and outstanding Letters of Credit shall be
deemed advances made on the Note and shall be subject to the restrictions on
advances contained in Section 2.6 hereof. The Borrower shall use the proceeds
of the Note for the acquisition, exploration, development and operation of Oil
and Gas Properties and for working capital needs of the Borrower.

                           2.1      PRINCIPAL. On each Evaluation Date,
         beginning July 1, 1998, the Bank shall establish the amount of the
         Borrowing Base and the Monthly Commitment Reductions with respect to
         the Loan for the period between said Evaluation Date and the next
         Evaluation Date. The Borrowing Base and Monthly Commitment Reductions
         shall be determined by Bank as provided in Sections 1.3 and 2.4 hereof.
         The Borrowing Base and Monthly Commitment Reductions, if any, as
         elected by the Borrower pursuant to Section 2.4 hereof shall be
         effective on each Evaluation Date and shall continue until the next
         succeeding Evaluation Date. The Bank will deliver to the Borrower
         written notice of the amount of the applicable Borrowing Base amounts
         and the proposed Monthly Commitment Reductions on each Evaluation Date.
         Within five (5) days after an Evaluation Date, the Borrower will
         deliver to the Bank written notice of Borrower's election of the
         applicable Borrowing Base and Monthly Commitment Reductions, as
         applicable, pursuant to Section 2.4 hereof. The outstanding principal
         amount of the Note and all outstanding Letters of Credit shall not
         exceed the Maximum Commitment Amount for the Loan during each such
         period. Advances on the Note shall be made only in accordance with
         Section 2.7 hereof and not in excess of the Maximum Commitment Amount.

                           2.2      INTEREST. With respect to any part of the
         outstanding principal amount of the Note which is not a LIBOR Portion
         as elected by the Borrower under Section 2.3 hereof, such outstanding
         principal amount shall bear interest at a rate equal to the following
         percentages in excess of the Base Rate as determined by the Bank based
         upon the following Pricing Levels and the applicable ratio of the
         average daily outstanding principal balance under the Note for the
         preceding calendar quarter divided by the Maximum Commitment Amount as
         of the last day of said preceding calendar quarter. The principal
         amount outstanding under the Note which is accruing interest at the
         Base Rate, plus applicable margin, shall bear interest per annum,
         accrued from the date of disbursement, at the Base Rate, plus
         applicable margin, in effect from day to day, with

                                       7

<PAGE>

         such floating interest rate to change on the effective date of any
         change in the Base Rate without notice. With respect to any part of the
         outstanding principal amount of the Note which is a LIBOR Portion, such
         LIBOR Portion shall bear interest at a rate equal to the following
         percentages in excess of the LIBOR Rate as determined by the Bank based
         upon the following Pricing Levels and the applicable ratio of the
         average daily outstanding principal balance under the Note for the
         preceding calendar quarter divided by the Maximum Commitment Amount as
         of the last day of said preceding calendar quarter. During any period
         in which the Borrower has made such a LIBOR Rate election, the
         principal amount of the LIBOR Portion shall bear interest per annum,
         accrued from the date of any disbursement thereunder or accrued during
         any LIBOR Interest Period as applicable, at a rate equal to the LIBOR
         Rate, plus the applicable margin as described below. The interest rate
         will be calculated on the basis of actual number of days elapsed, but
         computed as if each calendar year consisted of a 365-day year.

<TABLE>
<CAPTION>

             -----------------------------------------------------------------------------
                             Average Outstanding
                                  Principal
              Pricing         Balance/Maximum
               Level         Commitment Amount                 Base Rate       LIBOR Rate
              -------        -----------------                 ---------       ----------
             -----------------------------------------------------------------------------
             <S>         <C>                                  <C>              <C>
                 1       Equal to or greater than 75%         Plus 0.50%       Plus 3.25%
             -----------------------------------------------------------------------------
                 2       Equal to or greater than 50%, but    Plus 0.25%       Plus 3.00%
                         less than 75%
             -----------------------------------------------------------------------------
                 3       Less than 50%                        Plus 0.0%        Plus 2.75%
             -----------------------------------------------------------------------------

</TABLE>

                  Each election by the Borrower of the applicable interest rate
         on the Note shall be made in accordance with Section 2.3 hereof.

                           2.3      RATE ELECTIONS. With respect to any part
         of the outstanding principal amount of the Maximum Commitment Amount
         not to exceed three separate LIBOR Portions, Borrower may elect a LIBOR
         Rate, plus applicable margin, for such LIBOR Portion for a LIBOR
         Interest Period. Borrower may make no such election during the
         continuance of an Event of Default. Each election by Borrower shall:

                                    (i)      Be made by written notice to Bank
                  or by telephonic notice to Bank promptly confirmed in writing,
                  in the form and substance of the Rate Election, completed and
                  signed by an authorized representative of Borrower; and

                                    (ii)     Specify the election of the LIBOR
                  Rate, the amount of the LIBOR Portion and the first and last
                  days of the LIBOR Interest Period which is to apply thereto;
                  and

                                       8

<PAGE>

                                    (iii) Be received by Bank not later than
                  1:00 p.m., Oklahoma City, Oklahoma time, on the second
                  Business Day preceding the first day of the specified LIBOR
                  Interest Period.

                           Each Rate Election shall be irrevocable. Borrower may
         make no Rate Election which does not specify the LIBOR Interest Period
         complying with the definition of "LIBOR Interest Period" in Section 1.
         Upon the termination of each LIBOR Interest Period, the LIBOR Portion
         shall, unless the subject of a new Rate Election then taking effect,
         automatically accrue interest at the Base Rate plus applicable margin.

                           2.4      NOTICE AND ELECTION OF BORROWING BASE AND
         MONTHLY COMMITMENT REDUCTION ELECTIONS. On each Evaluation Date, the
         Bank shall provide written notice to the Borrower of the amounts of the
         proposed Borrowing Bases and Monthly Commitment Reductions as described
         in Section 1.3 hereof. Borrower shall then elect the amount of the
         Borrowing Base and associated Monthly Commitment Reductions which will
         be applicable to the Loan. Such elections shall be made concurrently
         with the signing of this Agreement and thereafter within five (5) days
         of each Evaluation Date. After such election, the Maximum Commitment
         Amount shall be reduced by the amount of the Monthly Commitment
         Reduction, if any, as of the last day of each month throughout the
         period beginning with said Evaluation Date and ending on the next
         subsequent Evaluation Date.

                           Each notice by the Bank and election by Borrower
shall:

                                    (i)      Be made in the form and substance
                  of the "Borrowing Base and Monthly Commitment Reduction
                  Election" attached hereto as Exhibit "D", completed and signed
                  by an authorized representative of both the Bank and Borrower;
                  and

                                    (ii)     Specify the applicable Borrowing
                  Base and Monthly Commitment Reduction elected for the Loan for
                  the period.

                           Each Borrowing Base and Monthly Commitment Reduction
         Election shall be irrevocable. If Borrower fails to make any such
         election for the Loan, the Monthly Commitment Reduction shall continue
         to be the monthly amount of the prior elected Monthly Commitment
         Reduction. Such Monthly Commitment Reduction amount shall continue to
         be used to calculate the Maximum Commitment Amount for the Loan until
         Borrower provides another Monthly Commitment Reduction Election in the
         manner stated above changing the amount of the Monthly Commitment
         Reduction.

                           2.5      REPAYMENT. Payments of accrued interest on
         the outstanding principal balance of the Note shall be due and payable
         monthly, beginning on March 31, 1998, and continuing thereafter on the
         last day of each and every month and at maturity. If the principal
         amount outstanding on the Note and the amount of all outstanding
         Letters of Credit exceed the Maximum Commitment Amount with respect to
         the Loan on the last day of any month, the Borrower shall, within ten
         (10) days of written notice from the

                                       9

<PAGE>

         Bank (i) make such principal payments as may be necessary to reduce
         the outstanding principal amount the Note to the Maximum Commitment
         Amount, or (ii) pledge additional collateral as security for the Loan
         in amounts and condition as satisfactory to the Bank.

                           2.6      MATURITY DATE. The Note shall mature on
         January 31, 2001, at which time all outstanding and unpaid principal
         and all accrued and unpaid interest on the Note shall be immediately
         due and payable.

                           2.7      ADVANCES. Advances under the Note (and
         issuing Letters of Credit which shall be deemed advances under the
         Note) will be made from time to time prior to the maturity date thereof
         upon request of the Borrower, provided, however, the aggregate
         principal amount at any one time outstanding on the Note and all
         outstanding Letters of Credit shall not exceed the lesser of the (A)
         Maximum Commitment Amount, or (B) the principal face amount of the
         Note. All advances on the Note (or with respect to a Letter of Credit)
         shall be made in accordance with this Agreement and the Bank shall not
         be obligated to make any such advance if (i) an Event of Default shall
         exist under this Agreement, or (ii) the amount of such advance and all
         other such outstanding advances made by the Bank would exceed the
         lesser of (A) or (B) above.

                           Borrower may request a cash advance under the Note
         orally, but said oral request will be confirmed in writing. Borrower
         must request an advance in the form of a Letter of Credit in writing.
         All such requests (or confirmations) for advances in writing shall be
         in a form consistent with Exhibit "C" attached hereto. Subject to the
         limitations on advances contained above, the Bank shall deposit the
         amount of such cash advance in one or more designated accounts
         maintained at the Bank on the same business day as any written request
         is received by 2:00 p.m. on such date, or on the next business day, if
         such written request is received later than 2:00 p.m. Subject to the
         limitations on advances contained above, the Bank may issue any Letter
         of Credit within two business days of receipt of information relating
         to such Letter of Credit that is satisfactory in all reasonable
         respects to the Bank.

                           2.8      NONUSAGE FEES. Within five (5) days after
         the end of each calendar quarter, the Borrower shall pay to the Bank a
         fee equal to a percentage of the difference between the amount of the
         Maximum Commitment Amount in effect during said quarter and the average
         daily outstanding principal balance under the Note for said quarter,
         with such percentage based upon the applicable ratio of the Borrower's
         outstanding principal balance under the Note divided by the last
         calculated Borrowing Base, as elected by Borrower.

<TABLE>
<CAPTION>

             --------------------------------------------------------------------------------
                 Maximum Commitment Amount Less the Average
                 ------------------------------------------
                Outstanding Principal Balance Borrowing Base         Nonusage Fee Percentage
                --------------------------------------------         -----------------------
             --------------------------------------------------------------------------------
             <S>                                                     <C>
              Equal to or greater than 75%                                    0.5%
             --------------------------------------------------------------------------------
              Equal to or greater than 50%, but less than 75%                 0.5%
             --------------------------------------------------------------------------------
              Less than 50%                                                   0.375%
             --------------------------------------------------------------------------------

</TABLE>

                                      10

<PAGE>

                           2.9      LETTER OF CREDIT FEES. Prior to the
         issuance of any Letter of Credit hereunder, the Borrower shall pay to
         the Bank a fee equal to two percent (2%) per annum on the amount of the
         Letter of Credit for the period such Letter of Credit shall be
         outstanding, with a minimum fee on each Letter of Credit of $400.00.
         Amendments to any outstanding Letter of Credit shall require a fee of
         $60.00 per amendment, payable at the time of the amendment.

                           2.10      LOAN FEE. The Borrower shall pay to the
         Bank a loan fee in the amount of $35,000.00, which such loan fee shall
         be paid at closing.

                  3.       PAYMENTS. The principal of and interest on the Note
shall be payable in lawful money of the United States of America, in immediately
available funds, at the office of the Bank in Oklahoma City, Oklahoma. All such
payments shall be made not later than the close of business of the Bank on the
date due, and funds received for principal payments on the Note after such time
on any day shall be treated for all purposes of this Agreement as having been
received on the next succeeding business day in Oklahoma City. If any payment
made by the Borrower under this Agreement or the Note is to be made on a
Saturday, Sunday or legal holiday in Oklahoma City, Oklahoma, such payment shall
be made on the next succeeding business day and such extension of time will in
such case be included in computing interest, if any, in connection with such
payment.

                  4.       PREPAYMENT. Subject to Section 4.1 below, the
Borrower may prepay the Note, either in whole or in part on any date, without
premium or penalty, and any such prepayment shall be applied first to accrued
interest and then to principal. Any such prepayment shall not waive or defer any
scheduled monthly payment or the effects of any Monthly Commitment Reduction.

                           4.1      PREPAYMENT DURING LIBOR INTEREST PERIOD.
         The Borrower hereby indemnifies Bank against, and shall reimburse Bank
         upon demand for, any loss or expense incurred or sustained by Bank
         (including without limitation any loss or expense incurred by reason of
         the liquidation or reemployment of deposits or other funds of, or
         acquired by, the Bank to fund or maintain any LIBOR Portion of the Loan
         during a LIBOR Interest Period) as a result of any prepayment (whether
         authorized or otherwise) of all or a portion of a LIBOR Portion of the
         Loan on a day other than the day on which the applicable LIBOR Interest
         Period ends for said LIBOR Portion.

                  5.       DEFAULT INTEREST. If any Event of Default occurs
and is not cured within the applicable cure period described in the Loan
Documents, in lieu of the interest rate provided in the Note, all sums owing by
Borrower to the Bank in connection with the Loan shall bear interest at the rate
equal to five percent (5%) per annum in excess of the Base Rate, accrued from
the date after the applicable grace period to cure the Event of Default as is
provided for herein, to the date on which such Event of Default is cured to the
reasonable satisfaction of the Bank.

                                       11

<PAGE>

                  6.       COLLATERAL. Payment of the Note will be secured by
the following collateral security which shall be evidenced by the Loan
Documents:

                           6.1      MORTGAGES. A first and prior lien created
         by mortgages, deeds of trust, assignments, security agreements and
         financing statements, in form satisfactory to the Bank, covering the
         Mortgaged Property, subject only to such encumbrances as might be
         approved in writing by the Bank.

                           6.2      SECURITY INTEREST. A first and prior
         security interest covering all of Borrower's respective interests in:
         (a) all oil, gas, and other hydrocarbons and other minerals produced
         from or allocated to the Mortgaged Property and all products processed
         or obtained therefrom, the proceeds thereof, and all accounts,
         contracts rights and general intangibles under which such proceeds may
         arise; (b) all (whether now owned or hereafter acquired by operation of
         law or otherwise) equipment, improvements, materials, supplies,
         fixtures, goods and personal property of whatever nature now or
         hereafter used, or held for use, in connection with the Mortgaged
         Property (or in connection with the operation thereof or the treating,
         handling, storing, transporting or marketing of oil, gas or other
         minerals produced therefrom or allocated thereto), and all accessions
         and appurtenances thereto and all renewals or replacements thereof or
         substitutions therefor, (c) all contract rights, contractual rights and
         other general intangibles related to the Mortgaged Property or to the
         operation thereof or the treating, handling, storing, transporting or
         marketing of oil, gas or other minerals produced therefrom or allocated
         thereto, (d) all funds, accounts, instruments, documents, notes or
         chattel paper of the Borrower arising from or by virtue of any
         transactions related to the Borrower's interests in the Mortgaged
         Property (all of the properties, rights and interests described in
         parts (a), (b), (c) and (d) above being herein sometimes collectively
         called the "Collateral"), and (e) all proceeds of the Collateral (the
         Collateral, and the proceeds of the Collateral shall constitute a part
         of the Mortgaged Property).

                  7.       CONDITIONS PRECEDENT. The Bank shall have no
obligation to make the foregoing Loan until such time as the following
requirements have been satisfied:

                           7.1      LOAN DOCUMENTS. This Agreement, the Note
         and all other Loan Documents shall have been duly executed,
         acknowledged (where appropriate) and delivered to the Bank, all in form
         and substance reasonably satisfactory to the Bank.

                           7.2      AUTHORITY. The Bank shall have received
         certified copies of the Certificate of Incorporation and Bylaws of
         Borrower, complete with all amendments thereto, a Certificate of Good
         Standing from the State of Oklahoma, and copies of resolutions,
         authorizations and other documents required to authorize the execution,
         delivery and performance of this Agreement, the Note and the Loan
         Documents by the Borrower, all in form and substance satisfactory to
         the Bank.

                           7.3      TITLE INFORMATION. The Bank shall have
         received and reviewed title information on at least ninety percent
         (90%) of all of the Mortgaged Property, the results

                                       12

<PAGE>

         of which shall be satisfactory to the Bank and its legal counsel. Such
         title information shall evidence Borrower's good and indefeasible title
         to said Mortgaged Property, free and clear of all liens and
         encumbrances except as may otherwise be approved in writing by the
         Bank. Any objections to title which may be issued by the Bank shall be
         cured prior to closing.

                           7.4      COLLATERAL REVIEW. The Bank shall have
         received and reviewed such well files, title opinions, division orders,
         material contracts and agreements and other information concerning the
         Collateral that the Bank deems necessary to verify the Borrower's
         respective title to and rights in the Collateral and the Bank shall
         have determined, in its sole discretion, that such title and the
         applicable interests of the Borrower thereto shall not be different
         than those interests previously disclosed to the Bank and that the Bank
         shall have a first Lien on the Mortgaged Property, except as to title
         exceptions previously consented to by the Bank in writing.

                           7.5      OPINION OF COUNSEL. A favorable opinion of
         legal counsel for Borrower, in such form as shall be acceptable to Bank
         and Bank's counsel, shall have been delivered to the Bank, covering
         such matters as: (i) the Borrower's due incorporation and qualification
         under the laws of the State of Oklahoma, and good standing under the
         laws of the State of Oklahoma; (ii) Borrower's authorization to enter
         into this Agreement and the other Loan Documents, and that such
         documents, when executed and delivered, will be the valid and binding
         obligations of the Borrower enforceable according to their respective
         terms, except as enforcement may be limited by bankruptcy, insolvency,
         reorganization, moratorium or similar laws or equitable principles
         relating to or limiting creditor's rights generally; and (iii) that the
         Loan Documents and other security documents evidencing the Liens of the
         Bank, when recorded, will be valid liens against the Collateral and
         that such documents will secure the payment and performance of the
         Loans and other obligations of the Borrower to the Bank as described
         herein.

                           7.6      INCUMBENCY CERTIFICATE. The Bank shall
         have received a certificate of an officer of Borrower which shall
         certify the names of the persons authorized to sign each of the Loan
         Documents to be executed by such person and the other documents or
         certificates to be delivered by such person pursuant to the Loan
         Documents, together with the true signatures of each of such persons.
         Bank may conclusively rely on the certificates until Bank shall receive
         a further certificate of an officer of Borrower canceling or amending
         the prior certificate and submitting the signatures of the persons
         named in such further certificate.

                           7.7      EQUITY. The Bank shall have received
         evidence satisfactory to the Bank that the shareholders of the Borrower
         have contributed cash equity to the Borrower of an aggregate, minimum
         amount of $1,000,000.00, and shall have received copies of all
         documentation requested by the Bank evidencing the issuance of all
         common and preferred stock (or any other equity instrument) all as
         determined by the Bank in the Bank's sole discretion.

                                       13

<PAGE>

                           7.8      BANKRUPTCY INFORMATION. The Bank shall
         have received, reviewed and approved all orders, approvals, consents
         and other such information as the Bank might reasonably require from
         the United States Bankruptcy Court for the District of Kansas (In
         re Petroleum Production Management, Inc. and Overland Resources
         Management, Inc., Debtors, Case No. 97-20144 and Case No. 97-20143,
         Chapter 11, the "Bankruptcy Case") relating to the acquisition of the
         Oil and Gas Properties by the Borrower.

                           7.9      ASSIGNMENTS TO BORROWER. The Bank shall
         have received, reviewed and approved all assignments of the Oil and Gas
         Properties to the Borrower by the debtors in the Bankruptcy Case, such
         assignments being free of liens and encumbrances of any kind as
         described in the Bankruptcy Court approved orders, approvals and
         consents in the Bankruptcy Case.

                           7.10      GAS IMBALANCE. The Bank shall have
         received all information regarding material obligations or liabilities
         on any contracts or agreements with respect to gas imbalances of the
         Borrower with respect to the Oil and Gas Properties.

                           7.11      INSURANCE. The Borrower shall have
         provided to the Bank, endorsements to all insurance policies of the
         Borrower described in Sections 8.16 and 9.5 hereof, which endorsements
         shall name the Bank as an additional insured.

                           7.12      EXPENSES. The Borrower shall have paid all
         of the Bank's costs and expenses, including reasonable fees of legal
         counsel, limited to an amount of $15,000.00, incurred in the
         negotiation and preparation of the Loan Documents and in closing and
         perfecting the rights of the Bank under the Loan Documents.

                           7.13      OTHER INFORMATION. The Bank shall have
         received current financial statements of the Borrower, including a
         balance sheet of the Borrower dated as of the date hereof, and such
         other financial information as the Bank might reasonably require.

                           7.14      NO DEFAULT.  No default shall have occurred
         and be continuing under this Agreement or the Note.

                           7.15      REPRESENTATIONS AND WARRANTIES. All
         representations and warranties contained herein shall be true and
         correct.

                  8.       REPRESENTATIONS AND WARRANTIES. To induce the Bank
to extend the Loan and enter into this Agreement, the Borrower represents and
warrants to the Bank during the term of the Note and any and all renewals and
extensions thereof, as follows:

                           8.1      EXISTENCE. The Borrower is duly organized,
         validly existing, and in good standing under the laws of Oklahoma, and
         is authorized to do business in all jurisdictions in which its
         ownership of property and transaction of business legally requires such
         authorization, and Borrower has full power, authority, and legal right
         to own its property and transact business as presently transacted or
         proposed to be transacted.

                                       14

<PAGE>

                           8.2      AUTHORITY. The execution, delivery and
         performance of the Loan Documents by the Borrower are within the powers
         of the Borrower, have been duly authorized, are not in contravention of
         law or the terms of the Borrower's certificate of incorporation or
         other organization documents, or of any indenture, agreement or
         undertaking to which the Borrower is a party or by which it is bound.

                           8.3      GOVERNMENTAL AUTHORIZATION. The execution,
         delivery, and performance by the Borrower of this Agreement requires no
         approval of or filing with any governmental authority.

                           8.4      BINDING EFFECT. This Agreement and the
         Loan Documents, when duly executed and delivered, will constitute
         legal, valid, and binding obligations of the Borrower, fully
         enforceable in accordance with their respective terms, except as
         enforcement may be limited by bankruptcy, insolvency, reorganization,
         moratorium or similar laws or equitable principles relating to or
         limiting creditor's rights generally.

                           8.5      FINANCIAL CONDITION. Subject to any
         limitations stated therein or in connection therewith, all balance
         sheets, earnings statements, and other financial data which have been
         or may hereafter be furnished to the Bank to induce the Bank to enter
         into this Agreement or otherwise in connection herewith, do or shall
         fairly represent the financial condition of the Borrower as of the
         dates and the results of operations for the periods for which the same
         are furnished, are, or shall be at the time the same are so furnished,
         accurate and correct in all material respects and complete insofar as
         completeness may be necessary to give the Bank a true and accurate
         knowledge of the respective subject matter involved.

                           8.6      LITIGATION. There is no action, suit,
         investigation or proceeding pending, or to the knowledge of the
         Borrower threatened against the Borrower or any of the Mortgaged
         Property, which would have a Material Adverse Effect on the Borrower or
         the Bank's rights in the Mortgaged Property.

                           8.7      TAXES. The Borrower has filed all tax
         returns which are required to be filed and has paid all taxes due
         pursuant to such returns or pursuant to any assessment received by the
         Borrower. This provision, however, does not preclude the Borrower from
         filing proper extensions or protesting by proper procedure any tax,
         assessment or penalty.

                           8.8      PERMITS. The Borrower has or has properly
         applied for, or has properly applied for the transfer of, all licenses,
         permits, certificates, consents and franchises in order to carry on its
         business as now being conducted or as anticipated and to own or lease
         and operate its properties as now owned, leased or operated or as
         anticipated. All such licenses, permits, certificates, consents, and
         franchises are valid and subsistent, and the Borrower is not in
         violation thereof to the extent such violation would cause a Material
         Adverse Effect.

                                       15

<PAGE>

                           8.9       TITLE TO MORTGAGED PROPERTY AND NO LIENS.
         All of the Mortgaged Property is free and clear of all Liens, other
         than Permitted Liens, and Borrower has good and defensible title to
         such Mortgaged Property.

                           8.10      FULL DISCLOSURE. Except as otherwise
         disclosed to Bank in writing prior to the execution of this Agreement,
         there is no material fact that Borrower has not disclosed to Bank which
         could have a Material Adverse Effect on the properties, business,
         prospects or condition (financial or otherwise) of Borrower. Neither
         the financial statements referenced herein, nor any certificate or
         statement delivered herewith or heretofore by Borrower to Bank in
         connection with the negotiations of this Agreement, contains any untrue
         statement of a material fact or omits to state any material fact
         necessary to keep the statements contained herein or therein from being
         misleading which would have a Material Adverse Effect.

                           8.11      USE OF PROCEEDS: MARGIN STOCK. The
         proceeds of the Loans will be used by Borrower solely for the purposes
         described herein. None of such proceeds will be used for the purpose of
         purchasing or carrying any "margin stock" as defined in Regulation U or
         Regulation X, or for the purpose of reducing or retiring any Debt which
         was originally incurred to purchase or carry a margin stock or for any
         other purpose which might constitute this transaction a "purpose
         credit" within the meaning of such Regulation U or Regulation X.
         Borrower is not engaged in the business of extending credit for the
         purpose of purchasing or carrying margin stocks. Borrower has not taken
         or will not take any action which might cause the Note or any of the
         other Loan Documents, including this Agreement, to violate Regulation U
         or Regulation X, or any other regulations of the Board of Governors of
         the Federal Reserve System or to violate Section 8 of the Securities
         Exchange Act of 1934 or any rule or regulation thereunder, in each case
         as now in effect or as the same may hereinafter be in effect. Borrower
         does not own margin stock.

                           8.12      PRINCIPAL OFFICE; ETC. The principal
         office, chief executive office and principal place of business of
         Borrower is One Benham Place, Suite 600, 9400 N. Broadway, Oklahoma
         City, Oklahoma, 73114. Borrower maintains its principal records and
         books at such address.

                           8.13      ERISA. Borrower is in compliance with all
         ERISA requirements and interpretations with respect to any employee
         benefit plan of the Borrower and have not incurred any liability to
         PBGC with respect to any such plan.

                           8.14      COMPLIANCE WITH LAW. Borrower is not in
         violation of any law, rule, regulation, order or decree which is
         applicable to Borrower or its properties the result of which could have
         a Material Adverse Effect.

                           8.15     CASUALTIES.  Neither the business nor the
         properties of Borrower are currently affected by any environmental
         hazard, fire, explosion, accident, strike, lockout or other labor
         dispute, drought, storm, hail, earthquake, embargo, act of God or
         other

                                       16

<PAGE>

         casualty (whether or not covered by insurance), which could have a
         Material Adverse Effect.

                           8.16      INSURANCE. The Mortgaged Property is
         insured in accordance with the coverage set forth in Exhibit "E"
         hereto, with the Bank as an additional insured to the extent of its
         interest therein. There has been no receipt of any notice from any
         insurer indicating that coverage or premium rates will be materially
         changed in the future with respect to the Mortgaged Property or
         indicating that the Mortgaged Property may not qualify for continued
         coverage with respect to any such insurance. Borrower is in full
         compliance with all such insurance contracts and the same are in full
         force and effect and are enforceable in accordance with their terms.

                           8.17      HAZARDOUS SUBSTANCES. To the best of
         Borrower's knowledge, all environmental permits, certificates,
         licenses, approvals, registrations and authorizations required under
         all Environmental Laws in connection with the business of Borrower have
         been obtained. No unremedied notice, citation, summons or order has
         been issued, no unremedied complaint has been filed, no unremedied
         penalty has been assessed and, to the best of Borrower's knowledge, no
         investigation or review is pending or threatened by any governmental
         entity with respect to any generation, treatment, storage, recycling;
         transportation or disposal of any hazardous or toxic or polluting
         substance or waste (including petroleum products and radioactive
         materials) generated or used ("Hazardous Substances") by Borrower which
         would have a Material Adverse Effect.

                           8.18      GAS IMBALANCE. The Borrower has no
         material obligations or liabilities on any contracts or agreements with
         respect to gas imbalances or other matters where the Borrower's oil end
         gas production will be substantially curtailed from the levels of
         production previously experienced.

                           8.19      NO EVENT OF DEFAULT.  No Event of Default
         has occurred and is continuing.

                           8.20      SURVIVAL OF REPRESENTATIONS. All of the
         representations and warranties made by the Borrower herein will survive
         the delivery of the Loan Documents and any renewal and extension of the
         Loan hereunder. All statements contained in any certificate or other
         instrument delivered by or on behalf of the Borrower under or pursuant
         to this Agreement or in connection with the transactions contemplated
         hereby shall constitute representations and warranties made by the
         Borrower hereunder as applicable.

                  9.       COVENANTS OF BORROWER. Until the payment in full of
the Note, unless the Bank otherwise consents in writing, the Borrower will
perform, or cause to be performed, the following agreements:

                           9.1      INFORMATION. The Borrower will furnish to
                  the Bank all information which the Bank might reasonably
                  request concerning the assets, properties and liabilities and
                  the financial status of the Borrower.

                                       17

<PAGE>

                           9.2      FINANCIAL INFORMATION AND REPORTING.

                                    9.2.1   AUDITED ANNUAL FINANCIAL STATEMENTS.
                  For the year ending December 31, 1998, and annually
                  thereafter, Borrower will furnish to Bank, within one
                  hundred-twenty (120) days after the close of such year,
                  complete copies of Borrower's audited annual financial
                  statements, including balance sheet, income statement and
                  statement of cash flow with accompanying notes and schedules,
                  as of the close of such year, audited by accountants
                  acceptable to the Bank and in form satisfactory to the Bank in
                  accordance with GAAP applied on a consistent basis. All such
                  audited financial statements shall be unqualified.

                                    9.2.2   QUARTERLY STATEMENTS AND COMPLIANCE
                  CERTIFICATE. Borrower will furnish to the Bank, within
                  forty-five (45) days following the end of each calendar
                  quarter, complete copies of its quarterly financial
                  statements prepared by Borrower, in accordance with GAAP
                  (or in another manner acceptable to Bank) consistently
                  applied and true and correct in all material respects. At
                  the same time, Borrower will certify to the Bank, in a
                  written certificate in the form of Exhibit "F" hereto and
                  signed by the Borrower, that no Event of Default has
                  occurred and is continuing, and that no event or condition
                  exists which might become an Event of Default with the
                  lapse of time. If any certificate describes such an Event
                  of Default or other condition, the Borrower shall also
                  describe in detail the steps or actions being taken to cure
                  or rectify said Event of Default or condition.

                                    9.2.3   SEMI-ANNUAL REPORTS. The Borrower
                  will furnish to the Bank, within thirty (30) days after the
                  end of each semi-annual calendar period, beginning with the
                  period ending June 30, 1998, complete copies of reports of
                  revenue and expenses from all Borrower's Oil and Gas
                  Properties, in form reasonably satisfactory to the Bank and
                  true and correct in all material respects.

                                    9.2.4   SEMI-ANNUAL ENGINEERING REPORT. No
                  later than June 1 and December 1 of each year throughout the
                  term of this Agreement, the Borrower will furnish to the Bank
                  an engineering evaluation report dated effective as of the
                  first day of the following month and prepared by an
                  independent petroleum consultant reasonably acceptable to the
                  Bank covering all of the Mortgaged Property. All engineering
                  parameters and assumptions, including without limitation
                  pricing, production and discount assumptions, shall be
                  acceptable to the Bank and shall be consistent with those used
                  by Bank at the time of report with respect to other similar
                  credits. The evaluation reports shall be prepared in form and
                  substance satisfactory to the Bank. The evaluation reports
                  shall be used to determine the adequacy of the Mortgaged
                  Property as collateral. The Bank reserves the right to
                  prepare, or have prepared, an engineering evaluation of any
                  additional Oil and Gas Properties which may become Mortgaged
                  Property and utilize the results to determine collateral
                  adequacy.

                                       18

<PAGE>

                                    9.2.5   OTHER FINANCIAL INFORMATION. The
                  Borrower shall also furnish to the Bank such other information
                  concerning the financial affairs of the Borrower as the Bank
                  might reasonably request.

                           9.3      EXISTENCE. The Borrower shall take all
         necessary actions to preserve the existence of Borrower and its right
         to do business in all applicable jurisdictions; to obtain and maintain
         for the Borrower all necessary governmental approvals, consents,
         permits, licenses and certificates; to comply with all valid and
         applicable statutes, laws, rules and regulations; and to continue to
         conduct its business in substantially the same manner as such business
         is now conducted.

                           9.4      TAXES. All taxes, assessments,
         governmental charges and levies imposed on the Borrower and its assets,
         properties, income and profits will be paid prior to the date on which
         penalties attach thereto, except for those being contested in good
         faith by appropriate proceedings.

                           9.5      INSURANCE. The Borrower shall maintain
         policies of insurance on all of its assets and operations with
         companies, in amounts and against risks as are acceptable to the Bank
         and consistent with the coverages described in Exhibit "E" hereto. Upon
         request of the Bank, the Bank will be furnished copies of all such
         insurance in effect and proof of premium payment. The Borrower shall
         add the Bank as an additional named insured to such policies.

                           9.6      RECORDS. The Borrower shall maintain
         accurate books and records of its assets, properties, income, profits,
         expenses and liabilities and the Bank shall have the continuing right,
         upon reasonable notice, to inspect such books and records and make
         copies thereof.

                           9.7      MANAGEMENT. The Borrower shall not make a
         material change in the management of Borrower from that in effect on
         the date of this Agreement. For purposes hereof, management shall
         consist of Ken L. Kenworthy, Jr. as a director and Chief Executive
         Officer, Fred W. Standefer as a director and President, and Ken L.
         Kenworthy, Sr., as a director and Chief Financial Officer.

                           9.8      LITIGATION. The Borrower shall notify the
         Bank of any action, suit, investigation or proceeding pending or
         threatened against the Borrower, and any other contingent liability of
         the Borrower, which may cause a Material Adverse Effect.

                           9.9      SALE OF ASSETS. The Borrower will not
         sell, lease, exchange or transfer title to any or all of the Mortgaged
         Property or other material assets of the Borrower, except for any such
         sales, leases, exchanges or transfers in an aggregate amount of no more
         than $500,000.00, provided (i) the proceeds of such transactions are
         paid to the Bank and applied to the Note and (ii) the Borrowing Base is
         correspondingly reduced until the next Evaluation Date by an amount
         equal to the loan amount of the properties sold, leased exchanged or
         transferred as determined by the Bank.

                                       19

<PAGE>

                           9.10      ENCUMBRANCES. The Borrower will not create
         or suffer to exist any mortgage, security interest, security agreement,
         pledge, lien, charge, encumbrance, assignment or transfer upon any of
         the Mortgaged Property, except for those that may be hereafter granted
         in favor of the Bank and the Permitted Liens. No shareholder of the
         Borrower shall have any lien, encumbrance, interest or other right with
         respect to any of the assets or properties of the Borrower which would
         be prior or superior to the rights of the Bank under the Loan
         Documents.

                           9.11      NEGATIVE PLEDGE. The Borrower will not
         create or suffer to exist any mortgage, security interest, security
         agreement, pledge, lien, charge, encumbrance, assignment or transfer
         upon any of the Oil and Gas Properties, whether now owned or hereafter
         acquired by the Borrower, other than Permitted Liens. The Borrower
         shall provide the Bank with a complete list of all said Oil and Gas
         Properties and other assets upon request of the Bank.

                           9.12      LIQUIDATION, MERGER, CONSOLIDATION.
         Borrower will not liquidate, dissolve or discontinue its normal
         operations with an intention to liquidate, dissolve or discontinue and
         will not merge or consolidate with any corporation, firm or partnership
         unless the Borrower is the surviving entity and no Event of Default
         would then exist or result therefrom.

                           9.13      DIVIDENDS. BONUSES AND DISTRIBUTIONS.
         Borrower shall not declare or pay any dividends, bonuses, distributions
         or payments, either in cash or property to the shareholders of
         Borrower, provided, however, the Borrower may pay reasonable and
         customary salaries to officers of the Borrower in the ordinary course
         of the Borrower's business.

                           9.14      REDEMPTIONS. Borrower shall not redeem,
         retire, purchase or repurchase any shares of stock of the Borrower,
         except with respect to any redemption of the Borrower's Series B
         Preferred Stock in accordance with the terms and conditions of such
         redemption as set forth in the Letter Agreements dated January 26,
         1998, among the Borrower, Petroleum Production Management, Inc.,
         Overland Resources Management, Inc. and Endowment Energy Partners,
         L.P., and only if such redemption occurs at a time when no Event of
         Default exists or results therefrom.

                           9.15      ADDITIONAL DEBT. Borrower shall not
         create, incur, contract, waive, assume, have outstanding, guarantee or
         otherwise be or become, directly or indirectly, liable in respect of
         any Debt, except Permitted Debt.

                           9.16     INVESTMENTS. Borrower shall not, directly
         or indirectly, acquire, purchase, establish or otherwise assume the
         ownership or control of any business, company, partnership, entity,
         person or subsidiary, or acquire substantially all of the assets or
         liabilities of any business, company, partnership, entity, person or
         subsidiary, provided, however, the Borrower may make such acquisitions
         of businesses conducting the same

                                       20
<PAGE>

         lines of business as the Borrower and if no Event of Default would then
         exist or result therefrom.

                           9.17     ENVIRONMENTAL LAWS. The Borrower will not
         knowingly cause any violation of applicable Environmental Laws, nor
         permit any environmental lien to be placed on any portion of its
         properties.

                           9.18     OWNERSHIP. The ownership of Borrower shall
         not change during the term of this Agreement.

                           9.19     CURRENT RATIO. Borrower will not permit
         its ratio of Current Assets (including for this purpose the unused
         portion of the Maximum Commitment Amount) to (ii) Current Liabilities
         (excluding the amounts of current maturities of the Maximum Commitment
         Amount in the next twelve months) to be less than 1.0 to 1.0 as
         determined at the end of each calendar quarter beginning with the
         calendar quarter ending June 30, 1998.

                           9.20     DEBT COVERAGE RATIO. Borrower shall not
         permit the Debt Coverage Ratio to be less than (i) 1.0 to 1.0 as
         determined at the end of the calendar quarter ending June 30, 1998, and
         (ii) 1.1 to 1.0 as determined at the end of each subsequent calendar
         quarter.

                           9.21     TANGIBLE NET WORTH. Borrower shall not
         permit its Tangible Net Worth to be less than the sum of (i)
         $800,000.00, (ii) seventy-five percent (75%) of the Borrower's Net
         Income for each calendar quarter after the date hereof, and (iii) all
         proceeds of any additional equity offering of the Borrower after the
         date hereof. Borrower's Tangible Net Worth shall be determined as of
         the end of each calendar quarter beginning with the calendar quarter
         ending June 30, 1998.

                           9.22     CAPITAL EXPENDITURES. Borrower shall not
         incur or expend, directly or indirectly, for any amount or amounts of
         capital expenditures (as determined by GAAP) which would be in excess
         of $100,000.00 in the aggregate for each fiscal year of the Borrower,
         provided, however, such capital expenditure limitation does not apply
         to amounts of capital expenditures which are made directly with respect
         to the operation and development of the Oil and Gas Properties.

                           9.23     OPERATING LEASES. Borrower shall not incur
         or expend, directly or indirectly, for any amount or amounts of
         operating lease expenses (as determined by GAAP) which would be in
         excess of $100,000.00 in the aggregate for each fiscal year of the
         Borrower, provided, however, such operating lease expense limitation
         does not apply to amounts of operating leases expenses which are made
         directly with respect to the operation and development of the Oil and
         Gas Properties.

                           9.24     AFFILIATE TRANSACTIONS. Borrower will not,
         directly or indirectly, enter into any transaction (including, but not
         limited to, the sale or exchange of property or the rendering of
         services other than services rendered as an employee or officer of the

                                      21

<PAGE>

         Borrower) with any officer, director, shareholder, subsidiary, parent
         corporation or other affiliate, or any entity owned or controlled by
         any such officer, director, shareholder, subsidiary, parent corporation
         or other affiliate, other than upon fair and reasonable terms no less
         favorable than such Borrower could obtain in an arm's-length
         transaction with another person not an affiliate and does not involve
         the grant or attachment of alien by the Borrower in favor of such
         party. Notwithstanding the above, the Borrower shall not pay any
         management fees of any kind to any affiliate.

                           9.25     LOANS. The Borrower will not loan or
         advance any funds or other property to any officer, director,
         shareholder, subsidiary, parent corporation or any third party, or any
         entity owned or controlled by any such officer, director, shareholder,
         subsidiary or parent corporation.

                           9.26     EQUITY OFFERINGS. The Borrower shall cause
         all of the net proceeds of any sale of stock or other disposition of
         equity interests in the Borrower to be paid to the Bank and applied to
         Loan. All such sales and dispositions shall be for cash.

                           9.27     CHANGE OF BUSINESS. The Borrower shall not
         change or otherwise discontinue its primary lines of business from that
         existing on the date hereof.

                           9.28     HEDGING. The Borrower shall not enter
         into, or agree to enter into, any hedging transaction involving the Oil
         and Gas Properties.

                           9.29     AUTHORIZATIONS AND APPROVALS. Borrower
         shall promptly obtain, from time to time at its own expense, all such
         governmental licenses, authorizations, consents, permits and approvals
         which may be required or necessary in the Borrower's business or with
         respect to its assets and properties if the failure to obtain the same
         could have a Material Adverse Effect.

                           9.30     ERISA COMPLIANCE. Borrower shall (i) at
         all times, make prompt payment of all contributions required under all
         employee benefit plans and as required to meet the minimum funding
         standard set forth in ERISA with respect to its plans, (ii) notify Bank
         immediately of any fact, including, but not limited to, any reportable
         event arising in connection with any of its plans, which might
         constitute grounds for termination thereof by the PBGC or for the
         appointment by the appropriate United States District Court of a
         trustee to administer such plan, together with a statement, if
         requested by Bank, as to the reason therefor and the action, if any,
         proposed to be taken with respect thereto, and (iii) furnish to Bank,
         upon its request, such additional information concerning any of their
         plans as may be reasonably requested.

                           9.31     BANKING ACCOUNTS. Borrower will establish
         and maintain all of its general operating banking accounts with the
         Bank and shall establish such control and administrative devices with
         respect to such accounts as the Bank may reasonably request.

                           9.32     MAINTENANCE OF COLLATERAL. Borrower will
         do all things necessary to maintain, preserve, protect and keep all the
         Mortgaged Property in good condition, and

                                      22

<PAGE>

         make all necessary and proper repairs, renewals and replacements
         thereto so that the business anticipated by the Borrower through the
         ownership, operation or use of the Mortgaged Property can be performed
         and conducted at all times.

                           9.33     ADDITIONAL COVENANTS. Borrower and Bank
         may from time to time hereafter agree to modifications to existing
         covenants or additional covenants with respect to the Loan and this
         Agreement, which covenants shall be in writing and shall be attached
         hereto as Exhibit "G" and form a part of this Agreement for all
         purposes.

                  10.      EVENTS OF DEFAULT. The Bank may declare the Note
and all other indebtedness and obligations of the Borrower owing to the Bank
to be due and payable, or exercise any other right or remedy available to the
Bank, if any of the following events ("Events of Default") shall occur and
shall not have been timely cured or waived by the Bank as provided in Section
11 hereof:

                           10.1     NONPAYMENT OF NOTE. Default in payment of
         any interest on or principal of the Note for a period in excess of ten
         (10) days after the date such payment is due; or

                           10.2     OTHER NONPAYMENT. Default in payment of
         any other amount payable to the Bank under the terms of this Agreement
         or any other Loan Document for a period in excess of ten (10) days
         after the date such payment is due; or

                           10.3     BREACH OF AGREEMENT. Default by the
         Borrower in the performance or observance of any agreement contained in
         this Agreement, the Loan Documents or under the terms of any other
         instrument delivered to the Bank in connection with this Agreement,
         provided, however, the Borrower shall have thirty (30) days to cure any
         default under Sections 9.19, 9.20 or 9.21 hereof; or

                           10.4     REPRESENTATIONS AND WARRANTIES. Any
         representation, warranty, statement, certificate, schedule or report
         made or furnished to the Bank on behalf of the Borrower proves to be
         false or erroneous in any material respect at the time of the making
         thereof; or

                           10.5    INSOLVENCY.  The Borrower shall: (i) apply
         for or consent to the appointment of a receiver, trustee or liquidator
         of the Borrower or any of its properties; (ii) admit in writing its
         inability to pay debts as they mature; (iii) make a general assignment
         for the benefit of creditors; or (iv) any material part of the assets
         or property of the Borrower shall be placed in the hands of a receiver,
         trustee or other officers or representatives of a court or of
         creditors; or

                           10.6     VOLUNTARY BANKRUPTCY.  The Borrower shall be
         adjudged bankrupt or any voluntary proceeding shall be instituted by
         the Borrower in insolvency or bankruptcy or for readjustment, extension
         or composition of debts or for any other relief of debtors; or

                                      23

<PAGE>

                           10.7     INVOLUNTARY BANKRUPTCY.  Any involuntary
         proceeding shall be instituted against the Borrower in insolvency or
         for readjustment, extension, or composition of debts; or

                           10.8     CREDITOR'S PROCEEDINGS. Entry by any court
         of a final judgment against the Borrower or the institution of any
         levy, attachment, garnishment or charging order against the Borrower
         which materially and adversely effects the repayment of the Loan
         described herein.

                  11.      REMEDIES. Upon the occurrence of any Event of
Default, which has not been timely cured pursuant to Section 10 above, the
Bank may, at its option:

                           11.1     ACCELERATION OF NOTE. Declare the Note and
         all sums outstanding pursuant to the Loan Documents to be immediately
         due and payable, whereupon the same will be forthwith due and payable,
         and the Bank will be entitled to proceed to selectively and
         successively enforce the Bank's rights under the Loan Documents or any
         other instrument delivered to the Bank in connection with this
         Agreement.

                           11.2     ACCELERATE OTHER INDEBTEDNESS.  The Bank may
         declare all other indebtedness and obligations of the Borrower owing to
         the Bank to be immediately due and payable.

                           11.3     EXERCISE OTHER RIGHTS. The Bank may (i)
         terminate any of the Bank's obligations hereunder, including the
         obligation to make any advance, (ii) reduce any claim to judgment,
         (iii) exercise any right of offset including the Set-Off as provided in
         Section 11.4 hereof, (iv) without notice of default or demand except as
         otherwise provided herein, pursue and enforce any of the Bank's rights
         and remedies under the Loan Documents, or otherwise provided under or
         pursuant to any applicable law or agreement, provided, however, that if
         any Event of Default specified in Sections 10.6 or 10.7 shall occur,
         the Loan shall thereupon become due and payable concurrently therewith,
         without any further action by the Bank and without presentment, demand,
         protest, notice of default, notice of acceleration or of intention to
         accelerate or other notice of any kind, all of which Borrower hereby
         expressly waives, or (v) exercise any other remedy at law or in equity.

                           11.4     RIGHT OF SET-OFF. Borrower hereby grants
         to Bank the right of set-off ("Set-Off") without notice or demand to or
         upon Borrower, (any such notice and/or demand being hereby waived by
         Borrower) to secure repayment of the Loan, regardless of whether Bank
         shall have made any demand therefor and whether all or any part of the
         Loan is or may be unmatured, upon any and all moneys, securities or
         other property of Borrower and the proceeds therefrom, now or hereafter
         held or received by or in transit to Bank, or any of its agents, from
         or for the account of Borrower, whether for safe keeping, custody,
         pledge, transmission, collection or otherwise, and also upon any and
         all deposits (general or special) and credits of Borrower, and any and
         all claims of

                                      24

<PAGE>

         Borrower against Bank at any time existing. Excluded from Set-Off are
         accounts properly designating third parties as beneficial owners of
         funds held in the accounts.

                           11.5     CROSS-DEFAULT. A default by Borrower in
         this Agreement, the Note or any of the Loan Documents shall constitute
         a default under all such agreements and obligations.

                           11.6     WAIVER OF DEFAULT. By an instrument in
         writing, the Bank may waive any Event of Default which shall have
         occurred and any of the consequences of such Event of Default, and, in
         such event, the Bank and the Borrower will be restored to their
         respective former positions, rights and obligations hereunder. Any
         Event of Default so waived will for all purposes of this Agreement be
         deemed to have been cured and not to be continuing; but no such waiver
         will extend to any subsequent or other Event of Default or impair any
         consequence of such subsequent or other Event of Default.

                  12.      GENERAL CONDITIONS. The following conditions shall
be applicable throughout the term of this Agreement:

                           12.1     STRICT COMPLIANCE. If any action or
         failure to act by Borrower violates any covenant or obligation of
         Borrower contained herein, then such violation shall not be excused by
         the fact that such action or failure to act would otherwise be required
         or permitted by any covenant (or exception to any covenant) other than
         the covenant violated.

                           12.2     PARTICIPATIONS IN LOAN AND NOTE. Bank may
         sell participations in all or any part of the Loan made by it to one or
         more banks or other entities. Bank may furnish any information
         concerning Borrower in the possession of Bank from time to time to
         participants (including prospective participants). Bank may provide to
         its participants on a timely basis copies of all financial statements
         and other documents furnished to it under the provisions of Section 9.
         Bank shall use reasonable efforts to notify Borrower of the identity of
         the purchaser and amount of any participation, but failure to give said
         notice shall have no effect on the participation, this Agreement or the
         other Loan Documents.

                           12.3     WAIVER: MODIFICATION.  No failure to
         exercise, and no delay in exercising, on the part of Bank, any right
         hereunder or under any Loan Document shall operate as a waiver thereof,
         nor shall any single or partial exercise thereof preclude any other
         or further exercise thereof or the exercise of any other right. The
         rights of Bank hereunder and under the Loan Documents shall be in
         addition to all other rights provided by law. No modification or waiver
         of any provision of this Agreement, the Note or any Loan Documents, nor
         consent to departure therefrom, shall be effective unless in writing
         and no such consent or waiver shall extend beyond the particular case
         and purpose involved. No notice or demand given in any case shall
         constitute a waiver of the right to take other action in the same,
         similar or other instances without such notice or demand.

                                      25

<PAGE>

                           12.4     NOTICES. Any notices or other
         communications required or permitted to be given by this Agreement or
         any other documents and instruments referred to herein must be (i)
         given in writing (the references to "in writing" elsewhere in this
         Agreement are for emphasis and are not a way of limitation of the
         generality of the requirement that notices or other communications
         shall be in writing), and (ii) be personally delivered or mailed by
         prepaid mail or overnight courier, or by telex or telecopy delivered or
         transmitted to the party to whom such notice or communication is
         directed, to the address of such party as follows:

         To Borrower:              GMX RESOURCES INC.
                                   One Benham Place, Suite 600
                                   9400 N. Broadway
                                   Oklahoma. City, Oklahoma 73114
                                   Attn: Ken L. Kenworthy, Jr.

         To Bank:                  BANK ONE, OKLAHOMA, N.A.
                                   100 N. Broadway
                                   Oklahoma City, Oklahoma 73102
                                   Attn: James R. Karcher, Senior Vice President

Any such notice or other communication shall be deemed to have been given on
the day three days after it is mailed by prepaid certified or registered mail,
one working day after sent by over night courier, or on the day it is
personally delivered as aforesaid or, if transmitted by telex or telecopy or
fax machine, on the working day that such notice is transmitted as aforesaid,
and otherwise when actually received. Any party may, for purposes of the Loan
Documents, change its address, telex number, fax number or the person to whom
a notice or other communication is marked to the attention of, by giving
notice of such change to the other parties pursuant hereto.

                           12.5     GOVERNING LAW. This Agreement has been
         prepared, is being executed and delivered in the State of Oklahoma, and
         the substantive laws of such state and the applicable federal laws of
         the United States of America shall govern the validity, construction,
         enforcement and interpretation of this Agreement and all of the Loan
         Documents, except as otherwise may be provided for in the respective
         Loan Documents.

                           12.6     CHOICE OF FORUM. Any suit, action or
         proceeding against Borrower with respect to this Agreement, the Note or
         any Loan Documents or any judgment entered by any court in respect
         thereof, may be brought in the courts of the State of Oklahoma,
         County of Oklahoma, or in the United States courts located in Oklahoma
         County, State of Oklahoma as Bank in its sole discretion may elect and
         Borrower hereby submits to the non-exclusive jurisdiction of such
         courts for the purpose of any such suit, action or proceeding. Borrower
         hereby irrevocably waives any objections which Borrower may now or
         hereafter have to the laying of venue of any suit, action or proceeding
         arising out of or relating to this Agreement or any Loan Document
         brought in the courts located in the State of Oklahoma, County of
         Oklahoma, and hereby further irrevocably waives any

                                      26

<PAGE>

         claim that any such suit, action or proceeding brought in any such
         court has been brought in an inconvenient forum.

                           12.7     INVALID PROVISIONS. If any provision of
         any Loan Document is held to be illegal, invalid or unenforceable under
         present or future laws during the term of this Agreement, such
         provision shall be fully severable; such Loan Document shall be
         construed and enforced as if such illegal, invalid or unenforceable
         provision had never comprised a part of such Loan Document; and the
         remaining provisions of such Loan Document shall remain in full force
         and effect and shall not be affected by the illegal, invalid or
         unenforceable provisions or by its severance from such Loan Document.
         Furthermore, in lieu of each such illegal, invalid or unenforceable
         provision there shall be added as part of such Loan Document a
         provision mutually agreeable to Borrower and Bank as similar in terms
         to such illegal, invalid or unenforceable provisions as may be possible
         and still be legal, valid and enforceable.

                           12.8     NONLIABILITY OF BANK. The relationship
         between Borrower and Bank is, and shall at all times remain, solely
         that of borrower and lender, and Bank neither undertakes nor assumes
         any responsibility or duty to Borrower to review, inspect, supervise,
         pass judgment upon, or inform Borrower of any matter in connection with
         any phase of Borrower's business, operations, or condition, financial
         or otherwise. Borrower shall rely entirely upon their own judgment with
         respect to such matters, and any review, inspection, supervision,
         exercise of judgment, or information supplied to Borrower by Bank in
         connection with any such matter is for the protection of Bank, and
         neither Borrower nor any third party are entitled to rely thereon.

                           12.9     BINDING EFFECT. The Loan Documents shall
         be binding upon and inure to the benefit of Borrower and Bank and their
         respective successors, assigns and legal representatives; provided,
         however, that Borrower may not, without the prior written consent of
         Bank, assign any rights, powers, duties or obligations thereunder.

                           12.10    HEADINGS. Section headings are for
         convenience of reference only and shall in no way affect the
         interpretation of this Agreement.

                           12.11    NO THIRD-PARTY BENEFICIARY. The parties do
         not intend the benefits of this Agreement to inure to any third party,
         nor shall this Agreement be construed to make or render Bank liable to
         any materialman, supplier, contractor, subcontractor, purchaser or
         lessee of any property owned by Borrower, or for debts or claims
         accruing to any such persons against Borrower. Notwithstanding anything
         contained herein or in the Note or in any other Loan Document, or any
         conduct or course of conduct by any or all of the parties hereto,
         before or after signing this Agreement or any other Loan Document,
         shall be construed as creating any right, claim or cause of action
         against Bank, or any of its officers, directors, agents or employees,
         in favor of any materialman, supplier, contractor, subcontractor,
         purchaser or lessee of any property owned by Borrower, nor to any other
         person or entity.

                                      27

<PAGE>

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

                           12.13    CONTRARY PROVISIONS. The terms and
         conditions of this Agreement shall govern and control any and all
         contrary provisions of the other Loan Documents.

                           12.14    NO ORAL AGREEMENTS. THIS WRITTEN LOAN
         AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
         NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
         SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
         AGREEMENTS OF THE PARTIES.

                           12.15    USURY. Under no circumstances (and
         notwithstanding any other provision of this Agreement, the Note or any
         other Loan Document) shall the interest charged, collected, or
         contracted for on this Agreement, the Note or any other Loan Document
         exceed the maximum rate permitted by applicable law. If any part of
         this Agreement or the Note cannot be enforced, this fact will not
         affect the rest of this Agreement or the Note, as applicable. In
         particular, this section means (among other things) that Borrower does
         not agree or intend to pay, and Lender does not agree or intend to
         contract for, charge, collect, take, reserve or receive (collectively
         referred to herein as "charge or collect"), any amount in the nature of
         interest or in the nature of a fee for the Loans, which would in any
         way or event (including demand, prepayment, or acceleration) cause Bank
         to charge or collect more for the Loans than the maximum Bank would be
         permitted to charge or collect by federal law or the law of the State
         of Oklahoma. Any such excess interest or unauthorized fee shall,
         instead of anything stated to the contrary, be applied first to reduce
         the principal balance of the Loans and when the principal has been paid
         in full, be refunded to Borrower. The right to accelerate maturity of
         sums due under this Agreement or the Note does not include the right to
         accelerate any interest which has not otherwise accrued on the date of
         such acceleration, and Bank does not intend to charge or collect any
         unearned interest in the event of acceleration. All sums paid or agreed
         to be paid to Bank for the use, forbearance or detention of sums due
         hereunder shall, to the extent permitted by applicable law, be
         amortized, prorated, allocated and spread throughout the full term of
         the Loans evidenced by this Agreement and the Note until payment in
         full so that the rate or amount of interest on account of the Loans
         evidenced hereby does not exceed the applicable usury ceiling. Bank may
         delay or forgo enforcing any of its rights or remedies under this
         Agreement, the Note or any other Loan Document without losing them.

                           12.16    ENVIRONMENTAL INDEMNIFICATION. Except with
         respect to any act or omission of the Bank, the Borrower indemnifies
         and agrees to hold the Bank harmless from all claims, demands, costs,
         expenses, liabilities and obligations of any kind with respect to any
         actual or threatened violation of any environmental law, rule or
         regulation, any clean-up or remediation costs or any other such damages
         with respect to any of the Oil and Gas Properties.

                                      28

<PAGE>

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

                  "BORROWER"        GMX RESOURCES INC.,
                                    an Oklahoma corporation

                                    By:  /s/ Ken L. Kenworthy, Jr.
                                       -----------------------------------------
                                       Ken L. Kenworthy, Jr.
                                       Chief Executive Officer

                  "BANK"            BANK ONE, OKLAHOMA, N.A.,
                                    a national banking association

                                    By:  /s/ James R. Karcher
                                       -----------------------------------------
                                       James R. Karcher,
                                       Senior Vice President

                                      29

<PAGE>

                   FIRST AMENDMENT TO CREDIT AGREEMENT BY AND
                           BETWEEN GMX RESOURCES INC.
                          AND BANK ONE, OKLAHOMA, N.A.

         THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
executed as of this 19th day of May, 1999 by and between GMX RESOURCES INC.,
an Oklahoma corporation (the "Borrower") and BANK ONE, OKLAHOMA, N.A. (the
"Bank").

                              W I T N E S S E T H:

         WHEREAS, on February 18, 1998 Borrower and Bank entered into that
certain Credit Agreement (the "Agreement") whereby Bank provided Borrower with
a revolving line of credit in an amount governed by a Borrowing Base which
shall not exceed $20,000,000.00, as evidenced by reducing revolving promissory
note with a stated like amount of even date with the Original Agreement (the
"Original Note").

         WHEREAS, the obligations described in the Agreement are secured by,
among other things not specifically set forth herein, certain oil and gas
properties and other properties as set forth in the Agreement; and

         WHEREAS, all capitalized terms not otherwise defined herein shall
have those meanings assigned to such terms in the Agreement;

         WHEREAS, Borrower and Bank desire to amend the Agreement for the
first time in order to document the January 1, 1999 redetermination of the
Borrowing Base, to redetermine the Maximum Commitment Amount at $5,915,000.00,
to add Ken L. Kenworthy, Jr. and Ken L. Kenworthy, Sr. as guarantors, and to
evidence such additional changes to the Agreement as more particularly set
forth herein;

         NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower and the
Bank hereby agree to amend the agreement as follows:

A.       CHANGES TO THE AGREEMENT

                  1.       Section 1 of the Agreement, Definitions, is here by
amended in order to add the following definitions for the terms "Guarantor"
and "Guaranty Agreement", which such terms shall be defined at the additional
Sections 1.43 and 1.44 as follows (Note: these definitions are not in
alphabetical order):

<PAGE>

                  1.43     Guarantor.  The term "Guarantor" individually and
         "Guarantors" collectively shall refer to Ken L. Kenworthy, Jr. and
         Ken L. Kenworthy, Sr.

                  1.44     Guaranty Agreement. The term "Guaranty Agreement"
         shall refer to that certain guaranty agreement made by each Guarantor,
         together with all renewals, extensions, modifications and substitutions
         thereto and therefor.

                  2.       The definition set forth at Section 1.10 of the
Agreement, Debt Coverage Ratio, is hereby amended and restated in its entirety
as follows:

                  The term "Debt Coverage Ratio" means as of the calendar
                  quarters ending June 30, 1999, September 30, 1999 and December
                  31, 1999 Net Income before interest expenses, tax expenses,
                  depreciation, depletion and amortization expenses: DIVIDED BY
                  the sum of interest expenses and dividends, which such ratio
                  shall be calculated for each calendar quarter based upon the
                  three months ending each calendar quarter-end.

                  Subsequent to December 31, 1999, the term "Debt Coverage
                  Ratio" means the sum of Net Income , less dividends, less any
                  non-cash income, plus depreciation, depletion and amortization
                  plus interest expenses which shall be calculated for and at
                  the end of each calendar quarter;

                                   DIVIDED BY

                  The sum of (i) the greater of (A) the quarterly sum of the
                  Monthly Commitment Reductions scheduled at the last Evaluation
                  Date or (B) the quarterly sum of the Monthly Commitment
                  Reductions which would be required assuming a level
                  amortization of the outstanding loan balance (as of the
                  quarter end) over the lesser of (X) 84 months or (Y) the Half
                  Life of the Borrower's Oil and Gas Properties plus (ii)
                  interest expense for the quarter plus any principal reductions
                  made to any other long term debts (including payments made on
                  capital lease obligations) during the quarter. For the
                  purposes hereof and for all other purposes herein, "Half Life
                  of the Borrower's Oil and Gas Properties" shall be defined by
                  the Bank, in its sole discretion, as that period of time
                  during which one-half of the undiscounted future income, net
                  of lease operating expenses, production taxes, and capital
                  expenditures will be realized from the Borrower's Oil and Gas
                  Properties. The Bank's calculation of the Half Life of the
                  Borrower's Oil and Gas

                                        2
<PAGE>

                  Properties shall be determined and communicated to Borrower
                  in conjunction with the periodic redeterminations of the
                  Borrowing Base and the Monthly Commitment Reduction as set
                  forth in Section 1.3 hereof.

                  3.        The definition set forth at Section 1.31 of the
Agreement, Permitted Debt, is hereby amended and restated in its entirety in
order to permit up to $575,000.00 of subordinated shareholder notes as follows:

                  1.31      Permitted Debt. The term "Permitted Debt" means (i)
         any accounts payable, taxes, insurance, operating expenses and all
         other general and administrative expenses and other obligations of the
         Borrower incurred in the normal course of Borrower's business
         operations, such obligations being in amounts and of the types as are
         consistent with those identified in the latest financial statements of
         the Borrower, (ii) up to $575,000.00 of subordinated shareholder notes
         based upon terms acceptable to Bank, and (iii) any existing
         indebtedness secured by any Permitted Lien.

                  4.       The definition set forth at Section 1.38 of the
Agreement, Tangible Net Worth, is hereby amended and restated in its entirety
in order to exclude Borrower's investment in any of its own shares as follows:

                  1.38      Tangible Net Worth. The term "Tangible Net Worth"
         means the difference between the Borrower's (i) Total Assets, excluding
         any intangibles and excluding any stock in the Borrower repurchased by
         Borrower and accounted for as an investment asset and not as treasury
         stock, and (ii) Total Liabilities, all as set forth in the financial
         statements of the Borrower and as determined by GAAP.

                  5.       Borrower and Bank acknowledge that Bank is
extending credit to Borrower over and above the Borrowing Base. Until such
time as the outstanding balance on the Note is less than or equal to the
Borrowing Base, interest on the Note shall accrue at either the Base Rate plus
1.00% or the LIBOR Rate plus 3.75% , at Borrower's election pursuant to
Section 2.3 of the Agreement.

                  6.       An additional subsection shall be added to Section
6 of the Agreement, Collateral, in order to provide for the additional credit
enhancement provided by the Guaranty Agreements and shall be set forth as new
Section 6.3 as follows:

                  6.3      Guaranty Agreements. In order to further secure the
         obligations of Borrower to Bank as described herein, in the Note and in
         the Loan Documents, each Guarantor shall provide his Guaranty
         Agreement, limited in amount to $750,000.00.

                                        3

<PAGE>

                  7.       Section 9.2.5 of the Agreement, Other Financial
Information, is hereby amended and restated in its entirety to include
information concerning the Guarantors as follows:

                  9.2.5    Other Financial Information. The Borrower shall
         also promptly furnish to the Bank such other financial information
         concerning the financial affairs of the Borrower or the Guarantors as
         the Bank might reasonably request.

                  8.       Additional paragraphs shall be added to Section 9.2
of the Agreement, Financial Information and Reporting, as new Section 9.2.6 in
order to require financial information from the Guarantors and Section 9.2.7
in order to require recompletion progress reports as follows:

                  9.2.6    Guarantor Financial Information. Borrower shall
         provide or Borrower shall cause each Guarantor to provide annual
         financial statements including a balance sheet, an income statement and
         a statement of Contingent Liabilities each year during the term hereof
         within thirty (30) days of the anniversary date of the last financial
         statement provided to Bank by such Guarantor. In addition to the
         financial statement, each Guarantor shall provide Bank with a copy of
         his federal income tax return within ten (10) days of its filing for
         1998 and each year thereafter during the term hereof.

                  9.2.7    Recompletion Progress Reports. Borrower shall
         furnish Bank with a monthly report of progress on its recompletion
         projects indicating a comparison of results to it original forecast and
         final costs of each project within thirty (30) days of each month end.

                  9.       Section 9.19 of the Agreement, Current Ratio, is
hereby deleted in its entirety in order to replace said Section 9.19 with a
new covenant pertaining to the Adjusted Current Ratio as follows:

                  9.19     Adjusted Current Ratio. Borrower will not permit
         its ratio of Current Assets plus any unused availability under the
         Note, minus any investment in stock of the Borrower to Current
         Liabilities less any amounts outstanding under the Note which are
         otherwise included as a Current Liability to be less than 1.0 to 1.0,
         as determined at the end of each calendar quarter beginning with the
         calendar quarter ending March 31, 1999. For the calculation of the
         March 31, 1999 Adjusted Current Ratio, the Borrower shall be allowed to
         add to "Current Assets" the $250,000.00 increase in availability
         documented herein.

                  10.      Section 9.20 of the Agreement, Debt Coverage Ratio,
is hereby amended and restated in its entirety as follows:

                                        4

<PAGE>

                  9.20     Debt Coverage Ratio. Borrower shall not permit the
         Debt Coverage Ratio to be less than (i) 1.0 to 1.0 as of June 30, 1999;
         (ii) 1.25 to 1.00 as of September 30, 1999; and (iii) 1.50 to 1.00 as
         of December 31, 1999. Subsequent to December 31, 1999, Borrower shall
         not permit the Debt Coverage Ratio to be less than 1.1 to 1.0 as
         determined at the end of each subsequent calendar quarter.

                  11.      Section 9.21 of the Agreement, Tangible Net Worth,
is hereby amended and restated in its entirety as follows:

                  9.21     Tangible Net Worth. Borrower shall not permit it
         Tangible Net Worth to be less than the sum of (i) $800,000.00, (ii)
         seventy-five percent (75%)of the Borrower's Net Income (if positive)
         for each calendar quarter subsequent to the quarter ended December 31,
         1998, and (iii) all proceeds of any additional equity offering of the
         Borrower after December 31, 1998. Borrower's Tangible Net Worth shall
         be determined as of the end of each calendar quarter beginning with the
         calendar quarter ending March 31, 1999.

                  12.      All references in the Agreement to the term "Note"
are hereby amended to refer to the promissory note in the form of Annex No.
"1" attached hereto (the "Replacement Note").

B.       NOTICES AND WAIVERS.

         Borrower is hereby notified of the following occurrences and the Bank
hereby provides the following waivers.

                  1.       Borrowing Base. Bank and Borrower acknowledge that
the Borrowing Base is currently $5,000,000.00. Bank and Borrower acknowledge
that the Monthly Commitment Reduction is $0.00 and shall remain at such amount
until September 1, 1999. Bank and Borrower acknowledge that Bank has
temporarily increased the Maximum Commitment Amount to $5,915,000.00 to remain
at such amount until the next Borrowing Base determination on September 1,
1999. On September 1, 1999, the Maximum Commitment Amount shall again be as
such term is otherwise defined in the Agreement, and Borrower shall make any
principal payments required by Section 2.5 of the Agreement.

                  2.       Determinations of Borrowing Base. Borrower and Bank
acknowledge that the Evaluation Dates are January 1 and July 1. The Evaluation
Dates set forth in Section 1.3 of the Agreement notwithstanding, the July 1,
1999 Evaluation Date (and only such date) is hereby extended until September
1, 1999. Accordingly, the requirement set forth at Section 9.2.4 of the
Agreement, Semi-Annual Engineering Report, that Borrower provide an
engineering evaluation report no later than June 1 to be effective as of July
1 is hereby extended until August 1 to be effective as of September 1 for the
year ending December 31, 1999 only.

                                        5

<PAGE>

                  3.       Financial Covenant Non-Compliance. Bank hereby
provides Borrower with a one-time waiver of the defaults created by Borrower's
failure to comply with (i) Section 9.19 of the Agreement, Current Ratio, as of
December 31, 1998 and (ii) Section 9.20 of the Agreement, Debt Coverage Ratio,
as of September 30, 1998, December 31, 1998, and March 31, 1999. Neither of
these waivers shall be deemed to constitute a waiver of any other Event of
Default or a waiver of any future occurrences of any event of default.

                  4.       Undeveloped Leasehold Acreage. Bank hereby
provides its consent to Borrower's assignment or pledge of Undeveloped
Leasehold Acreage (hereafter defined) to Ken L. Kenworthy, Jr. to secure his
subordinated loan to Borrower. For the purposes hereof, the term "Undeveloped
Leasehold Acreage" refers to those Oil and Gas Properties not currently in
the Bank's engineering evaluation or the Mortgage descriptions. Provided,
however, Borrower hereby agrees obtain prior written consent from Bank before
it expends any funds on the Undeveloped Leasehold Acreage.

                  5.       Use of Proceeds. Borrower hereby requests that it
be entitled to use the additional funds for the purposes set forth on Exhibit
A attached to this Amendment. Bank hereby consents to the use of such funds
for, and only for, such purposes. To the extent Borrower desires to utilize
these funds for purposes other than as set forth on Exhibit A attached hereto,
Borrower shall obtain Bank's prior written consent to and such use.

         C.       REPRESENTATIONS AND WARRANTIES

         Borrower hereby represents and warrants to Bank that:

                  1        Borrower is a corporation, duly organized, legally
existing, and in good standing under the laws of the State of Oklahoma, and is
duly qualified as a foreign corporation and in good standing in all other
states wherein the nature of its business or its assets make such
qualification necessary.

                  2.       Borrower's execution and delivery of this Amendment
and performance of its obligations hereunder: (a) are and will be within its
powers; (b) are duly authorized by its board of directors; (c) are not and
will not be in contravention of any law, statute, rule or regulation, the
terms of its articles or incorporation and bylaws, nor of any agreement or
undertaking to which Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of liens, charges or
encumbrances on any of its properties or assets, except those in favor of Bank
hereunder.

                  3.       This Amendment, when duly executed and delivered,
will constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with its terms.

                                        6

<PAGE>

                  4.       All financial statements, balance sheets, income
statements and other financial data which have been or are hereafter
furnished to Bank by Borrower to induce Bank to make the loans hereunder due,
and as to subsequent financial statements will, fairly represent each
Borrower's financial condition as of the dates for which the same are
furnished. All such financial statements, reports, papers and other data
furnished to Bank are and will be, when furnished: prepared in accordance
with generally accepted accounting principles consistently applied; accurate
and correct in all material respects; and complete insofar as completeness
may be necessary to give Bank a true and accurate knowledge of the subject
matter. Since the date of the last such financial statements, no material
adverse change has occurred in the operations or condition, financial or
otherwise and other financial data provided to Bank; of either Borrower, nor,
to the best of their knowledge, has either Borrower incurred, any material
liabilities or made any material investment or guarantees, direct or
contingent, in any single case or in the aggregate, which has not been
disclosed to Bank.

                  5.       The Borrower is the sole and lawful owner of the
Collateral, pledged, mortgaged or assigned by it, and Borrower has, and as to
after acquired property or new properties will have, good right to cause the
Collateral to be hypothecated to Bank as security for the obligations
described in the Agreement, as amended hereby.

                  6.       All of each Borrower's other representations and
warranties set forth in Section 8 of the Agreement, Representations and
Warranties, are true and correct on and as of the date hereof with the same
effect as though made and repeated by Borrower as of the date hereof.

         D.       CONDITIONS

         Bank's obligations under the Agreement, as hereby amended, are subject
to the following conditions:

                  1.       Bank and Borrower shall have executed and delivered
this Amendment.

                  2.       Borrower shall have executed and delivered the
Replacement Note.

                  3.       Each shareholder of Borrower shall have executed
and delivered an agreement satisfactory to Bank subordinating any indebtedness
of Borrower owed to such shareholders, individually or collectively, to the
indebtedness evidenced by the Note, this Agreement, as amended hereby, and any
other Loan Document.

                  4.       Guarantors shall have executed and delivered the
Guaranty Agreement.

                  5.       Bank shall have received a certified copy of a
"Dismissal With Prejudice" of Borrower's litigation with Fred Standefer or
such other evidence that such litigation has been extinguished to Bank's
satisfaction.

                                        7

<PAGE>

                  6.       Bank shall have received evidence, to its
reasonable satisfaction, that Borrower's shareholders have advanced, at
least, $200,000.00 to Borrower to be used by the Borrower for the express
purpose of (i) funding recompletion costs/expenses, (ii) reducing accounts
payable aged sixty (60) days or greater and/or (iii) making payment of past
due interest owed to Bank.

                  7.       Bank shall have received an executed balance sheet
and contingent liability disclosure from each Guarantor.

                  8.       Bank shall have received certificates dated as of
a recent date from the Secretary of State or other appropriate Governmental
Authority evidencing Borrower's existence or qualification and good standing
in all jurisdictions covered by the oil and gas properties where such
qualification is required and where failure to be qualified or in good
standing could reasonably be expected to have a material adverse effect upon
(i) its ability to repay the indebtedness set forth in the Note or the Loan
Documents or (ii) the Collateral;

                  9.       Bank shall have received results of searches of the
UCC records of the State of Oklahoma and any and all other applicable
jurisdictions from a source acceptable to the Bank and reflecting no Liens,
other than Permitted Liens, against any of its Collateral as to which
perfection of a lien is accomplished by the filing of a financing statement;

                  10.      Borrower's representations and warranties set forth
in Section C hereof shall be true and correct on and as of the date hereof,
and the date of any subsequent advance with the same effect as though such
representation and warranty had been on and as of such date.

                  11.      Borrower shall have executed any and all mortgages,
deeds of trust and/or any other security documents deemed necessary by Bank in
its sole discretion.

                  12.      Borrower shall have satisfied all conditions set
forth in the Agreement.

                  13.      As of the date hereof, and the date of any
subsequent Advance, no Event of Default nor any event which, with the giving of
notice or lapse of time, would constitute an Event of Default shall have
occurred and be continuing.

         E.       RELEASE

                  Borrower hereby remises, releases, and forever discharges
Bank, its successors and assigns, its officers, directors, employees, agents
and attorneys (collectively, the "Released Parties") of and from all actions,
causes of action, suits, proceedings, debts, contracts, claims, damages,
liability and demands whatsoever, known or unknown, in law or equity, which
Borrowers, and each of them, ever had or now have, by reason of any matter,
cause, or thing whatsoever arising from the actions or inactions of the
Released Parties in any matter relating to

                                        8

<PAGE>

the Agreement, Note, and other Loan Documents (collectively, the "Released
Matters"); and the Borrower covenants not to sue any of the Released Parties
with respect to the Released Matters. The release and covenant not to sue set
forth herein are intended by the parties to be as broad and comprehensive as
possible.

         F.       OTHER COVENANTS AND MISCELLANEOUS TERMS

                  1.       As additional consideration and in addition to
interest on the Note, Borrower hereby agrees to pay Bank by August 1, 1999, a
fee for this amendment (the "Amendment Fee") in the amount of $25,000.00.

                  2.       Borrower shall use the funds advanced by Ken L.
Kenworthy, Jr. for the express and exclusive purposes of (i) $375,000.00 to
purchase the ownership interest of Fred Standefer in Borrower; and (ii) at
least $200,000.00 for (A) recompletion costs/expenses, (B) reducing accounts
payable aged sixty (60) days or greater and/or (C) making payment of past due
interest owed to Bank.

                  3.       Except as expressly amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect,
and the same is hereby ratified and extended.

                  4.       The obligations described in the Agreement, as
amended hereby, including but not limited to the indebtedness evidenced by the
Note executed in conjunction with the Agreement, shall continue to be secured by
the Collateral, without interruption or impairment of any kind.

                  5.       Borrower agrees to execute such additional
mortgages, deeds of trust and/or amendments to such documents already in place
as Bank deems necessary to adequately secure the loan at any time and from time
to time hereafter.

                  6.       The Borrower hereby agrees to pay all reasonable
attorney fees and legal expenses incurred by Bank in preparation, execution and
implementation of this Amendment, the Replacement Note, and any mortgages,
guaranty agreements, subordination agreements, deeds of trust, security
agreements, pledge agreements or any amendments thereto.

                  7.       This Amendment shall be construed in accordance
with and governed by the laws of the State of Oklahoma, and shall be binding on
and inure to the benefit of the Borrower and Bank, and their respective
successors and assigns. All obligations of the Borrower under the Agreement and
all rights of Bank and any other holder of the Notes, whether expressed herein
or in any Note, shall be in addition to and not in limitation of those provided
by applicable law. Borrower irrevocably agrees that, subject to Bank's sole
election, all suits or proceedings arising from or related to the Agreement, as
amended, or the Notes may be litigated in courts (whether

                                        9

<PAGE>

State or Federal) sitting in Oklahoma City, Oklahoma, and the Borrower hereby
irrevocably waives any objection to such jurisdiction and venue.

                  8.       This Amendment may be executed in as many
counterparts as are deemed necessary or convenient, and it shall not be
necessary for the signature of more than any one party to appear on any
single counterpart. Each counterpart shall be deemed an original, but all
shall be construed together as one and the same instrument. The failure of
any party to sign shall not affect or limit the liability of any party
executing any such counterpart.

                                         BORROWER:

                                         GMX RESOURCES INC.,
                                         an Oklahoma corporation

                                           /s/ Ken L. Kenworthy, Jr.
                                         --------------------------------------
                                         By: Ken L. Kenworthy, Jr.
                                         Title: Chief Executive Officer

                                         BANK:

                                         BANK ONE, OKLAHOMA, N.A.

                                           /s/ John K. Slay, Jr.
                                         --------------------------------------
                                         By: John K. Slay, Jr.
                                         Title: Sr.  Vice President

                                       10

<PAGE>

                                                    EXHIBIT A

                                                 USE OF PROCEEDS

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
            WELL                    CURRENT HORIZON                   TARGET HORIZON                  ESTIMATED
                                                                                                      NET COSTS
-----------------------------------------------------------------------------------------------------------------
<S>                           <C>                              <C>                                   <C>
      Blocker-Fultz #1        McKimsey, Burnett & Pettit        Glen Rose, Rodessa & Paluxy           $40,064.00
                                         Page
-----------------------------------------------------------------------------------------------------------------
          Newton #1               Pettit Crane, Page            Burnett, Glen Rose & Paluxy           $44,737.00
-----------------------------------------------------------------------------------------------------------------
         Timmins A-1          Pettit Transition, McJimsey              Pettit McKay                   $29,500.00
-----------------------------------------------------------------------------------------------------------------
       Blocker-Ware #2         Roquemore, Upper Burnett                Lower Pettit                   $39,678.00
-----------------------------------------------------------------------------------------------------------------
       Furrh-Lewis #1              McJimsey, Burnett                 Pettit Transition                $19,447.00
-----------------------------------------------------------------------------------------------------------------
          Furrh #4                   Cotton Valley             Roquemore, McJimsey, Burnett,          $55,548.00
                                                                 Pettit Crane & Transition
-----------------------------------------------------------------------------------------------------------------
       A. Williams #2                                                    Glen Rose                    $36,942.00
-----------------------------------------------------------------------------------------------------------------
            TOTAL                                                                                    $265,916.00
-----------------------------------------------------------------------------------------------------------------

</TABLE>

                                                 11

<PAGE>

                   SECOND AMENDMENT TO CREDIT AGREEMENT BY AND
                           BETWEEN GMX RESOURCES INC.
                          AND BANK ONE, OKLAHOMA, N.A.

         THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
executed as of this 24th day of November, 1999 by and between GMX RESOURCES
INC., an Oklahoma corporation (the "Borrower") and BANK ONE, OKLAHOMA, N.A.
(the "Bank").

                              W I T N E S S E T H:

         WHEREAS, on February 18, 1998 Borrower and Bank entered into that
certain Credit Agreement (the "Agreement") whereby Bank provided Borrower with
a revolving line of credit in an amount governed by a Borrowing Base which
shall not exceed $20,000,000.00, as evidenced by reducing revolving promissory
note with a stated like amount of even date with the Original Agreement (the
"Original Note").

         WHEREAS, on May 19, 1999, Borrower and Bank amended the Agreement for
the first time (the "First Amendment") in order to document the January 1,
1999 redetermination of the Borrowing Base, to redetermine the Maximum
Commitment Amount at $5,915,000.00, to add Ken L. Kenworthy, Jr. and Ken L.
Kenworthy, Sr. as guarantors, and to evidence such additional changes to the
Agreement as more particularly set forth herein (the Original Agreement as
amended by the First Amendment is referred to herein as the "Agreement");

         WHEREAS, the obligations described in the Agreement are secured by,
among other things not specifically set forth herein, certain oil and gas
properties and other properties as set forth in the Agreement; and

         WHEREAS, all capitalized terms not otherwise defined herein shall
have those meanings assigned to such terms in the Agreement;

         WHEREAS, Borrower and Bank desire to amend the Agreement for the
second time in order to document the September 1, 1999 redetermination of the
Borrowing Base, to provide for Unscheduled Redeterminations, to included
commodity rate management language, and to evidence such additional changes to
the Agreement as more particularly set forth herein;

         NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower and the
Bank hereby agree to amend the agreement as follows:

                                       1

<PAGE>

         A.       CHANGES TO THE AGREEMENT

                  1.       Section 1 of the Agreement, Definitions, is here by
amended at Section 1.3, BORROWING BASE, to modify this definition in order to
indicate that Bank or Borrower has the right to make Unscheduled
Redeterminations by inserting the following at the end of said definition:

         Nothing contained within this Section 1.3 shall be construed to mean
         that Borrower can not request and/or that Bank can not require, at any
         time, an Unscheduled Redetermination.

                  2.       Section 1 of the Agreement, Definitions, is here by
amended in order to add the following definition for the term "Rate Management
Transactions", which such term shall be defined at the additional Section 1.33-A
to immediately follow Section 1.33 as follows:

                  1.33-A            RATE MANAGEMENT TRANSACTION" shall mean
         any transaction (including an agreement with respect thereto) now
         existing or hereafter entered into between Borrower and Lender which is
         a rate swap, basis swap, forward transaction, commodity swap, commodity
         option, equity or equity index swap, equity or equity index option,
         bond option, interest rate option, foreign exchange transaction, cap
         transaction, floor transaction, collar transaction, forward
         transaction, currency swap transaction, cross-currency rate swap
         transaction, currency option or any other similar transaction
         (including any option with respect to any of these transactions) or any
         combination thereof, whether linked to one or more interest rates,
         foreign currencies, commodity prices, equity prices or other financial
         measures.

                  3.       Section 1 of the Agreement, Definitions, is here by
amended in order to add the following definition for the term "Unscheduled
Redetermination", which such term shall be defined at the additional Section
1.41-A to immediately follow Section 1.41 as follows:

                  1.41-A            "UNSCHEDULED REDETERMINATION" shall mean a
         redetermination of the Maximum Commitment Amount made at any time other
         than on the dates set for the regular semi-annual redetermination of
         the Borrowing Base which is made (A) at the reasonable request of a
         Borrower, (B) at any time it appears to the Lender, in the exercise of
         its reasonable discretion, that either (i) there has been a material
         decrease in the value of the Oil and Gas Properties, or (ii) an event
         has occurred which is reasonably expected to have a Material Adverse
         Effect.

                  4.       The introductory phrase of Section 6 of the
Agreement, Collateral, is hereby amended in order to include Rate Management
Transactions as indebtedness secured by the Collateral by inserting the words
"and Rate Management Transactions" immediately after the word "Note" in the
first line of said Section 6.

                                       2

<PAGE>

                  5.       The Event of Default set forth at Section 10.2 of
the Agreement, OTHER NONPAYMENT, is hereby amended and restated in its
entirety in order to include Rate Management Transactions as follows:

                  10.2     OTHER NONPAYMENT. Default in payment of any other
         amount payable to the Bank under the terms of this Agreement, any Rate
         Management Transaction, or any other Loan Document for a period in
         excess of ten (10) days after the date such payment is due; or

         B.       NOTICES AND WAIVERS.

         Borrower is hereby notified of the following occurrences and the Bank
hereby provides the following waivers.

                  1.       BORROWING BASE. Bank and Borrower acknowledge that
the Borrowing Base is currently $5,000,000.00 and the Monthly Commitment
Reduction is $0.00 and such Borrowing Base and Monthly Commitment Reduction
shall remain at such amounts until January 1, 2000. Bank and Borrower
acknowledge that Bank has agreed to temporarily maintain the Maximum
Commitment Amount at $5,915,000.00 until the earlier to occur of an
Unscheduled Redetermination or the next Borrowing Base determination on
January 1, 2000. On January 1, 2000, the Maximum Commitment Amount shall again
be as such term is otherwise defined in the Agreement, and Borrower shall make
any principal payments required by Section 2.5 of the Agreement.

         C.       REPRESENTATIONS AND WARRANTIES

         Borrower hereby represents and warrants to Bank that:

                  1.       Borrower is a corporation, duly organized, legally
existing, and in good standing under the laws of the State of Oklahoma, and is
duly qualified as a foreign corporation and in good standing in all other
states wherein the nature of its business or its assets make such
qualification necessary.

                  2.       Borrower's execution and delivery of this Amendment
and performance of its obligations hereunder: (a) are and will be within its
powers; (b) are duly authorized by its board of directors; (c) are not and
will not be in contravention of any law, statute, rule or regulation, the
terms of its articles or incorporation and bylaws, nor of any agreement or
undertaking to which Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of liens, charges or
encumbrances on any of its properties or assets, except those in favor of Bank
hereunder.

                  3.       This Amendment, when duly executed and delivered,
will constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with its terms.

                                       3

<PAGE>

                  4.       All financial statements, balance sheets, income
statements and other financial data which have been or are hereafter furnished
to Bank by Borrower to induce Bank to make the loans hereunder due, and as to
subsequent financial statements will, fairly represent each Borrower's
financial condition as of the dates for which the same are furnished. All such
financial statements, reports, papers and other data furnished to Bank are and
will be, when furnished: prepared in accordance with generally accepted
accounting principles consistently applied; accurate and correct in all
material respects; and complete insofar as completeness may be necessary to
give Bank a true and accurate knowledge of the subject matter. Since the date
of the last such financial statements, no material adverse change has occurred
in the operations or condition, financial or otherwise and other financial
data provided to Bank; of either Borrower, nor, to the best of their
knowledge, has either Borrower incurred, any material liabilities or made any
material investment or guarantees, direct or contingent, in any single case or
in the aggregate, which has not been disclosed to Bank.

                  5.       The Borrower is the sole and lawful owner of the
Collateral, pledged, mortgaged or assigned by it, and Borrower has, and as to
after acquired property or new properties will have, good right to cause the
Collateral to be hypothecated to Bank as security for the obligations
described in the Agreement, as amended hereby.

                  6.       All of each Borrower's other representations and
warranties set forth in Section 8 of the Agreement, Representations and
Warranties, are true and correct on and as of the date hereof with the same
effect as though made and repeated by Borrower as of the date hereof.

         D.       CONDITIONS

         Bank's obligations under the Agreement, as hereby amended, are
subject to the following conditions:

                  1.       Bank and Borrower shall have executed and delivered
this Amendment.

                  2.       Guarantors shall have executed and delivered the
Guaranty Agreement.

                  3.       Bank shall have received certificates dated as of a
recent date from the Secretary of State or other appropriate Governmental
Authority evidencing Borrower's existence or qualification and good standing
in all jurisdictions covered by the oil and gas properties where such
qualification is required and where failure to be qualified or in good
standing could reasonably be expected to have a material adverse effect upon
(i) its ability to repay the indebtedness set forth in the Note or the Loan
Documents or (ii) the Collateral;

                  4.       Bank shall have received results of searches of the
UCC records of the State of Oklahoma and any and all other applicable
jurisdictions from a source acceptable to the Bank and reflecting no Liens,
other than Permitted Liens, against any of its Collateral as to which
perfection of a lien is accomplished by the filing of a financing statement;

                                       4

<PAGE>

                  5.       Borrower's representations and warranties set forth
in Section C hereof shall be true and correct on and as of the date hereof,
and the date of any subsequent advance with the same effect as though such
representation and warranty had been on and as of such date.

                  6.       Borrower shall have executed any and all mortgages,
deeds of trust and/or any other security documents deemed necessary by Bank in
its sole discretion.

                  7.       Borrower shall have satisfied all conditions set
forth in the Agreement.

                  8.       As of the date hereof, and the date of any
subsequent Advance, no Event of Default nor any event which, with the giving
of notice or lapse of time, would constitute an Event of Default shall have
occurred and be continuing.

         E.       RELEASE

                  Borrower hereby remises, releases, and forever discharges
Bank, its successors and assigns, its officers, directors, employees, agents
and attorneys (collectively, the "Released Parties") of and from all actions,
causes of action, suits, proceedings, debts, contracts, claims, damages,
liability and demands whatsoever, known or unknown, in law or equity, which
Borrowers, and each of them, ever had or now have, by reason of any matter,
cause, or thing whatsoever arising from the actions or inactions of the
Released Parties in any matter relating to the Agreement, Note, and other Loan
Documents (collectively, the "Released Matters"); and the Borrower covenants
not to sue any of the Released Parties with respect to the Released Matters.
The release and covenant not to sue set forth herein are intended by the
parties to be as broad and comprehensive as possible.

         F.       OTHER COVENANTS AND MISCELLANEOUS TERMS

                  1.       Except as expressly amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect, and
the same is hereby ratified and extended.

                  2.       The obligations described in the Agreement, as
amended hereby, including but not limited to the indebtedness evidenced by the
Note executed in conjunction with the Agreement, shall continue to be secured
by the Collateral, without interruption or impairment of any kind.

                  3.       Borrower agrees to execute such additional
mortgages, deeds of trust and/or amendments to such documents already in place
as Bank deems necessary to adequately secure the loan at any time and from
time to time hereafter.

                  4.       The Borrower hereby agrees to pay all reasonable
attorney fees and legal expenses incurred by Bank in preparation, execution
and implementation of this Amendment, the Replacement Note, and any mortgages,
guaranty agreements, subordination agreements, deeds of trust, security
agreements, pledge agreements or any amendments thereto.

                                       5

<PAGE>

                  5.       This Amendment shall be construed in accordance
with and governed by the laws of the State of Oklahoma, and shall be binding
on and inure to the benefit of the Borrower and Bank, and their respective
successors and assigns. All obligations of the Borrower under the Agreement
and all rights of Bank and any other holder of the Notes, whether expressed
herein or in any Note, shall be in addition to and not in limitation of those
provided by applicable law. Borrower irrevocably agrees that, subject to
Bank's sole election, all suits or proceedings arising from or related to the
Agreement, as amended, or the Notes may be litigated in courts (whether State
or Federal) sitting in Oklahoma City, Oklahoma, and the Borrower hereby
irrevocably waives any objection to such jurisdiction and venue.

                  6.       This Amendment may be executed in as many
counterparts as are deemed necessary or convenient, and it shall not be
necessary for the signature of more than any one party to appear on any single
counterpart. Each counterpart shall be deemed an original, but all shall be
construed together as one and the same instrument. The failure of any party to
sign shall not affect or limit the liability of any party executing any such
counterpart.

                                        BORROWER:

                                        GMX RESOURCES INC.,
                                        an Oklahoma corporation

                                          /s/ Ken L. Kenworthy, Jr.
                                        ----------------------------------------
                                        By: Ken L. Kenworthy, Jr.
                                        Title: Chief Executive Officer

                                        BANK:

                                        BANK ONE, OKLAHOMA, N.A.

                                          /s/ John K. Slay, Jr.
                                        ----------------------------------------
                                        By: John K. Slay, Jr.
                                        Title: Vice President

                                       6

<PAGE>

                   THIRD AMENDMENT TO CREDIT AGREEMENT BY AND
                           BETWEEN GMX RESOURCES INC.
                          AND BANK ONE, OKLAHOMA, N.A.

         THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
executed as of this 14th day of April, 2000 by and between GMX RESOURCES INC.,
an Oklahoma corporation (the "Borrower") and BANK ONE, OKLAHOMA, N.A. (the
"Bank").

                              W I T N E S S E T H:

         WHEREAS, on February 18, 1998 Borrower and Bank entered into that
certain Credit Agreement (the "Agreement") whereby Bank provided Borrower with
a revolving line of credit in an amount governed by a Borrowing Base which
shall not exceed $20,000,000.00, as evidenced by reducing revolving promissory
note with a stated like amount of even date with the Original Agreement (the
"Original Note").

         WHEREAS, on May 19, 1999, Borrower and Bank amended the Agreement for
the first time (the "First Amendment") in order to document the January 1,
1999 redetermination of the Borrowing Base, to redetermine the Maximum
Commitment Amount at $5,915,000.00, to add Ken L. Kenworthy, Jr. and Ken L.
Kenworthy, Sr. as guarantors, and to evidence such additional changes to the
Agreement as more particularly set forth herein;

         WHEREAS, on November 24, 1999, Borrower and Bank amended the
Agreement for the second time (the "Second Amendment") in order to document
the September 1, 1999 redetermination of the Borrowing Base, to provide for
Unscheduled Redeterminations, to include commodity rate management language,
and to evidence such additional changes to the Agreement as more particularly
set forth therein (the Original Agreement as amended by the First Amendment
and the Second Amendment is referred to herein as the "Agreement");

         WHEREAS, the obligations described in the Agreement are secured by,
among other things not specifically set forth herein, certain oil and gas
properties and other properties as set forth in the Agreement; and

         WHEREAS, all capitalized terms not otherwise defined herein shall
have those meanings assigned to such terms in the Agreement;

         WHEREAS, Borrower and Bank desire to amend the Agreement for the
third time in order to: (i) document the Unscheduled Redetermination (March 1,
2000) of the Borrowing Base, (ii) document the reversion of the interest rate
to the rate set forth in the Original Agreement, (iii) require that Borrower
have 90% of its Oil and Gas Properties mortgaged to Bank and, of those Oil and
Gas Properties mortgaged, have title coverage of 90%, (iv) delete the
monitoring of monthly recompletion reports, and (v) evidence such additional
changes to the Agreement as more particularly set forth herein;

                                       1

<PAGE>

         NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower and the
Bank hereby agree to amend the agreement as follows:

         A.       CHANGES TO THE AGREEMENT

                  1.       Bank and Borrower acknowledge that the outstanding
balance on the Note is now less than or equal to the Borrowing Base;
consequently, the interest rates shall revert to and be determined at those
rates set forth in the Original Agreement.

                  2.       Section 9.2.7 of the Agreement, Recompletion
Progress Reports, is hereby deleted from the Agreement in its entirety in
order to evidence that such reports are no longer required.

                  3.       The copy of the document attached hereto as Annex
"1" shall replace and be substituted for Exhibit "G" to the Agreement in order
to add an additional covenant pertaining to Borrower's continuing requirement
to maintain 90% of its Oil and Gas Properties as Mortgaged Properties and to
provide title information which is acceptable to Bank, on an on-going basis,
to at least 90% of its Mortgaged Properties.

         B.       NOTICES AND WAIVERS.

         Borrower is hereby notified of the following occurrences and the Bank
hereby provides the following waivers.

                  1.       BORROWING BASE. Bank and Borrower acknowledge that
the Borrowing Base as of March 1, 2000 (an Unscheduled Redetermination) is
currently $6,500,000.00 and, effective as of April 1, 2000, the Monthly
Commitment Reduction is $0.00 and such Borrowing Base and Monthly Commitment
Reduction shall remain at such amounts until the earlier to occur of an
Unscheduled Redetermination or September 1, 2000. Borrower and Bank
acknowledge that the Evaluation Dates are January 1 and July 1; provided,
however, the July 1, 2000 Evaluation Date is hereby deferred until September
1, 2000. Accordingly, the requirement set forth at Section 9.2.4 of the
Agreement, Semi-Annual Engineering Report, that Borrower provide an
engineering evaluation report by no later that June 1 to be effective as of
July 1 is hereby extended until August 1 to be effective as of September 1 for
the year ending December 31, 2000 only.

                  2.       FINANCIAL COVENANT NON-COMPLIANCE. Bank hereby
provides Borrower with a one-time waiver of the default created by Borrower's
failure to comply with Section 9.19, CURRENT RATIO, as of December 31, 1999.
This waiver shall not be deemed to constitute a waiver of any other Event of
Default or a waiver of any future violations of Section 9.19 or any other
term, covenant or condition of the Agreement.

         C.       REPRESENTATIONS AND WARRANTIES

                                       2

<PAGE>

         Borrower hereby represents and warrants to Bank that:

                  1.       Borrower is a corporation, duly organized, legally
existing, and in good standing under the laws of the State of Oklahoma, and is
duly qualified as a foreign corporation and in good standing in all other
states wherein the nature of its business or its assets make such
qualification necessary.

                  2.       Borrower's execution and delivery of this Amendment
and performance of its obligations hereunder: (a) are and will be within its
powers; (b) are duly authorized by its board of directors; (c) are not and
will not be in contravention of any law, statute, rule or regulation, the
terms of its articles or incorporation and bylaws, nor of any agreement or
undertaking to which Borrower or any of its properties are bound; (d) do not
require any consent or approval (including governmental) which has not been
given; and (e) will not result in the imposition of liens, charges or
encumbrances on any of its properties or assets, except those in favor of Bank
hereunder.

                  3.       This Amendment, when duly executed and delivered,
will constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with its terms.

                  4.       All financial statements, balance sheets, income
statements and other financial data which have been or are hereafter furnished
to Bank by Borrower to induce Bank to make the loans hereunder due, and as to
subsequent financial statements will, fairly represent each Borrower's
financial condition as of the dates for which the same are furnished. All such
financial statements, reports, papers and other data furnished to Bank are and
will be, when furnished: prepared in accordance with generally accepted
accounting principles consistently applied; accurate and correct in all
material respects; and complete insofar as completeness may be necessary to
give Bank a true and accurate knowledge of the subject matter. Since the date
of the last such financial statements, no material adverse change has occurred
in the operations or condition, financial or otherwise and other financial
data provided to Bank; of either Borrower, nor, to the best of their
knowledge, has either Borrower incurred, any material liabilities or made any
material investment or guarantees, direct or contingent, in any single case or
in the aggregate, which has not been disclosed to Bank.

                  5.       The Borrower is the sole and lawful owner of the
Collateral, pledged, mortgaged or assigned by it, and Borrower has, and as to
after acquired property or new properties will have, good right to cause the
Collateral to be hypothecated to Bank as security for the obligations
described in the Agreement, as amended hereby.

                  6.       All of each Borrower's other representations and
warranties set forth in Section 8 of the Agreement, Representations and
Warranties, are true and correct on and as of the date hereof with the same
effect as though made and repeated by Borrower as of the date hereof.

                                       3

<PAGE>

         D.       CONDITIONS

         Bank's obligations under the Agreement, as hereby amended, are
subject to the following conditions:

                  1.       Bank and Borrower shall have executed and delivered
this Amendment.

                  2.       Borrower shall have executed such additional
mortgages, deeds of trust, financing statement and such other documents as are
deemed necessary by Bank in order to perfect a lien in favor of Bank in and to
those Oil and Gas Properties necessary to achieve the percentages required by
the covenants set forth herein.

                  3.       Bank shall have received certificates dated as of a
recent date from the Secretary of State or other appropriate Governmental
Authority evidencing Borrower's existence or qualification and good standing
in all jurisdictions covered by the oil and gas properties where such
qualification is required and where failure to be qualified or in good
standing could reasonably be expected to have a material adverse effect upon
(i) its ability to repay the indebtedness set forth in the Note or the Loan
Documents or (ii) the Collateral;

                  4.       Bank shall have received results of searches of the
UCC records of the State of Oklahoma and any and all other applicable
jurisdictions from a source acceptable to the Bank and reflecting no Liens,
other than Permitted Liens, against any of its Collateral as to which
perfection of a lien is accomplished by the filing of a financing statement;

                  5.       Borrower's representations and warranties set forth
in Section C hereof shall be true and correct on and as of the date hereof,
and the date of any subsequent advance with the same effect as though such
representation and warranty had been on and as of such date.

                  6.       Borrower shall have executed any and all mortgages,
deeds of trust and/or any other security documents deemed necessary by Bank in
its sole discretion.

                  7.       Borrower shall have satisfied all conditions set
forth in the Agreement.

                  8.       As of the date hereof, and the date of any
subsequent Advance, no Event of Default nor any event which, with the giving
of notice or lapse of time, would constitute an Event of Default shall have
occurred and be continuing.

         E.       RELEASE

                  Borrower hereby remises, releases, and forever discharges
Bank, its successors and assigns, its officers, directors, employees, agents
and attorneys (collectively, the "Released Parties") of and from all actions,
causes of action, suits, proceedings, debts, contracts, claims, damages,
liability and demands whatsoever, known or unknown, in law or equity, which
Borrowers, and each of them, ever had or now have, by reason of any matter,
cause, or thing whatsoever arising from the

                                       4

<PAGE>

actions or inactions of the Released Parties in any matter relating to the
Agreement, Note, and other Loan Documents (collectively, the "Released
Matters"); and the Borrower covenants not to sue any of the Released Parties
with respect to the Released Matters. The release and covenant not to sue set
forth herein are intended by the parties to be as broad and comprehensive as
possible.

         F.       OTHER COVENANTS AND MISCELLANEOUS TERMS

                  1.       Except as expressly amended and supplemented
hereby, the Agreement shall remain unchanged and in full force and effect, and
the same is hereby ratified and extended.

                  2.       The obligations described in the Agreement, as
amended hereby, including but not limited to the indebtedness evidenced by the
Note executed in conjunction with the Agreement, shall continue to be secured
by the Collateral, without interruption or impairment of any kind.

                  3.       Borrower agrees to execute such additional
mortgages, deeds of trust and/or amendments to such documents already in place
as Bank deems necessary to adequately secure the loan at any time and from
time to time hereafter.

                  4.       The Borrower hereby agrees to pay all reasonable
attorney fees and legal expenses incurred by Bank in preparation, execution
and implementation of this Amendment, the Replacement Note, and any mortgages,
guaranty agreements, subordination agreements, deeds of trust, security
agreements, pledge agreements or any amendments thereto.

                  5.       This Amendment shall be construed in accordance
with and governed by the laws of the State of Oklahoma, and shall be binding
on and inure to the benefit of the Borrower and Bank, and their respective
successors and assigns. All obligations of the Borrower under the Agreement
and all rights of Bank and any other holder of the Notes, whether expressed
herein or in any Note, shall be in addition to and not in limitation of those
provided by applicable law. Borrower irrevocably agrees that, subject to
Bank's sole election, all suits or proceedings arising from or related to the
Agreement, as amended, or the Notes may be litigated in courts (whether State
or Federal) sitting in Oklahoma City, Oklahoma, and the Borrower hereby
irrevocably waives any objection to such jurisdiction and venue.

                                       5

<PAGE>

                  6.       This Amendment may be executed in as many
counterparts as are deemed necessary or convenient, and it shall not be
necessary for the signature of more than any one party to appear on any single
counterpart. Each counterpart shall be deemed an original, but all shall be
construed together as one and the same instrument. The failure of any party to
sign shall not affect or limit the liability of any party executing any such
counterpart.

                                    BORROWER:

                                    GMX RESOURCES INC.,
                                    an Oklahoma corporation

                                      /s/ Ken L. Kenworthy, Jr.
                                    --------------------------------------------
                                    By: Ken L. Kenworthy
                                    Title: Chief Financial Officer

                                    BANK:

                                    BANK ONE, OKLAHOMA, N.A.

                                      /s/ Coy Gallatin
                                    --------------------------------------------
                                    By: Coy Gallatin
                                    Title: Vice President

                                       6

<PAGE>

                                     ANNEX 1

                                   EXHIBIT "G"

                              ADDITIONAL COVENANTS

1.       Borrower shall execute any and all mortgages, deeds of trust, and
financing statements as are necessary, in Bank's discretion, to maintain
mortgages and/or liens on ninety percent (90%) of its Oil and Gas Properties.

2.       Borrower shall provide, on an on-going basis, title information on at
least ninety percent (90%) of all of the Mortgaged Property, the results of
which shall be satisfactory to the Bank and its legal counsel. Such title
information shall evidence Borrower's good and indefeasible title to said
Mortgaged Property, free and clear of all liens and encumbrances except as may
otherwise be approved in writing by the Bank.

                                       7<PAGE>

                                                                    EXHIBIT 10.4

                    [SAGESTONE CAPITAL MANAGEMENT LETTERHEAD]

                                October 20, 2000

GMX Resources, Inc.
One Benham Place
9400 North Broadway
Oklahoma City, Oklahoma 73114

Attn:  Ken L. Kenworthy

Gentlemen:

     We have today transferred to you the following assets in exchange for
$230,000 in cash:

     1.   22,000 shares of Series B Preferred Stock of GMX Resources, Inc.

     2.   220,683 shares of Common Stock of Transtech Resources, Inc. of which
          20,134 shares are represented by a lost certificate number 165.

     3.   All rights of EEP to any further distributions araising from the
          bankruptcies of Petroleum Production Management, Inc. and Overland
          Resources Management, Inc.

     In that connection, we would like to confirm the following:

     1.   The assets are conveyed to you without any representation or warranty
          or of any type save only a warranty that the assets are conveyed free
          and clear of any claims, liens or encumbrances of any kind.

     2.   You have assured us that the balance sheet and income statement
          delivered to us concurrently herewith present the financial condition
          of GMX Resources as August 31, 2000 and for the eight month period
          indicated thereon, that the statements have been prepared in
          accordance with Generally Accepted Accounting Principles, consistently
          applied, and that since the date thereof there have been no material
          adverse changes in the business or business prospects of GMX
          Resources.

     3.   You have assured us that the purchase of assets and payment of cash
          therefor are within the power and authority of GMX Resources, Inc. and

<PAGE>

          have been duly authorized by all necessary corporate action of GMX
          Resources, Inc.

     4.   The Equity Fund of Commonfund will cooperate with you to obtain from
          Transtech Resources, Inc. a newly issued certificate representing the
          lost certificate for 20,134 shares of Common Stock being sold
          concurrently therewith.

     Please indicate your concurrence with the foregoing by countersigning and
returning to us the enclosed copy of this letter.

Very Truly Yours,

Endowment Energy Partners, L.P
by Fairfield Partners Management LLC, General Partner
by Sagestone Capital Management, LLC
         Its Attorney in Fact

by:      /s/ Scott D. Josey
    -------------------------------------------------
         Scott D. Josey, Managing Director

Endowment Energy Partners II, L.P
by Fairfield Partners Management LLC, General Partner
by Sagestone Capitol Management, LLC
         Its Attorney in Fact

by:      /S/ Scott D. Josey
    -------------------------------------------------
         Scott D. Josey, Managing Director

The Common Fund by Nonprofit Organizations
for the account of its Multi-Strategy Equity Fund
by Fairfield Partners Management LLC, Attorney in Fact
by Sagestone Capital Management, LLC
         Its Attorney in Fact

by:      /s/ Scott D. Josey
    -------------------------------------------------
         Scott D. Josey, Managing Director

AGREED AND CONFIRMED:

GMX Resources, Inc.

 /s/ Ken L. Kenworthy, Jr.
----------------------------------------------------
Ken L. Kenworthy, Jr.
President

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