Document:

<PAGE>

                                                                    EXHIBIT 10.5
                                                                  EXECUTION COPY

                                 AMENDMENT NO. 3

            Amendment No. 3 dated as of November 13, 2002 (this "AMENDMENT")
among LIBERTY LIVEWIRE CORPORATION, a Delaware corporation (the "BORROWER"), the
several Lenders from time to time parties to the Credit Agreement (as defined
below), BANC OF AMERICA SECURITIES LLC, as Lead Arranger and Book Manager, BANK
OF AMERICA, N.A., as Issuer and Swingline Lender, BANK OF AMERICA, N.A., as
administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE
AGENT"), SALOMON SMITH BARNEY INC., as Syndication Agent, and THE BANK OF NEW
YORK COMPANY, INC., as Documentation Agent.

                               W I T N E S S E T H

            WHEREAS, the Borrower, the Lenders, the Lead Arranger, the Issuer,
the Administrative Agent, the Syndication Agent and the Documentation Agent are
parties to the Credit Agreement, dated as of December 22, 2000 (as amended by
Amendment No. 1, dated as of November 1, 2001, and Amendment No. 2, dated as of
March 26, 2002, the "CREDIT AGREEMENT"; terms defined in the Credit Agreement
are used herein as defined therein);

            WHEREAS, the parties desire to amend the Credit Agreement to modify
certain provisions thereof;

            NOW THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

            SECTION 1. AMENDMENT TO CREDIT AGREEMENT.

            (a) AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit Agreement is
      hereby amended by:

                  (i) Deleting clause (a) of the definition of "Applicable
            Margin" in its entirety and replacing it with the following:

                        (a) for each Type of Revolving Loan and Term A Loan, the
                  rate per annum set forth under the relevant column heading
                  opposite the applicable Total Leverage Ratio:

<TABLE>
<CAPTION>
                                                              Eurodollar           Alternate Base
                     Total Leverage Ratio                        Loans               Rate Loans
                     --------------------                     ----------           --------------
<S>                                                           <C>                  <C>
          Greater than or equal to 4.50 to 1.00                  3.50%                 2.50%

          Less than 4.50 to 1.00 but greater than or             3.25%                 2.25%
          equal to 4.00 to 1.00

          Less than 4.00 to 1.00 but greater than or             2.50%                 1.50%
          equal to 3.50 to 1.00
</TABLE>

<PAGE>

<TABLE>
<S>                                                              <C>                   <C>
          Less than 3.50 to 1.00 but greater than or             2.25%                 1.25%
          equal to 3.00 to 1.00

          Less than 3.00 to 1.00 but greater than or             2.00%                 1.00%
          equal to 2.50 to 1.00

          Less than 2.50 to 1.00                                 1.75%                 0.75%
</TABLE>

                  ; provided that, after June 30, 2003, if an EBITDA Event has
                  not yet occurred and the Total Leverage Ratio of the Borrower
                  for the applicable time period exceeds the level set forth
                  opposite such period in Section 6.1(c)(ii), for each Type of
                  Revolving Loan and Term A Loan, the rate per annum set forth
                  under the relevant column heading opposite the applicable
                  Total Leverage Ratio:

<TABLE>
<CAPTION>
                                                               Eurodollar          Alternate Base
                    Total Leverage Ratio                         Loans               Rate Loans
                    --------------------                       ----------          --------------
<S>                                                            <C>                 <C>
          Greater than or equal to 4.50 to 1.00                  4.50%                 3.50%

          Less than 4.50 to 1.00 but greater than or
          equal to 4.00 to 1.00                                  4.25%                 3.25%

          Less than 4.00 to 1.00 but greater than or
          equal to 3.50 to 1.00                                  2.50%                 1.50%

          Less than 3.50 to 1.00 but greater than or
          equal to 3.00 to 1.00                                  2.25%                 1.25%

          Less than 3.00 to 1.00 but greater than or
          equal to 2.50 to 1.00                                  2.00%                 1.00%

          Less than 2.50 to 1.00                                 1.75%                 0.75%
</TABLE>

                  (ii) Deleting clause (b) of the definition of "Applicable
            Margin" in its entirety and replacing it with the following:

                        (b) for each Type of Term B Loan, (i) if the Total
                  Leverage Ratio is less than 4.50 to 1.00, a rate per annum
                  equal to (x) in the case of an Alternate Base Rate Loan, 3.00%
                  and (y) in the case of a Eurodollar Loan, 4.00%, and (ii) if
                  the Total Leverage Ratio equals or exceeds 4.50 to 1.00, a
                  rate per annum equal to (x) in the case of an Alternate Base
                  Rate Loan, 3.25% and (y) in the case of a Eurodollar Loan,
                  4.25%; provided that, after June 30, 2003, if an EBITDA Event
                  has not yet occurred and the Total Leverage Ratio of the
                  Borrower for the applicable time period exceeds the level set
                  forth opposite such period in Section 6.1(c)(ii), (i) if the
                  Total Leverage Ratio is less than 4.50 to 1.00, a rate per
                  annum equal to (x) in the case of an Alternate Base Rate Loan,
                  4.00% and (y) in the case of a Eurodollar Loan, 5.00%, and
                  (ii) if the Total Leverage Ratio

                                       2
<PAGE>

                  equals or exceeds 4.50 to 1.00, a rate per annum equal to (x)
                  in the case of an Alternate Base Rate Loan, 4.25% and (y) in
                  the case of a Eurodollar Loan, 5.25%.

                  (iii) Deleting in its entirety the definition of "Capital
            Expenditures" and replacing it with the following:

                        "Capital Expenditures" of the Borrower and its
                  Subsidiaries shall mean any expenditure in respect of the
                  purchase or other acquisition of (including any expenditures
                  under any Financing Leases (but excluding operating leases
                  that are not Off Balance Sheet Lease Liabilities)) with
                  respect to fixed or capital assets of the Borrower or such
                  Subsidiary but shall exclude (a) Permitted Acquisitions, (b)
                  any fixed or capital assets purchased or acquired in
                  connection with normal replacement and maintenance programs
                  that, in accordance with GAAP, would be properly charged to
                  current operations, (c) Replacement Assets to the extent
                  funded pursuant to Section 2.9(c)(ii), (d) any equipment
                  purchased or acquired using the proceeds received from the
                  sale or disposition of other equipment as contemplated by
                  clauses (a) and (b) of Section 6.6, but only to the extent the
                  proceeds from such sale or disposition are reinvested in new
                  equipment within 60 days, (e) any fixed or capital assets
                  purchased or acquired from funds received from Liberty Media
                  Corporation pursuant to the Liberty Debt Documents, (f) any
                  fixed or capital assets purchased or acquired from funds
                  received through the issuance of Capital Stock of the Borrower
                  or any Subsidiary to any Person other than the Borrower or a
                  Subsidiary, and (g) any fixed or capital assets purchased or
                  acquired in connection with Net Disposition Proceeds not paid
                  to the Administrative Agent pursuant to Section 2.9(b).

                  (iv) Deleting in its entirety the first full paragraph of the
            definition of "EBITDA" and replacing it with the following:

                        "EBITDA" shall mean, for any period of determination, an
                  amount (computed without duplication) equal to (a) Net Income
                  for such period, after exclusion of (i) all items which should
                  be classified as extraordinary (all determined in accordance
                  with GAAP) and (ii) all gains attributable to insurance
                  proceeds (other than proceeds of business interruption
                  insurance) received during such period to the extent, if any,
                  such gains are included in Net Income plus (b) all amounts
                  deducted in computing Net Income for such period in respect of
                  (i) Interest Expense (after giving effect to all Hedging
                  Agreements and payments and receipts thereunder), (ii) noncash
                  amortization expense (including amortization of financing
                  costs, noncurrent assets and noncash charges), (iii)
                  depreciation, (iv) income taxes, (v) all other non-cash
                  expenses, (vi) any cash payments made to repurchase vested
                  employee stock options of the Borrower in an amount not to
                  exceed $10,000,000 in the aggregate during the term of this
                  Agreement, (vii) if any Permitted Acquisition occurred during
                  such

                                       3
<PAGE>

                  period, the amount of any Non-Recurring Expenses attributable
                  to the assets or Capital Stock so acquired, as set forth in
                  the certificate delivered pursuant to paragraph (c)(i) of the
                  definition of "Permitted Acquisition" and (viii) until
                  recognized in accordance with GAAP for the fiscal year 2000,
                  the items described in Schedule 1.1(c) in an aggregate amount
                  not to exceed $7,523,418, plus (c) Restructuring Charges
                  incurred in such period (provided, that (i) the amount of such
                  Charges shall be deducted from Net Income for purposes of
                  determining EBITDA in such period and each subsequent period
                  to the extent such Charges are paid in cash in such period or
                  subsequent period, as applicable, and (ii) in any fiscal year
                  of the Borrower, the aggregate of all Restructuring Charges
                  that shall be added back pursuant to this clause (c) shall not
                  exceed $10,000,000); provided that the amounts described in
                  clauses (a) and (b) above shall not include any amounts
                  attributable to any Venture Subsidiary that is Minority Owned,
                  except to the extent of cash dividends actually received by
                  the Borrower or any Subsidiary from on-going operations of
                  such Venture Subsidiary; provided further that, for periods of
                  determination on or prior to September 30, 2002, the amounts
                  described in clauses (a) and (b) above shall not include any
                  amounts attributable to ISG.

                  (v) Deleting in its entirety the definition of "Indebtedness"
            and replacing it with the following:

                        "Indebtedness" of any Person at any date shall mean
                  (without duplication), (a) all indebtedness of such Person for
                  borrowed money or for the deferred purchase price of property
                  or services (other than current trade liabilities incurred in
                  the ordinary course of business and payable in accordance with
                  customary practices), (b) any other indebtedness of such
                  Person which is evidenced by a note, bond, debenture or
                  similar instrument, (c) all obligations of such Person under
                  Financing Leases, (d) all Off Balance Sheet Lease Liabilities
                  of such Person, (e) all obligations of such Person in respect
                  of outstanding letters of credit, acceptances and similar
                  obligations issued or created for the account of such Person,
                  (f) all liabilities secured by any Lien on any property owned
                  by such Person even though such Person has not assumed or
                  otherwise become liable for the payment thereof, (g)
                  liabilities arising under Hedging Agreements (other than
                  interest rate caps) of such Person, (h) all Guarantee
                  Obligations of such Person, but excluding any Guarantee
                  Obligation where the primary obligor is a Subsidiary (except a
                  Venture Subsidiary) and the primary obligation does not
                  constitute Indebtedness, and (i) any asserted withdrawal
                  liability of such Person (either directly or indirectly
                  through a Commonly Controlled Entity) to a Plan.

                  (vi) Deleting in its entirety the definition of "Net
            Disposition Proceeds" and replacing it with the following:

                                       4
<PAGE>

                        "Net Disposition Proceeds" shall mean the gross cash
                  proceeds (including any cash received by way of deferred
                  payment pursuant to, or monetization of, a note receivable or
                  otherwise but only as and when received) received by the
                  Borrower or any Subsidiary from the sale (other than (i) the
                  sale of inventory in the ordinary course of business, (ii)
                  sales of assets in the ordinary course of business permitted
                  under clause (a) or (b) of Section 6.6 to the extent the
                  proceeds from such sales under either clause (a) or (b) are
                  reinvested in new equipment within 60 days, and (iii) sales to
                  the Borrower or Wholly Owned Subsidiaries permitted under
                  clause (d) or (e) of Section 6.6,), lease (other than a lease
                  in the ordinary course of business), transfer or other
                  disposition of any of its assets less the sum of (a)
                  reasonable selling expenses paid to non-affiliated third
                  parties, (b) any Indebtedness secured by a Lien on such asset
                  or property permitted to exist under clause (g) or (i) of
                  Section 6.3 to the extent the Borrower or such Subsidiary is
                  required to make a payment with respect thereto and (c) income
                  taxes reasonably estimated to be actually payable by the
                  Borrower or such Subsidiary with respect to any gain realized
                  as a result of such sale, lease, transfer or other disposition
                  and which taxes are payable by the Borrower or such Subsidiary
                  within two years of the date of such sale, lease, transfer or
                  other disposition or within two years of any installment
                  payment with respect thereto; provided that at the end of such
                  two year period any such amount not so paid shall constitute
                  Net Disposition Proceeds.

                  (vii) Deleting in its entirety the definition of "Replacement
            Assets" and replacing it with the following:

                        "Replacement Assets" shall have the meaning ascribed
                  thereto in Section 2.9(c).

                  (viii) Deleting in its entirety the definition of "Revolving
            Credit Commitment" and replacing it with the following:

                        "Revolving Credit Commitment" shall mean, as to any
                  Lender, the obligation of such Lender to make Revolving Loans
                  to the Borrower in an aggregate principal amount at any one
                  time outstanding not to exceed the amount set forth under the
                  heading "Revolving Credit Commitments" opposite such Lender's
                  name on Schedule I or in the New Lender Joinder Agreement
                  pursuant to which it became a party hereto, as such amount may
                  be reduced from time to time pursuant to this Agreement or as
                  such amount may otherwise vary based upon any assignment of
                  Revolving Credit Commitments by or to such Lender pursuant to
                  a Commitment Transfer Supplement. As of November 14, 2002, the
                  aggregate amount of the Revolving Credit Commitment is equal
                  to the Dollar Equivalent of $191,500,000.

                  (ix) Adding the following new definitions:

                                       5
<PAGE>

                        "Atlanta Property" shall mean the property located at
                  151 Ponce De Leon Avenue, Atlanta, Georgia and any personal
                  property attached thereto, including, without limitation,
                  buildings and fixtures, as further described in Schedule I
                  hereto.

                        "EBITDA Event" shall mean the sale by the Borrower or a
                  Subsidiary of (i) all the Capital Stock or all or
                  substantially all the assets of a Subsidiary or group of
                  Subsidiaries or (ii) an operating division of a Subsidiary or
                  group of Subsidiaries, such that, after giving effect to such
                  sale, EBITDA for the Borrower and its Subsidiaries for the
                  four fiscal quarter period most recently ended would have
                  increased by $3,000,000.

            (b) AMENDMENT OF SECTION 2.9(b). Section 2.9(b) of the Credit
      Agreement is hereby deleted in its entirety and the following inserted in
      its place:

                        (b) The Borrower, within ten days after receipt of any
                  Net Disposition Proceeds (other than Net Disposition Proceeds
                  not greater than $2,600,000 received from the sale of the
                  Atlanta Property permitted pursuant to Section 6.6(h) and
                  reinvested in the Atlanta Property for the purchase or other
                  acquisition of fixed or capital assets), shall (x) pay to the
                  Administrative Agent (1) 75% of such Net Disposition Proceeds,
                  if (A) the Total Leverage Ratio (prior to the application of
                  such Net Disposition Proceeds pursuant to this Section 2.9) is
                  greater than or equal to 3.50 to 1.00 on the date such Net
                  Disposition Proceeds are received and (B) the aggregate amount
                  of Net Disposition Proceeds received by the Borrower since
                  November 14, 2002 is not greater than $75,000,000, (2) 50% of
                  such Net Disposition Proceeds, if (A) the Total Leverage Ratio
                  (prior to the application of such Net Disposition Proceeds
                  pursuant to this Section 2.9) is less than 3.50 to 1.00 but
                  greater than or equal to 3.00 to 1.00 on the date such Net
                  Disposition Proceeds are received and (B) the aggregate amount
                  of Net Disposition Proceeds received by the Borrower since
                  November 14, 2002 is not greater than $75,000,000, (3)
                  notwithstanding the foregoing clauses (1) and (2), 100% of
                  such Net Disposition Proceeds, if such Net Disposition
                  Proceeds are received by the Borrower from dispositions
                  permitted under Section 6.6(c) or (4) 100% of such Net
                  Disposition Proceeds, if the aggregate amount of Net
                  Disposition Proceeds received by the Borrower since November
                  14, 2002 exceeds $75,000,000, and (y) deliver to the
                  Administrative Agent a certificate setting forth in reasonable
                  detail the calculation of such Net Disposition Proceeds;
                  provided that, any Net Disposition Proceeds from the Atlanta
                  Property less than $2,600,000 which may be received by
                  Borrower are held in a segregated account of the Borrower
                  until utilized to acquire fixed or capital leasehold
                  improvements in such property. Any Net Disposition Proceeds
                  shall be applied first, pro rata to all the Loans (with a
                  concomitant reduction in the Revolving Credit Commitments),
                  second, if the Loans have been repaid in full, to the payment
                  of any other Obligations then due and payable, and third, to
                  the extent of any remaining proceeds, to the Administrative
                  Agent to be held as cash collateral for any other Obligations
                  (including, without limitation, Obligations with respect to
                  outstanding Letters of Credit).

                                       6
<PAGE>

            (c) AMENDMENT TO SECTION 2.9(c). Section 2.9(c) of the Credit
      Agreement is hereby deleted in its entirety and the following inserted in
      its place:

                  (c) If the aggregate amount of Net Insurance Proceeds received
            since the Closing Date exceeds $2,500,000, the Borrower shall,
            within ten days after receipt thereof, (x) pay to the Administrative
            Agent 100% of such Net Insurance Proceeds to the extent of such
            excess, for application in the manner set forth in the next sentence
            and (y) deliver to the Administrative Agent a certificate setting
            forth in reasonable detail the calculation of such Net Insurance
            Proceeds; provided that the Borrower, by written notice to the
            Administrative Agent delivered within such ten day period, may elect
            to defer applying Net Insurance Proceeds aggregating up to an
            additional $50,000,000 in such manner if and only if (i) concurrent
            with such notice such deferred proceeds are applied to repay the
            Revolving Loans (with a concomitant temporary reduction in the
            Revolving Credit Commitments), and (ii) within 270 days after
            receipt by the Administrative Agent of such deferred proceeds, the
            Borrower shall obtain Revolving Loans for purposes of acquiring
            assets which are, in the ordinary course, used and useful in the
            operation of the business of the Borrower and its Subsidiaries
            permitted under Section 6.13 ("Replacement Assets") (it being
            understood that (A) upon expiration of such 270-day period, any
            portion of such deferred proceeds that has not been utilized by the
            Borrower as a Revolving Loan to acquire such Replacement Assets
            shall be applied to the payment of the Obligations in accordance
            with the next succeeding sentence and the Lenders shall be deemed to
            have made Revolving Loans the proceeds of which shall be used to
            effect such application, (B) upon each disbursement of such deferred
            proceeds as a Revolving Loan for purposes of acquiring Replacement
            Assets or paying such Obligations, the Revolving Credit Commitments
            shall (except as provided in the next sentence) be restored by the
            amount of such disbursement or application and (C) if any Default
            shall occur during such 270-day period, the Administrative Agent
            may, in its discretion, and shall, if directed by the Required
            Lenders, apply such deferred proceeds as a mandatory prepayment in
            accordance with the next sentence and the Borrower shall be deemed
            to have requested Revolving Loans in an amount equal to such
            deferred proceeds (as such amount may have been reduced hereunder)
            and, in the case of any mandatory prepayment, such Revolving Loans
            shall be made regardless of the failure of the Borrower to satisfy
            the conditions set forth in Section 4.2). Any Net Insurance Proceeds
            shall be applied first, pro rata to all the Loans (with a
            concomitant reduction in the Revolving Credit Commitments), second,
            if the Loans have been repaid in full, to the payment of any other
            Obligations then due and payable, and third, to the extent of any
            remaining proceeds, to the Administrative Agent to be held as cash
            collateral for any other Obligations (including, without limitation,
            Obligations with respect to outstanding Letters of Credit).

            (d) AMENDMENT OF SECTION 5.1. Section 5.1 of the Credit Agreement is
      hereby deleted in its entirety and the following inserted in its place:

            5.1 Financial Statements. Furnish to each Lender:

                                       7
<PAGE>

                  (a) as soon as available, but in any event within 90 days
            after the end of each fiscal year of the Borrower, a copy of the
            consolidated and consolidating balance sheet of the Borrower and its
            Subsidiaries as at the end of such year and the related statements
            of operations, stockholders equity and cash flows for such year,
            setting forth in each case in comparative form the figures as of the
            end of and for the previous year, reported on without a
            qualification or exception arising out of the scope of the audit, by
            KPMG or other independent certified public accountants of nationally
            recognized standing; provided that the submission of the Borrower's
            report on Form 10-K shall satisfy the foregoing requirements;

                  (b) as soon as available, but in any event not later than 45
            days after the end of each quarterly period for each of the first
            three fiscal quarters of each fiscal year of the Borrower, the
            unaudited consolidated and consolidating balance sheet of the
            Borrower and its Subsidiaries as at the end of such quarter and the
            related unaudited statements of operations, stockholders' equity and
            cash flows of the Borrower and its Subsidiaries for such quarter and
            the portion of the fiscal year through the end of such quarter and
            setting forth in each case in comparative form the figures from the
            budget for such fiscal year furnished to the Lenders pursuant to
            Section 5.2(d) and the actual figures for the corresponding date or
            period in the previous year, certified by a Responsible Officer as
            being fairly stated in all material respects (subject to normal
            year-end audit adjustments); provided that the submission of the
            Borrower's report on Form 10-Q shall satisfy the foregoing
            requirements; and

                  (c) as soon as available, but in any event not later than 30
            days after the end of each monthly period of each fiscal year of the
            Borrower, the unaudited consolidated and consolidating balance sheet
            of the Borrower and its Subsidiaries as at the end of such month and
            the related unaudited statements of operations, stockholders' equity
            and cash flows of the Borrower and its Subsidiaries for such month
            and the portion of the fiscal year through the end of such month and
            setting forth in each case in comparative form the figures from the
            budget for such fiscal year furnished to the Lenders pursuant to
            Section 5.2(d) and the actual figures for the corresponding date or
            period in the previous year, certified by a Responsible Officer as
            being fairly stated in all material respects (subject to normal
            year-end audit adjustments).

                  All such financial statements shall be complete and correct in
            all material respects and shall be prepared in reasonable detail and
            in accordance with GAAP applied consistently throughout the periods
            reflected therein and with prior periods (except as approved by such
            accountants or officer, as the case may be, and disclosed therein).

            (e) AMENDMENT OF SECTION 6.1(b). Section 6.1(b) of the Credit
      Agreement is hereby deleted in its entirety and the following inserted in
      its place:

                  (b) Fixed Charge Coverage. From and after January 1, 2003, on
            any date during any period set forth below, (i) prior to the
            occurrence of an EBITDA

                                       8
<PAGE>

            Event, after giving effect to the making of each Loan to be made on
            such date, permit the Fixed Charge Coverage Ratio to be less than
            the ratio set forth opposite such period below:

<TABLE>
<CAPTION>
             Period                               Fixed Charge Coverage Ratio
             ------                               ---------------------------
<S>                                               <C>
             1/01/03 to 3/31/03                           0.80 to 1.00
             4/01/03 to 6/30/03                           0.85 to 1.00
             7/01/03 to 9/30/03                           0.95 to 1.00
             10/01/03 and thereafter                      1.00 to 1.00
</TABLE>

            and (ii) after the occurrence of an EBITDA Event, after giving
            effect to the making of each Loan to be made on such date, permit
            the Fixed Charges Coverage Ratio to be less than the ratio set forth
            opposite such period below:

<TABLE>
<CAPTION>
             Period                               Fixed Charge Coverage Ratio
             ------                               ---------------------------
<S>                                               <C>
             1/01/03 to 3/31/03                           0.85 to 1.00
             4/01/03 to 6/30/03                           0.90 to 1.00
             7/01/03 to 9/30/03                           0.95 to 1.00
             10/01/03 and thereafter                      1.00 to 1.00
</TABLE>

            (f) AMENDMENT OF SECTION 6.1(c). Section 6.1(c) of the Credit
      Agreement is hereby deleted in its entirety and the following inserted in
      its place:

                  (c) Total Leverage Ratio. On any date during any period set
            forth below, (i) prior to the occurrence of an EBITDA Event, after
            giving effect to the making of each Loan to be made on such date,
            permit the Total Leverage Ratio to exceed the ratio set forth
            opposite such period below:

<TABLE>
<CAPTION>
             Period                               Total Leverage Ratio
             ------                               --------------------
<S>                                               <C>
             1/1/02 through 3/31/02                   4.65 to 1.00
             4/1/02 through 6/30/02                   4.55 to 1.00
             7/1/02 through 9/30/02                   4.45 to 1.00
             10/1/02 through 6/30/03                  4.75 to 1.00
             7/1/03 through 9/30/03                   4.70 to 1.00
             10/1/03 to 12/31/03                      4.65 to 1.00
             1/1/04 to 3/31/04                        4.55 to 1.00
             4/1/04 to 6/30/04                        4.05 to 1.00
             7/1/04 to 9/30/04                        4.00 to 1.00
             10/1/04 to 12/31/04                      3.80 to 1.00
             1/1/05 and thereafter                    3.50 to 1.00
</TABLE>

            and (ii) after the occurrence of an EBITDA Event, after giving
            effect to the making of each Loan to be made on such date, permit
            the Total Leverage Ratio to exceed the ratio set forth opposite such
            period below:

                                       9
<PAGE>

<TABLE>
<CAPTION>
             Period                               Total Leverage Ratio
             ------                               --------------------
<S>                                               <C>
             1/1/02 through 3/31/02                   4.65 to 1.00
             4/1/02 through 6/30/02                   4.55 to 1.00
             7/1/02 through 9/30/02                   4.45 to 1.00
             10/1/02 through 6/30/03                  4.55 to 1.00
             7/1/03 through 9/30/03                   4.50 to 1.00
             10/1/03 to 12/31/03                      4.40 to 1.00
             1/1/04 to 3/31/04                        4.35 to 1.00
             4/1/04 to 6/30/04                        4.05 to 1.00
             7/1/04 to 9/30/04                        4.00 to 1.00
             10/1/04 to 12/31/04                      3.80 to 1.00
             1/1/05 and thereafter                    3.50 to 1.00
</TABLE>

            ; provided that if the Borrower declares or pays any dividends, then
            at all times thereafter the Borrower will not permit the Total
            Leverage Ratio to exceed 3.00 to 1.00.

            (g) AMENDMENT OF SECTION 6.4(d). Section 6.4(d) of the Credit
      Agreement is hereby deleted in its entirety and the following inserted in
      its place:

                  (d) guarantees by the Borrower of performance of its
            Subsidiaries under service agreements and lease agreements entered
            into in the ordinary course of business and consistent with industry
            standards; and

            (h) AMENDMENT OF SECTION 6.5. Section 6.5 of the Credit Agreement is
      hereby deleted in its entirety and the following inserted in its place:

            6.5 Limitation on Fundamental Changes. Enter into any merger,
            acquisition, consolidation or amalgamation, or liquidate, wind up or
            dissolve itself (or suffer any liquidation or dissolution), or
            convey, sell, lease, assign, transfer or otherwise dispose of, all
            or substantially all its property, business or assets except:

            (a) any Subsidiary may be merged or consolidated with or into the
            Borrower (provided that the Borrower shall be the continuing or
            surviving corporation) or any Subsidiary of the Borrower may be
            merged or consolidated with or into any one or more Wholly Owned
            Subsidiaries of the Borrower;

            (b) any Wholly Owned Subsidiary may sell, lease, transfer or
            otherwise dispose of any or all its assets (upon voluntary
            liquidation or otherwise) to the Borrower or any other Wholly Owned
            Subsidiary of the Borrower;

            (c) any Wholly Owned Subsidiary of the Borrower may enter into any
            merger or consolidation necessary to effect a Permitted Acquisition;

            (d) Permitted Acquisitions; and

                                       10
<PAGE>

            (e) any Subsidiary may sell, lease, transfer or otherwise dispose of
            assets permitted by Section 6.6(g).

            (i) AMENDMENT OF SECTION 6.6. Section 6.6 of the Credit Agreement is
      hereby amended by:

                  (i) Deleting clauses (g) and (h) thereof in their entirety and
            the following inserted in its place:

                  (g) the sale of other assets in the aggregate amount not to
            exceed $75,000,000 from November 14, 2002; and

                  (h) the sale and lease of the Atlanta Property.

                  (ii) Inserting the following proviso at the end of Section
            6.6:

            provided that all Net Disposition Proceeds from such sales pursuant
            this Section 6.6 shall be applied in accordance with Section 2.9.

            (j) AMENDMENT OF SECTION 6.10. Section 6.10 is hereby amended by
      deleting the reference to Section 6.6(h) in the last sentence and
      replacing it with a reference to Sections 6.6(g) and 6.6(h).

            (k) AMENDMENT OF SCHEDULE I. Part A of Schedule I to the Credit
      Agreement is hereby deleted in its entirety and replaced by Schedule II
      hereto.

            SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants that, after giving effect to this Amendment,
all the representations and warranties of the Borrower contained in Section 3 of
the Credit Agreement shall be true in all material respects.

            SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be
effective upon the satisfaction of the following conditions precedent:

                                       11
<PAGE>

            (a) the Administrative Agent shall have received counterparts hereof
      executed by duly authorized officers of the Borrower and by duly
      authorized signatories of the Required Lenders;

            (b) the Administrative Agent shall have received a certificate of a
      Responsible Officer of the Borrower certifying that (i) this Amendment has
      been duly authorized, (ii) all representations and warranties are true as
      of the effective date hereof, and (iii) prior to and after giving effect
      to this Amendment, no Default or Event of Default shall have occurred
      which is continuing;

            (c) the Administrative Agent shall have received a consent from each
      Guarantor not a party hereto in the form attached as EXHIBIT A;

            (d) each consenting Lender shall have received a commitment fee
      equal to the product of (x) 37.5 basis points, times (y) the amount of
      such Lender's Commitment (after giving effect to this Amendment); and

            (e) the Administrative Agent shall have received such other
      documents and certificates as the Administrative Agent may request.

            SECTION 4. REFERENCE TO AND EFFECT IN THE LOAN DOCUMENTS.

            (a) Upon the effectiveness of this Amendment, each reference in the
      Credit Agreement to "this Agreement", "hereunder", "hereof" or words of
      like import referring to the Credit Agreement, and each reference in the
      other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
      words of like import referring to the Credit Agreement, shall mean and be
      a reference to the Credit Agreement as amended hereby.

            (b) Except as specifically amended above, the Credit Agreement and
      all other Loan Documents are and shall continue to be in full force and
      effect and are hereby in all respects ratified and confirmed. Without
      limiting the generality of the foregoing, the Loan Documents and all the
      Collateral described therein do and shall continue to secure the payment
      of all obligations of the Borrower under the Credit Agreement, the Notes
      and the other Loan Documents, in each case as amended hereby.

            (c) The execution, delivery and effectiveness of this Amendment
      shall not, except as expressly provided herein, operate as a waiver of any
      right, power or remedy of any Lender or the Administrative Agent under any
      of the Loan Documents, nor constitute a waiver of any provision of any of
      the Loan Documents.

            SECTION 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.

            SECTION 6. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.

                                       12
<PAGE>

            [NO ADDITIONAL TEXT ON THIS PAGE; SIGNATURE PAGES FOLLOW]

                                       13
<PAGE>

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

                                        BORROWER:

                                        LIBERTY LIVEWIRE CORPORATION

                                        By: /s/ WILLIAM E. NILES
                                           -------------------------------------
                                           Name: William E. Niles
                                           Title: Executive Vice President

                                        ADMINISTRATIVE AGENT:

                                        BANK OF AMERICA, N.A.,
                                        as Administrative Agent

                                        By: /s/ JAMES T. GILLAND
                                           -------------------------------------
                                           Name: James T. Gilland
                                           Title: Managing Director

                                        THE LENDERS:

                                        BANK OF AMERICA, N.A.

                                        By: /s/ JAMES T. GILLAND
                                           -------------------------------------
                                           Name: James T. Gilland
                                           Title: Managing Director

                                        CITICORP USA, INC.

                                        By: /s/ ROBERT F. PARR
                                           -------------------------------------
                                           Name: Robert F. Parr
                                           Title: Managing Director
                                                  Global Media & Communication
                                                  388 Greenwich St./21st Floor
                                                  212-816-8489

                                        THE BANK OF NEW YORK COMPANY, INC.

                                        By: /s/ JOHN C. LAMBERT
                                           -------------------------------------
                                           Name: John C. Lambert
                                           Title: Authorized Signer

                                      S-1
<PAGE>

                                        GENERAL ELECTRIC CAPITAL
                                        CORPORATION

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        ROYAL BANK OF CANADA

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        ING (U.S.) CAPITAL LLC

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        BNP PARIBAS

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        MIZUHO CORPORATE BANK, LTD.

                                        By: /S/ MASAHITO FUKADA
                                           -------------------------------------
                                           Name: Masahito Fukada
                                           Title: Senior Vice President

                                      S-2
<PAGE>

                                        THE GOVERNOR AND COMPANY OF THE
                                        BANK OF IRELAND

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        BANK OF TOKYO-MITSUBISHI TRUST
                                        COMPANY

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        U.S. BANK N.A.

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                        EAST WEST BANK

                                        By: /s/ NANCY A. MOORE
                                           -------------------------------------
                                           Name: Nancy A. Moore
                                           Title: Senior Vice President

                                      S-3
<PAGE>

                                                                       EXHIBIT A

                            REAFFIRMATION AND CONSENT

                          Dated as of November 13, 2002

            Each of the undersigned, a Subsidiary of Liberty Livewire
Corporation that has entered into one or more Loan Documents (as defined in the
Credit Agreement referred to in the foregoing Amendment No. 3), hereby consents
to said Amendment and hereby reaffirms and agrees that (i) such Loan Documents
are, and shall continue to be, in full force and effect and are hereby ratified
and confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, such Amendment No. 3, each reference in such Loan Documents
to the "Credit Agreement", "thereunder", "thereof" or words of like import shall
mean and be a reference to the Credit Agreement as amended by said Amendment,
and (ii) the Loan Documents to which the undersigned is a party and all of the
Collateral described therein do, and shall continue to, secure the payment of
all Obligations.

                                  10 MOONS AT POP, INC.

                                  4MC COMPANY 3, INC.

                                  4MC RADIANT, INC.

                                  4MC-BURBANK, INC.

                                  525 HOLDINGS, INC.

                                  525 STUDIOS, LLC

                                  A.F. ASSOCIATES, INC.

                                  AFA PRODUCTS GROUP, INC.

                                  AMERICAN SIMULCAST CORP.

                                  ANDERSON VIDEO COMPANY

                                  ANGAROLA, INC.

                                  ANS ACQUISITION SUB, INC.

                                  ATLANTIC SATELLITE COMMUNICATIONS, INC.

                                  AUDIO PLUS VIDEO INTERNATIONAL, INC.

                                  CABANA CORP.

                                  CATALINA TRANSMISSION CORP.

                                  CINRAM-POP DVD CENTER LLC

                                  COMPANY 11 PRODUCTIONS

                                  COMPANY 3 NEW YORK, INC.

                                  DIGITAL DOCTORS LLC

                                  DIGITAL MAGIC COMPANY

                                  DIGITAL SOUND & PICTURE, INC.

<PAGE>

                                  FILMCORE EDITORIAL LOS ANGELES LLC

                                  FILMCORE EDITORIAL SAN FRANCISCO LLC

                                  FOUR MEDIA COMPANY

                                  GWNS ACQUISITION SUB, INC.

                                  HOLLYWOOD SUPPLY COMPANY

                                  INTERNATIONAL POST FINANCE LIMITED

                                  INTERNATIONAL POST LEASING LIMITED

                                  IPL 235 CORP.

                                  LIBERTY LIVEWIRE LLC

                                  LIBERTY SEG ACQUISITION SUB, LLC

                                  LIVEWIRE NETWORK SERVICES, LLC

                                  MANHATTAN TRANSFER/EDIT, INC.

                                  MERIDIAN SOUND CORP.

                                  MERIDIAN SOUND, LLC

                                  MODERN MUSIC MAGIC, LLC

                                  MSCL, INC.

                                  POP ANIMATION

                                  SANTA MONICA FINANCIAL, INC.

                                  SOUND ONE CORPORATION

                                  SOUNDELUX HOLLYWOOD II, LLC

                                  SOUNDELUX HOLLYWOOD III, LLC

                                  SYMPHONIC VIDEO LLC

                                  THE TRIUMPH SWITCH COMPANY LLC

                                  TODD-AO AMUSEMENT PRODUCTION SERVICES, LLC

                                  TODD-AO DIGITAL IMAGES

                                  TODD-AO DVD, INC.

                                  TODD-AO HOLLYWOOD DIGITAL

                                  TODD-AO PRESERVATION SERVICES

                                  TODD-AO PRODUCTIONS, INC.

                                  TODD-AO STUDIOS

                                  TODD-AO STUDIOS EAST, INC.

                                  TODD-AO STUDIOS WEST

<PAGE>

                                  TODD-AO VIDEO SERVICES

                                  TODD-AO, ESPANA

                                  TRIUMPH COMMUNICATIONS & FIBER SERVICES, LLC

                                  TRIUMPH COMMUNICATIONS & LEASING SERVICES INC.

                                  TRIUMPH COMMUNICATIONS INC.

                                  VIDEO RENTALS, INC.

                                  VIDEO SERVICES CORPORATION

                                  VINE STREET MAGIC, LLC

                                  VISUALIZE

                                  VSC CORPORATION

                                  VSC EXPRESS COURIER, LLC

                                  VSC LIMA CORP.

                                  VSC MAL CORP.

                                  VSDD ACQUISITION CORP.

                                  WATERFRONT COMMUNICATIONS CORPORATION

                                  Each By:  /s/ WILLIAM E. NILES
                                            ------------------------------------
                                            Name: William E. Niles
                                            Title: Vice President

<PAGE>

                                                                      SCHEDULE I

                                 [See attached]

<PAGE>

                                                                     SCHEDULE II

A.    COMMITMENTS

<TABLE>
<CAPTION>
NAME                                          REVOLVING CREDIT                    TERM A                              TERM B
OF THE LENDER                                 COMMITMENT                          COMMITMENT                          COMMITMENT
-------------                                 ----------------                    ----------                          ----------
<S>                                           <C>                                 <C>                                 <C>
Bank of America, N.A.                         $36,397,408.21                      $28,000,000                         $0

Citicorp USA, Inc.                            $31,020,518.36                      $22,500,000                         $0

The Bank of New York Company, Inc.            $28,952,483.80                      $20,000,000                         $0

General Electric Capital Corporation          $12,408,207.34                      $0                                  $35,000,000

Royal Bank of Canada                          $18,198,704.10                      $11,000,000                         $7,000,000

ING (U.S.) Capital LLC                        $16,544,276.45                      $10,000,000                         $10,000,000

BNP Paribas                                   $13,235,421.17                      $9,000,000                          $0

Mizuho Corporate Bank, Ltd.                   $10,753,779.70                      $7,000,000                          $5,000,000

The Governor and Company of the Bank          $8,272,138.23                       $5,000,000                          $0
of Ireland

Bank of Tokyo-Mitsubishi Trust                $8,272,138.23                       $5,000,000                          $0
Company

US Bank N.A.                                  $7,444,924.41                       $6,000,000                          $0

East West                                     $0                                  $1,500,000                          $1,500,000
</TABLE>Exhibit 10.38 - Penn Virginia Agreement

                                                            M.10

                                   

September 3, 2002

Penn Virginia Oil & Gas Corporation

Waveland Drilling Partners 2002 A, LP

Darol Hoffman

J. William McGuinness TTEE

Walt Reinhardt

Miles H. Thomas and John Thomas TTEES

Pledger Operating Company, Inc.

Research Petroleum, Inc.

Alton R. Miller

                                                  Re:
Meander Prospect

                                                      Lafayette Parish,

                                                      L O U I S I A N A

Ladies and Gentlemen:

     This is the definitive Agreement between Beta Oil & Gas, Inc. ("Beta"), Penn Virginia Oil & Gas Corporation ("PVOG"), Waveland Drilling Partners 2002 A, LP ("Waveland "), Darol Hoffman, J. William McGuinness Trustee, Walt Reinhardt and Miles H. Thomas and John Thomas Trustees ("Fresno Group") and Pledger Operating, Inc., Research Petroleum, Inc. and Alton R. Miller ("Pledger Partners") hereinafter referred to as "Party" or "Parties", relative to the Meander Prospect, Lafayette Parish.                      

	

Article
	
      Title 

	Page

			
	1. 
	

Leases and Lease Burdens..........................
..	2

	2. 
	Sunk Land
      Costs.....................................	6

	3. 

	Due
  Diligence.......................................	7
	4. 

	Operating
  Agreement.................................	8

	5. 

	

Title
Opinions......................................	9

	

6. 

	East Unit
  Well......................................	9

	

7. 

	Subsequent
  Wells....................................	13
	

8. 

	West Unit
  Well......................................	14

	

9. 

	Non-Unitized Acreage
  Well...........................	15

	

10. 

	Substitute
  Wells....................................	16

	

11. 

	Additional Consideration - State
  Leases.............	18

	12.	

Indemnity...........................................	18
	13.	Assignment..........................................	18
	14.	Reassignment........................................	19
	15.	Annual
      Rentals......................................	20
	16.	

 Well Information and
Notices........................
	21
	17.	Insurance...........................................	21
	18.	Area of Mutual
      Interest.............................
	21
	19.	Miscellaneous.......................................	24

          Exhibit A - Leases

          Exhibit B - Land Plat

          Exhibit C - Operating Agreement

 

1.  Leases and Lease Burdens 

1.1     Beta represents that Beta holds record title to the Oil, Gas and Mineral Leases and Leases for Oil, Gas and Other Liquid or Gaseous Minerals listed in the Schedule attached as Exhibit "A" covering the 1,150 acres, more or less, colored in yellow on the Land Plat attached as Exhibit "B" ("Leases").

 

Meander Prospect

September 3, 2002

Page 2

 

1.2     Beta further represents, but does not warrant, that the Leases comprise between 40% and 52% interest, more or less, in Bol Mex 3 Reservoir SUB ("East Unit") and 95% interest, more or less, in Bol Mex 3 Reservoir SUA ("West Unit"), which Units were established by Louisiana Department of Conservation Order No. 442-D-14.  Certain of the Leases are "top leases" that may not yet be effective because the "bottom leases" to which they apply have not expired and Beta is negotiating with Williams for a farmout of certain acreage.  The percentages of 40%, 52% and 95% are based on the assumption that the bottom leases will expire and that the top leases will become effective and that Beta will receive the farmout  by Williams.  Beta does not guarantee that Beta will receive the farmout by Williams.

1.3     Beta represents that Beta has invested approximately Two Million Six Hundred Thousand and No/Dollars ($2,600,000.00) in the Leases as bonus consideration, brokerage, recording fees and related expenses ("Sunk Land Costs").

1.4     The Leases are subject to only the following burdens based on or measured by the production of oil or gas:

          (a)  lessor's royalties in the amount of twenty-six percent (26%) on SL

              17315, SAL 17318, SAL 17319, SAL 17320 and twenty-five percent

              (25%) on all other Leases;

     (b)  overriding royalties in favor of Toce Oil & Gas Company in the 

              amount of two and five tenths percent (2.5%) on the Leases 

              recorded under File Numbers 01-032280, 01-032281 and 01-032282;

          (c)  overriding royalties in favor of  Harris D. Butler, et al in the 

              amount of two percent (2%) on the Leases recorded under File

              Numbers 01-032280, 01-032281 and 01-032282, SL 17315, SAL 

              17318, SAL 17319 and SAL 17320  and three percent (3%) on all 

              other Leases;

("Lease Burdens") to the end that the net revenue interest is seventy and five tenths percent (70.5%) in the Leases recorded under File Numbers 01-032280, 01-032281 and 01-032282, and seventy-two percent (72%) in all other Leases.    Harris D. Butler, et al own the overriding royalties described in Section 1.4 (c) above in the proportions of:  

Harris D. Butler
              .05000001%           .03333335%

Tim Chesteen
                  .08333333%
          .05555555%

Mark O'Koren
                  .08333333%
          .05555555%

Alton R. Miller
               .08333333%
          .05555555%

                                      3.00000000%
          2.00000000%

1.5     The term "Wells", as used herein, shall mean all wells drilled under the terms of this Agreement in an effort to discover oil and gas including, but not limited to, the "East Unit Well", "West Unit Well", "Non-Unitized Acreage Wells", "Substitute Wells" and all other wells drilled by the Parties within the "Area of Mutual Interest" under the "Operating Agreements", all as hereinafter defined.

1.6     PVOG'S working interest in the Wells and Leases is subject to the following obligations for drilling and other operating cost:

          (a)  the option, but not the obligation, by the Pledger Partners to receive

              a working interest in the amount of eight percent (8%) in each 

              Well and Leases attributable thereto for production purposes

              through unitization or otherwise, effective at "Payout", as

              hereinafter defined, of each such Well and until Beta receives 
 

  

  

Meander Prospect

September 3, 2002

Page 3 

  

              the sum of One Million Seven Hundred Fifty Thousand Dollars

              ($1,750,000.00) from (i) PVOG under the terms of Article 2 

              below and (ii) revenue attributable to Beta's working interests 

              in all Wells; at such time as Beta has received the sum of

              $1,750,000.00, the Pledger Partners' working interest shall

              automatically increase to ten percent (10%) ("Pledger Partners' 

              APO Interest"); 

          (b)  the option, but not the obligation, by the Pledger Partners to 

             participate in each Well drilled on the Leases situated outside 

             the East Unit and the West Unit ("Non-Unitized Acreage Wells") 

             with five percent (5%) working interest, on a Well by Well 

             and an actual cost and expense basis ("Pledger Partners' 

             Ground Floor Interest");

     (c)  the option, but not the obligation, by Beta to receive a working

             interest in the amount of seventeen percent (17%) in  the East 

             Unit Well, West Unit Well and the first Well on Non-Unitized 

             Acreage and Leases attributable thereto for production 

             purposes through unitization or otherwise effective at Payout 

             and until Beta has received the said sum of $1,750,000.00; at 

             such time as Beta has received the sum of $1,750,000.00, 

             Beta's 17% working interest shall automatically be reduced 

             to fifteen percent (15%) ("Beta's APO Interest"),

to the end that PVOG's working interest after Casing Point in any Well and the Leases attributable thereto for production purposes through unitization or otherwise  shall be reduced at Payout by no more than 25%, and

     (d)  the right for Beta to receive a working interest in the amount of 

             5% at "Casing Point", as hereinafter defined, in the West Unit 

             Well  or the first Non-Unitized Acreage Well, whichever Well 

             is drilled first ("Beta's Carried Interest").

1.7     That portion of Waveland's working interest hereinafter identified as "1" and "3" in the Wells and Leases   and all of the Fresno Group's working interest in the Wells and Leases are subject to the following Carried Interests:

     (a)  Pledger Partner's APO Interest:

     (b)  the right for Beta to receive a working interest in the amount of 

             twenty percent (25%) at Casing Point in the  first Well drilled 

             under the terms of this Agreement ("Beta's Carried Interest").

1.8     That portion of Waveland's  working interest hereinafter identified as "2" in the Wells and Leases is subject to the Pledger Partners' APO Interest.

1.9     The Pledger Partners' APO Interest, the Pledger Partners' Ground Floor Interest, Beta's APO Interest and Beta's Carried Interest shall be reduced proportionately to the undivided interest of PVOG, Waveland and the Fresno Group in each Well and Leases attributable thereto for production purposes through unitization or otherwise. 

1.10    The term "Payout" shall be defined and occur at 7:00 a.m. on the first day following the date on which the "Cost" equals the "Revenue", as hereinafter defined, of and from each Well.  The "Cost" shall be (a) the actual and direct cost incurred in drilling, evaluating, completing, equipping, plugging back, re-working, deepening and operating each Well, according to the Accounting Procedure attached to the Operating Agreement provided for in Article 4 below, and (b) the sums of money described in Section 1.11 below. "Revenue" shall be

 

 

Meander Prospect

September 3, 2002

Page 4

 

100% of the "Gross Value of the Production" as hereinafter defined, from each Well, less the Lease Burdens and applicable production, severance and federal excise taxes.  "Gross Value of Production" shall mean the gross proceeds actually received in an arm's length sale of production, or in the absence of an arm's length sale, the prevailing market value of the production at the point of sale or at the tailgate of the plant where such production is processed, which ever is the greater amount.  For determining Cost, an oil Well shall be considered complete when equipped through the lease tanks or separator and a gas Well shall be considered complete when equipped through the flow lines and other equipment individually associated with said Well to the sales point.

1.11     In calculating Payout for Beta's APO Interest, the Cost of the East Unit Well shall include the "Installments" on Sunk Land Costs in the total amount of $1,300,000.00 paid under Sections 2.2 and 2.3 below, the Cost of the West Unit Well shall include one-half (1/2) of the $1,300,000.00 Installment payable under Section 2.4 below, and the Cost of the first Well on the Non-Unitized Acreage shall include the other 1/2 of such $1,300,000.00 Installment. 

1.12     The calculation of Payout for the Pledger Partners' APO Interest in each Well shall include all of the sums of money paid to Beta by PVOG under Article 2 below, divided by the number of Wells completed as oil or gas  Wells.  The Installment paid under Article 2 below attributable to the Payout account of the Pledger Partners for each Well shall be reduced as each additional oil or gas Well is completed before Payout of each previously drilled Well, and by this arrangement the Payout account for the Pledger Partners in each Well shall bear its respective share of the sums of money paid under Article 2 below.  The sum of $242,000.00 payable under Article 11 below, if and when paid, shall be included in the Payout account of the East Unit Well for Beta and the Pledger Partners.  PVOG will maintain an accurate record of all charges and credits connected with the Revenue and Cost of each Well.  PVOG will furnish Beta and the Pledger Partners monthly within thirty (30) days after the calendar month for which the computations are made, a statement showing (a) gross volume of oil and gas produced, (b) the proceeds from the sale of production and the amount of authorized deductions therefrom, (c) allocation of the  sums of money paid to Beta by PVOG under Article 2 below to each Well, and (d) cumulative Well Costs so that the then current status of Payout of each Well can be readily determined.  PVOG's records shall be available at all reasonable times for audit by Beta and the Pledger Partners. 

1.13     At Payout of each Well PVOG shall notify Beta and the Pledger Partners and Beta and each of the Pledger Partners shall have a period of fifteen (15) days after receipt of notice within which to make the separate and independent elections to receive their APO Interests  in and to each Well that has so paid out and the Leases attributable to each such Well for production purposes through unitization or otherwise.  Beta and the Pledger Partners shall bear their respective share of the Lease Burdens, but shall not bear any overriding royalty or similar burden created by PVOG.  Beta and the Pledger Partners shall make a diligent attempt to notify PVOG of Beta and the Pledger Partners' elections to receive their APO Interests within the period specified, however, failure on the part of Beta or the Pledger Partners to respond to a notice of Payout shall constitute an election by Beta or the Pledger Partners to receive the  APO Interests.  The  APO Interests of the Pledger Partners  are owned 50% by Pledger, 25% by Research and 25% by Miller.  In the event Beta or any Pledger Partner elects not to receive its APO Interest, PVOG and Waveland B shall retain the amount of such APO Interest.

1.14     After Payout of each Well and the elections by Beta and the Pledger Partners with respect to the  APO Interests there shall be no further adjustment in the interests of the Parties in each such Well, even though the "Cost" of

 

 

Meander Prospect

September 3, 2002

Page 5

 

future operations may exceed future "Revenue" from said Well, as hereinafter defined.

1.15    PVOG, Waveland and the Fresno Group shall keep the Leases and Wells free of all liens, mortgages and similar encumbrances until Payout.  

2. Sunk Land Costs

2.1     Under the terms of various Participation Agreements with Beta, Waveland and the Fresno Group paid Beta  for their interests in this Agreement, the Leases and the geological and geophysical information and data furnished by Beta.

2.2     As consideration for the rights granted by Beta to PVOG under Article 3 below and the geological and geophysical information and data furnished by Beta, PVOG is paying to Beta, with the execution of this Agreement, the sum of six hundred fifty thousand dollars ($650,000.00) in cash as  the first "Installment" to reimburse Beta for Sunk Land Costs.

2.3     In the event PVOG elects to drill a Well on the East Unit ("East Unit Well"), PVOG agrees to pay Beta, within ten (10) days following PVOG's election under Section 6.1 below, the additional sum of Six Hundred Fifty Thousand Dollars ($650,000.00) in cash  as the second Installment on Sunk Land Costs.

2.4     In the event PVOG elects to drill  a Well on the West Unit ("West Unit Well") or the Non-Unitized Acreage PVOG agrees to pay Beta, within ten (10) days following PVOG's election to drill said Well, the sum of One Million Three Hundred Thousand Dollars ($1,300,000.00) in cash  as the final Installment on Sunk Land Costs.

2.5     In the event PVOG elects not to drill  a Well, the $650,000.00  Installment paid under Section 2.2 above shall not be returned to PVOG.  If PVOG elects to drill any Well or Wells and if such Well or Wells are not drilled, or if commenced, are not drilled to their "Authorized Depth", as hereinafter defined, none of the  Installments shall be returned to PVOG.

2.6     The  Installments against Sunk Land Cost do not include the Cost of any Wells or "Subsequently Acquired Interests", as hereinafter defined.

3.  Due Diligence

3.1     For a period of forty-five (45) days following the execution of this Agreement by PVOG and receipt by Beta of the $650,000.00 Installment provided for in Section 2.2 above, PVOG is authorized by Beta and the Pledger Partners to contact, negotiate and speak freely with the other leasehold working interest owners within the East and West Units, including Newfield Exploration, Inc., but excluding the Parties to this Agreement ("Unit Owners") with respect to the drilling of the East and West Unit Wells.  PVOG agrees to keep Beta fully informed of all communication and meetings with the Unit Owners, to furnish Beta with copies of all written or electronic communications and to notify Beta in advance of any meeting with the Unit Owners so that Beta may have a representative present.  Following any meeting Beta does not attend, PVOG will immediately advise Beta of the results of such meeting.  Beta in turn will inform the Pledger Partners on communication and meetings between PVOG and the Unit Owners.

3.2     Within  for a period of twenty-one (21) days following execution of this Agreement by PVOG, PVOG shall (a) be afforded access to Beta's accounting records and files at Tulsa, during normal business hours, to verify Beta's sunk land  

   

   

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costs to date, (b) have access to Beta's lease files at Houston, during normal business hours, to verify Beta's leasehold position, and (c) review in detail, technical and regulatory information regarding operations in the subject area.  

3.3     Within fifteen (15) days following the execution of this Agreement by PVOG, or finalization of well location and AFE, whichever occurs last, PVOG shall notify the Unit Owners  and offer the Unit Owners the option to participate for their share of the risk and pay their share of the cost of  the East or West Unit Well or to incur the statutory penalty provided in La. Rev. Stat. Ann. 30:10 ("Louisiana Risk Fee Statute").  In the event a Unit Owner elects to participate in a Unit Well through farmout or other exploration agreement or arrangement, PVOG is authorized to withdraw the notice to such Unit Owner.

3.4     Within twenty-one (21) days following the execution of this Agreement by PVOG, PVOG shall apply to the Louisiana Department of Conservation and other governmental agencies having jurisdiction for the permits and other clearances necessary to drill the East or West Unit Wells or amend permits and clearances heretofore applied for by Beta.

3.5     No Party shall grant to any third party the right to conduct geophysical or similar survey across the Leases or the Area of Mutual Interest until such time as the East Unit Well has been drilled and completed as an oil or gas Well or as a dry hole.  After the drilling of the East Unit Well, no Party shall grant to any third party the right to conduct geophysical or similar survey across the Leases or the Area of Mutual Interest without PVOG's written consent, which written consent may be unreasonably withheld.

3.6     None of the acts  by PVOG under the terms of this Article shall constitute an election by PVOG to drill a Well.

4.  Operating Agreement

4.1     Concurrently with the execution of this Agreement, the Parties are approving the form of Operating Agreement attached as Exhibit "C" ("Operating Agreement") which names PVOG as Operator.  At least  thirty (30) days in advance of operations to drill each Well, the Parties shall execute and deliver to each other an Operating Agreement for each Well on the attached form.   The Operating Agreement shall control all jointly owned operations on each Well and the Leases within the "Contract Area", as hereinafter defined, for each Well, provided however, in the event of a conflict between this Agreement and an Operating Agreement, this Agreement shall take precedence.

4.2     The Contract Area for the East Unit Well shall be the East Unit, the Contract Area for the West Unit Well shall be the West Unit, and the Contract Area for each Well on the Non-Unitized Acreage shall be mutually agreed upon between Beta and PVOG.

4.3     All notices and communications under the terms of this Agreement shall be delivered to the Parties at the addresses and numbers set forth in Section 4 of Exhibit A to the Operating Agreement.

4.4     PVOG shall, upon request by each of the other Parties, and/or notice to the other Parties by PVOG, market each of the other Parties' share of oil and gas produced from the Contract Areas at the same time and under the same terms and conditions as PVOG markets its own share of oil and gas.  PVOG shall not charge a marketing fee.

5. Title Opinions

        PVOG will secure attorney's Title Opinions covering the surface location, drill path and bottom hole location for each Well.  The cost of abstracts, of the 

  

  

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Title Opinions, attorney's and landman's fees and curative title work shall be included in the Cost of each Well. 

6. East Unit Well

6.1     On or before October 31, 2002, PVOG shall notify Beta  of PVOG's election to drill the East Unit Well (or West Unit Well under Section 7.4 below) or terminate this Agreement.  In the event PVOG elects to terminate this Agreement, there shall be no further liability or obligations between PVOG, Beta and Pledger and PVOG shall  assign to Beta, PVOG's interest in any Subsequently Acquired Interest.    Failure on the part of PVOG to timely notify Beta shall constitute an election not to drill the East Unit Well.

6.2     In the event PVOG elects to drill the East Unit Well, PVOG shall, within ten (10) days following such election, pay to Beta the $650,000.00 Installment under Section 2.3 above.

6.3     Under the terms of the said Participation Agreements, Beta is authorized to represent Waveland A, Waveland B, Grey Goose and the Fresno Group and to perform to PVOG under the terms of this Agreement until Casing Point in the East Unit Well.  With Beta's execution of this Agreement, Beta is obligating Waveland A, Waveland B, Grey Goose and the Fresno Group to bear the percentages set forth in Section 6.4 below of the cost and risk to drill and evaluate the East Unit Well to Casing Point and to plug and abandon the Well if a dry hole.  The cost to plug and abandon the East Unit Well shall include the cost to settle surface damages.

6.4     At least  thirty (30) days prior to commencement of operations for drilling on the East Unit Well, PVOG will furnish the other Parties with an Authority for Expenditure ("AFE") to drill said Well to Casing Point and plug and abandon said Well if a dry hole.  The amount of the AFE shall be an estimate only and the Parties agree to assume and bear the actual and direct cost of the East Unit Well to Casing Point and to plug and abandon said
 Well if a dry hole, subject to the provisions of Section 6.12 below, whether such cost is more or less than the AFE. 

6.5     If PVOG elects to drill the East Unit Well, PVOG shall, on or before November 10, 2002, commence operations to drill said Well from the surface location of the Arco No. 1 Hamilton Well located in Section 24, Township 10 South, Range 4 East, Lafayette Parish and thereafter prosecute the drilling of said Well with due diligence and in a workmanlike manner to a bottom hole location  within the East Unit,  338 feet from east line of the East Unit, and having Lambert Plane coordinate values of X =  1,784,236 and Y =  547,794 and to:

      (a)  a depth sufficient to drill through and fully evaluate that certain

              sand or formation encountered between the depths of 16,162 feet 

              and 16,282 feet in the Newfield Exploration Inc. No. 1 Eddie 

              Knight Well located in Section 51, Township 10 South, Range 5 

              East, Lafayette Parish, according to the electric log of said 

              Well ("Bol Mex 3 A Sand") ("Objective Depth"), or

     (b)  a depth at which mechanical difficulty or loss of circulation, water

              flow, abnormal pressure, heaving shale, salt or other conditions

              are encountered which make drilling abnormally difficult or

              hazardous, causes sticking of drillpipe or casing or any other

              difficulties which preclude drilling ahead under normal 

              procedures ("Mechanical Difficulty or Gulf Coast Conditions"),

whichever is the lesser depth ("Authorized Depth").  The Parties may, at their option, drill the East Unit Well to any depth greater than the Authorized Depth.

 

 

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6.6     "Casing Point" in East Unit Well shall be defined and occur at the moment the Well has been drilled to its Authorized Depth and:

     (a)  an electric log, formation tests, dip meter, cores and other methods

              and tools of evaluation necessary to ensure a proper test of all

              formations indicating oil or gas have been taken; and

     (b)  the Well is under control and no mechanical difficulty or conditions

              exist that preclude future operations to complete, deepen,

              sidetrack, produce or plug and abandon the Well by ordinary

              standards of the oil industry, and

     (c)  the decision can be made by the Parties to complete the Well as an 

              oil and/or gas Well, deepen, sidetrack or abandon the Well as 

              a dry hole. 

The cost and risk of drilling the East Unit Well to Casing Point shall include the actual cost and expense to stake and prepare the location, secure the drilling permits, drill a hole of sufficient size to allow seven and five-eighths inch (7 5/8") protection casing to be set to the top of the Bol Mex 3 Sand and which hole will allow completion through five and one-half inch (5 1/2") casing, a closed loop mud system rigged up and converted to oil base mud before entering the Bol Mex 3 formation, drill the well to the Authorized Depth, run the tools of evaluation specified in Section 6.6 (a) above, furnish twenty-four (24) hours of rig time thereafter, and the plugging and abandonment of said Well if a dry hole including settlement of surface damages.

6.7     The cost and risk to drill and evaluate the East Unit Well to Casing Point shall be shared in the following proportions:

      PVOG
                                                  75.0000%

      Waveland 1
                                             8.5000%

      Waveland 2
                                             3.5000%

      Waveland 3
                                             4.0000%

      Hoffman
                                                 .8335%

      McGuinness
                                              .8335%

      Reinhardt
                                               .8335%

      Thomas
                                                  .8335%

      Beta
                                                   5.6660%

      Pledger Partners
                                          -0- 

                                                             100.0000%

6.8     At Casing Point, PVOG shall make a recommendation to complete, sidetrack, deepen or plug and abandon the East Unit Well and if all Parties cannot agree on the sequence of operations to be conducted on the Well, an election by PVOG shall take precedence over an election by any other Party.

6.9     At Casing Point, the cost and risk to complete, sidetrack, deepen or plug and abandon the East Unit Well shall be shared as follows:

     (a)  if all Parties elect to complete the Well as an oil or gas Well:

     PVOG
                                                   75.000000%

     Waveland 1
                                              8.500000%

     Waveland 2
                                              3.500000%

     Waveland 3
                                              4.000000%

     Hoffman
                                                  .625125%

 

 

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Page 9

 

     McGuinness
                                               .625125%

     Reinhardt
                                                .625125%

     Thomas
                                                   .625125%

     Beta
                                                    9.623500%

     Pledger Partners
                                            -0- 

                                                            100.000000%

     (b)  if all Parties elect to sidetrack, deepen or plug and abandon the 

              Well, the cost and risk of such operations shall be shared 

              as set forth in Section 6.7 above.

If any Unit Owner within the East Unit elects to join and pay their share of the cost of East Unit Well, the percentages set forth above shall be reduced proportionately.

6.10     Operations to complete the East Unit Well as an oil or gas Well shall include all necessary expenditures for the drilling, setting of protection and production casing, evaluation, perforating, well stimulation, completing and equipping of the Well including necessary tankage and surface facilities and production testing of the Well.  Operations to sidetrack or deepen the East Unit Well shall include  the evaluation and conditions provided in Section 6.6 above, and after deepening or sidetracking, all Section 6.7 shall apply to subsequent operations on the Well.

6.11     At Casing Point, if any Party elects not to complete, sidetrack or deepen and thereafter complete the East Unit Well and other Parties do elect to carry out such operations, the non-consenting Party shall have forfeited to the consenting Parties, all rights, title and interests in and to the Well, the equipment therein and thereon and all production of oil or gas produced therefrom and all rights to the Leases within the East Unit, all rights to all depths.  Provided, however, if Beta is a non-consenting Party, the only interest in the Well to be forfeited by Beta is Beta's 9.6235% working interest; Beta shall retain  its Carried and APO Interests.

6.12     At such time as the Cost of the East Unit Well exceeds one hundred ten percent (110%) of the approved AFE, whether before or after Casing Point, and PVOG or Beta determines that the expected total Cost of the Well will exceed one hundred twenty-five percent (125%) of the approved AFE, PVOG shall give immediate written notice to all other Parties participating in the Well at that time in the form of a supplemental AFE with a revised estimate of the total cost to complete the operation as originally proposed.  Each Party receiving the supplemental AFE shall have a period of twenty-four (24) hours from receipt of such notice within which to elect to either (a) continue to participate in such operation to the extent of its full interest or (b) become a non-consenting Party with respect to the Cost incurred in connection with such operation in excess of 125% of the approved AFE and such Party shall forfeit to the consenting Parties the rights and interests described in Section 6.9 above.  Failure by a Party to respond to the notice and supplemental AFE within the period specified shall be conclusively deemed an election not to participate in further operations.  No election to become a non-consenting Party under the terms of this Section shall be effective unless and until the Well is under control and no mechanical difficulty or conditions existing that preclude future operations to complete, deepen, sidetrack, evaluate, produce or plug and abandon the Well by ordinary standards of the oil industry.

7.  Subsequent Wells

7.1     Within ninety (90) days after the date the East Unit Well is plugged and abandoned, or one hundred eighty (180) days after the East Unit Well is completed as a Well capable of producing oil or gas, PVOG shall have the option to commence

 

 

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operations for drilling on the West Unit Well or a Well on the Non-Unitized Acreage.  In the event PVOG elects not to drill the West Unit Well or a Well on the Non-Unitized Acreage, this Agreement shall terminate and the Parties shall have no further rights or obligations to each other in the subject area except as to the East Unit.  In the event any Party other than PVOG elects not to participate in the West Unit Well or a Well on Non-Unitized Acreage, PVOG shall receive all of the interest of such non-participating Party under the same terms and conditions as PVOG's original interest in such Well or Wells.

7.2     Within ten (10) days following PVOG's election to drill the West Unit Well or a Well on the Non-Unitized Acreage PVOG shall pay to Beta, the  $1,300,000.00 Installment under Section 2.4 above.  

7.3     In the event the Parties drill the West Unit Well before a Well on the Non-Unitized Acreage, the Parties shall have the option for a period of one (1) year following the completion of the West Unit Well as an oil or gas Well or as a dry hole within which to commence operations for drilling on a Well on the Non-Unitized Acreage.  If the Parties elect to drill a Well on the Non-Unitized Acreage before the West Unit Well, the Parties shall have the option for a period of  one hundred twenty (120) days following completion of the Well on the Non-Unitized Acreage within which to commence operations for drilling on the West Unit Well.

7.4     The Parties may, at their option, drill the West Unit Well (but not a Well on the Non-Unitized Acreage) before the East Unit Well.  If the Parties drill the West Unit Well before the East Unit Well, then the Parties shall have the option to drill the  East Unit Well after the West Unit Well under the terms and conditions provided for the West Unit Well.

7.5     In the event PVOG elects to drill the West Unit Well before the East Unit Well, PVOG shall, within ten (10) days following PVOG's election to drill the West Unit Well, pay to Beta the sum of $650,000.00 payable under Section 2.3 above and the $1,300,000.00 payable under Section 2.4 above.

8.  West Unit Well

8.1     The West Unit Well shall be drilled  under the same terms and conditions as the East Unit Well, from a surface location mutually acceptable to Beta and PVOG, to a bottom hole location within the West Unit mutually acceptable to Beta and PVOG,  and the Cost and risk of drilling the  said Well to Casing Point and to plug and abandon said Well if a dry hole shall be shared as follows.

     PVOG
                                                     75.000000%

     Waveland 1  
                                              6.376000%

     Waveland 2
                                                3.500000%

     Waveland 3
                                                3.000000%

     Hoffman
                                                    .625125%

     McGuinness
                                                 .625125%

     Reinhardt
                                                  .625125%

     Thomas
                                                     .625125%

     Beta
                                                      9.623500%

     Pledger Partners
                                              -0-  

                                                               100.000000%

8.2     At Casing Point in the West Unit Well the Cost and risk to complete, sidetrack, deepen or plug and abandon said Well shall be shared as follows:

 

 

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     (a)   if all Parties elect to complete the Well as an oil or gas Well:

     PVOG
                                                      70.000000%

     Waveland 1
                                                 6.376000%

     Waveland 2
                                                 3.500000%

     Waveland 3
                                                 3.000000%

     Hoffman
                                                     .625125%

     McGuinness
                                                  .625125%

     Reinhardt
                                                   .625125%

     Thomas
                                                      .625125%

     Beta
                                                      14.623500%

     Pledger Partners
                                              -0-  

                                                               100.000000%

     (b)  if all Parties elect to sidetrack,  deepen or plug and abandon the Well, the Cost and risk thereof shall be shared  as set forth in Section 8.1 above.

 

 

 

 

 

 

 

 

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9.  Non-Unitized Acreage Wells

9.1     PVOG's option to drill a Well on the Non-Unitized Acreage shall include the right to drill a new Well or re-enter the Arco No. 1 Hamilton Well.  

9.2     PVOG shall notify the Pledger Partners at least forty-five (45) days before operations are commenced on each Well  on the Non-Unitized Acreage within which period of time the Pledger Partners shall elect to participate in the drilling of each Well on a Well by Well basis with  their Ground Floor Interest on an actual Cost and expense basis.  In the event any of the Pledger Partners elect not to participate in a Well on the Non-Unitized Acreage, PVOG shall receive  such Pledger Partners' share of  their Ground Floor Interest in the Well and the Leases attributable thereto for production purposes through unitization or otherwise between the surface and the total depth drilled in said Well, plus 100 feet.  The Pledger Partners shall retain the Pledger Partners'  APO Interest in such Well and the right to participate in subsequent Wells on the Non-Unitized Acreage on a Well by Well basis with their Ground Floor Interest.

9.3     The risk, cost, expense and liability incurred or accrued in drilling the first Well located on the Non-Unitized Acreage to Casing Point and to plug and abandon said Well if a dry hole, shall be shared as follows:

     PVOG
                                               70.000000% or 75%

     Waveland 1
                                          6.376000%

     Waveland 2
                                          3.500000%

     Waveland 3
                                          3.000000%

     Hoffman
                                              .625125%

     McGuinness TTEE
                                      .625125%

     Reinhardt
                                            .625125%

     Thomas TTEES
                                         .625125%

     Beta
                                                9.623500%

     Pledger Partners
                                    5.000000% or -0- 

                                                        100.000000%

9.4     At Casing Point in the first Well located on the Non-Unitized Acreage, the Cost and risk incurred or accrued to complete, sidetrack, deepen or plug and abandon said Well shall be shared as follows:

     (a)  if all Parties elect to complete the Well as an oil or gas Well:

     PVOG
                                             65.000000% or 70%

     Waveland 1
                                        6.376000%

     Waveland 2
                                        3.500000%

     Waveland 3
                                        3.000000%

     Hoffman
                                            .625125%

     McGuinness TTEE
                                    .625125%

     Reinhardt
                                          .625125%

     Thomas TTEES
                                       .625125%

     Beta
                                             14.623500%

     Pledger Partners
                                  5.000000% or -0- 

                                                       100.000000%

     (b)  If all Parties elect to sidetrack, deepen or plug and abandon the 

             Well, the Cost and risk thereof shall be shared by the Parties 

             as set forth in Section 9.3 above.

 

 

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9.5     The Cost and risk accrued in drilling all other Wells on the Non-Unitized Acreage to Casing Point and plugging and abandoning said Wells if a dry hole or sidetracking, deepening and thereafter evaluating, completing or plugging and abandoning said Wells shall be shared as follows:

     PVOG
                                      65.000000% or 70%

     Waveland 1
                                 6.376000%

     Waveland 2
                                 3.500000%

     Waveland 3
                                 3.000000%

     Hoffman
                                     .625125%

     McGuinness TTEE
                             .625125%

     Reinhardt
                                   .625125%

     Thomas TTEES
                                .625125%

     Beta
                                      14.623500%

     Pledger Partners
                           5.000000% or -0- 

                                               100.000000%

9.7     In the event PVOG elects to drill a new Well on the Non-Unitized Acreage, such Well shall be drilled in a like manner and under the same terms and conditions as the West Unit Well.  If PVOG elects to re-enter the Arco No. 1 Hamilton Well, PVOG agrees to re-enter, sidetrack and/or deepen such well with due diligence and in a workmanlike manner in an effort to complete the Well in the Bol Mex 3 Sand or a deeper sand or formation and in a like manner and under all the other same terms and conditions as provided for the West Unit Well as applicable.

10. Substitute Wells

10.1     In the event the East Unit Well, West Unit Well or the first Well located on Non-Unitized Acreage is not drilled to the Objective Depth due to Mechanical Difficulty or Gulf Coast Conditions, the Parties shall have the right, but not the obligation, to participate in another Well or Wells in an effort to drill such Well or Wells to the Objective Depth ("Substitute Well"), and the term "East Unit Well", "West Unit Well" and/or first "Non-Unitized Acreage Well" shall include the Substitute Well or Substitute Wells.  If any Party elects not to participate in a Substitute Well, Article VI.B.2 of the Operating Agreement shall not apply and such Party shall have forfeited to Beta, all rights, title and interests in and to the Leases within the East Unit, West Unit or Non-Unitized Acreage, as the case may be, provided, however:

     (a)  if the Well to which the non-consent applies was completed as an 

            oil or gas Well without having reached the Objective Depth due 

            to Mechanical Difficulty or Gulf Coast Conditions, and if the

            non-consenting Party joined in and paid for its share of the 

            cost to drill and complete such Well, the non-consenting Party 

            shall retain its rights to the Well, this Agreement and the 

            Leases within the East Unit, West Unit or Non-Unitized Acreage, 

            as the case may be, to the total depth drilled in said Well, 

            plus 100.0 feet.

         (b)  if the Well to which the non-consent applies is not commenced within 

            the period of time specified in Section 10.2 below, then no rights 

            in the Well, this Agreement or Leases shall be forfeited by the

            non-consenting Party.

    (c)  if the Well to which the non-consent applies is a Well on
Non-

            Unitized Acreage and the Pledger Partners are a non-consenting 

            Party, the only rights forfeited by the Pledger Partners shall 

            be the Pledger Partners' 5% interest in the Well to which the

            non-consent applies and the Leases attributable thereto for

            production purposes through unitization or otherwise, between 

            the surface and the total depth drilled in said Well, plus 

            100 feet, and the Pledger Partners shall retain the Pledger  

  

  

Meander Prospect

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Page 14 

            Partners'  APO Interest in such Well and the Pledger Partners' 

            right to participate in subsequent Wells on the Non-Unitized 

            Acreage with their Ground Floor Interest. 

10.2     In the event the Parties elect to drill a Substitute Well, PVOG shall apply for all permits to drill said Well within fifteen (15) days following the date the previous Well was plugged and abandoned.  Operations for drilling on a Substitute Well shall be commenced within ninety (90) days following the receipt of permits for the Substitute Well and shall be drilled in a like manner under the same terms and conditions as the Well for which it is a substitute.

 

 

 

 

 

 

 

 

 

 

 

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11.  Additional Consideration - State and State Agency Leases

11.1     The following Leases:

     SL 17315  State of Louisiana

     SAL 17320 Louisiana Department of Transportation

     SAL 17318 Lafayette Parish School Board

     SAL 17319 Lafayette City - Parish Consolidated Government

provide for  penalties in the total amount of Two Hundred Forty Thousand and No/100 Dollars ($242,000.00) to be paid to the Lessors in the event the West Unit Well is not commenced within the primary term of said Leases.

11.2     In the event the West Unit Well is not timely commenced and thereafter drilled to satisfy the provisions of the Leases described above, then PVOG agrees to pay $242,000.00 to the Lessors.  Waveland and the Fresno Group shall reimburse PVOG for their share of such payment as the Waveland and the Fresno Group's interest appears in the West Unit Well before Casing Point.

12.  Indemnity

PVOG, Waveland A, Waveland B, Grey Goose and the Fresno Group shall fully indemnify and hold Beta and Pledger harmless from PVOG, Waveland A, Waveland B, Grey Goose and the Fresno Group's "respective share" of all claims, causes of action, losses, costs, expenses, damages and liabilities arising directly or indirectly from operations on all Wells drilled under the terms of this Agreement or arising out of or connected with such Parties' performance or failure to perform under this Agreement, or the acts of or failure to act by such Parties' agents, employees, contractors.  PVOG, Waveland A, Waveland B, Grey Goose and the Fresno Group's "respective share" shall be equal to each such Party's percentage interest in the Well or operation to which a claim or cause of action applies at the time such claim or cause of action arises, whether it be before or after Casing Point or before or after Payout.

13. Assignment

13.1     In the event the Parties drill the East Unit Well, the West Unit Well and/or  a Well  on the Non-Unitized Acreage, Beta shall, within thirty (30) days following (a) completion of said Well or Wells as Wells capable of producing oil or gas or as dry holes, and (b) receipt of written consent by the appropriate lessors, execute and deliver to the Parties an assignment of the Leases situated within the East Unit, West Unit and Non-Unitized Acreage, as the case may be, as the Parties' interests appear in each Well after it is completed as an oil or gas Well or as a dry hole.

13.2    All Assignments shall be effective as of the date of this Agreement, subject to, and the Parties agree to assume and bear their respective share of the Lease Burdens and all other obligations and liabilities described in this Agreement.

13.3     In the event the East Unit Well, West Unit Well or the first Well drilled on the Non-Unitized Acreage are not drilled to the Objective Depth due to Gulf Coast Conditions, the Assignment earned by the drilling of such Well shall be limited to the total depth drilled in said Well, plus 100 feet.

14.  Reassignment

14.1     If a Party elects to release, surrender or otherwise let any Lease or interest therein expire, such Party will first give Beta notice sixty (60) days 

  

  

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in advance of the date on which the Lease or interest therein is to be surrendered and Beta shall have the right to receive an assignment of said Lease or interest therein for a period of thirty (30) days following receipt of such notice.  Failure on the part of Beta to decline the Party's offer shall constitute an election by Beta to receive and assignment of the Lease to be so surrendered.  In the event Beta declines to accept the Lease or interest to be so surrendered, the Pledger Partners shall have the right to receive an assignment of said Lease or interest therein within forty-five (45) days following the date of such notice. 

14.2     Reassignment will be made upon demand, without warranty, except as against the acts of the assignor and free and clear of any overriding royalty or similar burden except the Lease Burdens.  Reassignment shall not relieve the assignor of obligations and liabilities incurred by such Party prior to the effective date of the assignment including the $242,000.00 payable under Article 11 above.

14.3     Reassignment by the Pledger Partners shall not include the overriding royalties of Harris D. Butler, et al described in Section 1.4 (c) above nor the Pledger Partners' Carried Interests provided in Sections 1.6 (a) and 1.7 (a) above.  Reassignment by Beta shall not include Beta's Carried Interest provided in Section 1.6 (c) above.  Reassignment by any Party shall not include such Party's interest in the unitized sand or sands within a unit or units for Wells previously completed as oil or gas Wells.  Reassignment by any Party shall be subject to Sections 10.1 (a) and (c) above.

 

 

 

 

 

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15. Annual Rentals

15.1     Annual rentals due on the Leases between June 17, 2002 and the date of this Agreement shall be paid by Beta and the Parties shall reimburse Beta for the amount of such rentals as hereinafter set forth.  Annual rentals due after the date of this Agreement, shall be paid by PVOG and the Parties shall reimburse PVOG for the amount thereof.  Beta and PVOG may pay rentals and be reimbursed by the Parties immediately upon receipt of an appropriate invoice or Beta and PVOG may call for the amount of rentals in advance.

15.2     Beta and PVOG shall diligently attempt to make proper payment of rentals but shall not be held liable in damages for the loss of any Lease or a interest therein if through mistake or oversight, a rental is not paid or is erroneously paid.  The loss of any Lease from a failure to pay or an erroneous payment of rental shall be a joint loss of all Parties.  If any Party secures renewal of the terminated Lease, the Parties shall have the right to participate in such new Lease as their interest appeared in the original Lease.  Failure on the part of any Party to timely pay an invoice for rentals or to respond for a call in advance for such Parties' share of rentals shall constitute an election not to participate in such rentals.

15.3     Should any Party elect not to pay a rental on a Lease, such Party shall give the other Parties written notice thereof sixty (60) days in advance of the rental due date adequately identifying such Lease, whereupon such Party shall be relieved of its obligation to contribute to the payment of such rental falling due more than 60 days after such notice, except that after accrual of an obligation to drill or rework a Well on a Lease, notice to not pay a rental on such Lease may not be given until such obligation has been satisfied.  Whenever a Party gives notice of its election not to pay a rental on a Lease, if the other Parties shall make written request therefor within thirty (30) days after such notice, the Party giving such notice shall assign to the other Parties all rights, title and interests in and to such Lease.  If all Parties elect not to pay a rental on a Lease, all Parties shall join in a release thereof.

15.4     The amount of rentals on the Leases within the East Unit, West Unit and Non-Unitized Acreage shall be borne and shared by the Parties as their interest appears in the East Unit Well, West Unit Well and first Non-Unitized Acreage Well at the time such rental is due, whether it be before and/or after Casing Point or before and/or after Payout.

 

 

 

 

 

Meander Prospect

September 3, 2002

Page 18

 

16. Well Information and Notices

16.1     During the drilling of all Wells, PVOG will ensure that the Parties' representatives have access to said Wells at all times at the Parties' sole risk and expense, including freedom of the derrick floor and fully advise the Parties of the depth and condition of the Wells at all times.  In the event of evaluation, PVOG shall notify the Parties in sufficient time so that representatives can be present.

16.2     PVOG shall furnish each Party with the location plat, permit to drill, all logs, core analysis and each form required by each regulatory body for all Wells, and from the time operations are commenced until the Wells are completed, with daily drilling progress reports by facsimile or telephone to the addresses, facsimile and telephone numbers set forth in Section 4 of Exhibit A to the Operating Agreement.

16.3     All notices required under the terms of this Agreement shall be given to the Parties at the addresses, facsimile and telephone numbers set forth in the Operating Agreement.

17. Insurance

        PVOG shall maintain with one or more reputable and financially stable insurance companies the insurance specified in Exhibit "D" to the Operating Agreement including, but not limited to, "well control" (blowout) and "replacement cost" insurance for the benefit of all Parties.   PVOG will ensure that the certificates of insurance for all Wells and operations provide that all Parties are  named as "additional insured", contain waivers of subrogation in favor of the Parties and their insurers and that such insurance may not be cancelled without first giving all Parties thirty (30) days written notice.  PVOG shall furnish the Certificates of Insurance to all Parties at least ten (10) days prior to commencement of operations on each Well.

18. Area of Mutual Interest

18.1     If any Party acquires an oil, gas and mineral lease or interest therein, or any other contract that creates an interest in oil and gas, including minerals and royalties, or a surface lease, pipeline or road right-of-way, or any other contract with a surface or mineral owner or mineral lessee pertaining to the exploration for oil and gas ("Subsequently Acquired Interest"), within the area outlined in red on the Land Plat ("Area of Mutual Interest") other than the Leases described in Article 1 above, through direct purchase, farmin or other exploration agreement, through an employee, affiliate, broker or other representative, within five (5) years of the date of this Agreement, or the last expiration date of any Operating Agreement executed pursuant to this Agreement, whichever occurs last, the acquiring Party shall give notice within fifteen (15) days of acquisition to the other Parties in writing, furnishing copies of the instruments evidencing such acquisition and advising the full consideration paid or obligations assumed.  The Parties receiving such notice shall have fifteen (15) days from receipt of such notice within which to elect in writing to pay their share of all costs and considerations paid or obligations assumed and thereby be entitled to an assignment of their respective percentage interest therein as set forth in Section 18.2 below, or to reject such offer; however, if a Well is then drilling within Area of Mutual Interest, the results of which could affect the value of the Subsequently Acquired Interest, the acquiring Party said interest shall so advise the other Parties and the election must be made within twenty-four (24) hours.  Failure to reply within the period specified shall constitute an election to not participate in the Subsequently Acquired Interest.

 

 

Meander Prospect

September 3, 2002

Page 19

 

18.2     The Parties  shall have the right to participate in the ownership and cost of Subsequently Acquired Interests, except minerals or royalty, within the East Unit,  West Unit and Non-Unitized Acreage as their interest appears  in the East Unit Well,  West Unit Well and/or first Well on the Non-Unitized Acreage after Payout of such Wells, provided, however, if the consideration for a Subsequently Acquired Interest includes the drilling of a Well, the Cost of said Well shall be shared by the acquiring Parties as their interests appear in the East Unit Well, West Unit Well and/or first Well on the Non-Unitized Acreage before Casing Point.   The Parties shall have the right to participate in minerals or royalty in the proportions of 50% by PVOG and 50% by all other Parties.

18.3     All Subsequently Acquired Interests in the form of oil, gas and mineral leases, or interests therein, shall be subject to and the acquiring Parties shall assume and bear their respective share of the APO, Ground Floor and Carried Interests of Beta and the Pledger Partners  and the following overriding royalties in favor of  Harris D. Butler, et al:

     (a)   three percent (3%) on Subsequently Acquired Interests with "Net 

           Revenue Interest", as hereinafter defined, equal to or greater 

           than 75%.

     (b)   two percent (2%) on Subsequently Acquired Interests with Net 

           Revenue Interest of less than 75% but equal to or greater 

           than 70%.

     (c)   one percent (1%) on Subsequently Acquired Interests with Net 

           Revenue Interest less than 70%.

"Net Revenue Interest" shall be defined as (a) 100%, less (b) the total of the Lessor's royalties and all overriding royalties and similar burdens based on or measured by the production of oil or gas with which a Subsequently Acquired Interest is burdened immediately prior to its acquisition by the acquiring Party.

The overriding royalties of 3% and 2% shall be shared by Harris D. Butler, et al in the proportions set forth in Section 1.4 above, and the overriding royalties of 1% shall be shared:

Harris D. Butler
                            .01666666%

Tim Chesteen
                                .02777778%

Mark O'Koren
                                .02777778%

Alton R. Milton
                             .02777778%

                                            1.00000000%

18.4     In the event the Parties' working interests in a Well and Subsequently Acquired Interests attributable thereto for production purposes is reduced at Payout of the Well or other event under the terms of a farmout or other exploration agreement with a third party, then the overriding royalties of Harris D. Butler, et al and Beta and Pledger's APO, Ground Floor and Carried Interests provided in Section  18.3 above shall also be reduced proportionately at the same time the Parties' working interests are so reduced.

18.5     If a Subsequently Acquired Interest lies partially inside and partially outside the Area of Mutual Interest, the acquiring Party is not obligated to offer outside the portion to the other Parties, and if such outside portion is offered, the other Parties are  not obligated to acquire the outside portion as a prerequisite to acquiring the portion inside the Area of Mutual Interest.

   

   

Meander Prospect

September 3, 2002

Page 20  

   

18.6     This Article shall not apply to assets acquired by a Party by merger, consolidation or re-organization with or into another corporation nor to the purchase of all or a portion of the assets of another company.  

18.7     Notwithstanding anything in this Article 18 to the contrary, in the event Beta elects to not participate in the leases commonly referred to as "Montesanto", "Woodson" and/or "Hannie" covering 33, 15 and 2 acres, more or less, respectively, then Waveland shall have the exclusive first right to receive all of Beta's rights to such leases under the terms of this Article.

18.8     If less than all Parties elect to participate in a Subsequently Acquired Interest in the form of an oil, gas and mineral lease or interest therein, the participating Parties' working interests in the Well or Wells to which such Subsequently Acquired Interest is attributable for production purposes through unitization or otherwise, shall be increased proportionately and the non-participating Parties' working interest in such Well or Wells shall be reduced proportionately.

19. Miscellaneous

19.1     It is not the intention of the Parties to create, nor shall this Agreement be construed as creating, a mining or other partnership or association, or to render the Parties liable as partners. Neither this Agreement, nor the operations contemplated hereunder shall cause the Parties to be partners or establish a principal/agent relationship or any other relationship that would impose a fiduciary duty on either of them with regard to the other.  The rights and obligations of the Parties are contractual and no greater or less than established by the express terms of this Agreement.

19.2     This Agreement will extend to and be binding upon the Parties, their representatives, successors and assigns provided, however, this Agreement may not be assigned by the Parties, without the written consent of Beta being first obtained, which consent may not be unreasonably withheld; provided, however, Waveland shall have the right to assign all or a portion of its interest in this Agreement to Grey Goose Resources, L.L.C. or any affiliate thereof without Beta's written consent.

19.3     This Agreement shall be executed in counterpart and shall be binding upon the Parties that sign a counterpart, whether all Parties sign a counterpart or not, and the signature pages may be combined to form one original.

19.4     This Agreement is in lieu of and supersedes all prior agreements and communications between the Parties relative the Area of Mutual Interest, written, oral or electronic, and in the event of a conflict between this Agreement and any prior agreement or communication, this Agreement shall take precedence.  Provided, however, in the event this Agreement expires in whole or in part then as to the interest or conditions to which this Agreement expires, only insofar as the Pledger Partners and Beta are concerned, then unrecorded West Broussard Exploration Agreement dated February 28, 2001 shall remain in force and effect.  Nothing in this Agreement shall be construed as transferring from Beta to PVOG, and PVOG does not agree to bear, except as expressly set forth in this Agreement, any of the obligations of Beta under any previous Agreement between Beta and the other Parties.

19.5     If this Agreement is not executed in behalf of a Party in the space provided below and delivered to Beta on or before October 1, 2002 at 5:00 p.m. (and in the case of PVOG, together with PVOG's first Installment payable under Section 2.2 above ), this Agreement may not thereafter be entered into or executed by such Party without Beta's written consent.            

             

             

             

             

Meander Prospect

September 3, 2002

Page 21            

             

19.6     In the event Waveland or any member of the Fresno Group does not timely execute and return this Agreement as provided in Section 19.5 above, PVOG shall receive all of the interest of such Party under the same terms and conditions as PVOG's original interest under the terms of this Agreement.

*      *
     *

EXECUTED this 30th day of                   EXECUTED this
13th day of

September, 2002.
                           September, 2002.

BETA OIL & GAS, INC.                        PENN VIRGINIA OIL & GAS

                                                                                                CORPORATION

By:   /s/ Steve Antry                       By:   /s/
Robert E. Orth   

   Steve Antry                                 Robert E. Orth

      President                                   Vice President and

                                                                                              Regional Manager

EXECUTED this 30th day of
                 EXECUTED this
15th day of

September, 2002.
                          September, 2002.

PLEDGER OPERATING COMPANY, INC.
           WAVELAND DRILLING PARTNERS,

                                                                                                    2002 A, LP

By:   /s/ Tim G. Chesteen                   By:  /s/
Michael J. Greer 

   Tim G. Chesteen
                            Michael J. Greer

      President
                                  Managing Partner

 

 

 

Meander Prospect

September 3, 2002

Page 22

 

EXECUTED this 25th day of   
               EXECUTED this ______ day of

September, 2002.
                           September, 2002.

                                            MCGUINNESS FAMILY TRUST

                                            DATED U/A APRIL 22, 1983

By:  /s/ Darol Hoffman                       By: /s/
J. William McGuinness

      Darol Hoffman
                               J. William McGuinness

                                                                                                Trustee

EXECUTED this _______ day of
               EXECUTED this
23rd day of

September, 2002.
                           September, 2002.

                                            MILES H. THOMAS FAMILY TRUST

                                                                                         DATED DECEMBER 18, 1992

By:   /s/ Walt Reinhardt                    By:  /s/
Miles H. Thomas     

      Walt Reinhardt
                             Miles H. Thomas

                                                                                              Trustee

                                            By:  /s/
Joan Thomas        

                                               Joan Thomas

                                                                                              Trustee

EXECUTED this 23rd day of
                  EXECUTED this
24th day of

September, 2002.
                           September, 2002.

RESEARCH PETROLEUM, INC.

By:  /s/ Mark O'Koren                        By:  /s/
Alton R. Miller   

       Mark O'Koren
                               Alton R. Miller

       President

Meander\M.10b

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